<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________________
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997.
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO
___________.
COMMISSION FILE NUMBER: 000-22697
AT HOME CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 77-0408542
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYEE IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
425 BROADWAY STREET
REDWOOD CITY, CA 94063
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (650) 569-5000
FORMER NAME, FORMER ADDRESS, AND FORMER YEAR, IF CHANGED SINCE LAST REPORT: NOT
APPLICABLE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO __
-
THE NUMBER OF SHARES OF THE REGISTRANT'S COMMON STOCK, $0.01 PAR VALUE,
OUTSTANDING AS OF OCTOBER 31, 1997: 88,240,810 SHARES OF SERIES A COMMON STOCK,
15,400,000 SHARES OF SERIES B COMMON STOCK, AND 14,877,660 SHARES OF SERIES K
COMMON STOCK.
================================================================================
<PAGE>
AT HOME CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets-September 30, 1997
and December 31, 1996 3
Condensed Consolidated Statements of Operations-Three and Nine
months ended September 30, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows-Nine
months ended September 30, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures about Market Risk 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Change in Securities and Use of Proceeds 18
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
</TABLE>
2
<PAGE>
PART I.
ITEM 1. FINANCIAL STATEMENTS
AT HOME CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 59,046 $ 9,709
Short-term cash investments 73,639 7,061
------------------------------
Total cash, cash equivalents and
short-term cash investments 132,685 16,770
Accounts receivable 714 164
Accounts receivable - related parties 530 640
Other current assets 2,903 741
------------------------------
Total current assets 136,832 18,315
Property, equipment and improvements, net 29,577 14,328
Other assets 1,676 745
------------------------------
Total assets $168,085 $ 33,388
==============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,186 $ 1,946
Accounts payable - related parties 887 1,482
Accrued compensation and related expenses 599 248
Other accrued liabilities 7,418 885
Current portion of capital lease obligations 9,912 3,181
------------------------------
Total current liabilities 21,002 7,742
Capital lease obligations, less current portion 14,257 5,654
Other long-term liabilities 1,779 1,675
Commitments and contingencies
Stockholders' equity:
Preferred Stock ---- 44,993
Common Stock 198,074 1,035
Notes receivable from stockholders (335) (170)
Deferred compensation (4,725) (272)
Accumulated deficit (61,967) (27,269)
------------------------------
Total stockholders' equity 131,047 18,317
------------------------------
Total liabilities and stockholders' equity $168,085 $ 33,388
==============================
</TABLE>
See accompanying notes.
3
<PAGE>
AT HOME CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
1997 1996 1997 1996
---------------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
Revenues (1) $ 1,907 $ 141 $ 3,737 $ 141
Costs and expenses:
Operating costs 6,203 1,968 15,368 3,749
Product development and engineering 3,137 1,918 8,411 4,724
Sales and marketing 2,937 1,855 8,815 3,975
General and administrative 2,861 1,858 7,521 3,593
---------------- ------------- ------------- -----------
Total costs and expenses 15,138 7,599 40,115 16,041
---------------- ------------- ------------- -----------
Loss from operations (13,231) (7,458) (36,378) (15,900)
Interest income, net 1,337 212 1,680 375
---------------- ------------- ------------- -----------
Net loss $(11,894) $ (7,246) $(34,698) $ (15,525)
================ ============= ============= ===========
Pro forma net loss per share $ (0.10) $ (0.07) $ (0.31) $ (0.14)
================ ============ ============= ===========
Pro forma shares used in per share calculations 116,645 110,065 112,258 110,065
================ ============= ============= ===========
- -------------------------------
(1) Revenues from related parties $ 739 $ 132 $ 2,087 $ 132
</TABLE>
See accompanying notes.
4
<PAGE>
AT HOME CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
---------------------------------------------
1997 1996
-------------------- -----------------
<S> <C> <C>
Cash used in operating activities
Net loss $ (34,698) $(15,525)
Adjustments to reconcile net loss to cash used in operating activities:
Amortization of deferred compensation 804 29
Depreciation and amortization 5,311 787
Change in assets and liabilities:
Accounts receivable, including related parties (440) (174)
Other assets (1,794) 106
Accounts payable (355) 2,359
Accrued compensation and related expenses 351 131
Other accrued liabilities 6,533 949
Other long-term liabilities 104 550
-------------------- -----------------
Cash (used in) operating activities (24,184) (10,788)
Cash (used in) investing activities
Purchase of short-term cash investments (74,644) (6,959)
Sales and maturities of short-term cash investments 8,066 ----
Purchase of property, equipment and improvements (7,678) (7,299)
-------------------- -----------------
Cash (used in) investing activities (74,256) (14,258)
Cash provided by financing activities
Net proceeds from issuance of convertible preferred stock 46,528 35,025
Net proceeds from issuance of common stock 99,919 198
Proceeds from capital lease financing 5,630 1,500
Payments on capital lease obligations (4,477) (54)
Repayments of notes receivable from stockholders 177 ----
-------------------- -----------------
Cash provided by financing activities 147,777 36,669
-------------------- -----------------
Net increase in cash and cash equivalents 49,337 11,623
Cash and cash equivalents, beginning of period 9,709 6,906
-------------------- -----------------
Cash and cash equivalents, end of period $ 59,046 $ 18,529
==================== =================
Supplemental disclosures
Interest paid $ 579 $ 29
==================== =================
Acquisition of equipment under capital leases $ 12,882 $ 3,597
==================== =================
Financing of acquisition of other assets $ 1,299 $ ----
==================== =================
Notes receivable from stockholders issued in
connection with exercise of stock options
and restricted stock purchases $ 342 $ 133
==================== =================
</TABLE>
See accompanying notes.
5
<PAGE>
AT HOME CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements, include
the accounts of At Home Corporation, and it's wholly owned subsidiary
(collectively, the "Company"). These unaudited condensed consolidated financial
statements do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting only of normal recurring
adjustments) considered necessary for a fair presentation have been included in
the accompanying unaudited financial statements. Operating results for the three
and nine months ended September 30, 1997 are not necessarily indicative of the
results that may be expected for the full year ending December 31, 1997. For
further information, refer to the consolidated financial statements and notes
thereto, included in the Company's Prospectus dated July 11, 1997 filed as part
of a Registration Statement on Form S-1 (Registration No. 333-27323), as
amended).
Note 2. Stockholders' Equity
In July, 1997, the Company completed its initial public stock offering and
issued 10,350,000 shares (including 1,350,000 shares issued in connection with
the exercise of the underwriters' over-allotment option) of its Common Stock to
the public at a price of $10.50 per share. The Company received net proceeds of
approximately $99.9 million in cash. Concurrent with the initial public
offering, each outstanding share of the Company's Preferred Stock was
automatically converted into twenty shares of Common Stock.
Note 3. Pro Forma Net Loss Per Share
Except as noted below, pro forma net loss per share is computed using the
weighted average number of common shares outstanding and also gives effect to
the assumed conversion of all outstanding shares of convertible preferred stock
into common stock upon the closing of the Company's initial public offering
(using the as-if-converted method). Common equivalent shares are excluded from
the computation as their effect is antidilutive, except that pursuant to
applicable Securities and Exchange Commission Staff Accounting Bulletins, common
and common equivalent shares (from stock options and warrants) issued during the
period commencing twelve months prior to the initial filing date of the initial
public offering at prices below the public offering price have been included in
the calculation as if they were outstanding for all periods presented prior to
the initial filing date (using the treasury stock method).
Note 4. Impact of Recently Issued Accounting Standards
In February, 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("FAS") No. 128, "Earnings per Share" ("SFAS No.
128"). SFAS 128 specifies the computation, presentation and disclosure
requirements for earnings per share for entities with publicly held common stock
or potential common stock. This statement is effective for financial statements
issued for periods ending after December 15, 1997. Under the new requirements,
primary earnings per share (referred to as basic earnings per share under the
new pronouncement) will exclude the dilutive effect of stock options. The
impact of SFAS 128 on the calculation of the Company's reported pro forma net
loss per share is not expected to be material.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income," which
establishes standards for reporting and displaying comprehensive income and its
components, is required to be adopted by the Company
6
<PAGE>
beginning in 1998. Additionally, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information," which establishes reporting standards
regarding operating segments, products and services, geographic areas and major
customers. The Company is required to adopt these Statements in 1998. Adoption
of these Statements is expected to have no impact on the Company's consolidated
financial position, results of operations, or cash flows.
Note 5. Bank Term Loan Agreement
In September, 1997, the Company entered into a Term Loan Agreement ("Term Loan")
with Silicon Valley Bank (the "Bank"). The Term Loan provides for borrowings of
up to $8 million to finance the acquisition of property, equipment and
improvements, and to collateralize letters of credit. Borrowings under this Term
Loan bear interest at the Bank's prime rate. There were no borrowings under this
Term Loan as of September 30, 1997. Under the terms of the Term Loan, the
Company is required to meet certain financial covenants. The Term Loan expires
in September, 2001.
Note 6. Subsequent Events
Effective October 2, 1997, the Company entered into a Letter Agreement and Term
Sheet with Cablevision Systems Corporation ("Cablevision"), and it's parent, CSC
Parent Corporation ("CSC Parent"), Comcast Corporation ("Comcast"), Cox
Enterprises, Inc. ("Cox"), Kleiner, Perkins, Caufield & Byers and Tele-
Communications, Inc. ("TCI") (the "Agreement"). The Agreement provides that
Cablevision will enter into a Master Distribution Agreement for the distribution
of the Company's @Home service on substantially the same terms and conditions as
TCI, Comcast and Cox. Although Cablevision is subject to certain exclusivity
obligations that prohibit it from obtaining high-speed (greater than 128
kilobits per second ("Kbps")) residential consumer Internet services from any
source other than the Company, Cablevision is under no obligation to upgrade its
cable systems to two-way cable infrastructure and is under no affirmative
obligation to roll out, market, promote or carry any of the Company's services.
The exclusivity obligations in favor of the Company expire on June 4, 2002, and
may be terminated sooner under certain circumstances. These exclusivity
obligations also are subject to exceptions that would permit Cablevision to
engage in certain activities which could compete, directly or indirectly, with
the activities of the Company.
The Agreement provides for the issuance to Cablevision and CSC Parent of a
warrant to purchase up to 7,875,784 shares of the Company's Series A Common
Stock at an exercise price of $.50 per share (the "Warrant"). The Warrant is
immediately exercisable, subject to the receipt of all necessary governmental
consents or approvals. The Agreement provides for the issuance of an additional
warrant to Cablevision and CSC Parent to purchase up to 3,071,152 shares of
the Company's Series A Common Stock at an exercise price of $.50 per share under
certain conditions (the "Contingent Warrant"). The Contingent Warrant is not
immediately exercisable and will become exercisable as and to the extent certain
cable television systems are transferred from TCI and its controlled affiliates
to CSC, CSC Parent or their controlled affiliates. Copies of the Agreement, the
related Warrant Purchase Agreement, the Warrant and the Contingent Warrant have
been included filed as attachments to the Form 8-K filed with the Securities and
Exchange Commission on October 22, 1997.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion contains forward-looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934, as amended, and Section
27A of the Securities Act of 1933, as amended, and is subject to the safe
harbors created by those sections. These forward-looking statements are subject
to significant risks and uncertainties, including those identified in the
section of this Form 10Q entitled "Factors That May Affect Future Results" and
in the Company's Final Prospectus for its initial public offering filed with the
SEC on July 11, 1997, which may cause actual results to differ materially from
those discussed in such forward-looking statements. The forward-looking
statements within this Form 10-Q are identified by words such as "believes,"
"anticipates," "expects," "intends," "may" and other similar expressions.
However, these words are not the exclusive means of identifying such statements.
In addition, any statements which refer to expectations, projections or other
characterizations of future events or circumstances are forward-looking
statements. The Company undertakes no obligation to publicly release the results
of any revisions to these forward-looking statements which may be made to
reflect events or circumstances occurring subsequent to the filing of this Form
10-Q with the Securities and Exchange Commission. Readers are urged to carefully
review and consider the various disclosures made by the Company in this report
and in the Company's other reports filed with the Securities and Exchange
Commission, including its Final Prospectus, that attempt to advise interested
parties of the risks and factors that may affect the Company's business.
GENERAL
The Company is a leading provider of Internet services to consumers and
businesses over the cable television infrastructure. To overcome fundamental
architectural limitations of the Internet, the Company has been developing and
deploying the Company's network (the "@Network"), a scaleable, distributed
network that links its private high-speed nationwide backbone to hybrid fiber-
coaxial ("HFC") cable systems.
The Company's primary offering, the @Home service, allows residential
subscribers to connect their personal computers via cable modems to the
Company's new high-speed "parallel Internet." The Company has agreements with
eight leading North American cable companies for the distribution of the
Company's high-bandwidth residential consumer Internet services over their cable
systems.
The @Home service is currently offered by TCI, Comcast ,Cox InterMedia Partners
IV L.P. ("InterMedia") to consumers in 16 markets in the United States. As of
September 30, 1997, the Company had approximately 26,000 cable modem
subscribers, of which approximately 17,000 were in the United States. In
addition, the Company was in the process of converting approximately 9,000
subscribers currently receiving the Wave interactive service provided by Rogers
Cablesystems Limited ("Rogers") and Shaw Cablesystems Ltd. ("Shaw") in Canada.
Effective October 2, 1997, the Company entered into a Letter Agreement and Term
Sheet with Cablevision, CSC Parent, Comcast, Cox, Kleiner, Perkins, Caufield &
Byers and TCI. The Agreement provides that Cablevision will enter into a Master
Distribution Agreement for the distribution of the Company's @Home service on
substantially the same terms and conditions as TCI, Comcast and Cox. Although
Cablevision is subject to certain exclusivity obligations that prohibit it from
obtaining high-speed (greater than 128 kilobits per second ("Kbps")) residential
consumer Internet services from any source other than the Company, Cablevision
is under no obligation to upgrade its cable systems to two-way cable
infrastructure and is under no affirmative obligation to roll out, market,
promote or carry any of the Company's services. The exclusivity obligations in
8
<PAGE>
favor of the Company expire on June 4, 2002, and may be terminated sooner under
certain circumstances. These exclusivity obligations also are subject to
exceptions that would permit Cablevision to engage in certain activities which
could compete, directly or indirectly, with the activities of the Company.
The Agreement provides for the issuance to Cablevision and CSC Parent of a
warrant to purchase up to 7,875,784 shares of the Company's Series A Common
Stock at an exercise price of $.50 per share (the "Warrant"). The Warrant is
immediately exercisable, subject to the receipt of all necessary governmental
consents or approvals. The Agreement provides for the issuance of an additional
warrant to Cablevision and CSC Parent to purchase up to 3,071,152 shares of the
Company's Series A Common Stock at an exercise price of $.50 per share under
certain conditions (the "Contingent Warrant"). The Contingent Warrant is not
immediately exercisable and will become exercisable as and to the extent certain
cable television systems are transferred from TCI and its controlled affiliates
to CSC, CSC Parent or their controlled affiliates. Copies of the Agreement, the
related Warrant Purchase Agreement, the Warrant and the Contingent Warrant have
been included as attachments to the Form 8-K filed with the Securities and
Exchange Commission on October 22, 1997. The Company anticipates that it will
record a non-cash, non-recurring charge in the fourth quarter of 1997 based on
the fair value of the Warrant. The valuation of the Warrant has not been
completed, however the Company estimates the fair value to be approximately
$200 million. Additional charges to operations will be recorded if and when
the Contingent Warrant becomes exercisable.
For businesses, the Company's @Work services provide a platform for Internet,
intranet and extranet connectivity solutions and networked business applications
over both cable infrastructure and leased digital telecommunications lines. In
order to accelerate deployment of @Work services into major metropolitan areas,
the Company has established a strategic relationship with Teleport
Communications Group ("TCG"), the country's largest competitive local exchange
carrier (CLEC), to provide co-location facilities and local telephone circuits
for infrastructure and subscriber connectivity. @Work Internet, a high-speed
Internet connectivity service for commercial enterprises provided over both HFC
cable and leased digital telecommunications lines, is currently available in 11
metropolitan markets including Chicago, Los Angeles, New York, Orange County,
San Diego, San Francisco, Seattle, Land Washington, DC. As of September 30,
1997, the Company was receiving revenues from nearly 200 business customers and
had agreements with more than 100 additional business customers to begin to
install service. Substantially all of these agreements are for services over
telecommunications lines.
The Company expects to generate substantially all of its revenues through 1998
from monthly fees from subscribers to the @Home service, the @Work Internet
service, the @Work Remote service (a telecommuting service provided over HFC
cable) and from customer services provided to the Company's cable affiliates.
The Company believes that a growing subscriber base will generate @Media
division advertising revenues, as well as revenues from premium services and
transaction processing.
The Company has incurred substantial net losses in each fiscal period since its
inception and, as of September 30, 1997, had an accumulated deficit of $66.7
million (including deferred compensation). The Company currently intends to
increase its capital expenditures as well as its sales and marketing
expenditures in order to expand its network to support additional expected
subscribers in existing and future markets and to provide the Company's services
to a growing number of potential subscribers. As a result, the Company expects
to incur additional substantial net losses for the foreseeable future.
9
<PAGE>
RESULTS OF OPERATIONS
REVENUES (Amounts in thousands)
<TABLE>
<CAPTION>
Three Three Nine Nine
months months Months Months
Ended Ended Percent Ended Ended Percent
9/30/97 9/30/96 Change 9/30/97 9/30/96 Change
<S> <C> <C> <C> <C> <C> <C>
Total Revenues $1,907 $141 1,252% $3,737 $141 2,550%
</TABLE>
Revenues consist of monthly subscription fees for the @Home residential service,
installation and monthly access fees for @Work Internet services, and fees for
customer support activities for cable system operators, all of which are
recognized during the period in which services are provided. In the United
States, the @Home service is sold for a flat monthly fee generally ranging from
$35-$55, which currently includes the cost of a cable modem. Under the current
arrangements in the United States, the Company receives 35% of such monthly
fees. In Canada, the Company receives a smaller percentage of the monthly
subscription fees billed by Rogers and Shaw because they bear the costs of
providing additional customer support, data transport, marketing and programming
for the Canadian market. Total revenues were $1.9 million and $141,000 for the
three months ended September 30, 1997 and 1996, respectively. Total revenues
were $3.7 million and $141,000 for the nine months ended September 30, 1997 and
1996, respectively. A significant amount of the revenues to date have been
derived from customer services provided to TCI and Comcast. Revenues from these
related parties for the three and nine months ended September 30, 1997 were 39%
and 56%, as compared to 94% and 94% for the corresponding periods of 1996. The
percentage of revenues received from related parties is anticipated to decrease
significantly in subsequent periods. During the three months ended September
30, 1997, revenues from the @Work Internet service and revenues from the @Home
service in Canada began to contribute significantly to the Company's total
revenues. The Company anticipates that revenues from @Work services will
continue to increase as a percentage of total revenue in subsequent quarters.
COSTS AND EXPENSES (Amounts in thousands)
<TABLE>
<CAPTION>
Three Three Nine Nine
months months Months Months
Ended Ended Percent Ended Ended Percent
9/30/97 9/30/96 Change 9/30/97 9/30/96 Change
<S> <C> <C> <C> <C> <C> <C>
Operating Costs $ 6,203 $1,968 215% $15,368 $ 3,749 310%
Product Dev. $ 3,137 $1,918 64% $ 8,411 $ 4,724 78%
and Engineering
Sales and $ 2,937 $1,855 58% $ 8,815 $ 3,975 122%
Marketing
General and $ 2,861 $1,858 54% $ 7,521 $ 3,593 109%
Administrative
Total Costs $15,138 $7,599 99% $40,115 $16,041 150%
and Expenses
</TABLE>
10
<PAGE>
Total costs and expenses were $15.1 million and $7.6 million for the three
months ended September 30, 1997 and 1996, respectively. Total costs and
expenses for the nine months ended September 30, 1997 and 1996, were $40.1
million and $16.0 million, respectively. These period-to-period increases were
primarily a result of additional activities related to the development, testing
and deployment of the @Network and to support the subscriber growth of the @Home
service and the deployment of the @Work Internet service. The Company believes
continued expansion of operations as well as its network infrastructure is
critical to the achievement of its goals and anticipates that costs and expenses
will continue to increase in each quarter for the foreseeable future.
Operating Costs. Operating costs are primarily related to providing services
to customers and maintaining the @Network infrastructure, which includes the
functional areas of customer and technical support, regional data centers,
content programming, and @Home and @Work telecommunications costs. Included in
operating costs are salaries and related expenses for personnel,
telecommunication ("transport") costs and the depreciation, amortization and
maintenance of capital equipment. Operating costs were $6.2 million and $2.0
million for the three months ended September 30, 1997 and 1996, respectively.
These increases were primarily a result of: development of additional content
programming resources; additional transport costs to support the deployment of
the @Network to additional sites;, @Work operating costs; maintenance and
depreciation of capital equipment; and increased customer operations
expenditures to support a larger subscriber base.
Operating costs for the nine months ended September 30, 1997 and 1996, were
$15.4 million and $3.7 million, respectively. The increase in the nine months
ended September 30, 1997, compared to the corresponding period of 1996, was
principally attributable to activities associated with transport costs to
support the rollout of the @Network, the launch of the @Work Internet service,
maintenance and depreciation of capital equipment, customer service operations,
content programming expenditures and the increase in Regional Data Centers from
five as of December 31, 1996 to eighteen as of September 30, 1997.
Product Development and Engineering. Product development and engineering
expenses consist primarily of salaries and related expenses for personnel, fees
to outside contractors and consultants, the allocated cost of facilities, and
the depreciation and amortization of capital equipment. These expenses are
primarily incurred in three areas: the design, testing and deployment of the
@Network; the development of software tools and enabling platforms for the
creation and distribution of enhanced content; and applications development
specifically designed to take advantage of the @Network and the development of
@Work Internet services. Product development and engineering expenses were
$3.1 million and $1.9 million for the three months ended September 30, 1997 and
1996, respectively. Product development and engineering expenses for the nine
months ended September 30, 1997 and 1996, were $8.4 million and $4.7 million,
respectively. The increases in expenses for the three and nine month periods
ended September 30, 1997, as compared to the corresponding periods of 1996, were
principally attributable to increases in personnel and related expenses.
Product development and engineering costs have been expensed as incurred.
Sales and Marketing. Sales and marketing expenses consist primarily of
salaries, commissions and promotional expenses. Sales and marketing expenses
were $2.9 million and $1.9 million for the three months ended September 30, 1997
and 1996, respectively. Sales and marketing expenses for the nine months ended
September 30, 1997 and 1996, were $8.8 million and $4.0 million, respectively.
The increase in the three and nine month periods ended September 30, 1997, as
compared to the corresponding periods of 1996, were principally the result of:
continued increases in sales and marketing activities to support the expansion
of regional deployments of the @Home and @Work services; the expansion of the
Company's sales force and related travel and entertainment expenses;
expenditures for trade shows; and increased marketing activities, including
market development funds, to attract additional cable partners, subscribers and
corporate accounts.
11
<PAGE>
General and Administrative. General and administrative expenses consist
primarily of administrative and executive personnel costs, fees for professional
services and the costs of in-house systems and infrastructure to support the
operations of the Company. General and administrative expenses were $2.9
million and $1.9 million for the three months ended September 30, 1997 and 1996,
respectively, and $7.5 million and $3.6 million for the nine months ended
September 30, 1997 and 1996, respectively. These increases were the result of
additions of personnel to support the operations of the Company and their
related costs, stock compensation charges resulting from stock options and
restricted stock purchase agreements, additional facilities expenditures and
additional expenses incurred as a result of being a public company.
INTEREST INCOME, NET
Interest income, net was $1.3 million and $212,000 for the three months ended
September 30, 1997 and 1996, respectively. For the nine months ended September
30, 1997 and 1996, interest income, net was $1.7 million and $375,000,
respectively. These increases were principally due to the increased balances
available to invest resulting from the Company's Series C Preferred Stock
financing in April 1997, and its initial public offering in July 1997. Interest
income, net, represents interest earned by the Company on its cash and short-
term cash investments, less interest expense on capital lease obligations.
NET LOSS
The net loss was $11.9 million and $7.2 million for the three months ended
September 30, 1997 and 1996, respectively. The net loss for the nine months
ended September 30, 1997 and 1996 was $34.7 million and $15.5 million,
respectively. The increased loss in both comparable periods was due primarily to
increases in expenses as a result of additional business activities, partially
offset by the additional revenues attributable to the launch of the Company's
@Home and @Work services.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed its operations primarily through a
combination of private and public sales of equity securities and capital
equipment leases. At September 30, 1997, the principal source of liquidity for
the Company was $132.7 million of cash, cash equivalents and short-term cash
investments, as compared to $16.8 million at December 31, 1996. The Company
finances and expects to continue financing its substantial capital equipment
expenditures from a variety of sources, including direct vendor leasing
programs, third party commercial leasing arrangements and bank financing.
In September, 1997, the Company entered into a Term Loan Agreement ("Term Loan")
with Silicon Valley Bank (the "Bank"). The Term Loan provides for borrowings of
up to $8 million to finance the acquisition of property, equipment and
improvements, and to collateralize letters of credit. Borrowings under this Term
Loan facility bear interest at the Bank's prime rate. There were no borrowings
under this Term Loan as of September 30, 1997. Under the terms of the Term
Loan, the Company is required to meet certain financial covenants. The
Term Loan expires in September 2001.
Cash used in operating activities for the nine months ended September 30, 1997
and 1996, was $24.2 and $10.8 million, respectively, primarily as a result of
net losses.
For the nine months ended September 30, 1997, cash used in investing activities
was $74.3 million, primarily from purchases of short-term cash investments
($74.6 million) and cash purchases of property, equipment, and improvements
($7.7 million), slightly offset by sales and maturities of short-term cash
investments ($8.1 million). For the nine months ended September 30, 1996, cash
used in investing activities of $14.3 million was primarily the result of cash
purchases of property,
12
<PAGE>
equipment and improvements ($7.3 million) as well as purchases of short-term
cash investments ($7.0 million). Gross capital expenditures for equipment,
software, furniture, leasehold improvements and fixtures for the nine months
ended September 30, 1997 and 1996, were $20.6 million and $10.9 million,
respectively, of which $12.9 million and $3.6 million, respectively, were
financed through capital leases. The Company expects to expend approximately
$12.0 million for property, equipment and improvements in the three months
ending December 31, 1997, much of which will be financed through capital leases.
Cash provided by financing activities for the nine months ended September 30,
1997 was $147.8 million, resulting primarily from net proceeds of $46.5
million from the sale of Preferred Stock in April 1997, and net proceeds from
the Company's initial public offering in July 1997 of $99.9 million. For the
comparable nine month period of 1996, cash provided by financing activities was
$36.7 million, resulting primarily from net proceeds from the sale of Preferred
Stock.
The Company believes that it has the financial resources needed to meet its
presently anticipated business requirements, including capital expenditure and
strategic operating programs for at least the next twelve months. Thereafter,
if cash generated by operations is insufficient to satisfy the Company's
liquidity requirements, the Company may need to sell additional equity or debt
securities or obtain additional credit facilities. The sale of additional
equity or convertible debt securities may result in additional dilution to the
Company's stockholders. There can be no assurance that the Company will be able
to raise any such capital on terms acceptable to the Company or at all.
FACTORS THAT MAY AFFECT FUTURE RESULTS
UNPROVEN BUSINESS; NO ASSURANCE OF PROFITABILITY. The Company was incorporated
in March 1995, commenced operations in August 1995 and has incurred substantial
net losses in each fiscal period since its inception. As of September 30, 1997,
the Company had an accumulated deficit of $66.7 million (including deferred
compensation). In addition, the Company currently intends to increase its
capital expenditures and operating expenses in order to expand its network to
support additional expected subscribers in existing and future markets and to
market and provide the Company's services to a growing number of potential
subscribers. As a result, the Company expects to incur substantial operating and
net losses for the foreseeable future. The profit potential of the Company's
business is unproven. The Company's @Home service has only recently been
launched, and there can be no assurance that it will achieve broad consumer or
commercial acceptance. It is difficult to predict whether the Company's pricing
model will prove to be viable, whether demand for the Company's services will
materialize at the prices it expects the cable affiliates to charge or whether
current or future pricing levels will be sustainable. If such pricing levels are
not achieved or sustained or if the Company's services do not achieve or sustain
broad market acceptance, the Company's business, operating results and financial
condition will be materially adversely affected. There can be no assurance that
the Company will ever achieve favorable operating results or profitability.
SUBSCRIBER GROWTH RISKS. Currently, the Company has approximately 26,000 cable
modem subscribers. The Company's ability to increase the number of subscribers
to the @Home service to achieve its business plans and generate future revenues
will be dependent on a number of factors, many of which are beyond the Company's
control, including, among others, the rate at which the Company's current and
future cable affiliates upgrade their cable infrastructures, the ability of the
Company and its cable affiliates to coordinate timely and effective marketing
campaigns with the availability of such upgrades, the success of the cable
affiliates in marketing the @Home service to subscribers in their local cable
areas, the prices that the cable affiliates set for the @Home service and its
installation, and the rate at which the cable affiliates can complete the
installations required to initiate service for new subscribers. Because of the
foregoing factors, among others, the Company is able to forecast its revenues or
the rate at which it will add new subscribers with only a limited
13
<PAGE>
degree of accuracy. There can be no assurance that the Company will be able to
increase its subscriber base in accordance with its internal forecasts or the
forecasts of industry analysts or to a level that meets the expectations of
investors. Although the Company and Intel Corporation have recently announced a
joint development effort for creating and marketing a "plug and play" standard
for high-speed cable modems, which could reduce the time and personnel required
to install the @Home service for new subscribers, there can be no assurance that
this effort will be successful. While approximately 9,000 customers in Canada
currently are being converted from the Wave service offered by Rogers and Shaw,
deployment in Canada has been slower than the Company anticipated. The rate at
which subscribers have increased during the first three quarters of 1997 should
not be taken as indicative of the rate at which subscribers may be expected to
increase in the future. In particular, while the Company has forecast that its
number of subscribers may grow by up to 100% in the fourth quarter of 1997 from
approximately 26,000 subscribers in the third quarter of 1997, there can be no
assurance that the Company will achieve this level of subscriber growth,
particularly given the risks set forth in this "Factors That May Affect Future
Results" section.
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS. The Company's quarterly
operating results may fluctuate significantly in the future as a result of a
variety of factors, many of which are outside the Company's control. Factors
that may affect the Company's quarterly operating results attributable to its
@Home service include the timing of the Company's cable affiliates' upgrades of
their cable infrastructures and rollouts of the @Home service, the rate at which
customers subscribe to the Company's Internet services and the prices
subscribers pay for such services, subscriber churn rates, changes in the
revenue splits between the Company and its cable affiliates, the demand for
Internet advertising, the effectiveness of the cable affiliates' marketing and
other operations, and potential competition with cable affiliates for
advertising revenue. Quarterly operating results attributable to the Company's
@Work services are dependent on: the demand for, and level of acceptance of,
the Company's corporate Internet, intranet and extranet connectivity and
telecommuting solutions; the introduction of, demand for, and level of
acceptance of, the Company's value-added business applications; and, in part, on
the timing of the cable affiliates' upgrades of their cable infrastructures.
The Company operates with very little backlog, and quarterly sales and operating
results are difficult to forecast even in the short term. A significant portion
of the Company's expenses are fixed in advance based in large part on future
revenue forecasts. If revenue is below expectations in any given quarter, the
adverse impact of the shortfall on the Company's operating results may be
magnified by the Company's inability to adjust spending to compensate for the
shortfall. Therefore, a shortfall in actual as compared to estimated revenue
would have an immediate adverse effect on the Company's business, financial
condition and operating results that could be material.
DEPENDENCE ON CABLE AFFILIATES TO UPGRADE TO TWO-WAY CABLE INFRASTRUCTURE
NECESSARY TO SUPPORT THE @HOME SERVICE; UNCERTAIN AVAILABILITY AND TIMING OF
UPGRADES. Transmission of the @Home service over cable is dependent on the
availability of high-speed two-way HFC cable infrastructure. However, only a
small portion of existing cable plant in the United States has been upgraded to
HFC cable, and even less is capable of high-speed two-way transmission. The
Company's cable affiliates have announced and begun to implement major
infrastructure investments in order to deploy two-way HFC cable. However, cable
system operators have limited experience with these upgrades, and these
investments have placed a significant strain on the financial, managerial,
operating and other resources of the cable affiliates, most of which are already
highly leveraged, and thus have been, and the Company expects will continue to
be, subject to change, delay or cancellation. Although the Company's commercial
success depends on the successful and timely completion of these infrastructure
upgrades, the cable affiliates are under no obligation to the Company to upgrade
systems or to roll out, market or promote the Company's services. In addition,
the cable affiliates are not contractually required to achieve any specific
rollout schedule. Because of the very substantial capital cost of upgrading
cable systems for high-speed two-way data transmission, there has been
uncertainty in recent months as to the rate at which the cable affiliates
14
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will upgrade their systems. The failure of the cable affiliates to complete
these upgrades in a timely and satisfactory manner, or at all, would prevent the
Company from delivering high-performance Internet access services and would have
a material adverse effect on the Company's business, operating results and
financial condition.
NO OBLIGATION OF CABLE AFFILIATES TO CARRY THE COMPANY'S SERVICES; LIMITATIONS
ON THEIR EXCLUSIVITY. Although the Company's cable affiliates are subject to
certain exclusivity obligations that prohibit them from obtaining high-speed
(greater than 128 kilobits per second ("Kbps")) residential consumer Internet
services from any source other than the Company, such cable affiliates are under
no affirmative obligation to carry any of the Company's services. Such
exclusivity obligations in favor of the Company expire on June 4, 2002, and may
be terminated sooner under certain circumstances. The exclusivity obligations
also are subject to exceptions that would permit the cable affiliates to engage
in certain activities which could compete, directly or indirectly, with the
activities of the Company.
CONTROL BY TCI. TCI controls approximately 72% of the voting power of the
Company. Therefore, TCI has the ability to control most significant matters
requiring stockholder approval, including the election of a majority of the
Company's directors, subject to certain supermajority approval rights held by
Comcast and Cox. In addition, the Company's Board of Directors, which is
controlled by TCI and certain of the Company's other cable affiliates, has the
power, subject to directors' fiduciary duties, to change the terms of
distribution for the Company's Internet services.
POTENTIAL DISPOSITION OF CABLE SYSTEMS BY CABLE AFFILIATES. The Company's
agreements with its cable affiliates do not require these cable affiliates to
maintain a specified number of cable systems, subscribers or homes passed by
cable infrastructure in order to maintain their control over and equity
ownership of the Company. Therefore, these cable affiliates may dispose of a
significant amount of its cable systems without requiring that such cable
systems remain subject to any exclusivity provisions. TCI has recently
announced the proposed sale or transfer of certain cable systems. In addition,
TCI has announced that it is considering various plans and proposals that may
result in the disposition of other of its cable systems. To the extent that any
cable affiliate disposes of cable systems in the future without causing such
cable systems to remain subject to exclusivity provisions, the number of homes
passed that are exclusive to the Company will be decreased. Such decreases in
the number of exclusive homes passed may have an adverse effect upon the
business, operating results and financial condition of the Company.
UNPROVEN NETWORK SCALABILITY, SPEED AND SECURITY. Due to the limited deployment
of the Company's services, the ability of the @Network to connect and manage a
substantial number of online subscribers at high transmission speeds is as yet
unknown, and the Company faces risks related to the @Network's ability to be
scaled up to its expected subscriber levels while maintaining superior
performance. There can be no assurance that the @Network will be able to achieve
or maintain a high speed of data transmission, especially as the number of the
Company's subscribers grows, and the Company's failure to achieve or maintain
high-speed data transmission would significantly reduce consumer demand for its
services and have a material adverse effect on its business, operating results
and financial condition. In addition, the Company has recently discovered that
users may inadvertently configure their computer systems in a manner that
permits others to access a user's files without the user's knowledge. While the
Company has addressed this configuration issue and taken steps to prevent users
from sharing files via the @Home service, there can be no assurance that public
concerns about security and privacy of the cable network will not inhibit the
acceptance of the Company's services.
MANAGEMENT OF EXPANDED OPERATIONS. The Company may not be equipped to
successfully manage any future periods of rapid growth or expansion, which could
be expected to place a significant strain on the Company's managerial,
operating, financial and other resources. For
15
<PAGE>
example, certain of the Company's cable affiliates have reported problems
with customer service, which the Company believes is related to the rapid
subscriber growth the Company has experienced. The failure of the Company or its
cable affiliates to provide adequate customer service as the Company's Internet
service offerings scale would have a material adverse affect on subscriber
retention and growth and would materially adversely affect the Company's
business, operating results and financial condition.
DEPENDENCE ON TWO-WAY CABLE MODEMS; NEW INDUSTRY STANDARD. Each of the
Company's subscribers currently must obtain a cable modem from a cable affiliate
to access the @Home service. The North American cable industry has recently
adopted a set of interface specifications for hardware and software to support
the delivery of data services over the cable infrastructure. The Company
believes that these specifications, together with its recently announced
development agreement with Intel Corporation relating to "plug and play" modems,
will facilitate the growth of the cable modem industry and the availability of
lower cost cable modems. However, to the extent that any of the Company's cable
affiliates choose to slow the deployment of the @Home service until the
commercial availability of cable modems that are compliant with these new
specifications, the Company's subscriber growth could be constrained and the
Company's business, operating results and financial condition will be materially
adversely affected during the period of such a delay.
COMPETITION. The markets for consumer and business Internet services and online
content are extremely competitive, and the Company expects that competition will
intensify in the future. The Company's most direct competitors in these markets
are Internet service providers, national long distance carriers and local
exchange carriers, wireless service providers, online service providers and
Internet content aggregators. Many of these competitors are offering (or may
soon offer) technologies that will attempt to compete with some or all of the
Company's high-speed data service offerings. The Company also competes with
other cable-based data services that are seeking to contract with cable system
operators to bring their services into geographic areas that are not covered by
an exclusive relationship between the Company and its cable affiliates. Many of
the Company's competitors and potential competitors have substantially greater
financial, technical and marketing resources, larger subscriber bases, longer
operating histories, greater name recognition and more established relationships
with advertisers and content and application providers than the Company. There
can be no assurance that the Company will be able to compete successfully
against current or future competitors or that competitive pressures faced by the
Company will not materially adversely affect the Company's business, operating
results or financial condition.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS. A key component of the
Company's strategy is expansion into international markets. To date, the
Company has developed relationships only with United States and Canadian cable
system operators. The Company has extremely limited experience in developing
localized versions of its products and services and in developing relationships
with international cable system operators. There can be no assurance that the
Company will be successful in expanding its product and service offerings into
foreign markets. Moreover, the Company expects the incremental time and
infrastructure costs related to converting international subscribers to
significantly exceed the time and costs the Company expends for capturing
domestic subscribers.
POSSIBLE VOLATILITY OF STOCK PRICE. The stock market has from time to time
experienced significant price and volume fluctuations. In addition, the market
price of the shares of the Company's Series A Common Stock, similar to the
market prices of other Internet companies, is likely to be highly volatile.
Factors such as fluctuations in the Company's operating results, announcements
of technological innovations or new products by the Company or its competitors,
regulatory actions, and general market conditions may have a significant effect
on the market price of the Company's Series A Common Stock.
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DILUTION FROM CABLEVISION TRANSACTION. As a result of a transaction effective
October 2, 1997, whereby Cablevision Systems Corporation ("Cablevision") agreed
to enter into an agreement to distribute the @Home service on substantially the
same terms and conditions as TCI, Comcast and Cox, Cablevision and its parent
corporation were granted warrants to purchase up to 10,946,936 shares of the
Company's Series A Common Stock at an exercise price of $.50 per share under
certain conditions. To the extent that these warrants are exercised, the
Company's stockholders may experience substantial dilution. In addition, the
Company anticipates that it will record a non-cash, non-recurring charge in the
fourth quarter of 1997 based on the fair value of the Warrant. The valuation of
the Warrant has not been completed, however the Company estimates the fair value
to be approximately $200 million. Additional charges to operations will be
recorded if and when the Contingent Warrant becomes exercisable.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
17
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On July 8, 1997, PCTV, Inc. ("PCTV") filed a complaint against the Company in
the United States District Court for the District of New Hampshire asserting
rights in the @Home trademark. In the complaint, PCTV alleges trademark
infringement and unfair competition based on the Company's use of the @Home mark
and requests damages and injunctive relief. PCTV is a New Hampshire corporation
that produces computer-related television programs such as "Business Computing,"
"Computer Chronicles," and "@Home." PCTV alleges that it first used the mark in
August of 1994. The Company is currently in settlement discussions with PCTV
and is prepared to defend the suit vigorously if required. The Company does not
expect the outcome of this matter to have a material adverse effect on the
Company's business, operating results or financial condition.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) Sales of Unregistered Securities. From July 1, 1997 to July 10, 1997,
following the exercise of options to purchase shares of Series A Common Stock
that had been granted under the Company's stock option plans by five employees,
the Company issued an aggregate of 21,500 shares of Series A Common Stock for an
aggregate purchase price of $5,375. All sales of Series A Common Stock made by
the Company pursuant to the exercise of stock options were made pursuant to the
exemption from the registration requirements of the Securities Act afforded by
Rule 701 promulgated under the Securities Act.
On July 16, 1997, the Company issued a warrant to purchase an aggregate of
100,000 shares of Series A Common Stock at an exercise price of $10.00 per share
to one public corporation in connection with a technology development agreement
entered into between the Company and this corporation. On September 15, 1997,
the Company issued a warrant to purchase 100,000 shares of Series A Common Stock
at an exercise price of $21.00 per share to the same public corporation in
connection with a cooperation agreement entered into between the Company and
this corporation. Each of these issuances was made in reliance on Section 4(2)
of the Securities Act and/or Regulation D promulgated under the Securities Act.
Each of these issuances was made without general solicitation or advertising.
The purchaser was a sophisticated investor with access to all relevant
information necessary to evaluate the investment who represented to the Company
that the warrants were being acquired for investment.
(d) Use of Proceeds from Sales of Registered Securities. On July 16, 1997, the
Company completed an initial public offering of its Series A Common Stock, $0.01
par value (the "Offering"). The managing underwriters in the Offering were
Morgan Stanley Dean Witter, Merrill Lynch & Co., Alex. Brown & Sons Incorporated
and Hambrecht & Quist (the "Underwriters"). The shares of Series A Common Stock
sold in the Offering were registered under the Securities Act of 1933, as
amended, on a Registration Statement on Form S-1 (the "Registration Statement")
(Registration Number 333-27323). The Registration Statement was declared
effective by the Securities and Exchange Commission (the "SEC") on July 11,
1997.
On July 11, 1997, the Company commenced the Offering. The Offering terminated
on July 16, 1997 after the Company had sold all of the 10,350,000 shares of
Series A Common Stock registered under the Registration Statement. All of the
shares sold were sold by the Company (including 1,350,000 shares sold pursuant
to the exercise of the Underwriters' over-allotment option). The assumed
offering price was $10.50 per share for an aggregate price of the offering
amount registered of $108,675,000, and the shares were sold at a price to the
public of $10.50 per share for an aggregate offering price of $108,675,000.
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From the effective date of the Registration Statement to July 16, 1997, the
Company paid an aggregate of $7,607,250 in underwriting discounts and
commissions. In addition, the following table sets forth an estimate of all
expenses incurred in connection with the Offering, other than underwriting
discounts and commissions. All of the amounts shown are estimated except for
the registration fees of the SEC, the National Association of Securities
Dealers, Inc. (the "NASD") and the Nasdaq National Market. None of the amounts
shown were paid directly or indirectly to any director, officer, general partner
of the Company or their associates, persons owning 10 percent or more of any
class of equity securities of the Company, or an affiliate of the Company.
<TABLE>
<S> <C>
SEC registration fee $ 23,176
NASD filing fee $ 8,148
Nasdaq National Market Application fee $ 50,000
Printing $ 303,993
Legal fees and expenses $ 400,000
Accounting fees and expenses $ 249,946
NASD and Blue sky fees and expenses $ 10,000
Transfer agent and Registrar fees and expenses $ 2,500
Miscellaneous $ 100,504
Total $1,148,267
</TABLE>
After deducting the underwriting discounts and commissions and the Offering
expenses described above, net proceeds to the Company from the Offering were
approximately $99,919,483. The entire amount has been allocated for general
corporate purposes, including working capital requirements of the Company
resulting from its growth. None of the net proceeds of the Offering were paid
directly or indirectly to any director, officer, general partner of the Company
or their associates, persons owning 10 percent or more of any class of equity
securities of the Company, or an affiliate of the Company.
ITEM 5. OTHER INFORMATION
On October 16, 1997, Brendan R. Clouston resigned as a Series B Common Stock
Director of the Company. On the same date, as authorized by the Company's
Amended and Restated Certificate of Incorporation, the holders of the Company's
Series B Common Stock appointed Leo J. Hindery, Jr. to fill the vacancy created
by Mr. Clouston's resignation. Mr. Hindery is President and Chief Operating
Officer of Tele-Communications, Inc.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
See attached exhibit index.
(b) Reports on Form 8-K
-------------------
No such reports were filed during the quarter ended September 30,
1997.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AT HOME CORPORATION
(Registrant)
/s/ Kenneth A. Goldman
___________________________
Senior Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
(Duly Authorized Officer)
November 14, 1997
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Exhibit Title
- -------------- -------------
<S> <C>
10.21 Build To Suit Lease entered into by and between Martin/Campus
Associates, L.P. and At Home Corporation dated September 29,
1997 (450 Broadway, Redwood City, California).
10.22 Build To Suit Lease entered into by and between Martin/Campus
Associates, L.P. and At Home Corporation dated September 29,
1997 (440 Broadway, Redwood City, California).
10.23 Loan and Security Agreement entered into by and between Silicon
Valley Bank and At Home Corporation dated September 30, 1997.
11.1 Computation of Pro Forma Net Loss Per Share
27.1 Financial Data Schedule
</TABLE>
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EXHIBIT 10.21
BUILD TO SUIT LEASE
BY AND BETWEEN
MARTIN/CAMPUS ASSOCIATES, L.P.
"LANDLORD"
AND
AT HOME CORPORATION
"TENANT"
FOR THE APPROXIMATELY 86,418 SQ. FT. PREMISES AT 450 BROADWAY
REDWOOD CITY, CA 94063
<PAGE>
LEASE SUMMARY
-------------
Lease Date: _____________________________________
Landlord: Martin/Campus Associates, L.P.
Address of Landlord: 100 Bush Street, 26th Floor
San Francisco, CA 94104
Tenant: At Home Corporation
Address of Tenant: 425 Broadway
Redwood City, CA
Contact: Kenneth Goldman
Telephone: (650) 569-5353
Building Address: 450 Broadway
Redwood City, California
Total Building Square Footage: Approximately 86,418 square feet
Term: approximately fifteen years
(see Paragraph 4.A.)
Monthly Rent: As provided under Paragraph 5.A, and subject to
-------------
adjustment pursuant to Paragraph 4.C and 5.B
------------- ---
Security Deposit: An amount equal to three (3) payments of the initial
Monthly Rent (see Paragraph 7)
-----------
Exhibit A: Premises
Exhibit B: Work Letter Agreement
Exhibit C: Site Plan for Project
Exhibit D: Commencement Date Memorandum
Exhibit E: Subordination, Nondisturbance and Attornment Agreement
Exhibit F: Option to Purchase Terms
<PAGE>
TABLE OF CONTENTS
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1. Parties............................................... 2
2. Premises.............................................. 2
3. Definitions........................................... 2
A. Affiliate...................................... 2
B. Alterations.................................... 2
C. Broadway Lease................................. 2
D. Capital Improvements........................... 3
E. CC&Rs.......................................... 3
F. Collateral Agreements.......................... 3
G. Commencement Date.............................. 3
H. Common Area.................................... 3
I. Common Area Maintenance Costs.................. 3
J. Final Plans.................................... 5
K. HVAC........................................... 5
L. Impositions.................................... 6
M. Improvements................................... 6
N. Index.......................................... 6
O. Interest Rate.................................. 6
P. INTENTIONALLY DELETED.......................... 6
Q. Landlord's Agents.............................. 6
R. Lease Year..................................... 7
S. Monthly Rent................................... 7
T. Parking Area................................... 7
U. Person......................................... 7
V. Project........................................ 7
W. Real Property Taxes............................ 7
X. Rent........................................... 8
Y. Rentable Area.................................. 8
AA. Security Deposit............................... 8
BB. Sublet......................................... 8
CC. Subrent........................................ 9
DD. Subtenant...................................... 9
EE. Tenant Delay................................... 9
FF. Tenant Improvements............................ 9
GG. Tenant's Percentage Share...................... 9
HH. Tenant's Personal Property..................... 9
II. Term...........................................10
JJ. Fixed Charge Ratio.............................10
4. Lease Term..............................................10
A. Term...........................................10
</TABLE>
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B. Delays in Completion........................... 10
C. Option to Extend............................... 10
5. Rent and Additional Charges.......................... 13
A. Monthly Rent................................... 13
B. Adjustments to Monthly Rent.................... 14
C. Management Fee................................. 14
D. Common Area Maintenance Costs.................. 15
E. Additional Rent................................ 16
F. Prorations..................................... 16
G. Interest....................................... 16
6. Late Payment Charges................................. 16
7. Security Deposit..................................... 17
A. Deposit Required............................... 17
8. Holding Over......................................... 18
9. Tenant Improvements.................................. 19
10. Condition of Premises................................ 19
A. Capital Improvements........................... 19
B. Acceptance of Premises......................... 19
11. Use of the Premises and Common Area.................. 19
A. Tenant's Use................................... 20
B. Hazardous Materials............................ 20
C. Special Provisions Relating to The Americans
With Disabilities Act of 1990.................. 24
D. Use and Maintenance of Common Area............. 25
12. Quiet Enjoyment...................................... 25
13. Alterations.......................................... 26
A. Alteration Rights.............................. 26
B. Performance of Alterations..................... 26
C. Trade Fixtures................................. 26
14. Surrender of the Premises............................ 27
15. Impositions and Real Property Taxes.................. 27
A. Payment by Tenant.............................. 27
B. Taxes on Tenant Improvements and Personal
Property....................................... 28
C. Proration...................................... 29
16. Utilities and Services............................... 29
</TABLE>
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17. Repair and Maintenance.............................. 29
A. Landlord's Obligations........................ 29
B. Tenant's Obligations.......................... 30
C. Conditions Applicable to Repairs.............. 31
D. Landlord's Rights............................. 31
E. Compliance with Governmental Regulations...... 31
18. Liens............................................... 31
19. Landlord's Right to Enter the Premises.............. 32
20. Signs............................................... 32
21. Insurance........................................... 32
A. Indemnification............................... 32
B. Tenant's Insurance............................ 33
C. Premises Insurance............................ 34
D. Increased Coverage............................ 34
E. Failure to Maintain........................... 34
F. Insurance Requirements........................ 35
G. Waiver and Release............................ 35
22. Waiver of Subrogation............................... 35
23. Damage or Destruction............................... 36
A. Landlord's Obligation to Rebuild.............. 36
B. Right to Terminate............................ 36
C. Limited Obligation to Repair.................. 37
D. Abatement of Rent............................. 37
E. Damage Near End of Term....................... 37
24. Condemnation........................................ 37
25. Assignment and Subletting........................... 38
A. Landlord's Consent............................ 38
B. Tenant's Notice............................... 38
C. Information to be Furnished................... 38
D. Landlord's Alternatives....................... 39
E. Proration..................................... 39
F. Parameters of Landlord's Consent.............. 39
G. Permitted Transfers........................... 40
26. Default....................................... 40
A. Tenant's Default.............................. 40
B. Remedies...................................... 41
</TABLE>
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<TABLE>
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C. Landlord's Default............................ 42
27. Subordination....................................... 42
A. Subordination................................. 42
B. Attornment.................................... 43
C. Non-Disturbance............................... 43
28. Notices............................................. 43
29. Attorneys' Fees..................................... 44
30. Estoppel Certificates............................... 44
31. Transfer of the Premises by Landlord................ 45
32. Landlord's Right to Perform Tenant's Covenants...... 45
33. Tenant's Remedy..................................... 45
34. Mortgagee Protection................................ 45
35. Brokers............................................. 46
36. Acceptance.......................................... 46
37. Parking............................................. 46
38. Right of First Offer to Purchase.................... 46
A. Notice of Sale................................ 47
B. Acceptance.................................... 47
C. Rejection..................................... 47
D. Offered Terms................................. 48
E. Acceptance of Tenant's Offer.................. 48
F. Conditions.................................... 48
G. Process....................................... 48
H. Rights Personal............................... 49
39. General............................................. 49
A. Captions...................................... 49
B. Executed Copy................................. 49
C. Time.......................................... 49
D. Separability.................................. 49
E. Choice of Law................................. 49
F. Gender; Singular, Plural...................... 49
G. Binding Effect................................ 49
H. Waiver........................................ 50
</TABLE>
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<TABLE>
<S> <C>
I. Entire Agreement.............................. 50
J. Authority..................................... 50
K. Exhibits...................................... 50
L. Lease Summary................................. 50
M. Memorandum of Lease........................... 50
</TABLE>
<PAGE>
BUILD TO SUIT LEASE
-------------------
1. Parties.
-------
THIS BUILD TO SUIT LEASE (the "Lease"), dated as of ________ 1997, is
entered into by and between MARTIN/CAMPUS ASSOCIATES, L.P., a Delaware limited
partnership ("Landlord"), whose address is 100 Bush Street, San Francisco, CA
--------
94104, and AT HOME CORPORATION, a Delaware corporation ("Tenant"), whose address
------
is 425 Broadway, Redwood City, CA.
2. Premises.
--------
Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord those certain premises to situated in a building to be constructed by
Landlord pursuant to the terms of this Lease which shall be commonly known as
450 Broadway (the "Building"), in the City of Redwood City, County of San Mateo,
--------
State of California, as more particularly shown on Exhibit A (the "Premises"),
--------- --------
which Premises shall consist of a total area of approximately 86,418 square
feet. On or before the Commencement Date, Landlord shall measure the Rentable
Area of the Premises in accordance with BOMA Standard (ANSI Z65.1 1980) for full
floor office occupancy, and Landlord and Tenant shall amend this Lease if
necessary to reflect any discrepancy in the size of the Premises disclosed by
Landlord's measurement of the Premises by Landlord's architect. The Premises
also includes the appurtenant right to use in common with other tenants of the
Project (as defined below) the Common Area (as defined below) of the Project
owned by Landlord.
3. Definitions.
-----------
The following terms shall have the following meanings in this Lease:
A. Affiliate. Any Person that controls, or is controlled by or is
---------
under common control with, Landlord or Tenant. No Person shall be deemed in
control of another simply by virtue of being a partner, director, officer or
holder of voting securities of any Person. For purposes of this Paragraph 3.A,
-------------
"control" shall mean the ownership of, and/or the right to vote, stock,
partnership interests, membership interests, or other indicia of ownership
possessing at least fifty-one percent (51%) of either the total combined
interests in a Person, or the voting power of all classes of a Person's capital
stock, partnership interests, membership interests, or other indicia of
ownership, that have been issued, outstanding, and (if applicable) are entitled
to vote.
B. Alterations. Any alterations, additions or improvements made in,
-----------
on or about the Premises after the substantial completion of the Improvements,
including, but not limited to, lighting, heating, ventilating, air conditioning,
electrical, partitioning, drapery and carpentry installations.
C. Broadway Lease. That certain lease dated as of October 18, 1996,
--------------
by and
2
<PAGE>
between Landlord and Tenant, for those certain premises commonly known as 425
Broadway, situated in the City of Redwood City, County of San Mateo, State of
California.
D. Capital Improvements. Those certain improvements to the Building
--------------------
to be constructed by Landlord pursuant to Paragraph 10.A and the Work Letter
--------------
Agreement attached to this Lease as Exhibit B (the "Work Letter").
--------- -----------
E. CC&Rs. Any declaration of conditions, covenants and/or
-----
restrictions, or similar instrument, that now encumbers, or may in the future
encumber the Project or the Premises, as adopted by Landlord or its successors
in interest from time to time, and any modifications or amendments thereto.
F. Collateral Agreements. The following agreements: (i) the Broadway
---------------------
Lease, (ii) that certain Build to Suit Option Agreement by and between Landlord
and Tenant, dated as of October 25, 1996 (the "Build to Suit Agreement"), (iii)
-----------------------
that certain Agreement Granting Rights of First Offer, by and between Landlord
and Tenant, dated as of October 25, 1996, (iv) that certain Warrant to Purchase
Series A Common Stock of At Home Corporation and that certain Second Amended and
Restated Registration Rights Agreement, executed by Landlord, Tenant and certain
other parties, each dated as of October 18, 1996 (collectively, the "Warrant
-------
Agreement"), and (v) any leases at any time executed by Tenant arising out of
- ---------
Tenant's exercise of any of its rights set forth in the agreements described in
items (ii) and (iii) above.
G. Commencement Date. The Commencement Date of this Lease shall be
-----------------
the first day of the Term determined in accordance with Paragraph 4.A.
-------------
H. Common Area. All areas and facilities within the Project not
-----------
appropriated to the exclusive occupancy of tenants, including the Parking Area,
the sidewalks, pedestrian ways, driveways, signs, pools, ponds, service delivery
facilities, common storage areas, common utility facilities and all other areas
in the Project established by Landlord and/or its successors for non-exclusive
use. Landlord may, by written notice to Tenant, elect in its sole discretion to
increase and/or decrease the Common Area from time to time during the Term for
any reason whatsoever (including without limitation an election by Landlord
and/or its successors in their sole discretion to make changes to the buildings
situated in the Project, and/or to subdivide, sell, exchange, dispose of,
transfer, or change the configuration of all or any portion of the Common Area
from time to time), so long as Landlord neither unreasonably interferes with
ingress to or egress from the Building, nor permanently reduces the number of
parking spaces available for Tenant's use below the minimum requirements set
forth in Paragraph 37. No such subdivision, sale, exchange, disposition,
transfer, or change to the configuration of all or any portion of the Common
Area shall cause the Common Area to be increased or decreased unless and until
Landlord has given Tenant written notice of such increase or decrease.
I. Common Area Maintenance Costs. The total of all costs and
-----------------------------
expenses paid or incurred by Landlord in connection with the operation,
maintenance, ownership and repair of the Common Area, and the performance of
Landlord's obligations under Paragraphs 17.A and 17.E. Without limiting the
--------------- ----
generality of the foregoing, Common Area Maintenance
3
<PAGE>
Costs include all costs of and expense for: (i) maintenance and repairs of the
Common Area; (ii) resurfacing, resealing, remarking, painting, repainting,
striping or restriping the Parking Area; (iii) maintenance and repair of all
public or common facilities; (iv) maintenance, repair and replacement of
sidewalks, curbs, paving, walkways, Parking Area, Project signs, landscaping,
planting and irrigation systems, trash facilities, loading and delivery areas,
lighting, drainage and common utility facilities, directional or other signs,
markers and bumpers, and any fixtures, equipment and personal property located
on the Common Area; (v) wages, salaries, benefits, payroll burden fees and
charges of personnel employed by Landlord and the charges of all independent
contractors retained by Landlord (to the extent that such personnel and
contractors are utilized by Landlord) for the maintenance, repair, management
and/or supervision of the Project, and of any security personnel retained by
Landlord in connection with the operation and maintenance of the Common Area
(although Landlord shall not be required to obtain security services); (vi)
maintenance, repair and replacement of security systems and alarms installed by
Landlord (if any); (vii) depreciation or amortization (or in lieu thereof,
rental payments) on all tools, equipment and machinery used in the operation and
maintenance of the Common Area; (viii) premiums for Comprehensive General
Liability Insurance or Commercial General Liability Insurance, casualty
insurance, workers compensation insurance or other insurance on the Common Area,
or any portion thereof or interest therein, and any deductibles payable with
respect to such insurance policies; (ix) all personal property or real property
taxes and assessments levied or assessed on the Project, or any portion thereof
or interest therein, including without limitation the Real Property Taxes for
the Project, if applicable under Paragraph 15.A; (x) cleaning, collection,
--------------
storage and removal of trash, rubbish, dirt and debris, and sweeping and
cleaning the Common Area; (xi) legal, accounting and other professional services
for the Project, including costs, fees and expenses of contesting the validity
or applicability of any law, ordinance, rule, regulation or order relating to
the Building, and of contesting, appealing or otherwise attempting to reduce any
Real Property Taxes assessed against the Project; (xii) any alterations,
additions or improvements required to be made to the Common Area in order to
reduce Common Area Maintenance Costs or to protect the health or safety of
occupants of the Project, provided that the cost of any such alterations,
additions, improvements or capital improvements, together with interest at the
Interest Rate, shall be amortized over the useful life of the alteration,
addition, improvement or capital improvement in question and included in Common
Area Maintenance Costs for each year over which such costs are amortized; (xiii)
all costs and expenses of providing, creating, maintaining, repairing, managing,
operating, and supervising an amenity center for the Project, which may include
without limitation a dining facility (provided, however, that Landlord shall not
be required to provide or create such an amenity center), which costs and
expenses may include without limitation rent charged by Landlord for the space
occupied by such amenity center; (xiv) all costs and expenses incurred by
Landlord in performing its obligations under Paragraphs 17.A or 17.E, including
-----------------------
without limitation all costs and expenses incurred in performing any
alterations, additions or improvements required to be made to the Building in
order to comply with applicable laws, ordinances, rules, regulations and orders
and all capital improvements required to made in connection with the operation,
maintenance and repair of the Building, provided that the cost of any such
alterations, additions, improvements or capital improvements, together with
interest at the Interest Rate, shall be amortized over the useful life of the
alteration, addition, improvement or capital improvement in question and
included in Common Area Maintenance Costs for each
4
<PAGE>
year over which such costs are amortized; (xv) all costs and expenses incurred
in performing any alterations, additions or improvements required to be made to
the Common Area in order to comply with applicable laws, ordinances, rules,
regulations and orders and all capital improvements required to made in
connection with the operation, maintenance and repair of the Common Area,
provided that the cost of any such alterations, additions, improvements or
capital improvements, together with interest at the Interest Rate, shall be
amortized over the useful life of the alteration, addition, improvement or
capital improvement in question and included in Common Area Maintenance Costs
for each year over which such costs are amortized; (xvi) any and all payments
due and owing on behalf of the Project or any portion thereof with respect to
any CC&Rs, including without limitation any and all assessments and association
dues; (xvii) any other cost or expense which this Lease expressly characterizes
as a Common Area Maintenance Cost, and (xviii) all costs and expenses related to
the adoption and maintenance of a portion of Highway 101. However,
notwithstanding the foregoing or anything to the contrary in this Lease, Common
Area Maintenance Costs shall not include the cost of or expenses for the
following: (A) leasing commissions, attorneys' fees or other costs or expenses
incurred in connection with negotiations or disputes with other tenants of the
Project; (B) depreciation of buildings in the Project; (C) payments of
principal, interest, late fees, prepayment fees or other charges on any debt
secured by a mortgage covering the Project, or rental payments under any ground
lease or underlying lease; (D) any penalties incurred due to Landlord's
violation of any governmental rule or authority (but not excluding the cost of
compliance therewith, if such cost is chargeable to Tenant pursuant to this
Lease); (E) any Real Property Taxes or costs for which Landlord is separately
and directly reimbursed by Tenant or any other tenant of the Project which are
assessed against the Premises or the premises leased by such other tenant(s);
(F) items for which Landlord is reimbursed by insurance; (G) all costs arising
from monitoring, cleaning up and otherwise remediating any release of Hazardous
Materials at the Premises that has been specifically identified by Landlord and
Tenant in writing as of the date of the Lease; (H) all costs associated with the
operation of the business of the entity which constitutes "Landlord", as
distinguished from the costs of operations, including, but not limited to, costs
of partnership accounting and legal matters, costs of defending any lawsuits
with any mortgagee (except as the actions of Tenant may be in issue), costs of
selling, syndicating, financing, mortgaging, or hypothecating any of the
Landlord's interest in the Project and/or Common Area, or any portion thereof,
costs of any disputes between Landlord and its employees, costs of disputes of
Landlord with Building management or costs paid in connection with disputes with
Tenant or any other tenants; (I) all costs (including permit, license and
inspection fees) incurred in renovating or otherwise improving or decorating,
painting or redecorating space for other tenants in the Project; (J) the
creation of any reserves for equipment or capital replacement (but not the
expenditure of any funds from such reserves); and (K) all costs arising from
monitoring, cleaning up and otherwise remediating any release of Hazardous
Materials at the Premises to the extent that Landlord (who shall use reasonable
efforts to obtain reimbursement) is actually reimbursed by third parties for
such costs (but not the costs of collection incurred by Landlord, unless such
costs of collection are also reimbursed by third parties).
J. Final Plans. As defined in the Work Letter.
-----------
K. HVAC. Heating, ventilating and air conditioning.
----
5
<PAGE>
L. Impositions. Taxes, assessments, charges, excises and levies,
-----------
business taxes, license, permit, inspection and other authorization fees,
transit development fees, assessments or charges for housing funds, service
payments in lieu of taxes and any other fees or charges of any kind at any time
levied, assessed, charged or imposed by any federal, state or local entity, (i)
upon, measured by or reasonably attributable to the cost or value of Tenant's
equipment, furniture, fixtures or other personal property located in the
Premises, or the cost or value of any Alterations; (ii) upon, or measured by,
any Rent payable hereunder, including any gross receipts tax; (iii) upon, with
respect to or by reason of the development, possession, leasing, operation,
management, maintenance, alteration, repair, use or occupancy by Tenant of the
Premises, or any portion thereof; or (iv) upon this Lease transaction, or any
document to which Tenant is a party creating or transferring any interest or
estate in the Premises. Impositions do not include franchise, transfer,
inheritance or capital stock taxes, or income taxes measured by the net income
of Landlord from all sources, except to the extent any such taxes are levied or
assessed against Landlord as a substitute for, in whole or in part, any item
that would otherwise be deemed an Imposition under this paragraph.
M. Improvements. Collectively, the Tenant Improvements and the
------------
Capital Improvements.
N. Index. The Consumer Price Index, All Urban Consumers, All Items,
-----
published by the U.S. Department of Labor, Bureau of Labor Statistics for the
San Francisco-Oakland-San Jose Metropolitan Area (1982-84=100). If the Base
Year of the Index is changed, then all calculations pursuant to this Lease which
require the use of the Index shall be made by using the appropriate conversion
factor published by the Bureau of Labor Statistics (or successor agency) to
correlate to the Base Year of the Index herein specified. If no such conversion
factor is published, then Landlord shall, if possible, make the necessary
calculation to achieve such conversion. If such conversion is not in Landlord's
good-faith, business judgment possible, or if publication of the Index is
discontinued, or if the basis of calculating the Index is materially changed,
then the term "Index" shall mean comparable statistics on the cost of living, as
-----
computed either (i) by an agency of the United States Government performing a
function similar to the Bureau of Labor Statistics, or (ii) if no such agency
performs such function, by a substantial and responsible periodical or
publication of recognized authority most closely approximating the result which
would have been achieved by the Index, as may be determined by Landlord in the
exercise of its reasonable good faith business judgment.
O. Interest Rate. Either (i) the greater of (a) twelve percent
-------------
(121%) per annum, or (b) the reference rate, or succeeding similar index,
announced from time to time by the Bank of America's main San Francisco office,
plus three percent (3%) per annum; or (ii) the maximum rate of interest
permitted by law, whichever is less.
P. INTENTIONALLY DELETED
Q. Landlord's Agents. Landlord's authorized agents, partners,
-----------------
subsidiaries, directors, officers, and employees.
6
<PAGE>
R. Lease Year. A period of twelve (12) consecutive calendar months
----------
during the Term, commencing with the Commencement Date if the Commencement Date
is the first day of a calendar month, or commencing with the first day of the
month following the Commencement Date if the Commencement Date is not the first
day of a calendar month. The first Lease Year shall include the period between
the Commencement Date and the first day of the month following the Commencement
Date if the Commencement Date is not the first day of a calendar month. The
last Lease Year shall consist of the period between the date on which the Term
expires or terminates and the day after the last day of the preceding Lease
Year.
S. Monthly Rent. The rent payable pursuant to Paragraph 5.A., as
------------ --------------
adjusted from time to time pursuant to the terms of this Lease.
T. Parking Area. All Common Area (except sidewalks and service
------------
delivery facilities) now or hereafter designated by Landlord for the parking or
access of motor vehicles, including roads, traffic lanes, vehicular parking
spaces, landscaped areas and walkways, and including any parking structure
constructed during the Term. Landlord and/or its successors may, by written
notice to Tenant, elect in their sole discretion to increase and/or decrease the
Parking Area from time to time during the Term for any reason whatsoever
(including without limitation an election by Landlord and/or its successors in
their sole discretion to make changes to the buildings situated in the Project,
and/or to subdivide, sell, exchange, dispose of, transfer, or change the
configuration of all or any portion of the Parking Area from time to time), so
long as such changes to the Parking Area do not permanently reduce the number of
parking spaces available for Tenant's use below the minimum requirements set
forth in Paragraph 37. No such subdivision, sale, exchange, disposition,
------------
transfer, or change to the configuration of all or any portion of the Parking
Area shall cause the Parking Area to be increased or decreased unless and until
Landlord has given Tenant written notice of such increase or decrease.
U. Person. Any individual, partnership, firm, association,
------
corporation, limited liability company, trust, or other form of business or
legal entity.
V. Project. That certain real property shown on Exhibit C. Landlord
------- ---------
and/or its successors may, by written notice to Tenant, elect in their sole
discretion to increase and/or decrease the number of buildings and/or the amount
of Rentable Area situated in the Project from time to time during the Term for
any reason whatsoever.
W. Real Property Taxes. Taxes, assessments and charges now or
-------------------
hereafter levied or assessed upon, or with respect to, the Project, or any
personal property of Landlord used in the operation thereof or located therein,
or Landlord's interest in the Project or such personal property, by any federal,
state or local entity, including: (i) all real property taxes and general and
special assessments; (ii) charges, fees or assessments for transit, housing, day
care, open space, art, police, fire or other governmental services or benefits
to the Project, including assessments, taxes, fees, levies and charges imposed
by governmental agencies for such purposes as street, sidewalk, road, utility
construction and maintenance, refuse removal and for other governmental
services; (iii) service payments in lieu of taxes; (iv) any tax, fee or excise
on the use or occupancy of any part of the Project, or on rent for space in the
Project; (v) any other tax,
7
<PAGE>
fee or excise, however described, that may be levied or assessed as a substitute
for, or as an addition to, in whole or in part, any other Real Property Taxes;
and (vi) reasonable consultants, and attorneys' fees and expenses incurred in
connection with proceedings to contest, determine or reduce Real Property Taxes.
Real Property Taxes do not include: (A) franchise, transfer, inheritance or
capital stock taxes, or income taxes measured by the net income of Landlord from
all sources, unless any such taxes are levied or assessed against Landlord as a
substitute for, in whole or in part, any Real Property Tax; (B) Impositions and
all similar amounts payable by tenants of the Project under their leases; and
(C) penalties, fines, interest or charges due for late payment of Real Property
Taxes by Landlord. If any Real Property Taxes are payable, or may at the option
of the taxpayer be paid, in installments, such Real Property Taxes shall,
together with any interest that would otherwise be payable with such
installment, be deemed to have been paid in installments, amortized over the
maximum time period allowed by applicable law. If the tax statement from a
taxing authority does not allocate Real Property Taxes to the Building, Landlord
shall make the determination of the proper allocation of such Real Property
Taxes based, to the extent possible, upon records of the taxing authority and,
if not so available, then on an equitable basis.
X. Rent. Monthly Rent plus the Additional Rent as defined in
----
Paragraph 5.E.
- -------------
Y. Rentable Area. The aggregate square footage in any one or more
-------------
buildings in the Project, as appropriate, as reasonably determined by Landlord's
architect from time to time in accordance with BOMA Standard (ANSI Z65.1 1980)
for full floor office occupancy.
AA. Security Deposit. That amount paid by Tenant pursuant to
----------------
Paragraph 7.
- -----------
BB. Sublet. Any transfer, sublet, assignment, license or concession
------
agreement, change of ownership, mortgage, or hypothecation of this Lease or the
Tenant's interest in the Lease or in and to all or a portion of the Premises. As
used herein, a Sublet includes the following: (i) if Tenant is a partnership or
a limited liability company, a transfer, voluntary or involuntary, of all or any
part of any interest in such partnership or limited liability company, or the
dissolution of the partnership or limited liability company, whether voluntary
or involuntary; (ii) if Tenant is a corporation, any dissolution, merger,
consolidation or other reorganization of Tenant, or the transfer, either by a
single transaction or in a series of transactions, of a controlling percentage
of the stock of Tenant (except that a Sublet shall not include any such transfer
of a controlling percentage of the stock of Tenant occurring at a time when the
stock of Tenant is publicly traded on a nationally recognized stock exchange or
over the counter), or the sale, by a single transaction of or series of
transaction, within any one (1) year period, of corporate assets equaling or
exceeding twenty percent (20%) of the total value of Tenant's assets (except in
connection with an initial public offering of the stock of Tenant on a
nationally recognized stock exchange or over the counter); (iii) if Tenant is a
trust, the transfer, voluntarily or involuntarily, of all or any part of the
controlling interest in such trust; and (iv) if Tenant is any other form of
entity, a transfer, voluntary or involuntary, of all or any part of any interest
in such entity. As used herein, the phrases "controlling percentage" and
"controlling interest" means the ownership of, and/or the right to vote, stock,
partnership interests, membership interests, or other indicia of
8
<PAGE>
ownership possessing at least fifty-one percent (51%) of either the total
combined interests in Tenant, or the voting power of all classes of Tenant's
capital stock, partnership interests, membership interests, or other indicia of
ownership, that have been issued, outstanding, and (if applicable) are entitled
to vote.
CC. Subrent. Any consideration of any kind received, or to be
-------
received, by Tenant from a subtenant if such sums are related to Tenant's
interest in this Lease or in the Premises, including without limitation bonus
money and payments (in excess of book value) for Tenant's assets, including
without limitation its trade fixtures, equipment and other personal property,
goodwill, general intangibles, and any capital stock or other equity ownership
of Tenant.
DD. Subtenant. The person or entity with whom a Sublet agreement is
---------
proposed to be or is made.
EE. Tenant Delay. Any delay that Landlord may encounter in the
------------
performance of Landlord's obligations under the Lease because of any act or
omission of any nature by Tenant or its agents or contractors, including without
limitation any (i) delay attributable to the postponement of any Improvements at
the request of Tenant; (ii) delay by Tenant in the submission of information or
the giving of authorizations or approvals within the time limits set forth in
the Lease or the Work Letter; (iii) delay attributable to the failure of Tenant
to pay, when due, any amounts required to be paid by Tenant pursuant to the
Lease or the Work Letter; and (iv) delay resulting from any change order request
initiated or requested by Tenant.
FF. Tenant Improvements. Those certain improvements to the Premises
-------------------
to be constructed by Landlord pursuant to Exhibit B, other than the Capital
---------
Improvements. The Tenant Improvements shall at all times be the property of
Landlord and shall not be deemed Tenant's Personal Property.
GG. Tenant's Percentage Share. The ratio (expressed as a percentage)
-------------------------
of the total Rentable Area of the Premises to the total Rentable Area of all of
the buildings at the Project owned by Landlord from time to time, which as of
the Commencement Date shall equal 47.3% (i.e., the Rentable Area of the Premises
divided by the Rentable Area of the buildings at the Project owned by Landlord
as of the date of this Lease). Tenant's Percentage Share shall be recalculated
each and every time that the amount of Rentable Area contained in Premises is
adjusted, or the Premises is expanded, buildings are added to or removed from
the Project, or there is a change in the total Rentable Area of those buildings
in the Project owned by Landlord, or Landlord sells, exchanges, or otherwise
transfers any or all of the buildings situated in the Project (including without
limitation the Building). The parties acknowledge and agree that the total
Rentable Area of all of the buildings in the Project owned by Landlord may
increase and/or decrease from time to time during the Term, since Landlord may
elect in its sole discretion to sell a building or buildings or to make changes
to the buildings it owns in the Project (so long as Landlord does not
unreasonably interfere with ingress to or egress from the Premises).
HH. Tenant's Personal Property. Tenant's trade fixtures, furniture,
--------------------------
equipment
9
<PAGE>
and other personal property in the Premises.
II. Term. The Term of this Lease set forth in Paragraph 4.A., as it
---- -------------
may be extended hereunder pursuant to any options to extend granted herein.
JJ. Fixed Charge Ratio. Tenant's consolidated earnings before income
------------------
taxes, depreciation and amortization during the fiscal year in question, divided
by the sum of (i) all interest charges occurring during the fiscal year in
question, and (ii) all of Tenant's scheduled debt amortization payable during
the fiscal year in question.
4. Lease Term.
----------
A. Term. Subject to adjustment for Tenant Delays pursuant to
----
Paragraph 4.B below, the Term shall commence on the date of substantial
completion of the Improvements to be constructed by Landlord (the "Commencement
------------
Date"), and terminate on the date that is fifteen (15) years after the
- ----
Commencement Date. For the purposes of this Lease, substantial completion shall
mean that the Improvements have been completed in accordance with the Final
Plans approved by Landlord and Tenant, subject only to minor punch-list items,
and the City of Redwood City has issued a final building inspection approval for
such Improvements.
B. Delays in Completion. Tenant agrees that if Landlord, for any
--------------------
reason whatsoever, is unable to substantially complete the Improvements on or
before Landlord's initial estimate of the Commencement Date, Landlord shall not
be liable to Tenant for any loss or damage therefrom, nor shall this Lease be
void or voidable. Upon the establishment of the actual Commencement Date,
Landlord and Tenant shall execute a Commencement Date Memorandum in the form set
forth in Exhibit D. Notwithstanding any provision of this Lease to the
---------
contrary, if at any time after the date of this Lease a Tenant Delay occurs,
then the Commencement Date shall be moved earlier two (2) days for each one (1)
day of Tenant Delay that delays the substantial completion of the Improvements.
In addition, Tenant shall pay any and all costs and expenses incurred by
Landlord which result from any Tenant Delay, including, without limitation, any
and all costs and expenses attributable to increases in the cost of labor or
materials.
C. Option to Extend.
----------------
(i) Grant of Option. Landlord hereby grants to Tenant one (1)
---------------
option (the "Option to Extend") to extend the Term of this Lease, for an
----------------
additional term of five (5) years. The option term (the "Extended Term") shall
-------------
commence upon the expiration of the initial Term. The Option to Extend is
expressly conditioned upon Tenant's not being in default under any term or
condition of this Lease after the expiration of any applicable cure period
granted by this Lease, either at the time the Option to Extend is exercised or
at the time the applicable Extended Term would commence. The Option to Extend
shall be personal to the Tenant originally named in this Lease, and shall not be
assigned, sold, conveyed or otherwise transferred to any other party (including
without limitation any assignee or sublessee of such Tenant) without the prior
written consent of Landlord, which consent may be withheld in Landlord's sole
discretion; provided,
10
<PAGE>
however, that the Option to Extend may be transferred to the transferee pursuant
to a Permitted Transfer without Landlord's consent. The Option to Extend shall
be exercisable only so long as the Lease remains in full force and effect and
shall be an interest appurtenant to and not separable from Tenant's estate under
the Lease. Under no circumstances shall Landlord be required to pay any real
estate commission to any party with respect to Tenant's exercise of the Option
to Extend.
(ii) Manner of Exercise. Tenant may exercise the Option to
------------------
Extend the Lease only by giving Landlord written notice not less than one (1)
year prior to the expiration of the Term. If Tenant fails to exercise the Option
to Extend prior to such 1-year period, then the Option to Extend automatically
shall lapse and thereafter Tenant shall have no right to exercise the Option to
Extend.
(iii) Terms and Rent. The initial Monthly Rent for the Premises
--------------
for the Extended Term shall be equal to the greater of (w) ninety-five percent
(95%) of the fair market rent, as determined below, for the Premises as of the
commencement of the Extended Term, or (x) an amount equal to the Monthly Rent
payable during the fourteenth (14th) Lease Year of the initial Term, multiplied
by the greater of (A) the lesser of (I) a fraction, the numerator of which is
the Index published most recently before the first day of the fourteenth (14th)
Lease Year of the initial Term, and the denominator of which is the Index
published most recently before the first day of the thirteenth (13th) Lease Year
of the initial Term, or (II) one hundred sixteen percent (116%), or (B) one
hundred seven percent (107%). During the Extended Term the Monthly Rent shall
continue to be subject to adjustment in accordance with the provisions of
Paragraph 5.B below. All other terms and conditions of the Lease, as amended
- -------------
from time to time by the parties in accordance with the provisions of the Lease,
shall remain in full force and effect and shall apply during the Extended Term;
provided, however, that neither the Option to Extend nor Landlord's obligations
under the Work Letter shall be of any force or effect during the Extended Term.
(iv) Determination of Rent. For the purposes of calculating the
---------------------
Monthly Rent for the Extended Term, the fair market rent shall be equal to the
net effective rent per rentable square foot being charged for leases executed
within the preceding twelve (12) months for comparable space (in buildings with
2 - 4 stories) at either the Project (if any), or if there are none, for
comparable space (in buildings with 2 - 4 stories) in office and research and
development complexes located in the Redwood Shores area or the Menlo Oaks
Business Park (located in Menlo Park, California), with terms comparable to the
terms contained in this Lease, taking into consideration relevant factors such
as the presence or absence of tenant improvement contributions by the lessor,
and the fact that the Monthly Rent during the Extended Term shall be subject to
adjustment under Paragraph 5.B. Any value added to the Premises by the Tenant
--------------
Improvements and any Alterations paid for by Tenant shall not be considered or
included in the determination of the fair market rent. The fair market rent
shall be determined by mutual agreement of the parties or, if the parties are
unable to agree within thirty (30) days after Tenant's exercise of an Option,
then fair market rent shall be determined pursuant to the procedure set forth in
Paragraphs 4.C.(v) and 4.C.(vi).
- ------------------ --------
(v) Landlord's Initial Determination. If the parties are
--------------------------------
unable mutually to agree upon the fair market rent pursuant to Paragraph
---------
4.C.(iv), then the fair market rent initially
- --------
11
<PAGE>
shall be determined by Landlord by written notice ("Landlord's Notice") given to
-----------------
Tenant promptly following the expiration of the 30-day period set forth in
Paragraph 4.C.(iv). If Tenant disputes the amount of fair market rent set forth
- ------------------
in Landlord's Notice, then, within thirty (30) days after the date of Landlord's
Notice, Tenant shall send Landlord a written notice ("Tenant's Notice") which
---------------
specifically (a) disputes the fair market rent set forth in Landlord's Notice,
(b) demands arbitration pursuant to Paragraph 4.C.(vi), and (c) states the name
------------------
and address of the person who shall act as arbitrator on Tenant's behalf.
Tenant's Notice shall be deemed defective, and not given to Landlord, if it
fails strictly to comply with the Requirements and time period set forth above.
If Tenant does not send Tenant's Notice within thirty (30) days after the date
of Landlord's Notice, or if Tenant's Notice fails to contain all of the required
information, then the Monthly Rent for the Extended Term shall equal ninety-five
percent (95%) of the fair market rent specified in Landlord's Notice. If Tenant
sends Tenant's Notice in the proper form within thirty (30) days after the date
of Landlord's Notice, then the Monthly Rent for the Extended Term shall be
determined by arbitration pursuant to Paragraph 4.C(vi) below. If the
-----------------
arbitration is not concluded prior to the commencement of the Extended Term,
then Tenant shall pay Monthly Rent equal to one hundred twenty-five percent
(125%) of the Monthly Rent payable immediately prior to the commencement of the
Extended Term. If the fair market rent determined by arbitration differs from
that paid by Tenant pending the results of arbitration, then any adjustment
required to adjust the amount previously paid shall be made by payment by the
appropriate party within ten (10) days after the determination of fair market
rent.
(vi) Arbitration. The arbitration shall be conducted in the
-----------
City of San Francisco in accordance with the then prevailing rules of the
American Arbitration Association (or its successor) for the arbitration of
commercial disputes, except that the procedures mandated by such rules shall be
modified as follows:
(a) Each arbitrator must be a real estate appraiser
with at least five (5) years of full-time commercial appraisal experience who is
familiar with the fair market rent of office and research and development
complexes located in the vicinity of the Premises. Within ten (10) business days
after receipt of Tenant's Notice, Landlord shall notify Tenant of the name and
address of the person designated by Landlord to act as arbitrator on Landlord's
behalf.
(b) The two arbitrators chosen pursuant to Paragraph
---------
4.C.(vi)(a) shall meet within ten (10) business days after the second arbitrator
- -----------
is appointed and shall either agree upon the fair market rent or appoint a third
arbitrator possessing the qualifications set forth in Paragraph 4.C.(vi)(a). If
---------------------
the two arbitrators agree upon the fair market rent within such ten (10)
business day period, the Monthly Rent for the Extended Term shall equal ninety-
five percent (95%) of such fair market rent. If the two arbitrators are unable
to agree upon the fair market rent and are unable to agree upon the third
arbitrator within five (5) business days after the expiration of such ten (10)
business day period, the third arbitrator shall be selected by the parties
themselves. If the parties do not agree on the third arbitrator within five (5)
business days after the expiration of such five (5) business day period, then
either party, on behalf of both, may request appointment of the third arbitrator
by the Association of South say Brokers. The three arbitrators shall decide the
dispute, if it has not been previously resolved, by following the procedures set
forth in Paragraph 4.C.(vi)(c). Each party shall pay the fees and expenses of
---------------------
its
12
<PAGE>
respective arbitrator and both shall share the fees and expenses of the third
arbitrator. Each party shall pay its own attorneys' fees and costs of witnesses.
(c) The three arbitrators shall determine the fair
market rent in accordance with the following procedures. Each of Landlord's
arbitrator and Tenant's arbitrator shall state, in writing, his or her
determination of the fair market rent, supported by the reasons therefor, and
shall make counterpart copies for the other arbitrators. All of the arbitrators
shall arrange for a simultaneous exchange of the proposed resolutions within ten
(10) business days after appointment of the third arbitrator. If any arbitrator
fails to deliver his or her own determination to the other arbitrators within
such ten (10) business day period, then the fair market rent shall equal the
average of the resolutions submitted by the other arbitrators. If all three (3)
arbitrators deliver their determinations to the other arbitrators within such
ten (10) business day period, then the two (2) closest determinations of the
arbitrators shall be averaged, and the resulting quotient shall be the fair
market rent, and the Monthly Rent for the Extended Term shall equal ninety-five
percent (95%) of such fair market rent; provided, however, that if the
determination of one (1) of the arbitrators (the "Average Determination") is
---------------------
equal to the average of the determinations of the other two (2) arbitrators,
then the Average Determination shall be the fair market rent. However, the
arbitrators shall not attempt to reach a mutual agreement of the fair market
rent; each arbitrator shall independently arrive at his or her proposed
resolution.
(d) The arbitrators shall have the right to consult
experts and competent authorities for factual information or evidence pertaining
to a determination of fair market rent, but any such consultation shall be made
in the presence of both parties with full right on their part to cross-examine.
The arbitrators shall render the decision and award in writing with counterpart
copies to each party. The arbitrators shall have no power to modify the
provisions of this Lease. In the event of a failure, refusal or inability of any
arbitrator to act, his or her successor shall be appointed by him or her, but in
the case of the third arbitrator, his or her successor shall be appointed in the
same manner as that set forth herein with respect to the appointment of the
original third arbitrator.
5. Rent and Additional Charges.
---------------------------
A. Monthly Rent. Tenant shall pay to Landlord, in lawful money of
------------
the United States, Monthly Rent as follows: commencing on the Commencement Date,
and continuing through the balance of the Term (subject to adjustment pursuant
to Paragraph 5.B), the initial Monthly Rent shall equal that amount calculated
-------------
pursuant to the Build to Suit Agreement as the Monthly Rent for the Building.
Tenant shall have no obligation to pay Monthly Rent before the Commencement
Date. Until the Monthly Rent is established under the Build to Suit Agreement,
the Monthly Rent shall be deemed to equal that amount designated from time to
time in writing by Landlord to Tenant as Landlord's reasonable estimate of the
amount of Monthly Rent that will be established under the Build to Suit
Agreement upon completion of the construction of the Building (collectively, the
"Estimated Monthly Rent"), based upon Landlord's estimate of the Development
----------------------
Costs (as defined in the Build to Suit Agreement) that have been or will be
incurred in constructing the Building. Upon the final establishment of the
initial Monthly
13
<PAGE>
Rent in accordance with the Build to Suit Agreement, Landlord and Tenant shall
each execute an addendum to this Lease setting forth the initial Monthly Rent
under this Lease. If as of the date the initial Monthly Rent under this Lease is
established (the "Rent Establishment Date"), the aggregate amount of Estimated
-----------------------
Monthly Rent previously paid by Tenant exceeds the aggregate amount of Monthly
Rent payable under this Lease from the Commencement Date to the Rent
Establishment Date, then Landlord may elect, in its sole discretion, to either
refund such excess to Tenant within thirty (30) days after the Rent
Establishment Date, or offset such overpayment against Rent due or remaining due
under this Lease. If as of the Rent Establishment Date the aggregate amount of
Estimated Monthly Rent previously paid by Tenant is less than the aggregate
amount of Monthly Rent payable under this Lease from the Commencement Date to
the Rent Establishment Date, then Tenant shall pay the deficiency to Landlord
within thirty (30) days after the Rent Establishment Date.
Monthly Rent shall be paid in advance, on the first day of each
calendar month during the Term, without abatement, deduction, claim, offset,
prior notice or demand. Tenant shall pay to Landlord an amount equal to one (1)
month's advance payment of Monthly Rent for the Premises upon the execution of
this Lease by Landlord and Tenant. Additionally, Tenant shall pay, as and with
the Monthly Rent, the management fee described in Paragraph 5.C., Tenant's
--------------
Percentage Share of Common Area Maintenance Costs pursuant to Paragraph 5.D, the
-------------
Real Property Taxes and Impositions payable by Tenant pursuant to Paragraph 15,
------------
and the monthly cost of insurance premiums required pursuant to Paragraph 21.C.
--------------
B. Adjustments to Monthly Rent. The Monthly Rent may be adjusted at
---------------------------
any time during the Term in accordance with the provisions of Paragraph 2.1.1 of
---------------
Exhibit D to the Build to Suit Agreement. In addition, the Monthly Rent shall
- ---------
be increased, but not decreased, as of the first day of the month which is
twenty-five (25) months from the Commencement Date and every twenty-four (24)
months thereafter during the Term (including without limitation the Extended
Term) (each, an "Adjustment Date") by the greater of (i) the percentage increase
---------------
in the Index from the previous Adjustment Date (or, for the first Adjustment
Date, from the Commencement Date), up to a maximum of sixteen percent (16%), or
(ii) seven percent (7%). If, however, the last Adjustment Date occurs at any
time after the first day of a calendar month, the first Adjustment Date shall be
the first day of the immediately following calendar month. On each Adjustment
Date, the total aggregate amount of Monthly Rent then in effect shall be
multiplied by the greater of (x) the lesser of (A) a fraction, the numerator of
which is the Index published most recently before the applicable Adjustment
Date, and the denominator of which is the Index published most recently before
the prior Adjustment Date (or, in the case of the first Adjustment Date, the
Index published most recently before the Commencement Date), or (B) one hundred
sixteen percent (116%), or (y) one hundred seven percent (107%); and the
corresponding product shall be the Monthly Rent in effect until the next
Adjustment Date. In no event shall the Monthly Rent in effect after an
Adjustment Date be less than one hundred seven percent (107%) of the Monthly
Rent in effect immediately prior to such Adjustment Date. If no Index is
published for either of the months set forth above, the Index for the next
preceding month shall be used.
C. Management Fee. Tenant shall pay to Landlord monthly, as
--------------
Additional
14
<PAGE>
Rent, a management fee equal to three and one-half percent (3.5%) of the then
Monthly Rent.
D. Common Area Maintenance Costs.
-----------------------------
(i) Estimated Payments. Commencing on the Commencement Date
------------------
and continuing throughout the entire Term, Tenant shall pay Tenant's Percentage
Share of all Common Area Maintenance Costs paid or payable by Landlord in each
year; provided, however, that Tenant shall pay one hundred percent (100%) of
those Common Area Maintenance Costs arising from Landlord's performance of its
obligations under Paragraphs 17.A and Tenant's obligations under Paragraph 17.D.
--------------- --------------
Before commencement of the Term and during December of each calendar year or as
soon thereafter as practicable, Landlord shall give Tenant notice of its
estimate of amounts payable under this Paragraph 5.D.(i) for the ensuing
-----------------
calendar year. Such notice shall show in reasonable detail the basis on which
the estimate was determined. On or before the first day of each month during
the ensuing calendar year, Tenant shall pay to Landlord one-twelfth (1/12th) of
such estimated amounts, provided that if such notice is not given in December,
Tenant shall continue to pay on the basis of the prior year's estimate until the
month after such notice is given. If at any time or times it appears to
Landlord, in its reasonable judgment, that the amounts payable under this
Paragraph 5.D.(i) for the current calendar year will vary from its then-current
- -----------------
estimate by more than five percent (5%), Landlord may, in its sole discretion,
by notice to Tenant, showing in reasonable detail the basis for such variance,
revise its estimate for such year, in which case subsequent payments by Tenant
for such year shall be based upon such revised estimate. Landlord's election
not to give the notice described in the foregoing sentence shall not affect
Landlord's ability to charge Tenant for, nor Tenant's liability to pay for, any
shortfall in the estimated payments for such calendar year previously made by
Tenant, as set forth in Paragraph 5.D.(ii).
------------------
(ii) Adjustment. Within one hundred twenty (120) days after the
----------
close of each calendar year or as soon after such 120-day period as reasonably
practicable, Landlord shall deliver to Tenant a reasonably detailed statement of
Common Area Maintenance Costs for such calendar year, certified by Landlord or
its property manager, subject to Tenant's right to audit as hereinafter
provided. At that time, Landlord shall also deliver to Tenant a statement,
certified as correct by Landlord, of the adjustments to be made pursuant to
Paragraph 5.D.(i) above. If Landlord's statement shows that Tenant owes an
- -----------------
amount that is less than the estimated payments for such calendar year
previously made by Tenant, Landlord may elect, in its sole discretion, to either
refund such excess to Tenant within thirty (30) days after delivery of the
statement, or offset such overpayment against Rent due or remaining due under
this Lease; provided that if no Rent remains due, Landlord shall refund such
excess to Tenant within thirty (30) days after delivery of the statement. If
such statement shows that Tenant owes an amount that is more than the estimated
payments for such calendar year previously made by Tenant, Tenant shall pay the
deficiency to Landlord within thirty (30) days after delivery of the statement.
(iii) Last Year. If this Lease shall terminate on a day other
---------
than the last day of a calendar year, the adjustment in Rent applicable to the
calendar year in which such termination shall occur shall be prorated on the
basis which the number of days from the commencement of such calendar year to
and including such termination date bears to three
15
<PAGE>
hundred sixty (360). The termination of this Lease shall not affect the
obligations of Landlord and Tenant pursuant to Paragraph 5.D.(ii) to be
------------------
performed after such termination.
(iv) Audit. Within one hundred eighty (180) days after receipt
-----
of Landlord's statement of Common Area Maintenance Costs as provided in
Paragraph 5.D.(ii), Tenant or its designee, on not less than five (5) days'
- ------------------
prior written notice to Landlord, shall have the right to, at Tenant's sole cost
and expense, audit, examine and copy Landlord's books and records with respect
to the Common Area Maintenance Costs for the calendar year pertaining to the
year for which the Landlord's statement pertains. Landlord shall cooperate with
Tenant in any such examination of its books and records.
E. Additional Rent. All monies required to be paid by Tenant under
---------------
this Lease, including, without limitation, the Tenant Improvement costs pursuant
to Exhibit B, the management fee described in Paragraph 5.D, Tenant's Percentage
--------- -------------
Share of Common Area Maintenance Costs pursuant to Paragraph 5.D, Real Property
-------------
Taxes and Impositions pursuant to Paragraph 15, and the monthly cost of
------------
insurance premiums required pursuant to Paragraph 21.C, shall be deemed
--------------
Additional Rent.
F. Prorations. If the Commencement Date or the Second Half
----------
Commencement Date is not the first (1st) day of a month, or if the termination
date of this Lease is not the last day of a month, a prorated installment of
Monthly Rent based on a 30-day month shall be paid for the fractional month
during which such date occurs or the Lease terminates.
G. Interest. Any amount of Rent or other charges provided for under
--------
this Lease due and payable to Landlord which is not paid when due shall bear
interest at the Interest Rate from the date that is (i) five (5) days after the
date such Rent is due until such Rent is paid, or (ii) ten (10) days after
Tenant receives written notice from Landlord that any other charge provided for
under this Lease (other than Rent) is due and payable, until such other charge
is paid.
6. Late Payment Charges.
--------------------
Tenant acknowledges that late payment by Tenant to Landlord of Rent
and other charges provided for under this Lease will cause Landlord to incur
costs not contemplated by this Lease, the exact amount of such costs being
extremely difficult or impracticable to fix. Therefore, if any installment of
Rent or any other charge due from Tenant (excluding late release of the Set-
Aside Funds pursuant to the Work Letter) is not received by Landlord within
three (3) days after the date such Rent or other charge is due, Tenant shall pay
to Landlord an additional sum equal to seven percent (7%) of the amount overdue
as a late charge for every month or portion thereof that the Rent or other
charges remain unpaid. The parties agree that this late charge represents a
fair and reasonable estimate of the costs that Landlord will incur by reason of
the late payment by Tenant.
Initials:
16
<PAGE>
/s/ C. G. /s/ K. A. G.
- ------------------------ -------------------------
Landlord Tenant
7. Security Deposit.
----------------
A. Deposit Required. Tenant shall deposit with Landlord upon the
----------------
execution of this Lease by Landlord and Tenant, an amount equal to three (3)
payments of the Estimated Monthly Rent under this Lease, as the "Security
--------
Deposit" for the full and faithful performance of every provision of this Lease
- -------
to be performed by Tenant. Effective as of the Rent Establishment Date, the
Security Deposit shall be adjusted (if necessary) to equal three (3) payments of
the initial Monthly Rent under this Lease. If as of the Rent Establishment Date
the Estimated Monthly Rent exceeds the initial Monthly Rent as determined under
Paragraph 5.A above, then Landlord shall refund to Tenant, within thirty (30)
- -------------
days after the Rent Establishment Date, any overpayment of the Security Deposit.
If as of the Rent Establishment Date the Estimated Monthly Rent is less than the
initial Monthly Rent as determined under Paragraph 5.A above, then Tenant shall
-------------
increase the Security Deposit by paying the deficiency in the Security Deposit
to Landlord within thirty (30) days after the Rent Establishment Date. For the
purposes of this Lease, the term "Security Deposit" shall include the initial
sum deposited by Tenant as the Security Deposit and any other sum deposited by
Tenant as the Security Deposit and any other sum deposited by Tenant towards the
Security Deposit pursuant to this Paragraph 7.A. At Tenant's option, the
-------------
Security Deposit may be in the form of an irrevocable standby letter of credit
("L-C"). Landlord shall not be required to segregate the Security Deposit from
Landlord's general funds; Landlord's obligations with respect to the Security
Deposit shall be those of a debtor and not a trustee, and Tenant shall not be
entitled to any interest on the Security Deposit. Invocation by Landlord of its
rights hereunder shall not constitute a waiver of nor relieve Tenant from any
liability or obligation for any default by Tenant under this Lease.
(i) Reduction or Replacement. So long as Tenant has not
------------------------
committed any default under this Lease, then if Tenant can demonstrate to the
reasonable satisfaction of Landlord that Tenant has maintained a Fixed Charge
Ratio of at least 1.25 to 1 for a period of four (4) consecutive fiscal years at
any time after the Commencement Date, then Tenant may elect to reduce the
Security Deposit to a sum equal to the then-current amount of Monthly Rent. For
the purposes of this Paragraph 7, in order for Tenant to demonstrate that it has
-----------
maintained the required Fixed Charge Ratio for the fiscal year or years in
question, Tenant must at a minimum deliver to Landlord an audited financial
statement of Tenant, showing that Tenant has maintained the required Fixed
Charge Ratio for the fiscal year or years in question.
If Tenant is entitled to and does elect to reduce the amount of the
Security Deposit pursuant to this Paragraph 7.A.(i), and Tenant delivers to
-----------------
Landlord written notice of its election to so reduce the amount of the Security
Deposit and the financial statement described in the foregoing grammatical
paragraph, then either (x) if the Security Deposit is in the form of cash,
Landlord shall pay to Tenant the excess amount of the Security Deposit, without
interest, within thirty (30) days after Landlord's receipt of such notice and
statement; or (y) if the Security Deposit is in the form of an L-C, then Tenant
may, not less than ten (10) days after Landlord's receipt of such notice and
statement, replace the L-C with an L-C in an amount equal to the
17
<PAGE>
reduced amount of the Security Deposit.
(ii) Consequences of Default. If Tenant defaults with respect
-----------------------
to any provision of this Lease, after the expiration of any applicable cure or
grace periods expressly provided for in this Lease, Landlord may apply all or
any part of the Security Deposit for the payment of any Rent or other sum in
default, the repair of such damage to the Premises or the payment of any other
amount which Landlord may spend or become obligated to spend by reason of
Tenant's default or to compensate Landlord for any other loss or damage which
Landlord may suffer by reason of Tenant's default to the full extent permitted
by law. If any portion of a cash Security Deposit is so applied, or any portion
of an L-C posted as the Security Deposit, if applicable, is drawn upon, by
Landlord for such purposes, Tenant shall either, within ten (10) days after
written demand therefor, deposit cash with Landlord in an amount sufficient to
restore the Security Deposit to its original amount or deposit a replacement L-C
with Landlord in the amount of the original L-C. If Tenant is not otherwise in
default, the Security Deposit or any balance thereof shall be returned to Tenant
within thirty (30) days of termination of the Lease.
(ii) Form of L-C. If at any time Tenant elects to deposit an L-
-----------
C as the Security Deposit, the L-C shall be issued by a bank reasonably
acceptable to Landlord, shall be issued for a term of at least twelve (12)
months and shall be in a form and with such content reasonably acceptable to
Landlord. Tenant shall either replace the expiring L-C with an L-C in an amount
equal to the original L-C or renew the expiring L-C, in any event no later than
thirty (30) days prior to the expiration of the term of the L-C then in effect.
If Tenant fails to deposit a replacement L-C or renew the expiring L-C, Landlord
shall have the right to draw upon the expiring L-C for the full amount thereof
and hold the same as the Security Deposit; provided, however, that if Tenant
provides a replacement L-C that meets the requirements of this Paragraph, then
Landlord shall return to Tenant promptly in cash that amount of the L-C that had
been drawn upon by Landlord. Drawing upon the L-C shall be conditioned upon the
presentation to the issuer of the L-C of a certified statement executed by a
general partner of Landlord that (i) Tenant is in default under the Lease and
Landlord is exercising its right to draw upon so much of the L-C as is necessary
to cure Tenant's default, or (ii) Tenant has not renewed or replaced an expiring
L-C as required by this Lease and Landlord is authorized to draw upon the L-C
prior to its expiration. The L-C shall not be mortgaged, assigned or encumbered
in any manner whatsoever by Tenant without the prior written consent of
Landlord. The use, application or retention of the L-C, or any portion thereof,
by Landlord shall not prevent Landlord from exercising any other right or remedy
provided by this Lease or by law, it being intended that Landlord shall not
first be required to proceed against the L-C, and such use, application or
retention shall not operate as a limitation on any recovery to which Landlord
may otherwise be entitled.
8. Holding Over.
------------
If Tenant remains in possession of all or any part of the Premises
after the expiration of the Term, with the express or implied consent of
Landlord, such tenancy shall be at sufferance only, and shall not constitute a
renewal or extension for any further term. If Tenant
18
<PAGE>
remains in possession after the expiration of the Term, either with or without
Landlord's consent, Rent shall be payable at a rental equal to one hundred
thirty percent (130%) of the Monthly Rent payable during the last month of the
Term (which rental shall be due and payable at the same time as Monthly Rent is
due under this Lease), and any other sums due under this Lease shall be payable
in the amount and at the times specified in this Lease. Such holdover tenancy
shall be subject to every other term, condition, and covenant contained herein;
provided, however, that neither the Holdover Option (as defined below) nor
Landlord's obligations under the Work Letter shall be of any force or effect
during any such holdover tenancy.
9. Tenant Improvements.
-------------------
Landlord agrees to construct the Tenant Improvements pursuant to the
terms of Exhibit B.
---------
10. Condition of Premises.
---------------------
A. Capital Improvements. Landlord shall complete the Capital
--------------------
Improvements in accordance with the terms of Exhibit B; provided, however, that
---------
the construction of the shell and core of the Building shall be governed by the
terms of the Build to Suit Agreement. Except for its obligation to perform the
Capital Improvements and the Tenant Improvements as set forth in this Lease and
the Work Letter, Landlord shall have no obligation whatsoever to do any work or
perform any improvements whatsoever to any portion of the Premises or the
Building.
B. Acceptance of Premises. Within ten (10) days after completion of
----------------------
the Tenant Improvements Tenant shall conduct a walk-through inspection of the
Premises with Landlord and complete a punch list of items needing additional
work. Other than the items specified in the punch list, if any, and subject to
Landlord's representations and warranties described below, by taking possession
of the Premises, Tenant shall be deemed to have accepted the Premises in good,
clean and completed condition and repair, subject to all applicable laws, codes
and ordinances. Any damage to the Premises caused by Tenant's move-in shall be
repaired or corrected by Tenant, at its sole cost and expense, which repair or
corrective work shall not be paid for out of the Tenant Improvements Allowance.
Tenant acknowledges that neither Landlord nor Landlord's Agents have made any
representations or warranties as to the suitability or fitness of the Premises
for the conduct of Tenant's business or for any other purpose, nor has Landlord
or Landlord's Agents agreed to undertake any Alterations or construct any
Improvements to the Premises except as expressly provided in this Lease. If
Tenant fails to submit a punch-list to Landlord within such 10-day period, it
shall be deemed that there are no Improvement items needing additional work or
repair. Landlord's contractor shall complete all reasonable punch-list items
within thirty (30) days after the walk-through inspection or as soon as
practicable thereafter. Upon completion of such punch-list items, Tenant shall
approve such completed items in writing to Landlord. If Tenant fails to approve
such items within fourteen (14) days of completion, such items shall be deemed
approved by Tenant.
11. Use of the Premises and Common Area.
-----------------------------------
19
<PAGE>
A. Tenant's Use. Tenant shall use the Premises only for general
------------
office, research and development, marketing, sales, and storage related to such
activities, and any other legal use consistent with any CC&Rs. Tenant shall not
use the Premises or suffer or permit anything to be done in or about the
Premises which will in any way conflict with any law, statute, zoning
restriction, ordinance or governmental law, rule, regulation or requirement of
public authorities now in force or which may hereafter be in force, relating to
or affecting the condition, use or occupancy of the Premises. Tenant shall not
commit any public or private nuisance or any other act or thing which might or
would disturb the quiet enjoyment of any other tenant of Landlord or any
occupant of nearby property. Tenant shall place no loads upon the floors, walls
or ceilings in excess of the maximum designed load determined by a licensed
structural engineer or which endanger the structure; nor place any harmful
liquids in the drainage systems; nor dump or store waste materials or refuse or
allow waste materials or refuse to remain outside the Building proper, except in
the enclosed trash areas provided. Tenant shall not store or permit to be
stored or otherwise placed any other material of any nature whatsoever outside
the Building, except on a temporary basis.
B. Hazardous Materials.
-------------------
(i) Hazardous Materials Defined. As used herein, the term
---------------------------
"Hazardous Materials" shall mean any wastes, materials or substances (whether in
------------------
the form of liquids, solids or gases, and whether or not air-borne), which are
or are deemed to be (a) pollutants or contaminants, or which are or are deemed
to be hazardous, toxic, ignitable, reactive, corrosive, dangerous, harmful or
injurious, or which present a risk to public health or to the environment, or
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, any
amendments or successor(s) thereto, replacements thereof or publications
promulgated pursuant thereto, including, without limitation, any such items or
substances which are or may become regulated by any of the Environmental Laws
(as hereinafter defined); (b) listed as a chemical known to the State of
California to cause cancer or reproductive toxicity pursuant to Section 25249.8
of the California Health and Safety Code, Division 20, Chapter 6.6 (Safe
Drinking Water and Toxic Enforcement Act of 1986); or (c) a pesticide,
petroleum, including crude oil or any fraction thereof, asbestos or any
asbestos-containing material, a polychlorinated biphenyl, radioactive material,
or urea formaldehyde.
(ii) Environmental Laws Defined. In addition to the laws
--------------------------
referred to in Paragraph 11.B.(i) above, the term "Environmental Laws" shall be
------------------ ------------------
deemed to include, without limitation, 33 U.S.C. Section 1251 et seq., 42
------
U.S.C. Section 6901 et seq., 42 U.S.C. Section 7401 et seq., 42 U.S.C.
------ ------
Section 9601 et seq., and California Health and Safety Code Section 25100 et
------ --
seq., and 25300 et seq., California Water Code, Section 13020 et seq., or any
- --- ------ ------
successor(s) thereto, all local, state and federal laws, judgments, ordinances,
orders, rules, regulations, codes and other governmental restrictions,
guidelines and requirements, any amendments and successors thereto, replacements
thereof and publications promulgated pursuant thereto, which deal with or
otherwise in any manner relate to, air or water quality, air emissions, soil or
ground conditions or other environmental matters of any kind.
20
<PAGE>
(iii) Use of Hazardous Materials. Tenant agrees that during the
--------------------------
Term of this Lease, Tenant shall not use, or permit the use of, nor store,
generate, treat, manufacture or dispose of Hazardous Materials on, from or under
the Premises (individually and collectively, "Hazardous Use") except to the
-------------
extent that, and in accordance with such conditions as, Landlord may have
previously approved in writing in its sole and absolute discretion.
Notwithstanding the foregoing, Tenant shall be entitled to use and store only
those Hazardous Materials which are (a) set forth in a list prepared by Tenant
and approved in writing by Landlord, which shall be deemed given with respect to
the Approved Hazardous Materials (hereinafter defined), (b) necessary for
Tenant's business, but then only in the amounts and for the purposes previously
disclosed in writing to and approved in writing by Landlord, and (c) in full
compliance with Environmental Laws, and all judicial and administrative
decisions pertaining thereto. All Hazardous Materials approved in writing by
Landlord as provided in the preceding sentence shall collectively be referred to
as the "Approved Hazardous Materials". Within thirty (30) days after request by
----------------------------
Landlord, Tenant shall deliver to Landlord a list of the Approved Hazardous
Materials. Tenant shall not be entitled to install any tanks under, on or about
the Premises for the storage of Hazardous Materials without the express written
consent of Landlord, which may be given or withheld in Landlord's sole
discretion. For the purposes of this Paragraph 11.B.(iii), the term Hazardous
--------------------
Use shall include Hazardous Use(s) on, from or under the Premises by Tenant, any
Subtenant occupying all or any portion of the Premises during the Term, or any
of their directors, officers, employees, shareholders, partners, invitees,
agents, contractors or occupants (collectively, "Tenants Parties"), whether
---------------
known or unknown to Tenant, occurring during the Term of this Lease. The term
"Tenant's Parties" shall not include any tenants of the Project other than
----------------
Tenant, except that the term "Tenant's Parties" shall include any Subtenant
occupying all or any portion of the Premises during the Term.
(iv) Hazardous Materials Report; When Required. Tenant shall
-----------------------------------------
submit to Landlord a written report with respect to Hazardous Materials
("Report") in the form prescribed in Paragraph 11.B.(v) below on the following
------ ------------------
dates:
(a) At any time within ten (10) days after written
request by Landlord, and
(b) At any time when there has been a violation of any
Environmental Law, or in connection with any proposed request for Landlord's
consent to any change in the list of Approved Hazardous Materials or for an
increase in the intensity of usage or storage of such Approved Hazardous
Materials.
(v) Hazardous Materials Report; Contents. The Report shall
------------------------------------
contain, without limitation, the following information:
(a) Whether on the date of the Report and (if applicable)
during the period since the last Report there has been any Hazardous Use on,
from or under the Premises, other than the use of Approved Hazardous Materials.
(b) If there was such Hazardous Use, the exact identity
of the
21
<PAGE>
Hazardous Materials (other than the Approved Hazardous Materials), the dates
upon which such materials were brought upon the Premises, the dates upon which
such Hazardous Materials were removed therefrom, and the quantity, location, use
and purpose thereof.
(c) If there was such Hazardous Use, any governmental
permits maintained by Tenant with respect to such Hazardous Materials, the
issuing agency, original date of issue, renewal dates (if any) and expiration
date. Copies of any such permits and applications therefor shall be attached.
(d) If there was such Hazardous Use, any governmental
reporting or inspection requirements with respect to such Hazardous Materials,
the governmental agency to which reports are made and/or which conducts
inspections, and the dates of all such reports and/or inspections (if
applicable) since the last Report. Copies of any such Reports shall be attached.
(e) If there was such Hazardous Use, identification of
any operation or business plan prepared for any government agency with respect
to Hazardous Use.
(f) Any liability insurance carried by Tenant with
respect to Hazardous Materials, if any, the insurer, policy number, date of
issue, coverage amounts, and date of expiration. Copies of any such policies or
certificates of coverage shall be attached.
(g) Any notices of violation of Environmental Laws,
written or oral, received by Tenant from any governmental agency since the last
Report, the date, name of agency, and description of violation. Copies of any
such written notices shall be attached.
(h) Any knowledge, information or communication which
Tenant has acquired or received relating to (x) any enforcement, cleanup,
removal or other governmental or regulatory action threatened or commenced
against Tenant or with respect to the Premises pursuant to any Environmental
Laws; (y) any claim made or threatened by any person or entity against Tenant or
the Premises on account of any alleged loss or injury claimed to result from any
alleged Hazardous Use on or about the Premises; or (z) any report, notice or
complaint made to or filed with any governmental agency concerning any Hazardous
Use on or about the Premises. The Report shall be accompanied by copies of any
such claim, report, complaint, notice, warning or other communication that is in
the possession of or is available to Tenant.
(i) Such other pertinent information or documents as are
reasonably requested by Landlord in writing.
(vi) Release of Hazardous Materials; Notification and Cleanup.
--------------------------------------------------------
(a) At any time during the Term, if Tenant knows or
believes that any release of any Hazardous Materials has come or will come to be
located upon, about or beneath the Premises, then Tenant shall immediately,
either prior to the release or following the discovery thereof by Tenant, give
verbal and follow-up written notice of that condition to
22
<PAGE>
Landlord.
(b) At its sole cost and expense, Tenant covenants to
investigate, clean up and otherwise remediate any release of Hazardous Materials
which were caused or created by Tenant or any of Tenant's Parties. Such
investigation, clean-up and remediation shall be performed only after Tenant has
obtained, if practicable, Landlord's written consent, which shall not be
unreasonably withheld; provided, however, that Tenant shall be entitled to
respond immediately to an emergency without first obtaining Landlord's written
consent. All clean-up and remediation shall be done in compliance with
Environmental Laws and to the reasonable satisfaction of Landlord.
(c) Notwithstanding the foregoing, Landlord shall have
the right, but not the obligation, in Landlord's sole and absolute discretion,
exercisable by written notice to Tenant, to undertake within or outside the
Premises all or any portion of any reasonable investigation, clean-up or
remediation with respect to any Hazardous Use of such Hazardous Materials by
Tenant or any of Tenant's Parties (or, once having undertaken any of such work,
to cease same, in which case Tenant shall perform the work), all at Tenant's
sole cost and expense, which shall be paid by Tenant as Additional Rent within
ten (10) days after receipt of written request therefor by Landlord (and which
Landlord may require to be paid prior to commencement of any work by Landlord);
provided, however, that Tenant's obligation to pay for such work shall only be
applicable if Tenant fails to perform its obligations under this Paragraph 11
------------
(including without limitation the obligations described in Paragraph
---------
11.B.(vi)(b)). No such work by Landlord shall create any liability on the part
- -------------
of Landlord to Tenant or any other party in connection with such Hazardous
Materials by Tenant or any of Tenant's Parties or constitute an admission by
Landlord of any responsibility with respect to such Hazardous Materials.
(d) It is the express intention of the parties hereto
-------------------
that Tenant shall be liable under this Paragraph 11.B.(vi) for any and all
conditions covered hereby which were or are caused or created by Tenant or any
of Tenant's Parties, whether occurring prior to, on, or after the Commencement
Date. Tenant shall not enter into any settlement agreement, consent decree or
other compromise with respect to any claims relating to any Hazardous Materials
in any way connected to the Premises without first (x) notifying Landlord of
Tenant's intention to do so and affording Landlord the opportunity to
participate in any such proceedings, and (y) obtaining Landlord's written
consent, which shall not be unreasonably withheld.
(vii) Inspection and Testing by Landlord. Landlord shall have
----------------------------------
the right at all times during the Term of this Lease to (a) inspect the
Premises, as well as such of Tenant's books and records pertaining to the
Premises and the conduct of Tenant's business therein, and to (b) conduct tests
and investigations to determine whether Tenant is in compliance with the
provisions of this Paragraph 11.B. Except in case of emergency, Landlord shall
--------------
give reasonable notice to Tenant before conducting any inspections, tests, or
investigations in accordance with Paragraph 19, shall provide Tenant with a work
------------
plan describing any testing that shall be performed at the Premises, and shall
use reasonable efforts to minimize interference with the conduct of Tenant's
business at the Premises caused by any such inspections, tests, or
investigations. The cost of all such inspections, tests and investigations shall
be borne by Tenant.
23
<PAGE>
Neither any action nor inaction on the part of Landlord pursuant to this
Paragraph 11.B.(vii) shall be deemed in any way to release Tenant from, or in
- --------------------
any way modify or alter, Tenant's responsibilities, obligations, and liabilities
incurred pursuant to Paragraph 11.B hereof.
--------------
(viii) Indemnity. Tenant shall indemnify, defend, protect, hold
---------
harmless, and, at Landlord's option (with such attorneys as Landlord may approve
in advance and in writing), defend Landlord, Landlord's Agents, and Landlord's
officers, directors, shareholders, partners, employees, contractors, property
managers, agents and mortgagees and other lien holders, from and against any and
all Losses (as defined below), whenever such Losses arise, arising from or
related to: (a) any violation or alleged violation by Tenant or any of Tenant's
Parties of any of the requirements, ordinances, statutes, regulations or other
laws referred to in this Paragraph 11.b, including, without limitation, the
--------------
Environmental Laws, whether such violation or alleged violation occurred prior
to, on, or after the Commencement Date; (b) any breach of the provisions of this
Paragraph 11.b by Tenant or any of Tenant's Parties; or (c) any Hazardous Use
- --------------
on, about or from the Premises by Tenant or any of Tenant's Parties of any
Hazardous Materials (whether or not approved by Landlord under this Lease),
whether such Hazardous Use occurred prior to, on, or after the Commencement
Date. The term "Losses" shall mean all claims, demands, expenses, actions,
------
judgments, damages (whether consequential, direct or indirect, known or unknown,
foreseen or unforeseen), penalties, fines, liabilities, losses of every kind and
nature (including, without limitation, property damage, diminution in value of
Landlord's interest in the Premises, damages for the loss of restriction on use
of any space or amenity within the Premises, damages arising from any adverse
impact on marketing space in the Premises, sums paid in settlement of claims and
any costs and expenses associated with injury, illness or death to or of any
person), suits, administrative proceedings, costs and fees, including, but not
limited to, attorneys' and consultants' fees and expenses, and the costs of
cleanup, remediation, removal and restoration, that are in any way related to
any matter covered by the foregoing indemnity.
(ix) Survival. The provisions of this Paragraph 11.b shall
-------- --------------
survive the expiration or earlier termination of this Lease.
C. Special Provisions Relating to The Americans With Disabilities
--------------------------------------------------------------
Act of 1990.
- -----------
(i) Allocation of Responsibility to Landlord. As between
----------------------------------------
Landlord and Tenant, Landlord shall be responsible that the Common Area owned by
Landlord complies with the requirements of Title III of the Americans with
Disabilities Act of 1990 (42 U.S.C. 12181, et seq., The Provisions Governing
Public Accommodations and Services Operated by Private Entities), and all
regulations promulgated thereunder, and all amendments, revisions or
modifications thereto now or hereafter adopted or in effect in connection
therewith (hereinafter collectively referred to as the "ADA"), and to take such
actions and make such alterations and improvements as are necessary for such
compliance; provided, however, that to the extent such requirements arise from
the construction of any Alterations to the Premises made by or on behalf of
Tenant, then as between Landlord and Tenant, Tenant shall be responsible that
the Common Area complies with the requirements of the ADA, and to take such
actions and make such
24
<PAGE>
alterations and improvements as are necessary for such compliance.
(ii) Allocation of Responsibility to Tenant. Except as
--------------------------------------
expressly provided in the Work Letter, as between Landlord and Tenant, Tenant,
at its sole cost and expense, shall be responsible that the Premises (and all
modifications made by Tenant of access to the Premises from the street), and all
alterations and improvements in the Premises (including without limitation the
Tenant Improvements), and Tenant's use and occupancy of the Premises, and
Tenant's performance of its obligations under this Lease, comply with the
requirements of the ADA, and to take such actions and make such alterations and
improvements as are necessary for such compliance; provided, however, that
Tenant shall not make any such alterations or improvements except upon
Landlord's prior written consent (which shall not be unreasonably withheld)
pursuant to the terms and conditions of this Lease. If Tenant fails diligently
to take such actions or make such alterations or improvements as are necessary
for such compliance, Landlord may, but shall not be obligated to, take such
actions and make such alterations and improvements and may recover all of the
costs and expenses of such actions, alterations and improvements from Tenant as
Additional Rent. Tenant shall be entitled to utilize the Tenant Improvements
Allowance to pay for the cost of any improvements required by ADA that are
triggered by the construction of the Tenant Improvements.
(iii) General. Notwithstanding anything in this Lease contained
-------
to the contrary, no act or omission of either party, including any approval,
consent or acceptance by it or its agents, employees or other representatives,
shall be deemed an agreement, acknowledgment, warranty, or other representation
by it that the other party has complied with the ADA as provided under
Paragraphs 11.C.(i) or 11.c.(ii) or that any action, alteration or improvement
- ------------------- ---------
by it complies or will comply with the ADA as provided under Paragraphs 11.c.(i)
-------------------
or 11.c.(ii) or constitutes a waiver by it of the other party's obligations to
---------
comply with the ADA under Paragraphs 11.c.(i) or 11.c.(ii) of this Lease or
------------------- ---------
otherwise. Any failure of either party to comply with its obligations of the
ADA under Paragraphs 11.c.(i) or 11.c.(ii) shall not relieve such party from any
------------------- ---------
obligations under this Lease or in the case of Landlord's failure to comply
under Paragraph 11.c.(i), constitute or be construed as a constructive or other
------------------
eviction of Tenant or disturbance of Tenant's use and possession of the
Premises.
D. Use and Maintenance of Common Area. Tenant and its employees and
----------------------------------
invitees shall have the non-exclusive right to use the Common Area in common
with other persons during the Term of this Lease, subject to the CC&Rs and such
reasonable rules and regulations as may from time to time be deemed necessary or
advisable in Landlord's reasonable discretion for the proper and efficient
operation and maintenance of the Common Area. Such rules and regulations may
include, among other things, the hours during which the Common Area shall be
open for use. Landlord shall maintain and operate the Common Area from time to
time owned by Landlord in good condition, provided that any damage thereto,
other than normal wear and tear, occasioned by the act of Tenant or its
employees or invitees shall be paid by Tenant upon demand by Landlord.
12. Quiet Enjoyment.
---------------
25
<PAGE>
Landlord covenants that Tenant, upon performing the terms, conditions
and covenants of this Lease, shall have quiet and peaceful possession of the
Premises as against any person claiming the same by, through or under Landlord.
13. Alterations.
-----------
A. Alteration Rights. After the Commencement Date, Tenant shall not
-----------------
make or permit any Alterations in, on or about the Premises, except for
nonstructural Alterations (which shall not include any modifications to the
mechanical or electrical systems of the Building, nor any penetration of the
Building's roof) not exceeding Ten Thousand Dollars ($10,000.00) in aggregate
cost during any period of twelve (12) consecutive months, without the prior
written consent of Landlord, and according to plans and specifications approved
in writing by Landlord, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing Tenant shall not, without the prior written
consent of Landlord, make any:
(i) Alterations to the exterior of the Building;
(ii) Alterations to the roof of the Building; and
(iii) Alterations visible from outside the Building, to which
Landlord may withhold Landlord's consent on wholly aesthetic grounds.
B. Performance of Alterations. All Alterations shall be installed
--------------------------
at Tenant's sole expense, in compliance with all applicable laws, by a licensed
contractor, shall be done in a good and workmanlike manner conforming in quality
and design with the Premises existing as of the Commencement Date, and shall not
diminish the value of either the Building or the Premises. All Alterations made
by Tenant shall be and become the property of Landlord upon installation and
shall not be deemed Tenant's Personal Property, and Tenant shall not remove any
Alterations from the Premises unless Tenant has first obtained Landlord's
written consent to such removal. Landlord may require Tenant to remove, at
Tenant's expense, any Alterations from the Premises at the expiration or earlier
termination of this Lease; provided, however, that at the time any Alterations
are constructed, Tenant shall have the right to request Landlord's written
approval (which shall not be unreasonably withheld or delayed) that Landlord
will not require the removal of such Alterations at the expiration or earlier
termination of this Lease. Notwithstanding Alterations made by it to the
Premises. Tenant shall give Landlord written notice of Tenant's intention to
perform work on the Premises at least ten (10) days prior to the commencement of
such work to enable Landlord to post and record a Notice of Nonresponsibility or
other notice deemed proper before the commencement of any such work.
C. Trade Fixtures. Landlord acknowledges that Tenant may lease from
--------------
or finance with a third party (collectively, a "Trade Fixture Lessor") all or a
--------------------
portion of Tenant's Personal Property. Landlord shall duly execute and properly
deliver any waivers or consents which may reasonably be required by any proposed
Trade Fixture Lessor in connection with the leasing or financing of such
Tenant's Personal Property, so long as such waivers and consents shall include
the following: (i) the Trade Fixture Lessor shall agree to repair any damage to
the
26
<PAGE>
Premises caused by the Trade Fixtures Lessor's removal of Tenant's Personal
Property from the Premises, and (ii) Landlord's waiver and consent shall be of
no force or effect after the thirtieth (30th) day following the end of the Term
or earlier termination of this Lease.
14. Surrender of the Premises.
-------------------------
Upon the expiration or earlier termination of the Term, Tenant shall
surrender the Premises to Landlord in its condition existing as of the date of
substantial completion of the Improvements, normal wear and tear and fire or
other casualty excepted, with all interior walls repaired if damaged, all
broken, marred or nonconforming acoustical ceiling tiles replaced, all windows
washed, the plumbing and electrical systems and lighting in good order and
repair, including replacement of any burned out or broken light bulbs or
ballasts, the HVAC equipment serviced and repaired by a reputable and licensed
service firm, and all floors cleaned, all to the reasonable satisfaction of
Landlord. Tenant shall remove from the Premises all of Tenant's Alterations
required to be removed pursuant to Paragraph 13, and all Tenant's Personal
------------
Property, and repair any damage and perform any restoration work caused by such
removal. If Tenant fails to remove such Alterations and Tenant's Personal
Property, and such failure continues after the expiration or earlier termination
of this Lease, Landlord may retain such Alterations and Tenant's Property and
all rights of Tenant with respect to it shall cease, or Landlord may place all
or any portion of such Alterations and Tenant's Property in public storage for
Tenant's account. Tenant shall be liable to Landlord for costs of removal of any
such Alterations and Tenant's Personal Property and storage and transportation
costs of same, and the cost of repairing and restoring the Premises, together
with interest at the Interest Rate from the date of expenditure by Landlord. If
the Premises are not so surrendered at the expiration or earlier termination of
this Lease, Tenant shall indemnify Landlord and Landlord's Agents against all
loss or liability, including reasonable attorneys' fees and costs, resulting
from delay by Tenant in so surrendering the Premises.
Normal wear and tear, for the purposes of this Lease, shall be
construed to mean wear and tear caused to the Premises by a natural aging
process which occurs in spite of prudent application of the best standards for
maintenance, repair and janitorial practices. It is not intended, nor shall it
be construed, to include items of neglected or deferred maintenance which would
have or should have been attended to during the Term of the Lease if the best
standards had been applied to properly maintain and keep the Premises at all
times in good condition and repair.
15. Impositions and Real Property Taxes.
-----------------------------------
A. Payment by Tenant. Tenant shall pay all Impositions prior to
-----------------
delinquency. If billed directly, Tenant shall pay such Impositions and
concurrently present to Landlord satisfactory evidence of such payments. If any
Impositions are billed to Landlord or included in bills to Landlord for Real
Property Taxes, then Tenant shall pay to Landlord all such amounts within
fifteen (15) days after receipt of Landlord's invoice therefor. If applicable
law prohibits Tenant from reimbursing Landlord for an Imposition, but Landlord
may lawfully increase the Monthly Rent to account for Landlord's payment of such
Imposition, the Monthly Rent payable to Landlord shall be increased so that the
amount of such increased Monthly Rent, together with
27
<PAGE>
any accompanying increases in the Real Property Taxes payable by Tenant with
respect to such Imposition, are sufficient to net to Landlord the same return
without reimbursement of such Imposition as would have been received by Landlord
with reimbursement of such Imposition. In addition, on or before April 10 and
December 10 of each year of the Term, Tenant shall pay directly to the San Mateo
County assessor the Real Property Taxes for the Premises as set forth on the
assessors tax bill for the Premises. If, however, the Premises are not a
separate parcel for tax purposes but constitute a portion of a larger tax parcel
or parcels, the Real Property Taxes payable by Tenant under this Lease shall be
a percentage of the Real Property Taxes payable for such parcel or parcels,
which percentage shall be determined by dividing the Rentable Area of the
Building by the total Rentable Area of all buildings on such parcel or parcels
and multiplying the result by 100, which Real Property Taxes shall be payable by
Tenant to Landlord monthly as part of the Common Area Maintenance Costs.
(i) Tax Parcels. If Landlord determines in its reasonable
-----------
discretion that the configuration of tax parcels within the Project (including
without limitation the tax parcel on which the Premises is situated) causes the
allocation of Real Property Taxes between the affected tax parcels to be unfair
or inequitable, Landlord reserves the right to internally reallocate the Real
Property Taxes assessed against such affected tax parcels in a manner that
reasonably addresses such unfairness or inequity. If Landlord effects any such
reallocation, then the Real Property Taxes payable by Tenant under this Lease
shall be those Real Property Taxes allocated to the Premises pursuant to this
Paragraph 15.A.(i).
- ------------------
(ii) Payment. Promptly following payment of the Real Property
-------
Taxes, Tenant shall provide Landlord with copies of paid receipts or other
documentary evidence that the Real Property Taxes have been paid by Tenant. If
Tenant fails to pay the Real Property Taxes on or before April 10 and December
10, respectively, or if Tenant fails to pay its share of Real Property Taxes as
part of the Common Area Maintenance Costs, Tenant shall pay to Landlord any
penalty incurred by such late payment. In addition, Tenant shall pay any Real
Property Tax not included within the county tax assessor's tax bill within ten
(10) days after being billed for same by Landlord. The foregoing dates are based
on the dates established by the county as the dates on which Real Property Taxes
become delinquent if not paid. If such delinquency dates change, the dates on
which Tenant must pay the Real Property Taxes for the Premises shall be at least
ten (10) days prior to the new delinquency dates. Assessments, taxes, fees,
levies and charges may be imposed by governmental agencies for such purposes as
fire protection, street, sidewalk, road, utility construction and maintenance,
refuse removal and for other governmental services which may formerly have been
provided without charge to property owners or occupants. It is the intention of
the parties that all new and increased assessments, taxes, fees, levies and
charges are to be included within the definition of Real Property Taxes for the
purposes of this Lease.
B. Taxes on Tenant Improvements and Personal Property. Tenant shall
--------------------------------------------------
pay any increase in Real Property Taxes resulting from any and all Alterations
and Tenant Improvements of any kind whatsoever placed in, on or about the
Premises for the benefit of, at the request of, or by Tenant. Tenant shall pay
prior to delinquency all taxes assessed or levied against Tenant's Personal
Property in, on or about the Premises or elsewhere. When possible,
28
<PAGE>
Tenant shall cause its Personal Property to be assessed and billed separately
from the Premises and the real property or Personal Property of Landlord.
C. Proration. Tenant's liability to pay Real Property Taxes shall
---------
be prorated on the basis of a 360-day year to account for any fractional portion
of a fiscal tax year included at the commencement or expiration of the Term.
With respect to any assessments which may be levied against or upon the Premises
on all or any portion of the Project, or which under the laws then in force may
be evidenced by improvements or other bonds or may be paid in annual
installments, only the amount of such annual installment (with appropriate
proration for any partial year) and interest due thereon shall be included
within the computation of the annual Real Property Taxes levied against the
Premises or such portion of the Project, as applicable.
16. Utilities and Services.
----------------------
Tenant shall be responsible for and shall pay promptly all charges for
water, gas, electricity, telephone, refuse pick-up, janitorial service and all
other utilities, materials and services furnished directly to or used by Tenant
in, on or about the Premises during the Term, together with any taxes thereon.
If any utility, material or service is not separately charged or metered to any
portion of the Premises, Tenant shall pay to Landlord, within ten (10) days
after written demand therefor, Tenant's pro rata share of the total cost thereof
as may be determined by Landlord. Landlord shall not be liable in damages or
otherwise for any failure or interruption of any utility service or other
service furnished to the Premises, except that resulting from the gross
negligence or willful misconduct of Landlord. Tenant shall have the right to
contract directly with vendors for janitorial and maintenance services, provided
such vendors must be approved in advance by Landlord, which approval shall not
be unreasonably withheld; and provided further, that Tenant shall have no right
to contract with any vendor to maintain the Building's HVAC system, which shall
be the sole responsibility of Landlord as set forth in Paragraph 17.A.
--------------
17. Repair and Maintenance.
----------------------
A. Landlord's Obligations. Landlord shall keep in good order,
----------------------
condition and repair the structural parts of the Building, which structural
parts consist only of the foundation, subflooring, exterior walls (excluding the
interior of all walls and the exterior and interior of all windows, doors,
ceilings, and plate glass), and roof of the Building, and all plumbing and
electrical facilities leading up to (but not situated within) the Building,
except for any damage thereto caused by the negligence or willful acts or
omissions of Tenant or of Tenant's agents, employees or invitees, or by reason
of the failure of Tenant to perform or comply with any terms of this Lease, or
caused by Alterations made by Tenant or by Tenant's agents, employees or
contractors. It is an express condition precedent to all obligations of
Landlord to repair and maintain that Tenant shall have notified Landlord of the
need for such repairs or maintenance. Tenant waives the provisions of Sections
1941 and 1942 of the California Civil Code and any similar or successor law
regarding Tenant's right to make repairs and deduct the expenses of such repairs
from the Rent due under this Lease. Landlord shall keep in good order,
condition, repair and maintenance the Building's HVAC system and roof, and shall
maintain an HVAC system preventive maintenance service contract from a qualified
vendor for the purpose of maintaining
29
<PAGE>
the Building's HVAC system, and a roof maintenance service contract from a
qualified vendor for the purpose of maintaining the Building's roof. Landlord
shall determine in its sole discretion whether any such vendor is qualified. Any
and all costs of any maintenance or repair of the HVAC system or the roof
(including without limitation the cost of maintaining HVAC system preventative
maintenance contracts and roof maintenance service contracts) shall be included
in the Common Area Maintenance Costs payable solely by Tenant for the year in
which such cost is incurred. Landlord may elect, in its sole discretion, to
paint the exterior of the Building and/or to replace or perform capital
improvements to any area or aspect of the Building which Landlord is required
keep in good order, condition and repair. If Landlord decides, in its sole
discretion, to replace the roof of the Building during the Term, then the cost
of so replacing the roof, together with interest at the Interest Rate, shall be
amortized on a straight-line basis over the useful life of the roof (as
determined by Landlord in its sole discretion) (the "Useful Life"), and the
-----------
entire amount of such amortized costs and interest shall be included in the
monthly Common Area Maintenance Costs payable solely by Tenant during the entire
period over which such costs are amortized, until Tenant has paid to Landlord
that proportion of the total amount of such amortized costs equal to (a) the
number of months remaining during the Term as of the date such roof replacement
was completed, divided by (b) the number of months of the Useful Life; provided
that in no event shall such proportion exceed one hundred percent (100%). For
the purposes of example only and not by way of limitation, if the Building's
roof is replaced twenty-four (24) months before the end of the Term, at a cost
of Fifty Thousand Dollars ($50,000.00), and the Useful Life is one hundred
twenty (120) months, then (a) the cost of such replacement shall be amortized at
the rate of Four Hundred Sixteen and 67/100ths Dollars ($416.67) per month, with
interest at the Interest Rate, and (b) the amount to be included in the monthly
Common Area Maintenance Costs payable solely by Tenant for the balance of the
Term shall equal Four Hundred Sixteen and 67/100ths Dollars ($416.67), with
interest at the Interest Rate, until Tenant has paid to Landlord a total
aggregate amount of Ten Thousand Dollars ($10,000.00), together with interest at
the Interest Rate, towards such amortized costs (i.e., Fifty Thousand Dollars
($50,000.00) multiplied by [Twenty-Four (24) months divided by One Hundred
Twenty (120) months]). If Tenant exercises an Option to Extend, the total length
of the Term (i.e., the initial Term and each Extended Term) shall be utilized to
calculate the maximum amount of such amortized costs that shall be includable in
the monthly Common Area Maintenance Costs payable solely by Tenant pursuant to
this Paragraph 17.A.
--------------
It is the express intent of the parties that except as specifically
set forth in this Paragraph 17.A, Landlord shall have no obligation whatsoever
--------------
to repair or maintain the Building, and that Tenant shall be responsible for
performing all repair, operation, and maintenance of the Building except for
those tasks specifically described in this Paragraph 17.A.
--------------
B. Tenant's Obligations. Tenant shall at all times and at its sole
--------------------
cost and expense clean, keep and maintain in good order, condition and repair
(and replace, if necessary) every part of the Premises which is not within
Landlord's obligation pursuant to Paragraph 17.A. Tenant's repair and
--------------
maintenance obligations shall include without limitation all plumbing and
electrical facilities situated within the Building, fixtures, interior walls and
ceiling, floors, windows, window frames, doors, entrances, plate glass,
showcases, skylights, all lighting fixtures, lamps, fans and any exhaust
equipment and systems, all mechanical systems (but not the
30
<PAGE>
HVAC system), any automatic fire extinguisher equipment within the Building, all
security systems and alarms, all electrical motors and all other appliances and
equipment of every kind and nature located in, upon or about the Building or the
Premises. Tenant shall also be responsible for all pest control within the
Premises.
C. Conditions Applicable to Repairs. All repairs, replacements and
--------------------------------
reconstruction made by or on behalf of Tenant or any person claiming through or
under Tenant shall be made and performed (i) at Tenant's sole cost and expense,
in a good and workmanlike manner and at such time and in such manner as Landlord
may reasonably designate, (ii) by contractors approved in advance by Landlord,
(iii) so that the repairs, replacements or reconstruction shall be at least
equal in quality, value and utility to the original work or installation, (iv)
in accordance with such reasonable requirements as Landlord may impose with
respect to insurance and bonds to be obtained by Tenant in connection with the
proposed work, and (v) in accordance with any rules and regulations for the
Building as may be adopted by Landlord from time to time and in accordance with
all applicable laws and regulations of governmental authorities having
jurisdiction over the Premises.
D. Landlord's Rights. If Tenant fails to perform Tenant's
-----------------
obligations under Paragraph 17.B, Landlord may in its sole discretion give
--------------
Tenant notice of such work as is reasonably required to fulfill such
obligations. If Tenant fails to commence the work within thirty (30) days after
receipt of such notice and diligently prosecute the work to completion, then
Landlord shall have the right (but not the obligation) to do such acts or expend
such funds at the expense of Tenant as are reasonably required to perform such
work. Any amount so expended by Landlord shall be paid by Tenant to Landlord
promptly after demand with interest at the Interest Rate. Landlord shall have
no liability to Tenant for any damage to, or interference with Tenant's use of,
the Premises, or inconvenience to Tenant as a result of performing any such
work.
E. Compliance with Governmental Regulations. Tenant shall, at its
----------------------------------------
sole cost and expense, comply with, including the making by Tenant of any
Alteration to the Premises, all present and future regulations, rules, laws,
ordinances, and requirements of all governmental authorities (including, without
limitation state, municipal, county and federal governments and their
departments, bureaus, boards and officials) applicable to the Premises or the
Building.
18. Liens.
-----
Tenant shall keep the Building and the Premises free from any liens
arising out of any work performed, materials furnished or obligations incurred
by or on behalf of Tenant and hereby agrees to indemnify, defend, protect and
hold Landlord and Landlord's Agents harmless from and against any and all loss,
claim, damage, liability, cost and expense, including attorneys' fees and costs,
in connection with or arising out of any such lien or claim of lien. Tenant
shall cause any such lien imposed to be released of record by payment or posting
of a proper bond acceptable to Landlord within ten (10) days after written
request by Landlord. Tenant shall give Landlord written notice of Tenant's
intention to perform work on the Premises which might result in any claim of
lien at least ten (10) days prior to the commencement of such work to
31
<PAGE>
enable Landlord to post and record a Notice of Nonresponsibility or any such
other notice(s) as Landlord may deem appropriate. If Tenant fails to so remove
any such lien within the prescribed ten 10-day period, then Landlord may do so
at Tenant's expense and Tenant shall reimburse Landlord for such amounts upon
demand. Such reimbursement shall include all costs incurred by Landlord
including Landlord's reasonable attorneys' fees with interest thereon at the
Interest Rate.
19. Landlord's Right to Enter the Premises.
--------------------------------------
Tenant shall permit Landlord and Landlord's Agents to enter the
Premises at all reasonable times with reasonable notice, except for emergencies
in which case no notice shall be required, to inspect the same, to post Notices
of Nonresponsibility and similar notices, and real estate "For Sale" signs, to
show the Premises to interested parties such as prospective lenders and
purchasers, to make necessary repairs, to discharge Landlord's obligations under
this Lease, to discharge Tenant's obligations under this Lease when Tenant has
failed to do so within a reasonable time after written notice from Landlord, and
at any reasonable time within one hundred and eighty (180) days prior to the
expiration of the Term, to place upon the Building ordinary "For Lease" signs
and to show the Premises to prospective tenants.
20. Signs.
-----
Subject to Tenant obtaining all necessary approvals from the City of
Redwood City and subject to Landlord's review and approval of plans and
specifications for any proposed signage, which approval may be withheld only in
Landlord's commercially reasonable judgment, Tenant shall have the exclusive
right to install identification signage on the exterior of the Building, so long
as such signage complies with Landlord's project sign program. Tenant shall have
no right to maintain any Tenant identification sign in any other location in, on
or about the Building or the Premises and shall not display or erect any other
Tenant identification sign, display or other advertising material that is
visible from the exterior of the Building. Any changes to the size, design,
color or other physical aspects of Tenant's identification sign(s) shall be
subject to the Landlord's prior written approval, which shall not be
unreasonably withheld, and any appropriate municipal or other governmental
approvals. The cost of Tenant's sign(s) and their installation, maintenance and
removal shall be Tenant's sole cost and expense. If Tenant fails to maintain its
sign(s), or, if Tenant fails to remove its sign(s) upon termination of this
Lease, Landlord may do so at Tenant's expense and the amounts expended by
Landlord in doing so shall be immediately payable by Tenant to Landlord as
Additional Rent.
21. Insurance.
---------
A. Indemnification. Tenant shall indemnify, defend, protect and
---------------
hold Landlord harmless of and from any and all loss, liens, liability, claims,
causes of action, damage, injury, cost or expense arising out of or in
connection with, or related to (i) the making of Alterations, or (ii) injury to
or death of persons or damage to property occurring or resulting directly or
indirectly from: (A) the use or occupancy of, or the conduct of business in, the
Premises; (B) the use, storage, release or disposal by Tenant or Tenant's
employees, agents,
32
<PAGE>
contractors, licensees or invitees, of any Hazardous Materials in or about the
Premises or any other portion of the Project; (C) any other occurrence or
condition in or on the Premises; and (D) acts, neglect or omissions of Tenant,
its officers, directors, agents, employees, invitees or licensees in or about
any portion of the Project. Tenant's indemnity obligation includes reasonable
attorneys' fees and costs, investigation costs and all other reasonable costs
and expenses incurred by Landlord. If Landlord disapproves the legal counsel
proposed by Tenant for the defense of any claim indemnified against hereunder,
Landlord shall have the right to appoint its own legal counsel, the reasonable
fees, costs and expenses of which shall be included as part of Tenant's
indemnity obligation hereunder. The indemnification contained in this Section
-------
21.A shall extend to the officers, directors, shareholders, partners, employees,
- ----
agents and representatives of Landlord. The obligations assumed by Tenant herein
shall survive this Lease. Notwithstanding the foregoing, Landlord shall have the
right, in its sole discretion, but without being required to do so, to defend,
adjust, settle or compromise any claim, obligation, debt, demand, suit or
judgment against Landlord arising out of or in connection with the matters
covered by the foregoing indemnity and, in such event, Tenant shall reimburse
Landlord for all reasonable charges and expenses incurred by Landlord in
connection therewith, including reasonable attorneys' fees; provided, however,
that Landlord shall not undertake any unilateral action or settlement so long as
Tenant or an insurance company, at its or their sole expense, is contesting in
good faith, diligently and with continuity such claim, action, obligation,
demand or suit, and so long as such claim, action, obligation, demand or suit
does not have or threaten to have a material adverse impact on Landlord's
assets, reputation or business affairs.
B. Tenant's Insurance. Tenant agrees to maintain in full force and
------------------
effect at all times during the Term, at its sole cost and expense, for the
protection of Tenant and Landlord, as their interests may appear, policies of
insurance issued by a responsible carrier or carriers acceptable to Landlord
which afford the following coverages:
(i) Commercial general liability insurance in an amount not
less than Three Million and no/100ths Dollars ($3,000,000.00) combined single
limit for both bodily injury and property damage which includes blanket
contractual liability broad form property damage, personal injury, completed
operations, and products liability, which policy shall name Landlord and
Landlord's Agents as additional insureds and shall contain a provision that "the
insurance provided Landlord hereunder shall be primary and non-contributing with
any other insurance available to Landlord with respect to any damage, loss,
liability or expense covered by Tenant's indemnity obligations under Paragraph
---------
21.A of the Lease."
- ----
(ii) Causes of loss-special form property insurance (including,
without limitation, vandalism, malicious mischief, inflation endorsement, and
sprinkler leakage endorsement) on Tenant's Personal Property located on or in
the Premises. Such insurance shall be in the full amount of the replacement
cost, as the same may from time to time increase as a result of inflation or
otherwise. As long as this Lease is in effect, the proceeds of such policy shall
be used for the repair and replacement of such items so insured. Landlord shall
have no interest in the insurance proceeds on Tenant's Personal Property.
Notwithstanding the foregoing, Tenant shall have the right, at its election, to
self-insure with respect to any loss or damage to Tenant's Personal Property.
33
<PAGE>
(iii) Boiler and machinery insurance, including steam pipes,
pressure pipes, condensation return pipes and other pressure vessels and HVAC
equipment, including miscellaneous electrical apparatus, in an amount
satisfactory to Landlord.
(iv) Workers compensation insurance in the manner and to the
extent required by applicable law and with limits of liability not less than the
minimum required under applicable law, covering all employees of Tenant having
any duties or responsibilities in or about the Premises.
C. Premises Insurance. During the Term Landlord shall maintain
------------------
causes of loss-special form property insurance (including inflation endorsement,
sprinkler leakage endorsement, and, at Landlord's option, earthquake and flood
coverage) on the Building, excluding coverage of all Tenant's Personal Property
located on or in the Premises, but including the Tenant Improvements. Such
insurance shall also include insurance against loss of rents, including, at
Landlord's option, coverage for earthquake and flood, in an amount equal to the
Monthly Rent and Additional Rent, and any other sums payable under the Lease,
for a period of at least twelve (12) months commencing on the date of loss.
Such insurance shall name Landlord and Landlord's Agents as named insureds and
include a lender's loss payable endorsement in favor of Landlord's lender (Form
438 BFU Endorsement). Tenant shall reimburse Landlord monthly, as Additional
Rent, for one-twelfth (12th) of the annual cost of such insurance on the first
day of each calendar month of the Term, prorated for any partial month, or on
such other periodic basis as Landlord shall elect. If the insurance premiums are
increased after the Commencement Date for any reason, including without
limitation due to an increase in the value of the Building or its replacement
cost, or due to Tenant's use of the Premises or any improvements installed by
Tenant, Tenant shall pay such increase within ten (10) days of notice of such
increase. Landlord may, in its sole discretion, maintain the insurance coverage
described in this Paragraph 21.C as part of an umbrella insurance policy
--------------
covering other properties owned by Landlord. Notwithstanding the foregoing, so
long as the original Landlord under this Lease continues to be the Landlord
under this Lease, and subject to the following conditions, Tenant may elect to
carry the insurance required by this Paragraph 21.C if Tenant is able to obtain
--------------
the coverage required hereunder at a cost less than that charged by Landlord's
insurer. Tenant's right to carry such insurance shall be subject to the
following conditions: (i) all Holders, defined below, shall have approved
Tenant's right to carry such insurance, (ii) such insurance shall name Landlord,
and all parties designated by Landlord, as additional insureds, and (iii) such
insurance shall provide Landlord with at least the same coverage and rights as
Landlord would be entitled to receive if Landlord had obtained such insurance.
D. Increased Coverage. Upon demand, Tenant shall provide Landlord,
------------------
at Tenant's expense, with such increased amount of existing insurance, and such
other insurance as Landlord or Landlord's lender may reasonably require to
afford Landlord and Landlord's lender adequate protection.
E. Failure to Maintain. If Tenant fails to maintain any insurance
-------------------
coverage that Tenant is required to maintain under this Paragraph 21, and
------------
Landlord incurs any liability to its insurance carrier arising out of Tenant's
failure to so maintain such insurance coverage, then
34
<PAGE>
any and all loss or damage Landlord shall sustain by reason thereof, including
attorneys' fees and costs, shall be borne by Tenant and shall be immediately
paid by Tenant upon its receipt of a bill therefor and evidence of such loss.
Nothing contained in this Paragraph 21.E shall be deemed to limit or affect any
--------------
other remedies or rights available to Landlord under this Lease that arise from
Tenant's failure to so maintain such insurance coverage.
F. Insurance Requirements. All insurance shall be in a form
----------------------
satisfactory to Landlord and shall be carried in companies that have a general
policy holder's rating of not less than "A" and a financial rating of not less
than Class "X" in the most current edition of Best's Insurance Reports; and
------------------------
shall provide that such policies shall not be subject to material alteration or
cancellation except after at least thirty (30) days' prior written notice to
Landlord. The policy or policies, or duly executed certificates for them,
together with satisfactory evidence of payment of the premiums thereon shall be
deposited with Landlord prior to the Commencement Date, and upon renewal of such
policies, not less than thirty (30) days prior to the expiration of the term of
such coverage. If Tenant fails to procure and maintain the insurance it is
required to maintain under this Paragraph 21, Landlord may, but shall not be
------------
required to, order such insurance at Tenant's expense and Tenant shall reimburse
Landlord therefor. Such reimbursement shall include all costs incurred by
Landlord in obtaining such insurance including Landlord's reasonable attorneys'
fees, with interest thereon at the Interest Rate.
G. Waiver and Release. Except to the extent due to the negligence
------------------
or willful misconduct of Landlord, Landlord shall not be liable to Tenant or
Tenant's employees, agents, contractors, licenses or invitees for, and Tenant
waives as against and releases Landlord and Landlord's Agents from, all claims
for loss or damage to any property or injury, illness or death of any person in,
upon or about the Premises and/or any other portion of the Project, arising at
any time and from any cause whatsoever (including without limitation any claim
caused in whole or in part by the act, omission, or neglect of other tenants,
contractors, licensees, invitees or other occupants of the Project or their
agents or employees; and any claim arising from any construction activities
taking place in, upon or about the Premises and/or any other portion of the
Project). Landlord and Landlord's Agents shall not be liable for any latent
defect in the Premises.
22. Waiver of Subrogation.
---------------------
Landlord and Tenant each hereby waive all rights of recovery against
the other on account of loss or damage occasioned by such waiving party to its
property or the property of others under its control, to the extent that such
loss or damage would be covered by any causes of loss-special form policy of
insurance or its equivalent required to be or actually carried under Paragraph
---------
21. Tenant and Landlord shall, upon obtaining policies of insurance required
- --
hereunder, give notice to the insurance carrier that the foregoing mutual waiver
of subrogation is contained in this Lease and Tenant and Landlord shall cause
each insurance policy obtained by such party to provide that the insurance
company waives all right of recovery by way of subrogation against either
Landlord or Tenant in connection with any damage covered by such policy.
35
<PAGE>
23. Damage or Destruction.
---------------------
A. Landlord's Obligation to Rebuild. If all or any part of the
--------------------------------
Building is damaged or destroyed, Landlord shall promptly and diligently repair
the same unless it has the right to terminate this Lease as provided herein and
it elects to so terminate.
B. Right to Terminate. Landlord shall have the right to terminate
------------------
this Lease in the event any of the following events occur:
(i) insurance proceeds from the insurance Landlord is required
to carry pursuant to Paragraph 21.C, or that Landlord actually carries, are not
available to pay one hundred percent (100%) of the cost of such repair,
excluding the deductible for which Tenant shall be responsible; provided,
however, that if Tenant pays to Landlord, in immediately available funds, within
thirty (30) days after such casualty, any shortfall in such insurance proceeds,
as reasonably determined by Landlord, then Landlord shall have no right to
terminate the Lease pursuant to this item (i);
(ii) the Building cannot, with reasonable diligence, be fully
repaired by Landlord within three hundred sixty (360) days after the date of the
damage or destruction; or
(iii) the Building cannot be safely repaired because of the
presence of hazardous factors, including, but not limited to, earthquake faults,
radiation, Hazardous Materials and other similar dangers.
If Landlord elects to terminate this Lease, Landlord may give Tenant
written notice of its election to terminate within thirty (30) days after such
damage or destruction, and this Lease shall terminate fifteen (15) days after
the date Tenant receives such notice and both Landlord and Tenant shall be
released of all further liability under this Lease (except to the extent any
provision of this Lease expressly survives termination and except that Landlord
shall return to Tenant the Security Deposit). If Landlord elects not to
terminate the Lease, subject to Tenant's termination right set forth below,
Landlord shall promptly commence the process of obtaining necessary permits and
approvals and repair of the Building as soon as practicable, and this Lease will
continue in full force and affect. All insurance proceeds from insurance under
Paragraph 21, excluding proceeds for Tenant's Personal Property, shall be
- ------------
disbursed and paid to Landlord. Tenant shall be required to pay to Landlord the
amount of any deductibles payable in connection with any insured casualties,
unless the casualty was caused by the sole negligence or willful misconduct of
Landlord.
Tenant shall have the right to terminate this Lease if the Building
cannot, with reasonable diligence, be fully repaired within three hundred sixty
(360) days from the date of damage or destruction. The determination of the
estimated repair periods in this Paragraph 23 shall be made by an independent,
------------
licensed contractor or engineer within thirty (30) days after such damage or
destruction. Landlord shall deliver written notice of the repair period to
Tenant after such determination has been made and Tenant shall exercise its
right to terminate this Lease, if at all, within ten (10) days of receipt of
such notice from Landlord. Upon such
36
<PAGE>
termination both Landlord and Tenant shall be released of all further liability
under this Lease (except to the extent any provision of this Lease expressly
survives termination).
C. Limited Obligation to Repair. Landlord's obligation, should it
----------------------------
elect or be obligated to repair or rebuild, shall be limited to the basic
Building and the Tenant Improvements and shall not include any Alterations made
by Tenant.
D. Abatement of Rent. Rent shall be temporarily abated
-----------------
proportionately, during any period when, by reason of such damage or destruction
there is substantial interference with Tenant's use of the Premises, having
regard to the extent to which Tenant may be required to discontinue Tenant's use
of the Premises. Such abatement of Rent shall be proportional to the extent of
such interference with Tenant's use of the Premises reasonably attributable to
such damage or destruction (with the extent of such interference to be
reasonably determined by Landlord), and shall commence upon such damage or
destruction and end upon substantial completion by Landlord of the repair or
reconstruction which Landlord is obligated or undertakes to perform. Tenant
shall not be entitled to any compensation or damages from Landlord for loss of
the use of the Premises, damage to Tenant's Personal Property or any
inconvenience occasioned by such damage, repair or restoration. Tenant hereby
waives the provisions of Section 1932, Subdivision 2, and Section 1933,
Subdivision 4, of the California Civil Code, and the provisions of any similar
law hereinafter enacted.
E. Damage Near End of Term. Anything herein to the contrary
-----------------------
notwithstanding, if the Building is destroyed or materially damaged during the
last twelve (12) months of the Term (unless Tenant has properly exercised an
Option to Extend), then either Landlord or Tenant may, at its option, cancel and
terminate this Lease as of the date of the occurrence of such damage, by
delivery of written notice to the other party and, in such event, upon such
termination both Landlord and Tenant shall be released of all further liability
under this Lease (except to the extent any provision of this Lease expressly
survives termination). If neither Landlord nor Tenant elects to terminate this
Lease, the repair of such damage shall be governed by Paragraphs 23.A and 23.B.
24. Condemnation.
------------
If title to all of the Premises is taken for any public or quasi-
public use under any statute or by right of eminent domain, or so much thereof
is so taken so that reconstruction of the Premises will not, in Landlord's sole
discretion, result in the Premises being reasonably suitable for Tenant's
continued occupancy for the uses and purposes permitted by this Lease, this
Lease shall terminate as of the date that possession of the Premises or part
thereof is taken, and upon such termination both Landlord and Tenant shall be
released of all further liability under this Lease (except to the extent any
provision of this Lease expressly survives termination). A sale by Landlord to
any authority having the power of eminent domain, either under threat of
condemnation or while condemnation proceedings are pending, shall be deemed a
taking under the power of eminent domain for all purposes of this Paragraph 24.
If any part of the Premises is taken and the remaining part is
reasonably suitable
37
<PAGE>
for Tenant's continued occupancy for the purposes and uses permitted by this
Lease, this Lease shall, as to the part so taken, terminate as of the date that
possession of such part of the Premises is taken, and upon such termination both
Landlord and Tenant shall be released of all further liability under this Lease
with respect to that portion of the Premises that is taken (except to the extent
any provision of this Lease expressly survives termination and except that
Landlord shall return to Tenant the Security Deposit). The Rent and other sums
payable hereunder shall be reduced in the same proportion that Tenant's use and
occupancy of the Premises is reduced. If any portion of the Common Area is
taken, Tenant's Rent shall be reduced only if such taking materially interferes
with Tenant's use of the Common Area and then only to the extent that the fair
market rental value of the Premises is diminished by such partial taking. If the
parties disagree as to the amount of Rent reduction, the matter shall be
resolved by arbitration and such arbitration shall comply with and be governed
by the California Arbitration Act, Sections 1280 through 1294.2 of the
California Code of Civil Procedure. Each party hereby waives the provisions of
Section 1265.130 of the California Code of Civil Procedure allowing either party
to petition the Superior Court to terminate this Lease in the event of a partial
taking of the Premises.
All compensation or damages awarded or paid for any taking hereunder
shall belong to and be the property of Landlord, whether such compensation or
damages are awarded or paid as compensation for diminution in value of the
leasehold, the fee or otherwise, except that Tenant shall be entitled to any
award allowed to Tenant for the taking of Tenant's Personal Property, for the
interruption of Tenant's business, for its moving costs, or for the loss of its
good will. Except for the foregoing allocation, no award for any partial or
entire taking of the Premises shall be apportioned between Landlord and Tenant,
and Tenant assigns to Landlord its interest in the balance of any award which
may be made for the taking or condemnation of the Premises, together with any
and all rights of Tenant arising in or to the same or any part thereof.
25. Assignment and Subletting.
-------------------------
A. Landlord's Consent. Subject to the provisions of Paragraph 25.G
------------------ --------------
below, Tenant shall not enter into a Sublet without Landlord's prior written
consent, which consent shall not be unreasonably withheld. Any attempted or
purported Sublet without Landlord's prior written consent shall be void and
confer no rights upon any third person and, at Landlord's election, shall
terminate this Lease. Each Subtenant shall agree in writing, for the benefit of
Landlord, to assume, to be bound by, and to perform the terms, conditions and
covenants of this Lease to be performed by Tenant, as such terms, conditions and
covenants apply to the Sublet premises. Notwithstanding anything contained
herein, Tenant shall not be released from liability for the performance of each
term, condition and covenant of this Lease by reason of Landlord's consent to a
Sublet unless Landlord specifically grants such release in writing.
B. Tenant's Notice. If Tenant desires at any time to Sublet all or
---------------
any portion of the Premises, Tenant shall first notify Landlord in writing of
its desire to do so.
C. Information to be Furnished. If Tenant desires at any time to
---------------------------
Sublet all or any portion of the Premises, then Tenant shall submit in writing
to Landlord: (i) the name of the proposed Subtenant; (ii) the nature of the
proposed Subtenant's business to be carried on in the
38
<PAGE>
Premises; (iii) the terms and provisions of the proposed Sublet and a copy of
the proposed form of Sublet agreement containing a description of the subject
premises; and (iv) such financial information, including financial statements,
as Landlord may reasonably request concerning the proposed Subtenant.
D. Landlord's Alternatives. At any time within ten (10) days after
-----------------------
Landlord's receipt of the information specified in Paragraph 25.C., Landlord
---------------
may, by written notice to Tenant, elect: (i) to consent to the Sublet by Tenant;
or (ii) to refuse its consent to the Sublet. If Landlord consents to the Sublet,
Tenant may thereafter enter into a valid Sublet of the Premises or applicable
portion thereof, upon the terms and conditions and with the proposed Subtenant
set forth in the information furnished by Tenant to Landlord, subject, however,
at Landlord's election, to the condition that the following percentages of any
excess of the Subrent (the "Excess Subrent") over the Rent required to be paid
--------------
by Tenant under this Lease (or, if only a portion of the Premises is Sublet, the
pro rata share of the Rent attributable to the portion of the Premises being
Sublet) less reasonable attorneys' fees, leasing commissions, improvement costs
required for such Sublet (which shall not include the cost of any trade
fixtures, equipment or personal property) and other reasonable subletting costs
paid by Tenant on the Sublet, shall be paid to Landlord. Tenant shall pay the
following percentages of Excess Subrent to Landlord in the following
circumstances: (i) to the extent the Excess Subrent (for the entire term of the
applicable Sublet) is payable on a monthly basis (as opposed to one or more lump
sums) and to the extent the Excess Subrent is less than or equal to
$0.25/month/square foot of Rentable Area of the portion of the Premises being
Sublet, then Tenant shall pay to Landlord one-third (1/3) of the Excess Subrent;
(ii) to the extent the Excess Subrent (for the entire term of the applicable
Sublet) is payable on a monthly basis (as opposed to one or more lump sums) and
to the extent the Excess Subrent is greater than $0.25/month/square foot of
Rentable Area of the portion of the Premises being Sublet, then Tenant shall pay
to Landlord fifty percent (50%) of the Excess Subrent; (iii) to the extent the
Excess Subrent (for the entire term of the applicable Sublet) is not payable on
a monthly basis, then Tenant shall pay to Landlord fifty percent (50%) of the
Excess Subrent; and (iv) to the extent the Excess Subrent is applicable to any
period during an Extended Term, then Tenant shall pay to Landlord fifty percent
(50%) of the Excess Subrent.
E. Proration. If a portion of the Premises is Sublet, the pro rata
---------
share of the Rent attributable to such partial area of the Premises shall be
determined by Landlord by dividing the Rent payable by Tenant hereunder by the
total square footage of the Premises and multiplying the resulting quotient (the
per square foot rent) by the number of square feet of the Premises which are
Sublet.
F. Parameters of Landlord's Consent. Landlord shall have the right
--------------------------------
to base its consent to any Sublet hereunder upon such factors and considerations
as Landlord reasonably deems relevant or material to the proposed Sublet and the
best interests of the Project's operations. Without limiting the generality of
the foregoing, Tenant acknowledges that it shall be reasonable for Landlord to
withhold its consent to any Sublet hereunder if Tenant has not demonstrated
that: (i) the proposed Subtenant is financially responsible, with sufficient net
worth and net current assets, properly and successfully to operate its business
in the Premises and meet the financial and other obligations of this Lease; (ii)
the proposed Subtenant possesses sound and
39
<PAGE>
good business judgment, reputation and experience, and proven management skills
in the operation of a business or businesses substantially similar to the uses
permitted in the Premises under Paragraph 11.A; and (iii) the use of the
--------------
Premises proposed by such Subtenant conforms to the permitted uses specified
under Paragraph 11.a, and involves either no Hazardous Use or only such
--------------
Hazardous Use as shall be acceptable to Landlord in its sole discretion.
G. Permitted Transfers. Notwithstanding the provisions of Paragraph
------------------- ---------
25.A above, Tenant shall have the right to enter into a Sublet, and Landlord
- ----
shall not withhold its consent thereto (provided that all of the conditions set
forth in clauses (A) and (B) below shall be met), if such Sublet is one of the
following "Permitted Transfers": (i) a Sublet to the surviving entity of a
merger or consolidation involving the corporate entity constituting the Tenant
under this Lease; or (ii) a Sublet to any subsidiary or Affiliate of the Tenant
originally named in this Lease. However, the foregoing Permitted Transfers
shall be exempt from the requirement of Landlord's consent only if all of the
following conditions shall be met: (A) there shall be no change in the use or
operation of the Premises; (B) Tenant shall have provided to Landlord all
information to allow Landlord to determine, and Landlord shall have determined,
that the proposed transfer is a Permitted Transfer which is exempt from the
requirement of Landlord's consent; and (C) as of the effective date of such
Sublet, the proposed Subtenant has a net worth and net current assets equal to
or greater than those of the original Tenant under this Lease as of the date of
this Lease. No Sublet of the type described in this Paragraph 25.G, nor any
other transfer of all or any portion of Tenant's interest in the Lease or the
Premises, shall release Tenant of its obligations under this Lease.
26. Default.
-------
A. Tenant's Default. A default under this Lease by Tenant shall
----------------
exist if any of the following occurs:
(i) If Tenant fails to pay within five (5) days after written
notice from Landlord any Rent or any other sum required to be paid hereunder
when due, including, without limitation, any Tenant Improvement costs payable by
Tenant under Exhibit B; or
---------
(ii) If Tenant fails to perform any term, covenant or condition
of this Lease except those requiring the payment of money, and Tenant fails to
cure such breach within thirty (30) days after written notice from Landlord
where such breach could reasonably be cured within such 30-day period; provided,
however, that where such failure could not reasonably be cured within the 30-day
period, that Tenant shall not be in default if it commences such performance
within the 30-day period and diligently thereafter prosecutes the same to
completion; or
(iii) If Tenant assigns its assets for the benefit of its
creditors; or
(iv) If the sequestration or attachment of or execution on any
material part of Tenant's Personal Property essential to the conduct of Tenant's
business occurs, and Tenant fails to obtain a return or release of such Tenant's
Personal Property within thirty (30) days
40
<PAGE>
thereafter, or prior to sale pursuant to such sequestration, attachment or levy,
whichever is earlier; or
(v) If Tenant vacates or abandons the Premises; or
(vi) If a court makes or enters any decree or order other than
under the bankruptcy laws of the United States adjudging Tenant to be insolvent;
or approving as properly filed a petition seeking reorganization of Tenant; or
directing the winding up or liquidation of Tenant and such decree or order shall
have continued for a period of sixty (60) days; or
(vii) If Tenant fails to cure within any applicable grace period
any default by Tenant under any of the Collateral Agreements.
B. Remedies. Upon a default, Landlord shall have the following
--------
remedies, in addition to all other rights and remedies provided by law or
otherwise provided in this Lease, to which Landlord may resort cumulatively or
in the alternative:
(i) Landlord may continue this Lease in full force and effect,
and this Lease shall continue in full force and effect as long as Landlord does
not terminate this Lease, and Landlord shall have the right to collect Rent when
due. Without limiting the foregoing, Landlord has the remedy set forth in
Section 1951.4 of the California Civil Code.
(ii) Landlord may terminate Tenant's right to possession of the
Premises at any time by giving written notice to that effect, and relet the
Premises or any part thereof. Tenant shall be liable immediately to Landlord
for all costs Landlord incurs in reletting the Premises or any part thereof,
including, without limitation, broker's commissions, expenses of cleaning and
redecorating the Premises required by the reletting and like costs. Reletting
may be for a period shorter or longer than the remaining Term of this Lease. No
act by Landlord other than giving written notice of termination to Tenant shall
terminate this Lease. Neither acts of maintenance, nor efforts to relet the
Premises, nor the appointment of a receiver on Landlord's initiative to protect
Landlord's interest under this Lease shall not constitute a termination of
Tenant's right to possession. On termination, Landlord has the right to remove
all Tenant's Personal Property and store the same at Tenant's sole cost and
expense and to recover from Tenant as damages:
(a) The worth at the time of award of the unpaid Rent
and other sums due and payable which had been earned at the time of termination;
plus
(b) The worth at the time of award of the amount by
which the unpaid Rent and other sums due and payable which would have been
payable after termination until the time of award exceeds the amount of such
Rent loss that Tenant proves could have been reasonably avoided; plus
(c) The worth at the time of award of the amount by
which the unpaid rent and other sums due and payable for the balance of the Term
after the time of award
41
<PAGE>
exceeds the amount of such Rent loss that Tenant proves could be reasonably
avoided; plus
(d) Any other amount necessary to compensate Landlord for
all the detriment proximately caused by Tenant's failure to perform Tenant's
obligations under this Lease, or which, in the ordinary course of things, would
be likely to result therefrom, including, without limitation, any costs or
expenses incurred by Landlord: (i) in retaking possession of the Premises; (ii)
in maintaining, repairing, preserving, restoring, replacing, cleaning, altering
or rehabilitating the Premises or any portion thereof, including such acts for
reletting to a new tenant or tenants; (iii) for leasing commissions; or (iv) for
any other costs necessary or appropriate to relet the Premises; plus
(e) At Landlord's election, such other amounts in addition
to or in lieu of the foregoing as may be permitted from time to time by the laws
of the State of California.
The "worth at the time of award" of the amounts referred to in
Paragraphs 26.B.(ii)(a) and 26.B.(ii)(b) is computed by allowing interest at the
- ----------------------- ------------
Interest Rate on the unpaid rent and other sums due and payable from the
termination date through the date of award. The "worth at the time of award" of
the amount referred to in Paragraph 26.B.(ii)(c) is computed by discounting such
----------------------
amount at the discount rate of the Federal Reserve Bank of San Francisco at the
time of award plus one percent (1%). Tenant waives redemption or relief from
forfeiture under California Code of Civil Procedure Sections 1174 and 1179, or
under any other present or future law, in the event Tenant is evicted or
Landlord takes possession of the Premises by reason of any default of Tenant
hereunder.
(iii) Landlord may, with or without terminating this Lease, re-
enter the Premises and remove all persons and property from the Premises; such
property may be removed and stored in a public warehouse or elsewhere at the
cost of and for the account of Tenant. No reentry or taking possession of the
Premises by Landlord pursuant to this Paragraph 26.B.(iii) shall be construed as
an election to terminate this Lease unless a written notice of such intention is
given to Tenant.
C. Landlord's Default. Landlord shall not be deemed to be in
------------------
default in the performance of any obligation required to be performed by it
hereunder unless and until it has failed to perform such obligation within
thirty (30) days after receipt of written notice by Tenant to Landlord
specifying the nature of such default; provided, however, that if the nature of
Landlord's obligation is such that more than thirty (30) days are required for
its performance, then Landlord shall not be deemed to be in default if it shall
commence such performance within such 30-day period and thereafter diligently
prosecute the same to completion.
27. Subordination.
-------------
A. Subordination. This Lease is or may become subject and
-------------
subordinate to underlying leases, mortgages, deeds of trust, easements, and
CC&Rs (collectively, "Encumbrances") which may now or hereafter affect the
------------
Premises, and to all renewals,
42
<PAGE>
amendments, modifications, consolidations, replacements and extensions thereof;
provided, however, if the holder or holders of any such Encumbrance
(collectively, "Holder") shall require that this Lease be prior and superior
------
thereto, within fifteen (15) days of written request of Landlord to Tenant,
Tenant shall execute, have acknowledged and deliver any and all documents or
instruments, in the form presented to Tenant, which Landlord or Holder deems
reasonably necessary or desirable for such purposes. Subject to Paragraph 27.C
--------------
below, 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, so long as Tenant is not in default, Holder agrees to recognize
Tenant's rights under this Lease as long as Tenant shall pay the Rent and
observe and perform all the provisions of this Lease to be observed and
performed by Tenant. Within fifteen (15) days after Landlord's written request,
Tenant shall execute any and all documents reasonably required by Landlord or
the Holder to make this Lease subordinate to any lien of the Encumbrance
(including, without limitation, subordination to all CC&Rs), including without
limitation a Subordination, Non-Disturbance and Attornment Agreement in the form
attached hereto as Exhibit E ("SNDA"). Subject to Paragraph 27.C below, if
--------- ---- --------------
Tenant fails to do so, such failure shall constitute a default under this Lease,
and it shall be deemed that this Lease is subordinated to such Encumbrance.
B. Attornment. Notwithstanding anything to the contrary set forth
----------
in this Paragraph 27, 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; provided only, that so long as Tenant is not in default, any such
purchasing or acquiring entity agrees to recognize Tenant's rights under this
Lease as long as Tenant shall pay the Rent and observe and perform all the
provisions of this Lease to be observed and performed by Tenant.
C. Non-Disturbance. Notwithstanding anything to the contrary in
---------------
this Lease, if an Encumbrance, other than any CC&R's or Landlord's construction
loan, is created after the execution of this Lease, as a condition to the
subordination of this Lease thereto under Paragraph 27.A above, Landlord shall
--------------
obtain from the Holder of such Encumbrance, other than CC&R's or the Holder of
the construction loan, a SNDA in a form reasonably requested by such Holder.
Without in any way limiting the type or form of SNDA that may be required by
such Holder, Tenant hereby agrees that a SNDA in the form attached to this Lease
as Exhibit G shall be reasonable. Only upon Landlord's delivery of a SNDA in
---------
the form of Exhibit G or in a form reasonably requested by the Holder, shall
this Lease be automatically subject and subordinate to such Encumbrance, other
than CC&R's or the construction loan.
28. Notices.
-------
Any notice or demand required or desired to be given under this Lease
shall be in
43
<PAGE>
writing and shall be personally served or in lieu of personal service may be
given by certified mail, facsimile, or overnight courier service. All notices or
demands under this Lease shall be deemed given, received, made or communicated
on the date personal delivery is effected; or, if sent by certified mail, on the
delivery date or attempted delivery date shown on the return receipt; or, if
sent by facsimile, on the date sent by the sender; or, if sent by overnight
courier service, on the delivery date or attempted delivery date shown on such
service's records. At the date of execution of this Lease, the addresses of
Landlord and Tenant are as set forth in Paragraph 1. Either party may change its
address by giving notice of same in accordance with this Paragraph 28.
29. Attorneys' Fees.
---------------
If either party brings any action or legal proceeding for damages for
an alleged breach of any provision of this Lease, to recover Rent, or other sums
due, to terminate the tenancy of the Premises or to enforce, protect or
establish any term, condition or covenant of this Lease or right of either
party, the prevailing party shall be entitled to recover as a part of such
action or proceedings, or in a separate action brought for that purpose,
reasonable attorneys' fees and costs, including without limitation any and all
costs and expenses arising from (i) collection efforts, (ii) any appellate
proceedings, and (iii) any bankruptcy, insolvency or arbitration proceedings.
30. Estoppel Certificates.
---------------------
Tenant shall within fifteen (15) days following written request by
Landlord:
(i) Execute and deliver to Landlord any documents, including
estoppel certificates, in the form prepared by Landlord (a) certifying that this
Lease is unmodified and in full force and effect or, if modified, stating the
nature of such modification and certifying that this Lease, as so modified, is
in full force and effect and the date to which the Rent and other charges are
paid in advance, if any, and (b) acknowledging that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord, or, if there are
uncured defaults on the part of the Landlord, stating the nature of such uncured
defaults, (c) evidencing the status of the Lease as may be required either by a
lender making a loan to Landlord to be secured by deed of trust or mortgage
covering the Premises or a purchaser of the Premises from Landlord, and (d) such
other matters as may be reasonably requested by Landlord. Tenant's failure to
deliver an estoppel certificate within fifteen (15) days after delivery of
Landlord's written request therefor shall be conclusive upon Tenant (a) that
this Lease is in full force and effect, without modification except as may be
represented by Landlord, (b) that there are now no uncured defaults in
Landlord's performance, and (c) that no Rent has been paid in advance.
If Tenant fails to so deliver a requested estoppel certificate within
the prescribed time it shall be conclusively presumed that this Lease is
unmodified and in full force and effect except as represented by Landlord.
(ii) Deliver to Landlord the current financial statements of
Tenant, and
44
<PAGE>
financial statements of the two (2) years prior to the current financial
statements year, with an opinion of a certified public accountant, including a
balance sheet and profit and loss statement for the most recent prior year, all
prepared in accordance with generally accepted accounting principles
consistently applied.
31. Transfer of the Premises by Landlord.
------------------------------------
In the event of any conveyance of the Premises and assignment by
Landlord of this Lease, Landlord shall be and is hereby entirely released from
all liability under any and all of its covenants and obligations contained in or
derived from this Lease occurring after the date of such conveyance and
assignment, and Tenant agrees to attorn to such transferee provided such
transferee assumes Landlord's obligations under this Lease.
32. Landlord's Right to Perform Tenant's Covenants.
----------------------------------------------
If Tenant shall at any time fail to make any payment or perform any
other act on its part to be made or performed under this Lease, and such failure
shall continue after the expiration of any applicable grace or cure periods
provided in this Lease, Landlord may, but shall not be obligated to (and without
waiving or releasing Tenant from any obligation of Tenant under this Lease),
make such payment or perform such other act to the extent Landlord may deem
desirable, and in connection therewith, pay expenses and employ counsel. All
sums so paid by Landlord and all penalties, interest, expenses and costs in
connection therewith shall be due and payable by Tenant on the next day after
any such payment by Landlord, together with interest thereon at the Interest
Rate from such date to the date of payment by Tenant to Landlord, plus
collection costs and attorneys' fees. Landlord shall have the same rights and
remedies for the nonpayment thereof as in the case of default in the payment of
Rent.
33. Tenant's Remedy.
---------------
Landlord shall never be personally liable under this Lease, and Tenant
shall look solely to the net cash flow received by Landlord from its ownership
of the Building, for recovery of any damages for breach of this Lease by
Landlord or on any judgment in connection therewith. None of the persons or
entities comprising or representing Landlord (whether partners, shareholders,
officers, directors, trustees, employees, beneficiaries, agents or otherwise)
shall ever be personally liable under this Lease or for any such damages or
judgment, and Tenant shall have no right to effect any levy of execution against
any assets of such persons or entities on account of any such liability or
judgment. Any lien obtained by Tenant to enforce any such judgment, and any
levy of execution thereon, shall be subject and subordinate to all Encumbrances
as specified in Paragraph 27 above.
------------
34. Mortgagee Protection.
--------------------
If Landlord defaults under this Lease, Tenant shall give written
notice of such default to any beneficiary of a deed of trust or mortgagee of a
mortgage covering the Premises, and offer such beneficiary or mortgagee a
reasonable opportunity to cure the default, including
45
<PAGE>
time to obtain possession of the Premises by power of sale or a judicial
foreclosure, if such should prove necessary to effect a cure.
35. Brokers.
-------
Landlord and Tenant acknowledge and agree that they have utilized the
services of real estate brokers (with AMB Corporate Real Estate Advisors and
Colliers Parrish representing Tenant, and BT Commercial representing Landlord)
with respect to the transactions between Landlord and Tenant that are
represented by this Lease. Tenant warrants and represents that it has had no
dealings with any other real estate broker or agent in connection with the
negotiation of this Lease, and that it knows of no other real estate broker or
agent who is or might be entitled to a commission in connection with this Lease.
Tenant shall indemnify, defend and hold Landlord harmless from and against any
and all claims, causes of action, liability or costs, including reasonable
attorney's fees, arising as a result of a breach of the foregoing warranty and
representation. Nothing contained in this Paragraph 35 shall be deemed to
------------
obligate or require Landlord to pay any commission whatsoever to any real estate
broker (including without limitation AMB and BT) with respect to this Lease; the
payment of any such commission (if any) shall be governed by a separate written
agreement between Landlord and the real estate broker or brokers in question.
Tenant shall separately compensate AMB and Colliers Parrish for its services and
no commission shall be payable to AMB and Colliers Parrish in connection with
this Lease.
36. Acceptance.
----------
This Lease shall only become effective and binding upon full execution
hereof by Landlord and delivery of a signed copy to Tenant. Neither party shall
record this Lease nor a short form memorandum thereof.
37. Parking.
-------
Tenant shall have the non-exclusive right, in common with any other
tenants or occupants of the Project, to use up to 3.33 unassigned parking spaces
per each one thousand (1,000) square feet of Rentable Area in the Premises, upon
terms and conditions, as may from time to time be reasonably established by
Landlord; provided, however, that Tenant acknowledges and agrees that during the
construction of the Parking Structure (as defined in the Build to Suit
Agreement), the parking ratio for the Building may from time to time be less
than 3.33 spaces per 1,000 square feet of Rentable Area. Should parking charges
or surcharges of any kind be imposed on the parking facilities by a governmental
agency, Tenant shall reimburse Landlord for such charges and/or surcharges or,
if possible, shall pay such charges and/or surcharges directly to the
governmental agency and, in such event, Tenant shall provide Landlord with proof
that such charges and/or surcharges have been paid by Tenant. Parking on that
portion of the Project cross-hatched on Exhibit C shall be subject such
---------
reciprocal easement agreements affecting the such portion of the Project as
Landlord may adopt from time to time.
38. Right of First Offer to Purchase.
--------------------------------
46
<PAGE>
During the term of this Lease, Landlord shall not sell fee title to
the Building to any unaffiliated third party or parties, without first offering
to sell the Building to Tenant upon the terms, covenants and conditions set
forth in this Paragraph 38; provided, however, that as provided below this
------------
Paragraph 38 may cease to be of any force or effect prior to the expiration or
- ------------
earlier termination of the term of this Lease. Notwithstanding any provision of
this Lease to the contrary, the provisions of this Paragraph 38 shall not apply
------------
to, and Tenant shall have absolutely no rights in connection with, any of the
following: (i) any and all transfers of all or any portion of the Building, or
any interest therein, by means of judicial foreclosure, trustee's sale, deed in
lieu of foreclosure or similar conveyance, (ii) any and all transfers or
conveyances of any ownership interests in Landlord or any of the parties or
entities comprising Landlord (including without limitation transfers of
partnership interests, membership interests, and shares of common and/or
preferred stock), (iii) any and all transfers of tenancy-in-common interests in
the Building by Landlord to, or by and among, the parties or entities comprising
Landlord, (iv) the creation of any liens, encumbrances or security interests or
the transfer of any interest in the Building for security purposes, and (v) the
transfer of all or any portion of the Building, or any interest in the Building,
to any Affiliate of Landlord or any partner, member or shareholder of Landlord.
A. Notice of Sale. If at any time during the term of this Lease
--------------
Landlord desires to sell fee title to the Building to an unaffiliated third
party, Landlord shall give written notice to Tenant specifying the terms,
covenants and conditions upon which Landlord is willing to sell the Building
(the "Acceptable Sale Terms"). The notice shall constitute an irrevocable offer
---------------------
on the part of Landlord (subject to the conditions described in Paragraph 38.F
--------------
below) to sell the Building to Tenant upon the Acceptable Sale Terms, and
Landlord and Tenant shall have a period of thirty (30) days after Landlord's
delivery of the notice within which to negotiate and agree upon the terms and
conditions for the sale to Tenant of the Building (the "Sale Negotiation
----------------
Period").
- ------
B. Acceptance. If Tenant is interested in acquiring the Building,
----------
Tenant shall give Landlord written notice of such interest ("Notice of Interest
------------------
I") within ten (10) days of Tenant's receipt of Landlord's notice (the "Purchase
- - --------
Response Period"), and Landlord and Tenant shall proceed to negotiate Tenant's
- ---------------
purchase of the Building and the terms and conditions of purchase during the
Sale Negotiation Period. Should the parties reach agreement on the terms and
conditions of Tenant's acquisition of the Building within the Sale Negotiation
Period, then Tenant shall acquire, on an all cash basis, in the manner set forth
in Paragraph 38.G, fee title to the Building, together with any and all
--------------
improvements situated thereon. Failure on the part of Tenant either to deliver a
Notice of Interest to Landlord within the Purchase Response Period or to accept
Landlord's offer to sell the Building within the Sale Negotiation Period shall
each constitute Tenant's rejection of Landlord's offer to sell the Building.
C. Rejection. If (i) Tenant informs Landlord within the Sale
---------
Response Period that Tenant does not desire to negotiate the acquisition of the
Building, or (ii) after commencing negotiations, Landlord and Tenant do not
reach agreement upon the terms and conditions of Tenant's purchase of the
Building within the Sale Negotiation Period, or (iii) Tenant otherwise rejects
Landlord's offer to sell the Building, then, in any such event (except as
provided to the contrary in Paragraphs 38.D and 38.E), this Paragraph 38 shall
--------------- ---- ------------
no longer apply to the Building,
47
<PAGE>
and Landlord (and each and every subsequent owner of the Building) shall be free
to offer to sell all or any portion of the Building (separately or together with
any other parcel or parcels) to any third party or parties upon any terms
whatsoever, including without limitation terms less favorable to Landlord than
the Acceptable Sale Terms, without first offering the Building to Tenant.
D. Offered Terms. If Tenant does not accept Landlord's offer as set
-------------
forth above, but Tenant does deliver to Landlord within the Sale Negotiation
Period a written offer ("Tenant's Purchase Offer") to acquire the Building for a
-----------------------
purchase price ("Tenant's Offered Price") less than the price contained in the
----------------------
Acceptable Sale Terms, then Tenant shall be deemed to have made an irrevocable
offer to acquire the Building at Tenant's Offered Price. Tenant's Purchase Offer
shall be deemed to include all of the Acceptable Sale Terms, except that to the
extent there is any discrepancy between the Acceptable Sale Terms and the terms
set forth in Tenant's Purchase Offer, Tenant's Purchase Offer shall be
controlling (except as otherwise provided in Paragraph 38.G below).
--------------
E. Acceptance of Tenant's Offer. If Tenant rejects or otherwise
----------------------------
fails to accept Landlord's offer pursuant to this Paragraph 38 but delivers
------------
Tenant's Purchase Offer to Landlord in accordance with Paragraph 38.D, then
--------------
Landlord may at any time within sixty (60) days after Landlord's receipt of
Tenant's Purchase Offer, accept Tenant's Purchase Offer and sell the Building to
Tenant in accordance with the terms thereof and the other terms and conditions
set forth in this Paragraph 38. If Landlord thus accepts Tenant's Purchase
------------
Offer, then Tenant shall acquire, on an all cash basis, in accordance with the
provisions of Paragraph 38.G, fee title to the Building, together with the
--------------
improvements situated thereon. If Landlord does not accept Tenant's Purchase
Offer within such 60-day period, then upon the expiration of such 60-day period
this Paragraph 38 shall terminate and shall no longer apply to the Building, and
------------
Landlord (and each and every subsequent owner of the Building) shall be free to
sell all or any portion of the Building (separately or together with any other
parcel or parcels) to a third party or parties upon any terms whatsoever,
including without limitation terms less favorable to Landlord than the terms
contained in Tenant's Purchase Offer, without first offering to sell the
Building to Tenant.
F. Conditions. The effectiveness of Tenant's right to offer to
----------
acquire any Building, as set forth in this Paragraph 38, is conditioned on the
------------
following: (i) Tenant has not previously entered into a Sublet of this Lease
(other than a Permitted Transfer); and (ii) no monetary or other material
default by Tenant exists under this Lease which remains uncured after the giving
of any applicable notice and the expiration of any applicable cure period. In
addition, if any of the conditions specified under clauses (i) and (ii) above do
not continue to be satisfied as of the date on which the escrow for the sale of
the Building to Tenant is scheduled to close, then unless Landlord waives in
writing any such conditions, Tenant's exercise of its right to acquire the
Building under this Paragraph 38 shall be null and void, and this Lease shall
------------
terminate effective as of the date on which the escrow for the sale of the
Building to Tenant was scheduled to close.
G. Process. In the event that Landlord and Tenant reach agreement
-------
on the terms and conditions of the sale of the Building within the applicable
period of time set forth in
48
<PAGE>
this Paragraph 38, Tenant's acquisition of the Building shall be carried out on
------------
(i) the terms and conditions described in this Paragraph 38 and/or to which
------------
Landlord and Tenant have otherwise specifically agreed pursuant to this
Paragraph 38 (collectively, the "Agreed Terms"), and (ii) the terms and
- ------------ ------------
conditions set forth on Exhibit F attached to this Lease (the "Standard Terms
--------- --------------
for Purchase"). To the extent there is any discrepancy between the Agreed
- ------------
Terms and the Standard Terms, the Agreed Terms shall be controlling; provided,
however, that notwithstanding the foregoing, Tenant shall be required to make an
earnest money deposit equal to five percent (5%) of the purchase price for the
Building, pursuant to the Standard Terms.
H. Rights Personal. The rights granted to Tenant under this
---------------
Paragraph 38 shall be personal to Tenant, and shall not be assigned, sold,
- ------------
conveyed or otherwise transferred to any other party (including without
limitation any assignee or sublessee of Tenant) without the prior written
consent of Landlord, which consent may be withheld in Landlord's sole
discretion; provided, however, that the rights granted to Tenant under this
Paragraphs 38 may be transferred without Landlord's consent to the transferee of
- -------------
Tenant's interest in this Lease pursuant to a Permitted Transfer.
39. General.
-------
A. Captions. The captions and headings used in this Lease are for
--------
the purpose of convenience only and shall not be construed to limit or extend
the meaning of any part of this Lease.
B. Executed Copy. Any fully executed copy of this Lease shall be
-------------
deemed an original for all purposes.
C. Time. Time is of the essence for the performance of each term,
----
condition and covenant of this Lease.
D. Separability. If one or more of the provisions contained herein,
------------
except for the payment of Rent, is for any reason held invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision of this Lease, but this Lease shall be
construed as if such invalid, illegal or unenforceable provision had not been
contained herein.
E. Choice of Law. This Lease shall be construed and enforced in
-------------
accordance with the laws of the State of California. The language in all parts
of this Lease shall in all cases be construed as a whole according to its fair
meaning and not strictly for or against either Landlord or Tenant.
F. Gender; Singular, Plural. When the context of this Lease
------------------------
requires, the neuter gender includes the masculine, the feminine, a partnership
or corporation or joint venture, and the singular includes the plural.
G. Binding Effect. The covenants and agreement contained in this
--------------
Lease
49
<PAGE>
shall be binding on the parties hereto and on their respective successors and
assigns to the extent this Lease is assignable.
H. Waiver. The waiver by Landlord of any breach of any term,
------
condition or covenant, of this Lease shall not be deemed to be a waiver of such
provision or any subsequent breach of the same or any other term, condition or
covenant of this Lease. The subsequent acceptance of Rent hereunder by Landlord
shall not be deemed to be a waiver of any preceding breach at the time of
acceptance of such payment. No covenant, term or condition of this Lease shall
be deemed to have been waived by Landlord unless such waiver is in writing
signed by Landlord.
I. Entire Agreement. This Lease is the entire agreement between the
----------------
parties, and there are no agreements or representations between the parties
except as expressed herein. Except as otherwise provided herein, no subsequent
change or addition to this Lease shall be binding unless in writing and signed
by the parties hereto.
J. Authority. If Tenant is a corporation or a partnership, each
---------
individual executing this Lease on behalf of said corporation or partnership, as
the case may be, represents and warrants that he is duly authorized to execute
and deliver this Lease on behalf of said entity in accordance with its corporate
bylaws, statement of partnership or certificate of limited partnership, as the
case may be, and that this Lease is binding upon said entity in accordance with
its terms. Landlord, at its option, may require a copy of such written
authorization to enter into this Lease.
K. Exhibits. All exhibits, amendments, riders and addenda attached
--------
hereto are hereby incorporated herein and made a part hereof.
L. Lease Summary. The Lease Summary attached to this Lease is
-------------
intended to provide general information only. In the event of any inconsistency
between the Lease Summary and the specific provisions of this Lease, the
specific provisions of this Lease shall prevail.
M. Memorandum of Lease. This Lease shall not be recorded without
-------------------
the prior consent of both Landlord and Tenant; provided, however, that upon the
written request of Tenant, Landlord and Tenant shall execute and acknowledge, in
recordable form, a memorandum of this Lease in form reasonably acceptable to
both Landlord and Tenant, and shall cause such memorandum to be recorded in the
Official Records of the County of San Mateo, State of California. Upon
expiration of the term of this Lease or earlier termination of this Lease,
Tenant shall execute, acknowledge and deliver to Landlord an appropriate
instrument prepared by Landlord which Landlord may then record in the Official
Records of San Mateo County to expunge this Lease and any memorandum thereof
from the public record with respect to the Premises. In addition, Tenant hereby
irrevocably constitutes and appoints Landlord as its true and lawful attorney in
fact, in its name and in its behalf, to make, execute, acknowledge, deliver, and
file any and all such instruments that Tenant so fails or refuses to execute.
Tenant expressly understands and acknowledges that the foregoing special power
of attorney is coupled with an interest, is irrevocable, and shall survive the
dissolution or insolvency of Tenant, or the transfer
50
<PAGE>
by Tenant of the whole or any portion of its interest in this Lease (provided
that any such transfer shall be subject to the restrictions set forth in this
Lease).
51
<PAGE>
THIS LEASE is effective as of the date the last signatory necessary to
execute the Lease shall have executed this Lease.
TENANT:
Dated: July 7,1997 AT HOME CORPORATION,
a Delaware corporation
By: /s/ Kenneth A. Goldman
------------------------------
Its: Chief Financial Officer
------------------------------
By: _____________________________
Its: _____________________________
LANDLORD:
Dated: September 29, 1997 MARTIN/CAMPUS ASSOCIATES, L.P.,
a Delaware limited partnership
By: Martin/Redwood Partners,
L.P., a California limited
partnership, its General
Partner
By: The Martin Group of
Companies, Inc., a
California corporation,
its General Partner
By: /s/ Cathy Greenwold
--------------------
Its: Vice President
--------------------
52
<PAGE>
EXHIBIT A
@HOME CAMPUS
BUILDING A&B
<PAGE>
EXHIBIT B
---------
WORK LETTER AGREEMENT
---------------------
THIS WORK LETTER ("Agreement") is made and entered into by and between
Landlord and Tenant as of the date of the Lease. This Agreement shall be deemed
a part of the Lease to which it is attached. Capitalized terms which are used
herein and defined in the Lease shall have the meanings given in the Lease.
1. General.
-------
1.1 Capital Improvements. Pursuant to the Build to Suit Agreement,
--------------------
Landlord shall construct the Shell and Core and applicable site work (as defined
in the Build to Suit Agreement) (collectively, the "Capital Improvements").
--------------------
Except for its obligation to perform the Capital Improvements and the Tenant
Improvements as set forth in this Lease and the Work Letter, Landlord shall have
no obligation whatsoever to do any work or perform any improvements whatsoever
to any portion of the Premises or the Building; provided, however, that the
Tenant Improvements shall be performed at the sole cost and expense of Tenant
(subject to the provisions of Paragraph 1.4). Landlord shall cause Contractor
-------------
(as defined below) to perform all initial leasehold improvements, in accordance
with the approved Final Plans and as otherwise may be required to comply with
applicable law (collectively, the "Tenant Improvements"). The parties
-------------------
acknowledge and agree that the Capital Improvements and the Tenant Improvements
constitute all of the work required to enable Tenant to occupy, and operate its
business in, the Premises.
1.2 Tenant Improvement Costs. The cost of performing the Tenant
------------------------
Improvements, including without limitation the costs described in Paragraph 6
-----------
below (collectively, the "Tenant Improvement Costs") shall be paid by Tenant in
------------------------
the manner set forth in Paragraph 5 below, subject to the provisions of
-----------
Paragraph 1.4.
- -------------
1.3 Tenant Improvements Allowance. If the lender for the
-----------------------------
Construction Financing (as defined in the Build to Suit Agreement) is willing to
increase the amount of such Construction Financing to cover all or any portion
of the Tenant Improvement Costs, then Landlord shall provide an allowance for
the Tenant Improvement Costs in an amount equal to that portion of the
Construction Financing budgeted for payment of such costs (the "Tenant
------
Improvements Allowance"); provided, however, that in no event shall the Tenant
- ----------------------
Improvements Allowance exceed Thirty Dollars ($30.00) per square foot of
Rentable Area to be situated in the Building.
2. Approval of Plans for Tenant Improvements.
-----------------------------------------
2.1 Architect. Within five (5) days after execution of the Lease,
---------
Tenant shall notify Landlord in writing of the name and address of the licensed
architect which Tenant desires to engage for the preparation of plans for
Tenant's Work ("Architect"). Tenant's proposed architect shall be subject to
---------
Landlord's prior written approval. Tenant shall retain Architect's
administrative services throughout the performance of Tenant's Work. Designers
who are not
<PAGE>
licensed architects will not be acceptable.
2.2 Submittal of Plans.
------------------
2.2.1. Preliminary Plans. Tenant shall cause Architect to
-----------------
prepare preliminary plans (the "Preliminary Plans") for the Tenant Improvements
-----------------
to be performed at the Premises. Tenant shall cause Architect to deliver the
Preliminary Plans to Landlord within thirty (30) days after the date on which
the Lease has been signed by Landlord and Tenant. Within five (5) days after
Landlord's receipt of the Preliminary Plans, Landlord shall either approve or
disapprove the Preliminary Plans, which approval shall not be unreasonably
withheld. If Landlord disapproves the Preliminary Plans, then Landlord shall
state in reasonable detail the changes which Landlord requires to be made
thereto. Tenant shall submit to Landlord revised Preliminary Plans within five
(5) days after Tenant's receipt of Landlord's disapproval notice. Following
Landlord's receipt of the revised Preliminary Plans from Tenant, Landlord shall
have the right to review and approve the revised Preliminary Plans pursuant to
this Paragraph 2.2.1. Landlord shall give Tenant written notice of its approval
---------------
or disapproval of the revised Preliminary Plans within five (5) days after the
date of Landlord's receipt thereof. If Landlord reasonably disapproves the
revised Preliminary Plans, then the following shall occur: (i) Landlord and
Tenant shall continue to follow the procedures set forth in this Paragraph 2.2.1
---------------
until Landlord and Tenant reasonably approve the Preliminary Plans in accordance
with this Paragraph 2.2.1, and (ii) the period between the date of Landlord's
---------------
reasonable disapproval and the eventual mutual approval of such Preliminary
Plans shall constitute a Tenant Delay.
2.2.2. Preliminary Budget. Landlord shall retain a contractor
------------------
("Contractor") as the general contractor for the construction of the Tenant
- ------------
Improvements. Tenant shall have the right to approve the construction contract
between Landlord and Contractor for the construction of the Tenant Improvements,
which approval shall not be unreasonably withheld or delayed; provided, however,
that Tenant shall have no right to disapprove such construction contract if such
construction contract substantially conforms with the applicable AIA form
contract and general conditions. Ten (10) days after approval by Landlord and
Tenant of the Preliminary Plans, Contractor shall prepare a preliminary budget
for the Tenant Improvements based upon the approved Preliminary Plans, which
Contractor shall submit to Tenant for its review and approval. Within three (3)
days after Tenant's receipt of the preliminary budget, Tenant shall either
approve or disapprove the preliminary budget. If Tenant reasonably rejects such
preliminary budget, Tenant shall, within five (5) days of Tenant's delivery of a
written rejection notice to Landlord, require Architect to revise the
Preliminary Plans to reduce the cost of the Tenant Improvements. Following
Tenant's instructions to the Architect, Landlord and Tenant shall again follow
the procedures set forth in Paragraph 2.2.1 and this Paragraph 2.2.2 with
respect to the approval of the Preliminary Plans and to the submission and
approval of the preliminary budget from Contractor.
2.2.3. Final Plans. Within three (3) days after approval by
-----------
Landlord and Tenant of the preliminary budget for the Tenant Improvements,
Tenant shall cause Architect to commence preparing complete plans,
specifications and working drawings which incorporate and are consistent with
the approved Preliminary Plans and preliminary budget, and which show in detail
the intended design, construction and finishing of all portions of the Tenant
Improvements
<PAGE>
described in the Preliminary Plans (collectively, the "Final Plans"). Tenant
-----------
shall cause Architect to deliver the Final Plans to Landlord, for Landlord's
review and approval, no later than ninety (90) days after the date on which the
Lease has been signed by Landlord and Tenant. Within five (5) days after
Landlord's receipt of the Final Plans, Landlord shall either approve or
disapprove the Final Plans, which approval shall not be unreasonably withheld.
If Landlord disapproves the Final Plans, then Landlord shall state in reasonable
detail the changes which Landlord requires to be made thereto. Tenant shall
submit to Landlord revised Final Plans within five (5) days after Tenant's
receipt of Landlord's disapproval notice. Following Landlord's receipt of the
revised Final Plans from Tenant, Landlord shall have the right to review and
approve the revised Final Plans pursuant to this Paragraph 2.2.3. Landlord shall
---------------
give Tenant written notice of its approval or disapproval of the revised Final
Plans within five (5) days after the date of Landlord's receipt thereof. If
Landlord reasonably disapproves the revised Final Plans, then the following
shall occur: (i) Landlord and Tenant shall continue to follow the procedures set
forth in this Paragraph 2.2.3 until Landlord and Tenant reasonably approve such
Final Plans in accordance with this Paragraph 2.2.3, and (ii) the period between
---------------
the date of Landlord's reasonable disapproval and the eventual mutual approval
of such Final Plans shall constitute a Tenant Delay.
3. Construction Budget. Upon approval by Landlord and Tenant of the
-------------------
Final Plans, Landlord shall instruct Contractor to obtain competitive bids for
the Tenant Improvements from at least three (3) qualified subcontractors for
each of the major subtrades (excluding the mechanical and electrical trades,
which shall be on a design/build basis, unless Landlord elects to competitively
bid these trades) and to submit the same to Landlord and Tenant for their review
and approval. Upon selection of the subcontractors and approval of the bids,
Contractor shall prepare a cost estimate for the Tenant Improvements described
in such Final Plans, based upon the bids submitted by the subcontractors
selected. Contractor shall submit such cost estimate to Landlord and Tenant for
their review and approval. Within five (5) days after their receipt of the cost
estimate, Landlord and Tenant shall each either approve or disapprove the cost
estimate, which approval shall not be unreasonably withheld. Tenant's failure to
approve or disapprove the cost estimate within such 5-day period shall
constitute Grounds for the assertion of a Tenant Delay. Landlord or Tenant may
each approve or reject such cost estimate in their reasonable sole discretion.
If either Landlord or Tenant rejects such cost estimate, Landlord shall
resolicit bids based on such Final Plans, in accordance with the procedures
specified above. Following any resolicitation of bids by Landlord pursuant to
this Paragraph 3, Landlord and Tenant shall again follow the procedures set
-----------
forth in this Paragraph 3 with respect to the submission and reasonable approval
-----------
of the cost estimate from Contractor; provided, however that the period between
Tenant's disapproval of the first revised cost estimate and the eventual mutual
approval of a cost estimate shall constitute a Tenant Delay.
4. Landlord to Construct. Landlord shall cause Contractor to construct
---------------------
the Tenant Improvements in a good and workmanlike manner, in accordance with the
approved Final Plans and in compliance with all applicable laws. Architect shall
be responsible for obtaining all necessary building permits and approvals and
other authorizations from governmental agencies required in connection with the
Tenant Improvements. The cost of all such permits and approvals, including
inspection and other building fees required to obtain the permits for the Tenant
Improvements, shall be included as part of the Tenant Improvement Costs. Tenant
shall have the benefit of any warranties provided by Contractor, the
subcontractors and suppliers in
<PAGE>
connection with the Tenant Improvements.
5. Payment for Tenant Improvements. The Tenant Improvement Costs shall be
-------------------------------
paid solely by Tenant as follows:
5.1 Method of Payment. If Landlord provides a Tenant Improvements
-----------------
Allowance for the Building pursuant to Paragraph 1.4 above, Landlord shall bear
--------------
the Tenant Improvement Costs up to the amount of such Tenant Improvements
Allowance; and Tenant shall be responsible for paying any excess in the Tenant
Improvement Costs over the amount of such Tenant Improvements Allowance. If
Landlord does not provide a Tenant Improvements Allowance, Tenant shall be
solely responsible for the payment of any and all Tenant Improvement Costs. For
the purposes of this Exhibit B, the term "Tenant's Share of Tenant Improvement
--------- ------------------------------------
Costs" shall mean the entire amount of all Tenant Improvement Costs, less any
- -----
Tenant Improvements Allowance provided by Landlord; provided, however, that if
Landlord does not provide a Tenant Improvements Allowance, then "Tenant's Share
--------------
of Tenant Improvement Costs" shall mean the entire amount of all Tenant
- ---------------------------
Improvement Costs. If required by any lender holding a security interest
encumbering the land on which the Building will be situated, Tenant shall
provide the Set-Aside Funds (as defined in Paragraph 5.1.1) in accordance with
---------------
the provisions of Paragraph 5.1.1. If at the time construction of the Building
---------------
is scheduled to commence no such lender exists, or if there is such a lender but
such lender does not at any time during the construction of the Building require
Landlord to obtain the Set-Aside Funds from Tenant, then Tenant shall not be
required to provide the Set-Aside Funds for the construction of the Building.
5.1.1. Set-Aside Funds. If Tenant is required to deposit the
---------------
Set-Aside Funds pursuant to Paragraph 5.1, then within five (5) days after the
-------------
parties have mutually agreed upon a cost estimate for the Tenant Improvements as
provided above, Tenant shall deposit into a separate account with any financial
institution designated by Landlord, in Tenant's name, subject to restrictions in
favor of such financial institution, an amount (the "Set-Aside Funds") equal to
---------------
(a) the entire amount of Tenant's Share of Tenant Improvement Costs, based on
the assumption that the Tenant Improvement Costs shall equal such cost estimate,
and (b) all other amounts to be deposited by Tenant in such account pursuant to
the terms of the Build to Suit Option Agreement. Landlord shall instruct such
financial institution to hold the Set-Aside Funds in a separate interestbearing
account with interest to accrue for Tenant's account, and shall utilize the Set-
Aside Funds to pay for Tenant's Share of Tenant Improvement Costs and any other
obligations of Tenant pursuant to the Build to Suit Option Agreement. Before
commencement of construction of any subsequent portion of the Tenant
Improvements, Tenant shall deposit in such account an additional amount equal to
Tenant's Share of Tenant Improvement Costs for such subsequent Tenant
Improvements.
5.1.2. Payment. If Landlord provides a Tenant Improvements
-------
Allowance pursuant to Paragraph 1.4 above, then within twenty (20) days after
-------------
Landlord's receipt of reasonably satisfactory invoices for costs of labor and
materials incurred in connection with the Tenant Improvements, together with
such supporting documentation and lien waivers as Landlord may reasonably
require in order to review the costs covered by the billing, Landlord shall pay
the Tenant Improvement Costs represented by such invoices first coming due for
<PAGE>
payment, up to an aggregate amount equal to the Tenant Improvements Allowance.
As and when any amount of Tenant's Share of Tenant Improvement Costs or any
amounts payable by Tenant pursuant to the Build to Suit Option Agreement become
due and payable, Landlord shall request such financial institution to utilize
the remaining SetAside Funds to pay such amounts; provided, however, that if at
any time there are insufficient Set-Aside Funds to pay any amount of Tenant's
Share of Tenant Improvement Costs and/or any other amounts payable by Tenant
pursuant to the Build to Suit Option Agreement, Tenant shall pay any and all
such excess Shell and Core Costs and Tenant Improvement Costs to Landlord within
ten (10) days after the date of Tenant's receipt of Landlord's written request
therefor, together with such supporting documentation and lien waivers as Tenant
may reasonably require in order to review the costs covered by the billing. Any
failure by Tenant to pay any amount of Tenant's Share of Tenant Improvement
Costs or any other amounts payable by Tenant pursuant to the Build to Suit
Option Agreement as and when required under this Exhibit B shall constitute a
---------
default by Tenant under the Lease.
5.1.3. Penalties. To the extent that any contractor or
---------
subcontractor working on the Tenant Improvements imposes upon Landlord any
penalty or late charge due to Tenant's failure to pay to Landlord any amount due
under this Paragraph 5.1 as and when such amount is due, Tenant shall be solely
-------------
responsible for paying such penalty or late charge; provided, however, that if
Tenant disputes the imposition of such penalty or late charge, Tenant shall not
be required to pay the penalty or late charge until the dispute has been settled
or otherwise resolved; provided further, that if any penalty or late charge is
imposed due to Tenant's exercise of its rights under this Paragraph 5.1.3,
---------------
Tenant shall pay such penalty or late charge as provided in this Paragraph
---------
5.1.3.
- -----
5.2 Extra Work. Tenant shall be solely responsible for any and all
----------
costs and expenses arising from any improvements to or installations in the
Building desired by Tenant and approved by Landlord that are outside the scope
of the Final Plans.
6. Tenant Improvement Costs. The Tenant Improvement Costs shall include
------------------------
all reasonable costs incurred in connection with the Tenant Improvements (but
not the Capital Improvements), as determined by Landlord in its reasonable
discretion, including the following:
(a) All costs of space plans and other architectural and engineering
plans and specifications for the Tenant Improvements, including engineering
costs associated with completion of the State of California energy utilization
calculations under Title 24 legislation required in connection with the Tenant
Improvements;
(b) All costs of obtaining building permits and other necessary
authorizations from the City of Redwood City;
(c) All costs of interior design and finish schedule plans and
specifications, including as-built drawings by Architect;
(d) All direct and indirect costs of procuring, constructing and
installing the Tenant Improvements in the Premises, including, but not limited
to, the construction fee payable to the Contractor for overhead and profit, and
the cost of all on-site supervisory and
<PAGE>
administrative staff, office, equipment and temporary services rendered by
Contractor in connection with construction of the Tenant Improvements;
(e) All fees payable to Architect and Landlord's engineering firm if
they are required by Tenant to redesign any portion of the Tenant Improvements
following Tenant's approval of the Final Plans;
(f) Sewer connection fees (if any);
(g) All costs of installing an emergency power supply systems in each
of the Buildings, which emergency power supply shall include emergency HVAC for
Tenant's computer rooms;
(h) All direct and indirect construction costs associated with
complying with Title 24 legislation and ADA compliance for all interior
improvements (including the reconstruction of all restrooms); and
(i) A construction management fee payable to Landlord equal to three
percent (3%) of the total Tenant Improvement Costs. (Landlord shall either
provide, or cause a third party to provide, construction management services in
connection with the construction of the Tenant Improvements, and the foregoing
fee shall be the sole compensation for such services).
7. Chance Requests. No revisions to the approved Final Plans shall be
---------------
made by either Landlord or Tenant unless approved in writing by both parties.
Landlord agrees to make all changes (i) required by any public agency to conform
with governmental regulations, or (ii) requested in writing by Tenant and
approved in writing by Landlord, which approval shall not be unreasonably
withheld. Any costs related to such changes shall be added to the Tenant
Improvement Costs and shall be paid for in accordance with Paragraph 5. The
-----------
billing for such additional costs shall be accompanied by evidence of the
amounts billed as is customarily used in the business. Costs related to changes
shall include, without limitation, any architectural, structural engineering, or
design fees, and the Contractor's price for effecting the change. Any change
order which may extend the date of substantial completion of the Tenant
Improvements may be disapproved by Landlord unless Tenant agrees that for all
purposes under this Lease, the Tenant Improvements shall be deemed to have been
substantially completed on that date on which such Tenant Improvements would
have been substantially completed without giving effect to the change order in
question.
8. Early Access. So long as such entry does not in any way interfere
------------
with or delay Landlord's construction of the Improvements, Tenant shall have the
right to enter the Premises before the Commencement Date for the purpose of
installing cable T.V., telephones, telecommunications cabling, furniture and
other similar items. Such entry shall be subject to all of the terms and
conditions of the Lease, other than the obligation to pay Rent.
9. Acceptance of Building. Within thirty (30) days after completion of
----------------------
the Tenant Improvements, Tenant shall conduct a walk-through inspection of the
Building with Landlord and complete a punch-list of items needing additional
work. Other than the items specified in the
<PAGE>
punch list, if any, by taking possession of the Building, Tenant shall be deemed
to have accepted the Building in good, clean and completed condition and repair,
subject to all applicable laws, codes and ordinances. Any damage to the Building
caused by Tenant's move-in shall be repaired or corrected by Tenant, at its sole
cost and expense, which repair or corrective work shall not be paid for out of
any Tenant Improvements Allowance. Tenant acknowledges that neither Landlord nor
Landlord's agents shall be deemed to have made any representations or warranties
as to the suitability or fitness of the Building for the conduct of Tenant's
business or for any other purpose, nor shall Landlord or Landlord's agents be
deemed to have agreed to undertake any alterations or construct any improvements
to the Building except as expressly provided in the Lease, this Exhibit B, and
---------
the Build to Suit Option Agreement. If Tenant fails to submit a punch-list to
Landlord within such 30-day period, it shall be deemed that there are no items
needing additional work or repair. Contractor shall complete all reasonable
punch-list items within thirty (30) days after the walk-through inspection or as
soon as practicable thereafter. Upon completion of such punch-list items, Tenant
shall approve such completed items in writing to Landlord. If Tenant fails to
approve such items within fourteen (14) days of completion, such items shall be
deemed approved by Tenant. Landlord shall, upon Tenant's written request,
assign and transfer to Tenant, to the extent reasonably requested by Tenant and
consistent with Landlord's position as the owner of the Building, Landlord's
rights and claims against Contractor arising from Contractor's warranties
(express and implied) with respect to the Building. Nothing contained in this
Paragraph 10 shall limit, restrict, or terminate any right of Landlord or Tenant
- ------------
to make any claim against Contractor based upon the condition of the Building or
any and all of Contractor's warranties (express and implied) with respect to the
Building.
LANDLORD: TENANT:
MARTIN/CAMPUS ASSOCIATES, L.P., AT HOME CORPORATION,
a Delaware limited partnership a Delaware corporation
By: Martin/Redwood Partners, By: /s/ Kenneth Goldman
------------------------
L.P., a California limited Its: Chief Financial Officer
------------------------
partnership, its General
Partner By: _________________________
Its: _________________________
By: The Martin Group of
Companies, Inc., a
California corporation,
its General Partner
By: /s/ Cathy Greenwold
-------------------
Its: Vice President
--------------
<PAGE>
EXHIBIT C
---------
SITE PLAN FOR PROJECT
---------------------
This Exhibit will either be (i) the North Expansion Parcel (see
Exhibit C-1), or (ii) the south campus (see Exhibit C-2), as applicable.
<PAGE>
EXHIBIT C
---------
[SITE PLAN FOR PROJECT]
-----------------------
<PAGE>
EXHIBIT D
---------
COMMENCEMENT DATE MEMORANDUM
----------------------------
LANDLORD: Martin/Campus Associates, L.P.
TENANT: ______________________________
LEASE DATE: ______________________________
PREMISES: ______________________________
Pursuant to Paragraph 4.A. of the above referenced Lease, the
--------------
commencement date is hereby established as __________________ for
____________________, Redwood City, CA 94063. The Commencement Date as defined
in Paragraph 4.A. shall be ___________________.
--------------
TENANT:
Dated: _________________ AT HOME CORPORATION,
a Delaware corporation
By: ______________________________
Its: ______________________________
By: ______________________________
Its: ______________________________
LANDLORD:
Dated: _________________ MARTIN/CAMPUS ASSOCIATES, L.P.,
a Delaware limited partnership
By: Martin/Redwood Partners,
L.P., a California limited
partnership, its General
Partner
By: The Martin Group of
Companies, Inc., a
California corporation,
its General Partner
By: ____________________
Its: ____________________
<PAGE>
EXHIBIT E
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SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
-------------------------------------------------------
<PAGE>
EXHIBIT F
---------
STANDARD TERMS FOR OPTION TO PURCHASE
-------------------------------------
This Exhibit F sets forth certain standard terms that shall be applicable
---------
to the purchase of the Building pursuant Paragraph 38 of the Lease. This Exhibit
------------
shall be deemed a part of the Lease to which it is attached. Capitalized terms
which are used herein and defined in the Lease shall have the meanings given in
the Lease.
1. Sale and Purchase; Title Company.
--------------------------------
1.1 General. In the event Tenant acquires the Building, (the "Option
------- ------
Property"), Landlord shall sell to Tenant, and Tenant shall purchase from
- --------
Landlord, all of the "Property" (as defined below).
1.2 The Property. As used in this Agreement, the term "Property"
------------
includes the Option Property and all of the items referred to in Paragraphs
----------
1.2.1 through 1.2.4.
- ----- -----
1.2.1. Personal Property. All of Landlord's right, title and
-----------------
interest in and to any and all personal property located at the Option Property
which is owned by Landlord and which is used in the operation and maintenance of
the Option Property (the "Personal Property").
-----------------
1.2.2. Rights and Privileges. All of Landlord's right, title and
---------------------
interest, if any, in and to all rights, privileges, tenements, hereditaments,
rights-of-way, easements, appurtenances, mineral rights, development rights, air
rights and riparian or littoral rights belonging or appertaining to the Option
Property.
1.2.3. Contracts and Leases. All of Landlord's right, title and
--------------------
interest in and to (i) all service, maintenance, construction, management and
other contracts relating to the Option Property (collectively, "Contracts"), and
---------
(ii) all leases, tenancy and occupancy agreements for all or any portion of the
Option Property (collectively, "Leases").
------
1.2.4. Permits and Warranties. All of Landlord's right, title
----------------------
and interest in and to (i) all licenses, permits and approvals, if any,
affecting or pertaining to the Option Property which, if assignable, are to be
assigned to Tenant at the Closing (as defined below), and (ii) all warranties,
if any, affecting or pertaining to the Option Property which, if assignable, are
to be assigned to Tenant at the Closing.
1.3 Title Company. The purchase and sale of the Property shall be
-------------
accomplished through an escrow which Landlord has established or will establish
with Chicago Title Insurance Company, One Kaiser Plaza, Oakland, California (the
"Title Company").
-------------
2. Title. Title to the Property shall be conveyed from Landlord to Tenant
-----
by grant deed (the "Deed"), subject to: (i) liens to secure payment of real
estate taxes and assessments not delinquent; (ii) applicable zoning and use
laws, ordinances, rules and regulations of any municipality, township, county,
state or other governmental agency or authority; (iii) all matters
<PAGE>
that would be disclosed by a physical inspection or survey of the Option
Property or that are actually known to Tenant; (iv) any exceptions or matters
created by Tenant, its agents, employees or representatives; (v) all exceptions
of record that were in existence as of the date of the Lease and all CC&Rs
recorded by Landlord; (vi) all Leases and Contracts; and (vii) such other
exceptions as Tenant may approve in writing.
The foregoing exceptions to title are referred to collectively as the
"Conditions of Title". Conclusive evidence of delivery of title in accordance
-------------------
with the foregoing shall be the willingness of Title Company to issue to Tenant,
upon payment of its regularly scheduled premium, its CLTA owner's policy of
title insurance, in the amount of the Purchase Price, showing title to the
Option Property vested of record in Tenant, subject only to the Conditions of
Title (and the standard printed exceptions and conditions in the policy of title
insurance). If Landlord for any reason is unable to deliver title to the
Property subject only to the Conditions of Title, then Tenant's sole remedy
shall be to terminate this Agreement and receive a return of any Deposit, and
neither Landlord nor Tenant shall thereafter have any further rights or
obligations under this Agreement, except Tenant's obligation to perform the
Continuing Obligations (as defined below). Tenant shall have no right to
commence any action for damages, specific performance or other relief as a
result of Landlord's inability to deliver title to the Property subject only to
the Conditions of Title; provided, however, that if Landlord intentionally fails
to consummate the conveyance of the Option Property to Tenant in accordance with
the terms of the Lease, then Tenant shall have the right to commence any actions
for damages, specific performance or other relief as a result of Landlord's
intentional breach.
3. Damage, Destruction or Taking. If at any time prior to the Closing,
-----------------------------
Landlord determines that the Option Property has been destroyed or damaged by
earthquake, flood or other casualty and that such damage will require more than
One Million Dollars ($1,000,000.00) to repair (a "Casualty"), or if a proceeding
--------
is instituted for the taking of all or any material portion of the Option
Property under the power of eminent domain (a "Taking"), then Tenant shall have
------
the right by giving written notice to Landlord and Title Company within fifteen
(15) days after the date of receipt of written notice of any such Casualty or
Taking, either to: (i) consummate the purchase of the Property in accordance
with the Lease, in which event Landlord shall assign to Tenant at the Closing
(A) any insurance proceeds payable to Landlord on account of such Casualty, or
(B) any award payable to Landlord by reason of the Taking, as the case may be;
or (ii) terminate Landlord's obligations under Paragraph 38 of the Lease and
------------
this Exhibit F, effective as of the date such notice of termination is given. If
---------
Tenant fails to give such notice within such 15-day period, then Tenant shall be
deemed to have elected to terminate Landlord's obligations under Paragraph 38 of
------------
the Lease and this Exhibit F, pursuant to this Paragraph 3. The Closing Date
--------- -----------
shall be deferred, if necessary, to permit Tenant to have the 15-day period
following receipt of notice of a Casualty or a Taking to make the election
specified hereinabove. If Tenant terminates Landlord's obligations under
Paragraph 38 of the Lease and this Exhibit F, pursuant to this Paragraph 3, then
- ------------ --------- -----------
any Deposit shall be returned to Tenant, and neither Landlord nor Tenant shall
have any further obligations under Paragraph 38 of the Lease or this Exhibit F.
------------ ---------
Nothing herein shall be deemed to constitute an obligation on the part of
Landlord to carry or maintain any insurance of any kind whatsoever pertaining to
the Property.
4. Landlord's Disclaimer; Release and Indemnification of Landlord.
---------------------------------------------------------------
<PAGE>
4.1 Landlord's Disclaimer. Tenant acknowledges and agrees that the
---------------------
sale of the Property to Tenant is made without any warranty or representation of
any kind by Landlord, either express or implied, with respect to any aspect,
portion or component of the Property, including: (i) the physical condition,
nature or quality of the Property, including the quality of the soils on and
under the Property and the quality of the labor and materials included in any
buildings or other improvements, fixtures, equipment or personal property
comprising a portion of the Property; (ii) the fitness of the Property for any
particular purpose; (iii) the presence or suspected presence of hazardous
materials on, in, under or about the Property (including the soils and
groundwater on and under the Property); or (iv) existing or proposed
governmental laws or regulations applicable to the Property, or the further
development or change in use thereof, including environmental laws and laws or
regulations dealing with zoning or land use. Tenant further agrees and
acknowledges that, as of the Closing, Tenant shall have made such feasibility
studies, investigations, environmental studies, engineering studies, inquiries
of governmental officials, and all other inquiries and investigations, which
Tenant shall deem necessary to satisfy itself as to the condition, nature and
quality of the Property and as to the suitability of the Property for Tenant's
purposes. Tenant further agrees and acknowledges that, in purchasing the
Property, Tenant shall rely entirely on its own investigation, examination and
inspection of the Property, and not upon any representation or warranty of
Landlord, or any agent or representative of Landlord. Tenant further agrees and
acknowledges that Tenant has leased and occupied the Option Property prior to
the Closing, by reason of such tenancy, possession and occupancy, Tenant is
fully aware of the condition of the Option Property. THEREFORE, TENANT AGREES
THAT, IN CONSUMMATING THE PURCHASE OF THE PROPERTY PURSUANT TO THIS LEASE,
TENANT SHALL ACQUIRE THE PROPERTY IN ITS THEN CONDITION, "AS IS, WHERE IS" AND
WITH ALL FAULTS, AND SOLELY IN RELIANCE ON TENANT'S OWN INVESTIGATION,
EXAMINATION, INSPECTION, ANALYSIS AND EVALUATION OF THE PROPERTY. The
agreements and acknowledgments contained in this Paragraph 4.1 constitute a
-------------
conclusive admission that Tenant, as a sophisticated, knowledgeable investor in
real property, shall acquire the Property solely upon its own judgment as to any
matter germane to the Property or to Tenant's contemplated use of the Property,
and not upon any statement, representation or warranty by Landlord, or any agent
or representative of Landlord, which is not expressly set forth in this
Agreement. At the Closing, upon the request of Landlord, Tenant shall execute
and deliver to Landlord a certificate of Tenant reaffirming the foregoing.
4.2 Tenant's Release of Landlord. Tenant hereby waives, releases and
----------------------------
forever discharges Landlord and its officers, directors, employees and agents
from any and all claims, actions, causes of action, demands, liabilities,
damages, costs, expenses or compensation whatsoever, whether direct or indirect,
known or unknown, foreseeable or unforeseeable, which Tenant may have at the
Closing or which may arise in the future on account of or in any way arising out
of or connected with the Property, including: (i) the physical condition, nature
or quality of the Property (including the soils and groundwater on and under the
Option Property); (ii) the presence or release in, under, on or about the
Property (including the soils and groundwater on and under the Option Property)
of any hazardous materials; and (iii) the ownership, management or operation of
the Property, but excluding claims to the extent based on Landlord's fraud or
intentional misrepresentation. At the Closing, upon the request of Landlord,
Tenant shall deliver to Landlord a certificate of Tenant reaffirming the
foregoing. Tenant hereby
<PAGE>
waives the protection of California Civil Code Paragraph 1542, which reads as
follows:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him
must have materially affected his settlement with the
debtor."
Tenant's
Initials: /s/ K. A. G
-----------
4.3 Tenant's Indemnification of Landlord. Tenant shall indemnify,
------------------------------------
defend, protect and hold Landlord harmless from and against any and all claims,
actions, causes of action, demands, liabilities, damages, costs and expenses
(including attorneys' fees), whether direct or indirect, known or unknown,
foreseeable or unforeseeable, which may be asserted against or suffered by
Landlord at any time after the Closing on account of or in any way arising out
of or connected with the Property, including: (i) the physical condition, nature
or quality of the Property (including the soils and groundwater on and under the
Option Property); (ii) the presence or release in, under, on or about the
Property (including the soils and groundwater on and under the Option Property)
of any hazardous materials; and (iii) the ownership, management or operation of
the Property, including any claim or demand by any tenant for the refund or
return of any security deposit or other deposit, but excluding claims to the
extent based on Landlord's fraud or intentional misrepresentation. At the
Closing, upon the request of Landlord, Tenant shall deliver to Landlord a
certificate reaffirming the foregoing.
4.4 Flood Hazard Zone. Tenant acknowledges that if the Option
-----------------
Property is located in an area which the Secretary of HUD has found to have
special flood hazards, then pursuant to the National Flood Insurance Program,
Tenant will be required to purchase flood insurance in order to obtain any loan
secured by the Option Property from any federally regulated financial
institution or a loan insured or guaranteed by an agency of the United States
government. Tenant shall have sole responsibility to determine whether the
Option Property is located in an area which is subject to the National Flood
Insurance Program.
4.5 Inspections. Subject to obtaining Landlord's prior written
-----------
consent, which shall not be unreasonably withheld or delayed, Tenant shall have
the right to conduct such inspections, investigations, borings, samplings and
other tests of the Property that Tenant deems to be useful or necessary for the
conduct of Tenant's due diligence in connection with the acquisition of the
Property. Upon request by Tenant, Landlord shall make available to Tenant for
inspection all material documents and reports in Landlord's possession relating
to the condition of the Property. Tenant shall indemnify, defend, protect and
hold Landlord harmless from and against any and all loss, cost, damage, injury,
claim (including claims of lien for work or labor performed or materials or
supplies furnished), liability or expense (including attorneys' fees) as a
result of, arising out of, or in any way connected with the exercise of Tenant's
(or its agents', contractors', employees' or authorized representatives')
inspection rights pursuant to this Paragraph 4.5 or the performance of Tenant's
due diligence. Tenant shall promptly repair any damage to the Property caused by
its due diligence.
<PAGE>
5. Closing.
-------
5.1. Closing. The transaction contemplated by this Exhibit F shall
------- ---------
be consummated through escrow at the office of Title Company on the date
described in Paragraph 5.1.1 below, or on such other date as shall be mutually
---------------
agreed upon by Landlord and Tenant (each, a "Closing Date"). For purposes of
------------
this Exhibit F. the term "Closing" shall mean the consummation of the sale and
-------
conveyance of the Property to Tenant as evidenced by recordation of the Deed (as
defined below).
5.1.1. Closing Date. The Closing Date shall be no later than
------------
the date specified in the Agreed Terms.
5.2. Landlord's Delivery Into Escrow. Landlord shall deliver the
-------------------------------
following items into escrow:
5.2.1. Deed. The Deed, duly executed and acknowledged by
----
Landlord, except that the amount of any transfer tax shall not be shown on the
Deed, but shall be set forth on a separate affidavit or instrument which, after
recordation of the Deed, shall be attached thereto so that the amount of such
transfer tax shall not be of record.
5.2.2. Other Documents. Such other documents or instruments as
---------------
may be reasonably required to consummate this transaction in accordance with the
terms and conditions herein contained, such as appropriate escrow instructions
to Title Company.
5.3. Tenant's Delivery Into Escrow. Tenant shall deliver the
-----------------------------
following items into escrow:
5.3.1. Cash. Immediately available funds in the following
----
amounts: (i) the balance of the Purchase Price, less the amount of the Deposit;
(ii) such amount, if any, as is necessary for Tenant to pay Tenant's share of
the closing costs and prorations specified in Paragraphs 5.5 and 5.6; and (iii)
-------------- ---
any other amounts required to close escrow in accordance with the terms of this
Exhibit F.
- ---------
5.3.2. Other Documents. Such other documents and instruments as
---------------
may be reasonably required in order to consummate this transaction in accordance
with the terms and conditions of this Exhibit F and the Lease, such as
---------
appropriate escrow instructions to Title Company.
5.3.3. Evidence of Authorization. Such evidence as shall
-------------------------
reasonably establish that Tenant's performance of its obligations under the
Lease and this Exhibit F have been duly authorized and that the person or
---------
persons executing all documents on behalf of Tenant have been duly authorized
and empowered to do so.
5.4. Landlord's and Tenant's Joint Delivery Into Escrow. Landlord
--------------------------------------------------
and Tenant jointly shall deliver the following items into escrow:
<PAGE>
5.4.1. Assignment and Assumption Agreements. A document by which
------------------------------------
Landlord assigns to Tenant, and Tenant assumes, the Leases, Contracts, permits
and warranties which will survive the Closing.
5.4.2. Other Documents. Such other documents and instruments as
---------------
may be reasonably required to consummate this transaction in accordance with the
terms and conditions of this Agreement.
5.5. Closing Prorations. At the Closing, all items of income and
------------------
expense of the Property shall be prorated as provided in this Paragraph 5.5 on
-------------
the basis of a 360-day year, actual days elapsed for the month in which the
Closing occurs, as of midnight on the day immediately preceding the Closing
Date. Except as provided in this Paragraph 5.5, income and expenses attributable
-------------
to the period prior to the Closing Date shall be for the account of Landlord,
and income and expenses attributable to the period on and after the Closing Date
shall be for the account of Tenant. Property taxes and assessments shall be
prorated through escrow, and all other items of income and expense shall be
prorated outside of escrow on the Closing Date by the parties. Without limiting
the generality of the foregoing, the following items shall be prorated through
escrow as described above:
(a) Current rents collected by Landlord under the Leases. With
respect to any rent receivables carried by Landlord under the Leases as of the
Closing, Tenant shall pay Landlord full value in immediately available funds at
the Closing and Landlord shall execute and deliver to Tenant at the Closing an
assignment of all of Landlord's right, title and interest with respect thereto.
(b) Amounts paid or payable in respect of the Contracts which
Tenant assumes at the Closing.
5.6. Closing Costs. Landlord shall pay the following closing costs:
-------------
(i) all fees and costs for releasing all encumbrances, liens and security
interests of record which are not Conditions of Title; and (ii) county
documentary or other transfer taxes payable upon recordation of the Deed. Tenant
shall pay the following closing costs: (a) the premium for Tenant's policy of
title insurance; (b) any and all costs, fees, title insurance premiums and other
charges payable in connection with any financing obtained by Tenant to acquire
the Property, including all escrow fees relating to the funding and/or
recordation of such financing; and (c) all escrow fees. Each party shall pay
one-half of any escrow cancellation fee charged by Title Company in connection
with the purchase and sale of the Property in accordance with this Exhibit F.
---------
All other closing costs shall be paid by the parties in accordance with the
custom then prevailing in San Mateo County.
5.7. Security Deposits. With respect to all Leases which are in
-----------------
effect at the Closing, Landlord shall give Tenant at the Closing, through
Escrow, a credit in the amount of all security deposits and other deposits then
held by Landlord under such Leases.
5.8. Possession. Subject to the rights of tenants under the Leases,
----------
Landlord shall deliver exclusive possession of the Property to Tenant at the
Closing.
<PAGE>
5.9. Closing Procedure. Title Company shall close escrow when it is
-----------------
in a position to: (i) pay to Landlord, in immediately available funds, the
amount of the Purchase Price, as such amount may be increased or decreased as a
result of the allocation of the closing costs and prorations as specified in
Paragraphs 5.5 and 5.6 and Landlord's obligations with respect to security
- -------------- ---
deposits as specified in Paragraph 5.7; and (ii) issue to Tenant the policy of
-------------
title insurance referred to in Paragraph 2.
-----------
5.10. Escrow. Within five (5) days after Landlord and Tenant have
------
agreed upon the Agreed Terms, Tenant and Landlord shall deposit an executed
counterpart of this Exhibit F with the Title Company and this Exhibit F shall
--------- ---------
serve as instructions to the Title Company for consummation of the purchase and
sale contemplated hereby. Landlord and Tenant shall execute such supplemental
escrow instructions as may be appropriate to enable the Title Company to comply
with the terms of this Exhibit F. provided such supplemental escrow instructions
---------
are not in conflict with this Exhibit F. In the event of any conflict between
---------
the provisions of this Exhibit F and any supplementary escrow instructions
---------
signed by Tenant and Landlord, the terms of this Exhibit F shall control.
---------
5.11. Compliance. The Title Company shall comply with all applicable
----------
federal, state and local reporting and withholding requirements relating to the
close of the transactions contemplated herein. Without limiting the generality
of the foregoing, to the extent the transactions contemplated by this Exhibit F
---------
involve a real estate transaction within the purview of Section 6045 of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), Title
---------------------
Company shall have sole responsibility to comply with the requirements of
Section 6045 of the Internal Revenue Code (and any similar requirements imposed
by state or local law). For purposes of this Paragraph 5.11, Landlord's tax
--------------
identification number is 94-3236971. Title Company shall hold Tenant, Landlord
and their counsel free and harmless from and against any and all liability,
claims, demands, damages and costs, including reasonable attorney's fees and
other litigation expenses, arising or resulting from the failure or refusal of
Title Company to comply with such reporting requirements.
6. Survival of Provisions. Notwithstanding any other provision of this
----------------------
Exhibit F to the contrary, each representation, warranty, covenant or agreement
contained in this Exhibit F (including Tenant's obligations pursuant to
---------
Paragraph 4.3) shall survive and be binding and enforceable following the
- -------------
Closing and shall not be deemed to be merged into, or waived by delivery or
recordation of, the Deed or any other instruments delivered at the Closing.
7. Exchange. At the option of either party, such party may elect to
--------
consummate the transaction hereunder in whole or in part as a like-kind exchange
pursuant to Section 1031 of the Internal Revenue Code of 1986, as amended. If
either party (the "Exchanging Party") so elects, the other party (the
----------------
"Cooperating Party") shall cooperate with the Exchanging Party, executing such
- ------------------
documents and taking such action as may be reasonably necessary in order to
effectuate this transaction as a like-kind exchange; provided, however, that (i)
the Cooperating Party's cooperation hereunder shall be without cost, expense or
liability to the Cooperating Party of any kind or character, including, without
limitation, any attorneys' fees, costs or expense incurred in connection with
the review or preparation of documentation in order to effectuate such like-kind
exchange, and the Cooperating Party shall have no obligation to take title to
any real property;
<PAGE>
(ii) the Exchanging Party shall assume all risks in connection with the
designation, selection and setting of terms of the purchase or sale of any
exchange property; (iii) the Exchanging Party shall bear all costs and expenses
in connection with any such exchange transaction in excess of the costs and
expenses which would have otherwise been incurred in acquiring or selling the
Property by means of a straight purchase, so that the net effect to the
Cooperating Party shall be identical to that which would have resulted had this
Exhibit F closed on a purchase and sale; (iv) any documents to effectuate such
- ---------
exchange transaction are consistent with the terms and conditions contained in
this Exhibit F; and (v) the Exchanging Party shall indemnify, defend and hold
---------
the Cooperating Party harmless from any and all claims, demands, penalties,
loss, causes of action, suits, risks, liability, costs or expenses of any kind
or nature (including, without limitation, reasonable attorneys' fees) which the
Cooperating Party may incur or sustain, directly or indirectly, related to or in
connection with, or arising out of, the consummation of this transaction as a
like-kind exchange as contemplated hereunder.
8. Deposit. Notwithstanding anything to the contrary set forth in the
-------
Agreed Terms or this Exhibit F, within one (1) day after Landlord and Tenant
---------
reach agreement on the Agreed Terms for Tenant's purchase of the Property from
Landlord, Tenant shall deliver to Title Company a cashier's check in the amount
of five percent (5%) of the Purchase Price (the "Deposit"), as an earnest money
-------
deposit on account of the Purchase Price. Title Company shall deposit the
Deposit in an interest-bearing account, and the term "Deposit" as used in this
-------
Exhibit F shall include any interest earned thereon.
- ---------
9. Liquidated Damages. TENANT ACKNOWLEDGES THAT THE CLOSING OF THE SALE
------------------
OF THE PROPERTY TO TENANT, ON THE TERMS AND CONDITIONS AND WITHIN THE TIME
PERIOD SET FORTH IN THIS EXHIBIT F AND THE LEASE, IS MATERIAL TO LANDLORD.
---------
TENANT ALSO ACKNOWLEDGES THAT SUBSTANTIAL DAMAGES WILL BE SUFFERED BY LANDLORD
IF SUCH TRANSACTION IS NOT SO CONSUMMATED DUE TO TENANT'S DEFAULT. TENANT
FURTHER ACKNOWLEDGES THAT, AS OF THE DATE THE PARTIES REACH AGREEMENT ON THE
AGREED TERMS, LANDLORD'S DAMAGES WOULD BE EXTREMELY DIFFICULT OR IMPOSSIBLE TO
COMPUTE IN LIGHT OF THE UNPREDICTABLE STATE OF THE ECONOMY AND OF GOVERNMENTAL
REGULATIONS, THE FLUCTUATING MARKET FOR REAL ESTATE AND REAL ESTATE LOANS OF ALL
TYPES, AND OTHER FACTORS WHICH DIRECTLY AFFECT THE VALUE AND MARKETABILITY OF
THE PROPERTY. IN LIGHT OF THE FOREGOING AND ALL OF THE OTHER FACTS AND
CIRCUMSTANCES SURROUNDING THIS TRANSACTION, AND FOLLOWING NEGOTIATIONS BETWEEN
THE PARTIES, TENANT AND LANDLORD AGREE THAT THE AMOUNT OF THE DEPOSIT REPRESENTS
A REASONABLE ESTIMATE OF THE DAMAGES WHICH LANDLORD WOULD SUFFER BY REASON OF
TENANT'S DEFAULT HEREUNDER. ACCORDINGLY, TENANT AND LANDLORD HEREBY AGREE THAT,
IN THE EVENT OF SUCH DEFAULT BY TENANT, LANDLORD MAY TERMINATE ITS OBLIGATIONS
UNDER PARAGRAPH 38 OF THE LEASE AND THIS EXHIBIT F BY GIVING NOTICE TO TENANT.
------------ ---------
IN THE EVENT OF SUCH TERMINATION, LANDLORD SHALL RETAIN THE DEPOSIT AS
LIQUIDATED DAMAGES IN LIEU OF ANY OTHER CLAIM LANDLORD MAY HAVE AT LAW OR IN
EQUITY (INCLUDING, WITHOUT LIMITATION, SPECIFIC PERFORMANCE) ARISING
<PAGE>
BY REASON OF TENANT'S FAILURE TO PURCHASE THE PROPERTY PURSUANT TO THIS EXHIBIT
-------
F. LANDLORD'S RETENTION OF THE DEPOSIT PURSUANT TO THIS PARAGRAPH 9 SHALL IN NO
- -- -----------
WAY LIMIT ANY OF LANDLORD'S RIGHTS OR REMEDIES UNDER THE LEASE WITH RESPECT TO
ANY DEFAULT BY TENANT UNDER THE LEASE. THE PARTIES HAVE INITIALED THIS PARAGRAPH
---------
9 TO ESTABLISH THEIR INTENT SO TO LIQUIDATE DAMAGES. NOTWITHSTANDING THE
- -
FOREGOING, NOTHING CONTAINED IN THIS PARAGRAPH 9 SHALL BE DEEMED TO LIMIT: (i)
-----------
TENANT'S OBLIGATIONS UNDER THE LEASE; OR (ii) TENANT'S INDEMNIFICATION
OBLIGATIONS CONTAINED IN THIS EXHIBIT F.
---------
Landlord's Tenant's
Initials: _____ Initials: /s/ K.A.G.
----------
TENANT:
Dated: September 24, 1997 AT HOME CORPORATION,
a Delaware corporation
By: /s/ Kenneth Goldman
-----------------------
Its: Chief Financial Officer
-----------------------
By: _______________________
Its: _______________________
LANDLORD:
Dated: September 29, 1997 MARTIN/CAMPUS ASSOCIATES, L.P.,
a Delaware limited partnership
By: Martin/Redwood Partners,
L.P., a California limited
partnership, its General
Partner
By: The Martin Group of
Companies, Inc., a
California corporation,
its General Partner
By: /s/ Cathy Greenwold
-------------------
Its: Vice President
-------------------
<PAGE>
EXHIBIT 10.22
BUILD TO SUIT LEASE
BY AND BETWEEN
MARTIN/CAMPUS ASSOCIATES, L.P.
"LANDLORD"
AND
AT HOME CORPORATION
"TENANT"
FOR THE APPROXIMATELY 96,344 SQ. FT. PREMISES AT 440 BROADWAY
REDWOOD CITY, CA 94063
<PAGE>
LEASE SUMMARY
-------------
Lease Date: _____________________________________
Landlord: Martin/Campus Associates, L.P.
Address of Landlord: 100 Bush Street, 26th Floor
San Francisco, CA 94104
Tenant: At Home Corporation
Address of Tenant: 425 Broadway
Redwood City, CA
Contact: Kenneth Goldman
Telephone: (650) 569-5353
Building Address: 440 Broadway
Redwood City, California
Total Building Square Footage: Approximately 96,344 square feet
Term: approximately fifteen years
(see Paragraph 4.A.)
Monthly Rent: As provided under Paragraph 5.A, and subject to
-------------
adjustment pursuant to Paragraph 4.C and 5.B
------------- ---
Security Deposit: An amount equal to three (3) payments of the initial
Monthly Rent (see Paragraph 7)
-----------
Exhibit A: Premises
Exhibit B: Work Letter Agreement
Exhibit C: Site Plan for Project
Exhibit D: Commencement Date Memorandum
Exhibit E: Subordination, Nondisturbance and Attornment Agreement
Exhibit F: Option to Purchase Terms
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
1. Parties.......................................................................... 2
2. Premises......................................................................... 2
3. Definitions...................................................................... 2
A. Affiliate................................................................. 2
B. Alterations............................................................... 2
C. Broadway Lease............................................................ 2
D. Capital Improvements...................................................... 3
E. CC&Rs..................................................................... 3
F. Collateral Agreements..................................................... 3
G. Commencement Date......................................................... 3
H. Common Area............................................................... 3
I. Common Area Maintenance Costs............................................. 3
J. Final Plans............................................................... 5
K. HVAC...................................................................... 5
L. Impositions............................................................... 6
M. Improvements.............................................................. 6
N. Index..................................................................... 6
O. Interest Rate............................................................. 6
P. INTENTIONALLY DELETED..................................................... 6
Q. Landlord's Agents......................................................... 6
R. Lease Year................................................................ 7
S. Monthly Rent.............................................................. 7
T. Parking Area.............................................................. 7
U. Person.................................................................... 7
V. Project................................................................... 7
W. Real Property Taxes....................................................... 7
X. Rent...................................................................... 8
Y. Rentable Area............................................................. 8
AA. Security Deposit.......................................................... 8
BB. Sublet.................................................................... 8
CC. Subrent................................................................... 9
DD. Subtenant................................................................. 9
EE. Tenant Delay.............................................................. 9
FF. Tenant Improvements....................................................... 9
GG. Tenant's Percentage Share................................................. 9
HH. Tenant's Personal Property................................................ 9
II. Term...................................................................... 10
JJ. Fixed Charge Ratio........................................................ 10
4. Lease Term....................................................................... 10
A. Term...................................................................... 10
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B. Delays in Completion...................................................... 10
C. Option to Extend.......................................................... 10
5. Rent and Additional Charges...................................................... 13
A. Monthly Rent.............................................................. 13
B. Adjustments to Monthly Rent............................................... 14
C. Management Fee............................................................ 14
D. Common Area Maintenance Costs............................................. 15
E. Additional Rent........................................................... 16
F. Prorations................................................................ 16
G. Interest.................................................................. 16
6. Late Payment Charges............................................................. 16
7. Security Deposit................................................................. 17
A. Deposit Required........................................................... 17
8. Holding Over..................................................................... 18
9. Tenant Improvements.............................................................. 19
10. Condition of Premises............................................................ 19
A. Capital Improvements...................................................... 19
B. Acceptance of Premises.................................................... 19
11. Use of the Premises and Common Area.............................................. 19
A. Tenant's Use.
B. Hazardous Materials.
C. Special Provisions Relating to The Americans With Disabilities Act of 1990 24
D. Use and Maintenance of Common Area........................................ 25
12. Quiet Enjoyment.................................................................. 25
13. Alterations...................................................................... 26
A. Alteration Rights......................................................... 26
B. Performance of Alterations................................................ 26
C. Trade Fixtures............................................................ 26
14. Surrender of the Premises........................................................ 27
15. Impositions and Real Property Taxes.............................................. 27
A. Payment by Tenant......................................................... 27
B. Taxes on Tenant Improvements and Personal Property........................ 28
C. Proration................................................................. 29
16. Utilities and Services........................................................... 29
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17. Repair and Maintenance........................................................... 29
A. Landlord's Obligations.................................................... 29
B. Tenant's Obligations...................................................... 30
C. Conditions Applicable to Repairs.......................................... 31
D. Landlord's Rights......................................................... 31
E. Compliance with Governmental Regulations.................................. 31
18. Liens............................................................................ 31
19. Landlord's Right to Enter the Premises........................................... 32
20. Signs............................................................................ 32
21. Insurance........................................................................ 32
A. Indemnification........................................................... 32
B. Tenant's Insurance........................................................ 33
C. Premises Insurance........................................................ 34
D. Increased Coverage........................................................ 34
E. Failure to Maintain....................................................... 34
F. Insurance Requirements.................................................... 35
G. Waiver and Release........................................................ 35
22. Waiver of Subrogation............................................................ 35
23. Damage or Destruction............................................................ 36
A. Landlord's Obligation to Rebuild.......................................... 36
B. Right to Terminate........................................................ 36
C. Limited Obligation to Repair.............................................. 37
D. Abatement of Rent......................................................... 37
E. Damage Near End of Term................................................... 37
24. Condemnation..................................................................... 37
25. Assignment and Subletting........................................................ 38
A. Landlord's Consent........................................................ 38
B. Tenant's Notice........................................................... 38
C. Information to be Furnished............................................... 38
D. Landlord's Alternatives................................................... 39
E. Proration................................................................. 39
F. Parameters of Landlord's Consent.......................................... 39
G. Permitted Transfers....................................................... 40
26. Default.......................................................................... 40
A. Tenant's Default.......................................................... 40
B. Remedies.................................................................. 41
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C. Landlord's Default........................................................ 42
27. Subordination.................................................................... 42
A. Subordination............................................................. 42
B. Attornment................................................................ 43
C. Non-Disturbance........................................................... 43
28. Notices.......................................................................... 43
29. Attorneys' Fees.................................................................. 44
30. Estoppel Certificates............................................................ 44
31. Transfer of the Premises by Landlord............................................. 45
32. Landlord's Right to Perform Tenant's Covenants................................... 45
33. Tenant's Remedy.................................................................. 45
34. Mortgagee Protection............................................................. 45
35. Brokers.......................................................................... 46
36. Acceptance....................................................................... 46
37. Parking.......................................................................... 46
38. Right of First Offer to Purchase................................................. 46
A. Notice of Sale............................................................ 47
B. Acceptance................................................................ 47
C. Rejection................................................................. 47
D. Offered Terms............................................................. 48
E. Acceptance of Tenant's Offer.............................................. 48
F. Conditions................................................................ 48
G. Process................................................................... 48
H. Rights Personal........................................................... 49
39. General.......................................................................... 49
A. Captions.................................................................. 49
B. Executed Copy............................................................. 49
C. Time...................................................................... 49
D. Separability.............................................................. 49
E. Choice of Law............................................................. 49
F. Gender; Singular, Plural.................................................. 49
G. Binding Effect............................................................ 49
H. Waiver.................................................................... 50
I. Entire Agreement.......................................................... 50
J. Authority................................................................. 50
K. Exhibits.................................................................. 50
L. Lease Summary............................................................. 50
M. Memorandum of Lease....................................................... 50
</TABLE>
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BUILD TO SUIT LEASE
-------------------
1. Parties.
-------
THIS BUILD TO SUIT LEASE (the "Lease"), dated as of ________ 1997, is
entered into by and between MARTIN/CAMPUS ASSOCIATES, L.P., a Delaware limited
partnership ("Landlord"), whose address is 100 Bush Street, San Francisco, CA
--------
94104, and AT HOME CORPORATION, a Delaware corporation ("Tenant"), whose address
------
is 425 Broadway, Redwood City, CA.
2. Premises.
--------
Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord those certain premises to situated in a building to be constructed by
Landlord pursuant to the terms of this Lease which shall be commonly known as
440 Broadway (the "Building"), in the City of Redwood City, County of San Mateo,
--------
State of California, as more particularly shown on Exhibit A (the "Premises"),
--------- --------
which Premises shall consist of a total area of approximately 96,344 square
feet. On or before the Commencement Date, Landlord shall measure the Rentable
Area of the Premises in accordance with BOMA Standard (ANSI Z65.1 1980) for full
floor office occupancy, and Landlord and Tenant shall amend this Lease if
necessary to reflect any discrepancy in the size of the Premises disclosed by
Landlord's measurement of the Premises by Landlord's architect. The Premises
also includes the appurtenant right to use in common with other tenants of the
Project (as defined below) the Common Area (as defined below) of the Project
owned by Landlord.
3. Definitions.
-----------
The following terms shall have the following meanings in this Lease:
A. Affiliate. Any Person that controls, or is controlled by or is
---------
under common control with, Landlord or Tenant. No Person shall be deemed in
control of another simply by virtue of being a partner, director, officer or
holder of voting securities of any Person. For purposes of this Paragraph 3.A,
-------------
"control" shall mean the ownership of, and/or the right to vote, stock,
partnership interests, membership interests, or other indicia of ownership
possessing at least fifty-one percent (51%) of either the total combined
interests in a Person, or the voting power of all classes of a Person's capital
stock, partnership interests, membership interests, or other indicia of
ownership, that have been issued, outstanding, and (if applicable) are entitled
to vote.
B. Alterations. Any alterations, additions or improvements made in,
-----------
on or about the Premises after the substantial completion of the Improvements,
including, but not limited to, lighting, heating, ventilating, air conditioning,
electrical, partitioning, drapery and carpentry installations.
C. Broadway Lease. That certain lease dated as of October 18, 1996,
--------------
by and
2
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between Landlord and Tenant, for those certain premises commonly known as 425
Broadway, situated in the City of Redwood City, County of San Mateo, State of
California.
D. Capital Improvements. Those certain improvements to the Building
--------------------
to be constructed by Landlord pursuant to Paragraph 10.A and the Work Letter
--------------
Agreement attached to this Lease as Exhibit B (the "Work Letter").
--------- -----------
E. CC&Rs. Any declaration of conditions, covenants and/or
-----
restrictions, or similar instrument, that now encumbers, or may in the future
encumber the Project or the Premises, as adopted by Landlord or its successors
in interest from time to time, and any modifications or amendments thereto.
F. Collateral Agreements. The following agreements: (i) the Broadway
---------------------
Lease, (ii) that certain Build to Suit Option Agreement by and between Landlord
and Tenant, dated as of October 25, 1996 (the "Build to Suit Agreement"), (iii)
-----------------------
that certain Agreement Granting Rights of First Offer, by and between Landlord
and Tenant, dated as of October 25, 1996, (iv) that certain Warrant to Purchase
Series A Common Stock of At Home Corporation and that certain Second Amended and
Restated Registration Rights Agreement, executed by Landlord, Tenant and certain
other parties, each dated as of October 18, 1996 (collectively, the "Warrant
-------
Agreement"), and (v) any leases at any time executed by Tenant arising out of
- ---------
Tenant's exercise of any of its rights set forth in the agreements described in
items (ii) and (iii) above.
G. Commencement Date. The Commencement Date of this Lease shall be
-----------------
the first day of the Term determined in accordance with Paragraph 4.A.
--------- ---
H. Common Area. All areas and facilities within the Project not
-----------
appropriated to the exclusive occupancy of tenants, including the Parking Area,
the sidewalks, pedestrian ways, driveways, signs, pools, ponds, service delivery
facilities, common storage areas, common utility facilities and all other areas
in the Project established by Landlord and/or its successors for non-exclusive
use. Landlord may, by written notice to Tenant, elect in its sole discretion to
increase and/or decrease the Common Area from time to time during the Term for
any reason whatsoever (including without limitation an election by Landlord
and/or its successors in their sole discretion to make changes to the buildings
situated in the Project, and/or to subdivide, sell, exchange, dispose of,
transfer, or change the configuration of all or any portion of the Common Area
from time to time), so long as Landlord neither unreasonably interferes with
ingress to or egress from the Building, nor permanently reduces the number of
parking spaces available for Tenant's use below the minimum requirements set
forth in Paragraph 37. No such subdivision, sale, exchange, disposition,
transfer, or change to the configuration of all or any portion of the Common
Area shall cause the Common Area to be increased or decreased unless and until
Landlord has given Tenant written notice of such increase or decrease.
I. Common Area Maintenance Costs. The total of all costs and
-----------------------------
expenses paid or incurred by Landlord in connection with the operation,
maintenance, ownership and repair of the Common Area, and the performance of
Landlord's obligations under Paragraphs 17.A and 17.E. Without limiting the
--------------- ----
generality of the foregoing, Common Area Maintenance
3
<PAGE>
Costs include all costs of and expense for: (i) maintenance and repairs of the
Common Area; (ii) resurfacing, resealing, remarking, painting, repainting,
striping or restriping the Parking Area; (iii) maintenance and repair of all
public or common facilities; (iv) maintenance, repair and replacement of
sidewalks, curbs, paving, walkways, Parking Area, Project signs, landscaping,
planting and irrigation systems, trash facilities, loading and delivery areas,
lighting, drainage and common utility facilities, directional or other signs,
markers and bumpers, and any fixtures, equipment and personal property located
on the Common Area; (v) wages, salaries, benefits, payroll burden fees and
charges of personnel employed by Landlord and the charges of all independent
contractors retained by Landlord (to the extent that such personnel and
contractors are utilized by Landlord) for the maintenance, repair, management
and/or supervision of the Project, and of any security personnel retained by
Landlord in connection with the operation and maintenance of the Common Area
(although Landlord shall not be required to obtain security services); (vi)
maintenance, repair and replacement of security systems and alarms installed by
Landlord (if any); (vii) depreciation or amortization (or in lieu thereof,
rental payments) on all tools, equipment and machinery used in the operation and
maintenance of the Common Area; (viii) premiums for Comprehensive General
Liability Insurance or Commercial General Liability Insurance, casualty
insurance, workers compensation insurance or other insurance on the Common Area,
or any portion thereof or interest therein, and any deductibles payable with
respect to such insurance policies; (ix) all personal property or real property
taxes and assessments levied or assessed on the Project, or any portion thereof
or interest therein, including without limitation the Real Property Taxes for
the Project, if applicable under Paragraph 15.A; (x) cleaning, collection,
--------------
storage and removal of trash, rubbish, dirt and debris, and sweeping and
cleaning the Common Area; (xi) legal, accounting and other professional services
for the Project, including costs, fees and expenses of contesting the validity
or applicability of any law, ordinance, rule, regulation or order relating to
the Building, and of contesting, appealing or otherwise attempting to reduce any
Real Property Taxes assessed against the Project; (xii) any alterations,
additions or improvements required to be made to the Common Area in order to
reduce Common Area Maintenance Costs or to protect the health or safety of
occupants of the Project, provided that the cost of any such alterations,
additions, improvements or capital improvements, together with interest at the
Interest Rate, shall be amortized over the useful life of the alteration,
addition, improvement or capital improvement in question and included in Common
Area Maintenance Costs for each year over which such costs are amortized; (xiii)
all costs and expenses of providing, creating, maintaining, repairing, managing,
operating, and supervising an amenity center for the Project, which may include
without limitation a dining facility (provided, however, that Landlord shall not
be required to provide or create such an amenity center), which costs and
expenses may include without limitation rent charged by Landlord for the space
occupied by such amenity center; (xiv) all costs and expenses incurred by
Landlord in performing its obligations under Paragraphs 17.A or 17.E, including
--------------- ----
without limitation all costs and expenses incurred in performing any
alterations, additions or improvements required to be made to the Building in
order to comply with applicable laws, ordinances, rules, regulations and orders
and all capital improvements required to made in connection with the operation,
maintenance and repair of the Building, provided that the cost of any such
alterations, additions, improvements or capital improvements, together with
interest at the Interest Rate, shall be amortized over the useful life of the
alteration, addition, improvement or capital improvement in question and
included in Common Area Maintenance Costs for each
4
<PAGE>
year over which such costs are amortized; (xv) all costs and expenses incurred
in performing any alterations, additions or improvements required to be made to
the Common Area in order to comply with applicable laws, ordinances, rules,
regulations and orders and all capital improvements required to made in
connection with the operation, maintenance and repair of the Common Area,
provided that the cost of any such alterations, additions, improvements or
capital improvements, together with interest at the Interest Rate, shall be
amortized over the useful life of the alteration, addition, improvement or
capital improvement in question and included in Common Area Maintenance Costs
for each year over which such costs are amortized; (xvi) any and all payments
due and owing on behalf of the Project or any portion thereof with respect to
any CC&Rs, including without limitation any and all assessments and association
dues; (xvii) any other cost or expense which this Lease expressly characterizes
as a Common Area Maintenance Cost, and (xviii) all costs and expenses related to
the adoption and maintenance of a portion of Highway 101. However,
notwithstanding the foregoing or anything to the contrary in this Lease, Common
Area Maintenance Costs shall not include the cost of or expenses for the
following: (A) leasing commissions, attorneys' fees or other costs or expenses
incurred in connection with negotiations or disputes with other tenants of the
Project; (B) depreciation of buildings in the Project; (C) payments of
principal, interest, late fees, prepayment fees or other charges on any debt
secured by a mortgage covering the Project, or rental payments under any ground
lease or underlying lease; (D) any penalties incurred due to Landlord's
violation of any governmental rule or authority (but not excluding the cost of
compliance therewith, if such cost is chargeable to Tenant pursuant to this
Lease); (E) any Real Property Taxes or costs for which Landlord is separately
and directly reimbursed by Tenant or any other tenant of the Project which are
assessed against the Premises or the premises leased by such other tenant(s);
(F) items for which Landlord is reimbursed by insurance; (G) all costs arising
from monitoring, cleaning up and otherwise remediating any release of Hazardous
Materials at the Premises that has been specifically identified by Landlord and
Tenant in writing as of the date of the Lease; (H) all costs associated with the
operation of the business of the entity which constitutes "Landlord", as
distinguished from the costs of operations, including, but not limited to, costs
of partnership accounting and legal matters, costs of defending any lawsuits
with any mortgagee (except as the actions of Tenant may be in issue), costs of
selling, syndicating, financing, mortgaging, or hypothecating any of the
Landlord's interest in the Project and/or Common Area, or any portion thereof,
costs of any disputes between Landlord and its employees, costs of disputes of
Landlord with Building management or costs paid in connection with disputes with
Tenant or any other tenants; (I) all costs (including permit, license and
inspection fees) incurred in renovating or otherwise improving or decorating,
painting or redecorating space for other tenants in the Project; (J) the
creation of any reserves for equipment or capital replacement (but not the
expenditure of any funds from such reserves); and (K) all costs arising from
monitoring, cleaning up and otherwise remediating any release of Hazardous
Materials at the Premises to the extent that Landlord (who shall use reasonable
efforts to obtain reimbursement) is actually reimbursed by third parties for
such costs (but not the costs of collection incurred by Landlord, unless such
costs of collection are also reimbursed by third parties).
J. Final Plans. As defined in the Work Letter.
-----------
K. HVAC. Heating, ventilating and air conditioning.
----
5
<PAGE>
L. Impositions. Taxes, assessments, charges, excises and levies, business
-----------
taxes, license, permit, inspection and other authorization fees, transit
development fees, assessments or charges for housing funds, service payments in
lieu of taxes and any other fees or charges of any kind at any time levied,
assessed, charged or imposed by any federal, state or local entity, (i) upon,
measured by or reasonably attributable to the cost or value of Tenant's
equipment, furniture, fixtures or other personal property located in the
Premises, or the cost or value of any Alterations; (ii) upon, or measured by,
any Rent payable hereunder, including any gross receipts tax; (iii) upon, with
respect to or by reason of the development, possession, leasing, operation,
management, maintenance, alteration, repair, use or occupancy by Tenant of the
Premises, or any portion thereof; or (iv) upon this Lease transaction, or any
document to which Tenant is a party creating or transferring any interest or
estate in the Premises. Impositions do not include franchise, transfer,
inheritance or capital stock taxes, or income taxes measured by the net income
of Landlord from all sources, except to the extent any such taxes are levied or
assessed against Landlord as a substitute for, in whole or in part, any item
that would otherwise be deemed an Imposition under this paragraph.
M. Improvements. Collectively, the Tenant Improvements and the Capital
------------
Improvements.
N. Index. The Consumer Price Index, All Urban Consumers, All Items,
-----
published by the U.S. Department of Labor, Bureau of Labor Statistics for the
San Francisco-Oakland-San Jose Metropolitan Area (1982-84=100). If the Base Year
of the Index is changed, then all calculations pursuant to this Lease which
require the use of the Index shall be made by using the appropriate conversion
factor published by the Bureau of Labor Statistics (or successor agency) to
correlate to the Base Year of the Index herein specified. If no such conversion
factor is published, then Landlord shall, if possible, make the necessary
calculation to achieve such conversion. If such conversion is not in Landlord's
good-faith, business judgment possible, or if publication of the Index is
discontinued, or if the basis of calculating the Index is materially changed,
then the term "Index" shall mean comparable statistics on the cost of living, as
-----
computed either (i) by an agency of the United States Government performing a
function similar to the Bureau of Labor Statistics, or (ii) if no such agency
performs such function, by a substantial and responsible periodical or
publication of recognized authority most closely approximating the result which
would have been achieved by the Index, as may be determined by Landlord in the
exercise of its reasonable good faith business judgment.
O. Interest Rate. Either (i) the greater of (a) twelve percent (121%) per
-------------
annum, or (b) the reference rate, or succeeding similar index, announced from
time to time by the Bank of America's main San Francisco office, plus three
percent (3%) per annum; or (ii) the maximum rate of interest permitted by law,
whichever is less.
P. INTENTIONALLY DELETED
Q. Landlord's Agents. Landlord's authorized agents, partners,
-----------------
subsidiaries, directors, officers, and employees.
6
<PAGE>
R. Lease Year. A period of twelve (12) consecutive calendar months during
----------
the Term, commencing with the Commencement Date if the Commencement Date is the
first day of a calendar month, or commencing with the first day of the month
following the Commencement Date if the Commencement Date is not the first day of
a calendar month. The first Lease Year shall include the period between the
Commencement Date and the first day of the month following the Commencement Date
if the Commencement Date is not the first day of a calendar month. The last
Lease Year shall consist of the period between the date on which the Term
expires or terminates and the day after the last day of the preceding Lease
Year.
S. Monthly Rent. The rent payable pursuant to Paragraph 5.A., as adjusted
------------ --------------
from time to time pursuant to the terms of this Lease.
T. Parking Area. All Common Area (except sidewalks and service delivery
------------
facilities) now or hereafter designated by Landlord for the parking or access of
motor vehicles, including roads, traffic lanes, vehicular parking spaces,
landscaped areas and walkways, and including any parking structure constructed
during the Term. Landlord and/or its successors may, by written notice to
Tenant, elect in their sole discretion to increase and/or decrease the Parking
Area from time to time during the Term for any reason whatsoever (including
without limitation an election by Landlord and/or its successors in their sole
discretion to make changes to the buildings situated in the Project, and/or to
subdivide, sell, exchange, dispose of, transfer, or change the configuration of
all or any portion of the Parking Area from time to time), so long as such
changes to the Parking Area do not permanently reduce the number of parking
spaces available for Tenant's use below the minimum requirements set forth in
Paragraph 37. No such subdivision, sale, exchange, disposition, transfer, or
- ------------
change to the configuration of all or any portion of the Parking Area shall
cause the Parking Area to be increased or decreased unless and until Landlord
has given Tenant written notice of such increase or decrease.
U. Person. Any individual, partnership, firm, association, corporation,
------
limited liability company, trust, or other form of business or legal entity.
V. Project. That certain real property shown on Exhibit C. Landlord
------- ---------
and/or its successors may, by written notice to Tenant, elect in their sole
discretion to increase and/or decrease the number of buildings and/or the amount
of Rentable Area situated in the Project from time to time during the Term for
any reason whatsoever.
W. Real Property Taxes. Taxes, assessments and charges now or hereafter
-------------------
levied or assessed upon, or with respect to, the Project, or any personal
property of Landlord used in the operation thereof or located therein, or
Landlord's interest in the Project or such personal property, by any federal,
state or local entity, including: (i) all real property taxes and general and
special assessments; (ii) charges, fees or assessments for transit, housing, day
care, open space, art, police, fire or other governmental services or benefits
to the Project, including assessments, taxes, fees, levies and charges imposed
by governmental agencies for such purposes as street, sidewalk, road, utility
construction and maintenance, refuse removal and for other governmental
services; (iii) service payments in lieu of taxes; (iv) any tax, fee or excise
on the use or occupancy of any part of the Project, or on rent for space in the
Project; (v) any other tax,
7
<PAGE>
fee or excise, however described, that may be levied or assessed as a substitute
for, or as an addition to, in whole or in part, any other Real Property Taxes;
and (vi) reasonable consultants, and attorneys' fees and expenses incurred in
connection with proceedings to contest, determine or reduce Real Property Taxes.
Real Property Taxes do not include: (A) franchise, transfer, inheritance or
capital stock taxes, or income taxes measured by the net income of Landlord from
all sources, unless any such taxes are levied or assessed against Landlord as a
substitute for, in whole or in part, any Real Property Tax; (B) Impositions and
all similar amounts payable by tenants of the Project under their leases; and
(C) penalties, fines, interest or charges due for late payment of Real Property
Taxes by Landlord. If any Real Property Taxes are payable, or may at the option
of the taxpayer be paid, in installments, such Real Property Taxes shall,
together with any interest that would otherwise be payable with such
installment, be deemed to have been paid in installments, amortized over the
maximum time period allowed by applicable law. If the tax statement from a
taxing authority does not allocate Real Property Taxes to the Building, Landlord
shall make the determination of the proper allocation of such Real Property
Taxes based, to the extent possible, upon records of the taxing authority and,
if not so available, then on an equitable basis.
X. Rent. Monthly Rent plus the Additional Rent as defined in Paragraph
---- ---------
5.E.
- ---
Y. Rentable Area. The aggregate square footage in any one or more
-------------
buildings in the Project, as appropriate, as reasonably determined by Landlord's
architect from time to time in accordance with BOMA Standard (ANSI Z65.1 1980)
for full floor office occupancy.
AA. Security Deposit. That amount paid by Tenant pursuant to Paragraph 7.
---------------- -----------
BB. Sublet. Any transfer, sublet, assignment, license or concession
------
agreement, change of ownership, mortgage, or hypothecation of this Lease or the
Tenant's interest in the Lease or in and to all or a portion of the Premises. As
used herein, a Sublet includes the following: (i) if Tenant is a partnership or
a limited liability company, a transfer, voluntary or involuntary, of all or any
part of any interest in such partnership or limited liability company, or the
dissolution of the partnership or limited liability company, whether voluntary
or involuntary; (ii) if Tenant is a corporation, any dissolution, merger,
consolidation or other reorganization of Tenant, or the transfer, either by a
single transaction or in a series of transactions, of a controlling percentage
of the stock of Tenant (except that a Sublet shall not include any such transfer
of a controlling percentage of the stock of Tenant occurring at a time when the
stock of Tenant is publicly traded on a nationally recognized stock exchange or
over the counter), or the sale, by a single transaction of or series of
transaction, within any one (1) year period, of corporate assets equaling or
exceeding twenty percent (20%) of the total value of Tenant's assets (except in
connection with an initial public offering of the stock of Tenant on a
nationally recognized stock exchange or over the counter); (iii) if Tenant is a
trust, the transfer, voluntarily or involuntarily, of all or any part of the
controlling interest in such trust; and (iv) if Tenant is any other form of
entity, a transfer, voluntary or involuntary, of all or any part of any interest
in such entity. As used herein, the phrases "controlling percentage" and
"controlling interest" means the ownership of, and/or the right to vote, stock,
partnership interests, membership interests, or other indicia of
8
<PAGE>
ownership possessing at least fifty-one percent (51%) of either the total
combined interests in Tenant, or the voting power of all classes of Tenant's
capital stock, partnership interests, membership interests, or other indicia of
ownership, that have been issued, outstanding, and (if applicable) are entitled
to vote.
CC. Subrent. Any consideration of any kind received, or to be received, by
-------
Tenant from a subtenant if such sums are related to Tenant's interest in this
Lease or in the Premises, including without limitation bonus money and payments
(in excess of book value) for Tenant's assets, including without limitation its
trade fixtures, equipment and other personal property, goodwill, general
intangibles, and any capital stock or other equity ownership of Tenant.
DD. Subtenant. The person or entity with whom a Sublet agreement is
---------
proposed to be or is made.
EE. Tenant Delay. Any delay that Landlord may encounter in the performance
------------
of Landlord's obligations under the Lease because of any act or omission of any
nature by Tenant or its agents or contractors, including without limitation any
(i) delay attributable to the postponement of any Improvements at the request of
Tenant; (ii) delay by Tenant in the submission of information or the giving of
authorizations or approvals within the time limits set forth in the Lease or the
Work Letter; (iii) delay attributable to the failure of Tenant to pay, when due,
any amounts required to be paid by Tenant pursuant to the Lease or the Work
Letter; and (iv) delay resulting from any change order request initiated or
requested by Tenant.
FF. Tenant Improvements. Those certain improvements to the Premises to be
-------------------
constructed by Landlord pursuant to Exhibit B, other than the Capital
---------
Improvements. The Tenant Improvements shall at all times be the property of
Landlord and shall not be deemed Tenant's Personal Property.
GG. Tenant's Percentage Share. The ratio (expressed as a percentage) of
-------------------------
the total Rentable Area of the Premises to the total Rentable Area of all of the
buildings at the Project owned by Landlord from time to time, which as of the
Commencement Date shall equal 52.7% (i.e., the Rentable Area of the Premises
divided by the Rentable Area of the buildings at the Project owned by Landlord
as of the date of this Lease). Tenant's Percentage Share shall be recalculated
each and every time that the amount of Rentable Area contained in Premises is
adjusted, or the Premises is expanded, buildings are added to or removed from
the Project, or there is a change in the total Rentable Area of those buildings
in the Project owned by Landlord, or Landlord sells, exchanges, or otherwise
transfers any or all of the buildings situated in the Project (including without
limitation the Building). The parties acknowledge and agree that the total
Rentable Area of all of the buildings in the Project owned by Landlord may
increase and/or decrease from time to time during the Term, since Landlord may
elect in its sole discretion to sell a building or buildings or to make changes
to the buildings it owns in the Project (so long as Landlord does not
unreasonably interfere with ingress to or egress from the Premises).
HH. Tenant's Personal Property. Tenant's trade fixtures, furniture,
--------------------------
equipment
9
<PAGE>
and other personal property in the Premises.
II. Term. The Term of this Lease set forth in Paragraph 4.A., as it may be
---- --------------
extended hereunder pursuant to any options to granted herein.
JJ. Fixed Charge Ratio. Tenant's consolidated earnings before income
------------------
taxes, depreciation and amortization during the fiscal year in question, divided
by the sum of (i) all interest charges occurring during the fiscal year in
question, and (ii) all of Tenant's scheduled debt amortization payable during
the fiscal year in question.
4. Lease Term.
----------
A. Term. Subject to adjustment for Tenant Delays pursuant to Paragraph
----
4.B below, the Term shall commence on the date of substantial completion of the
Improvements to be constructed by Landlord (the "Commencement Date"), and
-----------------
terminate on the date that is fifteen (15) years after the Commencement Date.
For the purposes of this Lease, substantial completion shall mean that the
Improvements have been completed in accordance with the Final Plans approved by
Landlord and Tenant, subject only to minor punch-list items, and the City of
Redwood City has issued a final building inspection approval for such
Improvements.
B. Delays in Completion. Tenant agrees that if Landlord, for any reason
--------------------
whatsoever, is unable to substantially complete the Improvements on or before
Landlord's initial estimate of the Commencement Date, Landlord shall not be
liable to Tenant for any loss or damage therefrom, nor shall this Lease be void
or voidable. Upon the establishment of the actual Commencement Date, Landlord
and Tenant shall execute a Commencement Date Memorandum in the form set forth in
Exhibit D. Notwithstanding any provision of this Lease to the contrary, if at
- ---------
any time after the date of this Lease a Tenant Delay occurs, then the
Commencement Date shall be moved earlier two (2) days for each one (1) day of
Tenant Delay that delays the substantial completion of the Improvements. In
addition, Tenant shall pay any and all costs and expenses incurred by Landlord
which result from any Tenant Delay, including, without limitation, any and all
costs and expenses attributable to increases in the cost of labor or materials.
C. Option to Extend.
----------------
(i) Grant of Option. Landlord hereby grants to Tenant one (1) option
---------------
(the "Option to Extend") to extend the Term of this Lease, for an additional
----------------
term of five (5) years. The option term (the "Extended Term") shall commence
-------------
upon the expiration of the initial Term. The Option to Extend is expressly
conditioned upon Tenant's not being in default under any term or condition of
this Lease after the expiration of any applicable cure period granted by this
Lease, either at the time the Option to Extend is exercised or at the time the
applicable Extended Term would commence. The Option to Extend shall be personal
to the Tenant originally named in this Lease, and shall not be assigned, sold,
conveyed or otherwise transferred to any other party (including without
limitation any assignee or sublessee of such Tenant) without the prior written
consent of Landlord, which consent may be withheld in Landlord's sole
discretion; provided,
10
<PAGE>
however, that the Option to Extend may be transferred to the transferee pursuant
to a Permitted Transfer without Landlord's consent. The Option to Extend shall
be exercisable only so long as the Lease remains in full force and effect and
shall be an interest appurtenant to and not separable from Tenant's estate under
the Lease. Under no circumstances shall Landlord be required to pay any real
estate commission to any party with respect to Tenant's exercise of the Option
to Extend.
(ii) Manner of Exercise. Tenant may exercise the Option to Extend
------------------
the Lease only by giving Landlord written notice not less than one (1) year
prior to the expiration of the Term. If Tenant fails to exercise the Option to
Extend prior to such 1-year period, then the Option to Extend automatically
shall lapse and thereafter Tenant shall have no right to exercise the Option to
Extend.
(iii) Terms and Rent. The initial Monthly Rent for the Premises for
--------------
the Extended Term shall be equal to the greater of (w) ninety-five percent (95%)
of the fair market rent, as determined below, for the Premises as of the
commencement of the Extended Term, or (x) an amount equal to the Monthly Rent
payable during the fourteenth (14th) Lease Year of the initial Term, multiplied
by the greater of (A) the lesser of (I) a fraction, the numerator of which is
the Index published most recently before the first day of the fourteenth (14th)
Lease Year of the initial Term, and the denominator of which is the Index
published most recently before the first day of the thirteenth (13th) Lease Year
of the initial Term, or (II) one hundred sixteen percent (116%), or (B) one
hundred seven percent (107%). During the Extended Term the Monthly Rent shall
continue to be subject to adjustment in accordance with the provisions of
Paragraph 5.B below. All other terms and conditions of the Lease, as amended
- -------------
from time to time by the parties in accordance with the provisions of the Lease,
shall remain in full force and effect and shall apply during the Extended Term;
provided, however, that neither the Option to Extend nor Landlord's obligations
under the Work Letter shall be of any force or effect during the Extended Term.
(iv) Determination of Rent. For the purposes of calculating the
---------------------
Monthly Rent for the Extended Term, the fair market rent shall be equal to the
net effective rent per rentable square foot being charged for leases executed
within the preceding twelve (12) months for comparable space (in buildings with
2 - 4 stories) at either the Project (if any), or if there are none, for
comparable space (in buildings with 2 - 4 stories) in office and research and
development complexes located in the Redwood Shores area or the Menlo Oaks
Business Park (located in Menlo Park, California), with terms comparable to the
terms contained in this Lease, taking into consideration relevant factors such
as the presence or absence of tenant improvement contributions by the lessor,
and the fact that the Monthly Rent during the Extended Term shall be subject to
adjustment under Paragraph 5.B. Any value added to the Premises by the Tenant
--------------
Improvements and any Alterations paid for by Tenant shall not be considered or
included in the determination of the fair market rent. The fair market rent
shall be determined by mutual agreement of the parties or, if the parties are
unable to agree within thirty (30) days after Tenant's exercise of an Option,
then fair market rent shall be determined pursuant to the procedure set forth in
Paragraphs 4.C.(v) and 4.C.(vi).
- ------------------ --------
(v) Landlord's Initial Determination. If the parties are unable
--------------------------------
mutually to agree upon the fair market rent pursuant to Paragraph 4.C.(iv), then
------------------
the fair market rent initially
11
<PAGE>
shall be determined by Landlord by written notice ("Landlord's Notice") given to
-----------------
Tenant promptly following the expiration of the 30-day period set forth in
Paragraph 4.C.(iv). If Tenant disputes the amount of fair market rent set forth
- ------------------
in Landlord's Notice, then, within thirty (30) days after the date of Landlord's
Notice, Tenant shall send Landlord a written notice ("Tenant's Notice") which
---------------
specifically (a) disputes the fair market rent set forth in Landlord's Notice,
(b) demands arbitration pursuant to Paragraph 4.C.(vi), and (c) states the name
------------------
and address of the person who shall act as arbitrator on Tenant's behalf.
Tenant's Notice shall be deemed defective, and not given to Landlord, if it
fails strictly to comply with the Requirements and time period set forth above.
If Tenant does not send Tenant's Notice within thirty (30) days after the date
of Landlord's Notice, or if Tenant's Notice fails to contain all of the required
information, then the Monthly Rent for the Extended Term shall equal ninety-five
percent (95%) of the fair market rent specified in Landlord's Notice. If Tenant
sends Tenant's Notice in the proper form within thirty (30) days after the date
of Landlord's Notice, then the Monthly Rent for the Extended Term shall be
determined by arbitration pursuant to Paragraph 4.C(vi) below. If the
-----------------
arbitration is not concluded prior to the commencement of the Extended Term,
then Tenant shall pay Monthly Rent equal to one hundred twenty-five percent
(125%) of the Monthly Rent payable immediately prior to the commencement of the
Extended Term. If the fair market rent determined by arbitration differs from
that paid by Tenant pending the results of arbitration, then any adjustment
required to adjust the amount previously paid shall be made by payment by the
appropriate party within ten (10) days after the determination of fair market
rent.
(vi) Arbitration. The arbitration shall be conducted in the City of
-----------
San Francisco in accordance with the then prevailing rules of the American
Arbitration Association (or its successor) for the arbitration of commercial
disputes, except that the procedures mandated by such rules shall be modified as
follows:
(a) Each arbitrator must be a real estate appraiser with at
least five (5) years of full-time commercial appraisal experience who is
familiar with the fair market rent of office and research and development
complexes located in the vicinity of the Premises. Within ten (10) business days
after receipt of Tenant's Notice, Landlord shall notify Tenant of the name and
address of the person designated by Landlord to act as arbitrator on Landlord's
behalf.
(b) The two arbitrators chosen pursuant to Paragraph
---------
4.C.(vi)(a) shall meet within ten (10) business days after the second arbitrator
- -----------
is appointed and shall either agree upon the fair market rent or appoint a third
arbitrator possessing the qualifications set forth in Paragraph 4.C.(vi)(a). If
---------------------
the two arbitrators agree upon the fair market rent within such ten (10)
business day period, the Monthly Rent for the Extended Term shall equal ninety-
five percent (95%) of such fair market rent. If the two arbitrators are unable
to agree upon the fair market rent and are unable to agree upon the third
arbitrator within five (5) business days after the expiration of such ten (10)
business day period, the third arbitrator shall be selected by the parties
themselves. If the parties do not agree on the third arbitrator within five (5)
business days after the expiration of such five (5) business day period, then
either party, on behalf of both, may request appointment of the third arbitrator
by the Association of South say Brokers. The three arbitrators shall decide the
dispute, if it has not been previously resolved, by following the procedures set
forth in Paragraph 4.C.(vi)(c). Each party shall pay the fees and expenses of
---------------------
its
12
<PAGE>
respective arbitrator and both shall share the fees and expenses of the third
arbitrator. Each party shall pay its own attorneys' fees and costs of witnesses.
(c) The three arbitrators shall determine the fair market
rent in accordance with the following procedures. Each of Landlord's arbitrator
and Tenant's arbitrator shall state, in writing, his or her determination of the
fair market rent, supported by the reasons therefor, and shall make counterpart
copies for the other arbitrators. All of the arbitrators shall arrange for a
simultaneous exchange of the proposed resolutions within ten (10) business days
after appointment of the third arbitrator. If any arbitrator fails to deliver
his or her own determination to the other arbitrators within such ten (10)
business day period, then the fair market rent shall equal the average of the
resolutions submitted by the other arbitrators. If all three (3) arbitrators
deliver their determinations to the other arbitrators within such ten (10)
business day period, then the two (2) closest determinations of the arbitrators
shall be averaged, and the resulting quotient shall be the fair market rent, and
the Monthly Rent for the Extended Term shall equal ninety-five percent (95%) of
such fair market rent; provided, however, that if the determination of one (1)
of the arbitrators (the "Average Determination") is equal to the average of the
---------------------
determinations of the other two (2) arbitrators, then the Average Determination
shall be the fair market rent. However, the arbitrators shall not attempt to
reach a mutual agreement of the fair market rent; each arbitrator shall
independently arrive at his or her proposed resolution.
(d) The arbitrators shall have the right to consult experts
and competent authorities for factual information or evidence pertaining to a
determination of fair market rent, but any such consultation shall be made in
the presence of both parties with full right on their part to cross-examine. The
arbitrators shall render the decision and award in writing with counterpart
copies to each party. The arbitrators shall have no power to modify the
provisions of this Lease. In the event of a failure, refusal or inability of any
arbitrator to act, his or her successor shall be appointed by him or her, but in
the case of the third arbitrator, his or her successor shall be appointed in the
same manner as that set forth herein with respect to the appointment of the
original third arbitrator.
5. Rent and Additional Charges.
---------------------------
A. Monthly Rent. Tenant shall pay to Landlord, in lawful money of
------------
the United States, Monthly Rent as follows: commencing on the Commencement Date,
and continuing through the balance of the Term (subject to adjustment pursuant
to Paragraph 5.B), the initial Monthly Rent shall equal that amount calculated
--------------
pursuant to the Build to Suit Agreement as the Monthly Rent for the Building.
Tenant shall have no obligation to pay Monthly Rent before the Commencement
Date. Until the Monthly Rent is established under the Build to Suit Agreement,
the Monthly Rent shall be deemed to equal that amount designated from time to
time in writing by Landlord to Tenant as Landlord's reasonable estimate of the
amount of Monthly Rent that will be established under the Build to Suit
Agreement upon completion of the construction of the Building (collectively, the
"Estimated Monthly Rent"), based upon Landlord's estimate of the Development
----------------------
Costs (as defined in the Build to Suit Agreement) that have been or will be
incurred in constructing the Building. Upon the final establishment of the
initial Monthly
13
<PAGE>
Rent in accordance with the Build to Suit Agreement, Landlord and Tenant shall
each execute an addendum to this Lease setting forth the initial Monthly Rent
under this Lease. If as of the date the initial Monthly Rent under this Lease is
established (the "Rent Establishment Date"), the aggregate amount of Estimated
-----------------------
Monthly Rent previously paid by Tenant exceeds the aggregate amount of Monthly
Rent payable under this Lease from the Commencement Date to the Rent
Establishment Date, then Landlord may elect, in its sole discretion, to either
refund such excess to Tenant within thirty (30) days after the Rent
Establishment Date, or offset such overpayment against Rent due or remaining due
under this Lease. If as of the Rent Establishment Date the aggregate amount of
Estimated Monthly Rent previously paid by Tenant is less than the aggregate
amount of Monthly Rent payable under this Lease from the Commencement Date to
the Rent Establishment Date, then Tenant shall pay the deficiency to Landlord
within thirty (30) days after the Rent Establishment Date.
Monthly Rent shall be paid in advance, on the first day of each
calendar month during the Term, without abatement, deduction, claim, offset,
prior notice or demand. Tenant shall pay to Landlord an amount equal to one (1)
month's advance payment of Monthly Rent for the Premises upon the execution of
this Lease by Landlord and Tenant. Additionally, Tenant shall pay, as and with
the Monthly Rent, the management fee described in Paragraph 5.C., Tenant's
--------------
Percentage Share of Common Area Maintenance Costs pursuant to Paragraph 5.D, the
-------------
Real Property Taxes and Impositions payable by Tenant pursuant to Paragraph 15,
------------
and the monthly cost of insurance premiums required pursuant to Paragraph 21.C.
--------------
B. Adjustments to Monthly Rent. The Monthly Rent may be adjusted at
---------------------------
any time during the Term in accordance with the provisions of Paragraph 2.1.1 of
---------------
Exhibit D to the Build to Suit Agreement. In addition, the Monthly Rent shall be
- ---------
increased, but not decreased, as of the first day of the month which is twenty-
five (25) months from the Commencement Date and every twenty-four (24) months
thereafter during the Term (including without limitation the Extended Term)
(each, an "Adjustment Date") by the greater of (i) the percentage increase in
----------------
the Index from the previous Adjustment Date (or, for the first Adjustment Date,
from the Commencement Date), up to a maximum of sixteen percent (16%), or (ii)
seven percent (7%). If, however, the last Adjustment Date occurs at any time
after the first day of a calendar month, the first Adjustment Date shall be the
first day of the immediately following calendar month. On each Adjustment Date,
the total aggregate amount of Monthly Rent then in effect shall be multiplied by
the greater of (x) the lesser of (A) a fraction, the numerator of which is the
Index published most recently before the applicable Adjustment Date, and the
denominator of which is the Index published most recently before the prior
Adjustment Date (or, in the case of the first Adjustment Date, the Index
published most recently before the Commencement Date), or (B) one hundred
sixteen percent (116%), or (y) one hundred seven percent (107%); and the
corresponding product shall be the Monthly Rent in effect until the next
Adjustment Date. In no event shall the Monthly Rent in effect after an
Adjustment Date be less than one hundred seven percent (107%) of the Monthly
Rent in effect immediately prior to such Adjustment Date. If no Index is
published for either of the months set forth above, the Index for the next
preceding month shall be used.
C. Management Fee. Tenant shall pay to Landlord monthly, as
--------------
Additional
14
<PAGE>
Rent, a management fee equal to three and one-half percent (3.5%) of the then
Monthly Rent.
D. Common Area Maintenance Costs.
-----------------------------
(i) Estimated Payments. Commencing on the Commencement Date and
------------------
continuing throughout the entire Term, Tenant shall pay Tenant's Percentage
Share of all Common Area Maintenance Costs paid or payable by Landlord in each
year; provided, however, that Tenant shall pay one hundred percent (100%) of
those Common Area Maintenance Costs arising from Landlord's performance of its
obligations under Paragraphs 17.A and Tenant's obligations under Paragraph 17.D.
--------------- --------------
Before commencement of the Term and during December of each calendar year or as
soon thereafter as practicable, Landlord shall give Tenant notice of its
estimate of amounts payable under this Paragraph 5.D.(i) for the ensuing
-----------------
calendar year. Such notice shall show in reasonable detail the basis on which
the estimate was determined. On or before the first day of each month during
the ensuing calendar year, Tenant shall pay to Landlord one-twelfth (1/12th) of
such estimated amounts, provided that if such notice is not given in December,
Tenant shall continue to pay on the basis of the prior year's estimate until the
month after such notice is given. If at any time or times it appears to
Landlord, in its reasonable judgment, that the amounts payable under this
Paragraph 5.D.(i) for the current calendar year will vary from its then-current
- -----------------
estimate by more than five percent (5%), Landlord may, in its sole discretion,
by notice to Tenant, showing in reasonable detail the basis for such variance,
revise its estimate for such year, in which case subsequent payments by Tenant
for such year shall be based upon such revised estimate. Landlord's election
not to give the notice described in the foregoing sentence shall not affect
Landlord's ability to charge Tenant for, nor Tenant's liability to pay for, any
shortfall in the estimated payments for such calendar year previously made by
Tenant, as set forth in Paragraph 5.D.(ii).
------------------
(ii) Adjustment. Within one hundred twenty (120) days after the
----------
close of each calendar year or as soon after such 120-day period as reasonably
practicable, Landlord shall deliver to Tenant a reasonably detailed statement of
Common Area Maintenance Costs for such calendar year, certified by Landlord or
its property manager, subject to Tenant's right to audit as hereinafter
provided. At that time, Landlord shall also deliver to Tenant a statement,
certified as correct by Landlord, of the adjustments to be made pursuant to
Paragraph 5.D.(i) above. If Landlord's statement shows that Tenant owes an
- -----------------
amount that is less than the estimated payments for such calendar year
previously made by Tenant, Landlord may elect, in its sole discretion, to either
refund such excess to Tenant within thirty (30) days after delivery of the
statement, or offset such overpayment against Rent due or remaining due under
this Lease; provided that if no Rent remains due, Landlord shall refund such
excess to Tenant within thirty (30) days after delivery of the statement. If
such statement shows that Tenant owes an amount that is more than the estimated
payments for such calendar year previously made by Tenant, Tenant shall pay the
deficiency to Landlord within thirty (30) days after delivery of the statement.
(iii) Last Year. If this Lease shall terminate on a day other
---------
than the last day of a calendar year, the adjustment in Rent applicable to the
calendar year in which such termination shall occur shall be prorated on the
basis which the number of days from the commencement of such calendar year to
and including such termination date bears to three
15
<PAGE>
hundred sixty (360). The termination of this Lease shall not affect the
obligations of Landlord and Tenant pursuant to Paragraph 5.D.(ii) to be
------------------
performed after such termination.
(iv) Audit. Within one hundred eighty (180) days after receipt
-----
of Landlord's statement of Common Area Maintenance Costs as provided in
Paragraph 5.D.(ii), Tenant or its designee, on not less than five (5) days'
- ------------------
prior written notice to Landlord, shall have the right to, at Tenant's sole cost
and expense, audit, examine and copy Landlord's books and records with respect
to the Common Area Maintenance Costs for the calendar year pertaining to the
year for which the Landlord's statement pertains. Landlord shall cooperate with
Tenant in any such examination of its books and records.
E. Additional Rent. All monies required to be paid by Tenant under
---------------
this Lease, including, without limitation, the Tenant Improvement costs pursuant
to Exhibit B, the management fee described in Paragraph 5.D, Tenant's Percentage
--------- -------------
Share of Common Area Maintenance Costs pursuant to Paragraph 5.D, Real Property
-------------
Taxes and Impositions pursuant to Paragraph 15, and the monthly cost of
------------
insurance premiums required pursuant to Paragraph 21.C, shall be deemed
--------------
Additional Rent.
F. Prorations. If the Commencement Date or the Second Half
----------
Commencement Date is not the first (1st) day of a month, or if the termination
date of this Lease is not the last day of a month, a prorated installment of
Monthly Rent based on a 30-day month shall be paid for the fractional month
during which such date occurs or the Lease terminates.
G. Interest. Any amount of Rent or other charges provided for under
--------
this Lease due and payable to Landlord which is not paid when due shall bear
interest at the Interest Rate from the date that is (i) five (5) days after the
date such Rent is due until such Rent is paid, or (ii) ten (10) days after
Tenant receives written notice from Landlord that any other charge provided for
under this Lease (other than Rent) is due and payable, until such other charge
is paid.
6. Late Payment Charges.
--------------------
Tenant acknowledges that late payment by Tenant to Landlord of Rent
and other charges provided for under this Lease will cause Landlord to incur
costs not contemplated by this Lease, the exact amount of such costs being
extremely difficult or impracticable to fix. Therefore, if any installment of
Rent or any other charge due from Tenant (excluding late release of the Set-
Aside Funds pursuant to the Work Letter) is not received by Landlord within
three (3) days after the date such Rent or other charge is due, Tenant shall pay
to Landlord an additional sum equal to seven percent (7%) of the amount overdue
as a late charge for every month or portion thereof that the Rent or other
charges remain unpaid. The parties agree that this late charge represents a
fair and reasonable estimate of the costs that Landlord will incur by reason of
the late payment by Tenant.
Initials:
16
<PAGE>
_______________ _________________________________
Landlord Tenant
7. Security Deposit.
----------------
A. Deposit Required. Tenant shall deposit with Landlord upon the
----------------
execution of this Lease by Landlord and Tenant, an amount equal to three (3)
payments of the Estimated Monthly Rent under this Lease, as the "Security
--------
Deposit" for the full and faithful performance of every provision of this Lease
- -------
to be performed by Tenant. Effective as of the Rent Establishment Date, the
Security Deposit shall be adjusted (if necessary) to equal three (3) payments of
the initial Monthly Rent under this Lease. If as of the Rent Establishment Date
the Estimated Monthly Rent exceeds the initial Monthly Rent as determined under
Paragraph 5.A above, then Landlord shall refund to Tenant, within thirty (30)
- -------------
days after the Rent Establishment Date, any overpayment of the Security Deposit.
If as of the Rent Establishment Date the Estimated Monthly Rent is less than the
initial Monthly Rent as determined under Paragraph 5.A above, then Tenant shall
-------------
increase the Security Deposit by paying the deficiency in the Security Deposit
to Landlord within thirty (30) days after the Rent Establishment Date. For the
purposes of this Lease, the term "Security Deposit" shall include the initial
sum deposited by Tenant as the Security Deposit and any other sum deposited by
Tenant as the Security Deposit and any other sum deposited by Tenant towards the
Security Deposit pursuant to this Paragraph 7.A. At Tenant's option, the
-------------
Security Deposit may be in the form of an irrevocable standby letter of credit
("L-C"). Landlord shall not be required to segregate the Security Deposit from
Landlord's general funds; Landlord's obligations with respect to the Security
Deposit shall be those of a debtor and not a trustee, and Tenant shall not be
entitled to any interest on the Security Deposit. Invocation by Landlord of its
rights hereunder shall not constitute a waiver of nor relieve Tenant from any
liability or obligation for any default by Tenant under this Lease.
(i) Reduction or Replacement. So long as Tenant has not
------------------------
committed any default under this Lease, then if Tenant can demonstrate to the
reasonable satisfaction of Landlord that Tenant has maintained a Fixed Charge
Ratio of at least 1.25 to 1 for a period of four (4) consecutive fiscal years at
any time after the Commencement Date, then Tenant may elect to reduce the
Security Deposit to a sum equal to the then-current amount of Monthly Rent. For
the purposes of this Paragraph 7, in order for Tenant to demonstrate that it has
-----------
maintained the required Fixed Charge Ratio for the fiscal year or years in
question, Tenant must at a minimum deliver to Landlord an audited financial
statement of Tenant, showing that Tenant has maintained the required Fixed
Charge Ratio for the fiscal year or years in question.
If Tenant is entitled to and does elect to reduce the amount of the
Security Deposit pursuant to this Paragraph 7.A.(i), and Tenant delivers to
-----------------
Landlord written notice of its election to so reduce the amount of the Security
Deposit and the financial statement described in the foregoing grammatical
paragraph, then either (x) if the Security Deposit is in the form of cash,
Landlord shall pay to Tenant the excess amount of the Security Deposit, without
interest, within thirty (30) days after Landlord's receipt of such notice and
statement; or (y) if the Security Deposit is in the form of an L-C, then Tenant
may, not less than ten (10) days after Landlord's receipt of such notice and
statement, replace the L-C with an L-C in an amount equal to the
17
<PAGE>
reduced amount of the Security Deposit.
(ii) Consequences of Default. If Tenant defaults with respect to
-----------------------
any provision of this Lease, after the expiration of any applicable cure or
grace periods expressly provided for in this Lease, Landlord may apply all or
any part of the Security Deposit for the payment of any Rent or other sum in
default, the repair of such damage to the Premises or the payment of any other
amount which Landlord may spend or become obligated to spend by reason of
Tenant's default or to compensate Landlord for any other loss or damage which
Landlord may suffer by reason of Tenant's default to the full extent permitted
by law. If any portion of a cash Security Deposit is so applied, or any portion
of an L-C posted as the Security Deposit, if applicable, is drawn upon, by
Landlord for such purposes, Tenant shall either, within ten (10) days after
written demand therefor, deposit cash with Landlord in an amount sufficient to
restore the Security Deposit to its original amount or deposit a replacement L-C
with Landlord in the amount of the original L-C. If Tenant is not otherwise in
default, the Security Deposit or any balance thereof shall be returned to Tenant
within thirty (30) days of termination of the Lease.
(ii) Form of L-C. If at any time Tenant elects to deposit an L-C
-----------
as the Security Deposit, the L-C shall be issued by a bank reasonably acceptable
to Landlord, shall be issued for a term of at least twelve (12) months and shall
be in a form and with such content reasonably acceptable to Landlord. Tenant
shall either replace the expiring L-C with an L-C in an amount equal to the
original L-C or renew the expiring L-C, in any event no later than thirty (30)
days prior to the expiration of the term of the L-C then in effect. If Tenant
fails to deposit a replacement L-C or renew the expiring L-C, Landlord shall
have the right to draw upon the expiring L-C for the full amount thereof and
hold the same as the Security Deposit; provided, however, that if Tenant
provides a replacement L-C that meets the requirements of this Paragraph, then
Landlord shall return to Tenant promptly in cash that amount of the L-C that had
been drawn upon by Landlord. Drawing upon the L-C shall be conditioned upon the
presentation to the issuer of the L-C of a certified statement executed by a
general partner of Landlord that (i) Tenant is in default under the Lease and
Landlord is exercising its right to draw upon so much of the L-C as is necessary
to cure Tenant's default, or (ii) Tenant has not renewed or replaced an expiring
L-C as required by this Lease and Landlord is authorized to draw upon the L-C
prior to its expiration. The L-C shall not be mortgaged, assigned or encumbered
in any manner whatsoever by Tenant without the prior written consent of
Landlord. The use, application or retention of the L-C, or any portion thereof,
by Landlord shall not prevent Landlord from exercising any other right or remedy
provided by this Lease or by law, it being intended that Landlord shall not
first be required to proceed against the L-C, and such use, application or
retention shall not operate as a limitation on any recovery to which Landlord
may otherwise be entitled.
8. Holding Over.
------------
If Tenant remains in possession of all or any part of the Premises
after the expiration of the Term, with the express or implied consent of
Landlord, such tenancy shall be at sufferance only, and shall not constitute a
renewal or extension for any further term. If Tenant
18
<PAGE>
remains in possession after the expiration of the Term, either with or without
Landlord's consent, Rent shall be payable at a rental equal to one hundred
thirty percent (130%) of the Monthly Rent payable during the last month of the
Term (which rental shall be due and payable at the same time as Monthly Rent is
due under this Lease), and any other sums due under this Lease shall be payable
in the amount and at the times specified in this Lease. Such holdover tenancy
shall be subject to every other term, condition, and covenant contained herein;
provided, however, that neither the Holdover Option (as defined below) nor
Landlord's obligations under the Work Letter shall be of any force or effect
during any such holdover tenancy.
9. Tenant Improvements.
-------------------
Landlord agrees to construct the Tenant Improvements pursuant to the
terms of Exhibit B.
---------
10. Condition of Premises.
---------------------
A. Capital Improvements. Landlord shall complete the Capital
--------------------
Improvements in accordance with the terms of Exhibit B; provided, however, that
---------
the construction of the shell and core of the Building shall be governed by the
terms of the Build to Suit Agreement. Except for its obligation to perform the
Capital Improvements and the Tenant Improvements as set forth in this Lease and
the Work Letter, Landlord shall have no obligation whatsoever to do any work or
perform any improvements whatsoever to any portion of the Premises or the
Building.
B. Acceptance of Premises. Within ten (10) days after completion of
----------------------
the Tenant Improvements Tenant shall conduct a walk-through inspection of the
Premises with Landlord and complete a punch list of items needing additional
work. Other than the items specified in the punch list, if any, and subject to
Landlord's representations and warranties described below, by taking possession
of the Premises, Tenant shall be deemed to have accepted the Premises in good,
clean and completed condition and repair, subject to all applicable laws, codes
and ordinances. Any damage to the Premises caused by Tenant's move-in shall be
repaired or corrected by Tenant, at its sole cost and expense, which repair or
corrective work shall not be paid for out of the Tenant Improvements Allowance.
Tenant acknowledges that neither Landlord nor Landlord's Agents have made any
representations or warranties as to the suitability or fitness of the Premises
for the conduct of Tenant's business or for any other purpose, nor has Landlord
or Landlord's Agents agreed to undertake any Alterations or construct any
Improvements to the Premises except as expressly provided in this Lease. If
Tenant fails to submit a punch-list to Landlord within such 10-day period, it
shall be deemed that there are no Improvement items needing additional work or
repair. Landlord's contractor shall complete all reasonable punch-list items
within thirty (30) days after the walk-through inspection or as soon as
practicable thereafter. Upon completion of such punch-list items, Tenant shall
approve such completed items in writing to Landlord. If Tenant fails to approve
such items within fourteen (14) days of completion, such items shall be deemed
approved by Tenant.
11. Use of the Premises and Common Area.
-----------------------------------
19
<PAGE>
A. Tenant's Use. Tenant shall use the Premises only for general
------------
office, research and development, marketing, sales, and storage related to such
activities, and any other legal use consistent with any CC&Rs. Tenant shall not
use the Premises or suffer or permit anything to be done in or about the
Premises which will in any way conflict with any law, statute, zoning
restriction, ordinance or governmental law, rule, regulation or requirement of
public authorities now in force or which may hereafter be in force, relating to
or affecting the condition, use or occupancy of the Premises. Tenant shall not
commit any public or private nuisance or any other act or thing which might or
would disturb the quiet enjoyment of any other tenant of Landlord or any
occupant of nearby property. Tenant shall place no loads upon the floors, walls
or ceilings in excess of the maximum designed load determined by a licensed
structural engineer or which endanger the structure; nor place any harmful
liquids in the drainage systems; nor dump or store waste materials or refuse or
allow waste materials or refuse to remain outside the Building proper, except in
the enclosed trash areas provided. Tenant shall not store or permit to be
stored or otherwise placed any other material of any nature whatsoever outside
the Building, except on a temporary basis.
B. Hazardous Materials.
-------------------
(i) Hazardous Materials Defined. As used herein, the term
---------------------------
"Hazardous Materials" shall mean any wastes, materials or substances (whether in
-------------------
the form of liquids, solids or gases, and whether or not air-borne), which are
or are deemed to be (a) pollutants or contaminants, or which are or are deemed
to be hazardous, toxic, ignitable, reactive, corrosive, dangerous, harmful or
injurious, or which present a risk to public health or to the environment, or
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, any
amendments or successor(s) thereto, replacements thereof or publications
promulgated pursuant thereto, including, without limitation, any such items or
substances which are or may become regulated by any of the Environmental Laws
(as hereinafter defined); (b) listed as a chemical known to the State of
California to cause cancer or reproductive toxicity pursuant to Section 25249.8
of the California Health and Safety Code, Division 20, Chapter 6.6 (Safe
Drinking Water and Toxic Enforcement Act of 1986); or (c) a pesticide,
petroleum, including crude oil or any fraction thereof, asbestos or any
asbestos-containing material, a polychlorinated biphenyl, radioactive material,
or urea formaldehyde.
(ii) Environmental Laws Defined. In addition to the laws
--------------------------
referred to in Paragraph 11.B.(i) above, the term "Environmental Laws" shall be
------------------ ------------------
deemed to include, without limitation, 33 U.S.C. Section 1251 et seq., 42 U.S.C.
-------
Section 6901 et seq., 42 U.S.C. Section 7401 et seq., 42 U.S.C. Section 9601 et
------- ------- --
seq., and California Health and Safety Code Section 25100 et seq., and 25300 et
- ---- ------- --
seq., California Water Code, Section 13020 et seq., or any successor(s) thereto,
- ---- -------
all local, state and federal laws, judgments, ordinances, orders, rules,
regulations, codes and other governmental restrictions, guidelines and
requirements, any amendments and successors thereto, replacements thereof and
publications promulgated pursuant thereto, which deal with or otherwise in any
manner relate to, air or water quality, air emissions, soil or ground conditions
or other environmental matters of any kind.
20
<PAGE>
(iii) Use of Hazardous Materials. Tenant agrees that during
--------------------------
the Term of this Lease, Tenant shall not use, or permit the use of, nor store,
generate, treat, manufacture or dispose of Hazardous Materials on, from or under
the Premises (individually and collectively, "Hazardous Use") except to the
-------------
extent that, and in accordance with such conditions as, Landlord may have
previously approved in writing in its sole and absolute discretion.
Notwithstanding the foregoing, Tenant shall be entitled to use and store only
those Hazardous Materials which are (a) set forth in a list prepared by Tenant
and approved in writing by Landlord, which shall be deemed given with respect to
the Approved Hazardous Materials (hereinafter defined), (b) necessary for
Tenant's business, but then only in the amounts and for the purposes previously
disclosed in writing to and approved in writing by Landlord, and (c) in full
compliance with Environmental Laws, and all judicial and administrative
decisions pertaining thereto. All Hazardous Materials approved in writing by
Landlord as provided in the preceding sentence shall collectively be referred to
as the "Approved Hazardous Materials". Within thirty (30) days after request by
--------
Landlord, Tenant shall deliver to Landlord a list of the Approved Hazardous
- ----------------
Materials. Tenant shall not be entitled to install any tanks under, on or about
the Premises for the storage of Hazardous Materials without the express written
consent of Landlord, which may be given or withheld in Landlord's sole
discretion. For the purposes of this Paragraph 11.B.(iii), the term Hazardous
--------------------
Use shall include Hazardous Use(s) on, from or under the Premises by Tenant,
any Subtenant occupying all or any portion of the Premises during the Term, or
any of their directors, officers, employees, shareholders, partners, invitees,
agents, contractors or occupants (collectively, "Tenants Parties"), whether
---------------
known or unknown to Tenant, occurring during the Term of this Lease. The term
"Tenant's Parties" shall not include any tenants of the Project other than
----------------
Tenant, except that the term "Tenant's Parties" shall include any Subtenant
occupying all or any portion of the Premises during the Term.
(iv) Hazardous Materials Report; When Required. Tenant shall
-----------------------------------------
submit to Landlord a written report with respect to Hazardous Materials
("Report") in the form prescribed in Paragraph 11.B.(v) below on the following
------ ------------------
dates:
(a) At any time within ten (10) days after written
request by Landlord, and
(b) At any time when there has been a violation of any
Environmental Law, or in connection with any proposed request for Landlord's
consent to any change in the list of Approved Hazardous Materials or for an
increase in the intensity of usage or storage of such Approved Hazardous
Materials.
(v) Hazardous Materials Report; Contents. The Report shall
------------------------------------
contain, without limitation, the following information:
(a) Whether on the date of the Report and (if applicable)
during the period since the last Report there has been any Hazardous Use on,
from or under the Premises, other than the use of Approved Hazardous Materials.
(b) If there was such Hazardous Use, the exact identity
of the
21
<PAGE>
Hazardous Materials (other than the Approved Hazardous Materials), the dates
upon which such materials were brought upon the Premises, the dates upon which
such Hazardous Materials were removed therefrom, and the quantity, location, use
and purpose thereof.
(c) If there was such Hazardous Use, any governmental
permits maintained by Tenant with respect to such Hazardous Materials, the
issuing agency, original date of issue, renewal dates (if any) and expiration
date. Copies of any such permits and applications therefor shall be attached.
(d) If there was such Hazardous Use, any governmental
reporting or inspection requirements with respect to such Hazardous Materials,
the governmental agency to which reports are made and/or which conducts
inspections, and the dates of all such reports and/or inspections (if
applicable) since the last Report. Copies of any such Reports shall be attached.
(e) If there was such Hazardous Use, identification of
any operation or business plan prepared for any government agency with respect
to Hazardous Use.
(f) Any liability insurance carried by Tenant with
respect to Hazardous Materials, if any, the insurer, policy number, date of
issue, coverage amounts, and date of expiration. Copies of any such policies or
certificates of coverage shall be attached.
(g) Any notices of violation of Environmental Laws,
written or oral, received by Tenant from any governmental agency since the last
Report, the date, name of agency, and description of violation. Copies of any
such written notices shall be attached.
(h) Any knowledge, information or communication which
Tenant has acquired or received relating to (x) any enforcement, cleanup,
removal or other governmental or regulatory action threatened or commenced
against Tenant or with respect to the Premises pursuant to any Environmental
Laws; (y) any claim made or threatened by any person or entity against Tenant or
the Premises on account of any alleged loss or injury claimed to result from any
alleged Hazardous Use on or about the Premises; or (z) any report, notice or
complaint made to or filed with any governmental agency concerning any Hazardous
Use on or about the Premises. The Report shall be accompanied by copies of any
such claim, report, complaint, notice, warning or other communication that is in
the possession of or is available to Tenant.
(i) Such other pertinent information or documents as are
reasonably requested by Landlord in writing.
(vi) Release of Hazardous Materials; Notification and Cleanup.
--------------------------------------------------------
(a) At any time during the Term, if Tenant knows or
believes that any release of any Hazardous Materials has come or will come to be
located upon, about or beneath the Premises, then Tenant shall immediately,
either prior to the release or following the discovery thereof by Tenant, give
verbal and follow-up written notice of that condition to
22
<PAGE>
Landlord.
(b) At its sole cost and expense, Tenant covenants to
investigate, clean up and otherwise remediate any release of Hazardous Materials
which were caused or created by Tenant or any of Tenant's Parties. Such
investigation, clean-up and remediation shall be performed only after Tenant has
obtained, if practicable, Landlord's written consent, which shall not be
unreasonably withheld; provided, however, that Tenant shall be entitled to
respond immediately to an emergency without first obtaining Landlord's written
consent. All clean-up and remediation shall be done in compliance with
Environmental Laws and to the reasonable satisfaction of Landlord.
(c) Notwithstanding the foregoing, Landlord shall have
the right, but not the obligation, in Landlord's sole and absolute discretion,
exercisable by written notice to Tenant, to undertake within or outside the
Premises all or any portion of any reasonable investigation, clean-up or
remediation with respect to any Hazardous Use of such Hazardous Materials by
Tenant or any of Tenant's Parties (or, once having undertaken any of such work,
to cease same, in which case Tenant shall perform the work), all at Tenant's
sole cost and expense, which shall be paid by Tenant as Additional Rent within
ten (10) days after receipt of written request therefor by Landlord (and which
Landlord may require to be paid prior to commencement of any work by Landlord);
provided, however, that Tenant's obligation to pay for such work shall only be
applicable if Tenant fails to perform its obligations under this Paragraph 11
------------
(including without limitation the obligations described in Paragraph 11.B.(vi)
-------------------
(b)). No such work by Landlord shall create any liability on the part of
- ---
Landlord to Tenant or any other party in connection with such Hazardous
Materials by Tenant or any of Tenant's Parties or constitute an admission by
Landlord of any responsibility with respect to such Hazardous Materials.
(d) It is the express intention of the parties hereto
that Tenant shall be liable under this Paragraph 11.B.(vi) for any and all
-------------------
conditions covered hereby which were or are caused or created by Tenant or any
of Tenant's Parties, whether occurring prior to, on, or after the Commencement
Date. Tenant shall not enter into any settlement agreement, consent decree or
other compromise with respect to any claims relating to any Hazardous Materials
in any way connected to the Premises without first (x) notifying Landlord of
Tenant's intention to do so and affording Landlord the opportunity to
participate in any such proceedings, and (y) obtaining Landlord's written
consent, which shall not be unreasonably withheld.
(vii) Inspection and Testing by Landlord. Landlord shall have
----------------------------------
the right at all times during the Term of this Lease to (a) inspect the
Premises, as well as such of Tenant's books and records pertaining to the
Premises and the conduct of Tenant's business therein, and to (b) conduct tests
and investigations to determine whether Tenant is in compliance with the
provisions of this Paragraph 11.B. Except in case of emergency, Landlord shall
--------------
give reasonable notice to Tenant before conducting any inspections, tests, or
investigations in accordance with Paragraph 19, shall provide Tenant with a work
------------
plan describing any testing that shall be performed at the Premises, and shall
use reasonable efforts to minimize interference with the conduct of Tenant's
business at the Premises caused by any such inspections, tests, or
investigations. The cost of all such inspections, tests and investigations shall
be borne by Tenant.
23
<PAGE>
Neither any action nor inaction on the part of Landlord pursuant to this
Paragraph 11.B.(vii) shall be deemed in any way to release Tenant from, or in
- --------------------
any way modify or alter, Tenant's responsibilities, obligations, and liabilities
incurred pursuant to Paragraph 11.B hereof.
--------------
(viii) Indemnity. Tenant shall indemnify, defend, protect, hold
---------
harmless, and, at Landlord's option (with such attorneys as Landlord may approve
in advance and in writing), defend Landlord, Landlord's Agents, and Landlord's
officers, directors, shareholders, partners, employees, contractors, property
managers, agents and mortgagees and other lien holders, from and against any and
all Losses (as defined below), whenever such Losses arise, arising from or
related to: (a) any violation or alleged violation by Tenant or any of Tenant's
Parties of any of the requirements, ordinances, statutes, regulations or other
laws referred to in this Paragraph 11.b, including, without limitation, the
--------------
Environmental Laws, whether such violation or alleged violation occurred prior
to, on, or after the Commencement Date; (b) any breach of the provisions of this
Paragraph 11.b by Tenant or any of Tenant's Parties; or (c) any Hazardous Use
- --------------
on, about or from the Premises by Tenant or any of Tenant's Parties of any
Hazardous Materials (whether or not approved by Landlord under this Lease),
whether such Hazardous Use occurred prior to, on, or after the Commencement
Date. The term "Losses" shall mean all claims, demands, expenses, actions,
------
judgments, damages (whether consequential, direct or indirect, known or unknown,
foreseen or unforeseen), penalties, fines, liabilities, losses of every kind and
nature (including, without limitation, property damage, diminution in value of
Landlord's interest in the Premises, damages for the loss of restriction on use
of any space or amenity within the Premises, damages arising from any adverse
impact on marketing space in the Premises, sums paid in settlement of claims and
any costs and expenses associated with injury, illness or death to or of any
person), suits, administrative proceedings, costs and fees, including, but not
limited to, attorneys' and consultants' fees and expenses, and the costs of
cleanup, remediation, removal and restoration, that are in any way related to
any matter covered by the foregoing indemnity.
(ix) Survival. The provisions of this Paragraph 11.b shall
-------- --------------
survive the expiration or earlier termination of this Lease.
C. Special Provisions Relating to The Americans With Disabilities
--------------------------------------------------------------
Act of 1990.
- -----------
(i) Allocation of Responsibility to Landlord. As between
----------------------------------------
Landlord and Tenant, Landlord shall be responsible that the Common Area owned by
Landlord complies with the requirements of Title III of the Americans with
Disabilities Act of 1990 (42 U.S.C. 12181, et seq., The Provisions Governing
Public Accommodations and Services Operated by Private Entities), and all
regulations promulgated thereunder, and all amendments, revisions or
modifications thereto now or hereafter adopted or in effect in connection
therewith (hereinafter collectively referred to as the "ADA"), and to take such
actions and make such alterations and improvements as are necessary for such
compliance; provided, however, that to the extent such requirements arise from
the construction of any Alterations to the Premises made by or on behalf of
Tenant, then as between Landlord and Tenant, Tenant shall be responsible that
the Common Area complies with the requirements of the ADA, and to take such
actions and make such
24
<PAGE>
alterations and improvements as are necessary for such compliance.
(ii) Allocation of Responsibility to Tenant. Except as
--------------------------------------
expressly provided in the Work Letter, as between Landlord and Tenant, Tenant,
at its sole cost and expense, shall be responsible that the Premises (and all
modifications made by Tenant of access to the Premises from the street), and all
alterations and improvements in the Premises (including without limitation the
Tenant Improvements), and Tenant's use and occupancy of the Premises, and
Tenant's performance of its obligations under this Lease, comply with the
requirements of the ADA, and to take such actions and make such alterations and
improvements as are necessary for such compliance; provided, however, that
Tenant shall not make any such alterations or improvements except upon
Landlord's prior written consent (which shall not be unreasonably withheld)
pursuant to the terms and conditions of this Lease. If Tenant fails diligently
to take such actions or make such alterations or improvements as are necessary
for such compliance, Landlord may, but shall not be obligated to, take such
actions and make such alterations and improvements and may recover all of the
costs and expenses of such actions, alterations and improvements from Tenant as
Additional Rent. Tenant shall be entitled to utilize the Tenant Improvements
Allowance to pay for the cost of any improvements required by ADA that are
triggered by the construction of the Tenant Improvements.
(iii) General. Notwithstanding anything in this Lease
-------
contained to the contrary, no act or omission of either party, including any
approval, consent or acceptance by it or its agents, employees or other
representatives, shall be deemed an agreement, acknowledgment, warranty, or
other representation by it that the other party has complied with the ADA as
provided under Paragraphs 11.C.(i) or 11.c.(ii) or that any action, alteration
------------------- ---------
or improvement by it complies or will comply with the ADA as provided under
Paragraphs 11.c.(i) or 11.c.(ii) or constitutes a waiver by it of the other
- ------------------- --------
party's obligations to comply with the ADA under Paragraphs 11.c.(i) or
-------------------
11.c.(ii) of this Lease or otherwise. Any failure of either party to comply
- ---------
with its obligations of the ADA under Paragraphs 11.c.(i) or 11.c.(ii) shall
------------------- ---------
not relieve such party from any obligations under this Lease or in the case of
Landlord's failure to comply under Paragraph 11.c.(i), constitute or be
------------------
construed as a constructive or other eviction of Tenant or disturbance of
Tenant's use and possession of the Premises.
D. Use and Maintenance of Common Area. Tenant and its employees and
----------------------------------
invitees shall have the non-exclusive right to use the Common Area in common
with other persons during the Term of this Lease, subject to the CC&Rs and such
reasonable rules and regulations as may from time to time be deemed necessary or
advisable in Landlord's reasonable discretion for the proper and efficient
operation and maintenance of the Common Area. Such rules and regulations may
include, among other things, the hours during which the Common Area shall be
open for use. Landlord shall maintain and operate the Common Area from time to
time owned by Landlord in good condition, provided that any damage thereto,
other than normal wear and tear, occasioned by the act of Tenant or its
employees or invitees shall be paid by Tenant upon demand by Landlord.
12. Quiet Enjoyment.
---------------
25
<PAGE>
Landlord covenants that Tenant, upon performing the terms, conditions
and covenants of this Lease, shall have quiet and peaceful possession of the
Premises as against any person claiming the same by, through or under Landlord.
13. Alterations.
-----------
A. Alteration Rights. After the Commencement Date, Tenant shall not
-----------------
make or permit any Alterations in, on or about the Premises, except for
nonstructural Alterations (which shall not include any modifications to the
mechanical or electrical systems of the Building, nor any penetration of the
Building's roof) not exceeding Ten Thousand Dollars ($10,000.00) in aggregate
cost during any period of twelve (12) consecutive months, without the prior
written consent of Landlord, and according to plans and specifications approved
in writing by Landlord, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing Tenant shall not, without the prior written
consent of Landlord, make any:
(i) Alterations to the exterior of the Building;
(ii) Alterations to the roof of the Building; and
(iii) Alterations visible from outside the Building, to which
Landlord may withhold Landlord's consent on wholly aesthetic grounds.
B. Performance of Alterations. All Alterations shall be installed at
--------------------------
Tenant's sole expense, in compliance with all applicable laws, by a licensed
contractor, shall be done in a good and workmanlike manner conforming in quality
and design with the Premises existing as of the Commencement Date, and shall not
diminish the value of either the Building or the Premises. All Alterations made
by Tenant shall be and become the property of Landlord upon installation and
shall not be deemed Tenant's Personal Property, and Tenant shall not remove any
Alterations from the Premises unless Tenant has first obtained Landlord's
written consent to such removal. Landlord may require Tenant to remove, at
Tenant's expense, any Alterations from the Premises at the expiration or earlier
termination of this Lease; provided, however, that at the time any Alterations
are constructed, Tenant shall have the right to request Landlord's written
approval (which shall not be unreasonably withheld or delayed) that Landlord
will not require the removal of such Alterations at the expiration or earlier
termination of this Lease. Notwithstanding Alterations made by it to the
Premises. Tenant shall give Landlord written notice of Tenant's intention to
perform work on the Premises at least ten (10) days prior to the commencement of
such work to enable Landlord to post and record a Notice of Nonresponsibility or
other notice deemed proper before the commencement of any such work.
C. Trade Fixtures. Landlord acknowledges that Tenant may lease from
--------------
or finance with a third party (collectively, a "Trade Fixture Lessor") all or a
--------------------
portion of Tenant's Personal Property. Landlord shall duly execute and properly
deliver any waivers or consents which may reasonably be required by any proposed
Trade Fixture Lessor in connection with the leasing or financing of such
Tenant's Personal Property, so long as such waivers and consents shall include
the following: (i) the Trade Fixture Lessor shall agree to repair any damage to
the
26
<PAGE>
Premises caused by the Trade Fixtures Lessor's removal of Tenant's Personal
Property from the Premises, and (ii) Landlord's waiver and consent shall be of
no force or effect after the thirtieth (30th) day following the end of the Term
or earlier termination of this Lease.
14. Surrender of the Premises.
-------------------------
Upon the expiration or earlier termination of the Term, Tenant shall
surrender the Premises to Landlord in its condition existing as of the date of
substantial completion of the Improvements, normal wear and tear and fire or
other casualty excepted, with all interior walls repaired if damaged, all
broken, marred or nonconforming acoustical ceiling tiles replaced, all windows
washed, the plumbing and electrical systems and lighting in good order and
repair, including replacement of any burned out or broken light bulbs or
ballasts, the HVAC equipment serviced and repaired by a reputable and licensed
service firm, and all floors cleaned, all to the reasonable satisfaction of
Landlord. Tenant shall remove from the Premises all of Tenant's Alterations
required to be removed pursuant to Paragraph 13, and all Tenant's Personal
------------
Property, and repair any damage and perform any restoration work caused by such
removal. If Tenant fails to remove such Alterations and Tenant's Personal
Property, and such failure continues after the expiration or earlier termination
of this Lease, Landlord may retain such Alterations and Tenant's Property and
all rights of Tenant with respect to it shall cease, or Landlord may place all
or any portion of such Alterations and Tenant's Property in public storage for
Tenant's account. Tenant shall be liable to Landlord for costs of removal of any
such Alterations and Tenant's Personal Property and storage and transportation
costs of same, and the cost of repairing and restoring the Premises, together
with interest at the Interest Rate from the date of expenditure by Landlord. If
the Premises are not so surrendered at the expiration or earlier termination of
this Lease, Tenant shall indemnify Landlord and Landlord's Agents against all
loss or liability, including reasonable attorneys' fees and costs, resulting
from delay by Tenant in so surrendering the Premises.
Normal wear and tear, for the purposes of this Lease, shall be
construed to mean wear and tear caused to the Premises by a natural aging
process which occurs in spite of prudent application of the best standards for
maintenance, repair and janitorial practices. It is not intended, nor shall it
be construed, to include items of neglected or deferred maintenance which would
have or should have been attended to during the Term of the Lease if the best
standards had been applied to properly maintain and keep the Premises at all
times in good condition and repair.
15. Impositions and Real Property Taxes.
-----------------------------------
A. Payment by Tenant. Tenant shall pay all Impositions prior to
-----------------
delinquency. If billed directly, Tenant shall pay such Impositions and
concurrently present to Landlord satisfactory evidence of such payments. If any
Impositions are billed to Landlord or included in bills to Landlord for Real
Property Taxes, then Tenant shall pay to Landlord all such amounts within
fifteen (15) days after receipt of Landlord's invoice therefor. If applicable
law prohibits Tenant from reimbursing Landlord for an Imposition, but Landlord
may lawfully increase the Monthly Rent to account for Landlord's payment of such
Imposition, the Monthly Rent payable to Landlord shall be increased so that the
amount of such increased Monthly Rent, together with
27
<PAGE>
any accompanying increases in the Real Property Taxes payable by Tenant with
respect to such Imposition, are sufficient to net to Landlord the same return
without reimbursement of such Imposition as would have been received by Landlord
with reimbursement of such Imposition. In addition, on or before April 10 and
December 10 of each year of the Term, Tenant shall pay directly to the San Mateo
County assessor the Real Property Taxes for the Premises as set forth on the
assessors tax bill for the Premises. If, however, the Premises are not a
separate parcel for tax purposes but constitute a portion of a larger tax parcel
or parcels, the Real Property Taxes payable by Tenant under this Lease shall be
a percentage of the Real Property Taxes payable for such parcel or parcels,
which percentage shall be determined by dividing the Rentable Area of the
Building by the total Rentable Area of all buildings on such parcel or parcels
and multiplying the result by 100, which Real Property Taxes shall be payable by
Tenant to Landlord monthly as part of the Common Area Maintenance Costs.
(i) Tax Parcels. If Landlord determines in its reasonable
-----------
discretion that the configuration of tax parcels within the Project (including
without limitation the tax parcel on which the Premises is situated) causes the
allocation of Real Property Taxes between the affected tax parcels to be unfair
or inequitable, Landlord reserves the right to internally reallocate the Real
Property Taxes assessed against such affected tax parcels in a manner that
reasonably addresses such unfairness or inequity. If Landlord effects any such
reallocation, then the Real Property Taxes payable by Tenant under this Lease
shall be those Real Property Taxes allocated to the Premises pursuant to this
Paragraph 15.A.(i).
- ------------------
(ii) Payment. Promptly following payment of the Real Property
-------
Taxes, Tenant shall provide Landlord with copies of paid receipts or other
documentary evidence that the Real Property Taxes have been paid by Tenant. If
Tenant fails to pay the Real Property Taxes on or before April 10 and December
10, respectively, or if Tenant fails to pay its share of Real Property Taxes as
part of the Common Area Maintenance Costs, Tenant shall pay to Landlord any
penalty incurred by such late payment. In addition, Tenant shall pay any Real
Property Tax not included within the county tax assessor's tax bill within ten
(10) days after being billed for same by Landlord. The foregoing dates are based
on the dates established by the county as the dates on which Real Property Taxes
become delinquent if not paid. If such delinquency dates change, the dates on
which Tenant must pay the Real Property Taxes for the Premises shall be at least
ten (10) days prior to the new delinquency dates. Assessments, taxes, fees,
levies and charges may be imposed by governmental agencies for such purposes as
fire protection, street, sidewalk, road, utility construction and maintenance,
refuse removal and for other governmental services which may formerly have been
provided without charge to property owners or occupants. It is the intention of
the parties that all new and increased assessments, taxes, fees, levies and
charges are to be included within the definition of Real Property Taxes for the
purposes of this Lease.
B. Taxes on Tenant Improvements and Personal Property. Tenant shall
--------------------------------------------------
pay any increase in Real Property Taxes resulting from any and all Alterations
and Tenant Improvements of any kind whatsoever placed in, on or about the
Premises for the benefit of, at the request of, or by Tenant. Tenant shall pay
prior to delinquency all taxes assessed or levied against Tenant's Personal
Property in, on or about the Premises or elsewhere. When possible,
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<PAGE>
Tenant shall cause its Personal Property to be assessed and billed separately
from the Premises and the real property or Personal Property of Landlord.
C. Proration. Tenant's liability to pay Real Property Taxes shall be
---------
prorated on the basis of a 360-day year to account for any fractional portion of
a fiscal tax year included at the commencement or expiration of the Term. With
respect to any assessments which may be levied against or upon the Premises on
all or any portion of the Project, or which under the laws then in force may be
evidenced by improvements or other bonds or may be paid in annual installments,
only the amount of such annual installment (with appropriate proration for any
partial year) and interest due thereon shall be included within the computation
of the annual Real Property Taxes levied against the Premises or such portion of
the Project, as applicable.
16. Utilities and Services.
----------------------
Tenant shall be responsible for and shall pay promptly all charges for
water, gas, electricity, telephone, refuse pick-up, janitorial service and all
other utilities, materials and services furnished directly to or used by Tenant
in, on or about the Premises during the Term, together with any taxes thereon.
If any utility, material or service is not separately charged or metered to any
portion of the Premises, Tenant shall pay to Landlord, within ten (10) days
after written demand therefor, Tenant's pro rata share of the total cost thereof
as may be determined by Landlord. Landlord shall not be liable in damages or
otherwise for any failure or interruption of any utility service or other
service furnished to the Premises, except that resulting from the gross
negligence or willful misconduct of Landlord. Tenant shall have the right to
contract directly with vendors for janitorial and maintenance services, provided
such vendors must be approved in advance by Landlord, which approval shall not
be unreasonably withheld; and provided further, that Tenant shall have no right
to contract with any vendor to maintain the Building's HVAC system, which shall
be the sole responsibility of Landlord as set forth in Paragraph 17.A.
--------------
17. Repair and Maintenance.
----------------------
A. Landlord's Obligations. Landlord shall keep in good order,
----------------------
condition and repair the structural parts of the Building, which structural
parts consist only of the foundation, subflooring, exterior walls (excluding the
interior of all walls and the exterior and interior of all windows, doors,
ceilings, and plate glass), and roof of the Building, and all plumbing and
electrical facilities leading up to (but not situated within) the Building,
except for any damage thereto caused by the negligence or willful acts or
omissions of Tenant or of Tenant's agents, employees or invitees, or by reason
of the failure of Tenant to perform or comply with any terms of this Lease, or
caused by Alterations made by Tenant or by Tenant's agents, employees or
contractors. It is an express condition precedent to all obligations of
Landlord to repair and maintain that Tenant shall have notified Landlord of the
need for such repairs or maintenance. Tenant waives the provisions of Sections
1941 and 1942 of the California Civil Code and any similar or successor law
regarding Tenant's right to make repairs and deduct the expenses of such repairs
from the Rent due under this Lease. Landlord shall keep in good order,
condition, repair and maintenance the Building's HVAC system and roof, and shall
maintain an HVAC system preventive maintenance service contract from a qualified
vendor for the purpose of maintaining
29
<PAGE>
the Building's HVAC system, and a roof maintenance service contract from a
qualified vendor for the purpose of maintaining the Building's roof. Landlord
shall determine in its sole discretion whether any such vendor is qualified. Any
and all costs of any maintenance or repair of the HVAC system or the roof
(including without limitation the cost of maintaining HVAC system preventative
maintenance contracts and roof maintenance service contracts) shall be included
in the Common Area Maintenance Costs payable solely by Tenant for the year in
which such cost is incurred. Landlord may elect, in its sole discretion, to
paint the exterior of the Building and/or to replace or perform capital
improvements to any area or aspect of the Building which Landlord is required
keep in good order, condition and repair. If Landlord decides, in its sole
discretion, to replace the roof of the Building during the Term, then the cost
of so replacing the roof, together with interest at the Interest Rate, shall be
amortized on a straight-line basis over the useful life of the roof (as
determined by Landlord in its sole discretion) (the "Useful Life"), and the
-----------
entire amount of such amortized costs and interest shall be included in the
monthly Common Area Maintenance Costs payable solely by Tenant during the entire
period over which such costs are amortized, until Tenant has paid to Landlord
that proportion of the total amount of such amortized costs equal to (a) the
number of months remaining during the Term as of the date such roof replacement
was completed, divided by (b) the number of months of the Useful Life; provided
that in no event shall such proportion exceed one hundred percent (100%). For
the purposes of example only and not by way of limitation, if the Building's
roof is replaced twenty-four (24) months before the end of the Term, at a cost
of Fifty Thousand Dollars ($50,000.00), and the Useful Life is one hundred
twenty (120) months, then (a) the cost of such replacement shall be amortized at
the rate of Four Hundred Sixteen and 67/100ths Dollars ($416.67) per month, with
interest at the Interest Rate, and (b) the amount to be included in the monthly
Common Area Maintenance Costs payable solely by Tenant for the balance of the
Term shall equal Four Hundred Sixteen and 67/100ths Dollars ($416.67), with
interest at the Interest Rate, until Tenant has paid to Landlord a total
aggregate amount of Ten Thousand Dollars ($10,000.00), together with interest at
the Interest Rate, towards such amortized costs (i.e., Fifty Thousand Dollars
($50,000.00) multiplied by [Twenty-Four (24) months divided by One Hundred
Twenty (120) months]). If Tenant exercises an Option to Extend, the total length
of the Term (i.e., the initial Term and each Extended Term) shall be utilized to
calculate the maximum amount of such amortized costs that shall be includable in
the monthly Common Area Maintenance Costs payable solely by Tenant pursuant to
this Paragraph 17.A.
--------------
It is the express intent of the parties that except as specifically
set forth in this Paragraph 17.A, Landlord shall have no obligation whatsoever
--------------
to repair or maintain the Building, and that Tenant shall be responsible for
performing all repair, operation, and maintenance of the Building except for
those tasks specifically described in this Paragraph 17.A.
--------------
B. Tenant's Obligations. Tenant shall at all times and at its sole
--------------------
cost and expense clean, keep and maintain in good order, condition and repair
(and replace, if necessary) every part of the Premises which is not within
Landlord's obligation pursuant to Paragraph 17.A. Tenant's repair and
--------------
maintenance obligations shall include without limitation all plumbing and
electrical facilities situated within the Building, fixtures, interior walls and
ceiling, floors, windows, window frames, doors, entrances, plate glass,
showcases, skylights, all lighting fixtures, lamps, fans and any exhaust
equipment and systems, all mechanical systems (but not the
30
<PAGE>
HVAC system), any automatic fire extinguisher equipment within the Building, all
security systems and alarms, all electrical motors and all other appliances and
equipment of every kind and nature located in, upon or about the Building or the
Premises. Tenant shall also be responsible for all pest control within the
Premises.
C. Conditions Applicable to Repairs. All repairs, replacements and
--------------------------------
reconstruction made by or on behalf of Tenant or any person claiming through or
under Tenant shall be made and performed (i) at Tenant's sole cost and expense,
in a good and workmanlike manner and at such time and in such manner as Landlord
may reasonably designate, (ii) by contractors approved in advance by Landlord,
(iii) so that the repairs, replacements or reconstruction shall be at least
equal in quality, value and utility to the original work or installation, (iv)
in accordance with such reasonable requirements as Landlord may impose with
respect to insurance and bonds to be obtained by Tenant in connection with the
proposed work, and (v) in accordance with any rules and regulations for the
Building as may be adopted by Landlord from time to time and in accordance with
all applicable laws and regulations of governmental authorities having
jurisdiction over the Premises.
D. Landlord's Rights. If Tenant fails to perform Tenant's
-----------------
obligations under Paragraph 17.B, Landlord may in its sole discretion give
--------------
Tenant notice of such work as is reasonably required to fulfill such
obligations. If Tenant fails to commence the work within thirty (30) days after
receipt of such notice and diligently prosecute the work to completion, then
Landlord shall have the right (but not the obligation) to do such acts or expend
such funds at the expense of Tenant as are reasonably required to perform such
work. Any amount so expended by Landlord shall be paid by Tenant to Landlord
promptly after demand with interest at the Interest Rate. Landlord shall have
no liability to Tenant for any damage to, or interference with Tenant's use of,
the Premises, or inconvenience to Tenant as a result of performing any such
work.
E. Compliance with Governmental Regulations. Tenant shall, at its
----------------------------------------
sole cost and expense, comply with, including the making by Tenant of any
Alteration to the Premises, all present and future regulations, rules, laws,
ordinances, and requirements of all governmental authorities (including, without
limitation state, municipal, county and federal governments and their
departments, bureaus, boards and officials) applicable to the Premises or the
Building.
18. Liens.
-----
Tenant shall keep the Building and the Premises free from any liens
arising out of any work performed, materials furnished or obligations incurred
by or on behalf of Tenant and hereby agrees to indemnify, defend, protect and
hold Landlord and Landlord's Agents harmless from and against any and all loss,
claim, damage, liability, cost and expense, including attorneys' fees and costs,
in connection with or arising out of any such lien or claim of lien. Tenant
shall cause any such lien imposed to be released of record by payment or posting
of a proper bond acceptable to Landlord within ten (10) days after written
request by Landlord. Tenant shall give Landlord written notice of Tenant's
intention to perform work on the Premises which might result in any claim of
lien at least ten (10) days prior to the commencement of such work to
31
<PAGE>
enable Landlord to post and record a Notice of Nonresponsibility or any such
other notice(s) as Landlord may deem appropriate. If Tenant fails to so remove
any such lien within the prescribed ten 10-day period, then Landlord may do so
at Tenant's expense and Tenant shall reimburse Landlord for such amounts upon
demand. Such reimbursement shall include all costs incurred by Landlord
including Landlord's reasonable attorneys' fees with interest thereon at the
Interest Rate.
19. Landlord's Right to Enter the Premises.
--------------------------------------
Tenant shall permit Landlord and Landlord's Agents to enter the
Premises at all reasonable times with reasonable notice, except for emergencies
in which case no notice shall be required, to inspect the same, to post Notices
of Nonresponsibility and similar notices, and real estate "For Sale" signs, to
show the Premises to interested parties such as prospective lenders and
purchasers, to make necessary repairs, to discharge Landlord's obligations under
this Lease, to discharge Tenant's obligations under this Lease when Tenant has
failed to do so within a reasonable time after written notice from Landlord, and
at any reasonable time within one hundred and eighty (180) days prior to the
expiration of the Term, to place upon the Building ordinary "For Lease" signs
and to show the Premises to prospective tenants.
20. Signs.
-----
Subject to Tenant obtaining all necessary approvals from the City of
Redwood City and subject to Landlord's review and approval of plans and
specifications for any proposed signage, which approval may be withheld only in
Landlord's commercially reasonable judgment, Tenant shall have the exclusive
right to install identification signage on the exterior of the Building, so long
as such signage complies with Landlord's project sign program. Tenant shall have
no right to maintain any Tenant identification sign in any other location in, on
or about the Building or the Premises and shall not display or erect any other
Tenant identification sign, display or other advertising material that is
visible from the exterior of the Building. Any changes to the size, design,
color or other physical aspects of Tenant's identification sign(s) shall be
subject to the Landlord's prior written approval, which shall not be
unreasonably withheld, and any appropriate municipal or other governmental
approvals. The cost of Tenant's sign(s) and their installation, maintenance and
removal shall be Tenant's sole cost and expense. If Tenant fails to maintain its
sign(s), or, if Tenant fails to remove its sign(s) upon termination of this
Lease, Landlord may do so at Tenant's expense and the amounts expended by
Landlord in doing so shall be immediately payable by Tenant to Landlord as
Additional Rent.
21. Insurance.
---------
A. Indemnification. Tenant shall indemnify, defend, protect and hold
---------------
Landlord harmless of and from any and all loss, liens, liability, claims, causes
of action, damage, injury, cost or expense arising out of or in connection with,
or related to (i) the making of Alterations, or (ii) injury to or death of
persons or damage to property occurring or resulting directly or indirectly
from: (A) the use or occupancy of, or the conduct of business in, the Premises;
(B) the use, storage, release or disposal by Tenant or Tenant's employees,
agents,
32
<PAGE>
contractors, licensees or invitees, of any Hazardous Materials in or about the
Premises or any other portion of the Project; (C) any other occurrence or
condition in or on the Premises; and (D) acts, neglect or omissions of Tenant,
its officers, directors, agents, employees, invitees or licensees in or about
any portion of the Project. Tenant's indemnity obligation includes reasonable
attorneys' fees and costs, investigation costs and all other reasonable costs
and expenses incurred by Landlord. If Landlord disapproves the legal counsel
proposed by Tenant for the defense of any claim indemnified against hereunder,
Landlord shall have the right to appoint its own legal counsel, the reasonable
fees, costs and expenses of which shall be included as part of Tenant's
indemnity obligation hereunder. The indemnification contained in this Section
-------
21.A shall extend to the officers, directors, shareholders, partners, employees,
- ----
agents and representatives of Landlord. The obligations assumed by Tenant herein
shall survive this Lease. Notwithstanding the foregoing, Landlord shall have the
right, in its sole discretion, but without being required to do so, to defend,
adjust, settle or compromise any claim, obligation, debt, demand, suit or
judgment against Landlord arising out of or in connection with the matters
covered by the foregoing indemnity and, in such event, Tenant shall reimburse
Landlord for all reasonable charges and expenses incurred by Landlord in
connection therewith, including reasonable attorneys' fees; provided, however,
that Landlord shall not undertake any unilateral action or settlement so long as
Tenant or an insurance company, at its or their sole expense, is contesting in
good faith, diligently and with continuity such claim, action, obligation,
demand or suit, and so long as such claim, action, obligation, demand or suit
does not have or threaten to have a material adverse impact on Landlord's
assets, reputation or business affairs.
B. Tenant's Insurance. Tenant agrees to maintain in full force and
------------------
effect at all times during the Term, at its sole cost and expense, for the
protection of Tenant and Landlord, as their interests may appear, policies of
insurance issued by a responsible carrier or carriers acceptable to Landlord
which afford the following coverages:
(i) Commercial general liability insurance in an amount not less
than Three Million and no/100ths Dollars ($3,000,000.00) combined single limit
for both bodily injury and property damage which includes blanket contractual
liability broad form property damage, personal injury, completed operations, and
products liability, which policy shall name Landlord and Landlord's Agents as
additional insureds and shall contain a provision that "the insurance provided
Landlord hereunder shall be primary and non-contributing with any other
insurance available to Landlord with respect to any damage, loss, liability or
expense covered by Tenant's indemnity obligations under Paragraph 21.A of the
--------------
Lease."
(ii) Causes of loss-special form property insurance (including,
without limitation, vandalism, malicious mischief, inflation endorsement, and
sprinkler leakage endorsement) on Tenant's Personal Property located on or in
the Premises. Such insurance shall be in the full amount of the replacement
cost, as the same may from time to time increase as a result of inflation or
otherwise. As long as this Lease is in effect, the proceeds of such policy shall
be used for the repair and replacement of such items so insured. Landlord shall
have no interest in the insurance proceeds on Tenant's Personal Property.
Notwithstanding the foregoing, Tenant shall have the right, at its election, to
self-insure with respect to any loss or damage to Tenant's Personal Property.
33
<PAGE>
(iii) Boiler and machinery insurance, including steam pipes,
pressure pipes, condensation return pipes and other pressure vessels and HVAC
equipment, including miscellaneous electrical apparatus, in an amount
satisfactory to Landlord.
(iv) Workers compensation insurance in the manner and to the
extent required by applicable law and with limits of liability not less than the
minimum required under applicable law, covering all employees of Tenant having
any duties or responsibilities in or about the Premises.
C. Premises Insurance. During the Term Landlord shall maintain
------------------
causes of loss-special form property insurance (including inflation endorsement,
sprinkler leakage endorsement, and, at Landlord's option, earthquake and flood
coverage) on the Building, excluding coverage of all Tenant's Personal Property
located on or in the Premises, but including the Tenant Improvements. Such
insurance shall also include insurance against loss of rents, including, at
Landlord's option, coverage for earthquake and flood, in an amount equal to the
Monthly Rent and Additional Rent, and any other sums payable under the Lease,
for a period of at least twelve (12) months commencing on the date of loss.
Such insurance shall name Landlord and Landlord's Agents as named insureds and
include a lender's loss payable endorsement in favor of Landlord's lender (Form
438 BFU Endorsement). Tenant shall reimburse Landlord monthly, as Additional
Rent, for one-twelfth (12th) of the annual cost of such insurance on the first
day of each calendar month of the Term, prorated for any partial month, or on
such other periodic basis as Landlord shall elect. If the insurance premiums are
increased after the Commencement Date for any reason, including without
limitation due to an increase in the value of the Building or its replacement
cost, or due to Tenant's use of the Premises or any improvements installed by
Tenant, Tenant shall pay such increase within ten (10) days of notice of such
increase. Landlord may, in its sole discretion, maintain the insurance coverage
described in this Paragraph 21.C as part of an umbrella insurance policy
--------------
covering other properties owned by Landlord. Notwithstanding the foregoing, so
long as the original Landlord under this Lease continues to be the Landlord
under this Lease, and subject to the following conditions, Tenant may elect to
carry the insurance required by this Paragraph 21.C if Tenant is able to obtain
--------------
the coverage required hereunder at a cost less than that charged by Landlord's
insurer. Tenant's right to carry such insurance shall be subject to the
following conditions: (i) all Holders, defined below, shall have approved
Tenant's right to carry such insurance, (ii) such insurance shall name Landlord,
and all parties designated by Landlord, as additional insureds, and (iii) such
insurance shall provide Landlord with at least the same coverage and rights as
Landlord would be entitled to receive if Landlord had obtained such insurance.
D. Increased Coverage. Upon demand, Tenant shall provide Landlord,
------------------
at Tenant's expense, with such increased amount of existing insurance, and such
other insurance as Landlord or Landlord's lender may reasonably require to
afford Landlord and Landlord's lender adequate protection.
E. Failure to Maintain. If Tenant fails to maintain any insurance
-------------------
coverage that Tenant is required to maintain under this Paragraph 21, and
------------
Landlord incurs any liability to its insurance carrier arising out of Tenant's
failure to so maintain such insurance coverage,
34
<PAGE>
then any and all loss or damage Landlord shall sustain by reason thereof,
including attorneys' fees and costs, shall be borne by Tenant and shall be
immediately paid by Tenant upon its receipt of a bill therefor and evidence of
such loss. Nothing contained in this Paragraph 21.E shall be deemed to limit or
--------------
affect any other remedies or rights available to Landlord under this Lease that
arise from Tenant's failure to so maintain such insurance coverage.
F. Insurance Requirements. All insurance shall be in a form
----------------------
satisfactory to Landlord and shall be carried in companies that have a general
policy holder's rating of not less than "A" and a financial rating of not less
than Class "X" in the most current edition of Best's Insurance Reports; and
------------------------
shall provide that such policies shall not be subject to material alteration or
cancellation except after at least thirty (30) days' prior written notice to
Landlord. The policy or policies, or duly executed certificates for them,
together with satisfactory evidence of payment of the premiums thereon shall be
deposited with Landlord prior to the Commencement Date, and upon renewal of such
policies, not less than thirty (30) days prior to the expiration of the term of
such coverage. If Tenant fails to procure and maintain the insurance it is
required to maintain under this Paragraph 21, Landlord may, but shall not be
------------
required to, order such insurance at Tenant's expense and Tenant shall reimburse
Landlord therefor. Such reimbursement shall include all costs incurred by
Landlord in obtaining such insurance including Landlord's reasonable attorneys'
fees, with interest thereon at the Interest Rate.
G. Waiver and Release. Except to the extent due to the negligence or
------------------
willful misconduct of Landlord, Landlord shall not be liable to Tenant or
Tenant's employees, agents, contractors, licenses or invitees for, and Tenant
waives as against and releases Landlord and Landlord's Agents from, all claims
for loss or damage to any property or injury, illness or death of any person in,
upon or about the Premises and/or any other portion of the Project, arising at
any time and from any cause whatsoever (including without limitation any claim
caused in whole or in part by the act, omission, or neglect of other tenants,
contractors, licensees, invitees or other occupants of the Project or their
agents or employees; and any claim arising from any construction activities
taking place in, upon or about the Premises and/or any other portion of the
Project). Landlord and Landlord's Agents shall not be liable for any latent
defect in the Premises.
22. Waiver of Subrogation.
---------------------
Landlord and Tenant each hereby waive all rights of recovery against
the other on account of loss or damage occasioned by such waiving party to its
property or the property of others under its control, to the extent that such
loss or damage would be covered by any causes of loss-special form policy of
insurance or its equivalent required to be or actually carried under Paragraph
---------
21. Tenant and Landlord shall, upon obtaining policies of insurance required
- --
hereunder, give notice to the insurance carrier that the foregoing mutual waiver
of subrogation is contained in this Lease and Tenant and Landlord shall cause
each insurance policy obtained by such party to provide that the insurance
company waives all right of recovery by way of subrogation against either
Landlord or Tenant in connection with any damage covered by such policy.
35
<PAGE>
23. Damage or Destruction.
---------------------
A. Landlord's Obligation to Rebuild. If all or any part of the
--------------------------------
Building is damaged or destroyed, Landlord shall promptly and diligently repair
the same unless it has the right to terminate this Lease as provided herein and
it elects to so terminate.
B. Right to Terminate. Landlord shall have the right to terminate
------------------
this Lease in the event any of the following events occur:
(i) insurance proceeds from the insurance Landlord is required
to carry pursuant to Paragraph 21.C, or that Landlord actually carries, are not
available to pay one hundred percent (100%) of the cost of such repair,
excluding the deductible for which Tenant shall be responsible; provided,
however, that if Tenant pays to Landlord, in immediately available funds, within
thirty (30) days after such casualty, any shortfall in such insurance proceeds,
as reasonably determined by Landlord, then Landlord shall have no right to
terminate the Lease pursuant to this item (i);
(ii) the Building cannot, with reasonable diligence, be fully
repaired by Landlord within three hundred sixty (360) days after the date of the
damage or destruction; or
(iii) the Building cannot be safely repaired because of the
presence of hazardous factors, including, but not limited to, earthquake faults,
radiation, Hazardous Materials and other similar dangers.
If Landlord elects to terminate this Lease, Landlord may give Tenant
written notice of its election to terminate within thirty (30) days after such
damage or destruction, and this Lease shall terminate fifteen (15) days after
the date Tenant receives such notice and both Landlord and Tenant shall be
released of all further liability under this Lease (except to the extent any
provision of this Lease expressly survives termination and except that Landlord
shall return to Tenant the Security Deposit). If Landlord elects not to
terminate the Lease, subject to Tenant's termination right set forth below,
Landlord shall promptly commence the process of obtaining necessary permits and
approvals and repair of the Building as soon as practicable, and this Lease will
continue in full force and affect. All insurance proceeds from insurance under
Paragraph 21, excluding proceeds for Tenant's Personal Property, shall be
- ------------
disbursed and paid to Landlord. Tenant shall be required to pay to Landlord the
amount of any deductibles payable in connection with any insured casualties,
unless the casualty was caused by the sole negligence or willful misconduct of
Landlord.
Tenant shall have the right to terminate this Lease if the Building
cannot, with reasonable diligence, be fully repaired within three hundred sixty
(360) days from the date of damage or destruction. The determination of the
estimated repair periods in this Paragraph 23 shall be made by an independent,
------------
licensed contractor or engineer within thirty (30) days after such damage or
destruction. Landlord shall deliver written notice of the repair period to
Tenant after such determination has been made and Tenant shall exercise its
right to terminate this Lease, if at all, within ten (10) days of receipt of
such notice from Landlord. Upon such
36
<PAGE>
termination both Landlord and Tenant shall be released of all further liability
under this Lease (except to the extent any provision of this Lease expressly
survives termination).
C. Limited Obligation to Repair. Landlord's obligation, should it
----------------------------
elect or be obligated to repair or rebuild, shall be limited to the basic
Building and the Tenant Improvements and shall not include any Alterations made
by Tenant.
D. Abatement of Rent. Rent shall be temporarily abated
-----------------
proportionately, during any period when, by reason of such damage or destruction
there is substantial interference with Tenant's use of the Premises, having
regard to the extent to which Tenant may be required to discontinue Tenant's use
of the Premises. Such abatement of Rent shall be proportional to the extent of
such interference with Tenant's use of the Premises reasonably attributable to
such damage or destruction (with the extent of such interference to be
reasonably determined by Landlord), and shall commence upon such damage or
destruction and end upon substantial completion by Landlord of the repair or
reconstruction which Landlord is obligated or undertakes to perform. Tenant
shall not be entitled to any compensation or damages from Landlord for loss of
the use of the Premises, damage to Tenant's Personal Property or any
inconvenience occasioned by such damage, repair or restoration. Tenant hereby
waives the provisions of Section 1932, Subdivision 2, and Section 1933,
Subdivision 4, of the California Civil Code, and the provisions of any similar
law hereinafter enacted.
E. Damage Near End of Term. Anything herein to the contrary
-----------------------
notwithstanding, if the Building is destroyed or materially damaged during the
last twelve (12) months of the Term (unless Tenant has properly exercised an
Option to Extend), then either Landlord or Tenant may, at its option, cancel and
terminate this Lease as of the date of the occurrence of such damage, by
delivery of written notice to the other party and, in such event, upon such
termination both Landlord and Tenant shall be released of all further liability
under this Lease (except to the extent any provision of this Lease expressly
survives termination). If neither Landlord nor Tenant elects to terminate this
Lease, the repair of such damage shall be governed by Paragraphs 23.A and 23.B.
24. Condemnation.
------------
If title to all of the Premises is taken for any public or quasi-
public use under any statute or by right of eminent domain, or so much thereof
is so taken so that reconstruction of the Premises will not, in Landlord's sole
discretion, result in the Premises being reasonably suitable for Tenant's
continued occupancy for the uses and purposes permitted by this Lease, this
Lease shall terminate as of the date that possession of the Premises or part
thereof is taken, and upon such termination both Landlord and Tenant shall be
released of all further liability under this Lease (except to the extent any
provision of this Lease expressly survives termination). A sale by Landlord to
any authority having the power of eminent domain, either under threat of
condemnation or while condemnation proceedings are pending, shall be deemed a
taking under the power of eminent domain for all purposes of this Paragraph 24.
If any part of the Premises is taken and the remaining part is
reasonably suitable
37
<PAGE>
for Tenant's continued occupancy for the purposes and uses permitted by this
Lease, this Lease shall, as to the part so taken, terminate as of the date that
possession of such part of the Premises is taken, and upon such termination both
Landlord and Tenant shall be released of all further liability under this Lease
with respect to that portion of the Premises that is taken (except to the extent
any provision of this Lease expressly survives termination and except that
Landlord shall return to Tenant the Security Deposit). The Rent and other sums
payable hereunder shall be reduced in the same proportion that Tenant's use and
occupancy of the Premises is reduced. If any portion of the Common Area is
taken, Tenant's Rent shall be reduced only if such taking materially interferes
with Tenant's use of the Common Area and then only to the extent that the fair
market rental value of the Premises is diminished by such partial taking. If the
parties disagree as to the amount of Rent reduction, the matter shall be
resolved by arbitration and such arbitration shall comply with and be governed
by the California Arbitration Act, Sections 1280 through 1294.2 of the
California Code of Civil Procedure. Each party hereby waives the provisions of
Section 1265.130 of the California Code of Civil Procedure allowing either party
to petition the Superior Court to terminate this Lease in the event of a partial
taking of the Premises.
All compensation or damages awarded or paid for any taking hereunder
shall belong to and be the property of Landlord, whether such compensation or
damages are awarded or paid as compensation for diminution in value of the
leasehold, the fee or otherwise, except that Tenant shall be entitled to any
award allowed to Tenant for the taking of Tenant's Personal Property, for the
interruption of Tenant's business, for its moving costs, or for the loss of its
good will. Except for the foregoing allocation, no award for any partial or
entire taking of the Premises shall be apportioned between Landlord and Tenant,
and Tenant assigns to Landlord its interest in the balance of any award which
may be made for the taking or condemnation of the Premises, together with any
and all rights of Tenant arising in or to the same or any part thereof.
25. Assignment and Subletting.
-------------------------
A. Landlord's Consent. Subject to the provisions of Paragraph 25.G
------------------ --------------
below, Tenant shall not enter into a Sublet without Landlord's prior written
consent, which consent shall not be unreasonably withheld. Any attempted or
purported Sublet without Landlord's prior written consent shall be void and
confer no rights upon any third person and, at Landlord's election, shall
terminate this Lease. Each Subtenant shall agree in writing, for the benefit of
Landlord, to assume, to be bound by, and to perform the terms, conditions and
covenants of this Lease to be performed by Tenant, as such terms, conditions and
covenants apply to the Sublet premises. Notwithstanding anything contained
herein, Tenant shall not be released from liability for the performance of each
term, condition and covenant of this Lease by reason of Landlord's consent to a
Sublet unless Landlord specifically grants such release in writing.
B. Tenant's Notice. If Tenant desires at any time to Sublet all or
---------------
any portion of the Premises, Tenant shall first notify Landlord in writing of
its desire to do so.
C. Information to be Furnished. If Tenant desires at any time to
---------------------------
Sublet all or any portion of the Premises, then Tenant shall submit in writing
to Landlord: (i) the name of the proposed Subtenant; (ii) the nature of the
proposed Subtenant's business to be carried on in the
38
<PAGE>
Premises; (iii) the terms and provisions of the proposed Sublet and a copy of
the proposed form of Sublet agreement containing a description of the subject
premises; and (iv) such financial information, including financial statements,
as Landlord may reasonably request concerning the proposed Subtenant.
D. Landlord's Alternatives. At any time within ten (10) days after
-----------------------
Landlord's receipt of the information specified in Paragraph 25.C., Landlord
---------------
may, by written notice to Tenant, elect: (i) to consent to the Sublet by Tenant;
or (ii) to refuse its consent to the Sublet. If Landlord consents to the Sublet,
Tenant may thereafter enter into a valid Sublet of the Premises or applicable
portion thereof, upon the terms and conditions and with the proposed Subtenant
set forth in the information furnished by Tenant to Landlord, subject, however,
at Landlord's election, to the condition that the following percentages of any
excess of the Subrent (the "Excess Subrent") over the Rent required to be paid
--------------
by Tenant under this Lease (or, if only a portion of the Premises is Sublet, the
pro rata share of the Rent attributable to the portion of the Premises being
Sublet) less reasonable attorneys' fees, leasing commissions, improvement costs
required for such Sublet (which shall not include the cost of any trade
fixtures, equipment or personal property) and other reasonable subletting costs
paid by Tenant on the Sublet, shall be paid to Landlord. Tenant shall pay the
following percentages of Excess Subrent to Landlord in the following
circumstances: (i) to the extent the Excess Subrent (for the entire term of the
applicable Sublet) is payable on a monthly basis (as opposed to one or more lump
sums) and to the extent the Excess Subrent is less than or equal to
$0.25/month/square foot of Rentable Area of the portion of the Premises being
Sublet, then Tenant shall pay to Landlord one-third (1/3) of the Excess Subrent;
(ii) to the extent the Excess Subrent (for the entire term of the applicable
Sublet) is payable on a monthly basis (as opposed to one or more lump sums) and
to the extent the Excess Subrent is greater than $0.25/month/square foot of
Rentable Area of the portion of the Premises being Sublet, then Tenant shall pay
to Landlord fifty percent (50%) of the Excess Subrent; (iii) to the extent the
Excess Subrent (for the entire term of the applicable Sublet) is not payable on
a monthly basis, then Tenant shall pay to Landlord fifty percent (50%) of the
Excess Subrent; and (iv) to the extent the Excess Subrent is applicable to any
period during an Extended Term, then Tenant shall pay to Landlord fifty percent
(50%) of the Excess Subrent.
E. Proration. If a portion of the Premises is Sublet, the pro rata
---------
share of the Rent attributable to such partial area of the Premises shall be
determined by Landlord by dividing the Rent payable by Tenant hereunder by the
total square footage of the Premises and multiplying the resulting quotient (the
per square foot rent) by the number of square feet of the Premises which are
Sublet.
F. Parameters of Landlord's Consent. Landlord shall have the right
--------------------------------
to base its consent to any Sublet hereunder upon such factors and considerations
as Landlord reasonably deems relevant or material to the proposed Sublet and the
best interests of the Project's operations. Without limiting the generality of
the foregoing, Tenant acknowledges that it shall be reasonable for Landlord to
withhold its consent to any Sublet hereunder if Tenant has not demonstrated
that: (i) the proposed Subtenant is financially responsible, with sufficient net
worth and net current assets, properly and successfully to operate its business
in the Premises and meet the financial and other obligations of this Lease; (ii)
the proposed Subtenant possesses sound and
39
<PAGE>
good business judgment, reputation and experience, and proven management skills
in the operation of a business or businesses substantially similar to the uses
permitted in the Premises under Paragraph 11.A; and (iii) the use of the
--------------
Premises proposed by such Subtenant conforms to the permitted uses specified
under Paragraph 11.a, and involves either no Hazardous Use or only such
--------------
Hazardous Use as shall be acceptable to Landlord in its sole discretion.
G. Permitted Transfers. Notwithstanding the provisions of Paragraph
------------------- ---------
25.A above, Tenant shall have the right to enter into a Sublet, and Landlord
- ----
shall not withhold its consent thereto (provided that all of the conditions set
forth in clauses (A) and (B) below shall be met), if such Sublet is one of the
following "Permitted Transfers": (i) a Sublet to the surviving entity of a
merger or consolidation involving the corporate entity constituting the Tenant
under this Lease; or (ii) a Sublet to any subsidiary or Affiliate of the Tenant
originally named in this Lease. However, the foregoing Permitted Transfers
shall be exempt from the requirement of Landlord's consent only if all of the
following conditions shall be met: (A) there shall be no change in the use or
operation of the Premises; (B) Tenant shall have provided to Landlord all
information to allow Landlord to determine, and Landlord shall have determined,
that the proposed transfer is a Permitted Transfer which is exempt from the
requirement of Landlord's consent; and (C) as of the effective date of such
Sublet, the proposed Subtenant has a net worth and net current assets equal to
or greater than those of the original Tenant under this Lease as of the date of
this Lease. No Sublet of the type described in this Paragraph 25.G, nor any
other transfer of all or any portion of Tenant's interest in the Lease or the
Premises, shall release Tenant of its obligations under this Lease.
26. Default.
-------
A. Tenant's Default. A default under this Lease by Tenant shall
----------------
exist if any of the following occurs:
(i) If Tenant fails to pay within five (5) days after written
notice from Landlord any Rent or any other sum required to be paid hereunder
when due, including, without limitation, any Tenant Improvement costs payable by
Tenant under Exhibit B; or
---------
(ii) If Tenant fails to perform any term, covenant or condition
of this Lease except those requiring the payment of money, and Tenant fails to
cure such breach within thirty (30) days after written notice from Landlord
where such breach could reasonably be cured within such 30-day period; provided,
however, that where such failure could not reasonably be cured within the 30-day
period, that Tenant shall not be in default if it commences such performance
within the 30-day period and diligently thereafter prosecutes the same to
completion; or
(iii) If Tenant assigns its assets for the benefit of its
creditors; or
(iv) If the sequestration or attachment of or execution on any
material part of Tenant's Personal Property essential to the conduct of Tenant's
business occurs, and Tenant fails to obtain a return or release of such Tenant's
Personal Property within thirty (30) days
40
<PAGE>
thereafter, or prior to sale pursuant to such sequestration, attachment or levy,
whichever is earlier; or
(v) If Tenant vacates or abandons the Premises; or
(vi) If a court makes or enters any decree or order other than
under the bankruptcy laws of the United States adjudging Tenant to be insolvent;
or approving as properly filed a petition seeking reorganization of Tenant; or
directing the winding up or liquidation of Tenant and such decree or order shall
have continued for a period of sixty (60) days; or
(vii) If Tenant fails to cure within any applicable grace period
any default by Tenant under any of the Collateral Agreements.
B. Remedies. Upon a default, Landlord shall have the following
--------
remedies, in addition to all other rights and remedies provided by law or
otherwise provided in this Lease, to which Landlord may resort cumulatively or
in the alternative:
(i) Landlord may continue this Lease in full force and effect,
and this Lease shall continue in full force and effect as long as Landlord does
not terminate this Lease, and Landlord shall have the right to collect Rent when
due. Without limiting the foregoing, Landlord has the remedy set forth in
Section 1951.4 of the California Civil Code.
(ii) Landlord may terminate Tenant's right to possession of the
Premises at any time by giving written notice to that effect, and relet the
Premises or any part thereof. Tenant shall be liable immediately to Landlord
for all costs Landlord incurs in reletting the Premises or any part thereof,
including, without limitation, broker's commissions, expenses of cleaning and
redecorating the Premises required by the reletting and like costs. Reletting
may be for a period shorter or longer than the remaining Term of this Lease. No
act by Landlord other than giving written notice of termination to Tenant shall
terminate this Lease. Neither acts of maintenance, nor efforts to relet the
Premises, nor the appointment of a receiver on Landlord's initiative to protect
Landlord's interest under this Lease shall not constitute a termination of
Tenant's right to possession. On termination, Landlord has the right to remove
all Tenant's Personal Property and store the same at Tenant's sole cost and
expense and to recover from Tenant as damages:
(a) The worth at the time of award of the unpaid Rent and
other sums due and payable which had been earned at the time of termination;
plus
(b) The worth at the time of award of the amount by which
the unpaid Rent and other sums due and payable which would have been payable
after termination until the time of award exceeds the amount of such Rent loss
that Tenant proves could have been reasonably avoided; plus
(c) The worth at the time of award of the amount by which
the unpaid rent and other sums due and payable for the balance of the Term after
the time of award
41
<PAGE>
exceeds the amount of such Rent loss that Tenant proves could be reasonably
avoided; plus
(d) Any other amount necessary to compensate Landlord for
all the detriment proximately caused by Tenant's failure to perform Tenant's
obligations under this Lease, or which, in the ordinary course of things, would
be likely to result therefrom, including, without limitation, any costs or
expenses incurred by Landlord: (i) in retaking possession of the Premises; (ii)
in maintaining, repairing, preserving, restoring, replacing, cleaning, altering
or rehabilitating the Premises or any portion thereof, including such acts for
reletting to a new tenant or tenants; (iii) for leasing commissions; or (iv) for
any other costs necessary or appropriate to relet the Premises; plus
(e) At Landlord's election, such other amounts in addition
to or in lieu of the foregoing as may be permitted from time to time by the laws
of the State of California.
The "worth at the time of award" of the amounts referred to in
Paragraphs 26.B.(ii)(a) and 26.B.(ii)(b) is computed by allowing interest at the
- ----------------------- ------------
Interest Rate on the unpaid rent and other sums due and payable from the
termination date through the date of award. The "worth at the time of award" of
the amount referred to in Paragraph 26.B.(ii)(c) is computed by discounting such
----------------------
amount at the discount rate of the Federal Reserve Bank of San Francisco at the
time of award plus one percent (1%). Tenant waives redemption or relief from
forfeiture under California Code of Civil Procedure Sections 1174 and 1179, or
under any other present or future law, in the event Tenant is evicted or
Landlord takes possession of the Premises by reason of any default of Tenant
hereunder.
(iii) Landlord may, with or without terminating this Lease, re-
enter the Premises and remove all persons and property from the Premises; such
property may be removed and stored in a public warehouse or elsewhere at the
cost of and for the account of Tenant. No reentry or taking possession of the
Premises by Landlord pursuant to this Paragraph 26.B.(iii) shall be construed as
an election to terminate this Lease unless a written notice of such intention is
given to Tenant.
C. Landlord's Default. Landlord shall not be deemed to be in
------------------
default in the performance of any obligation required to be performed by it
hereunder unless and until it has failed to perform such obligation within
thirty (30) days after receipt of written notice by Tenant to Landlord
specifying the nature of such default; provided, however, that if the nature of
Landlord's obligation is such that more than thirty (30) days are required for
its performance, then Landlord shall not be deemed to be in default if it shall
commence such performance within such 30-day period and thereafter diligently
prosecute the same to completion.
27. Subordination.
-------------
A. Subordination. This Lease is or may become subject and
-------------
subordinate to underlying leases, mortgages, deeds of trust, easements, and
CC&Rs (collectively, "Encumbrances") which may now or hereafter affect the
------------
Premises, and to all renewals,
42
<PAGE>
amendments, modifications, consolidations, replacements and extensions thereof;
provided, however, if the holder or holders of any such Encumbrance
(collectively, "Holder") shall require that this Lease be prior and superior
------
thereto, within fifteen (15) days of written request of Landlord to Tenant,
Tenant shall execute, have acknowledged and deliver any and all documents or
instruments, in the form presented to Tenant, which Landlord or Holder deems
reasonably necessary or desirable for such purposes. Subject to Paragraph 27.C
--------------
below, 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, so long as Tenant is not in default, Holder agrees to recognize
Tenant's rights under this Lease as long as Tenant shall pay the Rent and
observe and perform all the provisions of this Lease to be observed and
performed by Tenant. Within fifteen (15) days after Landlord's written request,
Tenant shall execute any and all documents reasonably required by Landlord or
the Holder to make this Lease subordinate to any lien of the Encumbrance
(including, without limitation, subordination to all CC&Rs), including without
limitation a Subordination, Non-Disturbance and Attornment Agreement in the form
attached hereto as Exhibit E ("SNDA"). Subject to Paragraph 27.C below, if
--------- ---- --------------
Tenant fails to do so, such failure shall constitute a default under this Lease,
and it shall be deemed that this Lease is subordinated to such Encumbrance.
B. Attornment. Notwithstanding anything to the contrary set forth
----------
in this Paragraph 27, 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; provided only, that so long as Tenant is not in default, any such
purchasing or acquiring entity agrees to recognize Tenant's rights under this
Lease as long as Tenant shall pay the Rent and observe and perform all the
provisions of this Lease to be observed and performed by Tenant.
C. Non-Disturbance. Notwithstanding anything to the contrary in
---------------
this Lease, if an Encumbrance, other than any CC&R's or Landlord's construction
loan, is created after the execution of this Lease, as a condition to the
subordination of this Lease thereto under Paragraph 27.A above, Landlord shall
--------------
obtain from the Holder of such Encumbrance, other than CC&R's or the Holder of
the construction loan, a SNDA in a form reasonably requested by such Holder.
Without in any way limiting the type or form of SNDA that may be required by
such Holder, Tenant hereby agrees that a SNDA in the form attached to this Lease
as Exhibit G shall be reasonable. Only upon Landlord's delivery of a SNDA in
---------
the form of Exhibit G or in a form reasonably requested by the Holder, shall
this Lease be automatically subject and subordinate to such Encumbrance, other
than CC&R's or the construction loan.
28. Notices.
-------
Any notice or demand required or desired to be given under this Lease
shall be in
43
<PAGE>
writing and shall be personally served or in lieu of personal service may be
given by certified mail, facsimile, or overnight courier service. All notices or
demands under this Lease shall be deemed given, received, made or communicated
on the date personal delivery is effected; or, if sent by certified mail, on the
delivery date or attempted delivery date shown on the return receipt; or, if
sent by facsimile, on the date sent by the sender; or, if sent by overnight
courier service, on the delivery date or attempted delivery date shown on such
service's records. At the date of execution of this Lease, the addresses of
Landlord and Tenant are as set forth in Paragraph 1. Either party may change its
address by giving notice of same in accordance with this Paragraph 28.
29. Attorneys' Fees.
---------------
If either party brings any action or legal proceeding for damages for
an alleged breach of any provision of this Lease, to recover Rent, or other sums
due, to terminate the tenancy of the Premises or to enforce, protect or
establish any term, condition or covenant of this Lease or right of either
party, the prevailing party shall be entitled to recover as a part of such
action or proceedings, or in a separate action brought for that purpose,
reasonable attorneys' fees and costs, including without limitation any and all
costs and expenses arising from (i) collection efforts, (ii) any appellate
proceedings, and (iii) any bankruptcy, insolvency or arbitration proceedings.
30. Estoppel Certificates.
---------------------
Tenant shall within fifteen (15) days following written request by
Landlord:
(i) Execute and deliver to Landlord any documents, including
estoppel certificates, in the form prepared by Landlord (a) certifying that this
Lease is unmodified and in full force and effect or, if modified, stating the
nature of such modification and certifying that this Lease, as so modified, is
in full force and effect and the date to which the Rent and other charges are
paid in advance, if any, and (b) acknowledging that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord, or, if there are
uncured defaults on the part of the Landlord, stating the nature of such uncured
defaults, (c) evidencing the status of the Lease as may be required either by a
lender making a loan to Landlord to be secured by deed of trust or mortgage
covering the Premises or a purchaser of the Premises from Landlord, and (d) such
other matters as may be reasonably requested by Landlord. Tenant's failure to
deliver an estoppel certificate within fifteen (15) days after delivery of
Landlord's written request therefor shall be conclusive upon Tenant (a) that
this Lease is in full force and effect, without modification except as may be
represented by Landlord, (b) that there are now no uncured defaults in
Landlord's performance, and (c) that no Rent has been paid in advance.
If Tenant fails to so deliver a requested estoppel certificate within
the prescribed time it shall be conclusively presumed that this Lease is
unmodified and in full force and effect except as represented by Landlord.
(ii) Deliver to Landlord the current financial statements of
Tenant, and
44
<PAGE>
financial statements of the two (2) years prior to the current financial
statements year, with an opinion of a certified public accountant, including a
balance sheet and profit and loss statement for the most recent prior year, all
prepared in accordance with generally accepted accounting principles
consistently applied.
31. Transfer of the Premises by Landlord.
------------------------------------
In the event of any conveyance of the Premises and assignment by
Landlord of this Lease, Landlord shall be and is hereby entirely released from
all liability under any and all of its covenants and obligations contained in or
derived from this Lease occurring after the date of such conveyance and
assignment, and Tenant agrees to attorn to such transferee provided such
transferee assumes Landlord's obligations under this Lease.
32. Landlord's Right to Perform Tenant's Covenants.
----------------------------------------------
If Tenant shall at any time fail to make any payment or perform any
other act on its part to be made or performed under this Lease, and such failure
shall continue after the expiration of any applicable grace or cure periods
provided in this Lease, Landlord may, but shall not be obligated to (and without
waiving or releasing Tenant from any obligation of Tenant under this Lease),
make such payment or perform such other act to the extent Landlord may deem
desirable, and in connection therewith, pay expenses and employ counsel. All
sums so paid by Landlord and all penalties, interest, expenses and costs in
connection therewith shall be due and payable by Tenant on the next day after
any such payment by Landlord, together with interest thereon at the Interest
Rate from such date to the date of payment by Tenant to Landlord, plus
collection costs and attorneys' fees. Landlord shall have the same rights and
remedies for the nonpayment thereof as in the case of default in the payment of
Rent.
33. Tenant's Remedy.
---------------
Landlord shall never be personally liable under this Lease, and Tenant
shall look solely to the net cash flow received by Landlord from its ownership
of the Building, for recovery of any damages for breach of this Lease by
Landlord or on any judgment in connection therewith. None of the persons or
entities comprising or representing Landlord (whether partners, shareholders,
officers, directors, trustees, employees, beneficiaries, agents or otherwise)
shall ever be personally liable under this Lease or for any such damages or
judgment, and Tenant shall have no right to effect any levy of execution against
any assets of such persons or entities on account of any such liability or
judgment. Any lien obtained by Tenant to enforce any such judgment, and any
levy of execution thereon, shall be subject and subordinate to all Encumbrances
as specified in Paragraph 27 above.
------------
34. Mortgagee Protection.
--------------------
If Landlord defaults under this Lease, Tenant shall give written
notice of such default to any beneficiary of a deed of trust or mortgagee of a
mortgage covering the Premises, and offer such beneficiary or mortgagee a
reasonable opportunity to cure the default, including
45
<PAGE>
time to obtain possession of the Premises by power of sale or a judicial
foreclosure, if such should prove necessary to effect a cure.
35. Brokers.
-------
Landlord and Tenant acknowledge and agree that they have utilized the
services of real estate brokers (with AMB Corporate Real Estate Advisors and
Colliers Parrish representing Tenant, and BT Commercial representing Landlord)
with respect to the transactions between Landlord and Tenant that are
represented by this Lease. Tenant warrants and represents that it has had no
dealings with any other real estate broker or agent in connection with the
negotiation of this Lease, and that it knows of no other real estate broker or
agent who is or might be entitled to a commission in connection with this Lease.
Tenant shall indemnify, defend and hold Landlord harmless from and against any
and all claims, causes of action, liability or costs, including reasonable
attorney's fees, arising as a result of a breach of the foregoing warranty and
representation. Nothing contained in this Paragraph 35 shall be deemed to
------------
obligate or require Landlord to pay any commission whatsoever to any real estate
broker (including without limitation AMB and BT) with respect to this Lease; the
payment of any such commission (if any) shall be governed by a separate written
agreement between Landlord and the real estate broker or brokers in question.
Tenant shall separately compensate AMB and Colliers Parrish for its services and
no commission shall be payable to AMB and Colliers Parrish in connection with
this Lease.
36. Acceptance.
----------
This Lease shall only become effective and binding upon full execution
hereof by Landlord and delivery of a signed copy to Tenant. Neither party shall
record this Lease nor a short form memorandum thereof.
37. Parking.
-------
Tenant shall have the non-exclusive right, in common with any other
tenants or occupants of the Project, to use up to 3.33 unassigned parking spaces
per each one thousand (1,000) square feet of Rentable Area in the Premises, upon
terms and conditions, as may from time to time be reasonably established by
Landlord; provided, however, that Tenant acknowledges and agrees that during the
construction of the Parking Structure (as defined in the Build to Suit
Agreement), the parking ratio for the Building may from time to time be less
than 3.33 spaces per 1,000 square feet of Rentable Area. Should parking charges
or surcharges of any kind be imposed on the parking facilities by a governmental
agency, Tenant shall reimburse Landlord for such charges and/or surcharges or,
if possible, shall pay such charges and/or surcharges directly to the
governmental agency and, in such event, Tenant shall provide Landlord with proof
that such charges and/or surcharges have been paid by Tenant. Parking on that
portion of the Project cross-hatched on Exhibit C shall be subject such
---------
reciprocal easement agreements affecting the such portion of the Project as
Landlord may adopt from time to time.
38. Right of First Offer to Purchase.
--------------------------------
46
<PAGE>
During the term of this Lease, Landlord shall not sell fee title to
the Building to any unaffiliated third party or parties, without first offering
to sell the Building to Tenant upon the terms, covenants and conditions set
forth in this Paragraph 38; provided, however, that as provided below this
------------
Paragraph 38 may cease to be of any force or effect prior to the expiration or
- ------------
earlier termination of the term of this Lease. Notwithstanding any provision of
this Lease to the contrary, the provisions of this Paragraph 38 shall not apply
------------
to, and Tenant shall have absolutely no rights in connection with, any of the
following: (i) any and all transfers of all or any portion of the Building, or
any interest therein, by means of judicial foreclosure, trustee's sale, deed in
lieu of foreclosure or similar conveyance, (ii) any and all transfers or
conveyances of any ownership interests in Landlord or any of the parties or
entities comprising Landlord (including without limitation transfers of
partnership interests, membership interests, and shares of common and/or
preferred stock), (iii) any and all transfers of tenancy-in-common interests in
the Building by Landlord to, or by and among, the parties or entities comprising
Landlord, (iv) the creation of any liens, encumbrances or security interests or
the transfer of any interest in the Building for security purposes, and (v) the
transfer of all or any portion of the Building, or any interest in the Building,
to any Affiliate of Landlord or any partner, member or shareholder of Landlord.
A. Notice of Sale. If at any time during the term of this Lease
--------------
Landlord desires to sell fee title to the Building to an unaffiliated third
party, Landlord shall give written notice to Tenant specifying the terms,
covenants and conditions upon which Landlord is willing to sell the Building
(the "Acceptable Sale Terms"). The notice shall constitute an irrevocable offer
---------------------
on the part of Landlord (subject to the conditions described in Paragraph 38.F
--------------
below) to sell the Building to Tenant upon the Acceptable Sale Terms, and
Landlord and Tenant shall have a period of thirty (30) days after Landlord's
delivery of the notice within which to negotiate and agree upon the terms and
conditions for the sale to Tenant of the Building (the "Sale Negotiation
----------------
Period").
- ------
B. Acceptance. If Tenant is interested in acquiring the Building,
----------
Tenant shall give Landlord written notice of such interest ("Notice of Interest
------------------
I") within ten (10) days of Tenant's receipt of Landlord's notice (the "Purchase
- - --------
Response Period"), and Landlord and Tenant shall proceed to negotiate Tenant's
- ---------------
purchase of the Building and the terms and conditions of purchase during the
Sale Negotiation Period. Should the parties reach agreement on the terms and
conditions of Tenant's acquisition of the Building within the Sale Negotiation
Period, then Tenant shall acquire, on an all cash basis, in the manner set forth
in Paragraph 38.G, fee title to the Building, together with any and all
--------------
improvements situated thereon. Failure on the part of Tenant either to deliver a
Notice of Interest to Landlord within the Purchase Response Period or to accept
Landlord's offer to sell the Building within the Sale Negotiation Period shall
each constitute Tenant's rejection of Landlord's offer to sell the Building.
C. Rejection. If (i) Tenant informs Landlord within the Sale
---------
Response Period that Tenant does not desire to negotiate the acquisition of the
Building, or (ii) after commencing negotiations, Landlord and Tenant do not
reach agreement upon the terms and conditions of Tenant's purchase of the
Building within the Sale Negotiation Period, or (iii) Tenant otherwise rejects
Landlord's offer to sell the Building, then, in any such event (except as
provided to the contrary in Paragraphs 38.D and 38.E), this Paragraph 38 shall
--------------- ---- ------------
no longer apply to the Building,
47
<PAGE>
and Landlord (and each and every subsequent owner of the Building) shall be free
to offer to sell all or any portion of the Building (separately or together with
any other parcel or parcels) to any third party or parties upon any terms
whatsoever, including without limitation terms less favorable to Landlord than
the Acceptable Sale Terms, without first offering the Building to Tenant.
D. Offered Terms. If Tenant does not accept Landlord's offer as set
-------------
forth above, but Tenant does deliver to Landlord within the Sale Negotiation
Period a written offer ("Tenant's Purchase Offer") to acquire the Building for a
-----------------------
purchase price ("Tenant's Offered Price") less than the price contained in the
----------------------
Acceptable Sale Terms, then Tenant shall be deemed to have made an irrevocable
offer to acquire the Building at Tenant's Offered Price. Tenant's Purchase Offer
shall be deemed to include all of the Acceptable Sale Terms, except that to the
extent there is any discrepancy between the Acceptable Sale Terms and the terms
set forth in Tenant's Purchase Offer, Tenant's Purchase Offer shall be
controlling (except as otherwise provided in Paragraph 38.G below).
--------------
E. Acceptance of Tenant's Offer. If Tenant rejects or otherwise
----------------------------
fails to accept Landlord's offer pursuant to this Paragraph 38 but delivers
------------
Tenant's Purchase Offer to Landlord in accordance with Paragraph 38.D, then
--------------
Landlord may at any time within sixty (60) days after Landlord's receipt of
Tenant's Purchase Offer, accept Tenant's Purchase Offer and sell the Building to
Tenant in accordance with the terms thereof and the other terms and conditions
set forth in this Paragraph 38. If Landlord thus accepts Tenant's Purchase
------------
Offer, then Tenant shall acquire, on an all cash basis, in accordance with the
provisions of Paragraph 38.G, fee title to the Building, together with the
--------------
improvements situated thereon. If Landlord does not accept Tenant's Purchase
Offer within such 60-day period, then upon the expiration of such 60-day period
this Paragraph 38 shall terminate and shall no longer apply to the Building, and
------------
Landlord (and each and every subsequent owner of the Building) shall be free to
sell all or any portion of the Building (separately or together with any other
parcel or parcels) to a third party or parties upon any terms whatsoever,
including without limitation terms less favorable to Landlord than the terms
contained in Tenant's Purchase Offer, without first offering to sell the
Building to Tenant.
F. Conditions. The effectiveness of Tenant's right to offer to
----------
acquire any Building, as set forth in this Paragraph 38, is conditioned on the
------------
following: (i) Tenant has not previously entered into a Sublet of this Lease
(other than a Permitted Transfer); and (ii) no monetary or other material
default by Tenant exists under this Lease which remains uncured after the giving
of any applicable notice and the expiration of any applicable cure period. In
addition, if any of the conditions specified under clauses (i) and (ii) above do
not continue to be satisfied as of the date on which the escrow for the sale of
the Building to Tenant is scheduled to close, then unless Landlord waives in
writing any such conditions, Tenant's exercise of its right to acquire the
Building under this Paragraph 38 shall be null and void, and this Lease shall
------------
terminate effective as of the date on which the escrow for the sale of the
Building to Tenant was scheduled to close.
G. Process. In the event that Landlord and Tenant reach agreement
-------
on the terms and conditions of the sale of the Building within the applicable
period of time set forth in
48
<PAGE>
this Paragraph 38, Tenant's acquisition of the Building shall be carried out on
------------
(i) the terms and conditions described in this Paragraph 38 and/or to which
------------
Landlord and Tenant have otherwise specifically agreed pursuant to this
Paragraph 38 (collectively, the "Agreed Terms"), and (ii) the terms and
- ------------ ------------
conditions set forth on Exhibit F attached to this Lease (the "Standard Terms
--------------
for Purchase"). To the extent there is any discrepancy between the Agreed Terms
- ------------
and the Standard Terms, the Agreed Terms shall be controlling; provided,
however, that notwithstanding the foregoing, Tenant shall be required to make an
earnest money deposit equal to five percent (5%) of the purchase price for the
Building, pursuant to the Standard Terms.
H. Rights Personal. The rights granted to Tenant under this
---------------
Paragraph 38 shall be personal to Tenant, and shall not be assigned, sold,
- ------------
conveyed or otherwise transferred to any other party (including without
limitation any assignee or sublessee of Tenant) without the prior written
consent of Landlord, which consent may be withheld in Landlord's sole
discretion; provided, however, that the rights granted to Tenant under this
Paragraphs 38 may be transferred without Landlord's consent to the transferee of
- -------------
Tenant's interest in this Lease pursuant to a Permitted Transfer.
39. General.
-------
A. Captions. The captions and headings used in this Lease are for
--------
the purpose of convenience only and shall not be construed to limit or extend
the meaning of any part of this Lease.
B. Executed Copy. Any fully executed copy of this Lease shall be
-------------
deemed an original for all purposes.
C. Time. Time is of the essence for the performance of each term,
----
condition and covenant of this Lease.
D. Separability. If one or more of the provisions contained herein,
------------
except for the payment of Rent, is for any reason held invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision of this Lease, but this Lease shall be
construed as if such invalid, illegal or unenforceable provision had not been
contained herein.
E. Choice of Law. This Lease shall be construed and enforced in
-------------
accordance with the laws of the State of California. The language in all parts
of this Lease shall in all cases be construed as a whole according to its fair
meaning and not strictly for or against either Landlord or Tenant.
F. Gender; Singular, Plural. When the context of this Lease
------------------------
requires, the neuter gender includes the masculine, the feminine, a partnership
or corporation or joint venture, and the singular includes the plural.
G. Binding Effect. The covenants and agreement contained in this
--------------
Lease
49
<PAGE>
shall be binding on the parties hereto and on their respective successors and
assigns to the extent this Lease is assignable.
H. Waiver. The waiver by Landlord of any breach of any term,
------
condition or covenant, of this Lease shall not be deemed to be a waiver of such
provision or any subsequent breach of the same or any other term, condition or
covenant of this Lease. The subsequent acceptance of Rent hereunder by Landlord
shall not be deemed to be a waiver of any preceding breach at the time of
acceptance of such payment. No covenant, term or condition of this Lease shall
be deemed to have been waived by Landlord unless such waiver is in writing
signed by Landlord.
I. Entire Agreement. This Lease is the entire agreement between the
----------------
parties, and there are no agreements or representations between the parties
except as expressed herein. Except as otherwise provided herein, no subsequent
change or addition to this Lease shall be binding unless in writing and signed
by the parties hereto.
J. Authority. If Tenant is a corporation or a partnership, each
---------
individual executing this Lease on behalf of said corporation or partnership, as
the case may be, represents and warrants that he is duly authorized to execute
and deliver this Lease on behalf of said entity in accordance with its corporate
bylaws, statement of partnership or certificate of limited partnership, as the
case may be, and that this Lease is binding upon said entity in accordance with
its terms. Landlord, at its option, may require a copy of such written
authorization to enter into this Lease.
K. Exhibits. All exhibits, amendments, riders and addenda attached
--------
attached hereto are hereby incorporated herein and made a part hereof.
L. Lease Summary. The Lease Summary attached to this Lease is
-------------
intended to provide general information only. In the event of any inconsistency
between the Lease Summary and the specific provisions of this Lease, the
specific provisions of this Lease shall prevail.
M. Memorandum of Lease. This Lease shall not be recorded without the
-------------------
prior consent of both Landlord and Tenant; provided, however, that upon the
written request of Tenant, Landlord and Tenant shall execute and acknowledge, in
recordable form, a memorandum of this Lease in form reasonably acceptable to
both Landlord and Tenant, and shall cause such memorandum to be recorded in the
Official Records of the County of San Mateo, State of California. Upon
expiration of the term of this Lease or earlier termination of this Lease,
Tenant shall execute, acknowledge and deliver to Landlord an appropriate
instrument prepared by Landlord which Landlord may then record in the Official
Records of San Mateo County to expunge this Lease and any memorandum thereof
from the public record with respect to the Premises. In addition, Tenant hereby
irrevocably constitutes and appoints Landlord as its true and lawful attorney in
fact, in its name and in its behalf, to make, execute, acknowledge, deliver, and
file any and all such instruments that Tenant so fails or refuses to execute.
Tenant expressly understands and acknowledges that the foregoing special power
of attorney is coupled with an interest, is irrevocable, and shall survive the
dissolution or insolvency of Tenant, or the transfer
50
<PAGE>
by Tenant of the whole or any portion of its interest in this Lease (provided
that any such transfer shall be subject to the restrictions set forth in this
Lease).
51
<PAGE>
THIS LEASE is effective as of the date the last signatory necessary to
execute the Lease shall have executed this Lease.
TENANT:
Dated: July 7, 1997 AT HOME CORPORATION,
a Delaware corporation
By: /s/ Kenneth A. Goldman
----------------------------
Its: Chief Financial Officer
---------------------------
By: _____________________________
Its: ____________________________
LANDLORD:
Dated: September 29, 1997 MARTIN/CAMPUS ASSOCIATES, L.P.,
a Delaware limited partnership
By: Martin/Redwood Partners,
L.P., a California limited
partnership, its General
Partner
By: The Martin Group of
Companies, Inc., a
California corporation,
its General Partner
By: /s/ Cathy Greenwold
-------------------
Its: Vice President
------------------
52
<PAGE>
EXHIBIT A
---------
PREMISES
--------
<PAGE>
EXHIBIT A
HOME CAMPUS BUILDING A & B
<PAGE>
EXHIBIT B
---------
WORK LETTER AGREEMENT
---------------------
THIS WORK LETTER ("Agreement") is made and entered into by and between
Landlord and Tenant as of the date of the Lease. This Agreement shall be deemed
a part of the Lease to which it is attached. Capitalized terms which are used
herein and defined in the Lease shall have the meanings given in the Lease.
1. General.
-------
1.1 Capital Improvements. Pursuant to the Build to Suit Agreement,
--------------------
Landlord shall construct the Shell and Core and applicable site work (as defined
in the Build to Suit Agreement) (collectively, the "Capital Improvements").
--------------------
Except for its obligation to perform the Capital Improvements and the Tenant
Improvements as set forth in this Lease and the Work Letter, Landlord shall have
no obligation whatsoever to do any work or perform any improvements whatsoever
to any portion of the Premises or the Building; provided, however, that the
Tenant Improvements shall be performed at the sole cost and expense of Tenant
(subject to the provisions of Paragraph 1.4). Landlord shall cause Contractor
-------------
(as defined below) to perform all initial leasehold improvements, in accordance
with the approved Final Plans and as otherwise may be required to comply with
applicable law (collectively, the "Tenant Improvements"). The parties
-------------------
acknowledge and agree that the Capital Improvements and the Tenant Improvements
constitute all of the work required to enable Tenant to occupy, and operate its
business in, the Premises.
1.2 Tenant Improvement Costs. The cost of performing the Tenant
------------------------
Improvements, including without limitation the costs described in Paragraph 6
-----------
below (collectively, the "Tenant Improvement Costs") shall be paid by Tenant in
------------------------
the manner set forth in Paragraph 5 below, subject to the provisions of
-----------
Paragraph 1.4.
- -------------
1.3 Tenant Improvements Allowance. If the lender for the
-----------------------------
Construction Financing (as defined in the Build to Suit Agreement) is willing to
increase the amount of such Construction Financing to cover all or any portion
of the Tenant Improvement Costs, then Landlord shall provide an allowance for
the Tenant Improvement Costs in an amount equal to that portion of the
Construction Financing budgeted for payment of such costs (the "Tenant
------
Improvements Allowance"); provided, however, that in no event shall the Tenant
- ----------------------
Improvements Allowance exceed Thirty Dollars ($30.00) per square foot of
Rentable Area to be situated in the Building.
2. Approval of Plans for Tenant Improvements.
-----------------------------------------
2.1 Architect. Within five (5) days after execution of the Lease,
---------
Tenant shall notify Landlord in writing of the name and address of the licensed
architect which Tenant desires to engage for the preparation of plans for
Tenant's Work ("Architect"). Tenant's proposed architect shall be subject to
---------
Landlord's prior written approval. Tenant shall retain Architect's
administrative services throughout the performance of Tenant's Work. Designers
who are not
<PAGE>
licensed architects will not be acceptable.
2.2 Submittal of Plans.
------------------
2.2.1. Preliminary Plans. Tenant shall cause Architect to
-----------------
prepare preliminary plans (the "Preliminary Plans") for the Tenant Improvements
-----------------
to be performed at the Premises. Tenant shall cause Architect to deliver the
Preliminary Plans to Landlord within thirty (30) days after the date on which
the Lease has been signed by Landlord and Tenant. Within five (5) days after
Landlord's receipt of the Preliminary Plans, Landlord shall either approve or
disapprove the Preliminary Plans, which approval shall not be unreasonably
withheld. If Landlord disapproves the Preliminary Plans, then Landlord shall
state in reasonable detail the changes which Landlord requires to be made
thereto. Tenant shall submit to Landlord revised Preliminary Plans within five
(5) days after Tenant's receipt of Landlord's disapproval notice. Following
Landlord's receipt of the revised Preliminary Plans from Tenant, Landlord shall
have the right to review and approve the revised Preliminary Plans pursuant to
this Paragraph 2.2.1. Landlord shall give Tenant written notice of its approval
---------------
or disapproval of the revised Preliminary Plans within five (5) days after the
date of Landlord's receipt thereof. If Landlord reasonably disapproves the
revised Preliminary Plans, then the following shall occur: (i) Landlord and
Tenant shall continue to follow the procedures set forth in this Paragraph 2.2.1
---------------
until Landlord and Tenant reasonably approve the Preliminary Plans in accordance
with this Paragraph 2.2.1, and (ii) the period between the date of Landlord's
---------------
reasonable disapproval and the eventual mutual approval of such Preliminary
Plans shall constitute a Tenant Delay.
2.2.2. Preliminary Budget. Landlord shall retain a contractor
------------------
("Contractor") as the general contractor for the construction of the Tenant
- ------------
Improvements. Tenant shall have the right to approve the construction contract
between Landlord and Contractor for the construction of the Tenant Improvements,
which approval shall not be unreasonably withheld or delayed; provided, however,
that Tenant shall have no right to disapprove such construction contract if such
construction contract substantially conforms with the applicable AIA form
contract and general conditions. Ten (10) days after approval by Landlord and
Tenant of the Preliminary Plans, Contractor shall prepare a preliminary budget
for the Tenant Improvements based upon the approved Preliminary Plans, which
Contractor shall submit to Tenant for its review and approval. Within three (3)
days after Tenant's receipt of the preliminary budget, Tenant shall either
approve or disapprove the preliminary budget. If Tenant reasonably rejects such
preliminary budget, Tenant shall, within five (5) days of Tenant's delivery of a
written rejection notice to Landlord, require Architect to revise the
Preliminary Plans to reduce the cost of the Tenant Improvements. Following
Tenant's instructions to the Architect, Landlord and Tenant shall again follow
the procedures set forth in Paragraph 2.2.1 and this Paragraph 2.2.2 with
respect to the approval of the Preliminary Plans and to the submission and
approval of the preliminary budget from Contractor.
2.2.3. Final Plans. Within three (3) days after approval by
-----------
Landlord and Tenant of the preliminary budget for the Tenant Improvements,
Tenant shall cause Architect to commence preparing complete plans,
specifications and working drawings which incorporate and are consistent with
the approved Preliminary Plans and preliminary budget, and which show in detail
the intended design, construction and finishing of all portions of the Tenant
Improvements
<PAGE>
described in the Preliminary Plans (collectively, the "Final Plans"). Tenant
-----------
shall cause Architect to deliver the Final Plans to Landlord, for Landlord's
review and approval, no later than ninety (90) days after the date on which the
Lease has been signed by Landlord and Tenant. Within five (5) days after
Landlord's receipt of the Final Plans, Landlord shall either approve or
disapprove the Final Plans, which approval shall not be unreasonably withheld.
If Landlord disapproves the Final Plans, then Landlord shall state in reasonable
detail the changes which Landlord requires to be made thereto. Tenant shall
submit to Landlord revised Final Plans within five (5) days after Tenant's
receipt of Landlord's disapproval notice. Following Landlord's receipt of the
revised Final Plans from Tenant, Landlord shall have the right to review and
approve the revised Final Plans pursuant to this Paragraph 2.2.3. Landlord shall
---------------
give Tenant written notice of its approval or disapproval of the revised Final
Plans within five (5) days after the date of Landlord's receipt thereof. If
Landlord reasonably disapproves the revised Final Plans, then the following
shall occur: (i) Landlord and Tenant shall continue to follow the procedures set
forth in this Paragraph 2.2.3 until Landlord and Tenant reasonably approve such
Final Plans in accordance with this Paragraph 2.2.3, and (ii) the period between
---------------
the date of Landlord's reasonable disapproval and the eventual mutual approval
of such Final Plans shall constitute a Tenant Delay.
3. Construction Budget. Upon approval by Landlord and Tenant of the Final
-------------------
Plans, Landlord shall instruct Contractor to obtain competitive bids for the
Tenant Improvements from at least three (3) qualified subcontractors for each of
the major subtrades (excluding the mechanical and electrical trades, which shall
be on a design/build basis, unless Landlord elects to competitively bid these
trades) and to submit the same to Landlord and Tenant for their review and
approval. Upon selection of the subcontractors and approval of the bids,
Contractor shall prepare a cost estimate for the Tenant Improvements described
in such Final Plans, based upon the bids submitted by the subcontractors
selected. Contractor shall submit such cost estimate to Landlord and Tenant for
their review and approval. within five (5) days after their receipt of the cost
estimate, Landlord and Tenant shall each either approve or disapprove the cost
estimate, which approval shall not be unreasonably withheld. Tenant's failure to
approve or disapprove the cost estimate within such 5-day period shall
constitute Grounds for the assertion of a Tenant Delay. Landlord or Tenant may
each approve or reject such cost estimate in their reasonable sole discretion.
If either Landlord or Tenant rejects such cost estimate, Landlord shall
resolicit bids based on such Final Plans, in accordance with the procedures
specified above. Following any resolicitation of bids by Landlord pursuant to
this Paragraph 3, Landlord and Tenant shall again follow the procedures set
-----------
forth in this Paragraph 3 with respect to the submission and reasonable approval
-----------
of the cost estimate from Contractor; provided, however that the period between
Tenant's disapproval of the first revised cost estimate and the eventual mutual
approval of a cost estimate shall constitute a Tenant Delay.
4. Landlord to Construct. Landlord shall cause Contractor to construct
---------------------
the Tenant Improvements in a good and workmanlike manner, in accordance with the
approved Final Plans and in compliance with all applicable laws. Architect shall
be responsible for obtaining all necessary building permits and approvals and
other authorizations from governmental agencies required in connection with the
Tenant Improvements. The cost of all such permits and approvals, including
inspection and other building fees required to obtain the permits for the Tenant
Improvements, shall be included as part of the Tenant Improvement Costs. Tenant
shall have the benefit of any warranties provided by Contractor, the
subcontractors and suppliers in
<PAGE>
connection with the Tenant Improvements.
5. Payment for Tenant Improvements. The Tenant Improvement Costs shall be
-------------------------------
paid solely by Tenant as follows:
5.1 Method of Payment. If Landlord provides a Tenant Improvements
-----------------
Allowance for the Building pursuant to Paragraph 1.4 above, Landlord shall bear
--------------
the Tenant Improvement Costs up to the amount of such Tenant Improvements
Allowance; and Tenant shall be responsible for paying any excess in the Tenant
Improvement Costs over the amount of such Tenant Improvements Allowance. If
Landlord does not provide a Tenant Improvements Allowance, Tenant shall be
solely responsible for the payment of any and all Tenant Improvement Costs. For
the purposes of this Exhibit B, the term "Tenant's Share of Tenant Improvement
--------- ------------------------------------
Costs" shall mean the entire amount of all Tenant Improvement Costs, less any
- -----
Tenant Improvements Allowance provided by Landlord; provided, however, that if
Landlord does not provide a Tenant Improvements Allowance, then "Tenant's Share
--------------
of Tenant Improvement Costs" shall mean the entire amount of all Tenant
- ---------------------------
Improvement Costs. If required by any lender holding a security interest
encumbering the land on which the Building will be situated, Tenant shall
provide the Set-Aside Funds (as defined in Paragraph 5.1.1) in accordance with
---------------
the provisions of Paragraph 5.1.1. If at the time construction of the Building
---------------
is scheduled to commence no such lender exists, or if there is such a lender but
such lender does not at any time during the construction of the Building require
Landlord to obtain the Set-Aside Funds from Tenant, then Tenant shall not be
required to provide the Set-Aside Funds for the construction of the Building.
5.1.1. Set-Aside Funds. If Tenant is required to deposit the
---------------
Set-Aside Funds pursuant to Paragraph 5.1, then within five (5) days after the
-------------
parties have mutually agreed upon a cost estimate for the Tenant Improvements as
provided above, Tenant shall deposit into a separate account with any financial
institution designated by Landlord, in Tenant's name, subject to restrictions in
favor of such financial institution, an amount (the "Set-Aside Funds") equal to
---------------
(a) the entire amount of Tenant's Share of Tenant Improvement Costs, based on
the assumption that the Tenant Improvement Costs shall equal such cost estimate,
and (b) all other amounts to be deposited by Tenant in such account pursuant to
the terms of the Build to Suit Option Agreement. Landlord shall instruct such
financial institution to hold the Set-Aside Funds in a separate interestbearing
account with interest to accrue for Tenant's account, and shall utilize the Set-
Aside Funds to pay for Tenant's Share of Tenant Improvement Costs and any other
obligations of Tenant pursuant to the Build to Suit Option Agreement. Before
commencement of construction of any subsequent portion of the Tenant
Improvements, Tenant shall deposit in such account an additional amount equal to
Tenant's Share of Tenant Improvement Costs for such subsequent Tenant
Improvements.
5.1.2. Payment. If Landlord provides a Tenant Improvements
-------
Allowance pursuant to Paragraph 1.4 above, then within twenty (20) days after
-------------
Landlord's receipt of reasonably satisfactory invoices for costs of labor and
materials incurred in connection with the Tenant Improvements, together with
such supporting documentation and lien waivers as Landlord may reasonably
require in order to review the costs covered by the billing, Landlord shall pay
the Tenant Improvement Costs represented by such invoices first coming due for
<PAGE>
payment, up to an aggregate amount equal to the Tenant Improvements Allowance.
As and when any amount of Tenant's Share of Tenant Improvement Costs or any
amounts payable by Tenant pursuant to the Build to Suit Option Agreement become
due and payable, Landlord shall request such financial institution to utilize
the remaining SetAside Funds to pay such amounts; provided, however, that if at
any time there are insufficient Set-Aside Funds to pay any amount of Tenant's
Share of Tenant Improvement Costs and/or any other amounts payable by Tenant
pursuant to the Build to Suit Option Agreement, Tenant shall pay any and all
such excess Shell and Core Costs and Tenant Improvement Costs to Landlord within
ten (10) days after the date of Tenant's receipt of Landlord's written request
therefor, together with such supporting documentation and lien waivers as Tenant
may reasonably require in order to review the costs covered by the billing. Any
failure by Tenant to pay any amount of Tenant's Share of Tenant Improvement
Costs or any other amounts payable by Tenant pursuant to the Build to Suit
Option Agreement as and when required under this Exhibit B shall constitute a
---------
default by Tenant under the Lease.
5.1.3. Penalties. To the extent that any contractor or
---------
subcontractor working on the Tenant Improvements imposes upon Landlord any
penalty or late charge due to Tenant's failure to pay to Landlord any amount due
under this Paragraph 5.1 as and when such amount is due, Tenant shall be solely
-------------
responsible for paying such penalty or late charge; provided, however, that if
Tenant disputes the imposition of such penalty or late charge, Tenant shall not
be required to pay the penalty or late charge until the dispute has been settled
or otherwise resolved; provided further, that if any penalty or late charge is
imposed due to Tenant's exercise of its rights under this Paragraph 5.1.3,
---------------
Tenant shall pay such penalty or late charge as provided in this Paragraph
---------
5.1.3.
- -----
5.2 Extra Work. Tenant shall be solely responsible for any and all
----------
costs and expenses arising from any improvements to or installations in the
Building desired by Tenant and approved by Landlord that are outside the scope
of the Final Plans.
6. Tenant Improvement Costs. The Tenant Improvement Costs shall include
------------------------
all reasonable costs incurred in connection with the Tenant Improvements (but
not the Capital Improvements), as determined by Landlord in its reasonable
discretion, including the following:
(a) All costs of space plans and other architectural and engineering
plans and specifications for the Tenant Improvements, including engineering
costs associated with completion of the State of California energy utilization
calculations under Title 24 legislation required in connection with the Tenant
Improvements;
(b) All costs of obtaining building permits and other necessary
authorizations from the City of Redwood City;
(c) All costs of interior design and finish schedule plans and
specifications, including as-built drawings by Architect;
(d) All direct and indirect costs of procuring, constructing and
installing the Tenant Improvements in the Premises, including, but not limited
to, the construction fee payable to the Contractor for overhead and profit, and
the cost of all on-site supervisory and
<PAGE>
administrative staff, office, equipment and temporary services rendered by
Contractor in connection with construction of the Tenant Improvements;
(e) All fees payable to Architect and Landlord's engineering firm if
they are required by Tenant to redesign any portion of the Tenant Improvements
following Tenant's approval of the Final Plans;
(f) Sewer connection fees (if any);
(g) All costs of installing an emergency power supply systems in each
of the Buildings, which emergency power supply shall include emergency HVAC for
Tenant's computer rooms;
(h) All direct and indirect construction costs associated with
complying with Title 24 legislation and ADA compliance for all interior
improvements (including the reconstruction of all restrooms); and
(i) A construction management fee payable to Landlord equal to three
percent (3%) of the total Tenant Improvement Costs. (Landlord shall either
provide, or cause a third party to provide, construction management services in
connection with the construction of the Tenant Improvements, and the foregoing
fee shall be the sole compensation for such services).
7. Chance Requests. No revisions to the approved Final Plans shall be
---------------
made by either Landlord or Tenant unless approved in writing by both parties.
Landlord agrees to make all changes (i) required by any public agency to conform
with governmental regulations, or (ii) requested in writing by Tenant and
approved in writing by Landlord, which approval shall not be unreasonably
withheld. Any costs related to such changes shall be added to the Tenant
Improvement Costs and shall be paid for in accordance with Paragraph 5. The
-----------
billing for such additional costs shall be accompanied by evidence of the
amounts billed as is customarily used in the business. Costs related to changes
shall include, without limitation, any architectural, structural engineering, or
design fees, and the Contractor's price for effecting the change. Any change
order which may extend the date of substantial completion of the Tenant
Improvements may be disapproved by Landlord unless Tenant agrees that for all
purposes under this Lease, the Tenant Improvements shall be deemed to have been
substantially completed on that date on which such Tenant Improvements would
have been substantially completed without giving effect to the change order in
question.
8. Early Access. So long as such entry does not in any way interfere with
------------
or delay Landlord's construction of the Improvements, Tenant shall have the
right to enter the Premises before the Commencement Date for the purpose of
installing cable T.V., telephones, telecommunications cabling, furniture and
other similar items. Such entry shall be subject to all of the terms and
conditions of the Lease, other than the obligation to pay Rent.
9. Acceptance of Building. Within thirty (30) days after completion of
----------------------
the Tenant Improvements, Tenant shall conduct a walk-through inspection of the
Building with Landlord and complete a punch-list of items needing additional
work. Other than the items specified in the
<PAGE>
punch list, if any, by taking possession of the Building, Tenant shall be deemed
to have accepted the Building in good, clean and completed condition and repair,
subject to all applicable laws, codes and ordinances. Any damage to the Building
caused by Tenant's move-in shall be repaired or corrected by Tenant, at its sole
cost and expense, which repair or corrective work shall not be paid for out of
any Tenant Improvements Allowance. Tenant acknowledges that neither Landlord nor
Landlord's agents shall be deemed to have made any representations or warranties
as to the suitability or fitness of the Building for the conduct of Tenant's
business or for any other purpose, nor shall Landlord or Landlord's agents be
deemed to have agreed to undertake any alterations or construct any improvements
to the Building except as expressly provided in the Lease, this Exhibit B, and
---------
the Build to Suit Option Agreement. If Tenant fails to submit a punch-list to
Landlord within such 30-day period, it shall be deemed that there are no items
needing additional work or repair. Contractor shall complete all reasonable
punch-list items within thirty (30) days after the walk-through inspection or as
soon as practicable thereafter. Upon completion of such punch-list items, Tenant
shall approve such completed items in writing to Landlord. If Tenant fails to
approve such items within fourteen (14) days of completion, such items shall be
deemed approved by Tenant. Landlord shall, upon Tenant's written request, assign
and transfer to Tenant, to the extent reasonably requested by Tenant and
consistent with Landlord's position as the owner of the Building, Landlord's
rights and claims against Contractor arising from Contractor's warranties
(express and implied) with respect to the Building. Nothing contained in this
Paragraph 10 shall limit, restrict, or terminate any right of Landlord or Tenant
- ------------
to make any claim against Contractor based upon the condition of the Building or
any and all of Contractor's warranties (express and implied) with respect to the
Building.
LANDLORD: TENANT:
MARTIN/CAMPUS ASSOCIATES, L.P., AT HOME CORPORATION,
a Delaware limited partnership a Delaware corporation
By: Martin/Redwood Partners, By: /s/ Kenneth Goldman
------------------------------------
L.P., a California limited Its: Chief Financial Officer
-----------------------------------
partnership, its General
Partner By:____________________________________
Its: _________________________________
By: The Martin Group of
Companies, Inc., a
California corporation,
its General Partner
By: /s/ Cathy Greenwold
--------------------
Its: Vice President
-------------------
<PAGE>
EXHIBIT C
---------
SITE PLAN FOR PROJECT
---------------------
This Exhibit will either be (i) the North Expansion Parcel (see Exhibit C-
1), or (ii) the south campus (see Exhibit C-2), as applicable.
<PAGE>
EXHIBIT C
HOME CORPORATE CAMPUS
SITEPLAN
FIGURE 1
SAN MATEO COUNTY
<PAGE>
EXHIBIT D
---------
COMMENCEMENT DATE MEMORANDUM
----------------------------
LANDLORD: Martin/Campus Associates, L.P.
TENANT: ______________________________
LEASE DATE: ______________________________
PREMISES: ______________________________
Pursuant to Paragraph 4.A. of the above referenced Lease, the commencement date
--------------
is hereby established as __________________ for ____________________, Redwood
City, CA 94063. The Commencement Date as defined in Paragraph 4.A. shall be
--------------
___________________.
TENANT:
Dated: _________________ AT HOME CORPORATION,
a Delaware corporation
By: ______________________________
Its: ______________________________
By: ______________________________
Its: ______________________________
LANDLORD:
Dated: _________________ MARTIN/CAMPUS ASSOCIATES, L.P.,
a Delaware limited partnership
By: Martin/Redwood Partners,
L.P., a California limited
partnership, its General
Partner
By: The Martin Group of
Companies, Inc., a
California corporation,
its General Partner
By: ___________________
Its: ___________________
<PAGE>
EXHIBIT E
---------
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
-------------------------------------------------------
<PAGE>
EXHIBIT F
---------
STANDARD TERMS FOR OPTION TO PURCHASE
-------------------------------------
This Exhibit F sets forth certain standard terms that shall be
---------
applicable to the purchase of the Building pursuant Paragraph 38 of the Lease.
------------
This Exhibit shall be deemed a part of the Lease to which it is attached.
Capitalized terms which are used herein and defined in the Lease shall have the
meanings given in the Lease.
1. Sale and Purchase; Title Company.
--------------------------------
1.1 General. In the event Tenant acquires the Building, (the "Option
------- ------
Property"), Landlord shall sell to Tenant, and Tenant shall purchase from
- --------
Landlord, all of the "Property" (as defined below).
1.2 The Property. As used in this Agreement, the term "Property"
------------
includes the Option Property and all of the items referred to in Paragraphs
----------
1.2.1 through 1.2.4.
- ----- -----
1.2.1. Personal Property. All of Landlord's right, title and
-----------------
interest in and to any and all personal property located at the Option Property
which is owned by Landlord and which is used in the operation and maintenance of
the Option Property (the "Personal Property").
-----------------
1.2.2. Rights and Privileges. All of Landlord's right, title
---------------------
and interest, if any, in and to all rights, privileges, tenements,
hereditaments, rights-of-way, easements, appurtenances, mineral rights,
development rights, air rights and riparian or littoral rights belonging or
appertaining to the Option Property.
1.2.3. Contracts and Leases. All of Landlord's right, title and
--------------------
interest in and to (i) all service, maintenance, construction, management and
other contracts relating to the Option Property (collectively, "Contracts"), and
---------
(ii) all leases, tenancy and occupancy agreements for all or any portion of the
Option Property (collectively, "Leases").
------
1.2.4. Permits and Warranties. All of Landlord's right, title
----------------------
and interest in and to (i) all licenses, permits and approvals, if any,
affecting or pertaining to the Option Property which, if assignable, are to be
assigned to Tenant at the Closing (as defined below), and (ii) all warranties,
if any, affecting or pertaining to the Option Property which, if assignable, are
to be assigned to Tenant at the Closing.
1.3 Title Company. The purchase and sale of the Property shall be
-------------
accomplished through an escrow which Landlord has established or will establish
with Chicago Title Insurance Company, One Kaiser Plaza, Oakland, California (the
"Title Company").
-------------
2. Title. Title to the Property shall be conveyed from Landlord to
-----
Tenant by grant deed (the "Deed"), subject to: (i) liens to secure payment of
real estate taxes and assessments not delinquent; (ii) applicable zoning and use
laws, ordinances, rules and regulations of any municipality, township, county,
state or other governmental agency or authority; (iii) all matters
<PAGE>
that would be disclosed by a physical inspection or survey of the Option
Property or that are actually known to Tenant; (iv) any exceptions or matters
created by Tenant, its agents, employees or representatives; (v) all exceptions
of record that were in existence as of the date of the Lease and all CC&Rs
recorded by Landlord; (vi) all Leases and Contracts; and (vii) such other
exceptions as Tenant may approve in writing.
The foregoing exceptions to title are referred to collectively as the
"Conditions of Title". Conclusive evidence of delivery of title in accordance
-------------------
with the foregoing shall be the willingness of Title Company to issue to Tenant,
upon payment of its regularly scheduled premium, its CLTA owner's policy of
title insurance, in the amount of the Purchase Price, showing title to the
Option Property vested of record in Tenant, subject only to the Conditions of
Title (and the standard printed exceptions and conditions in the policy of title
insurance). If Landlord for any reason is unable to deliver title to the
Property subject only to the Conditions of Title, then Tenant's sole remedy
shall be to terminate this Agreement and receive a return of any Deposit, and
neither Landlord nor Tenant shall thereafter have any further rights or
obligations under this Agreement, except Tenant's obligation to perform the
Continuing Obligations (as defined below). Tenant shall have no right to
commence any action for damages, specific performance or other relief as a
result of Landlord's inability to deliver title to the Property subject only to
the Conditions of Title; provided, however, that if Landlord intentionally fails
to consummate the conveyance of the Option Property to Tenant in accordance with
the terms of the Lease, then Tenant shall have the right to commence any actions
for damages, specific performance or other relief as a result of Landlord's
intentional breach.
3. Damage, Destruction or Taking. If at any time prior to the Closing,
-----------------------------
Landlord determines that the Option Property has been destroyed or damaged by
earthquake, flood or other casualty and that such damage will require more than
One Million Dollars ($1,000,000.00) to repair (a "Casualty"), or if a proceeding
--------
is instituted for the taking of all or any material portion of the Option
Property under the power of eminent domain (a "Taking"), then Tenant shall have
------
the right by giving written notice to Landlord and Title Company within fifteen
(15) days after the date of receipt of written notice of any such Casualty or
Taking, either to: (i) consummate the purchase of the Property in accordance
with the Lease, in which event Landlord shall assign to Tenant at the Closing
(A) any insurance proceeds payable to Landlord on account of such Casualty, or
(B) any award payable to Landlord by reason of the Taking, as the case may be;
or (ii) terminate Landlord's obligations under Paragraph 38 of the Lease and
------------
this Exhibit F, effective as of the date such notice of termination is given. If
---------
Tenant fails to give such notice within such 15-day period, then Tenant shall be
deemed to have elected to terminate Landlord's obligations under Paragraph 38 of
------------
the Lease and this Exhibit F, pursuant to this Paragraph 3. The Closing Date
--------- -----------
shall be deferred, if necessary, to permit Tenant to have the 15-day period
following receipt of notice of a Casualty or a Taking to make the election
specified hereinabove. If Tenant terminates Landlord's obligations under
Paragraph 38 of the Lease and this Exhibit F, pursuant to this Paragraph 3,
- ------------ --------- -----------
then any Deposit shall be returned to Tenant, and neither Landlord nor Tenant
shall have any further obligations under Paragraph 38 of the Lease or this
------------
Exhibit F. Nothing herein shall be deemed to constitute an obligation on the
- ---------
part of Landlord to carry or maintain any insurance of any kind whatsoever
pertaining to the Property.
4. Landlord's Disclaimer; Release and Indemnification of Landlord.
--------------------------------------------------------------
<PAGE>
4.1 Landlord's Disclaimer. Tenant acknowledges and agrees that the
---------------------
sale of the Property to Tenant is made without any warranty or representation of
any kind by Landlord, either express or implied, with respect to any aspect,
portion or component of the Property, including: (i) the physical condition,
nature or quality of the Property, including the quality of the soils on and
under the Property and the quality of the labor and materials included in any
buildings or other improvements, fixtures, equipment or personal property
comprising a portion of the Property; (ii) the fitness of the Property for any
particular purpose; (iii) the presence or suspected presence of hazardous
materials on, in, under or about the Property (including the soils and
groundwater on and under the Property); or (iv) existing or proposed
governmental laws or regulations applicable to the Property, or the further
development or change in use thereof, including environmental laws and laws or
regulations dealing with zoning or land use. Tenant further agrees and
acknowledges that, as of the Closing, Tenant shall have made such feasibility
studies, investigations, environmental studies, engineering studies, inquiries
of governmental officials, and all other inquiries and investigations, which
Tenant shall deem necessary to satisfy itself as to the condition, nature and
quality of the Property and as to the suitability of the Property for Tenant's
purposes. Tenant further agrees and acknowledges that, in purchasing the
Property, Tenant shall rely entirely on its own investigation, examination and
inspection of the Property, and not upon any representation or warranty of
Landlord, or any agent or representative of Landlord. Tenant further agrees and
acknowledges that Tenant has leased and occupied the Option Property prior to
the Closing, by reason of such tenancy, possession and occupancy, Tenant is
fully aware of the condition of the Option Property. THEREFORE, TENANT AGREES
THAT, IN CONSUMMATING THE PURCHASE OF THE PROPERTY PURSUANT TO THIS LEASE,
TENANT SHALL ACQUIRE THE PROPERTY IN ITS THEN CONDITION, "AS IS, WHERE IS" AND
WITH ALL FAULTS, AND SOLELY IN RELIANCE ON TENANT'S OWN INVESTIGATION,
EXAMINATION, INSPECTION, ANALYSIS AND EVALUATION OF THE PROPERTY. The
agreements and acknowledgments contained in this Paragraph 4.1 constitute a
-------------
conclusive admission that Tenant, as a sophisticated, knowledgeable investor in
real property, shall acquire the Property solely upon its own judgment as to any
matter germane to the Property or to Tenant's contemplated use of the Property,
and not upon any statement, representation or warranty by Landlord, or any agent
or representative of Landlord, which is not expressly set forth in this
Agreement. At the Closing, upon the request of Landlord, Tenant shall execute
and deliver to Landlord a certificate of Tenant reaffirming the foregoing.
4.2 Tenant's Release of Landlord. Tenant hereby waives, releases and
----------------------------
forever discharges Landlord and its officers, directors, employees and agents
from any and all claims, actions, causes of action, demands, liabilities,
damages, costs, expenses or compensation whatsoever, whether direct or indirect,
known or unknown, foreseeable or unforeseeable, which Tenant may have at the
Closing or which may arise in the future on account of or in any way arising out
of or connected with the Property, including: (i) the physical condition, nature
or quality of the Property (including the soils and groundwater on and under the
Option Property); (ii) the presence or release in, under, on or about the
Property (including the soils and groundwater on and under the Option Property)
of any hazardous materials; and (iii) the ownership, management or operation of
the Property, but excluding claims to the extent based on Landlord's fraud or
intentional misrepresentation. At the Closing, upon the request of Landlord,
Tenant shall deliver to Landlord a certificate of Tenant reaffirming the
foregoing. Tenant hereby
<PAGE>
waives the protection of California Civil Code Paragraph 1542, which reads as
follows:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him
must have materially affected his settlement with the
debtor."
Tenant's
Initials: ________________
4.3 Tenant's Indemnification of Landlord. Tenant shall indemnify,
------------------------------------
defend, protect and hold Landlord harmless from and against any and all claims,
actions, causes of action, demands, liabilities, damages, costs and expenses
(including attorneys' fees), whether direct or indirect, known or unknown,
foreseeable or unforeseeable, which may be asserted against or suffered by
Landlord at any time after the Closing on account of or in any way arising out
of or connected with the Property, including: (i) the physical condition, nature
or quality of the Property (including the soils and groundwater on and under the
Option Property); (ii) the presence or release in, under, on or about the
Property (including the soils and groundwater on and under the Option Property)
of any hazardous materials; and (iii) the ownership, management or operation of
the Property, including any claim or demand by any tenant for the refund or
return of any security deposit or other deposit, but excluding claims to the
extent based on Landlord's fraud or intentional misrepresentation. At the
Closing, upon the request of Landlord, Tenant shall deliver to Landlord a
certificate reaffirming the foregoing.
4.4 Flood Hazard Zone. Tenant acknowledges that if the Option
-----------------
Property is located in an area which the Secretary of HUD has found to have
special flood hazards, then pursuant to the National Flood Insurance Program,
Tenant will be required to purchase flood insurance in order to obtain any loan
secured by the Option Property from any federally regulated financial
institution or a loan insured or guaranteed by an agency of the United States
government. Tenant shall have sole responsibility to determine whether the
Option Property is located in an area which is subject to the National Flood
Insurance Program.
4.5 Inspections. Subject to obtaining Landlord's prior written
-----------
consent, which shall not be unreasonably withheld or delayed, Tenant shall have
the right to conduct such inspections, investigations, borings, samplings and
other tests of the Property that Tenant deems to be useful or necessary for the
conduct of Tenant's due diligence in connection with the acquisition of the
Property. Upon request by Tenant, Landlord shall make available to Tenant for
inspection all material documents and reports in Landlord's possession relating
to the condition of the Property. Tenant shall indemnify, defend, protect and
hold Landlord harmless from and against any and all loss, cost, damage, injury,
claim (including claims of lien for work or labor performed or materials or
supplies furnished), liability or expense (including attorneys' fees) as a
result of, arising out of, or in any way connected with the exercise of Tenant's
(or its agents', contractors', employees' or authorized representatives')
inspection rights pursuant to this Paragraph 4.5 or the performance of Tenant's
due diligence. Tenant shall promptly repair any damage to the Property caused by
its due diligence.
<PAGE>
5. Closing.
-------
5.1. Closing. The transaction contemplated by this Exhibit F
------- ---------
shall be consummated through escrow at the office of Title Company on the date
described in Paragraph 5.1.1 below, or on such other date as shall be mutually
---------------
agreed upon by Landlord and Tenant (each, a "Closing Date"). For purposes of
------------
this Exhibit F. the term "Closing" shall mean the consummation of the sale and
-------
conveyance of the Property to Tenant as evidenced by recordation of the Deed (as
defined below).
5.1.1. Closing Date. The Closing Date shall be no later
------------
than the date specified in the Agreed Terms.
5.2. Landlord's Delivery Into Escrow. Landlord shall deliver
-------------------------------
the following items into escrow:
5.2.1. Deed. The Deed, duly executed and acknowledged by
----
Landlord,shall except that the amount of any transfer tax shall not be shown on
the Deed, but shall be set forth on a separate affidavit or instrument which,
after recordation of the Deed, shall be attached thereto so that the amount of
such transfer tax shall not be of record.
5.2.2. Other Documents. Such other documents or
---------------
instruments as may be reasonably required to consummate this transaction in
accordance with the terms and conditions herein contained, such as appropriate
escrow instructions to Title Company.
5.3. Tenant's Delivery Into Escrow. Tenant shall deliver the
-----------------------------
following items into escrow:
5.3.1. Cash. Immediately available funds in the following
----
amounts: (i) the balance of the Purchase Price, less the amount of the Deposit;
(ii) such amount, if any, as is necessary for Tenant to pay Tenant's share of
the closing costs and prorations specified in Paragraphs 5.5 and 5.6; and (iii)
-------------- ---
any other amounts required to close escrow in accordance with the terms of this
Exhibit F.
- ---------
5.3.2. Other Documents. Such other documents and
---------------
instruments as may be reasonably required in order to consummate this
transaction in accordance with the terms and conditions of this Exhibit F and
---------
the Lease, such as appropriate escrow instructions to Title Company.
5.3.3. Evidence of Authorization. Such evidence as shall
-------------------------
reasonably establish that Tenant's performance of its obligations under the
Lease and this Exhibit F have been duly authorized and that the person or
---------
persons executing all documents on behalf of Tenant have been duly authorized
and empowered to do
so.
5.4. Landlord's and Tenant's Joint Delivery Into Escrow.
--------------------------------------------------
Landlord and Tenant jointly shall deliver the following items into escrow:
<PAGE>
5.4.1. Assignment and Assumption Agreements. A document
------------------------------------
by which Landlord assigns to Tenant, and Tenant assumes, the Leases, Contracts,
permits and warranties which will survive the Closing.
5.4.2. Other Documents. Such other documents and
---------------
instruments as may be reasonably required to consummate this transaction in
accordance with the terms and conditions of this Agreement.
5.5. Closing Prorations. At the Closing, all items of income
------------------
and expense of the Property shall be prorated as provided in this Paragraph 5.5
-------------
on the basis of a 360-day year, actual days elapsed for the month in which the
Closing occurs, as of midnight on the day immediately preceding the Closing
Date. Except as provided in this Paragraph 5.5, income and expenses attributable
-------------
to the period prior to the Closing Date shall be for the account of Landlord,
and income and expenses attributable to the period on and after the Closing Date
shall be for the account of Tenant. Property taxes and assessments shall be
prorated through escrow, and all other items of income and expense shall be
prorated outside of escrow on the Closing Date by the parties. Without limiting
the generality of the foregoing, the following items shall be prorated through
escrow as described above:
(a) Current rents collected by Landlord under the Leases.
With respect to any rent receivables carried by Landlord under the Leases as of
the Closing, Tenant shall pay Landlord full value in immediately available funds
at the Closing and Landlord shall execute and deliver to Tenant at the Closing
an assignment of all of Landlord's right, title and interest with respect
thereto.
(b) Amounts paid or payable in respect of the Contracts
which Tenant assumes at the Closing.
5.6. Closing Costs. Landlord shall pay the following closing
-------------
costs: (i) all fees and costs for releasing all encumbrances, liens and security
interests of record which are not Conditions of Title; and (ii) county
documentary or other transfer taxes payable upon recordation of the Deed. Tenant
shall pay the following closing costs: (a) the premium for Tenant's policy of
title insurance; (b) any and all costs, fees, title insurance premiums and other
charges payable in connection with any financing obtained by Tenant to acquire
the Property, including all escrow fees relating to the funding and/or
recordation of such financing; and (c) all escrow fees. Each party shall pay
one-half of any escrow cancellation fee charged by Title Company in connection
with the purchase and sale of the Property in accordance with this Exhibit F.
---------
All other closing costs shall be paid by the parties in accordance with the
custom then prevailing in San Mateo County.
5.7. Security Deposits. With respect to all Leases which are in
-----------------
effect at the Closing, Landlord shall give Tenant at the Closing, through
Escrow, a credit in the amount of all security deposits and other deposits then
held by Landlord under such Leases.
5.8. Possession. Subject to the rights of tenants under the
----------
Leases, Landlord shall deliver exclusive possession of the Property to Tenant at
the Closing.
<PAGE>
5.9. Closing Procedure. Title Company shall close escrow when
-----------------
it is in a position to: (i) pay to Landlord, in immediately available funds, the
amount of the Purchase Price, as such amount may be increased or decreased as a
result of the allocation of the closing costs and prorations as specified in
Paragraphs 5.5 and 5.6 and Landlord's obligations with respect to security
- -------------- ---
deposits as specified in Paragraph 5.7; and (ii) issue to Tenant the policy of
-------------
title insurance referred to in Paragraph 2.
-----------
5.10. Escrow. Within five (5) days after Landlord and Tenant
------
have agreed upon the Agreed Terms, Tenant and Landlord shall deposit an executed
counterpart of this Exhibit F with the Title Company and this Exhibit F shall
--------- ---------
serve as instructions to the Title Company for consummation of the purchase and
sale contemplated hereby. Landlord and Tenant shall execute such supplemental
escrow instructions as may be appropriate to enable the Title Company to comply
with the terms of this Exhibit F. provided such supplemental escrow instructions
---------
are not in conflict with this Exhibit F. In the event of any conflict between
---------
the provisions of this Exhibit F and any supplementary escrow instructions
---------
signed by Tenant and Landlord, the terms of this Exhibit F shall control.
---------
5.11. Compliance. The Title Company shall comply with all
----------
applicable federal, state and local reporting and withholding requirements
relating to the close of the transactions contemplated herein. Without limiting
the generality of the foregoing, to the extent the transactions contemplated by
this Exhibit F involve a real estate transaction within the purview of Section
---------
6045 of the Internal Revenue Code of 1986, as amended (the "Internal Revenue
----------------
Code"), Title Company shall have sole responsibility to comply with the
- ----
requirements of Section 6045 of the Internal Revenue Code (and any similar
requirements imposed by state or local law). For purposes of this Paragraph
---------
5.11, Landlord's tax identification number is 94-3236971. Title Company shall
- ----
hold Tenant, Landlord and their counsel free and harmless from and against any
and all liability, claims, demands, damages and costs, including reasonable
attorney's fees and other litigation expenses, arising or resulting from the
failure or refusal of Title Company to comply with such reporting requirements.
6. Survival of Provisions. Notwithstanding any other provision of this
----------------------
Exhibit F to the contrary, each representation, warranty, covenant or agreement
contained in this Exhibit F (including Tenant's obligations pursuant to
---------
Paragraph 4.3) shall survive and be binding and enforceable following the
- -------------
Closing and shall not be deemed to be merged into, or waived by delivery or
recordation of, the Deed or any other instruments delivered at the Closing.
7. Exchange. At the option of either party, such party may elect to
--------
consummate the transaction hereunder in whole or in part as a like-kind exchange
pursuant to Section 1031 of the Internal Revenue Code of 1986, as amended. If
either party (the "Exchanging Party") so elects, the other party (the
----------------
"Cooperating Party") shall cooperate with the Exchanging Party, executing such
- ------------------
documents and taking such action as may be reasonably necessary in order to
effectuate this transaction as a like-kind exchange; provided, however, that (i)
the Cooperating Party's cooperation hereunder shall be without cost, expense or
liability to the Cooperating Party of any kind or character, including, without
limitation, any attorneys' fees, costs or expense incurred in connection with
the review or preparation of documentation in order to effectuate such like-kind
exchange, and the Cooperating Party shall have no obligation to take title to
any real property;
<PAGE>
(ii) the Exchanging Party shall assume all risks in connection with the
designation, selection and setting of terms of the purchase or sale of any
exchange property; (iii) the Exchanging Party shall bear all costs and expenses
in connection with any such exchange transaction in excess of the costs and
expenses which would have otherwise been incurred in acquiring or selling the
Property by means of a straight purchase, so that the net effect to the
Cooperating Party shall be identical to that which would have resulted had this
Exhibit F closed on a purchase and sale; (iv) any documents to effectuate such
- ---------
exchange transaction are consistent with the terms and conditions contained in
this Exhibit F; and (v) the Exchanging Party shall indemnify, defend and hold
---------
the Cooperating Party harmless from any and all claims, demands, penalties,
loss, causes of action, suits, risks, liability, costs or expenses of any kind
or nature (including, without limitation, reasonable attorneys' fees) which the
Cooperating Party may incur or sustain, directly or indirectly, related to or in
connection with, or arising out of, the consummation of this transaction as a
like-kind exchange as contemplated hereunder.
8. Deposit. Notwithstanding anything to the contrary set forth in the
-------
Agreed Terms or this Exhibit F, within one (1) day after Landlord and Tenant
---------
reach agreement on the Agreed Terms for Tenant's purchase of the Property from
Landlord, Tenant shall deliver to Title Company a cashier's check in the amount
of five percent (5%) of the Purchase Price (the "Deposit"), as an earnest money
-------
deposit on account of the Purchase Price. Title Company shall deposit the
Deposit in an interest-bearing account, and the term "Deposit" as used in this
-------
Exhibit F shall include any interest earned thereon.
- ---------
9. Liquidated Damages. TENANT ACKNOWLEDGES THAT THE CLOSING OF THE SALE
------------------
OF THE PROPERTY TO TENANT, ON THE TERMS AND CONDITIONS AND WITHIN THE TIME
PERIOD SET FORTH IN THIS EXHIBIT F AND THE LEASE, IS MATERIAL TO LANDLORD.
---------
TENANT ALSO ACKNOWLEDGES THAT SUBSTANTIAL DAMAGES WILL BE SUFFERED BY LANDLORD
IF SUCH TRANSACTION IS NOT SO CONSUMMATED DUE TO TENANT'S DEFAULT. TENANT
FURTHER ACKNOWLEDGES THAT, AS OF THE DATE THE PARTIES REACH AGREEMENT ON THE
AGREED TERMS, LANDLORD'S DAMAGES WOULD BE EXTREMELY DIFFICULT OR IMPOSSIBLE TO
COMPUTE IN LIGHT OF THE UNPREDICTABLE STATE OF THE ECONOMY AND OF GOVERNMENTAL
REGULATIONS, THE FLUCTUATING MARKET FOR REAL ESTATE AND REAL ESTATE LOANS OF ALL
TYPES, AND OTHER FACTORS WHICH DIRECTLY AFFECT THE VALUE AND MARKETABILITY OF
THE PROPERTY. IN LIGHT OF THE FOREGOING AND ALL OF THE OTHER FACTS AND
CIRCUMSTANCES SURROUNDING THIS TRANSACTION, AND FOLLOWING NEGOTIATIONS BETWEEN
THE PARTIES, TENANT AND LANDLORD AGREE THAT THE AMOUNT OF THE DEPOSIT REPRESENTS
A REASONABLE ESTIMATE OF THE DAMAGES WHICH LANDLORD WOULD SUFFER BY REASON OF
TENANT'S DEFAULT HEREUNDER. ACCORDINGLY, TENANT AND LANDLORD HEREBY AGREE THAT,
IN THE EVENT OF SUCH DEFAULT BY TENANT, LANDLORD MAY TERMINATE ITS OBLIGATIONS
UNDER PARAGRAPH 38 OF THE LEASE AND THIS EXHIBIT F BY GIVING NOTICE TO TENANT.
------------ ---------
IN THE EVENT OF SUCH TERMINATION, LANDLORD SHALL RETAIN THE DEPOSIT AS
LIQUIDATED DAMAGES IN LIEU OF ANY OTHER CLAIM LANDLORD MAY HAVE AT LAW OR IN
EQUITY (INCLUDING, WITHOUT LIMITATION, SPECIFIC PERFORMANCE) ARISING
<PAGE>
BY REASON OF TENANT'S FAILURE TO PURCHASE THE PROPERTY PURSUANT TO THIS EXHIBIT
-------
F. LANDLORD'S RETENTION OF THE DEPOSIT PURSUANT TO THIS PARAGRAPH 9 SHALL IN NO
- - -----------
WAY LIMIT ANY OF LANDLORD'S RIGHTS OR REMEDIES UNDER THE LEASE WITH RESPECT TO
ANY DEFAULT BY TENANT UNDER THE LEASE. THE PARTIES HAVE INITIALED THIS PARAGRAPH
---------
9 TO ESTABLISH THEIR INTENT SO TO LIQUIDATE DAMAGES. NOTWITHSTANDING THE
- -
FOREGOING, NOTHING CONTAINED IN THIS PARAGRAPH 9 SHALL BE DEEMED TO LIMIT: (i)
-----------
TENANT'S OBLIGATIONS UNDER THE LEASE; OR (ii) TENANT'S INDEMNIFICATION
OBLIGATIONS CONTAINED IN THIS EXHIBIT F.
---------
Landlord's Tenant's
Initials: ________ Initials: ________
TENANT:
Dated: September 24, 1997 AT HOME CORPORATION,
a Delaware corporation
By: /s/ Kenneth Goldman
------------------------
Its: Chief Financial Officer
------------------------
By: ________________________
Its: ________________________
LANDLORD:
Dated: September 29, 1997 MARTIN/CAMPUS ASSOCIATES, L.P.,
a Delaware limited partnership
By: Martin/Redwood Partners,
L.P., a California limited
partnership, its General
Partner
By: The Martin Group of
Companies, Inc., a
California corporation,
its General Partner
By: Cathy Greenwold
---------------
Its: Vice President
---------------
<PAGE>
EXHIBIT 10.23
---------------------------------------------------------------
AT HOME CORPORATION
LOAN AND SECURITY AGREEMENT
---------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. DEFINITIONS AND CONSTRUCTION................................. 1
1.1 Definitions............................................ 1
1.2 Accounting and Other Terms............................. 6
2. LOAN AND TERMS OF PAYMENT.................................... 6
2.1 Credit Extensions...................................... 6
2.2 Interest Rates, Payments, and Calculations............. 6
2.3 Crediting Payments..................................... 9
2.4 Fees................................................... 9
2.5 Additional Costs....................................... 10
2.6 Term................................................... 10
3. CONDITIONS OF LOANS.......................................... 11
3.1 Conditions Precedent to Initial Credit Extension....... 11
3.2 Conditions Precedent to all Credit Extensions.......... 11
4. CREATION OF SECURITY INTEREST................................ 11
4.1 Grant of Security Interest............................. 11
4.2 Delivery of Additional Documentation Required.......... 12
4.3 Right to Inspect....................................... 12
4.4 Release of Security Interest........................... 12
5. REPRESENTATIONS AND WARRANTIES............................... 12
5.1 Due Organization and Qualification..................... 12
5.2 Due Authorization; No Conflict......................... 12
5.3 No Prior Encumbrances.................................. 12
5.4 Merchantable Inventory................................. 12
5.5 Name; Location of Chief Executive Office............... 13
5.6 Litigation............................................. 13
5.7 No Material Adverse Change in Financial Statements..... 13
5.8 Solvency............................................... 13
5.9 Regulatory Compliance.................................. 13
5.10 Environmental Condition................................ 13
5.11 Taxes.................................................. 14
5.12 Subsidiaries........................................... 14
5.13 Government Consents.................................... 14
5.14 Full Disclosure........................................ 14
6. AFFIRMATIVE COVENANTS........................................ 14
6.1 Good Standing.......................................... 14
6.2 Government Compliance.................................. 15
6.3 Financial Statements, Reports, Certificates............ 15
6.4 Inventory; Returns..................................... 15
6.5 Taxes.................................................. 15
6.6 Insurance.............................................. 16
6.7 Principal Depository................................... 16
6.8 Tangible Net Worth..................................... 16
6.9 Remaining Months Liquidity............................. 16
6.10 Liquidity, Debt Service Coverage....................... 16
6.11 Further Assurances..................................... 17
7. NEGATIVE COVENANTS........................................... 17
7.1 Dispositions........................................... 17
7.2 Changes in Business, Ownership, Management
or Business Locations.................................. 17
7.3 Mergers or Acquisitions................................ 17
7.4 Indebtedness........................................... 17
7.5 Encumbrances........................................... 18
7.6 Distributions.......................................... 18
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
7.7 Investments............................................ 18
7.8 Transactions with Affiliates........................... 18
7.9 Subordinated Debt...................................... 18
7.10 Inventory.............................................. 18
7.11 Compliance............................................. 18
8. EVENTS OF DEFAULT............................................ 19
8.1 Payment Default........................................ 19
8.2 Covenant Default....................................... 19
8.3 Material Adverse Change................................ 19
8.4 Attachment............................................. 19
8.5 Insolvency............................................. 20
8.6 Other Agreements....................................... 20
8.7 Subordinated Debt...................................... 20
8.8 Judgments.............................................. 20
8.9 Misrepresentations..................................... 20
9. BANK'S RIGHTS AND REMEDIES................................... 20
9.1 Rights and Remedies.................................... 20
9.2 Power of Attorney...................................... 21
9.3 Accounts Collection.................................... 22
9.4 Bank Expenses.......................................... 22
9.5 Bank's Liability for Collateral........................ 22
9.6 Remedies Cumulative.................................... 22
9.7 Demand; Protest........................................ 23
10. NOTICES...................................................... 23
11. CHOICE OF LAW AND VENUE...................................... 23
12. GENERAL PROVISIONS........................................... 24
12.1 Successors and Assigns................................. 24
12.2 Indemnification........................................ 24
12.3 Time of Essence........................................ 24
12.4 Severability of Provisions............................. 24
12.5 Amendments in Writing, Integration..................... 24
12.6 Counterparts........................................... 24
12.7 Survival............................................... 24
12.8 Confidentiality........................................ 25
</TABLE>
ii
<PAGE>
This LOAN AND SECURITY AGREEMENT is entered into as of September 24, 1997,
by and between SILICON VALLEY BANK ("Bank") and AT HOME CORPORATION
("Borrower").
RECITALS
--------
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
---------
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
----------------------------
1.1 Definitions
-----------
As used in this Agreement, the following terms shall have the
following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights to receive payments, and all other forms of payment
obligations owing to Borrower arising out of the sale or lease of goods
(including, without limitation, the right to receive payment under the licensing
of software and other technology) or the rendering of services by Borrower,
whether or not earned by performance, and any and all credit insurance,
guaranties, and other security therefor, as well as all merchandise returned to
or reclaimed by Borrower and Borrower's Books relating to any of the foregoing.
Notwithstanding the foregoing, the term "Collateral" shall not include any
general intangibles or contracts of Borrower (whether owned or held as licensee
or lessee, or otherwise) to the extent that (i) such general intangibles or
contracts are not assignable or capable of being encumbered as a matter of law
or under the terms of the license, lease or other agreement applicable thereto
(but solely to the extent that such restriction shall be enforceable under
applicable law) without the consent of the licensor or lessor thereof or other
applicable party thereto and (ii) such consent has not been obtained: provided,
--------
however, that the term "Collateral" shall include (A) any general intangible or
- -------
contract which is an Account or a proceed of, or otherwise related to the
enforcement or collection of, any Account or goods which are the subject of any
Account, and (B) any and all proceeds of any general intangibles or contracts
which are otherwise excluded to the extent that the assignment or encumbrance of
such proceeds is not so restricted, and (C) upon obtaining the consent of any
such licensor, lessor or other applicable party with respect to any such
otherwise excluded general intangibles or contracts, the proceeds of such
general intangibles or contracts that might theretofore have been excluded from
such grant of a security interest and the term "Collateral".
"Affiliate" means, with respect to any Person, any Person that
owns or controls directly or indirectly such Person, any Person that controls or
is controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, partners and, for any Person that
is a limited liability company, such Persons, managers and members.
"Bank Expenses" means all: reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
the preparation, negotiation and administration of the Loan Documents not to
exceed $5,000; and Bank's reasonable attorneys' fees and expenses incurred in
enforcing or defending the Loan Documents (including fees and expenses of appeal
or review, or those incurred in any Insolvency Proceeding), whether or not suit
is brought.
"Borrower's Books" means all of Borrower's books and records
including without limitation: ledgers; records concerning Borrower's assets or
liabilities, the Collateral, business operations or financial condition; and all
computer programs, or tape files, and the equipment, containing such
information.
"Business Day" means any day that is not a Saturday, Sunday, or
other day on which banks in the State of California are authorized or required
to close.
1
<PAGE>
"Cash Burn" has the meaning set forth in Section 6.9.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on Exhibit A attached
---------
hereto.
"Committed Equipment Line means a credit extension of Eight
Million Dollars ($8,000,000).
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; provided, however,
that the term "Contingent Obligation" shall not include endorsements for
collection or deposit or standard contractual indemnities including without
limitation indemnities provided in connection with Borrower's initial public
offering for which reserves are not required under GAAP in the ordinary course
of business. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determined amount of the primary obligation in
respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof as
determined by such Person in good faith; provided, however, that such amount
shall not in any event exceed the maximum amount of the obligations under the
guarantee or other support arrangement.
"Credit Extension" means each Equipment Advance, Letter of
Credit, Exchange Contract or any other extension of credit by Bank for the
benefit of Borrower hereunder.
"Current Assets" means, as of any applicable date, all amounts
that should, in accordance with GAAP, be included as current assets on the
consolidated balance sheet of Borrower and its Subsidiaries as at such date.
"Current Liabilities" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as current liabilities
on the consolidated balance sheet of Borrower and its Subsidiaries, as at such
date, plus, to the extent not already included therein, all outstanding Credit
Extensions made under this Agreement, including all Indebtedness that is payable
upon demand or within one year from the date of determination thereof unless
such Indebtedness is renewable or extendable at the option of Borrower or any
Subsidiary to a date more than one year from the date of determination, but
excluding Subordinated Debt.
"Debt Service Coverage" means, as measured as of the last day of
each calendar month, on a consolidated basis determined in accordance with GAAP,
the ratio of (a) an amount equal to the sum of (i) net income, plus (ii)
----
depreciation and amortization of intangible assets plus (iii) monthly interest
----
expense to (b) an amount equal to the sum of (x) all scheduled repayments and
mandatory prepayments of principal on account of long-term Debt and capitalized
lease expense for such month plus (y) monthly interest expense.
----
"Eligible Equipment" means computer and networking equipment,
software, furniture, office equipment and tenant improvements.
"Equipment" means all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments
in which Borrower has any interest.
"Equipment Advance" means a loan advance under the Committed
Equipment Line.
"Equipment Availability End Date" has the meaning set forth in
Section 2.1.1.
2
<PAGE>
"ERISA" means the Employment Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
"Exchange Contract" has the meaning set forth in Section 2.1.3.
"Foreign Exchange Reserve" has the meaning set forth in Section
2.1.3 herein.
"GAAP" means generally accepted accounting principles as in
effect in the United States from time to time.
"Indebtedness" means (a) all indebtedness for borrowed money or
the deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety bonds and
letters of credit, (b) all obligations evidenced by notes, bonds, debentures or
similar instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or
against any person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
"Inventory" means all present and future inventory in which
Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of Borrower, including such
inventory as is temporarily out of its custody or possession or in transit and
including any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above.
"Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"Letter of Credit" means a letter of credit or similar
undertaking issued by Bank pursuant to Section 2.1.2.
"Letter of Credit Reserve" has the meaning set forth in Section
2.1.2.
"Lien" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any note or
notes executed by Borrower, and any other present or future agreement entered
into between Borrower and/or for the benefit of Bank in connection with this
Agreement, all as amended, extended or restated from time to time.
"Material Adverse Effect" means a material adverse effect on (i)
the business operations or condition (financial or otherwise) of Borrower and
its Subsidiaries taken as a whole or (ii) the ability of Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents.
"Maturity Date" means September 23, 2001.
"Negotiable Collateral" means all of Borrower's present and
future letters of credit of which it is a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper.
"Obligations" means all debt, principal, interest, Bank Expenses
and other
3
<PAGE>
amounts owed to Bank by Borrower pursuant to this Agreement or any other
agreement, whether absolute or contingent, due or to become due, now existing or
hereafter arising, including any interest that accrues after the commencement of
an Insolvency Proceeding and including any debt, liability, or obligation owing
from Borrower to others that Bank may have obtained by assignment or otherwise.
"Payment Date" means the twenty-third (23rd) calendar day of each
month, commencing on the first such date after the Closing Date and ending on
the Maturity Date.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under
this Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed
in the Schedule or Borrower's financial statements;
(c) Indebtedness to trade creditors incurred in the ordinary
course of business;
(d) Subordinated Debt;
(e) Indebtedness secured by Permitted Liens; and
(f) Any other Indebtedness that does not in aggregate exceed
Twenty-Five Million Dollars ($25,000,000);
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule; and
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States of America or any agency or any State thereof
maturing within one (1) year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one (1) year from the date of
creation thereof and currently having the highest rating obtainable from either
Standard & Poor's Corporation or Moody's Investors Service, Inc.,
(iii) certificates of deposit maturing no more than one (1) year from the date
of investment therein issued by Bank, (iv) any Investments permitted by
Borrower's investment policy, as amended from time to time, provided that such
investment policy (and such amendment thereto) has been approved by Bank, which
approval shall not be unreasonably withheld, and (v) any other Investments in
the aggregate not to exceed Twenty-Five Million Dollars ($25,000,000).
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed in
the Schedule or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings and as to which adequate reserves are maintained on
Borrower's Books in accordance with GAAP, provided the same have no priority
--------
over any of Bank's security interests;
(c) Liens (i) upon or in any Equipment acquired or held by
Borrower or any of its Subsidiaries to secure the purchase price of such
Equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such Equipment, or (ii) existing on such equipment at the time of
its acquisition, provided that the Lien is confined solely to the property so
--------
acquired and improvements thereon, and the proceeds of such Equipment;
(d) Leases or subleases and licenses or sublicenses granted
to others in the ordinary course of Borrower's business not interfering in any
material respect with the business of Borrower and its Subsidiaries taken as a
whole, and any interest or title of a lessor, licensor or under any lease or
license, provided that such leases, subleases, licenses and sublicenses do not
prohibit the grant of the security interest granted hereunder; and
4
<PAGE>
(e) Liens incurred in connection with the extension, renewal
or refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (c) above, provided that any extension, renewal or
--------
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase.
"Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per annum, most
recently announced by Bank, as its "prime rate," whether or not such announced
rate is the lowest rate available from Bank.
"Quick Assets" means, as of any applicable date, the unrestricted
cash; unrestricted cash-equivalents; net, billed accounts receivable and
investments with maturities of fewer than one year of Borrower determined in
accordance with GAAP.
"Remaining Months Liquidity" has the meaning set forth in Section
6.9.
"Responsible Officer" means each of the Chief Executive Officer,
the President, the Chief Financial Officer and the Controller of Borrower.
"Schedule" means the schedule of exceptions attached hereto, if
any.
"Subordinated Debt" means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank on terms acceptable to Bank
(and identified as being such by Borrower and Bank).
"Subsidiary" means with respect to any Person, corporation,
partnership, company association, joint venture, or any other business entity of
which more than fifty percent (50%) of the voting stock or other equity
interests is owned or controlled, directly or indirectly, by such Person or one
or more Affiliates of such Person.
"Tangible Net Worth" means, as of any applicable date, the
consolidated total assets of Borrower and its Subsidiaries minus, without
-----
duplication, (i) the sum of any amounts attributable to (a) goodwill,
(b) intangible items such as unamortized debt discount and expense, patents,
trade and service marks and names, copyrights and research and development
expenses except prepaid expenses, and (c) all reserves not already deducted from
assets, and (ii) Total Liabilities.
---
"Total Liabilities" means, as of any applicable date, all
obligations that should, in accordance with GAAP, be classified as liabilities
on the consolidated balance sheet of Borrower, including in any event all
Indebtedness, but specifically excluding Subordinated Debt.
1.2 Accounting and Other Terms.
--------------------------
All accounting terms not specifically defined herein shall be
construed in accordance with GAAP and all calculations and determinations made
hereunder shall be made in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto. The terms
"including" / "includes" shall always be read as meaning "including (or
includes) without limitation," when used herein or in any other Loan Document.
2. LOAN AND TERMS OF PAYMENT
-------------------------
2.1 Credit Extensions.
-----------------
Borrower promises to pay to the order of Bank, in lawful money of
the United States of America, the aggregate unpaid principal amount of all
Credit Extensions made by Bank to Borrower hereunder. Borrower shall also pay
interest on the unpaid principal amount of such Credit Extensions at rates in
accordance with the terms hereof.
2.1.1 Equipment Advances.
------------------
5
<PAGE>
(a) Subject to and upon the terms and conditions of this
Agreement, at any time from the date hereof through September 23, 1998 (the
"Equipment Availability End Date"), Bank agrees to make advances (each an
"Equipment Advance" and, collectively, the "Equipment Advances") to Borrower in
an aggregate outstanding amount not to exceed (i) the Committed Equipment Line
minus (ii) the face amount of all outstanding Letters of Credit (including drawn
- -----
but unreimbursed Letters of Credit), minus (iii) the Foreign Exchange Reserve,
-----
minus (iv) the Cash Management Sublimit, minus (v) the Executive Guaranty
- ----- -----
Reserve. The Equipment Advances shall be used only to purchase or refinance
Eligible Equipment purchased on or after one hundred fifty (150) days prior to
the date hereof and shall not exceed one hundred percent (100%) of the invoice
amount of such equipment approved from time to time by Bank, excluding taxes,
shipping, warranty charges, freight discounts and installation expense.
(b) Interest shall accrue from the date of each
outstanding Equipment Advance at the rate specified in Section 2.2(a) and shall
be payable monthly for each month through the month in which the Equipment
Availability End Date falls. Any Equipment Advances that are outstanding on the
Equipment Availability End Date will be payable in thirty-six (36) equal monthly
installments of principal, plus all accrued interest, beginning on the Payment
Date of each month following the Equipment Availability End Date and ending on
the Maturity Date, at which time all Equipment Advances under this Section 2.1
and all other amounts due under this Agreement shall be immediately due and
payable. Equipment Advances may be prepaid at any time without penalty, but,
once repaid, may not be reborrowed.
(c) When Borrower desires to obtain an Equipment Advance,
Borrower shall notify Bank (which notice shall be irrevocable) by facsimile
transmission to be received no later than 3:00 p.m. Pacific time one (1)
Business Day before the day on which the Equipment Advance is to be made. Such
notice shall be substantially in the form of Exhibit B. The notice shall be
---------
signed by a Responsible Officer and shall constitute a representation and
warranty by Borrower that the requested Equipment Advance is for the purchase of
Eligible Equipment.
2.1.2 Letters of Credit.
-----------------
(a) Subject to the terms and conditions of this
Agreement, Bank agrees to issue or cause to be issued Letters of Credit for the
account of Borrower in an aggregate outstanding face amount not to exceed the
Committed Equipment Line minus the aggregate Equipment Advances, provided that
----- --------
the aggregate face amount of outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit and any Letter of Credit Reserve) shall not in
any case exceed Three Million Dollars ($3,000,000). Each Letter of Credit shall
have an expiry date no later than the Maturity Date. All Letters of Credit shall
be, in form and substance, acceptable to Bank in its sole discretion and shall
be subject to the terms and conditions of Bank's form of standard Application
and Letter of Credit Agreement.
(b) The obligation of Borrower to immediately reimburse
Bank for drawings made under Letters of Credit shall be absolute, unconditional
and irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement and such Letters of Credit, under all circumstances whatsoever.
Borrower shall indemnify, defend, protect and hold Bank harmless from any loss,
cost, expense or liability, including, without limitation, reasonable attorneys'
fees, arising out of or in connection with any Letters of Credit.
(c) Borrower may request that Bank issue a Letter of
Credit payable in a currency other than United States Dollars. If a demand for
payment is made under any such Letter of Credit, Bank shall treat such demand as
an Advance to Borrower of the equivalent of the amount thereof (plus cable
charges) in United States currency at the then prevailing rate of exchange in
San Francisco, California, for sales of that other currency for cable transfer
to the country of which it is the currency.
(d) Upon the issuance of any Letter of Credit payable in
a currency other than United States Dollars, Bank shall create a reserve under
the Committed Equipment Line for Letters of Credit against fluctuations in
currency exchange rates, in an amount equal to ten percent (10%) of the face
amount of such Letter of Credit. The amount of such reserve may be amended by
Bank from time to time to account for fluctuations in the exchange rate. The
availability of funds under the Committed Equipment Line shall be reduced by the
amount of such reserve for so long as such Letter of Credit remains outstanding.
6
<PAGE>
2.1.3 Foreign Exchange Contract; Foreign Exchange Settlements.
-------------------------------------------------------
(a) Subject to the terms of this Agreement, Borrower may
enter into foreign exchange contracts (the "Exchange Contracts") not to exceed
an aggregate amount of One Million Dollars ($1,000,000) (the "Contract Limit"),
pursuant to which Bank shall sell to or purchase from Borrower foreign currency
on a spot or future basis. Borrower shall not request any Exchange Contracts at
any time it is out of compliance with any of the provisions of this Agreement.
All Exchange Contracts must provide for delivery of settlement on or before the
Maturity Date. The amount available under the Committed Equipment Line at any
time shall be reduced by the following amounts (the "Foreign Exchange Reserve")
on any given day (the "Determination Date"): (i) on all outstanding Exchange
Contracts on which delivery is to be effected or settlement allowed more than
two (2) Business Days after the Determination Date, ten percent (10%) of the
gross amount of the Exchange Contracts; plus (ii) on all outstanding Exchange
Contracts on which delivery is to be effected or settlement allowed within two
(2) Business Days after the Determination Date, one hundred percent (100%) of
the gross amount of the Exchange Contracts.
(b) Bank may, in its discretion, terminate the Exchange
Contracts at any time (a) that an Event of Default occurs or (b) that there is
no sufficient availability under the Committed Equipment Line and Borrower does
not have available funds in its bank account to satisfy the Foreign Exchange
Reserve. If Bank terminates the Exchange Contracts, and without limitation of
any applicable indemnities, Borrower agrees to reimburse Bank for any and all
fees, costs and expenses relating thereto or arising in connection therewith.
(c) Borrower shall not permit the total gross amount of
all Exchange Contracts on which delivery is to be effected and settlement
allowed in any two (2) Business Day period to be more than One Million Dollars
($1,000,000) (the "Settlement Limit"), nor shall Borrower permit the total gross
amount of all Exchange Contracts to which Borrower is a party, outstanding at
any one time, to exceed the Contract Limit.
(d) In the case of Borrower's purchase of foreign
currency, Borrower in advance shall instruct Bank upon settlement either to
treat the settlement amount as an advance under the Committed Equipment Line, or
to debit Borrower's account for the amount settled.
(e) Borrower shall execute all standard form applications
and agreements of Bank in connection with the Exchange Contracts and, without
limiting any of the terms of such applications and agreements, Borrower will pay
all standard fees and charges of Bank in connection with the Exchange Contracts.
2.1.4 Cash Management Sublimit. Subject to the terms and
------------------------
conditions of this Agreement, Borrower may utilize up to an aggregate amount not
to exceed One Million Dollars ($1,000,000) (the "Cash Management Sublimit") for
cash management services provided by Bank, which services may include merchant
services, PC-ACH, direct deposit of payroll, business credit card, Firstax, and
other related check cashing services as defined in that certain Cash Management
Services Agreement provided to Borrower in connection herewith (a "Cash
Management Service", or the "Cash Management Services"). Any amounts actually
paid by Bank in respect of a Cash Management Service or Cash Management Services
shall, when paid, constitute an Equipment Advance under the Committed Equipment
Line.
2.1.5 Executive Guarantee Reserve. Subject to the terms and
---------------------------
conditions of this Agreement, at Bank's sole discretion, Bank may agree to make
or arrange loans to executives of Borrower in an aggregate amount not to exceed
Five Hundred Thousand Dollars ($500,000). Any such loans shall be guaranteed by
Borrower, and shall be subject to terms and conditions agreed to separately in
writing among any such executives, Bank, and Borrower (the "Guaranteed Executive
Loans"). All agreements executed in connection with the Guaranteed Executive
Loans shall be, in form and substance, acceptable to Bank, in its sole
discretion. The amount available under the Committed Equipment Line at any time
shall be reduced by the aggregate outstanding amount of principal, interest and
other amounts due in respect of the Guaranteed Executive Loans (the "Executive
Guaranty Reserve").
2.2 Interest Rates, Payments, and Calculations.
------------------------------------------
(a) Interest Rate. Except as set forth in Section 2.2(b),
-------------
any Equipment
7
<PAGE>
Advances shall bear interest on the average daily balance thereof, at a per
annum rate equal to the Prime Rate.
(b) Default Rate. All Obligations shall bear interest, from
------------
and during the continuance of an Event of Default, at a rate equal to four (4)
percentage points above the interest rate applicable immediately prior to the
occurrence of the Event of Default.
(c) Payments. Interest hereunder shall be due and payable
--------
on each Payment Date. Borrower hereby authorizes Bank to debit any accounts with
Bank, including, without limitation, Account Number 3300033101 for payments of
principal and interest due on the Obligations and any other amounts owing by
Borrower to Bank. Bank will notify Borrower of all debits which Bank has made
against Borrower's accounts. Any such debits against Borrower's accounts in no
way shall be deemed a set-off. Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.
(d) Computation. In the event the Prime Rate is changed
-----------
from time to time hereafter, the applicable rate of interest hereunder shall be
increased or decreased effective as of 12:01 a.m. on the day the Prime Rate is
changed, by an amount equal to such change in the Prime Rate. All interest
chargeable under the Loan Documents shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed. Bank shall
notify Borrower of any changes to the Prime Rate.
2.3 Crediting Payments.
------------------
Prior to the occurrence of an Event of Default, Bank shall credit
a wire transfer of funds, check or other item of payment to such deposit account
or Obligation as Borrower specifies. After the occurrence of an Event of
Default, the receipt by Bank of any wire transfer of funds, check, or other item
of payment, whether directed to Borrower's deposit account with Bank or to the
Obligations or otherwise, shall be immediately applied to conditionally reduce
Obligations. Payments shall not be considered a payment in respect of the
Obligations unless such payment is of immediately available federal funds (e.g.
wire transfers) or unless and until such check or other item of payment is
honored when presented for payment. Notwithstanding anything to the contrary
contained herein, any wire transfer or payment received by Bank after 12:00 noon
Pacific time shall be deemed to have been received by Bank as of the opening of
business on the immediately following Business Day. Whenever any payment to Bank
under the Loan Documents would otherwise be due (except by reason of
acceleration) on a date that is not a Business Day, such payment shall instead
be due on the next Business Day, and additional fees or interest, as the case
may be, shall accrue and be payable for the period of such extension.
2.4 Fees.
----
Borrower shall pay to Bank the following:
(a) Facility Fee. A Facility Fee equal to Ten Thousand
------------
Dollars ($10,000), which fee shall be due on the Closing Date and shall be fully
earned and non-refundable; and an additional Facility Fee equal to Ten Thousand
Dollars ($10,000), which fee shall be due if and when the outstanding Equipment
Advances under this Agreement are equal to or greater than Four Million Dollars
($4,000,000).
(b) Bank Expenses. Upon demand from Bank, including, without
-------------
limitation, upon the date hereof, all Bank Expenses incurred through the date
hereof, including reasonable attorneys' fees and expenses not to exceed
[$5,000], plus Bank Expenses, including reasonable attorneys' fees and expenses,
incurred in the enforcement of the Loan Documents.
2.5 Additional Costs.
----------------
In case any change in any law, regulation, treaty or official
directive or the interpretation or application thereof by any court or any
governmental authority charged with the administration thereof or the compliance
with any guideline or request of any central bank or other governmental
authority (whether or not having the force of law), in each case after the date
of this Agreement:
8
<PAGE>
(a) subjects Bank to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by Borrower or
otherwise with respect to the transactions contemplated hereby (except for taxes
on the overall net income of Bank imposed by the United States of America or any
political subdivision thereof);
(b) imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar requirement against assets held
by, or deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect to its
performance under this Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans, Bank shall notify Borrower thereof. Borrower agrees to pay to Bank
the amount of such increase in cost, reduction in income or additional expense
as and when such cost, reduction or expense is incurred or determined, upon
presentation by Bank of a statement of the amount and setting forth Bank's
calculation thereof, all in reasonable detail, which statement shall be deemed
true and correct absent manifest error.
2.6 Term.
----
Except as otherwise set forth herein, this Agreement shall become
effective on the Closing Date and, subject to Section 12.7, shall continue in
full force and effect for a term ending on the Maturity Date. Notwithstanding
the foregoing, Bank shall have the right to terminate its obligation to make
Credit Extensions under this Agreement immediately and without notice upon the
occurrence and during the continuance of an Event of Default. Notwithstanding
termination of this Agreement, Bank's lien on the Collateral shall remain in
effect for so long as any Obligations (excluding Obligations under Section 2.5
and 12.2 to the extent they remain inchoate at the time outstanding payment
obligations are paid in full) are outstanding.
3. CONDITIONS OF LOANS
-------------------
3.1 Conditions Precedent to Initial Credit Extension.
------------------------------------------------
The obligation of Bank to make the initial Credit Extension is
subject to the condition precedent that Bank shall have received, in form and
substance satisfactory to Bank, the following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with respect
to articles, bylaws, incumbency and resolutions authorizing the execution and
delivery of this Agreement;
(c) financing statement (Form UCC-1);
(d) insurance certificate;
(e) payment of the fees and Bank Expenses then due specified
in Section 2.4 hereof; and
(f) such other documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Credit Extensions.
---------------------------------------------
The obligation of Bank to make each Credit Extension, including
the initial Credit Extension, is further subject to the following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as
provided in Section 2.1; and
9
<PAGE>
(b) the representations and warranties contained in Section 5
shall be true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Credit Extension as
though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would result from such Credit Extension. The
making of each Credit Extension shall be deemed to be a representation and
warranty by Borrower on the date of such Credit Extension as to the accuracy of
the facts referred to in this Section 3.2(b).
4. CREATION OF SECURITY INTEREST
-----------------------------
4.1 Grant of Security Interest.
--------------------------
Borrower grants and pledges to Bank a continuing security
interest in all presently existing and hereafter acquired or arising Collateral
in order to secure prompt payment of any and all Obligations and in order to
secure prompt performance by Borrower of each of its covenants and duties under
the Loan Documents. Except as set forth in the Schedule, such security interest
constitutes a valid, first priority security interest in the presently existing
Collateral, and will constitute a valid, first priority security interest in
Collateral acquired after the date hereof. Notwithstanding termination of this
Agreement, Bank's Lien on the Collateral shall remain in effect for so long as
any Obligations are outstanding (excluding Obligations under Section 2.5 and
12.2 to the extent they remain inchoate at the time outstanding payment
obligations are paid in full).
4.2 Delivery of Additional Documentation Required.
---------------------------------------------
Borrower shall from time to time execute and deliver to Bank, at
the reasonable request of Bank, all Negotiable Collateral, all financing
statements and other documents that Bank may reasonably request, in form
satisfactory to Bank, to perfect and continue perfected Bank's security
interests in the Collateral and in order to fully consummate all of the
transactions contemplated under the Loan Documents.
4.3 Right to Inspect.
----------------
Bank (through any of its officers, employees, or agents) shall
have the right, upon reasonable prior notice, from time to time during
Borrower's usual business hours, to inspect Borrower's Books and to make copies
thereof and to check, test, and appraise the Collateral in order to verify
Borrower's financial condition or the amount, condition of, or any other matter
relating to, the Collateral.
4.4 Release of Security Interest.
----------------------------
Bank shall release the security interest in the Collateral upon
repayment of all Obligations and termination of all commitments to make any
Credit Extensions hereunder.
5. REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification.
----------------------------------
Borrower and each Subsidiary is a corporation duly existing and
in good standing under the laws of its state of incorporation and qualified and
licensed to do business in, and is in good standing in, any state in which the
conduct of its business or its ownership of property requires that it be so
qualified, except for states as to which any failure to so qualify would not
have a Material Adverse Effect.
5.2 Due Authorization; No Conflict.
------------------------------
The execution, delivery, and performance of the Loan Documents
are within Borrower's powers, have been duly authorized, and are not in conflict
with nor constitute a breach of any provision contained in Borrower's
Articles/Certificate of Incorporation or Bylaws, nor will they constitute an
event of default under any material agreement to which Borrower is a party or by
which Borrower is bound. Borrower is not in default under any agreement to which
it is a party or by which it is bound, which default could reasonably be
expected to have a Material Adverse Effect.
10
<PAGE>
5.3 No Prior Encumbrances.
---------------------
Borrower has good and indefeasible title to the Collateral, free
and clear of Liens, except for Permitted Liens.
5.4 Merchantable Inventory.
----------------------
All Inventory is in all material respects of good and marketable
quality, free from all material defects.
5.5 Name; Location of Chief Executive Office.
----------------------------------------
Except as disclosed in the Schedule, and except for At Home
Corporation, @Home Network, and @Work, Borrower has not done business and will
not, without at least thirty (30) days prior written notice to Bank, do business
under any name other than that specified on the signature page hereof. The chief
executive office of Borrower is located at the address indicated in Section 10
hereof.
5.6 Litigation.
----------
Except as set forth in the Schedule, there are no actions or
proceedings pending or, to Borrower's knowledge, threatened by or against
Borrower or any Subsidiary before any court or administrative agency in which an
adverse decision could reasonably be expected to have a Material Adverse Effect
or a material adverse effect on Borrower's interest or Bank's security interest
in the Collateral.
5.7 No Material Adverse Change in Financial Statements.
--------------------------------------------------
All consolidated financial statements related to Borrower and any
Subsidiary that have been delivered by Borrower to Bank fairly present in all
material respects Borrower's consolidated financial condition as of the date
thereof and Borrower's consolidated results of operations for the period then
ended. There has not been a material adverse change in the consolidated
financial condition of Borrower since the date of the most recent of such
financial statements submitted to Bank on or about the Closing Date.
5.8 Solvency.
--------
The fair saleable value of Borrower's assets (including goodwill
minus disposition costs) exceeds the fair value of its liabilities; the Borrower
is not left with unreasonably small capital after the transactions contemplated
by this Agreement; and Borrower is able to pay its debts (including trade debts)
as they mature.
5.9 Regulatory Compliance.
---------------------
Borrower and each Subsidiary has met the minimum funding
requirements of ERISA with respect to any employee benefit plans subject to
ERISA. No event has occurred resulting from Borrower's failure to comply with
ERISA that is reasonably likely to result in Borrower's incurring any liability
that could reasonably be expected to have a Material Adverse Effect. Borrower is
not an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940. Borrower is not
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could reasonably be
expected to have a Material Adverse Effect.
11
<PAGE>
5.10 Environmental Condition.
-----------------------
None of Borrower's or any Subsidiary's properties or assets has
ever been used by Borrower or any Subsidiary or, to the best of Borrower's
knowledge, by previous owners or operators, in the disposal of, or to produce,
store, handle, treat, release, or transport, any hazardous waste or hazardous
substance other than in material accordance with applicable law violation of
which could reasonably be expected to have a Material Adverse Effect; to the
best of Borrower's knowledge, none of Borrower's properties or assets has ever
been designated or identified in any manner pursuant to any material
environmental protection statute as a hazardous waste or hazardous substance
disposal site, or a candidate for closure pursuant to any environmental
protection statute, which could reasonably be expected to have a Material
Adverse Effect; no material lien arising under any environmental protection
statute has attached to any revenues or to any real or personal property owned
by Borrower or any Subsidiary which could reasonably be expected to have a
Material Adverse Effect; and neither Borrower nor any Subsidiary has received a
summons, citation, notice, or directive from the Environmental Protection Agency
or any other federal, state or other governmental agency concerning any material
action or omission by Borrower or any Subsidiary resulting in the release or
other disposition of material hazardous waste or hazardous substances into the
environment which could reasonably be expected to have a Material Adverse
Effect.
5.11 Taxes.
-----
Borrower and each Subsidiary has filed or caused to be filed all
tax returns required to be filed on a timely basis, and has paid, or has made
adequate provision for the payment of, all taxes reflected therein, except those
being contested in good faith by proper proceedings with adequate reserves under
GAAP.
5.12 Subsidiaries.
------------
Borrower does not own any stock, partnership interest or other
equity securities of any Person, except for Permitted Investments.
5.13 Government Consents.
-------------------
Borrower and each Subsidiary has obtained all consents, approvals
and authorizations of, made all declarations or filings with, and given all
notices to, all governmental authorities that are necessary for the continued
operation of Borrower's business as currently conducted except where the failure
to obtain any such consent, approval or authorization, to make any such
declaration or filing, or to be given any such notice could not reasonably be
expected to have a Material Adverse Effect.
5.14 Full Disclosure.
---------------
No representation, warranty or other statement made by Borrower
in any certificate or written statement furnished to Bank when taken as a whole
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates or
statements not misleading.
6. AFFIRMATIVE COVENANTS
---------------------
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
a Credit Extension hereunder, Borrower shall do all of the following:
6.1 Good Standing.
-------------
Borrower shall maintain its and each of its Subsidiaries'
corporate existence and good standing in its jurisdiction of incorporation and
maintain qualification in each jurisdiction in which the failure to so qualify
could reasonably be expected to have a Material Adverse Effect. Borrower shall
maintain, and shall cause each of its Subsidiaries to maintain, to the extent
consistent with prudent management of Borrower's business, in force all
licenses, approvals and agreements, the loss of which could reasonably be expect
to have a Material Adverse Effect.
12
<PAGE>
6.2 Government Compliance.
---------------------
Borrower shall meet, and shall cause each Subsidiary to meet, the
minimum funding requirements of ERISA with respect to any employee benefit plans
subject to ERISA. Borrower shall comply, and shall cause each Subsidiary to
comply, with all statutes, laws, ordinances and government rules and regulations
to which it is subject, noncompliance with which could reasonably be expected to
have a Material Adverse Effect or a material adverse effect on the Collateral or
the priority of Bank's Lien on the Collateral.
6.3 Financial Statements, Reports, Certificates.
-------------------------------------------
Borrower shall deliver to Bank: (a) as soon as available, but in
any event within thirty (30) days after the end of each month, a company
prepared consolidated balance sheet and income statement covering Borrower's
consolidated operations during such period, in a form and certified by an
Officer of Borrower reasonably acceptable to Bank; (b) as soon as available, but
in any event within ninety (90) days after the end of Borrower's fiscal year,
audited consolidated financial statements of Borrower prepared in accordance
with GAAP, consistently applied, together with an opinion on such financial
statements of an independent certified public accounting firm reasonably
acceptable to Bank; (c) within five (5) days of filing, copies of all
statements, reports and notices sent or made available generally by Borrower to
its security holders or to any holders of Subordinated Debt and all reports on
Form 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission;
(d) promptly upon receipt of notice thereof, a report of any legal actions
pending or threatened against Borrower or any Subsidiary that could result in
damages or costs to Borrower or any Subsidiary of One Hundred Thousand Dollars
($100,000) or more; and (e) such budgets, sales projections, operating plans or
other financial information as Bank may reasonably request from time to time.
Within thirty (30) days after the last day of each month,
Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the form
of Exhibit C hereto.
---------
6.4 Inventory; Returns.
------------------
Borrower shall keep all Inventory in good and marketable
condition, free from all material defects. Returns and allowances, if any, as
between Borrower and its account debtors shall be on the same basis and in
accordance with the usual customary practices of Borrower, as they exist at the
time of the execution and delivery of this Agreement. Borrower shall promptly
notify Bank of all returns and recoveries and of all disputes and claims, where
the return, recovery, dispute or claim involves more than Fifty Thousand Dollars
($50,000).
6.5 Taxes.
-----
Borrower shall make, and shall cause each Subsidiary to make, due
and timely payment or deposit of all material federal, state, and local taxes,
assessments, or contributions required of it by law, and will execute and
deliver to Bank, on demand, appropriate certificates attesting to the payment or
deposit thereof; and Borrower will make, and will cause each Subsidiary to make,
timely payment or deposit of all material tax payments and withholding taxes
required of it by applicable laws, including, but not limited to, those laws
concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal
income taxes, and will, upon request, furnish Bank with proof satisfactory to
Bank indicating that Borrower or a Subsidiary has made such payments or
deposits; provided that Borrower or a Subsidiary need not make any payment if
the amount or validity of such payment is (i) contested in good faith by
appropriate proceedings, (ii) is reserved against (to the extent required by
GAAP) by Borrower and (iii) no lien other than a Permitted Lien results.
6.6 Insurance.
---------
(a) Borrower, at its expense, shall keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as ordinarily insured against by other
owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain
insurance relating to Borrower's ownership and use of the Collateral in amounts
and of a type that are customary to businesses similar to Borrower's.
13
<PAGE>
(b) All such policies of insurance shall be in such form, with
such companies, and in such amounts as are reasonably satisfactory to Bank. All
such policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof and all liability insurance policies shall show the Bank as an
additional insured, and shall specify that the insurer must give at least twenty
(20) days notice to Bank before canceling its policy for any reason. At Bank's
request, Borrower shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. All proceeds
payable under any such policy shall, at the option of Bank, be payable to Bank
to be applied on account of the Obligations. Bank acknowledges that Borrower's
current insurance policies in effect satisfy the requirements hereunder.
6.7 Principal Depository.
--------------------
Borrower shall maintain its operating accounts with Bank.
6.8 Tangible Net Worth.
------------------
Borrower shall maintain, as of the last day of each calendar
month, a Tangible Net Worth of not less than Forty Million Dollars
($40,000,000).
6.9 Remaining Months Liquidity.
--------------------------
Subject to Section 6.10, Borrower shall maintain, as of the last
day of each month, at least nine (9) months Remaining Months Liquidity.
"Remaining Months Liquidity" is defined as unrestricted cash and cash
equivalents divided by Cash Burn. "Cash Burn" means the average for the previous
three (3) months from the date of measurement of (i) unrestricted cash and cash
equivalents as of the last day of the immediately preceding month, minus (ii)
-----
cash and cash equivalents as of the last day of the applicable month plus
----
(B) any decrease in short and long term debt (including subordinated debt) or in
capitalized lease obligations or in contributed equity minus (C) any increase in
-----
short or long term debt (including subordinated debt) or in capitalized lease
obligations or in contributed equity.
6.10 Liquidity, Debt Service Coverage.
--------------------------------
Subject to the remainder of this section, Borrower shall
maintain, as of the last day of each calendar month, a Liquidity Ratio of at
least 2.0 to 1.0. Notwithstanding the foregoing, if Borrower attains three
consecutive months of Debt Service Coverage of not less than 2.0 to 1.0, then
the Liquidity Ratio and Remaining Months Liquidity will no longer be tested and
instead Borrower shall maintain, as of the last day of each calendar month, a
Debt Service Coverage of at least 2.0 to 1.0. For purposes of this Section,
"Liquidity Ratio" means as of any date for which it is tested, the ratio of (a)
unrestricted cash and cash equivalents to (b) the aggregate amount of
outstanding Equipment Advances.
6.11 Further Assurances.
------------------
At any time and from time to time Borrower shall execute and
deliver such further instruments and take such further action as may reasonably
be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS
------------------
Borrower covenants and agrees that, so long as any Credit Extension
hereunder shall be available and until payment in full of the outstanding
Obligations, Borrower will not do any of the following:
14
<PAGE>
7.1 Dispositions.
------------
Convey, sell, lease, transfer or otherwise dispose of
(collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer, all
or any substantial part of its business or property, other than Transfers (i) of
inventory in the ordinary course of business, (ii) of non-exclusive licenses and
similar arrangements for the use of the property of Borrower or its Subsidiaries
in the ordinary course of business, (iii) Transfers of worn-out or obsolete
Equipment, (iv) of accounts receivable for collection purposes, (v) in
connection with Permitted Liens, Permitted Indebtedness or Permitted Investment,
(vi) in connection with the payment of any obligation of Borrower incurred in
good faith for which Borrower has received reasonably equivalent value, (vii) of
intellectual property made in good faith in exchange for reasonably equivalent
value other than a substantial portion in one or more transactions or series of
related transactions, (viii) Transfers made in good faith in the ordinary course
of business, and (ix) Transfers of other property made in good faith in exchange
for reasonably equivalent value in an aggregate amount not to exceed Ten Million
Dollars ($10,000,000); provided in any case that Borrower shall not transfer any
Equipment that Bank has financed without Bank's consent; provided further that
Bank will not unreasonably withhold its consent to any Transfer permitted under
clause (ix) hereof.
7.2 Changes in Business, Ownership, Management or Business Locations.
----------------------------------------------------------------
Engage in any business, or permit any of its Subsidiaries to
engage in any business, other than the businesses currently engaged in by
Borrower and any business substantially similar or related thereto (or
incidental thereto), or suffer a change of fifty percent (50%) or more in the
composition of Borrower's board of directors. Borrower will not, without at
least twenty (20) days prior written notification to Bank, relocate its chief
executive office or add any new offices or business locations in which Borrower
maintains assets with a fair market value of more than Seven Hundred Fifty
Thousand Dollars ($750,000).
7.3 Mergers or Acquisitions.
-----------------------
Without Bank's consent, which will not be unreasonably withheld,
merge or consolidate, or permit any of its Subsidiaries to merge or consolidate,
with or into any other business organization, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock or
property of another Person other than Permitted Investments.
7.4 Indebtedness.
------------
Create, incur, assume or be or remain liable with respect to any
Indebtedness, or permit any Subsidiary so to do, other than Permitted
Indebtedness.
7.5 Encumbrances.
------------
Create, incur, assume or suffer to exist any Lien with respect to
any of its property, or assign or otherwise convey any right to receive income,
including the sale of any Accounts, or permit any of its Subsidiaries so to do,
except for Permitted Liens; provided Borrower may grant a security interest in
its intellectual property in transactions entered into in good faith and for
reasonably equivalent value, other than in a substantial portion of such
intellectual property granted in one or more transactions or series of related
transaction.
7.6 Distributions.
-------------
Pay any dividends or make any other distribution or payment on
account of or in redemption, retirement or purchase of any capital stock.
7.7 Investments.
-----------
Directly or indirectly acquire or own, or make any Investment in
or to any Person, or permit any of its Subsidiaries so to do, other than
Permitted Investments.
15
<PAGE>
7.8 Transactions with Affiliates.
----------------------------
Without Bank's consent, which will not be unreasonably withheld,
directly or indirectly enter into or permit to exist any material transaction
with any Affiliate of Borrower except for transactions that are in the ordinary
course of Borrower's business, upon fair and reasonable terms that are no less
favorable to Borrower than would be obtained in an arm's length transaction with
a non-affiliated Person; provided that this Section 7.8 shall not prohibit
transactions approved by Bank, such approval not to be unreasonably withheld,
and transactions described in the Form S-1 filed in connection with Borrower's
initial public offering.
7.9 Subordinated Debt.
-----------------
Make any payment in respect of any Subordinated Debt, or permit
any of its Subsidiaries to make any such payment, except in compliance with the
terms of such Subordinated Debt, or amend any provision contained in any
documentation relating to the Subordinated Debt which Bank determines undermines
the status of such debt as Subordinated Debt without Bank's prior written
consent.
7.10 Inventory.
---------
Store the Inventory with a bailee, warehouseman, or similar party
unless Bank has received a pledge of any warehouse receipt covering such
Inventory. Except for Inventory sold in the ordinary course of business and
except for such other locations as Bank may approve in writing, Borrower shall
keep the Inventory only at the location set forth in Section 10 hereof and such
other locations of which Borrower gives Bank prior written notice and as to
which Borrower signs and files a financing statement where needed to perfect
Bank's security interest.
7.11 Compliance.
----------
Become an "investment company" or a company controlled by an
"investment company," within the meaning of the Investment Company Act of 1940,
or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose; fail
to meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the
Federal Fair Labor Standards Act or violate any other law or regulation, which
violation could have a Material Adverse Effect or a material adverse effect on
the Collateral or the priority of Bank's Lien on the Collateral, or permit any
of its Subsidiaries to do any of the foregoing.
8. EVENTS OF DEFAULT
-----------------
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
8.1 Payment Default.
---------------
If Borrower fails to pay, when due, any of the Obligations;
16
<PAGE>
8.2 Covenant Default.
----------------
(a) If Borrower fails to perform any obligation under Sections
6.8, 6.9 or 6.10 or violates any of the covenants contained in Article 7 of this
Agreement; notwithstanding the foregoing, if Borrower secures the Obligations
with cash in which Bank has had a perfected security interest for not less than
ninety (90) days on terms reasonably satisfactory to Bank or Bank otherwise
agrees, then, for so long as the Obligations remain cash-secured, Borrower's
failure to comply with any of Sections 6.8, 6.9 or 6.10 shall not be an Event of
Default (provided that no Credit Extensions will be required to be made during
such period of noncompliance unless those Cash Extensions are also secured by
cash on terms reasonably satisfactory to Bank); or
(b) If Borrower fails or neglects to perform, keep, or observe
any other material term, provision, condition, covenant, or agreement contained
in this Agreement, in any of the Loan Documents, or in any other present or
future agreement between Borrower and Bank and as to any default under such
other term, provision, condition, covenant or agreement that can be cured, has
failed to cure such default within twenty (20) days after the earlier of the
date that Borrower knew or reasonably should have known of the occurrence
thereof or the date that Bank gives Borrower notice of such default; provided,
however, that if the default cannot by its nature be cured within the twenty
(20) day period or cannot after diligent attempts by Borrower be cured within
such twenty (20) day period, and such default is likely to be cured within a
reasonable time, then Borrower shall have an additional reasonable period (which
shall not in any case exceed forty-five (45) days) to attempt to cure such
default, and within such reasonable time period the failure to have cured such
default shall not be deemed an Event of Default (provided that no Credit
Extensions will be required to be made during such cure period);
8.3 Material Adverse Change.
-----------------------
If there (i) occurs a material adverse change in the business,
operations, or condition (financial or otherwise) of Borrower or (ii) is a
material impairment of the prospect of repayment of any portion of the
Obligations or (iii) is a material impairment of the value or priority of Bank's
security interests in the Collateral, and Bank gives notice of any of the
foregoing to Borrower;
8.4 Attachment.
----------
If any material portion of Borrower's assets is attached, seized,
subjected to a writ or distress warrant, or is levied upon, or comes into the
possession of any trustee, receiver or person acting in a similar capacity and
such attachment, seizure, writ or distress warrant or levy has not been removed,
discharged or rescinded within twenty (20) days, or if Borrower is enjoined,
restrained, or in any way prevented by court order from continuing to conduct
all or any material part of its business affairs, or if a judgment or other
claim becomes a lien or encumbrance upon any material portion of Borrower's
assets, or if a notice of lien, levy, or assessment is filed of record with
respect to any of Borrower's assets by the United States Government, or any
department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within twenty (20)
days after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Credit Extensions will be required to be made during such cure period);
8.5 Insolvency.
----------
If Borrower becomes insolvent, or if an Insolvency Proceeding is
commenced by Borrower, or if an Insolvency Proceeding is commenced against
Borrower and is not dismissed or stayed within forty-five (45) days (provided
that no Credit Extensions will be made prior to the dismissal of such Insolvency
Proceeding);
6.6 Other Agreements.
----------------
If there is a default in any agreement to which Borrower is a
party with a third party or parties resulting in a right by such third party or
parties, whether or not exercised, to accelerate the maturity of any
Indebtedness in an amount in excess of Five Hundred Thousand Dollars ($500,000)
or that could reasonably be expected to have a Material Adverse Effect;
17
<PAGE>
8.7 Subordinated Debt.
-----------------
If Borrower makes any payment on account of Subordinated Debt, in
violation of any subordination agreement entered into with Bank or the terms of
any subordination provisions contained in any document or instrument evidencing
such Subordinated Debt;
8.8 Judgments.
---------
If a judgment or judgments for the payment of money in an amount,
individually or in the aggregate, of at least Two Hundred Thousand Dollars
($200,000) shall be rendered against Borrower and shall remain unsatisfied and
unstayed for a period of thirty (30) days (provided that no Credit Extensions
will be made prior to the satisfaction or stay of such judgment); or
8.9 Misrepresentations.
------------------
If any material misrepresentation or material misstatement exists
now or hereafter in any warranty or representation set forth herein or in any
certificate or writing delivered to Bank by Borrower or any Person acting on
Borrower's behalf pursuant to this Agreement or to induce Bank to enter into
this Agreement or any other Loan Document.
9. BANK'S RIGHTS AND REMEDIES
--------------------------
9.1 Rights and Remedies.
-------------------
Upon the occurrence and during the continuance of an Event of
Default, Bank may, at its election, without notice of its election and without
demand, do any one or more of the following (but only if permitted by the Code)
all of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable (provided that upon the occurrence of an Event of Default described in
Section 8.5 all Obligations shall become immediately due and payable without any
action by Bank);
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement between
Borrower and Bank;
(c) Demand that Borrower (i) deposit cash with Bank in an amount
equal to the amount of any Letters of Credit remaining undrawn, as collateral
security for the repayment of any future drawings under such Letters of Credit,
and Borrower shall forthwith deposit and pay such amounts, and (ii) pay in
advance all Letters of Credit fees scheduled to be paid or payable over the
remaining term of the Letters of Credit;
(d) Liquidate any Exchange Contracts not yet settled and demand
that Borrower immediately deposit cash with Bank in an amount sufficient to
cover any losses incurred by Bank due to liquidation of the Exchange Contracts
at the then prevailing market price;
(e) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
(f) Without notice to or demand upon Borrower, make such
payments and do such acts as Bank considers necessary or reasonable to protect
its security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires, and to make the Collateral available to Bank as
Bank may designate. Borrower authorizes Bank to enter the premises where the
Collateral is located, to take and maintain possession of the Collateral, or any
part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or lien which in Bank's determination appears to be prior or superior to
its security interest and to pay all expenses incurred in connection therewith.
With respect to any of Borrower's premises, Borrower hereby grants Bank a
license to enter such premises and to occupy the same, without charge, in order
to exercise any of Bank's rights or remedies provided herein, at law, in equity,
or otherwise;
(g) Set off and apply to the Obligations any and all (i)
balances and deposits of Borrower held by Bank, or (ii) indebtedness at any time
owing to or for the credit or the account of
18
<PAGE>
Borrower held by Bank;
(h) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral;
(i) Sell the Collateral in accordance with the Code, by way of
one or more contracts or transactions, for cash or on terms, in such manner and
at such places (including Borrower's premises) as Bank determines is
commercially reasonable, and apply the proceeds thereof to the Obligations in
whatever manner or order Bank deems appropriate;
(j) Bank may credit bid in accordance with the Code; and
(k) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
9.2 Power of Attorney.
-----------------
Effective only upon the occurrence and during the continuance of
an Event of Default, Borrower hereby irrevocably appoints Bank (and any of
Bank's designated officers, or employees) as Borrower's true and lawful attorney
to: (a) send requests for verification of Accounts or notify account debtors of
Bank's security interest in the Accounts; (b) endorse Borrower's name on any
checks or other forms of payment or security that may come into Bank's
possession; (c) sign Borrower's name on any invoice or bill of lading relating
to any Account, drafts against account debtors, schedules and assignments of
Accounts, verifications of Accounts, and notices to account debtors; (d) make,
settle, and adjust all claims under and decisions with respect to Borrower's
policies of insurance; (e) settle and adjust disputes and claims respecting the
accounts directly with account debtors, for amounts and upon terms which Bank
determines to be reasonable; and (f) to file, in its sole discretion, one or
more financing or continuation statements and amendments thereto, relative to
any of the Collateral without the signature of Borrower where permitted by law;
and provided Bank may exercise such power of attorney to sign the name of
Borrower on any of the documents described in Section 4.2 regardless of whether
an Event of Default has occurred. The appointment of Bank as Borrower's attorney
in fact, and each and every one of Bank's rights and powers, being coupled with
an interest, is irrevocable until all of the Obligations have been fully repaid
and performed and Bank's obligation to provide advances hereunder is terminated.
9.3 Accounts Collection.
-------------------
At any time from the date of this Agreement, Bank may notify any
Person owing funds to Borrower of Bank's security interest in such funds and
verify the amount of such Account. If requested or required by Bank after the
occurrence of an Event of Default, Borrower shall collect all amounts owing to
Borrower for Bank, receive in trust all payments as Bank's trustee, and, if
requested or required by Bank after the occurrence of an Event of Default,
immediately deliver such payments to Bank in their original form as received
from the account debtor, with proper endorsements for deposit.
9.4 Bank Expenses.
-------------
If Borrower fails to pay any amounts or furnish any required
proof of payment due to third persons or entities, as required under the terms
of this Agreement, then Bank may do any or all of the following: (a) make
payment of the same or any part thereof; or (b) obtain and maintain insurance
policies of the type discussed in Section 6.6 of this Agreement, and take any
action with respect to such policies as Bank deems prudent. Any amounts so paid
or deposited by Bank shall constitute Bank Expenses, shall be immediately due
and payable, and shall bear interest at the then applicable rate hereinabove
provided, and shall be secured by the Collateral. Any payments made by Bank
shall not constitute an agreement by Bank to make similar payments in the future
or a waiver by Bank of any Event of Default under this Agreement.
19
<PAGE>
9.5 Bank's Liability for Collateral.
-------------------------------
So long as Bank complies with reasonable banking practices, Bank
shall not in any way or manner be liable or responsible for: (a) the safekeeping
of the Collateral; (b) any loss or damage thereto occurring or arising in any
manner or fashion from any cause; (c) any diminution in the value thereof; or
(d) any act or default of any carrier, warehouseman, bailee, forwarding agency,
or other person whomsoever. All risk of loss, damage or destruction of the
Collateral shall be borne by Borrower.
9.6 Remedies Cumulative.
-------------------
Bank's rights and remedies under this Agreement, the Loan
Documents, and all other agreements shall be cumulative. Bank shall have all
other rights and remedies not expressly set forth herein as provided under the
Code, by law, or in equity. No exercise by Bank of one right or remedy shall be
deemed an election, and no waiver by Bank of any Event of Default on Borrower's
part shall be deemed a continuing waiver. No delay by Bank shall constitute a
waiver, election, or acquiescence by it. No waiver by Bank shall be effective
unless made in a written document signed on behalf of Bank and then shall be
effective only in the specific instance and for the specific purpose for which
it was given.
9.7 Demand; Protest.
---------------
Borrower waives demand, protest, notice of protest, notice of
dishonor, notice of payment, notice of any release, compromise, settlement,
extension, or renewal of account of accounts, documents, instruments, chattel
paper, and guarantees at any time held by Bank on which Borrower may in any way
be liable.
10. NOTICES
-------
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, by certified mail, postage prepaid, return receipt requested,
or by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:
If to Borrower: At Home Corporation
425 Broadway Street
Redwood City, CA 94063
Attn: Kenneth Goldman
FAX: (415) 482-4605
cc: At Home Corporation
425 Broadway Street
Redwood City, CA 94063
Attn: David Pine, Esq.
Fax: (415) 482-4605
If to Bank: Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA 95054
Attn: Tim Walsh
FAX: (408) 748-9478
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
20
<PAGE>
11. CHOICE OF LAW AND VENUE
-----------------------
The Loan Documents shall be governed by, and construed in accordance
with, the internal laws of the State of California, without regard to principles
of conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
Clara, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
12. GENERAL PROVISIONS
------------------
12.1 Successors and Assigns.
----------------------
This Agreement shall bind and inure to the benefit of the
respective successors and permitted assigns of each of the parties; provided,
--------
however, that neither this Agreement nor any rights hereunder may be assigned by
- -------
Borrower without Bank's prior written consent, which consent may be granted or
withheld in Bank's sole discretion. Bank shall have the right without the
consent of or notice to Borrower to sell, assign, transfer, negotiate, or grant
participations in all or any part of, or any interest in, Bank's obligations,
rights and benefits hereunder.
12.2 Indemnification.
---------------
Borrower shall indemnify, defend, protect and hold harmless Bank
and its officers, employees, and agents against: (a) all obligations, demands,
claims, and liabilities claimed or asserted by any other party in connection
with the transactions contemplated by the Loan Documents; and (b) all losses or
reasonable Bank Expenses in any way suffered, incurred, or paid by Bank as a
result of or in any way arising out of transactions between Bank and Borrower
under the Loan Documents (including without limitation reasonable attorneys fees
and expenses), except for losses caused by Bank's gross negligence or willful
misconduct. Bank agrees to give Borrower notice of any matters for which Bank
proposes to seek indemnification hereunder and to advise Borrower of the
progress of any such matters.
12.3 Time of Essence.
---------------
Time is of the essence for the performance of all obligations set
forth in this Agreement.
12.4 Severability of Provisions.
--------------------------
Each provision of this Agreement shall be severable from every
other provision of this Agreement for the purpose of determining the legal
enforceability of any specific provision.
12.5 Amendments in Writing, Integration.
----------------------------------
This Agreement cannot be amended or terminated except by a
writing signed by Borrower and Bank. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the Loan Documents.
12.6 Counterparts.
------------
This Agreement may be executed in any number of counterparts and
by different parties on separate counterparts, each of which, when executed and
delivered, shall be deemed to be an original, and all of which, when taken
together, shall constitute but one and the same Agreement.
21
<PAGE>
12.7 Survival.
--------
All covenants, representations and warranties made in this
Agreement shall continue in full force and effect so long as any Obligations
remain outstanding. The obligations of Borrower to indemnify Bank with respect
to the expenses, damages, losses, costs and liabilities described in Section
12.2 shall survive until all applicable statute of limitations periods with
respect to actions that may be brought against Bank have run.
12.8 Confidentiality.
---------------
In handling any confidential information, Bank shall exercise the
same degree of care that it exercises with respect to its own proprietary
information of the same types to maintain the confidentiality of any non-public
information thereby received or received pursuant to this Agreement, except that
disclosure of such information may be made (i) to the subsidiaries or affiliates
of Bank in connection with their present or prospective business relations with
Borrower, (ii) to prospective transferees or purchasers of any interest in the
Loans, provided that they have entered into a comparable confidentiality
agreement in favor of Borrower and have delivered a copy to Borrower, (iii) as
required by law, regulations, rule or order, subpoena, judicial order or similar
order, (iv) as may be required in connection with the examination, audit or
similar investigation of Bank and (v) as Bank may deem appropriate in connection
with the exercise of any remedies hereunder. Confidential information hereunder
shall not include information that either: (a) is in the public domain or in the
knowledge or possession of Bank when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank through no fault of Bank; or (b) is
disclosed to Bank by a third party, provided Bank does not have actual knowledge
that such third party is prohibited from disclosing such information. Bank
acknowledges that Borrower's securities are publicly traded, and the information
provided by Borrower may constitute material non-public information.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
AT HOME CORPORATION
By: /s/ Robert A. Lerner
_________________________________
Title: Corporate Controller
______________________________
SILICON VALLEY BANK
By: /s/ Timothy Walsh
_________________________________
Title: Vice President
______________________________
22
<PAGE>
EXHIBIT A
---------
The Collateral shall consist of all right, title and interest of Borrower
in and to the following:
(a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's Books relating to any of the foregoing;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, franchise agreements,
blueprints, drawings, purchase orders, customer lists, route lists, claims,
literature, reports, catalogs, income tax refunds, payments of insurance and
rights to payment of any kind;
(d) All now existing and hereafter arising accounts, rights to receive
payments, royalties, license rights and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods, the licensing of technology
or the rendering of services by Borrower, whether or not earned by performance,
and any and all credit insurance, guaranties, and other security therefor, as
well as all merchandise returned to or reclaimed by Borrower and Borrower's
Books relating to any of the foregoing;
(e) All documents, cash, deposit accounts, securities, securities
entitlements, securities accounts, letters of credit, certificates of deposit,
instruments and chattel paper now owned or hereafter acquired and Borrower's
Books relating to the foregoing; and
(f) Any and all claims, rights and interests in any of the above and all
substitutions for, additions and accessions to and proceeds thereof.
Notwithstanding the foregoing, the Collateral shall not be deemed to
include any copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work thereof,
whether published or unpublished, now owned or hereafter acquired; any patents,
trademarks, servicemarks and applications therefor; any trade secret rights,
including any rights to unpatented inventions, know-how, operating manuals,
license rights and agreements and confidential information, now owned or
hereafter acquired; or any claims for damages by way of any past, present and
future infringement of any of the foregoing.
The Collateral shall not include Equipment that Borrower does not own,
which Equipment Borrower leases from third parties. Notwithstanding the
foregoing, the term "Collateral" shall not include any general intangibles or
contracts of Borrower (whether owned or held as licensee or lessee, or
otherwise) to the extent that (i) such general intangibles or contracts are not
assignable or capable of being encumbered as a matter of law or under the terms
of the license, lease or other agreement applicable thereto (but solely to the
extent that such restriction shall be enforceable under applicable law) without
the consent of the licensor or lessor thereof or other applicable party thereto
and (ii) such consent has not been obtained: provided, however, that the
-------- -------
foregoing grant of security interest shall extend to, and the term "Collateral"
shall include, (A) any general intangible or contract which is an Account or a
proceed of, or otherwise related to the enforcement or collection of, any
Account or goods which are the subject of any Account, and (B) any and all
proceeds of any general intangibles or contracts which are otherwise excluded to
the extent that the assignment or encumbrance of such proceeds is not so
restricted, and (C) upon obtaining the consent of any such licensor, lessor or
other applicable party with respect to any such otherwise excluded general
intangibles or contracts, such general intangibles or contracts as well as any
and all proceeds thereof that might theretofore have been excluded from such
grant of a security interest and the term "Collateral".
A-1
<PAGE>
EXHIBIT B
---------
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE: ___________________
FAX#: (408) 496-2426 TIME:____________________
- --------------------------------------------------------------------------------
FROM: At Home Corporation
---------------------------------------------------------------------------
CLIENT NAME (BORROWER)
REQUESTED BY:___________________________________________________________________
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:___________________________________________________________
PHONE NUMBER:___________________________________________________________________
FROM ACCOUNT # ____________________ TO ACCOUNT # _____________________________
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
- -------------------------- ---------------------
PRINCIPAL INCREASE (ADVANCE) $__________________________________
PRINCIPAL PAYMENT (ONLY) $__________________________________
INTEREST PAYMENT (ONLY) $__________________________________
PRINCIPAL AND INTEREST (PAYMENT) $__________________________________
OTHER INSTRUCTIONS:_____________________________________________________________
________________________________________________________________________________
All representations and warranties of Borrower stated in the Loan and Security
Agreement are true, correct and complete in all material respects as of the date
of the telephone request for and Credit Extension confirmed by this Borrowing
Certificate; provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BANK USE ONLY
TELEPHONE REQUEST:
- -----------------
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
_________________________________ _______________________________________
Authorized Requester Phone #
_________________________________ ________________________________________
Received By (Bank) Phone #
_______________________________
Authorized Signature (Bank)
- --------------------------------------------------------------------------------
B-1
<PAGE>
EXHIBIT C
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: AT HOME CORPORATION
The undersigned authorized officer of At Home Corporation hereby certifies
that in accordance with the terms and conditions of the Loan and Security
Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is in
complete compliance for the period ending _______________ with all required
covenants except as noted below and (ii) all representations and warranties of
Borrower stated in the Agreement are true and correct in all material respects
as of the date hereof. Attached herewith are the required documents supporting
the above certification. The Officer further certifies that these are prepared
in accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The Officer expressly acknowledges that no
borrowings may be requested by Borrower at any time or date of determination
that Borrower is not in compliance with any of the terms of the Agreement, and
that such compliance is determined not just at the date this certificate is
delivered.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
<TABLE>
<CAPTION>
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- ---------
<S> <C> <C>
Monthly financial statements Monthly within 30 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
10-Q, 10-K and 8-K Within 5 days after filing with SEC Yes No
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
<S> <C> <C> <C>
Maintain on a Monthly Basis:
Minimum Liquidity Ratio 2.0:1.0 _____:1.0 Yes No
Minimum Tangible Net Worth $40,000,000 $_______ Yes No
Minimum Debt Service* 2.0:1.0 _____:1.0 Yes No
Remaining Months Liquidity 9 Months _________ Yes No
</TABLE>
* Replaces Liquidity Ratio and Remaining Months Liquidity upon achievement of 3
consecutive months of Debt Service Coverage of at least 2.0 to 1.0.
--------------------------------
COMMENTS REGARDING EXCEPTIONS: See Attached. BANK USE ONLY
Sincerely, Received by:__________________
AUTHORIZED SIGNER
AT HOME CORPORATION
By: Date:
SIGNATURE Verified:______________________
AUTHORIZED SIGNER
___________________________________________
Title Date:
___________________________________________ Compliance Status: Yes No
Date
---------------------------------
C-1
<PAGE>
DISBURSEMENT REQUEST AND AUTHORIZATION
Borrower: At Home Corporation Bank: Silicon Valley Bank
- --------------------------------------------------------------------------------
LOAN TYPE. This is a Variable Rate, Equipment Line of Credit of a principal
amount up to $8,000,000.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business.
SPECIFIC PURPOSE. The specific purpose of this loan is: purchase of Equipment
or Tenant Improvements.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Bank's conditions for making the loan have been
satisfied. Please disburse the loan proceeds as follows:
<TABLE>
<CAPTION>
Equipment Line
--------------
<S> <C>
Amount paid to Borrower directly: $ 0
Undisbursed Funds $8,000,000
Principal $8,000,000
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:
Charges Paid in Cash: (only for initial disbursement)
$10,000 Loan Fee
Other Charges Paid in Cash:
$ 100 UCC Search Fees
$ 100 UCC Filing Fees
$ 5,000 Outside Counsel Fees and Expenses (Estimate)
Total Charges Paid in Cash $ 15,200
</TABLE>
AUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct
from Borrower's account numbered __________ the amount of any loan payment. If
the funds in the account are insufficient to cover any payment, Bank shall not
be obligated to advance funds to cover the payment.
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS
DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO BANK. THIS
AUTHORIZATION IS DATED AS OF September 30, 1997.
BORROWER:
AT HOME CORPORATION
/s/ Robert A. Lerner
__________________________________
Authorized Officer
- --------------------------------------------------------------------------------
<PAGE>
AGREEMENT TO PROVIDE INSURANCE
GRANTOR: At Home Corporation BANK: Silicon Valley Bank
- --------------------------------------------------------------------------------
INSURANCE REQUIREMENTS. At Home Corporation ("Grantor") understands that
insurance coverage is required in connection with the extending of a loan or the
providing of other financial accommodations to Grantor by Bank. These
requirements are set forth in the Loan Documents. The following minimum
insurance coverages must be provided on the following described collateral (the
"Collateral"):
Collateral: All Inventory, Equipment and Fixtures.
Type: All risks, including fire, theft and liability.
Amount: Full insurable value.
Basis: Replacement value.
Endorsements: Loss payable clause to Bank with stipulation that
coverage will not be cancelled or diminished
without a minimum of twenty (20) days' prior
written notice to Bank.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance company
Grantor may choose that is reasonably acceptable to Bank. Grantor understands
that credit may not be denied solely because insurance was not purchased through
Bank.
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Bank, on or
before closing, evidence of the required insurance as provided above, with an
effective date of September 24, 1997, or earlier. Grantor acknowledges and
agrees that if Grantor fails to provide any required insurance or fails to
continue such insurance in force, Bank may do so at Grantor's expense as
provided in the Loan and Security Agreement. The cost of such insurance, at the
option of Bank, shall be payable on demand or shall be added to the indebtedness
as provided in the security document. GRANTOR ACKNOWLEDGES THAT IF BANK SO
PURCHASES ANY SUCH INSURANCE, THE INSURANCE WILL PROVIDE LIMITED PROTECTION
AGAINST PHYSICAL DAMAGE TO THE COLLATERAL, UP TO THE BALANCE OF THE LOAN;
HOWEVER, GRANTOR'S EQUITY IN THE COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE
INSURANCE MAY NOT PROVIDE ANY PUBLIC LIABILITY OR PROPERTY DAMAGE
INDEMNIFICATION AND MAY NOT MEET THE REQUIREMENTS OF ANY FINANCIAL
RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral,
Grantor authorizes Bank to provide to any person (including any insurance agent
or company) all information Bank deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO
PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED SEPTEMBER
24, 1997.
GRANTOR:
AT HOME CORPORATION
x /s/ Robert A. Lerner
____________________________
Authorized Officer
================================================================================
FOR BANK USE ONLY
INSURANCE VERIFICATION
DATE: ___________________ PHONE: ____________
AGENT'S NAME: _________________________________________________________________
INSURANCE COMPANY: ____________________________________________________________
POLICY NUMBER: ________________________________________________________________
EFFECTIVE DATES: ______________________________________________________________
COMMENTS: _____________________________________________________________________
================================================================================
<PAGE>
CORPORATE RESOLUTIONS TO BORROW
================================================================================
BORROWER: AT HOME CORPORATION
================================================================================
I, the undersigned Secretary or Assistant Secretary of At Home Corporation
(the "Corporation"), HEREBY CERTIFY that the Corporation is organized and
existing under and by virtue of the laws of the State of __________.
I FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true and
complete copies of the Certificate of Incorporation and Bylaws of the
Corporation, each of which is in full force and effect on the date hereof.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation (or
by other duly authorized corporate action in lieu of a meeting), duly called and
held, at which a quorum was present and voting, the following resolutions were
adopted:
BE IT RESOLVED, that ANY ONE (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:
NAMES POSITIONS ACTUAL SIGNATURES
----------------------------------------------------------------------
____________________ _____________________ ______________________________
____________________ _____________________ ______________________________
____________________ _____________________ ______________________________
____________________ _____________________ ______________________________
____________________ _____________________ ______________________________
acting for an on behalf of this Corporation and as its act and deed be, and they
hereby are, authorized and empowered:
BORROW MONEY. To borrow from time to time from Silicon Valley Bank
("Bank"), on such terms as may be agreed upon between the officers, employees,
or agents and Bank, such sum or sums of money as in their judgment should be
borrowed, without limitation, including such sums as are specified in that
certain Loan and Security Agreement dated as of September 24, 1997 (the "Loan
Agreement").
EXECUTE NOTES. To execute and deliver to Bank the promissory note or notes
of the Corporation, on Bank's forms, at such rates of interest and on such terms
as may be agreed upon, evidencing the sums of money so borrowed or any
indebtedness of the Corporation to Bank, and also to execute and deliver to Bank
one or more renewals, extensions, modifications, refinancings, consolidations,
or substitutions for one or more of the notes, or any portion of the notes.
GRANT SECURITY. To grant a security interest to Bank in the Collateral
described in the Loan Agreement, which security interest shall secure all of the
Corporation's Obligations, as described in the Loan Agreement.
NEGOTIATE ITEMS. To draw, endorse, and discount with Bank all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness payable
to or belonging to the Corporation or in which the Corporation may have an
interest, and either to receive cash for the same or to cause such proceeds to
be credited to the account of the Corporation with Bank, or to cause such other
disposition of the proceeds derived therefrom as they may deem advisable.
LETTERS OF CREDIT; FOREIGN EXCHANGE. To execute letters of credit
applications, foreign exchange agreements and other related documents pertaining
to Bank's issuance of letters of credit and foreign exchange contracts.
FURTHER ACTS. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder, and in
all cases, to do and perform such other acts and things, to pay any and all fees
and costs, and to execute and deliver such other documents and agreements as
they may in their discretion deem
1
<PAGE>
reasonably necessary or proper in order to carry into effect the provisions of
these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these
resolutions and performed prior to the passage of these resolutions are hereby
ratified and approved, that these Resolutions shall remain in full force and
effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above are
duly elected, appointed, or employed by or for the Corporation, as the case may
be, and occupy the positions set forth opposite their respective names; that the
foregoing Resolutions now stand of record on the books of the Corporation; and
that the Resolutions are in full force and effect and have not been modified or
revoked in any manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on _______________, 19___
and attest that the signatures set opposite the names listed above are their
genuine signatures.
CERTIFIED TO AND ATTESTED BY:
X_______________________________________
================================================================================
2
<PAGE>
Exhibit 11.1
AT HOME CORPORATION
STATEMENT REGARDING THE COMPUTATION OF PRO FORMA NET LOSS PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Nine Months
September 30, Ended September 30,
---------------------- -------------------------
(In thousands, except per share data) 1997 1996 1997 1996
----------- --------- ----------- ------------
<S> <C> <C> <C> <C>
Computation of pro forma weighted average
common equivalent shares outstanding:
Weighted average shares outstanding 116,645 ---- 112,258 ----
Dilutive employee stock options and warrants
in the current period (treasury stock method) ---- ---- ---- ----
Shares of common stock issued during the
twelve-month period prior to the Company's
initial public offering ---- 13,269 ---- 13,269
Common equivalent shares from convertible
preferred stock issued during the twelve-
month period prior to the Company's initial
public offering ---- 75,252 ---- 75,252
Common equivalent shares from convertible
preferred stock issued more than twelve-
months prior to the Company's initial
public offering ---- 20,000 ---- 20,000
Common equivalent shares from common stock
options granted during the twelve-month
period prior to the Company's initial public
offering (treasure stock method) ---- 1,544 ---- 1,544
-------- ------- -------- -------
Shares used in computing pro forma net loss per share 116,645 110,065 112,258 110,065
======== ======= ======== =======
Net (loss) $(11,894) $ (7,246) $(34,698) $(15,525)
======== ======= ======== =======
Net (loss) per share $ (0.10) $(0.07) $ (0.31) $(0.14)
======== ======= ======== =======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 59,046
<SECURITIES> 73,639
<RECEIVABLES> 1,244
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 136,832
<PP&E> 36,758
<DEPRECIATION> 7,181
<TOTAL-ASSETS> 168,085
<CURRENT-LIABILITIES> 21,002
<BONDS> 16,036
0
0
<COMMON> 198,074
<OTHER-SE> (67,027)
<TOTAL-LIABILITY-AND-EQUITY> 168,085
<SALES> 0
<TOTAL-REVENUES> 3,737
<CGS> 0
<TOTAL-COSTS> 15,368
<OTHER-EXPENSES> 24,747
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 736
<INCOME-PRETAX> (34,698)
<INCOME-TAX> 0
<INCOME-CONTINUING> (34,698)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (34,698)
<EPS-PRIMARY> (0.31)
<EPS-DILUTED> (0.31)
</TABLE>
