<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
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 000-25661
================================================================================
TenFold Corporation
(Exact name of registrant as specified in its charter)
Delaware 83-0302610
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
180 West Election Road
Draper, Utah 84020
(Address of principal executive offices, including zip code)
(801) 495-1010
(Registrant's telephone number, including area code)
================================================================================
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 [_]
As of March 31, 2000, there were 35,311,643 shares of the registrant's
Common Stock outstanding.
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INDEX
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<TABLE>
<CAPTION>
Page
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.
Consolidated Balance Sheets at March 31, 2000 and December
31, 1999.................................................... 3
Consolidated Statements of Operations for the three months
ended March 31, 2000 and March 31, 1999..................... 4
Consolidated Statements of Cash Flows for the three months
ended March 31, 2000 and March 31, 1999..................... 5
Notes to Consolidated Financial Statements.................. 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 11
Item 3. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 26
PART II. OTHER INFORMATION
Item 2. Use of Proceeds............................................. 26
Item 6. Exhibits and Reports on Form 8-K............................ 27
SIGNATURES................................................................. 28
</TABLE>
2
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PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
TENFOLD CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
March 31, December 31,
---------------- --------------
2000 1999
---------------- --------------
Assets
Current assets:
<S> <C> <C>
Cash and cash equivalents..................................................... $ 47,228 $ 58,247
Accounts receivable (net of allowances for doubtful accounts
of $125 and $725, respectively)........................................... 14,761 10,713
Unbilled accounts receivable.................................................. 10,123 4,377
Prepaid expenses and other assets............................................. 1,043 889
Deferred income taxes......................................................... 7,784 2,650
Other assets.................................................................. 135 1,080
---------------- --------------
Total current assets.................................................... 81,074 77,956
Restricted cash............................................................... 111 111
Property and equipment, net................................................... 9,602 9,810
Due from stockholders......................................................... 1,000 1,000
Other assets.................................................................. 1,220 216
Goodwill and other intangibles, net........................................... 22,389 23,539
---------------- --------------
Total assets............................................................ $ 115,396 $ 112,632
================ ==============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable.............................................................. $ 2,213 $ 2,903
Income taxes payable.......................................................... 918 1,142
Accrued liabilities........................................................... 10,074 16,836
Deferred revenue.............................................................. 7,012 9,066
Current installments of obligations under capital leases...................... 938 926
Current installments of notes payable......................................... 1,911 1,701
Promissory note............................................................... 12,000 12,000
---------------- --------------
Total current liabilities............................................... 35,066 44,574
---------------- --------------
Long-term liabilities:
Deferred income taxes......................................................... 2,749 2,754
Obligations under capital leases, excluding current installments.............. 941 1,175
Notes payable, excluding current installments................................. 2,243 2,289
---------------- --------------
Total long-term liabilities............................................. 5,933 6,218
---------------- --------------
Minority interest.............................................................. 8 -
---------------- --------------
Stockholders' equity:
Common stock, $0.001 par value:
Authorized: 120,000,000 shares
Issued and outstanding shares: 35,311,643 shares at March 31, 2000
and 34,806,602 shares at December 31, 1999................................. 35 35
Additional paid-in capital................................................... 73,263 62,672
Notes receivable from stockholders........................................... (2,115) (1,155)
Deferred compensation........................................................ (4,730) (5,611)
Retained earnings............................................................ 8,009 5,872
Accumulated other comprehensive income....................................... (73) 27
---------------- --------------
Total stockholders' equity.............................................. 74,389 61,840
---------------- --------------
Total liabilities and stockholders' equity.............................. $ 115,396 $ 112,632
================ ==============
</TABLE>
See accompanying notes to consolidated financial statements
3
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TENFOLD CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------------
2000 1999
--------------- ----------------
Revenues:
<S> <C> <C>
License..................................................................... $ 4,681 $ 5,656
Services.................................................................... 26,994 10,371
--------------- ----------------
Total revenues........................................................ 31,675 16,027
--------------- ----------------
Operating expenses:
Cost of revenues............................................................ 11,718 6,246
Sales and marketing......................................................... 6,844 4,736
Research and development.................................................... 6,424 3,401
General and administrative.................................................. 1,864 820
Amortization of deferred compensation....................................... 351 305
Amortization of goodwill and acquired intangibles........................... 1,151 -
--------------- ----------------
Total operating expenses.............................................. 28,352 15,508
--------------- ----------------
Income from operation....................................................... 3,323 519
--------------- ----------------
Other income (expense):
Interest and other income................................................... 787 159
Interest expense............................................................ (279) (71)
--------------- ----------------
Total other income.................................................... 508 88
--------------- ----------------
Income before income taxes and minority interest............................. 3,831 607
Provision for income taxes................................................... 1,686 234
--------------- ----------------
Net income before minority interest.......................................... 2,145 373
Minority interest............................................................ 8 -
--------------- ----------------
Net income................................................................... $ 2,137 $ 373
=============== ================
Accretion of Series A and B preferred stock.................................. - (248)
Net income available to common stock......................................... $ 2,137 $ 125
=============== ================
Basic earnings per common share.............................................. $ 0.06 $ 0.01
=============== ================
Diluted earnings per common share............................................ $ 0.05 $ 0.00
=============== ================
Weighted average common and common equivalent shares used to calculate
earnings per share:
Basic....................................................................... 34,038 22,765
=============== ================
Diluted..................................................................... 38,864 28,176
=============== ================
</TABLE>
See accompanying notes to consolidated financial statements
4
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TENFOLD CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
2000 1999
----- -------
<S> <C> <C>
Cash flows from operating activities:
Net income..................................................................... $ 2,137 $ 373
Adjustments to reconcile net income to net cash used in operating activities:
Tax benefit from exercise of stock options.................................. 6,820 -
Deferred taxes.............................................................. (5,139) -
Amortization of goodwill and acquired intangibles........................... 1,151 -
Depreciation and amortization............................................... 1,011 541
Allowances for doubtful accounts............................................ (262) -
Amortization of deferred compensation ...................................... 351 305
Minority interest........................................................... 8 -
Changes in operating assets and liabilities:
Accounts receivable......................................................... (3,786) (1,509)
Unbilled accounts receivable................................................ (5,746) (788)
Prepaid expenses and other assets........................................... 520 (302)
Accounts payable............................................................ (690) 272
Income taxes payable........................................................ (224) (404)
Accrued liabilities......................................................... (6,762) 311
Deferred costs.............................................................. - (107)
Deferred revenues........................................................... (2,054) (2,485)
---------- --------
Net cash used in operating activities.............................. (12,665) (3,793)
---------- --------
Cash flows from investing activities:
Additions to property and equipment......................................... (804) (842)
Net increase (decrease) in other assets..................................... (733) -
---------- --------
Net cash used in investing activities.............................. (1,537) (842)
---------- --------
Cash flows from financing activities:
Proceeds from employee stock purchase plan stock issuance................... 2,520 -
Proceeds from issuance of common stock...................................... - 1,976
Exercise of common stock options............................................ 821 369
Proceeds from issuance of notes payable..................................... 576 733
Principal payments on notes payable......................................... (412) (194)
Notes receivable from stockholders.......................................... - (349)
Principal payments on capital lease obligations............................. (222) (82)
---------- --------
Net cash provided by financing activities.............................. 3,283 2,453
---------- --------
Effect of exchange rate changes.................................................. (100) (20)
---------- --------
Net decrease in cash and cash equivalents........................................ (11,019) (2,202)
Cash and cash equivalents at beginning of period................................. 58,247 15,373
---------- --------
Cash and cash equivalents at end of period....................................... $ 47,228 $ 13,171
========== ========
</TABLE>
See accompanying notes to consolidated financial statements
5
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TENFOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited consolidated financial statements included
herein have been prepared by TenFold Corporation (the "Company") pursuant to the
rules and regulations of the Securities and Exchange Commission. In management's
opinion, the interim financial data presented includes all adjustments
(consisting of normal recurring items) necessary for fair presentation. All
intercompany accounts and transactions have been eliminated. Certain information
required by generally accepted accounting principles has been condensed or
omitted pursuant to rules and regulations of the Securities and Exchange
Commission. Operating results for the three-month period ended March 31, 2000
are not necessarily indicative of the results that may be expected for any
future period or the year ended December 31, 2000.
This report should be read in conjunction with the Company's audited
consolidated financial statements for the year ended December 31, 1999 included
in the Annual Report on Form 10-K filed with the Securities and Exchange
Commission.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
2. Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share (in thousands except per share data):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
2000 1999
-------- --------
<S> <C> <C>
Numerator:
Numerator for basic earnings per share - net income available to common
stockholders............................................................................. $ 2,137 $ 125
======= =======
Assumed dilution related to subsidiaries' earnings applicable to minority
stockholders............................................................................. (43) -
------- -------
Numerator for diluted earnings per share.................................. $ 2,094 $ 125
======= =======
Denominator:
Denominator for basic earnings per share - weighted average shares....................... 34,038 22,765
======= =======
Employee stock options................................................................... 4,826 5,411
------- -------
Denominator for diluted earnings per share............................................... 38,864 28,176
======= =======
Earnings per common share:
Basic earnings per common share.......................................................... $ 0.06 $ 0.01
======= =======
Diluted earnings per common share........................................................ $ 0.05 $ 0.00
======= =======
</TABLE>
Employee stock options of 182,700 outstanding during the three months
ended March 31, 2000 that could potentially dilute basic earnings per share in
the future were not included in the computation of diluted earnings per share
because to do so would have been anti-dilutive for the period.
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The computation of diluted earnings per common share for the three months
ended March 31, 1999 excludes the assumed conversion of 6,261,129 shares of
Series A and B convertible preferred stock because the impact of the conversion,
including the assumed elimination of the accretion of such preferred stock,
would be anti-dilutive.
3. Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less at the date of acquisition to be cash equivalents. The
Company generally invests its cash and cash equivalents in money market
accounts, commercial paper, and certificates of deposit. The carrying value of
the Company's short-term investments approximates fair value.
4. Comprehensive Income (Loss)
The Company has adopted the provisions of SFAS No. 130, Reporting
Comprehensive Income. SFAS No. 130 establishes standards for reporting
comprehensive income and its components in financial statements. The Company
incurred a foreign currency translation adjustment loss of $100,000, net of tax,
for the three months ended March 31, 2000 compared to a foreign currency
translation adjustment loss of $20,000, net of tax, for the same period in the
prior year. This resulted in comprehensive income of $2.0 million for the three
months ended March 31, 2000 and comprehensive income of $353,000 for the three
months ended March 31, 1999.
5. Lease Commitments
We have commitments under long-term operating leases, principally for
office space and computer equipment. Our future minimum lease payments under
non-cancelable operating lease obligations, in excess of one year, at March 31,
2000 are as follows:
Year Amount
---- ------
Q2 - Q4, 2000 $ 6,840,240
2001 8,177,081
2002 6,781,143
2003 5,507,380
2004 5,101,046
Thereafter 17,770,587
-----------
Total minimum lease commitments $50,177,477
===========
The lease mentioned in Note 11 was excluded from this table as it was
signed subsequent to March 31, 2000.
6. Operating Segments
The Company has adopted the provisions of SFAS No. 131, Disclosure About
Segments of an Enterprise and Related Information. SFAS No. 131 establishes
standards for the reporting by public business enterprises of information about
operating segments, products and services, geographic areas, and major
customers. The method for determining what information to report is based on
the way that management organizes the operating segments within the Company for
making operating decisions and assessing financial performance.
The Company's chief operating decision-maker is considered to be the
Company's CEO. The CEO reviews financial information presented on a consolidated
basis accompanied by disaggregated information about revenues by Vertical
Business Group for purposes of making operating decisions and assessing
financial performance. Revenues from operations outside of North America were
approximately 10 percent of revenues for the three months ended March 31, 2000
and 5 percent of revenues for the same period in the
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prior year. The consolidated financial information reviewed by the CEO is
identical to the information presented in the accompanying consolidated
statements of operations. Therefore, the Company operates in a single operating
segment, which is applications products and services.
No material change has occurred since December 31, 1999 in the extent of
the Company's reliance on major customers. The Company's long-lived assets
continue to be deployed predominantly in the United States.
Revenue from our Vertical Business Groups is as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
2000 1999
------ ------
<S> <C> <C>
Banking
License........................................................... $ - $ 200
Services.......................................................... 2,576 548
------- -------
$ 2,576 $ 748
======= =======
Communications
License........................................................... $ 339 $ 8
Services.......................................................... 1,866 66
------- -------
$ 2,205 $ 74
======= =======
e-Business and Other
License........................................................... $ 213 $ 76
Services.......................................................... 1,263 386
------- -------
$ 1,476 $ 462
======= =======
Energy
License........................................................... $ 911 $ -
Services.......................................................... 4,718 44
------- -------
$ 5,629 $ 44
======= =======
Healthcare
License........................................................... $ 263 $ 27
Services.......................................................... 1,334 593
------- -------
$ 1,597 $ 620
======= =======
Insurance
License........................................................... $ 1,019 $ 4,662
Services.......................................................... 13,414 7,405
------- -------
$14,433 $12,067
======= =======
Investment Management
License........................................................... $ 1,936 $ 683
Services.......................................................... 1,823 1,329
------- -------
$ 3,759 $ 2,012
======= =======
Total
License........................................................... $ 4,681 $ 5,656
Services.......................................................... 26,994 10,371
------- -------
$31,675 $16,027
======= =======
</TABLE>
7. Acquisition
On September 30, 1999, the Company entered into a Stock Purchase Agreement
("Agreement") with Barclays California Corporation ("BarCal") whereby the
Company purchased the entire equity interest of BarCal in its wholly-owned
subsidiary, The LongView Group, Inc. ("LongView"). On October 7, 1999, the
acquisition was closed. Accordingly, the operations of LongView have been
included in the accompanying
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consolidated statement of operations for the Company since the acquisition was
closed. The acquisition was accounted for under the purchase method of
accounting.
Pursuant to the Agreement, the Company acquired from BarCal all of the
issued and outstanding capital stock of LongView for $22 million, comprised of
$10 million in cash and a $12 million note from the Company to BarCal. The
promissory note is due and payable in installments of $3 million on April 15,
2000 and $9 million on July 15, 2000 and bears interest at 6.5 percent. The
first installment was paid during April 2000.
BarCal has been a customer of LongView since 1998. BarCal has been a
customer of the Company since 1997 and, as such, has various software license
and service agreements with the Company. BarCal signed, on September 30, 1999,
an additional Master Software License and Services Agreement, purchasing from
the Company a multi-project license to the Universal Application and TenFold
ComponentWare products and related technical support services for $4 million.
The Company recorded approximately $3.7 million of license revenue in the fourth
quarter of 1999 and is recording the remaining $300,000 as support revenue,
ratably over the support period.
In connection with the acquisition, the Company recorded a write-off of $2
million for in-process research and development in the fourth quarter of 1999.
The estimated costs to complete the acquired in-process research and development
as of the date of acquisition were $1.2 million. Management believed that the
assumptions used in the LongView in-process research and development analysis
were reasonable at the time of the acquisition. No assurance can be given,
however, that the underlying assumptions used to estimate expected revenues,
development costs or profitability, or the events associated with such projects,
will transpire as estimated. Expenses incurred to date associated with the
development and integration of the in-process research and development projects
are higher than previous estimates. Management believes that projected revenues
from these projects will be higher than previous estimates and that revised
estimates of net cash flows related to these projects are not materially
different than the original net cash flows used to calculate the in-process
research and development write-off. To date, no revenues have been recognized
on these projects.
The following unaudited pro forma financial information presents the
combined results of operations of the Company and LongView for the three months
ended March 31, 1999 as if the acquisition had occurred at the beginning of
calendar 1999, after giving effect to certain adjustments, including, but not
limited to, amortization of goodwill and other intangible assets, and decreased
interest income. The $2 million write-off for acquired in-process research and
development has been excluded from the pro forma results as it is a non-
recurring charge. All amounts are in thousands except per share data.
Three Months
Ended
March 31, 1999
--------------
Total revenues................... $17,230
-------
Net income (loss)................ (566)
-------
Earnings (loss) per share:
Basic......................... $ (0.04)
=======
Diluted....................... $ (0.04)
=======
8. Subsidiary Stock Plans
During 1999, the Company formed six subsidiaries in each of which the
Company holds 20,000,000 issued and outstanding shares of common stock. Each
subsidiary, with approval of its Board of Directors, adopted its own stock plan
during 1999. The terms of the plans are similar to the Company's 1999 Stock
Plan. A total of 3,740,000 shares of common stock of each subsidiary has been
reserved under the Stock Plans of all six subsidiaries. The Company plans to
account for the sale of common stock in the Company's subsidiaries as an equity
transaction.
Outstanding stock options under the respective stock option plans as of
March 31, 2000 range from 2.1 to 3.2 million common stock options. One employee
exercised certain subsidiary stock options during the three months ended March
31, 2000. In connection with this option exercise, the Company loaned the
employee
9
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$960,000, which is included in the consolidated balance sheet under the caption
Notes Receivable from Stockholders. The note receivable is secured by the
related shares.
9. Legal Proceedings
On September 17, 1999, Ohio Farmers Insurance Company doing business as
Westfield Companies (the "Plaintiff"), filed a complaint in the United States
District Court for the District of Ohio seeking $5.8 million from the Company.
The complaint alleges that the Company failed to deliver on contractual
commitments under a license agreement with the Plaintiff and includes specific
claims of anticipatory breach of contract, breach of express warranty, and
negligent misrepresentation. The $5.8 million being sought from the Company by
the Plaintiff was paid to the Company by the Plaintiff in the first half of 1999
and recognized as revenue by the Company over this period. On November 4, 1999,
the Company filed an Answer and Counterclaim denying these claims and seeking
recovery of $3.9 million that Plaintiff owes the Company under the license
agreement together with claims for additional damages. The case is in its
preliminary stages. Based on the information currently available, the Company
believes that it has valid defenses against the Plaintiff's claims and the
Company intends to vigorously defend the case. The Company also intends to
vigorously enforce its rights under the license agreement, including recovery of
the $3.9 million due and owing under the agreement.
The Company's legal counsel has commenced investigation of the facts
pertinent to the claims and counterclaims. Based on their analysis and current
assumptions, the Company's counsel has advised the Company that there is a
reasonable likelihood that the Company will successfully prosecute the Company's
claims and defenses. The Company's counsel has advised the Company that, pending
further investigation and discovery, the prospect that the Company will incur a
loss regarding monies already collected is remote, and that it is too early in
the litigation process to determine the probability of a recovery or loss with
respect to the remaining $3.9 million due under the agreement. The $3.9 million
due and owing under the agreement is included in accounts receivable in the
consolidated balance sheet at March 31, 2000, and there has been no allowance
for loss recorded on this receivable. Due to the high degree of uncertainty
associated with litigation, it is possible that the Company will incur a loss
with respect to the $3.9 million currently due from the Plaintiff. Such loss
could range from zero to $3.9 million. However, at the current time, the amount
of any loss cannot be reasonably estimated. Although the Company believes it
will ultimately prevail against the Plaintiff in the matters explained above, an
unfavorable outcome of these matters may have a material adverse impact on the
Company's financial position and results of operations.
10. Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes
new accounting and reporting standards for companies to report information about
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives), and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the balance sheet and measure those instruments at fair
value. For a derivative not designated as a hedging instrument, changes in the
fair value of the derivative are recognized in earnings in the period of change.
The Company must adopt SFAS No. 133 by January 1, 2001. Management does not
believe the adoption of SFAS No. 133 will have a material effect on the
Company's results of operations, financial position or liquidity.
In December 1999, the Securities and Exchange Commission staff released
Staff Accounting Bulletin No. 101, "Revenue Recognition," ("SAB No. 101") to
provide guidance on the recognition, presentation and disclosure of revenue in
financial statements; however, SAB No. 101 does not change existing literature
on revenue recognition. SAB No. 101 explains the staff's general framework for
revenue recognition, stating that four criteria need to be met in order to
recognize revenue. The four criteria, all of which must be met, are the
following:
. There must be persuasive evidence of an arrangement;
10
<PAGE>
. Delivery must have occurred or services must have been rendered;
. The selling price must be fixed or determinable; and
. Collectibility must be reasonably assured.
The Company will adopt SAB No. 101 during the second quarter of 2000. The
Company believes that its current revenue recognition policy is in compliance
with this guidance; however, the Company continues to evaluate the impact, if
any, of SAB No. 101 and any possible, subsequent interpretations of SAB No. 101
on the Company's policies and procedures.
The FASB issued Interpretation No. 44, "Accounting for Certain Transactions
Involving Stock Compensation--an Interpretation of APB Opinion No. 25" ("FIN No.
44") in March 2000. The interpretation clarifies the application of Opinion 25
for only certain issues such as the following: (a) the definition of employee
for purposes of applying Opinion 25, (b) the criteria for determining whether a
plan qualifies as a noncompensatory plan, (c) the accounting consequence of
various modifications to the terms of a previously fixed stock option or award,
and (d) the accounting for an exchange of stock compensation awards in a
business combination. The Company must adopt FIN No. 44 by July 1, 2000.
Management does not believe that the interpretation will have a material effect
on the Company's results of operations, financial position or liquidity.
11. Subsequent Event
On April 28, 2000, the Company signed a 10-year lease for approximately
170,000 square feet of office space in South Jordan, Utah. The lease will
commence upon completion of construction and the Company's subsequent occupancy
of the office space, which is estimated to occur in late 2001.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements that
involve risks and uncertainties that may cause actual future events or results
to differ materially from those described in the forward-looking statements.
Words such as "expects," "intends," "anticipates," "should," "believes," "will,"
"plans," "estimates," "may," variations of such words and similar expressions
are intended to identify such forward-looking statements. We disclaim any
intention or obligation to revise any forward-looking statements whether as a
result of new information, future developments or otherwise. There are many
factors which could cause actual results to differ materially from those
contained in the forward-looking statements. These factors include: limited
operating history; attraction and retention of employees; variability of
quarterly operating results; dependence on a small number of customers;
customer's fulfillment of various responsibilities; fixed-time, fixed-price
contracts; timing of new product releases; competitive factors; protection of
intellectual property; and risks associated with the integration of LongView
into TenFold's operations. These are representative of factors which could
affect the outcome of the forward-looking statements. In addition, such
statements could be affected by general industry and market conditions and
growth rates, general domestic and international economic conditions including
interest rate and currency exchange rate fluctuations and other factors. Please
also refer to the documents filed by us with the Securities and Exchange
Commission, which identify important risk factors that could cause actual
results to differ from those contained in forward-looking statements. Some of
these factors are described below under the section entitled "Factors That May
Affect Future Results and Market Price of Stock."
Overview
TenFold is a leading provider of large-scale e-business applications for
market-leading customers in banking, communications, energy, healthcare,
insurance, investment management and other industries. From 1993 through 1995,
we engaged primarily in the development of our Universal Application technology
and derived revenue primarily from technology development and consulting
projects, generally on a time and materials basis. In 1996, we began using our
Universal Application to develop large-scale, complex applications. In 1997 and
in subsequent years, we derived the majority of our license and service revenues
from fixed-price, fixed-time applications development projects. Starting in
1998, we also began
11
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reselling vertical applications products that we had previously developed for
other customers.
We derive our revenues from license fees, application development and
implementation services, support services, and training services. License
revenues consist of fees for licensing our Universal Application and license
fees for the applications that we develop for our customers. We also derive
license revenues from the resale of our vertical applications products. Service
revenues consist of fees for applications development and implementation,
support and training. We recognized revenues consistent with Statement of
Position (SOP) 97-2, Software Revenue Recognition, as modified by SOP 98-9,
Modification of SOP 97-2 with Respect to Certain Transactions for 1999 and 2000.
For software arrangements that include a service element that is essential
to the functionality of the software, we recognize license fees related to the
application, and the application development service fees, over time as we
perform the services, using the percentage-of-completion method of accounting.
We determine our proposed fixed price for a project using a formal estimation
process that takes into account the project's timetable, complexity, technical
environment, risks and other available alternatives. Members of our senior
management team approve each fixed price proposal. We make adjustments to the
original estimates used in the percentage-of-completion method of accounting as
work progresses under the contract and as we gain experience. On a limited
basis, we also provide application development and implementation services on a
time and materials basis. We recognize revenue on our time and material
contracts as we perform the services.
We recognize license revenues from applications products sales and
Universal Application development licenses, whether sold separately or with an
application development project, that do not include related services that are
essential to the functionality of the software, when the following criteria are
met: we have a signed non-cancelable license agreement with non-refundable fees;
we have shipped the software product; there are no uncertainties surrounding
product acceptance; the fees are fixed and determinable; and collection is
considered probable.
We recognize support revenue from contracts for ongoing technical support
and product updates ratably over the support period. We recognize training
revenues as we perform the services.
In mid-1998, we began offering the TenFold Guarantee, the industry's first
money-back guarantee for large scale software applications, under which we
recognize revenue using the percentage-of-completion method of accounting. As a
result, in some of our contracts we have guaranteed that we will complete our
projects within a fixed-time period or we will refund the fees paid. This
guarantee also requires the customer to fulfill various responsibilities within
a specified time period, including reviewing and approving requirements,
providing timely feedback, and providing adequate staffing or the guarantee is
voided. Accordingly, we treat this guarantee as a conditional guarantee. If
necessary, we make provisions for estimated refunds or losses on uncompleted
contracts on a contract by contract basis and recognize the provisions in the
period in which the refunds or losses become probable and we can reasonably
estimate them.
The timing and amount of cash received from customers can vary
significantly depending on specific contract terms and can therefore have a
significant impact on the amount of deferred revenue and unbilled accounts
receivable in any given period. We record billings and cash received in excess
of revenue earned as deferred revenue. Our deferred revenue balance at March 31,
2000 was $7.0 million, which we expect to recognize as revenue within the next
twelve months. Our deferred revenue balance generally results from contractual
commitments made by customers to pay amounts to us in advance of revenues
earned. Our unbilled accounts receivable represents revenue that we have earned
but which we have not yet billed. We bill customers for this revenue as payments
become due under the terms of the customer's contract. Our unbilled accounts
receivable balance at March 31, 2000 was $10.1 million and we expect to bill and
collect this amount within twelve months.
We are organized into discrete Vertical Business Groups, subsidiaries of
TenFold, to tailor marketing, selling, product development, and business
strategies for our target vertical industries. As each
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Vertical Business Group grows in size, gains multiple customers, and develops
multiple, resalable applications products, it achieves increasing autonomy. We
offer employee incentives tied to the performance of these Vertical Business
Groups. We have granted to employees, and plan to continue to grant, options to
acquire capital stock of these subsidiaries. We expect these grants over time to
total approximately 15 percent to 20 percent of each subsidiary. We have offered
and may offer in the future, Vertical Business Group equity to strategic
industry partners. These subsidiaries may raise capital independently through an
initial public offering, private placement or other means, or be spun off from
TenFold.
As of March 31, 2000, we had formed six subsidiaries from which we are
conducting or expect to conduct our vertical business operations in the banking,
communications, energy, healthcare, insurance, and investment management
industries. We are in the process of preparing intercompany agreements to cover
technology licensing and shared services between TenFold and these subsidiaries,
and between the subsidiaries themselves. We are also in the process of
transferring many of our employees to these subsidiaries.
On September 30, 1999, we entered into a definitive agreement to acquire
The LongView Group, Inc ("LongView"). The closing of the transaction occurred on
October 7, 1999. TenFold's acquisition of LongView was reported in a Form 8-K
filed on October 14, 1999, as amended.
Results of Operations
The following table sets forth, for the periods indicated, the percentage
relationship of selected items from TenFold's statements of operations to total
net revenues.
<TABLE>
<CAPTION>
Three Months
Ended March 31,
----------------------------------
2000 1999
----------- -----------
<S> <C> <C>
Revenues:
License.......................................................... 15% 35%
Services......................................................... 85% 65%
----------- -----------
Total revenues................................................ 100% 100%
----------- -----------
Operating expenses:
Cost of revenues................................................. 37% 39%
Sales and marketing.............................................. 22% 30%
Research and development......................................... 20% 21%
General and administrative....................................... 6% 5%
Amortization of deferred compensation............................ 1% 2%
Amortization of goodwill and acquired intangibles................ 4% 0%
----------- -----------
Total operating expenses...................................... 90% 97%
----------- -----------
Income from operations............................................. 10% 3%
----------- -----------
Other income, net............................................. 2% 1%
----------- -----------
Income before income taxes and minority interest................... 12% 4%
Provision for income taxes......................................... 5% 1%
----------- -----------
Net income before minority interest................................ 7% 2%
Minority interest.................................................. 0% 0%
----------- -----------
Net income......................................................... 7% 2%
=========== ==========
</TABLE>
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Revenues
Total revenues increased to $31.7 million for the three months ended March
31, 2000 as compared to $16.0 million for the same period in 1999. License
revenues decreased to $4.7 million for the three months as compared to $5.7
million for the same period in 1999, while service revenues increased to $27.0
million as compared to $10.4 million for the same period in 1999. License
revenues represented 15 percent of total revenues during the three months ended
March 31, 2000 as compared to 35 percent during the three months ended March 31,
1999. License revenues decreased for the three months ended March 31, 2000
compared to the same period in 1999 due primarily to the fact that we sold more
Universal Application development licenses in the 1999 period. Service revenues
increased for the three months ended March 31, 2000 compared to the same period
in 1999 due to an increase in the number of customer projects.
Revenues from international customers were approximately 10 percent of
total revenues for the three months ended March 31, 2000 as compared to 5
percent for the same period in 1999.
One customer accounted for more than 10 percent of our revenues for the
three months ended March 31, 2000, compared to three customers each accounting
for more than 10 percent of our revenues for the same period in 1999.
We believe that period to period comparisons between license and services
revenues are not necessarily indicative of future performance given the nature
of our product and services offerings and the relative emphasis we apply to
these offerings in any given quarter.
Operating Expenses
Cost of Revenues. Cost of revenues consists primarily of compensation and
other related costs of personnel to provide applications development and
implementation, support, and training services. Cost of revenues increased to
$11.7 million for the three months ended March 31, 2000 compared to $6.2 million
for the same period in 1999. Cost of revenues as a percentage of total revenues
was 37 percent for the three months ended March 31, 2000 as compared to 39
percent for the same period in 1999. The increase in absolute dollars between
periods was mainly due to an increase in the number of customer projects.
Sales and Marketing. Sales and marketing expenses consist primarily of
compensation, travel, and other related expenses for sales and marketing
personnel, as well as advertising and other marketing expenses. Sales and
marketing expenses increased to $6.8 million for the three months ended March
31, 2000 as compared to $4.7 million for the same period in 1999. Sales and
marketing expenses as a percentage of total revenues were 22 percent for the
three months ended March 31, 2000 as compared to 30 percent for the same period
in 1999. The increases in sales and marketing expenses in absolute dollars was
primarily the result of hiring additional sales and marketing personnel and
expanding advertising and other marketing programs in connection with the growth
of our business. The decrease in expenses as a percentage of total revenues was
primarily due to timing of advertising expenses. We anticipate that sales and
marketing expenses will be higher as a percentage of total revenue later in
calendar 2000 than were incurred during the three months ended March 31, 2000.
Additionally, we anticipate that sales and marketing expenses will continue to
increase in absolute dollars as the Company continues to grow.
Research and Development. Research and development expenses consist
primarily of compensation and other related costs of personnel dedicated to
research and development activities. Research and development expenses increased
to $6.4 million for the three months ended March 31, 2000 as compared to $3.4
million for the same period in 1999. Research and development expenses as a
percentage of total revenues were 20 percent for the three months ended March
31, 2000 as compared to 21 percent for the same period in 1999. Research and
development expenses grew in absolute dollars due primarily to the addition of
personnel required to support expanded development efforts.
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<PAGE>
General and Administrative. General and administrative expenses consist
primarily of the costs of executive management and finance and administrative
staff, recruiting, business insurance, and professional fees. General and
administrative expenses increased to $1.9 million for the three months ended
March 31, 2000 as compared to $820,000 for the same period in 1999. General and
administrative expenses as a percentage of total revenues were 6 percent for
the three months ended March 31, 2000 as compared to 5 percent for the same
period in 1999. The increase in absolute dollars was primarily the result of
hiring additional finance and administrative personnel to manage and support the
increased complexity and scale of our operations. We believe that our general
and administrative expenses will continue to increase in absolute dollars as a
result of the need to add additional finance and administrative staff to support
growing operations and from costs related to being a publicly-held company.
Amortization of Deferred Compensation. Deferred compensation, along with
the associated amortization, resulted from the grant of stock options when
there is a difference between the exercise price of certain stock option grants
and the deemed fair value of the common stock at the time of such grants.
Certain grants during 1997, 1998, and 1999 were issued at a price which differed
from the deemed fair value at the grant date. We are amortizing these amounts
over the vesting periods of the applicable options, resulting in amortization
expense of $351,000 for the three months ended March 31, 2000 as compared to
$305,000 for the same period of 1999.
Amortization of Goodwill and Acquired Intangibles. Amortization of goodwill
and acquired intangibles resulted from the acquisition of LongView Group, Inc.
("LongView"). The remaining intangible assets after the write-off of in-process
research and development, totaled $24.6 million and are being amortized over the
expected lives of the goodwill and intangibles. These lives range from five to
seven years. We recorded amortization expense of intangibles of $1.2 million
for the three months ended March 31, 2000. We did not incur any amortization
of goodwill and acquired intangibles for the same period of 1999 because the
LongView acquisition did not occur until October 7, 1999.
Total Other Income, net. Net other income increased to $508,000 for the
three months ended March 31, 2000 compared to $88,000 for the same period in
1999. This increase mainly resulted from an increase in interest and other
income of $628,000 resulting from higher cash and cash equivalent balances in
the first three months of 2000 as compared to similar periods in 1999. These
balances mainly increased due to our initial public offering in May 1999.
Interest income in both years was partially offset by interest expense resulting
from notes payable and capital leases.
Provision for Income Taxes. The provision for income taxes was $1.7 million
for the three months ended March 31, 2000 as compared to $234,000 for the same
period of 1999. The effective tax rate of 44 percent during the three months
ended March 31, 2000 increased from the 38.5 percent effective tax rate during
the same period of 1999 due to the non-tax deductibility of the amortization of
goodwill and acquired intangibles associated with the LongView acquisition.
Minority Interest. Minority interest was $8,000 for the three months
ended March 31, 2000 as compared to $0 in the same period of 1999. This amount
represents the minority stockholders' proportionate interest in the net income
of the Company's subsidiaries. In future periods, as employees exercise common
stock options in the Company's subsidiaries, this amount is anticipated to
increase. We intend to account for the sale of common stock in our
subsidiaries as an equity transaction.
Liquidity and Capital Resources
Prior to our initial public offering in May 1999, we financed our
operations primarily through cash flows from operations, private sales of
capital stock totaling $13.4 million, and, to a lesser extent, various types of
equipment loans and lease lines of credit. Effective May 20, 1999, we completed
an initial public offering of our common stock, resulting in net cash proceeds
to TenFold of $34.2 million.
15
<PAGE>
On January 18, 1999, we entered into an unsecured Revolving Line of Credit
providing for borrowings of up to $5.0 million. On December 29, 1999 we modified
and extended the unsecured Revolving Line of Credit to provide for borrowings of
up to $15 million. The line of credit expires on November 15, 2000. Borrowings
under the line of credit bear interest at rates which vary from prime rate to
prime rate less 1 percent or LIBOR plus 100 to 250 basis points. The actual
interest rate is determined quarterly by certain financial ratios. The line of
credit includes covenants relating to the maintenance of certain financial
ratios and cash balances and limits the payment of dividends. We had no
outstanding borrowings on this line as of March 31, 2000.
Net cash used in operating activities was $12.7 million for the three
months ended March 31, 2000 as compared to $3.8 million in the same period of
1999. Net cash used in investing activities was $1.5 million for the three
months ended March 31, 2000 as compared to $842,000 in the same period of 1999.
Net cash provided by financing activities was $3.3 million for the three months
ended March 31, 2000 as compared to $2.5 million in the same period of 1999. The
increase in cash flows used in operating activities was due to changes in
operating accounts, primarily a decrease in accrued liabilities and increases in
accounts receivable and unbilled accounts receivable. Additionally, the Company
recognized a tax benefit associated with the exercise of certain stock options.
This tax benefit was recorded as an increase in additional paid-in capital. We
expect to fully utilize the deferred tax assets associated with these stock
options during calendar 2000.
The increase in net cash used in investing activities was due primarily to
deposits made during the three months ended March 31, 2000 on additional office
space, equipment and furniture. Most of these deposits related to new office
space in San Francisco and Dallas. Net cash provided by financing activities for
the three month periods ended March 31, 2000 and 1999 resulted from the issuance
of common stock and the issuance of notes payable.
We believe that our current cash and cash equivalent balances, anticipated
cash flows from operations, and available credit facilities will be sufficient
to meet our capital requirements for at least the next twelve months. However,
there can be no assurance that we will be successful in generating anticipated
levels of cash from operations or borrowings. If we are unable to generate
sufficient cash flow from operations, or additional equipment loans or equipment
and working capital lines of credit, we may be required to scale down our
operations and expansion plans, refinance all or a portion of our existing
indebtedness, or obtain other sources of financing earlier than planned, any of
which could have a material adverse effect on our business, results of
operations, and financial condition. There can be no assurance that any such
refinancing would be available on commercially reasonable terms, or at all, or
that any other financing could be obtained.
16
<PAGE>
In-Process Research and Development
In connection with the LongView acquisition, the Company recorded a
write-off of $2 million for in-process research and development in the fourth
quarter of 1999. An independent valuation of LongView was used to evaluate the
acquired in-process research and development technology. The fair value assigned
to purchased in-process research and development was determined by estimating
the costs to develop the purchased in-process research and development into
commercially viable products and discounting the resulting net cash flows
related to these projects. At the date of the acquisition, the acquired in-
process research and development had not yet reached technological feasibility
and had no alternative future uses.
In developing these cash flow projections, revenues were forecasted
based on estimates of relevant market sizes and growth factors, expected trends
in technology, and the nature and expected timing of new product introductions
by LongView and it competitors. LongView's projected revenues are dependent upon
successful introduction of the in-process research and development projects.
Operating expenses and resulting profit margins were forecasted based on the
characteristics and cash flow generating potential of the acquired in-process
research and development. Appropriate adjustments were made to operating income
to derive net cash flow.
In determining the operating cash flows related exclusively to in-
process research and development, management has considered the contribution of
both prior technologies (as demonstrated by prior products) and existing
technology or know-how that is generic among most or all products. Where
appropriate, the operating income estimates for each project have been
apportioned between in-process research and development and the appropriate
intangible asset (i.e., existing technology). The operating income apportionment
factor was determined on the basis of an analysis of the specific contribution
of each element of existing technology to the subject in-process research and
development, the estimated effect of this contribution on the profitability of
the subject in-process project, and the relative importance of the existing
technology to the product's ultimate customer.
The discount rate for in-process research and development considers
the following risk elements (in addition to the baseline business and market
risks considered as part of the current product discount rate); risk of
successfully completing the in-process research and development project, risk
that market demand will exist in the future for the in-process research and
development product, risk that the forecasted cost structure will be possible,
and the risk that as yet unknown competitive products will emerge. An after-tax
rate of 27.5 percent was applied to the in-process research and development
projects.
The revenues earned by the in-process research and development
products represent the return on
17
<PAGE>
all of the assets acquired under the agreement. The cash flows generated by the
new products must provide a return on each asset purchased that is consistent
with the value and the relative risk of the asset. To separately value in-
process research and development, the value and required rate of return for
other identifiable assets must be determined. The required return on these other
assets is charged to (deducted from) the cash flows generated by the projects
shown in the in-process research and development model to determine the
incremental cash flows specifically attributable to the in-process research and
development project.
The estimated costs to complete the acquired in-process research and
development as of the date of acquisition was $1.2 million. We believed that the
foregoing assumptions used in the LongView in-process research and development
analysis were reasonable at the time of the acquisition. No assurance can be
given, however, that the underlying assumptions used to estimate expected
revenues, development costs or profitability, or the events associated with such
projects, will transpire as estimated. Expenses incurred to date associated with
the development and integration of the in-process research and development
projects are higher than our previous estimates. We believe that our projected
revenues from these projects will be higher than our previous estimates and that
our revised estimates of net cash flows related to these projects are not
materially different than the original net cash flows used to calculate the in-
process research and development write-off. To date, no revenues have been
recognized as these projects.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes
new accounting and reporting standards for companies to report information about
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives), and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the balance sheet and measure those instruments at fair
value. For a derivative not designated as a hedging instrument, changes in the
fair value of the derivative are recognized in earnings in the period of change.
We must adopt SFAS No. 133 by January 1, 2001. We do not believe the adoption of
SFAS No. 133 will have a material effect on our results of operations, financial
position or liquidity.
In December 1999, the Securities and Exchange Commission staff released
Staff Accounting Bulletin No. 101, "Revenue Recognition," ("SAB No. 101") to
provide guidance on the recognition, presentation and disclosure of revenue in
financial statements; however, SAB No. 101 does not change existing literature
on revenue recognition. SAB No. 101 explains the staff's general framework for
revenue recognition, stating that four criteria need to be met in order to
recognize revenue. The four criteria, all of which must be met, are the
following:
. There must be persuasive evidence of an arrangement;
. Delivery must have occurred or services must have been rendered;
. The selling price must be fixed or determinable; and
. Collectibility must be reasonably assured.
We will adopt SAB No. 101 during the second quarter of 2000. We
believe that our current revenue recognition policy is in compliance with this
guidance; however, we continue to evaluate the impact, if any, of SAB No.101 and
any possible, subsequent interpretations of SAB No. 101 on our policies and
procedures.
The FASB issued Interpretation No. 44, "Accounting for Certain
Transactions Involving Stock Compensation--an Interpretation of APB Opinion No.
25" ("FIN No. 44") in March 2000. The interpretation clarifies the application
of Opinion 25 for only certain issues such as the following: (a) the definition
of employee for purposes of applying Opinion 25, (b) the criteria for
determining whether a plan qualifies as a noncompensatory plan, (c) the
accounting consequence of various modifications to the terms of a previously
fixed stock option or award, and (d) the accounting for an exchange of stock
compensation awards in a business combination. We must adopt FIN No. 44 by July
1, 2000. We do not believe that the interpretation will have a material effect
on our results of operations, financial position or liquidity.
Factors That May Affect Future Results and Market Price of Stock
We operate in a rapidly changing environment that involves numerous risks,
some of which are beyond our control. The following discussion highlights some
of these risks.
We have a limited operating history and consequently our future prospects are
difficult to evaluate.
We were founded in 1993 and have a limited operating history. As a result,
it is difficult to evaluate our future prospects. We have only a limited number
of applications completed and currently in use and there can be no assurance
that we will be able to complete any current or new projects. We cannot be
certain that our business strategy will succeed.
There are many factors that may cause fluctuations in our quarterly financial
results, and if results are below the expectations of securities market
analysts, our stock price will likely decline.
In the past, the software industry has experienced significant downturns,
particularly when general economic conditions decline and spending on management
information systems decreases. Our business, financial condition, and operating
results may fluctuate substantially from quarter-to-quarter as a consequence of
general economic conditions in the software industry. In addition, our revenues
and operating results may vary significantly from quarter-to-quarter due to a
number of factors that affect our business and the software industry, including:
. the number, size, and scope of projects in which we are engaged;
. the contractual terms and degree of completion of our projects;
. any delays or changes in customer requirements incurred in connection
with new or existing projects;
. the accuracy of our estimates of the resources required to complete
ongoing, as well as new, projects;
. the adequacy of provisions for losses associated with fixed-price
contracts;
. the timing of sales of our products and services; and
. delays in introducing new applications.
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Due to these factors, some of which are discussed in more detail below, we
believe that quarter-to-quarter comparisons of our operating results are not a
good indication of our future performance. It is likely that in some future
quarter our operating results will be below the expectations of securities
market analysts and investors. In this event, the price of our common stock will
likely fall.
Our historical quarterly operating results have varied significantly and
future adverse quarterly operating results could cause our stock price to fall.
Historically, our quarterly operating results have varied significantly.
For example, during some years, we have had quarterly losses followed by profits
in a subsequent quarter and then returned again to a loss in a later quarter.
Our future quarterly operating results may continue to vary significantly.
Furthermore, there can be no assurance that we will not suffer a loss in future
periods.
If we fail to adequately anticipate employee and resource utilization rates,
quarterly operating results could suffer and our stock price could fall.
We plan to significantly increase our operating expenses to broaden our
service and customer support capabilities, expand sales and marketing
operations, develop new distribution channels, and fund greater levels of
research and development. Our operating expenses are largely based on
anticipated revenue trends and a high percentage of our operating expenses,
particularly personnel and rent, are relatively fixed in advance of any
particular quarter. As a result, unanticipated variations in the number, or
progress toward completion, of our projects or in employee utilization rates may
cause significant variations in operating results in any particular quarter and
could result in quarterly losses. An unanticipated termination of a major
project, the delay of a project, or the completion during a quarter of several
major projects could result in under-utilized employees and could, therefore,
cause us to suffer quarterly losses or adverse results of operations.
If we experience project delays, quarterly operating results could suffer and
our stock price could fall.
Because we recognize service revenues over the period we develop an
application, project delays could have a significant negative impact on
operating results. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations-Overview" for a discussion of our revenue
recognition policies. These delays could be caused by a number of factors that
are outside of our control. For example, because our development methodology
requires significant involvement by customer personnel during several key phases
of the development cycle, delays could be caused by customers failing to meet
their contractual obligations, including reviewing and approving requirements,
providing timely feedback, and providing adequate staffing. Delays could also be
caused by customers being distracted by information technology issues they face,
by corporate reorganizations or business combinations in which they are
involved, or other factors. Furthermore, delays could be caused by
misinterpretations of, or changes in, customer requirements, or by a loss of
personnel or members of a particular project team. We have experienced delays
for these and other reasons in the past and there can be no assurance that we
will not experience delays in the future.
Our sales cycle is lengthy and subject to delays and these delays could cause
our quarterly operating results to suffer and our stock price to fall.
We believe that a customer's decision to purchase our software involves a
significant commitment of resources and is influenced by customer budget cycles.
To successfully sell our products, we generally must educate our potential
customers regarding the use and benefit of our products, which can require
significant time and resources. Consequently, the period between initial contact
and the purchase of our products is often long and subject to delays associated
with the lengthy budgeting, approval, and competitive evaluation processes that
typically accompany significant capital expenditures. Our sales cycles are
lengthy and variable, typically ranging between three to twelve months from
initial contact with a
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potential customer to the signing of a contract. Sales delays could cause our
operating results to vary widely.
We are dependent on a small number of large customers and the loss of one or
more of these customers may cause revenues to decline.
Although we plan to expand and diversify our customer base, as a result of
our limited operating history, we have derived, and over the near term we expect
to continue to derive, a significant portion of our revenues from a limited
number of large customers. The loss of any of these large customers, without
their replacement by new large customers, would have an adverse effect on our
revenues. In the future, revenues from a single customer or a few large
customers may constitute a significant portion of our total revenues in a
particular quarter. The volume of work performed for specific customers is
likely to vary from year to year, and a major customer in one year may not hire
us to develop applications in a subsequent year. In addition, if a customer is
involved in a corporate reorganization or business combination, it may delay a
decision to hire us or cause the customer to choose not to hire us to develop
applications in a given year. See "Management Discussion and Analysis of
Financial Condition and Results of Operations - Revenues" for more information
concerning our customers and revenues.
We have historically derived a significant portion of our revenues from
customers in the insurance industry.
Software applications we developed for companies in the insurance industry
represented 46 percent of our total revenues during the three months ended March
31, 2000. Our reliance on customers from a particular industry subjects our
business to the economic conditions impacting that industry, including the
industry's demand for information technology resources. If we continue to rely
on the insurance industry, or any one industry as a major source of revenues,
and that industry suffers adverse economic conditions, there will likely be a
significant reduction in the demand for our products, causing revenues to
suffer. Although we intend to diversify our customer base, there can be no
assurance that we will be able to do so in the near term or at all.
We are involved in litigation and may in the future be involved in further
litigation or disputes which may be costly and time-consuming, and if we suffer
adverse judgements could cause our operating results to suffer.
We are currently involved in one significant litigation matter. See
Note 9 in the accompanying Notes to Consolidated Financial Statements for more
information concerning this matter. We may in the future face other litigation
or disputes with customers, employees, partners, or other third parties. Such
litigation or disputes could result in substantial costs and diversion of
resources which would harm our business. An unfavorable outcome of these matters
may have a material adverse impact on our financial position and results of
operations.
We offer fixed-price, fixed-time contracts that we guarantee.
An important element of our strategy is to enter into fixed-price, fixed-
time contracts, rather than time and materials contracts. These contracts
involve risk because they require us to absorb possible cost overruns and, if we
fail to meet our performance obligations, may require us to satisfy our
performance guarantee. We guarantee that we will complete our projects within a
fixed time or the customer has the option to return the software and receive a
refund of any fees paid under the contract. For fixed-price contracts, we
recognize license fees related to the application and the application
development service fees over time as we perform the services, using the
percentage of completion method of accounting. Our failure to accurately
estimate the resources required for a project or our failure to complete our
contractual obligations in a manner consistent with the project plan would
likely cause us to have lower margins or to suffer a loss on the project, which
would negatively impact our operating results. In specific circumstances, we
have been required to commit unanticipated additional resources to complete
projects. We will likely experience similar situations in the future. In
addition, for specific projects, we may fix the price before the requirements
are finalized. This could result in a fixed price that turns out to be too low,
which would cause us to suffer a loss on the project and would negatively impact
our operating results.
If our software contains defects or other limitations, we could face product
liability exposure and our reputation could be damaged.
Because of our limited operating history and our small number of customers,
we have completed a limited number of projects that are now in production. As a
result, there may be undiscovered material defects in our products or
technology. Furthermore, complex software products often contain errors or
defects, particularly when first introduced or when new versions or enhancements
are released. Despite internal testing and testing by current and potential
customers, our current and future products may contain serious defects. Serious
defects or errors could result in lost revenues or a delay in market acceptance,
which would damage our reputation and business.
Our products have not been extensively tested to determine the extent to
which they are scaleable - capable of being used effectively by large numbers of
users simultaneously. Because customers may require that our products be capable
of simultaneous use by large numbers of users, if it turns out that our
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products are not scaleable to the required extent, our growth and market share
would be materially adversely affected.
Because our customers may use our products for mission-critical
applications, errors, defects, or other performance problems could result in
financial or other damages to customers. Our customers could seek damages for
these losses. Any successful claims for these losses, to the extent not covered
by insurance, could result in us being obligated to pay substantial damages,
which would cause operating results to suffer. Although our license agreements
typically contain provisions designed to limit our exposure to product liability
claims, existing or future laws or unfavorable judicial decisions could negate
these limitation of liability provisions. A product liability claim brought
against us, even if not successful, would likely be time consuming and costly.
Our failure to manage growth and organizational structure could impair our
business.
Our growth and new projects have placed significant demands on our
management and other resources. If we are unable to manage our growth and
projects effectively, this inability could have a material adverse effect on the
quality of our services and products, our ability to retain key personnel, and
our business, financial condition, and results of operations. Our revenues
during the three months ended March 31, 2000 increased approximately 98 percent
when compared with the same period in 1999. Our staff increased from 351 full-
time employees at March 31, 1999 to 587 full-time employees at March 31, 2000.
Our ability to manage this growth effectively will require us to continue to
develop and improve our operational, financial, and other internal systems, as
the well as our business development capabilities, and to train, motivate, and
manage our employees. In addition, our future success will depend in large part
on our ability to continue to set fixed-price fees accurately, maintain high
rates of employee utilization, and maintain project quality.
An element of our business strategy involves organizing our business along
industry lines, and evolving these business units into separate operating
companies. Our success in executing this strategy will depend to a large extent
on our ability to create and manage this complex organizational structure,
including our ability to establish and implement the appropriate management
structure, compensation programs, and financial reporting systems. Our
management has limited experience in managing an organization of this nature,
and our failure to meet the managerial challenges posed by the development and
operation of such an organization would harm our business.
21
<PAGE>
A loss of Gary D. Kennedy, Jeffrey L. Walker, or any other key employee
could impair our business.
Our industry is competitive and we are substantially dependent upon the
continued service of our existing executive personnel, especially Gary D.
Kennedy, President and Chief Executive Officer. Furthermore, our products and
technologies are complex and we are substantially dependent upon the continued
service of our senior technical staff, including Jeffrey L. Walker, Chairman,
Executive Vice President and Chief Technology Officer; Sameer Shalaby, Senior
Vice President of Architecture Development; and Adam Slovik, Senior Vice
President of Worldwide Applications Development. If a key employee resigns to
join a competitor or to form a competing company, the loss of the employee and
any resulting loss of existing or potential customers to the competing company
would harm our business. We do not carry key man life insurance on any of our
key employees. None of our key employees, other than Mr. Kennedy, has signed an
employment agreement or an agreement not to compete with TenFold upon
termination of employment. Even in the case of Mr. Kennedy, his employment
agreement does not assure his continued service to TenFold. In the event of the
loss of key personnel, there can be no assurance that we would be able to
prevent their unauthorized disclosure or use of our technical knowledge,
practices, or procedures.
Our failure to attract and retain highly-skilled employees, particularly
project managers and other senior technical personnel, could impair our ability
to complete projects and expand our business.
Our business is labor intensive. Our success will depend in large part
upon our ability to attract, retain, train, and motivate highly-skilled
employees, particularly project managers and other senior technical personnel.
Any failure on our part to do so would impair our ability to adequately manage
and complete existing projects, bid for and obtain new projects, and expand
business. There exists significant competition for employees with the skills
required to perform the services we offer. Qualified project managers and
senior technical staff are in great demand and are likely to remain a limited
resource for the foreseeable future. There can be no assurance that we will be
successful in attracting a sufficient number of highly-skilled employees in the
future, or that we will be successful in retaining, training, and motivating the
employees we are able to attract. If our employees are unable to achieve
expected performance levels, our business will be harmed.
Our growth and success depends on our ability to resell applications
products; however, we have limited experience reselling applications products to
date and our current and future agreements with our customers may limit our
ability to resell applications products in the future.
The success of our business is dependent upon our ability to develop
software applications for customers that we can resell to other customers in the
same industry without significant modification. If we are unable to develop and
license these applications successfully or within the time frames anticipated,
our revenues, growth, and operating results will suffer. Some customers have
prohibited us from marketing the applications developed for them generally or
for specified periods of time or to specified third parties, or have required
that we pay them a royalty on licenses of the application to third parties.
Customers may continue to make similar demands in the future. Furthermore,
there can be no assurance that we will be able to develop software applications
that can be marketed generally within a particular industry without the need for
significant modification. Our current product plans include the introduction of
multiple resellable products in the near term. In addition, we have agreed with
Perot Systems Corporation, a systems integrator with whom we have a strategic
relationship, that in some cases Perot Systems or its customers will own
applications that we develop under our relationship with them.
We may not be able to successfully develop applications for new vertical
industries in which we have limited experience.
We intend to expand our business into new vertical industries. If we are
unsuccessful in developing applications that meet the needs of companies in
these markets or if our applications are not
22
<PAGE>
competitive, our operating results will suffer. We have limited experience in
developing software applications for companies outside of the industries we have
targeted to date and there can be no assurance that we will be able to
successfully develop these applications in the future. In addition, we will face
competition from companies that have significantly greater experience in
developing applications for the industries we intend to target and that have
greater name recognition than we do.
If we are unsuccessful in implementing our vertical business strategy, our
ability to grow our business will be impaired.
Our vertical business strategy involves segmenting our business along
industry lines, likely through the creation of separate subsidiaries, and having
these subsidiaries evolve into separate operating companies. We offer employee
incentives, including stock options in the subsidiaries, to attract, motivate,
and retain quality staff. We have offered and may offer in the future, equity
in the subsidiaries to strategic industry partners. These subsidiaries may raise
capital independently through an initial public offering, private placement or
other means, or be spun off from TenFold. We believe that the successful
implementation of this strategy will be important in order for us to achieve
significant growth. We may face significant challenges in implementing this
strategy, including the segmentation and valuation of the various subsidiaries,
the selection of strategic industry partners, issues relating to conflicts of
interest among the subsidiaries, their stockholders and TenFold, and potential
charges and expenses resulting from any repurchases of equity interests in the
subsidiaries. Our failure to successfully address these challenges could cause
this business strategy to fail, which would impair our ability to grow our
business.
Future events could affect previous valuations of subsidiaries.
Our subsidiaries grant options to certain employees. The exercise price
for all option grants is equal to the fair market value of the subsidiaries'
common stock. As none of the subsidiaries are publicly traded, the
determination of fair market value is made by the subsidiaries' boards of
directors based upon the board's knowledge of the subsidiaries' financial
condition, prospects, success in the marketplace, counsel from its professional
advisors such as outside counsel or independent appraisers, and other factors.
Before TenFold Corporation was publicly traded, we recognized deferred
compensation, along with the associated amortization, from the granting of
certain stock options when there was a difference between the exercise price of
certain stock option grants and the deemed fair value of the common stock at the
time of such grants. Future events could occur that could challenge the board
of directors previous determination of fair value. As a result, certain of the
subsidiaries' stock option grants could be deemed to have been granted at less
than fair market value. Such a determination would create deferred compensation
and associated amortization expense and change our reported financial results.
If we fail to generate substantial revenues from our relationship with Perot
Systems Corporation, our operating results may suffer.
We entered into a strategic relationship with Perot Systems Corporation, a
systems integrator, to develop and deliver applications, products, and services
to TenFold and Perot Systems customers. We plan to devote significant resources
to the development of this relationship. As a result, if we fail to generate
substantial revenues from this relationship, whether due to the failure of the
relationship or our inability to staff the opportunities presented, our
operating results may suffer. We have not recognized substantial revenues
from the Perot relationship to date.
If we are unable to expand our international operations, our growth will
suffer.
Although we currently have limited international operations, our ability to
achieve revenue growth in the future will depend in part on our ability to
develop international sales. Although we may invest significant resources to
establish additional sales and service operations outside the United States and
to enter additional international markets, there can be no assurance that these
efforts will be successful. In
23
<PAGE>
order to successfully establish international sales, we must establish foreign
operations, add an international sales and support organization, hire additional
personnel, and recruit international distributors. To the extent that we are
unable to do so in a cost-effective manner, our growth and operating results
could be materially adversely affected. In addition, our guarantee may not be
appropriate in some international markets for various reasons, including
business practices in these markets. As a result, we may not be able to derive
value from the TenFold Guarantee in these markets.
If we cannot protect or enforce our intellectual property rights, our
competitive position would be impaired and we may become involved in costly and
time-consuming litigation.
Our success is dependent, in part, upon our proprietary Universal
Application technology and other intellectual property rights. If we are unable
to protect and enforce these intellectual property rights, our competitors will
have the ability to introduce competing products that are similar to ours, and
our revenues, market share and operating results will suffer. To date we have
relied primarily on a combination of patent, copyright, trade secret, and
trademark laws, and nondisclosure and other contractual restrictions on copying
and distribution to protect our proprietary technology. We have been granted
one patent and applied for two additional patents in the United States and
intend to continue to seek patents on our technology where appropriate. There
can be no assurance that the steps we have taken in this regard will be adequate
to deter misappropriation of our proprietary information or that we will be able
to detect unauthorized use and take appropriate steps to enforce our
intellectual property rights. The laws of some foreign countries may not
protect our intellectual property rights to the same extent as do the laws of
the United States. Furthermore, litigation may be necessary to enforce our
intellectual property rights, to protect our trade secrets, to determine the
validity and scope of the proprietary rights of others, or to defend against
claims of infringement or invalidity. This litigation could result in
substantial costs and diversion of resources which would harm our business.
To date, we have not been notified that our products infringe the
proprietary rights of third parties, but there can be no assurance that third
parties will not claim infringement by us with respect to current or future
products. We expect software developers will increasingly be subject to
infringement claims as the number of products and competitors in our industry
segment grows and the functionality of products in different industry segments
overlaps. Any of these claims, with or without merit, could be time-consuming
to defend, result in costly litigation, divert management's attention and
resources, cause product shipment delays, or require us to enter into royalty or
licensing agreements. These royalty or licensing agreements, if required, may
not be available on terms acceptable to us, or at all. A successful claim
against us of product infringement and our failure or inability to license the
infringed or similar technology on favorable terms would harm our business.
If we fail to successfully compete, our growth and market share will be
adversely affected.
The market for our products and services is highly competitive, and if we
are not successful in competing in this market, our growth and market share will
suffer. We believe that we currently compete principally with consulting and
software integration firms, application software vendors, and internal
information systems groups. Many of these competitors have significantly
greater financial, technical and marketing resources, generate greater revenues,
and have greater name recognition than we do. In addition, there are relatively
low barriers to entry into our markets and we have faced, and expect to continue
to face, additional competition from new entrants into our markets.
We believe that the principal competitive factors in our markets include
quality of services and products, speed of development and implementation,
price, project management capability, and technical and business expertise. We
believe that our ability to compete also depends in part on a number of
competitive factors outside our control, including the ability of our
competitors to hire, retain and motivate project managers and other senior
technical staff, the development by others of software and services that are
competitive with our products and services, and the extent of our responsiveness
to customer needs. There can be no assurance that we will be able to compete
successfully with our competitors.
24
<PAGE>
If we fail to release new versions of our products or product enhancements
in a timely manner to accommodate technological change, our ability to grow our
business will suffer.
The market in which we compete is characterized by rapid technological
change, including new versions of operating systems, relational databases or new
hardware technologies. We may need to modify our products to accommodate these
changes. Our revenues and market share will decline if we fail to release new
versions of our products or product enhancements in a timely manner or if these
products and product enhancements fail to achieve market acceptance when
released. In addition, customers may defer or forego purchases of our products
if our competitors or major hardware, systems, or software vendors introduce or
announce new products or product enhancements.
We may fail to properly integrate our LongView acquisition, which could
cause our business to suffer.
While we analyzed carefully the LongView acquisition, we cannot ensure
that it will result in long-term benefits to us or our stockholders, or that our
management will be able to manage the acquired businesses effectively. In
addition, growth through acquisition involves a number of risks. If any of the
following events occur with the LongView acquisition, it could seriously harm
our business, operating results, and financial condition:
. we have difficulty combining previously separate businesses into
a single unit;
we fail to realize anticipated benefits, such as cost savings and
. revenue enhancements;
. we discover unknown liabilities after the acquisition;
. we do not properly train LongView employees on our technology and
our culture;
. we are unable to retain key personnel;
. we have difficulty assimilating LongView's products; and
. we fail to retain LongView's customers
No corporate actions requiring stockholder approval can take place without
the approval of our controlling stockholders.
The executive officers, directors, and entities affiliated with them,
in the aggregate, beneficially own approximately 62% of our outstanding common
stock. Furthermore, Jeffrey L. Walker, Chairman, Executive Vice President and
Chief Technology Officer, and the Walker Children's Trust, in the aggregate,
currently beneficially own approximately 50% of our outstanding common stock.
Mr. Walker, acting alone or with others, would be able to decide or
significantly influence all matters requiring approval by our stockholders,
including the election of directors and the approval of mergers or other
business combination transactions. This concentration of ownership may have the
effect of delaying or preventing a merger or other business combination
transaction, even if the transaction would be beneficial to our other
stockholders.
The anti-takeover provisions in our charter documents and under Delaware
law could discourage a takeover that stockholders may consider favorable.
Provisions of our Certificate of Incorporation, Bylaws, stock
incentive plans and Delaware law may discourage, delay, or prevent a merger or
acquisition that a stockholder may consider favorable.
25
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Interest Rate Risk. As of March 31, 2000, we had cash and cash equivalents
of $47.2 million. All of the cash equivalents consist of highly-liquid
investments with remaining maturities at the date of purchase of less than
ninety days. These investments are subject to interest rate risk and will
decrease in value if market interest rates increase. A hypothetical increase or
decrease in market interest rates by 10 percent from the March 31, 2000 rates
would cause the fair value of these cash investments to change by an
insignificant amount. Risk is mitigated through limits regarding investment
concentration in particular securities and institutions, and investments in
varying maturities. We do not invest in any financial derivatives or any other
complex financial instruments. TenFold does not own any equity investments.
Therefore, we do not currently have any direct equity price risk.
Foreign Currency Exchange Rate Risk. A portion of our operations consists
of applications development and sales activities in the United Kingdom. As a
result, our financial results could be affected by factors such as a change in
the foreign currency exchange rate between the U.S. dollar and the British
pound, or by weak economic conditions in the United Kingdom. When the U.S.
dollar strengthens against the British pound, the value of revenues in the
United Kingdom decreases. When the U.S. dollar weakens against the British
pound, the value of revenues in the United Kingdom increases. The monetary
assets and liabilities in our foreign subsidiary which are impacted by foreign
currency fluctuations are cash, accounts receivable, fixed assets, accounts
payable, deferred revenue, and certain accrued liabilities. A hypothetical 10
percent increase or decrease in the exchange rate between the U.S. dollar and
the British pound from the March 31, 2000 rate would cause the fair value of
such monetary assets and liabilities in the United Kingdom to change by an
insignificant amount. We are not currently engaged in any foreign currency
hedging activities.
PART II. OTHER INFORMATION
Item 2. Use of Proceeds.
Our registration statement (Registration No. 333-74057) under the
Securities Act of 1933, for our initial public offering, became effective on
May 20, 1999. Our offering proceeds, net of aggregate expenses of
approximately $4.7 million, were $34.2 million. As of March 31, 2000, we used
approximately $34.2 million of those proceeds as follows (in millions):
<TABLE>
<S> <C>
Construction of plant, building and facilities $ -
Purchase and installation of machinery and equipment -
Purchases of real estate -
Acquisition of The LongView Group, Inc. 10.0
Repayment of indebtedness -
Working capital -
Purchase of temporary investments 24.2
-----
$34.2
=====
</TABLE>
See Note 7 of Notes to Consolidated Financial Statements for a more
detailed discussion of our acquisition of The LongView Group, Inc. and payments
made or to be made in connection with this acquisition. The foregoing amounts
represent our best estimate of our use of the proceeds for the period indicated.
We invested the net proceeds used for the purchase of temporary investments in
cash, cash equivalents, and short-term investments. None of our net offering
proceeds were paid directly or indirectly to our directors, officers, general
partners, holders of 10 percent or more of any class of equity securities, or
any of our affiliates.
26
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
Number Description
- ------ -----------
<S> <C>
10.1 Purchase and Sale Agreement at 171 and 181 San Carlos Drive, San
Rafael County, California between 181 Investors and TenFold
Corporation.
10.2 Office Lease at 600 Las Colinas Boulevard, Irving, Texas between
W9/CGN Real Estate Limited Partnership and TenFold Corporation
10.3 Office Lease at 150 California Street in San Francisco, California
between EOP-150 California Street, L.L.C. and TenFold Corporation
10.4 Office Lease at approximately 10000 South 900 West in South Jordan,
Utah between Boyer Jordan Valley 1 L.C. and TenFold Corporation
11* Computation of Shares used in Computing Basic and Diluted Net Income
Per Share
27 Financial Data Schedule.
</TABLE>
* Incorporated by reference to "Notes to Consolidated Financial Statements"
herein
(b) Reports on Form 8-K
None
27
<PAGE>
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.
TenFold Corporation
By: /s/ Robert P. Hughes
----------------------------------
Robert P. Hughes
Senior Vice President and
Chief Financial Officer
Date: May 5, 2000
28
<PAGE>
TenFold Corporation
Exhibit Index
<TABLE>
<S> <C>
Exhibit 10.1 Purchase and Sale Agreement at 171 and 181 San Carlos Drive, San Rafael County, California
between 181 Investors and TenFold Corporation
Exhibit 10.2 Office Lease at 600 Las Colinas Boulevard, Irving, Texas between W9/CGN Real Estate Limited
Partnership and TenFold Corporation
Exhibit 10.3 Office Lease at 150 California Street in San Francisco, California between EOP-150 California
Street, L.L.C. and TenFold Corporation
Exhibit 10.4 Office Lease at approximately 10000 South 900 West in South Jordan, Utah between Boyer Jordan
Valley 1 L.C. and TenFold Corporation
</TABLE>
<PAGE>
PURCHASE AND SALE AGREEMENT
By and Between
181 Investors
-Seller-
and
TENFOLD CORPORATION,
a Delaware corporation
-Buyer-
February 14, 2000
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is made as of February
14, 2000, by and between 181 INVESTORS, a California general partnership
("Seller"), and TEN FOLD CORPORATION, a Delaware corporation (the "Buyer").
RECITALS
--------
A. Seller owns all of that certain real property located in San Rafael,
Marin County, California, commonly known as at 171 and 181 Carlos Drive, as more
particularly described on Exhibit A attached hereto (the "Real Property").
---------
B. Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, said Real Property and all rights and interests appurtenant thereto, all
on the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the respective agreements hereinafter
set forth, Seller and Buyer agree as follows:
1. PROPERTY INCLUDED IN SALE Seller hereby agrees to sell and convey to
-------------------------
Buyer, and Buyer hereby agrees to purchase from Seller, the following:
1.1. Real Property All of the land comprising the Real Property, as
-------------
described on Exhibit A attached hereto.
---------
1.2. Appurtenances All rights, privileges and easements appurtenant
-------------
to the Real Property to the extent owned by Seller, including, without
limitation, all minerals, oil, gas and other hydrocarbon substances on the Real
Property, as well as all air rights, solar rights, water, water rights and water
stock relating to the Real Property, and all easements, rights-of-way or other
appurtenances used or intended to be used in connection with the beneficial use
and enjoyment of the Real Property (the "Appurtenances").
1.3. Improvements All improvements and fixtures located on the Real
------------
Property (the "Improvements"). The parties acknowledge that the improvements
include, without limitation, two (2) - two (2) story wood-frame office buildings
containing approximately 13,714 rentable square feet in the aggregate. This
recital is not a representation of square footage and the purchase price is not
predicated upon the amount of square footage.
1.4. Permits, Development Approvals and Fees All permits and
---------------------------------------
development rights, agreements, entitlements and approvals relating to the Real
Property.
1.5. Personal Property All personal property used in connection with
-----------------
or located on the Real Property, including, but not limited to, the items
specifically listed in Exhibit B attached hereto.
---------
All of the items described in Sections 1.1 through 1.5 above are
hereinafter collectively called the "Property."
<PAGE>
2. PURCHASE PRICE
--------------
2.1 The purchase price for the Property shall be $3,100,000.00
("Purchase Price").
2.2 Buyer agrees to deposit One Hundred Thousand Dollars
($100,000.00) in cash with the Title Company within three (3) business days
following Seller's execution of this Agreement. Funds deposited with the Title
Company pursuant to this Section 2.2, together with all earnings from the
investment of those funds while they are held by the Title Company, are referred
to in this Agreement as the "Deposit." All sums comprising the Deposit shall be
held in an interest-bearing account and interest accruing thereon shall be held
for the account of Buyer. In the event the sale of the Property as contemplated
hereunder is consummated, the Deposit (plus interest accrued thereon) shall be
credited against the Purchase Price. In the event the sale of the Property is
not consummated because of the failure of any condition or any other reason
except a default under this Agreement solely on the part of Buyer, the Deposit
(plus interest accrued thereon) shall immediately be returned to Buyer. If said
sale is not consummated because of a default under this Agreement solely on the
part of Buyer, the Deposit, but not the interest accrued thereon, shall be paid
to and retained by Seller as liquidated damages. THE PARTIES HAVE AGREED THAT
SELLER'S ACTUAL DAMAGES, IN THE EVENT OF A DEFAULT BY BUYER, WOULD BE EXTREMELY
DIFFICULT OR IMPRACTICABLE TO DETERMINE. THEREFORE, BY PLACING THEIR INITIALS
BELOW, THE PARTIES ACKNOWLEDGE THAT THE DEPOSIT HAS BEEN AGREED UPON, AFTER
NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF SELLER'S DAMAGES AND AS
SELLER'S EXCLUSIVE REMEDY AGAINST BUYER, AT LAW OR IN EQUITY, IN THE EVENT OF A
DEFAULT UNDER THIS AGREEMENT SOLELY ON THE PART OF BUYER.
/s/ RPH /s/ PFW /s/ AC /s/ ARN /s/ IM
---------------- -----------------------------
Buyer's Initials Seller's Initials
3. TITLE TO THE PROPERTY On the Closing Date (as hereinafter defined),
---------------------
Seller shall convey to Buyer marketable and insurable fee simple title to the
Real Property, Appurtenances and Improvements by duly executed and acknowledged
grant deed in the form attached hereto as Exhibit B (the "Deed"), free and clear
---------
of any known exceptions save and except those to which Buyer has not objected
pursuant to this Agreement. Evidence of delivery of marketable and insurable
fee simple title shall be the issuance by Title Company of an ALTA Owner's
Policy of Title Insurance (the "Title Policy") in the amount of the Purchase
Price, insuring fee simple title to the Real Property and Appurtenances in the
Buyer.
3.1. Buyer, during the Review Period but in no event later than ten
(10) business days following delivery of the preliminary title report covering
the Property and meeting the requirements of Section 6.1(a) below, shall give
written notice to Seller of any exception to title to which Buyer objects.
3.2. If Seller is unable to (or unwilling, based upon the cost of
removing an exception being disproportionate in relation to the Purchase Price)
remove the objectionable exception(s), Seller shall give notice to Buyer,
specifying the exception and the reason for Seller's inability or unwillingness
to remove same, within five (5) business days following
2
<PAGE>
Buyer's notice given pursuant to Section 3.1 above, and Buyer may, within seven
(7) business days of such notice, Buyer may either to waive its objection to the
exception(s), or terminate this Agreement, in which event all deposits shall be
refunded to Buyer. Buyer's election to waive its objection to the exception or
terminate shall be delivered in writing to Seller no more than seven (7)
business days from delivery of Seller's notice.
3.3. In the event of an exception to title to which Buyer has objected
and which Seller is willing to remove, but is unable to remove prior to close of
escrow, or any extension thereof to which both parties have agreed, Buyer may
withdraw the exception, or terminate this Agreement, in which event all deposits
shall be refunded to Buyer. Buyer agrees to extend closing of escrow, once, for
a period of no less than and no more than 20 calendar days, in the event such
additional time may, in Seller's reasonable opinion, enable Seller to remove the
excepted exception.
4. CONDITIONS TO CLOSING
---------------------
The following conditions are conditions precedent to Buyer's obligation to
purchase the Property:
4.1. Approval of Property Buyer shall have approved the Property
--------------------
pursuant to Article 6 below.
4.2. Financing Buyer's procurement, on or before the expiration of
---------
the Review Period, of a loan commitment to finance a portion of Buyer's purchase
of the Property at terms acceptable to Buyer in its sole and absolute
discretion.
4.3. Title Policy Title Company shall issue the Title Policy to Buyer
------------
at the closing of the purchase and sale of the Property (the "Closing").
4.4. Estoppel Certificates Seller delivers fully executed estoppel
---------------------
certificates in form and substance reasonably satisfactory to Buyer on or from
each tenant under the Leases (defined below) on or before the Closing Date
(defined below)
4.5. Representations and Warranties All of Seller's representations
------------------------------
and warranties contained in or made pursuant to this Agreement shall have been
true and correct when made and shall be true and correct as of the Closing Date,
as defined below.
4.6. Board Approval Buyer's Board of Directors shall, on or before
--------------
the expiration of the Review Period, have authorized the purchase of the
Property by Buyer.
The foregoing conditions in this Section 4 are intended solely for the
benefit of Buyer. If any of the foregoing conditions are not satisfied, Buyer
shall have the right at its sole election either to waive in writing the
condition in question and proceed with the purchase or, in the alternative,
terminate this Agreement.
3
<PAGE>
5. THE CLOSING
-----------
5.1. Closing Date The Closing hereunder shall be consummated through
------------
an escrow ("Escrow") to be opened with Title Company. All of the documents
required for the Closing and the funds required for the payment of the Purchase
Price shall be delivered into the Escrow on or before the date that is thirty
(30) days following Buyer's approval of the Property pursuant to Article 6 below
(provided, that if such thirtieth (30/th/) day is a weekend or holiday then such
documents and/or sums shall be due on the next succeeding business day), or such
other date prior thereto as Buyer and Seller may mutually agree in writing (the
"Closing Date"). Such date may not be extended without the approval of both
Seller and Buyer, except as otherwise expressly provided in this Agreement. The
Closing shall commence on the Closing Date and shall be completed on the Closing
Date or the business day following the Closing Date upon recordation by the
Title Company of the Deed and disbursement by the Title Company of the Purchase
Price to Seller. Buyer and Seller shall each submit to the Title Company, not
less than two (2) business days prior to the Closing Date, escrow instructions
consistent with the provisions of this Agreement.
5.2. Seller's Documents At the Closing, Seller shall deliver to Buyer
------------------
through escrow the following:
(a) a duly executed and acknowledged Deed;
(b) a duly executed counterpart of an Assignment of Permits and
Other Intangible Property in the form of Exhibit D attached hereto;
---------
(c) a duly executed Bill of Sale in the form of Exhibit E
---------
attached hereto;
(d) a duly executed Affidavit of Non-foreign Status in the form
of Exhibit F attached hereto;
---------
(e) estoppel certificates, duly executed by the tenant under each
of the Leases, in the form of Exhibit G hereunder; and
---------
(f) a duly executed Assignment of Leases in the form of Exhibit H
---------
attached hereto.
(g) any other documents, instruments or agreements called for
hereunder which have not previously been delivered.
Buyer may waive compliance on Seller's part under any of the foregoing
items by an instrument in writing.
5.3. Buyer's Documents and Funds At the Closing, Buyer shall deliver
---------------------------
to Seller through escrow the following:
(a) the Purchase Price, subject to the prorations and credits
hereinafter provided for; and
4
<PAGE>
(b) any documents, instruments or agreements expressly called for
hereunder which exist and have not previously been delivered.
Seller may waive compliance on Buyer's part under any of the foregoing
items by an instrument in writing.
5.4. Other Documents Seller and Buyer shall each deposit such other
---------------
instruments as are reasonably required by the escrow holder or otherwise
required to close the escrow and consummate the purchase of the Property in
accordance with the terms hereof.
5.5. Prorations Rents, real property taxes, and other items of income
----------
and expense of ownership of the Property shall be prorated as of 12:01 a.m. on
the date the Deed is recorded on the basis of a 365-day year.
5.6. Closing Costs Transfer taxes applicable to the sale of the
-------------
Property (if any), the fee for the Title Policy, escrow charges and other costs
of the Closing shall be paid one-half (1/2) by the Seller and one-half (1/2) by
the Buyer. Each party shall pay its own attorneys' fees in connection with the
sale.
6. REVIEW PERIOD
-------------
6.1. To assist Buyer in evaluating the Property, Seller will deliver
to Buyer within ten (10) calendar days after the date of Seller's execution and
delivery of this Agreement to Buyer (the date of Buyer's actual delivery being
referred to herein as the "Delivery Date") the following (collectively, the
"Review Materials"):
(a) A preliminary title report and offer of title commitment,
issued by the Title Company, indicating the condition of title to the Property
(the "Preliminary Report"), accompanied by legible copies of all documents
listed as exceptions to coverage in the Title Report.
(b) Copies of (i) all maintenance, repair and operating records
relating to the maintenance, repair and operation of the Property which have
been maintained by Seller in the business records of Seller in the ordinary
course of business, (ii) all documents evidencing permits, licenses, approvals,
utility rights, development rights and similar rights relating to ownership,
operation and/or maintenance of the Property, if any, whether granted by
governmental authorities or private persons that are in the possession of
Seller, (iii) all assignable warranties and guaranties covering all or any part
of the Property that are in the possession of Seller, and (iv) any leases or
occupancy agreements affecting the Property.
(c) A copy of ad valorem tax bills (both real and personal
property taxes) for the Property for the current tax year (if available to
Seller) as well as the immediately preceding tax year.
(d) To the extent not already provided to Buyer, copies of all
environmental reports and test results for the Property or neighboring property
performed by or for Seller or any of its affiliates or Seller's property manager
or otherwise in Seller's possession.
5
<PAGE>
(e) All service contracts, maintenance contracts, management
contracts, certificates of occupancy, audits of the compliance of the
Improvements with applicable laws (including, without limitation, the Americans
with Disabilities Act), warranties, soils and geologic reports, hazardous
materials reports or audits, insurance policies, operating statements for the
Property for the prior two (2) years.
(f) All existing and pending leases (and any amendments,
modifications, and letter agreements relating thereto) affecting the Property,
as well as a current rent roll for the Property, listing for each tenant the
name, rent, obligation for reimbursement for expenses, amount of deposit and
prepaid rent, if any, lease commencement date, lease termination date, lease
options, option rent, and cost of living or other rent escalation clauses; and
(g) All "as-built" plans and specifications for the Property,
which shall include, without limitation, any mechanical, electrical, HVAC,
plumbing and life safety system plans, specifications and drawings, and service
records for the building systems in the Improvements and the operating and
maintenance statements and manuals therefor.
All Review Materials shall be delivered by Seller to Buyer at one time,
under cover of a letter signed by Seller specifying by category the documents
provided and containing Seller's representation that due diligence was used in
the effort to locate the documents herein identified and that such documents as
were located, are to the best of Seller's knowledge after diligent search and
inquiry, all of the herein identified by Seller.
6.2. Buyer and its representatives, consultants and contractors may
enter upon the Property at any time and make inspections and tests (including
soil borings and environmental tests) regarding the Property as Buyer deems
necessary or desirable; provided that Buyer must obtain Seller's approval of any
intrusive or destructive testing. Damages to the Property resulting from any
inspection or testing conducted by or at the direction of Buyer will be repaired
by Buyer so that the Property is restored to its original condition. Buyer will
indemnify, defend and hold harmless Seller against any claim arising out of
activities conducted at the Property pursuant to this Section 6.2 by Buyer and
its representatives, consultants and contractors and related damage, cost or
expense (including fees and disbursements of attorneys and other professionals
and court costs).
6.3. Buyer may terminate its obligation to complete the Purchase at
any time during the 45-day period commencing on the Delivery Date (the "Review
Period") if Buyer, in its sole discretion, is not satisfied with the Property or
any matter relating to the Property, including the physical or environmental
condition of the Property, title to the Property or the Property's operating
history, or if Buyer is unable to procure the Loan Commitment. Buyer may
exercise its right under this Section 6.3 by giving Seller written notice so
long as actually delivered during the Review Period. Upon delivery of the
notice, Seller shall direct the Title Company to return the Deposit to the
Buyer. Failure to timely approve the Property in writing shall constitute an
election by Buyer to terminate this Agreement in which event the title company
shall return to Buyer the Deposit.
6
<PAGE>
7. REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller hereby represents and warrants to Buyer as follows:
7.1. Seller is a general partnership duly organized and validly
existing and in good standing under the laws of the State of California and all
documents executed by Seller which are to be delivered to Buyer at the Closing
are or at the time of Closing will be duly authorized, executed and delivered by
Seller, and are or at the Closing will be legal, valid and binding obligations
of Seller, and do not and at the time of Closing will not violate any provisions
of any agreement, mortgage, deed, note or other document or instrument to which
Seller is a party or to which it is subject.
7.2. There are no known claims, suits or proceedings which are pending
against Seller or which relate to the Property or the use or operation thereof
and, to the knowledge of Seller, no such claims, suits or proceedings are
threatened or anticipated against Seller.
7.3. All contracts or documents delivered by Seller to Buyer pursuant
to this Agreement or in connection with the execution hereof are and at the time
of Closing will be, so far as is known to Seller at the time of delivery, true,
complete and correct copies.
7.4. At the time of Closing there will be no outstanding contracts
made by Seller for any improvements to the Property which have not been fully
paid for and Seller shall cause to be discharged all mechanics' or materialmen's
liens arising from any labor or materials furnished to the Property prior to the
time of Closing.
7.5. There are no leases or occupancy agreements of any kind
recognized by Seller relating to the Real Property or any portion thereof other
than those delivered and identified on the rent roll.
7.6. Seller is not aware of any actually communicated assertion by any
party that the Property is in material violation of any laws. Seller has not
ever been subject to or received any notice of any private, administrative or
judicial action, or notice of any intended private, administrative or judicial
action relating to code violations, or of the presence or alleged presence of
Hazardous Material in, under, upon or emanating from the Property. There are no
known pending or threatened actions or proceedings from any governmental agency
or any other entity involving remediation of any condition of the Property,
including, without limitation, petroleum contamination, pursuant to
Environmental Laws. (As used in this Agreement, "Hazardous Material" shall mean
the substances (i) defined as "Hazardous Waste" in 40 CFR 261, and substances
defined in any comparable California statute or regulation; (ii) any substance
the presence of which requires remediation pursuant to any Environmental Laws;
and (iii) any substance disposed of in a manner not in compliance with
Environmental Laws.) the federal Resource Conservation Recovery Act, 42 USC
(S)6901 et seq. ("RCRA").
7.7. No underground storage tanks containing petroleum products or
wastes or other hazardous substances regulated by 40 CFR 280 or Environmental
Laws have been installed or discovered on the Property during Seller's ownership
thereof.
7
<PAGE>
7.8. The Property is not the subject of, or would be affected by, any
pending condemnation or eminent domain proceedings, and to the knowledge of the
Seller, no such proceedings are threatened.
7.9. All documents executed by Seller which are to be delivered to
Buyer at the Closing are or at the time of Closing will be duly authorized,
executed and delivered by Seller, are or at the time of Closing will be legal,
valid and binding obligations of Seller, and do not and at the time of Closing
will not violate any provisions of any agreement, mortgage, deed, note or other
document or instrument to which Seller are a party or to which the Property is
subject.
8. REPRESENTATIONS AND WARRANTIES OF BUYER Buyer hereby represents and
---------------------------------------
warrants to Seller that Buyer is a Delaware corporation duly organized and
validly existing and is in good standing under the laws of the State of
California and all documents executed by Buyer which are to be delivered to
Seller at the Closing are or at the time of Closing will be duly authorized,
executed and delivered by Buyer, and are or at the Closing will be legal, valid
and binding obligations of Buyer, and do not and at the time of Closing will not
violate any provisions of any agreement, mortgage, deed, note or other document
or instrument to which Buyer is a party or to which it is subject.
9. REMEDIES
--------
9.1. If, following approval of the Property, Buyer fails to purchase
the Property in default of this Agreement, Seller, as its sole and exclusive
remedy, may terminate its obligation to consummate the Closing and, upon doing
so, shall be entitled to receive the Deposit.
9.2. If Seller fails to perform its obligations to convey the Property
to Buyer, Buyer, at Buyer's option, may enforce specific performance, seek
monetary damages, and/or terminate its obligation to purchase the Property. The
foregoing remedies are meant to be cumulative, and not exclusive, nor shall this
Section 9.d serve to limit Buyer's options to seek relief at law or in equity in
the event of Seller's default hereunder. If Buyer terminates its obligation to
purchase the Property under this Section 9.2, (a) the Deposit shall be returned
to Buyer, and (b) Buyer shall be entitled to recover from Seller its out-of-
pocket costs in negotiating this Agreement and reviewing the Property up to
$25,000.00 in the aggregate.
10. INDEMNIFICATION Each party hereby agrees to indemnify the other party
---------------
and hold it harmless from and against any and all claims, demands, liabilities,
costs, expenses, penalties, damages and losses, including, without limitation,
reasonable attorneys' fees, resulting from any material misrepresentations or
breach of warranty or breach of covenant made by such party in this Agreement or
in any document, certificate, or exhibit given or delivered to the other
pursuant to or in connection with this Agreement. The indemnification provisions
of this Section 10 shall survive beyond the delivery of the Deed and transfer of
title so long as applicable limitations statutes permit for said breach or
misrepresentation.
11. CASUALTY OR CONDEMNATION In the event that, prior to Closing, the
------------------------
Property, or any material part thereof, is destroyed or damaged, or if
condemnation proceedings
8
<PAGE>
are commenced against the Property or any material part thereof, Buyer shall
have the right, exercisable by giving notice of such decision to Seller within
ten (10) business days after receiving written notice from Seller of such
damage, destruction or condemnation proceedings, to terminate this Agreement, in
which case, neither party shall have any further rights or obligations
hereunder. If Buyer elects to accept the Property in its then condition, all
proceeds of insurance or condemnation awards payable to Seller by reason of such
damage, destruction or condemnation shall be paid or assigned to Buyer.
12. POSSESSION Possession of the Property shall be delivered to Buyer on
----------
the Closing Date. Prior to the closing, Seller shall afford Buyer or authorized
representatives of Buyer reasonable access to the Property for the purposes of
conducting soils tests, surveys or other physical inspections of the Property.
Buyer shall indemnify Seller and hold Seller harmless against all loss, cost,
damage and expenses, including reasonable attorneys' fees, arising from or
related entry onto the Property by Buyer and its representatives.
13. BUYER'S CONSENT TO NEW CONTRACTS AFFECTING THE PROPERTY Seller shall
-------------------------------------------------------
not, after the date of Seller's execution of this Agreement, enter into any
agreement affecting the Property or any aspect thereof without obtaining Buyer's
consent thereto, which consent Buyer may withhold only in its reasonable good
faith discretion. Notwithstanding the foregoing, in no event will Seller enter
into a new lease for space in the Property or any amendment of any existing
lease for space in the Property which extends the then-current term of such
lease or expands the premises leased thereunder, without Buyer's advance written
consent thereto.
14. AS-IS The Property is being sold AS IS and without any warranty other
-----
than those expressly included in this Agreement. BUYER, in removing the review
contingency, agrees that they have relied solely and exclusively upon their own
or their employed agents and/or experts inspections, inquiries, and
investigation, and have not relied upon anything said by or on behalf of SELLER.
Except with respect to the representations contained herein, SELLER has not
authorized ANY PERSON to make any representation on behalf of SELLER and any
reliance by BUYER upon any person who purports to represent SELLER is
unreasonable. It is understood and agreed that, although SELLER has employed a
real estate agent and attorney to facilitate this transaction, neither have been
authorized to make any factual representations, promises, or provide any factual
or legal warranties.
15. MISCELLANEOUS
-------------
15.1. Notices Any notice, consent, approval, waiver or other
-------
communication required or permitted to be given under this Agreement shall be in
writing and shall be (i) delivered personally, (ii) deposited with the United
States Postal Service, all charges and first class postage prepaid or (iii)
delivered by nationally recognized overnight courier, addressed as follows:
9
<PAGE>
If to Seller:
Name:___________________________________
Street Address:_________________________
City, State, Zip Code:__________________
If to Buyer:
Tenfold Corporation
181 West Election Road
Draper, Utah 84020
Attn: General Counsel
With a copy to:
Tenfold Corporation
100 Foster City Boulevard
Suite 200
Foster City, CA 94404
Attn: Lease Administrator
and to:
Shartsis, Friese & Ginsburg LLP
One Maritime Plaza, 18th Floor
San Francisco, California 94111
Attention: Jonathan M. Kennedy, Esq.
or such other address as either party may from time to time specify by notice
hereunder to the other. Notice shall be deemed given on the date of delivery
(or the date delivery is refused by addressee) unless such date is a weekend or
holiday, in which event the Notice shall be deemed given on the next succeeding
business day.
15.2. Brokers and Finders Seller acknowledges that Seller has been
-------------------
represented by Keegan & Coppin & Company ("KCC"), and Buyer acknowledges that
Buyer has been represented by Cushman & Wakefield, ("C&W") (KCC and C&W being
referred to collectively herein as "Brokers") in the negotiation of the this
transaction. Brokers shall be paid a commission by Seller pursuant to a
separate agreement. Neither party has had any contact or dealings regarding the
Property, or any communication in connection with the subject matter of this
transaction, through any licensed real estate broker or other person who can
claim a right to a commission or finder's fee as a procuring cause of the sale
contemplated herein. If any broker or finder perfects a claim for a commission
or finder's fee based on any such contact, dealings or communication, the party
through whom the broker or finder makes such claim shall be responsible for said
commission or fee and all costs and expenses, including reasonable attorneys'
fees, incurred by the other party in defending against the same.
10
<PAGE>
15.3. Successors and Assigns This Agreement shall bind and inure to
----------------------
the benefit of the parties hereto and their respective successors, heirs,
administrators and assigns. Without being relieved of any liability under this
Agreement, Buyer reserves the right to take title to the Property in a name or
assignee other than Buyer.
15.4. Amendments This Agreement may be amended or modified by, and
----------
only by, a written instrument executed by Seller and Buyer.
15.5. Governing Law This Agreement shall be governed by and
-------------
construed and interpreted in accordance with the laws of the State of
California.
15.6. Merger of Prior Agreements This Agreement contains the entire
--------------------------
agreement of the parties and supersedes all prior negotiations, correspondence,
understandings and agreements between the parties relating to the subject matter
hereof.
15.7. Attorneys' Fees In the event of litigation between the parties
---------------
hereto arising from this Agreement or the performance of either party hereunder,
and whether in contract, tort, or in equity, the prevailing party shall be
entitled to recover their reasonably expended attorneys' fees. This right to
attorneys' fees shall be forfeited by any party who fails to demand and
participate in mediation, in advance of filing a lawsuit.
15.8. Time of the Essence Time is of the essence of this Agreement.
-------------------
15.9. Specific Performance Seller acknowledge that in the event of a
--------------------
breach or default or threatened breach or default under this Agreement by Seller
prior to the Closing, damages at law will be an inadequate remedy and,
accordingly, without in any manner limiting any other remedies available to
Buyer, Seller's obligations under this Agreement may be enforced by specific
performance.
15.10. Interpretation Whenever used herein, the term "including"
--------------
shall be deemed to be followed by the words "without limitation." Words used in
the singular number shall include the plural, and vice-versa, and any gender
shall be deemed to include each other gender. The captions and headings of the
Articles and Sections of this Agreement are for convenience of reference only,
and shall not be deemed to define or limit the provisions hereof.
15.11. Counterparts This Agreement may be executed in any number of
------------
counterparts which together shall constitute the Agreement.
15.12. Exhibits The following exhibits are attached hereto.
--------
Exhibit A Description of Property
Exhibit B Schedule of Personal Property
Exhibit C Deed
Exhibit D Assignment of Permits and Other Intangible Reports
Exhibit E Bill of Sale
Exhibit F Affidavit of Non-Foreign Status
Exhibit G Estoppel Certificate Form
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
BUYER:
TENFOLD CORPORATION,
a Delaware corporation
By: /s/ Robert P. Hughes
----------------------------
Its: Chief Financial Officer
--------------------------
SELLER:
181 INVESTORS,
a California general partnership
By: /s/ Peter F. Walz
----------------------------
Its: Partner
---------------------------
By: /s/ Allen Cristofani
----------------------------
Its: Partner
---------------------------
By: /s/ Arthur R. Nicolaisen
----------------------------
Its: Partner
---------------------------
By: /s/ Ian MacLeod
----------------------------
Its: Partner
---------------------------
12
<PAGE>
Exhibit A
---------
DESCRIPTION OF REAL PROPERTY
All of that certain real property situated in the City of San Rafael,
County of Marin, State of California, described as follows:
LOT 6C, as shown upon that certain Map entitled "Map of Smith Ranch -
Southerly Portion", filed for record June 9, 1978 in Volume 17 of Maps, at Page
40, Marin County Records.
EXHIBIT A
1
<PAGE>
Exhibit B
---------
SCHEDULE OF PERSONAL PROPERTY
None
<PAGE>
Exhibit C
---------
DEED
Recording Requested By and
When Recorded Return To:
Shartsis, Friese & Ginsburg LLP
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Attn: Jonathan M. Kennedy, Esq.
Mail Tax Statements To:
Tenfold Corporation
____________________________
____________________________
____________________________
Attn:_______________________
________________________________________________________________________________
(Space above this line for Recorder's use only.)
TRANSFER TAX NOT TO BE DISCLOSED
OF PUBLIC RECORD - SEE STATEMENT
SUBMITTED HEREWITH
GRANT DEED
FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
_______________________________, a _____________ ("GRANTOR"), hereby
GRANTS to
TENFOLD CORPORATION ("GRANTEE"),
all the real property situated in Marin County, California described in
Exhibit A attached hereto and incorporated herein by this reference.
IN WITNESS WHEREOF, the undersigned has executed these presents this _____
day of ______________, 2000.
________________________________________,
a_______________________________________
By:_____________________________________
Name:___________________________________
Its:____________________________________
Recording Date: _____________ Official Record No.: ______________
EXHIBIT C
1
<PAGE>
STATEMENT OF TAX DUE
AND
REQUEST THAT AMOUNT PAID NOT BE MADE A PART OF THE PERMANENT
RECORD IN THE OFFICE OF THE RECORDER
(Pursuant to Section 11934 of the Revenue & Taxation Code)
To: Marin County Recorder
Request is hereby made, in accordance with the provisions of the
Documentary Transfer Tax Act, that this form showing the amount of tax due not
be made part of the permanent record in the Office of the Recorder.
Grantor: ___________, a ___________ limited partnership
Grantee: TENFOLD CORPORATION, a Delaware corporation
The property described in the accompanying document is located in:
( ) Unincorporated area. (X) City of: San Rafael
Declaration: Documentary Transfer Tax: $
( ) Computed on full value of property
conveyed
or
( ) Computed on full value less liens and
encumbrances remaining at the time
of sale.
NOTE: After the permanent record is made, this form will be affixed to the
conveying document and returned with it.
EXHIBIT C
2
<PAGE>
CALIFORNIA ALL PURPOSE ACKNOWLEDGEMENT
State of California
County of
On __________, before me, _______________________________________________,
Date Name and Title of Officer (e.g., "Jane
Doe, Notary Public")
Personally appeared ______________________________________________________
Name(s) of Signer(s)
[_] personally known to me
[_] proved to me on the basis
of satisfactory evidence
to be the person(s) whose name(s) is/are
subscribed to the within instrument and
acknowledged to me that he/she/they
executed the same in his/her/their
authorized capacity(ies), and that by
his/her/their signature(s) on the
instrument the person(s), or the entity
upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
--------------------------------------
Place Notary Seal Above Signature of Notary Public
____________________________________OPTIONAL__________________________________
Though the information below is not required by law, it may prove valuable
to persons relying on the document and could prevent fraudulent removal
and reattachment of this form to another document.
Description of Attached Document
Title or Type of Document:________________________________________________
Document Date:_____________________ Number of Pages:_____________________
Signer(s) Other Than Named Above:_________________________________________
Capacity(ies) Claimed by Signer
Signer's Name:__________________________________________________
[_] Individual
[_] Corporate Officer - Title(s)____________________________________
[_] Partner - [_] Limited [_] General
[_] Attorney in Fact
[_] Trustee
[_] Guardian or Conservator
[_] Other___________________________________________________________
Signer is Representing:______________________________________________
EXHIBIT C
3
<PAGE>
Exhibit A
---------
to Deed
LEGAL DESCRIPTION
[Insert Legal Description]
EXHIBIT C
4
<PAGE>
Exhibit D
---------
ASSIGNMENT OF PERMITS
AND OTHER INTANGIBLE PROPERTY
THIS ASSIGNMENT dated _____________, 19__ (the "Assignment"), is made by
181 INVESTORS, a California general partnership ("Assignor") to TENFOLD
CORPORATION, a Delaware corporation ("Assignee").
FOR GOOD AND VALUABLE CONSIDERATION, the receipt of which is hereby
acknowledged, Assignor hereby assigns and transfers unto Assignee all of its
right, title, claim and interest in and under any and all governmental permits
and other intangible property owned by Assignor in connection with that certain
real property described in Exhibit A attached hereto (the "Real Property") or
any improvements or personal property located thereon, including without
limitation, any of Assignor's interest in or rights under licenses or planning
approvals and any contract rights, agreements, utility contracts, warranties,
guaranties, general intangibles or other rights relating to the ownership,
development, use or operation of Real Property.
Assignor warrants and represents that as of the date the Real Property is
conveyed to Assignee there are no assignments of or agreements to assign the
foregoing permits and other intangible property to any other party.
The Assignment shall be binding on and inure to the benefit of the parties
hereto and the successors and assigns.
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment as
of the date and year first above written.
ASSIGNOR:
181 INVESTORS,
a California general partnership
By: ___________________________________
Its: __________________________________
ASSIGNEE:
TENFOLD CORPORATION,
a Delaware corporation
By: ___________________________________
Its: __________________________________
1
<PAGE>
Exhibit A
---------
to Assignment of Permits and Other Intangible Property
LEGAL DESCRIPTION
All of that certain real property located in Marin County, California
described as follows:
[Insert Legal Description]
2
<PAGE>
Exhibit E
---------
BILL OF SALE
None
<PAGE>
Exhibit F
---------
AFFIDAVIT OF NON-FOREIGN STATUS
INTERNAL REVENUE CODE SECTION 1445
Section 1445 of the Internal Revenue Code provides that a transferee of a
U.S. real property interest must withhold tax equal to ten percent of the
purchase price if the transferor is a foreign person. Such transferee is exempt
from such obligation to withhold if the transferor provides the transferee an
affidavit that the transferor is not a foreign person.
To induce TENFOLD CORPORATION, a Delaware corporation ("Transferee"), to
not withhold tax under such Section 1445 upon the transfer by 181 Investors, a
California general partnership ("Transferor"), of a U.S. real property interest
located in Marin County, California, as more particularly described in Exhibit A
attached hereto, the following affidavit is made on behalf of Transferor under
penalty of perjury and with knowledge that Transferee will rely thereon.
1. Transferor is not a foreign person or foreign corporation, foreign
partnership, foreign trust (as those terms are defined in the Internal Revenue
Code);
2. The tax identification number of the Transferor is _____________; and
3. The Transferor resides at the following addresses: __________________
._________________________________________________________________________
Transferor understands that this certification may be disclosed to the
Internal Revenue Service by Transferee, and that any false statement contained
herein could be punished by fine, imprisonment, or both.
Under penalty of perjury, the undersigned declares that he/she has examined
this certificate and to the best of his/her knowledge and belief it is true,
correct and complete.
Date: _____________, 19__
181 INVESTORS,
a California general partnership
By: _____________________________________
Its: ____________________________________
1
<PAGE>
Exhibit A
---------
to Affidavit of Non-foreign Status
Internal Revenue Code Section 1445
LEGAL DESCRIPTION
All of that certain real property located in Marin County, California,
described as follows:
[Insert Legal Description]
2
<PAGE>
Exhibit G
---------
TENANT'S ESTOPPEL CERTIFICATE
AND
ATTORNMENT AGREEMENT
To: ____________________
____________________
____________________
Re: ____________________
The undersigned (the "Lessee") understands that you are presently
negotiating the purchase of the certain real property commonly known as
_________________________ of which the Lessee is a tenant pursuant to the terms
of that certain Lease dated _______, by and between Lessee and
______________________ ("Lessor"), including any amendments to or modifications
of the same. The Lessee hereby certifies the following information with respect
to the Lease under which the Lessee is a tenant and agrees that you may rely
upon the same in purchasing said real property:
1. The copy of the Lease attached hereto as Exhibit A is a true, correct
and complete copy of the Lease, and the Lease is in full force and effect and
has not been modified or amended except as specifically set forth below.
2. The Lessee asserts no claim of default or offset or defense against
the payment of rent or other charges payable by the Lessee and asserts no claim
against the Lessor under the Lease in regard to the premises occupied by Lessee.
There is no default by Lessor under the Lease.
3. All fixed minimum rental has been paid to the end of the current
calendar month, which is fixed rent presently in the following sum: $_________,
and no rent under the Lease has been paid more than one month in advance of its
due date.
4. The Lease commencement and termination dates are: _______________ and
_______________.
5. Date of original Lease: ________________________ Dates of any
amendments or modifications: _________________________________________________
_____________________________________.
6. Current annual fixed minimum rental: _______________________________
___________________________________________________.
7. Lease termination date: _______________________________.
<PAGE>
8. The Lease provides _____ (number of options) option(s) to renew for
additional term(s) of __________.
9. The Lease contains no first right of refusal, option to expand, or
option to terminate, except as follows: ______________________________________
_______________________________________. No notice to terminate has been given
by the undersigned.
10. Lessor is holding a security deposit of $____________.
11. The undersigned is not in default under the Lease and is current in
the payment of any taxes, utilities, common area maintenance payments, or other
charges required to be paid by the undersigned.
12. The improvements and space required to be furnished according to the
Lease have been duly delivered by the Lessor and accepted by the Lessee.
13. Lessee has no defenses as to its obligations under the Lease and
claims no setoff or counterclaim against Lessor.
14. Lessee has not received notice of any assignment, hypothecation,
mortgage, or pledge of Lessor's interest in the Lease or the rents of other
amounts payable thereunder.
15. Lessee has not entered into any sublease, assignment or other
agreement transferring any of its interest in the Lease or the leased premises.
16. Lessee agrees to attorn to any successor-in-interest to Lessor and be
bound by all the terms, covenants and conditions of the Lease for the balance of
the term thereof.
17. The Lessee certifies that he is required to pay a pro rata share of
real property taxes, as well as a pro rata share of the following operating
expenses: ____________________________________________________________________
_______________________________________________________________________________.
Moreover, the Lessee is required to pay or all utilities, including water and
sewer, used in and upon the leased premises and is responsible for all repairs
and maintenance to the HVAC/mechanical systems.
<PAGE>
18. Under the Lease the Lessee is entitled to the use of _____________
parking spaces.
Dated: _____________, 19__.
Very truly yours,
By____________________________
Its___________________________
<PAGE>
Exhibit H
---------
ASSIGNMENT OF LEASES
THIS AGREEMENT dated _________, 2000 (the "Agreement"), is entered into by
and between 181 INVESTORS, a California general partnership (collectively,
"Assignor") and TENFOLD CORPORATION, a Delaware corporation ("Assignee")
WITNESSETH:
----------
WHEREAS, Assignor is the lessor under certain leases executed with respect
to that certain real property commonly known as 171-181 Carlos Drive, San
Rafael, California, which leases are described in Schedule 1 attached hereto
(the "Leases"); and
WHEREAS, Assignor desires to assign its interest as lessor in the Leases to
Assignee, and Assignee desires to accept the assignment thereof;
NOW, THEREFORE, in consideration of the promises and conditions contained
herein, the parties hereby agree as follows:
1. Assignor hereby assigns to Assignee all of its right, title and
interest in and to the Leases herein described.
2. Assignor warrants and represents that as of the date hereof:
(a) The attached list includes all of the Leases affecting the
property being acquired by Assignee from Assignor. As of the date hereof,
there are no assignments of or agreements to assign the Leases to any other
party.
(b) The Leases are in full force and effect and there exist no
default on the part of Assignor thereunder, nor does Assignor have any
actual knowledge of any defaults or any acts or events which with the
passage of time or the giving of notice could become defaults thereunder on
the part of any tenant thereunder.
3. Assignee hereby assumes all of the landlord's or lessor's obligations
under the Leases described in Schedule 1 and agrees to indemnify Assignor
against and hold Assignor harmless from any and all cost, liability, loss,
damage or expense, including without limitation, reasonable attorneys' fees,
originating subsequent to the date hereof and arising out of the lessor's
obligations under the Leases.
4. In the event of any litigation between Assignor and Assignee arising
out of the obligations of the parties under this Assignment or concerning the
meaning or interpretation of any provision contained herein, the losing party
shall pay the prevailing party's costs and expenses of such litigation,
including, without limitation, reasonable attorney's fees.
1
<PAGE>
5. This Agreement shall be binding on and inure to the benefit of the
parties hereto, their heirs, executors, administrators, successors in interest
and assigns.
IN WITNESS WHEREOF, the Assignor and Assignee have executed this Agreement
the day and year first above written.
ASSIGNOR:
181 INVESTORS,
a California general partnership
By: _______________________________
Its: ______________________________
ASSIGNEE:
TENFOLD CORPORATION,
a Delaware corporation
By: _______________________________
Its: ______________________________
2
<PAGE>
SCHEDULE 1
Tenant Premises Lease Date Amendment Date(s)
- ------ -------- ---------- -----------------
[to be completed]
3
<PAGE>
________________________________________________________________________________
LEASE AGREEMENT BETWEEN
W9/CGN REAL ESTATE LIMITED PARTNERSHIP,
AS LANDLORD, AND
TENFOLD CORPORATION,
AS TENANT
DATED FEBRUARY 4, 2000
600 LAS COLINAS BOULEVARD
IRVING, TEXAS
________________________________________________________________________________
<PAGE>
BASIC LEASE INFORMATION
-----------------------
Lease Date: February 4, 2000
Landlord: W9/CGN REAL ESTATE LIMITED PARTNERSHIP, a Delaware limited
partnership
Tenant: TENFOLD CORPORATION, a Delaware corporation
Premises: Suite No. 600, containing 23,386 rentable square feet, in
the office building commonly known as 600 Las Colinas
Boulevard (the "Building"), and whose street address is 600
--------
East Las Colinas Boulevard, Irving, Texas 75039. The
Premises are outlined on the plan attached to the Lease as
Exhibit A-1. The land on which the Building is located (the
-----------
"Land") is described on Exhibit B. The term "Building"
---- ---------
includes the related land, driveways, parking facilities,
and similar improvements.
Term: Approximately 60 months, commencing on the Commencement Date
and ending at 5:00 p.m. local time on the last day of the
60th full calendar month following the Commencement Date,
subject to adjustment and earlier termination as provided in
the Lease.
Commencement Date: The earliest of (a) the date on which Tenant occupies any
portion of the Premises and begins conducting business
therein, (b) the date on which the Work (as defined in
Exhibit D hereto) in the Premises is Substantially Completed
---------
(as defined in Exhibit D hereto), (c) the date on which the
---------
Work in the Premises would have been Substantially Completed
but for the occurrence of any Tenant Delay Days (as defined
in Exhibit D hereto), or (d) April 1, 2000.
---------
Basic Rent: Basic Rent shall be the following amounts for the following
periods of time:
------------------------------------------------------------
Monthly Basic Rent
per Rentable Square
Lease Month Foot Monthly Basic Rent
------------------------------------------------------------
1 - 24 $22.50 $43,848.75
------------------------------------------------------------
25 - 36 $24.00 $46,772.00
------------------------------------------------------------
37 - 60 $25.50 $49,695.25
------------------------------------------------------------
As used herein, the term "Lease Month" shall mean each
-----------
calendar month during the Term (and if the Commencement Date
does not occur on the first day of a calendar month, the
period from the Commencement Date to the first day of the
next calendar month shall be included in the first Lease
Month for purposes of determining the duration of the Term
and the monthly Basic Rent rate applicable for such partial
month).
i
<PAGE>
Security Deposit: [Intentionally deleted.]
Rent: Basic Rent, Tenant's Proportionate Share of Taxes and
Electrical Costs, Tenant's share of Additional Rent, and all
other sums that Tenant may owe to Landlord or otherwise be
required to pay under the Lease.
Permitted Use: General office use, including software development, training
and demonstrations.
Tenant's Proportionate Share:
4.589%, which is the percentage obtained by dividing (a) the
number of rentable square feet in the Premises as stated
above by (b) the 509,559 rentable square feet in the
Building. Landlord and Tenant stipulate that the number of
rentable square feet in the Premises and in the Building set
forth above shall be binding upon them.
Expense Stop: Operating Costs per rentable square foot in the Building for
the calendar year 2000 (grossed up as provided in Section
4.(b)(6) of the Lease).
Base Tax Year: The calendar year 2000.
Initial Liability Insurance Amount:
$3,000,000.
Tenant's Tenfold Corporation With a copy to:
Address: 180 West Election Road --------------
Suite 100 Tenfold Corporation
Draper, Utah 84020 100 Foster City Boulevard
Attention: General Counsel Suite 200
Telephone: 801-495-1010 Foster City, California 94404
Telecopy: 801-495-0353 Attention: Lease Administrator
Telephone: 650-570-5711
Telecopy: 650-570-5988
Landlord's For all Notices: With a copy to:
Address: --------------- --------------
W9/CGN Real Estate Limited W9/CGN Real Estate Limited
Partnership Partnership
c/o Grubb & Ellis c/o Archon Group, L.P.
600 E. Las Colinas Boulevard, 600 East Las Colinas Blvd.,
Suite 100 Suite 400
Irving, Texas 75039 Irving, Texas 75039
Attention: Property Manager Attention: General Counsel -
Telephone: 972-869-0044 600 Las Colinas Blvd.
Telecopy: 972-869-2043 Telephone: 972-368-2200
Telecopy: 972-368-3199
ii
<PAGE>
The foregoing Basic Lease Information is incorporated into and made a part of
the Lease identified above. If any conflict exists between any Basic Lease
Information and the Lease, then the Lease shall control.
LANDLORD: W9/CGN REAL ESTATE LIMITED PARTNERSHIP, a Delaware
limited partnership
By: W9/CGN Gen-Par, Inc., a Delaware corporation, its
general partner
By: /s/ William G. Mundinger II
----------------------------
Name: William G. Mundinger II
--------------------------
Title: Assistant Vice President
-------------------------
TENANT: TENFOLD CORPORATION, a Delaware corporation
By: /s/ Robert P. Hughes
--------------------------------
Name: Robert P. Hughes
------------------------------
Title: Chief Financial Officer
-----------------------------
iii
<PAGE>
LEASE
-----
THIS LEASE AGREEMENT (this "Lease") is entered into as of February 4, 2000,
-----
between W9/CGN REAL ESTATE LIMITED PARTNERSHIP, a Delaware limited partnership
("Landlord"), and TENFOLD CORPORATION, a Delaware corporation ("Tenant").
-------- ------
1. Definitions and Basic Provisions. The definitions and basic
--------------------------------
provisions set forth in the Basic Lease Information (the "Basic Lease
-----------
Information") executed by Landlord and Tenant contemporaneously herewith are
- -----------
incorporated herein by reference for all purposes. Additionally, the following
terms shall have the following meanings when used in this Lease: "Affiliate"
---------
means any person or entity which, directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with the
party in question; "Building's Structure" means the Building's exterior walls,
--------------------
roof, elevator shafts, footings, foundations, structural portions of load-
bearing walls, structural floors and subfloors, and structural columns and
beams; "Building's Systems" means the Building's HVAC, elevators, life-safety,
------------------
plumbing, electrical, and mechanical systems; "including" means including,
---------
without limitation; "Laws" means all federal, state, and local laws, rules and
----
regulations, all court orders, governmental directives, and governmental orders,
and all restrictive covenants affecting the Building, and "Law" shall mean any
---
of the foregoing; and "Tenant Party" means any of the following persons:
------------
Tenant; any assignees claiming by, through, or under Tenant; any subtenants
claiming by, through, or under Tenant; and any of their respective agents,
contractors, employees, and invitees.
2. Lease Grant. Subject to the terms of this Lease, Landlord leases to
-----------
Tenant, and Tenant leases from Landlord, the Premises.
3. Tender of Possession. Landlord and Tenant presently anticipate that
--------------------
possession of the Premises will be tendered to Tenant (with the Work to be
performed by Landlord therein, if any, Substantially Completed) on or about
March 15, 2000 (the "Estimated Delivery Date"). If Landlord is unable to tender
-----------------------
possession of the Premises in such condition to Tenant by the Estimated Delivery
Date, then (a) Landlord shall not be in default hereunder or be liable for
damages therefor, and (b) Tenant shall accept possession of the Premises when
Landlord tenders possession thereof to Tenant. Notwithstanding the foregoing,
if the Work in the Premises is not Substantially Completed by the Completion
Termination Date, Tenant may terminate this Lease by delivering to Landlord
written notice thereof at any time before the earlier of (1) ten days following
the Completion Termination Date or (2) the date on which the Work in the
Premises is Substantially Completed. The termination right afforded to Tenant
under this Section 3 shall be Tenant's sole remedy for Landlord's failure to
timely Substantially Complete the Work. Time is of the essence for the delivery
of Tenant's termination notice under this Section 3; accordingly, if Tenant
fails timely to deliver any such notice, Tenant's right to terminate this Lease
under this Section 3 shall expire. As used herein, "Completion Termination Date"
---------------------------
means 180 days after the Estimated Delivery Date, plus the number of Tenant
Delay Days and the number of Force Majeure Delay Days. As used herein, "Force
-----
Majeure Delay Days" means any delay in achieving Substantial Completion with
- ------------------
respect to the Work for the reasons specified in Section 25.(c) of this Lease.
By occupying the Premises, Tenant shall be deemed to have accepted the Premises
in their condition as of the date of such occupancy, subject to the performance
of punch-list items that remain to be performed by Landlord, if any. Prior to
occupying the Premises, Tenant shall execute and deliver to Landlord a letter
substantially in the form of Exhibit E hereto confirming (A) the Commencement
---------
Date and the expiration date of the initial Term, (B) that Tenant has accepted
the Premises, and (C) that Landlord has performed all of its obligations with
respect to the Premises (except for punch-list
1
<PAGE>
items specified in such letter). Occupancy of the Premises by Tenant prior to
the Commencement Date shall be subject to all of the provisions of this Lease
excepting only those requiring the payment of Basic Rent, Additional Rent, Taxes
and Electrical Costs (each as defined herein).
4. Rent.
----
(a) Payment. Tenant shall timely pay to Landlord Rent, without
-------
notice, demand, deduction or set off (except as otherwise expressly provided
herein), at Landlord's address provided for in this Lease or as otherwise
specified by Landlord and shall be accompanied by all applicable state and local
sales or use taxes. Basic Rent, adjusted as herein provided, shall be payable
monthly in advance. The first monthly installment of Basic Rent shall be
payable contemporaneously with the execution of this Lease; thereafter, Basic
Rent shall be payable on the first day of each month beginning on the first day
of the second full calendar month of the Term. The monthly Basic Rent for any
partial month at the beginning of the Term shall equal the product of 1/365 of
the annual Basic Rent in effect during the partial month and the number of days
in the partial month from and after the Commencement Date, and shall be due on
the Commencement Date.
(b) Operating Costs; Taxes; Electrical Costs.
----------------------------------------
(1) Tenant shall pay to Landlord the amount (per each rentable
square foot in the Premises) ("Additional Rent") by which the annual
---------------
Operating Costs (defined below) per rentable square foot in the Building
exceed the Expense Stop (per rentable square foot in the Building).
Landlord may make a good faith estimate of the Additional Rent to be due by
Tenant for any calendar year or part thereof during the Term. During each
calendar year or partial calendar year of the Term (after the base year, if
the Expense Stop is calculated on a base year basis), Tenant shall pay to
Landlord, in advance concurrently with each monthly installment of Basic
Rent, an amount equal to the estimated Additional Rent for such calendar
year or part thereof divided by the number of months therein. From time to
time, Landlord may estimate and re-estimate the Additional Rent to be due
by Tenant and deliver a copy of the estimate or re-estimate to Tenant.
Thereafter, the monthly installments of Additional Rent payable by Tenant
shall be appropriately adjusted in accordance with the estimations so that,
by the end of the calendar year in question, Tenant shall have paid all of
the Additional Rent as estimated by Landlord. Any amounts paid based on
such an estimate shall be subject to adjustment as herein provided when
actual Operating Costs are available for each calendar year.
(2) The term "Operating Costs" shall mean all expenses and
---------------
disbursements (subject to the limitations set forth below) that Landlord
incurs in connection with the ownership, operation, and maintenance of the
Building, determined in accordance with sound accounting principles
consistently applied, including the following costs: (A) wages and salaries
(including management fees consistent with other similar class A buildings
in the Las Colinas Urban Center) of all on-site employees at or below the
grade of senior building manager engaged in the operation, maintenance or
security of the Building (together with Landlord's reasonable allocation of
expenses of off-site employees at or below the grade of senior building
manager who perform a portion of their services in connection with the
operation, maintenance or security of the Building), including taxes,
insurance and benefits relating thereto; (B) all supplies and materials
used in the operation, maintenance, repair, replacement, and security of
the Building; (C) costs for improvements made to the Building which,
although capital in nature, are reasonably expected to reduce the normal
2
<PAGE>
operating costs (including all utility costs) of the Building, as amortized
using a commercially reasonable interest rate over the time period
reasonably estimated by Landlord to recover the costs thereof taking into
consideration the anticipated cost savings, as determined by Landlord using
its good faith, commercially reasonable judgment, as well as capital
improvements made in order to comply with any Law hereafter promulgated by
any governmental authority or any interpretation hereafter rendered with
respect to any existing Law, as amortized using a commercially reasonable
interest rate over the useful economic life of such improvements as
determined by Landlord in its reasonable discretion; (D) cost of all
utilities, except Electrical Costs and the cost of other utilities
reimbursable to Landlord by the Building's tenants other than pursuant to a
provision similar to this Section 4.(b); (E) insurance expenses; (F)
repairs, replacements, and general maintenance of the Building except those
repair and replacement costs that are reimbursed by warranties or insurance
proceeds; and (G) service or maintenance contracts with independent
contractors for the operation, maintenance, repair, replacement, or
security of the Building (including alarm service, window cleaning, and
elevator maintenance).
Operating Costs shall not include costs for (i) capital improvements
made to the Building, other than capital improvements described in Section
4.(b)(2)(C) and except for items which are generally considered maintenance
and repair items, such as painting of common areas, replacement of carpet
in elevator lobbies, and the like; (ii) repair, replacements and general
maintenance paid by proceeds of insurance or by Tenant or other third
parties; (iii) interest, amortization or other payments on loans to
Landlord; (iv) depreciation; (v) leasing commissions; (vi) legal expenses
for services, other than those that benefit the Building tenants generally
(e.g., tax disputes); (vii) renovating or otherwise improving space for
occupants of the Building or vacant space in the Building; (viii) Taxes;
(ix) federal income taxes imposed on or measured by the income of Landlord
from the operation of the Building; (x) original construction costs of the
Building; (xi) reserves for repairs, maintenance and replacements (as
opposed to escrows for such things as taxes and insurance expenses, both of
which may be included in Operating Costs); (xii) costs or expenses
associated with leasing space in the Building or the sale of any interest
in the Building, including advertising and marketing, commissions or any
amounts paid for on behalf of a tenant such as space planning, moving
costs, rental and other tenant concessions; (xiii) ground rents; (xiv)
costs of electricity outside normal business hours sold to tenants of the
Building by Landlord or any other special service to tenants or service in
excess of that furnished to Tenant or which are over and above the rent and
escalations payable under the lease agreement with that tenant (including
after-hour HVAC costs); (xv) expenses for repairs, replacements or
improvements arising from the initial construction of the Building to the
extent such expenses are either a) reimbursed to Landlord by virtue of
warranties from contractors or suppliers or b) result by reason of
deficiencies in design or workmanship except conditions resulting from
ordinary wear and tear; (xvi) the excess over competitive costs by
independent suppliers and contractors, of the cost of supplies and services
provided by subsidiaries and affiliates of Landlord; (xvii) Landlord's
general overhead except to the extent it is expended in direct connection
with management and operation of the Building; (xviii) accounting or legal
fees incurred in tenant disputes, or in procuring tenants, or for fees not
related to the operation and maintenance of the Building but personal to
Landlord; (xix) all costs shall be "net" only and shall be reduced by the
amount of insurance (or the amount of reimbursement if Landlord would have
maintained insurance per Landlord's requirements in the Lease),
condemnation awards or other reimbursement, recoupment, payment, discount,
warrantee, guarantee or allowance received by Landlord; (xx) costs of
renovating or otherwise improving space for new tenants or in renovating
space vacated by any tenant or any other work which Landlord performs for
3
<PAGE>
any tenant; (xxi) costs relating to maintaining Landlord's existence,
either as a corporation, partnership, or other entity, such as trustee's
fees, annual fees, partnership organization or administration expenses,
deed recordation expenses, legal and accounting fees (other than with
respect to Building operations); (xxii) interest or penalties arising by
reason of Landlord's failure to timely pay any Operating Costs or Taxes,
provided such late payment was caused (in whole or in part) by a Tenant
Party; (xxiii) costs incurred to contain, encapsulate, remove or remedy any
hazardous or toxic wastes, materials or substances from either the Building
or Land or any tests or surveys obtained in connection with the above,
unless such incurred costs are caused, in whole or in part, by a Tenant
Party; (xxiv) rental and other expenses incurred in leasing air condition
systems, elevators or other equipment considered to be of a capital nature
under generally accepted accounting principles, except equipment used in
emergency situations or in providing janitorial services when such
equipment is not affixed to the Building; (xxv) costs incurred because the
Building or common areas violate any valid, applicable building code,
regulation or law in effect and as interpreted by government authorities
before the date on which this Lease is signed (including fines, penalties,
interest and the costs of repairs, replacements, alterations or
improvements necessary to make the Building or common areas comply with
applicable past laws in effect and as interpreted by government authorities
before the date on which this Lease is signed, such as sprinkler
installation or requirements under the Americans With Disabilities Act of
1990; (xxvi) costs for acquisitions of sculpture, paintings or other
objects of art; (xxvii) title insurance, automobile insurance, key man and
other life insurance, long-term disability insurance and health, accident
and sickness insurance, excepting only group plans providing reasonable
benefits to persons of the grade of building manager and below employed in
the operation and management of the Building (provided that the cost of
insurance with respect to any such employee dividing his or her time
between the Building and any other buildings shall be apportioned pro rata
among all such buildings); (xxviii) the cost of removal of halon or CFCs
from the Building, unless the cost incurred is cause, in whole or in part,
by a Tenant Party; and (xxix) costs of any items for which Landlord
receives reimbursement from insurance proceeds (insurance proceeds shall be
excluded from Operating Costs in the year in which they are received,
except that any deductible amount under any insurance policy shall be
included within Operating Costs). If the Expense Stop is calculated on a
base year basis, Operating Costs for the base year only shall not include
market-wide labor-rate increases due to extraordinary circumstances,
including boycotts and strikes; utility rate increases due to extraordinary
circumstances, including conservation surcharges, boycotts, embargos or
other shortages; or amortized costs relating to capital improvements.
(3) Tenant shall also pay its Proportionate Share of any
increase in Taxes for each year and partial year falling within the Term
over the Taxes for the Base Tax Year. Tenant shall pay its Proportionate
Share of Taxes in the same manner as provided above for Additional Rent
with regard to Operating Costs. "Taxes" shall mean taxes, assessments, and
-----
governmental charges or fees whether federal, state, county or municipal,
and whether they be by taxing districts or authorities presently taxing or
by others, subsequently created or otherwise, and any other taxes and
assessments (including non-governmental assessments for common charges
under a restrictive covenant or other private agreement that are not
treated as part of Operating Costs) now or hereafter attributable to the
Building (or its operation), excluding, however, penalties and interest
thereon and federal and state taxes on income (if the present method of
taxation changes so that in lieu of the whole or any part of any Taxes,
there is levied on Landlord a capital tax directly on the rents received
therefrom or a franchise tax, assessment, or charge based, in whole or in
part, upon such rents for the Building, then all such taxes, assessments,
or charges, or the part thereof so based, shall
4
<PAGE>
be deemed to be included within the term "Taxes" for purposes hereof).
Taxes shall include the actual and reasonable costs of consultants retained
in an effort to lower taxes and all costs incurred in disputing any taxes
or in seeking to lower the tax valuation of the Building. For property tax
purposes, Tenant waives all rights to protest or appeal the appraised value
of the Premises, as well as the Building, and all rights to receive notices
of reappraisement as set forth in Sections 41.413 and 42.015 of the Texas
Tax Code.
(4) Tenant shall also pay to Landlord Tenant's Proportionate
Share of the cost of all electricity used by the Building ("Electrical
----------
Costs"). Such amount shall be payable in monthly installments on the
-----
Commencement Date and on the first day of each calendar month thereafter.
Each installment shall be based on Landlord's estimate of the amount due
for each month. From time to time during any calendar year, Landlord may
estimate or re-estimate the Electrical Costs to be due by Tenant for that
calendar year and deliver a copy of the estimate or re-estimate to Tenant.
Thereafter, the monthly installments of Electrical Costs payable by Tenant
shall be appropriately adjusted in accordance with the estimations.
Electrical Costs shall be billed at actual cost from the local utility
without any markup or service charges. Landlord's reasonable estimate of
calendar year 2000 Electrical Costs is $1.07 per rentable square foot in
the Building; however, Landlord and Tenant agree that such figure shall not
be interpreted as the maximum amount which may be charged to Tenant for
Electrical Costs per rentable square foot during calendar year 2000.
(5) By April 1 of each calendar year, or as soon thereafter as
practicable, Landlord shall furnish to Tenant a statement of Operating
Costs and Electrical Costs for the previous year, in each case adjusted as
provided in Section 4.(b)(6), and of the Taxes for the previous year (the
"Operating Costs and Tax Statement"). If Tenant's estimated payments of
---------------------------------
Operating Costs, Electrical Costs or Taxes under this Section 4.(b) for the
year covered by the Operating Costs and Tax Statement exceed Tenant's share
of such items as indicated in the Operating Costs and Tax Statement, then
Landlord shall promptly credit or reimburse Tenant for such excess;
likewise, if Tenant's estimated payments of Operating Costs, Electrical
Costs or Taxes under this Section 4.(b) for such year are less than
Tenant's share of such items as indicated in the Operating Costs and Tax
Statement, then Tenant shall promptly pay Landlord such deficiency.
(6) With respect to any calendar year or partial calendar year
in which the Building is not occupied to the extent of 100% of the rentable
area thereof, the Operating Costs and Electrical Costs for such period
shall, for the purposes hereof, be increased to the amount which would have
been incurred had the Building been occupied to the extent of 100% of the
rentable area thereof.
(7) Provided no Event of Default then exists, after receiving an
annual Operating Costs and Tax Statement and giving Landlord 30-days' prior
written notice thereof, Tenant may inspect or audit Landlord's records
relating to Operating Costs for the period of time covered by such
Operating Costs and Tax Statement in accordance with the following
provisions. If Tenant fails to object to the calculation of Operating Costs
on an annual Operating Costs and Tax Statement within 30 days after the
statement has been delivered to Tenant, or if Tenant fails to conclude its
audit or inspection within 90 days after the statement has been delivered
to Tenant, then Tenant shall have waived its right to object to the
calculation of Operating Costs for the year in question and the calculation
of Operating Costs set forth on such statement shall be final. Tenant's
audit or inspection shall be conducted where Landlord maintains its books
and records, shall not unreasonably interfere
5
<PAGE>
with the conduct of Landlord's business, and shall be conducted only during
business hours reasonably designated by Landlord. Tenant shall pay the cost
of such audit or inspection, including $150 per hour of Landlord's or the
building manager's employee time devoted to such inspection or audit in
excess of the first four hours (Landlord shall provide the first four such
hours to Tenant free of charge) to reimburse Landlord for its overhead
costs allocable to the inspection or audit, unless the total Operating
Costs for the period in question is determined to be in error by more than
5% in the aggregate, and, as a result thereof, Tenant paid to Landlord
$0.50 per square foot in the Premises more than the actual Operating Costs
due for such period, in which case Landlord shall pay the audit cost (not
to exceed the amount Tenant was overcharged for the period in question).
Tenant may not conduct an inspection or have an audit performed more than
once during any calendar year. Tenant or the accounting firm conducting
such audit shall, at no charge to Landlord, submit its audit report in
draft form to Landlord for Landlord's review and comment before the final
approved audit report is submitted to Landlord, and any reasonable comments
by Landlord shall be incorporated into the final audit report. If such
inspection or audit reveals that an error was made in the Operating Costs
previously charged to Tenant, then Landlord shall refund to Tenant any
overpayment of any such costs, or Tenant shall pay to Landlord any
underpayment of any such costs, as the case may be, within 30 days after
notification thereof. Provided Landlord's accounting for Operating Costs is
consistent with the terms of this Lease, Landlord's good faith judgment
regarding the proper interpretation of this Lease and the proper accounting
for Operating Costs shall be binding on Tenant in connection with any such
audit or inspection. Tenant shall maintain the results of each such audit
or inspection confidential and shall not be permitted to use any third
party to perform such audit or inspection, other than a certified public
accountant (A) reasonably acceptable to Landlord, (B) which is not
compensated on a contingency fee basis or in any other manner which is
dependent upon the results of such audit or inspection (and Tenant shall
deliver the fee agreement or other similar evidence of such fee arrangement
to Landlord upon request), and (C) which agrees with Landlord in writing to
maintain the results of such audit or inspection confidential.
Notwithstanding the foregoing, Tenant shall have no right to conduct an
audit if Landlord furnishes to Tenant an audit report for the period of
time in question prepared by an independent certified public accounting
firm of recognized national standing (whether originally prepared for
Landlord or another party). Nothing in this Section 4.(b)(7) shall be
construed to limit, suspend or abate Tenant's obligation to pay Rent when
due, including Additional Rent.
5. Delinquent Payment; Handling Charges. All past due payments required
------------------------------------
of Tenant hereunder shall bear interest from the date due until paid at the
lesser of eighteen percent per annum or the maximum lawful rate of interest;
additionally, Landlord may charge Tenant a fee equal to five percent of the
delinquent payment to reimburse Landlord for its cost and inconvenience incurred
as a consequence of Tenant's delinquency. In no event, however, shall the
charges permitted under this Section 5 or elsewhere in this Lease, to the extent
they are considered to be interest under applicable Law, exceed the maximum
lawful rate of interest. Notwithstanding the foregoing, the late fee referenced
above shall not be charged with respect to the first two occurrences (but not
any subsequent occurrence) during any 12-month period that Tenant fails to make
payment when due, until five days after Landlord delivers written notice of such
delinquency to Tenant.
6. Security Deposit. Landlord agrees to waive Tenant's payment of a
----------------
security deposit (the "Security Deposit") in connection with the execution of
----------------
this Lease. Notwithstanding the foregoing, if, during the three-month period
immediately preceding the leasing by Tenant during the initial Term of any
additional space in the Building (including under Tenant's Right of Opportunity
hereunder), Tenant's
6
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Tangible Net Worth (defined below) decreases to a level below Tenant's Tangible
Net Worth for the third quarter of 1999 (which amount is stipulated by Landlord
and Tenant to be $57,671,000), Tenant shall deliver to Landlord a standby,
unconditional, irrevocable letter of credit (the "Letter of Credit") in the face
----------------
amount of the construction allowance plus all commissions paid by Landlord for
leasing the space in question. The Letter of Credit shall be issued by any of
the five largest national banking associations with banking offices in Dallas,
Texas, shall permit partial draws thereon, and shall otherwise be in the form of
Exhibit J attached hereto or another form reasonably acceptable to Landlord.
- ---------
Tenant shall from time to time cause its letter of credit to be renewed no later
than 30 days prior to any expiration date thereof so that its letter of credit
remains in effect for 30 days after the scheduled expiration date of the Term or
any renewal Term; if Tenant fails timely to renew its letter of credit, then
Landlord shall have the right to draw thereon, and retain the amounts so drawn
as the Security Deposit. Landlord may draw upon the letter of credit and apply
the proceeds thereof to perform any of Tenant's unperformed obligations under
this Lease. After any such draw, Tenant shall pay to Landlord on demand the
amount so drawn to be held as part of the Security Deposit. Tenant hereby
irrevocably appoints Landlord its true and lawful attorney-in-fact, such power
of attorney being coupled with an interest, with full power of substitution, to
do any one or more of the following in its sole discretion upon the occurrence
of an Event of Default under the Lease: (1) demand, collect, receive, sue for,
compound and give acquittance for any and all amounts which may be or become due
or payable with respect to the letter of credit and all funds evidenced thereby,
(2) execute any and all withdrawal receipts or others orders for the payment of
money drawn from the letter of credit, (3) endorse the name of Tenant on all
commercial paper given in payment or in partial payment of the letter of credit,
(4) file any claim or institute any proceeding with respect to the letter of
credit, (5) transfer the letter of credit into the name of Landlord or its
nominee, and (6) take any other action which Landlord may deem necessary or
appropriate to protect and preserve the right, title, and interest of Landlord
under the Lease. To further secure Tenant's obligations under the Lease, Tenant
hereby pledges to Landlord, and grants to Landlord a security interest in, the
letter of credit, and all renewals and replacements thereof, and proceeds
therefrom. The Security Deposit is not an advance payment of Rent or a measure
or limit of Landlord's damages upon an Event of Default (as defined herein).
Landlord may, from time to time following an Event of Default and without
prejudice to any other remedy, use all or a part of the Security Deposit to
perform any obligation Tenant fails to perform hereunder. Following any such
application of the Security Deposit, Tenant shall pay to Landlord on demand the
amount so applied in order to restore the Security Deposit to its original
amount. Provided that Tenant has performed all of its obligations hereunder,
Landlord shall, within 30 days after the Term ends, return to Tenant the portion
of the Security Deposit which was not applied to satisfy Tenant's obligations.
The Security Deposit may be commingled with other funds, and no interest shall
be paid thereon. If Landlord transfers its interest in the Premises and the
transferee assumes Landlord's obligations under this Lease, then Landlord may
assign the Security Deposit to the transferee and Landlord thereafter shall have
no further liability for the return of the Security Deposit.
7. Landlord's Obligations.
----------------------
(a) Services. Landlord shall furnish to Tenant (1) water at those
--------
points of supply provided for general use of tenants of the Building; (2) heated
and refrigerated air conditioning ("HVAC") as appropriate, at such temperatures
----
and in such amounts as are consistent with other similar class A buildings in
the Las Colinas Urban Center; (3) janitorial service to the Premises on
weekdays, other than holidays, for Building-standard installations in accordance
with the janitorial specifications in Exhibit K hereto (Landlord reserves the
---------
right to modify and/or replace such specifications from time to time so long as
such modifications and/or replacement specifications are consistent with the
janitorial services provided in other similar class A buildings in the Las
Colinas Urban Center) and such window washing as may from
7
<PAGE>
time to time be reasonably required; (4) elevators for ingress and egress to the
floor on which the Premises are located, in common with other tenants, provided
that Landlord may reasonably limit the number of operating elevators during non-
business hours and holidays; and (5) electrical current during normal business
hours for equipment that does not require more than 110 volts and whose
electrical energy consumption does not exceed normal office usage. Landlord
shall maintain the common areas of the Building in reasonably good order and
condition, except for damage caused by a Tenant Party. If Tenant desires any of
the services specified in Section 7.(a)(2): (A) at any time other than between
8:00 a.m. and 6:00 p.m. on weekdays and between 8:00 a.m. and 1:00 p.m. on
Saturday (in each case other than holidays), or (B) on Sunday or holidays, then
such services shall be supplied to Tenant upon the written request of Tenant
delivered to Landlord before 3:00 p.m. on the business day preceding such extra
usage, and Tenant shall pay to Landlord the cost of such services within 30 days
after Landlord has delivered to Tenant an invoice therefor. The costs incurred
by Landlord in providing after-hour HVAC service to Tenant shall include costs
for electricity, water, sewage, water treatment, labor, metering, filtering, and
maintenance reasonably allocated by Landlord to providing such service.
Landlord's reasonable estimate of calendar year 2000 after-normal-business-hours
charges for HVAC is $25 per hour per one-half floor of the Building (with a two-
hour minimum); however, Landlord and Tenant agree that such figure shall not be
interpreted as the maximum amount which may be charged to Tenant for such
services.
(b) Excess Utility Use. Landlord shall not be required to furnish
------------------
electrical current for equipment that requires more than 110 volts or other
equipment whose electrical energy consumption exceeds normal office usage. If
Tenant's requirements for or consumption of electricity exceed the electricity
to be provided by Landlord as described in Section 7.(a), Landlord shall, at
Tenant's expense, make reasonable efforts to supply such service through the
then-existing feeders and risers serving the Building and the Premises, and
Tenant shall pay to Landlord the cost of such service within 30 days after
Landlord has delivered to Tenant an invoice therefor. Landlord may determine
the amount of such additional consumption and potential consumption by any
verifiable method, including installation of a separate meter in the Premises
installed, maintained, and read by Landlord, at Tenant's expense. Tenant shall
not install any electrical equipment requiring special wiring or requiring
voltage in excess of 110 volts or otherwise exceeding Building capacity unless
approved in advance by Landlord. The use of electricity in the Premises shall
not exceed the capacity of existing feeders and risers to or wiring in the
Premises. Any risers or wiring required to meet Tenant's excess electrical
requirements shall, upon Tenant's written request, be installed by Landlord, at
Tenant's cost, if, in Landlord's judgment, the same are necessary and shall not
cause permanent damage to the Building or the Premises, cause or create a
dangerous or hazardous condition, entail excessive or unreasonable alterations,
repairs, or expenses, or interfere with or disturb other tenants of the
Building. If Tenant uses machines or equipment in the Premises which affect the
temperature otherwise maintained by the air conditioning system or otherwise
overload any utility, Landlord may install supplemental air conditioning units
or other supplemental equipment in the Premises, and the cost thereof, including
the cost of installation, operation, use, and maintenance, shall be paid by
Tenant to Landlord within 30 days after Landlord has delivered to Tenant an
invoice therefor.
(c) Restoration of Services; Abatement. Landlord shall use
----------------------------------
commercially reasonable efforts to restore any service required of it that
becomes unavailable; however, such unavailability shall not render Landlord
liable for any damages caused thereby, be a constructive eviction of Tenant,
constitute a breach of any implied warranty, or, except as provided in the next
sentence, entitle Tenant to any abatement of Tenant's obligations hereunder.
If, however, Tenant is prevented from using the Premises for more than 15
consecutive business days because of the unavailability of any such service (or
seven consecutive business days because of the unavailability and the
restoration of such services is within the reasonable control of
8
<PAGE>
Landlord) and such unavailability was not caused by a Tenant Party, then Tenant
shall, as its exclusive remedy be entitled to a reasonable abatement of Rent for
each consecutive day (after such 15-day period [or after such seven-day period,
as applicable]) that Tenant is so prevented from using the Premises.
8. Improvements; Alterations; Repairs; Maintenance.
-----------------------------------------------
(a) Improvements; Alterations. Improvements to the Premises shall be
-------------------------
installed at Tenant's expense only in accordance with plans and specifications
which have been previously submitted to and approved in writing by Landlord,
which approval shall be governed by standards in the following sentence. No
alterations or physical additions in or to the Premises may be made without
Landlord's prior written consent, which shall not be unreasonably withheld,
conditioned or delayed; however, Landlord may withhold its consent to any
alteration or addition that would adversely affect (in the reasonable discretion
of Landlord) (1) the Building's Structure or the Building's Systems (including
the Building's restrooms or mechanical rooms), (2) the exterior appearance of
the Building, or (3) the appearance of the Building's common areas or elevator
lobby areas. Tenant shall not paint or install lighting or decorations, signs,
window or door lettering, or advertising media of any type on or about the
Premises without the prior written consent of Landlord, which shall not be
unreasonably withheld, conditioned or delayed; however, Landlord may withhold
its consent to any such painting or installation which would affect the
appearance of the exterior of the Building or of any common areas of the
Building. Notwithstanding the foregoing, Tenant shall not be required to obtain
Landlord's consent for repainting, recarpeting, or other alterations, tenant
improvements, alterations or physical additions to the Premises which are
cosmetic in nature totaling less than $10,000 in any single instance or series
of related alternations performed within a six-month period (provided that
Tenant shall not perform any improvements, alterations or additions to the
Premises in stages as a means to subvert this provision), in each case provided
that (A) Tenant delivers to Landlord written notice thereof, a list of
contractors and subcontractors to perform the work (and certificates of
insurance for each such party) and any plans and specifications therefor prior
to commencing any such alterations, additions, or improvements (for
informational purposes only so long as no consent is required by Landlord as
required by this Lease), (B) the installation thereof does not involve any core
drilling or the configuration or location of any exterior of interior walls of
the Building, and (C) such alterations, additions and improvements will not
affect (i) the Building's Structure or the Building's Systems, (ii) the
provision of services to other Building tenants, or (iii) the appearance of the
Building's common areas or the exterior of the Building. All alterations,
additions, and improvements shall be constructed, maintained, and used by
Tenant, at its risk and expense, in accordance with all Laws; Landlord's consent
to or approval of any alterations, additions or improvements (or the plans
therefor) shall not constitute a representation or warranty by Landlord, nor
Landlord's acceptance, that the same comply with sound architectural and/or
engineering practices or with all applicable Laws, and Tenant shall be solely
responsible for ensuring all such compliance.
(b) Repairs; Maintenance. Tenant shall maintain the Premises in a
--------------------
clean, safe, and operable condition, and shall not permit or allow to remain any
waste or damage to any portion of the Premises. Tenant shall repair or replace,
subject to Landlord's direction and supervision, any damage to the Building
caused by a Tenant Party. If Tenant fails to make such repairs or replacements
within 15 business days after the occurrence of such damage, then Landlord may
make the same at Tenant's cost. If any such damage occurs outside of the
Premises, then Landlord may elect to repair such damage at Tenant's expense,
rather than having Tenant repair such damage. The cost of all repair or
replacement work performed by Landlord under this Section 8 shall be paid by
Tenant to Landlord within 30 days after Landlord has invoiced Tenant therefor.
(c) Performance of Work. All work described in this Section 8 shall
-------------------
be performed only by Landlord or by contractors and subcontractors approved in
writing by Landlord. Tenant shall cause all contractors and subcontractors to
procure and maintain insurance coverage naming Landlord as an additional insured
against such risks, in such amounts, and with such companies as Landlord may
reasonably require. All such work shall be performed in accordance with all Laws
and in a good and workmanlike manner so as not to damage the Building (including
the Premises, the Building's Structure and the Building's Systems). All such
work which may affect the Building's Structure or the Building's Systems must be
approved by the Building's engineer of record, at Tenant's expense and, at
Landlord's election, must be performed by Landlord's usual contractor for such
work.
9
(d) Mechanic's Liens. Tenant shall not permit any mechanic's liens to
----------------
be filed against the Premises or the Building for any work performed, materials
furnished, or obligation incurred by or at the request of Tenant. If such a
lien is filed, then Tenant shall, within ten business days after Landlord has
delivered notice of the filing thereof to Tenant (or such earlier time period as
may be necessary to prevent the forfeiture of the Building or any interest of
Landlord therein or the imposition of a civil or criminal fine with respect
thereto), either (1) pay the amount of the lien and cause the lien to be
released of record, or (2) diligently contest such lien and deliver to Landlord
a bond or other security reasonably satisfactory to Landlord. If Tenant fails
to timely take either such action, then Landlord may pay the lien claim, and any
amounts so paid, including expenses and interest, shall be paid by Tenant to
Landlord within ten days after Landlord has invoiced Tenant therefor. All
materialmen, contractors, artisans, mechanics, laborers and any other persons
now or hereafter contracting with Tenant or any contractor or subcontractor of
Tenant for the furnishing of any labor, services, materials, supplies or
equipment with respect to any portion of the Premises, at any time from the date
hereof until the end of the Term, are hereby charged with notice that they look
exclusively to Tenant to obtain payment for same. Nothing herein shall be
deemed a consent by Landlord to any liens being placed upon the Building or
Landlord's interest therein due to any work performed by or for Tenant.
9. Use. Tenant shall continuously occupy and use the Premises only for
---
the Permitted Use and shall comply with all Laws relating to the use, condition,
access to, and occupancy of the Premises. The population density within the
Premises as a whole shall at no time exceed one person for each 200 rentable
square feet in the Premises. Tenant shall not conduct second or third shift
operations within the Premises; however, Tenant may use the Premises after
normal business hours, so long as Tenant is not generally conducting business
from the Premises after normal business hours. The Premises shall not be used
for any use which is disreputable, creates extraordinary fire hazards, or
results in an increased rate of insurance on the Building or its contents, or
for the storage of any Hazardous Materials (other than typical office supplies
[e.g., photocopier toner] and then only in compliance with all Laws). Tenant
shall not use any substantial portion of the Premises for a "call center," any
other telemarketing use, or any credit processing use. If, because of a Tenant
Party's acts, the rate of insurance on the Building or its contents increases,
then such acts shall be an Event of Default, Tenant shall pay to Landlord the
amount of such increase on demand, and acceptance of such payment shall not
waive any of Landlord's other rights. Tenant shall conduct its business and
control each other Tenant Party so as not to create any nuisance or unreasonably
interfere with other tenants or Landlord in its management of the Building.
10. Assignment and Subletting.
-------------------------
(a) Transfers. Except as provided in Section 10.(g), Tenant shall
---------
not, without the prior written consent of Landlord, (1) assign, transfer, or
encumber this Lease or any estate or interest herein, whether directly or by
operation of law, (2) permit any other entity to become Tenant hereunder by
merger, consolidation, or other reorganization, (3) if Tenant is an entity other
than a corporation whose stock is publicly traded, permit the transfer of an
ownership interest in Tenant so as to result in a change in the current control
of Tenant, (4) sublet any portion of the Premises, (5) grant any license,
concession, or other right of occupancy of any portion of the Premises, or (6)
permit the use of the Premises by any parties other than Tenant (any of the
events listed in Section 10.(a)(1) through 10.(a)(6) being a "Transfer").
--------
(b) Consent Standards. Landlord shall not unreasonably withhold or
-----------------
delay its consent to any assignment or subletting of the Premises, provided that
the proposed transferee (1) is creditworthy, (2) has a reasonably good
reputation in the business community, (3) will use the Premises for the
Permitted Use (thus, excluding, without limitation, uses for credit processing
and telemarketing) and will not use the Premises in any manner that would
conflict with any exclusive use agreement or other similar agreement entered
into by Landlord with any other tenant of the Building, (4) is not a
governmental entity, or subdivision or agency thereof, (5) is not another
occupant of the Building, and (6) is not a person or entity with whom Landlord
is negotiating to lease space in the Building; otherwise, Landlord may withhold
its consent in its sole discretion.
10
(c) Request for Consent. If Tenant requests Landlord's consent to a
-------------------
Transfer, then, at least 15 business days prior to the effective date of the
proposed Transfer, Tenant shall provide Landlord with a written description of
all terms and conditions of the proposed Transfer, copies of the proposed
documentation, and the following information about the proposed transferee: name
and address; reasonably satisfactory information about its business and business
history; its proposed use of the Premises; banking, financial, and other credit
information; and general references sufficient to enable Landlord to determine
the proposed transferee's creditworthiness and character. Concurrently with
Tenant's notice of any request for consent to a Transfer, Tenant shall pay to
Landlord a fee of $500 to defray Landlord's expenses in reviewing such request,
and Tenant shall also reimburse Landlord immediately upon request for its
reasonable attorneys' fees incurred in connection with considering any request
for consent to a Transfer. If Landlord fails to notify Tenant that it approves
or disapproves the requested Transfer within 15 business days after submission
to Landlord of all of the items required under this Section 10 and the Tenant's
request for consent conspicuously states, "IF YOU DO NOT MAIL YOUR APPROVAL OR
DISAPPROVAL OF THE REQUESTED TRANSFER WITHIN 15 BUSINESS DAYS AFTER YOU RECEIVE
THIS REQUEST FOR CONSENT, YOUR APPROVAL OF THIS TRANSFER WILL BE DEEMED GIVEN,"
then Landlord shall be deemed to have approved such Transfer.
(d) Conditions to Consent. If Landlord consents to a proposed
---------------------
Transfer, then the proposed transferee shall deliver to Landlord a written
agreement whereby it expressly assumes Tenant's obligations hereunder; however,
any transferee of less than all of the space in the Premises shall be liable
only for obligations under this Lease that are properly allocable to the space
subject to the Transfer for the period of the Transfer. No Transfer shall
release Tenant from its obligations under this Lease, but rather Tenant and its
transferee shall be jointly and severally liable therefor. Landlord's consent
to any Transfer shall not waive Landlord's rights as to any subsequent
Transfers. If an Event of Default occurs while the Premises or any part thereof
are subject to a Transfer, then Landlord, in addition to its other remedies, may
collect directly from such transferee all rents becoming due to Tenant and apply
such rents against Rent.
11
<PAGE>
Tenant authorizes its transferees to make payments of rent directly to Landlord
upon receipt of notice from Landlord to do so following the occurrence of an
Event of Default hereunder. Tenant shall pay for the cost of any demising walls
or other improvements necessitated by a proposed subletting or assignment.
(e) Cancellation. Landlord may, within 20 business days after
------------
submission of Tenant's written request for Landlord's consent to an assignment
or subletting, cancel this Lease as to the portion of the Premises proposed to
be sublet or assigned as of the date the proposed Transfer is to be effective.
If Landlord cancels this Lease as to any portion of the Premises, then this
Lease shall cease for such portion of the Premises and Tenant shall pay to
Landlord all Rent accrued through the cancellation date relating to the portion
of the Premises covered by the proposed Transfer. Thereafter, Landlord may
lease such portion of the Premises to the prospective transferee (or to any
other person) without liability to Tenant. Notwithstanding the foregoing, if
Landlord provides written notification to Tenant of its election to cancel this
Lease as to any portion of the Premises as provided above, Tenant may rescind
its proposed assignment or subletting of all or any portion of the Premises by
notifying Landlord in writing within three business days following Landlord's
written cancellation notice.
(f) Additional Compensation. While no Event of Default exists, Tenant
-----------------------
shall pay to Landlord, immediately upon receipt thereof, 50% of the excess of
(1) all compensation received by Tenant for a Transfer less the costs reasonably
incurred by Tenant with unaffiliated third parties in connection with such
Transfer (i.e., brokerage commissions, tenant finish-work, and the like) over
(2) the Rent allocable to the portion of the Premises covered thereby. While
any Event of Default exists, Tenant shall pay to Landlord, immediately upon
receipt thereof, 100% of the excess of (A) all compensation received by Tenant
for a Transfer over (B) the Rent allocable to the portion of the Premises
covered thereby.
(g) Permitted Transfers. Notwithstanding Section 10.(a), Tenant may
-------------------
Transfer all or part of its interest in this Lease or all or part of the
Premises (a "Permitted Transfer") to the following types of entities (a
------------------
"Permitted Transferee") without the written consent of Landlord:
--------------------
(1) an Affiliate of Tenant;
(2) any corporation, limited partnership, limited liability
partnership, limited liability company or other business entity in which or
with which Tenant, or its corporate successors or assigns, is merged or
consolidated, in accordance with applicable statutory provisions governing
merger and consolidation of business entities, so long as (A) Tenant's
obligations hereunder are assumed by the entity surviving such merger or
created by such consolidation; and (B) the Tangible Net Worth of the
surviving or created entity is not less than the Tangible Net Worth of
Tenant as of the date hereof; or
(3) any corporation, limited partnership, limited liability
partnership, limited liability company or other business entity acquiring
all or substantially all of Tenant's assets if such entity's Tangible Net
Worth after such acquisition is not less than the Tangible Net Worth of
Tenant as of the date hereof.
Tenant shall promptly notify Landlord of any such Permitted Transfer. Tenant
shall remain liable for the performance of all of the obligations of Tenant
hereunder, or if Tenant no longer exists because of a merger, consolidation, or
acquisition, the surviving or acquiring entity shall expressly assume in writing
the obligations of Tenant hereunder. Additionally, the Permitted Transferee
shall comply with all of the terms
12
<PAGE>
and conditions of this Lease, including the Permitted Use, and the use of the
Premises by the Permitted Transferee may not violate any other agreements
affecting the Premises, the Building, Landlord or other tenants of the Building.
At least 30 days after the effective date of any Permitted Transfer, Tenant
agrees to furnish Landlord with copies of the instrument effecting any of the
foregoing Transfers and documentation establishing Tenant's satisfaction of the
requirements set forth above applicable to any such Transfer. The occurrence of
a Permitted Transfer shall not waive Landlord's rights as to any subsequent
Transfers. "Tangible Net Worth" means the excess of total assets over total
------------------
liabilities, in each case as determined in accordance with generally accepted
accounting principles consistently applied ("GAAP"), excluding, however, from
----
the determination of total assets all assets which would be classified as
intangible assets under GAAP including goodwill, licenses, patents, trademarks,
trade names, copyrights, and franchises. Any subsequent Transfer by a Permitted
Transferee shall be subject to the terms of this Section 10.
11. Insurance; Waivers; Subrogation; Indemnity.
------------------------------------------
(a) Tenant's Insurance. Tenant shall maintain throughout the Term the
------------------
following insurance policies: (1) commercial general liability insurance in
amounts of $3,000,000 per occurrence or, following the expiration of the initial
Term, such other amounts as Landlord may from time to time reasonably require
(and, if the use and occupancy of the Premises include any activity or matter
that is or may be excluded from coverage under a commercial general liability
policy [e.g., the sale, service or consumption of alcoholic beverages], Tenant
shall obtain such endorsements to the commercial general liability policy or
otherwise obtain insurance to insure all liability arising from such activity or
matter [including liquor liability, if applicable] in such amounts as Landlord
may reasonably require), insuring Tenant, Landlord, Landlord's agents and their
respective Affiliates against all liability for injury to or death of a person
or persons or damage to property arising from the use and occupancy of the
Premises, (2) insurance covering the full value of Tenant's property and
improvements, and other property (including property of others) in the Premises,
(3) contractual liability insurance sufficient to cover Tenant's indemnity
obligations hereunder (but only if such contractual liability insurance is not
already included in Tenant's commercial general liability insurance policy), (4)
worker's compensation insurance, and (5) business interruption insurance.
Tenant's insurance shall provide primary coverage to Landlord when any policy
issued to Landlord provides duplicate or similar coverage, and in such
circumstance Landlord's policy will be excess over Tenant's policy. Tenant
shall furnish to Landlord certificates of such insurance and such other evidence
satisfactory to Landlord of the maintenance of all insurance coverages required
hereunder, and Tenant shall obtain a written obligation on the part of each
insurance company to notify Landlord at least 30 days before cancellation or a
material change of any such insurance policies. All such insurance policies
shall be in form, and issued by companies, reasonably satisfactory to Landlord.
(b) Landlord's Insurance. Throughout the Term of this Lease, Landlord
--------------------
shall maintain, as a minimum, the following insurance policies: (1) fire and
extended risk insurance for the Building's replacement value and (2) commercial
general liability insurance in an amount of not less than $3,000,000. The cost
of all insurance carried by Landlord with respect to the Building shall be
included in Operating Costs. The foregoing insurance policies and any other
insurance carried by Landlord shall be for the sole benefit of Landlord and
under Landlord's sole control, and Tenant shall have no right or claim to any
proceeds thereof or any other rights thereunder.
(c) No Subrogation. Landlord and Tenant each waives any claim it
--------------
might have against the other for any injury to or death of any person or persons
or damage to or theft, destruction, loss, or loss of use of any property (a
"Loss"), to the extent the same is insured against under any insurance policy
----
that
13
<PAGE>
covers the Building, the Premises, Landlord's or Tenant's fixtures, personal
property, leasehold improvements, or business, or is required to be insured
against under the terms hereof, regardless of whether the negligence of the
other party caused such Loss. Each party shall cause its insurance carrier to
endorse all applicable policies waiving the carrier's rights of recovery under
subrogation or otherwise against the other party.
(d) Indemnity. Subject to Section 11.(c), Tenant shall defend,
---------
indemnify, and hold harmless Landlord and its representatives and agents from
and against all claims, demands, liabilities, causes of action, suits,
judgments, damages, and expenses (including attorneys' fees) arising from (1)
any Loss arising from any occurrence on the Premises or (2) Tenant's failure to
perform its obligations under this Lease, even though caused or alleged to be
caused by the negligence or fault of Landlord or its agents (other than a Loss
arising from the sole or gross negligence of Landlord or its agents), and even
though any such claim, cause of action, or suit is based upon or alleged to be
based upon the strict liability of Landlord or its agents. This indemnity is
intended to indemnify Landlord and its agents against the consequences of their
own negligence or fault as provided above when Landlord or its agents are
jointly, comparatively, contributively, or concurrently negligent with Tenant.
Subject to Section 11.(c), Landlord shall defend, indemnify, and hold harmless
Tenant and its agents from and against all claims, demands, liabilities, causes
of action, suits, judgments, and expenses (including attorneys' fees) for any
Loss arising from any occurrence in the Building's common areas, even though
caused or alleged to be caused by the negligence or fault of Tenant or its
agents (other than a Loss arising from the sole or gross negligence of Tenant or
its agents), and even though any such claim, cause of action, or suit is based
upon or alleged to be based upon the strict liability of Tenant or its agents.
This indemnity is intended to indemnify Tenant and its agents against the
consequences of their own negligence or fault as provided above when Tenant or
its agents are jointly, comparatively, contributively, or concurrently negligent
with Landlord. The indemnities set forth in this Section 11.(d) shall survive
termination or expiration of this Lease and shall not terminate or be waived,
diminished or affected in any manner by any abatement or apportionment of Rent
under any provision of this Lease. If any proceeding is filed for which
indemnity is required hereunder, the indemnifying party agrees, upon request
therefor, to defend the indemnified party in such proceeding at its sole cost
utilizing counsel satisfactory to the indemnified party.
12. Subordination; Attornment; Notice to Landlord's Mortgagee.
---------------------------------------------------------
(a) Subordination. This Lease shall be subordinate to any deed of
-------------
trust, mortgage, or other security instrument (each, a "Mortgage"), or any
--------
ground lease, master lease, or primary lease (each, a "Primary Lease"), that now
-------------
or hereafter covers all or any part of the Premises (the mortgagee under any
such Mortgage, beneficiary under any such deed of trust, or the lessor under any
such Primary Lease is referred to herein as a "Landlord's Mortgagee"). Landlord
--------------------
shall use reasonable efforts to obtain a subordination, non-disturbance and
attornment agreement from the current Landlord's Mortgagee in the form of
Exhibit L hereto within 60 days from the date hereof; however, Landlord's
- ---------
failure to deliver such agreement shall not constitute a default by Landlord
hereunder nor affect the subordination of the Lease as provided in this Section;
and further provided that any administration fee or other similar cost imposed
by Landlord's Mortgagee in connection with obtaining such subordination, non-
disturbance and attornment agreement shall be paid by Tenant within 15 days
after Landlord's written request therefor. Any Landlord's Mortgagee may elect,
at any time, unilaterally, to make this Lease superior to its Mortgage, Primary
Lease, or other interest in the Premises by so notifying Tenant in writing. The
provisions of this Section shall be self-operative and no further instrument of
subordination shall be required; however, in confirmation of such subordination,
Tenant shall execute and return to Landlord (or such other party designated by
Landlord)
14
<PAGE>
within ten business days after written request therefor such documentation, in
recordable form if required, as a Landlord's Mortgagee may reasonably request to
evidence the subordination of this Lease to such Landlord's Mortgagee's Mortgage
or Primary Lease (including a subordination, non-disturbance and attornment
agreement) or, if the Landlord's Mortgagee so elects, the subordination of such
Landlord's Mortgagee's Mortgage or Primary Lease to this Lease.
(b) Attornment. Tenant shall attorn to any party succeeding to
----------
Landlord's interest in the Premises, whether by purchase, foreclosure, deed in
lieu of foreclosure, power of sale, termination of lease, or otherwise, upon
such party's request, and shall execute such agreements confirming such
attornment as such party may reasonably request.
(c) Notice to Landlord's Mortgagee. Tenant shall not seek to enforce
------------------------------
any remedy it may have for any default on the part of Landlord without first
giving written notice by certified mail, return receipt requested, specifying
the default in reasonable detail, to any Landlord's Mortgagee whose address has
been given to Tenant, and affording such Landlord's Mortgagee a reasonable
opportunity to perform Landlord's obligations hereunder.
(d) Landlord's Mortgagee's Protection Provisions. If Landlord's
--------------------------------------------
Mortgagee shall succeed to the interest of Landlord under this Lease, Landlord's
Mortgagee shall not be: (1) liable for any act or omission of any prior lessor
(including Landlord); (2) bound by any rent or additional rent or advance rent
which Tenant might have paid for more than the current month to any prior lessor
(including Landlord), and all such rent shall remain due and owing,
notwithstanding such advance payment; (3) bound by any security or advance
rental deposit made by Tenant which is not delivered or paid over to Landlord's
Mortgagee and with respect to which Tenant shall look solely to Landlord for
refund or reimbursement; (4) bound by any termination, amendment or modification
of this Lease made without Landlord's Mortgagee's consent and written approval,
except for those terminations, amendments and modifications permitted to be made
by Landlord without Landlord's Mortgagee's consent pursuant to the terms of the
loan documents between Landlord and Landlord's Mortgagee; (5) subject to the
defenses which Tenant might have against any prior lessor (including Landlord);
and (6) subject to the offsets which Tenant might have against any prior lessor
(including Landlord) except for those offset rights which (A) are expressly
provided in this Lease, (B) relate to periods of time following the acquisition
of the Building by Landlord's Mortgagee, and (C) Tenant has provided written
notice to Landlord's Mortgagee and provided Landlord's Mortgagee a reasonable
opportunity to cure the event giving rise to such offset event. Landlord's
Mortgagee shall have no liability or responsibility under or pursuant to the
terms of this Lease or otherwise after it ceases to own an interest in the
Building. Nothing in this Lease shall be construed to require Landlord's
Mortgagee to see to the application of the proceeds of any loan, and Tenant's
agreements set forth herein shall not be impaired on account of any modification
of the documents evidencing and securing any loan.
13. Rules and Regulations. Tenant shall comply with the rules and
---------------------
regulations of the Building which are attached hereto as Exhibit C. Landlord
---------
may, from time to time, change such rules and regulations for the safety, care,
or cleanliness of the Building and related facilities, provided that such
changes are applicable to all tenants of the Building, will not unreasonably or
materially interfere with Tenant's use of the Premises and are enforced by
Landlord in a non-discriminatory manner. Tenant shall be responsible for the
compliance with such rules and regulations by each Tenant Party.
15
<PAGE>
14. Condemnation.
------------
(a) Total Taking. If the entire Building or Premises are taken by
------------
right of eminent domain or conveyed in lieu thereof (a "Taking"), this Lease
------
shall terminate as of the date of the Taking.
(b) Partial Taking - Tenant's Rights. If any part of the Building
--------------------------------
becomes subject to a Taking and such Taking will prevent Tenant from conducting
its business in the Premises in a manner reasonably comparable to that conducted
immediately before such Taking for a period of more than 180 days, then Tenant
may terminate this Lease as of the date of such Taking by giving written notice
to Landlord within 30 days after the Taking, and Basic Rent and Additional Rent
shall be apportioned as of the date of such Taking. If Tenant does not
terminate this Lease, then Rent shall be abated on a reasonable basis as to that
portion of the Premises rendered untenantable by the Taking.
(c) Partial Taking - Landlord's Rights. If any material portion, but
----------------------------------
less than all, of the Building becomes subject to a Taking, or if Landlord is
required to pay any of the proceeds arising from a Taking to a Landlord's
Mortgagee, then Landlord may terminate this Lease by delivering written notice
thereof to Tenant within 30 days after such Taking, and Basic Rent and
Additional Rent shall be apportioned as of the date of such Taking. If Landlord
does not so terminate this Lease, then this Lease will continue, but if any
portion of the Premises has been taken, Rent shall abate as provided in the last
sentence of Section 14.(b).
(d) Award. If any Taking occurs, then Landlord shall receive the
-----
entire award or other compensation for the Land, the Building, and other
improvements taken; however, Tenant may separately pursue a claim (to the extent
it will not reduce Landlord's award) against the condemnor for the value of
Tenant's personal property which Tenant is entitled to remove under this Lease,
moving costs, loss of business, and other claims it may have.
15. Fire or Other Casualty.
----------------------
(a) Repair Estimate. If the Premises or the Building are damaged by
---------------
fire or other casualty (a "Casualty"), Landlord shall, within 75 days after such
--------
Casualty, deliver to Tenant a good faith estimate (the "Damage Notice") of the
-------------
time needed to repair the damage caused by such Casualty.
(b) Tenant's Rights. If a material portion of the Premises is damaged
---------------
by Casualty such that Tenant is prevented from conducting its business in the
Premises in a manner reasonably comparable to that conducted immediately before
such Casualty and Landlord estimates that the damage caused thereby cannot be
repaired within 210 days after the Casualty (the "Repair Period"), then Tenant
-------------
may terminate this Lease by delivering written notice to Landlord of its
election to terminate within 30 days after the Damage Notice has been delivered
to Tenant.
(c) Landlord's Rights. If a Casualty damages the Premises or a
-----------------
material portion of the Building and (1) Landlord estimates that the damage to
the Premises cannot be repaired within the Repair Period, (2) the damage to the
Premises exceeds 50% of the replacement cost thereof (excluding foundations and
footings), as estimated by Landlord, and such damage occurs during the last two
years of the Term, (3) regardless of the extent of damage to the Premises,
Landlord makes a good faith determination that restoring the Building would be
uneconomical, or (4) Landlord is required to pay any insurance proceeds arising
out
16
<PAGE>
of the Casualty to a Landlord's Mortgagee, then Landlord may terminate this
Lease by giving written notice of its election to terminate within 30 days after
the Damage Notice has been delivered to Tenant.
(d) Repair Obligation. If neither party elects to terminate this
-----------------
Lease following a Casualty, then Landlord shall, within a reasonable time after
such Casualty, begin to repair the Premises and shall proceed with reasonable
diligence to restore the Premises to substantially the same condition as they
existed immediately before such Casualty; however, Landlord shall only be
required to reconstruct the Premises to the extent of any improvements existing
therein on the date of the damage that were installed by Landlord as part of the
Work (if any) pursuant to Exhibit D ("Landlord's Contribution"), and Landlord's
--------- -----------------------
obligation to repair or restore the Premises shall be limited to the extent of
the insurance proceeds (plus any applicable deductible amounts) actually
received by Landlord for the Casualty in question. Tenant shall be responsible
for repairing or replacing its furniture, equipment, fixtures, alterations and
other improvements which Landlord is not obligated to restore, and shall use the
proceeds of its insurance for such purpose. Tenant shall pay the difference
between the total cost of reconstructing the Premises and Landlord's
Contribution ("Tenant's Contribution").
---------------------
(e) Abatement of Rent. If the Premises are damaged by Casualty, Rent
-----------------
for the portion of the Premises rendered untenantable by the damage shall be
abated from the date of damage until the completion of Landlord's repairs (or
until the date of termination of this Lease by Landlord or Tenant as provided
above, as the case may be), unless such damage was caused solely by a Tenant
Party, in which case, Tenant shall continue to pay Rent without abatement.
16. Personal Property Taxes. Tenant shall be liable for all taxes levied
-----------------------
or assessed against personal property, furniture, or fixtures placed by Tenant
in the Premises. If any taxes for which Tenant is liable are levied or assessed
against Landlord or Landlord's property and Landlord elects to pay the same, or
if the assessed value of Landlord's property is increased by inclusion of such
personal property, furniture or fixtures and Landlord elects to pay the taxes
based on such increase, then Tenant shall pay to Landlord, within 30 days
following written request, the part of such taxes for which Tenant is primarily
liable hereunder; however, Landlord shall not pay such amount if Tenant notifies
Landlord that it will contest the validity or amount of such taxes before
Landlord makes such payment, and thereafter diligently proceeds with such
contest in accordance with Law and if the non-payment thereof does not pose a
threat of loss or seizure of the Building or interest of Landlord therein or
impose any fee or penalty against Landlord.
17. Events of Default. Each of the following occurrences shall be an
-----------------
"Event of Default":
----------------
(a) Payment Default. Tenant's failure to pay Rent within five
---------------
business days after Landlord has delivered written notice to Tenant that the
same is due; however, an Event of Default shall occur hereunder without any
obligation of Landlord to give any notice if Tenant fails to pay Rent when due
and, during the 12 month interval preceding such failure, Landlord has given
Tenant written notice of failure to pay Rent on one or more occasions;
(b) Vacation. Tenant vacates the Premises or any substantial portion
--------
thereof;
(c) Estoppel. Tenant fails to provide any estoppel certificate after
--------
Landlord's written request therefor pursuant to Section 25.(e) and such failure
shall continue for five days after Landlord's second written notice thereof to
Tenant;
17
<PAGE>
(d) Other Defaults. Tenant's failure to perform, comply with, or
--------------
observe any other agreement or obligation of Tenant under this Lease and the
continuance of such failure for a period of more than 30 days after Landlord has
delivered to Tenant written notice thereof; and
(e) Insolvency. The filing of a petition by or against Tenant (the
----------
term "Tenant" shall include, for the purpose of this Section 17.(e), any
------
guarantor of Tenant's obligations hereunder) (1) in any bankruptcy or other
insolvency proceeding; (2) seeking any relief under any state or federal debtor
relief law; (3) for the appointment of a liquidator or receiver for all or
substantially all of Tenant's property or for Tenant's interest in this Lease;
or (4) for the reorganization or modification of Tenant's capital structure;
however, if such a petition is filed against Tenant, then such filing shall not
be an Event of Default unless Tenant fails to have the proceedings initiated by
such petition dismissed within 90 days after the filing thereof.
18. Remedies. Upon any Event of Default, Landlord may, in addition to all
--------
other rights and remedies afforded Landlord hereunder or by law or equity, take
any one or more of the following actions:
(a) Termination of Lease. Terminate this Lease by giving Tenant
--------------------
written notice thereof, in which event Tenant shall pay to Landlord the sum of
(1) all Rent accrued hereunder through the date of termination, (2) all amounts
due under Section 19.(a), and (3) an amount equal to (A) the total Rent that
Tenant would have been required to pay for the remainder of the Term discounted
to present value at a per annum rate equal to the "Prime Rate" as published on
the date this Lease is terminated by The Wall Street Journal, Southwest Edition,
in its listing of "Money Rates" minus one percent, minus (B) the then present
fair rental value of the Premises for such period, similarly discounted;
(b) Termination of Possession. Terminate Tenant's right to possess
-------------------------
the Premises without terminating this Lease by giving written notice thereof to
Tenant, in which event Tenant shall pay to Landlord (1) all Rent and other
amounts accrued hereunder to the date of termination of possession, (2) all
amounts due from time to time under Section 19.(a), and (3) all Rent and other
net sums required hereunder to be paid by Tenant during the remainder of the
Term, diminished by any net sums thereafter received by Landlord through
reletting the Premises during such period, after deducting all costs incurred by
Landlord in reletting the Premises. If Landlord elects to proceed under this
Section 18.(b), Landlord may remove all of Tenant's property from the Premises
and store the same in a public warehouse or elsewhere at the cost of, and for
the account of, Tenant, without becoming liable for any loss or damage which may
be occasioned thereby. Landlord shall use reasonable efforts to relet the
Premises on such terms as Landlord in its sole discretion may determine
(including a term different from the Term, rental concessions, and alterations
to, and improvement of, the Premises); however, Landlord shall not be obligated
to relet the Premises before leasing other portions of the Building. Landlord
shall not be liable for, nor shall Tenant's obligations hereunder be diminished
because of, Landlord's failure to relet the Premises or to collect rent due for
such reletting. Tenant shall not be entitled to the excess of any consideration
obtained by reletting over the Rent due hereunder. Reentry by Landlord in the
Premises shall not affect Tenant's obligations hereunder for the unexpired Term;
rather, Landlord may, from time to time, bring an action against Tenant to
collect amounts due by Tenant, without the necessity of Landlord's waiting until
the expiration of the Term. Unless Landlord delivers written notice to Tenant
expressly stating that it has elected to terminate this Lease, all actions taken
by Landlord to dispossess or exclude Tenant from the Premises shall be deemed to
be taken under this Section 18.(b). If Landlord elects to proceed under this
Section 18.(b), it may at any time elect to terminate this Lease under Section
18.(a); or
18
<PAGE>
(c) Alteration of Locks. Additionally, with or without notice, and to
-------------------
the extent permitted by Law, Landlord may alter locks or other security devices
at the Premises to deprive Tenant of access thereto, and Landlord shall not be
required to provide a new key or right of access to Tenant.
19. Payment by Tenant; Non-Waiver; Cumulative Remedies.
--------------------------------------------------
(a) Payment by Tenant. Upon any Event of Default, Tenant shall pay to
-----------------
Landlord all costs incurred by Landlord (including court costs and reasonable
attorneys' fees and expenses) in (1) obtaining possession of the Premises, (2)
removing and storing Tenant's or any other occupant's property, (3) repairing,
restoring, altering, remodeling, or otherwise putting the Premises into
condition reasonably acceptable to a new tenant for similar space in the Las
Colinas Urban Center, (4) if Tenant is dispossessed of the Premises and this
Lease is not terminated, reletting all or any part of the Premises (including
brokerage commissions, cost of tenant finish work, and other costs incidental to
such reletting for similar space in the Las Colinas Urban Center), (5)
performing Tenant's obligations which Tenant failed to perform, and (6)
enforcing, or advising Landlord of, its rights, remedies, and recourses arising
out of the Event of Default. To the full extent permitted by law, Landlord and
Tenant agree the federal and state courts of the state in which the Premises are
located shall have exclusive jurisdiction over any matter relating to or arising
from this Lease and the parties' rights and obligations under this Lease.
(b) No Waiver. Landlord's acceptance of Rent following an Event of
---------
Default shall not waive Landlord's rights regarding such Event of Default. No
waiver by Landlord of any violation or breach of any of the terms contained
herein shall waive Landlord's rights regarding any future violation of such
term. Landlord's acceptance of any partial payment of Rent shall not waive
Landlord's rights with regard to the remaining portion of the Rent that is due,
regardless of any endorsement or other statement on any instrument delivered in
payment of Rent or any writing delivered in connection therewith; accordingly,
Landlord's acceptance of a partial payment of Rent shall not constitute an
accord and satisfaction of the full amount of the Rent that is due.
(c) Cumulative Remedies. Any and all remedies set forth in this
-------------------
Lease: (1) shall be in addition to any and all other remedies Landlord may have
at law or in equity, (2) shall be cumulative, and (3) may be pursued
successively or concurrently as Landlord may elect. The exercise of any remedy
by Landlord shall not be deemed an election of remedies or preclude Landlord
from exercising any other remedies in the future.
20. Landlord's Lien. [Intentionally Deleted].
---------------
21. Surrender of Premises. No act by Landlord shall be deemed an
---------------------
acceptance of a surrender of the Premises, and no agreement to accept a
surrender of the Premises shall be valid unless it is in writing and signed by
Landlord. At the expiration or termination of this Lease, Tenant shall deliver
to Landlord the Premises with all improvements located therein in good repair
and condition, free of Hazardous Materials placed on the Premises during the
Term, broom-clean, reasonable wear and tear (and condemnation and Casualty
damage not caused by Tenant, as to which Sections 14 and 15 shall control)
excepted, and shall deliver to Landlord all keys to the Premises. Provided that
Tenant has performed all of its obligations hereunder, Tenant may remove all
unattached trade fixtures, furniture, and personal property placed in the
Premises or elsewhere in the Building by Tenant (but Tenant may not remove any
such item which was paid for, in whole or in part, by Landlord or any wiring or
cabling unless Landlord requires such removal). Additionally, at Landlord's
option, Tenant shall remove such alterations, additions, improvements, trade
19
<PAGE>
fixtures, personal property, equipment, wiring, cabling, and furniture as
Landlord may request; however, Tenant shall not be required to remove any
addition or improvement to the Premises if Landlord has specifically agreed in
writing that the improvement or addition in question need not be removed.
Tenant shall repair all damage caused by such removal. All items not so removed
shall, at Landlord's option, be deemed to have been abandoned by Tenant and may
be appropriated, sold, stored, destroyed, or otherwise disposed of by Landlord
without notice to Tenant and without any obligation to account for such items;
any such disposition shall not be considered a strict foreclosure or other
exercise of Landlord's rights in respect of the security interest granted under
Section 20. The provisions of this Section 21 shall survive the end of the
Term.
22. Holding Over. If Tenant fails to vacate the Premises at the end of
------------
the Term, then Tenant shall be a tenant at sufferance and, in addition to all
other damages and remedies to which Landlord may be entitled for such holding
over, (a) Tenant shall pay for the first 60 days of such holdover period, in
addition to the other Rent, Basic Rent equal to 150% of the Basic Rent payable
during the last month of the Term, and (b) Tenant shall otherwise continue to be
subject to all of Tenant's obligations under this Lease. The provisions of this
Section 22 shall not be deemed to limit or constitute a waiver of any other
rights or remedies of Landlord provided herein or at law. If Tenant fails to
surrender the Premises within 30 days following the termination or expiration of
this Lease, in addition to any other liabilities to Landlord accruing therefrom,
Tenant shall protect, defend, indemnify and hold Landlord harmless from all
loss, costs (including reasonable attorneys' fees) and direct liability
resulting from such failure. If Tenant holds over in the Premises for more than
60 days following the end of the Term, then the holdover rental rate as stated
above shall increase from 150% of the Basic Rent payable during the last month
of the Term to 200% of the Basic Rent payable during the last term of the Term,
and in addition to all the liabilities described above, Tenant shall also be
liable for all liabilities (direct and indirect) resulting from Tenant's failure
to vacate the Premises at the end of the Term, including any claims made by any
succeeding tenant founded upon such failure to surrender, and any lost profits
to Landlord resulting therefrom.
23. Certain Rights Reserved by Landlord. Provided that the exercise of
-----------------------------------
such rights does not unreasonably interfere with Tenant's occupancy of the
Premises, Landlord shall have the following rights:
(a) Building Operations. To decorate and to make inspections,
-------------------
repairs, alterations, additions, changes, or improvements, whether structural or
otherwise, in and about the Building, or any part thereof; to enter upon the
Premises (after giving Tenant reasonable notice thereof, which may be oral
notice, except in cases of real or apparent emergency, in which case no notice
shall be required) and, during the continuance of any such work, to temporarily
close doors, entryways, public space, and corridors in the Building; to
interrupt or temporarily suspend Building services and facilities; to change the
name of the Building; and to change the arrangement and location of entrances or
passageways, doors, and doorways, corridors, elevators, stairs, restrooms, or
other public parts of the Building;
(b) Security. To take such reasonable measures as Landlord deems
--------
advisable for the security of the Building and its occupants; evacuating the
Building for cause, suspected cause, or for drill purposes; temporarily denying
access to the Building; and closing the Building after normal business hours and
on Sundays and holidays, subject, however, to Tenant's right to enter when the
Building is closed after normal business hours under such reasonable regulations
as Landlord may prescribe from time to time;
(c) Prospective Purchasers and Lenders. To enter the Premises at all
----------------------------------
reasonable hours to show the Premises to prospective purchasers or lenders; and
20
<PAGE>
(d) Prospective Tenants. At any time during the last nine months of
-------------------
the Term (or earlier if Tenant has notified Landlord in writing that it does not
desire to renew the Term) or at any time following the occurrence of an Event of
Default, to enter the Premises at all reasonable hours to show the Premises to
prospective tenants.
Prior to Landlord exercising its rights under Sections 23.(c) and 23.(d),
Landlord shall provide Tenant with reasonable prior notice thereof (which notice
may be verbal) and allow Tenant the opportunity to provide an employee or other
representative of Tenant to accompany Landlord during such entries.
24. Substitution Space. Landlord may, at Landlord's expense, relocate any
------------------
part of the Premises consisting of less than 10,000 rentable square feet and any
expansion areas on which tenant has a right to expand (including the Opportunity
Space [as defined below]) within the Building to space which is comparable in
size, utility and condition to the Premises. If Landlord relocates Tenant,
Landlord shall reimburse Tenant for Tenant's reasonable out-of-pocket expenses
for moving Tenant's furniture, equipment, cabling and supplies from the Premises
to the relocation space and for reprinting Tenant's stationery of the same
quality and quantity as Tenant's stationery supply on hand immediately before
Landlord's notice to Tenant of the exercise of this relocation right. Upon such
relocation, the relocation space shall be deemed to be the Premises and the
terms of the Lease shall remain in full force and shall apply to the relocation
space.
25. Miscellaneous.
-------------
(a) Landlord Transfer. Landlord may transfer any portion of the
-----------------
Building and any of its rights under this Lease. If Landlord assigns its rights
under this Lease, then Landlord shall thereby be released from any further
obligations hereunder arising after the date of transfer, provided that the
assignee assumes Landlord's obligations hereunder in writing.
(b) Landlord's Liability. The liability of Landlord (and its
--------------------
partners, shareholders or members) to Tenant (or any person or entity claiming
by, through or under Tenant) for any default by Landlord under the terms of this
Lease or any matter relating to or arising out of the occupancy or use of the
Premises and/or other areas of the Building shall be limited to Tenant's actual
direct, but not consequential, damages therefor and shall be recoverable only
from the interest of Landlord in the Building, and Landlord (and its partners,
shareholders or members) shall not be personally liable for any deficiency.
Additionally, Tenant hereby waives its statutory lien under Section 91.004 of
the Texas Property Code.
(c) Force Majeure. Other than for Tenant's obligations under this
-------------
Lease that can be performed by the payment of money (e.g., payment of Rent and
maintenance of insurance), whenever a period of time is herein prescribed for
action to be taken by either party hereto, such party shall not be liable or
responsible for, and there shall be excluded from the computation of any such
period of time, any delays due to strikes, riots, acts of God, shortages of
labor or materials, war, governmental laws, regulations, or restrictions, or any
other causes of any kind whatsoever which are beyond the control of such party.
(d) Brokerage. Neither Landlord nor Tenant has dealt with any broker
---------
or agent in connection with the negotiation or execution of this Lease, other
than Grubb & Ellis Management Services, Inc. and Cushman & Wakefield of Texas,
Inc., whose commissions shall be paid by Landlord pursuant to separate written
agreements. Tenant and Landlord shall each indemnify the other against all
costs, expenses,
21
<PAGE>
attorneys' fees, liens and other liability for commissions or other compensation
claimed by any broker or agent claiming the same by, through, or under the
indemnifying party.
(e) Estoppel Certificates. From time to time, Tenant shall furnish to
---------------------
any party designated by Landlord, within ten days after Landlord has made a
request therefor, a certificate signed by Tenant confirming and containing such
factual certifications and representations as to this Lease as Landlord may
reasonably request. Unless otherwise required by Landlord's Mortgagee or a
prospective purchaser or mortgagee of the Building, the initial form of estoppel
certificate to be signed by Tenant is attached hereto as Exhibit F.
---------
(f) Notices. All notices and other communications given pursuant to
-------
this Lease shall be in writing and shall be (1) mailed by first class, United
States Mail, postage prepaid, certified, with return receipt requested, and
addressed to the parties hereto at the address specified in the Basic Lease
Information, (2) hand delivered to the intended address, (3) sent by a
nationally recognized overnight courier service, or (4) sent by facsimile
transmission during normal business hours followed on the same day by a
confirmatory letter sent in another manner permitted hereunder. All notices
shall be effective upon delivery to the address of the addressee. The parties
hereto may change their addresses by giving notice thereof to the other in
conformity with this provision.
(g) Separability. If any clause or provision of this Lease is
------------
illegal, invalid, or unenforceable under present or future laws, then the
remainder of this Lease shall not be affected thereby and in lieu of such clause
or provision, there shall be added as a part of this Lease a clause or provision
as similar in terms to such illegal, invalid, or unenforceable clause or
provision as may be possible and be legal, valid, and enforceable.
(h) Amendments; Binding Effect. This Lease may not be amended except
--------------------------
by instrument in writing signed by Landlord and Tenant. No provision of this
Lease shall be deemed to have been waived by Landlord unless such waiver is in
writing signed by Landlord, and no custom or practice which may evolve between
the parties in the administration of the terms hereof shall waive or diminish
the right of Landlord to insist upon the performance by Tenant in strict
accordance with the terms hereof. The terms and conditions contained in this
Lease shall inure to the benefit of and be binding upon the parties hereto, and
upon their respective successors in interest and legal representatives, except
as otherwise herein expressly provided. This Lease is for the sole benefit of
Landlord and Tenant, and, other than Landlord's Mortgagee, no third party shall
be deemed a third party beneficiary hereof.
(i) Quiet Enjoyment. Provided Tenant has performed all of its
---------------
obligations hereunder, Tenant shall peaceably and quietly hold and enjoy the
Premises for the Term, without hindrance from Landlord or any party claiming by,
through, or under Landlord, but not otherwise, subject to the terms and
conditions of this Lease.
(j) No Merger. There shall be no merger of the leasehold estate
---------
hereby created with the fee estate in the Premises or any part thereof if the
same person acquires or holds, directly or indirectly, this Lease or any
interest in this Lease and the fee estate in the leasehold Premises or any
interest in such fee estate.
22
<PAGE>
(k) No Offer. The submission of this Lease to Tenant shall not be
--------
construed as an offer, and Tenant shall not have any rights under this Lease
unless Landlord executes a copy of this Lease and delivers it to Tenant.
(l) Entire Agreement. This Lease constitutes the entire agreement
----------------
between Landlord and Tenant regarding the subject matter hereof and supersedes
all oral statements and prior writings relating thereto. Except for those set
forth in this Lease, no representations, warranties, or agreements have been
made by Landlord or Tenant to the other with respect to this Lease or the
obligations of Landlord or Tenant in connection therewith. The normal rule of
construction that any ambiguities be resolved against the drafting party shall
not apply to the interpretation of this Lease or any exhibits or amendments
hereto.
(m) Waiver of Jury Trial. To the maximum extent permitted by law,
--------------------
Landlord and Tenant each waive right to trial by jury in any litigation arising
out of or with respect to this Lease.
(n) Governing Law. This Lease shall be governed by and construed in
-------------
accordance with the laws of the state in which the Premises are located.
(o) Recording. Tenant shall not record this Lease or any memorandum
---------
of this Lease without the prior written consent of Landlord, which consent may
be withheld or denied in the sole and absolute discretion of Landlord. Tenant
grants to Landlord a power of attorney to execute and record a release releasing
any such recorded instrument of record that was recorded without the prior
written consent of Landlord.
(p) Joint and Several Liability. If Tenant is comprised of more than
---------------------------
one party, each such party shall be jointly and severally liable for Tenant's
obligations under this Lease. All unperformed obligations of Tenant at the end
of the Term shall survive.
(q) Financial Reports. Within 15 business days after Landlord's
-----------------
request, Tenant will furnish Tenant's most recent audited financial statements
(including any notes to them) to Landlord, or, if no such audited statements
have been prepared, such other financial statements (and notes to them) as may
have been prepared by an independent certified public accountant or, failing
those, Tenant's internally prepared financial statements. If Tenant is a
publicly traded corporation, Tenant may satisfy its obligations hereunder by
providing to Landlord Tenant's most recent annual and quarterly reports. Tenant
will discuss its financial statements with Landlord and, following the
occurrence of an Event of Default hereunder, will give Landlord access to
Tenant's books and records in order to enable Landlord to verify the financial
statements. Landlord will not disclose any aspect of Tenant's financial
statements that Tenant designates to Landlord as confidential except (1) to
Landlord's Mortgagee or prospective mortgagees or purchasers of the Building,
(2) in litigation between Landlord and Tenant, and (3) if required by court
order. Tenant shall not be required to deliver the financial statements
required under this Section 25.(q) more than once in any 12-month period unless
requested by Landlord's Mortgagee or a prospective buyer or lender of the
Building or an Event of Default occurs.
(r) Landlord's Fees. Whenever Tenant requests Landlord to take any
---------------
action not required of it hereunder or give any consent required or permitted
under this Lease, Tenant will reimburse Landlord for Landlord's reasonable, out-
of-pocket costs payable to third parties and incurred by Landlord in reviewing
the proposed action or consent, including reasonable attorneys', engineers' or
architects' fees, within 30 days after Landlord's delivery to Tenant of an
invoice containing a statement of such costs. Tenant
23
<PAGE>
will be obligated to make such reimbursement without regard to whether Landlord
consents to any such proposed action.
(s) Telecommunications. Tenant and its telecommunications companies,
------------------
including local exchange telecommunications companies and alternative access
vendor services companies, shall have no right of access to and within the
Building, for the installation and operation of telecommunications systems,
including voice, video, data, Internet, and any other services provided over
wire, fiber optic, microwave, wireless, and any other transmission systems
("Telecommunications Services"), for part or all of Tenant's telecommunications
- -----------------------------
within the Building and from the Building to any other location without
Landlord's prior written consent. All providers of Telecommunications Services
shall be required to comply with the rules and regulations of the Building,
applicable Laws and Landlord's policies and practices for the Building. Tenant
acknowledges that Landlord shall not be required to provide or arrange for any
Telecommunications Services and that Landlord shall have no liability to any
Tenant Party in connection with the installation, operation or maintenance of
Telecommunications Services or any equipment or facilities relating thereto.
Tenant, at its cost and for its own account, shall be solely responsible for
obtaining all Telecommunications Services.
(t) Confidentiality. Both Landlord and Tenant acknowledge that the
---------------
terms and conditions of this Lease (other than the existence of this Lease and
the location of the Premises) are to remain confidential for both parties'
benefit, and may not be disclosed by either party to anyone, by any manner or
means, directly or indirectly, without the other party's prior written consent;
however, each party may disclose the terms and conditions of this Lease to their
respective attorneys, accountants, employees and existing or prospective
financial partners and Landlord may also disclose the terms and conditions
hereof to any existing, future or prospective Landlord's Mortgagee, prospective
purchasers of the Building, any necessary governmental agencies (including any
taxing authority), and internal and external auditors. The consent by either
party to any disclosures shall not be deemed to be a waiver on the part of such
party of any prohibition against any future disclosure.
(u) Authority. Tenant (if a corporation, partnership or other
---------
business entity) hereby represents and warrants to Landlord that Tenant is a
duly formed and existing entity qualified to do business in the state in which
the Premises are located, that Tenant has full right and authority to execute
and deliver this Lease, and that each person signing on behalf of Tenant is
authorized to do so. Landlord hereby represents and warrants to Tenant that
Landlord is a duly formed and existing entity qualified to do business in the
state in which the Premises are located, that Landlord has full right and
authority to execute and deliver this Lease, and that each person signing on
behalf of Landlord is authorized to do so.
(v) Hazardous Materials.
-------------------
(1) The term "Hazardous Materials" means any substance, material,
-------------------
or waste which is now or hereafter classified or considered to be
hazardous, toxic, or dangerous under any Law relating to pollution or the
protection or regulation of human health, natural resources or the
environment, or poses or threatens to pose a hazard to the health or safety
of persons on the Premises or in the Building. Tenant shall not use,
generate, store, or dispose of, or permit the use, generation, storage or
disposal of Hazardous Materials on or about the Premises or the Building
except in a manner and quantity necessary for the ordinary performance of
Tenant's business, and then in compliance with all Laws. If Tenant breaches
its obligations under this Section 25.(v), Landlord may immediately take
any and all action reasonably appropriate to remedy the same, including
taking
24
<PAGE>
all appropriate action to clean up or remediate any contamination resulting
from Tenant's use, generation, storage or disposal of Hazardous Materials.
Tenant shall defend, indemnify, and hold harmless Landlord and its
representatives and agents from and against any and all claims, demands,
liabilities, causes of action, suits, judgments, damages and expenses
(including reasonable attorneys' fees and cost of clean up and remediation)
arising from Tenant's failure to comply with the provisions of this Section
25.(v). This indemnity provision shall survive termination or expiration of
this Lease.
(2) Landlord has provided to Tenant a copy of a Phase I Environmental
Site Assessment (NOVA Project No. 976135) ("Report") with respect to the
------
Land, dated September 29, 1997, prepared by NOVA Consulting Services, Inc.
("Consultant"). Tenant agrees not to release the Report, or a copy of it,
----------
or any part of it, or disclose any of the information contained in the
Report to any third party (other than Tenant's counsel) without the express
prior written consent of Landlord. Such consent shall not be unreasonably
withheld as long as the proposed party to whom the report is given executes
a letter agreement containing covenants similar to this Section 25.(v).
Tenant releases Landlord for any inaccuracies, omissions, or errors
contained in the Report. Tenant agrees that it will not rely on the Report
and it will make whatever independent investigation it feels is necessary
to investigate the environmental and other conditions of the Land. Tenant
agrees that Landlord has no duty to provide it with the Report, to correct
any inaccuracies, errors, or omission in the Report, to supplement the
Report with any additional information, or to provide Tenant with any
information concerning the environmental conditions of the Land. Tenant
agrees that Landlord considers the Report to be confidential proprietary
information and Tenant agrees to maintain the confidentiality and security
of the Report information in accordance with the highest standards of
confidentiality and security associated with the protection of "trade
secrets." Landlord hereby expressly disclaims responsibility for the
investigation of the Land by Tenant and further disclaims any
responsibility for the contents of the Report. Tenant's obligations
pursuant to this Section 25.(v) shall survive the expiration or termination
of this Lease.
(3) Landlord represents and warrants to Tenant that to the best of
Landlord' s actual knowledge (not constructive), without any duty of
inquiry, Landlord has not received written notice of any Hazardous
Materials on the Land or the Premises in violation of any environmental
Law. Landlord and Tenant each specifically acknowledge and agree that all
references in this Lease to the phrase "to the best of Landlord's actual
knowledge" (or other similar phrase) (1) shall mean the actual (not
constructive) personal knowledge of Landlord' s individual asset manager,
Paul Garancis ("Landlord's Personnel"); (2) shall in no case mean or refer
--------------------
to the actual or constructive knowledge of any other employee, trustee,
partner, agent or partner of a partner, officer, director or other
representative of Landlord or any investment advisor, attorney, contractor
or representative of Landlord (together with Landlord's Personnel,
"Landlord's Representatives"); and (3) shall in no event or circumstance
--------------------------
impose upon Landlord or any of Landlord's Representatives any duty or
obligation to verify, inquire or make any independent inquiry or
investigation of any such representation, warranty or statement, or to
otherwise investigate the facts or circumstances relating or otherwise
pertinent thereto. Tenant further acknowledges and agrees that none of
Landlord's Representatives shall be personally liable, or otherwise have
any personal liability, under or in connection with this Lease, including
without limitation, in connection with any of the representations,
warranties or statements made in connection with, or pursuant to, this
Lease.
25
<PAGE>
(w) List of Exhibits. All exhibits and attachments attached hereto
----------------
are incorporated herein by this reference.
Exhibit A-1 - Outline of Premises
Exhibit A-2 - Outline of Opportunity Space
Exhibit B - Description of the Land
Exhibit C - Building Rules and Regulations
Exhibit D - Tenant Finish-Work: Allowance
Exhibit E - Form of Confirmation of Commencement Date Letter
Exhibit F - Form of Tenant Estoppel Certificate
Exhibit G - Parking
Exhibit H - Renewal Option
Exhibit I - Right of First Opportunity
Exhibit J - Form of Letter of Credit
Exhibit K - Janitorial Specifications
Exhibit L - Form of Subordination, Non-Disturbance and Attornment
Agreement
26. Other Provisions.
----------------
(a) Attorneys' Fees. If there is any legal or arbitration action or
---------------
proceeding between Landlord and Tenant to enforce any provision of this Lease or
to protect or establish any right or remedy of either Landlord or Tenant
hereunder, the unsuccessful party to such action or proceeding will pay to the
prevailing party all reasonable, actual out-of-pocket costs and expenses paid or
payable to third parties, including reasonable attorneys' fees incurred by such
prevailing party in such action or proceeding and in any appeal in connection
therewith, and if such prevailing party recovers a judgment in any such action,
proceeding or appeal, such costs, expenses and attorneys' fees will be
determined by the court or arbitration panel handling the proceeding and will be
included in and as a part of such judgment.
(b) Signage. Following the leasing by Tenant of at least two full
-------
floors in the Building and subject to (1) the rights of other tenants in the
Building and (2) Landlord's prior approval of the location, design, size, color,
material composition, and plans and specifications therefor, Tenant may, at its
sole risk and expense, install Tenant's trade name (the "Sign") on the black
----
marble retaining wall adjacent to the main entrance of the Building. If
Landlord grants its approval, Tenant shall erect the Sign in accordance with the
approved plans and specifications, in a good and workmanlike manner, in
accordance with all laws, regulations, restrictions (governmental or otherwise),
and architectural guidelines in effect for the area in which the Building is
located (including the Las Colinas Association) and has received all requisite
approvals thereunder (the "Sign Requirements"), and in a manner so as not to
-----------------
unreasonably interfere with the use of the Building grounds while such
construction is taking place; thereafter, Tenant shall maintain the Sign in a
good, clean, and safe condition in accordance with the Sign Requirements. After
the end of the Term or after Tenant's right to possess the Premises has been
terminated, Landlord (A) may require that Tenant remove the Sign by delivering
to Tenant written notice thereof within 30 days after the end of the Term or (B)
may use the Sign, in which case the Sign shall become the property of Landlord
without compensation to Tenant. If Landlord so requests, Tenant shall remove
the Sign, repair all damage caused thereby, and restore the black marble
retaining wall to its condition before the installation of the Sign within ten
business days after Landlord's request therefor. If Tenant fails to timely do
so, Landlord may, without compensation to Tenant, (i) use the Sign or (ii) at
Tenant's expense, remove the Sign, perform the related restoration and repair
work and dispose of the Sign in any manner Landlord deems appropriate.
Notwithstanding
26
<PAGE>
Landlord's indemnification contained in Section 11.(d), it is the intention of
the parties that Tenant bear all risks relating to the installation, use,
maintenance, operation, and removal of the Sign; therefore, Tenant shall defend,
indemnify, and hold harmless Landlord, its agents, and their respective
affiliates from all losses, claims, costs, and liabilities arising in connection
with or relating to the installation, maintenance, use, operation, and removal
of the Sign, including, without limitation, that arising from Landlord's
negligence (other than its sole or gross negligence). The rights granted to
Tenant under this Section 26.(b) are personal to Tenfold Corporation, may not be
assigned to any party, and may be revoked by Landlord if Tenant ceases to lease
at least two full floors in the Building or if Tenant ceases to occupy a portion
of the Premises.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
27
<PAGE>
LANDLORD AND TENANT EXPRESSLY DISCLAIM ANY IMPLIED WARRANTY THAT THE PREMISES
ARE SUITABLE FOR TENANT'S INTENDED COMMERCIAL PURPOSE, AND TENANT'S OBLIGATION
TO PAY RENT HEREUNDER IS NOT DEPENDENT UPON THE CONDITION OF THE PREMISES OR THE
PERFORMANCE BY LANDLORD OF ITS OBLIGATIONS HEREUNDER, AND, EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED HEREIN, TENANT SHALL CONTINUE TO PAY THE RENT, WITHOUT
ABATEMENT, DEMAND, SETOFF OR DEDUCTION, NOTWITHSTANDING ANY BREACH BY LANDLORD
OF ITS DUTIES OR OBLIGATIONS HEREUNDER, WHETHER EXPRESS OR IMPLIED.
Dated as of the date first above written.
LANDLORD: W9/CGN REAL ESTATE LIMITED PARTNERSHIP,
a Delaware limited partnership
By: W9/CGN Gen-Par, Inc., a Delaware corporation,
its general partner
By: /s/ William G. Mundinger II
----------------------------------------
Name: William G. Mundinger II
--------------------------------------
Title: Assistant Vice President
-------------------------------------
TENANT: TENFOLD CORPORATION, a Delaware corporation
By: /s/ Robert P. Hughes
--------------------------------------------
Name: Robert P. Hughes
------------------------------------------
Title: Chief Financial Officer
-----------------------------------------
28
<PAGE>
EXHIBIT A-1
-----------
OUTLINE OF PREMISES
-------------------
A-1-1
<PAGE>
EXHIBIT A-2
-----------
OUTLINE OF OPPORTUNITY SPACE
----------------------------
A-2-1
<PAGE>
EXHIBIT B
---------
DESCRIPTION OF THE LAND
-----------------------
Being a 4.982 acre tract of land situated in the S.A. & M.G.R.R. Survey,
Abstract No. 1452, Dallas County, Texas, said 4.982 acre tract being all of
Lot 1, Block A, Las Colinas Urban Center, Nineteenth Installment Revised,
an addition to the City of Irving, Dallas County, Texas as recorded in
Volume 88192, Page 2950, Plat Records, Dallas County, Texas, said 4.982
acre tract being more particularly described as follows:
BEGINNING at a set point on a corner cutoff line of the northeasterly
right-of-way line on El Lago Boulevard (110' R.O.W.), said iron pin being
the most easterly southeast corner of said El Lago Boulevard as recorded in
Volume 80246, Page 2835, Deed Records of Dallas County, Texas;
THENCE N 55 degrees 44'02" W, 60.66 feet along a corner cutoff line of said
------
El Lago Boulevard to a set 'x' in concrete for an angle point;
THENCE N 15 degrees 02'47" W, a distance of 385.46 feet along said
------
northeasterly line to a set 'x' in concrete for an angle point;
THENCE N 29 degrees 57'13" E, a distance of 56.57 feet along a corner
------
cutoff line to a set 'x' in concrete for an angle point on the southerly
right-of-way line of Las Colinas Boulevard (1100 R.O.W.);
THENCE easterly along said southerly line of Las Colinas Boulevard as
------
follows:
N 74 degrees 57'13" E, a distance of 20.00 feet to a set 'x' in
concrete for the beginning of a curve to the right having a central
angle of 18 degree 50'41" and a radius of 765.51 feet and a chord
bearing and distance of N 84 degrees 22'33" E, 251.63 feet;
Easterly an arc distance of 252.76 feet to a set 'x' in concrete for
an angle point said point being the common line of said Lot 1 and Lot
2, Block A, Las Colinas Urban Center, Nineteenth Installment Revised,
an addition to the City of Irving as recorded in Volume 88192, Page
2950, Plat Records, Dallas County, Texas;
THENCE continuing along said common line S 69E0401800 E, a distance of 5.49
------
feet departing said southerly line of Las Colinas Boulevard to a set 'x' in
concrete for corner, said 'x' being the beginning of a nontangent curve to
the right having a central angle of 26 degrees 25'51", a radius of 265.00
feet, and a long chord bearing of S 49 degrees 22'45" E, for a distance of
121.17 feet;
THENCE continuing along said common line southeasterly an arc distance of
------
122.25 feet to a set 'x' in concrete, said 'x' being the beginning of a
nontangent curve to the left having
B-1
<PAGE>
a central angle of 138 degrees 48' 01" and a radius of 61.30 feet and a
long cord bearing and distance of N 62 degrees 22'18" W, 114.76 feet;
THENCE continuing along said common line along said curve an arc distance
------
of 148.50 feet to a set 'x' in concrete, said 'x' being the end of said
curve;
THENCE continuing along said common line, S 15 degrees 05'46" E, a portion
------
of said line lying along the easterly face of a multi-story parking garage,
a distance of 381.02 feet, to a set iron pin on the northerly right-of-way
line of Rochelle Boulevard (110' R.O.W.);
THENCE departing said common line westerly along said northerly line of
------
said Rochelle Boulevard as follows:
Westerly along a curve to the right having a central angle of 06
degrees 08'07" and a radius of 1206.13 feet, and a long chord bearing
and a distance of N 88 degrees 45'05" W, 129.09 feet, an arc being the
end of said curve;
N 85 degrees 41'02" W, a distance of 192.92 feet to a set iron pin,
said iron pin being the beginning of a curve to the left having a
central angle 9E1501500 and a radius of 771.20 feet and a long chord
bearing and distance of S 89 degrees 41'16" W, 124.45 feet;
Westerly, an arc distance of 124.60 feet to the POINT OF BEGINNING and
------------------
CONTAINING 4.982 acres of 217,008 square feet of land.
----------
B-2
<PAGE>
EXHIBIT C
---------
BUILDING RULES AND REGULATIONS
------------------------------
The following rules and regulations shall apply to the Premises, the
Building, the parking garage associated therewith, and the appurtenances
thereto:
1. Sidewalks, doorways, vestibules, halls, stairways, and other similar
areas shall not be obstructed by tenants or used by any tenant for purposes
other than ingress and egress to and from their respective leased premises and
for going from one to another part of the Building.
2. Plumbing, fixtures and appliances shall be used only for the purposes
for which designed, and no sweepings, rubbish, rags or other unsuitable material
shall be thrown or deposited therein. Damage resulting to any such fixtures or
appliances from misuse by a tenant or its agents, employees or invitees, shall
be paid by such tenant.
3. No signs, advertisements or notices shall be painted or affixed on or
to any windows or doors or other part of the Building without the prior written
consent of Landlord. No nails, hooks or screws (other than those which are
necessary to hang paintings, prints, pictures, or other similar items on the
Premises' interior walls) shall be driven or inserted in any part of the
Building except by Building maintenance personnel. No curtains or other window
treatments shall be placed between the glass and the Building standard window
treatments.
4. Landlord shall provide and maintain an alphabetical directory for all
tenants in the main lobby of the Building.
5. Landlord shall provide all door locks in each tenant's leased
premises, at the cost of such tenant, and no tenant shall place any additional
door locks in its leased premises without Landlord's prior written consent.
Landlord shall furnish to each tenant a reasonable number of keys to such
tenant's leased premises, at such tenant's cost, and no tenant shall make a
duplicate thereof.
6. Movement in or out of the Building of furniture or office equipment,
or dispatch or receipt by tenants of any bulky material, merchandise or
materials which require use of elevators or stairways, or movement through the
Building entrances or lobby shall be conducted under Landlord's supervision at
such times and in such a manner as Landlord may reasonably require. Each tenant
assumes all risks of and shall be liable for all damage to articles moved and
injury to persons or public engaged or not engaged in such movement, including
equipment, property and personnel of Landlord if damaged or injured as a result
of acts in connection with carrying out this service for such tenant.
7. Landlord may prescribe weight limitations and determine the locations
for safes and other heavy equipment or items, which shall in all cases be placed
in the Building so as to distribute weight in a manner acceptable to Landlord
which may include the use of such supporting devices as Landlord may require.
All damages to the Building caused by the installation or removal of any
property of a tenant, or done by a tenant's property while in the Building,
shall be repaired at the expense of such tenant.
C-1
<PAGE>
8. Corridor doors, when not in use, shall be kept closed. Nothing shall
be swept or thrown into the corridors, halls, elevator shafts or stairways. No
birds or animals (other than seeing-eye dogs) shall be brought into or kept in,
on or about any tenant's leased premises. No portion of any tenant's leased
premises shall at any time be used or occupied as sleeping or lodging quarters.
9. Tenant shall cooperate with Landlord's employees in keeping its leased
premises neat and clean. Tenants shall not employ any person for the purpose of
such cleaning other than the Building's cleaning and maintenance personnel.
10. To ensure orderly operation of the Building, no ice, mineral or other
water, towels, newspapers, etc. shall be delivered to any leased area except by
persons approved by Landlord, which approval shall not be unreasonably withheld.
11. Tenant shall not make or permit any vibration or improper,
objectionable or unpleasant noises or odors in the Building or otherwise
interfere in any way with other tenants or persons having business with them.
12. No machinery of any kind (other than normal office equipment) shall be
operated by any tenant on its leased area without Landlord's prior written
consent, nor shall any tenant use or keep in the Building any flammable or
explosive fluid or substance (other than typical office supplies [e.g.,
photocopier toner] used in compliance with all Laws).
13. Landlord will not be responsible for lost or stolen personal property,
money or jewelry from tenant's leased premises or public or common areas
regardless of whether such loss occurs when the area is locked against entry or
not.
14. No vending or dispensing machines of any kind may be maintained in any
leased premises without the prior written permission of Landlord, which approval
shall not be unreasonably withheld.
15. Tenant shall not conduct any activity on or about the Premises or
Building which will draw pickets, demonstrators, or the like.
16. All vehicles are to be currently licensed, in good operating
condition, parked for business purposes having to do with Tenant's business
operated in the Premises, parked within designated parking spaces, one vehicle
to each space. No vehicle shall be parked as a "billboard" vehicle in the
parking lot. Any vehicle parked improperly may be towed away. Tenant, Tenant's
agents, employees, vendors and customers who do not operate or park their
vehicles as required shall subject the vehicle to being towed at the expense of
the owner or driver. Landlord may place a "boot" on the vehicle to immobilize it
and may levy a charge of $50.00 to remove the "boot." Tenant shall indemnify,
hold and save harmless Landlord of any liability arising from the towing or
booting of any vehicles belonging to a Tenant Party.
17. No tenant may enter into phone rooms, electrical rooms, mechanical
rooms, or other service areas of the Building unless accompanied by Landlord or
the Building manager.
C-2
<PAGE>
EXHIBIT D
---------
TENANT FINISH-WORK: ALLOWANCE
-----------------------------
(Landlord Performs the Work)
1. Acceptance of Premises. Except as set forth in this Exhibit, Tenant
----------------------
accepts the Premises in their "AS-IS" condition on the date that this Lease is
-----
entered into. Notwithstanding the foregoing, Landlord, shall, at its expense,
make such alterations to ensure that the drinking fountains currently located in
the Premises comply with the Americans With Disabilities Act.
2. Space Plans.
-----------
(a) Preparation and Delivery. Landlord and Tenant hereby approve the
------------------------
space plans dated December 23, 1999, prepared by da&a architects (the
"Architect") depicting improvements to be installed in the Premises (the "Space
--------- -----
Plans").
- -----
(b) Approval Process. [Intentionally deleted.]
----------------
3. Working Drawings.
----------------
(a) Preparation and Delivery. On or before February 4, 2000 (the
------------------------
"Working Drawings Delivery Deadline"), Tenant shall provide to Landlord for its
----------------------------------
approval final working drawings, prepared by the Architect, of all improvements
that Tenant proposes to install in the Premises; such working drawings shall
include the partition layout, ceiling plan, electrical outlets and switches,
telephone outlets, drawings for any modifications to the mechanical and plumbing
systems of the Building, and detailed plans and specifications for the
construction of the improvements called for under this Exhibit in accordance
with all applicable Laws. If Tenant fails to timely deliver such drawings, then
each day after the Working Drawings Delivery Deadline that such drawings are not
delivered to Landlord shall be a Tenant Delay Day.
(b) Approval Process. Landlord shall notify Tenant whether it
----------------
approves of the submitted working drawings within five business days after
Tenant's submission thereof. If Landlord disapproves of such working drawings,
then Landlord shall notify Tenant thereof specifying in reasonable detail the
reasons for such disapproval, in which case Tenant shall, within five business
days after such notice, revise such working drawings in accordance with
Landlord's objections and submit the revised working drawings to Landlord for
its review and approval. Landlord shall notify Tenant in writing whether it
approves of the resubmitted working drawings within three business days after
its receipt thereof. This process shall be repeated until the working drawings
have been finally approved by Tenant and Landlord. If Landlord fails to notify
Tenant that it disapproves of the initial working drawings within five business
days (or, in the case of resubmitted working drawings, within three business
days) after the submission thereof, then Landlord shall be deemed to have
approved the working drawings in question. If the working drawings are not fully
approved (or deemed approved) by both Landlord and Tenant by the 15th business
day after the delivery of the initial draft thereof to Landlord, then each day
after such time period that such working drawings are not fully approved (or
deemed approved) by both Landlord and Tenant shall constitute a Tenant Delay
Day.
D-1
<PAGE>
(c) Landlord's Approval; Performance of Work. If any of Tenant's
----------------------------------------
proposed construction work will affect the Building's Structure or the
Building's Systems, then the working drawings pertaining thereto must be
approved by the Building's engineer of record. Landlord's approval of such
working drawings shall not be unreasonably withheld, provided that (1) they
comply with all Laws, (2) the improvements depicted thereon do not adversely
affect (in the reasonable discretion of Landlord) the Building's Structure or
the Building's Systems (including the Building's restrooms or mechanical rooms),
the exterior appearance of the Building, or the appearance of the Building's
common areas or elevator lobby areas, (3) such working drawings are sufficiently
detailed to allow construction of the improvements in a good and workmanlike
manner, and (4) the improvements depicted thereon conform to the rules and
regulations promulgated from time to time by Landlord for the construction of
tenant improvements (a copy of which has been delivered to Tenant). As used
herein, "Working Drawings" shall mean the final working drawings approved by
----------------
Landlord, as amended from time to time by any approved changes thereto, and
"Work" shall mean all improvements to be constructed in accordance with and as
----
indicated on the Working Drawings, together with any work required by
governmental authorities to be made to other areas of the Building as a result
of the improvements indicated by the Working Drawings. Landlord's approval of
the Working Drawings shall not be a representation or warranty of Landlord that
such drawings are adequate for any use or comply with any Law, but shall merely
be the consent of Landlord thereto. Tenant shall, at Landlord's request, sign
the Working Drawings to evidence its review and approval thereof. After the
Working Drawings have been approved, Landlord shall cause the Work to be
performed in substantial accordance with the Working Drawings.
4. Bidding of Work. Constructors & Associates, Inc. of Dallas, Texas, is
---------------
hereby deemed approved by Landlord. If Tenant elects to use a general contractor
other than Constructors & Associates, Inc., prior to commencing the Work,
Landlord shall competitively bid the Work to three contractors approved by
Landlord. If the estimated Total Construction Costs are expected to exceed the
Construction Allowance, Tenant shall be allowed to review the submitted bids
from such contractors to value engineer any of Tenant's requested alterations.
In such case, Tenant shall notify Landlord of any items in the Working Drawings
that Tenant desires to change within two business days after Landlord's
submission thereof to Tenant. If Tenant fails to notify Landlord of its election
within such two business day period, Tenant shall be deemed to have approved the
bids. Within five business days following Landlord's submission to Tenant of the
initial construction bids to Tenant under the foregoing provisions (if
applicable), Tenant shall have completed all of the following items: (a)
finalized with Landlord's representative and the proposed contractor, the
pricing of any requested revisions to the bids for the Work, and (b) approved in
writing any overage in the Total Construction Costs in excess of the
Construction Allowance, failing which each day after such five business day
period shall constitute a Tenant Delay Day.
5. Change Orders. Tenant may initiate changes in the Work. Each such
-------------
change must receive the prior written approval of Landlord, such approval not to
be unreasonably withheld or delayed; however, (a) if such requested change would
adversely affect (in the reasonable discretion of Landlord) (1) the Building's
Structure or the Building's Systems (including the Building's restrooms or
mechanical rooms), (2) the exterior appearance of the Building, or (3) the
appearance of the Building's common areas or elevator lobby areas, or (b) if any
such requested change might delay the Commencement Date, Landlord may withhold
its consent in its sole and absolute discretion. Tenant shall, upon completion
of the Work, furnish Landlord with an accurate architectural "as-built" plan of
the Work as constructed, which plan shall be incorporated into this Exhibit D by
---------
this reference for all purposes. If Tenant requests any changes to the Work
described in the Space Plans or the Working Drawings, then such increased costs
and any additional
D-2
<PAGE>
design costs incurred in connection therewith as the result of any such change
shall be added to the Total Construction Costs.
6. Definitions. As used herein, a "Tenant Delay Day" shall mean each
----------- ----------------
day of delay in the performance of the Work that occurs (a) because of Tenant's
failure to timely deliver or approve any required documentation such as the
Space Plans or Working Drawings, (b) because of any change by Tenant to the
Space Plans or Working Drawings, (c) because of any specification by Tenant of
materials or installations in addition to or other than Landlord's standard
finish-out materials, or (d) because a Tenant Party otherwise delays completion
of the Work. As used herein "Substantial Completion," "Substantially
---------------------- -------------
Completed," and any derivations thereof mean (1) the Work in the Premises is
- ---------
substantially completed (as reasonably determined by Landlord) in substantial
accordance with the Working Drawings and (2) the applicable municipality has
issued and Tenant has received authorization from the City of Irving (as
evidenced by the issuance of so-called "green tag") to occupy the Premises.
Substantial Completion shall have occurred even though minor details of
construction, decoration, landscaping and mechanical adjustments remain to be
completed by Landlord.
7. Walk-Through; Punchlist. When Landlord considers the Work in the
-----------------------
Premises to be Substantially Completed, Landlord will notify Tenant and within
three business days thereafter, Landlord's representative and Tenant's
representative shall conduct a walk-through of the Premises and identify any
necessary touch-up work, repairs and minor completion items that are necessary
for final completion of the Work. Neither Landlord's representative nor Tenant's
representative shall unreasonably withhold his or her agreement on punchlist
items. Landlord shall use reasonable efforts to cause the contractor performing
the Work to complete all punchlist items within 30 days after agreement thereon;
however, Landlord shall not be obligated to engage overtime labor in order to
complete such items.
8. Excess Costs. The entire cost of performing the Work (including
------------
design of the Work and preparation of the Working Drawings, costs of
construction labor and materials, additional janitorial services, general tenant
signage, related taxes and insurance costs, and the construction supervision fee
referenced in Section 10 of this Exhibit, all of which costs are herein
collectively called the "Total Construction Costs") in excess of the
------------------------
Construction Allowance (hereinafter defined) shall be paid by Tenant. Upon
approval of the Working Drawings and selection of a contractor, Tenant shall
promptly (a) execute a work order agreement prepared by Landlord which
identifies such drawings and itemizes the Total Construction Costs and sets
forth the Construction Allowance, and (b) pay to Landlord 50% of the amount by
which Total Construction Costs exceed the Construction Allowance. Upon
Substantial Completion of the Work and before Tenant occupies the Premises to
conduct business therein, Tenant shall pay to Landlord an amount equal to the
Total Construction Costs (as adjusted for any approved changes to the Work),
less (1) the amount of the advance payment already made by Tenant, and (2) the
amount of the Construction Allowance. In the event of default of payment of such
excess costs, Landlord (in addition to all other remedies) shall have the same
rights as for an Event of Default under the Lease.
9. Construction Allowance. Landlord shall provide to Tenant a
----------------------
construction allowance not to exceed $18.00 per rentable square foot in the
Premises (the "Construction Allowance") to be applied toward the Total
----------------------
Construction Costs, as adjusted for any changes to the Work. The Construction
Allowance shall not be disbursed to Tenant in cash, but shall be applied by
Landlord to the payment of the Total Construction Costs, if, as, and when the
cost of the Work is actually incurred and paid by Landlord. The Construction
Allowance must be used within six months following the Commencement Date or
shall be deemed forfeited with no further obligation by Landlord with respect
thereto. From the Construction
D-3
<PAGE>
Allowance, Tenant may apply up to $1.00 per rentable square foot in the Premises
of such allowance to pay for the costs of Tenant's architectural and MEP fees.
10. Construction Management. Landlord or its Affiliate or agent shall
-----------------------
supervise the Work, make disbursements required to be made to the contractor,
and act as a liaison between the contractor and Tenant and coordinate the
relationship between the Work, the Building and the Building's Systems. In
consideration for Landlord's construction supervision services, Tenant shall pay
to Landlord a construction supervision fee equal to four percent of the Total
Construction Costs.
11. Construction Warranty. As part of the construction contract with
---------------------
general contractor performing the Work in the Premises, Landlord shall obtain a
one-year construction warranty with respect to the Work therein, beginning on
the date of Substantial Completion (such time period is referred to herein as
the "Warranty Period"). During the Warranty Period, if Tenant notifies Landlord
---------------
of any defect in the workmanship or construction of the Work, then Landlord
shall enforce such construction warranty against the general contractor on
Tenant's behalf. Such construction warranty shall expire and be of no further
force or effect (and neither the general contractor nor Landlord shall have any
obligation of repair relative thereto), for any defect with respect to the Work
that Tenant fails to make a written claim to Landlord relative to such defect on
or before the expiration of the Warranty Period. Notwithstanding the foregoing,
in no event shall Landlord or the general contractor have any liability for any
defects in the Work caused by any deficiencies in the Working Drawings, and,
with respect to any such defects, Tenant shall rely solely on any warranties it
separately obtains from its Architect.
12. Early Entry by Tenant. Tenant may enter the Premises before the
---------------------
Premises are in a substantially completed condition with Landlord's prior
consent (which shall not be unreasonably withheld) to perform work therein
(including data cabling, telephone and data equipment, security, audio/visual
equipment, white noise, and furniture systems), provided that (a) Landlord is
given prior written notice of any such entry, (b) such entry shall be
coordinated with Landlord and shall not interfere with Landlord's work, and (c)
Tenant shall deliver to Landlord evidence that the insurance required under
Section 11.(a) of this Lease has been obtained. Any such entry shall be on the
terms of this Lease, but no rent shall accrue in respect of Basic Rent or
Operating Costs, during the period that Tenant so enters the Premises prior to
the Commencement Date. Tenant shall conduct its activities therein so as not to
interfere with Landlord's construction activities, and shall do so at its risk
and expense. If, in Landlord's judgment, Tenant's activities therein interfere
with Landlord's construction activities, Landlord may terminate Tenant's right
to enter the Premises before the Commencement Date.
13. Construction Representatives. Landlord's and Tenant's representatives
----------------------------
for coordination of construction and approval of change orders will be as
follows, provided that either party may change its representative upon written
notice to the other:
Landlord's Representative: Kathy Boop
c/o Grubb & Ellis Management Services, Inc.
14785 Preston Road, Suite 1000
Dallas, Texas 75240
Telephone: 972-450-3300
Telecopy: 972-450-3239
D-4
<PAGE>
Tenant's Representative: Gina Katigbak
c/o Tenfold Corporation
100 Foster City Boulevard
Suite 200
Foster City, California 94404
Telephone: 650-570-5711
Telecopy: 650-570-5988
14. Miscellaneous. To the extent not inconsistent with this Exhibit,
-------------
Sections 8.(a) and 21 of this Lease shall govern the performance of the Work and
Landlord's and Tenant's respective rights and obligations regarding the
improvements installed pursuant thereto.
D-5
<PAGE>
EXHIBIT E
---------
CONFIRMATION OF COMMENCEMENT DATE
---------------------------------
______________, 2000
Tenfold Corporation
__________________________
__________________________
__________________________
Re: Lease Agreement (the "Lease") dated February 4, 2000, between W9/CGN
-----
Real Estate Limited Partnership, a Delaware limited partnership
("Landlord"), and Tenfold Corporation, a Delaware corporation
--------
("Tenant"). Capitalized terms used herein but not defined shall be
------
given the meanings assigned to them in the Lease.
Ladies and Gentlemen:
Landlord and Tenant agree as follows:
1. Condition of Premises. Tenant has accepted possession of the Premises
---------------------
pursuant to the Lease. Any improvements required by the terms of the Lease to be
made by Landlord have been completed to the full and complete satisfaction of
Tenant in all respects except for the punchlist items described on Exhibit A
---------
hereto (the "Punchlist Items"), and except for such Punchlist Items, Landlord
---------------
has fulfilled all of its duties under the Lease with respect to such initial
tenant improvements. Furthermore, Tenant acknowledges that the Premises are
suitable for the Permitted Use.
2. Commencement Date. The Commencement Date of the Lease is __________,
-----------------
2000.
3. Expiration Date. The Term is scheduled to expire on the last day of
---------------
the 60th full calendar month of the Term, which date is ______________, 2005.
4. Contact Person. Tenant's contact person in the Premises is:
--------------
Tenfold Corporation
600 Las Colinas Boulevard, Suite 600
Irving, Texas 75039
Attention: ____________________
Telephone: ____- ___-_____
Telecopy: ____- ___-_____
5. Ratification. Tenant hereby ratifies and confirms its obligations
------------
under the Lease, and represents and warrants to Landlord that it has no defenses
thereto. Additionally, Tenant further confirms and ratifies that, as of the
date hereof, (a) the Lease is and remains in good standing and in full force and
E-1
<PAGE>
effect, and (b) Tenant has no claims, counterclaims, set-offs or defenses
against Landlord arising out of the Lease or in any way relating thereto or
arising out of any other transaction between Landlord and Tenant.
6. Binding Effect; Governing Law. Except as modified hereby, the Lease
-----------------------------
shall remain in full effect and this letter shall be binding upon Landlord and
Tenant and their respective successors and assigns. If any inconsistency exists
or arises between the terms of this letter and the terms of the Lease, the terms
of this letter shall prevail. This letter shall be governed by the laws of the
state in which the Premises are located.
Please indicate your agreement to the above matters by signing this letter
in the space indicated below and returning an executed original to us.
Sincerely,
GRUBB & ELLIS MANAGEMENT SERVICES, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
Agreed and accepted:
TENFOLD CORPORATION, a Delaware corporation
By:________________________________
Name:______________________________
Title:_____________________________
E-2
<PAGE>
EXHIBIT A
---------
PUNCHLIST ITEMS
---------------
Please insert any punchlist items that remain to be performed by Landlord. If no
items are listed below by Tenant, none shall be deemed to exist.
E-3
<PAGE>
EXHIBIT F
---------
FORM OF TENANT ESTOPPEL CERTIFICATE
-----------------------------------
The undersigned is the Tenant under the Lease (defined below) between
_______________________, a ___________________, as Landlord, and the undersigned
as Tenant, for the Premises on the __________ floor(s) of the office building
located at _____________________, __________ and commonly known as
_______________________, and hereby certifies as follows:
1. The Lease consists of the original Lease Agreement dated as of
___________, 2000, between Tenant and Landlord ['s predecessor-in-interest] and
the following amendments or modifications thereto (if none, please state
"none"):________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
The documents listed above are herein collectively referred to as the "Lease"
-----
and represent the entire agreement between the parties with respect to the
Premises. All capitalized terms used herein but not defined shall be given the
meaning assigned to them in the Lease.
2. The Lease is in full force and effect and has not been modified,
supplemented or amended in any way except as provided in Section 1 above.
3. The Term commenced on __________________, 200__, and the Term expires,
excluding any renewal options, on _____________________, 200__, and Tenant has
no option to purchase all or any part of the Premises or the Building or, except
as expressly set forth in the Lease, any option to terminate or cancel the
Lease.
4. Tenant currently occupies the Premises described in the Lease and
Tenant has not transferred, assigned, or sublet any portion of the Premises nor
entered into any license or concession agreements with respect thereto except as
follows (if none, please state "none"):_________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
5. All monthly installments of Basic Rent, all Additional Rent and all
monthly installments of estimated Additional Rent have been paid when due
through _____________. The current monthly installment of Basic Rent is
$__________.
6. All conditions of the Lease to be performed by Landlord necessary to
the enforceability of the Lease have been satisfied and Landlord is not in
default thereunder. In addition, Tenant has not delivered any notice to Landlord
regarding a default by Landlord thereunder.
7. As of the date hereof, there are no existing defenses or offsets, or,
to the undersigned's knowledge, claims or any basis for a claim, that the
undersigned has against Landlord and no event has
F-1
<PAGE>
occurred and no condition exists, which, with the giving of notice or the
passage of time, or both, will constitute a default under the Lease.
8. No rental has been paid more than 30 days in advance and no security
deposit has been delivered to Landlord except as provided in the Lease.
9. If Tenant is a corporation, partnership or other business entity, each
individual executing this Estoppel Certificate on behalf of Tenant hereby
represents and warrants that Tenant is a duly formed and existing entity
qualified to do business in the state in which the Premises are located and that
Tenant has full right and authority to execute and deliver this Estoppel
Certificate and that each person signing on behalf of Tenant is authorized to do
so.
10. There are no actions pending against Tenant under any bankruptcy or
similar laws of the United States or any state.
11. Other than in compliance with all applicable laws and incidental to
the ordinary course of the use of the Premises, the undersigned has not used or
stored any hazardous substances in the Premises.
12. All tenant improvement work to be performed by Landlord under the
Lease has been completed in accordance with the Lease and has been accepted by
the undersigned and all reimbursements and allowances due to the undersigned
under the Lease in connection with any tenant improvement work have been paid in
full.
Tenant acknowledges that this Estoppel Certificate may be delivered to
Landlord, Landlord's Mortgagee or to a prospective mortgagee or prospective
purchaser, and their respective successors and assigns, and acknowledges that
Landlord, Landlord's Mortgagee and/or such prospective mortgagee or prospective
purchaser will be relying upon the statements contained herein in disbursing
loan advances or making a new loan or acquiring the property of which the
Premises are a part and that receipt by it of this certificate is a condition of
disbursing loan advances or making such loan or acquiring such property.
Executed as of __________, 200_.
TENANT: _______________________________________,
a ______________________________________
By:_____________________________________
Name:___________________________________
Title:__________________________________
F-2
<PAGE>
EXHIBIT G
---------
PARKING
-------
Tenant may use up to 108 undesignated parking spaces and seven reserved
parking spaces in the parking garage/area associated with the Building (the
"Parking Area") during the initial Term subject to such terms, conditions and
------------
regulations as are from time to time applicable to patrons of the Parking Area.
Prior to April 1, 2003, the parking spaces granted to Tenant hereunder shall be
provided at no charge to Tenant. On and after April 1, 2003, and continuing
until the end of the initial Term, Tenant shall pay $40.00 per undesignated
parking space per month (plus any applicable taxes) for each undesignated
parking space leased hereunder and $125.00 (plus any applicable taxes) for each
of the reserved parking spaces leased hereunder, in each case, regardless of
whether Tenant elects to use such parking spaces. Following the expiration of
the initial Term, Tenant shall pay to Landlord for each parking space leased
hereunder, regardless of whether Tenant elects to use such parking space, the
amount charged to patrons of the Parking Area, as the same may change from time
to time. If, for any reason, Landlord is unable to provide Tenant the use of all
or any portion of the parking spaces to which it is entitled hereunder, then
Tenant's obligation to pay for such spaces shall be abated for so long as Tenant
does not have the use thereof; this abatement shall be in full settlement of all
claims that Tenant might otherwise have against Landlord because of Landlord's
failure or inability to provide Tenant with such parking spaces.
G-1
<PAGE>
EXHIBIT H
---------
RENEWAL OPTION
--------------
Provided no Event of Default exists and Tenant is occupying the entire
Premises at the time of such election, Tenant may renew this Lease for one
additional period of five years, by delivering written notice of the exercise
thereof to Landlord not earlier than 12 months nor later than nine months before
the expiration of the Term. The Basic Rent payable for each month during such
extended Term shall be the prevailing rental rate (the "Prevailing Rental
-----------------
Rate"), at the commencement of such extended Term, for renewals of space in the
Building of equivalent quality, size, utility and location, with the length of
the extended Term and the credit standing of Tenant to be taken into account.
Within 30 days after receipt of Tenant's notice to renew, Landlord shall deliver
to Tenant written notice of the Prevailing Rental Rate and shall advise Tenant
of the required adjustment to Basic Rent, if any, and the other terms and
conditions offered. Tenant shall, within ten days after receipt of Landlord's
notice, notify Landlord in writing whether Tenant accepts or rejects Landlord's
determination of the Prevailing Rental Rate. If Tenant timely notifies Landlord
that Tenant accepts Landlord's determination of the Prevailing Rental Rate,
then, on or before the commencement date of the extended Term, Landlord and
Tenant shall execute an amendment to this Lease extending the Term on the same
terms provided in this Lease, except as follows:
(a) Basic Rent shall be adjusted to the Prevailing Rental Rate;
(b) Tenant shall have no further renewal option unless expressly
granted by Landlord in writing;
(c) Landlord shall lease to Tenant the Premises in their then-current
condition, and Landlord shall not provide to Tenant any allowances (e.g.,
moving allowance, construction allowance, and the like) or other tenant
inducements; and
(d) Tenant shall pay for the parking spaces which it is entitled to
use at the rates from time to time charged to patrons of the Parking Area
and/or any other parking area associated with the Building during the
extended Term (plus all applicable taxes).
If Tenant rejects Landlord's determination of the Prevailing Rental Rate, and
timely notifies Landlord thereof, Tenant may, in its notice to Landlord, require
that the determination of the Prevailing Rental Rate be made by brokers (and if
Tenant makes such election, Tenant shall be deemed to have irrevocably renewed
the Term, subject only to the determination of the Prevailing Rental Rate as
provided below). In such event, within ten days thereafter, each party shall
select a qualified commercial real estate broker with at least ten years
experience in appraising property and buildings in the city or submarket in
which the Premises are located. The two brokers shall give their opinion of
prevailing rental rates within 20 days after their retention. In no event,
however, shall the Basic Rent in the renewal term be less than the then current
Basic Rent rate per rentable square foot in effect hereunder. In the event the
opinions of the two brokers differ and, after good faith efforts over the
succeeding 20 day period, they cannot mutually agree, the brokers shall
immediately and jointly appoint a third broker with the qualifications specified
above. This third broker shall immediately (within five days) choose either the
determination of Landlord's broker or Tenant's broker and such choice of this
third broker shall be final and binding on Landlord and Tenant. Each party shall
pay its own costs for its real estate broker. Following the determination of the
Prevailing Rental Rate by the brokers,
H-1
<PAGE>
the parties shall equally share the costs of any third broker. The parties shall
immediately execute an amendment as set forth above. If Tenant fails to timely
notify Landlord in writing that Tenant accepts or rejects Landlord's
determination of the Prevailing Rental Rate, time being of the essence with
respect thereto, Tenant's rights under this Exhibit shall terminate and Tenant
shall have no right to renew this Lease.
Tenant's rights under this Exhibit shall terminate if (1) this Lease or
Tenant's right to possession of the Premises is terminated, (2) Tenant assigns
any of its interest in this Lease or sublets any portion of the Premises, or (3)
Tenant fails to timely exercise its option under this Exhibit, time being of the
essence with respect to Tenant's exercise thereof.
H-2
<PAGE>
EXHIBIT I
---------
RIGHT OF FIRST OPPORTUNITY
--------------------------
1. Subject to then-existing renewal or expansion options of other
tenants, if Landlord has a bona fide prospect other than the then-current tenant
therein (the "Prospect") for any portion of the space on the fifth floor
--------
designated on Exhibit A (the "Opportunity Space"), Landlord shall offer to lease
--------- -----------------
to Tenant the Opportunity Space on the same terms and conditions as offered to
the Prospect; such offer shall be in writing, specify the rent to be paid for
the Opportunity Space, contain the basic terms and conditions offered to the
Prospect and the date on which the Opportunity Space shall be included in the
Premises (the "Opportunity Notice"). Tenant shall notify Landlord in writing
------------------
whether Tenant elects to lease the entire portion of the Opportunity Space
subject to the same terms and conditions as offered to the Prospect as outlined
in the Opportunity Notice within five business days after Landlord delivers to
Tenant the Opportunity Notice. If Tenant timely elects to lease the Opportunity
Space within such five-business-day period, then Landlord and Tenant shall
execute an amendment to this Lease, effective as of the date the Opportunity
Space is to be included in the Premises, on the same terms as this Lease except
(a) the Basic Rent shall be the amount specified in the Offer Notice, (b) the
term for the Opportunity Space shall be that specified in the Offer Notice, (c)
Tenant shall lease the Opportunity Space in an "AS-IS" condition, Landlord shall
-----
not be required to perform any work therein, and Landlord shall not provide to
Tenant any allowances other than those contained in the Opportunity Notice
(e.g., moving allowance, construction allowance, and the like) if any, and (d)
other matters set forth in the Lease which are inconsistent with the terms of
the Opportunity Notice shall be modified accordingly. Notwithstanding the
foregoing, if the Opportunity Notice includes space in excess of the Opportunity
Space, Tenant must exercise its right hereunder, if at all, as to all of the
space contained in the Opportunity Notice. If Tenant fails or is unable to
timely exercise its right hereunder, then such right shall lapse, time being of
the essence with respect to the exercise thereof (it being understood that
Tenant's right hereunder is a one-time right only), and Landlord may lease all
or a portion of the Opportunity Space to third parties on such terms as Landlord
may elect. Tenant may not exercise its rights under this Exhibit if an Event of
Default exists or Tenant is not then occupying the entire Premises. For purposes
hereof, if an Opportunity Notice is delivered for less than all of the
Opportunity Space but such notice provides for an expansion, right of first
refusal, or other preferential right to lease some of the remaining portion of
the Opportunity Space, then such remaining portion of the Opportunity Space
shall thereafter be excluded from the provisions of this Exhibit.
2. Prior to September 30, 2001, if Tenant is unable to exercise its
rights as provided hereunder as to the Opportunity Space due to the exercise by
JPI, Inc., a Texas corporation, of its right to renew its lease as to any
portion of the Opportunity Space, then, as soon as reasonably practicable,
Landlord shall designate as the Opportunity Space the next available space in
the Building that consists of between 15,000 rentable square feet of area and a
full floor of the Building, and Tenant's rights as provided hereunder shall
continue only as to such newly-designated Opportunity Space subject to the terms
and conditions of this Exhibit G.
---------
3. Tenant's rights under this Exhibit shall terminate if (a) this Lease
or Tenant's right to possession of the Premises is terminated, (b) Tenant
assigns any of its interest in this Lease or sublets any portion of the Premises
other than to a Permitted Transferee, or (c) Tenant fails timely to exercise its
option as to any portion of the Opportunity Space; provided, however, that if
Landlord delivers to Tenant the Opportunity Notice before January 1, 2001 and
Tenant does not elect to lease the Opportunity Space as provided in paragraph 1
of this Exhibit G within five business days after Landlord delivers to Tenant
---------
the
I-1
<PAGE>
Opportunity Notice, then, as soon as reasonably practicable, Landlord shall
designate as the Opportunity Space the next available space in the Building that
consists of between 15,000 rentable square feet of area and a full floor of the
Building, and Tenant's rights as provided hereunder shall not terminate but
shall continue only as to such newly-designated Opportunity Space subject to the
terms and conditions of this Exhibit G.
---------
I-2
<PAGE>
FORM OF OFFER NOTICE
--------------------
[Insert Date of Notice]
BY TELECOPY AND FEDERAL EXPRESS
- -------------------------------
Tenfold Corporation
_________________________________
_________________________________
_________________________________
Re: Lease Agreement (the "Lease") dated February 4, 2000, between W9/CGN
-----
Real Estate Limited Partnership, a Delaware limited partnership
("Landlord"), and Tenfold Corporation, a Delaware corporation
-------- ------
("Tenant"). Capitalized terms used herein but not defined shall be
------
given the meanings assigned to them in the Lease.
Ladies and Gentlemen:
Pursuant to the Right of First Offer attached to the Lease, enclosed please
find an Offer Notice on Suite ______. The basic terms and conditions are as
follows:
LOCATION: ____________________________________________
SIZE: ___________ rentable square feet
BASIC RENT RATE: $______ per month
TERM: ____________________________________________
IMPROVEMENTS: ____________________________________________
COMMENCEMENT: ____________________________________________
PARKING TERMS: ____________________________________________
OTHER MATERIAL TERMS: ___________________________________________
Under the terms of the Right of First Offer, you must exercise your rights,
if at all, as to the Offer Space on the depiction attached to this Offer Notice
within ______ days after Landlord delivers such Offer Notice. Accordingly, you
have until 5:00 p.m. local time on _______________, 200__, to exercise your
rights under the Right of First Offer and accept the terms as contained herein,
failing which your rights under the Right of First Offer shall terminate and
Landlord shall be free to lease the Offer Space to any third party.
I-3
<PAGE>
If possible, any earlier response would be appreciated. Please note that your
acceptance of this Offer Notice shall be irrevocable and may not be rescinded.
Upon receipt of your acceptance herein, Landlord and Tenant shall execute
an amendment to the Lease memorializing the terms of this Offer Notice including
the inclusion of the Offer Space in the Premises; provided, however, that the
failure by Landlord and Tenant to execute such amendment shall not affect the
inclusion of such Offer Space in the Premises in accordance with this Offer
Notice.
THE FAILURE TO ACCEPT THIS OFFER NOTICE BY (1) DESIGNATING THE "ACCEPTED"
BOX, AND (2) EXECUTING AND RETURNING THIS OFFER NOTICE TO LANDLORD WITHOUT
MODIFICATION WITHIN SUCH TIME PERIOD SHALL BE DEEMED A WAIVER OF TENANT'S RIGHTS
UNDER THE RIGHT OF FIRST OFFER, AND TENANT SHALL HAVE NO FURTHER RIGHTS TO THE
OFFER SPACE. THE FAILURE TO EXECUTE THIS LETTER WITHIN SUCH TIME PERIOD SHALL BE
DEEMED A WAIVER OF THIS OFFER NOTICE.
Should you have any questions, do not hesitate to call.
Sincerely,
________________________________
________________________________
________________________________
[please check appropriate box]
ACCEPTED [_]
REJECTED [_]
TENFOLD CORPORATION, a Delaware corporation
By: ____________________________
Name: ____________________________
Title: ____________________________
Date: ____________________________
Enclosure [attach depiction of Offer Space]
I-4
<PAGE>
EXHIBIT J
---------
FORM OF LETTER OF CREDIT
------------------------
________________, 200__
IRREVOCABLE, UNCONDITIONAL LETTER OF CREDIT NO.____
W9/CGN Real Estate Limited Partnership
c/o Archon Group, L.P.
600 Las Colinas Boulevard, Suite 400
Irving, Texas 75039
Gentlemen:
________________________, a national banking association ("Bank"), of
----
________, _______________ hereby issues its Irrevocable, Unconditional Letter of
Credit in favor of W9/CGN REAL ESTATE LIMITED PARTNERSHIP, a Delaware limited
partnership, and/or its successors and assigns ("Landlord") for the account of
--------
TENFOLD CORPORATION, a Delaware corporation ("Tenant") up to the aggregate
------
amount of $__________, available at sight by the drafts of Landlord on the Bank.
Drafts drawn on this Letter of Credit will be honored when presented,
accompanied only by a letter or certificate executed by a representative of
Landlord stating that it is entitled to draw on this Letter of Credit under the
terms of the Lease Agreement, dated as of February 4, 2000, between Landlord and
Tenant. Partial draws shall be permitted hereunder. This Letter of Credit may be
assigned.
The Bank shall be entitled (and required) to rely upon the statements
contained in the above-described letter or certificate and will have no
obligation to verify the truth of any statements set forth therein.
The Bank hereby agrees with drawers, endorsers, and bona fide holders of
this Letter of Credit that all drafts drawn by reason of this Letter of Credit
and in accordance with the above conditions, will meet with due honor when
presented at the office of the Bank in _______________, _______________.
The obligations of the Bank shall not be subject to any claim or defense by
reason of the invalidity, illegality, or inability to enforce any of the
agreement set forth in the Lease.
This Letter of Credit is subject to the Uniform Customs and Practices for
Documentary Credits (1993 Revision) fixed by the International Chamber of
Commerce (publication 500) when not in conflict with the express terms of this
Letter of Credit or with the provisions of Article 5 of the Texas Business and
Commerce Code, as amended.
This Letter of Credit shall terminate at 3:00 p.m. Central Daylight Savings
Time on the first anniversary date following the date hereof.
J-1
<PAGE>
Amounts drawn upon this Letter of Credit are to be endorsed on the reverse
side of this Letter of Credit by the negotiating bank.
THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES THAT MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
_____________________________________________
By:__________________________________________
Name:________________________________________
Title:_______________________________________
J-2
<PAGE>
EXHIBIT K
---------
SCHEDULE OF JANITORIAL SERVICES
-------------------------------
OFFICE AREAS:
- ------------
1. Empty, clean and damp dust all waste receptacles and remove waste
paper and rubbish from the Premises nightly; wash receptacles as
necessary.
2. Empty and clean all ash trays, screen all sand urns nightly and supply
and replace sand as necessary.
3. Vacuum all rugs and carpeted areas in offices, lobbies and corridors
nightly. Spot clean carpets as needed.
4. Hand dust and wipe clean with damp or treated cloth all office
furniture, files, fixtures, paneling, window sills and other
horizontal surfaces nightly; wash window sills when necessary.
5. Damp wipe and polish all glass furniture tops nightly.
6. Remove all finger marks and smudges from vertical surfaces, including
doors, door frames, around light switches, private entrance glass and
partitions nightly.
7. Wash clean all water coolers nightly.
8. Sweep all stairways nightly, vacuum if carpeted.
9. Police all stairwells throughout the entire building daily and keep in
clean condition.
10. Damp mop spillage in office and public areas as required.
11. Damp dust all telephones as necessary.
WASHROOMS:
- ---------
1. Mop, rinse and dry floors nightly.
2. Scrub floors weekly.
3. Clean all mirrors, bright work and enameled surfaces nightly.
4. Wash and disinfect all basis, urinals and bowls nightly, using non-
abrasive cleaners to remove stains and clean underside of rim on
urinals and bowls nightly.
K-1
<PAGE>
5. Wash both sides of all toilet seats with soap and water and disinfect
nightly.
6. Damp wipe nightly, wash all partitions, tile walls and outside surface
of all dispensers and receptacles.
7. Empty and sanitize all receptacles and sanitary disposals nightly;
thoroughly clean and wash at least once per week.
8. Fill toilet tissue, soap, towel and sanitary napkin dispensers
nightly.
9. Clean flushometers, piping, toilet seat hinges and other metal work
nightly.
10. Wash and polish all wall, partitions, tile walls and enamel surfaces
from trim to floor monthly or as needed.
11. Vacuum all louvers, ventilating grills, and dust light fixtures
monthly.
FLOORS:
- ------
1. Ceramic tile, marble and terrazzo floors to be swept and buffed
nightly and washed or scrubbed as necessary.
2. Vinyl asbestos, asphalt, vinyl, rubber or other composition floors and
bases to be swept nightly; such floors in public areas on multiple
tenancy floors to be waxed and buffed as needed.
3. Tile floors in office areas will be washed and buffed monthly.
4. All vinyl floors stripped and rewaxed as necessary.
5. All carpeted areas and rugs to be vacuumed clean nightly.
6. Detail vacuuming shall be performed as necessary.
RAISED COMPUTER FLOORS:
- ----------------------
1. Dry mop and spot clean all computer flooring nightly.
2. West mop all computer flooring at least once weekly. Mopping may be
performed on separate sections of the computer flooring on successive
nights, as long as entire raised flooring is mopped once during each
one-week period.
3. Buff all computer flooring monthly.
4. Computer sub-flooring shall be cleaned annually by contractor, or as
necessary.
K-2
<PAGE>
GLASS:
- -----
1. Clean glass entrance doors, adjacent glass panels, and any common area
glass nightly.
HIGH DUSTING (as needed):
- ------------
1. Dust and wipe clean all closet shelving when empty and carpet sweep or
dry mop all floors in closets if such are empty.
2. Dust all picture frames, charts, graphs, and similar wall hangings.
3. Dust clean all verticals such as walls, partitions, doors, door bucks,
and other surfaces above shoulder height.
4. Damp dust all ceiling air conditions diffusers, wall grilles,
registers and other ventilating louvers.
5. Dust the exterior surfaces of lighting fixtures, including glass and
plastic enclosures.
6. Dust all mini blinds.
ELEVATORS:
- ---------
1. Carpets will be vacuumed daily and spot cleaned as necessary.
2. Exterior and interior doors and trim will be dusted nightly.
3. Cabinets will be dusted nightly.
4. Control and dispatch panels will be dusted and polished as necessary.
5. Elevator thresholds will be cleaned nightly.
6. Hardwood surfaces will be kept clean.
7. Telephones will be kept dust free.
GENERAL:
- -------
1. Wipe all interior metal window frames, mullions, and other unpainted
interior metal surfaces of the perimeter walls of the building each
time the interior of the window is washed (as requested by the
Manager).
K-3
<PAGE>
2. Keep slopsink rooms in a clean, neat and orderly condition at all
times.
3. Wipe clean and polish all metal hardware fixtures and other bright
work nightly.
4. Dust and/or wash all directory boards as required, remove fingerprints
and smudges nightly.
5. Maintain building lobby, corridors and other public areas in a clean
condition.
6. Dust fire extinguishers and cabinets nightly (interior and exterior);
wash as necessary.
7. All baseboards (resilient flooring and carpeted areas) will be washed
and wiped clean as necessary.
8. Vacuum entrance mats nightly.
9. Perform special cleaning needs of individual tenants only as
authorized and directed by the Manger.
10. Properly maintain exterior of building at ground level by ensuring
that curtain wall, glass, marble, etc., is kept in a clean condition.
Exterior stainless steel is to be cleaned or polished weekly.
11. Polish standpipes and sprinkler siamese connections as necessary.
K-4
<PAGE>
EXHIBIT L
---------
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
-------------------------------------------------------
This Subordination, Non-Disturbance, and Attornment Agreement ("Agreement")
---------
is made as of February 4, 2000, by and among LaSALLE NATIONAL BANK, with a place
-
of business at 135 South LaSalle Street, Chicago, Illinois 60603 ("Collateral
----------
Agent"), W9/CGN REAL ESTATE LIMITED PARTNERSHIP, a Delaware limited partnership
- -----
("Landlord"), and TENFOLD CORPORATION, a Delaware corporation, with a place of
--------
business as stated in the Lease (as defined below) ("Tenant").
------
A. Tenant has entered into a certain lease dated February 4, 2000 (the
"Lease"), with Landlord covering certain premises (the "Premises") at the
----- --------
property known as 600 Las Colinas Boulevard, Irving, Texas 75039 (the
"property").
--------
B. The Collateral Agent is acting for the benefit of certain Lenders (the
"Lenders") in connection with a loan to Landlord (the "Loan") secured by a First
------- ----
Deed of Trust, Security Agreement and Fixture Filing (the "Mortgage") and by
--------
other security instruments (the Mortgage, such other security instruments and
the loan agreement, collectively, the "Loan Documents").
--------------
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereby covenant and agree
as follows:
1. Subordination. The Lease and all rights created thereby are and shall
-------------
be subject and subordinate to the Loan Documents and to any and all renewals,
modifications, consolidations, replacements, and extensions thereof and all
advances made thereunder, to the full extent of all sums due to the Lenders. The
Loan Documents shall take priority over the Lease and shall be entitled to the
same rights and privileges, both at law and in equity, as the Loan Documents
would have had if they had been executed, delivered, and recorded prior to the
execution, delivery, or recording of the Lease.
2. Non-Disturbance. If the Lenders or any of their agents succeed to the
---------------
interest of Landlord under the Lease and no event of default shall then be
continuing under the Lease, the Lenders or such agents shall not disturb
Tenant's possession of the Premises or its rights under the Lease, except in
accordance with the terms of the Lease and this Agreement, and the Lease shall
continue as a lease between Tenant and Lenders or such agents. Neither Lenders
nor their agents shall join Tenant in summary or foreclosure proceedings,
provided the Lease is then in full force and effect and Tenant is not in default
thereunder.
3. Attornment. Tenant agrees that, following foreclosure or any deed in
----------
lieu of foreclosure, it will attorn to, and recognize as its landlord, the
Lenders or any agent acting on behalf of the Lenders or any purchaser at a
foreclosure sale and their respective successors and assigns (the "Successor
---------
Landlord") for the unexpired balance of the term of the Lease (and any
- --------
extensions, if exercised) upon the same terms and conditions as are set forth in
the Lease. This agreement shall be effective without further written agreement,
but, on request of such Successor Landlord, Tenant agrees to execute and deliver
an agreement of attornment of similar import to this Agreement. Tenant agrees
that foreclosure of the Mortgage will not be a constructive eviction of Tenant.
Tenant shall not join, appear, or petition to become a party in any foreclosure
action.
L-1
<PAGE>
4. Liability of Lenders. If a Successor Landlord succeeds to the
--------------------
interest of Landlord under the Lease, such Successor Landlord shall assume and
perform (but only while such Successor Landlord is the owner of the Property)
all of Landlord's obligations under the Lease, except that the Successor
Landlord shall not be:
(a) liable for any action or omission of any prior landlord,
including the present Landlord (the "Former Landlord");
---------------
(b) liable for the return of any security deposit not actually
received by such Successor Landlord;
(c) subject to any offsets or defenses which Tenant might have
against the Former Landlord (including any claim for damages of any kind
whatsoever as the result of any breach by a Former Landlord that occurred before
the date of attornment) (the "Offset Rights");
-------------
(d) bound by any rent or additional rent which Tenant might have paid
for more than the then current month to any Former Landlord;
(e) bound by any assignment, surrender, termination, cancellation,
amendment, or modification of the Lease made without its express written
consent;
(f) bound by any sum(s) that any Former Landlord owed to Tenant; or
(g) bound by any obligation of a Former Landlord under the Lease to
make, pay for, or reimburse Tenant for any alterations, demolition, or other
improvements or work (other than day-to-day maintenance and repairs).
5. Notice and Right to Cure. Tenant agrees to give the Collateral Agent
------------------------
at the time given to Landlord a copy of any notice of default served upon
Landlord. If Landlord fails to cure such default within the time provided for in
the Lease, the Collateral Agent and the Lenders shall have the right, but not
the obligation, to cure such default within a reasonable time thereafter (but in
no event more than 60 days from the expiration of Landlord's cure period), or if
such default cannot be cured within such reasonable time then such additional
time as may be necessary to cure such default, provided the Collateral Agent
and/or the Lenders have commenced and are diligently pursuing the remedies
necessary to cure such default (including, without limitation, commencement of
foreclosure proceedings if necessary to effect such cure). In such event, the
Lease shall not be terminated or the rights of Landlord under the Lease
forfeited or adversely affected during such reasonable time or while the
Collateral Agent and/or the Lenders diligently pursue such remedies. Neither the
Collateral Agent nor any Lender shall have any obligation to cure, or liability
or obligation for not curing.
6. Assignment of Lease. Tenant acknowledges that the Lease is being
-------------------
assigned to the Collateral Agent under the Loan Documents. The interest of
Landlord in the Lease is being assigned to the Collateral Agent, but the
Collateral Agent assumes no duty, liability, or obligation whatever under the
Lease. Unless and until different written instructions from the Collateral Agent
are received by Tenant, all rent payments under the Lease shall be paid directly
to the Cash Receipts Account (as defined in the Loan Agreement) in accordance
with the terms of the tenant notice delivered to Tenant by Landlord pursuant to
the Loan Agreement, a copy of which is attached hereto.
L-2
<PAGE>
7. Effect of Foreclosure. Any right of Tenant to purchase the Property,
---------------------
including any right of first refusal, shall not apply to a foreclosure sale.
8. Exculpation of Successor Landlord. Notwithstanding anything to the
---------------------------------
contrary in this Agreement or the Lease, upon any attornment pursuant to this
Agreement the Lease shall be deemed to have been automatically amended to
provide that Successor Landlord's obligations and liability under the Lease
shall never extend beyond Successor Landlord's (or its successors' or assigns')
interest, if any, in the premises covered by the Lease from time to time,
including insurance and condemnation proceeds and Successor Landlord's interest
in the Lease (collectively, "Successor Landlord's Interest"). Tenant shall look
-----------------------------
exclusively to Successor Landlord's Interest (or that of its successors and
assigns) for payment or discharge of any obligations of Successor Landlord under
the Lease as affected by this Agreement. If Tenant obtains any money judgment
against Successor Landlord with respect to the Lease or the relationship between
Successor Landlord and Tenant, then Tenant shall look solely to Successor
Landlord's Interest (or that of its successors and assigns) to collect such
judgment. Tenant shall not collect or attempt to collect any such judgment out
of any other assets of Successor Landlord.
9. Interpretation; Governing Law. The interpretation, validity and
-----------------------------
enforcement of this Agreement shall be governed by and construed under the
internal laws of the State of New York, excluding its principles of conflict of
laws.
10. Amendments. No modification, amendment, waiver, or release of any
----------
provisions of this Agreement or of any right, obligation, claim or cause of
action arising hereunder shall be valid or binding for any purpose whatsoever
unless in writing and duly executed by the party against which the same is
sought to be asserted.
11. Notices. All notices, directions, demands, requests, permissions,
-------
approvals, consents, elections or other communications permitted or required to
be given hereunder (singly, a "notice" or collectively, "notices") shall be in
------ -------
writing, shall be effective for all purposes if hand delivered or sent by
expedited prepaid delivery service (either commercial or United States Postal
Service) with proof of delivery, and shall be deemed given on the date of actual
receipt by the entity to which it is directed, notwithstanding any further
direction to the attention of any individual or department. Notices shall be
addressed to any party hereto at its address first above written. Notices to the
Lenders shall be addressed to the Collateral Agent on the Lenders' behalf at the
address of the Collateral Agent first above written. Any address or name
specified above may be changed by a notice given in accordance with this
Section. The inability to deliver because of a changed address of which no
notice was given, rejection, or other refusal to accept any notice shall be
deemed to be the receipt of the notice as of the date of such inability to
deliver, rejection, or refusal to accept.
12. Successors and Assigns. The terms of this Agreement shall be binding
----------------------
upon, inure to benefit of, and be enforceable by, the parties and their
respective successors and assigns.
L-3
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
LENDER: LaSALLE NATIONAL BANK, as Collateral Agent
By:_________________________________________
Name:_______________________________________
Title:______________________________________
LANDLORD: W9/CGN REAL ESTATE LIMITED PARTNERSHIP, a
Delaware limited partnership
By: W9/CGN Gen-Par, Inc., a Delaware corporation,
its general partner
By:____________________________________
Name:__________________________________
Title:_________________________________
TENANT: TENFOLD CORPORATION, a Delaware corporation
By:_________________________________________
Name:_______________________________________
Title:______________________________________
L-4
<PAGE>
Exhibit 10.3
150 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA
OFFICE LEASE AGREEMENT
BETWEEN
EOP-150 CALIFORNIA STREET, L.L.C., a Delaware limited liability company
("LANDLORD")
AND
TENFOLD CORPORATION, a Delaware corporation
("TENANT")
<PAGE>
OFFICE LEASE AGREEMENT
THIS OFFICE LEASE AGREEMENT (the "Lease") is made and entered into as of
the 3/rd/ day of March, 2000, by and between EOP-150 CALIFORNIA STREET, L.L.C.,
a Delaware limited liability company ("Landlord") and TENFOLD CORPORATION, a
Delaware corporation ("Tenant").
I. Basic Lease Information.
A. "Building" shall mean that certain building to be constructed at 150
California Street, San Francisco, California, commonly known as 150
California Street. As of the date of this Lease, Landlord has not
caused the Building to be fully constructed.
B. "Rentable Square Footage of the Building" is deemed to be
approximately 201,787 square feet, subject to adjustment as provided
below in Section I.C.
C. "Premises A", "Premises B" and "Premises C" shall mean the areas shown
on Exhibits A-1, A-2, and A-3, respectively, to this Lease. Premises A
consists of approximately 9,819 rentable square feet described as
Suite No. 700 on the 7/th/ floor and approximately 9,829 rentable
square feet described as Suite No. 800 on the 8/th/ floor. Premises B
consists of approximately 9,162 rentable square feet described as
Suite No. 500 on the 5/th/ floor and approximately 6,266 rentable
square feet described as Suite No. 600 on the 6/th/ floor. Premises C
consists of approximately 14,095 rentable square feet described as
Suite No. 200 on the 2/nd/ floor, approximately 14,105 rentable square
feet described as Suite No. 300 on the 3/rd/ floor, and approximately
14,154 rentable square feet described as Suite No. 400 on the 4/th/
floor. Premises A, Premises B and Premises C are collectively referred
to herein as the "Premises". The "Rentable Square Footage of Premises
A" is deemed to be 19,648 square feet. The "Rentable Square Footage of
Premises B" is deemed to be 15,428 square feet. The "Rentable Square
Footage of Premises C" is deemed to be 42,354 square feet.
Collectively, the "Rentable Square Footage of the Premises" is deemed
to be 77,430 square feet. If the Premises include one or more floors
in their entirety, all corridors and restroom facilities located on
such full floor(s) shall be considered part of the Premises. Upon
substantial completion of the Building, Landlord shall have its
architect measure the Premises and Building in accordance with
Landlord's standard measurement practices for the Building,
consistently applied, in order to determine the Rentable Square
Footage of the Premises and Rentable Square Footage of the Building.
Landlord currently anticipates utilizing Stephenson Systems, Inc. to
perform such remeasurement. Such remeasurement shall be conducted
using the following load factors for the following floors of the
Premises: (i) single tenant/full floor load factor of approximately
18.31% (not to exceed 20.31%) for the 2/nd/ floor of the Building;
(ii) single tenant/full floor load factor of approximately 17.97% (not
to exceed 19.97%) for the 3/rd/ floor of the Building; (iii) single
tenant/full floor load factor of approximately 17.94% (not to exceed
19.94%) for the 4/th/ floor of the Building; (iv) single tenant/full
floor load factor of approximately 22.08% (not to exceed 24.08%) for
the 5/th/ floor of the Building; (v) single tenant/full floor load
factor of approximately 30.18% (not to exceed 32.18%) for the 6/th/
floor of the Building; (vi) single tenant/full floor load factor of
approximately 20.80% (not to exceed 22.80%) for the 7/th/ floor of the
Building; and (vii) single tenant/full floor load factor of
approximately 21.33% (not to exceed 23.33%) for the 8/th/ floor of the
Building. Upon such determination, Landlord and Tenant shall enter
into the amendment as described in the last paragraph of Section I.D.
below.
1
<PAGE>
D. "Base Rent":
---------------------------------------------------------------------------
PREMISES A
---------------------------------------------------------------------------
Annual Rate Annual Monthly
Period Per Square Foot Base Rent Base Rent
---------------------------------------------------------------------------
5/1/2000 - 4/30/2003 $47.00 $ 923,456.04 $ 76,954.67
---------------------------------------------------------------------------
5/1/2003 - 4/30/2005 $49.00 $ 962,751.96 $ 80,229.33
---------------------------------------------------------------------------
5/1/2005 - 6/30/2008 $53.00 $1,041,344.04 $ 86,778.67
---------------------------------------------------------------------------
---------------------------------------------------------------------------
PREMISES B
---------------------------------------------------------------------------
Annual Rate Annual Monthly
Period Per Square Foot Base Rent Base Rent
---------------------------------------------------------------------------
5/22/2000 - 5/31/2000 $47.00 $ 725,115.96 $ 19,492.40
---------------------------------------------------------------------------
6/1/2000 - 4/30/2003 $47.00 $ 725,115.96 $ 60,426.33
---------------------------------------------------------------------------
5/1/2003 - 4/30/2005 $49.00 $ 755,972.04 $ 62,997.67
---------------------------------------------------------------------------
5/1/2005 - 6/30/2008 $53.00 $ 817,683.96 $ 68,140.33
---------------------------------------------------------------------------
---------------------------------------------------------------------------
PREMISES C
---------------------------------------------------------------------------
Annual Rate Annual Monthly
Period Per Square Foot Base Rent Base Rent
---------------------------------------------------------------------------
6/19/2000 - 6/30/2000 $47.00 $1,990,638.00 $ 66,354.60
---------------------------------------------------------------------------
7/1/2000 - 4/30/2003 $47.00 $1,990,638.00 $165,886.50
---------------------------------------------------------------------------
5/1/2003 - 4/30/2005 $49.00 $2,075,346.00 $172,945.50
---------------------------------------------------------------------------
5/1/2005 - 6/30/2008 $53.00 $2,244,762.00 $187,063.50
---------------------------------------------------------------------------
Landlord and Tenant acknowledge that the foregoing schedules are based on
the Premises A Term (as hereinafter defined) commencing on May 1, 2000, the
Premises B Term (as hereinafter defined) commencing on May 22, 2000, and
the Premises C Term (as hereinafter defined) commencing on June 19, 2000.
In the event the Premises A Term commences on a date other than May 1,
2000, the Premises B Term commences on a date other then May 22, 2000, or
the Premises C Term commences on a date other than June 19, 2000, the
foregoing schedule(s) shall be recalculated, as applicable, to reflect the
modified commencement date(s).
Landlord and Tenant further acknowledge that the foregoing schedules are
based upon the assumption that the Premises shall contain a total of 77,430
square feet of Rentable Square Footage. In the event that the Premises
contain other than 77,430 square feet of Rentable Square Footage as a
result of a remeasurement of the Premises by Landlord's architect as
provided in Section I.C. above, the foregoing schedules shall be
recalculated based upon the actual Rentable Square Footage of the Premises,
and upon such determination of the Rentable Square Footage of the Premises,
Landlord and Tenant shall promptly enter into an amendment to this Lease to
modify (i) the total Rentable Square Footage of the Premises, (ii) the
Rentable Square Footage of the Building (to reflect any change in the
Rentable Square Footage of the Building as a result of a remeasurement of
the Building by Landlord's architect as provided in Section I.C. above),
(iii) the amount of the monthly installments of Base Rent
2
<PAGE>
payable by Tenant with respect to the Premises, (iv) the amount of the
Allowance, if any, and (v) any other matters which are affected by a
change in the Rentable Square Footage of the Premises.
E. "Tenant's Pro Rata Share": 9.7370% for Premises A; 7.6457% for
Premises B; and 20.9895% for Premises C. The Tenant's Pro Rata Share
for the entire Premises is 38.3722%. As used herein, "Tenant's Pro
Rata Share" shall mean, from time to time, the combined Tenant's Pro
Rata Share for Premises A, Premises B and Premises C to the extent the
Premises A Commencement Date (as hereinafter defined), Premises B
Commencement Date (as hereinafter defined) and Premises C Commencement
Date (as hereinafter defined) has occurred.
F. "Base Year" for Taxes: 2000; "Base Year" for Expenses: 2000.
G. "Term": With respect to Premises A, a period of 98 months; with
respect to Premises B, a period of 97 months and 10 days; and with
respect to Premises C, a period of 96 months and 12 days. The
"Premises A Term" shall commence on May 1, 2000 ("Premises A
Commencement Date") and end on the Termination Date (as hereinafter
defined). The "Premises B Term" shall commence on May 22, 2000
("Premises B Commencement Date") and end on the Termination Date. The
"Premises C Term" shall commence on June 19, 2000 ("Premises C
Commencement Date") and end on the Termination Date. The Premises A
Commencement Date, the Premises B Commencement Date and the Premises C
Commencement Date are individually referred to herein as a
"Commencement Date". Unless terminated early in accordance with this
Lease, the Premises A Term, the Premises B Term and the Premises C
Term shall end on June 30, 2008 (the "Termination Date"). However, if
Landlord is required to Substantially Complete (defined in Section
III.A) any Landlord Work (defined in Section I.O.) in Premises A,
Premises B or Premises C prior to the Premises A Commencement Date,
Premises B Commencement Date or Premises C Commencement Date, as the
case may be, under the terms of a Work Letter (defined in Section
I.O): (1) the dates set forth above as the Premises A Commencement
Date, Premises B Commencement Date and Premises C Commencement Date,
as the case may be, shall instead be defined as the "Target Premises A
Commencement Date", "Target Premises B Commencement Date" and "Target
Premises C Commencement Date", respectively, by which date Landlord
will use reasonable efforts to Substantially Complete the applicable
Landlord Work; and (2) the actual Premises A Commencement Date,
Premises B Commencement Date and Premises C Commencement Date, as the
case may be, shall be the date on which the Landlord Work is
Substantially Complete in Premises A, Premises B and Premises C,
respectively, as determined by Section III.A. In such circumstances,
the Termination Date will instead be 96 months after the last to occur
of the Premises A Commencement Date, Premises B Commencement Date and
Premises C Commencement Date. Landlord's failure to Substantially
Complete the Landlord Work by the applicable Target Commencement Date
shall not be a default by Landlord or otherwise render Landlord liable
for damages. Promptly after the determination of the last to occur of
the Premises A Commencement Date, Premises B Commencement Date and
Premises C Commencement Date, Landlord and Tenant shall enter into a
commencement letter agreement in the form attached as Exhibit C.
H. Tenant allowance(s): $36.50 per rentable square foot of the Premises,
as more fully set forth on Exhibit D.
I. "Security Deposit" shall mean $3,000,000.00 in the form of a letter of
credit, as more fully described in Article VI.
J. "Guarantor(s)": As of the date of this Lease, there are no Guarantors.
K. "Broker(s)": Cushman & Wakefield of California, Inc.
L. "Permitted Use": General office use which shall include software
development, training and demonstrations.
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M. "Notice Addresses":
Tenant:
Prior to the Premises A Commencement Date, notices shall be sent to
Tenant at the following address:
TenFold Corporation
180 West Election Road
Suite 100
Draper, Utah 84020
Attn: General Counsel
Phone #: (801) 495-1010
Fax #: (801) 495-0353
On and after the Commencement Date, notices shall be sent to Tenant at
the Premises with copies to:
TenFold Corporation and TenFold Corporation
180 West Election Road 100 Foster City Boulevard
Suite 100 Suite 200
Draper, Utah 84020 Foster City, California 94404
Attn: General Counsel Attn: Lease Administrator
Phone #: (801) 495-1010 Phone #: (650) 570-5711
Fax #: (801) 495-0353 Fax #: (650) 570-5988
If any additional person listed above fails to receive the copy of the
notice of Tenant default, the validity of the notice served on Tenant
shall not be affected thereby.
Landlord: With a copy to:
EOP-150 California Street, L.L.C. Equity Office Properties Trust
c/o Equity Office Properties Trust Two North Riverside Plaza
150 California Street Suite 2200
San Francisco, California 94104 Chicago, Illinois 60606
Attention: Building Manager Attention: Regional Counsel -
Pacific Region
Rent (defined in Section IV.A) is payable to the order of Equity
Office Properties at the following address: TO BE DETERMINED.
N. "Business Day(s)" are Monday through Friday of each week, exclusive of
New Year's Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day ("Holidays"). Landlord may
designate additional Holidays, provided that the additional Holidays
are commonly recognized by other Class A office buildings in the area
where the Building is located.
O. "Landlord Work" means the work, if any, that Landlord is obligated to
perform in the Premises pursuant to a separate work letter agreement
(the "Work Letter"), if any, attached as Exhibit D. If a Work Letter
is not attached to this Lease or if an attached Work Letter does not
require Landlord to perform any work, the occurrence of the
Commencement Date shall not be conditioned upon the performance of
work by Landlord and, accordingly, Section III.A. shall not be
applicable to the determination of the Commencement Date.
P. "Law(s)" means all applicable statutes, codes, ordinances, orders,
rules and regulations of any municipal or governmental entity.
Q. "Normal Business Hours" for the Building are 7:00 a.m. to 6:30 p.m. on
Business Days.
R. "Property" means the Building and the parcel(s) of land on which it is
located and, at Landlord's discretion, the Building garage and other
improvements serving the Building, if any, and the parcel(s) of land
on which they are located.
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II. Lease Grant.
Landlord leases the Premises to Tenant and Tenant leases the Premises from
Landlord, together with the right in common with others to use any portions of
the Property that are designated by Landlord for the common use of tenants and
others, such as sidewalks, unreserved parking areas, common corridors, elevator
foyers, restrooms, vending areas and lobby areas (the "Common Areas").
III. Adjustment of Commencement Date; Possession.
A. The Landlord Work with respect to Premises A shall be deemed to be
"Substantially Complete" on the later of (i) the date that all
Landlord Work for Premises A has been performed other than any details
of construction, mechanical adjustment or any other similar matter,
the noncompletion of which does not materially interfere with Tenant's
use of Premises A, or (ii) the date Landlord receives (or would have
received absent any Tenant Delays) all governmental approvals which
are required to obtain a temporary or permanent certificate of
occupancy for the Building and/or Premises A (as required) from the
local governmental authority. The Landlord Work with respect to
Premises B shall be deemed to be "Substantially Complete" on the later
of (i) the date that all Landlord Work for Premises B has been
performed other than any details of construction, mechanical
adjustment or any other similar matter, the noncompletion of which
does not materially interfere with Tenant's use of Premises B, or (ii)
the date Landlord receives (or would have received absent any Tenant
Delays) all governmental approvals which are required to obtain a
temporary or permanent certificate of occupancy for the Building
and/or Premises B (as required) from the local governmental authority.
The Landlord Work with respect to Premises C shall be deemed to be
"Substantially Complete" on the later of (i) the date that all
Landlord Work for Premises C has been performed other than any details
of construction, mechanical adjustment or any other similar matter,
the noncompletion of which does not materially interfere with Tenant's
use of Premises C, or (ii) the date Landlord receives (or would have
received absent any Tenant Delays) all governmental approvals which
are required to obtain a temporary or permanent certificate of
occupancy for the Building and/or Premises C (as required) from the
local governmental authority. However, if Landlord is delayed in the
performance of the Landlord Work as a result of any Tenant Delay(s)
(defined below), the Landlord Work for Premises A, Premises B and
Premises C, as the case may be, shall be deemed to be Substantially
Complete on the date that Landlord could reasonably have been expected
to Substantially Complete the applicable Landlord Work absent any
Tenant Delay. "Tenant Delay" means any act or omission of Tenant or
its agents, employees, vendors or contractors that actually delays the
Substantial Completion of the applicable Landlord Work, including,
without limitation: (1) Tenant's failure to furnish information or
approvals within any time period specified in this Lease, including
the failure to prepare or approve preliminary or final plans by any
applicable due date; (2) Tenant's selection of equipment or materials
that have long lead times after first being informed by Landlord that
the selection may result in a delay; (3) changes requested or made by
Tenant to previously approved plans and specifications; (4)
performance of work in the Premises by Tenant or Tenant's
contractor(s) during the performance of the Landlord Work; or (5) if
the performance of any portion of the Landlord Work depends on the
prior or simultaneous performance of work by Tenant, a delay by Tenant
or Tenant's contractor(s) in the completion of such work.
If the Premises A Commencement Date, the Premises B Commencement Date
or the Premises C Commencement Date does not occur by December 31,
2000 (or such later date as the Premises A Commencement Date, Premises
B Commencement Date or Premises C Commencement Date may be extended
due to Tenant Delays and events of Force Majeure) (the "Outside
Completion Date"), Landlord or Tenant, as their sole remedy, may
terminate this Lease with respect to the applicable portion of the
Premises (i.e. Premises A, Premises B or Premises C) the Term of which
has not commenced as of the Outside Completion Date (the "Terminated
Premises"), by giving the other party written notice of termination on
or before 10 Business Days after the Outside Completion
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Date. In such event, the termination of this Lease with respect to the
Terminated Premises shall be effective as of the date of the non-
terminating party's receipt of such notice of termination. In the
event that either Tenant or Landlord has so provided the termination
notice, this Lease shall be deemed null and void and of no further
force and effect with respect to the Terminated Premises and Landlord
shall promptly refund any prepaid rent and Security Deposit previously
advanced by Tenant under this Lease with respect to the Terminated
Premises and, so long as Tenant has not previously defaulted under any
of its obligations under the Work Letter beyond any applicable notice
and cure period, the parties hereto shall have no further
responsibilities or obligations to each other with respect to the
Terminated Premises under this Lease. Landlord and Tenant acknowledge
and agree that the determination of the Premises A Commencement Date,
Premises B Commencement Date, Premises C Commencement Date and the
Outside Completion Date shall take into consideration the effect of
any Tenant Delays, and any events of Force Majeure. Notwithstanding
anything herein to the contrary, if Landlord determines, that it will
be unable to cause the Premises A Commencement Date, Premises B
Commencement Date or Premises C Commencement Date to occur by the
Outside Completion Date, Landlord shall have the right to immediately
cease its performance of the Landlord Work with respect to such
applicable portion of the Premises and provide Tenant with written
notice (the "Outside Extension Notice") of such inability, which
Outside Extension Notice shall set forth the date on which Landlord
reasonably believes that the Premises A Commencement Date, Premises B
Commencement Date or Premises C Commencement Date, as applicable, will
occur. Upon receipt of the Outside Extension Notice, Tenant shall have
the right to terminate this Lease with respect to such applicable
portion of the Premises by providing written notice of termination to
Landlord within 10 Business Days after the date of Tenant's receipt of
the Outside Extension Notice. In the event Tenant so provides a
written notice of termination, this Lease shall terminate with respect
to such applicable portion of the Premises effective as of the date of
Landlord's receipt of Tenant's notice of termination. In the event
that Tenant does not terminate this Lease with respect to such
applicable portion of the Premises within such 10 Business Day period,
the Outside Completion Date with respect to such applicable portion of
the Premises shall automatically be amended to be the date set forth
in Landlord's Outside Extension Notice (subject to an ongoing right of
the parties hereto to repeat this process in the event Tenant does not
so terminate this Lease and Landlord subsequently determines that
Landlord will be unable to cause the applicable Commencement Date to
occur by the Outside Completion Date as extended).
B. Subject to Landlord's obligation, if any, to perform Landlord Work and
Landlord's obligations under Section IX.B., the Premises are accepted
by Tenant in "as is" condition and configuration. By taking possession
of the Premises, Tenant agrees that the Premises are in good order and
satisfactory condition, and that there are no representations or
warranties by Landlord regarding the condition of the Premises or the
Building. If Landlord is delayed delivering possession of the
Premises or any other space due to the holdover or unlawful possession
of such space by any party, Landlord shall use reasonable efforts to
obtain possession of the space. Tenant's acceptance of the Premises
shall be subject to Landlord's obligation to correct portions of the
Landlord Work as set forth on a construction punch list prepared by
Landlord and Tenant in accordance with the terms hereof. Within 15
days after the substantial completion of the Landlord Work with
respect to each of Premises A, Premises B and Premises C, Landlord and
Tenant shall together conduct an inspection of Premises A, Premises B
or Premises C, as applicable, and prepare a "punch list" setting forth
any portions of the Landlord Work that are not in conformity with the
Landlord Work as required by the terms of this Lease. Notwithstanding
the foregoing, at the request of Landlord, such construction punch
list shall be mutually prepared and executed by Landlord and Tenant
prior to the date on which Tenant first begins to move its furniture,
equipment or other personal property into Premises A, Premises B or
Premises C, as applicable. Landlord, as part of the Landlord Work,
shall use good faith efforts to correct all such items within a
reasonable time following the completion of the punch list.
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C. If Tenant takes possession of Premises A before the Premises A
Commencement Date, Premises B before the Premises B Commencement Date
or Premises C before the Premises C Commencement Date, such possession
shall be subject to the terms and conditions of this Lease and Tenant
shall pay Rent (defined in Section IV.A.) to Landlord for each day of
possession before the applicable Commencement Date. However, except
for the cost of services requested by Tenant or necessitated by
Tenant's early entry (e.g. extra security personnel), Tenant shall not
be required to pay Rent for any days of possession before the
applicable Commencement Date during which Tenant, with the approval of
Landlord, is in possession of the Premises for the sole purpose of
performing improvements or installing furniture, equipment or other
personal property. Landlord shall use its reasonable efforts to
provide Tenant with prior notice in the event Landlord shall charge
Tenant for any such services. In order to accommodate the completion
of the installation of Tenant's cabling, telephone equipment and
Tenant's furniture, fixtures and equipment by each applicable
Commencement Date, Landlord shall use its good faith efforts to allow
Tenant to enter the Premises prior to substantial completion of the
Landlord Work in the Premises for such purposes, provided that any
such early entry by Tenant shall not interfere with Landlord's
completion of the Landlord Work, the construction of the Building or
the construction of improvements to any other tenant's space in the
Building. Tenant's contractor(s) shall coordinate their early entry
so as not to interfere with the Landlord Work in the Premises or the
other construction work in the Building. However, the foregoing shall
not be deemed to be a representation or guaranty by Landlord that
Tenant shall be permitted access to the Premises prior to any
applicable Commencement Date and Landlord may terminate Tenant's right
of entry into the Premises prior to any applicable Commencement Date
at any time without any liability to Tenant for any loss or damage
incurred by Tenant as a result thereof in the event Landlord
reasonably determines that Tenant's continued presence in the Premises
will materially interfere with the Landlord Work in the Premises or
any other construction work in the Building.
IV. Rent.
A. Payments. As consideration for this Lease, Tenant shall pay Landlord,
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without any setoff or deduction, the total amount of Base Rent and
Additional Rent due for the Term. "Additional Rent" means all sums
(exclusive of Base Rent) that Tenant is required to pay Landlord.
Additional Rent and Base Rent are sometimes collectively referred to
as "Rent". Tenant shall pay and be liable for all rental, sales and
use taxes (but excluding income taxes), if any, imposed upon or
measured by Rent under applicable Law. Base Rent and recurring
monthly charges of Additional Rent shall be due and payable in advance
on the first day of each calendar month without notice or demand,
provided that the installment of Base Rent for the first full calendar
month of the Term shall be payable upon the execution of this Lease by
Tenant. All other items of Rent shall be due and payable by Tenant 30
days after billing by Landlord. All payments of Rent shall be by good
and sufficient check or, at Tenant's election, by other means (such as
automatic debit or electronic transfer) acceptable to Landlord. If
Tenant fails to pay any item or installment of Rent when due, Tenant
shall pay Landlord an administration fee equal to 5% of the past due
Rent, provided that Tenant shall be entitled to a grace period of 5
Business Days for the first 2 late payments of Rent in a given
calendar year. If the Term commences on a day other than the first day
of a calendar month or terminates on a day other than the last day of
a calendar month, the monthly Base Rent and Tenant's Pro Rata Share of
any Tax Excess (defined in Section IV.B.) or Expense Excess (defined
in Section IV.B.) for the month shall be prorated based on the number
of days in such calendar month. Landlord's acceptance of less than
the correct amount of Rent shall be considered a payment on account of
the earliest Rent due. No endorsement or statement on a check or
letter accompanying a check or payment shall be considered an accord
and satisfaction, and either party may accept the check or payment
without prejudice to that party's right to recover the balance or
pursue other available remedies. Tenant's covenant to pay Rent is
independent of every other covenant in this Lease.
B. Expense Excess and Tax Excess. Tenant shall pay Tenant's Pro Rata
------------------------------
Share of the amount, if any, by which Expenses (defined in Section
IV.C.) for each
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calendar year during the Term exceed Expenses for the Base Year (the
"Expense Excess") and also the amount, if any, by which Taxes (defined
in Section IV.D.) for each calendar year during the Term exceed Taxes
for the Base Year (the "Tax Excess"). If Expenses and/or Taxes in any
calendar year decrease below the amount of Expenses and/or Taxes for
the Base Year, Tenant's Pro Rata Share of Expenses and/or Taxes, as
the case may be, for that calendar year shall be $0. Landlord shall
provide Tenant with a good faith estimate of the Expense Excess and of
the Tax Excess for each calendar year during the Term. On or before
the first day of each month, Tenant shall pay to Landlord a monthly
installment equal to one-twelfth of Tenant's Pro Rata Share of
Landlord's estimate of the Expense Excess and one-twelfth of Tenant's
Pro Rata Share of Landlord's estimate of the Tax Excess. If Landlord
determines that its good faith estimate of the Expense Excess or of
the Tax Excess was incorrect by a material amount, Landlord may
provide Tenant with a revised estimate. After its receipt of the
revised estimate, Tenant's monthly payments shall be based upon the
revised estimate. If Landlord does not provide Tenant with an estimate
of the Expense Excess or of the Tax Excess by January 1 of a calendar
year, Tenant shall continue to pay monthly installments based on the
previous year's estimate(s) until Landlord provides Tenant with the
new estimate. Upon delivery of the new estimate, an adjustment shall
be made for any month for which Tenant paid monthly installments based
on the previous year's estimate(s). Tenant shall pay Landlord the
amount of any underpayment within 30 days after receipt of the new
estimate. Any overpayment shall be refunded to Tenant within 30 days
or credited against the next due future installment(s) of Additional
Rent.
As soon as is practical following the end of each calendar year,
Landlord shall furnish Tenant with a statement of the actual Expenses
and Expense Excess and the actual Taxes and Tax Excess for the prior
calendar year. Landlord shall use reasonable efforts to furnish the
statement of actual Expenses on or before June 1 of the calendar year
immediately following the calendar year to which the statement
applies. If the estimated Expense Excess and/or estimated Tax Excess
for the prior calendar year is more than the actual Expense Excess
and/or actual Tax Excess, as the case may be, for the prior calendar
year, Landlord shall apply any overpayment by Tenant against
Additional Rent due or next becoming due, provided if the Term expires
before the determination of the overpayment, Landlord shall promptly
refund any overpayment to Tenant after first deducting the amount of
Rent due. If the estimated Expense Excess and/or estimated Tax Excess
for the prior calendar year is less than the actual Expense Excess
and/or actual Tax Excess, as the case may be, for such prior year,
Tenant shall pay Landlord, within 30 days after its receipt of the
statement of Expenses and/or Taxes, any underpayment for the prior
calendar year.
C. Expenses Defined. "Expenses" means all costs and expenses incurred in
----------------
each calendar year in connection with operating, maintaining,
repairing, and managing the Building and the Property, including, but
not limited to:
1. Labor costs, including, wages, salaries, social security and
employment taxes, medical and other types of insurance, uniforms,
training, and retirement and pension plans.
2. Management fees, the cost of equipping and maintaining a
management office, accounting and bookkeeping services, legal
fees not attributable to leasing or collection activity, and
other administrative costs. Landlord, by itself or through an
affiliate, shall have the right to directly perform or provide
any services under this Lease (including management services),
provided that the cost of any such services shall not exceed the
cost that would have been incurred had Landlord entered into an
arms-length contract for such services with an unaffiliated
entity of comparable skill and experience.
3. The cost of services, including amounts paid to service providers
and the rental and purchase cost of parts, supplies, tools and
equipment.
4. Premiums and deductibles paid by Landlord for insurance,
including workers compensation, fire and extended coverage,
earthquake, general
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liability, rental loss, elevator, boiler and other insurance
customarily carried from time to time by owners of comparable
Class A office buildings.
5. Electrical Costs (defined below) and charges for water, gas,
steam and sewer, but excluding those charges for which Landlord
is reimbursed by tenants. "Electrical Costs" means: (a) charges
paid by Landlord for electricity; (b) costs incurred in
connection with an energy management program for the Property;
and (c) if and to the extent permitted by Law, a fee for the
services provided by Landlord in connection with the selection of
utility companies and the negotiation and administration of
contracts for electricity, provided that such fee shall not
exceed 50% of any savings obtained by Landlord, and further
provided that in no event shall Tenant pay more for electricity
as a result of Landlord's negotiation and administration of
contracts for electricity than Tenant would have paid had
Landlord not negotiated and administered such contracts for
electricity. Electrical Costs shall be adjusted as follows: (i)
amounts received by Landlord as reimbursement for above standard
electrical consumption shall be deducted from Electrical Costs;
(ii) the cost of electricity incurred to provide overtime HVAC to
specific tenants (as reasonably estimated by Landlord) shall be
deducted from Electrical Costs; and (iii) if Tenant is billed
directly for the cost of building standard electricity to the
Premises as a separate charge in addition to Base Rent, the cost
of electricity to individual tenant spaces in the Building shall
be deducted from Electrical Costs.
6. The amortized cost of capital improvements (as distinguished from
replacement parts or components installed in the ordinary course
of business) made to the Property which are: (a) performed
primarily to reduce operating expense costs or otherwise improve
the operating efficiency of the Property; or (b) required to
comply with any Laws that are enacted, or first interpreted to
apply to the Property, after the date of this Lease. The cost of
capital improvements shall be amortized by Landlord over the
lesser of the Payback Period (defined below) or 5 years. The
amortized cost of capital improvements may, at Landlord's
option, include actual or imputed interest at the rate that
Landlord would reasonably be required to pay to finance the cost
of the capital improvement. "Payback Period" means the
reasonably estimated period of time that it takes for the cost
savings resulting from a capital improvement to equal the total
cost of the capital improvement.
If Landlord incurs Expenses for the Property together with one or more
other buildings or properties, whether pursuant to a reciprocal
easement agreement, common area agreement or otherwise, the shared
costs and expenses shall be equitably prorated and apportioned between
the Property and the other buildings or properties. Expenses shall
not include: the cost of capital improvements (except as set forth
above); depreciation; interest (except as provided above for the
amortization of capital improvements); principal payments of mortgage
and other non-operating debts of Landlord; ground lease rental; the
cost of repairs or other work to the extent Landlord is reimbursed by
insurance or condemnation proceeds; costs in connection with leasing
space in the Building, including brokerage commissions; lease
concessions, including rental abatements and construction allowances,
granted to specific tenants; costs incurred in connection with the
sale, financing or refinancing of the Building; fines, interest and
penalties incurred due to the late payment of Taxes (defined in
Section IV.D) or Expenses; organizational expenses associated with the
creation and operation of the entity which constitutes Landlord;
reserves not spent by Landlord by the end of the calendar year for
which Expenses are paid; Landlord's costs of electricity and other
services sold or provided to tenants in the Building and for which
Landlord is entitled to be reimbursed by such tenants as a separate
additional charge or rental over and above the base rent or additional
rent payable under the lease with such tenant; costs incurred (less
costs of recovery) for any items to the extent covered by a
manufacturer's, materialman's, vendor's or contractor's warranty (a
"Warranty") which are paid by such manufacturer, materialman, vendor
or contractor (Landlord shall use reasonable efforts to pursue a
warranty claim for
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items covered by a Warranty unless Landlord determines in good faith
that such action would not be in the best interest of the Building);
overhead and profit increment paid to subsidiaries or other affiliates
of Landlord for services on or to the Property, Building and\or
Premises to the extent only that the costs of such services exceed the
competitive cost for such services rendered by persons or entities of
similar skill, competence and experience; attorney's fees, costs and
disbursements and other expenses incurred in connection with
negotiations or disputes with tenants or other occupants of the
Building or with prospective tenants (other than attorney's fees,
costs and disbursements and other expenses incurred by Landlord in
seeking to enforce Building rules and regulations); advertising and
promotional expenditures; any costs, fines or penalties incurred due
to violations by Landlord of any law, order, rule or regulations of
any governmental authority which was in effect (and as enforced) as of
the Lease Commencement Date except where such costs, fines or
penalties are incurred by Landlord for violations of any such law,
order, rule or regulation that is ultimately determined to be invalid,
or inapplicable; payments for rented equipment, the cost of which
would constitute a capital expenditure if the equipment were
purchased, in which event, Section IV.C.6. above would govern the
determination of whether such costs are included in Expenses; all
costs of purchasing or leasing major sculptures, paintings or other
major works or objects of art (as opposed to decorations purchased or
leased by Landlord for display in the Common Areas of the Building);
key man and other life insurance, long-term disability insurance and
health, accident and sickness insurance, except only for group plans
providing reasonable benefits to persons of the grade of building
manager or general manager and below employed and engaged in operating
and managing the Building; or any penalties or damages that Landlord
pays to Tenant under this Lease or to other tenants in the Building
under their respective leases. If the Building is not at least 95%
occupied during any calendar year or if Landlord is not supplying
services to at least 95% of the total Rentable Square Footage of the
Building at any time during a calendar year, Expenses shall, at
Landlord's option, be determined as if the Building had been 95%
occupied and Landlord had been supplying services to 95% of the
Rentable Square Footage of the Building during that calendar year. If
Tenant pays for its Pro Rata Share of Expenses based on increases over
a "Base Year" and Expenses for a calendar year are determined as
provided in the prior sentence, Expenses for the Base Year shall also
be determined as if the Building had been 95% occupied and Landlord
had been supplying services to 95% of the Rentable Square Footage of
the Building. The extrapolation of Expenses under this Section shall
be performed by appropriately adjusting the cost of those components
of Expenses that are impacted by changes in the occupancy of the
Building.
D. Taxes Defined. "Taxes" shall mean: (1) all real estate taxes and
--------------
other assessments on the Building and/or Property, including, but not
limited to, assessments for special improvement districts and building
improvement districts, taxes and assessments levied in substitution or
supplementation in whole or in part of any such taxes and assessments
and the Property's share of any real estate taxes and assessments
under any reciprocal easement agreement, common area agreement or
similar agreement as to the Property; (2) all personal property taxes
for property that is owned by Landlord and used in connection with the
operation, maintenance and repair of the Property; and (3) all costs
and fees incurred in connection with seeking reductions in any tax
liabilities described in (1) and (2), including, without limitation,
any costs incurred by Landlord for compliance, review and appeal of
tax liabilities. Without limitation, Taxes shall not include any
income, capital levy, franchise, capital stock, gift, estate or
inheritance tax. If an assessment is payable in installments, Taxes
for the year shall include the amount of the installment and any
interest due and payable during that year. For all other real estate
taxes, Taxes for that year shall, at Landlord's election, include
either the amount accrued, assessed or otherwise imposed for the year
or the amount due and payable for that year, provided that Landlord's
election shall be applied consistently throughout the Term. If a
change in Taxes is obtained for any year of the Term during which
Tenant paid Tenant's Pro Rata Share of any Tax Excess, then Taxes for
that year will be retroactively adjusted and Landlord shall provide
Tenant with a credit, if any, based on the adjustment. Likewise, if a
change is obtained for Taxes for the Base Year, Taxes for the Base
Year shall be restated and the Tax Excess for all
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subsequent years shall be recomputed. Tenant shall pay Landlord the
amount of Tenant's Pro Rata Share of any such increase in the Tax
Excess within 30 days after Tenant's receipt of a statement from
Landlord.
E. Tenant shall be responsible for, and shall pay prior to delinquency,
taxes or governmental service fees, possessory interest taxes, fees or
charges in lieu of any such taxes, capital levies, or other charges
imposed upon, levied with respect to, or assessed against, its
personal property, and its interest pursuant to this Lease. To the
extent that any such taxes are not separately assessed or billed to
Tenant, Tenant shall pay the amount thereof as invoiced to Tenant by
Landlord prior to the delinquency of such taxes. In the event that
the tenant improvements in the Building which correspond to the
Landlord Work, as defined in this Lease, are assessed and taxed
separately by the applicable taxing authority, then Tenant shall be
liable and shall pay that portion of the Taxes applicable to the value
of the Landlord Work in the Premises which is in excess of $35.00 per
rentable square foot of the Premises based on the value attributed
thereto by the applicable taxing authority to either (a) the
applicable taxing authority prior to the delinquency of such taxes in
the event Tenant is billed directly by such taxing authority, or (b)
the Landlord within 30 days after written demand, in the event
Landlord is billed directly by the applicable taxing authority.
F. Audit Rights. Tenant may, within 180 days after receiving Landlord's
------------
statement of Expenses, give Landlord written notice ("Review Notice")
that Tenant intends to review Landlord's records of the Expenses for
that calendar year. Within a reasonable time after receipt of the
Review Notice, Landlord shall make all pertinent records available for
inspection that are reasonably necessary for Tenant to conduct its
review. If any records are maintained at a location other than the
office of the Building, Tenant may either inspect the records at such
other location or pay for the reasonable cost of copying and shipping
the records. If Tenant retains an agent to review Landlord's records,
the agent must be with a licensed CPA. Tenant shall be solely
responsible for all costs, expenses and fees incurred for the audit.
Within 60 days after the records are made available to Tenant, Tenant
shall have the right to give Landlord written notice (an "Objection
Notice") stating in reasonable detail any objection to Landlord's
statement of Expenses for that year. If Tenant fails to give Landlord
an Objection Notice within the 60 day period or fails to provide
Landlord with a Review Notice within the 180 day period described
above, Tenant shall be deemed to have approved Landlord's statement of
Expenses and shall be barred from raising any claims regarding the
Expenses for that year. If Tenant provides Landlord with a timely
Objection Notice, Landlord and Tenant shall work together in good
faith to resolve any issues raised in Tenant's Objection Notice. If
Landlord and Tenant determine that Expenses for the calendar year are
less than reported, Landlord shall provide Tenant with a credit
against the next installment of Rent in the amount of the overpayment
by Tenant. Likewise, if Landlord and Tenant determine that Expenses
for the calendar year are greater than reported, Tenant shall pay
Landlord the amount of any underpayment within 30 days. In addition,
if Landlord and Tenant determine that Expenses for the Building for
the year in question were less than stated by more than 5%, Landlord,
within 30 days after its receipt of paid invoices therefor from
Tenant, shall reimburse Tenant for any reasonable amounts paid by
Tenant to third parties in connection with such review by Tenant. The
records obtained by Tenant shall be treated as confidential. In no
event shall Tenant be permitted to examine Landlord's records or to
dispute any statement of Expenses unless Tenant has paid and continues
to pay all Rent when due.
V. Compliance with Laws; Use.
The Premises shall be used only for the Permitted Use and for no other use
whatsoever. Tenant shall not use or permit the use of the Premises for any
purpose which is illegal, dangerous to persons or property or which, in
Landlord's reasonable opinion, unreasonably disturbs any other tenants of the
Building or interferes with the operation of the Building. Tenant shall comply
with all Laws, including the Americans with Disabilities Act, regarding the
operation of Tenant's business and the use, condition, configuration and
occupancy of the Premises. Tenant, within 10 Business Days after receipt, shall
provide Landlord with copies of any notices it receives regarding a violation or
alleged violation of any Laws. Except to the extent properly
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included in Expenses, Landlord shall be responsible for the cost of correcting
any violations of Title III of the Americans with Disabilities Act (ADA) with
respect to the Common Areas of the Building. Notwithstanding the foregoing,
Landlord shall have the right to contest any alleged violation in good faith,
including, without limitation, the right to apply for and obtain a waiver or
deferment of compliance, the right to assert any and all defenses allowed by law
and the right to appeal any decisions, judgments or rulings to the fullest
extent permitted by law. Landlord, after the exhaustion of any and all rights to
appeal or contest, will make all repairs, additions, alterations or improvements
necessary to comply with the terms of any final order or judgment. Tenant shall
comply with the rules and regulations of the Building attached as Exhibit B and
such other reasonable rules and regulations adopted by Landlord from time to
time. Tenant shall also cause its agents, contractors, subcontractors,
employees, customers, and subtenants to comply with all rules and regulations.
Landlord shall not knowingly discriminate against Tenant in Landlord's
enforcement of the rules and regulations.
VI. Security Deposit.
A. The Security Deposit shall be in the form of an irrevocable letter of
credit (the "Letter of Credit") which shall: (a) be in the amount of
$3,000,000.00; (b) be issued on the form attached hereto as Exhibit G;
(c) name Landlord as its beneficiary; (d) be drawn on an FDIC insured
financial institution satisfactory to Landlord; and (e) expire no
earlier than 60 days after the Termination Date of this Lease. The
Security Deposit shall be delivered to Landlord within 45 days after
the execution of this Lease by Tenant and shall be held by Landlord
without liability for interest (unless required by Law) as security
for the performance of Tenant's obligations. The Security Deposit is
not an advance payment of Rent or a measure of Tenant's liability for
damages. Landlord may, from time to time, without prejudice to any
other remedy, use all or a portion of the Security Deposit to satisfy
past due Rent or to cure any uncured default by Tenant. If Landlord
uses the Security Deposit, Tenant shall on demand restore the Security
Deposit to its original amount. Landlord shall return any unapplied
portion of the Security Deposit to Tenant within 45 days after the
later to occur of: (1) the determination of Tenant's Pro Rata Share of
any Tax Excess and Expense Excess for the final year of the Term; (2)
the date Tenant surrenders possession of the Premises to Landlord in
accordance with this Lease; or (3) the Termination Date. If Landlord
transfers its interest in the Premises, Landlord may assign the
Security Deposit to the transferee and, following the assignment,
Landlord shall have no further liability for the return of the
Security Deposit. Landlord shall not be required to keep the Security
Deposit separate from its other accounts.
B. Notwithstanding anything herein to the contrary, provided (1) Tenant
is not in default under this Lease, and (2) Tenant's then-applicable
current ratio (as determined in accordance with generally acceptable
accounting principles) is greater than or equal to 1.75 and Tenant's
then-applicable return on equity (as determined in accordance with
generally acceptable accounting principles) is greater than or equal
to 13% (the "Benchmarks"), as evidenced by Tenant's audited financial
statements delivered by Tenant to Landlord and prepared by an
independent CPA for the most recent calendar year, Tenant shall have
the right to reduce the amount of the Security Deposit (i.e., the
Letter of Credit) by $375,000.00 on each anniversary of the
Commencement Date that Tenant has successfully met the Benchmarks.
Such reduction shall be accomplished by having Tenant provide Landlord
with a substitute Letter of Credit in the form of the letter of credit
attached hereto as Exhibit G in the reduced amount. Notwithstanding
the foregoing to the contrary, Landlord agrees that Tenant may
extinguish the Letter of Credit in the event Tenant's net equity, as
evidenced by Tenant's audited financial statements delivered by Tenant
to Landlord and prepared by an independent CPA for the most recent
calendar year, is at any time greater than or equal to One Billion
Dollars ($1,000,000,000.00). For purposes of this Article VI,
Tenant's net equity shall be defined to mean the amount determined by
subtracting Tenant's total liabilities from Tenant's total assets.
VII. Services to be Furnished by Landlord.
A. Landlord agrees to furnish Tenant with the following services: (1)
Water and sewer service for use in the lavatories on each floor on
which the Premises are
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located; (2) Heat and air conditioning in season during Normal
Business Hours, at such temperatures and in such amounts as may be
required by governmental authority or as are standard for comparable
high-rise office buildings in the San Francisco Financial District of
a Class A character which are perceived in the marketplace to be
similar to the Property, taking into account the size, age, quality of
construction and location, as such market perception may change over
time, depending upon future development in downtown San Francisco.
Landlord shall provide heating and air conditioning based on the
ASHRAE 55 standards established by the American Society of Heating,
Refrigeration and Air Conditioning Engineers. Tenant, upon such
advance notice as is reasonably required by Landlord, shall have the
right to receive HVAC service during hours other than Normal Business
Hours. Tenant shall pay Landlord the standard charge for the
additional service as reasonably determined by Landlord from time to
time. As of the date hereof, Landlord's charge for after hours
ventilation service is $35.00 per hour, per floor and Landlord's
charge for after hours air conditioning service is $55.00 per hour,
per floor, subject to change; (3) Maintenance and repair of the
Property as described in Section IX.B.; (4) Janitor service on
Business Days. If Tenant's use, floor covering or other improvements
require special services in excess of the standard services for the
Building, Tenant shall pay the additional cost attributable to the
special services. Upon request by Tenant, Landlord shall provide
Tenant with Landlord's then-current janitorial specifications for the
Building, subject to change; (5) Elevator service; (6) Electricity to
the Premises for general office use, in accordance with and subject to
the terms and conditions in Article X; (7) Tenant's allocable share of
cooled condenser water circulating in the Building 24 hours a day, 7
days a week, subject to the terms of this Lease (including, but not
limited to, Landlord's right to interrupt the operation of the cooled
condenser water system from time to time to make repairs, upgrades,
etc., provided that except in the event of an emergency, Landlord
shall use its good faith, reasonable efforts to provide Tenant with
reasonable notice prior to interrupting such cooled condenser water
services); (8) Access to the Building for Tenant and its employees 24
hours a day, 7 days a week, subject to the terms of this Lease and
such security or monitoring systems as Landlord may reasonably impose,
including, without limitation, sign-in procedures and/or presentation
of identification cards; and (9) such other services as Landlord
reasonably determines are necessary or appropriate for the Property.
Tenant expressly acknowledges that if Landlord, from time to time,
elects to provide security services, Landlord shall not be deemed to
have warranted the efficiency of any security personnel, service,
procedures or equipment and Landlord shall not be liable in any manner
for the failure of any such security personnel, services, procedures
or equipment to prevent or control, or apprehend anyone suspected of
personal injury, property damage or any criminal conduct in, on or
around the Property. As of the Commencement Date of the Lease,
Landlord will provide security at the Building on a 24-hour per day,
7-day per week basis such that the security post on the ground floor
of the Building shall be occupied at all times (except in the event of
an emergency). The preceding sentence shall not be deemed to be a
representation by Landlord that Landlord shall continuously maintain
security services at the same level throughout the Term of this Lease
(or that Landlord shall provide any security services at all during
the Term of this Lease), and Landlord shall have the right, at
Landlord's sole discretion, to increase, decrease, eliminate or
otherwise modify the amount and/or type of security services provided
to the Property, provided that the level of security provided by
Landlord at the Building shall be consistent with the level of
security provided at comparable Class A buildings in the downtown San
Francisco, California area. The cost of any security services provided
by Landlord for the benefit of the Property shall be included as a
part of Expenses.
B. Landlord's failure to furnish, or any interruption or termination of,
services due to the application of Laws, the failure of any equipment,
the performance of repairs, improvements or alterations, or the
occurrence of any event or cause beyond the reasonable control of
Landlord (a "Service Failure") shall not render Landlord liable to
Tenant, constitute a constructive eviction of Tenant, give rise to an
abatement of Rent, nor relieve Tenant from the obligation to fulfill
any covenant or agreement. However, if the Premises, or a material
portion of the Premises, is made untenantable for a period in excess
of 3 consecutive Business Days as a
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result of the Service Failure, then Tenant, as its sole remedy, shall
be entitled to receive an abatement of Rent payable hereunder during
the period beginning on the 4th consecutive Business Day of the
Service Failure and ending on the day the service has been restored.
If the entire Premises has not been rendered untenantable by the
Service Failure, the amount of abatement that Tenant is entitled to
receive shall be prorated based upon the percentage of the Premises
rendered untenantable and not used by Tenant. In no event, however,
shall Landlord be liable to Tenant for any loss or damage, including
the theft of Tenant's Property (defined in Article XV), arising out of
or in connection with the failure of any security services, personnel
or equipment.
VIII. Leasehold Improvements.
All improvements to the Premises (collectively, "Leasehold Improvements")
shall be owned by Landlord and shall remain upon the Premises without
compensation to Tenant. However, Landlord, by written notice to Tenant within 30
days prior to the Termination Date, may require Tenant to remove, at Tenant's
expense: (1) Cable (defined in Section IX.A) installed by or for the exclusive
benefit of Tenant and located in the Premises or other portions of the Building;
and (2) any Leasehold Improvements that are performed by or for the benefit of
Tenant and, in Landlord's reasonable judgment, are of a nature that would
require removal and repair costs that are materially in excess of the removal
and repair costs associated with standard office improvements (collectively
referred to as "Required Removables"). Without limitation, it is agreed that
Required Removables include internal stairways, raised floors, personal baths
and showers, vaults, rolling file systems and structural alterations and
modifications of any type. The Required Removables designated by Landlord shall
be removed by Tenant before the Termination Date, provided that upon prior
written notice to Landlord, Tenant may remain in the Premises for up to 5
Business Days after the Termination Date for the sole purpose of removing the
Required Removables. In addition to the foregoing, in the event Tenant elects to
reallocate the condenser water among the floors of the Premises as permitted
pursuant to Exhibit D-1 attached hereto, then in the event of (i) the
termination of this Lease, (ii) a reduction or partial termination of all or a
part of the Premises, or (iii) a sublease of all or a part of the Premises,
Landlord may require Tenant, at Tenant's sole cost and expense, to reallocate
the condenser water so that each floor receives its proper pro rata share of
chilled water. Any such work required by Landlord shall also be deemed to be a
Required Removable for purposes of this Lease and, in the case of a reduction or
partial termination of all or a part of the Premises, or of a sublease, such
required work shall be performed by Tenant prior to the effective date of such
reduction, partial termination or sublease. Tenant's possession of the Premises
shall be subject to all of the terms and conditions of this Lease, including the
obligation to pay Rent on a per diem basis at the rate in effect for the last
month of the Term. Tenant shall repair damage caused by the installation or
removal of Required Removables. If Tenant fails to remove any Required
Removables or perform related repairs in a timely manner, Landlord, at Tenant's
expense, may remove and dispose of the Required Removables and perform the
required repairs. Tenant, within 30 days after receipt of an invoice, shall
reimburse Landlord for the reasonable costs incurred by Landlord.
Notwithstanding the foregoing, Tenant, at the time it requests approval for a
proposed Alteration (defined in Section IX.C), or at the time it delivers the
final approved Plans for the Landlord Work to Landlord, may request in writing
that Landlord advise Tenant whether the Alteration or the Landlord Work, as the
case may be, or any portion of the Alteration or the Landlord Work, as the case
may be, will be designated as a Required Removable. Within 10 Business Days
after receipt of Tenant's request, Landlord shall advise Tenant in writing as to
which portions of the Alteration or the Landlord Work, as the case may be, if
any, will be considered to be Required Removables.
IX. Repairs and Alterations.
A. Tenant's Repair Obligations. Tenant shall, at its sole cost and
---------------------------
expense, promptly perform all maintenance and repairs to the Premises
that are not Landlord's express responsibility under this Lease, and
shall keep the Premises in good condition and repair, reasonable wear
and tear excepted. Tenant's repair obligations include, without
limitation, repairs to: (1) floor covering; (2) interior partitions;
(3) doors; (4) the interior side of demising walls; (5) electronic,
phone and data cabling and related equipment (collectively, "Cable")
that is installed by or for the exclusive benefit of Tenant and
located in the Premises or other portions of the Building; (6)
supplemental air conditioning units, private showers and kitchens,
including hot water heaters, plumbing, and similar facilities serving
Tenant exclusively; and (7) Alterations performed by contractors
retained by
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Tenant, including related HVAC balancing. All work shall be performed
in accordance with the rules and procedures described in Section IX.C.
below. If Tenant fails to make any repairs to the Premises for more
than 15 Business Days after notice from Landlord (although notice
shall not be required if there is an emergency), Landlord may make the
repairs, and Tenant shall pay the reasonable cost of the repairs to
Landlord within 30 days after receipt of an invoice, together with an
administrative charge in an amount equal to 10% of the cost of the
repairs.
B. Landlord's Repair Obligations. Landlord shall keep and maintain in
------------------------------
good repair and working order and make repairs to and perform
maintenance upon: (1) structural elements of the Building; (2)
mechanical (including HVAC and condenser water system), electrical,
plumbing, security (if any) and fire/life safety systems serving the
Building in general; (3) Common Areas; (4) the roof of the Building;
(5) exterior windows of the Building; and (6) elevators serving the
Building. Landlord shall promptly make repairs (considering the nature
and urgency of the repair) for which Landlord is responsible. If
Tenant's use, or if Tenant's non-building standard improvements
(including but not limited to any ambient lighting installed by or for
the benefit of Tenant) require extra maintenance or repair services in
excess of the standard maintenance or repair services provided by
Landlord for the Building, Tenant shall pay the additional costs
attributable to such above-standard services.
C. Alterations. Tenant shall not make alterations, additions or
------------
improvements to the Premises or install any Cable in the Premises or
other portions of the Building (collectively referred to as
"Alterations") without first obtaining the written consent of Landlord
in each instance, which consent shall not be unreasonably withheld,
conditioned or delayed. However, Landlord's consent shall not be
required for any Alteration that satisfies all of the following
criteria (a "Cosmetic Alteration"): (1) is of a cosmetic nature such
as painting, wallpapering, hanging pictures and installing carpeting;
(2) is not visible from the exterior of the Premises or Building; (3)
will not affect the systems or structure of the Building; and (4) does
not require work to be performed inside the walls or above the ceiling
of the Premises. However, even though consent is not required, the
performance of Cosmetic Alterations shall be subject to all the other
provisions of this Section IX.C. Prior to starting work, Tenant shall
furnish Landlord with plans and specifications reasonably acceptable
to Landlord; names of contractors reasonably acceptable to Landlord
(provided that Landlord may designate specific contractors with
respect to Building systems); copies of contracts; necessary permits
and approvals; evidence of contractor's and subcontractor's insurance
in amounts reasonably required by Landlord; and any security for
performance that is reasonably required by Landlord. Changes to the
plans and specifications must also be submitted to Landlord for its
approval. Alterations shall be constructed in a good and workmanlike
manner using materials of a quality that is at least equal to the
quality designated by Landlord as the minimum standard for the
Building. Landlord may designate reasonable rules, regulations and
procedures for the performance of work in the Building and, to the
extent reasonably necessary to avoid disruption to the occupants of
the Building, shall have the right to designate the time when
Alterations may be performed. Tenant shall reimburse Landlord within
30 days after receipt of an invoice for reasonable sums paid by
Landlord for third party examination of Tenant's plans for non-
Cosmetic Alterations. In addition, within 30 days after receipt of an
invoice from Landlord, Tenant shall pay Landlord a fee for Landlord's
oversight and coordination of any non-Cosmetic Alterations equal to 7%
of the cost of the non-Cosmetic Alterations. Upon completion, Tenant
shall furnish "as-built" plans (except for Cosmetic Alterations),
completion affidavits, full and final waivers of lien in recordable
form, and receipted bills covering all labor and materials. Tenant
shall assure that the Alterations comply with all insurance
requirements and Laws. Landlord's approval of an Alteration shall not
be a representation by Landlord that the Alteration complies with
applicable Laws or will be adequate for Tenant's use.
X. Use of Electrical Services by Tenant.
A. Electricity used by Tenant in the Premises shall, at Landlord's
option, be paid for by Tenant either: (1) through inclusion in
Expenses (except as provided in
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Section X.B. for excess usage); (2) by a separate charge payable by
Tenant to Landlord within 30 days after billing by Landlord; or (3) by
separate charge billed by the applicable utility company and payable
directly by Tenant. Electrical service to the Premises may be
furnished by one or more companies providing electrical generation,
transmission and distribution services, and the cost of electricity
may consist of several different components or separate charges for
such services, such as generation, distribution and stranded cost
charges. Landlord shall have the exclusive right to select any company
providing electrical service to the Premises, to aggregate the
electrical service for the Property and Premises with other buildings,
to purchase electricity through a broker and/or buyers group and to
change the providers and manner of purchasing electricity. Landlord
shall be entitled to receive a fee (if permitted by Law) for the
selection of utility companies and the negotiation and administration
of contracts for electricity, provided that the amount of such fee
shall not exceed 50% of any savings obtained by Landlord, and further
provided that in no event shall Tenant pay more for electricity as a
result of Landlord's negotiation and administration of contracts for
electricity than Tenant would have paid had Landlord not negotiated
and administered such contracts for electricity.
B. Tenant's use of electrical service shall not exceed, either in
voltage, rated capacity or overall load, that which Landlord deems to
be standard for the Building. Standard electrical use for the Building
is deemed to be 1 kilowatt hour per rentable square foot, per month,
including lighting. If Tenant requests permission to consume excess
electrical service, Landlord may refuse to consent or may condition
consent upon conditions that Landlord reasonably elects (including,
without limitation, the installation of utility service upgrades,
meters, submeters, air handlers or cooling units), and the additional
usage (to the extent permitted by Law), installation and maintenance
costs shall be paid by Tenant. Landlord shall have the right to
separately meter electrical usage for the Premises and to measure
electrical usage by survey or other commonly accepted methods.
XI. Entry by Landlord.
Landlord, its agents, contractors and representatives may enter the
Premises to inspect or show the Premises, to clean and make repairs, alterations
or additions to the Premises, and to conduct or facilitate repairs, alterations
or additions to any portion of the Building, including other tenants' premises.
Except in emergencies or to provide janitorial and other Building services after
Normal Business Hours, Tenant shall have the right to have a representative of
Tenant accompany Landlord during Landlord's entry into the Premises. Except in
emergencies or to provide janitorial and other Building services after Normal
Business Hours, Landlord shall provide Tenant with reasonable prior notice of
entry into the Premises, which may be given orally. If reasonably necessary for
the protection and safety of Tenant and its employees, Landlord shall have the
right to temporarily close all or a portion of the Premises to perform repairs,
alterations and additions. However, except in emergencies, Landlord will not
close the Premises if the work can reasonably be completed on weekends and after
Normal Business Hours. Entry by Landlord shall not constitute constructive
eviction or entitle Tenant to an abatement or reduction of Rent.
Notwithstanding the foregoing, except in emergency situations as determined by
Landlord, Landlord shall exercise reasonable efforts to perform any entry into
the Premises in a manner that is reasonably designed to minimize interference
with the operation of Tenant's business in the Premises.
XII. Assignment and Subletting.
A. Except in connection with a Permitted Transfer (defined in Section
XII.E. below), Tenant shall not assign, sublease, transfer or encumber
any interest in this Lease or allow any third party to use any portion
of the Premises (collectively or individually, a "Transfer") without
the prior written consent of Landlord, which consent shall not be
unreasonably withheld, conditioned or delayed if Landlord does not
elect to exercise its termination rights under Section XII.B below.
Without limitation, it is agreed that Landlord's consent shall not be
considered unreasonably withheld if: (1) the proposed transferee's
financial condition does not meet the criteria Landlord uses to select
Building tenants having similar leasehold obligations; (2) the
proposed transferee's business is not suitable for the Building
considering the business of the other tenants and the Building's
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prestige, or would result in a violation of another tenant's pre-
existing rights; (3) the proposed transferee is a governmental agency
or occupant of the Building (provided that Landlord will not withhold
its consent solely because the transferee is a government agency if
the Transfer would not impose any additional obligations on Landlord
or result in an excessive amount of foot traffic to and from the
Premises or an excessive amount of people per square foot within the
Premises); (4) Tenant is in default after the expiration of the notice
and cure periods in this Lease; or (5) any portion of the Building or
Premises would likely become subject to additional or different Laws
as a consequence of the proposed Transfer. Notwithstanding the
foregoing, Landlord will not withhold its consent solely because the
proposed subtenant or assignee is an occupant of the Building if
Landlord does not have space available for lease in the Building that
is comparable to the space Tenant desires to sublet or assign. For
purposes hereof, Landlord shall be deemed to have comparable space if
it has space available on any floor of the Building that is
approximately the same size as the space Tenant desires to sublet or
assign within six (6) months of the proposed commencement of the
proposed sublease or assignment. Tenant shall not be entitled to
receive monetary damages based upon a claim that Landlord unreasonably
withheld its consent to a proposed Transfer and Tenant's sole remedy
shall be an action to enforce any such provision through specific
performance or declaratory judgment. Any attempted Transfer in
violation of this Article shall, at Landlord's option, be void.
Consent by Landlord to one or more Transfer(s) shall not operate as a
waiver of Landlord's rights to approve any subsequent Transfers. In no
event shall any Transfer or Permitted Transfer release or relieve
Tenant from any obligation under this Lease.
B. As part of its request for Landlord's consent to a Transfer, Tenant
shall provide Landlord with financial statements for the proposed
transferee, a complete copy of the proposed assignment, sublease and
other contractual documents and such other information as Landlord may
reasonably request. Landlord shall, by written notice to Tenant
within 30 days of its receipt of the required information and
documentation, either: (1) consent to the Transfer by the execution of
a consent agreement in a form reasonably designated by Landlord or
reasonably refuse to consent to the Transfer in writing; or (2) in the
case of (i) an assignment of this Lease, or (ii) a subletting which
would (a) result in 75% or more of the Premises in the aggregate being
sublet for any portion of the Term of this Lease, and/or (b) result in
the sublease of all or a portion of the Premises for more than 75% of
the then remaining Term of this Lease, exercise its right to terminate
this Lease with respect to the portion of the Premises that Tenant is
proposing to assign or sublet. Any such termination shall be
effective on the proposed effective date of the Transfer for which
Tenant requested consent. Tenant shall pay Landlord a review fee of
$750.00 for Landlord's review of any Permitted Transfer or requested
Transfer, provided if Landlord's actual reasonable costs and expenses
(including reasonable attorney's fees) exceed $750.00, Tenant shall
reimburse Landlord for its actual reasonable costs and expenses in
lieu of a fixed review fee.
C. Tenant shall pay Landlord 65% of all rent and other consideration
which Tenant receives as a result of a Transfer that is in excess of
the Rent payable to Landlord for the portion of the Premises and Term
covered by the Transfer. Tenant shall pay Landlord for Landlord's
share of any excess within 30 days after Tenant's receipt of such
excess consideration. Tenant may deduct from the excess all
reasonable and customary expenses directly incurred by Tenant
attributable to the Transfer (other than Landlord's review fee),
including brokerage fees, legal fees and construction costs. If
Tenant is in Monetary Default (defined in Section XIX.A. below),
Landlord may require that all sublease payments be made directly to
Landlord, in which case Tenant shall receive a credit against Rent in
the amount of any payments received (less Landlord's share of any
excess).
D. Except as provided below with respect to a Permitted Transfer, if
Tenant is a corporation, limited liability company, partnership, or
similar entity, and if the entity which owns or controls a majority of
the voting shares/rights at any time changes for any reason (including
but not limited to a merger, consolidation or reorganization), such
change of ownership or control shall constitute a Transfer. The
foregoing shall not apply so long as Tenant is an entity whose
outstanding
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stock is listed on a recognized security exchange, or if at least 80%
of its voting stock is owned by another entity, the voting stock of
which is so listed.
E. Tenant may assign its entire interest under this Lease to a successor
to Tenant by purchase, merger, consolidation or reorganization without
the consent of Landlord, provided that all of the following conditions
are satisfied (a "Permitted Transfer"): (1) Tenant is not in default
under this Lease; (2) Tenant's successor shall own all or
substantially all of the assets of Tenant; (3) Tenant's successor
shall have a net worth which is at least equal to the greater of
Tenant's net worth at the date of this Lease or Tenant's net worth as
of the day prior to the proposed purchase, merger, consolidation or
reorganization; (4) the Permitted Use does not allow the Premises to
be used for retail purposes; and (5) Tenant shall give Landlord
written notice at least 30 days prior to the effective date of the
proposed purchase, merger, consolidation or reorganization. Tenant's
notice to Landlord shall include information and documentation showing
that each of the above conditions has been satisfied. If requested by
Landlord, Tenant's successor shall sign a commercially reasonable form
of assumption agreement.
XIII. Liens.
Tenant shall not permit mechanic's or other liens to be placed upon the
Property, Premises or Tenant's leasehold interest in connection with any work or
service done or purportedly done by or for benefit of Tenant. If a lien is so
placed, Tenant shall, within 10 Business Days of notice from Landlord of the
filing of the lien, fully discharge the lien by settling the claim which
resulted in the lien or by bonding or insuring over the lien in the manner
prescribed by the applicable lien Law. If Tenant fails to discharge the lien,
then, in addition to any other right or remedy of Landlord, Landlord may bond or
insure over the lien or otherwise discharge the lien. Tenant shall reimburse
Landlord for any amount paid by Landlord to bond or insure over the lien or
discharge the lien, including, without limitation, reasonable attorneys' fees
(if and to the extent permitted by Law) within 30 days after receipt of an
invoice from Landlord.
XIV. Indemnity and Waiver of Claims.
A. Except to the extent caused by the negligence or willful misconduct of
Landlord or any Landlord Related Parties (defined below), Tenant shall
indemnify, defend and hold Landlord, its trustees, members,
principals, beneficiaries, partners, officers, directors, employees,
Mortgagee(s) (defined in Article XXVI) and agents ("Landlord Related
Parties") harmless against and from all liabilities, obligations,
damages, penalties, claims, actions, costs, charges and expenses,
including, without limitation, reasonable attorneys' fees and other
professional fees (if and to the extent permitted by Law), which may
be imposed upon, incurred by or asserted against Landlord or any of
the Landlord Related Parties and arising out of or in connection with
any damage or injury occurring in the Premises or any acts or
omissions (including violations of Law) of Tenant, the Tenant Related
Parties (defined below) or any of Tenant's transferees, contractors or
licensees.
B. Except to the extent caused by the negligence or willful misconduct of
Tenant or any Tenant Related Parties (defined below), Landlord shall
indemnify, defend and hold Tenant, its trustees, members, principals,
beneficiaries, partners, officers, directors, employees and agents
("Tenant Related Parties") harmless against and from all liabilities,
obligations, damages, penalties, claims, actions, costs, charges and
expenses, including, without limitation, reasonable attorneys' fees
and other professional fees (if and to the extent permitted by Law),
which may be imposed upon, incurred by or asserted against Tenant or
any of the Tenant Related Parties and arising out of or in connection
with the acts or omissions (including violations of Law) of Landlord,
the Landlord Related Parties or any of Landlord's contractors.
C. Landlord and the Landlord Related Parties shall not be liable for, and
Tenant waives, all claims for loss or damage to Tenant's business or
loss, theft or damage to Tenant's Property or the property of any
person claiming by, through or under Tenant resulting from: (1) wind
or weather; (2) the failure of any sprinkler, heating or air-
conditioning equipment, any electric wiring or any gas, water or steam
pipes; (3) the backing up of any sewer pipe or downspout; (4) the
bursting, leaking or running of any tank, water closet, drain or other
pipe;
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(5) water, snow or ice upon or coming through the roof, skylight,
stairs, doorways, windows, walks or any other place upon or near the
Building; (6) any act or omission of any party other than Landlord or
Landlord Related Parties; and (7) any causes not reasonably within the
control of Landlord. Tenant shall insure itself against such losses
under Article XV below. Notwithstanding the foregoing, except as
provided in Article XVI to the contrary, Tenant shall not be required
to waive any claims against Landlord (other than for loss or damage to
Tenant's business) where such loss or damage is due to Landlord's
negligence. Nothing herein shall be construed as to diminish the
repair and maintenance obligations of Landlord contained elsewhere in
this Lease.
XV. Insurance.
Tenant shall carry and maintain the following insurance ("Tenant's
Insurance"), at its sole cost and expense: (1) Commercial General Liability
Insurance applicable to the Premises and its appurtenances providing, on an
occurrence basis, a minimum combined single limit of $2,000,000.00; (2) All Risk
Property/Business Interruption Insurance, including flood and earthquake,
written at replacement cost value and with a replacement cost endorsement
covering all of Tenant's trade fixtures, equipment, furniture and other personal
property within the Premises ("Tenant's Property"); (3) Workers' Compensation
Insurance as required by the state in which the Premises is located and in
amounts as may be required by applicable statute; and (4) Employers Liability
Coverage of at least $1,000,000.00 per occurrence. Any company writing any of
Tenant's Insurance shall have an A.M. Best rating of not less than A-VIII. All
Commercial General Liability Insurance policies shall name Tenant as a named
insured and Landlord (or any successor), Equity Office Properties Trust, a
Maryland real estate investment trust, EOP Operating Limited Partnership, a
Delaware limited partnership, and their respective members, principals,
beneficiaries, partners, officers, directors, employees, and agents, and other
designees of Landlord as the interest of such designees shall appear, as
additional insureds. All policies of Tenant's Insurance shall contain
endorsements that the insurer(s) shall give Landlord and its designees at least
30 days' advance written notice of any change, cancellation, termination or
lapse of insurance. Tenant shall provide Landlord with a certificate of
insurance evidencing Tenant's Insurance prior to the earlier to occur of the
Commencement Date or the date Tenant is provided with possession of the Premises
for any reason, and upon renewals at least 15 days prior to the expiration of
the insurance coverage. So long as the same is available at commercially
reasonable rates, Landlord shall maintain so called All Risk property insurance
on the Building at replacement cost value, as reasonably estimated by Landlord.
Except as specifically provided to the contrary, the limits of either party's'
insurance shall not limit such party's liability under this Lease.
XVI. Subrogation.
Notwithstanding anything in this Lease to the contrary, Landlord and
Tenant hereby waive and shall cause their respective insurance carriers to waive
any and all rights of recovery, claim, action or causes of action against the
other and their respective trustees, principals, beneficiaries, partners,
officers, directors, agents, and employees, for any loss or damage that may
occur to Landlord or Tenant or any party claiming by, through or under Landlord
or Tenant, as the case may be, with respect to Tenant's Property, the Building,
the Premises, any additions or improvements to the Building or Premises, or any
contents thereof, including all rights of recovery, claims, actions or causes of
action arising out of the negligence of Landlord or any Landlord Related Parties
or the negligence of Tenant or any Tenant Related Parties, which loss or damage
is (or would have been, had the insurance required by this Lease been carried)
covered by insurance.
XVII. Casualty Damage.
A. If all or any part of the Premises is damaged by fire or other
casualty, Tenant shall immediately notify Landlord in writing. During
any period of time that all or a material portion of the Premises is
rendered untenantable as a result of a fire or other casualty, the
Rent shall abate for the portion of the Premises that is untenantable
and not used by Tenant. Landlord shall have the right to terminate
this Lease if: (1) the Building shall be damaged so that, in
Landlord's reasonable judgment, substantial alteration or
reconstruction of the Building shall be required (whether or not the
Premises has been damaged); (2) Landlord is not permitted by Law to
rebuild the Building in substantially the same form as existed before
the fire or casualty; (3) the Premises have been materially damaged
and there is less
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than 2 years of the Term remaining on the date of the casualty; (4)
any Mortgagee requires that the insurance proceeds be applied to the
payment of the mortgage debt; or (5) a material uninsured loss to the
Building occurs. Landlord may exercise its right to terminate this
Lease by notifying Tenant in writing within 90 days after the date of
the casualty. If Landlord does not terminate this Lease, Landlord
shall commence and proceed with reasonable diligence to repair and
restore the Building and the Leasehold Improvements (excluding any
Alterations that were performed by Tenant in violation of this Lease).
However, in no event shall Landlord be required to spend more than the
insurance proceeds received by Landlord. Landlord shall not be liable
for any loss or damage to Tenant's Property or to the business of
Tenant resulting in any way from the fire or other casualty or from
the repair and restoration of the damage. Landlord and Tenant hereby
waive the provisions of any Law relating to the matters addressed in
this Article, and agree that their respective rights for damage to or
destruction of the Premises shall be those specifically provided in
this Lease.
B. If all or any portion of the Premises shall be made untenantable by
fire or other casualty, Landlord shall, with reasonable promptness,
cause an architect or general contractor selected by Landlord to
provide Landlord and Tenant with a written estimate of the amount of
time required to substantially complete the repair and restoration of
the Premises (excluding any Alterations that were performed by Tenant
in violation of this Lease) to substantially the condition which
existed prior to such casualty and make the Premises tenantable again,
using standard working methods ("Completion Estimate"). If the
Completion Estimate indicates that the Premises cannot be made
tenantable within 240 days from the date the repair and restoration is
started, then regardless of anything in Section XVII.A above to the
contrary, either party shall have the right to terminate this Lease by
giving written notice to the other of such election within 10 Business
Days after receipt of the Completion Estimate. Tenant, however, shall
not have the right to terminate this Lease if the fire or casualty was
caused by the negligence or intentional misconduct of Tenant, Tenant
Related Parties or any of Tenant's transferees, contractors or
licensees.
XVIII. Condemnation.
Either party may terminate this Lease if the whole or any material part
of the Premises shall be taken or condemned for any public or quasi-public use
under Law, by eminent domain or private purchase in lieu thereof (a "Taking").
Landlord shall also have the right to terminate this Lease if there is a Taking
of any portion of the Building or Property which would leave the remainder of
the Building unsuitable for use as an office building in a manner comparable to
the Building's use prior to the Taking. In order to exercise its right to
terminate the Lease, Landlord or Tenant, as the case may be, must provide
written notice of termination to the other within 45 days after the terminating
party first receives notice of the Taking. Any such termination shall be
effective as of the date the physical taking of the Premises or the portion of
the Building or Property occurs. If this Lease is not terminated, the Rentable
Square Footage of the Building, the Rentable Square Footage of the Premises and
Tenant's Pro Rata Share shall, if applicable, be appropriately adjusted. In
addition, Rent for any portion of the Premises taken or condemned shall be
abated during the unexpired Term of this Lease effective when the physical
taking of the portion of the Premises occurs. All compensation awarded for a
Taking, or sale proceeds, shall be the property of Landlord, any right to
receive compensation or proceeds being expressly waived by Tenant. However,
Tenant may file a separate claim at its sole cost and expense for Tenant's
Property and Tenant's reasonable relocation expenses, provided the filing of the
claim does not diminish the award which would otherwise be receivable by
Landlord.
XIX. Events of Default.
Tenant shall be considered to be in default of this Lease upon the
occurrence of any of the following events of default:
A. Tenant's failure to pay when due all or any portion of the Rent, if
the failure continues for 5 Business Days after written notice to
Tenant ("Monetary Default").
B. Tenant's failure (other than a Monetary Default) to comply with any
term, provision or covenant of this Lease, if the failure is not cured
within 10 Business Days after written notice to Tenant. However, if
Tenant's failure to comply cannot
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reasonably be cured within 10 Business Days, Tenant shall be allowed
additional time (not to exceed 60 days) as is reasonably necessary to
cure the failure so long as: (1) Tenant commences to cure the failure
within 10 Business Days, and (2) Tenant diligently pursues a course of
action that will cure the failure and bring Tenant back into
compliance with the Lease. However, if Tenant's failure to comply
creates a hazardous condition, the failure must be cured immediately
upon notice to Tenant. In addition, if Landlord provides Tenant with
notice of Tenant's failure to comply with any particular term,
provision or covenant of the Lease on 3 occasions during any 12 month
period, Tenant's subsequent violation of such term, provision or
covenant shall, at Landlord's option, be an incurable event of default
by Tenant.
C. Tenant or any Guarantor becomes insolvent, makes a transfer in fraud
of creditors or makes an assignment for the benefit of creditors, or
admits in writing its inability to pay its debts when due.
D. The leasehold estate is taken by process or operation of Law.
E Tenant is in default beyond any notice and cure period under any other
lease or agreement with Landlord, including, without limitation, any
lease or agreement for parking.
XX. Remedies.
A. Upon the occurrence of any event or events of default under this
Lease, whether enumerated in Article XIX or not, Landlord shall have
the option to pursue any one or more of the following remedies without
any notice (except as expressly prescribed herein) or demand
whatsoever (and without limiting the generality of the foregoing,
Tenant hereby specifically waives notice and demand for payment of
Rent or other obligations and waives any and all other notices or
demand requirements imposed by applicable law):
1. Terminate this Lease and Tenant's right to possession of the
Premises and recover from Tenant an award of damages equal to the
sum of the following:
(a) The Worth at the Time of Award of the unpaid Rent which had
been earned at the time of termination;
(b) The Worth at the Time of Award of the amount by which the
unpaid Rent which would have been earned after termination
until the time of award exceeds the amount of such Rent loss
that Tenant affirmatively proves could have been reasonably
avoided;
(c) The Worth at the Time of Award of the amount by which the
unpaid Rent for the balance of the Term after the time of
award exceeds the amount of such Rent loss that Tenant
affirmatively proves could be reasonably avoided;
(d) Any other amount necessary to compensate Landlord for all
the detriment either 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; and
(e) All such other amounts in addition to or in lieu of the
foregoing as may be permitted from time to time under
applicable law.
The "Worth at the Time of Award" of the amounts referred to in
parts (a) and (b) above, shall be computed by allowing interest
at the lesser of a per annum rate equal to: (i) the greatest per
annum rate of interest permitted from time to time under
applicable law, or (ii) the Prime Rate plus four percent (4%).
For purposes hereof, the "Prime Rate" shall be the per annum
interest rate publicly announced as its prime or base rate by a
federally insured bank selected by Landlord in the State of
California. The "Worth at the Time of Award" of the amount
referred to in part (c), above,
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shall be computed by discounting such amount at the discount rate
of the Federal Reserve Bank of San Francisco at the time of award
plus one percent (1%);
2. Employ the remedy described in California Civil Code (S) 1951.4
(Landlord may continue this Lease in effect after Tenant's breach
and abandonment and recover Rent as it becomes due, if Tenant has
the right to sublet or assign, subject only to reasonable
limitations); or
3. Notwithstanding Landlord's exercise of the remedy described in
California Civil Code (S) 1951.4 in respect of an event or events
of default, at such time thereafter as Landlord may elect in
writing, to terminate this Lease and Tenant's right to possession
of the Premises and recover an award of damages as provided above
in Paragraph XX.A.1.
B. The subsequent acceptance of Rent hereunder by Landlord shall not be
deemed to be a waiver of any preceding breach by Tenant of any term,
covenant or condition of this Lease, other than the failure of Tenant
to pay the particular Rent so accepted, regardless of Landlord's
knowledge of such preceding breach at the time of acceptance of such
Rent. No waiver by Landlord of any breach hereof shall be effective
unless such waiver is in writing and signed by Landlord.
C. TENANT HEREBY WAIVES ANY AND ALL RIGHTS CONFERRED BY SECTION 3275 OF
THE CIVIL CODE OF CALIFORNIA AND BY SECTIONS 1174 (C) AND 1179 OF THE
CODE OF CIVIL PROCEDURE OF CALIFORNIA AND ANY AND ALL OTHER LAWS AND
RULES OF LAW FROM TIME TO TIME IN EFFECT DURING THE LEASE TERM
PROVIDING THAT TENANT SHALL HAVE ANY RIGHT TO REDEEM, REINSTATE OR
RESTORE THIS LEASE FOLLOWING ITS TERMINATION BY REASON OF TENANT'S
BREACH. TENANT ALSO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, THE RIGHT TO TRIAL BY JURY IN ANY LITIGATION ARISING OUT OF OR
RELATING TO THIS LEASE.
D. No right or remedy herein conferred upon or reserved to Landlord is
intended to be exclusive of any other right or remedy, and each and
every right and remedy shall be cumulative and in addition to any
other right or remedy given hereunder or now or hereafter existing by
agreement, applicable law or in equity. In addition to other remedies
provided in this Lease, Landlord shall be entitled, to the extent
permitted by applicable law, to injunctive relief, or to a decree
compelling performance of any of the covenants, agreements, conditions
or provisions of this Lease, or to any other remedy allowed to
Landlord at law or in equity. Forbearance by Landlord to enforce one
or more of the remedies herein provided upon an event of default shall
not be deemed or construed to constitute a waiver of such default.
E. This Article XX shall be enforceable to the maximum extent such
enforcement is not prohibited by applicable law, and the
unenforceability of any portion thereof shall not thereby render
unenforceable any other portion.
XXI. Limitation of Liability.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS LEASE, THE
LIABILITY OF LANDLORD (AND OF ANY SUCCESSOR LANDLORD) TO TENANT SHALL BE LIMITED
TO THE INTEREST OF LANDLORD IN THE PROPERTY. TENANT SHALL LOOK SOLELY TO
LANDLORD'S INTEREST IN THE PROPERTY FOR THE RECOVERY OF ANY JUDGMENT OR AWARD
AGAINST LANDLORD. NEITHER LANDLORD NOR ANY LANDLORD RELATED PARTY SHALL BE
PERSONALLY LIABLE FOR ANY JUDGMENT OR DEFICIENCY. BEFORE FILING SUIT FOR AN
ALLEGED DEFAULT BY LANDLORD, TENANT SHALL GIVE LANDLORD AND THE MORTGAGEE(S)
(DEFINED IN ARTICLE XXVI BELOW) WHOM TENANT HAS BEEN NOTIFIED HOLD MORTGAGES
(DEFINED IN ARTICLE XXVI BELOW) ON THE PROPERTY, BUILDING OR PREMISES, NOTICE
AND REASONABLE TIME TO CURE THE ALLEGED DEFAULT.
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XXII. No Waiver.
Either party's failure to declare a default immediately upon its
occurrence, or delay in taking action for a default shall not constitute a
waiver of the default, nor shall it constitute an estoppel. Either party's
failure to enforce its rights for a default shall not constitute a waiver of its
rights regarding any subsequent default. Receipt by Landlord of Tenant's keys
to the Premises shall not constitute an acceptance or surrender of the Premises.
XXIII. Quiet Enjoyment.
Tenant shall, and may peacefully have, hold and enjoy the Premises,
subject to the terms of this Lease, provided Tenant pays the Rent and fully
performs all of its covenants and agreements. This covenant and all other
covenants of Landlord shall be binding upon Landlord and its successors only
during its or their respective periods of ownership of the Building, and shall
not be a personal covenant of Landlord or the Landlord Related Parties.
XXIV. Relocation.
Landlord, at its expense, at any time before or during the Term, may
relocate Tenant from any additional space which may be added to the original
2/nd/, 3/rd/, 4/th/, 5/th/, 6/th/, 7/th/ and 8/th/ floor Premises pursuant to
any options granted pursuant to this Lease or any amendments to this Lease
mutually agreed to by Landlord and Tenant (the "Additional Spaces") to
reasonably comparable space ("Relocation Space") within the Building or adjacent
buildings within the same project upon 60 days' prior written notice to Tenant.
From and after the date of the relocation, "Premises" shall refer to the
Relocation Space into which Tenant has been moved and the Base Rent and Tenant's
Pro Rata Share shall be adjusted based on the rentable square footage of the
Relocation Space. Landlord shall pay Tenant's reasonable costs for moving
Tenant's furniture and equipment and printing and distributing notices to
Tenant's customers of Tenant's change of address and one month's supply of
stationery showing the new address.
XXV. Holding Over.
Except for any permitted occupancy by Tenant under Article VIII, if
Tenant fails to surrender the Premises at the expiration or earlier termination
of this Lease, occupancy of the Premises after the termination or expiration
shall be that of a tenancy at sufferance. Tenant's occupancy of the Premises
during the holdover shall be subject to all the terms and provisions of this
Lease and Tenant shall pay an amount (on a per month basis without reduction for
partial months during the holdover) equal to 125% of the greater of: (1) the sum
of the Base Rent and Additional Rent due for the period immediately preceding
the holdover; or (2) the fair market gross rental for the Premises as reasonably
determined by Landlord. Notwithstanding the foregoing, if such holding over
continues for more than 30 days, effective as of the 31/st/ day, holdover rent
shall increase to 150% of the greater of: (a) the sum of the Base Rent and
Additional Rent due for the period immediately preceding the holdover; or (b)
the fair market gross rental for the Premises as reasonably determined by
Landlord. No holdover by Tenant or payment by Tenant after the expiration or
early termination of this Lease shall be construed to extend the Term or prevent
Landlord from immediate recovery of possession of the Premises by summary
proceedings or otherwise. In addition to the payment of the amounts provided
above, if Landlord is unable to deliver possession of the Premises to a new
tenant, or to perform improvements for a new tenant, as a result of Tenant's
holdover and Tenant fails to vacate the Premises within 30 days after Landlord
notifies Tenant of Landlord's inability to deliver possession, or perform
improvements, Tenant shall be liable to Landlord for all damages, including,
without limitation, consequential damages, that Landlord suffers from the
holdover.
XXVI. Subordination to Mortgages; Estoppel Certificate.
Tenant accepts this Lease subject and subordinate to any mortgage(s),
deed(s) of trust, ground lease(s) or other lien(s) now or subsequently arising
upon the Premises, the Building or the Property, and to renewals, modifications,
refinancings and extensions thereof (collectively referred to as a "Mortgage").
The party having the benefit of a Mortgage shall be referred to as a
"Mortgagee". This clause shall be self-operative, but upon request from a
Mortgagee, Tenant shall execute a commercially reasonable subordination
agreement in favor of the Mortgagee. In lieu of having the Mortgage be superior
to this Lease, a Mortgagee shall have the right at any time to subordinate its
Mortgage to this Lease. If requested by a successor-in-interest to all or a
part of Landlord's interest in the Lease, Tenant shall, without charge, attorn
to the successor-in-interest. Landlord and Tenant shall each, within 10 days
after receipt of a written request from
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the other, execute and deliver an estoppel certificate to those parties as are
reasonably requested by the other (including a Mortgagee or prospective
purchaser). The estoppel certificate shall include a statement certifying that
this Lease is unmodified (except as identified in the estoppel certificate) and
in full force and effect, describing the dates to which Rent and other charges
have been paid, representing that, to such party's actual knowledge, there is no
default (or stating the nature of the alleged default) and indicating other
matters with respect to the Lease that may reasonably be requested.
Notwithstanding the foregoing, upon written request by Tenant, Landlord will use
reasonable efforts to obtain a non-disturbance, subordination and attornment
agreement from Landlord's then current Mortgagee on such Mortgagee's then
current standard form of agreement. "Reasonable efforts" of Landlord shall not
require Landlord to incur any cost, expense or liability to obtain such
agreement, it being agreed that Tenant shall be responsible for any fee or
review costs charged by the Mortgagee. Upon request of Landlord, Tenant will
execute the Mortgagee's form of non-disturbance, subordination and attornment
agreement and return the same to Landlord for execution by the Mortgagee.
Landlord's failure to obtain a non-disturbance, subordination and attornment
agreement for Tenant shall have no effect on the rights, obligations and
liabilities of Landlord and Tenant or be considered to be a default by Landlord
hereunder.
XXVII. Attorneys' Fees.
If either party institutes a suit against the other for violation of or
to enforce any covenant or condition of this Lease, or if either party
intervenes in any suit in which the other is a party to enforce or protect its
interest or rights, the prevailing party shall be entitled to all of its costs
and expenses, including, without limitation, reasonable attorneys' fees.
XXVIII. Notice.
If a demand, request, approval, consent or notice (collectively referred
to as a "notice") shall or may be given to either party by the other, the notice
shall be in writing and delivered by hand or sent by registered or certified
mail with return receipt requested, or sent by overnight or same day courier
service at the party's respective Notice Address(es) set forth in Article I,
except that if Tenant has vacated the Premises (or if the Notice Address for
Tenant is other than the Premises, and Tenant has vacated such address) without
providing Landlord a new Notice Address, Landlord may serve notice in any manner
described in this Article or in any other manner permitted by Law. Each notice
shall be deemed to have been received or given on the earlier to occur of actual
delivery or the date on which delivery is refused, or, if Tenant has vacated the
Premises or the other Notice Address of Tenant without providing a new Notice
Address, 3 Business Days after notice is deposited in the U.S. mail or with a
courier service in the manner described above. Either party may, at any time,
change its Notice Address by giving the other party written notice of the new
address in the manner described in this Article.
XXIX. Excepted Rights.
This Lease does not grant any rights to light or air over or about the
Building. Landlord excepts and reserves exclusively to itself the use of: (1)
roofs, (2) telephone, electrical and janitorial closets, (3) equipment rooms,
Building risers or similar areas that are used by Landlord for the provision of
Building services, (4) rights to the land and improvements below the floor of
the Premises, (5) the improvements and air rights above the Premises, (6) the
improvements and air rights outside the demising walls of the Premises, and (7)
the areas within the Premises used for the installation of utility lines and
other installations serving occupants of the Building. Landlord has the right to
change the Building's name or address. Landlord also has the right to make such
other changes to the Property and Building as Landlord deems appropriate,
provided the changes do not materially affect Tenant's ability to use the
Premises for the Permitted Use. Landlord shall also have the right (but not the
obligation) to temporarily close the Building if Landlord reasonably determines
that there is an imminent danger of significant damage to the Building or of
personal injury to Landlord's employees or the occupants of the Building. The
circumstances under which Landlord may temporarily close the Building shall
include, without limitation, electrical interruptions, hurricanes and civil
disturbances. A closure of the Building under such circumstances shall not
constitute a constructive eviction nor entitle Tenant to an abatement or
reduction of Rent.
XXX. Surrender of Premises.
At the expiration or earlier termination of this Lease or Tenant's right
of possession, Tenant shall remove Tenant's Property (defined in Article XV)
from the Premises, and quit and
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surrender the Premises to Landlord, broom clean, and in good order, condition
and repair, ordinary wear and tear excepted. Tenant shall also be required to
remove the Required Removables in accordance with Article VIII. If Tenant fails
to remove any of Tenant's Property within 2 Business Days after the termination
of this Lease or of Tenant's right to possession, Landlord, at Tenant's sole
cost and expense, shall be entitled (but not obligated) to remove and store
Tenant's Property. Landlord shall not be responsible for the value, preservation
or safekeeping of Tenant's Property. Tenant shall pay Landlord, upon demand, the
expenses and storage charges incurred for Tenant's Property. In addition, if
Tenant fails to remove Tenant's Property from the Premises or storage, as the
case may be, within 30 days after written notice, Landlord may deem all or any
part of Tenant's Property to be abandoned, and title to Tenant's Property shall
be deemed to be immediately vested in Landlord.
XXXI. Miscellaneous.
A. This Lease and the rights and obligations of the parties shall be
interpreted, construed and enforced in accordance with the Laws of the
State of California and Landlord and Tenant hereby irrevocably consent
to the jurisdiction and proper venue of such state. If any term or
provision of this Lease shall to any extent be invalid or
unenforceable, the remainder of this Lease shall not be affected, and
each provision of this Lease shall be valid and enforced to the
fullest extent permitted by Law. The headings and titles to the
Articles and Sections of this Lease are for convenience only and shall
have no effect on the interpretation of any part of the Lease.
B. Tenant shall not record this Lease or any memorandum without
Landlord's prior written consent.
C. Landlord and Tenant hereby waive any right to a trial by jury in any
eviction or forcible entry and detainer action or similar proceeding
based upon, or related to, the subject matter of this Lease.
D. Whenever a period of time is prescribed for the taking of an action by
Landlord or Tenant, the period of time for the performance of such
action shall be extended by the number of days that the performance is
actually delayed due to strikes, acts of God, shortages of labor or
materials, war, civil disturbances and other causes beyond the
reasonable control of the performing party ("Force Majeure").
However, events of Force Majeure shall not extend any period of time
for the payment of Rent or other sums payable by either party or any
period of time for the written exercise of an option or right by
either party.
E. Landlord shall have the right to transfer and assign, in whole or in
part, all of its rights and obligations under this Lease and in the
Building and/or Property referred to herein, and upon such transfer
Landlord shall be released from any further obligations hereunder, and
Tenant agrees to look solely to the successor in interest of Landlord
for the performance of such obligations.
F. Tenant represents that it has dealt directly with and only with the
Broker as a broker in connection with this Lease. Tenant shall
indemnify and hold Landlord and the Landlord Related Parties harmless
from all claims of any other brokers claiming to have represented
Tenant in connection with this Lease. Landlord agrees to indemnify
and hold Tenant and the Tenant Related Parties harmless from all
claims of any brokers claiming to have represented Landlord in
connection with this Lease.
G. Tenant covenants, warrants and represents that: (1) each individual
executing, attesting and/or delivering this Lease on behalf of Tenant
is authorized to do so on behalf of Tenant; (2) this Lease is binding
upon Tenant; and (3) Tenant is duly organized and legally existing in
the state of its organization and is qualified to do business in the
State of California. If there is more than one Tenant, or if Tenant
is comprised of more than one party or entity, the obligations imposed
upon Tenant shall be joint and several obligations of all the parties
and entities. Notices, payments and agreements given or made by, with
or to any one person or entity shall be deemed to have been given or
made by, with and to all of them.
25
<PAGE>
H. Time is of the essence with respect to Tenant's exercise of any
expansion, renewal or extension rights granted to Tenant. This Lease
shall create only the relationship of landlord and tenant between the
parties, and not a partnership, joint venture or any other
relationship. This Lease and the covenants and conditions in this
Lease shall inure only to the benefit of and be binding only upon
Landlord and Tenant and their permitted successors and assigns.
I. The expiration of the Term, whether by lapse of time or otherwise,
shall not relieve either party of any obligations which accrued prior
to or which may continue to accrue after the expiration or early
termination of this Lease. Without limiting the scope of the prior
sentence, it is agreed that Tenant's obligations under Sections IV.A,
IV.B., VIII, XIV, XX, XXV and XXX shall survive the expiration or
early termination of this Lease.
J. Landlord has delivered a copy of this Lease to Tenant for Tenant's
review only, and the delivery of it does not constitute an offer to
Tenant or an option. This Lease shall not be effective against any
party hereto until an original copy of this Lease has been signed by
both parties and delivered to each party hereto.
K. All understandings and agreements previously made between the parties
are superseded by this Lease, and neither party is relying upon any
warranty, statement or representation not contained in this Lease.
This Lease may be modified only by a written agreement signed by
Landlord and Tenant.
L. Tenant, within 15 Business Days after request, shall provide Landlord
with a current financial statement and such other information as
Landlord may reasonably request in order to create a "business
profile" of Tenant and determine Tenant's ability to fulfill its
obligations under this Lease. Landlord, however, shall not require
Tenant to provide such information unless Landlord is requested to
produce the information in connection with a proposed financing or
sale of the Building. Upon written request by Tenant, Landlord shall
enter into a commercially reasonable confidentiality agreement
covering any confidential information that is disclosed by Tenant.
M. Pursuant to City Planning Code Section 163, the Landlord has entered
into an agreement with the Department of City Planning for the City of
San Francisco, California to provide and implement a Transportation
Management Program for building tenants and to participate in a
program designed to coordinate commute alternatives marketing and
brokerage for greater downtown San Francisco, California employees.
During the Term of this Lease, Landlord agrees to provide
transportation brokerage and commute assistance services to Tenant and
to assist Tenant in meeting the transportation needs of its employees.
Tenant agrees to cooperate with and assist the Landlord's
transportation management coordinator (the "Coordinator"), through
designation of a responsible employee to distribute to Tenant's
employees written materials promoting and encouraging the use of
public transit and/or ridesharing, and distribute and return to the
Coordinator transportation survey questionnaire forms. Tenant may
agree, at its option, to participate in other activities required of
Landlord as incentives for increasing use of public transit and/or
ridesharing by employees in the Building.
XXXII. Entire Agreement.
This Lease and the following exhibits and attachments constitute the
entire agreement between the parties and supersede all prior agreements and
understandings related to the Premises, including all lease proposals, letters
of intent and other documents: Exhibit A-1 (Outline and Location of Premises A),
Exhibit A-2 (Outline and Location of Premises B), Exhibit A-3 (Outline and
Location of Premises C), Exhibit B (Rules and Regulations), Exhibit C
(Commencement Letter), Exhibit D (Work Letter Agreement), Exhibit D-1 (Summary
of Final Plans), Exhibit E (Additional Provisions), Exhibit E-1 (Tenant's Logo),
Exhibit F (Parking Agreement) and Exhibit G (Form of Letter of Credit).
26
<PAGE>
Landlord and Tenant have executed this Lease as of the day and year first
above written.
LANDLORD:
EOP-150 CALIFORNIA STREET, L.L.C., a Delaware
limited liability company
By: EOP Operating Limited Partnership, a Delaware
limited partnership, its sole member
By: Equity Office Properties Trust, a
Maryland real estate investment trust,
its managing general partner
By: /s/ Peter H. Adams
---------------------------------
Name: Peter H. Adams
-------------------------------
Title: Senior Vice President
------------------------------
TENANT:
TENFOLD CORPORATION, a Delaware corporation
By: /s/ Robert P. Hughes
-----------------------------------------
Name: Robert P. Hughes
-----------------------------------------
Title: Chief Financial Officer
----------------------------------------
By: /s/ Gary D. Kennedy
-------------------------------------------
Name: Gary D. Kennedy
-----------------------------------------
Title: President and Chief Executive Officer
----------------------------------------
27
<PAGE>
EXHIBIT A-1
OUTLINE AND LOCATION OF PREMISES A
----------------------------------
This Exhibit is attached to and made a part of the Lease dated as of March
3, 2000, by and between EOP-150 CALIFORNIA STREET, L.L.C., a Delaware limited
liability company ("Landlord") and TENFOLD CORPORATION, a Delaware corporation
("Tenant") for space in the Building located at 150 California Street, San
Francisco, California.
[FLOOR PLAN APPEARS HERE]
Floor 7
[FLOOR PLAN APPEARS HERE]
Floor 8
Page 1 of 3
<PAGE>
EXHIBIT A-2
OUTLINE AND LOCATION OF PREMISES B
----------------------------------
This Exhibit is attached to and made a part of the Lease dated as of March
3, 2000, by and between EOP-150 CALIFORNIA STREET, L.L.C., a Delaware limited
liability company ("Landlord") and TENFOLD CORPORATION, a Delaware corporation
("Tenant") for space in the Building located at 150 California Street, San
Francisco, California.
[FLOOR PLAN APPEARS HERE]
Floor 5
[FLOOR PLAN APPEARS HERE]
Floor 6
Page 2 of 3
<PAGE>
EXHIBIT A-3
OUTLINE AND LOCATION OF PREMISES C
----------------------------------
This Exhibit is attached to and made a part of the Lease dated as of March
3, 2000, by and between EOP-150 CALIFORNIA STREET, L.L.C., a Delaware limited
liability company ("Landlord") and TENFOLD CORPORATION, a Delaware corporation
("Tenant") for space in the Building located at 150 California Street, San
Francisco, California.
[FLOOR PLAN APPEARS HERE]
Floor 2
[FLOOR PLAN APPEARS HERE] [FLOOR PLAN APPEARS HERE]
Floor 3 Floor 4
Page 3 of 3
<PAGE>
EXHIBIT B
BUILDING RULES AND REGULATIONS
------------------------------
The following rules and regulations shall apply, where applicable, to the
Premises, the Building, the parking garage (if any), the Property and the
appurtenances. Capitalized terms have the same meaning as defined in the Lease.
1. Sidewalks, doorways, vestibules, halls, stairways and other similar areas
shall not be obstructed by Tenant or used by Tenant for any purpose other
than ingress and egress to and from the Premises. No rubbish, litter,
trash, or material shall be placed, emptied, or thrown in those areas. At
no time shall Tenant permit Tenant's employees to loiter in Common Areas or
elsewhere about the Building or Property.
2. Plumbing fixtures and appliances shall be used only for the purposes for
which designed, and no sweepings, rubbish, rags or other unsuitable
material shall be thrown or placed in the fixtures or appliances. Damage
resulting to fixtures or appliances by Tenant, its agents, employees or
invitees, shall be paid for by Tenant, and Landlord shall not be
responsible for the damage.
3. No signs, advertisements or notices shall be painted or affixed to windows,
doors or other parts of the Building, except those of such color, size,
style and in such places as are first approved in writing by Landlord. All
tenant identification and suite numbers at the entrance to the Premises
shall be installed by Landlord, at Tenant's cost and expense, using the
standard graphics for the Building. Except in connection with the hanging
of lightweight pictures and wall decorations, no nails, hooks or screws
shall be inserted into any part of the Premises or Building except by the
Building maintenance personnel.
4. Landlord may provide and maintain in the first floor (main lobby) of the
Building an alphabetical directory board or other directory device listing
tenants, and no other directory shall be permitted unless previously
consented to by Landlord in writing.
5. Tenant shall not place any lock(s) on any door in the Premises or Building
without Landlord's prior written consent and Landlord shall have the right
to retain at all times and to use keys to all locks within and into the
Premises. A reasonable number of keys to the locks on the entry doors in
the Premises shall be furnished by Landlord to Tenant at Tenant's cost, and
Tenant shall not make any duplicate keys. All keys shall be returned to
Landlord at the expiration or early termination of this Lease.
6. All contractors, contractor's representatives and installation technicians
performing work in the Building shall be subject to Landlord's prior
approval and shall be required to comply with Landlord's standard rules,
regulations, policies and procedures, which may be revised from time to
time.
7. Movement in or out of the Building of furniture or office equipment, or
dispatch or receipt by Tenant of merchandise or materials requiring the use
of elevators, stairways, lobby areas or loading dock areas, shall be
restricted to hours designated by Landlord. Tenant shall obtain Landlord's
prior approval by providing a detailed listing of the activity. If
approved by Landlord, the activity shall be under the supervision of
Landlord and performed in the manner required by Landlord. Tenant shall
assume all risk for damage to articles moved and injury to any persons
resulting from the activity. If equipment, property, or personnel of
Landlord or of any other party is damaged or injured as a result of or in
connection with the activity, Tenant shall be solely liable for any
resulting damage or loss.
8. Landlord shall have the right to approve the weight, size, or location of
heavy equipment or articles in and about the Premises. Damage to the
Building by the installation, maintenance, operation, existence or removal
of Tenant's Property shall be repaired at Tenant's sole expense.
9. Corridor doors, when not in use, shall be kept closed.
10. Tenant shall not: (1) make or permit any improper, objectionable or
unpleasant noises or odors in the Building, or otherwise interfere in any
way with other tenants or persons having business with them; (2) solicit
business or distribute, or cause to be distributed, in any portion of the
Building, handbills, promotional materials or other advertising; or (3)
conduct or permit other activities in the Building that might, in
Landlord's sole opinion, constitute a nuisance.
<PAGE>
11. No animals, except those assisting handicapped persons, shall be brought
into the Building or kept in or about the Premises.
12. No inflammable, explosive or dangerous fluids or substances shall be used
or kept by Tenant in the Premises, Building or about the Property. Tenant
shall not, without Landlord's prior written consent, use, store, install,
spill, remove, release or dispose of, within or about the Premises or any
other portion of the Property, any asbestos-containing materials or any
solid, liquid or gaseous material now or subsequently considered toxic or
hazardous under the provisions of 42 U.S.C. Section 9601 et seq. or any
other applicable environmental Law which may now or later be in effect.
Tenant shall comply with all Laws pertaining to and governing the use of
these materials by Tenant, and shall remain solely liable for the costs of
abatement and removal.
13. Tenant shall not use or occupy the Premises in any manner or for any
purpose which might injure the reputation or impair the present or future
value of the Premises or the Building. Tenant shall not use, or permit any
part of the Premises to be used, for lodging, sleeping or for any illegal
purpose.
14. Tenant shall not take any action which would violate Landlord's labor
contracts or which would cause a work stoppage, picketing, labor disruption
or dispute, or interfere with Landlord's or any other tenant's or
occupant's business or with the rights and privileges of any person
lawfully in the Building ("Labor Disruption"). Tenant shall take the
actions necessary to resolve the Labor Disruption, and shall have pickets
removed and, at the request of Landlord, immediately terminate any work in
the Premises that gave rise to the Labor Disruption, until Landlord gives
its written consent for the work to resume. Tenant shall have no claim for
damages against Landlord or any of the Landlord Related Parties, nor shall
the Commencement Date of the Term be extended as a result of the above
actions.
15. Tenant shall not install, operate or maintain in the Premises or in any
other area of the Building, electrical equipment that would overload the
electrical system beyond its capacity for proper, efficient and safe
operation as determined solely by Landlord. Tenant shall not furnish
cooling or heating to the Premises, including, without limitation, the use
of electronic or gas heating devices, without Landlord's prior written
consent. Tenant shall not use more than its proportionate share of
telephone lines and other telecommunication facilities available to service
the Building.
16. Tenant shall not operate or permit to be operated a coin or token operated
vending machine or similar device (including, without limitation,
telephones, lockers, toilets, scales, amusement devices and machines for
sale of beverages, foods, candy, cigarettes and other goods), except for
machines for the exclusive use of Tenant's employees.
17. Bicycles and other vehicles are not permitted inside the Building or on the
walkways outside the Building, except in areas designated by Landlord.
18. Landlord may from time to time adopt systems and procedures for the
security and safety of the Building, its occupants, entry, use and
contents. Tenant, its agents, employees, contractors, guests and invitees
shall comply with Landlord's systems and procedures.
19. Landlord shall have the right to prohibit the use of the name of the
Building or any other publicity by Tenant that in Landlord's sole opinion
may impair the reputation of the Building or its desirability. Upon
written notice from Landlord, Tenant shall refrain from and discontinue
such publicity immediately.
20. Tenant shall not canvass, solicit or peddle in or about the Building or the
Property.
21. Neither Tenant nor its agents, employees, contractors, guests or invitees
shall smoke or permit smoking in the Common Areas, unless the Common Areas
have been declared a designated smoking area by Landlord, nor shall the
above parties allow smoke from the Premises to emanate into the Common
Areas or any other part of the Building. Landlord shall have the right to
designate the Building (including the Premises) as a non-smoking building.
<PAGE>
22. Landlord shall have the right to designate and approve standard window
coverings for the Premises and to establish rules to assure that the
Building presents a uniform exterior appearance. Tenant shall ensure, to
the extent reasonably practicable, that window coverings are closed on
windows in the Premises while they are exposed to the direct rays of the
sun.
23. Deliveries to and from the Premises shall be made only at the times, in the
areas and through the entrances and exits designated by Landlord. Tenant
shall not make deliveries to or from the Premises in a manner that might
interfere with the use by any other tenant of its premises or of the Common
Areas, any pedestrian use, or any use which is inconsistent with good
business practice.
24. The work of cleaning personnel shall not be hindered by Tenant after 5:30
p.m., and cleaning work may be done at any time when the offices are
vacant. Windows, doors and fixtures may be cleaned at any time. Tenant
shall provide adequate waste and rubbish receptacles to prevent
unreasonable hardship to the cleaning service.
<PAGE>
EXHIBIT C
COMMENCEMENT LETTER
-------------------
(EXAMPLE)
Date ______________________
Tenant ______________________
Address ______________________
______________________
______________________
Re: Commencement Letter with respect to that certain Lease dated as of
_________, 2000, by and between EOP-150 CALIFORNIA STREET, L.L.C., a
Delaware limited liability company, as Landlord, and TENFOLD CORPORATION, a
Delaware corporation, as Tenant, for 77,430 rentable square feet on the
2/nd/, 3/rd/, 4/th/, 5/th/, 6/th/, 7/th/ and 8/th/ floors of the Building
located at 150 California Street, San Francisco, California.
Dear __________________:
In accordance with the terms and conditions of the above referenced Lease,
Tenant accepts possession of the Premises and agrees:
1. The Premises A Commencement Date of the Lease is ____________________.
2. The Premises B Commencement Date of the Lease is ____________________.
3. The Premises C Commencement Date of the Lease is ___________________.
4. The Termination Date of the Lease is ____________________________.
Please acknowledge your acceptance of possession and agreement to the terms
set forth above by signing all 3 counterparts of this Commencement Letter in the
space provided and returning 2 fully executed counterparts to my attention.
Sincerely,
___________________________________
Property Manager
Agreed and Accepted:
Tenant: ______________________
By: ______________________
Name: ______________________
Title: ______________________
Date: ______________________
<PAGE>
EXHIBIT D
WORK LETTER
-----------
This Exhibit is attached to and made a part of the Lease dated as of March
3, 2000, by and between EOP-150 CALIFORNIA STREET, L.L.C., a Delaware limited
liability company ("Landlord") and TENFOLD CORPORATION, a Delaware corporation
("Tenant") for space in the Building located at 150 California Street, San
Francisco, California.
1. This Work Letter shall set forth the obligations of Landlord and Tenant
with respect to the preparation of the Premises for Tenant's occupancy.
All improvements described in this Work Letter to be constructed in and
upon the Premises by Landlord are hereinafter referred to as the "Landlord
Work." It is agreed that construction of the Landlord Work will be
completed at Tenant's sole cost and expense, subject to the Allowance (as
defined below). Landlord shall enter into a direct contract for the
Landlord Work with Webcor Builders (the "General Contractor"). Landlord's
contract with the General Contractor shall provide that the General
Contractor's combined general conditions, profit and overhead payable in
connection with the Landlord Work shall not exceed, (i) 10% of the total
contract amount payable by Landlord to the General Contractor in the event
the total amount of the contract for the Landlord Work between Landlord and
the General Contractor is greater than $750,000.00 and less than
$2,999,999.99, and (ii) 7% of the total contract amount payable by Landlord
to the General Contractor in the event the total amount of the contract for
the Landlord Work between Landlord and the General Contractor is greater
than $3,000,000.00. Landlord will not charge a separate construction fee
in connection with the initial Landlord Work in the Premises. Landlord
shall not charge the General Contractor for the use of the freight elevator
during the construction of the Landlord Work. The General Contractor will
solicit bids from no less than 3 separate pre-qualified subcontractors
mutually agreed upon by Landlord and Tenant as to each major trade involved
with the Landlord Work; provided, however, Tenant shall have the right to
direct the General Contractor to accept the lowest bid received.
Notwithstanding the foregoing to the contrary, Tenant agrees that Landlord
shall utilize Landlord's building-approved engineering firm and contractors
for all engineering work and for all fire/life safety, electrical,
plumbing, HVAC and mechanical work to be performed in connection with the
construction of the Landlord Work. Landlord's Work shall not include base
building work (the "Base Building Work") which shall be performed by
Landlord at Landlord's sole cost and expense prior to or concurrent with
Landlord's construction of Landlord's Work in the Premises substantially in
accordance with the construction documents prepared by Hellmuth Obata &
Kassabaum, Inc., and designated as M&L Project #6502.00 (the "Final
Plans"), a partial summary of which is set forth on Exhibit D-1 to the
Lease. In the event of a conflict between the Final Plans and the
provisions of Exhibit D-1, the Final Plans will control. In no event shall
the cost of the Base Building Work be applied against or deducted from the
Allowance (as hereinafter defined). Landlord shall have the right to
change the plans and specifications for the Base Building Work from time to
time, provided that Landlord shall not materially reduce the overall
quality of the Base Building Work. Landlord will comply with all
applicable Laws in connection with the construction of the Base Building
Work.
2. Tenant shall be solely responsible for the timely preparation and
submission to Landlord of the final architectural, electrical and
mechanical construction drawings, plans and specifications (called "Plans")
necessary to construct the Landlord Work, which plans shall be subject to
approval by Landlord and Landlord's architect and engineers and shall
comply with their requirements to avoid aesthetic or other conflicts with
the design and function of the balance of the Building. Landlord and
Tenant acknowledge and agree that the Landlord Work shall be performed in
separate phases for each of Premises A, Premises B and Premises C, and that
Tenant shall prepare separate architectural, electrical and mechanical
construction drawings, plans and specifications for each of Premises A,
Premises B and Premises C. Such plans for each of Premises A, Premises B
and Premises C shall be referred to herein as the "Premises A Plans", the
"Premises B Plans" and the "Premises C Plans", respectively, and shall be
collectively referred to herein as the "Plans". Landlord shall advise
Tenant in writing within 5 Business Days after Landlord's receipt of
Tenant's design plans for each of Premises A, Premises B and Premises C, as
applicable, and within 10 Business Days after
<PAGE>
Landlord's receipt of final construction plans for each of Premises A,
Premises B and Premises C, as applicable, if the Landlord disapproves such
design plans or final construction plans. If Landlord disapproves the
applicable design plans or final construction plans, then within 2 Business
Days after Tenant's receipt of such disapproval, Tenant shall cause the
applicable design plans or final construction plans, as the case may be, to
be revised to correct any such problems identified by Landlord that
Landlord may require. Tenant shall be responsible for all elements of the
design of Tenant's plans (including, without limitation, compliance with
law, functionality of design, the structural integrity of the design, the
configuration of the Premises and the placement of Tenant's furniture,
appliances and equipment), and Landlord's approval of Tenant's plans shall
in no event relieve Tenant of the responsibility for such design. Landlord
hereby agrees (subject to Landlord's prior review and approval of the same,
which approval shall not be unreasonably withheld) that (i) Tenant shall
not be required to use or purchase building standard materials (except for
building standard locksets) in connection with the Landlord Work, (ii)
Tenant may install ambient lighting, and (iii) Tenant shall have the right
to remove (or not install) the building standard ceiling grid or acoustical
tiles in the Premises. If requested by Tenant, Landlord's architect will
prepare the Plans necessary for such construction at Tenant's cost. Whether
or not the layout and Plans are prepared with the help (in whole or in
part) of Landlord's architect, Tenant agrees to remain solely responsible
for the timely preparation and submission of the Plans and for all elements
of the design of such Plans and for all costs related thereto. Tenant has
assured itself by direct communication with the architect and engineers
(Landlord's or its own, as the case may be) that (a) the final approved
Premises A Plans can be delivered to Landlord on or before February 18,
2000 (the "Premises A Plans Due Date"), (b) the final approved Premises B
Plans can be delivered to Landlord on or before February 25, 2000 (the
"Premises B Plans Due Date"), and (c) the final approved Premises C Plans
can be delivered to Landlord on or before March 24, 2000 (the "Premises C
Plans Due Date"); provided that Tenant promptly furnishes complete
information concerning its requirements to said architect and engineers as
and when requested by them. The Premises A Plans Due Date, the Premises B
Plans Due Date and the Premises C Plans Due Date are individually referred
to herein as a "Plans Due Date". Tenant covenants and agrees to cause the
final, approved Plans for Premises A, Premises B and Premises C to be
delivered to Landlord on or before each applicable Plans Due Date and to
devote such time as may be necessary in consultation with said architect
and engineers to enable them to complete and submit the Plans for Premises
A, Premises B and Premises C within the required time limit. Time is of the
essence in respect of preparation and submission of Plans by Tenant. In the
event the Plans for Premises A, Premises B or Premises C are not fully
completed and approved by the applicable Plans Due Date, Tenant shall be
responsible for 1 day of Tenant Delay (as defined in the Lease) for each
day during the period beginning on the day following the applicable Plans
Due Date and ending on the date completed Plans for Premises A, Premises B
or Premises C, as the case may be, are approved. (The word "architect" as
used in this Exhibit D shall include an interior designer or space
planner.)
3. In the event Landlord's estimate and/or the actual cost of construction
shall exceed the Allowance, Landlord, prior to commencing any construction
of Landlord Work, shall submit to Tenant a written estimate setting forth
the anticipated cost of the Landlord Work, including but not limited to
labor and materials, contractor's fees and permit fees. Within 3 Business
Days thereafter, Tenant shall either notify Landlord in writing of its
approval of the cost estimate, or specify its objections thereto and any
desired changes to the proposed Landlord Work. In the event Tenant
notifies Landlord of such objections and desired changes, Tenant shall work
with Landlord to reach a mutually acceptable alternative cost estimate.
4 In the event Landlord's estimate and/or the actual cost of construction
shall exceed the Allowance, if any (such amounts exceeding the Allowance
being herein referred to as the "Excess Costs"), Tenant shall pay to
Landlord such Excess Costs, plus any applicable state sales or use tax
thereon within 30 days after presentation of invoice to Tenant. Landlord
shall determine the Excess Costs applicable to each of Premises A, Premises
B and Premises C by determining the total cost of performing the Landlord
Work for each of Premises A,
<PAGE>
Premises B and Premises C, and deducting the allocable share of the
Allowance attributable to Premises A, Premises B and Premises C as provided
in Paragraph 7 below. Landlord agrees not to demand payment of the Excess
Costs attributable to Premises A, Premises B or Premises C until such time
as Landlord reasonably determines that the allocable share of the Allowance
for Premises A, Premises B or Premises C, as the case may be, has nearly
been exhausted toward the performance of the Landlord Work. The statements
of costs submitted to Landlord by Landlord's contractors shall be
conclusive for purposes of determining the actual cost of the items
described therein. The amounts payable by Tenant hereunder constitute Rent
payable pursuant to the Lease, and the failure to timely pay same
constitutes an event of default under the Lease.
5. If Tenant shall request any change, addition or alteration in any of the
Plans after approval by Landlord, Landlord shall have such revisions to the
drawings prepared, and Tenant shall reimburse Landlord for the cost
thereof, plus any applicable state sales or use tax thereon, upon demand.
Promptly upon completion of the revisions, Landlord shall notify Tenant in
writing of the increased cost which will be chargeable to Tenant by reason
of such change, addition or deletion. Tenant, within 2 Business Days,
shall notify Landlord in writing whether it desires to proceed with such
change, addition or deletion. In the absence of such written
authorization, Landlord shall have the option to continue work on the
Premises disregarding the requested change, addition or alteration, or
Landlord may elect to discontinue work on the Premises until it receives
notice of Tenant's decision, in which event Tenant shall be responsible for
any Delay in completion of the Premises resulting therefrom. In the event
such revisions result in a higher estimate of the cost of construction
and/or higher actual construction costs which exceed the Allowance, such
increased estimate or costs shall be deemed Excess Costs pursuant to
Paragraph 4 hereof and Tenant shall pay such Excess Costs, plus any
applicable state sales or use tax thereon, upon demand.
6. Following approval of the Plans and the payment by Tenant of the required
portion of the Excess Costs, if any, Landlord shall cause the Landlord Work
to be constructed substantially in accordance with the approved Plans.
Landlord shall use its reasonable efforts to notify Tenant prior to the
substantial completion of the Landlord Work.
7. Landlord, provided Tenant is not in default, agrees to provide Tenant with
an allowance (the "Allowance") in an amount not to exceed $36.50 per
rentable square foot of the Premises to be applied toward the cost of the
Landlord Work in the Premises. In the event the Allowance shall not be
sufficient to complete the Landlord Work, Tenant shall pay the Excess
Costs, plus any applicable state sales or use tax thereon, as prescribed in
Paragraph 4 above. In the event the Allowance exceeds the cost of Landlord
Work, any remaining Allowance not utilized in connection with the Landlord
Work on or before December 31, 2000 shall accrue to the sole benefit of
Landlord, it being agreed that Tenant shall not be entitled to any credit,
offset, abatement or payment with respect thereto. The Allowance shall be
allocated by Landlord to each of Premises A, Premises B and Premises C such
that each of Premises A, Premises B and Premises C shall receive its pro
rata share of the Allowance based on the ratio of its Rentable Square
Footage to the Rentable Square Footage of the entire Premises.
8. This Exhibit D shall not be deemed applicable to any additional space added
to the original Premises at any time or from time to time, whether by any
options under the Lease or otherwise, or to any portion of the original
Premises or any additions to the Premises in the event of a renewal or
extension of the original Term of this Lease, whether by any options under
the Lease or otherwise, unless expressly so provided in the Lease or any
amendment or supplement to the Lease.
<PAGE>
Landlord and Tenant have executed this exhibit as of the day and year first
above written.
LANDLORD:
EOP-150 CALIFORNIA STREET, L.L.C., a Delaware
limited liability company
By: EOP Operating Limited Partnership, a Delaware
limited partnership, its sole member
By: Equity Office Properties Trust, a Maryland
real estate investment trust, its managing
general partner
By: /s/ Peter H. Adams
----------------------------------
Name: Peter H. Adams
--------------------------------
Title: Senior Vice President
-------------------------------
TENANT:
TENFOLD CORPORATION, a Delaware corporation
By: /s/ Robert P. Hughes
----------------------------------
Name: Robert P. Hughes
--------------------------------
Title: Chief Financial Officer
-------------------------------
By: /s/ Gary D. Kennedy
----------------------------------
Name: Gary D. Kennedy
--------------------------------
Title: President and Chief Executive
------------------------------
Officer
------------------------------
<PAGE>
EXHIBIT D-1
SUMMARY OF FINAL PLANS
----------------------
This Exhibit is attached to and made a part of the Lease dated as of March
3, 2000, by and between EOP-150 CALIFORNIA STREET, L.L.C., a Delaware limited
liability company ("Landlord") and TENFOLD CORPORATION, a Delaware corporation
("Tenant") for space in the Building located at 150 California Street, San
Francisco, California.
The Base Building Work includes the following improvements:
1. HVAC System.
a. The Building will have 2 central fan systems which shall deliver
cooling and ventilation air to all office floors. Floors 2 through 13
will be served from a fan system located at Level 5, while Floors 14
through 23 will be served from a fan system located at the roof
penthouse.
The central fan systems will be sized for the cooling load imposed by
the building envelope, lights, people and miscellaneous receptacle
loads (PC's, printers, etc.) of 2.5 watts per square foot of tenant
floor area. The central fan systems will have an "air economizer
cycle" which uses outside air for cooling.
b. Cooling will be provided by 2 chillers and 2 cooling towers located at
the roof penthouse.
c. Heating will be provided by 2 boilers located at the roof penthouse,
and by heating water coils at tenant provided VAV boxes serving the
perimeter areas of each tenant floor.
d. Each tenant floor will receive air from the central fan system during
Normal Business Hours.
e. Tenant may install a water-cooled air conditioning unit and
circulating pump for supplemental air conditioning on a 24-hour basis.
Connection to be made by Tenant to a set of condenser water pipe
risers, which will have valved stub-outs on each tenant floor. Tenant
will be charged on a pro rata basis (at such rate as is reasonably
determined by Landlord) for running the central cooling towers, as
necessary, after Normal Business Hours. This tenant condenser water
system will be sized for 2 watts per square foot of tenant floor area,
or 9 tons per floor, over and above the cooling provided by the
central fan systems. Tenant shall have the right to reallocate the
condenser water among the floors of the Premises, provided that Tenant
shall not exceed the total available capacity and Tenant installs any
new taps at Tenant's expense.
f. Tenant's mechanical engineer is required to verify that total loads,
including building envelope loads, can be met with the existing system
capacities. Tenant loads in excess of the available capacity will
require supplemental air conditioning that is to be supplied by the
Tenant.
g. Landlord shall provide fully functioning HVAC and VAV boxes for one
bathroom for each gender on each floor of the Premises and for the
6/th/ floor elevator lobby only.
2. Electrical Systems.
a. The Building will be served by 480Y/277 volt. The electric service
will consist of a 4000A bus to serve the building and office tenant
loads, a fire pump service and a 400A service to serve the retail
tenant loads.
b. A bus duct riser at 480Y/227 volt will have a capacity of 7.0 volt-
amperes per net rentable square foot for office tenant loads. Local
480V-208Y/120V, 3 phase, 4 wire will have a capacity of 2.5 volt-
amperes per net rentable square foot to serve tenant equipment and
receptacle loads.
<PAGE>
c. A 480Y/277V, 3 phase, 4 wire panelboard will be provided at each floor
for lighting loads. A 208Y/120V, 3 phase, 4 wire panelboard will be
provided at each floor for equipment and receptacle loads.
d. Tenant lighting and lighting controls to be provided by Tenant.
Tenant may install ambient lighting in the Premises subject to
Landlord's reasonable review and approval of the same.
e. A telephone/data closet will be provided at each floor for tenant/data
service.
f. 24 circuits per each floor of the Premises will be delivered by
Landlord for power usage and 6 circuits per each floor of the Premises
will be delivered by Landlord for lighting purposes.
3. Fire Protection in Premises.
a. All exposed decks, columns and beams will have fireproofing in
accordance with City of San Francisco building codes.
b. Automatic sprinkler system piping will be connected to the existing
system riser, including flow and damper switches and riser drains.
Smoke detectors, main loop and minimum distribution piping will
provide required system density for shell space per City of San
Francisco building codes. Sprinkler system piping relocation and
sprinkler head installation will be the responsibility of Tenant.
c. The Building's fire alarm system low voltage power supply shall have
sufficient capacity to connect to all strobes in the Premises required
by applicable codes.
4. Condition of Premises.:
Drywall (taped, sanded and finish-ready) at all core locations in the
Premises, columns exposed, ceiling exposed to structure, concrete slab
exposed, exit signs per shell code, HVAC main duct trunk run stubbed out to
a predetermined location, upright fire sprinklers, fire extinguisher
cabinets, window sills painted.
5. Elevator Lobby on Premises Floors.
Drywall (taped, sanded and finish-ready) in elevator lobby area, ceiling
exposed to structure, concrete slab exposed, exit signs per shell code,
pendent fire sprinklers.
6. Toilet Rooms in Premises.
Granite counters with undermount sinks, tile floor and base, full height
tile at wet walls, wall covering at other walls, metal toilet partitions,
wood door at entry, down lights/cove light at wet wall/sconce light at
mirror, HVAC diffusers with VAV boxes, toilet room accessories, pendent
fire sprinklers. Interior lights to be tied to a motion sensor. Toilet
rooms in the Premises shall comply with the requirements of Title III of
the ADA as of the date possession of each applicable portion of the
Premises is initially tendered to Tenant.
7. Electrical/Telecom Rooms on Premises Floors.
Drywall (taped, sanded and finish-ready) in electrical/telecom area,
ceiling exposed to structure, concrete slab exposed, fluorescent utility
lighting, HVAC per shell code, pendent fire sprinklers. One (1) lighting
panel and one (1) power panel per floor.
8. Soffit/Sheetrock.
Landlord shall value engineer, design and construct the permanent drywall
Soffit at the building windowline. Landlord shall finish out and sheetrock
all exterior walls in the Premises. This work shall not include the
columns.
9. Window Coverings.
<PAGE>
Landlord shall provide and install Building Standard window coverings for
the Premises in accordance with the General Contractor's schedule.
However, the cost of such window coverings shall be borne by Tenant.
IN WITNESS WHEREOF, Landlord and Tenant have executed this exhibit as of
the day and year first above written.
LANDLORD:
EOP-150 CALIFORNIA STREET, L.L.C., a Delaware
limited liability company
By: EOP Operating Limited Partnership, a Delaware
limited partnership, its sole member
By: Equity Office Properties Trust, a
Maryland real estate investment trust,
its managing general partner
By: /s/ Peter H. Adams
---------------------------
Name: Peter H. Adams
-------------------------
Title: Senior Vice President
-------------------------
TENANT:
TENFOLD CORPORATION, a Delaware corporation
By: /s/ Robert P. Hughes
----------------------------------
Name: Robert P. Hughes
--------------------------------
Title: Chief Financial Officer
-------------------------------
By: /s/ Gary D. Kennedy
----------------------------------
Name: Gary D. Kennedy
--------------------------------
Title: President and Chief Executive
-------------------------------
Officer
-------
<PAGE>
EXHIBIT E
ADDITIONAL PROVISIONS
---------------------
This Exhibit is attached to and made a part of the Lease dated as of March
3, 2000, by and between EOP-150 CALIFORNIA STREET, L.L.C., a Delaware limited
liability company ("Landlord") and TENFOLD CORPORATION, a Delaware corporation
("Tenant") for space in the Building located at 150 California Street, San
Francisco, California.
I. FIRST RENEWAL OPTION.
A. Tenant shall have the right to extend the Term (the "First Renewal
Option") for one additional period of 5 years commencing on the day
following the Termination Date of the initial Term and ending on the
5/th/ anniversary of the Termination Date (the "First Renewal Term"),
if:
1. Landlord receives notice of exercise of the First Renewal Option
("Initial First Renewal Notice") not less than 9 full calendar
months prior to the expiration of the initial Term and not more
than 12 full calendar months prior to the expiration of the
initial Term; and
2. Tenant is not in default under the Lease beyond any applicable
cure periods at the time that Tenant delivers its Initial First
Renewal Notice or at the time Tenant delivers its First Binding
Notice (as hereinafter defined); and
3. No part of the Premises is sublet (other than pursuant to a
Permitted Transfer) at the time that Tenant delivers its Initial
First Renewal Notice or at the time Tenant delivers its First
Binding Notice; and
4. The Lease has not been assigned (other than pursuant to a
Permitted Transfer) prior to the date that Tenant delivers its
Initial First Renewal Notice or prior to the date Tenant delivers
its First Binding Notice.
B. The initial Base Rent rate per rentable square foot for the Premises
during the First Renewal Term shall equal the Prevailing Market
(hereinafter defined) rate per rentable square foot for the Premises.
C. Tenant shall pay Additional Rent (i.e. Expenses and Taxes) for the
Premises during the First Renewal Term in accordance with Article IV
of the Lease.
D. Within 30 days after receipt of Tenant's Initial First Renewal Notice,
Landlord shall advise Tenant of the applicable Base Rent rate for the
Premises for the First Renewal Term. Tenant, within 15 days after the
date on which Landlord advises Tenant of the applicable Base Rent rate
for the First Renewal Term, shall either (i) give Landlord final
binding written notice ("First Binding Notice") of Tenant's exercise
of its option, or (ii) if Tenant disagrees with Landlord's
determination, provide Landlord with written notice of rejection (the
"First Rejection Notice"). If Tenant fails to provide Landlord with
either a First Binding Notice or First Rejection Notice within such 15
day period, Tenant's First Renewal Option shall be null and void and
of no further force and effect. If Tenant provides Landlord with a
First Binding Notice, Landlord and Tenant shall enter into the First
Renewal Amendment (hereinafter defined) upon the terms and conditions
set forth herein. If Tenant provides Landlord with a First Rejection
Notice, Landlord and Tenant shall work together in good faith to agree
upon the Prevailing Market Base Rent rate for the Premises during the
First Renewal Term. Upon agreement Tenant shall provide Landlord with
First Binding Notice and Landlord and Tenant shall enter into the
First Renewal Amendment in accordance with the terms and conditions
hereof. Notwithstanding the foregoing, if Landlord and Tenant are
unable to agree upon the Prevailing Market Base Rent rate for the
Premises within 30 days after the date on which Tenant provides
Landlord with a First Rejection Notice, Tenant's First Renewal Option
shall be null and void and of no force and effect.
<PAGE>
E. If Tenant is entitled to and properly exercises its First Renewal
Option, Landlord shall prepare an amendment (the "First Renewal
Amendment") to reflect changes in the Base Rent, Term, Termination
Date and other appropriate terms. The First Renewal Amendment shall
be:
1. sent to Tenant within a reasonable time after receipt of the
First Binding Notice; and
2. executed by Tenant and returned to Landlord within 15 Business
Days after its submission to Tenant.
An otherwise valid exercise of the First Renewal Option shall, at
Landlord's option, be fully effective whether or not the First Renewal
Amendment is executed.
F. For purposes of this First Renewal Option, "Prevailing Market" shall
mean the arms length fair market annual rental rate per rentable
square foot under renewal leases and amendments entered into on or
about the date on which the Prevailing Market is being determined
hereunder for space comparable to the Premises in the Building and
office buildings comparable to the Building in the downtown financial
district of San Francisco, California. The determination of
Prevailing Market shall take into account any material economic
differences between the terms of this Lease and any comparison lease,
such as rent abatements, allowances, construction costs and other
concessions and the manner, if any, in which the Landlord under any
such lease is reimbursed for operating expenses and taxes. The
determination of Prevailing Market shall also take into consideration
any reasonably anticipated changes in the Prevailing Market rate from
the time such Prevailing Market rate is being determined and the time
such Prevailing Market rate will become effective under this Lease.
G. Landlord and Tenant acknowledge and agree that Tenant's First Renewal
Option is personal to Tenant only and not transferable to any other
entity (except in connection with a Permitted Transfer) and in no
event shall be exercisable by Tenant on behalf of any potential
assignees or sublessees (except in connection with a Permitted
Transfer).
II. SECOND RENEWAL OPTION.
A. Tenant shall have the right to extend the Term (the "Second Renewal
Option") for an additional period of 3 years commencing on the day
following the Termination Date of the First Renewal Term and ending on
the 3/rd/ anniversary of the Termination Date of the First Renewal
Term (the "Second Renewal Term"), if:
1. Landlord receives notice of exercise of the Second Renewal Option
("Initial Second Renewal Notice") not less than 9 full calendar
months prior to the expiration of the First Renewal Term and not
more than 12 full calendar months prior to the expiration of the
First Renewal Term; and
2. Tenant is not in default under the Lease beyond any applicable
cure periods at the time that Tenant delivers its Initial Second
Renewal Notice or at the time Tenant delivers its Second Binding
Notice (as hereinafter defined); and
3. No part of the Premises is sublet (other than in connection with
a Permitted Transfer) at the time that Tenant delivers its
Initial Second Renewal Notice or at the time Tenant delivers its
Second Binding Notice; and
4. The Lease has not been assigned (other than in connection with a
Permitted Transfer) prior to the date that Tenant delivers its
Initial Second Renewal Notice or prior to the date Tenant
delivers its Second Binding Notice; and
5. Tenant has exercised its First Renewal Option in accordance with
the terms and provisions of Section I above.
<PAGE>
B. The initial Base Rent rate per rentable square foot for the Premises
during the Second Renewal Term shall equal the Prevailing Market
(hereinafter defined) rate per rentable square foot for the Premises.
C. Tenant shall pay Additional Rent (i.e. Expenses and Taxes) for the
Premises during the Second Renewal Term in accordance with Article IV
of the Lease.
D. Within 30 days after receipt of Tenant's Initial Second Renewal
Notice, Landlord shall advise Tenant of the applicable Base Rent rate
for the Premises for the Second Renewal Term. Tenant, within 15 days
after the date on which Landlord advises Tenant of the applicable Base
Rent rate for the Second Renewal Term, shall either (i) give Landlord
final binding written notice ("Second Binding Notice") of Tenant's
exercise of its option, or (ii) if Tenant disagrees with Landlord's
determination, provide Landlord with written notice of rejection (the
"Second Rejection Notice"). If Tenant fails to provide Landlord with
either a Second Binding Notice or Second Rejection Notice within such
15 day period, Tenant's Second Renewal Option shall be null and void
and of no further force and effect. If Tenant provides Landlord with
a Second Binding Notice, Landlord and Tenant shall enter into the
Second Renewal Amendment (as hereinafter defined) upon the terms and
conditions set forth herein. If Tenant provides Landlord with a
Second Rejection Notice, Landlord and Tenant shall work together in
good faith to agree upon the Prevailing Market Base Rent rate for the
Premises during the Second Renewal Term. Upon agreement Tenant shall
provide Landlord with Second Binding Notice and Landlord and Tenant
shall enter into the Second Renewal Amendment in accordance with the
terms and conditions hereof. Notwithstanding the foregoing, if
Landlord and Tenant are unable to agree upon the Prevailing Market
Base Rent rate for the Premises within 30 days after the date on which
Tenant provides Landlord with a Second Rejection Notice, Tenant's
Second Renewal Option shall be null and void and of no force and
effect.
E. If Tenant is entitled to and properly exercises its Second Renewal
Option, Landlord shall prepare an amendment (the "Second Renewal
Amendment") to reflect changes in the Base Rent, Term, Termination
Date and other appropriate terms. The Second Renewal Amendment shall
be:
1. sent to Tenant within a reasonable time after receipt of the
Second Binding Notice; and
2. executed by Tenant and returned to Landlord within 15 Business
Days after its submission to Tenant.
An otherwise valid exercise of the Second Renewal Option shall, at
Landlord's option, be fully effective whether or not the Second
Renewal Amendment is executed.
F. For purposes of this Second Renewal Option, "Prevailing Market" shall
mean the arms length fair market annual rental rate per rentable
square foot under renewal leases and amendments entered into on or
about the date on which the Prevailing Market is being determined
hereunder for space comparable to the Premises in the Building and
office buildings comparable to the Building in the downtown financial
district of San Francisco, California. The determination of
Prevailing Market shall take into account any material economic
differences between the terms of this Lease and any comparison lease,
such as rent abatements, allowances, construction costs and other
concessions and the manner, if any, in which the Landlord under any
such lease is reimbursed for operating expenses and taxes. The
determination of Prevailing Market shall also take into consideration
any reasonably anticipated changes in the Prevailing Market rate from
the time such Prevailing Market rate is being determined and the time
such Prevailing Market rate will become effective under this Lease.
G. Landlord and Tenant acknowledge and agree that Tenant's Second Renewal
Option is personal to Tenant only and not transferable to any other
entity (except in connection with a Permitted Transfer) and in no
event shall be exercisable by
<PAGE>
Tenant on behalf of any potential assignees or sublessees (except in
connection with a Permitted Transfer).
III. ELEVATOR BANK IDENTITY SIGNAGE.
-------------------------------
A. If Tenant occupies at least 60,000 rentable square feet within the
low-rise elevator bank of the Building which services floors 2-11,
Landlord, at Tenant's sole cost and expense, shall erect one exclusive
sign identifying Tenant (the "Sign") on the ground floor Building
lobby wall within the low-rise elevator bank lobby, the exact location
of which Sign shall be determined in Landlord's reasonable judgment.
The Sign shall substantially conform to the design of Tenant's logo,
as shown on Exhibit E-1 attached hereto. Notwithstanding the
foregoing to the contrary, if at any time during the Term Tenant
enters into one or more subleases with respect to the Premises with
terms of 2 years or less each (the "Short Term Subleases"), and so
long as Tenant still occupies at least 49,000 rentable square feet of
the Premises, the Sign shall remain in its position within the low-
rise elevator bank lobby If, at any time during the Term, Tenant
enters into Short Term Sublease(s) with respect to the Premises and
Tenant occupies between 40,000 rentable square feet and 48,999
rentable square feet of the Premises, or if at any time during the
Term Tenant enters into subleases (other than Short Term Subleases)
and Tenant occupies more than 40,000 rentable square feet, Tenant's
right to the exclusive low-rise elevator bank lobby signage shall
become a non-exclusive right. If, at any time during the Term, Tenant
occupies less than 40,000 rentable square feet of the Premises,
Tenant's right to erect low-rise elevator bank lobby signage shall be
revoked. Within a reasonable time after its execution of this Lease,
Tenant shall submit detailed drawings of its proposed Sign to
Landlord, which drawings shall be subject to Landlord's review and
approval. Such drawings shall include, without limitation, detailed
information concerning the size, material, shape, color, lettering,
and method of installation of the proposed Sign. All maintenance and
repair of the Sign shall be at Tenant's sole cost and expense.
B. Landlord, upon the expiration date or sooner termination of this
Lease, shall have the right to remove the Sign at Tenant's sole cost
and expense. In addition, Landlord, at Tenant's sole cost and
expense, shall have the right to remove the Sign if, at any time
during the Term (1) Tenant's signage rights are revoked as provided in
Paragraph A above, or (2) Tenant defaults under any term or condition
of the Lease and fails to cure such default within any applicable
grace period. Tenant acknowledges and agrees that the rights
contained herein in connection with the Sign are personal to Tenant
and in no event shall the rights contained herein be transferred or
assigned.
IV. CONSTRUCTION OF ELEVATOR LOBBIES. Tenant shall be responsible for
construction of the elevator lobbies and corridor finishes on the 2/nd/,
3/rd/, 4/th/, 5/th/, 7/th/ and 8/th/ floors within the Premises. Tenant
shall provide Landlord with detailed drawings of Tenant's proposed
construction of the 2/nd/, 3/rd/, 4/th/, 5/th/, 7/th/ and 8/th/ floor
elevator lobbies for Landlord's review and approval. Landlord shall be
responsible for the construction of the lobby and corridor finishes with
respect to the 6/th/ floor of the Premises only.
V. ROOF ANTENNA.
A. Subject to availability (as determined by Landlord in Landlord's sole
discretion), Tenant shall have the option to lease space on the roof
of the Building for the purpose of installing (in accordance with
Section IX.C of the Lease), operating and maintaining a dish, antenna
or other communication device not to exceed 2 meters in diameter (the
"Dish/Antenna"), if (i) Landlord receives written notice ("Dish
Notice") of Tenant's exercise of the Dish Option (the "Dish Option")
from Tenant specifying (a) the type of Dish/Antenna Tenant desires to
install and (b) the date Tenant desires to commence the operation of
the Dish/Antenna, provided that such notice is delivered to Landlord
not less than one hundred twenty (120) days prior to the date Tenant
desires to install and commence operations of the Dish/Antenna; (ii)
Tenant is not in default under the Lease beyond any applicable cure
periods at the time that Tenant delivers its Dish Notice; (iii) no
portion of the Premises is sublet (other than any sublease(s) entered
into pursuant to a Permitted Transfer) at the time that Tenant
delivers its Dish Notice; (iv) the Lease has not been assigned (other
than pursuant to a
<PAGE>
Permitted Transfer) prior to the date that Tenant delivers its Dish
Notice; and (v) Landlord approves of the type and size of Dish/Antenna
which Tenant desires to install (provided that such approval shall not
be unreasonably withheld, conditioned or delayed).
Tenant shall pay monthly rent for the Dish/Antenna based upon the
Landlord's reasonable determination of the then prevailing rate for
comparable dish/antennas at the Building (the "Dish/Antenna Payments")
The Dish/Antenna Payments shall commence on a commencement date to be
mutually agreed upon by Landlord and Tenant and shall constitute
Additional Rent under the terms of the Lease and Tenant shall be
required to make these payments in strict compliance with the terms of
Section IV of the Lease. The exact location of the space on the roof
to be leased by Tenant shall be designated by Landlord and shall not
exceed 10 square feet (the "Roof Space"). Landlord reserves the right
to relocate the Roof Space as reasonably necessary during the Term.
Landlord's designation shall take into account Tenant's use of the
Dish/Antenna. Notwithstanding the foregoing, Tenant's right to
install the Dish/Antenna shall be subject to the approval rights of
Landlord and Landlord's architect and/or engineer with respect to the
plans and specifications of the Dish/Antenna, the manner in which the
Dish/Antenna is attached to the roof of the Building and the manner in
which any cables are run to and from the Dish/Antenna. The precise
specifications and a general description of the Dish/Antenna along
with all documents Landlord reasonably requires to review the
installation of the Dish/Antenna (the "Plans and Specifications")
shall be submitted to Landlord for Landlord's written approval no
later than 20 Business Days before Tenant commences to install the
Dish/Antenna. Tenant shall be solely responsible for obtaining all
necessary governmental and regulatory approvals and for the cost of
installing, operating, maintaining and removing the Dish/Antenna.
Tenant shall notify Landlord upon completion of the installation of
the Dish/Antenna. If Landlord determines that the Dish/Antenna
equipment does not comply with the approved Plans and Specifications,
that the Building has been damaged during installation of the
Dish/Antenna or that the installation was defective, Landlord shall
notify Tenant of any noncompliance or detected problems and Tenant
immediately shall cure the defects. If the Tenant fails to
immediately cure the defects, Tenant shall pay to Landlord upon demand
the cost, as reasonably determined by Landlord, of correcting any
defects and repairing any damage to the Building caused by such
installation. If at any time Landlord, in its sole discretion, deems
it necessary, Tenant shall provide and install, at Tenant's sole cost
and expense, appropriate aesthetic screening, reasonably satisfactory
to Landlord, for the Dish/Antenna (the "Aesthetic Screening").
B. Landlord agrees that Tenant, upon reasonable prior written notice to
Landlord, shall have access to the roof of the Building and the Roof
Space for the purpose of installing, maintaining, repairing and
removing the Dish/Antenna, the appurtenances and the Aesthetic
Screening, if any, all of which shall be performed by Tenant or
Tenant's authorized representative or contractors, which shall be
approved by Landlord, at Tenant's sole cost and risk. It is agreed,
however, that only authorized engineers, employees or properly
authorized contractors of Tenant, FCC inspectors, or persons under
their direct supervision will be permitted to have access to the roof
of the Building and the Roof Space. Tenant further agrees to exercise
firm control over the people requiring access to the roof of the
Building and the Roof Space in order to keep to a minimum the number
of people having access to the roof of the Building and the Roof Space
and the frequency of their visits.
C. It is further understood and agreed that the installation,
maintenance, operation and removal of the Dish/Antenna, the
appurtenances and the Aesthetic Screening, if any, is not permitted to
damage the Building or the roof thereof, or interfere with the use of
the Building and roof by Landlord. Tenant agrees to be responsible
for any damage caused to the roof or any other part of the Building,
which may be caused by Tenant or any of its agents or representatives.
D. Tenant agrees to install only equipment of types and frequencies which
will not cause unreasonable interference to Landlord or existing
tenants of the Building. In the event Tenant's equipment causes such
interference, Tenant will change
<PAGE>
the frequency on which it transmits and/or receives and take any other
steps necessary to eliminate the interference. If said interference
cannot be eliminated within a reasonable period of time, in the
judgment of Landlord, then Tenant agrees to remove the Dish/Antenna
from the Roof Space.
E. Tenant shall, at its sole cost and expense, and at its sole risk,
install, operate and maintain the Dish/Antenna in a good and
workmanlike manner, and in compliance with all Building, electric,
communication, and safety codes, ordinances, standards, regulations
and requirements, now in effect or hereafter promulgated, of the
Federal Government, including, without limitation, the Federal
Communications Commission (the "FCC"), the Federal Aviation
Administration ("FAA") or any successor agency of either the FCC or
FAA having jurisdiction over radio or telecommunications, and of the
state, city and county in which the Building is located. Under this
Lease, the Landlord and its agents assume no responsibility for the
licensing, operation and/or maintenance of Tenant's equipment. Tenant
has the responsibility of carrying out the terms of its FCC license in
all respects. The Dish/Antenna shall be connected to Landlord's power
supply in strict compliance with all applicable Building, electrical,
fire and safety codes. Neither Landlord nor its agents shall be
liable to Tenant for any stoppages or shortages of electrical power
furnished to the Dish/Antenna or the Roof Space because of any act,
omission or requirement of the public utility serving the Building, or
the act or omission of any other tenant, invitee or licensee or their
respective agents, employees or contractors, or for any other cause
beyond the reasonable control of Landlord, and Tenant shall not be
entitled to any rental abatement for any such stoppage or shortage of
electrical power. Neither Landlord nor its agents shall have any
responsibility or liability for the conduct or safety of any of
Tenant's representatives, repair, maintenance and engineering
personnel while in or on any part of the Building or the Roof Space.
F. The Dish/Antenna, the appurtenances and the Aesthetic Screening, if
any, shall remain the personal property of Tenant, and shall be
removed by Tenant at its own expense at the expiration or earlier
termination of this Lease or Tenant's right to possession hereunder.
Tenant shall repair any damage caused by such removal, including the
patching of any holes to match, as closely as possible, the color
surrounding the area where the equipment and appurtenances were
attached. Tenant agrees to maintain all of the Tenant's equipment
placed on or about the roof or in any other part of the Building in
proper operating condition and maintain same in satisfactory condition
as to appearance and safety in Landlord's sole discretion. Such
maintenance and operation shall be performed in a manner to avoid any
interference with any other tenants or Landlord. Tenant agrees that
at all times during the Term, it will keep the roof of the Building
and the Roof Space free of all trash or waste materials produced by
Tenant or Tenant's agents, employees or contractors.
G. In light of the specialized nature of the Dish/Antenna, Tenant shall
be permitted to utilize the services of its choice for installation,
operation, removal and repair of the Dish/Antenna, the appurtenances
and the Aesthetic Screening, if any, subject to the reasonable
approval of Landlord. Notwithstanding the foregoing, Tenant must
provide Landlord with prior written notice of any such installation,
removal or repair and coordinate such work with Landlord in order to
avoid voiding or otherwise adversely affecting any warranties granted
to Landlord with respect to the roof. If necessary, Tenant, at its
sole cost and expense, shall retain any contractor having a then
existing warranty in effect on the roof to perform such work (to the
extent that it involves the roof), or, at Tenant's option, to perform
such work in conjunction with Tenant's contractor. In the event the
Landlord contemplates roof repairs that could affect Tenant's
Dish/Antenna, or which may result in an interruption of the Tenant's
telecommunication service, Landlord shall formally notify Tenant at
least 30 days in advance (except in cases of an emergency) prior to
the commencement of such contemplated work in order to allow Tenant to
make other arrangements for such service.
H. Tenant shall not allow any provider of telecommunication, video, data
or related services ("Communication Services") to locate any equipment
on the roof of the Building or in the Roof Space for any purpose
whatsoever, nor may Tenant use the Roof Space and/or Dish/Antenna to
provide Communication Services to an
<PAGE>
unaffiliated tenant, occupant or licensee of another building, or to
facilitate the provision of Communication Services on behalf of
another Communication Services provider to an unaffiliated tenant,
occupant or licensee of the Building or any other building.
I. Tenant acknowledges that Landlord may at some time establish a
standard license agreement (the "License Agreement") with respect to
the use of roof space by tenants of the Building. Tenant, upon
request of Landlord, shall enter into such License Agreement with
Landlord provided that such agreement does not materially alter the
rights of Tenant hereunder with respect to the Roof Space.
J. Tenant specifically acknowledges and agrees that the terms and
conditions of Article XIV of the Lease (Indemnity and Waiver of
Claims) shall apply with full force and effect to the Roof Space and
any other portions of the roof accessed or utilized by Tenant, its
representatives, agents, employees or contractors.
K. If Tenant defaults under any of the terms and conditions of this
Section or the Lease, and Tenant fails to cure said default within the
time allowed by Article XIX of the Lease, Landlord shall be permitted
to exercise all remedies provided under the terms of the Lease,
including removing the Dish/Antenna, the appurtenances and the
Aesthetic Screening, if any, and restoring the Building and the Roof
Space to the condition that existed prior to the installation of the
Dish/Antenna, the appurtenances and the Aesthetic Screening, if any.
If Landlord removes the Dish/Antenna, the appurtenances and the
Aesthetic Screening, if any, as a result of an uncured default, Tenant
shall be liable for all costs and expenses Landlord incurs in removing
the Dish/Antenna, the appurtenances and the Aesthetic Screening, if
any, and repairing any damage to the Building, the roof of the
Building and the Roof Space caused by the installation, operation or
maintenance of the Dish/Antenna, the appurtenances, and the Aesthetic
Screening, if any.
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this exhibit as of
the day and year first above written.
LANDLORD:
EOP-150 CALIFORNIA STREET, L.L.C., a Delaware
limited liability company
By: EOP Operating Limited Partnership, a Delaware
limited partnership, its sole member
By: Equity Office Properties Trust, a Maryland
real estate investment trust, its managing
general partner
By: /s/ Peter H. Adams
----------------------------
Name: Peter H. Adams
--------------------------
Title: Senior Vice President
-------------------------
TENANT:
TENFOLD CORPORATION, a Delaware corporation
By: /s/ Robert P. Hughes
-------------------------------------------
Name: Robert P. Hughes
-----------------------------------------
Title: Chief Financial Officer
----------------------------------------
By: /s/ Gary D. Kennedy
-------------------------------------------
Name: Gary D. Kennedy
-----------------------------------------
Title: President and Chief Executive Officer
----------------------------------------
<PAGE>
EXHIBIT E-1
TENANT'S LOGO
-------------
<PAGE>
EXHIBIT F
PARKING AGREEMENT
-----------------
This Exhibit is attached to and made a part of the Lease dated as of March
3, 2000, by and between EOP-150 CALIFORNIA STREET, L.L.C., a Delaware limited
liability company ("Landlord") and TENFOLD CORPORATION, a Delaware corporation
("Tenant") for space in the Building located at 150 California Street, San
Francisco, California.
1. The parties acknowledge that they have heretofore entered, or are
contemporaneously herewith entering into, a certain lease dated March 3,
2000 (the "Lease") for the premises known as Suite Nos. 200, 300, 400, 500,
600, 700 and 800 (the "Premises") located in the building known as 150
California (the "Building"). In the event of any conflict between the
Lease and this Parking Agreement, the latter shall control.
2. Landlord hereby grants to Tenant and persons designated by Tenant a license
to use 7 non-priority parking privileges in the parking facility ("Parking
Facility") servicing the Building. The term of such license shall commence
on the Commencement Date under the Lease and shall continue until the
earlier to occur of the Termination Date under the Lease (subject to
extension or renewal rights as provided in the Lease), the sooner
termination of the Lease, or Tenant's abandonment of the Premises
thereunder. During the term of this license, the charge for the parking
privileges shall be the then prevailing monthly charge established from
time to time for parking in the Parking Facility, payable in advance, with
Tenant's payment of monthly Base Rent. No deductions from the monthly
charge shall be made for days on which the Parking Facility is not used by
Tenant. Tenant may, from time to time request additional parking
privileges, and if Landlord shall provide the same, such parking privileges
shall be provided and used on a month-to-month basis, and otherwise on the
foregoing terms and provisions, and at such prevailing monthly parking
charges as shall be established from time to time. Notwithstanding the
foregoing to the contrary, any parking privileges granted herein or which
may be subsequently granted under the provisions of this Parking Agreement
may be revoked by Landlord at any time in the event Landlord reasonably
determines that such revocation shall be necessary or desirable to comply
with all applicable Laws and the provisions of any requirements of any
applicable governmental authority.
3. Tenant shall at all times comply with all applicable ordinances, rules,
regulations, codes, laws, statutes and requirements of all federal, state,
county and municipal governmental bodies or their subdivisions respecting
the use of the Parking Facility. Landlord reserves the right to adopt,
modify and enforce reasonable rules ("Rules") governing the use of the
Parking Facility from time to time including any key-card, sticker or other
identification or entrance system and hours of operation provided that
Tenant shall receive written notification of such exception and/or
modification of rules at least 30 days prior to implementation. The rules
set forth herein are currently in effect. Landlord may refuse to permit
any person who violates such rules to park in the Parking Facility, and any
violation of the rules shall subject the car to removal from the Parking
Facility.
4. Unless specified to the contrary above, the parking spaces hereunder shall
be provided on a non-designated "first-come, first-served" basis. Landlord
and Tenant acknowledge and agree that as of the date of this Lease, it is
currently contemplated that parking in the Parking Facility shall be
performed through a valet service and that there may not be designated
parking spaces in the Parking Facility. Tenant acknowledges that Landlord
has no liability for claims arising through acts or omissions of any
Operator (as hereinafter defined) of the Parking Facility, if any.
Landlord shall have no liability whatsoever for any damage to items located
in the Parking Facility, nor for any personal injuries or death arising out
of any matter relating to the Parking Facility, and in all events, Tenant
agrees to look first to its insurance carrier and to require that Tenant's
employees look first to their respective insurance carriers for payment of
any losses sustained in connection with any use of the Parking Facility.
Tenant hereby waives on behalf of its insurance carriers all rights of
subrogation against Landlord or Landlord's agents. Landlord reserves the
right to assign specific parking spaces or privileges, and to reserve
parking spaces or privileges for visitors, small cars, handicapped persons
and for other tenants, guests of tenants or other parties, which assignment
and reservation or spaces or privileges may be relocated as determined by
Landlord from time to time, and Tenant and persons designated by Tenant
hereunder shall not park in any location designated for such assigned or
reserved parking spaces or privileges. Tenant acknowledges that the
Parking Facility may not be open and
<PAGE>
operational as of the Commencement Date and that the Parking Facility may
be closed entirely or in part in order to make repairs or perform
maintenance services, or to alter, modify, re-stripe or renovate the
Parking Facility, or if required by casualty, strike, condemnation, act of
God, governmental law or requirement or other reason beyond the operator's
reasonable control.
5. If Tenant shall default under this Parking Agreement, the Landlord or the
Operator, as the case may be, shall have the right to remove from the
Parking Facility any vehicles hereunder which shall have been involved or
shall have been owned or driven by parties involved in causing such
default, without liability therefor whatsoever. In addition, if Tenant
shall default under this Parking Agreement, Landlord shall have the right
to cancel this Parking Agreement on 30 days' written notice, unless within
such 30 day period, Tenant cures such default. If Tenant defaults with
respect to the same term or condition under this Parking Agreement more
than 3 times during any 12 month period, and Landlord notifies Tenant
thereof promptly after each such default, the next default of such term or
condition during the succeeding 12 month period, shall, at Landlord's
election, constitute an incurable default. Such cancellation right shall
be cumulative and in addition to any other rights or remedies available to
Landlord at law or equity, or provided under the Lease (all of which rights
and remedies under the Lease are hereby incorporated herein, as though
fully set forth). Any default by Tenant under the Lease shall be a default
under this Parking Agreement, and any default under this Parking Agreement
shall be a default under the Lease.
RULES
(i) Parking Facility hours shall be 7:00 a.m. to 6:00 p.m., however,
Tenant shall have access to the Parking Facility on a 24 hour basis,
7 days a week. Tenant shall not store or permit its employees to
store any automobiles in the Parking Facility without the prior
written consent of the Landlord. Except for emergency repairs,
Tenant and its employees shall not perform any work on any
automobiles while located in the Parking Facility, or on the
Property. If it is necessary for Tenant or its employees to leave an
automobile in the Parking Facility overnight, Tenant shall provide
the Landlord with prior notice thereof designating the license plate
number and model of such automobile.
(ii) Cars must be parked entirely within the stall lines painted on the
floor, and only small cars may be parked in areas reserved for small
cars.
(iii) All directional signs and arrows must be observed.
(iv) The speed limit shall be 5 miles per hour.
(v) Parking spaces or privileges reserved for handicapped persons must
be used only by vehicles properly designated.
(vi) Parking is prohibited in all areas not expressly designated for
parking, including without limitation:
(a) Areas not striped for parking
(b) aisles
(c) where "no parking" signs are posted
(d) ramps
(e) loading zones
(vii) Parking stickers, key cards or any other devices or forms of
identification or entry supplied by the Landlord or the Operator, as
the case may be, shall remain the property of the Landlord or the
Operator. Such device must be displayed as requested and may not be
mutilated in any manner. The serial number of the parking
identification device may not be obliterated. Parking passes and
devices are not transferable except to agents, employees,
representatives and invitees of Tenant and any pass or device in the
possession of an unauthorized holder will be void.
(viii) Monthly fees shall be payable in advance prior to the first day of
each month. Failure to do so will automatically cancel parking
privileges and a charge at the
<PAGE>
prevailing daily parking rate will be due. No deductions or
allowances from the monthly rate will be made for days on which the
Parking Facility is not used by Tenant or its designees.
(ix) Parking Facility managers or attendants are not authorized to make
or allow any exceptions to these Rules.
(x) Every parker is required to park and lock his/her own car.
(xi) Loss or theft of parking pass, identification, key cards or other
such devices must be reported to Landlord and to the Parking
Facility manager immediately. Any parking devices reported lost or
stolen found on any authorized car will be confiscated and the
illegal holder will be subject to prosecution. Lost or stolen passes
and devices found by Tenant or its employees must be reported to the
office of the garage immediately.
(xii) Washing, waxing, cleaning or servicing of any vehicle by the
customer and/or his agents is prohibited. Parking spaces may be used
only for parking automobiles.
(xiii) By signing this Parking Agreement, Tenant agrees to acquaint all
persons to whom Tenant assigns a parking pass with these Rules.
6. Landlord may elect to provide parking cards or keys to control access to
the Parking Facility or surface parking areas, if any. In such event,
Landlord shall provide Tenant with one card or key for each parking
privilege that Tenant is entitled to hereunder, provided that Landlord
shall have the right to require Tenant or its employees to place a deposit
on such access cards or keys and to pay a fee for any lost or damaged cards
or keys.
7. Landlord hereby reserves the right to enter into a management agreement or
lease with an entity for the Parking Facility ("Operator"). In such event,
Tenant upon request of Landlord, shall enter into a parking agreement with
the Operator and pay the Operator the monthly charge established hereunder,
and Landlord shall have no liability for claims arising through acts or
omissions of the Operator unless caused by Landlord's negligence or willful
misconduct. It is understood and agreed that the identity of the Operator
may change from time to time during the Term. In connection therewith, any
parking lease or agreement entered into between Tenant and an Operator
shall be freely assignable by such Operator or any successors thereto.
8. NO LIABILITY. TENANT ACKNOWLEDGES AND AGREES THAT, TO THE FULLEST EXTENT
PERMITTED BY LAW, LANDLORD SHALL NOT BE RESPONSIBLE FOR ANY LOSS OR DAMAGE
TO TENANT OR TENANT'S PROPERTY (INCLUDING, WITHOUT LIMITATIONS, ANY LOSS OR
DAMAGE TO TENANT'S AUTOMOBILE OR THE CONTENTS THEREOF DUE TO THEFT,
VANDALISM OR ACCIDENT) ARISING FROM OR RELATED TO TENANT'S USE OF THE
PARKING FACILITY OR EXERCISE OF ANY RIGHTS UNDER THIS PARKING AGREEMENT,
WHETHER OR NOT SUCH LOSS OR DAMAGE RESULTS FROM LANDLORD'S ACTIVE
NEGLIGENCE OR NEGLIGENT OMISSION. THE LIMITATION ON LANDLORD'S LIABILITY
UNDER THE PRECEDING SENTENCE SHALL NOT APPLY HOWEVER TO LOSS OR DAMAGE
ARISING DIRECTLY FROM LANDLORD'S WILLFUL MISCONDUCT.
9. Release of Liability. Without limiting the provisions of Paragraph 8
above, Tenant hereby voluntarily releases, discharges, waives and
relinquishes any and all actions or causes of action for personal injury or
property damage occurring to Tenant arising as a result of parking in the
Parking Facility, or any activities incidental thereto, wherever or however
the same may occur, and further agrees that Tenant will not prosecute any
claim for personal injury or property damage against Landlord or any of its
officers, agents, servants or employees for any said causes of action. It
is the intention of Tenant by this instrument, to exempt and relieve
Landlord from liability for personal injury or property damage caused by
negligence.
10. The provisions of Article XXI of the Lease are hereby incorporated by
reference as if fully recited.
<PAGE>
Tenant acknowledges that Tenant has read the provisions of this Parking
Agreement, has been fully and completely advised of the potential dangers
incidental to parking in the Parking Facility and is fully aware of the legal
consequences of signing this instrument.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Exhibit as of
the day and year first above written.
LANDLORD:
EOP-150 CALIFORNIA STREET, L.L.C., a Delaware
limited liability company
By: EOP Operating Limited Partnership, a Delaware
limited partnership, its sole member
By: Equity Office Properties Trust, a Maryland real
estate investment trust, its managing general
partner
By: /s/ Peter H. Adams
---------------------------
Name: Peter H. Adams
-------------------------
Title: Senior Vice President
------------------------
TENANT:
TENFOLD CORPORATION, a Delaware corporation
By: /s/ Robert P. Hughes
-----------------------------------------
Name: Robert P. Hughes
---------------------------------------
Title: Chief Financial Officer
--------------------------------------
By: /s/ Gary D. Kennedy
-----------------------------------------
Name: Gary D. Kennedy
---------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
<PAGE>
EXHIBIT G
FORM OF LETTER OF CREDIT
------------------------
________________________
[Name of Financial Institution]
Irrevocable Standby
Letter of Credit
No. ______________________
Issuance Date:_____________
Expiration Date:____________
Applicant:__________________
Beneficiary
- -----------
EOP-150 California Street, L.L.C., a Delaware limited liability company
Two North Riverside Plaza
Suite 2200
Chicago, Illinois 60606
Ladies/Gentlemen:
We hereby establish our Irrevocable Standby Letter of Credit in your favor
for the account of the above referenced Applicant in the amount of Three
Million and 00/100 U.S. Dollars ($3,000,000.00) available for payment at sight
by your draft drawn on us when accompanied by the following documents:
1. An original copy of this Irrevocable Standby Letter of Credit.
2. Beneficiary's dated statement purportedly signed by one of its officers
reading: "This draw in the amount of ______________________ U.S. Dollars
($____________) under your Irrevocable Standby Letter of Credit No.
____________________ represents funds due and owing to us as a result of
the Applicant's failure to comply with one or more of the terms of that
certain lease by and between ______________________, as landlord, and
_____________, as tenant."
It is a condition of this Irrevocable Standby Letter of Credit that it will
be considered automatically renewed for a one year period upon the expiration
date set forth above and upon each anniversary of such date, unless at least
sixty (60) days prior to such expiration date or applicable anniversary thereof,
we notify you in writing by certified mail, return receipt requested, that we
elect not to so renew this Irrevocable Standby Letter of Credit. A copy of any
such notice shall also be sent to: Equity Office Properties Trust, 2 North
Riverside Plaza, Suite 2200, Chicago, IL 60606, Attention: Senior Vice
President-Treasurer. In addition to the foregoing, we understand and agree that
you shall be entitled to draw upon this Irrevocable Standby Letter of Credit in
accordance with 1 and 2 above in the event that we elect not to renew this
Irrevocable Standby Letter of Credit and, in addition, you provide us with a
dated statement proportedly signed by one of Beneficiary's officers stating that
the Applicant has failed to provide you with an acceptable substitute
irrevocable standby letter of credit in accordance with the terms of the above
referenced lease. We further acknowledge and agree that: (a) upon receipt of
the documentation required herein, we will honor your draws against this
Irrevocable Standby Letter of Credit without inquiry into the accuracy of
Beneficiary's signed statement and regardless of whether Applicant disputes the
content of such statement; (b) this Irrevocable Standby Letter of Credit shall
permit partial draws and, in the event you elect to draw upon less than the full
stated amount hereof, the stated amount of this Irrevocable Standby Letter of
Credit shall be automatically reduced by the amount of such partial draw; and
(c) you shall be entitled to assign your interest in this Irrevocable Standby
Letter of Credit from time to time without our approval and without charge. In
the event of an assignment, we reserve the right to require reasonable evidence
of such assignment as a condition to any draw hereunder.
This Irrevocable Standby Letter of Credit is subject to the Uniform Customs
and Practice for Documentary Credits (1993 revision) ICC Publication No. 500.
<PAGE>
We hereby engage with you to honor drafts and documents drawn under and in
compliance with the terms of this Irrevocable Standby Letter of Credit.
All communications to us with respect to this Irrevocable Standby Letter of
Credit must be addressed to our office located at
______________________________________________ to the attention of
__________________________________.
Very truly yours,
______________________
[name]
----------
[title
----------
<PAGE>
LEASE AGREEMENT
LANDLORD: BOYER JORDAN VALLEY 1 L.C., BY
ITS MANAGING PARTNER, THE
BOYER COMPANY, L.C.
TENANT: TENFOLD CORPORATION
<PAGE>
LEASE AGREEMENT
TENFOLD OFFICE BUILDINGS PHASE I
THIS LEASE AGREEMENT (the "Lease") is made and entered into as of this 28th
day of April, 2000, by and between BOYER JORDAN VALLEY 1, L.C. by its managing
partner, THE BOYER COMPANY, L.C., a Utah Limited Liability Company, (the
"Landlord"), and TENFOLD CORPORATION, a Delaware Corporation, (the "Tenant"),
(collectively the "Parties").
For and in consideration of the rental to be paid by Tenant and of the
covenants and agreements herein set forth to be kept and performed by Tenant,
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord, the
Leased Premises (as hereafter defined) and certain other areas, rights and
privileges for the term, at the rental and subject to and upon all of the terms,
covenants and agreements hereinafter set forth.
It is the intent of the Parties that this Lease be construed and
interpreted as an "operating lease" under the guidelines established by EITF 97-
10 and other Generally Accepted Accounting Principles.
I. PREMISES
1.1 Description of Premises. Landlord does hereby demise, lease and
let unto Tenant, and Tenant does hereby take and receive from Landlord the
following:
(a) That certain floor area containing approximately 168,600 rentable
square feet (the "Leased Premises") in Office Buildings One and Two2 (the
"Buildings") located at approximately 10000 South 900 West in South Jordan, Utah
containing approximately 200,000 rentable square feet (the "Building Area"), on
the real property (the "Property") described on Exhibit "A" attached hereto and
by this reference incorporated herein. The space occupied by Tenant consists of
that certain area crosshatched on Exhibit "B" which is attached hereto and by
this reference incorporated herein.
(i) The Leased Premises and the Building Area shall be measured
by the Base Building architect in accordance with the American National
Standard Z65.1-1996 published by the Building Owners and Managers
Association.
(ii) "Tenant's Proportionate Share" shall mean the percentage
derived from the fraction, the numerator of which is the gross rentable
square footage of the Leased Premises (168,600), the denominator of which
is the gross rentable square footage of the Buildings (200,000). In this
Lease, Tenant's pro-rata share initially is 84.30%, subject to increase or
1
<PAGE>
decrease due to increases or decreases in the gross rentable square footage
of the Leased Premises and/or the Buildings.
(b) The non-exclusive right to Tenant's use of the Common Areas (as
defined in Section 20.1 below).
(c) Such non-exclusive rights-of-way, easements and similar rights with
respect to the Building and Property as may be reasonably necessary for access
to and egress from, the Leased Premises.
(d) The non-exclusive right to use those areas designated and suitable for
vehicular parking, including the non-exclusive right to the use of six hundred
seventy four (674) parking stalls, based on the ratio of four (4) parking spaces
per 1,000 rentable square feet.
(e) The non-exclusive right to use of the roof for installation of
Tenant's equipment including satellite equipment. Landlord shall have the right
to review and reasonably approve the location of Tenant's equipment.
1.2 Construction of Tenant Improvements. The obligation of Landlord to
perform the work and supply the necessary materials and labor to prepare the
Leased Premises for occupancy ("Tenant Improvements") are described in detail on
Exhibit "C". Landlord and Tenant shall do all acts required of them as described
on Exhibit "C", expend all funds as described on Exhibit "E" and shall perform
or have the work performed promptly and diligently in a first class and
workmanlike manner.
1.3 Construction of Building. If the Leased Premises and the Building in
which the Leased Premises are located are not currently in existence, Landlord
shall, at its own cost and expense, construct and complete such Building and
cause all of the construction which is to be performed by it in completing the
Building and performing its work as set forth on Exhibit "C", to be
substantially completed, and the Leased Premises ready for Tenant to install its
fixtures and equipment and to perform its other work as described on Exhibit "C"
as soon as reasonably possible, but in no event later than eighteen (18) months
after the date of this Lease. In the event that Landlord's obligation of
construction has not been fulfilled upon the expiration of said eighteen (18)
month period, Tenant shall have the right to exercise any right or remedy
available to it under this Lease, including the right to terminate this Lease.
Landlord shall be obligated to pay for any increase in the actual cost of
construction over and above the construction costs as specified in Exhibit "G-
1", unless such increase shall be the result of a requested change or upgrade of
the floor plan (Exhibit "B"), initiated by the Tenant, its agents or assigns.
Any change in the Buildings requested by Tenant, its agents or assigns that
results in an increase in the cost or time to complete the Buildings shall not
be performed unless Tenant executes an amendment to this Lease and Exhibit "G-
1" which will modify the Project Budget and the Tenant's lease rate.
2
<PAGE>
1.4 Changes to Building. Landlord hereby reserves the right at any
time and from time to time to make minor changes, alterations or additions
to the Building or to the Property, provided Landlord gives Tenant
reasonable prior written notice of intent to do so, and the proposed
changes or alterations will have no material impact on the Tenant's ability
to conduct its business in the Leased Premises or, except as required by
applicable law or good engineering practices, the agreed upon design.
1.5 Economic Incentives. Landlord and Tenant shall share equally any
economic benefits or tax rebates received from a Redevelopment Area or
similar incentive program granted to the Landlord exclusively for the
building by the City of South Jordan or Salt Lake County. This agreement to
share economic incentives expires when the Redevelopment Area or similar
program expires.
II. TERM
2.1 Length of Term. The term of this Lease shall be for a period of
Ten (10) years plus the partial calendar month, if any, occurring after the
Commencement Date (as hereinafter defined) if the Commencement Date occurs
other than on the first day of a calendar month.
2.2 Commencement Date; Obligation to Pay. The term of this Lease and
Tenant's obligation to pay rent hereunder shall commence on the first to
occur of the following dates ("Commencement Date"):
(a) The date Tenant occupies the Leased Premises and conducts
business.
(b) The Monday that is a minimum of Fourteen (14) calendar days after
the Landlord, notified Tenant in writing that Landlord's construction
obligations respecting the Leased Premises have been fulfilled and that the
Leased Premises are ready for occupancy.
The Commencement Date of the Lease shall not occur until each of
the following have occurred; (i) the Buildings, with the exception of minor
punch list items, are Substantially Completed as defined in AIA Document
A201-1997 in accordance with Building Plans; (ii) the Tenant Improvements,
with the exception of minor punch list items, are substantially completed
in accordance with Tenant's Plans; (iii) Landlord has obtained approval
from South Jordan City for occupancy for the Building and the Leased
Premises; (iv) the Building Systems, utilities and life safety systems
serving the Leased Premises are fully operational; (v) Tenant has access to
its allotment of parking spaces; and (vi) Landlord has tendered possession
of the Leased Premises to Tenant. Exhibit "D" acknowledges the Commencement
Date of the Lease.
3
<PAGE>
2.3 Construction of Leased Premises. Landlord shall construct or
cause to be constructed the improvements to the Leased Premises (see
Exhibit "C -Work Letter"). Landlord shall itemize each part of the
construction and its associated cost. Landlord shall pay for $843,000
($5.00 per rentable square foot) of the cost listed (the "Tenant
Allowance") and subject to the provisions of Exhibit "C" including
specifically but without limitation Paragraph 3 of Exhibit "C" Tenant shall
be responsible for the costs that exceed the Tenant Allowance as shown on
Exhibit "E". Any special decorator items, equipment, furniture or
furnishings not designated on Exhibit "E", shall be the sole cost of
Tenant.
The Construction of Leased Premises as designated in this section
2.3, in Exhibit "C", and Exhibit "E", shall be in accordance with the
minimum Building standard finishes described in Exhibit "F".
2.4 Acknowledgment of Commencement Date. Landlord and Tenant shall
execute a written acknowledgment of the Commencement Date in the form
attached hereto as Exhibit "D".
2.5 Right to Lease Additional Space. As specified in Section 1.1(a)
of this Lease, Landlord is constructing approximately 31,400 rentable
square feet in excess of that Leased by Tenant. Landlord grants Tenant the
right to lease the space on the following terms and conditions:
Tenant shall have the exclusive right to lease the 31,400
rentable square feet through February 28, 2001. Thereafter, Landlord may
lease the space to Tenant or other tenants. If Tenant leases additional
space, it shall be under the same terms and conditions as the Leased
Premises.
(b) In the event that the 31,400 square feet is leased to other
tenants, Landlord warrants that any renewal options to the other tenants
shall be subordinated to Tenant's right to lease the space at the end of
the other tenant's lease term.
2.6 Renewal Option. Tenant shall have the option to renew the Lease
for two (2) terms of five years each.
III. BASIC RENTAL PAYMENTS
3.1 Basic Annual Rent. Tenant agrees to pay to Landlord as basic
annual rent (the "Basic Annual Rent") at such place as Landlord may
designate, without prior demand therefore and without any deduction or set
off whatsoever, the sum of Two Million Eight Hundred Forty Nine Thousand
Three Hundred Forty and 00/100 Dollars ($2,849,340.00). Said Basic Annual
Rent shall be due and payable in twelve (12) equal monthly installments to
be paid in advance on or before the first day of each calendar month during
the term of the Lease. The Basic Annual Rent shall escalate at the
beginning of the 2/nd/ lease year and
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each year thereafter using a 3% annually compounded rate. Simultaneously
with the execution hereof, Tenant has paid to Landlord the first month's
rent, receipt whereof is hereby acknowledged, subject to collection,
however, if made by check. In the event the Commencement Date occurs on a
day other than the first day of a calendar month, then rent shall be paid
on the Commencement Date for the initial fractional calendar month prorated
on a per-diem basis (based upon a thirty (30) day month). The amounts of
Basic Annual Rent set forth above shall be adjusted upon completion of the
building pursuant to changes resulting from the application of the Rent
Formula (Exhibit G).
3.2 Additional Monetary Obligations. Tenant shall also pay as rental
(in addition to the Basic Annual Rent) all other sums of money as shall
become due and payable by Tenant to Landlord under this Lease. Landlord
shall have the same remedies in the case of a default in the payment of
said other sums of money as are available to Landlord in the case of a
default in the payment of one or more installments of Basic Annual Rent.
3.3 Basic Annual Rent During Renewal Term. The Basic Annual Rent
shall escalate by 3% at the start of each year of the renewal term(s).
IV. ADDITIONAL RENT
4.1 Definitions. It is the intent of both parties that the Basic
Annual Rent herein specified shall be absolutely net to the Landlord
throughout the term of this Lease, and that all costs, expenses and
obligations relating to the Building, Property and/or Leased Premises which
may arise or become due during the term shall be paid by Tenant in the
manner hereafter provided.
For purposes of this Part IV and the Lease in general, the
following words and phrases shall have the meanings set forth below:
(a) "Basic Costs" shall mean all actual costs and expenses incurred
by Landlord in connection with the ownership, operation, management and
maintenance of the Building and Property and related improvements located
thereon (the "Improvements"), including, but not limited to, all expenses
incurred by Landlord as a result of Landlord's compliance with any and all
of its obligations under this Lease (or under similar leases with other
tenants) other than the performance by Landlord of its work under Section
2.3 of this Lease or similar provisions of leases with other tenants. In
explanation of the foregoing, and not in limitation thereof, Basic Costs
shall include: all real and personal property taxes and assessments
(whether general or special, known or unknown, foreseen or unforeseen) and
any tax or assessment levied or charged in lieu thereof, whether assessed
against Landlord and/or Tenant and whether collected from Landlord and/or
Tenant; South Jordan City Special Improvement District assessments; snow
removal, trash removal, common area utilities, Utah Power & Light Company
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Finanswer service charge, cost of equipment or devices used to conserve or
monitor energy consumption, supplies, insurance, license, permit and
inspection fees, cost of services of independent contractors, cost of
compensation (including employment taxes and fringe benefits) of all
persons who perform regular and recurring duties connected with day-to-day
operation, maintenance, repair, and replacement of the Building, its
equipment and the adjacent walk and landscaped area (including, but not
limited to janitorial, scavenger, gardening, security, parking, elevator,
painting, plumbing, electrical, mechanical, carpentry, window washing,
structural and roof repairs and reserves, signing and advertising), but
excluding persons performing services not uniformly available to or
performed for substantially all Building tenants; and rental expense or a
reasonable allowance for depreciation of personal property used in the
maintenance, operation and repair of the Building. The foregoing
notwithstanding, Basic Costs shall not include depreciation on the Building
and Improvements; amounts paid toward principal or interest of loans of
Landlord; nor "Direct Costs" as defined in Section 4.1(b) below.
(b) "Direct Costs" shall mean all actual costs and expenses incurred
by Landlord in connection with the operation, management, maintenance,
replacement, and repair of tenants' premises, including but not limited to
janitorial services, maintenance, repairs, supplies, utilities, heating,
ventilation, air conditioning, and property management fees, which property
management fees shall be equal to four and 23/100 percent (4.23%) of the
Basic Annual Rent. Tenant shall pay its share of Direct Costs of the
Building. The amount of Tenant's Direct Costs shall be obtained by
multiplying the expenses in question by a fraction, the numerator of which
shall be the gross rentable square footage of the premises, and the
denominator of which shall be the average rentable square feet leased and
occupied by tenants of the Building during any given year in which the
Direct Costs are then being calculated.
Landlord will cause meters to be installed to measure actual
electrical and ventilation/air conditioning usage by Tenant. Tenant shall
pay Landlord monthly, as additional rent, the estimated costs of such
metered electrical and ventilation/air conditioning usage. At least
annually, Landlord shall reconcile the estimated costs of these metered
services and shall show the actual costs and shall apply any appropriate
credits or debits from the previous year's actual usage. All such billings
will be computed at the actual kilowatt hourly rate billed to the Landlord
by the public utility companies for each respective period, including
taxes, but without any additional mark-up or service charges. The costs of
ventilation/air conditioning usage by Tenant shall be equitably apportioned
among all building tenants according to usage. Tenant shall promptly pay to
Landlord the amount due on each monthly billing received for and throughout
the term of the Lease.
(c) "Estimated Costs" shall mean the projected amount of Tenant's
Direct Costs and Tenant's Proportionate Share of Basic Costs, excluding the
costs of electricity and ventilation/air conditioning provided to the
Buildings, if separately metered. The Estimated Costs for the calendar year
in which the Lease commences are $950,000 excluding the costs of
electricity and ventilation/air conditioning to the
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Buildings, and are not included in the Basic Annual Rent. The Estimated
Costs are based on 200,000 rentable square feet and a $4.75 per rentable
square foot cost. If the Estimated Costs as of the date Tenant takes
occupancy are greater than Estimated Costs at the time this Lease is
executed, the Estimated Costs shall be increased to equal the Estimated
Costs as of the date of Tenant's occupancy.
(d) "Tenant's Proportionate Share of Basic Costs" shall mean the
percentage of the Estimated Costs provided to the Buildings derived by
multiplying the Estimated Costs times the Tenant's Proportionate Share.
4.2 Report of Basic Costs and Statement of Estimated Costs.
(a) After the expiration of each calendar year occurring during the
term of this Lease, Landlord shall furnish Tenant a written statement of
the Tenant's Proportionate Share of Basic Costs and the Tenant's Direct
Costs occurring during the previous calendar year. The written statement
shall specify the amount by which Tenant's Direct Costs and Proportionate
Share of Basic Costs exceeds or is less than the amounts paid by Tenant
during the previous calendar year pursuant to Section 4.3(b) below.
(b) At the same time specified in Section 4.2(a) above, Landlord
shall furnish Tenant a written statement of the Estimated Costs for the
then current calendar year.
4.3 Payment of Additional Rent. Tenant shall pay as additional rent
("Additional Rent") Tenant's Direct Costs and Tenant's Proportionate Share
of Basic Costs. The Additional Rent shall be paid as follows:
(a) With each monthly payment of Basic Annual Rent due pursuant to
Section 3.1 above, Tenant shall pay to Landlord, without offset or
deduction, one-twelfth (l/12th) of the Estimated Costs as defined in
Section 4.1(c).
(b) Within thirty (30) days after delivery of the written statement
referred to in section 4.2(a) above, Tenant shall pay to Landlord the
amount by which Tenant's Direct Costs and Proportionate Share of Basic
Costs, as specified in such written statements, exceed the aggregate of
Estimated Costs actually paid by Tenant for the year at issue. Payments by
Tenant shall be made pursuant to this Section 4.3(b) notwithstanding that a
statement pursuant to Section 4.2(a) is furnished to Tenant after the
expiration of the term of this Lease.
(c) If the annual statement of costs indicates that the Estimated
Costs paid by Tenant pursuant to Section 4.3(a) above for any year exceeded
Tenant's Direct Costs and Tenant's Proportionate Share of Basic Costs for
the same year, Landlord, at Tenant's election, shall either (i) promptly
pay the amount of such
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excess to Tenant, or (ii) apply such excess against the next installment of
Basic Annual Rental or Additional Rent due hereunder.
4.4 Exclusions. Notwithstanding anything to the contrary contained
herein, Basic Costs and Direct Costs shall not include: 1) original
construction costs of the Building; 2) interest and amortization of funds
borrowed by Landlord, whether secured or unsecured; 3) reserves for
repairs, maintenance and replacements (unless approved by Tenant); 4) costs
or expenses associated with leasing space in the Building or the sale of
any interest in the Building, including, without limitation, advertising
and marketing, commissions or any amounts paid for or on behalf of a tenant
such as space planning, moving costs, rental and other tenant concessions;
5) ground rents; 6) salaries, wages or other compensations paid to
employees of any property management organization whose salaries are deemed
covered by a management fee (i.e., property manager, accounting or clerical
personnel); 7) amounts paid to any partners, shareholder, officer or
director of Landlord, for salary or other compensation; 8) repairs or other
work occasioned by fire, windstorm, or other casualty covered by building
insurance; 9) expenses for repairs, replacements or improvements arising
from the initial construction of the Building to the extent such expenses
are either (i) reimbursed to Landlord by virtue of warranties from
contractors or suppliers or (ii) result by reason of deficiencies in design
or workmanship except conditions resulting from ordinary wear and tear; 10)
Landlord's general overhead except to the extent it is expended in direct
connection with management and operation of the Building of which the
Leased Premises forms a part; 11) accounting or legal fees incurred in
tenant disputes, or in procuring tenants, or for fees not related to the
operation and maintenance of the Building but personal to Landlord; 12)
advertising and promotional activities; 13) leasing commissions, attorney's
fees, costs, and disbursements and other expenses incurred in connection
with negotiations or disputes with tenant, other occupants, or prospective
tenant or other occupants; 14) all costs shall be "net" only and shall be
reduced by the amount of insurance, condemnation awards or other
reimbursement, recoupment, payment, discount, warrantee, guarantee or
allowance received by Landlord; 15) costs of renovating or otherwise
improving space for new tenants or in renovating space vacated by any
tenant or any other work which Landlord performs for any tenant; 16) costs
relating to maintaining Landlord's existence, either as a corporation,
partnership or other entity, such as trustee's fees, annual fees,
partnership organization or administration expenses, deed recordation
expenses, legal and accounting fees (other than with respect to Building
operations); 17) capital improvements to the Building, except those items
that need replacement due to Tenant's occupancy of the Leased Premises; 18)
depreciation of the Building or any equipment, machinery, fixtures or
improvements therein; 19) any costs related to Landlord's compliance in the
Building common areas with the Americans with Disabilities Act; 20) costs
incurred due to Landlord's violation of any term or condition of this Lease
or any law, ordinance or governmental rule or regulation affecting the
Building; 21) costs for acquisitions of sculpture, paintings or other
objects of art, unless approved by Tenant; 22) title insurance, automobile
insurance, key man and other life insurance, long-term disability insurance
and health, accident and sickness insurance, excepting only group plans
providing reasonable benefits to persons of the grade of building manager
and below employed in the operation and management of the Building
(provided that the cost of
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insurance with respect to any such employee dividing his or her time
between the Building and any other buildings shall be apportioned pro rate
among all such buildings); 23) any expense that would not be considered a
normal maintenance or operating expense; 24) any inheritance, estate,
succession, transfer, gift tax or capital levy shall not be included in
Real Estate Taxes; and 25) costs of any items for which Landlord receives
reimbursement from insurance proceeds or a third party. Insurance proceeds
shall be excluded from Operating Expenses in the year in which they are
received, except that any deductible amount under any insurance policy
shall be included within Operation Expenses.
4.5 Resolution of Disagreement. Every statement given by Landlord
pursuant to Section 4.2 shall be conclusive and binding upon Tenant unless
within ninety (90) days after the receipt of such statement Tenant shall
notify Landlord that it disputes the correctness thereof, specifying the
particular respects in which the statement is claimed to be incorrect. If
such dispute shall not have been settled by agreement, the parties hereto
shall submit the dispute to arbitration within ninety (90) days after
Tenant's receipt of such statement. Pending the determination of such
dispute by agreement or arbitration as aforesaid, Tenant shall, within
thirty (30) days after receipt of such statement, pay Additional Rent in
accordance with Landlord's statement, and such payment shall be without
prejudice to Tenant's position. If the dispute shall be determined in
Tenant's favor, Landlord shall forthwith pay Tenant the amount of Tenant's
overpayment of rents resulting from compliance with Landlord's statement.
Landlord agrees to grant Tenant reasonable access to Landlord's books and
records for the purpose of verifying operating expenses incurred by
Landlord.
4.6 Landlord Duty to Keep Books for Audit. Landlord agrees to keep
accurate books and records reflecting Basic Costs and Direct Costs and to
make such records, and reasonable supporting detail available for
examination during normal business hours upon reasonable notice by Tenant
and its representatives; provided that any such examination or audit shall
be at Tenant's sole cost and expense, unless the audit discloses a
discrepancy of 10% or more per line item then Landlord shall be responsible
for the cost of the audit. In addition, if the audit discloses any
overpayment by Tenant, the overpayment shall be promptly repaid to Tenant
together with interest at the rate of two percent (2%) above prime per
annum.
Landlord shall, at all times during the entire term and its
options, operate, manage, maintain and repair the Building in a lawful,
efficient and businesslike manner in accordance with sound property
management practices consistent with comparable first class buildings in
the area. Landlord shall not expend more than the reasonable and fair
market value for any goods, services, labor or materials purchased or
provided by Landlord in connection with the management, operation
maintenance and repair of the Building. Tenant shall only be liable for
Basic Costs and Direct Costs incurred by Tenant which are attributable to
the term of this Lease or such time as Tenant occupies the Leased Premises,
whichever is greater.
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4.7 Limitations. Nothing contained in this Part IV shall be construed
at any time so as to reduce the monthly installments of Basic Annual Rent
payable hereunder below the amount set forth in Section 3.1 of this Lease.
V. SECURITY DEPOSIT
5.1 Deposit. Intentionally Deleted.
5.2 Default. Intentionally Deleted
VI. USE
6.1 Use of Leased Premises. The Leased Premises shall be used and
occupied by Tenant for general office purposes only which shall include
computer room, training, conferences, and direct marketing and for no other
purpose whatsoever without the prior written consent of Landlord.
6.2 Prohibition of Certain Activities or Uses. The Tenant shall not
do or permit anything to be done in or about, or bring or keep anything in
the Leased Premises which is prohibited by this Lease or will, in any way
or to any extent:
(a) Adversely affect any fire, liability or other insurance policy
carried with respect to the Building, the Improvements or any of the
contents of the Building (except with Landlord's express written
permission, which will not be unreasonably withheld, but which may be
contingent upon Tenant's agreement to bear any additional costs, expenses
or liability for risk that may be involved).
(b) Obstruct or interfere with any right of any other tenant or
occupant of the Building or injure or annoy such persons;
(c) Conflict with or violate any law, statute, ordinance, rule,
regulation or requirement of any governmental unit, agency or authority
(whether existing or enacted as promulgated in the future, known or
unknown, foreseen or unforeseen).
(d) Adversely overload the floors or otherwise damage the structural
soundness of the Leased Premises or Building, or any part thereof (except
with Landlord's express written permission, which will not be unreasonably
withheld, but which may be contingent upon Tenant's agreement to bear any
additional costs, expenses or liability for risk that may be involved).
6.3 Affirmative Obligations with Respect to Use.
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(a) Tenant will comply with all governmental laws, ordinances,
regulations, and requirements, now in force or which hereafter may be in
force, of any lawful governmental body or authorities having jurisdiction
over the Leased Premises, will keep the Leased Premises and every part
thereof in a clean, neat, and orderly condition, free of objectionable
noise, odors, or nuisances, will in all respects and at all times fully
comply with all health and policy regulations, and will not suffer, permit,
or commit any waste.
(b) At all times during the term hereof, Tenant shall, at Tenant's
sole cost and expense, comply with all statutes, ordinances, laws, orders,
rules, regulations and requirements of all applicable federal, state,
county, municipal and other agencies or authorities, now in effect or which
may hereafter become effective, which shall impose any duty upon Landlord
or Tenant with respect to the use, occupation or alterations of the Leased
Premises (including, without limitation, all applicable requirements of the
Americans with Disabilities Act of 1990 and all other applicable laws
relating to people with disabilities, and all rules and regulations which
may be promulgated thereunder from time to time and whether relating to
barrier removal, providing auxiliary aids and services or otherwise) and
upon request of Landlord shall deliver evidence thereof to Landlord.
6.4 Suitability. Tenant acknowledges that except as expressly set
forth in this Lease, neither Landlord nor any other person has made any
representation or warranty with respect to the Leased Premises or any other
portion of the Building, and that no representation has been made or relied
on with respect to the suitability of the Leased Premises or any other
portion of the Building or Improvements for the conduct of Tenant's
business. The Leased Premises, Building and Improvements (and each and
every part thereof) shall be deemed to be in satisfactory condition subject
to the "punch list" prepared at Substantial Completion of the Building and
the Leased Premises. Landlord shall be responsible for correcting any
latent defects during the two (2) year warranty period following Tenant
occupancy, normal wear and tear excepted.
6.5 Taxes. Tenant shall pay all taxes, assessments, charges, and fees
which during the term hereof may be imposed, assessed or levied by any
governmental or public authority against or upon Tenant's use of the Leased
Premises or any personal property or fixture kept or installed therein by
Tenant and on the value of leasehold improvements to the extent that the
same exceed Building allowances.
VII. UTILITIES AND SERVICE
7.1 Obligation of Landlord. During the term of this Lease the
Landlord agrees to cause to be furnished to the Building 24 hours per day,
365 days per year the following utilities and services, the cost and
expense of which shall be included in Basic and/or Direct Costs:
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(a) Electricity, water, gas and sewer service.
(b) Telephone connection, but not including telephone stations and
equipment (it being expressly understood and agreed that Tenant shall be
responsible for the ordering and installation of telephone lines and
equipment which pertain to the Leased Premises).
(c) Elevator service.
7.2 Obligation of Landlord. During the term of this Lease the
Landlord agrees to cause to be furnished to the Leased Premises during
customary business hours (7:00 a.m. to 6:00 p.m. Monday through Friday and
8:00 a.m. to l:00 p.m. on Saturday) and during generally recognized
business days the following services, the cost and expense of which shall
be included in Basic and/or Direct Costs:
(a) Heat and air-conditioning to comply with ASHRAE 1989, so that the
temperature does not exceed 80 (Degrees) F in summer nor fall below
68(Degrees) F in winter. The parties agree and understand that the above
heat and air-conditioning will be provided Monday through Friday from 7:00
a.m. to 6:00 p.m. and Saturday from 8:00 a.m. to 1:00 p.m.
(b) Janitorial service in accordance with specifications attached
hereto as Exhibit "H".
(c) Security (including the lighting of common halls, stairways,
entries and restrooms) to such extent as is usual and customary in similar
buildings in Salt Lake County, Utah.
(d) Snow removal service.
(e) Landscaping and groundskeeping service.
7.3 Tenant's Obligations. Tenant shall arrange for and shall pay the
entire cost and expense of all telephone stations, equipment and use
charges, electric light bulbs (but not fluorescent bulbs used in fixtures
originally installed in the Leased Premises) and all other materials and
services not expressly required to be provided and paid for pursuant to the
provisions of Section 7.1 above.
7.4 Additional Limitations.
(a) Tenant will not, without the written consent of Landlord, which
consent shall not be unreasonably withheld, use any apparatus or device on
the Leased Premises (including but without limitation thereto, electronic
data processing machines, punch card machines or machines using current in
excess of 110 volts) which will in any way or to any extent increase the
amount of electricity or water usually furnished or supplied for use on the
Leased Premises for the use
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designated in Section 6.1 above, nor connect with electrical current,
except through existing electrical outlets in the Leased Premises, or water
pipes, any apparatus or device, for the purposes of using electric current
or water.
(b) If Tenant shall require water or electric current in excess of
that usually furnished or supplied for use of the Leased Premises, or for
purposes other than those designated in Section 6.l above, Tenant shall
first procure the consent of Landlord for the use thereof. If the Building
is a multi-tenant building, the Landlord's consent may require a water
meter or electric current meter to be installed in the Leased Premises, so
as to measure the amount of water and/or electric current consumed for any
such use. The cost of such meters and of installation maintenance, and
repair thereof shall be paid for by Tenant and Tenant agrees to pay
Landlord promptly upon demand by Landlord for all such water and electric
current consumed as shown by said meters, at the rates charged for such
service by the City in which the Building is located or the local public
utility, as the case may be, furnishing the same, plus any additional
expense incurred in keeping account of the water and electric current so
consumed.
(c) If and where heat generating machines devices are used in the
Leased Premises which affect the temperature otherwise maintained by the
air conditioning system, Landlord reserves the right to install additional
or supplementary air conditioning units for the Leased Premises, and the
entire cost of installing, operating, maintaining and repairing the same
shall be paid by Tenant to Landlord promptly after demand by Landlord.
7.5 Limitation on Landlord's Liability. Landlord shall not be liable
for and Tenant shall not be entitled to terminate this Lease or to
effectuate any abatement or reduction of rent by reason of Landlord's
failure to provide or furnish any of the foregoing utilities or services if
such failure was reasonably beyond the control of Landlord. In no event
shall Landlord be liable for loss or injury to persons or property,
however, arising or occurring in connection with or attributable to any
failure to furnish such utilities or services even if within the control of
Landlord. Notwithstanding anything to the contrary contained herein, if
Tenant cannot reasonably use any portion of the Leased Premises for
Tenant's normal business operations by reason of any interruption in
services within Landlord's reasonable control and such condition exists for
three (3) consecutive business days, then Tenant's rent shall be equitably
abated from the date of such occurrence for that portion of the Leased
Premises that Tenant is unable to occupy until such service is restored and
Tenant is able to use the Leased Premises.
Notwithstanding the above, in the event Landlord needs to perform
work in the Leased Premises which will interfere with the Tenant's normal
course of business, then Landlord shall use its best efforts to perform
such work and clean up the area after Tenant's business hours and prior to
the Tenant's next day of business.
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VIII. MAINTENANCE AND REPAIRS; ALTERATIONS; ACCESS
8.1 Maintenance and Repairs by Landlord. Landlord shall maintain in
good order, condition and repair the Building, Base Building Systems, and
Improvements in accordance with Class A office buildings in suburban Salt
Lake City, except the Leased Premises and those other portions of the
Building leased, rented or otherwise occupied by persons not affiliated
with the Landlord. Base Building Systems includes, but is not limited to,
the Building enclosure, the roof, HVAC system, plumbing, sprinklers, fire
alarm, elevators, and electrical systems (which may be routed through the
Leased Premises). Landlord shall supply normal janitorial and cleaning
services reasonably required to keep the Leased Premises and the Building
and Improvements in a clean, sanitary and orderly condition. The cost and
expense of this maintenance and repair by Landlord shall be included in
Direct and/or Basic Costs.
8.2 Maintenance and Repairs by Tenant. Tenant, at Tenant's sole cost
and expense and without prior demand being made, shall maintain the Leased
Premises in good order, condition and repair, and will be responsible for
the painting, carpeting or other interior design work of the Leased
Premises beyond the initial construction phase as specified in Section 2.3
and Exhibit "C" and "E" of the Lease and shall maintain all equipment and
fixtures installed by Tenant. If repainting or recarpeting is required and
authorized by Tenant, the cost for such are the sole obligation of Tenant
and shall be paid for by Tenant immediately following the performance of
said work and a presentation of an invoice for payment.
8.3 Alterations. Except as set forth on Exhibit "C" attached hereto,
Tenant shall not make or cause to be made any alterations, additions or
improvements or install or cause to be installed any fixtures, signs, floor
coverings, interior or exterior lighting, plumbing fixtures, or shades or
awnings, or make any other changes to the Leased Premises without first
obtaining Landlord's written approval, which approval shall not be
unreasonably withheld. Tenant shall present to the Landlord plans and
specifications for such work at the time approval is sought. In the event
Landlord consents to the making of any alterations, additions, or
improvements to the Leased Premises by Tenant, the same shall be made by
Tenant at Tenant's sole cost and expense. All such work with respect to any
alterations, additions, and changes shall be done in a good and workmanlike
manner and diligently prosecuted to completion such that, except as
absolutely necessary during the course of such work, the Leased Premises
shall at all times be a complete operating unit. Any such alterations,
additions, or changes shall be performed and done strictly in accordance
with all laws and ordinances relating thereto. In performing the work or
any such alterations, additions, or changes, Tenant shall have the same
performed in such a manner as not to obstruct access to any portion of the
Building. Any alterations, additions, or improvements to or of the Leased
Premises, including, but not limited to, wallcovering, paneling, and built-
in cabinet work, but excepting movable furniture and equipment, shall at
once become a part of the realty and shall be surrendered with the Leased
Premises unless Landlord otherwise elects at the end of the term hereof.
Notwithstanding the above, decorating items shall not require notice to, or
consent of Landlord. In the event Landlord does not respond
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to Tenant's written request for consent within ten (10) days, consent shall
be deemed given. Landlord shall not charge any supervisory fee for
alterations.
8.4 Landlord's Access to Leased Premises. Landlord shall have the
right to place, maintain, and repair all utility equipment of any kind in,
upon, and under the Leased Premises as may be necessary for the servicing
of the Leased Premises and other portion of the Building. Landlord shall
upon providing adequate notice to Tenant, also have the right to enter the
Leased Premises at all times to inspect or to exhibit the same to
prospective purchasers, mortgagees, tenants, and lessees, and to make such
repairs, additions, alterations, or improvements as Landlord may deem
desirable. Landlord shall be allowed to take all material upon said Leased
Premises that may be required therefor without the same constituting an
actual or constructive eviction of Tenant in whole or in part and the rents
reserved herein shall in no wise abate while said work is in progress by
reason of loss or interruption of Tenant's business or otherwise, and
Tenant shall have no claim for damages. During the three (3) months prior
to expiration of this Lease or of any renewal term, Landlord may place upon
the Leased Premises "For Lease" or "For Sale" signs which Tenant shall
permit to remain thereon.
IX. ASSIGNMENT
9.1 Assignment Prohibited. Tenant shall not transfer, assign,
mortgage, or hypothecate this Lease, in whole or in part, or permit the use
of the Leased Premises by any person or persons other than Tenant, or
sublet the Leased Premises, or any part thereof, without the prior written
consent of Landlord in each instance, which consent shall not be
unreasonably withheld, provided sufficient information is provided to
Landlord to accurately represent the financial condition of those to whom
this Lease will be transferred, assigned, mortgaged, or hypothecated. Such
prohibition against assigning or subletting shall include any assignment or
subletting by operation of law. Notwithstanding anything to the contrary
contained herein, Tenant may assign this lease or sublet all or any portion
of the Leased Premises, with Landlord's written consent, which shall not be
unreasonably withheld, to any corporation or other business entity which
(1) controls, is controlled by, or is under common control with Tenant or
(2) is a successor corporation related to Tenant by merge, consolidation,
non-bankruptcy reorganization or government action (herein referred to as a
"Related Corporation") for any of the purposes permitted to Tenant, subject
however to compliance with Tenant's obligations under this lease. Any such
assignment or subletting shall not be deemed to relieve, release, impair or
discharge any of Tenant's obligations thereunder. For the purposes hereof,
"control" shall be deemed to mean ownership of not less than fifty percent
(50%) of all of the voting stock of such corporation or not less than fifty
percent (50%) of all of the legal and equitable interest in any other
business entities. The sale of Tenant's capital stock through any public
exchange shall not be deemed a sublease, assignment or transfer of this
Lease.
9.2 Consent Required:
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(a) Any assignment or subletting without Landlord's consent shall be
void, and shall constitute a default hereunder which, at the option of
Landlord, shall result in the termination of this Lease or exercise of
Landlord's other remedies hereunder. Consent to any assignment or
subletting shall not operate as a waiver of the necessity for consent to
any subsequent assignment or subletting, and the terms of such consent
shall be binding upon any person holding by, under, or through Tenant.
(b) Landlord shall have no obligation to consent to the proposed
sublease or assignment if the proposed sublessee or assignee or its
business is or may be subject to compliance with additional requirements of
the law, including any related rules or regulations, commonly known as the
"Americans with Disabilities Act of l990" or similar state or local laws
relating to persons with disabilities beyond those requirements which are
applicable to the tenant desiring to so sublease or assign, unless Tenant
pays the cost of the compliance with such additional rules or regulations.
9.3 Landlord's Right in Event of Assignment If this Lease is assigned
or if the Leased Premises or any portion thereof are sublet or occupied by
any person other than the Tenant, Landlord may collect rent and other
charges from such assignee or other party, and apply the amount collected
to the rent and other charges reserved hereunder, but such collection shall
not constitute consent or waiver of the necessity of consent to such
assignment, subleasing, or other transfer, nor shall such collection
constitute the recognition of such assignee, sublessee, or other party as
the Tenant hereunder or a release of Tenant from the further performance of
all of the covenants and obligations, including obligation to pay rent, of
Tenant herein contained. In the event that Landlord shall consent to a
sublease or assignment hereunder, Tenant shall pay to Landlord reasonable
fees, not to exceed $100.00, incurred in connection with processing of
documents necessary to the giving of such consent.
9.4 Sublease and Assignments Rights The above paragraphs of this
Section 9 not withstanding, Tenant shall have the right to sublet or assign
all or part of the Leased Premises without Landlord's prior consent to any
and all affiliates, subsidiaries, sister companies, or any entity in which
Tenant or Tenant's parent company has a controlling interest, provided
Tenant is not relieved of its obligations under the lease.
For non-affiliated companies, Landlord shall not unreasonably
withhold, condition or delay the approval of any and all proposed sublease
or assignment, provided proposed sublessor has the same or better financial
condition as Tenant. Tenant shall retain any and all profits from a
sublease or assignment. Tenant's foregoing Rights of Sublease and
Assignment shall apply to the initial lease term and any renewal terms.
9.5 Right to Sublet and Retain Profit. Any profits from subleasing
shall be retained by Tenant. Landlord may not withhold its consent on the
grounds that the proposed assignee or sublessee is an occupant of the
building or office park. Landlord shall
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provide sublessee and/or assignees all rights and services provided for in
Tenant's Lease. Landlord shall not be entitled to any sublease profits nor
shall Landlord have a right of recapture.
X. INDEMNITY
10.1 Indemnification By Landlord and Tenant. From and after the
Commencement Date, Landlord and/or Tenant shall defend and indemnify the
other and save the other harmless from and against any and all suits,
actions, damage and claims, liability and expense in connection with loss
of life, bodily or personal injury, or property damage arising from or out
of any occurrence in, upon, at or from the Leased Premises, or occasioned
wholly or in part by any act or omission of the other or its agents,
contractors, employees, servants, invitees, licensees or concessionaires.
All insurance policies carried by Tenant and/or Landlord shall include a
waiver of subrogation endorsement which specifies that the insurance
carrier(s) will waive any right of subrogation against Tenant and/or
Landlord arising out of any insurance claim.
10.2 Release of Landlord. Landlord shall not be responsible or
liable at any time for any loss or damage to Tenant's personal property or
to Tenant's business, including any loss or damage to either the person or
property of Tenant that may be occasioned by or through the acts or
omissions of persons occupying adjacent, connecting, or adjoining space.
Tenant shall store its property in and shall use and enjoy the Leased
Premises and all other portions of the Building and Improvements at its own
risk, and hereby releases Landlord, to the full extent permitted by law,
from all claims of every kind resulting in loss of life, personal or bodily
injury, or property damage.
10.3 Notice. Tenant shall give prompt notice to Landlord in case of
fire or accidents in the Leased Premises or in the Building of which the
Leased Premises are a part or of defects therein or in any fixtures or
equipment.
10.4 Litigation. In case Landlord or Tenant, without fault on its
part, shall be made a party to any litigation commenced by or against
Tenant or Landlord, then Tenant or Landlord shall protect and hold the
other party harmless and shall pay all costs, expenses, and reasonable
attorneys' fees.
XI. INSURANCE
11.1 Insurance on Tenant's Personal Property and Fixtures. At all
times during the term of this Lease, Tenant shall keep in force at its sole
cost and expense, hazardous insurance with special causes of loss including
theft coverage, insuring against fire and extended coverage risks
(including vandalism and malicious mischief) in companies acceptable to
Landlord, equal to the replacement cost of Tenant's fixtures, furnishings,
equipment, and contents upon the Leased Premises and all improvements or
additions made
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by Tenant to the Leased Premises. The Landlord shall be named as a loss
payer on all such policies.
11.2 Property Coverage. Landlord shall obtain and maintain in force
"All Risk" insurance, including vandalism and malicious mischief, required
to cover any loss or destruction that the Leased Premises herein may
experience during the Lease period and any extension thereof, and
including, at Landlord's discretion, flood and earthquake coverage if
commercially available at reasonable rates. Such insurance shall also
include coverage against loss of rents. Tenant shall pay Landlord, as a
separate consideration, all reasonable costs to purchase the insurance
called for in this paragraph on the Leased Premises.
11.3 Liability Insurance. Tenant shall, during the entire term
hereof, keep in full force and effect a policy of public liability and
property damage insurance with respect to the Leased Premises and the
business operated by Tenant in the Leased Premises, with a combined single
limit for personal or bodily injury and property damage of not less than
$1,000,000.00. The policy shall name Landlord, any person, firms, or
corporations designated by Landlord, and Tenant as insureds, and shall
contain a clause that the insurer will not cancel or materially change the
insurance pertaining to the Leased Premises without first giving Landlord
ten (10) days' written notice. Tenant shall at all times during the term
hereof provide Landlord with evidence of current insurance coverage. All
public liability, property damage, and other liability policies shall be
written as primary policies, not contributing with coverage which Landlord
may carry. All such policies shall contain a provision that Landlord,
although named as an insured, shall nevertheless be entitled to recover
under said policies for any loss occasioned to it, its servants, agents,
and employees by reason of the negligence of Tenant. All such insurance
shall specifically insure the performance by Tenant of the indemnity
agreement as to liability for injury to or death of persons or injury or
damage to property contained in Part X.
11.4 Waiver of Subrogation. Landlord and Tenant waive all rights to
recover against each other, against any other tenant or occupant of the
Building and against the officers, directors, shareholders, partners, joint
venturers, employees, agents, customers, invitees or business visitors of
each other or of any other tenant or occupant of the Building, for any loss
or damage arising from any cause covered by any insurance carried by the
waiving party, to the extent that such loss or damage is actually covered.
No party shall have any right or claim against any of Landlord's
agents for any property damage (whether caused by negligence or the
condition of the Leased Premises or the Building or any part thereof) by
way of subrogation or assignment, Tenant hereby waiving and relinquishing
any such right. Tenant shall obtain a valid certificate of insurance or
similar document from its insurance company verifying this waiver of
subrogation for that property that Tenant chooses to insure. Landlord
hereby waives and relinquishes any right or claim against Tenant from
damages to the Leased Premises or Building by way of subrogation or
assignment by Landlord. At Tenant's request, Landlord
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shall obtain a valid certificate of insurance verifying this waiver of
subrogation for that property Landlord chooses to insure.
11.5 Lender. Any mortgage lender interest in any part of the
Building or Improvements may, at Landlord's option, be afforded coverage
under any policy required to be secured by Tenant hereunder, by use of a
mortgagee's endorsement to the policy concerned.
XII. DESTRUCTION
If the Leased Premises shall be partially damaged by any casualty insured
against under any insurance policy maintained by Landlord, Landlord shall,
upon receipt of the insurance proceeds, repair the Leased Premises and
until repair is complete the Basic Annual Rent and Additional Rent shall
be abated proportionately as to that portion of the Leased Premises
rendered untenantable. Notwithstanding the foregoing, if: (a) the Leased
Premises by reason of such occurrence are rendered wholly untenantable, or
(b) the Leased Premises should be damaged as a result of a risk which is
not covered by insurance, or (c) the Leased Premises should be damaged in
whole or in part during the last six (6) months of the term or of any
renewal hereof, or (d) the Leased Premises or the Building (whether the
Leased Premises are damaged or not) should be damaged to the extent of
fifty percent (50%) or more of the then-monetary value thereof, then and
in any such events, Landlord may either elect to repair the damage or may
cancel this Lease by notice of cancellation within sixty (60) days after
such event and thereupon this Lease shall expire, and Tenant shall vacate
and surrender the Leased Premises to Landlord. Tenant's liability for rent
upon the termination of this Lease shall cease as of the day following
Landlord's giving notice of cancellation. In the event Landlord elects to
repair any damage, any abatement of rent shall end five (5) days after
notice by Landlord to Tenant that the Leased Premises have been repaired.
In the event Landlord elects to repair any damage, Landlord shall give
notice to Tenant within sixty (60) days of the occurrence and such notice
shall include a schedule for the completion of the repairs. Unless this
Lease is terminated by Landlord, Tenant shall repair and refixture the
interior of the Leased Premises in a manner and in at least a condition
equal to that existing prior to the destruction or casualty and the
proceeds of all insurance carried by Tenant on its property and fixtures
shall be held in trust by Tenant for the purpose of said repair and
replacement. During the repair of the Leased Premises, Landlord shall
grant Tenant access to refixture and install furniture as needed.
XIII. CONDEMNATION
13.1 Total Condemnation. If the whole of the Leased Premises shall
be acquired or taken by condemnation proceeding, then this Lease shall
cease and terminate as of the date of title vesting in such proceeding.
13.2 Partial Condemnation. If any part of the Leased Premises shall
be taken as aforesaid, and such partial taking shall render that portion
not so taken unsuitable for the
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business of Tenant, then this Lease shall cease and terminate as aforesaid.
If such partial taking is not extensive enough to render the Leased
Premises unsuitable for the business of Tenant, then this Lease shall
continue in effect except that the Basic Annual Rent and Additional Rent
shall be reduced in the same proportion that the portion of the Leased
Premises (including basement, if any) taken bears to the total area
initially demised and Landlord shall, upon receipt of the award in
condemnation, make all necessary repairs or alterations to the Building in
which the Leased Premises are located, provided that Landlord shall not be
required to expend for such work an amount in excess of the amount received
by Landlord as damages for the part of the Leased Premises so taken.
"Amount received by Landlord" shall mean that part of the award in
condemnation which is free and clear to Landlord of any collection by
mortgage lenders for the value of the diminished fee.
13.3 Landlord's Option to Terminate. If more than twenty percent
(20%) of the Building shall be taken as aforesaid, Landlord may, by written
notice to Tenant, terminate this Lease. If this Lease is terminated as
provided in this Section, rent shall be paid up to the day that possession
is so taken by public authority and Landlord shall make an equitable refund
of any rent paid by Tenant in advance.
13.4 Award. Tenant shall not be entitled to and expressly waives all
claim to any condemnation award for any taking, whether whole or partial
and whether for diminution in value of the leasehold or to the fee,
although Tenant shall have the right, to the extent that the same shall not
reduce Landlord's award, to claim from the condemnor, but not from the
Landlord, such compensation as may be recoverable by Tenant in its own
right for damages to Tenant's business and fixtures.
13.5 Definition. As used in this Part XIII the term "condemnation
proceeding" means any action or proceeding in which any interest in the
Leased Premises is taken for any public or quasi-public purpose by any
lawful authority through exercise of eminent domain or right of
condemnation or by purchase or otherwise in lieu thereof.
XIV. LANDLORD'S RIGHTS TO CURE
14.1 General Right. In the event of breach, default, or
noncompliance hereunder by Landlord, Tenant shall, before exercising any
right or remedy available to it, give Landlord written notice of the
claimed breach, default, or noncompliance. If prior to its giving such
notice Tenant has been notified in writing (by way of Notice of Assignment
of Rents and Leases, or otherwise) of the address of a lender which has
furnished any of the financing referred to in Part XV hereof, concurrently
with giving the aforesaid notice to Landlord, Tenant shall, by certified
mail, return receipt requested, transmit a copy thereof to such lender. For
the thirty (30) days following the giving of the notice(s) required by the
foregoing portion of this section (or such longer period of time as may be
reasonably required to cure a matter which, due to its nature, cannot
reasonably be rectified within thirty (30) days, Landlord shall have the
right to cure the breach, default, or noncompliance involved. If Landlord
has failed to cure a default within said period, any such lender shall
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have an additional thirty (30) days within which to cure the same or, if
such default cannot be cured within that period, such additional time as
may be necessary if within such thirty (30) day period said lender has
commenced and is diligently pursuing the actions or remedies necessary to
cure the breach default, or noncompliance involved (including, but not
limited to, commencement and prosecution of proceedings to foreclose or
otherwise exercise its rights under its mortgage or other security
instrument, if necessary to effect such cure), in which event this Lease
shall not be terminated by Tenant so long as such actions or remedies are
being diligently pursued by said lender. Following the thirty (30) day
notice period to Landlord, Tenant may perform such obligation(s) for or on
behalf of the Landlord or make good any such default after three (3)
business days written notice to Landlord, and any cost incurred by Tenant
shall be repaid by Landlord to Tenant, within 30 days after receipt of an
invoice.
14.2 Mechanic's Lien. Should any mechanic's or other lien be filed
against the Leased Premises or any part thereof by reason of Tenant's acts
or omissions or because of a claim against Tenant, Tenant shall cause the
same to be canceled and discharged of record by bond or otherwise within
ten (10) days after notice by Landlord.
XV. FINANCING; SUBORDINATION
15.1 Subordination. Tenant acknowledges that it might be necessary
for Landlord or its successors or assigns to secure mortgage loan financing
or refinancing affecting the Leased Premises. Tenant also acknowledges that
the lender interested in any given loan may desire that Tenant's interest
under this Lease be either superior or subordinate to the mortgage then
held or to be taken by said Lender. Accordingly, Tenant agrees that at the
request of Landlord at any time and from time to time Tenant shall execute
and deliver to Landlord an instrument, in form reasonably acceptable to
Landlord, whereby Tenant subordinates its interest under this Lease and in
the Leased Premises to any first mortgage or deed of trust covering the
Leased Premises (a "Mortgage"); provided, however, that any such instrument
or subordination executed by Tenant shall provide that so long as Tenant
continues to perform all of its obligations under this Lease its tenancy
shall remain in full force and effect notwithstanding Landlord's default in
connection with the Mortgage concerned or any resulting foreclosure or sale
or transfer in lieu of such proceedings. Tenant shall not subordinate its
interests hereunder or in the Leased Premises to any lien or encumbrance
other than the Mortgages described in and specified pursuant to this
Section 15.1 without the prior written consent of Landlord and of the
lender interested under each Mortgage then affecting the Leased Premises.
Any such unauthorized subordination by Tenant shall be void and of no force
or effect whatsoever.
15.2 Amendment. Tenant recognizes that Landlord's ability from time
to time to obtain construction, acquisition, standing, and/or permanent
mortgage loan financing for the Building and/or the Leased Premises may in
part be dependent upon the acceptability of the terms of this Lease to the
lender concerned. Accordingly, Tenant agrees that from time to time it
shall, if so requested by Landlord and if doing so will not substantially
and adversely
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affect Tenant's economic interests hereunder join with Landlord in amending
this Lease so as to meet the needs or requirements of any lender which is
considering making or which has made a loan secured by a Mortgage affecting
the Leased Premises.
15.3 Attornment. Any sale, assignment, or transfer of Landlord's
interest under this Lease or in the Leased Premises including any such
disposition resulting from Landlord's default under a Mortgage, shall be
subject to this Lease and also Tenant shall attorn to Landlord's successor
and assigns and shall recognize such successor or assigns as Landlord under
this Lease, regardless of any rule of law to the contrary or absence of
privity of contract.
15.4 Financial Information. As a condition to Landlord's acceptance
of this Lease, Tenant shall provide financial information sufficient to
verify to Landlord the financial condition of Tenant. Tenant hereby
represents and warrants that none of such information contains or will
contain any untrue statement of material fact, nor will such information
omit any material fact necessary to make the statements contained therein
misleading or unreliable.
15.5 Non-Disturbance Agreement. Landlord shall obtain a Non-
Disturbance Agreement for the benefit of Tenant from the holders of any
current or future encumbrances against the Building, including but not
limited to, mortgages, deeds or trusts and ground leases and any holders of
interests superior to Tenant. Such non-disturbance agreement shall be in
form and content then used by such holder, but shall provide, among other
things, that so long as Tenant is not in default in the payment of rent or
any other material covenant or condition of this lease, (i) its rights as
Tenant hereunder shall not be affected or terminated, (ii) its possession
of the demised premises shall not be disturbed, (iii) no action or
proceeding shall be commenced to remove or evict Tenant, and (iv) this
lease shall continue in full force and effect notwithstanding the
foreclosure of the mortgage prior to the expiration or termination of this
lease.
XVI. EVENTS OF DEFAULT; REMEDIES OF LANDLORD
16.1 Default by Tenant. Upon the occurrence of any of the following
events, Landlord shall have the remedies set forth in Section 16.2:
(a) Tenant fails to pay any installment of Basic Annual Rent or
Additional Rent or any other sum due hereunder within ten (10) days after
Tenant receives written notice of rent due.
(b) Tenant fails to perform any other term, condition, or covenant
to be performed by it pursuant to this Lease within ten (10) days after
written notice of such default shall have been given to Tenant by Landlord
or, if cure would reasonably require more than ten (10) days to complete,
if Tenant fails to commence
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performance within the ten (10) day period or fails diligently to pursue
such cure to completion.
(c) Tenant or any guarantor of this Lease shall become bankrupt or
insolvent or file any debtor proceedings or have taken against such party
in any court pursuant to state or federal statute, a petition in
bankruptcy or insolvency, reorganization, or appointment of a receiver or
trustee; or Tenant petitions for or enters into an arrangement; or suffers
this Lease to be taken under a writ of execution.
16.2 Remedies. In the event of any default by Tenant hereunder,
Landlord may at any time, without waiving or limiting any other right or
remedy available to it, terminate Tenant's rights under this Lease by
written notice, reenter and take possession of the Leased Premises by any
lawful means (with or without terminating this Lease), or pursue any other
remedy allowed by law. Tenant agrees to pay to Landlord the cost of
recovering possession of the Leased Premises, all costs of reletting, and
all other costs and direct damages arising out of Tenant's default,
including reasonable attorneys' fees. Notwithstanding any reentry, the
liability of Tenant for the rent reserved herein shall not be extinguished
for the balance of the Term, and Tenant agrees to compensate Landlord upon
demand for any deficiency arising from reletting the Leased Premises at a
lesser rent than applies under this Lease.
16.3 Past Due Sums; Penalty. If Tenant fails to pay, when the same
is due and payable, any Basic Annual Rent, Additional Rent, or other sum
required to be paid by it hereunder, such unpaid amounts shall bear
interest from the due date thereof to the date of payment at a fluctuating
rate equal to two percent (2%) per annum above the prime rate of interest
charged by First Security Bank of Utah, Salt Lake City, Utah. In addition
thereto, Tenant shall pay a sum of five percent (5%) of such unpaid
amounts as a service fee. Notwithstanding the foregoing, however,
Landlord's right concerning such interest and service fee shall be limited
by the maximum amount which may properly be charged by Landlord for such
purposes under applicable law. Twice each calendar year, Landlord shall
grant Tenant a five (5) day grace period in case of late payment of Basic
Annual Rent and Additional Rent.
XVII. PROVISIONS APPLICABLE AT TERMINATION OF LEASE
17.1 Surrender of Premises. At the expiration of this Lease, except
for changes made by Tenant that were approved by Landlord, Tenant shall
surrender the Leased Premises in the same condition, less reasonable wear
and tear, as they were in upon delivery of possession thereto under this
Lease and shall deliver all keys to Landlord. Before surrendering the
Leased Premises, Tenant shall remove all of its personal property and
trade fixtures and such property or the removal thereof shall in no way
materially damage the Leased Premises, and Tenant shall be responsible for
all costs, expenses and damages incurred in the removal thereof. If Tenant
fails to remove its personal property and fixtures
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upon the expiration of this Lease, the same shall be deemed abandoned and
shall become the property of Landlord.
17.2 Removal of Trade Fixtures and Improvements. At the expiration
of the term, Tenant may remove movable walls, Tenant's trade fixtures,
furniture, rooftop satellite equipment, A/V equipment (including screen,
monitors, projectors) and Tenant's interior security system.
17.3 Holding Over. Any holding over after the expiration of the term
hereof or of any renewal term with the prior written consent of Landlord
shall be construed to be a tenancy from month to month. Tenant shall pay
holdover rent equal to the then current Basic Annual Rent for three
months, and thereafter the Basic Annual Rent shall be increased by 25%.
XVIII. ATTORNEYS' FEES
In the event that at any time during the term of this Lease either
Landlord or the Tenant institutes any action or proceeding against the other
relating to the provisions of this Lease or any default hereunder, then the
unsuccessful party in such action or proceeding agrees to reimburse the
successful party for the reasonable expenses of such action including reasonable
attorneys' fees, incurred therein by the successful party.
XIX. ESTOPPEL CERTIFICATE
19.1 Landlord's Right to Estoppel Certificate Tenant shall, within
fifteen (15) days after Landlord's request, execute and deliver to
Landlord a written declaration, in form and substance similar to Exhibit
"D", in recordable form: (1) ratifying this Lease; (2) expressing the
Commencement Date and expiration date hereof; (3) certifying that this
Lease is in full force and effect and has not been assigned, modified,
supplemented or amended (except by such writing as shall be stated); (4)
that all conditions under this Lease to be performed by Landlord have been
satisfied; (5) that there are no defenses or offsets against the
enforcement of this Lease by the Landlord, or stating those claimed by
Tenant; (6) the amount of advance rental, if any, (or none if such is the
case) paid by Tenant; (7) the date to which rental has been paid; (8) the
amount of security deposited with Landlord; and (9) such other information
as Landlord may reasonably request. Landlord's mortgage lenders and/or
purchasers shall be entitled to rely upon such declaration.
19.2 Effect of Failure to Provide Estoppel Certificate. Tenant's
failure to furnish any Estoppel Certificate within fifteen (15) days after
request therefor shall be deemed a default hereunder and moreover, it
shall be conclusively presumed that: (a) this Lease is in full force and
effect without modification in accordance with the terms set forth in the
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request; (b) that there are no unusual breaches or defaults on the part of
the Landlord; and (c) no more than one (1) month's rent has been paid in
advance.
XX. COMMON AREAS
20.1 Definition of Common Areas. "Common Areas" means all areas,
space, equipment and special services provided for the joint or common use
and benefit of the tenants or occupants of the Building and Property or
portions thereof, and their employees, agents, servants, patients,
customers, and other invitees (collectively referred to herein as
"Occupants") including without limitation, parking, access roads,
driveways, retaining walls, landscaped areas, serviceways, loading docks,
pedestrian walks; courts, stairs, ramps, and sidewalks; common corridors,
rooms and restrooms; air-conditioning, fan, janitorial, electrical and
telephone rooms or closets; and all other areas within the Building which
are not specified for exclusive use or occupancy by Landlord or any tenant
(whether or not they are leased or occupied).
20.2 License to Use Common Areas. The Common Areas shall be
available for the common use of all Occupants and shall be used and
occupied under a revocable license. If any such areas shall be changed or
diminished, and provided the changes do not materially affect Tenant's
ability to conduct its normal business in the Leased Premises, Landlord
shall not be subject to any liability nor shall Tenant be entitled to any
compensation or diminution or abatement of rent nor shall revocation or
diminution of such areas be deemed constructive or actual eviction. All
Common Areas shall be subject to the exclusive control and management of
Landlord. Landlord shall have the right to construct, maintain, and operate
lighting and other facilities on all said areas and improvements; to police
the same; to change the area, level, location, and arrangement of parking
areas and other facilities; to restrict parking by non-tenants; to close
all or any portion of said areas or facilities to such extent as may be
legally sufficient to prevent a dedication thereof or the accrual of any
right to any person or the public therein; and to close temporarily any
portion of the parking areas to discourage non-occupant parking. Landlord
shall operate and maintain the Common Areas in such manner as Landlord in
its discretion shall determine, shall have full right and authority to
employ and discharge all personnel with respect thereto, and shall have the
right, through reasonable rules, regulations, and/or restrictive covenants
promulgated by it from time to time, to control use and operation of the
Common Areas in order that the same may occur in a proper and orderly
fashion.
20.3 Parking. Automobiles of Tenant and all Occupants (as defined
above) associated with Tenant shall be parked only within parking areas not
otherwise reserved by Landlord. Landlord or its agents shall, without any
liability to Tenant or its Occupants, have the right to cause to be removed
any automobile that may be wrongfully parked in a prohibited or reserved
parking area, and Tenant agrees to indemnify, defend and hold Landlord
harmless from and against any and all claims, losses, demands, damages and
liabilities asserted or arising with respect to or in connection with any
such removal of an automobile.
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XXI. SIGNS, AWNINGS, AND CANOPIES
21.1 General Rights. Tenant shall not place or suffer to be placed
or maintained on any exterior door, wall, or window of the Leased
Premises, or elsewhere in the Building, any sign, awning, marquee,
decoration, lettering, attachment, or canopy, or advertising matter or
other thing of any kind, and will not place or maintain any decoration,
lettering, or advertising matter on the glass of any window or door of the
Leased Premises without first obtaining Landlord's written approval.
Tenant further agrees to maintain such sign, awning, canopy, decoration,
lettering, advertising matter, or other things, as may be approved, in
good condition and repair at all times. Landlord may, after five (5)
business days notice to Tenant, at Tenant's cost, and without liability to
Tenant, enter the Leased Premises and remove any item erected in violation
of this Section. Landlord may establish rules and regulations governing
the size, type, and design of all signs, decorations, etc., and Tenant
agrees to abide thereby.
21.2 Exclusive Rights. Tenant shall have exclusive building and
monument signage rights for the Building. Tenant shall have non-exclusive
signage rights on the Jordan Valley Technology Center monument sign
located on the easternmost part of the property.
XXII. MISCELLANEOUS PROVISIONS
22.1 No Partnership. Landlord does not by this Lease, in any way or
for any purpose, become a partner or joint venturer of Tenant in the
conduct of its business or otherwise.
22.2 Force Majeure. Landlord shall be excused for the period of any
delay in the performance of any obligations hereunder when prevented from
so doing by cause or causes beyond Landlord's control, including labor
disputes, civil commotion, war, governmental regulations or controls, fire
or other casualty, unforeseen material shortages, or acts of God.
22.3 No Waiver. Failure of Landlord to insist upon the strict
performance of any provision or to exercise any option hereunder shall not
be deemed a waiver of such breach. No provision of this Lease shall be
deemed to have been waived unless such waiver be in writing signed by
Landlord.
22.4 Notice. Any notice, demand, request, or other instrument which
may be or is required to be given under this Lease shall be delivered in
person or sent by United States certified or registered mail, postage
prepaid and shall be addressed (a) if to Landlord, at the place specified
for payment of rent, which is set forth below, and (b) if to Tenant,
either at the Leased Premises or at any other current address for Tenant
which is known to Landlord,
26
<PAGE>
including the address set forth below. Either party may designate such
other address as shall be given by written notice.
Landlord: Boyer Jordan Valley 1, L.C.
c/o The Boyer Company
127 South 500 East, Suite 100
Salt Lake City, Utah 84102
(801) 521-4781
Tenant: TenFold Corporation
180 West Election Road
Draper, Utah 84020
(801) 495-1010
22.5 Captions; Attachments; Defined Terms
(a) The captions to the section of this Lease are for convenience of
reference only and shall not be deemed relevant in resolving questions of
construction or interpretation under this Lease.
(b) Exhibits referred to in this Lease, and any addenda and
schedules attached to this Lease shall be deemed to be incorporated in this
Lease as though part thereof.
22.6 Recording. Tenant may not record this Lease or a memorandum
thereof without the written consent of Landlord, which consent shall not be
unreasonably withheld. Landlord, at its option and at any time, may file
this Lease for record with the Recorder of the County in which the Building
is located.
22.7 Partial Invalidity. If any provision of this Lease or the
application thereof to any person or circumstance shall to any extent be
invalid, the remainder of this Lease or the application of such provision
to persons or circumstances other than those as to which it is held invalid
shall not be affected thereby and each provision of this Lease shall be
valid and enforced to the fullest extent permitted by law.
22.8 Broker's Commissions. Tenant represents and warrants that other
than Grubb & Ellis and Colliers Commerce CRG there are no claims for
brokerage commissions or finder's fees in connection with this Lease and
agrees to indemnify Landlord against and hold it harmless from all
liabilities arising from any other such claims, including any attorneys'
fees connected therewith.
22.9 Tenant Defined. Use of Pronouns. The word "Tenant" shall be
deemed and taken to mean each and every person or party executing this
document as a Tenant herein. If there is more than one person or
organization set forth on the signature line as the Tenant, their liability
hereunder shall be joint and several. If there is more than one Tenant,
any
27
<PAGE>
notice required or permitted by the terms of this Lease may be given by
or to any one thereof, and shall have the same force and effect as if given
by or to all thereof. The use of the neuter singular pronoun to refer to
Landlord or Tenant shall be deemed a proper reference even though Landlord
or Tenant may be an individual, a partnership, a corporation, or a group of
two or more individuals or corporations. The necessary grammatical changes
required to make the provisions of this Lease apply in the plural sense
where there is more than one Landlord or Tenant and to corporations,
associations, partnerships, or individuals, males or females, shall in all
instances be assumed as though in each case fully expressed.
22.10 Provisions Binding, Etc. Except as otherwise provided, all
provisions herein shall be binding upon and shall inure to the benefit of
the parties, their legal representative, heirs, successors, and assigns.
Each provision to be performed by Tenant shall be construed to be both a
covenant and a condition, and if there shall be more than one Tenant, they
shall all be bound, jointly and severally, by such provisions. In the
event of any sale or assignment (except for purposes of security or
collateral) by Landlord of the Building, the Leased Premises, or this
Lease, Landlord shall, from and after the Commencement Date (irrespective
of when such sale or assignment occurs), be entirely relieved of all of its
obligations hereunder.
22.11 Entire Agreement, Etc. This Lease and the Exhibits, Riders,
and/or Addenda, if any, attached hereto, constitute the entire agreement
between the parties. Any guaranty attached hereto is an integral part of
this Lease and constitutes consideration given to Landlord to enter in this
Lease. Any prior conversations or writings are merged herein and
extinguished. No subsequent amendment to this Lease shall be binding upon
Landlord or Tenant unless reduced to writing and signed. Submission of
this Lease for examination does not constitute an option for the Leased
Premises and becomes effective as a lease only upon execution and delivery
thereof by Landlord to Tenant. If any provision contained in the rider or
addenda is inconsistent with a provision in the body of this Lease, the
provision contained in said rider or addenda shall control. It is hereby
agreed that this Lease contains no restrictive covenants or exclusives in
favor of Tenant. The captions and Section numbers appearing herein are
inserted only as a matter of convenience and are not intended to define,
limit, construe, or describe the scope or intent of any section or
paragraph.
22.12 Governing Law. The interpretation of this Lease shall be
governed by the laws of the State of Utah. Tenant hereby expressly and
irrevocably agrees that Landlord may bring any action or claim to enforce
the provisions of this Lease in the State of Utah, County of Salt Lake, and
the Tenant irrevocably consents to personal jurisdiction in the State of
Utah for the purposes of any such action or claim. Tenant further
irrevocably consents to service of process in accordance with the
provisions of the laws of the State of Utah. Nothing herein shall be
deemed to preclude or prevent Landlord from bringing any action or claim to
enforce the provisions of this Lease in any other appropriate place or
forum.
28
<PAGE>
22.13 Recourse by Tenant. Anything in this Lease to the contrary
notwithstanding, Tenant agrees that it shall look solely to the estate and
property of Landlord in the land, Buildings and Improvements thereto, and
subject to prior rights of any mortgagee, for the collection of any
judgment (or other judicial process) requiring the payment of money by
Landlord in the event of any default or breach by Landlord with respect to
any of the terms, covenants, and conditions of this Lease to be observed
and/or performed by Landlord, and no other assets of Landlord or any of its
partners, shareholders, successors, or assigns shall be subject to levy,
execution, or other procedures for the satisfaction of Tenant's remedies.
22.14 Choice of Law. This Lease shall be governed by and construed
in accordance with the laws of the State of Utah.
22.15 Waiver of Right to Jury Trial. Landlord and Tenant waive their
respective rights to trial by jury of any contract or tort claim,
counterclaim, cross-complaint, or cause of action in any action,
proceeding, or hearing brought by either party against the other on any
matter arising out of or in any way connected with this Lease, the
relationship of Landlord and Tenant, or Tenant's use or occupancy of the
Leased Premises, including any claim of injury or damage or the enforcement
of any remedy under any current or future law, statue, regulation, code, or
ordinance.
22.16 Arbitration. Where arbitration provisions apply, arbitration
procedures shall be "baseball" where the arbitrator accepts one of the
parties' claims without modification and rejects the other party's claim
entirely.
22.17 Tenant's Personal Property. Notwithstanding anything in this
Lease to the contrary under no circumstances shall Landlord have any lien
or possessory interest in Tenant's equipment and personal property.
22.18 Hazardous Substances. Landlord represents and warrants, as of
the date of commencement of this Lease that the Leased Premises will be
free of asbestos and all hazardous materials as described by Federal, State
and Local regulations and on behalf of itself and its successors and
assigns hereby covenants and agrees to use and operate the Building and
Property at all times during the term hereof, or any extensions, under and
in compliance with any and all laws or rules, regulations, or other legal
requirements regarding hazardous substances or other environmental matters
and shall indemnify, defend and hold Tenant harmless from and against any
and all loss, cost, liability, damage or expense, including reasonable
attorney's fees, which Tenant may incur, sustain or which may be asserted
against Tenant by reason of Landlord's failure to comply with all such laws
or regulations.
Notwithstanding the above, Tenant shall indemnify, defend and
hold Landlord harmless from and against any and all loss, cost liability,
damage or expense including reasonable attorney's fees, which Landlord may
incur or sustain or which may be asserted against Landlord by reason of any
liability Landlord may incur for clean up,
29
<PAGE>
restoration costs, fines, or penalties resulting from the violation of any
environmental law or regulation caused by Tenant, its employees, agents and
contractors, arising out of Tenant's use of the Premises. Tenant shall
operate its business in the Leased Premises in compliance with all
environmental laws or regulations including but not limited to obtaining
all required permits or licenses, if any, when required.
IN WITNESS WHEREOF, the Landlord and Tenant have executed this Lease on the
date first set forth above.
LANDLORD: BOYER JORDAN VALLEY 1, L.C., BY
ITS MANAGING PARTNER,
THE BOYER COMPANY, L.C.
By: /s/ Kem C. Gardner
------------------------------
Kem C. Gardner
President and Manager
TENANT: TENFOLD CORPORATION
By: /s/ Robert P. Hughes
------------------------------
Robert P. Hughes
Its: Chief Financial Officer
30
<PAGE>
NOTARY
STATE OF UTAH )
) ss
COUNTY OF SALT LAKE )
On this 28 day of April, 2000, personally appeared before me KEM C.
GARDNER, who duly acknowledged to me that he executed the foregoing Lease as the
PRESIDENT AND MANAGER of BOYER JORDAN VALLEY 1, L.C., BY ITS MANAGING PARTNER,
THE BOYER COMPANY, L.C., A UTAH LIMITED LIABILITY COMPANY.
My commission Expires: /s/ Samantha Quealy
---------------------------------
Notary Public
4/28/01 Residing at SALT LAKE COUNTY
[SEAL]
STATE OF UTAH )
) ss
COUNTY OF UTAH )
On this 28 day of April, 2000, personally appeared before me ROBERT P.
HUGHES, who being duly sworn, did say that he is the CHIEF FINANCIAL OFFICER of
Tenfold Corporation, a Delaware Corporation, and that said instrument was signed
in behalf of said corporation by authority of its by-laws or a resolution of its
Board of Directors, and said ROBERT P. HUGHES acknowledged to me that said
corporation executed the same.
My Commission Expires: /s/ Sheila Neumann
---------------------------------
Notary Public
3-15-2004 Residing at Sandy, UT
- ---------------------- ---------------------
[SEAL]
31
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION OF PROPERTY
-----------------------------
Jordan Valley Technology Center
LOT No. 1 Boundary
Beginning at a point which lies South 89?32'26" East 183.61 feet and South
00?27'34" West perpendicular to the north line of the southwest quarter of
section 12, T3S., R1W., S.L.B.&M., 75.67 feet, from the West quarter corner of
said section 12, ( a found brass cap ),
said point also lies on the westerly boundary of the Pheasant Hollow Business
Park; thence along said boundary line the following (7) seven courses:
1.) South 10?46'37"East 407.04 feet to a found rebar,
2.) South 60?49'07" East 407.94 feet to a found rebar,
3.) South 28?11'14" East 192.46,
4.) South 27?32'55" East 114.91 feet,
5.) South 86?31'49" East 29.65 feet,
6.) South 83?32'07" East 128.83 feet
7.) South 29?42'38" East 375.76 feet to a point which lies on the Northerly
right of way line of the proposed 10000 South street; thence along said
boundary line the following (6) six courses:
1.) North 89?46'10" West 406.21 feet to the beginning of a 2.) curve to the
right having a central
of 35?13'30", radius of 667.00 feet, (chord bears North 72?09'25" West 403.64
feet), thence along the Arc of said curve 410.07 feet; 3.) thence North
54?32'40" West 259.04 feet to the beginning of a 4.) curve to the right, having
a central angle of 15?39'15", radius of 967.00 feet, ( chord bears North
46?43'02" West 263.38 feet), thence along the Arc of said curve 264.20 feet;
5.) thence North 38?53'25" West 119.58 feet to the beginning of a 6.) Curve to
the left, having a central angle of 7?56'11", radius of 508.00 feet, (chord
bears North 42?51'30"West 70.31 feet ), thence along the Arc of said curve 70.37
feet to a point which lies on the Phase Boundary line of the Jordan Valley
Technology Center; thence along said phase line North 32?53'27" East 729.04 feet
to the Point of Beginning.
Said Tract of land contains 14.925 acres more or less.
A-1
<PAGE>
EXHIBIT "B"
Floorplan of Leased Premises
----------------------------
[FLOOR PLAN APPEARS HERE]
B-1
<PAGE>
SECOND FLOORPLAN
----------------
[FLOOR PLAN APPEARS HERE]
B-2
<PAGE>
THIRD FLOORPLAN
---------------
[FLOOR PLAN APPEARS HERE]
B-3
<PAGE>
FOURTH FLOORPLAN
----------------
[FLOOR PLAN APPEARS HERE]
B-4
<PAGE>
FIFTH FLOORPLAN
---------------
[FLOOR PLAN APPEARS HERE]
B-5
<PAGE>
EXHIBIT "C"
WORK LETTER
-----------
CONSTRUCTION AND/OR FINISHING OF
IMPROVEMENTS TO LEASED PREMISES
In accordance with the provisions of the body of the Lease to which this
Exhibit "C" is attached, the improvements to the Leased Premises shall be
constructed and/or finished (as the case may be) in the manner described, and
upon all of the terms and conditions contained in the following portion of this
Exhibit "C."
I. GENERAL DESCRIPTION OF WORK:
---------------------------
A. LANDLORD'S CONSTRUCTION OBLIGATION: Landlord's construction obligation
----------------------------------
respecting improvements to the Leased Premises shall consist of the following
described items or elements of work (where more than one type of material,
structure, or method is indicated, Landlord shall have the option of selecting
or employing any thereof):
1. STRUCTURAL:
----------
(a) Frame: The building shall be of steel or concrete frame,
-----
reinforced concrete, or bearing wall construction designed in
accordance with the applicable building code.
(b) Exterior Walls: Insulated exterior walls of the building shall
--------------
be of masonry, concrete, or such other material(s) as may be selected
by Landlord's architect.
(c) Floor: Floor shall be of concrete slab.
-----
2. BASE BUILDING: The Landlord shall provide the Tenant a building
-------------
shell consistent with a Class "A" multi-tenant office building including the
following as part of the base building shell and parking: Landscaping, site
identification, elevators, elevator lobbies, toilets, stairwells, elevator
machine rooms, mechanical rooms, electrical rooms, main lobby, loading
docks, and janitorial closets on Leased Premises floors. Landlord warrants
that the Building and the Leased Premises are being constructed in
compliance with the current 1989-62 ASHRAE Air Quality Standards.
3. UTILITIES:
---------
(a) Water and Sewer: Water and sewer service shall be furnished to
---------------
the toilet rooms on the floors of the Leased Premises.
C-1
<PAGE>
(b) Electricity: Electrical service shall be provided to panels on
-----------
the floors of the Leased Premises, capable of providing 7 watts per
rentable square foot over the entire area.
4. HEATING, AIR CONDITIONING, AND SPRINKLERS:
-----------------------------------------
(a) Air Conditioning and Heating: HVAC trunk lines shall be
----------------------------
provided to the floor area. No distribution or controls shall be
provided by Landlord.
(b) Sprinklers: Automatic sprinkler system, if and to the extent
----------
required by the applicable code, shall be installed in the Leased
Premises.
B. TENANT'S LEASEHOLD IMPROVEMENT REQUEST: The work to be performed by
--------------------------------------
Landlord in satisfying its obligations respecting construction of improvements
to the Leased Premises shall be limited to that described in the foregoing
Section. The Landlord, as Tenant's agent, shall construct the Tenant
Improvements in accordance with drawings and specifications prepared by the
Tenant and reasonably approved by the Landlord ("Tenant's Plans"). Tenant may
elect to negotiate with the Base Building contractor or bid the Tenant
Improvements. If directed by Tenant, the Landlord shall competitively bid the
Approved Plans to not less than three (3) qualified general contractors. The
Tenant shall have the right to review the list of qualified general contractors
prior to bidding and to remove from the list any general contractor which the
Tenant reasonably believes is unsatisfactory to perform the work. The Tenant
and Landlord shall open the bids together and adjust the bids for
inconsistencies and/or qualification, and the Tenant shall select the contractor
("Tenant Contractor") with the lowest responsive bid. Subject to Tenant's right
to modify the scope of the Tenant Improvements set forth in Section 3 of this
Exhibit "C," Tenant's Leasehold Improvement Request respecting improvements to
the Leased Premises shall include, but not necessarily be limited to, the
purchase, installation, and/or performance (as the case may be) of the following
described items or elements of work:
1. Tenant's Electric Fixtures and Equipment: All electrical work and
----------------------------------------
distribution related to Tenant's Improvements from Base Building panels.
2. Tenant's Telephone: All arrangements for telephone service and all
------------------
conduits for telephone wires in the Leased Premises.
3. Walls: All interior partitioning and drywall on all party or the
-----
walls surrounding the Leased Premises.
4. Doors: All interior doors and door frames.
-----
5. Floor Covering: All floor covering and floor materials other than
--------------
concrete.
6. Alarm System: Any alarm systems or other protective devices within
------------
the Leased Premises.
C-2
<PAGE>
7. Demising Walls: Demising walls (i.e., walls dividing the Leased
--------------
Premises for areas, if any, in the same building occupied by other lessees)
shall be of steel stud or masonry.
8. Special Plumbing and Water Heater: All extra plumbing (either
--------------------------------
roughing-in or fixtures) required for Tenant's special needs and any water
heater required.
9. Special Ventilation: All ventilation and related equipment not
------------------
installed under Landlord's Construction Obligation.
10. Special Equipment: All special equipment such as conveyors,
-----------------
lifts, etc.
11. Painting: All interior painting.
--------
12. Ceiling: The following shall be furnished and installed:
-------
suspended type ceiling using pre-formed panels; drywall blown acoustical
tile ceilings; light coves and specially hung or furred ceiling.
13. Tenant's Distribution System: All low pressure ducting
----------------------------
distribution, controls and diffusers.
II. PLANS
-----
A. LANDLORD'S PLANS: Landlord shall furnish, construct and install the
----------------
items and elements comprising Landlord's Construction Obligation substantially
in accordance with the plans, specifications, and working drawings applicable
thereto (hereinafter referred to as "Landlord's Plans") prepared by the
architectural firms of Studios Architecture and MHTN Architects as Landlord's
Plans may be changed or modified from time to time.
B. TENANT'S PLANS: Landlord and Tenant shall collaborate in preparation
--------------
of complete plans and specifications (hereinafter referred to as "Tenant's
Plans") detailing the work and elements comprising Tenant's Leasehold
Improvement Request. Tenant shall submit such Plans to Landlord for written
approval (not to be unreasonably withheld.) The approval by Landlord of
Tenant's Plans for work to be performed in the Leased Premises shall in no way
create any responsibility or liability on the part of Landlord for their
completeness, design sufficiency or compliance with any and all laws, rules and
regulations of federal, state, county and municipal agencies or authorities.
Any objections by Landlord to the Tenant's Plans and the reason therefore shall
be given to Tenant within ten (10) business days of receipt of Tenant's Plans.
Tenant shall complete or cause to have completed the Tenant's Plans within
ninety (90) days of receipt of complete and accurate Base Building plans and
specifications. If Tenant fails within the ninety (90) day period after
receiving the necessary Base Building information from Landlord to furnish to
Landlord Tenant's Plans, Landlord shall have the right to terminate the Lease
five (5) days after written notice to Tenant (without prejudice to any right
Landlord may have against Tenant for damages arising out of Tenant's failure).
C-3
<PAGE>
III. CONSTRUCTION
------------
A. COMPETITIVE BIDDING: At Tenant's option Landlord shall either (i)
--------------------
have no less than three (3) general contractors reasonably approved by Tenant
and Landlord provide competitive bids to construct the Leased Premises or (ii)
select a general contractor of Tenant's choice (with Landlord's reasonable
approval) to negotiate a Cost Plus Fee Contract and to procure three competitive
bids on all trades of subcontractor work.
B. COMPLETION BY LANDLORD: Landlord shall construct and complete all the
----------------------
items or elements or work entering into Landlord's Construction Obligation as
soon as reasonably possible, but in no event later than Eighteen (18) months
after the date of the Lease. In the event Landlord's Construction Obligations
have not been fulfilled upon the expiration of said Eighteen (18) month period,
Tenant shall have the right to exercise any right or remedy available to it
under applicable law, except that under no circumstances shall Landlord be
liable to Tenant for any incidental or consequential loss or damage to Tenant
resulting from delay in construction. All of the items or elements of work
entering into Landlord's Construction Obligation shall be furnished,
constructed, and installed substantially in accordance with those portions of
Tenant's Plans applicable thereto. Landlord shall not be liable for any latent,
patent, or observable defects in such improvements after such acceptance by
Tenant. Landlord does, however, warrant the work performed hereunder by
Landlord against latent defects discovered at any time during the one (1) year
period following the time of such acceptance by Tenant.
C. TENANT'S LEASEHOLD IMPROVEMENT REQUEST: At such time as construction
-------------------------------------
has progressed to a suitable point, Landlord, or Landlord's architect or
supervising contractor, shall notify Tenant in writing that work on the items or
elements entering into Tenant's Leasehold Improvement Request may begin. Upon
receipt of such notice, Tenant shall promptly commence and thereafter shall
diligently pursue to completion all of the matters entering into Tenant's
Leasehold Improvement Request, and such matters shall be performed or
accomplished in accordance with the applicable law, in a good and workmanlike
manner, by contractors approved in writing by Landlord, and in such manner as to
maintain harmonious and suitable labor relations and working conditions. Tenant
shall timely obtain all licenses or permits required for the work performed by
Tenant.
Tenant's Leasehold Improvement Request shall include, but not be
limited to telephone and data cabling, security system, furniture, telephone and
data equipment, audio/visual wiring and equipment, white noise system, signage
and computers.
Tenant shall, at Landlord's request, furnish Landlord with a bond or
bonds assuring payment to all those furnishing labor, materials, or services in
connection with Tenant's Leasehold Improvement Request. Any work or change
which Tenant desires to accomplish and which is not reflected by Tenant's Plans
shall be subject to Landlord's prior written approval (not to be unreasonably
withheld). Upon completion of Tenant's Leasehold Improvement Request, Tenant
shall furnish to Landlord a complete set of "as built" plans and specifications
for the items and elements entering into Tenant's Leasehold Improvement Request.
C-4
<PAGE>
D. INTERRELATIONSHIP OF WORK: In performing its Leasehold Improvement
-------------------------
Request, Tenant shall comply with all directions of Landlord or Landlord's
contractor so as to coordinate its construction activities with those being
pursued by others (whether on the Leased Premises or elsewhere in the Building,
and whether by Landlord or by other tenants). Any improvements or items of
equipment installed by Tenant which are to be visible from outside of the Leased
Premises shall be finish painted by Tenant in accordance with Landlord's
standard paint schedule. All work performed by Tenant shall leave Landlord's
structure as strong or stronger than original design and with finishes
unimpaired. Any roofing or flashing work accomplished by Tenant shall conform
to original work and shall be performed at Tenant's expense by Landlord's
roofing subcontractor who installed the original roof. Either party hereto may
examine and inspect the work of the other at any reasonable time and shall
promptly give notice of any observed defects.
1. TENANT'S CONTRACTORS/VENDORS: Tenant shall have the right to
----------------------------
retain its own contractors or vendors to perform any portion of the work
necessary to construct and outfit the Leased Premises (which will not be
part of the general contractor's scope of work nor shall a mark-up be
added). The Tenant's contractors'/vendors' work shall include, but not be
limited to: data cabling, telephone and data equipment, security,
audio/visual equipment, white noise, and furniture systems. Tenant's
contractors/vendors and Landlord's Building and Tenant Improvement
contractor(s) shall work in harmony during the construction of the Tenant
Improvements. Tenant and Tenant's contractors/vendors shall have access to
the Leased Premises during the construction to install cabling and for the
purpose of inspecting the work in progress.
2. ROOF PENETRATIONS: Tenant agrees that neither it nor its
-----------------
contractors or employees will, during the construction of the Leased
Premises or at any time during the term of this Lease, make or cause to be
made in the roof of the Premises any penetration whatsoever without first
obtaining the prior written approval from Landlord. Tenant acknowledges
that Landlord may require Tenant to use Landlord's designated roofing
contractor to perform or supervise any roof cuts or penetrations to which
Landlord may agree or give its consent.
In the event Tenant fails to observe this condition, Landlord may
hire a roofing contractor of its choice to inspect any penetrations in the
roofing material over the Demised Premises and to perform any needed
modifications or corrections to the roof surface or its components in order
to preserve the integrity of the roof structure. Landlord may bill Tenant
for the expenses of any such roof inspection and/or repairs, plus a 20%
overhead fee for such work. Tenant agrees to pay for said inspection and/or
repairs immediately upon presentation of said invoice.
3. HEATING/VENTILATING/AIR CONDITIONING DISTRIBUTION AND CONTROL
-------------------------------------------------------------
WORK: In order to insure that the rooftop mechanical equipment, originally
-----
provided by the Landlord, will work efficiently and effectively to provide
the specified heating, ventilating and/or cooling to the Leased Premises,
Tenant agrees and
C-5
<PAGE>
covenants that prior to its installation of any duct work, distribution
equipment, controls or other related components of the mechanical system, it
will first obtain from Landlord or from Landlord's designated mechanical
contractor, written approval of its plans for same.
E. PAYMENT: Landlord shall furnish, construct, and complete all of the
-------
matters entering into Landlord's Construction Obligation at its own cost and
expense. Landlord, as Tenant's agent, shall furnish, construct and complete all
of the matters entering Tenant's Leasehold Improvement Request at its own cost
and expense up to the amount of the Tenant Allowance specified below. All fees
of Tenant's architect or engineer shall be paid by Tenant.
1. Landlord agrees to provide a Tenant Allowance of $843,000 based on
$5.00 per rentable square foot times 168,600 rentable square feet.
2. This Tenant Allowance shall be provided in accordance with the
following conditions:
(i) All items of work specifically listed or implied under
Tenant's Leasehold Improvement Request shall be certified complete by
Landlord and Tenant;
(ii) Any such invoices with the necessary certification shall be
forwarded to the Landlord for consideration and payment;
(iii) If such work is found to be complete as certified, Landlord
shall remit to the supplier of all such certified materials and/or
labor thus invoiced, a total amount due within thirty (30) days.
(iv) The above notwithstanding, Landlord shall not be obligated to
remit final payment prior to its receipt of the following documents:
l. A Certificate of Occupancy from the municipality
involved;
2. A signed copy of Exhibit "D" of this Lease as defined in
Section 2.2, or an equivalent document provided by Landlord and as
required by lender;
3. A copy of Liability Insurance or Certificate of Insurance
as defined in Section 11; and
4. All copies of necessary lien waivers involved with any
general or subcontractors involved with Tenant's Leasehold
Improvement Request.
(v) No personal property shall be included as part of the Tenant
Allowance.
C-6
<PAGE>
3. Subject to the last sentence of this Section 3, all expenses arising
by reason of Tenant's Leasehold Improvement Request in excess of the Tenant
Allowance shall be borne exclusively by the Tenant. Not later than May 15,
2000, Tenant shall deposit into an escrow account reasonably acceptable to
Landlord, an additional sum of Fifteen Dollars ($15.00) per rentable square
foot or Two Million Five Hundred Twenty Nine Thousand Dollars
($2,529,000.00) for a portion of the cost of Tenant's Leasehold Improvement
Request. Subject to the last sentence of this Section 3, Tenant shall pay
or cause the payment from the escrow account to the Landlord any excess
costs related to Tenant Improvements that exceed the Tenant Allowance on a
pro-rata basis with each Tenant Improvement monthly construction draw.
Landlord shall provide Tenant with an anticipated schedule of monthly draw
amounts. To the extent that at any time the cost of Tenant's Leasehold
Improvement Request, as modified pursuant to the next sentence, is less
than the sum of the Tenant Allowance plus amounts disbursed from escrow to
pay the cost of Tenant's Leasehold Improvement Request, the balance shall
immediately be returned to Tenant. Tenant may reduce the cost or scope of
Tenant's Leasehold Improvement Request with the consent of Landlord, which
consent shall not be withheld if the Tenant's Improvements comply with
applicable law and reasonable engineering and design practices for a Class
"A" office building, but any reduction shall not affect Tenant's obligation
to open for business in the Leased Premises or to pay Basic Annual Rent,
Additional Rent or other rents and charges. If, however, Tenant defaults in
performing any obligation under the Lease prior to full disbursement of the
escrow account, Landlord shall have a security interest in any amounts
remaining in escrow to secure payment of any damages finally determined to
be owing by Tenant. Except to the extent more extensive Tenant Improvements
are approved by Tenant, Tenant shall not be responsible to pay more than
Two Million Five Hundred Twenty-Nine Thousand Dollars ($2,529,000.00) for
its portion of the Tenant Leasehold Improvement Request and Landlord shall
not be obligated to pay more than Eight Hundred Forty-Three Thousand
Dollars ($843,000.00) for Tenant Improvements. In no event shall Tenant be
obligated to pay any amount of cost overruns for items other than Tenant
Leasehold Improvement Requests.
F. ACCURATE DRAWINGS: Landlord shall supply to Tenant a full set in both
-----------------
hard copy and on electronic media in a format acceptable by Tenant, of accurate
as-built architectural and engineering drawings.
G. PUNCH LIST PENALTY: If the punch list items are not completed within
------------------
thirty (30) days, then landlord shall collect a penalty from the Tenant
Contractor in the amount of $300.00 for each day thereafter until the punch list
items are completed, and credit Tenant for the amount collected against any
excess Tenant Improvement costs or pay such amount to Tenant.
C-7
<PAGE>
EXHIBIT "D "
ACKNOWLEDGMENT OF COMMENCEMENT DATE
AND TENANT ESTOPPEL CERTIFICATE
TO: DATE:
RE:________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
Gentlemen:
The undersigned, as Tenant, has been advised that the Lease has been or
will be assigned to you as a result of your financing of the above-referenced
property, and as an inducement therefor hereby confirms the following:
1. That the space leased by Tenant is ________________ rentable square feet.
2. That the Basic Annual Rent is $ ($ per rentable square foot).
3. That it has accepted possession and is in full occupancy of the Premises,
that the Lease is in full force and effect, that Tenant has received no
notice of any default of any of its obligations under the Lease, and that
the Lease Commencement Date is _______________________________________.
4. That other than the attached punch list items, the improvements and space
required to be furnished according to the Lease have been completed and
paid for in all respects, and that to the best of its knowledge, Landlord
has fulfilled all of its duties under the terms, covenants and obligations
of the Lease and is not currently in default thereunder.
5. That the Lease has not been modified, altered, or amended, and represents
the entire agreement of the parties, except as follows:
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
D-1
<PAGE>
6. That there are no offsets, counterclaims or credits against rentals, nor
have rentals been prepaid or forgiven, except as provided by the terms of the
Lease.
7. That said rental payments commenced or will commence to accrue on
_____________, and the Lease term expires ___________________________. The
amount of the security deposit and all other deposits paid to Landlord is
$__________________.
8. That Tenant has no actual notice of a prior assignment, hypothecation or
pledge of rents of the Lease, except: ____________________________________
___________________________________________________________________________
______________________.
9. That this letter shall inure to your benefit and to the benefit of your
successors and assigns, and shall be binding upon Tenant and Tenant's
heirs, personal representatives, successors and assigns. This letter shall
not be deemed to alter or modify any of the terms, covenants or obligations
of the Lease.
The above statements are made with the understanding that you will rely on
them in connection with the purchase of the above-referenced property.
Very truly yours,
____________________________________
Date of Signature: _____________ By:_________________________________
D-2
<PAGE>
E X H I B I T "E"
------------------
COST TO CONSTRUCT LEASED PREMISES
---------------------------------
TENANT: TENFOLD CORPORATION
SQUARE FOOTAGE: 168,600
ITEM COST ESTIMATE
- ---- -------------
1.0 General Conditions--Clean up _____________
6.1 Rough Carpentry _____________
6.2 Millwork _____________
7.1 Insulation _____________
7.2 Caulking & Sealants _____________
8.1 Hollowmetal Doors & Frames _____________
Lobby Door Access Controls _____________
8.2 Glazing _____________
9.0 Drywall/Painting/Wall Coverings _____________
9.1 Acoustical _____________
9.2 Flooring _____________
10.0 Specialties _____________
15.0 HVAC _____________
Plumbing _____________
15.1 Fire Protection _____________
16.0 Electrical _____________
17.0 Controls _____________
17.2 Tax _____________
17.3 Fee _____________
TOTAL COST $ 3,372,000
-------------
SOURCES OF FUNDS:
LANDLORD ALLOWANCE
(Section 2.3) $ 843,000
-------------
TENANT ESCROW ACCOUNT $2,529,000
-------------
E-1
<PAGE>
E X H I B I T "F"
MINIMUM BUILDING STANDARD FINISHES
----------------------------------
A. FLOORCOVERINGS:
--------------
1. 30 ounce face-weight carpet cut-pile on pad, color to be selected by
Tenant.
2. Designated areas to receive vinyl composite tile made by Ken Tile,
Avanti type, rubber base on all walls.
B. WALLS: All interior walls shall be sheetrock 5/8" on metal studs, taped
-----
and ready for paint.
C. DOORS/HARDWARE/GLASS: Doors shall be twenty-minute rated, solid core, oak
--------------------
veneer faced, 7' in height, 3' in width.
Hardware shall be a one-hour rated assembly to include a closure and lock
set on the hallway doors. All other doors to receive passage hardware,
building standard. Exterior doors shall have heavy duty hardware.
Door frames to be 2" face hollow metal frames; frames must comply with
U.B.C. requirements for fire rating.
All interior glass shall be wired, clear. Glass put in by Tenant shall
conform to U.B.C. and C.P.S.C. requirements.
D. LEVELORS: All exterior windows to receive Levelor, Riviera window blinds,
--------
building standard color.
E. PAINT: All sheetrock interior walls and core walls to receive one coat
------
prime, two coats Ameritone; color to be selected by Tenant.
F. PLUMBING/CABINETRY: Laminate base cabinet only with shelving; laminate
------------------
color
F-1
<PAGE>
to be selected by Tenant.
G. ELECTRICAL:
----------
1. 2X4 four-tube, recessed, florescent light fixtures with parabolic lens
to produce a lighting level of not less than 75 foot candles lighting
at desk level.
2. One telephone outlet per 200 square feet of usable space.
3. One duplex outlet per 75 square feet of usable space.
4. One light switch per 200 square feet of usable space.
H. HVAC: The Landlord shall provide heating, ventilation and air
----
conditioning on a year-round basis throughout the premises and common
areas. The equipment shall maintain a uniform indoor temperature of 75
degrees F.D.B. in summer and 72 degrees F.D.B. in the winter. Temperature
control shall be automatic and shall maintain temperature set point
plus/minus 2 degrees F. A thermostat control system with no more than
l,000 square foot exterior zones and 3,000 square foot interior zones.
All systems shall conform to local and national codes. HVAC design and
systems selected shall be submitted for review and approval by the Tenant.
Approval by the Tenant does not release the Landlord from his strict
responsibility to ensure furnishing design conditions as stated herein.
I. CEILING TILE: 2x2 Acoustical tile 5/8" fissured tile.
------------
F-2
<PAGE>
EXHIBIT "G"
"RENT FORMULA"
--------------
It is the intent of Landlord and Tenant that the Basic Annual Rent
specified is Section 3.1 of the Lease will be adjusted upon project completion.
The Basic Annual Rent specified in Section 3.1 of this Lease is established by
application of the "Rent Formula" to the Initial Project Budget (Exhibit "G-1").
Specifically, the Rent Formula is derived as follows:
1. Multiply the Initial Project Budget by the Tenant's pro-rata share
of the Building as identified in Section 4.1(d) of this Lease.
2. Multiply the product obtained in Subsection 1 by the 13% rate of return
to obtain the Basic Annual Rent.
3. Divide the Basic Annual Rent obtained in subsection (2) by the Tenant's
rentable square feet to obtain the per square foot triple net lease
rate.
No later than ninety (90) days following the Commencement Date, Tenant and
Landlord shall jointly review the actual construction/development costs for the
project and establish the "Final Project Cost".
The Rent Formula shall then be applied to the "Final Project Cost" to
derive the adjusted Basic Annual Rent to be paid by Tenant to Landlord.
Retroactive to the Commencement Date this Basic Annual Rent shall be paid in
lieu of the amount specified in Section 3.1 of the Lease.
G-1
<PAGE>
EXHIBIT "G-1"
INITIAL PROJECT BUDGET
----------------------
TENFOLD CORPORATION 4/20/00
SITE 21.43 ACRES
SQUARE FEET BLDG 1 3 FLOORS @ 31,630 SQ FT 94,890
BLDG 2 5 FLOORS @ 21,022 SQ FT 105,110
----------
200,000
TENFOLD SQUARE FEET 84.30% 168,600
AVAILABLE SQUARE FEET 15.70% 31,400
PARKING 4 STALLS PER 1000 800
<TABLE>
<CAPTION>
<S> <C> <C> <C>
LAND 21.43 ACRES $ 4.56 / SQ FT $ 4,257,530
SHELL 200,000 SQ FT $ 65.00 / SQ FT $ 13,000,000
SITE $ 3,088,480
A & E FEES 6.0% $ 965,309
TENANT FINISH 200,000 SQ FT $ 20.00 / SQ FT $ 4,000,000
CONTINGENCY 3% $ 631,614
--------------
HARD COST SUB TOTAL $ 25,942,933
LEGAL, TITLE, PROPERTY TAXES, MISC $ 433,000
CITY IMPACT FEES $ 2.00 / SQ FT $ 400,000
LEASING COMMISSION $ 5.00 / SQ FT $ 1,000,000
CONSTRUCTION LOAN POINTS 0.5% $ 151,730
CONSTRUCTION INTEREST 8.5% 16 MONTHS $ 1,599,764
PERMANENT LOAN POINTS 1% $ 303,460
SET UP FEE 1% $ 303,460
CONSTRUCTION MGMT FEE $ 83,365
CONTINGENCY 3% $ 128,243
--------------
SOFT COST SUB TOTAL $ 4,403,021
--------------
TOTAL COST $ 30,345,954
LESS:
TENFOLD TENANT ESCROW ACCOUNT $ 15.00 X 168,600 $ (2,529,000)
SOUTH JORDAN WAIVER OF IMPACT FEES $ (400,000)
SOUTH JORDAN SPECIAL IMPROVEMENT DISTRICT $ (1,166,429)
UTAH POWER & LIGHT FINANSWER PROGRAM $ (250,000)
--------------
INITIAL PROJECT BUDGET $ 26,000,525
MULTIPLY BY PRO-RATA SHARE 84.30%
MULTIPLY BY RATE OF RETURN 13%
--------------
BASIC ANNUAL RENT $ 2,849,398
DIVIDE BY TENFOLD SQUARE FEET 168,600
--------------
TRIPLE NET LEASE RATE $ 16.90
==============
</TABLE>
<PAGE>
EXHIBIT "H"
CLEANING SPECIFICATIONS
SCHEDULE OF JANITORIAL SERVICES
- -------------------------------
OFFICE AREAS:
- ------------
1. Empty, clean and damp dust all waste receptacles and remove waste
paper and rubbish from the Premises nightly; wash receptacles as
necessary.
2. Empty and clean all ash trays, screen all sand urns nightly and supply
and replace sand as necessary.
3. Vacuum all rugs and carpeted areas in offices, lobbies and corridors
nightly. Spot clean carpets as needed.
4. Hand dust and wipe clean with damp or treated cloth all office
furniture, files, fixtures, paneling, window sills and other
horizontal surfaces nightly; wash window sills when necessary.
5. Damp wipe and polish all glass furniture tops nightly.
6. Remove all finger marks and smudges from vertical surfaces, including
doors, door frames, around light switches, private entrance glass and
partitions nightly.
7. Wash clean all water coolers nightly.
8. Sweep all stairways nightly, vacuum if carpeted.
9. Police all stairwells throughout the entire building daily and keep in
clean condition.
10. Damp mop spillage in office and public areas as required.
11. Damp dust all telephones as necessary.
WASHROOMS:
- ---------
1. Mop, rinse and dry floors nightly.
2. Scrub floors weekly.
3. Clean all mirrors, bright work and enameled surfaces nightly.
H-1
<PAGE>
4. Wash and disinfect all basis, urinals and bowls nightly, using non-
abrasive cleaners to remove stains and clean underside of rim on
urinals and bowls nightly.
5. Wash both sides of all toilet seats with soap and water and disinfect
nightly.
6. Damp wipe nightly, wash all partitions, tile walls and outside surface
of all dispensers and receptacles.
7. Empty and sanitize all receptacles and sanitary disposals nightly;
thoroughly clean and wash at least once per week.
8. Fill toilet tissue, soap, towel and sanitary napkin dispensers
nightly.
9. Clean flushometers, piping, toilet seat hinges and other metal work
nightly.
10. Wash and polish all wall, partitions, tile walls and enamel surfaces
from trim to floor monthly or as needed.
11. Vacuum all louvers, ventilating grills, and dust light fixtures
monthly.
FLOORS:
- ------
1. Ceramic tile, marble and terrazzo floors to be swept and buffed
nightly and washed or scrubbed as necessary.
2. Vinyl asbestos, asphalt, vinyl, rubber or other composition floors and
bases to be swept nightly; such floors in public areas on multiple
tenancy floors to be waxed and buffed as needed.
3. Tile floors in office areas will be washed and buffed monthly.
4. All vinyl floors stripped and rewaxed as necessary.
5. All carpeted areas and rugs to be vacuumed clean nightly.
6. Detail vacuuming shall be performed as necessary.
RAISED COMPUTER FLOORS:
- ----------------------
1. Dry mop and spot clean all computer flooring nightly.
2. West mop all computer flooring at least once weekly. Mopping may be
performed on separate sections of the computer flooring on successive
nights, as long as entire raised flooring is mopped once during each
one-week period.
H-2
<PAGE>
3. Buff all computer flooring monthly.
4. Computer sub-flooring shall be cleaned annually by contractor, or as
necessary.
GLASS:
- -----
1. Clean glass entrance doors, adjacent glass panels, and any common area
glass nightly.
HIGH DUSTING (as needed):
- ------------
1. Dust and wipe clean all closet shelving when empty and carpet sweep or
dry mop all floors in closets if such are empty.
2. Dust all picture frames, charts, graphs, and similar wall hangings.
3. Dust clean all verticals such as walls, partitions, doors, door bucks,
and other surfaces above shoulder height.
4. Damp dust all ceiling air conditions diffusers, wall grilles,
registers and other ventilating louvers.
5. Dust the exterior surfaces of lighting fixtures, including glass and
plastic enclosures.
6. Dust all mini blinds.
ELEVATORS:
- ---------
1. Carpets will be vacuumed daily and spot cleaned as necessary.
2. Exterior and interior doors and trim will be dusted nightly.
3. Cabinets will be dusted nightly.
4. Control and dispatch panels will be dusted and polished as necessary.
5. Elevator thresholds will be cleaned nightly.
6. Hardwood surfaces will be kept clean.
7. Telephones will be kept dust free.
H-3
<PAGE>
GENERAL:
- -------
1. Wipe all interior metal window frames, mullions, and other unpainted
interior metal surfaces of the perimeter walls of the building each
time the interior of the window is washed (as requested by the
Manager).
2. Keep slopsink rooms in a clean, neat and orderly condition at all
times.
3. Wipe clean and polish all metal hardware fixtures and other bright
work nightly.
4. Dust and/or wash all directory boards as required, remove fingerprints
and smudges nightly.
5. Maintain building lobby, corridors and other public areas in a clean
condition.
6. Dust fire extinguishers and cabinets nightly (interior and exterior);
wash as necessary.
7. All baseboards (resilient flooring and carpeted areas) will be washed
and wiped clean as necessary.
8. Vacuum entrance mats nightly.
9. Perform special cleaning needs of individual tenants only as
authorized and directed by the Manger.
10. Properly maintain exterior of building at ground level by ensuring
that curtain wall, glass, marble, etc., is kept in a clean condition.
Exterior stainless steel is to be cleaned or polished weekly.
11. Polish standpipes and sprinkler siamese connections as necessary.
12. Wash all interior windows semi-annually.
13. Police parking lot, paying particular attention to drains, corners,
curbs and general policing of grounds.
14. Janitors will change out florescent lights as necessary. Janitors
will order and receive shipments.
15. All cleaning equipment will be provided by janitorial contractor.
Paper products will be ordered and received by janitors. Landlord
will provide janitor with supply vendor.
H-4
<PAGE>
LIABILITY INSURANCE
- -------------------
1. Contractors shall at all times during this contract maintain in force
a policy of liability and property damage insurance of at least
$200,000, and shall name The Boyer Company as an additional insured in
said policy. Contractors shall provide evidence of such coverage to
The Boyer Company.
H-5
<PAGE>
EXHIBIT "I"
BUILDING RULES AND REGULATIONS
The following rules and regulations shall apply, where applicable, to the
Premises, the Building, the parking garage (if any), the Property and the
appurtenances. Capitalized terms have the same meaning as defined in the Lease.
1. Sidewalks, doorways, vestibules, halls, stairways and other similar areas
shall not be obstructed by Tenant or used by Tenant for any purpose other
than ingress and egress to and from the Premises. No rubbish, litter,
trash, or material shall be placed, emptied, or thrown in those areas. At
no time shall Tenant permit Tenant's employees to loiter in Common Areas or
elsewhere about the Building or Property.
2. Plumbing fixtures and appliances shall be used only for the purposes for
which designed, and no sweepings, rubbish, rags or other unsuitable
material shall be thrown or placed in the fixtures or appliances. Damage
resulting to fixtures or appliances by Tenant, its agents, employees or
invitees, shall be paid for by Tenant, and Landlord shall not be
responsible for the damage.
3. No signs, advertisements or notices shall be painted or affixed to windows,
doors or other parts of the Building, except those of such color, size,
style and in such places as are first approved in writing by Landlord. All
tenant identification and suite numbers at the entrance to the Premises
shall be installed by Landlord, at Tenant's cost and expense, using the
standard graphics for the Building. Except in connection with the hanging
of lightweight pictures and wall decorations, no nails, hooks or screws
shall be inserted into any part of the Premises or Building except by the
Building maintenance personnel.
4. Landlord may provide and maintain in the first floor (main lobby) of the
Building an alphabetical directory board or other directory device listing
tenants, and no other directory shall be permitted unless previously
consented to by Landlord in writing.
5. Tenant shall not place any lock(s) on any door in the Premises or Building
without Landlord's prior written consent and Landlord shall have the right
to retain at all times and to use keys to all locks within and into the
Premises. A reasonable number of keys to the locks on the entry doors in
the Premises shall be furnished by Landlord to Tenant at Tenant's cost, and
Tenant shall not make any duplicate keys. All keys shall be returned to
Landlord at the expiration or early termination of this Lease.
6. All contractors, contractor's representatives and installation technicians
performing work in the Building shall be subject to Landlord's prior
approval and shall be required to comply with Landlord's standard rules,
regulations, policies and procedures, which may be revised from time to
time.
I-1
<PAGE>
7. Movement in or out of the Building of furniture or office equipment, or
dispatch or receipt by Tenant of merchandise or materials requiring the use
of elevators, stairways, lobby areas or loading dock areas, shall be
restricted to hours designated by Landlord. Tenant shall obtain Landlord's
prior approval by providing a detailed listing of the activity. If
approved by Landlord, the activity shall be under the supervision of
Landlord and performed in the manner required by Landlord. Tenant shall
assume all risk for damage to articles moved and injury to any persons
resulting from the activity. If equipment, property, or personnel of
Landlord or of any other party is damaged or injured as a result of or in
connection with the activity, Tenant shall be solely liable for any
resulting damage or loss.
8. Landlord shall have the right to approve the weight, size, or location of
heavy equipment or articles in and about the Premises. Damage to the
Building by the installation, maintenance, operation, existence or removal
of Tenant's Property shall be repaired at Tenant's sole expense.
9. Corridor doors, when not in use, shall be kept closed. Nothing shall be
swept or thrown into the corridors, halls, elevator shafts or stairways.
No birds or animals (other than seeing-eye dogs) shall be brought into or
kept in, on or about any tenant's leased premises. No portion of any
tenant's leased premises shall at any time be used or occupied as sleeping
or lodging quarters.
10. Tenant shall not: (1) make or permit any improper, objectionable or
unpleasant noises or odors in the Building, or otherwise interfere in any
way with other tenants or persons having business with them; (2) solicit
business or distribute, or cause to be distributed, in any portion of the
Building, handbills, promotional materials or other advertising; or (3)
conduct or permit other activities in the Building that might, in
Landlord's sole opinion, constitute a nuisance.
11. Tenant shall cooperate with Landlord's employees in keeping its leased
premises neat and clean. Tenants shall not employ any person for the
purpose of such cleaning other than the Building's cleaning and maintenance
personnel.
12. No flammable, explosive or dangerous fluids or substances shall be used or
kept by Tenant in the Premises, Building or about the Property. Tenant
shall not, without Landlord's prior written consent, use, store, install,
spill, remove, release or dispose of, within or about the Premises or any
other portion of the Property, any asbestos-containing materials or any
solid, liquid or gaseous material now or subsequently considered toxic or
hazardous under the provisions of 42 U.S.C. Section 9601 et seq. or any
other applicable environmental Law which may now or later be in effect.
Tenant shall comply with all Laws pertaining to and governing the use of
these materials by Tenant, and shall remain solely liable for the costs of
abatement and removal.
13. Tenant shall not use or occupy the Premises in any manner or for any
purpose which might injure the reputation or impair the present or future
value of the Premises or the
I-2
<PAGE>
Building. Tenant shall not use, or permit any part of the Premises to be
used, for lodging, sleeping or for any illegal purpose.
14. Tenant shall not take any action which would violate Landlord's labor
contracts or which would cause a work stoppage, picketing, demonstration,
labor disruption or dispute, or interfere with Landlord's or any other
tenant's or occupant's business or with the rights and privileges of any
person lawfully in the Building ("Labor Disruption"). Tenant shall take
the actions necessary to resolve the Labor Disruption, and shall have
pickets removed and, at the request of Landlord, immediately terminate any
work in the Premises that gave rise to the Labor Disruption, until Landlord
gives its written consent for the work to resume. Tenant shall have no
claim for damages against Landlord or any of the Landlord Related Parties,
nor shall the Commencement Date of the Term be extended as a result of the
above actions.
15. Tenant shall not install, operate or maintain in the Premises or in any
other area of the Building, electrical equipment that would overload the
electrical system beyond its capacity for proper, efficient and safe
operation as determined solely by Landlord. Tenant shall not furnish
cooling or heating to the Premises, including, without limitation, the use
of electronic or gas heating devices, without Landlord's prior written
consent. Tenant shall not use more than its proportionate share of
telephone lines and other telecommunication facilities available to service
the Building.
16. Tenant shall not operate or permit to be operated a coin or token operated
vending machine or similar device (including, without limitation,
telephones, lockers, toilets, scales, amusement devices and machines for
sale of beverages, foods, candy, cigarettes and other goods), except for
machines for the exclusive use of Tenant's employees.
17. Bicycles and other vehicles are not permitted inside the Building or on the
walkways outside the Building, except in areas designated by Landlord.
18. Landlord may from time to time adopt systems and procedures for the
security and safety of the Building, its occupants, entry, use and
contents. Tenant, its agents, employees, contractors, guests and invitees
shall comply with Landlord's systems and procedures.
19. Landlord shall have the right to prohibit the use of the name of the
Building or any other publicity by Tenant that in Landlord's sole opinion
may impair the reputation of the Building or its desirability. Upon
written notice from Landlord, Tenant shall refrain from and discontinue
such publicity immediately.
20. Tenant shall not canvass, solicit or peddle in or about the Building or the
Property.
21. Neither Tenant nor its agents, employees, contractors, guests or invitees
shall smoke or permit smoking in the Common Areas, unless the Common Areas
have been declared a designated smoking area by Landlord, nor shall the
above parties allow smoke from the Premises to emanate into the Common
Areas or any other part of the Building. Landlord
I-3
<PAGE>
shall have the right to designate the Building (including the Premises) as
a non-smoking building.
22. Landlord shall have the right to designate and approve standard window
coverings for the Premises and to establish rules to assure that the
Building presents a uniform exterior appearance. Tenant shall ensure, to
the extent reasonably practicable, that window coverings are closed on
windows in the Premises while they are exposed to the direct rays of the
sun.
23. Deliveries to and from the Premises shall be made only at the times, in the
areas and through the entrances and exits designated by Landlord. Tenant
shall not make deliveries to or from the Premises in a manner that might
interfere with the use by any other tenant of its premises or of the Common
Areas, any pedestrian use, or any use which is inconsistent with good
business practice.
24. The work of cleaning personnel shall not be hindered by Tenant after 5:30
p.m., and cleaning work may be done at any time when the offices are
vacant. Windows, doors and fixtures may be cleaned at any time. Tenant
shall provide adequate waste and rubbish receptacles to prevent
unreasonable hardship to the cleaning service.
25. Landlord will not be responsible for lost or stolen personal property,
money or jewelry from tenant's leased premises or public or common areas
regardless of whether such loss occurs when the area is locked against
entry or not.
26. No tenant may enter into phone rooms, electrical rooms, mechanical rooms,
or other service areas of the Building unless accompanied by Landlord or
the Building manager.
27. All vehicles are to be currently licensed, in good operating condition,
parked for business purposes having to do with Tenant's business operated
in the Premises, parked within designated parking spaces, one vehicle to
each space. No vehicle shall be parked as a "billboard" vehicle in the
parking lot. Any vehicle parked improperly may be towed away. Tenant,
Tenant's agents, employees, vendors and customers who do not operate or
park their vehicles as required shall subject the vehicle to being towed at
the expense of the owner or driver. Landlord may place a "boot" on the
vehicle to immobilize it and may levy a charge of $50.00 to remove the
"boot." Tenant shall indemnify, hold and save harmless Landlord of any
liability arising from the towing or booting of any vehicles belonging to a
Tenant Party.
I-4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2001
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-01-2000
<EXCHANGE-RATE> 1
<CASH> 47,228
<SECURITIES> 0
<RECEIVABLES> 14,886
<ALLOWANCES> 125
<INVENTORY> 0
<CURRENT-ASSETS> 81,074
<PP&E> 15,833
<DEPRECIATION> 6,231
<TOTAL-ASSETS> 115,396
<CURRENT-LIABILITIES> 35,066
<BONDS> 0
0
0
<COMMON> 35
<OTHER-SE> 74,354
<TOTAL-LIABILITY-AND-EQUITY> 115,396
<SALES> 31,675
<TOTAL-REVENUES> 31,675
<CGS> 11,718
<TOTAL-COSTS> 11,718
<OTHER-EXPENSES> 16,634
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 279
<INCOME-PRETAX> 3,831
<INCOME-TAX> 1,686
<INCOME-CONTINUING> 2,145
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,137
<EPS-BASIC> .06
<EPS-DILUTED> .05
</TABLE>
