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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 1, 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 000-29789
HomeGrocer.com, Inc.
--------------------
(Exact name of registrant as specified in its charter)
Washington 91-1863408
---------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
10230 N.E. Points Drive Kirkland, WA 98033
--------------------------------------------
(Address of principal executive offices)
(425) 201-7500
--------------
(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 [_] NO [X]
The registrant had 128,237,462 shares of common stock, without par value,
outstanding at April 1, 2000.
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HomeGrocer.com, Inc.
INDEX TO FORM 10-Q
PAGE
----
PART I - FINANCIAL INFORMATION.................................... 3
ITEM 1 - FINANCIAL STATEMENTS................................ 3
Balance Sheets.......................................... 3
Statements of Operations................................ 4
Statements of Cash Flows................................ 5
Notes to Unaudited Financial Statements................. 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS....................................... 9
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK................................... 23
PART II - OTHER INFORMATION....................................... 24
ITEM 1 - LEGAL PROCEEDINGS................................... 24
ITEM 2 - CHANGES IN SECURITIES AND USE OF
PROCEEDS............................................ 24
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS.................................... 25
ITEM 5 - OTHER INFORMATION................................... 26
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K.................... 26
SIGNATURES........................................................ 27
2
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PART I - FINANCIAL INFORMATION:
- ------------------------------
Item 1 - Financial Statements -
- -----------------------------
HomeGrocer.com, Inc.
Balance Sheets
(in thousands, except share amounts)
<TABLE>
<CAPTION>
April 1, January 1,
2000 2000
----------- ----------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents....................................... $ 257,144 $ 39,806
Marketable securities........................................... 0 37,762
Inventories..................................................... 3,579 2,555
Prepaid expenses and other current assets....................... 10,995 3,032
--------- ---------
Total current assets.......................................... 271,718 83,155
Fixed assets, net............................................... 94,874 52,066
Deposits and other long-term assets............................. 4,678 3,776
Restricted cash................................................. 16,087 7,932
--------- ---------
Total assets.................................................. $ 387,357 $ 146,929
========= =========
Liabilities & Shareholders' Equity
Current liabilities:
Accounts payable................................................ 9,451 4,396
Accrued liabilities............................................. 9,061 4,856
Accrued compensation and related liabilities.................... 6,789 3,249
Current portion of capital lease obligations.................... 3,879 3,081
Current portion of long-term debt............................... 3,991 980
--------- ---------
Total current liabilities..................................... 33,171 16,562
Capital lease obligations, less current portion................. 23,032 17,041
Long-term debt, less current portion............................ 7,000 749
Other long-term liabilities..................................... 794 430
--------- ---------
Total liabilities............................................. 63,997 34,782
Commitments and contingencies
Shareholders' equity:
Convertible preferred stock, no par value:
10,000,000 and 78,357,142 shares authorized as of
April 1, 2000 and January 1, 2000:
Issued and outstanding shares -- none and
73,206,738 as of April 1, 2000 and January 1, 2000,
respectively............................................... 0 170,047
Common stock, no par value:
1,000,000,000 and 130,000,000 shares authorized as of
April 1, 2000 and January 1, 2000:
Issued and outstanding shares -- 128,237,462
and 29,605,536 as of April 1, 2000 and January 1, 2000,
respectively............................................... 498,249 80,207
Notes receivable from officers for common stock................. (3,231) ( 3,231)
Deferred stock compensation..................................... (34,844) ( 41,619)
Unrealized gain/(loss) on investments........................... (92) 0
Accumulated deficit............................................. (136,722) ( 93,257)
--------- ---------
Total Shareholders' equity.................................... 323,360 112,147
--------- ---------
Total liabilities & shareholders' equity...................... $ 387,357 $ 146,929
========= =========
</TABLE>
See accompanying notes to the financial statements
3
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HomeGrocer.com, Inc.
Statements of Operations
(in thousands, except share and per share amounts)
13 Weeks 13 Weeks
Ended Ended
April 1, April 3,
2000 1999
----------- -----------
(Unaudited) (Unaudited)
Net sales.......................................... $ 21,215 $ 1,778
Cost of merchandise sold........................... 17,515 1,487
Customer fulfillment center expenses............... 17,644 1,244
Marketing expenses................................. 5,588 735
Technology operations and development expenses..... 6,466 1,088
Preopening expenses................................ 2,015 0
General & administrative expenses.................. 8,311 824
Stock-based compensation expense................... 8,143 108
-------- -------
Loss from operations............................... (44,467) (3,708)
Interest expense................................... (663) (21)
Interest income.................................... 1,688 4
Other income/(expense)............................. (23) 1
-------- -------
Net loss........................................ $(43,465) $(3,724)
======== =======
Basic and diluted net loss per share............... $ (0.98) $ (0.31)
======== =======
Weighted average shares outstanding used to
compute basic and diluted net loss per share.... 44,511,283 12,180,848
========== ==========
See accompanying notes to the financial statements
4
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HomeGrocer.com, Inc.
Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
13 Weeks 13 Weeks
Ended Ended
April 1, April 3,
2000 1999
-------- --------
(Unaudited) (Unaudited)
<S> <C> <C>
Operating Activities:
Net loss.................................................... $(43,465) $(3,724)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation............................................ 3,261 118
Amortization............................................ 102 0
Stock-based compensation expense........................ 8,143 108
Changes in operating assets and liabilities:
Prepaid expenses and other current assets............... (7,963) (168)
Inventories............................................. (1,024) (82)
Accounts payable........................................ 5,055 220
Accrued liabilities..................................... 4,205 (309)
Accrued compensation and related liabilities............ 3,540 689
-------- -------
Net cash used in operating activities................. (28,146) (3,148)
Investing Activities:
Purchases of fixed assets................................... (38,600) (30)
Sales and maturities of marketable securities............... 37,762 0
Deposits and other long-term................................ (640) (20)
Restricted cash............................................. (8,155) 0
-------- -------
Net cash used in investing activities................... (9,633) (50)
Financing Activities:
Proceeds from initial public offering....................... 243,503 0
Proceeds from exercise of stock options..................... 2,301 804
Repurchase of common stock.................................. (54) 0
Proceeds from exercise of warrants.......................... 877 0
Proceeds from long-term debt................................ 10,000 2,128
Repayments of long-term debt................................ (738) (135)
Repayments of capital lease obligations..................... (772) 0
-------- -------
Net cash provided by financing activities................. 255,117 2,797
-------- -------
Net increase in cash and equivalents.......................... 217,338 (401)
Cash and equivalents, beginning of period..................... 39,806 1,084
-------- -------
Cash and equivalents, end of period........................... $257,144 $ 683
======== =======
Supplemental Cash Flow Information:
Cash paid during the period for interest...................... $ 696 $ 14
Noncash Financing and Investing Activities:
Fixed assets acquired through capital lease arrangements...... $ 7,561 $ 1,251
</TABLE>
See accompanying notes to the financial statements
5
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HOMEGROCER.COM
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- ------------------------------------------
1. Basis of Presentation
The accompanying unaudited consolidated financial statements of HomeGrocer.com,
Inc. have been prepared in conformity with generally accepted accounting
principles for interim financial information and with the instructions for Form
10-Q and Article 10 of Regulation S-X. Accordingly, certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted. In the opinion of the Company's management, the statements include all
adjustments necessary, which are of a normal and recurring nature, for the fair
presentation of the results of the interim periods presented. These financial
statements should be read in conjunction with the Company's audited financial
statements for the year ended January 1, 2000, included in the Company's
Registration Statement on Form S-1 (File No. 333-93015) dated March 9, 2000,
filed with the Securities and Exchange Commission in connection with the
Company's initial public offering. The results of operations for any interim
period are not necessarily indicative of the results of operations for any other
interim period or for a full fiscal year.
The Company reports on a 52/53-week fiscal year basis that ends on the Saturday
nearest December 31. The quarters ended April 1, 2000 and April 3, 1999 were
13-week quarters.
2. Description of Business
HomeGrocer.com, Inc. (the "Company") is an Internet retailer of grocery and
other consumer products. The Company operates its own distribution system
providing next-day delivery of products within a customer-designated delivery
period. The Company began delivering groceries to the Seattle market from its
first customer fulfillment center ("CFC") located in Bellevue, Washington in
June 1998. As of April 26, 2000, the Company was delivering groceries from six
CFCs serving the Seattle, Washington; Portland, Oregon; and Orange County/Los
Angeles, California markets.
3. Initial Public Offering
On March 10, 2000, the Company completed its initial public offering ("IPO") of
22,000,000 shares of common stock at a price of $12.00 per share. The IPO, net
of underwriting and other issuance costs resulted in approximately $243.5
million of net proceeds to the Company. Concurrent with the closing of the
offering, all of the outstanding convertible preferred stock was converted into
an aggregate of 73,206,738 shares of common stock.
4. Reincorporation
In March 2000, the Company reincorporated into the State of Washington and
eliminated the par value of its common and preferred stock. The Company also
increased its authorization to issue common shares to 1,000,000,000 and
preferred shares to 10,000,000.
5. Earnings Per Share
Net loss per share is computed using the weighted average number of shares of
common stock outstanding less the number of shares that the Company has the
right but not the obligation to repurchase. Shares associated with common stock
subject to repurchase, stock options and warrants are not included in the
calculation of diluted net loss per share because they are anti-dilutive.
6
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The following table sets forth the computation of basic and diluted net loss per
share for the periods indicated:
<TABLE>
<CAPTION>
-----------------------------
13 Weeks Ended
-----------------------------
April 1, April 3,
2000 1999
-----------------------------
(in thousands, except
per share amounts)
<S> <C> <C>
Numerator:
Net loss ($43,465) ($3,724)
=============================
Denominator:
Weighted average shares outstanding 56,451,330 12,954,206
Less: Weighted averages shares subject
to repurchase 11,940,047 773,358
-----------------------------
Denominator for basic and diluted 44,511,283 12,180,848
=============================
Net loss per share:
Basic and diluted ($0.98) ($0.31)
=============================
</TABLE>
At April 1, 2000, 18,217,480 shares of common stock subject to repurchase,
stock options and warrants were excluded from the computation of actual diluted
loss per share, as their impact was anti-dilutive. If the Company had reported
net income, the calculation of earnings per share would have included the
dilutive effect of these common stock equivalents using the treasury stock
method.
6. Commitments and Contingencies
As of April 13, 2000, the Company had signed agreements to acquire additional
delivery vehicles with an estimated cost of $28.1 million. In addition, since
January 1, 2000, the Company has executed leases for operating facilities and
office space with future minimum lease commitments totaling $200.5 million.
In February 2000, the Company entered into a marketing agreement with America
Online ("AOL"). Under the terms of the agreement, AOL has agreed to promote the
Company online and to deliver a minimum number of annual page views. Over the
five year term of the agreement, the Company is obligated to make payments
totaling up to $60 million to AOL and pay a referral fee for each new customer
referred by AOL to the Company above specified thresholds.
In February 2000, the Company borrowed $10.0 million under its Subordinated Loan
and Security Agreement with Comdisco. Borrowings under the agreement are due in
36 monthly installments and bear interest at 11%. The first installment of
approximately $326,400 was paid on March 1, 2000.
In March 2000, the amount available under the Company's revolving line of credit
with Mercedes-Benz Credit Corporation was increased from $15.0 million to $20.0
million. As of April 1, 2000, no amounts remained available for borrowing under
the line of credit.
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Borrowings under the line are payable in 84 monthly installments and are secured
by the delivery vehicles.
7. Subsequent Event
Subsequent to April 1, 2000, the Company's Board of Director's approved stock
option grants to purchase approximately 4.7 million shares of the Company's
common stock. The options were granted pursuant to the Company's existing stock
option plans.
8
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Item 2 - Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operations -
---------------------
The following information should be read in conjunction with the historical
financial information and the notes thereto included in this quarterly report on
Form 10-Q and "Management's Discussion and Analysis" included in the Company's
Registration Statement on Form S-1 (File No. 333-93015), which was previously
filed with the Securities and Exchange Commission.
This Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including, without limitation, statements regarding
HomeGrocer.com's expectations, beliefs, intentions or future strategies that are
signified by the words "expect", "anticipate", "intend", "believe", or similar
language. All forward-looking statements included in this document are based on
information available to HomeGrocer.com on the date hereof and HomeGrocer.com
assumes no obligation to update any such forward-looking statements. Actual
results could differ materially from those projected in the forward-looking
statements.
HomeGrocer.com's business and financial performance are subject to
substantial risks and uncertainties. In evaluating our business, you should
carefully consider various factors that might cause actual results to differ
materially from stated expectations. These risks include, among others that our
ability to raise capital and achieve our expansion plans may be adversely
impacted by market conditions; our ability to build strong brand identity and
customer loyalty may require additional marketing expenditures; and the risk
that our customer fulfillment center ("CFC") and delivery service model may not
be readily or cost-effectively replicable in additional geographic markets.
These and other risks are described in detail in this Form 10-Q and in our
Registration Statement on Form S-1 (File No. 333-93015).
Overview
HomeGrocer.com is a retailer of grocery and other consumer products on the
Internet. We operate our own state-of-the-art distribution system providing
next-day home delivery of a wide range of products, including high quality food
items, at prices competitive with local supermarket prices. Our goals are to
expand nationally and to be our customers' preferred regular provider of
household consumer products. We believe that our core grocery business provides
us with a strong platform to expand into other product and service areas.
We commercially launched our storefront at www.homegrocer.com and began
delivering groceries to the Seattle market from our Bellevue, Washington
customer fulfillment center in June 1998. We currently serve customers in two
additional markets: Portland, Oregon since May 1999 and Orange County/Los
Angeles, California since September 1999. On April 26, 2000, we began delivering
groceries to additional customers in Southern California from Carson,
California, which is our sixth CFC and our fourth in Southern California. In
addition, we anticipate introducing our service in Dallas, Texas; San Diego,
California; and Atlanta, Georgia during the second quarter.
We have operated in the Seattle market for nearly two years. While revenues
have grown steadily over this period, our Seattle operations are not yet cash
flow positive. Many of our first-time customers have cited word-of-mouth and the
visibility of our distinctive trucks in their neighborhoods as the foremost
factors attracting them to our storefront. Hence, the sales volumes of new CFCs
tend to start low and build gradually. In February 2000, we entered into an
interactive marketing agreement with America Online ("AOL"), an on-line service
provider, under which our grocery shopping services will be prominently featured
on the web sites of AOL and affiliated networks. Further, under the advertising
agreement we entered into with Amazon.com in November 1999, Amazon.com agreed to
introduce our services to its customers residing in
9
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markets we currently service or will service in the future. We believe that
these agreements will enable us to attract customers to our web site more
rapidly and lead to faster sales growth in new markets as compared to the
Seattle market.
We also anticipate that increased customer acceptance of the Internet and
the national growth in online grocery shopping will enable our sales to grow at
a more rapid pace in new markets. Many of the markets where we intend to begin
operations in the next few years also have larger populations than the Seattle
metropolitan area, which we believe will reduce the time necessary to reach
profitability. Because of these factors, we believe that our operations in
subsequent markets may achieve positive operating cash flow faster than our
Seattle operations. This section contains forward-looking statements. Actual
results may differ materially, for example, if competition from other online
grocers slows our rate of attracting customers, if competition from traditional
stores erodes prices, or if customers are deterred from online shopping by
breaches of security. We are a young company with a limited operating history
and entering into new markets may strain our staffing, financial resources and
operating systems.
As we expand our operations into new markets over the next several years,
our business will consist of a mix of mature and new customer fulfillment
centers. Our growth plans over the next several years will likely result in
substantially greater losses than we have experienced in the past, as the losses
anticipated from new facilities offset the earnings anticipated from a smaller
number of mature facilities. As such, we anticipate reporting substantial net
losses over the next few years, with the magnitude of such losses being related
to the speed, scope and success of our expansion plans.
Results of Operations
Net Sales. We began serving customers in the Orange County/Los Angeles
market late in the third quarter of fiscal 1999. We also relocated our Bellevue
customer fulfillment center to a significantly larger and more automated
facility in Renton, Washington on October 31, 1999. Due primarily to these
factors, our sales, net of returns and promotional discounts, approximately
doubled to $21.2 million for the first quarter of fiscal 2000 from $10.8 million
in the fourth quarter of fiscal 1999. This compared to only $1.8 million in the
first quarter of fiscal 1999. Sales in Southern California accounted for
approximately 44% of total sales in the recent quarter. On average, we
delivered 2,283 orders per day in the first quarter, as compared to 1,186 and
241 orders in the fourth and first quarters of fiscal 1999. In Seattle, we
delivered an average of 888 orders per day in the recent quarter, compared to
241, 365, 426, and 625 orders delivered in the first, second, third, and fourth
quarters of fiscal 1999, respectively. The average order size for the Company
increased to $102 in the first quarter of fiscal 2000, as compared to $100 and
$95 in the fourth and first quarters of fiscal 1999, respectively. Our repeat
customers accounted for 77% of total orders in the first quarter of fiscal 2000,
as compared to 74% of total fourth quarter orders. A "repeat customer" is
defined as a person who has ordered with us previously.
Gross Profit. Our cost of sales consists of the cost of merchandise sold to
customers, including inbound freight costs. Gross profit increased to $3.7
million for the first quarter of fiscal 2000 from $166,000 and $291,000 in the
fourth and first quarters of fiscal 1999, respectively. As a percentage of net
sales, gross profit increased to 17.4% in the first quarter of fiscal 2000 from
1.5% and 16.4% in the fourth and first quarters of fiscal 1999, respectively.
The fourth quarter gross profit was heavily impacted by temporary factors
related primarily to the opening of three new customer fulfillment centers in
the September through December timeframe, including high levels of shrink and
food bank donations and certain promotional items for new customers that affect
the gross profit percentage. Within the first quarter, our gross profit
percentage was 13.2% in January, 14.7% in February, and 21.9% in March.
To promote the HomeGrocer.com brand and establish customer loyalty, we
currently offer each customer a free bag of produce with the first order and $10
off the second order. The free produce bag and similar promotions are included
in the cost of merchandise sold. The $10
10
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second-order discount and similar promotions are accounted for as a "sales
discount," which reduces gross sales to net sales and therefore affects the
gross margin percentage.
Customer Fulfillment Expenses. Our customer fulfillment expenses include
the wages and benefits of our delivery drivers, personal shoppers, receiving
personnel and other operations and administrative staff located at the CFC, CFC
rent and related facility costs, supplies and credit card fees. CFC expenses
increased to $17.6 million for the first quarter of fiscal 2000 from $11.0
million and $1.2 million in the fourth and first quarters of fiscal 1999,
respectively. The increase in such expenses results from the increase in the
number of CFCs delivering to customers. During the first quarter of fiscal 2000,
we had four CFCs delivering to customers for the entire 13-week period and an
additional CFC delivering to customers for nine weeks. In the fourth quarter of
fiscal 1999, we operated three CFCs for the entire 13-week period and an
additional CFC for seven weeks; and for the first quarter of fiscal 1999, we
operated one CFC for the entire 13-week period. Our customer fulfillment
expenses are expected to continue to increase as we open additional CFCs.
Marketing Expenses. Our marketing expenses increased to $5.6 million for
the first quarter of fiscal 2000 as compared to $5.1 million and $735,000 in the
fourth and first quarters of fiscal 1999, respectively. Our marketing programs
are designed to strengthen the HomeGrocer.com brand name, encourage trials of
our service in our target markets, build customer loyalty, maximize repeat
purchases and increase our average order size. Late in fiscal 1999, we began
local television advertising to build consumer awareness. In addition, we
utilize extensive radio advertising and direct mail programs to attract first-
time shoppers. Accordingly, prior to and upon entering a new market, we expect
to incur significant costs to build brand awareness and loyalty.
Our marketing expenses for the first quarter of fiscal 2000 did not reflect
any expense under our agreements with AOL or Amazon.com, as we did not commence
marketing activities under those agreements until the second quarter. Such
agreements are being expensed based on the number of impressions or mailings
provided in each period, as compared to the total impressions or mailings
purchased by the Company through each agreement. In addition, commensurate with
the opening of each new market, we anticipate spending $5 million to $12 million
on marketing and advertising within each market, varying within that range on
the size of the market. Primarily because the number of new markets is
anticipated to be higher in future quarters than it was in the first quarter, we
expect to report significantly higher marketing expenditures in future quarters
than the $5.6 million recorded in the recent quarter.
Technology Operations and Development Expenses. Technology operations and
development expenses increased to $6.5 million in the first quarter of fiscal
2000 from $5.4 million and $1.1 million in the fourth and first quarters of
fiscal 1999, respectively. The increase results primarily from an increase in
the number of employees developing, enhancing, and maintaining our storefront
and other internal operating systems. On April 26, 2000, we launched a new
version of our web site, providing shoppers with a more convenient shopping
experience. We have also invested heavily to improve the reliability and
scalability of our systems. We expect to continue to invest heavily in
technology due to the rapidly evolving and competitive environment of e-tailing.
Preopening Expenses. Preopening expenses represent costs incurred at our
CFCs prior to opening and consist primarily of rent and related costs and wages
and benefits. Preopening expenses increased to $2.0 million for the first
quarter of fiscal 2000 from $1.2 million for the fourth quarter of fiscal 1999.
There were no preopening expenses in the first quarter of fiscal 1999. The
increase reflects the implementation of the Company's rollout plans.
General and administrative expenses. General and administrative expenses
were $8.3 million for the first quarter of fiscal 2000 as compared to $8.5
million and $824,000 in the fourth and first quarters of fiscal 1999,
respectively. Such expenses have increased significantly from the first quarter
of the prior year as we built the corporate infrastructure necessary to support
our
11
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growth plans. General and administrative expenses for the first quarter of
fiscal 2000 decreased as compared to the fourth quarter of fiscal 1999, despite
a 97% increase in our quarterly net sales. We expect that, as a percentage of
net sales, our general and administrative expenses will continue to decrease.
Stock-Based Compensation Expense. Stock-based compensation expense
consists primarily of the amortization of deferred stock compensation resulting
from the grant of stock options or sale of restricted stock at exercise or sale
prices subsequently deemed to be less than the fair value of the common stock on
the grant or sale date. We recorded total deferred stock-based compensation of
$67.7 million for fiscal 1999 and an additional $1.4 million in the first
quarter of 2000 in connection with stock options granted and restricted stock
sold during the periods. Such deferred compensation is calculated based largely
on the Company's initial public offering price and has not been adjusted for
subsequent variations in the share price, even though most of such options and
restricted stock are subject to multi-year vesting requirements. This cost is
being amortized to expense over the vesting periods of the applicable
agreements, resulting in amortization of deferred stock-based compensation
totaling $8.1 million in the first quarter of fiscal 2000 and $9.9 million and
$83,000 in the fourth and first quarters of fiscal 1999, respectively. The
remaining $34.8 million of deferred stock-based compensation for stock options
and restricted stock is expected to be amortized in the amounts of $6.6 million,
$5.4 million and $4.5 million in the second, third and fourth quarters of fiscal
2000 and $12.0 million for fiscal year 2001, $5.3 million for fiscal year 2002
and $1.0 million for fiscal year 2003. Such amortization amounts assume that all
vesting periods are completed by all employees; to the extent that unvested
options are forfeited by an employee, previously recorded amortization related
to the unvested options will be credited to stock-based compensation expense.
Interest Income. Interest income increased to $1.7 million for the first
quarter of fiscal 2000 as compared to $1.3 million and $4,000 in the fourth and
first quarters of fiscal 1999, respectively, as our cash available for
investment increased significantly upon receiving the proceeds from our initial
public offering in mid-March. We plan to use such proceeds to fund our
operations and expansion.
Interest Expense. Interest expense increased to $663,000 for the first
quarter of fiscal 2000 from $143,000 and $21,000 in the fourth and first
quarters of fiscal 1999, respectively, as a result of interest paid on
borrowings to finance purchases of fixed assets and fund operations and
expansion.
Other Expense. Our other expenses were $23,000 for the first quarter of
fiscal 2000, compared to other expenses of $488,000 in the fourth quarter of
fiscal 1999 and other income of $1,000 in first quarter of fiscal 1999. The
other expenses in the fourth quarter of fiscal 1999 resulted primarily from the
write-off of certain machinery and equipment due to the relocation of our
Seattle operations from our original location in Bellevue to the larger and more
automated CFC in Renton.
Income Taxes. There was no provision or benefit for income taxes for any
period since inception due to our operating losses.
Liquidity and Capital Resources
Prior to our initial public offering, we financed our operations primarily
through sales of preferred stock with net cash proceeds of $168.4 million
through January 1, 2000. On March 10, 2000, we completed our initial public
offering of our common stock, generating net proceeds of $243.5 million.
Net cash used in operating activities in the first quarter was $28.1
million. In addition, we invested $38.6 million primarily in new customer
fulfillment centers and the rollout of our service, including tenant
improvements and the purchase of computer and transportation equipment, but
12
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not including equipment acquired through capital leases. As of April 1, 2000, we
had $257.1 million of unrestricted cash and cash equivalents. As of that date,
our principal commitments consisted of minimum lease payments due under
operating leases totaling approximately $200.5 million over 15 years, agreements
to purchase additional delivery vehicles in fiscal 2000 totaling approximately
$28.1 million and approximately $54.0 million due over four years under our
marketing agreement with America Online. Our lease commitments include amounts
related to customer fulfillment centers we expect to open in future periods. Our
cash needs in future periods will be a function of our operating results, the
speed of rollout and the terms and availability of leases for real estate and
equipment, including trucks.
We believe that our operations in each market are largely independent of
our operations in other markets. The procedure to enter a new market begins with
a search for appropriate real estate. We then build the tenant improvements to
convert such real estate into a functioning CFC, while we order the appropriate
fleet of trucks. To date, we have been able to lease all of our CFC real estate
and most of our transportation equipment. Finally, we incur hiring and training
costs prior to beginning service in each market and we anticipate that our
operations in each market will incur operating losses before reaching the
breakeven point.
We have decided to make certain changes in our strategy that could reduce
the amount of capital required in each market prior to reaching the breakeven
point. One such change is to delay the construction of a second facility in
certain markets, but implementing service to significant portions of the
customer areas that would otherwise have been serviced by that facility. This
may allow the first CFC in each market to reach higher volume levels more
quickly than it would if we open two CFCs in the same market within a narrow
timeframe. This shift in strategy would likely be transparent to the customers
and may result in similar overall revenues to the Company, but with lower
operating expenses and capital expenditures.
We believe that our existing cash and cash equivalents will be sufficient
to meet our anticipated needs for working capital and capital expenditures into
the fourth quarter of 2000 and perhaps the first quarter of 2001. In the past,
the Company has been able to lease much of its transportation equipment on
relatively favorable terms. However, changes in the equity markets since the
Company's IPO on March 10, 2000 may have affected other capital markets as well.
The Company may have to, for example, purchase some of its transportation
equipment, which in the past has generally been leased. If this is the case and
no other financing is available on acceptable terms, or if the Company's losses
are larger than expected, then we may choose to postpone or cancel some of our
planned expansion in order to focus our financial and other resources on the
markets that we do open. If we raise additional funds through the issuance of
equity, equity-related or debt securities, such securities may have rights,
preferences or privileges senior to those of the rights of our common stock and
our stockholders may experience additional dilution. We cannot be certain that
additional financing will be available to us on acceptable terms when required,
or at all.
New Accounting Pronouncements
In January 2000, the Emerging Issues Task Force (''EITF'') reached a
consensus on EITF Statement No. 99-17 ''Accounting For Barter Transactions''
involving a nonmonetary exchange of advertising. This EITF consensus does not
impact our results of operations as we do not have any advertising barter
transactions.
Risk Factors
There are numerous risks involving any potential investment in
HomeGrocer.com. These include the risks enumerated in the Company's Registration
Statements on Form S-1 (File No. 333-93015) dated March 9, 2000 and the
following:
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We anticipate significant increases in our operating expenses and continuing
losses for the foreseeable future.
We incurred net losses of $43.5 million, or 205% of our revenues, for the
first quarter of fiscal 2000. We intend to open customer fulfillment centers in
approximately eight new markets within the next twelve months. Because all of
our customer fulfillment centers have lost money over their first several
quarters of operation and none are yet profitable, we anticipate that our net
losses for the fiscal year ended December 30, 2000 will be significantly greater
than in prior years. As of April 1, 2000, we had an accumulated deficit of
$136.7 million. Although we cannot be certain of the size of the capital
commitment we will make and the operating expenses we will incur, we expect the
expansion will also include:
. Approximately $6 to $9 million to equip each new customer fulfillment
center in additional geographic markets;
. The lease of the site or shell of each CFC and the lease or purchase
of its transportation equipment;
. Approximately $6 to $12 million for brand development, marketing and
other promotional activities in each new geographic market;
. Continued investment in our computer network, web site, warehouse
management and order fulfillment systems and delivery and corporate
infrastructure.
We anticipate using our current cash and equivalents, our revenues from
operations and funds from future debt and equity offerings to finance these
expenses. We expect to continue to experience substantial operating losses on a
quarterly and annual basis for the foreseeable future. At current numbers of
customers and orders, the geographic density of customers and productivity of
employees, we are not profitable and cannot predict when or if we will be
profitable.
We are an early stage company operating in the e-commerce market, which makes it
difficult for investors to evaluate our business and prospects.
Prior to June 1998, we were focused on developing our web site and
constructing and equipping our first customer fulfillment center serving the
Seattle, Washington area. We did not begin commercial operations in the Seattle
area until June 1998, the Portland, Oregon area until May 1999, and the Orange
County, California area until September 1999. Our limited operating history
makes it difficult to evaluate our financial results and future plans. You must
consider our business and prospects in light of the risks and difficulties we
encounter as an early stage company in the new and rapidly evolving market of e-
commerce. Our failure to address such risks and difficulties could hurt our
business.
If a sufficient number of grocery shoppers do not accept our online shopping
service, we may never become profitable.
We have not operated profitably to date and cannot predict when or if we
will achieve profitability overall or in any single customer fulfillment center.
If we do not achieve and maintain customer volumes and sufficient density of our
deliveries in our market areas at a reasonable cost, we will not be able to
increase our revenues or achieve profitability. The market for e-commerce is new
and rapidly evolving. It is uncertain whether e-commerce will achieve and
sustain high levels of demand and market acceptance, particularly in the home
delivery industry. Our success will depend to a substantial extent on the
willingness of consumers to increase their use of online services as a means of
buying groceries and other products and services. We may
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not be able to convert a large number of consumers from traditional shopping
methods to online shopping for groceries and other consumer products. Even if we
are successful in attracting online customers, we expect that it may take
several years to achieve a sufficient base of customers in a given market.
Specific factors that could prevent widespread customer acceptance include:
. Prolonged delivery time compared to the immediate receipt of products at
a traditional store;
. Perceptions that online delivery services are premium services and
therefore may be more expensive than traditional grocery stores;
. Customers' desire to see and touch products, particularly fresh produce,
prior to purchase;
. Product selection that is less varied than customers desire;
. Perceived or actual lack of security or privacy of online transactions;
and
. Difficulties in making accurate and timely deliveries to customers.
Moreover, the growth of our business will depend on the growth of the
number of consumers who have access to personal computers or other systems that
can access the Internet. If e-commerce, especially in the grocery industry, does
not achieve high levels of demand and market acceptance, we may never become
profitable.
Our customer fulfillment center and delivery service model may not be readily or
cost-effectively replicable in additional geographic markets; as a result, we
may fail to expand our business effectively.
A critical part of our business strategy is to expand our business by
opening customer fulfillment centers in additional geographic markets at a rapid
pace. Our expansion strategy is dependent upon our ability to replicate our
customer fulfillment center and delivery service model in a timely and cost-
effective manner. Our strategy of using proprietary technology that can be
implemented in pre-existing warehouses to quickly open customer fulfillment
centers may not be as effective as we anticipate. In addition, our existing
customer fulfillment centers have been limited to locations on the west coast,
and we may fail to recognize specific issues associated with expansion beyond
the west coast. Because our customer fulfillment centers have been operational
for a limited period of time, we have not yet demonstrated whether our customer
fulfillment centers and delivery service model are in fact readily and cost-
effectively replicable for long-term use or across additional markets. If we
fail to launch our service in new markets in a timely and cost effective manner
or if the market fails to accept our new services, we may not generate the
revenue we expect, and we could incur substantial additional operating costs.
We will need substantial additional capital to fund our operations and planned
expansion, and we cannot be sure that additional financing will be available.
We require substantial amounts of working capital to fund our business. In
addition, the opening of new customer fulfillment centers and the continued
development of our order fulfillment and delivery systems require significant
amounts of capital. For example, we anticipate that we will require
approximately $6 to $9 million to equip each new customer fulfillment center and
approximately $5 to $12 million for brand development, marketing and other
promotional activities in each new geographic market. In addition, we will need
substantial additional capital to fund growth beyond the initial phase of our
expansion or if we encounter unexpected costs in the initial phase of our
expansion, such as higher than anticipated real estate, technology or customer
acquisition costs. Since our inception, we have experienced negative cash flow
from operations and expect to experience significant negative cash flow from
operations for the foreseeable future. In the past, we have funded our operating
losses and capital expenditures through proceeds from equity offerings, debt
financing and equipment leases. Changes in the equity markets since the
Company's IPO on March 10, 2000 may have affected the markets for debt financing
and equipment leases. We expect to require substantial additional capital to
fund our expansion program and operating expenses. Our future capital needs will
be highly dependent on the number and actual cost of additional customer
fulfillment centers we open, the timing of openings and the success of our
facilities once they are launched. We cannot be certain that additional
financing will be available to us on favorable terms when required, or at all.
If we are unable to obtain sufficient additional capital when needed, we could
be forced to alter our business strategy, delay or abandon some of our expansion
plans or sell assets. Any of these events would have a material adverse effect
on our business, financial condition and our ability to reduce losses or
generate profits. In addition, if we raise additional funds through the issuance
of equity, debt or other securities, those securities may have rights,
preferences or privileges senior or equal to those of the rights of our common
stock and our shareholders may experience dilution.
We may be unable to upgrade our existing technology in a cost-effective and
efficient manner to accommodate the increased volumes of Internet traffic and
transactions that may arise from our expansion, which could hurt our business.
The launch of the HomeGrocer.com service in additional metropolitan
locations may require us to expand and upgrade our technology, including our
integrated set of software tools and business processes for delivery management,
web site production, customer service and order fulfillment. Our existing
technology may not be able to accommodate increased volumes of traffic and
transactions that may arise in the future from our expansion into other
metropolitan locations. To the extent that customer traffic grows substantially,
we will need to expand the capacity of our web site and transaction processing
systems to accommodate a larger number of customers. If we are unable to upgrade
our technology, we may suffer from unanticipated system disruptions,
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slower response times, degradation in levels of customer service, impaired
quality and speed of order fulfillment or delays in reporting accurate financial
information. We may not accurately predict the rate or timing of increases in
the use of our web site to allow us to effectively upgrade or expand our
transaction processing systems. Upgrading our current technology could result in
material expenses. If we fail to cost-effectively and efficiently upgrade and
expand our current technology, our business will suffer.
Expansion of our service in additional geographic markets may place a greater
than expected strain on our personnel and systems and jeopardize future
scheduled expansion.
The strain placed on our employees, management and systems by simultaneous
launches of the HomeGrocer.com service in multiple metropolitan locations may
jeopardize future scheduled launches or the quality of our service in a
particular location. The lack of sufficient resources to operate in multiple
locations could cause our quality of service or number of customers to decline.
If we fail to adequately predict and maintain the personnel and systems
necessary to successfully manage multiple customer fulfillment centers, we may
be forced to delay our expansion and our business will suffer.
If we encounter operational difficulties, our business could suffer erosion of
customer trust and loss of income.
Our business relies on complex systems to manage the process from the
receipt of orders to the delivery of goods to our customers. The satisfactory
performance, reliability and availability of our web site and transaction
processing systems are critical to our reputation and our ability to attract and
retain customers and maintain adequate customer service levels.
Our web site has experienced numerous outages since inception. In addition
to outages, we occasionally experience periods of slow site response times. We
have, from time to time, also experienced operational "bugs" in our systems and
technologies that have resulted in order errors, such as missing items and
delays in deliveries. Operational bugs may arise from one or more factors
including mechanical equipment failures, computer server or system failures,
network outages, software bugs, power failures and human error. We may not be
able to correct every problem in a timely manner. We expect bugs to continue to
occur from time to time and our operations may experience significant
inefficiencies or failures. If we are unable to meet customer demand or service
expectations as a result of operational issues, we may be unable to develop
customer relationships that result in repeat orders, which would hurt our
business.
Our communications hardware is located at a third party hosting provider and
natural disasters and any other unanticipated problems faced by our hosting
provider may reduce our capacity or damage our systems.
Our communications hardware and other computer hardware operations are
located at a web site hosting provider in Seattle, Washington. The hardware for
our warehouse management and inventory system is maintained in our corporate
data center in Kirkland, Washington. Fires, floods, earthquakes, power losses,
telecommunications failures, break-ins and similar events could damage these
systems or cause them to fail completely. In addition, our hosting provider is
responsible for the allocation of our system capacity and any unanticipated
problems with the telecommunications network providers with whom it contracts or
with the systems by which it allocates capacity among its customers could reduce
our system capacity. Natural disasters and any other unanticipated problems
faced by our hosting provider could adversely impact the customer shopping
experience and, consequently, our business.
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Our limited operating history makes it difficult for us to forecast our future
financial results.
As a result of our limited operating history, it is difficult to accurately
forecast our total revenue, revenue per customer fulfillment center, gross and
operating margins, real estate and labor costs, average order size, number of
orders per day and other financial and operating data. We have a limited amount
of meaningful historical financial data upon which to base planned operating
expenses. Sales and operating results are difficult to forecast because they
generally depend on the growth of our customer base and the volume of the orders
we receive, as well as the mix of products sold. As a result, we may be unable
to make accurate financial forecasts and adjust our spending in a timely manner
to compensate for any unexpected revenue shortfall. This inability to accurately
forecast our results could cause our net losses in a given quarter to be greater
than expected and could cause a decline in the trading price of our common
stock.
Our quarter-to-quarter operating results are expected to fluctuate based upon
seasonal purchasing patterns, and are therefore difficult to predict.
Our quarter-to-quarter operating results are expected to fluctuate based
upon seasonal purchasing patterns of our customers and the mix of groceries and
other products sold by us. For instance, we expect a reduction in sales in the
summer months, which is a popular vacation season in most markets, and higher
sales during the weeks preceding Thanksgiving. Because of our short operating
history and limited geographical experience, we may not accurately predict the
seasonal purchasing patterns of our customers and may experience unexpected
difficulties in matching inventory to demand by customers.
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If we fail to generate sufficient levels of repeat orders and market
penetration, our revenues could be significantly lower than expected.
In the online retail industry, customer attrition rates, or the rates at
which subscribers cancel a service, are generally high. Although we do not
charge a subscription fee for our service, we do depend upon customers to
continue to order from us after their initial order is placed. We compete to
retain customers once they have used our service. We currently track our repeat
customers and the data we have gathered shows during the first quarter of fiscal
2000 approximately 77% of our orders were from repeat customers. A critical part
of our business strategy depends on hiring, training and retaining customer
friendly delivery persons to interact directly with the customer on a regular
basis and promote customer loyalty. In addition, we must ensure that our
customer service agents who answer telephone and email inquiries offer prompt
attention and helpful information in response to our customers' concerns. If we
fail to provide high quality customer care and experience significant decreases
in repeat customer orders as a percentage of orders delivered, or if we are
unable to establish sufficient customer loyalty needed for market penetration,
our business could be hurt. Retention of customers is also dependent on
operational execution. If orders are incomplete or not delivered on time,
customer retention rates could decline, causing revenue and profitability to
decline as well.
We face intense competition from traditional grocery retailers and anticipate
increased competition from online grocery retailers in our existing and future
markets
The grocery retailing market is extremely competitive. Local, regional, and
national food chains, independent food stores and markets, as well as online
grocery retailers comprise our principal competition, although we also face
substantial competition from convenience stores, liquor retailers, membership
warehouse clubs, specialty retailers, supercenters and drugstores. Many of our
existing and potential competitors, particularly traditional grocers and
retailers, have existed for a longer period of time, have greater financial
resources and have more established relationships with leading manufacturers,
suppliers and advertisers than we do.
In April 2000, Safeway, a national traditional grocery chain announced it
would purchase 50% of Groceryworks.com, an Internet grocer currently serving
Dallas, Texas, a market we expect to enter in mid-May. Royal Ahold, also a
traditional grocery chain, has entered into a contract to acquire a 51%
ownership interest in Peapod, an online grocer that operates in several of the
markets we intend to enter. In November 1999, Albertson's introduced an
Internet based service in the Seattle area and Webvan, an online grocery
retailer has indicated that it will introduce its online grocery service in the
Seattle and Atlanta area sometime in 2000. We expect our competition will
intensify as more traditional and online grocery retailers offer competitive
services, both in Seattle and other markets.
The number and nature of competitors and the amount of competition we will
experience will vary by market area. We expect to compete with traditional
grocery stores in every market, including Albertson's, Safeway, Quality Food
Centers and Kroger, and other online grocers in most markets, including
companies such as Webvan, Peapod, HomeRuns, GroceryWorks.com, ShopLink.com and
Streamline.com. The principal competitive factors that affect our business are
product selection, product quality, customer service, price and convenience. For
traditional grocers, convenience is largely a function of location and hours of
operation. For online grocers, it is primarily determined by ease of use of the
web site and availability of delivery times. If we fail to effectively compete
in any of these areas, we may lose existing and potential customers and face
decreased demand for our products and services, which would hurt our business.
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If our efforts to build strong brand identity and customer loyalty are not
successful, our business will suffer.
We believe that customers may direct future grocery purchases to those
online and traditional grocers for whose brands they feel loyalty and personal
affinity. If we do not increase spending substantially to create and maintain
brand loyalty, we may not attract and retain consumers and respond to
competitive pressures. We believe the cost of our advertising campaigns could
increase substantially in the future. The costs required to successfully
establish our brand may exceed the benefits associated with creating our brand
identity and loyalty. If we fail to establish and maintain brand identity and
brand loyalty, we may not attract the customers we need in order to be
profitable.
Customer loyalty will also depend on our success in consistently providing
a high quality shopping experience for purchasing groceries and other products.
If consumers do not perceive our service offerings to be of high quality, or if
we introduce new services that are not favorably received by consumers, the
value of the HomeGrocer.com brand could be harmed. Any loss of value of our
brand could decrease the attractiveness of HomeGrocer.com to consumers, which
could harm our reputation, reduce our sales and cause us to lose customers.
We do not have long-term contracts with our suppliers and could face disruptions
in our supply of products.
We purchase products from a network of suppliers, wholesalers, brokers and
distributors. We do not have long term or exclusive contracts with these
suppliers. The loss of any of our suppliers could cause disruptions in our
supply of products and harm our business. We purchase a number of top brands and
high volume items directly from manufacturers and may increase our use of direct
suppliers as our product volumes increase with additional customer fulfillment
centers. We also utilize premium specialty suppliers and local sources for
gourmet foods, traditional and organic produce, bakery items, fish and meats and
floral products. From time to time, we may experience difficulty in obtaining
sufficient product allocations from a key vendor. In addition, our key vendors
may establish their own online retailing efforts, which may impact our ability
to obtain sufficient product allocations from these vendors. Many of our key
vendors also supply products to the retail grocery industry and our online
competitors. If we are unable to obtain sufficient quantities of products in a
timely fashion from our key vendors to meet customer demand, our business would
suffer.
The loss of the services of one or more of our key personnel could seriously
harm our business.
The loss of the services of one or more of our key personnel, including
Mary Alice Taylor, our chairman and chief executive officer, and J. Terrence
Drayton, our president, could seriously harm our business. We depend on the
continued services and performance of our senior management and other key
personnel. In addition, Mr. Drayton and Ken Deering, our vice president of
Storefront, are Canadian citizens who hold visas to work in the United States.
If the Immigration and Naturalization Service were to deny a renewal of either
of these visas and we were to lose the services of either of these officers, our
business could suffer.
We may not be able to hire and retain qualified employees necessary to support
our business, which would threaten our future growth.
Our future success depends upon attracting and retaining the continued
service of our executive officers, delivery persons, and other key software
development, merchandising, marketing and support personnel. Our relationships
with all of our employees are at will. Additionally, there are low levels of
unemployment in the Seattle, Portland, and Orange County/Los Angeles areas, as
well as in many of the regions in which we plan to operate. These
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low levels of unemployment have led to upward pressure on wage rates, which can
make it more difficult and costly for us to attract and retain qualified
employees. The failure to attract and retain qualified employees, could
adversely affect our business.
Several key members of our management team have only recently joined us and if
they are not successfully integrated into our business or fail to work together
as a management team, our business will suffer.
Several key members of our management team have joined us since September
1, 1999, including Mary Alice Taylor, our chairman and chief executive officer,
Daniel R. Lee, our senior vice president and chief financial officer, Rex L.
Carter, our senior vice president of systems development & technology, Corwin J.
Karaffa, our senior vice president of operations, David A. Pace, our senior vice
president of people capability, and Kristin H. Stred, our senior vice president,
general counsel and secretary. If we do not effectively integrate these
executives and key personnel into our business, or if they do not work together
with existing personnel as a management team to enable us to implement our
business strategy, our business will suffer.
We may not be able to obtain required licenses or permits for the sale of
alcohol in a cost-effective manner or at all, which would hurt our sales and
profitability.
For first quarter of fiscal 2000, sales of alcohol accounted for
approximately 2% of our sales. We will be required to obtain state, and in some
cases county and municipal, licenses and permits for the sale and delivery of
alcohol in new markets. Some jurisdictions do not allow companies such as ours
to sell alcohol. We cannot assure you that we will be able to obtain any or all
required permits or licenses in a timely manner, or at all. We may be forced to
incur substantial costs and experience significant delays in obtaining these
permits or licenses. In addition, the U.S. Congress is considering enacting
legislation, which would restrict the interstate sale of alcoholic beverages
over the Internet. Changes to existing laws or our inability to obtain required
permits or licenses could prevent us from selling alcohol in one or more of our
geographic markets or in a portion of those markets. In those locations where we
cannot obtain alcohol permits or licenses, we will be unable to sell these items
and will lose an opportunity to increase revenue.
We are required to verify the age of purchasers of our alcohol and tobacco
products and the failure to do so may have a negative impact on our reputation
and make us vulnerable to liability claims.
We are required to verify the age of purchasers of our alcohol and tobacco
products. If our delivery personnel fail to request the proper identification or
if false identification cards are presented by the purchaser, we could face
substantial penalties and legal liability for sales of alcohol and tobacco
products to underage persons. Any inquiry or investigation from a regulatory
authority could have a negative impact on our reputation and any liability
claims could require us to spend significant time and money in litigation.
We may incur significant costs or experience product availability delays in
complying with regulations applicable to the sale of food products, which may
hurt our business.
We are not currently regulated by the U.S. Department of Agriculture, or
USDA. Whether the handling of food items in our customer fulfillment centers,
such as meat and fish, will subject us to USDA regulation in the future will
depend on several factors, including whether we sell food products on a
wholesale basis or whether we obtain food products from non-USDA inspected
facilities. In the future the USDA may require costly changes to our food
handling operations. We are also required to comply with local health
regulations concerning the preparation and packaging of any prepared food items,
such as deli salads that we prepare on site. Applicable federal, state or local
regulations may cause us to incur substantial compliance costs or delay the
availability of items at one or more of our customer fulfillment centers. In
addition, any inquiry or
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investigation from a food regulatory authority could have a negative impact on
our reputation. The occurrence of any of these events could delay or impair our
expansion plans and could cause us to lose customers.
Intellectual property claims can be costly and could result in the loss of
significant rights.
Intellectual property rights are becoming increasingly important to us and
other e-commerce retailers. Many companies are devoting significant resources to
developing patents that could affect many aspects of our business. Other parties
may assert infringement or unfair competition claims against us that could
relate to any aspect of our technologies, business processes or other
intellectual property. We cannot predict whether third parties will assert
claims of infringement against us, the subject matter of any of these claims, or
whether these assertions or prosecutions will harm our business. If we are
forced to defend ourselves against any of these claims, whether they are with or
without merit or are determined in our favor, or defend our intellectual
property by bringing lawsuits, then we may experience diversion of technical and
management attention, an inability to use our current web site technology or
other intellectual property or product shipment delays. As a result of a
dispute, we may have to develop non-infringing technology or enter into royalty
or licensing agreements. These royalty or licensing agreements, if required, may
be unavailable on terms acceptable to us, or at all. If there is a successful
claim of infringement against us and we are unable to develop non-infringing
technology or license the infringed or similar technology on a timely basis, our
business and competitive position may be hurt.
We may face product claims that create liability and adverse publicity.
Grocery and other related products can contain contaminants due to inherent
defects in the products or improper storage or handling. If any of the products
that we sell causes harm to any of our customers, we could be vulnerable to
product liability lawsuits. If we are found liable under a product liability
claim, or even if we successfully defend ourselves against this type of a claim,
we could be forced to spend a substantial amount of money in litigation
expenses, our reputation could suffer and customers may substantially reduce
their orders or stop ordering from us.
If the protection of our patents, trademarks and proprietary rights is
inadequate, our business may be seriously harmed.
We regard patents, copyrights, service marks, trademarks, trade secrets and
similar intellectual property as important to our success. We rely on patent,
trademark and copyright law, trade secret protection and confidentiality or
license agreements with our employees, customers, partners and others to protect
our proprietary rights; however, the steps we take to protect our proprietary
rights may be inadequate and legal means afford only limited protection. For
example, our confidentiality and license agreements may be unenforceable in some
jurisdictions and, as a result, offer no protection of our proprietary rights.
In addition, traditional legal protections may not be applicable in the Internet
context. Because our business and technology have developed rapidly since our
incorporation, the ownership of proprietary rights in our technology may be
subject to uncertainty. Our failure to protect our proprietary rights could
materially harm our business and competitive position.
We currently have no patents. On January 10, 2000, we filed three
provisional patent applications with the U.S. Patent and Trademark Office. From
time to time, we may decide to file additional patent applications relating to
aspects of our proprietary technology. Other parties may independently develop
similar or competing technology or design around any patents that may be issued
to us. We cannot assure you that any of our pending provisional patent
applications will be approved, that any issued patents will protect our
intellectual property or that any issued patents will not be challenged by third
parties.
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We may not be able to protect our domain names against all infringers, which
could decrease the value of our brand name and proprietary rights.
We currently own the Internet domain name "homegrocer.com," as well as
various other related names. Domain names generally are regulated by Internet
regulatory bodies. The regulation of domain names in the United States and in
foreign countries is subject to change. Regulatory bodies could establish
additional top-level domains, appoint additional domain name registrars or
modify the requirements for holding domain names. The relationship between
regulations governing domain names and laws protecting trademarks and similar
proprietary rights is unclear. Therefore, we could be unable to prevent third
parties from acquiring domain names that infringe or otherwise decrease the
value of our brand name, trademarks and other proprietary rights.
Future sales of our common stock may cause our stock price to decline.
If our shareholders sell substantial amounts of our common stock in the
public market, the market price of our common stock could decline. As of April
1, 2000, we have 128,237,462 shares of outstanding common stock of which 12.2
million are restricted. Of these shares, 22,000,000 were sold as part of our
March 10, 2000 initial public offering ("IPO") and the majority are freely
tradable, without restriction, in the public market.
We agreed not to sell any shares of common stock for period of 180 days
following our IPO without the consent of Morgan Stanley & Co. Incorporated. We
have no agreement with Morgan Stanley for a waiver of this restriction. However,
Morgan Stanley may, in its discretion, release us from the agreement. In some
cases underwriters have agreed to waive lock-up restrictions when a company's
stock has performed well and market conditions are favorable, in order to allow
a follow-on offering of common stock. Any decision by Morgan Stanley to waive
the lock-up restrictions would depend on a number of factors including market
conditions, the performance of our common stock in the market and our financial
condition at that time. If Morgan Stanley were to waive the lock-up restrictions
prior to the expiration of the 180 day period, and we were to sell additional
shares of common stock to the public, the market price of our common stock could
decline.
Each of our officers, directors and most of our shareholders have entered
into lock-up agreements generally providing that they will not sell or otherwise
dispose of or transfer any of our common stock or other securities for the
period of 180 days after our IPO without the consent of Morgan Stanley. However,
Morgan Stanley has agreed that if the reported last sale price of the common
stock on the Nasdaq National Market is at least twice the initial public
offering price per share for 20 of the 30 trading days ending on the last
trading day preceding the 90th day after the date of this prospectus, 25% of the
shares of our common stock that are held by our employees who are not officers
or directors of HomeGrocer.com, or a total of approximately 418,492 shares,
subject to this 180-day restriction will be released from the restriction.
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Item 3 - Quantitative and Qualitative Disclosures About Market Risk -
- -------------------------------------------------------------------
We maintain a short-term investment portfolio consisting of commercial
paper with maturities of three months or less. Such securities are subject to
interest rate risk and will rise and fall in value if market interest rates
change. The extent of this risk is not quantifiable or predictable due to the
variability of future interest rates.
Our restricted cash is invested in certificates of deposit. There is
inherent risk in these instruments as they mature and are immediately renewed at
current market rates. The extent of this risk is not quantifiable or predictable
due to the variability of future interest rates.
We believe that the market risk arising from our holdings of financial
instruments is not material.
The following table provides information about our investment portfolio,
restricted cash, capital lease obligations and long-term debt as of April 1,
2000, principal cash flows and related weighted average interest rates by
expected maturity dates.
<TABLE>
<CAPTION>
Year of Maturity
---------------------------------------------------------------- Total
After Carrying
2000 2001 2002 2003 2004 2004 Value
----------------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and equivalents $257,144 - - - - - $257,144
Average interest rate 6.0% - - - - - 6.0%
Restricted certificates of $ 11,315 $4,772 - - - - $ 16,087
deposit
Average interest rate 6.0% 6.7% - - - - 6.2%
Capital lease obligations $ 2,870 $4,223 $4,271 $3,663 $2,534 $9,350 $ 26,911
Average interest rate 9.0% 9.0% 8.9% 8.7% 7.6% 7.6% 8.4%
Long-term debt $ 2,980 $3,814 $3,874 $ 323 - - $ 10,991
Average interest rate 10.6% 10.8% 10.9% 11.0% - - 10.8%
</TABLE>
23
<PAGE>
PART II - OTHER INFORMATION:
- ---------------------------
Item 1 - Legal Proceedings -
- --------------------------
On January 7, 2000, a personal injury action was filed against us in the
Superior Court of California for Orange County. The plaintiffs are seeking
compensatory damages in the amount of approximately $3.2 million plus loss of
earnings and future earning capacity resulting from a motor vehicle accident
involving one of our delivery trucks. We believe our insurance policies will
cover us for damages, if any, awarded to plaintiffs.
On February 28, 2000, CNA Industrial Engineering, Inc. filed suit against
HomeGrocer.com in Superior Court of Washington for King County to collect
$473,000, which it claims it is owed for consulting, design and installation
services. We dispute the amount claimed and intend to vigorously defend the
lawsuit.
Item 2 - Changes in Securities and Use of Proceeds -
- --------------------------------------------------
(a) Not applicable.
(b) Not applicable.
(c) Sales of Unregistered Securities During the Quarter
During the quarter ended April 1, 2000, we issued an aggregate of 1,463,693
shares of our common stock with a weighted average purchase price of $1.57 per
share to employees upon the exercise of stock options pursuant to our 1997 Stock
Incentive Compensation Plan.
During the quarter ended April 1, 2000, we issued an aggregate of 2,015,666
shares of common stock with a weighted average purchase price of $0.43 per share
upon exercise of common stock warrants.
The issuances of the above securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) and Regulation
D as transactions by an issuer not involving any public offering. In addition,
issuances pursuant to the exercise of stock options were deemed exempt from
registration under the Securities Act in reliance upon Rule 701 promulgated
under the Securities Act. The recipients of securities in each such transaction
represented their intentions to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof and
appropriate legends were affixed to the share certificates issued in such
transactions. All recipients had adequate access, through their relationships
with the Company, to information about HomeGrocer.com.
(d) Use of Proceeds
On March 9, 2000, our Registration Statement on Form S-1 (File No. 333-
93015) became effective. The offering has been terminated as the 22.0 million
shares being offered were sold and the underwriters' over-allotment option to
purchase an additional 3.3 million shares has expired. The managing underwriters
were Morgan Stanley Dean Witter and Donaldson, Lufkin & Jenrette. The aggregate
proceeds of the shares offered and sold was $264.0 million. After accounting for
$18.5 million in underwriting discounts and $2.0 million of other issuance
costs, we received proceeds of approximately $243.5 million.
We expect to use the proceeds of the offering to fund our operations and
expansion. We also intend to use a portion to pay our current obligations to
America Online and Amazon.com
24
<PAGE>
pursuant to our advertising agreements. David Risher, one of our directors, is
senior vice president of product development at Amazon.com.
Other than the payments to Amazon.com, none of the net proceeds of our
initial public offering were paid directly or indirectly to any director,
officer or general partner of HomeGrocer.com, person owning 10% or more of any
class of equity securities of HomeGrocer.com or any affiliate of HomeGrocer.com.
Item 4 - Submission of Matters to a Vote of Security Holders -
- ------------------------------------------------------------
During the quarter ended April 1, 2000, the following matters were
submitted to a vote of the shareholders of HomeGrocer.com:
1. Effective February 25, 2000, prior to the Company's initial public
offering, the shareholders of HomeGrocer.com acting by written consent,
approved the Company's reincorporation from the state of Delaware to
the state of Washington by means of a merger of the Company with and
into a wholly-owned Washington subsidiary ("HomeGrocer-Washington"),
which also constituted approval of (i) the exchange of shares of
HomeGrocer-Delaware capital stock for shares of HomeGrocer-Washington
capital stock on a one-for-one basis, (ii) the execution of
indemnification agreements between HomeGrocer.com- Washington and each
of its officers and directors, (iii) the HomeGrocer-Washington's
charter documents and (iv) the Agreement and Plan of Merger.
Shareholders holding 87% of the shares (on an as if converted into
common stock basis) outstanding at December 31, 1999 consented to the
foregoing.
2. Effective February 25, 2000, prior to the Company's initial public
offering, the shareholders of HomeGrocer.com, acting by written
consent, approved the 1999 Stock Incentive Plan and the reservation of
12,500,000 shares of the Company's Common Stock for issuance
thereunder, plus an annual increase in shares for issuance under the
1999 Stock Incentive Plan in each of fiscal years 2001, 2002, 2003,
2004 and 2005 of the lesser of 2,500,000 shares of the Company's Common
Stock or 2.5% of the outstanding shares of the Company's Common Stock
on the last day of the preceding fiscal year. Shareholders holding 87%
of the shares (on an as if converted into common stock basis)
outstanding at December 31, 1999 consented to the foregoing.
3. Effective February 25, 2000, prior to the Company's initial public
offering, the shareholders of HomeGrocer.com acting by written consent,
approved the 1999 Director's Stock Option Plan and the reservation of
500,000 shares of the Company's Common Stock for issuance thereunder.
Shareholders holding 87% of the shares (on an as if converted into
common stock basis) outstanding at December 31, 1999 consented to the
foregoing.
4. Effective February 25, 2000, prior to the Company's initial public
offering, the shareholders of HomeGrocer.com acting by written consent,
approved the 1999 Employee Stock Purchase Plan and the reservation of
3,000,000 shares of the Company's Common Stock for issuance thereunder,
plus an annual increase in shares for issuance under the 1999 Employee
Stock Purchase Plan in each of fiscal years 2001, 2002, 2003, 2004 and
2005 of the lesser of 500,000 shares of the Company's Common Stock or
0.5% of the outstanding shares of the Company's Common Stock on the
last day of the preceding fiscal year. Shareholders holding 87% of the
shares (on an as if converted into common stock basis) outstanding at
December 31, 1999 consented to the foregoing.
5. Effective February 25, 2000, prior to the Company's initial public
offering, the shareholders of HomeGrocer.com acting by written consent,
approved the Second
25
<PAGE>
Amended and Restated Articles of Incorporation of HomeGrocer-Washington, to
be put into effect immediately after the closing of the proposed initial
public offering of the Company's Common Stock. Shareholders holding 87% of
the shares (on an as if converted into common stock basis) outstanding at
December 31, 1999 consented to the foregoing.
Item 5 - Other Information -
- --------------------------
Subsequent to the end of the quarter, on May 5, 2000, J. Terrence Drayton,
President, began a sabbatical from his day-to-day operating duties. He remains
on the Board of Directors and plans to return to his active position on
September 5, 2000. In the interim, Mary Alice Taylor, Chairman and CEO, and Cor
Karaffa, Senior Vice President - Operations, will perform Mr. Drayton's duties.
Item 6 - Exhibits and Reports on Form 8-K -
- -----------------------------------------
(a) Exhibits filed with this Form 10-Q are as follows:
3.1 Second Amended and Restated Articles of Incorporation of
HomeGrocer.com
10.1 Subordinated Promissory Note dated February 11, 2000, between
HomeGrocer.com and Comdisco, Inc.
10.2 First Amendment dated February 29, 2000, to the Facility Lease
between HomeGrocer.com, as lessee, and Exposition Property Associates,
LLC.
10.3 Facility Lease dated February 25, 2000, between HomeGrocer.com, as
lessee, and TransDulles Center, Inc.
10.4 Facility Lease dated March 23, 2000, between HomeGrocer.com, as
lessee, and Opus Northwest, L.L.C.
10.5 Facility lease dated March 31, 2000, between HomeGrocer.com, as
lessee, and 3 Plus Limited Partnership.
10.6 Facility Lease dated April 14, 2000, between HomeGrocer.com, as
lessee, and Connecticut General Life Insurance Company.
10.7 Facility Lease dated April 3, 2000, between HomeGrocer.com, as
lessee, and Bellevue Hines Development, L.L.C.
27.1 Financial Data Schedule.
- --------------------
(b) No reports on Form 8-K were filed during the first quarter of fiscal
2000.
26
<PAGE>
SIGNATURES:
- ----------
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
HOMEGROCER.COM
--------------
Registrant
May 10, 2000 /s/ Mary Alice Taylor
------------------------------------
Date Mary Alice Taylor
Chairman and Chief Executive Officer
May 10, 2000 /s/ Daniel R. Lee
------------------------------------
Date Daniel R. Lee
Senior Vice President and
Chief Financial Officer
27
<PAGE>
EXHIBIT INDEX
3.1 Second Amended and Restated Articles of Incorporation of
HomeGrocer.com
10.1 Subordinated Promissory Note dated February 11, 2000, between
HomeGrocer.com and Comdisco, Inc.
10.2 First Amendment dated February 29, 2000, to the Facility Lease
between HomeGrocer.com, as lessee, and Exposition Property Associates,
LLC.
10.3 Facility Lease dated February 25, 2000, between HomeGrocer.com, as
lessee, and TransDulles Center, Inc.
10.4 Facility Lease dated March 23, 2000, between HomeGrocer.com, as
lessee, and Opus Northwest, L.L.C.
10.5 Facility lease dated March 31, 2000, between HomeGrocer.com, as
lessee, and 3 Plus Limited Partnership.
10.6 Facility Lease dated April 14, 2000, between HomeGrocer.com, as
lessee, and Connecticut General Life Insurance Company.
10.7 Facility Lease dated April 3, 2000, between HomeGrocer.com, as
lessee, and Bellevue Hines Development, L.L.C.
27.1 Financial Data Schedule.
<PAGE>
EXHIBIT 3.1
SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
HOMEGROCER.COM, INC.
ARTICLE I. NAME
The name of this corporation shall be HomeGrocer.com, Inc. (the
"Corporation").
-----------
ARTICLE II. PURPOSE
To engage in and carry on any lawful business or trade and exercise all
powers granted to a corporation formed under the Washington Business Corporation
Act (the "WBCA"), including any amendments thereto or successor statute that may
----
hereinafter be enacted.
ARTICLE III. REGISTERED OFFICE; REGISTERED AGENT
The name of the registered agent of this corporation and the address of its
registered office are as follows:
Corporation Service Company
1010 Union Avenue, Suite B
Olympia, Washington 98501-1539
ARTICLE IV. SHARES
(a) Authorized Stock. The Corporation is authorized to issue two classes of
----------------
capital stock to be designated, respectively, "Common Stock" and "Preferred
------------ ---------
Stock." The total number of shares of capital stock that the Corporation shall
- -----
have authority to issue is 1,010,000,000 consisting of 1,000,000,000 shares of
Common Stock, no par value per share, and 10,000,000 shares of Preferred Stock,
no par value per share.
(b) Issuance of Preferred Stock in Series. The Preferred Stock may be
-------------------------------------
issued from time to time in one or more series in any manner permitted by law
and the provisions of these Amended and Restated Articles of Incorporation (the
"Articles of Incorporation"), as determined from time to time by the Board of
-------------------------
Directors of the Corporation (the "Board") and stated in the resolution or
-----
resolutions providing for the issuance thereof, prior to the issuance of any
shares thereof. In addition, such resolution or resolutions shall set forth the
voting powers, full or limited or none, of each such series of Preferred Stock
and shall fix the designations, preferences and relative, participating,
optional or other special rights and qualifications, limitations or restrictions
of each such series of Preferred Stock. The Board is authorized to alter the
designation, rights, preferences, privileges and restrictions granted to or
imposed upon any wholly unissued series of Preferred Stock and, within the
limits and restrictions stated in any
<PAGE>
resolution or resolutions of the Board originally fixing the number of shares
constituting any series of Preferred Stock, to increase or decrease (but not
below the number of shares of any such series then outstanding) the number of
shares of any such series subsequent to the issue of shares of that series. In
case the number of shares of any series shall be decreased, the shares
constituting such decrease shall resume the status which they had prior to the
adoption of the resolution originally fixing the number of shares of such
series. The Corporation shall from time to time, in accordance with the laws of
the State of Washington, increase the authorized amount of its Common Stock if
at any time the number of shares of Common Stock remaining unissued and
available for issuance shall not be sufficient to permit conversion of the
Preferred Stock.
ARTICLE V. PREEMPTIVE RIGHTS
No preemptive rights to acquire additional securities issued by the
Corporation shall exist with respect to shares of the Corporation's capital
stock, or securities convertible into shares of the Corporation's capital stock.
ARTICLE VI. CUMULATIVE VOTING
Shareholders of the Corporation shall not be entitled to cumulate votes for
the election of directors.
ARTICLE VII. DIRECTORS
(a) Number of Directors. The number of directors of this Corporation shall
-------------------
be determined in the manner provided by the Corporation's bylaws (the "Bylaws")
------
and may be increased or decreased from time to time in the manner provided
therein.
(b) Classified Board. The directors shall be divided into three classes
----------------
designated as Class I, Class II and Class III, respectively. Directors shall be
assigned to each class in accordance with a resolution or resolutions adopted by
the Board. Each class shall consist, as nearly as may be possible, of one-third
(1/3) of the total number of directors constituting the entire Board. The
initial term of the office of the Class I directors shall expire at the annual
meeting of shareholders in 2000 and Class I directors shall subsequently be
elected for a full term of three (3) years. The initial term of office of the
Class II directors shall expire at the annual meeting of shareholders in 2001
and Class II directors shall subsequently be elected for a full term of three
(3) years. The initial term of office of the Class III directors shall expire at
the annual meeting of shareholders in 2002 and Class III directors shall
subsequently be elected for a full term of three (3) years. Thereafter, the term
of office of each class of directors shall be three years and directors shall
hold office until the annual meeting for the year in which their terms expire
and until their successors shall be elected and shall qualify, subject, however,
to prior death, resignation, retirement, disqualification or removal from
office. If the number of directors is changed, any increase or decrease in
directorships shall be apportioned among the classes so as to maintain the
number of directors in each class as nearly equal as possible, and any
additional directors of any class elected to fill a vacancy resulting from an
increase in such class shall hold
-2-
<PAGE>
office only until next election of directors by the shareholders, but in no case
will a decrease in the number of directors shorten the term of any incumbent
director.
ARTICLE VII. AMENDMENT OF BYLAWS
The shareholders shall have the power to adopt, amend or repeal the Bylaws
of the Corporation by the affirmative vote of the holders of not less than two-
thirds of the outstanding shares, and, to the extent, if any, provided by
resolution or resolutions of the Board of Directors providing for the issuance
of a series of Common or Preferred Stock, not less than two-thirds of the
outstanding shares of such class or series entitled to vote thereon, voting as a
class. Any Bylaw of the Corporation may be amended or repealed at any time by
the Board of Directors in the manner provided in the Bylaws; provided, however,
-------- -------
that the Board of Directors may not repeal or amend any Bylaw that the
shareholders have expressly provided may not be amended or repealed by the Board
of Directors.
ARTICLE VIII. SHAREHOLDER ACTION
All shareholder action must be taken at a meeting of shareholders and may
not be taken by written consent.
ARTICLE IX. SPECIAL MEETINGS OF SHAREHOLDERS
A special meeting of the shareholders may be called, at any time for any
purpose or purposes for which such a meeting may lawfully be called, only by (i)
the Chairman of the Board, (ii) the Chief Executive Officer, (iii) the President
or (iv) a majority of the Corporation's Board of Directors.
ARTICLE X. SHAREHOLDER VOTING REQUIREMENTS FOR CERTAIN
TRANSACTIONS
(a) Definitions. For purposes of this Article X:
-----------
(i) "Business Combination" means (a) a merger, share exchange or
--------------------
consolidation of the Corporation or any of its Subsidiaries with any other
corporation or other entity; (b) the sale, lease, exchange, mortgage, pledge,
transfer or other disposition or encumbrance, whether in one transaction or a
series of transactions, by the Corporation or any of its Subsidiaries of all or
a substantial part of the Corporation's assets otherwise than in the usual and
regular course of business; or (c) any agreement, contract or other arrangement
providing for any of the foregoing transactions.
(ii) "Subsidiary" means a domestic or foreign corporation that has a
----------
majority of its outstanding voting shares owned, directly or indirectly by the
Corporation.
-3-
<PAGE>
(b) Vote Required for Business Combinations. The affirmative vote of the
---------------------------------------
holders of not less than two-thirds of the outstanding shares of stock entitled
to vote thereon and, to the extent, if any, provided by resolution adopted by
the Board of Directors authorizing the issuance of a class or series of
Preferred Stock, the affirmative vote of the holders of not less than two-thirds
of the outstanding shares of such class or series, voting as a separate voting
group, shall be required for the adoption or authorization of any Business
Combination.
ARTICLE XI. LIMITATION OF LIABILITY OF DIRECTORS
To the full extent that the WBCA, as it exists on the date hereof or may
hereafter be amended, permits the limitation or elimination of the liability of
directors, a director shall not be liable to this Corporation or its
shareholders for monetary damages for conduct as a director, except for acts or
omissions that involve intentional misconduct by the director, or a knowing
violation of law by the director, or for conduct violation Section 23B.08.310 of
the WBCA, or for any transaction from which the director will personally receive
a benefit in money, property or services to which the director is not legally
entitled. If the WBCA is hereafter amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director shall be eliminated or limited to the full extent permitted by the
WBCA, as so amended. Any repeal or modification of this Article shall not
adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification for or with respect to an
act or omission of such director occurring prior to such repeal or modification.
ARTICLE XII. AMENDMENTS TO ARTICLES
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in the Articles of Incorporation, in the manner now or
hereafter permitted by the WBCA, and all rights and powers conferred herein on
shareholders and directors are subject to this reserved power.
-4-
<PAGE>
Dated: March 14, 2000.
--------
HomeGrocer.com, Inc.,
a Washington corporation
/s/ Mary Alice Taylor
---------------------
Mary Alice Taylor
Chief Executive Officer
-5-
<PAGE>
OFFICER'S CERTIFICATE
---------------------
In accordance with Section 23B.10.070 of the Washington Business
Corporation Act, the undersigned, as the duly elected Chief Executive Officer of
HomeGrocer.com, Inc. (the "Corporation"), hereby submits these Second Amended
-----------
and Restated Articles of Incorporation of the Corporation for filing with the
Secretary of State of the State of Washington for purposes of amending the
Amended and Restated Article of Incorporation filed on March 8, 2000, in the
form of the Second Amended and Restated Articles of Incorporation set forth on
Exhibit A attached hereto.
- ---------
The Second Amended and Restated Articles of Incorporation were adopted by
the Board of Directors on February 29, 2000.
The Second Amended and Restated Articles of Incorporation were approved by
the shareholders of the Corporation on March 3, 2000 in accordance with the
Articles of Incorporation of the Corporation and the provisions of RCW
23B.10.030 and RCW 23B.10.040 of the Washington Business Corporation Act.
[signature page follows]
<PAGE>
Dated: March 14, 2000.
--------
HomeGrocer.com, Inc.,
a Washington corporation
/s/ Mary Alice Taylor
---------------------
Mary Alice Taylor
Chief Executive Officer
<PAGE>
EXHIBIT 10.1
SUBORDINATED PROMISSORY NOTE
$10,000,000 Date: February 11, 2000
Maturity Date: February 1, 2003
FOR VALUE RECEIVED, HomeGrocer.com, Inc., a Delaware corporation (the
"Borrower"), hereby promises to pay to the order of Comdisco, Inc., a Delaware
corporation (the "Lender") at P.O. Box 91744, Chicago, IL 60693, or such other
place of payment as the holder of this Secured Promissory Note (this "Note") may
specify from time to time in writing, in lawful money of the United States of
America, the principal amount of Ten Million and 00/100 Dollars ($10,000,000.00)
together with interest at eleven percent (11%) per annum from the date of this
Note to maturity of each installment on the principal hereof remaining from time
to time unpaid, such principal and interest to be paid in thirty-six (36)
monthly installments of $326,395.91 each, commencing March 1, 2000 and on the
same day of each month thereafter to and including February 1, 2003, such
installments to be applied first to accrued and unpaid interest and the balance
to unpaid principal. Interest shall be computed on the basis of a year
consisting of twelve months of thirty days each.
This Note is the Note referred to in, and is executed and delivered in
connection with, that certain Subordinated Loan and Security Agreement dated
September 15, 1999 by and between Borrower and Lender (as the same may from time
to time be amended, modified or supplemented in accordance with its terms, the
"Loan Agreement"), and is entitled to the benefit and security of the Loan
Agreement and the other Loan Documents (as defined in the Loan Agreement), to
which reference is made for a statement of all of the terms and conditions
thereof. All terms defined in the Loan Agreement shall have the same definitions
when used herein, unless otherwise defined herein.
THIS NOTE IS EXPRESSLY SUBJECT TO THE TERMS OF THAT CERTAIN SUBORDINATION
AGREEMENT BY AND BETWEEN LENDER AND BORROWER FOR THE BENEFIT OF SENIOR CREDITOR.
IN THE EVENT OF ANY CONTRADICTION OR INCONSISTENCY BETWEEN THIS NOTE AND THE
SUBORDINATION AGREEMENT, THE TERMS OF THE SUBORDINATION AGREEMENT SHALL CONTROL.
The Borrower waives presentment and demand for payment, notice of dishonor,
protest and notice of protest and any other notice as permitted under the UCC or
any applicable law.
<PAGE>
This Note has been negotiated and delivered to Lender and is payable in the
State of Illinois, and shall not become effective until accepted by Lender in
the State of Illinois. This Note shall be governed by and construed and enforced
in accordance with, the laws of the State of Illinois, excluding any conflicts
of law rules or principles that would cause the application of the laws of any
other jurisdiction.
BORROWER: HOMEGROCER. COM, INC.
/s/ Mary Alice Taylor
-----------------------------------
(Signature)
Mary Alice Taylor
-----------------------------------
(Print Name)
Chairman and CEO
-----------------------------------
(Title)
<PAGE>
<TABLE>
<S> <C>
HOMEGROCER. COM, INC.
Prepared by V. Tonga
Loan Agreement 10,000,000.00 Draw to Subordinated Loan & Security Agmt dtd 9/15/99
=============
Interest Rate 11.000%
=============
Payment 326,395.91
</TABLE>
<TABLE>
<CAPTION>
Payment Number Date Principal Interest Payment Balance
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
02/11/00 10,000,000.00
1 03/01/00 265,284.80 61,111.11 326,395.91 9,734,715.20
2 04/01/00 237,161.02 89,234.89 326,395.91 9,497,554.18
3 05/01/00 239,334.99 87,060.91 326,395.91 9,258,219.19
4 06/01/00 241,528.90 84,867.01 326,395.91 9,016,690.29
5 07/01/00 243,742.91 82,652.99 326,395.91 8,772,947.38
6 08/01/00 245,977.22 80,418.68 326,395.91 8,526,970.15
7 09/01/00 248,232.01 78,163.89 326,395.91 8,278,738.14
8 10/01/00 250,507.48 75,888.43 326,395.91 8,028,230.66
9 11/01/00 252,803.79 73,592.11 326,395.91 7,775,426.87
10 12/01/00 255,121.16 71,274.75 326,395.91 7,520,305.71
11 01/01/01 257,459.77 68,936.14 326,395.91 7,262,845.94
12 02/01/01 259,819.82 66,576.09 326,395.91 7,003,026.12
13 03/01/01 262,201.50 64,194.41 326,395.91 6,740,824.61
14 04/01/01 264,605.02 61,790.89 326,395.91 6,476,219.60
15 05/01/01 267,030.56 59,365.35 326,395.91 6,209,189.04
16 06/01/01 269,478.34 56,917.57 326,395.91 5,939,710.69
17 07/01/01 271,948.56 54,447.35 326,395.91 5,667,762.13
18 08/01/01 274,441.42 51,954.49 326,395.91 5,393,320.71
19 09/01/01 276,957.13 49,438.77 326,395.91 5,116,363.58
20 10/01/01 279,495.91 46,900.00 326,395.91 4,836,867.67
21 11/01/01 282,057.95 44,337.95 326,395.91 4,554,809.71
22 12/01/01 284,643.49 41,752.42 326,395.91 4,270,166.23
23 01/01/02 287,252.72 39,143.19 326,395.91 3,982,913.51
24 02/01/02 289,885.87 36,510.04 326,395.91 3,693,027.64
25 03/01/02 292,543.15 33,852.75 326,395.91 3,400,484.49
26 04/01/02 295,224.80 31,171.11 326,395.91 3,105,259.69
27 05/01/02 297,931.03 28,464.88 326,395.91 2,807,328.66
28 06/01/02 300,662.06 25,733.85 326,395.91 2,506,666.60
29 07/01/02 303,418.13 22,977.78 326,395.91 2,203,248.47
30 08/01/02 306,199.46 20,196.44 326,395.91 1,897,049.00
31 09/01/02 309,006.29 17,389.62 326,395.91 1,588,042.71
32 10/01/02 311,838.85 14,557.06 326,395.91 1,276,203.86
33 11/01/02 314,697.37 11,698.54 326,395.91 961,506.49
34 12/01/02 317,582.10 8,813.81 326,395.91 643,924.39
35 01/01/03 320,493.27 5,902.64 326,395.91 323,431.12
36 02/01/03 323,431.12 2,964.79 326,395,91 (0.00)
</TABLE>
Page 1
<PAGE>
[LOGO]
[LETTERHEAD]
FEDERAL EXPRESS
January 11, 2000
Mr. Peter Klein
HomeGrocer.com, Inc.
10230 NE Points Drive
Kirkland, WA 98033
Re: Executed Documents
Dear Peter:
Enclosed please find the below listed copy of executed documents for our recent
loan financing. Please retain these documents for your records.
. Side Letter Agreement - Advance Date Extension
If you have any questions concerning the enclosed, please feel free to call me
at (650) 566-4912.
Sincerely,
/s/ Vika Tonga
Vika Tonga
Information Document Specialist
cc: File Copy
Rosemont (original attached)
Enclosures
<PAGE>
[LOGO]
[LETTERHEAD]
VIA FACSIMILE
(425) 201-7877
January 7, 2000
Mr. Peter Klein
HomeGrocer.com, Inc,
10239 NE Points Drive
Kirkland, WA 98033
Re: Subordinated Loan and Security Agreement dated September 15, 1999 by and
between Comdisco, Inc. ("Lender") and HomeGrocer.com, Inc. ("Lessee")
collectively, the Loan.
Dear Peter,
This letter is to confirm that Comdisco, as Lender hereby agrees that the
Advance Date for any installment under the Loan shall be extended from January
12, 2000 through January 26, 2000. Except as specifically set forth above, all
other terms and conditions of the Loan shall remain in full force and effect.
Please indicate your acceptance of the above agreement by signing in the space
provided below and returning it to me via facsimile at (650) 473-0204. If you
have any questions or comments please do not hesitate to call me at (650) 566-
4912
Sincerely, HomeGrocer.com, Inc.
By: /s/ Peter Klein
---------------
/s/ Vika Tonga Title: Director of Finance
-------------------
Vika Tonga
Information Document Specialist
Comdisco, Inc
By: /s/ James Labe
------------------------------
James Labe, President
Title: Comdisco Ventures Division
------------------------------
A faxed counterpart ("Fax") of this document may be delivered to the parties.
Each party adopts its signature on the Fax as its original signature. The
parties hereto agree that the Fax will have the same effect as the document if
the document had been signed and delivered by mail or in person.
<PAGE>
EXHIBIT 10.2
FIRST AMENDMENT TO
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE -- NET
(3450 S. LaBrea Avenue, Los Angeles)
------------------------------------
THIS FIRST AMENDMENT TO STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE
- -- NET ("Amendment") is made as of this 29th day of February, 2000 by and
between EXPOSITION PROPERTY ASSOCIATES, LLC, a Delaware limited liability
company ("Lessor") and HOMEGROCER.COM, INC., a Delaware corporation ("Lessee"),
with reference to the following:
Recitals
--------
A. Lessor and Lessee have entered into that certain Standard
Industrial/Commercial Single-Tenant Lease -- Net, dated as of July 23, 1999 (the
"Lease") for that certain leased premises described therein containing
approximately 330,000 leaseable square feet in that certain
commercial/industrial building owned by Lessor, commonly known as 3450 S. La
Brea Avenue, in the City and County of Los Angeles, State of California, and
defined as the Project in the Lease.
B. Lessee desires to lease all remaining leaseable space of the Project
under the Lease, among other amendments, and Lessor and Lessee desire and
intend, by this Amendment, to amend the Lease to provide such additional
leaseable space to Lessee under the Lease, among other amendments, subject to,
and in accordance with, the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises and agreements of the parties set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do hereby amend the Lease as follows:
1. Incorporation of Recitals; Definitions: Recital Paragraphs A and B above
--------------------------------------
are hereby incorporated below as substantive provisions of this Amendment. Any
capitalized term not defined in this Amendment shall have the meaning ascribed
to such term in the Lease.
2. Additional Premises: Lease Paragraph 1.2, Lease Addendum Paragraph 50,
-------------------
and all related provisions of the Lease are hereby amended to include in the
definition of the term "Premises," in addition to that portion of the Project
shown and described in the site plan attached to the Lease at Exhibit "A" (the
"Original Premises"), all remaining leaseable space of both floors of the
Project (the "Additional Premises"), as shown on the revised site plan attached
to this Amendment at Exhibit "A" and incorporated herein by this reference. The
Original Premises and Additional Premises shall be referred to collectively as
the Premises, and all references in the Lease, including this Amendment, to the
Premises shall mean and refer to the Original Premises under the Lease and the
Additional Premises under this Amendment,
<PAGE>
collectively. The site plan attached at Exhibit "A" to this Amendment shall
supersede and replace in its entirely the site plan attached at Exhibit "A" to
the Lease. All references in Lease Addendum Paragraph 50 and all other
provisions of the Lease to the 330,000 leaseable square footage of the Premises
are hereby amended to refer to 384,037 leaseable square feet. All rights,
duties, and obligations of the parties, respectively, under the Lease relating
to the Premises shall apply equally, from and after the date of this Amendment,
to the Additional Premises as part of the Premises.
3. Base Rent: Lease Addendum Paragraph 54 is hereby deleted in its entirety
---------
and the following new Lease Addendum Paragraph 54 is substituted in lieu
thereof:
54. Base Rent and Adjustment. [continued from Paragraph 1.5] Lessee
shall pay the following base rent (the "Base Rent") for the Premises
during the periods provided below:
(1) From the Rent Commencement Date through the thirty-sixth (36)
month, inclusive, of the Lease Term --, $2,195,355.36 per year,
payable in monthly installments of $182,946.28;
(2) During the thirty-seventh (37th) month through the seventy-second
(72nd) month, inclusive, of the Lease Term -- $2,379,693.12 per
year, payable in monthly installments of $198,307.76;
(3) During the seventy-third (73rd) month through the one hundred
twentieth (120th) month, inclusive, of the Lease Term --
$2,564,030.88 per year, payable in monthly installments of
$213,669.24;
(4) During the one hundred twenty-first (121th) month through the one
hundred fifty-sixth (156th) month, inclusive, of the Lease Term -
- $2,794,453.08 per year, payable in monthly installments of
$232,871.09;
(5) During the one hundred fifty-seventh (157th) month through the
Expiration Date, inclusive, of the Lease Term -- $3,024,875.28
per year, payable in monthly installments of $252,072.94; and
(6) If Lessee shall exercise one or more of the Options, the Fair
Market Rental, as provided in Addendum Paragraph 51 above.
Lease Section 1.6 shall be amended to delete the reference to $158,400 as the
first monthly installment of Base Rent paid to Lessor upon execution of the
Lease and to substitute therefor a reference to $182,946.28. Concurrently with
the mutual execution and delivery to Lessee of a fully executed original of this
Amendment, Lessee shall pay to Lessor the difference between the monthly
installment amounts specified in the preceding sentence.
2
<PAGE>
4. No Change in Letter of Credit: Notwithstanding any provision of this
-----------------------------
Amendment, the stated amount of the Letter of Credit shall remain One Million
Four Hundred Fifty Thousand Dollars ($1,450,000), as provided in Lease Addendum
Paragraph 55 and shall neither be increased nor decreased by this Amendment.
5. Term: Lease Addendum Paragraphs 52(a) and (b) and Exhibit "B" are
----
hereby deleted in their entirety (but not Lease Addendum Paragraphs 52[c] and
[d] which will remain in full force and effect and shall be renumbered as
Paragraphs 52[g] and [h]), and the following new Lease Addendum Paragraphs 52(a)
through (f) are substituted in lieu thereof:
52. Term; Commencement; Expiration; and Extension of Term. [continued
from Paragraph 1.3] The Commencement Date shall mean and refer to the date
of this Lease.
(a) Rent Commencement Date: The Rent Commencement Date shall mean and refer
----------------------
to the earlier to occur of:
(i) the date on which Lessee first opens for business to the general
public in the Premises; or
(ii) sixty (60) days after the Delivery Date (as defined below);
subject to termination for Lessor's failure to substantially complete as
provided in Lease Addendum Section 52(f) below. The Expiration Date shall
mean and refer to the final business day of the one hundred eightieth
(180th) complete calendar month after the Rent Commencement Date, subject
to earlier termination in accordance with the provisions of this Lease and
subject further to Lessee's options to extend such Original Term as
provided below.
(b) Landlord's Work: Lessor shall use commercially reasonable efforts to
---------------
diligently prosecute and substantially complete in a timely manner, at
Lessor's sole cost and expense, the improvements of the Project described
in Exhibit "B-1" attached hereto (collectively, "Landlord Work"). In
addition, Lessor agrees to pay to Lessee the amounts specified in the
attached Exhibit "B-2" in lieu of Lessor's construction or installation of
the identified improvements, (the "In-Lieu Payments"), within thirty (30)
days after written request of Lessee therefor made from and after Lessor's
completion of Landlord Work, together with reasonably detailed back-up
documentation satisfactory to Lessor of such amounts actually incurred by
Lessee. The improvements identified on the attached Exhibit "B-2" in
connection with the In-Lieu Payments shall be completed by Lessee, at
Lessee's sole cost and expense including any amounts in excess of the In-
Lieu Payments, as part of the Tenant Improvements Work (as defined below).
The In-Lieu Payments to be paid by Lessor shall be in addition to the
Allowance (as defined and described in the Tenant Improvements Work Letter
attached hereto at Exhibit "C" and incorporated by this reference). Lessor
shall have no
3
<PAGE>
obligation whatsoever with respect to the Tenant Improvements Work,
including without limitation, any improvements with respect to which the
In-Lieu Payments are made as provided in Exhibit "B-2." Lessor shall
complete the Landlord Work in good and workmanlike manner, in lien-free
condition, and free of defects in materials and workmanship. All references
in the Lease to Base Building Work to be completed by Lessor shall be
amended to refer to Landlord Work, and Landlord Work shall be strictly
limited to the improvements described in the attached Exhibit "B-1."
(c) Tenant Improvements Work: Except for Landlord's obligation for the
------------------------
Landlord Work and the In-Lieu Payments, all improvements to the Project of
any kind or nature whatsoever desired by Lessee or required by governmental
authorities specifically in connection with Lessee's permitted use of the
Premises, including without limitation all improvements listed on Exhibit
"C" attached to this Amendment and incorporated by this reference, shall be
the sole responsibility of Lessee to be completed, or caused to be
completed, at Lessee's solo cost and expense, subject to Lessor's payment
of the Allowance, and shall be collectively referred to herein as the
"Tenant Improvements Work." Lessee shall use its commercially reasonable
efforts to diligently prosecute and substantially complete the Tenant
Improvements Work in a timely manner. In the event any Tenant Improvements
Work (whether to the Original Premises or the Additional Premises or either
or both) shall not be substantially completed by the Rent Commencement
Date, such lack of substantial completion shall have no effect whatsoever
upon the occurrence of the Rent Commencement Date. Lessee shall cause the
Tenant Improvements Work to be constructed in good and workmanlike manner,
in lien-free condition, and free of defects in materials and workmanship.
(d) Delivery Date: Upon Lessor's substantial completion of the Landlord's
-------------
Work to the Original Premises, either Lessor or Lessor's architect shall
provide written certification of same to Lessee, and the date of delivery
to Lessee of such written certification shall be referred to herein as the
"Delivery Date." If Lessor's substantial completion of the Landlord Work to
the Original Premises shall be delayed in any material respect by any
action or inaction attributable to Lessee, then the Delivery Date shall be
deemed to be such earlier date as Lessor's architect shall reasonably
determine Lessor's substantial completion of the Landlord Work to the
Original Premises would have occurred, but for such delay of Lessee. Lessor
and Lessee acknowledge and agree that Lessee's requests for material
changes in the Landlord Work (formerly known as the Base Building Work) and
the Tenant Improvements Work; suspension or delay in Lessor's prosecution
of the Landlord Work; suspension or delay in Lessor's ordering of necessary
equipment for the Landlord Work and the Tenant Improvements Work; and
expansion into the Additional Premises, have caused delay in Lessor's
completion of the improvements to the Project to be completed by Lessor.
due to no fault or neglect of Lessor, and such delay would have resulted in
delay in the Rent Commencement Date under the Lease, as originally
provided. Accordingly, Lessor and Lessee acknowledge and agree that it is a
material part of the consideration to Lessor under this Amendment, without
which Lessor would not entered into this Amendment,
4
<PAGE>
that the Delivery Date shall occur in strict accordance with the provisions
of this Paragraph 52, notwithstanding that any Landlord Work to the
Additional Premises or any Tenant Improvements Work shall not then be
completed. Moreover, Lessor and Lessee further acknowledge and agree that
it is a further material part of the consideration to Lessor under this
Amendment, without which Lessor would not entered into this Amendment and
would have instead satisfied its obligations and exercised its rights and
remedies as originally provided in the Lease to the detriment of Lessee,
that the Rent Commencement Date shall also occur in strict accordance with
the provisions of this Paragraph 52, notwithstanding that, among other
things, the Tenant Improvements Work may not then be complete, the Premises
may not then be occupied by Lessee, or the Premises may not then be open
for business to the general public.
(e) Mutual Cooperation and Coordination: Each party agrees to cooperate
-----------------------------------
with the other with respect to the exchange of status and scheduling
information regarding the progress of the Landlord Work and Tenant
Improvements Work. Lessor agrees to provide prior notice to Lessee of the
date estimated by Lessor for the Delivery Date, which notice will be
provided, if feasible, thirty (30) days prior to the Delivery Date
estimated therein. Lessee agrees to provide prior notice to Lessor of the
date estimated by Lessee for the completion of the Tenant Improvements
Work, which notice will be provided, if feasible, thirty (30) days prior to
the completion date estimated therein.
(f) Failure to Substantially Complete Landlord Work: In the event the
-----------------------------------------------
Landlord Work to the Original Premises has not been substantially completed
by Lessor and the Delivery Date has not occurred as required hereunder, due
to fault or neglect of Lessor, by May 1, 2001, subject to Force Majeure,
Lessee shall be entitled to a penalty to be applied against Lessee's first
Base Rent coming due under this Lease equal to One Thousand Dollars
($1,000) for each 24-hour period after May 1, 2001 by which the substantial
completion of the Landlord Work to the Original Premises is so delayed due
to fault or neglect of Lessor. If such substantial completion does not
occur by November 1, 2001 in any event and without extension for Force
Majeure, then either Lessor or Lessee, each acting alone, shall be entitled
to terminate this Lease upon thirty (30) days prior written notice to the
other, provided that, if Lessee shall deliver such termination notice as
required hereunder and Lessor shall substantially complete the Landlord
Work to the Original Premises and the Delivery Date shall occur within such
30-day period, Lessee's notice shall be null and void, and this Lease shall
continue in full force and effect.
6. Exteriorization Work: Lease Paragraph 7.4(c) is hereby amended to add
--------------------
the following additional text at the end of the existing provision:
Notwithstanding the foregoing, Lessor and Lessee acknowledge and agree
that among Lessee's requests for material changes in the Landlord Work
and the Tenant Improvements Work referred to in Paragraph 5 above of
this Amendment, Lessee may propose removal of a portion of the
building
5
<PAGE>
improvements of the Project to construct an exterior loading area or
other exterior improvements for Lessee's use (collectively, the
"Exteriorization Work"). Lessor and Lessee further acknowledge and
agree that it is a material part of the consideration to Lessor for
this Amendment, without which Lessor would not have entered into this
Amendment, that Lessee pay to Lessor, concurrently with Lessee's
surrender of the Premises and in all events not later than the
Expiration Date or earlier termination date, the reasonable cost and
expense, as determined by Lessor, of restoration of the portion of the
building improvements removed by Lessee in connection with the
Exteriorization Work, including removal of all loading dock and
exterior improvements constructed by Lessee and construction of all
base, core, shell, and other reasonable building improvements in the
Restoration Area to restore to leaseable condition that portion of the
building improvements of the Project removed by Lessee in connection
with the Exteriorization Work. If Lessee shall fail to satisfy fully
its payment obligation set forth above by the Expiration Date,
provided Lessee shall have not less than thirty (30) days prior
written notice of the amount due to Lessor hereunder, Lessor shall be
entitled, at Lessor's election, to use all or any remaining portion of
Lessee's security deposit, including without limitation the Letter of
Credit, to satisfy such payment obligation of Lessee.
7. Tenant Improvements Work; Tenant Improvements Work Letter: Nothing in
---------------------------------------------------------
this Amendment shall relieve Lessee of any obligation under the Lease, including
without limitation, the Lease Exhibit "C" Tenant Improvements Work Letter,
regarding the Tenant Improvements Work. Furthermore, nothing in this Amendment
shall limit or restrict any right of Lessor granted under the Lease with respect
to the Tenant Improvements Work, including without limitation Lessor's right to
approve all Plans therefor. All material changes in any Plans previously
approved by Lessor in connection with the Tenant Improvements Work shall be
approved by Lessor pursuant to the Lease Exhibit "C" Tenant Improvements Work
Letter. All modifications to the Tenant Improvements Work and/or Landlord Work
requested by Lessee not previously approved by Lessor shall be subject to
Lessor's approval and other rights provided in the Lease Exhibit "C" Tenant
Improvements Work Letter and other relevant provisions of the Lease. Once
approved by Lessor, all modifications or additional work requested by Lessee
shall become part of the Tenant Improvements Work for which Lessee shall be
liable, including without limitation all cost and expense thereof. Approval by
Lessor of any Tenant Improvements Work shall in no event increase the amounts of
the Allowance or the In-Lieu Payments, as provided herein.
8. No Change in Tenant Reimbursement Allowance: The maximum amount of the
-------------------------------------------
Allowance shall remain $1,300,000, as provided in Exhibit "C" Paragraph 4 and
shall neither be increased nor decreased by this Amendment. Notwithstanding the
foregoing, however, the In-Lieu Payments to be paid by Lessor shall be in
addition to the Allowance.
9. Effective Date: This Amendment and all provisions hereof shall be
--------------
effective upon mutual execution by Lessor and Lessee which shall be the date
specified in the preamble
6
<PAGE>
paragraph above.
10. General Provisions: The Lease and all terms and provisions thereof are
------------------
and shall remain in full force and effect, except as amended in this Amendment
and are hereby ratified and confirmed. The persons executing this Amendment on
behalf of each party hereby covenant and warrant that they have been duly
authorized and empowered by their respective principals to execute this
Amendment and that this Amendment is, and henceforth shall be, the binding
obligation of the party on whose behalf such person acted. This Amendment may be
executed in any number of counterparts, each of which shall be deemed an
original, and all of which, when taken together, shall constitute one and the
same Amendment.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the day and date first set forth above.
"Lessor" "Lessee"
EXPOSITION PROPERTY HOMEGROCER. COM, INC.,
ASSOCIATES, LLC, a Delaware corporation
a Delaware limited liability company
By: M&B Capital, LLC,
a Delaware limited liability By /s/ Terry Drayton
company, -------------------------------
Its Managing Member Name: Terry Drayton
----------------------------
Title: President
---------------------------
By:__________________________________
Bryan Ezralow, Trustee By /s/ C.J Karaffa
of the Bryan Ezralow 1994 ------------------------------
Trust, Its Member Name: C.J Karaffa
------------------------
Title: Sr VP Ops
-----------------------
7
<PAGE>
EXHIBIT "A"
Revised Site Plan of Premises
-----------------------------
(See attachment)
<PAGE>
EXHIBIT "A"
[Site Plan]
CITY OF LOS ANGELES DEPT. OF PARKS & RECREATION
<PAGE>
EXHIBIT "B-1"
List of Landlord Work
---------------------
to be Completed by Lessor
-------------------------
1. Landlord shall undertake structural repairs to walls and roof deck to
the satisfaction of the City of Los Angeles Department of Building and Safety,
except for that certain new semi-truck and trailer loading area shown on the
attached Exhibit "B-1-A."
2. Landlord shall remove all temporary chain link fencing securing the
building and the site as of the date of this Amendment.
3. Landlord shall restore the existing HVAC system serving the lower deck
of the building to working order, including chiller, cooling tower and air
handling units to fully operating condition on temporary electrical service
lines. Permanent electrical service lines to be part of Tenant's Work.
4. Landlord shall demolish and remove all drywall partitions and toilet
facilities in the building pursuant to Urban Concepts Division 91 permitted
plan, dated December 1, 1999.
5. Landlord shall remove and replace the second level roof deck and roof
membrane, including portions demolished subsequent to the earthquake. The
replacement roof decking will have a load rating not to exceed 20 psf live load.
6. Landlord shall warrant that the second level of the building will be
suitable for (non-semi-tractor-trailer) parking delivery trucks. The second
level, however, is a flat surface without drainage. Scuppers are located around
the perimeter of the second level floor for emergency drainage purposes only.
7. Tenant will have the right to park up to one hundred twenty (120)
employee passenger vehicles on the upper level of the building along with up to
ninety (90) of Tenant's delivery trucks (but excluding semi-tractor-trailers).
8. Landlord shall provide protected areas on the ground outside the
building as locations for satellite receivers and antennas. Tenant shall have
the option to locate such receivers and antennas within the building. Any
structural reinforcement required to mount receivers and/or antennas on the roof
of the building will be the responsibility of Tenant and such construction shall
be subject to Landlord's approval under the Lease. Landlord discloses that
Tenant's election to locate its satellite receivers and antennas on the ground
outside the building may result in a loss of parking spaces for which Landlord
will not be responsible.
<PAGE>
EXHIBIT "B-1-A"
Plot of New Semi-
-----------------
Truck and Trailer Loading Area
------------------------------
(See attachment.)
<PAGE>
EXHIBIT "B-1-A"
Plot of New Semi-
-----------------
Truck and Trailer Loading Area
------------------------------
<PAGE>
EXHIBIT "B-2"
List of In-Lieu Payments to be Made by Landlord
-----------------------------------------------
(See attachment; also below.)
In addition to the total of $1,148,927 in In-Lieu Payments shown on the
attached Exhibit B-2, Landlord's In-Lieu Payments to Tenant shall include an
additional Four Percent (4%) of such amount for a general contractor's fee which
equals $45,957.08, for a total of all In-Lieu Payments of $1,194,884.08.
<PAGE>
[LETTERHEAD OF BENCHMARK]
East Building Gross Square Footage = 336,382 GSF
West Building Gross Square Footage = 50,230 GSF
-----------
Total Building Gross Square Footage = 386.612 GSF
Building Cost Per Square Foot = /SF
BUDGETARY ESTIMATE - HOMEGROCER ALLOWANCES
<TABLE>
<CAPTION>
ACCT ITEM QTY UNIT UNIT PRICE ITEM TOTALS ACCT SUB
TOTAL
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1002 CLEAN-UP
- ----------------------------------------------------------------------------------------------------------------------------
General Clean-up 1 LS 10,000.00 10,000
- ----------------------------------------------------------------------------------------------------------------------------
10,000
- ----------------------------------------------------------------------------------------------------------------------------
2100 DEMOLITION
- ----------------------------------------------------------------------------------------------------------------------------
Demolition of concrete stair along La Brea Ave. 1 LS 6,000.00 6,000
- ----------------------------------------------------------------------------------------------------------------------------
Remove striping @ 2nd floor 1 LS 9,000.00 9,000
- ----------------------------------------------------------------------------------------------------------------------------
15,000
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
2500 ASHALTIC PAVING AND SITE CONCRETE
- ----------------------------------------------------------------------------------------------------------------------------
Misc. curb repair damaged by General Contractor 100 LF 13.00 1,300
- ----------------------------------------------------------------------------------------------------------------------------
Misc. curb replacement damaged by General Contractor 100 LF 13.00 1,300
- ----------------------------------------------------------------------------------------------------------------------------
Asphaltic paving repairs @ north entrance (dam'd by SE) 800 SF 3.75 3,000
- ----------------------------------------------------------------------------------------------------------------------------
Slurry coat existing site paving 68,009 SF 0.07 4,761
- ----------------------------------------------------------------------------------------------------------------------------
10,361
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
2580 STRIPING
- ----------------------------------------------------------------------------------------------------------------------------
Paint curbs for fire lanes (158 LF) 158 LF 0.50 79
- ----------------------------------------------------------------------------------------------------------------------------
ADA Handicap stalls @ north & south of site (7 total) 7 EA 30.00 210
- ----------------------------------------------------------------------------------------------------------------------------
Single line stalls @ north & south of site (162 total) 162 EA 5.00 810
- ----------------------------------------------------------------------------------------------------------------------------
1,099
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
2830 FENCES AND GATES
- ----------------------------------------------------------------------------------------------------------------------------
New wrought iron fence (Picket type w/posts) 473 LF 22.00 10,406
- ----------------------------------------------------------------------------------------------------------------------------
10,406
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
2900 LANDSCAPING & IRRIGATION
- ----------------------------------------------------------------------------------------------------------------------------
24" box, 10' - 12' high, deep root eucalyptis trees 20 EA 250.00 5,000
- ----------------------------------------------------------------------------------------------------------------------------
New site irrigation and plantings @ west and north
elevation 3,800 SF 4.00 15,200
- ----------------------------------------------------------------------------------------------------------------------------
20,200
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
3210 REINFORCING STEEL
- ----------------------------------------------------------------------------------------------------------------------------
Site Rebar 1 LS 3,500.00 3,500
- ----------------------------------------------------------------------------------------------------------------------------
Rebar @ north entrance stair repair (damaged by SE) (147 LF) 122 LB. 0.50 61
- ----------------------------------------------------------------------------------------------------------------------------
3,561
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
3300 CAST-IN-PLACE CONCRETE
- ----------------------------------------------------------------------------------------------------------------------------
2 stairs along La Brea Ave. 1 LS 15,000.00 15,000
- ----------------------------------------------------------------------------------------------------------------------------
Chip & level raised concrete slab areas
along 19-line in east building 960 SF 1.50 1,440
- ----------------------------------------------------------------------------------------------------------------------------
Leveling slab (slurry) at dips in concrete along
20-line in west building 960 SF 1.50 1,440
- ----------------------------------------------------------------------------------------------------------------------------
T-10 landing replacement 1 LS 500.00 500
- ----------------------------------------------------------------------------------------------------------------------------
Reset handrail @ metal stair removed by GC @ T-line: 8-10 1 LS 500.00 500
- ----------------------------------------------------------------------------------------------------------------------------
Concrete @ north entrance stair repair (damaged by SE)
(147 LF) 2 CY 500.00 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Reset metal stair removed by GC @ T-line:8-10 1 LS 3,000.00 3,000
- ----------------------------------------------------------------------------------------------------------------------------
22,880
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
3355 HYDRO BLASTING
- ----------------------------------------------------------------------------------------------------------------------------
Powerwashing north ramp 1 LS 1,000.00 1,000
- ----------------------------------------------------------------------------------------------------------------------------
1,000
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
4200 CONCRETE MASONRY UNITS
- ----------------------------------------------------------------------------------------------------------------------------
CMU @ T-10 landing replacement (8" block, cells filled) 25 SF 11.00 275
- ----------------------------------------------------------------------------------------------------------------------------
275
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
5120 STRUCTURAL STEEL
- ----------------------------------------------------------------------------------------------------------------------------
Additional steel at modernized elevator 1 LS 6,500.00 6,500
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
6,500
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
5500 MISCELLANEOUS METALS
- ------------------------------------------------------------------------------------------------------------
Reset bollards at HVAC ducts, enclosures, etc. 90 EA 135.00 12,150
- ------------------------------------------------------------------------------------------------------------
12,150
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
5510 METAL STAIRS
- ------------------------------------------------------------------------------------------------------------
New stair #5 from 2nd floor to roof per 6/A4.1 30 RISER 360.00 10,800
- ------------------------------------------------------------------------------------------------------------
10,800
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
5520 HANDRAILS & RAILINGS
- ------------------------------------------------------------------------------------------------------------
Resent handrail @ T-10 landing replacement 1 LS 500.00 500
- ------------------------------------------------------------------------------------------------------------
New wall mounted handrail @ int. stair 24-line: F-G 36 LF 25.00 900
- ------------------------------------------------------------------------------------------------------------
Add S.S. cable to existing Stair #5 multi-line
handrails 35 LF 70.00 2,450
- ------------------------------------------------------------------------------------------------------------
New multi-line handrail @ stair #1 144 LF 31.50 4,536
- ------------------------------------------------------------------------------------------------------------
New multi-line handrail @ stair #2 144 LF 31.50 4,536
- ------------------------------------------------------------------------------------------------------------
New multi-line handrail @ stair #4 144 LF 31.50 4,536
- ------------------------------------------------------------------------------------------------------------
New multi-line handrail @ stair #5 144 LF 31.50 4,536
- ------------------------------------------------------------------------------------------------------------
New multi-line handrail @ stair #6 144 LF 31.50 4,536
- ------------------------------------------------------------------------------------------------------------
26,530
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
6100 ROUGH CARPENTRY
- ------------------------------------------------------------------------------------------------------------
Miscellaneous (Backing for handrails in GWB) 1 LS 2,000.00 2,000
- ------------------------------------------------------------------------------------------------------------
2,000
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
7200 INSULATION (per 1/A4.8 and floor plans)
- ------------------------------------------------------------------------------------------------------------
R-13 Batt 6" wall @ int. stair 24-line:F-G (2X6
@ 20'h) @ 1st floor 1,360 SF 0.40 544
- ------------------------------------------------------------------------------------------------------------
R-13 Batt 6" wall @ stair #1 enclosure (2X6 @ 20'h)
@ 1st floor 695 SF 0.40 278
- ------------------------------------------------------------------------------------------------------------
R-13 Batt 6" wall @ stair #2 enclosure (2X6 @ 20'h)
@ 1st floor 707 SF 0.40 283
- ------------------------------------------------------------------------------------------------------------
R-13 Batt 6" wall @ stair #4 enclosure (2X6 @ 20'h)
@ 1st floor 575 SF 0.40 230
- ------------------------------------------------------------------------------------------------------------
R-13 Batt 6" wall @ stair #5 enclosure (2X6 @ 20'h)
@ 1st floor 610 SF 0.40 244
- ------------------------------------------------------------------------------------------------------------
R-13 Batt 6" wall @ stair #6 enclosure (2X6 @ 20'h)
@ 1st floor 707 SF 0.40 283
- ------------------------------------------------------------------------------------------------------------
R-13 Batt 6" wall @ main switch room (2X6 @ 20'h)
@ 1st floor 760 SF 0.40 304
- ------------------------------------------------------------------------------------------------------------
R-13 Batt 6" wall @ electrical telephone room (2X6
@ 20'h) @ 1st floor 320 SF 0.40 128
- ------------------------------------------------------------------------------------------------------------
R-13 Batt 6" wall @ HVAC louver intakes
(2X6 @ 20'h) @ 1st floor 1,500 SF 0.40 600
- ------------------------------------------------------------------------------------------------------------
R-13 Batt 6" wall @ stair #5 enclosure
(2X6 @ 20'h) @ 2nd floor 610 SF 0.40 244
- ------------------------------------------------------------------------------------------------------------
R-13 Batt 6" wall @ int. stair 24-line:F-G
(2X6 @ 10'h) @ 2nd floor 680 SF 0.36 245
- ------------------------------------------------------------------------------------------------------------
R-13 Batt 6" wall @ stair #1 enclosure
(2X6 @ 10'h) @ 2nd floor 348 SF 0.36 125
- ------------------------------------------------------------------------------------------------------------
R-13 Batt 6" wall @ stair #2 enclosure
(2X6 @ 10'h) @ 2nd floor 353 SF 0.36 127
- ------------------------------------------------------------------------------------------------------------
R-13 Batt 6" wall @ stair #4 enclosure
(2X6 @ 10'h) @ 2nd floor 288 SF 0.36 104
- ------------------------------------------------------------------------------------------------------------
R-13 Batt 6" wall @ stair #6 enclosure
(2X6 @ 10'h) @ 2nd floor 353 SF 0.36 127
- ------------------------------------------------------------------------------------------------------------
R-13 Batt ceiling @ int. stair 24-line: F-G
(2X6 @ 10'h) @ 2nd floor 240 SF 0.36 86
- ------------------------------------------------------------------------------------------------------------
R-13 Batt ceiling @ stair #1 enclosure
(2X6 @ 10'h) @ 2nd floor 255 SF 0.36 92
- ------------------------------------------------------------------------------------------------------------
R-13 Batt ceiling @ stair #2 enclosure
(2X6 @ 10'h) @ 2nd floor 262 SF 0.36 94
- ------------------------------------------------------------------------------------------------------------
R-13 Batt ceiling @ stair #4 enclosure
(2X6 @ 10'h) @ 2nd floor 188 SF 0.36 68
- ------------------------------------------------------------------------------------------------------------
R-13 Batt ceiling @ stair #6 enclosure
(2X6 @ 10'h) @ 2nd floor 262 SF 0.36 94
- ------------------------------------------------------------------------------------------------------------
4,300
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
8100 HOLLOW METAL DOORS AND FRAMES
- ------------------------------------------------------------------------------------------------------------
New HM door/frames @ interior stairwell enclosures 6 EA 300.00 1,800
- ------------------------------------------------------------------------------------------------------------
New 18 HM doors/ frames @ 1st floor excl. A-line 18 EA 300.00 5,400
- ------------------------------------------------------------------------------------------------------------
7,200
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
8330 COILING DOORS
- ------------------------------------------------------------------------------------------------------------
Replace exterior coiling doors over storefront
entrances @ T-line 5 EA 2,000.00 10,000
- ------------------------------------------------------------------------------------------------------------
New coiling doors to fit existing 8' x 7'
openings (FC22 Ga.) 9 EA 2,000.00 18,000
- ------------------------------------------------------------------------------------------------------------
28,000
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
8410 ALUMINUM STOREFRONTS
- ------------------------------------------------------------------------------------------------------------
Refurb/replace custom double storefront doors &
hardware @ T-line 5 EA 1,132.00 5,660
- ------------------------------------------------------------------------------------------------------------
Replace glazing, mullions, inserts @ elevator tower 1 LS 10,000.00 10,000
- ------------------------------------------------------------------------------------------------------------
15,660
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
8710 HARDWARE
- ------------------------------------------------------------------------------------------------------------
New hardware for interior doors @ stairwell
enclosures 6 PKG 200.00 1,200
- ------------------------------------------------------------------------------------------------------------
New hardware for exterior HM doors @ 1st floor excl.
A-line 18 PKG 300.00 5,400
- ------------------------------------------------------------------------------------------------------------
6,600
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
9200 METAL STUDS @ DRYWALL (per 1/A4.8 and floor plans)
Studs/Gyp @ int. stair 24-line: F-G (1 hr; 1+1 5/8"
type-X, mud / tape) @ 1st floor 1,360 SF 5.75 7,820
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Studs/Gyp @ stair #1 enclosure (1 hr; 1+1 5/8"
type-X, mud / tape) @ 1st floor 695 SF 5.75 3,996
- --------------------------------------------------------------------------------------------------------------
Studs/Gyp @ stair #2 enclosure (1 hr; 1+1 5/8"
type-X, mud / tape) @ 1st floor 695 SF 5.75 3,996
- --------------------------------------------------------------------------------------------------------------
Studs/Gyp @ stair #4 enclosure (1 hr; 1+1 5/8"
type-X, mud / tape) @ 1st floor 575 SF 5.75 3,306
- --------------------------------------------------------------------------------------------------------------
Studs/Gyp @ stair #5 enclosure (1 hr; 1+1 5/8"
type-X, mud / tape) @ 1st floor 610 SF 5.75 3,508
- --------------------------------------------------------------------------------------------------------------
Studs/Gyp @ stair #6 enclosure (1 hr; 1+1 5/8"
type-X, mud / tape) @ 1st floor 707 SF 5.75 4,065
- --------------------------------------------------------------------------------------------------------------
Studs/Gyp @ int. stair 24-line:F-G (1 hr; 1+1 5/8"
type-X, mud / tape) @ 2nd floor 760 SF 5.75 4,370
- --------------------------------------------------------------------------------------------------------------
Studs/Gyp @ stair #1 enclosure (1 hr; 1+1 5/8"
type-X, mud / tape) @ 2nd floor 320 SF 5.75 1,840
- --------------------------------------------------------------------------------------------------------------
Studs/Gyp @ stair #2 enclosure (1 hr; 1+1 5/8"
type-X, mud / tape) @ 2nd floor 1,500 SF 5.75 8,625
- --------------------------------------------------------------------------------------------------------------
Studs/Gyp @ stair #4 enclosure (1 hr; 1+1 5/8"
type-X, mud / tape) @ 2nd floor 610 SF 5.75 3,508
- --------------------------------------------------------------------------------------------------------------
Studs/Gyp @ stair #5 enclosure (1 hr; 1+1 5/8"
type-X, mud / tape) @ 2nd floor 680 SF 4.75 3,230
- --------------------------------------------------------------------------------------------------------------
Studs/Gyp @ stair #6 enclosure (1 hr; 1+1 5/8"
type-X, mud / tape) @ 2nd floor 348 SF 4.75 1,653
- --------------------------------------------------------------------------------------------------------------
Studs/Gyp @ main switch room (1 hr; 1+1 5/8" type-X,
mud / tape) 348 SF 4.75 1,653
- --------------------------------------------------------------------------------------------------------------
Studs/Gyp @ electrical telephone room (1 hr; 1+1 5/8"
type-X, mud / tape) 288 SF 4.75 1,368
- --------------------------------------------------------------------------------------------------------------
Studs/Gyp @ HVAC louver intakes (1 hr; 1+1 5/8"
type-X, mud / tape) 353 SF 4.75 1,677
- --------------------------------------------------------------------------------------------------------------
Studs/Gyp @ main switch room (1 hr; 1+1 5/8" type-X,
mud / tape)
- --------------------------------------------------------------------------------------------------------------
Studs/Gyp-ceiling @ int. stair 24-line:F-G (1 hr; 1+1
5/8" type-X, mud / tape) @ 2nd floor 240 SF 4.75 1,140
- --------------------------------------------------------------------------------------------------------------
Studs/Gyp-ceiling @ stair #1 enclosure (1 hr; 1+1
5/8" type-X, mud / tape) @ 2nd floor 257 SF 4.75 1,221
- --------------------------------------------------------------------------------------------------------------
Studs/Gyp-ceiling @ stair #2 enclosure (1 hr; 1+1
5/8" type-X, mud / tape) @ 2nd floor 262 SF 4.75 1,245
- --------------------------------------------------------------------------------------------------------------
Studs/Gyp-ceiling @ stair #4 enclosure (1 hr; 1+1
5/8" type-X, mud / tape) @ 2nd floor 188 SF 4.75 893
- --------------------------------------------------------------------------------------------------------------
Studs/Gyp-ceiling @ stair #6 enclosure (1 hr; 1+1
5/8" type-X, mud / tape) @ 2nd floor 262 SF 4.75 1,245
- --------------------------------------------------------------------------------------------------------------
60,358
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
9860 GRAFITTI RESISTANT COATING
- --------------------------------------------------------------------------------------------------------------
All around building to 10'h per City of LA code 17,760 SF 0.65 11,544
- --------------------------------------------------------------------------------------------------------------
11,544
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
9900 PAINTING
- --------------------------------------------------------------------------------------------------------------
Building exterior: 1 coat epoxy primer, 2 coats
acrylic masonry paint, up to 2 colors 1 LS 86,000.00 86,000
- --------------------------------------------------------------------------------------------------------------
Mask, clean, repaint HM doors/frames @ interior
stairwell enclosures 6 EA 100.00 600
- --------------------------------------------------------------------------------------------------------------
Mask, clean, repaint custom storefront @ T-line 5 EA 200.00 1,000
- --------------------------------------------------------------------------------------------------------------
Repaint coiling doors to remain (8' x 7') 6 EA 300.00 1,800
- --------------------------------------------------------------------------------------------------------------
Painting railings at north ramp/stair railings 1 LS 1,500.00 1,500
- --------------------------------------------------------------------------------------------------------------
Repaint NW exit stairs handrails 1 LS 700.00 700
- --------------------------------------------------------------------------------------------------------------
Repaint NE exit stairs handrails 1 LS 700.00 700
- --------------------------------------------------------------------------------------------------------------
Paint drywall @ int. stair 24-line:F-G (2x @ 20'h) @
2nd floor 2,720 SF 0.50 1,360
- --------------------------------------------------------------------------------------------------------------
Paint drywall @ stair #1 enclosure (2x6 @ 20'h) @ 1st
floor 1,390 SF 0.50 695
- --------------------------------------------------------------------------------------------------------------
Paint drywall @ stair #2 enclosure (2x6 @ 20'h) @ 1st
floor 1,390 SF 0.50 695
- --------------------------------------------------------------------------------------------------------------
Paint drywall @ stair #4 enclosure (2x6 @ 20'h) @ 1st
floor 3,550 SF 0.50 1,775
- --------------------------------------------------------------------------------------------------------------
Paint drywall @ stair #5 enclosure (2x6 @ 20'h) @ 1st
floor 1,220 SF 0.50 610
- --------------------------------------------------------------------------------------------------------------
Paint drywall @ stair #6 enclosure (2x6 @ 20'h) @ 1st
floor 1,414 SF 0.50 707
- --------------------------------------------------------------------------------------------------------------
Paint drywall @ main switch room (1 hr; 1+1 5/8"
type-X, mud / tape) 1,520 SF 0.50 760
- --------------------------------------------------------------------------------------------------------------
Paint drywall @ electrical telephone room (2x6 @ 20'h) 640 SF 0.50 320
- --------------------------------------------------------------------------------------------------------------
Paint drywall @ HVAC louver intakes (2x6 @ 20'h) 1,500 SF 0.50 750
- --------------------------------------------------------------------------------------------------------------
Paint drywall @ stair #5 enclosure (2x6 @ 20'h) @ 2nd
floor 1,220 SF 0.50 610
- --------------------------------------------------------------------------------------------------------------
Paint drywall @ int. stair 24-line:F-G (2x6 @ 10'h) @
2nd floor 1,360 SF 0.50 680
- --------------------------------------------------------------------------------------------------------------
Paint drywall @ stair #1 enclosure (2x6 @ 10'h) @ 2nd
floor 696 SF 0.50 348
- --------------------------------------------------------------------------------------------------------------
Paint drywall @ stair #2 enclosure (2x6 @ 10'h) @ 2nd
floor 696 SF 0.50 348
- --------------------------------------------------------------------------------------------------------------
Paint drywall @ stair #4 enclosure (2x6 @ 10'h) @ 2nd
floor 576 SF 0.50 288
- --------------------------------------------------------------------------------------------------------------
Paint drywall @ stair #6 enclosure (2x6 @ 10'h) @ 2nd
floor 706 SF 0.50 353
- --------------------------------------------------------------------------------------------------------------
Paint drywall-ceiling @ int. stair 24-line:F-G (2x6)
@ 2nd floor 240 SF 0.50 120
- --------------------------------------------------------------------------------------------------------------
Paint drywall-ceiling @ stair #1 enclosure (2x6) @
2nd floor 257 SF 0.50 129
- --------------------------------------------------------------------------------------------------------------
Paint drywall-ceiling @ stair #2 enclosure (2x6) @
2nd floor 262 SF 0.50 131
- --------------------------------------------------------------------------------------------------------------
Paint drywall-ceiling @ stair #4 enclosure (2x6) @
2nd floor 188 SF 0.50 94
- --------------------------------------------------------------------------------------------------------------
Paint drywall-ceiling @ stair #6 enclosure (2x6) @
2nd floor 262 SF 0.50 131
- --------------------------------------------------------------------------------------------------------------
103,204
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
10500 FIRE EXTINGUISHERS AND CABINET
- --------------------------------------------------------------------------------------------------------------
Fire extinguishers - 5 lb. 20 EA 70.00 1,400
- --------------------------------------------------------------------------------------------------------------
Flush mounted fire extinguisher cabinets 20 EA 45.00 900
- --------------------------------------------------------------------------------------------------------------
2,300
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
14200 ELEVATOR
- --------------------------------------------------------------------------------------------------------------
2 stop, 19'-6" travel, elevator w/ standard finishes 1 EA 48,700.00 48,700
- --------------------------------------------------------------------------------------------------------------
48,700
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
15510 FIRE SPRINKLER
- --------------------------------------------------------------------------------------------------------------
Shell & Core:
- --------------------------------------------------------------------------------------------------------------
New automatic fire sprinkler system @ 2nd floor
complete, and 1st floor stairwells 1 LS 176,000 176,000
- --------------------------------------------------------------------------------------------------------------
New separate floor control valves @ each fire riser INCL
- --------------------------------------------------------------------------------------------------------------
Hydro-test existing piping INCL
Repairs to existing 1st floor automatic fire
sprinkler system 1 LS 60,000.00 60,000
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
236,000
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
15600 HVAC
- ------------------------------------------------------------------------------------------------------------------
Shell & Core:
- ------------------------------------------------------------------------------------------------------------------
Garage ventilation system (figured @ 325 pass.
vehicle capacity) 1 LS 175,000.00 175,000
- ------------------------------------------------------------------------------------------------------------------
175,000
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
16000 ELECTRICAL
- ------------------------------------------------------------------------------------------------------------------
Shell & Core
- ------------------------------------------------------------------------------------------------------------------
Retrofit Existing Switch Gear (Main switch board) 1 LS 297,300.00 297,300
- ------------------------------------------------------------------------------------------------------------------
Recondition Existing Lighting @ 1st Floor (50 fc) INCL
- ------------------------------------------------------------------------------------------------------------------
Recondition Existing Lighting @ 2nd Floor (5-10 fc) INCL
- ------------------------------------------------------------------------------------------------------------------
Recondition Site Lighting (1 fc) INCL
- ------------------------------------------------------------------------------------------------------------------
House panels: One High Voltage for future build-out INCL
- ------------------------------------------------------------------------------------------------------------------
House panels: One Low voltage for house lighting and
site lighting INCL
- ------------------------------------------------------------------------------------------------------------------
Reconnect feeders to elevator controllers (existing
elevator) INCL
- ------------------------------------------------------------------------------------------------------------------
Interface with HVAC systems INCL
- ------------------------------------------------------------------------------------------------------------------
Fire system monitoring INCL
- ------------------------------------------------------------------------------------------------------------------
New D-mark telephone into west building INCL
- ------------------------------------------------------------------------------------------------------------------
Exit lighting with emergency battery back-up lighting INCL
- ------------------------------------------------------------------------------------------------------------------
297,300
- ------------------------------------------------------------------------------------------------------------------
TOTAL DIRECT COSTS 1,148,927 1,148,927
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT "C"
List of Improvements Included Within
------------------------------------
the Tenant Improvements Work
----------------------------
to be Completed by Lessee
-------------------------
1. All work shown and described in Exhibit "B-2" (subject to Landlord's
payment of the In-Lieu Payments).
2. All work indicated in Exhibit "B-1" as a part of Tenant's Work.
3. Any and all work desired by Tenant or required by the applicable
governmental authorities and not included within Landlord's Work as shown on
Exhibit "B-1."
<PAGE>
EXHIBIT 10.3
DEED OF LEASE
-------------
THIS DEED OF LEASE, (this "Lease"), is made this 25th day of February,
2000, by and between TransDulles Center, Inc., a Virginia corporation, or
assigns ("Landlord") and HomeGrocer.com, Inc., a Delaware corporation,
("Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant desire to create a leasehold estate in favor
of Tenant in the Premises (as hereinafter defined) consisting of approximately
126,231 rentable square feet of space in a building being planned for
development and construction within an office and warehouse park located in
Loudoun County, Virginia known as TransDulles Centre; and
WHEREAS, Landlord has, prior to the date hereof, submitted for approval the
"Amended Site Plan," as defined below, and, in addition, has submitted
application for a building permit for the "Building Shell," as defined below;
and
WHEREAS, subject to: (i) execution and delivery of this Lease on or before
February 25, 2000; (ii) posting of the Security Deposit (as defined, below) and
first month's rent on or before February 25, 2000; (iii) Tenant Delay (as
defined below); (iv) Force Majeure Delay (as defined below); and (v) all of the
terms and conditions of this Lease, the parties anticipate that the Commencement
Date (as defined below) of this Lease shall be on or about October 1, 2000
NOW, THEREFORE, in consideration of the Premises, and of the covenants and
agreements herein contained, the parties hereto agree as follows:
1. PREMISES.
Effective as of the Commencement Date, Landlord shall lease unto Tenant and
Tenant shall lease from Landlord approximately One Hundred Twenty Six Thousand
Two Hundred. Thirty One (126,231) rentable square feet (the "Premises"),
consisting of the entire floor area of a building to be known as TransDulles
Centre Building 14 (the "Building") the proposed footprint of which is shown on
Exhibit A-I, together with the right to use all entranceways, parking areas and
sidewalks serving the Building, which Building is located on a parcel of land
known as Lot 49A, TransDulles Centre (the "Property") as shown and described by
metes and bounds in Exhibit A-2, within the office and warehouse park known as
TransDulles Centre as shown on Exhibit A-3 (TransDulles Centre"), and that
machinery and equipment installed in and upon the Premises by Landlord, together
with all additions and accessions thereto, substitutions therefor and
replacements thereof permitted by this Lease (collectively, the "Equipment").
The exact square footage of the Premises shall be determined by the architect
responsible for the design of the Building Shell (the "Designing Architect")
promptly following the Commencement Date, in accordance with the standard of
measurement described in Exhibit A-4. Landlord shall promptly provide Tenant
with notice of the square footage as so determined, accompanied by a summary of
the calculations prepared by the Designing Architect ("Landlord's Area
Determination Notice"). Within thirty (30) calendar days of the Landlord's Area
Determination Notice, Tenant may issue to Landlord notice of Tenants
determination of the square footage of the Premises ("Tenant's Area
Determination Notice") as determined by an architect selected by Tenant
("Tenants Architect") in accordance with the standard of measurement described
in Exhibit A-4, accompanied by a summary of the calculations prepared by
Tenant's Architect. Should Tenant fail to timely issue Tenant's Area
Determination Notice to Landlord, the area of the Premises as set forth in
Landlord's Area Determination shall conclusively be deemed to be the rentable
area of the Premises for all purposes. If Tenant timely issues to Landlord
Tenant's Area Determination Notice, the Designing Architect and Tenant's
Architect shall promptly confer and shall use their best efforts to agree upon
the area of the Premises. If The Designing Architect and Tenant's Architect
cannot reach agreement within
<PAGE>
thirty (30) days after the date of Tenants Area Determination Notice, then
within ten (10) days thereafter, they shall designate a third reputable,
licensed architect familiar with the design and construction of flex warehouse
space, (the "Independent Architect"). Upon the failure of the Designing
Architect and Tenants Architect to agree upon the designation of the Independent
Architect, then the Independent Architect shall be appointed by a Judge of the
Circuit Court of Loudoun County, Virginia upon ten (10) days notice, or by any
other court in Virginia having jurisdiction. Concurrently with such appointment,
the Designing Architect and Tenant's Architect shall each submit a letter to the
Independent Architect, with a copy to Landlord and Tenant, setting forth such
architects statement of the area of the Premises (respectively, "Designing
Architect's Letter" and "Tenant's Architect's Letter").In the event the areas
set forth in the Designing Architect's Letter and the Tenant's Architect's
Letter shall differ by less than Five Hundred (500) rentable square feet, then
the area of the Premises shall not be determined by the Independent Architect,
and the area of the Premises shall be the average of the areas set forth in the
Designing Architect's Letter and Tenant's Architect's Letter. In the event the
area of the Premises set forth in the Designing Architect's Letter and the
Tenant's Architect's Letter shall differ by more than Four Hundred Ninety Nine
(499) rentable square feet, the Independent Architect shall conduct such
investigations and take such measurements as he may deem appropriate and shall,
within sixty (60) days after the date of his designation, choose either the area
set forth in the Designing Architect's Letter, and the Tenant's Architect's
Letter, and such choice shall be binding upon Landlord and Tenant. Landlord and
Tenant shall each pay the fees and expenses of its respective architect. The
fees and expenses of the Independent Architect shall be shared equally by
Landlord and Tenant.
The parties acknowledge that the Property is currently subject to a site
plan (the "Existing Site Plan") which has been approved by the appropriate
Loudoun County governmental agencies, and. which contemplates the construction
of two (2) buildings having footprints of Forty Thousand Three Hundred and
Twenty (40,320) and Eighty Five Thousand Six Hundred Eighty (85,680) rentable
square feet respectively. Landlord shall undertake to amend the Existing Site
Plan, and to obtain the requisite governmental approvals therefor, to provide
for the development of the Building to consist of approximately Ten Thousand
Eighty (10,080) rentable square feet of first floor office space, and
approximately One Hundred Sixteen One Hundred Fifty One (116,151) rentable
square feet of warehouse space having a clear height of twenty four feet (24')
(the Existing Site Plan, with the contemplated amendments, as the same may be
modified in the course of obtaining the necessary governmental approvals, is
referred to as the "Amended Site Plan"). Tenant shall make advance payments (the
"Advance Payments") to Landlord to defray the costs of the preparation and
solicitation of approvals of the Amended Site Plan as provided in that certain
letter agreement attached hereto as Exhibit A-5. In the event that Landlord is
unable to obtain all necessary governmental approvals for the Amended Site Plan
on or before June 1, 2000 and Landlord has been unable to obtain such necessary
governmental approvals within thirty (30) days of written notice from Tenant
issued no earlier than June 2, 2000, Tenant may, at its option, by second
written notice to Landlord, declare this Lease to be null and void and of no
further effect, in which case the Security Deposit, the Advance Payments, and
any prepaid rent, shall be returned to Tenant, following deduction of (i) all
actual, reasonable, out-of pocket costs incurred by Landlord in connection with
the preparation and solicitation of approvals for the Amended Site Plan, and any
building permits, including but not limited to all fees and expenses paid to any
architects, engineers, attorneys, and/or permit expediters, (ii) actual,
reasonable, out-of-pocket legal fees and expenses incurred by Landlord in
connection with the negotiation and preparation of this Lease not in excess of
One Hundred Thousand Dollars ($100,000.00), and (iii) a fee to Landlord equal to
four percent (4.0%) of the sum of items (i) and (ii) above. Notwithstanding the
above, the time within which Landlord shall have to obtain all necessary
governmental approvals for the Amended Site Plan before Tenant shall have any
right to terminate this Lease as provided herein shall be extended by any time
period attributable to "Tenant Delay" or "Force Majeure Delay," both as defined
below.
2
<PAGE>
Following receipt of all necessary governmental approvals for the Amended
Site Plan, Landlord shall be responsible for obtaining the necessary permits
for, and constructing, at its expense, the "Building Shell" as described in
Exhibit B hereto.
2. COMMENCEMENT DATE AND LEASE TERM.
(a) The initial term of this Lease shall be for a period of thirteen
(13) years and one (1) month (hereafter referred to as "Initial Term"), (subject
to early termination as provided in Paragraph 4 below) commencing on the
Commencement Date, which shall be the date upon which the following are
satisfied:
(i) substantial completion of the Building Shell, as determined
by the Designing Architect, and
(ii) delivery of possession of the Premises to Tenant.
Landlord projects that the Commencement Date shall be approximately seven (7)
months after the issuance of the building permit for construction of the
Building Shell by Loudoun County (the "Projected Commencement Date"), although
the Projected Commencement Date is subject to delays in design, permitting and
construction of the Building Shell for causes both within and beyond the control
of Landlord. If the Commencement Date is not the first day of a month, then the
Term shall be the period set forth above plus the partial month in which the
Commencement Date occurs. Except as expressly provided in Paragraph 2(c) below,
in no event shall Landlord be liable to Tenant for any failure to complete
construction of the Building Shell and deliver the Premises to Tenant by the
Projected Commencement Date for any reason whatsoever. Landlord shall use
reasonable efforts to keep Tenant informed of the progress of construction, and
any change in the Projected Commencement Date. The twelve (12) month period
commencing thirty (30) days after the Commencement Date and each successive
twelve (12) month period thereafter during the initial Term and any Renewal Term
shall be hereinafter referred to as a "Lease Year;" the first day of the first
Lease Year shall be hereinafter referred to as the Rent Commencement Date."
Notwithstanding the foregoing, if substantial completion of the Building Shell
is delayed as a direct or indirect result of "Tenant Delay" (as defined below)
the Rent. Commencement Date shall be deemed to occur thirty (30) days after the
date that Landlord determines in its reasonable judgment that the Building Shell
would have been substantially complete but for such Tenant Delay.
Notwithstanding any other provision of this Lease, no Base Rent or Additional
Rent shall be payable in respect of any period prior to the Rent Commencement
Date. The Initial Term and, any Renewal Term(s) resulting from Tenant's exercise
of the options provided in Paragraph 6 hereof, are collectively referred to
herein as the "Term."
(b) Landlord agrees that approximately forty five (45) days prior to
the Commencement Date, or on such earlier date as Landlord reasonably determines
that Tenant may enter upon the Premises for the purposes described below without
interfering with Landlord's construction of the Building Shell (the "Early
Access Period"), (which date shall be determined by Landlord in its reasonable
discretion) it shall permit Tenant to have access to the Premises for the sole
purpose of commencing construction of the Tenant Work, and installation of
Tenant's trade fixtures, furniture, equipment, and related wiring, in accordance
with Construction Drawings and Specifications previously approved by Landlord as
provided in the Work Agreement attached hereto as Exhibit D, and permits
previously issued by Loudoun County. Tenant agrees however, that the provisions
of Paragraph 5(c) pertaining to Hazardous Materials, and the provisions of
Paragraph 20 pertaining to insurance and indemnification, shall apply during the
Early Access Period, and that Tenant shall indemnify and hold Landlord of and
from any and claims for damage to persons or property arising from Tenants
activities on the Premises during the Early Access Period. Tenant further agrees
that it will conduct its activities in the
3
<PAGE>
Premises during the Early Access Period so as not to interfere with the
construction of the Building Shell, and that all of Tenants activities on the
Premises during such period shall be subject to coordination by Landlord.
(c) Notwithstanding any other provision of this Lease, Tenant shall
have the following rights:
(i) In the event that Landlord is unable to obtain the building
permits necessary for the construction of the Building Shell within sixty
(60) days of receipt of approval of the Amended Site Plan, and Landlord has
been unable to obtain such building permits within thirty (30) days after
written notice from Tenant issued no earlier than the sixty first (61st)
day after receipt of approval of the Amended Site Plan (the thirtieth day
following Tenant's notice is referred to herein as the "Outside Building
Permit Issuance Date"), Tenant may, at its option, by second written notice
to Landlord, declare this Lease to be null and void and of no further
effect, in which case the Security Deposit, the Advance Payments, and any
prepaid rent, shall be returned to Tenant, following deduction of (i) all
actual, reasonable, out-of pocket costs incurred by Landlord in connection
with the preparation and solicitation of approvals for the Amended Site
Plan, and any building permits, including but not limited to all fees and
expenses paid to any architects, engineers, attorneys, and/or permit
expediters, (ii) actual, reasonable, out-of-pocket legal fees and expenses
incurred by Landlord in connection with the negotiation and preparation of
this Lease not in excess of One Hundred Thousand Dollars ($100,000.00), and
(iii) a fee to Landlord equal to four percent (4.0%) of the sum of items
(i) and (ii) above. Notwithstanding the above, the Outside Building Permit
Issuance Date shall be extended by any delay in the issuance of building
permits which results From "Tenant Delay" or "Force Majeure Delay" (both as
defined below), and shall be further extended by the time necessary for
Landlord to obtain such building Permits provided that Landlord has
diligently taken commercially reasonable efforts to obtain such permits
following receipt of approval of the Amended Site Plan.
(ii) In the event that the Commencement Date has not occurred
within twelve (12) months from the date of issuance of the last of the
building permits necessary for the Construction of the Building Shell (the
"Penalty Date"), Tenant shall be afforded a credit against Base Rent
payable hereunder at the rate of One Thousand Dollars ($1,000.00) per day
for each day from the Penalty Date to the Commencement Date.
Notwithstanding the above, the Penalty Date shall be shall be extended by
any period of delay in construction of the Building Shell attributable to
"Tenant Delay" or "Force Majeure Delay" (both as defined below).
(iii) In the event that the Commencement Date has not occurred by
the Penalty Date as determined pursuant to Paragraph 2(c)(ii) above, Tenant
may thereafter issue a notice to Landlord declaring its intent to terminate
this Lease as of a date which is no less than sixty (60) days from the date
of such notice (the "Outside Commencement Date"). If the Commencement Date
has not occurred by such Outside Commencement Date, Tenant may, at its
option, by second written notice to Landlord, declare this Lease to be null
and void and of no further effect, in which case the Security Deposit, the
Advance Payments, and any prepaid rent, shall be returned to Tenant,
following deduction of (i) all actual, reasonable, out-of pocket costs
incurred by Landlord in connection with the preparation and solicitation of
approvals for the Amended Site Plan, and any building permits, including
but not limited to all fees and expenses paid to any architects, engineers,
attorneys, and/or permit expediters, (ii) actual, reasonable, out-of-pocket
legal fees and expenses incurred by Landlord in connection with the
negotiation and preparation of this Lease not in excess of One Hundred
Thousand Dollars ($100,000.00), and (iii) a fee to Landlord equal to four
percent (4.0%) of the sum of items (i) and (ii) above. Notwithstanding the
above, the Outside Commencement Date shall be shall
4
<PAGE>
be extended by any period of delay in construction of the Building Shell
attributable to "Tenant Delay" or "Force Majeure Delay" (both as defined
below).
(d) As used in the Lease, the term "Tenant Delay" shall mean any
delay in construction of the Building Shell resulting directly or indirectly
from any of the following reasons: Tenant's failure to comply with any of its
duties and obligations hereunder, including the Work Agreement attached hereto
as Exhibit D; Tenant's request for modifications to plans or working drawings
subsequent to the date such plans or working drawings are approved by Tenant;
Tenant's failure to pay when due any amount required hereunder; Tenant's request
for materials, finishes or installations reasonably determined by Landlord not
to be building standard materials, finishes or installations; Tenant's
activities on the Premises during the Early Access Period; the performance or
timing of any work by any person or firm employed or retained by Tenant; Tenants
request for modifications to the Building Shell made at any time. Landlord shall
use commercially reasonable efforts to provide verbal notice to Tenant of the
occurrence of any event of Tenant Delay as soon as reasonably practicable after
Landlord becomes aware of the occurrence of an event of Tenant Delay, or if any
activity contemplated by Tenant of which Landlord becomes aware is likely to
cause a Tenant Delay; at the time of such notice, Landlord will use commercially
reasonable efforts to provide a good faith estimate of the duration of such
Tenant Delay. As used in this Lease, the term "Force Majeure Delay" shall mean
any delay in construction of the Building Shell resulting directly or directly
from any of the following reasons: earthquake; explosion; flood; hurricane; fire
or other casualty, the elements; acts of God or public enemy; actions or
restrictions of governmental authorities (permitting or inspection);
governmental regulation of the sale of materials or supplies or the
transportation thereof; war; invasion; insurrection; rebellion; riots; strikes
or lockouts; inability to obtain necessary materials, goods, equipment,
services, utilities or labor at commercially reasonable rates and upon
commercially reasonable terms; or any other cause whether similar or dissimilar
to the foregoing which is beyond the reasonable control of Landlord. Landlord
shall use commercially reasonable efforts to minimize the impact of any Force
Majeure Delay.
3. RENT.
As rent for the Premises (all of which is hereinafter referred to
collectively as "Rent"), Tenant shall pay to Landlord all of the following:
(a) Base Rent. Tenant shall pay, without offset, demand or
counterclaim, as base rent (hereafter referred to as the "Base Rent") for each
Lease Year the sums identified on the attached Exhibit C, Rent Schedule. In the
event that the total rentable area of the Building changes in the process of
obtaining approval of the Amended Site Plan, or is otherwise determined to be
different from the square footage set forth in Paragraph 1 hereof in accordance
with the procedure set forth therein, Landlord shall prepare an Amended and
Restated Rent Schedule based upon the actual rentable square footage of the
Building as determined in accordance with Paragraph 1 hereof. Tenant hereby
agrees to execute such Amended and Restated Rent Schedule, or to provide
Landlord with written notice of its objections thereto, within seven (7)
calendar days of its presentation by Landlord, time being of the essence. Should
Tenant fail to do so, the Amended and Restated Rent Schedule shall conclusively
be deemed approved by Tenant. Should Tenant timely object to the Amended and
Restated Rent Schedule by written notice to Landlord served in accordance with
the provisions hereof, Landlord will evaluate Tenant's objections and determine,
in the exercise of its discretion, whether any change in the Amended and
Restated Rent Schedule is warranted; Landlord's determination in this regard,
shall be binding upon Tenant, provided such determination is made in good faith.
The monthly installments shall be payable in advance on the first day of each
and every month during the Term at the office of TransDulles Center, Inc., c/o
The Mark Winkler Company, 4900 Seminary Road, Suite 900, Alexandria, Virginia
22311, or by wire transfer routed to: Fleet Bank, Boston, Massachusetts, ABA #
011900571, Account Name: TransDulles Center, Inc., Account Number: 9427834304,
or at such other place as Landlord may hereafter
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designate in writing, except that the first such installment, in the amount of
Ninety Thousand Nine Hundred Ninety One Dollars and Fifty Cents ($90,991.51),
shall be due contemporaneously with the execution of this Lease. Rent checks are
to be made payable to TransDulles Center, Inc., or such other person, firm or
corporation as Landlord may hereafter designate in writing.
(b) Intentionally Omitted.
(c) Intentionally Omitted.
(d) Intentionally Omitted.
(e) Tax on Lease. Tenants pro rata share of any federal, state or
local tax (including gross receipts tax) assessment, levy or other charge (other
than any income tax, gift tax, inheritance tax or real property tax)
(hereinafter collectively referred to as "Tax") if now or hereafter directly or
indirectly upon (a) Landlord with respect to this Lease or the value thereof,
(b) Tenant's use or occupancy of the Premises, or (c) the Base Rent or any other
sum payable under this Lease, payment of such Tax shall be paid by Tenant as
Additional Rent. Landlord shall annually notify Tenant of the amount which
Landlord estimates will be the Tax for each tax year, and Tenant shall pay such
amount in equal monthly installments in advance on or before the first day of
each of the twelve (12) months after the date of such notice. Landlord shall
annually submit to Tenant a statement showing Tenant's pro rata share of the
actual Tax for the current tax year, the amount thereof theretofore paid by
Tenant, and the amount of the resulting balance due thereon or overpayment
thereof. Such balance due shall be paid by Tenant, without interest, within
thirty (30) days after the date of such statement. In the event of an
overpayment by Tenant, Landlord shall afford Tenant a credit against Rent due
hereunder for the month or months following the date of such statement. Official
tax bills rendered by the taxing authority shall be presumptive evidence of the
actual amount of Tax. Tenant shall have the right to audit Landlord's records
pertaining to such Tax in accordance with paragraph 11 below.
(f) Tenant does hereby take and hold the Premises at the Rent
hereinabove specifically reserved and payable as aforesaid, and upon and subject
to the terms and conditions herein contained.
(g) Late Payment. If Tenant fails to pay any installment of Rent on
or before the third (3rd) calendar day of the calendar month when such
installment becomes due and payable, Tenant shall pay to Landlord a late charge
of five per cent (5%) of the amount of such installment, and, in addition, any
unpaid installment shall bear interest at that rate per annum which is two per
cent (2%) greater than the "prime rate" then in effect at Morgan Guaranty Trust
Company of New York, New York, (the "Default Rate") from the date such
installment became due and payable to the date of payment by Tenant, provided,
however, that nothing herein contained shall be construed or implemented in such
a manner as to allow Landlord to charge or receive interest in excess of the
maximum legal rate than allowed by law. Such late charge and interest shall
constitute Additional Rent hereunder and shall be due and payable with the next
monthly installment of Rent. Nothing in this paragraph shall be deemed to be in
derogation of Landlord's rights under Paragraph 17 .
(h) Additional Rent. With respect to this Lease, Additional Rent
shall mean any and all monetary obligations for which Tenant is responsible
under the terms, covenants and conditions of this Lease, including but not
limited to, Base Rent escalations, taxes, late fees, interest payments, holdover
Rent, Operating Costs, and cost of change orders.
(i) Tenants Proportionate Share. Landlord and Tenant agree that
Tenant's "pro rata share" for purposes of Paragraphs 3(e) and 11 shall be One
Hundred percent (100.00%), the approximate and agreed upon ratio that the area
of the Premises bears to the total rentable area of the Building.
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4. EARLY TERMINATION.
Notwithstanding the provisions of paragraph 2(a) above, provided that (i)
this Lease is in full force and effect, and (ii) there shall be no uncured Event
of Default by Tenant existing as of the date of issuance by Tenant of the Notice
of Termination as provided in this Paragraph 4, Tenant shall have the one time
option to terminate this Lease effective as of the last day of the tenth (10th)
Lease Year (the "Early Termination Date") only. To exercise such option, Tenant
shall provide Landlord with written notice (the "Notice of Termination") of its
exercise of such option at least one (1) year prior to the Early Termination
Date, time being of the essence, which Notice of Termination must be accompanied
by payment to Landlord of a termination fee equal to four (4) months Rent (as
"Rent" is defined in Paragraph 3 hereof, which includes, but is not limited to,
four (4) months' Base Rent payable in respect of the 11th Lease Year, and four
(4) months' Tenant's of Estimated Operating Costs as established pursuant to
Paragraph 11(c) hereof as of the date of the Notice of Termination). If between
the date of issuance of the Notice of Termination and the Termination Date,
Tenant shall have committed or suffered an Event of Default in Tenant's
obligations under this Lease, or should Tenant fail to vacate the Premises by
the Termination Date, time being of the essence, Landlord may, at its sole
option, (i) nullify the election to terminate in which event the Lease shall
remain in full force and effect, subject to its terms, or (ii) without further
notice declare an Event of Default under this Lease, and in addition to
recovering the Termination Fee, Landlord may exercise all other rights and
remedies for an Event of Default as hereinafter provided, or (iii) deem Tenant
to be holding over in accordance with the provisions of paragraph 18
hereinbelow. The option granted hereunder is personal to Tenant, and may not be
exercised by any transferee or assignee of Tenant other than a Related Entity as
defined in Paragraph 12 hereof; the option is exercisable only as to the
entirety of the Premises, and not as to a portion thereof.
5. USE OF PREMISES.
(a) Subject to the provisions hereof, Tenant shall have access to the
Premises twenty four (24) hours per day, seven (7) days per week, fifty-two (52)
weeks per year. To the extent permitted by applicable law, including applicable
zoning ordinances, and laws pertaining to the sale of alcoholic beverages,
Tenant may occupy and use the Premises for general office, storage, warehousing
and distribution purposes, product processing and other incidental uses, and for
no other purpose without the consent of Landlord (which consent shall not be
unreasonably withheld, conditioned or delayed), subject, however, to the terms
and provisions of any covenants, easements, conditions or restrictions which
affect the use of the Premises. Provided, however, that notwithstanding any
other provision of this Lease, and subject to Tenant obtaining all necessary
licenses therefor, Tenant shall be permitted to utilize the Premises for the on-
site retail sale of alcoholic beverages, but only if and to the extent that such
on-site distribution is necessary in order to permit Tenant to obtain the
necessary governmental approvals to distribute alcoholic beverages off site;
Tenant shall not be permitted to advertise or otherwise promote such on-site
sale, nor utilize any larger portion of the Premises or the Property than is
reasonably necessary in order to obtain such governmental approvals. Tenant
shall not Permit any unlawful occupation, business or trade to be conducted on
any of the Premises or any use to be made thereof contrary to applicable laws or
regulations. Tenant shall not use or occupy or permit any of the Premises to be
used or occupied, nor do or permit anything to be done in or on any of the
Premises, in a manner which would (i) violate any certificate of occupancy
affecting any of the Premises, (ii) make void or voidable any insurance then in
force with respect to any of the Premises, (iii) make it difficult or impossible
to obtain fire or other insurance which is required hereunder, or cause the cost
of maintaining such insurance to increase, (iv) cause structural damage to the
Building, or (v) constitute a public or private nuisance or waste.
(b) As part of its obligation to comply with laws and other
requirements under Paragraph 5(a) of this Lease, Tenant shall not (either with
or without negligence), in violation of any law, generate, use, store, or cause
or permit the escape, disposal or release of any Hazardous Materials in or about
the Building or
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the Property or the Premises. Hazardous Materials shall mean (a) "hazardous
wastes", as defined by the Resource Conservation and Recovery Act of 1976, as
amended from time to time, (b) "hazardous substances", as defined by the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended from time to time, (c) "toxic substances", as defined by the Toxic
Substances Control Act, as amended from time to time, (d) "hazardous materials",
as defined by the Hazardous Materials Transportation Act, as amended from time
to time, (e) any applicable state or local laws and the regulations adopted
under these acts, as amended from time to time, (f) oil or other petroleum
products whether refined or unrefined, (g) any highly combustible substance and
(h) any substance whose presence in Landlord's reasonable judgment could be
detrimental to the Building or the Property or the Premises or hazardous to
health or the environment. Notwithstanding the above, Tenant may, store and
handle, in strict compliance with all applicable laws and regulations: (i)
reasonable quantities of customary janitorial supplies that may contain
Hazardous Materials, (ii) packaged goods intended for resale to customers, such
as, but not limited to, hairspray, household cleaners, automotive products,
antifreeze, dog food, plant fertilizer and other items customarily sold to
customers in a grocery, food or drug store, and (iii) standard office products
that may contain Hazardous Materials (such as photocopy toner, "White Out" and
the like). If any lender or governmental agency shall ever require testing to
ascertain whether or not here has been any release of Hazardous Materials, then
the reasonable costs thereof shall be reimbursed by Tenant to Landlord upon
demand as Additional Rent if such requirement applies to the Premises if the
requirement for such testing results from Tenant's activities at the Building or
on the Property. In addition, Tenant shall execute affidavits, representations
and the like from time to time at Landlord's request concerning Tenant's best
knowledge and belief regarding the presence of Hazardous Materials in the
Premises. In all events, Tenant shall indemnify and hold Landlord harmless of
and from any and all costs and expenses of any nature arising from the release
of Hazardous Materials in the Premises occurring while Tenant is in possession,
or elsewhere on the Property and any adjacent real estate owned by Landlord, if
caused by Tenant or persons acting under Tenant. The within covenants shall
survive the expiration or earlier termination of the Lease. Landlord warrants
that to the best of its knowledge, information and belief, the Premises,
Building and Property shall, as of the commencement of the Early Access Period,
be free and clear of Hazardous Materials, except for those materials used in
accordance with applicable law in connection with the construction of the
Building Shell.
(c) If Tenant fails to comply with any applicable law or regulation
or if Landlord reasonably believes the violation of any law or regulation is
threatened, excluding the exceptions set forth in Paragraph 5(b), Landlord shall
have the right (but not the obligation) following thirty (30) days notice to
Tenant unless Tenant commences to act during or prior to such period, and
diligently pursues the cure of such failure to comply (unless such failure or
threatened failure causes imminent threat to life or property in which case no
notice is required), to act in place of Tenant and to take such action as it may
deem necessary or desirable to ensure compliance or to mitigate, abate or
correct the violation or threatened violation. All costs of any kind whatsoever
incurred by Landlord in connection therewith, including consultants' and
reasonable attorneys' fees, shall be payable on demand, shall bear interest at
the default rate until paid, and shall constitute Additional Rent.
(d) Tenant shall indemnify, defend and hold Landlord harmless from
and against any and all claims, losses, damages, liabilities, cost and expenses,
including attorneys' fees, arising from Tenant's failure to comply with all
applicable laws and regulations. The foregoing provisions shall survive the
expiration or earlier termination of this Lease.
(e) Landlord represents that as of the date of this Lease, the
Building is zoned PD-IP (Planned Development-Industrial Park) in Loudoun County,
with a special exception for office and warehouse uses, and is subject to the
1972 Zoning Ordinance for such County.
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6. OPTION TO EXTEND TERM.
(a) Renewal Terms. Provided that (i) this Lease is in full force and
effect, (ii) no material adverse change in Tenant's financial condition has
occurred since the date of execution of this Lease, and (iii) there shall be no
uncured Event of Default by Tenant existing as of the date of issuance the
Renewal Notice contemplated by Paragraph 6(b) below, Tenant shall have the
option to renew this Lease for two (2) consecutive five (5) year terms (each, a
"Renewal Term"), in "AS IS" condition, with the Base Rent for such renewal
periods being equal to the then current fair market rent ("FMR") for comparable
space in the Sterling, Virginia market area. first used in this Lease, FMR.
shall mean the annual amount payable as Base Rent that a non-equity, non-
renewal, non-expansion tenant would pay a landlord of a similar building in the
Sterling, Virginia submarket in "AS IS" condition, giving appropriate
consideration to annual rental rates per rentable Square foot on a "triple net"
basis, the length of the lease term, the size and location of the premises being
leased, the cost to Tenant of relocating its operations to another site, tenant
concessions prevalent in the marker. if any (including but not limited to such
items as free rent and build out allowances), and brokerage commissions, and
shall be determined in accordance with the provisions of Paragraph 6(c) below.
The option to renew provided herein may be exercised by Tenant solely as to the
entirety of the Premises.
(b) Notice Required. Tenant shall give Landlord written notice of its
intent to exercise its option to extend the Lease Term (the "Renewal Notice") at
least twelve (12) months, but no more than eighteen (18) months, prior to the
end of the then current term, time being of the essence. Should Tenant fail to
notify Landlord of its intent to exercise such Renewal option within the
aforementioned notice period, time being of the essence, then Tenant's renewal
option shall expire without action by either party and Landlord shall not need
to advise Tenant in writing of Tenant's neglect in reference to the notice
period.
(c) Determination of FMR for Renewal Terms. Within fifteen (15)
calendar days of Landlord's receipt of the Renewal Notice as to each Renewal
Term, Landlord shall issue written notice to Tenant of Landlord's determination
of FMR for such Renewal Term ("Landlord's Rent Notice"); if Tenant shall fail to
give written notice to Landlord within fifteen (15) calendar days of Landlord's
Rent Notice of its objection to the FMR as set forth in such notice, and if
Tenant's failure shall continue for five (5) days after notice from Landlord to
Tenant that Landlord did not receive from Tenant, within fifteen (15) days of
Landlord's Rent Notice, an objection to the FMR as set forth in Landlord's Rent
Notice, then the Base Rent for the applicable Renewal Term shall be the FMR as
set forth in Landlord's Rent Notice. If within fifteen (15) calendar days of
Landlord's Rent Notice, Tenant shall give written notice to Landlord of its
objection to the FMR ("Tenant's Objection Notice") as set forth in Landlord's
Rent Notice such notice, and its proposed FMR then Base Rent for such Renewal
Term shall be determined as follows:
(i) Landlord and Tenant shall use reasonable efforts to
negotiate and agree upon an FMR. within thirty (30) days of Tenants Objection
Notice. If Landlord and Tenant fail to agree upon an FMR within such period,
Landlord and Tenant shall each select a reputable, qualified, licensed real
estate broker having an office in Northern Virginia, and familiar with the
rentals then being charged for Buildings comparable to the Building in the
Sterling, Virginia area (respectively, "Landlord's Broker" and "Tenant's
Broker") who shall confer promptly after their selection by Landlord and Tenant
and shall use their best efforts to agree upon the FMR.
(ii) If Landlord's Broker and Tenant's Broker cannot reach
agreement within seventy five (75) days after the date of Tenant's Objection
Notice, then within ten (10) days thereafter, they shall designate a third
reputable, licensed real estate broker having an office in Northern Virginia,
and familiar with the rentals then being charged for buildings comparable to the
Building in the Sterling, Virginia area (the "Independent Broker"). Upon the
failure of Landlord's Broker and Tenant's Broker to agree upon the
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designation of the Independent Broker, then the Independent Broker shall be
appointed by a Judge of the Circuit Court of Loudoun County, Virginia upon ten
(10) days notice, or by any other court in Virginia having jurisdiction.
Concurrently with such appointment, Landlord's Broker and Tenant's Broker shall
each submit a letter to the Independent Broker, with a copy to Landlord and
Tenant, setting forth such broker's estimate of the FMR, taking into
consideration the duration of the first Renewal Term or the second Renewal Term,
as the case may be, and all other terms and conditions of this Lease which are
applicable to the Extension Term (respectively, Landlord's Broker's Letter" and
"Tenant's Brokers Letter"). In the event the FMR set forth in Landlord's
Broker's Letter and Tenant's Broker's Letter shall differ by less than Sixty
Cents ($0.60) per rentable square foot for each year during the Renewal Term,
then the FMR shall not be determined by the Independent Broker, and the FMR
shall be the average of the FMR set forth in Landlord's Broker's Letter and
Tenant's Broker's Letter. In the event the FMR set forth in Landlord's Broker's
Letter and Tenant's Broker's Letter shall differ by more than Fifty Nine Cents
($0.59) per rentable square foot per annum for any year during the Renewal Term,
the Independent Broker shall conduct such investigations as he may deem
appropriate and shall, within sixty (60) days after the date of his designation,
choose either the rental set forth in Landlord's Broker's Letter or Tenant's
Broker's Letter to be the FMR for the Renewal Term, and such choice shall be
binding upon Landlord and Tenant. Landlord and Tenant shall each pay the fees
and expenses of its respective broker. The fees and expenses of the Independent
Broker shall be shared equally by Landlord and Tenant.
7. CONSTRUCTION OF PREMISES.
Landlord warrants that, at Landlord's sole cost and expense, the
Building Shell shall be constructed in a good and workmanlike manner in
conformance with the description of the Building Shell set forth in Exhibit B
hereto, and all applicable federal, state and local codes and regulations in
effect at the time of issuance of permits for the initial construction of the
Building Shell.
8. TENANT WORK.
The respective rights and obligations of the parties with respect to
the design and construction of the Tenant Work are set forth in the Work Letter
attached hereto as Exhibit D hereto.
9. COMPLIANCE WITH LAWS.
During the Term, Landlord shall be responsible for complying with and
promptly making all structural changes, alterations or additions necessitated by
all laws regulating the Property and exterior areas of the Building (excluding
the areas within the Premises), including the Americans with Disabilities Act
(ADA), and any amendments thereto. The cost of the modifications, alterations,
and/or additions contemplated by this Paragraph shall be included in Operating
Costs for which Tenant is responsible pursuant to the provisions of Paragraph 11
hereof.
10. SECURITY DEPOSIT.
(a) Contemporaneously with the execution of this Lease by Tenant the
sum of Two Million Two Hundred Thousand Dollars ($2,200,000.00) shall be
delivered to Landlord as a Security Deposit (the "Security Deposit") pursuant to
this Lease and shall be security for the payment and performance by Tenant of
all Tenants obligations, covenants, conditions and agreements under this Lease.
Such sum shall be either in cash, or in a letter of credit ("Letter of Credit"),
or in some combination thereof, as determined by Tenant. Upon the expiration of
the Term hereof, Landlord shall, if there does not then exist an uncured default
by Tenant in the performance of its covenants under this Lease, return such
Security Deposit to Tenant, less such portion thereof as Landlord shall have
appropriated to make good any default by Tenant with respect to Tenant's
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obligations within ninety (90) days of such expiration. If Tenant suffers or
commits any Event of Default during the Term of this Lease, or Tenant defaults
in the performance of any covenant contained herein, and such default results,
in Landlord's reasonable judgment, in an imminent danger to persons or property,
or if Tenant fails to take possession on the Commencement Date stated in
Paragraph 2, Landlord shall have the right, but not the obligation, to apply all
or any portion of the Security Deposit to remedy such default, in which event
Tenant shall promptly deposit with Landlord the amount necessary to restore the
Security Deposit to its original amount. The Security Deposit shall not be
deemed liquidated damages, and Landlord's application of said Security Deposit
to reduce its damages shall not preclude recovery from Tenant of any additional
damages incurred by Landlord. If the Landlord sells or transfers its interest in
the Building, Landlord shall transfer the Security Deposit, and the Landlord
shall be released From all liability to Tenant for the return of such Security
Deposit.
(b) Landlord agrees to accept a Letter of Credit as and for the
Security Deposit, provided that such Letter of Credit shall be (i)
unconditional; (ii) irrevocable; (iii) issued by a financial institution
approved by Landlord in Landlord's reasonable discretion, which financial
institution must be a member bank of the Federal Reserve, and which has branch
offices in both the Washington, D.C. metropolitan area, and in New York, New
York, for the presentation of the Letter of Credit; (iv) in a form permitting
partial and multiple drawings; (v) for either multiple terms of at least one (1)
year each in duration, which are automatically renewed unless notice is given to
Landlord at least sixty (60) days prior to the expiration thereof, extending
until the date which is ninety (90) days after the expiration of the Lease Term,
as such Lease Term may be extended pursuant to the provisions of the Lease, or
at Tenant's option for a single term extending until the date which is ninety
(90) days after the expiration of the Lease Term, as such Lease Term may be
extended pursuant to the provisions of the Lease; and (vi) be in a form and
substance acceptable to the Landlord, in its reasonable discretion,
substantially in conformity with the provisions of Exhibit E hereto. If a
partial drawing occurs under the Letter of Credit, the Tenant shall, upon demand
but not more than five (5) days after such partial drawing, cause the financial
institution to reissue the Letter of Credit in the amount then currently
required under the terms of this Lease. Notwithstanding the foregoing, the
Landlord shall be entitled to draw down the entire amount of the Letter of
Credit, without any notice, at any time on or after the earlier of (i) the
occurrence of an Event of Default by Tenant under this Lease; or (ii) at any
time after the thirtieth (30th) day preceding the expiration date of the Letter
of Credit in the event that the issuer of the Letter of Credit gives notice to
Landlord that it will nor renew the Letter of Credit as contemplated hereby.
(c) The Security Deposit shall be reduced to the amounts set forth in
the schedule below, provided there shall have been no material adverse change in
Tenant's financial condition, as determined by Landlord in the exercise of its
reasonable discretion, between the date of execution of this Lease and the date
of the scheduled reduction. Notwithstanding any other provision of this Lease,
the Security Deposit shall not be reduced unless and until Tenant shall have
delivered to Landlord: (x) a financial statement in the same form, and
containing the same type of information, as the financial statement provided to
Landlord prior to the execution of this Lease, which financial statement shall
reflect Tenant's financial condition as of a date no earlier than six (6) months
prior to the scheduled reduction in the Security Deposit; and (y) a warranty, in
writing, that the financial statement is accurate as of its date, and that there
has been no material adverse change in Tenant's financial condition between the
date of the financial statement and the date of the scheduled reduction in the
Security Deposit. Subject to the foregoing, the Security Deposit shall be
reduced as follows:
. At the beginning of the fifth (5th) Lease Year, the Security Deposit shall
be reduced to One Million Five Hundred Thousand Dollars ($1,500,000.00)
. At the beginning of the sixth (6th) Lease Year, the Security Deposit shall
be reduced to Nine Hundred Thousand Dollars ($900,000.00)
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. At the beginning of the seventh (7th) Lease Year, the Security Deposit
shall be reduced to Seven Hundred Thousand Dollars ($700,000.00)
. At the beginning of the eighth (8th) Lease Year, the Security Deposit shall
be reduced to Five Hundred Thousand Dollars ($500,000.00)
. At the beginning of the ninth (9th) Lease Year, the Security Deposit shall
be reduced to Three Hundred Thousand Dollars ($300,000.00)
. At the beginning of the tenth (10th) Lease Year, the Security Deposit shall
be reduced to Two Hundred Thousand Dollars ($200,000.00)
. At the beginning of each Renewal Period, the Security Deposit shall be
reduced to three (3) times the monthly Base Rent in effect at the beginning
of such Renewal Period
Notwithstanding the above, in the event that Tenant commits or suffers either a
monetary Event of Default or a material non-monetary Event of Default at any
time prior to a scheduled reduction in the Security Deposit, then the next
scheduled reduction in the Security Deposit shall be delayed for a period of one
year from the date of such Event of Default, and each succeeding reduction shall
be correspondingly delayed.
11. OPERATING COSTS.
This is a "Triple Net Lease." Effective as of the first day of the first
Lease Year, Tenant shall pay as Additional Rent its pro rata share of Operating
Costs of the Building and Property ("Operating Costs"). The projected
preliminary estimated calendar year 2000 Operating Costs are $1.75 per rentable
square foot of the Premises. This amount shall be adjusted on an annual basis in
accordance with the procedures outlined below. The parties recognize that this
estimate is for the projected Operating Costs of the Building in "shell"
condition, prior to the completion of the Tenant Work, and that actual Operating
Costs are likely to be higher after completion of such Tenant Work.
(a) Definition. As used herein, the term Operating Costs includes
(except as specifically excluded below) the actual costs incurred in owning,
operating and maintaining the Building and Property during each year of the
Lease Term. Such costs shall include, by way of example rather than of
limitation, (i) real property, county, and other similar taxes or assessments,
including but not limited to any special assessments (which specifically
includes, without limitation, the so caller "Route 28 Special Assessment"),
levied against any or all of the Building and Property; (ii) intentionally
omitted (iii) costs of providing landscaping service, snow removal service, and
of maintaining grounds, and adjacent parking and other costs of maintaining the
Property; (iv) all other reasonable costs of maintaining, repairing or replacing
any or all of the Building, and any of the Building systems including the roof
unless the cost of maintaining the roof is borne directly by Tenant, except (a)
costs for repairs, maintenance and replacements required due to defective
materials, installations or workmanship at the time of initial construction of
the Building Shell and Property and expenses incurred in connection with the
enforcement of any warranty rights in connection therewith, or (b) costs to
repair the foundation, interior load bearing partitions, exterior walls and
window systems, except to the extent any such structural repair is required due
to Tenant's negligence or willful misconduct (v) charges or fees for any
necessary governmental permits; (vi) management fees equal to Three and One Half
percent (3.5%) of Base Rent and Operating Expenses payable hereunder, plus any
related overhead and expenses; (vii) premiums for hazard, liability, workmen's
compensation or similar, insurance upon any or all of the Building and Property
as maintained by Landlord under Paragraph 20; (viii) costs arising under service
contracts with independent contractors for servicing, maintenance and repair of
building equipment and systems; and (ix) the cost of any other items which,
under accounting principles consistently applied from year to year with respect
to the Building and Property, constitute operating or maintenance costs
attributable to any or all of the Building and Property. Landlord and its agents
reserve the right to enter onto the Premises at reasonable times upon reasonable
notice from Landlord or its agent and accompanied by a representative of Tenant,
excepting
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emergency, for the specific purpose of managing and maintaining the Premises.
Landlord agrees that it shall make no profit from its collection of Operating
Costs.
(b) Notwithstanding anything to the contrary herein, Operating Costs
shall not include (i) any costs (including payments of principal and interest
under any mortgage and any ground rental payments) associated with the initial
construction of the Building, (ii) costs of development of the Property or the
Premises, (iii) intentionally omitted (iv) intentionally omitted (v)
intentionally omitted (vi) salaries and other compensation paid to officers or
executives of Landlord or any partner, principal or owner of the entity
comprising Landlord, (vii) fees or charges paid to any party affiliated with
Landlord on account of the provision by such entity of goods or services
constituting Operating Costs to the extent such fees or charges exceed the fees
or charges that would have been incurred to an independent entity in an arm's
length transaction, (viii) any expenses reimbursable by any insurance company or
condemning authority, or actually reimbursed by any other source, (ix)
intentionally omitted (xi) Landlord's income taxes, (xii) repairs or other work
occasioned by fire or other casualty of an insurable nature, but only to the
extent of any recovery actually received by Landlord, and (xiii) costs arising
from Landlord's civic activities or charitable or political contributions, all
of which costs are the responsibility of the Landlord except where agreed to
otherwise by the parties in writing, (xiv) costs or fees relating to the defense
of Landlord's title or interest in the Property, or any part thereof, (xv) any
costs or expenses relating to Landlord's obligations under this Lease or any
work letter to construct the Building Shell, or in connection with the Tenant
Work (xvi) wages, salaries, or other compensation or benefits for off-site
employees applicable to time spent working other than on the Property or
Building, (xvii) costs of acquisition of sculpture, paintings, or other objects
of art, and (xviii) without limiting Tenant's obligations for environmental
matters set forth in Paragraph 5(b), costs incurred by Landlord in connection
with cleanup of Hazardous Materials affecting the Building or Property resulting
from any cause other than Tenant's activities at the Building or on the
Property; Operating Costs shall, however, include the premiums (up to the amount
of Twenty Thousand Dollars ($20,000.00) in the first Lease Year, which limit
shall be increased by ten percent (10%) in each subsequent Lease Year) incurred
by Landlord in obtaining insurance for environmental matters, and shall also
include payment of any deductible if, and only if, the occurrence or condition
giving rise to the payment of such deductible results from Tenant's activities
at the Building or on the Property.
(c) In order to provide for current payments, a statement of
Landlord's estimate of Operating Costs as initially set forth in Paragraph 11
(a) above, shall be submitted by Landlord to Tenant prior to the beginning of
each calendar year or part thereof during the Term. Tenant shall pay monthly, as
Additional Rent, one-twelfth (1/12th) of Tenants pro rata share of Landlord's
estimate of Operating Costs. Further, from time to time during any calendar
year, Landlord may submit to Tenant a revised statement of Landlord's estimate
of Tenants pro rata share of any Operating Costs and within thirty (30) days
after delivery of such statement, Tenant shall pay to Landlord, as Additional
Rent, with each monthly installment of Basic Rent, an amount equal to one-
twelfth (1/12th) of the revised amount so estimated. Landlord will, within one
hundred twenty (120) days of the end of each fiscal year, submit to Tenant a
statement of the actual expenses, incurred for Operating Costs for such
preceding fiscal year. Such statement shall also indicate the amount of Tenants
excess payment or underpayment based on the Landlord's estimate.
If Additional Rent paid by Tenant during the preceding calendar year
shall be in excess of, or less than its share of the actual expenses incurred by
Landlord for Operating Costs for that year, Landlord and Tenant agree to make
the appropriate adjustment following the submission of Landlord's statement by
Tenant paying any Additional Rent due with the installment of rent due for the
month following submission of Landlord's statement, or Tenant deducting its
excess payment from the installment of rent for such month and any subsequent
months until Tenant has received full credit for such excess payment.
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During the final year of the Lease Term if Tenant overpays its portion
of Operating Costs, said overpayment amount shall be returned by Landlord within
thirty (30) days of termination provided no event of default has occurred or is
occurring.
Within sixty (60) days after the receipt of Landlord's statement
showing actual figures for the year, Tenant shall have the right to request
copies of a statement of Operating Costs prepared by the Landlord which shall be
supplied to the Tenant within a reasonable time after Tenants written request,
but no such request shall extend the time for payment as set forth in the
preceding Paragraph. Unless Tenant asserts specific error(s) within thirty (30)
days after Landlord has complied with Tenant's request, the statement submitted
by Landlord shall be deemed to be correct. Provided Tenant timely asserts such
specific errors, and is current in its obligations to Landlord for the payment
of all sums due to Landlord as Rent under this Lease, and is not otherwise in
default in its obligations under this Lease, Tenant shall have the right,
exercisable no more than once per Lease Year, to cause Landlord's books and
records showing Tares and Operating Expenses for the prior Lease Year to be
examined and copied by a certified Public Accountant engaged by Tenant upon no
less than thirty (30) days prior written notice and during normal business hours
at any time within ninety (90) days following Tenant's receipt of Landlord's
statement for the prior Lease Year. No such Certified Public Accountant may be
engaged on a contingent fee basis. Such examination shall, at Landlord's option,
occur at the offices of the Landlord's management agent, and shall not take more
than thirty (30) days to complete. Any information obtained by Tenant from such
examination will be treated as confidential unless and until such information
has been publicly disclosed by Landlord; provided, however, that nothing herein
contained shall limit or impair the right or obligation of Tenant to disclose
such information when required to do so by law or to appropriate regulatory
authorities having jurisdiction over its affairs, or to use the same in
connection with the enforcement of the terms and conditions of the Lease. As a
condition of such examination, Landlord may require any party reviewing or
having access to Landlord's records to execute and deliver to Landlord a
confidentiality agreement substantially in the form attached hereto as Exhibit
F-1. In the event that Operating Expenses or Taxes for any Lease Year have been
overstated by ten percent (10%) or more, Landlord shall promptly reimburse or
credit Tenant for the reasonable costs of such audit, in addition to refunding
all overpayments previously made by Tenant. The provisions of this paragraph
shall survive the expiration or earlier termination of the Term of this Lease.
(d) In any year which Landlord does not protest the real property tax
assessment levied against the Property and Building, Tenant may choose to
protest the assessment in Landlord's name, provided however, that Landlord's
prior written consent, which shall not be unreasonably withheld, conditioned or
delayed, is first obtained with respect to any substantive position as to the
value of the Building and Property which Tenant desires to assert. If Tenant
chooses to protest the assessment, Landlord shall reasonably cooperate with
Tenant's efforts provided Tenant pays all costs and expenses, including
attorneys fees, necessary to conduct such protest. Notwithstanding any other
provision of this Paragraph 11(d), Tenant shall not file any papers in
Landlord's name in connection with such protest without first obtaining
Landlord's prior written consent, which shall not be unreasonably withheld,
conditioned or delayed, as to each such filing. All costs and expenses incurred
by Landlord in connection with such protest, including attorneys fees, shall be
considered an Operating Cost regardless of whether the protest is brought by
Tenant or Landlord, and regardless of the result of such protest. In the event
that a reduction in real property tares results from such protest, Tenant shall
be entitled to the benefit of such reassessment to the extent that it is
applicable to a time Period prior to the termination of this Lease, either as a
credit against the next payments of Rent and Additional Rent due under this
Lease or as a refund if this Lease has expired. Tenant shall have the right to
audit Landlord's records pertaining to such tax in accordance with the
provisions of Paragraph 11(b) above.
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11.1 COSTS OF OPERATING THE PREMISES.
In addition to the Base Rent and Additional Rent provided elsewhere herein,
Tenant shall be responsible for making direct payment of all costs incurred by
Tenant in operating the Premises to the parties actually providing service to
the Premises and the Property, including without limitation, all utility costs
(including but not limited to water, sewer, gas, fuel, and electricity), and
costs of trash removal and janitorial services. In addition, notwithstanding any
provision of this lease to the contrary, maintenance and repair of special
tenant areas, facilities, finishes and equipment (including, but not limited to,
any special fire protection equipment, telecommunications and computer
equipment, kitchen/galley/coffee equipment, air-conditioning equipment, freezer
and refrigeration equipment, and any racking or conveyor system, and all other
furniture, furnishings and equipment of Tenant installed by Tenant, and any
Alteration (as hereinafter defined) made by Tenant, shall be the sole
responsibility of Tenant. Moreover, Landlord shall have the right to require
Tenant, at Tenants sole expense, to enter into reasonable and customary
maintenance contracts with duly qualified contractors reasonably satisfactory to
Landlord in all respects providing for good, workmanlike, first-class and prompt
routine maintenance and repair of such areas, facilities, finishes, equipment
and Alterations as may be designated by Landlord in its sole and absolute
discretion. Tenant shall at all times maintain the Premises in a neat and clean
manner, and shall place all trash in its dumpster.
12. ASSIGNMENT AND SUBLETTING.
(a) Tenant shall not mortgage, pledge or encumber this Lease (herein
sometimes collectively referred to as "Transfers") without Landlord's prior
written consent, which consent shall not be unreasonably withheld or delayed.
(b) Tenant shall have the right to assign this Lease or sublet all or
any portion of the Premises throughout the Term, subject to Landlord's prior
written consent and approval, which shall not be unreasonably withheld,
conditioned, or delayed, provided, that Tenant remains fully liable for the
performance of all terms and conditions of this Lease including but not limited
to the payment of Base Rent and Additional Rent and that the assignee or
subtenant agrees to be bound by all terms, conditions, and provisions of this
Lease. If Tenant wants to assign, sublet or otherwise transfer all or part of
the Premises 0r this Lease, then Tenant shall give Landlord written notice
("Tenant's Request Notice") of the identity of the proposed assignee or
subtenant and its business, all terms of the proposed assignment or subletting,
the commencement date of the proposed assignment or subletting (the "Proposed
Sublease Commencement Date"), the area proposed to be assigned or sublet (the
"Proposed Sublet Space") and such other information as Landlord may reasonably
request, together with a processing fee of One Thousand Dollars ($1,000.00)
payable to Landlord, which shall be earned by Landlord regardless of whether
Landlord's written consent and approval is given. Tenant shall also transmit
therewith the most recent financial statement or other evidence of financial
responsibility of such assignee or subtenant and a certification executed by
Tenant and such proposed assignee or subtenant stating whether any premium or
other consideration is being paid for the proposed assignment or sublease. Any
sublease, assignment or other transfer shall be effective on forms supplied or
approved by Landlord. Tenant assigns to Landlord any sum due to Tenant from any
assignee, subtenant or occupancy of Tenant as security for Tenant's performance
of its obligations pursuant to this Lease, provided, however, that Tenant shall
have the license to collect such rents prior to the occurrence of an monetary
Event of Default by Tenant. Following a monetary Event of Default by Tenant,
Tenant authorizes each such assignee, subtenant or occupant to pay such sum
directly to Landlord if such assignee, subtenant or occupant receives written
notice from Landlord specifying that such rent shall be paid directly to
Landlord. Landlord's collection of such rent shall not be construed as an
acceptance of such assignee, subtenant or occupant as a tenant nor a waiver of
any default hereunder by Tenant. Notwithstanding anything in this Paragraph 12
to the contrary, provided no Event of Default exists under this Lease, Tenant
may, without Landlord's consent, but after providing written notice to
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Landlord, assign this Lease or sublet all or any portion of the Premises to any
Related Entity (as hereinafter defined) provided that (i) in the event of an
assignment, such Related Entity assumes in full all of Tenants obligations
under this Lease; (ii) Landlord is provided with a counterpart of the fully
executed agreement of assignment or sublease, which shall be in a form
reasonably satisfactory to Landlord; (iii) to the extent Tenant remains in
existence Tenant remains liable under the terms of this Lease; (iv) such Related
Entity is not a governmental entity or agency; (v) such Related Entity's use
requirement does not differ from the Permitted Use described in Paragraph 5
hereof; and (vi) such Related Entity does not require additional services other
than those agreed to be provided by Landlord under the terms of this Lease.
"Related Entity" shall be defined as (i) any parent company, subsidiary, or
affiliate of Tenant, which controls, is controlled by, or is under common
control with Tenant, and/or (ii) any entity into which Tenant shall be merged or
consolidated, or which purchases substantially all of the assets of Tenant
located at the Premises and assumes the liabilities of Tenant under this Lease
and continues in the same business as that of Tenant, whose net worth is not
less than One Hundred Million Dollars ($100,000,000.00). In addition, the
restrictions on Transfers, subletting and assignment set forth in this Lease do
not apply to the sale or transfer of Tenant's capital stock in connection with:
(i) the public offering of such stock; (ii) any transfer or sale of stock
amongst those parties which hold stock in Tenant as of the date of this Lease;
(iii) issuance of stock to employees of Tenant in accordance with Tenant's
Employee Stock Ownership Program, (iv) any sale of stock via private placement
provided existing shareholders maintain at least fifty (50%) of the voting
stock of Tenant, or (v) the reincorporation of Tenant in another state, which
reincorporation does not result in a transfer of voting control of Tenant.
(c) Intentionally Omitted.
(d) If Tenant proposes to assign this Lease other than in an
assignment not requiring Landlord's consent, Landlord may, at its option, upon
written notice to Tenant given within fifteen (15) calendar days after its
receipt of Tenant's Request Notice, together with all other necessary
information, elect to recapture the Premises and terminate this Lease. Landlord
may thereafter, without limitation, lease the Premises to the proposed assignee
without liability to Tenant. Upon any such termination, Landlord and Tenant
shall have no further obligations or liabilities to each other under this Lease
with respect to the Premises, except with respect to obligations or liabilities
which accrue or have accrued hereunder as of the date of such termination (in
the same manner as if the date of such termination were the date originally
fixed for the expiration of the Term hereof).
(e) If any sublease, assignment or other Transfer (whether by
operation of law or otherwise) provides that the subtenant, assignee or other
transferee (or any affiliate thereof) is to pay any amount in excess of the rent
and other charges due under this Lease, then, whether such excess be in the form
of an increased rental, lump sum payment, or any other form (and if the
applicable space does not constitute the entire Premises, the amount and
existence of such excess shall be determined on a prorata basis), Tenant shall
pay to Landlord fifty per cent (50%) of such excess within ten (10) days,
provided, however, that in the event of a sublease, such excess shall be reduced
by the amount of market-rate brokerage commissions, reasonable attorneys fees,
and reasonable costs of improvements to the Premises actually paid by Tenant,
amortized on a straight line basis over the term of the Sublease. Landlord shall
have the right to inspect and audit Tenant's books and records relating to any
sublease, assignment or other transfer. In such event, Landlord shall be bound
by the confidentiality provisions set forth in Exhibit F-2 hereof.
13. CASUALTY DAMAGE.
If the adjacent parking area, Premises or the Building are totally damaged
or destroyed thereby rendering the Premises totally untenantable, then Landlord
shall repair and restore the adjacent parking area, Premises (except as
hereinafter provided) and the Building together with the Tenant's Work and
Alterations
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made by Tenant to substantially the same condition which they were in prior to
such damage or destruction; provided, however, that if in Landlord's reasonable
judgment such repair and restoration cannot be reasonably completed within two
hundred seventy (270) days after the occurrence of such damage or destruction
(taking into account the time needed for removal of debris, preparation of plans
and issuance of all required governmental permits), then either Landlord or
Tenant shall have the right, to terminate this Lease by giving written notice of
termination to the other within forty-five (45) days after the occurrence of
such damage or destruction. In addition, Tenant shall have the right to
terminate this Lease upon written notice to Landlord if Landlord fails to
complete the repair and restoration of the adjacent parking area, Premises,
and/or the Building with sixty (60) days of notice from Tenant to Landlord
issued no earlier than two hundred seventy (270) days after the occurrence of
such damage or destruction.
If the parking area, Premises or the Building are partially damaged or
destroyed thereby rendering the Premises partially untenantable or not suitable
for Tenant's conduct of business, then Landlord shall repair and restore the
parking area, Premises (except as hereinafter provided) and the Building to
substantially the same condition which they were in prior to such damage or
destruction; provided, however, that if in Landlord's reasonable judgment such
repair and restoration cannot be reasonably completed within one hundred eighty
(180) days after the occurrence of such damage or destruction (taking into
account the time needed for, removal of debris, preparation of plans and
issuance of all required governmental permits), then Tenant shall have the
right, at its sole option, to terminate this Lease by giving written notice of
termination within thirty (30) days after the occurrence of such damage or
destruction.
If the parking area, Premises or any part thereof are damaged or destroyed
by fire or any other cause, Tenant, as soon as it reasonably becomes aware of
such damage shall give prompt notice thereof to Landlord. If this Lease is
terminated pursuant to this Paragraph, then Rent and all other amounts payable
by Tenant hereunder shall be apportioned (based upon the portion of the
Premises, if any, which is usable after such damage or destruction) and paid to
the date of termination. If this Lease is not terminated as a result of such
damage or destruction, then until such diligent repair and restoration of the
Premises are substantially complete, Tenant shall be required to pay the Base
Rent and additional rent only for the Portion of the Premises that is usable
while such repair and restoration are being made, provided, however, that if
such damage or destruction was caused by the act or omission of Tenant or any
Invitee, then Tenant shall not be entitled to any such rent reduction. If this
Lease is not terminated as a result of such damage or destruction, then Landlord
shall bear the expenses of such diligent repair and restoration of the Premises
and the Building; provided, however, that if such damage or destruction was
caused by the act or omission of Tenant or any Invitee, then Tenant shall pay
the amount by which such expenses exceed the insurance proceeds, if any,
actually received by Landlord on account of such damage or destruction; and
provided further, however, that in no event shall Landlord be required to repair
or restore any work and materials not deemed by Landlord to be building standard
work and materials, any Alteration previously made by Tenant or any of Tenants
trade fixtures, furnishings, equipment or personal property, unless damaged or
loss are due to Landlord's negligence or intentional acts or omissions.
Notwithstanding anything herein to the contrary, Landlord shall have the right
to terminate this Lease if zoning or other applicable laws or regulations do not
permit such repair and restoration.
14. MAINTENANCE AND REPAIRS:
(a) Subject to Tenants responsibilities set forth in Paragraph 14 (d),
Landlord shall keep the Building and all machinery, equipment and fixtures
attached to, or used in connection with the operation of the Building and
Property, including all electrical, heating, mechanical, sanitary, sprinkler,
utility, Power, plumbing, cleaning, refrigeration, ventilating, air conditioning
and elevator systems and equipment (excluding, however, lines, improvements,
systems and machinery for water, gas, steam and electricity owned and maintained
by any public utility company or governmental agency or body and excluding also
any of Tenants
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property) in good order and repair. Landlord shall develop, in consultation with
Tenant, a program for maintenance of the Building and Property, including a
budget therefor. Landlord shall meet with Tenant at commercially reasonable
times, and upon commercially reasonable notice (but is not required to meet more
often than twice annually), to secure Tenant's input into such program and
budget. Landlord reserves the right of access to the Premises for the purposes
of such operation, cleaning, maintenance, safety, security and repairs, and
agrees that it shall use reasonable efforts (except in the case of emergency) to
provide reasonable advance written notice to Tenant of its intent to enter the
Premises for such purposes. The cost for maintaining the Building and Premises
in good order and repair as contemplated by this paragraph 14 (a) shall be an
Operating Cost for purposes of paragraph 11 hereof. There shall be no abatement
in rents due and payable hereunder and no liability on the part of Landlord by
reason of any inconvenience, annoyance or disruption arising from Landlord's
making reasonable repairs, additions or improvements to the Building or Premises
in accordance with its obligations hereunder. Tenant will not do or permit
anything to be done in the Premises or the Building of which they form a part or
bring or keep anything therein which shall in any way increase the rate of fire
or other insurance for said Building, or on the property kept therein, or
obstruct, or interfere with the rights of other tenants, or in any way injure or
annoy them, or those having business with them, or conflict with them or
conflict with the fire laws or regulations, or with any insurance policy upon
said Building or any part thereof, or with any statutes, rules or regulations
enacted or established by the appropriate governmental authority. If any
increase in the rate of fire insurance or other insurance is stated by any
insurance company or by any insurance rate bureau due to any activity or
equipment of Tenant, such statement shall be conclusive evidence that the
increase in such rate is caused by such activity or equipment, and Tenant shall
be liable for such increase and shall reimburse Landlord therefor upon demand,
and any such sum shall be considered Additional Rent payable hereunder.
In the event Landlord elects to make substantial improvements or
additions to the Building, Property or Premises, such improvements or additions
shall not adversely affect Tenant's use of or access to the Premises unless
Landlord has obtained the prior written consent of Tenant, which consent shall
not be unreasonably withheld, to make such improvements or additions which
affect Tenant's Premises in an adverse manner. Landlord shall be free to make
improvements or additions to the Building, Property or Premises which do not
have an adverse effect on Tenant's use of or access to the Premises.
(b) Except as hereinafter expressly set forth Tenant will not make any
alterations, installments, changes, replacements, additions or improvements,
collectively "Alterations", in or to the Premises or any part thereof, without
the prior written consent of Landlord, not to be unreasonably withheld or
delayed. Any request to make alterations shall be in writing, and shall be
accompanied by a space plan in detail sufficient to permit Landlord to evaluate
its impact on the Building. Within seven (7) calendar days of its receipt of the
Space Plan, Landlord shall have given its written consent to such plan, or shall
have provided Tenant with a list of recommended changes. If a list of changes is
provided, Tenant will address the changes and resubmit the plan to Landlord for
approval. If Landlord fails to provide Tenant with its consent or recommended
changes with seven (7) calendar days of its receipt of the request and Space
Plan, such request and Space Plan shall be deemed to be approved. In the event
Landlord elects to have the Alterations remain upon the Premises following the
expiration of the Term, said written consent shall include Landlord's election.
It is expressly understood that all Alterations shall be performed in a good and
workmanlike manner and shall conform to all rules and regulations established
from time to time by any applicable underwriter's association and conform to all
requirements of local, state and federal governments. All Alterations shall be
made at Tenants sole expense, by contractors, or subcontractors reasonably
approved by Landlord, and only after (i) Tenant has obtained all necessary
permits from governmental authorities and (ii) Tenant has submitted complete
plans and specifications to Landlord with respect to the Alterations and
Landlord has approved them. If any mechanic's lien is filed against the Premises
or the Building for work or materials furnished to Tenant, the lien shall be
discharged or bonded off by Tenant solely at Tenant's expense, within thirty
(30) days after Tenant receives
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notice thereof. Tenant shall indemnify and hold harmless Landlord from any and
all expenses (including attorney's fees), liens and claims or damage to persons,
property, or the Building which may arise from the making of any Alterations.
Tenant will deliver to Landlord a complete set of "as built" plans showing the
approved Alterations. Notwithstanding anything to the contrary in this Paragraph
14, Tenant shall have the right to make interior decorative non-structural
alterations to the Premises having an aggregate cost of less than $25,000 in any
one (1) year period without the consent of Landlord.
It is also expressly understood that all Alterations upon the Premises
(whether with or without Landlord's consent), shall at the election of Landlord,
as provided in the written consent required hereinabove, remain upon the
Premises and be surrendered with the Premises at the expiration of this Lease
without disturbance, molestation or injury. Notwithstanding the foregoing,
provided (i) this Lease is in full force and effect, and (ii) there shall be no
uncured Event of Default existing as of the time of such removal, Tenant shall
have the right to remove, prior to the expiration or termination of this Lease,
all movable furniture, fixtures or equipment installed in the Premises solely at
Tenant's expense. Should Landlord elect that alterations, installments, changes,
replacements, additions to or improvements made by Tenant are not to remain on
the Premises, Tenant hereby agrees that within five (5) days following the
expiration of the Term of this Lease, Landlord shall have the right to cause
same to be removed at Tenant's sole cost and expense. Tenant hereby agrees to
reimburse Landlord for the reasonable cost of such removal together with the
cost of restoring the Premises to its original condition, reasonable wear and
tear excepted.
(c) Tenant shall not install any other equipment of any kind or nature
whatsoever which will or may necessitate any changes, replacements or additions
to or require the use of the water system, air conditioning system or the
electrical system of the Premises without the prior written consent of the
Landlord, which consent shall not be unreasonably withheld or delayed. In the
event that Tenant wishes to install machinery or mechanical equipment which may
cause noise or vibration to be transmitted to the structure of the Building or
any space therein, such machinery shall be installed and maintained by Tenant,
at Tenant's expense, on vibration eliminators or other devices sufficient to
eliminate such noise and vibration. Tenant may, at its expense, install and
remove additional equipment and machinery used or useful in Tenant's business,
which equipment and machinery shall remain the property of Tenant and shall not
become part of the real estate, provided that such installation shall not reduce
the value of the Premises or its usefulness. Any equipment of Tenant not removed
by Tenant within ten (10) days after the expiration or earlier termination of
this Lease shall be considered abandoned by Tenant and may be appropriated,
sold, destroyed or otherwise disposed of by Landlord without first giving notice
thereof and without obligation to account therefor. Notwithstanding any other
provision of this Lease, Tenant may not install any equipment which emits
electromagnetic, microwave, ultrasonic, laser, or other radiation which Landlord
determines causes a risk to persons or property, or interferes with
telecommunications transmissions or computer use.
(d) Subject to Landlord's obligations to maintain and repair the
Premises in accordance with this Paragraph 14, Tenant agrees that it will take
good care of the Premises and the fixtures therein and will, at the expiration
or other termination of the Term hereof, surrender and deliver up the same in
like good order and conditions as the same now is or shall be at the
commencement of the Term hereof, ordinary wear and tear and damage by insured
casualty excepted. Without limiting the generality of the foregoing, Tenant
shall promptly make all repairs to the Premises or to any. part of the Building,
to the extent such repairs are not covered by insurance and if such repairs are
necessitated by any act or omission of Tenant, any subtenant, assignee or
concessionaire of Tenant, any of its respective agents or employees, or by the
failure of Tenant to Perform any of its obligations under this Lease. In
addition, Tenant shall be solely responsible, at its expense, for maintaining
the roof of the Premises in good condition, consistent with the manufacture's
standards for maintenance, utilizing contractors reasonably designated or
approved by Landlord. Landlord will use commercially reasonable efforts to
assign or otherwise make available to Tenant any warranties obtained by
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Landlord in connection with the roof, and will use commercially reasonable
efforts to cooperate with Tenant in enforcing such warranties.
15. PARKING AND LOADING AREAS.
(a) During the Term of this Lease, Tenant shall have, without charge,
the right to utilize the Building's parking facilities, consisting of two
hundred sixty five (265) parking spaces for passenger vehicles upon such non-
financial terms and conditions as may from time to time be reasonably
established by Landlord in writing. The location of such parking facilities is
shown on Exhibit G. Landlord shall not grant unto any other tenant of
TransDulles Centre the right to park vehicles in such parking facilities, and
Landlord shall use commercially reasonable efforts to prohibit any such other
tenant from parking vehicles in such parking facilities, but in no event shall
Landlord have any obligation to impose any physical barrier to use of the
parking area by parties other than Tenant, its employees, invitees, vendors,
suppliers and contractors, or to tow vehicles from the parking area. Parking is
specifically prohibited on the streets adjacent to the Building, including Glenn
Drive, Sally Ride Drive, and Davis Drive. Tenant shall be responsible for
monitoring and enforcing these restrictions with respect to the vehicles used by
its employees, vendors, suppliers and contractors, and by parties visiting the
Premises. It is understood and agreed that Landlord assumes no responsibility,
and shall not be held liable, for any damage or loss to any automobiles parked
in the parking facilities or to any personal property located therein, or for
any injury sustained by any person in or about the parking facilities, or for
and claim arising from the unauthorized use of the parking areas by any party
other than Tenant, its employees, invitees, vendors, suppliers and contractors,
regardless of the cause. The parking facilities and areas adjacent to the
loading docks serving the Premises may not be used for storage or repair of
vehicles.
(b) During the Term of this Lease, Tenant shall have, without charge,
the right to utilize the paved areas adjacent to the loading docks serving the
Premises for shipping and receiving. Landlord shall not be liable to Tenant as a
result of any inability of Tenant to access such docks due to the parking of
vehicles in the vicinity of such loading docks, or otherwise. Truck parking
shall be restricted to such loading docks, and, subject to applicable
governmental restrictions, to the areas in the rear of the Building in the
vicinity of such loading docks identified in Exhibit G as the truck Parking
Area. Truck parking is specifically prohibited in the parking areas located in
front of and on the sides of the Building designated for automobiles, and on the
streets located adjacent to the Building, including Glenn Drive, Sally Ride
Drive, and Davis Drive. Tenant shall be responsible for enforcing these
restrictions with respect to trucks making pickups and deliveries at the
Premises, or otherwise serving the Premises.
16. SIGNAGE
Tenant shall be entitled to install, at its sole expense, one (1)
building mounted exterior sign providing identification of Tenant, and/or one
monument sign, subject to Landlord's prior written approval, which shall not be
unreasonably withheld, conditioned or delayed, as to location, design, color,
lighting, and specifications, and to applicable Loudoun County regulations.
Landlord shall not install, erect or maintain any signs on the interior or
exterior of the Building or on the Property during the Term, except that unless
this Lease shall have previously extended or renewed, Landlord may erect a "For
Rent" sign during the last twelve (12) months of the Term; provided, however,
that such sign shall not obstruct any sign of Tenant or interfere unreasonably
with the conduct of Tenants business at the Premises.
17. TENANT'S EVENT OF DEFAULT.
(a) Definition. As used in the provisions of this Lease, each of the
following events shall constitute, and is hereinafter referred to as, an "Event
of Default":
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(i) If Tenant (1) fails to pay Base Rent, Additional Rent or any
other sum which Tenant is obligated to pay by any provision of this Lease, when
and as it is due and payable hereunder and without demand therefor, or (2) in
any material respect violates any of the terms, conditions or covenants set
forth in the provisions of this Lease; or
(ii) If Tenant (1) applies for or consents to the appointment of a
receiver, trustee or liquidator of Tenant or of all or a substantial part of its
assets, (2) files a voluntary petition in bankruptcy or admits in writing its
inability to pay its debts as they come due, (3) makes an assignment for the
benefit of its creditors, (4) files a petition or an answer seeking a
reorganization or an arrangement with creditors, or seeks to take advantage of
any insolvency, law, (5) performs any other act of bankruptcy, or (6) files an
answer admitting the material allegations of a reorganization insolvency
proceeding.
(iii) If an order of relief or other order, judgement or decree is
entered by any court of competent jurisdiction adjudicating Tenant as insolvent,
or otherwise entitled to the protection of or subject to any bankruptcy statute,
approving a petition seeking such a reorganization, or appointing a receiver,
trustee or liquidator of Tenant or otherwise commence with respect to Tenant or
any of its assets any proceeding under any bankruptcy, reorganization,
arrangement, insolvency, readjustment, receivership or similar law, and if such
order, judgement, decree or proceeding continues unstayed for more than sixty
(60) consecutive days after the expiration of any stay thereof.
(b) Notice of Default; Cure Period. Anything contained in the
provisions of this Paragraph to the contrary notwithstanding, no Event of
Default Tenant shall not be deemed to have occurred, and Landlord shall not
exercise any right or remedy which it holds under any provision of this Lease or
under applicable law unless and until;
(i) Landlord has given written notice ("Notice of Default")
thereof to Tenant, and
(ii) Tenant has failed, (1) if such Event of Default consists of
the failure to pay money, within five (5) calendar days after issuance of the
Notice of Default to pay all of such money, together with interest thereon and
any late payment charge which may be due hereunder of five per cent (5%) levied
on all monies due to Landlord in accordance with Paragraph 3(g) as of the date
of issuance of the Notice of Default, or (2) if such Event of Default consists
of something other than the failure to pay money, within thirty (30) calendar
days after issuance of the Notice of Default to commence actively, diligently
and in good faith to proceed to cure such Event of Default and to continue to do
so until it is fully cured; provided however, if Tenant commence, to cure such
default during such thirty (30) day period, and such default cannot be cured
within such period despite diligent effort, Tenant shall be afforded such
additional time as may reasonably required to affect a cure provided that Tenant
continues to diligently pursue such cure.
(iii) No such notice shall be required, and Tenant shall be
entitled to no such grace period, (1) if Tenant has substantially terminated or
is in the process of substantially terminating its continuous occupancy and use
of the Premises for the purpose set forth in the provisions of Paragraph 5, or
(2) if any Event of Default enumerated in the provisions of Paragraphs 17(a)(ii)
or 17(a)(iii) has occurred.
(c) Landlord's Rights upon Event of Default. Upon the occurrence of an
Event of Default, Landlord, at its option, may terminate this Lease, and with
our without terminating this Lease, may pursue any and all other remedies
available to it under the laws of the Commonwealth of Virginia, including, by
way of example rather than of limitation, the rights to:
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(i) re-enter and repossess the Premises, with lawful force, and any
and all improvements hereon and additions thereto;
(ii) at Landlord's option, immediately recover an amount equal to the
present: value (as of the date of Tenant's default) of the Base Rent and
Additional Rent which would have become due through the date on which the Lease
Term would have expired but for Tenants default, less such amounts as Tenant
proves could reasonably have been avoided by Landlord through the exercise of
commercially reasonable efforts to relet the Premises, which damages shall be
payable to Landlord in a lump sum on demand. For purposes of this Section,
present value shall be computed by discounting at a rate equal to one (1) whole
per cent point above the "prime rate" then in effect at Morgan Guaranty Trust
Company of New York, and collect such balance in any manner not inconsistent
with applicable law; and/or
(iii) relet any or all of the Premises for Tenant's account for any
or all of the remainder of the Lease Term, or pay to Landlord any deficiency in
the Rent and any other sum which Tenant is obligated to pay resulting, with
respect to such remainder, from such reletting, as well as the out-of-pocket
cost to Landlord of any reasonable fees relating to reletting of the Premises
including but not limited to construction costs, brokerage fees, reasonable
attorney's fees or of any repairs or other action (including those taken in
exercising Landlord's rights under any provision of this Lease) taken by
Landlord on account of such Event of Default.
Landlord's rights and remedies set forth in this Lease are cumulative and
in addition to Landlord's other rights and remedies at law or in equity,
including those available as a result of any anticipatory breach of this Lease.
Landlord's exercise of any such right or remedy shall not prevent the concurrent
or subsequent exercise of any other right or remedy. Landlord's delay or failure
to exercise or enforce any of Landlord's rights or remedies or Tenant's
obligations shall not constitute a waiver of any such rights, remedies or
obligations. Landlord shall not be deemed to have waived any default unless such
waiver expressly set forth in an instrument signed by Landlord. Any such waiver
shall not be construed as a waiver of any covenant or condition except as to the
specific circumstances described in such waiver. Neither Tenant's payment of an
amount less than a sum due nor Tenant's endorsement or statement on any check or
letter accompanying such payment shall be deemed an accord and satisfaction.
Notwithstanding any request or designation by Tenant, Landlord may apply any
payment received from Tenant to any payment then due. Landlord may accept the
same without prejudice to Landlord's right to recover the balance of such sum or
to pursue other remedies, Re-entry and acceptance of keys shall not be
considered an acceptance of a surrender of this Lease.
(d) Right of Landlord to Cure Tenants Default. If Tenant defaults in
the performance of any of its obligations under this Lease, then Landlord shall
have the right (but not the duty) to perform such obligation, and Tenant shall
reimburse Landlord for any costs and expenses thereby incurred, together with
interest: thereon at that rate per annum which is two per cent (2%) greater than
the "prime rate" then in effect at Morgan Guaranty Trust Company of New York,
from the date such costs and expenses are incurred by Landlord to the date of
payment thereof by Tenant; provided, however, that nothing herein contained
shall be construed or implemented in such a manner as to allow Landlord to
charge or receive interest in excess of the maximum legal rate then allowed by
law. Such payment and interest shall constitute Additional Rent hereunder, which
shall be due and payable with the next monthly installment of Rent; but the
making of such payment or the taking of such action by Landlord shall not
operate to cure such default or to stop Landlord from the pursuit of any remedy
to which Landlord would otherwise be entitled.
(e) Intentionally omitted.
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(f) No Waiver. If Landlord institutes legal proceedings against Tenant
as to any matter under this Lease and a compromise or settlement is made,
Landlord shall not be deemed to have waived any rights under this Lease except
as explicitly set forth in a written agreement signed by Landlord evidencing
such compromise or settlement. No waiver by Landlord of any breach of any
covenant, condition, or agreement in this Lease shall operate as a waiver of
such covenant or condition itself or of any subsequent breach thereof. No
payment by Tenant or receipt by Landlord of a lesser amount than the monthly
installments of Rent herein stipulated shall be deemed to be other than a
payment on account, nor shall any endorsement or statement on any check or
letter accompanying a check for payment of Rent be deemed an accord and
satisfaction, and Landlord may accept such check prepayment without prejudice to
Landlord's right to recover the balance of such Rent or to pursue any other
remedy provided in the Lease. No re-entry by Landlord, and no acceptance by
Landlord of keys from Tenant, shall be considered an acceptance of a surrender
of the Lease.
18. HOLDING OVER.
Tenant acknowledges that it is extremely important that Landlord have
substantial advance notice of the date on which Tenant will vacate the Premises,
became Landlord will (a) require a substantial period to locate a replacement
tenant, and (b) plan its entire leasing and renovation program for the Building
in reliance on its lease expiration dates. Tenant also acknowledges that if
Tenant fails to surrender the Premises at the expiration or earlier termination
of the Lease Term, then it will be conclusively presumed that the value to
Tenant of remaining in possession and the loss that will be suffered by Landlord
as a result thereof, far exceed the Base Rent and Additional Rent that would
have been payable had the Lease Term continued during such holdover period.
Therefore, if Tenant (or anyone claiming through Tenant) does not immediately
surrender the Premises or any portion thereof upon the expiration or earlier
termination of the Lease Term, then the rent shall be increased to One Hundred
Fifty percent (150%) of the Base Rent and Additional Rent that would have been
payable pursuant to the provisions of this Lease if the Lease Term had continued
such holdover period. Such rent shall be computed by Landlord on a monthly basis
and shall be payable on the first day of such holdover period and the first day
of each calendar month thereafter during such holdover period until the Premises
have been vacated. Notwithstanding any other provision of this Lease, Landlord's
acceptance of such rent shall not in any manner adversely affect Landlord's
other rights and remedies, including Landlord's right to evict Tenant and to
recover all damages. Any holdover shall be deemed to be a tenancy-at-sufferance
and not a tenancy-at-will or tenancy From month-to-month; provided, however,
that Landlord may, in addition to its other remedies, elect, in its sole
discretion, to treat such holdover as the creation of a month-to-month tenancy
with Tenant. In no event shall any holdover be deemed a permitted extension or
renewal of the Lease Term, and nothing contained herein shall be construed to
constitute Landlord's consent to any holdover or to give Tenant any right with
respect thereto. Except as otherwise specifically provided in this Article, all
terms of this Lease shall remain in full force and effect during the holdover
period.
19. LANDLORD'S RIGHT OF ENTRY.
Landlord and its agents shall be entitled to enter the Premises at any
reasonable time, with reasonable prior notice (Landlord shall use commercially
reasonable efforts to provide no less than twenty four (24) hours notice, which
notice may be oral and provided to Tenant's on site facilities manager), except
in emergency,
(a) To inspect the Premises;
(b) To exhibit the Premises to any existing or prospective purchaser
or mortgagee thereof or, during the last nine (9) months of the Term, any
prospective tenant thereof, in which case Landlord shall use commercially
reasonable efforts to provide Tenant with no less than forty-eight (48) hours
notice (which
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notice may be oral and provided to Tenant's on site facilities manager), and
shall use commercially reasonable efforts to inform Tenant of the identity and
affiliation of the parties to whom the Premises shall be exhibited;
(c) To make any reasonable and necessary alteration, improvement or
repair to the Premises; or
(d) For any other reasonable purpose relating to the operation or
maintenance of the Premises; provided, that Landlord shall (i) give Tenant
reasonable prior notice of its intention to enter the Premises, except in the
case of emergency, and (ii) use reasonable efforts to avoid thereby interfering
any more than is reasonably necessary with Tenants use and enjoyment thereof.
20. LIABILITY, TENANT'S INDEMNITY, INSURANCE.
(a) (i) Landlord shall not be liable for, and Tenant shall indemnify
and hold Landlord harmless from and against, any injury, loss or damage of
whatever nature (including incidental and consequential damages) to any persons
or property, arising within the Premises. Commencing with the date on which the
Premises are made available to Tenant and continuing thereafter throughout the
Lease Term, Tenant shall maintain, at its sole expense, (i) general
comprehensive public liability insurance, including bodily injury, property
damage or other loss, insuring Tenant, Landlord, Landlord's Lender, Landlord's
Ground Lessor and Landlord's appointed agent with respect to the Premises and
their appurtenances, in a company or companies reasonably satisfactory to
Landlord, in an amount not less than Five Million Dollars ($5,000,000), (ii)
all-risk property and casualty insurance, including theft, written at
replacement cost value and with replacement cost endorsement, covering all of
Tenant's personal property in the Premises, and (iii) if, and to the extent
required by law, worker's compensation or similar insurance offering statutory
coverage and containing statutory limits. All such insurance shall: (1) be
issued by a company that is licensed to do business in the jurisdiction in which
the Building is located, that has been approved in advance by Landlord and that
has a rating equal to or exceeding A:XI from Best's Insurance Guide; (2) name
Landlord, its managing agent (or its successor) and the holder of any Mortgage
as additional insureds and/or loss payees as applicable (as their interests may
appear), except that the liability insurance shall not name Landlord's Mortgage
holder as an additional insured; (3) contain an endorsement that such insurance
shall remain in full force and effect notwithstanding that the insured may have
waived its right of action against any person or entity prior to the occurrence
of a loss (Tenant hereby waiving its right of action and recovery against and
releasing Landlord and its employees, affiliates, partners and agents from any
and all liabilities, claims and losses for which they may otherwise be liable to
the extent Tenant is covered by insurance carried or required to be carried
under this Lease); (4) provide that the insurer waives all right of recovery by
way of subrogation against Landlord, its partners, affiliates, agents and
employees, (5) be acceptable in form and content to Landlord; (6) be primary and
non-contributory; and (7) contain an endorsement prohibiting cancellation,
failure to renew, reduction in amount of insurance or change of coverage (A) as
to the interests of Landlord or the holder of the Mortgage by reason of any act
or omission of Tenant, and (B) without the insurer's giving Landlord thirty (30)
days' prior written notice of such action. No such policy shall contain any
deductible provision except as otherwise approved in writing by Landlord, which
approval shall not be unreasonably withheld. Landlord reserves the right from
time to time to require Tenant to obtain higher minimum amounts or different
types of insurance. Tenant shall deliver a certificate of all such insurance and
receipts evidencing payment of the premium for such insurance (and, upon
request, copies of all required insurance policies, including endorsements and
declarations) to Landlord concurrently with Tenant's execution of this Lease and
at least annually thereafter.
(ii) Tenant shall require any contractor retained by it to
perform any Alteration to carry and maintain at Tenant's or such contractor's
expense (and furnish the policy, policies or certificates thereof to Landlord,
Landlord's lender and Ground Lessor (provided Landlord has provided Tenant with
the
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names and addresses of such lender and ground lessor, if any) during such times
as contractor is working in the Premises, (i) comprehensive general liability
insurance policy, including, but not limited to, contractor's liability
coverage, contractual liability coverage, complete operations coverage, broad
form property damage endorsement and contractor's protective liability coverage,
to afford protection with limits per person and for each occurrence, of not less
than One Million ($1,000,000), combined single limit, with respect to Personal
injury and death and property damage, such insurance to provide for no
deductible, to name Landlord, Landlord's lender and Ground Lessor as additional
insureds and (ii) worker's compensation insurance or similar insurance in form
and amounts as required by law.
(iii) Landlord shall maintain insurance coverage for the
Building, the cost of such insurance shall be an Operating Cost for purposes of
paragraph 11 hereof, in such amounts and with such carriers and providing such
coverages as Landlord shall deem to be reasonable and necessary from time to
time for comparable buildings in the Sterling, Virginia area, including (a) fire
insurance, with standard extended coverage endorsement including demolition
costs, increased costs of construction, and contingent liability from changes in
building codes on the Premises, in an amount not less than the full replacement
value from time to time of the Premises; (b) flood insurance in an amount
Landlord may from time to time reasonably require, if the Premises are located
in an area designated as "flood prone" pursuant to the national Flood Insurance
Act of 1968 and the Flood Disaster Protection Act; (c) general comprehensive
public liability insurance, including bodily injury, property damage or other
loss; and (d) such other insurance as Landlord may require against such other
insurable hazards which at the time are customary and prudent under the
circumstances.
(b) All damages to the Premises or the Building of which they are a
part, caused by Tenant, or the agents, servants, employees and invitees of
Tenant, will be repaired by Landlord at the expense of Tenant, to the extent not
covered by insurance proceeds, with the right on the part of Landlord to elect
in its discretion to regard the same as Additional Rent, in which event such
cost or charge shall become Additional Rent payable with the installment of Base
Rent next becoming due or thereafter falling due under the terms of this Lease.
This provision shall be construed as an additional remedy granted to Landlord
and not in limitation of any other rights and remedies which Landlord has or may
have in said circumstances.
(c) Without limiting the scope of the provisions of paragraph
18(a)(i), all Personal property of Tenant in the Premises or in the Building of
which the Premises is a part shall be at the sole risk of Tenant. Landlord shall
not be liable for any accident to or damage to the property of Tenant (nor for
any incidental or consequential damages) resulting from the use or operation of
the heating, cooling, electrical or plumbing apparatus or any other cause
whatsoever. Landlord shall not be liable in damages, nor shall this Lease be
affected, for conditions arising or resulting, and which may affect the Building
of which the Premises is a part, due to construction on contiguous premises
unless such construction renders the Premises untenantable or impractical for
use for Tenant's purposes.
(d) Without limiting the scope of the provisions of paragraph
18(a)(i), Landlord assumes no liability or responsibility whatsoever to the
conduct and operations of the business to be conducted in the Premises. Landlord
shall not be liable for any accident to or injury to any person or Persons or
property in or about the Premises which are caused by the conduct and operation
of said business or by virtue of equipment or property of Tenant in said
Premises.
(e) Without limiting the scope of the provisions of paragraph
18(a)(i), Landlord shall have no liability to Tenant, its employees, agents,
invitees, licensees, customers, clients, family members or guests for any
damage, compensation or claim (specifically including any incidental or
consequential damages) arising from the repair by Landlord of any portion of the
Premises or the Building, any interruption in the use of the Premises, accident
or damage resulting from the use or operation (by Landlord, Tenant or any other
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person) of heating, cooling, electrical or plumbing equipment or apparatus, or
from untenantability of the Premises resulting from fire or other casualty
subject to Paragraph 13, or from any robbery, theft, mysterious disappearance
and/or any other casualty, or from any leakage in any part or portion of the
Premises or the Building, or from water, rain or snow that may leak into or flow
from any part of the Premises, or from drains, pipes or plumbing work in the
Building, or from any other cause whatsoever. The employees of Landlord are
prohibited from receiving any packages or other articles delivered to the
Premises for Tenant, and if any such employee receives any such package or
article, at the request of Tenant, such employee shall be the agent of Tenant
for such purposes and not of Landlord.
21. WAIVER OF SUBROGATION.
If either party hereto is paid or indemnified by any proceeds under any
policy of insurance naming such party as an insured (or would have been paid or
indemnified by such proceeds if it had maintained all of the insurance coverages
it is required under this Lease to maintain), on account of any loss, damage or
liability, then such party hereby releases the other party hereto from any and
all liability for such loss, damage or liability, notwithstanding that such
loss, damage or liability, may arise out of the negligent act or omission of the
other party, its agents or employees.
22. EMINENT DOMAIN.
(a) If any or all of the Premises or parking spaces are taken by the
exercise of any power of eminent domain or are conveyed to or at the direction
of any governmental entity under a threat of any such taking (each of which is
hereinafter referred to as a "Condemnation"), Landlord, subject to subparagraph
(c) below shall be entitled to collect from the condemning authority thereunder
the entire amount of any award made in any such proceeding or as consideration
for such deed, without deduction therefrom for any leasehold or other estate
held by Tenant by virtue of this Lease.
(b) Tenant, subject to subparagraph (c) below, hereby (i) assigns to
Landlord all of Tenant's right, title and interest, if any, in and to any such
award, (ii) waives any right which it may otherwise have in connection with such
Condemnation, against Landlord, and (iii) agrees to execute any and all further
documents which may be required in order to facilitate the Landlord's collection
of any and all such awards.
(c) Notwithstanding the foregoing provisions of this Paragraph, if
there is a Condemnation, Tenant may, to the extent permitted by law, appear,
claim, prove and receive in the Condemnation proceeding (a) the unamortized
value over the Term of Tenant's property and its improvements and alterations to
the Premises and Building (but only to the extent that such value exceeds the
unamortized portion of the Tenant Work Allowance described in Exhibit D),
provided the same shall have been installed by or at Tenant's expense but
regardless of whether Tenant's property or the improvements and alterations
might be considered by law or otherwise as a part of the Premises or Building or
shall be or become Landlord's property under the provisions of this Lease, (b)
the value of Tenant's trade fixtures, equipment, and personal property that are
damaged, destroyed or taken hereunder, (c) the cost of relocation, (d) special
awards or allowances paid to tenants when their rental space is taken by eminent
domain, and (e) value of the leasehold of which it is deprived for the remainder
of the Term.
23. EFFECT OF CONDEMNATION.
(a) If (i) all of the Premises or parking areas are covered by a
Condemnation, or (ii) if any part of the Premises is covered by a Condemnation
and the remainder thereof is insufficient for the reasonable operation therein
of Tenants business, or (iii) any of the Building is covered by a Condemnation
and, in
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Landlord's reasonable opinion, reasonably concurred in by Tenant, it would be
impractical to restore the remainder thereof, then, in any such event, the Term
shall terminate on the date upon which possession of so much of the Premises as
is covered by such Condemnation is taken by the condemning authority thereunder,
and all Rent (including, by way of example rather than of limitation, any
Operating Costs payable pursuant to the provisions of Paragraph 11), taxes, and
other charges payable hereunder shall be prorated and paid to such date.
(b) If there is a Condemnation and the Term does not terminate
pursuant to the foregoing provisions of this Paragraph, the operation and effect
of this Lease shall be unaffected by such Condemnation, except that the Base
Rent payable under the provisions of Paragraph 3 shall be reduced in proportion
to the square footage, if any, of the Premises covered by such Condemnation, and
Tenant shall be required to pay Base Rent and additional rent only for the
portion of the Premises that is usable while repair and restoration, if any, are
being made.
(c) Except as expressly provided in Paragraph 23 (b) above, If there
is a Condemnation, Landlord shall have no liability to Tenant on account of any
(i) interruption of Tenant's business upon the Premises, (ii) diminution in
Tenant's ability to use the Premises, or (iii) other injury or damage sustained
by Tenant as a result of such Condemnation.
(d) Except as provided in Paragraph 22(c), Landlord shall be entitled
to conduct any such condemnation proceeding and any settlement thereof free of
interference from Tenant, and Tenant hereby waives any right which it might
otherwise have to participate therein.
24. MECHANICS AND MATERIALMEN'S LIENS.
Excluding labor or materials provided in connection with the construction
of the Building by Landlord, Tenant shall bond, remove or have removed any
mechanic's, materialmen's or other lien filed or claimed against any or all of
the Premises, by reason of labor or materials provided for or at the request of
Tenant of any of its contractors or subcontractors within thirty (30) days of
notice of filing said lien.
25. QUIET ENJOYMENT.
Landlord hereby covenants that Tenant, on paying the Rent and performing
the covenants set forth herein, shall without interference from Landlord
peaceably and quietly hold and enjoy, throughout the Term, (i) the Premises, and
(ii) such rights as Tenant may hold hereunder with respect to the Premises.
26. SURRENDER.
(a) Upon the expiration or earlier termination of the Term, Tenant
shall surrender the Premises to Landlord in good order, cleanliness and repair,
ordinary wear and tear and damages from insured casualty excepted.
(b) Subject to Paragraph 14(c) hereof, any and all improvements,
repairs, alterations and all other property attached to, used in connection with
or otherwise installed upon the Premises (i) shall, immediately upon the
completion of the installation thereof, be and become Landlord's property
without payment therefor by Landlord, and (ii) shall be surrendered to Landlord
upon the expiration or earlier termination of the Term, except that any
machinery, equipment or fixtures installed by Tenant and used in the conduct of
Tenant's trade or business (rather than to service the Premises) shall remain
Tenant's property and shall be removed by Tenant within five (5) days after the
expiration or earlier termination of the Term, and
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Tenant shall promptly and thereafter fully restore any of the Premises or the
Building damaged by such installation or removal thereof.
27. SUBORDINATION.
This Lease is subject and. subordinate to all ground or underlying leases
and to all mortgages and/or deeds of trust which may now or hereafter affect
such leases or the real property, of which the Premises form part,(the
"Mortgage") and to all renewals, modifications, consolidations, re-castings,
replacements and extensions thereof. In confirmation of the foregoing
subordination, Tenant shall at Landlord's request promptly execute any requisite
or appropriate document. So long as Tenant receives the Mortgage holder's
agreement not to disturb Tenant and to perform all of Landlord's obligations
hereunder upon Foreclosure, Tenant waives the provisions of any statute or rule
of law now or hereafter in effect which may give or purport to give Tenant any
right to terminate or otherwise adversely affect this Lease or Tenant's
obligations in the event any such Foreclosure proceeding is prosecuted or
completed or in the event the Land, the Building or Landlord's interest therein
is sold at a foreclosure sale or by deed in lieu of foreclosure. If this Lease
is not extinguished upon such sale or by the purchaser following such sale,
then, at the request of such purchaser, Tenant shall attorn to such purchaser
and shall recognize such purchaser as the landlord under this Lease, if such
purchaser shall recognize this Lease, and perform all of Landlord's obligations
hereunder from and after the date of purchaser's acquisition of the Property.
Upon such attornment such purchaser shall not be (a) bound by any payment of the
Base Rent or additional rent more than one (1) month in advance, (b) bound by
any amendment of this Lease made without the consent of the holder of the
Mortgage existing as of the date of such amendment, (c) liable for damages for
any breach, act or omission of any prior landlord, or (d) subject to any offset
or defenses which Tenant might have against any prior landlord. Within fifteen
(15) days after receipt, Tenant shall execute, acknowledge and deliver any
requisite or appropriate document submitted to Tenant confirming such
attornment, in form and substance reasonably acceptable to Tenant, in
consideration of Tenant's receipt of the attorned party's agreement to recognize
this Lease and perform all of Landlord's obligations hereunder from and after
the date of purchaser's acquisition of the Property.
28. ESTOPPEL CERTIFICATE.
Landlord and Tenant agree from time to time, upon not less than fifteen
(15) days' prior written notice by the other party, to execute, acknowledge and
deliver to such party or to any existing or prospective owner or mortgagee of
the Building or land upon which such Building has been built, or any interest in
either, a statement in writing (i) certifying that this Lease is unmodified and
in full force and effect (or if there have been modifications, stating the
modifications and that the Lease is in full force and effect as modified), (ii)
stating the dates to which the Rent and any other charges hereunder have been
paid by Tenant, (iii) stating whether or not, to the knowledge of such party,
the other party is in default in the performance of any covenant, agreement or
condition contained in this Lease, and if so, specifying each such default of
which such party may have knowledge, (iv) stating that Tenant shall give notice
to any mortgagee prior to seeking to terminate the Lease by reason of any act or
omission of Landlord until such mortgagee has reasonable time, at its option, to
remedy such act or omission, and (v) stating the address to which notices to
Tenant, or Landlord, as the case may be, should be sent. Any such statement may
be relied upon by any existing or prospective owner or mortgagee of the Building
or aforesaid land or any interest in either or any assignee of any such person.
29. NOTICE.
Any notice, demand, consent, approval request or other communication or
document to be provided hereunder to a party hereto, shall be in writing and
shall be deemed to have been provided (i) three (3) days after being sent by
certified or registered mail, return receipt requested, in the United States
mail, or (ii) the
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next business day after delivery to a reputable commercial courier for next day
delivery. Any and all notices or other communications to Landlord and Tenant
shall be given as follows:
Landlord: TransDulles Center, Inc.
c/o The Mark Winkler Company
4900 Seminary Road, Suite 900
Alexandria, Virginia 22311
Attn: Michael D. Lynch, President
Copy to: TransDulles Center, Inc.
c/o J.P. Morgan Investment Management, Inc.
522 Fifth Avenue at 44th Street
New York, New York 10036
Tenant: HomeGrocer.com, Inc.
10230 N.E. Points Drive, Suite 300
Kirkland, WA 98033
Attn: Vice President of Operations
Copy to: HomeGrocer.com, Inc.
10230 N.E. Points Drive, Suite 300
Kirkland, WA 98033
Attn: Legal Department
Either party may hereafter designate a new address for notice purposes, by
giving notice as provided hereunder.
30. GENERAL.
(a) Complete Understanding. This Lease, including without limitation,
all Exhibits attached hereto, represents the complete understanding between the
parties hereto as to the subject matter hereof, and supersedes all prior
negotiations, representations, warranties, statements or agreements, either
written or oral, between the parties hereto as to the same.
(b) Amendment. This Lease may be amended by and only by an instrument
executed and delivered by each party hereto.
(c) Applicable Law. This Lease shall be given effect and construed by
application of the laws of the Commonwealth of Virginia.
(d) Time of Essence. Time shall be of the essence of this Lease.
(e) Headings. The headings of the Paragraphs and subparagraphs hereof
are provided herein for and only for convenience or reference, and shall not be
considered in construing their contents.
(f) Exhibits. Each writing or plat referred to herein as being
attached hereto as an exhibit or otherwise designated herein as an exhibit
hereto is hereby made a part hereof.
(g) Severability. No determination by any court, governmental body or
otherwise that any provision of this Lease or any amendment hereof is invalid or
unenforceable in any instance shall affect the
29
<PAGE>
validity of enforceability of (a) any other provision thereof, or (b) such
provision in any circumstance not controlled by such determination. Each such
provision shall be valid and enforceable to the fullest extent allowed by, and
shall be construed wherever possible as being consistent with, applicable law.
(h) Definition of "Landlord". As used herein, the term "Landlord"
means the entity hereinabove named as such, and its successors and assigns.
(i) Definition of "Tenant". As used herein, the term "Tenant" means
the entity hereinabove named as such, and its successors and assigns, each of
whom shall have the same obligations, liabilities, rights and privileges as it
would have possessed had it originally executed this Lease, except that no such
right or privilege granted to Tenant hereunder shall inure to the benefit of any
assignee of Tenant, immediate or remote, unless the assignment to such assignee
is made in accordance with the provisions of Paragraph 12. Whenever two or more
persons constitute Tenant, all such persons shall be jointly and severally
liable for the performance of Tenant's obligations hereunder.
(j) Successors. It is agreed that all/rights, remedies and
liabilities herein given to or imposed upon either of the parties hereto, shall
extend to their respective heirs, executors, administrators, successors and
assigns.
(k) Landlord's Authority. Landlord warrants that it is the owner of
the Building and Premises and has the full right and authority to make this
Lease. Tenant hereby accepts this Lease.
(l) Force Majeure. In the event that Landlord or Tenant shall be
delayed, or hindered, or prevented from the performance of any act required
hereunder (except for the payment of monies), by reason of government
restrictions, scarcity of labor or materials, or for other reasons beyond its
reasonable control, the performance of such act shall be excused for the period
of delay and the period for the performance of any such act shall be extended
for a period equivalent to the period of such delay.
(m) Recordation. The parties agree to execute a short form of this
Lease, which may, at Landlord's or Tenant's option, be recorded among the land
records of the jurisdiction where the Premises are located. The expense thereof
shall be borne by the party requesting recordation.
(n) Tenant's Corporate Authority. Tenant hereby warrants and
represents that each individual executing this Lease on behalf of Tenant is duly
authorized to execute and deliver this Lease and that Tenant is a duly organized
corporation under the laws of the State of its incorporation, is qualified to do
business in the Commonwealth of Virginia, and has the Power and authority to
enter into this Lease, and that all corporate action requisite to authorize
Tenant to enter into this Lease has been duly taken.
(o) Commission. Landlord and Tenant warrant that they have not had
any dealings with any realtor, broker or agent in connection with the
negotiation of this Lease, except for The Mark Winkler Company and Cushman &
Wakefield ("Brokers") whose commissions shall be paid for by Landlord pursuant
to the terms of a separate agreement between Landlord and the Brokers. Should
any claim for a commission be established by any other broker or agent, the
parties hereby expressly agree to hold one another harmless with respect thereto
to the extent that one or the other is shown to have been responsible for the
creation of such claim.
(p) No Representations By Landlord. Tenant acknowledges that neither
Landlord or any broker, agent or employee of Landlord has made any
representations or promises with respect to the Premises
30
<PAGE>
or the Building except as herein expressly set forth, and no rights, privileges,
assessments or licenses are acquired by Tenant except as herein expressly
provided
(q) Authority of Landlord. Landlord hereby represents and warrants
that it is a corporation duly organized and in good standing under the laws of
the Commonwealth of Virginia, that each individual or entity executing this
Lease on behalf of Landlord is authorized to do so, and that all action
necessary to authorize Landlord to enter into this Lease has been duly taken.
(r) Third-Party Consents. Landlord hereby represents and warrants
that (i) the execution and delivery of this Lease by Landlord, and the
performance of Landlord's obligations hereunder, do not conflict with or result
in any breach under the terms of any agreement to which Landlord is a party or
by which Landlord or the Premises is bound and (ii) all consents of any third
parties, including without limitation any ground lessor or mortgagee of the
Premises, required in connection with the execution and delivery of this Lease
have been obtained by Landlord, and Landlord shall furnish evidence of such
consents to Tenant upon Tenant's written request therefor.
(s) Litigation. The prevailing party shall recover all reasonable
attorney's fees and costs incurred by or on behalf of such prevailing party if
(a) either party institutes litigation for a breach of the terms and conditions
of this Lease, (b) either party institutes litigation for possession of the
Premises, (c) either party is made party to litigation instituted by a third
party relating to Premises. Such attorney's fees and costs may be levied against
the party whose conduct necessitated the use of an attorney whether or not
litigation is prosecuted to judgment.
(t) Assignment by Landlord. Landlord may freely assign its interest
hereunder. The term "Landlord" as used herein shall be deemed to be related only
to a person or entity during the time of his or its ownership of Landlords
interest in this Lease.
(u) WAIVER OF JURY TRIAL. LANDLORD AND TENANT WAIVE TRIAL BY JURY IN
ANY ACTION, CLAIM OR COUNTERCLAIM BROUGHT IN CONNECTION WITH LANDLORD-TENANT
RELATIONSHIP, TENANTS USE OR OCCUPANCY OF THE PREMISES OR ANY CLAIM OF INJURY OR
DAMAGE RELATING TO THIS LEASE. Landlord and Tenant and all Guarantors waive any
objection to the venue of any action filed in any court situated in the
jurisdiction in which the Building is located and waive any right under the
doctrine of forum non conveniens or otherwise to transfer any such action filed
in any such court to any other court.
31. ROOFTOP INSTALLATIONS.
For no additional consideration, Landlord hereby grants to Tenant an
irrevocable license to install and maintain, during the Term, at locations on
the roof of the Building (the "Roof") to be determined by Landlord and Tenant in
their reasonable discretion, (i) up to three (3) satellite or microwave dishes
(the "Antennae"), (ii) refrigeration equipment, and (iii) heating, ventilating
and air conditioning equipment, (individually and collectively the "Rooftop
Installations"), subject to the terms and conditions of this Lease and the
following specific conditions:
(a) Tenant shall bear all costs and expenses associated with the
installation of the Rooftop Installations (including but not limited to any and
all costs of design and permitting, and any and all costs associated with
structural changes to the Roof necessary to bear the increased loads associated
with the Rooftop Installations), and Tenant shall be responsible for, and shall
bear all costs and expenses associated with, the
31
<PAGE>
operation and maintenance thereof. Tenant understands and acknowledges that
Landlord shall not be responsible for the operation and maintenance of any such
Rooftop Installations.
(b) The plans and specifications for the Rooftop Installations,
including the manner of their attachment to the Roof, the structural analysis of
the ability of the Roof to bear the loads associated with them, their location,
and the nature and location of any roof penetrations and conduit, shall be
subject to the prior written approval of Landlord, which shall not be
unreasonably withheld, conditioned or delayed. Tenant shall install the Rooftop
Installations in a good and safe manner in accordance with the terms and
conditions of this Lease, by a contractor reasonably approved by Landlord.
Tenant shall provide reasonable notice to Landlord of the time and date upon
which it desires to install such Rooftop Installations. A representative of
Landlord and Landlord's roofing contractor shall, at Landlord's election, be
present at the installation of the Rooftop Installations in order to approve the
methods of installation and performance thereof; the reasonable and actual out-
of-pocket cost of the attendance of such representative and contractor shall be
borne by Tenant.
(c) Tenant shall have the responsibility to secure all necessary
approvals relating to the installation and operation of the Rooftop
Installations from state, federal and other governmental authorities. Further,
Tenant shall construct, operate and maintain such facilities in accordance with
all applicable laws, ordinances, rules and regulations and in compliance with
the reasonable requirements of the insurers of the Building.
(d) Tenant shall be responsible for the cost of repairs required to
the Building arising out of the construction, installation, operation,
maintenance, repair, replacement or removal of the Rooftop Installations and
related equipment and, in reasonable consultation with Landlord, shall take
commercially reasonable steps to minimize wear and tear on the roof, including
the use of walking pads. In furtherance thereof, Tenant agrees to indemnify,
defend and hold Landlord harmless from an against any and all such costs or
expenses (including reasonable attorneys fees) incurred by Landlord as a result
of the acts, omissions or negligence of Tenant and its agents and contractors
in the construction, installation, operation, maintenance, repair, replacement
or removal of the Rooftop Installations and related equipment, including all
cable, wires and transformers related thereto.
(e) Tenant warrants that its Antennae will not cause measurable
interference with the radio signals of any transmitting or receiving equipment
installed at TransDulles Centre as of the date of installation by Tenant of its
Antennae; Tenant shall, at its sole expense, within twenty four (24) hours of
notice from Landlord, take whatever steps are necessary to eliminate such
interference. Similarly, from and after the date of execution of this Lease,
Landlord shall not use, nor shall Landlord permit its lessees, licensees,
employees, invitees or agents to use, any portion of TransDulles Centre,
including the roof of the Building, in any way which results in measurable
interference with the operations of Antennae or other Rooftop Installations.
Landlord, after prior written notice, shall have the right to require Tenant to
relocate or temporarily move any of the Antennae in order to reasonably
accommodate, at Landlord's sole cost, Landlord, any other tenant of TransDulles
Centre, or any other user of the roof.
(f) Tenant represents and warrants that the Antennae do and will not
emit levels of electromagnetic, microwave, or other radiation in excess of any
health-related standards now or hereafter established by any law or regulation.
In furtherance hereof Tenant agrees to indemnify, defend and hold Landlord
harmless from an against any and all such claims, losses, damages, costs or
expenses (including reasonable attorneys fees) incurred by Landlord as a result
of a claim by anyone that the Antennae, and the emissions therefrom, are in any
way harmful to human health.
32
<PAGE>
(g) Landlord shall have no responsibility to insure or maintain the
Rooftop Installations, and Tenant, at its sole cost and expense, shall be
responsible for maintaining such insurance coverage with regard thereto as may
be reasonably required by Landlord. Both Tenant and Landlord should be reflected
as named insurers. Tenant shall be solely responsible for any damage or
destruction to the Rooftop Installations, regardless of the cause.
(h) Tenant acknowledges that as part of the installation of the
Rooftop Installations, Landlord may require Tenant to install screening
reasonably acceptable to Landlord in order to conceal the Rooftop Installations.
(i) Tenant shall pay all taxes of any kind or nature whatsoever
levied upon the Rooftop Installations and all licensing fees, franchise fees and
other taxes, expenses and other costs of any nature whatsoever relating to the
construction, ownership, maintenance and operation of the Rooftop Installations.
(j) Upon the expiration of the Term, or earlier termination of this
Lease, Tenant shall be responsible for removing the Rooftop Installations and
any associated equipment from their location on the roof, restoring the roof to
the condition in which it existed prior to the installation of the Rooftop
Installations (including complete repair of any roof penetrations and removal of
conduit), ordinary wear and tear (determined without consideration oft he
presence of the Rooftop Installations) and insured casualty damage excepted, and
repairing any damage caused by the presence and removal of the Rooftop
Installations and associated equipment.
32. LANDLORD'S OBLIGATIONS.
(a) If Landlord fails within fifteen (15) days after notice from
Tenant (i) to discharge any of its obligations imposed by a mortgage that is
superior to this Lease, or (ii) to pay any real estate taxes or assessments
imposed upon the Property, then Tenant may (but is not required to) discharge
such obligations, or pay such taxes, as the case may be, and may recover the
same from Landlord, together with interest thereon at the legal rate from the
date of payment to the date of recovery from Landlord.
(b) If Landlord fails to commence and diligently pursue any necessary
repairs to the Property or Premises within thirty (30) days after notice from
Tenant of the need for such repairs, and if the necessary repairs are of a
nature that the costs thereof are properly borne by Tenant under the provisions
of this triple net Lease, Tenant may (but is not required to) make such repairs
at its sole expense, and may not recover from Landlord the costs of such
repairs, it being understood by the parties that the obligation for payment of
the cost of such repairs is Tenant's responsibility under the provisions of this
Lease.
(c) If Landlord fails to commence and diligently pursue any necessary
repairs to the Property or Premises within thirty (30) days of notice from
Tenant of the need for such repairs, and if the necessary repairs are to the
structure of the Building, the costs of which are properly borne by Landlord
under this Lease, and if Landlord fails to commence and diligently pursue such
repairs within ten (10) days of a second notice from Tenant of the need for such
repairs, Tenant may (but is not required to) make such repairs, and may recover
the reasonable direct costs incurred by Tenant in connection with such repairs,
together with interest thereon at the legal rate from the date of payment to the
date of recovery from Landlord.
(d) Notwithstanding any other provision of this Lease or of
applicable law, Tenant may not deduct from Rent payable hereunder any amount
claimed due from Landlord hereunder. Tenant's sole remedy shall be to institute
an action in a court of competent jurisdiction to obtain a judgement against
Landlord. If Tenant or any Invitee is awarded a money judgement against
Landlord, then recourse for satisfaction of such
33
<PAGE>
judgement shall be limited to execution against Landlord's estate and interest
in the Building and the Land, which interest shall be deemed to include the rent
payments due under this Lease. No other asset of Landlord, any partner,
director or officer of Landlord (collectively, "Officer") or any other person or
entity shall be available to satisfy or subject to such judgment, nor shall any
Officer or other person or entity have personal liability for satisfaction of
any claim or judgment against Landlord or any Officer.
IN WITNESS WHEREOF, each party hereto has executed and ensealed this Lease, or
has caused it to be executed and ensealed on its behalf by its duly authorized
representatives, the day and year first above written.
ATTEST: LANDLORD: TRANSDULLES CENTER, INC.
[ILLEGIBLE] By: /s/ Douglas Lawrence (Seal)
- ------------------------ ------------------------------
Name: Douglas Lawrence
------------------------------
Title: V.P.
------------------------------
ATTEST: TENANT: HOMEGROCER.COM, INC.
/s/ Ursula M. Lazo By: /s/ C.J. Karaffa (Seal)
- ------------------------ ---------------------------------
Name: C.J. Karaffa
------------------------------
Title: Sr. V.P. Operations
------------------------------
34
<PAGE>
EXHIBIT A-1
BUILDING FOOTPRINT
Plan appears here
<PAGE>
[LETTERHEAD]
[LOGO]
EXHIBIT A-2
LOT 49A-TRANSDULLES CENTRE
[Bowers & Associates Letterhead]
METES & BOUNDS DESCRIPTION
LOT 49A
SECTION FIVE
USS INDUSTRIAL PARK-STERLING
PROPERTY OF:
TRANSDULLES CENTER, INC.
DULLES ELECTION DISTRICT
LOUDOUN COUNTY, VIRGINIA
BEING all of Lot 49A, Section Five, USS Industrial Park-Sterling as the same is
shown on that certain Boundary Line Adjustment (BLA) Plat entitled "Boundary
Line Adjustment & Consolidation/Vacation, Lots 49 & 50 - Section Five, USS
Industrial Park-Sterling and Lots 51A & 52A- Section Five, Industrial Park-
Sterling" as recorded in deed book (DB) 1670 at page (PG) 706 and being part of
the land conveyed by Deed of Confirmation Following Merger recorded in DB 1556,
PG 1717 (original deed of conveyance having been in the name of TransDulles Land
Company and recorded in DB 971, PG 1408) and all of the land conveyed by Special
Warranty Deed recorded in DB 1544, PG 2374, all among the land records of
Loudoun County, Virginia.
BEGINNING at a point in the southerly right of way (R/W) line of Glenn Drive, a
60' R/W (DB 903, PG 483), said point being S 14(degrees)15'15" W, 0.20' from an
iron pipe found (IPF) as shown on said BLA, said point also being in the line of
or a comer to Lot 48A, Willow Pond Condominium Office Park (DB 1036, PG 310) and
the northwesterly corner of the herein described Lot 49A:
Thence departing said Willow Pond Condominium Office Park and running with said
southerly R/W line of Glenn Drive and with Lot 49A;
S 75(degrees)46'22" E, 419.66' to an iron pipe set (IPS),
540.67' along the arc of a curve to the left with a radius of 848.51' and a
chord bearing N 85(degrees)58'23" E, 531.57' to a PK nail set, said PK nail
being a corner to Lot 56A, Section Five, USS Industrial Park-Sterling CDB 1024,
PG 1247),
Thence departing the southerly R/W line of Glenn Drive and running with said Lot
56A;
S 22(degrees)19'12" E, 208.37' to an IPS, said iron pipe being adjacent, or in
the line of, or a comer to Tax Map 94, Parcel 53 (property of Tung Hong Shoung,
et al as recorded in DB 1136, PG 1620),
<PAGE>
Thence departing Lot 56A and running with or adjacent to said Tax Map 94, Parcel
53 and generally along or adjacent to a stone wall;
S 33(degrees)33', 19" W, 903.67' to an IPS adjacent to Lot 6A, Commonwealth
Center (DB 828, PG 653), having departed along the way (running with or adjacent
to) Tax Map 94, Parcel 53 and the stone wall, and running thereafter adjacent to
said Lot 6A,
Thence continuing to run adjacent to Lot 6A (for part of the way) and Lot 5,
Commonwealth Center (thereafter);
N 55(degrees)28'28" W, 799.39' to an IPF, said iron pipe being a corner to the
aforementioned Willow Pond Condominium Office Park,
Thence no longer running adjacent to said Lot 5 and running with Willow Pond
Condominium Office Park;
N 14(degrees)15'15" E, 576.31' to the POINT OF BEGINNING, containing 700,847
square feet or 16.0892 acres of land more or less.
<PAGE>
EXHIBIT A-3
TRANSDULLES CENTRE
[SITE PLAN]
<PAGE>
EXHIBIT A-4
STANDARD OF MEASUREMENT
[LETTERHEAD OF ARCHITECTURE, INC. APPEARS HERE]
February 4, 2000
Mr. Peter S. Scholz
Vice President - Asset Management
The Mark Winkler Company
4900 Seminary Road
Alexandria, VA 22311
Re: Square Footage Calculations for TransDulles Centre - Building 14
Dear Peter,
As discussed, Architecture, Inc. calculated the square footage for this building
by measuring from the centerline of the structural portion of the exterior wall
inward. The (structural) exterior walls of the building are tilt-up concrete
panels with a thickness of eight inches (8"). The calculated square footage
includes the building sprinkler and electric rooms as well as all recessed
entries.
The method of square footage measurement described above is a modified
industrial gross calculation. The modified industrial gross square footage
calculation for this building is 126,231 s.f.
Note: Normally the square footage for this type of industrial building is
calculated as industrial gross which is measured from the exterior face of the
exterior walls. The (standard) industrial gross square footage for this building
is 126,840 s.f.
Please feel free to contact me with any questions or concerns about the
information listed above. Let me know if any additional information is required.
Sincerely,
/s/ Christopher J. Corneau
Christopher J. Corneau, AIA
Principal
<PAGE>
EXHIBIT A-5
LETTER AGREEMENT AS TO DESIGN FEES
[LETTERHEAD OF ERNST & YOUNG APPEARS HERE]
December 10, 1999
Mr. Peter S. Scholz
The Mark Winkler Company
4900 Seminary Road
Alexandria. VA 22311
Re: Indemnification for Design Fees
Dear Mr. Scholz
As discussed on December 9, 1999, HomeGrocer.com is very interested in
pursuing the conversion of the proposed site development at TransDulles
from its present two building plan to a single building of 126,000 square
feet, HomeGrocer.com fully understands the landlord's concern at converting
its proposed development before a binding lease has been signed by the
parties, Accordingly, in order to assure the landlord of HomeGrocer.com's
good faith, and as an inducement for the landlord to proceed with the
conversion of the site and construction documents to a single building,
HomeGrocer.com offers the following program of rent prepayment:
1. Upon HomeGrocer.com's receipt of signed originals of this letter and of
the original letter of intent, HomeGrocer shall pay the landlord the sum
of $15,000,00.
2. Upon receiving the proposed lease from the landlord, HomeGrocer.com
shall pay the landlord the sum of $15,000,00
3. Upon completion of the first round of negotiations of the terms of the
lease. HomeGrocer.com shall pay the landlord the sum of $15,000.00. For
the purposes of this letter, the first round of negotiations of the
lease is deemed complete when HomeGrocer.com has delivered its comments
in response to Landlord's proposed lease and Landlord and HomeGrocer.com
---
have discussed each of HomeGrocer.com's comments regarding the proposed
lease and Landlord has communicated its response to HomeGrocer.com's
---
comments after obtaining all necessary input from appropriate decision
makers, and professional advisors.
4. When the landlord delivers to HomeGrocer.com, the final lease
agreement, reflecting all changes agreed to by both parties, and signed
by the record owner of the property, HomeGrocer.com shall pay the
landlord the sum of $15,000,00.
HomeGrocer.com acknowledges that the lease would necessarily be contingent
upon the proposed conversion being approved by all governmental agencies
with jurisdiction and all requisite consents and permits issued.
Accordingly, if despite the landlord's best efforts to obtain all above-
mentioned approvals, consents and permits, any one or more such approvals,
consents or permits cannot be obtained for the conversion and building of
the project as a single building development, Landlord is entitled to apply
lease prepaid rent towards those third party professional costs incurred by
landlord in respect of the conversion of the project. Landlord shall
provide HomeGrocer.com with copies of all such invoices as evidence of
payment of such third party coats. All funds not applied towards such third
party costs shall be returned to HomeGrocer.com by March 1, 2000.
Of course, both parties shall work diligently to obtain all the above-
mentioned approvals, consents and permits, and if our efforts are
successful, and all such approvals, consents and
<PAGE>
permits are obtained, and the proposed building constructed, then the
entire $60,000 shall be credited towards the first month's rent payable
under the lease.
As I mentioned, HomeGrocer.com is proposing this arrangement to give the
landlord comfort in changing its proposed development and so as to
accelerate the construction and lease negotiation process for the benefit
of both parties. Accordingly, the negotiation schedule is necessarily as
follows:
. Landlord and HomeGrocer.com must enter into a letter of
intent by 5:00 p.m., EST, on Tuesday December 14, 1999;
. Landlord shall provide HomeGrocer.com the proposed lease by Thursday
December 16, 1999;
. HomeGrocer.com shall provide Landlord with HomeGrocer.com's comments
on the proposed lease by Tuesday December 21, 1999.
. First negotiation of the lease must be completed by 5:00 p.m. EST on
December 30, 1999;
. HomeGrocer.com and Landlord must sign the final lease agreement by
5:00 p.m. on January 15. 2000.
By entering into this agreement Landlord and HomeGrocer.com agree to act,
in good faith and shall use their best possible efforts to perform and
consummate the transactions contemplated and described in this letter, and
to complete this matter by the timelines prescribed above. Further, in
order to bring this matter to a mutually beneficial conclusion in a timely
fashion, but in any event to complete negotiations no later than January
30, 2000, the parties agree to negotiate exclusively with each other in
respect of a lease arrangement for commercial warehouse space in the
TransDulles sub-market of the Maryland and Virginia Washington DC real
estate market.
If these terms are acceptable to the landlord, please have an authorized
signatory sign where indicated below, and return one original and an
original letter of Intent to Ernst & Young LLP. HomeGrocer.com will then
immediately-return to you the first prepayment of rent in the amount of
$15,000.00.
If you have any questions, please do not hesitate to call me. I can be
reached at (425) 922 0365. HomeGrocer.com looks forward to a long, mutually
beneficial relationship with you.
Sincerely,
/s/ John Martin for Daryl Stromswold
Daryl L. Stromswood
Director of Real Estate
Agreed and Accepted:
The Mark Winkler Company as Agent For
TransDulles Centre Inc.
By: /s/ Peter Scholz
----------------------------
Name: Peter Scholz
--------------------------
Title: Senior Vice President
-------------------------
Date: Dec 13, 1999
-------------------------
CC: John Martin, Ernst & Young LLP
John W. Anderson, Cushman & Wakefield
<PAGE>
EXHIBIT B
---------
DESCRIPTION OF BUILDING SHELL
-----------------------------
TransDulles Centre
Sterling, Virginia
Building 14
Building Structure: The Building Shell shall be a tilt-up concrete structure
with interior steel columns supporting steel roof joists and
girders.
Exterior Finish: The exterior surface of the tilt-up concrete panels shall be
painted with "Tex-Cote", a textured exterior coating
manufactured by Textured Coatings of America (TCA) in a
color scheme to be determined by Landlord, and reasonably
acceptable to Tenant.
Concrete Slab: The building floor slab consists of an average thickness of
6" reinforced concrete above a 4" stone gravel base.
Structural Grid: The typical column grid is 40' x 42'.
Loading Docks &
Overhead Doors: The Building Shell is provided with twenty (20) loading
docks at thirty eight inches (38") above finished grade, and
eight loading docks at forty, eight inches (48") above
finished grade., The typical loading dock door is a 9' wide
x 10' tall insulated, sectional, steel door with two small
windows. These roll-up doors are opened manually with a
chain hoist.
Sprinkler System: The Building Shell is provided with a wet-pipe sprinkler
system conforming with the requirements of NFPA 231C, Class
IV commodities, with storage allowed to 20'0" above finished
floor.
Storefront
Entrances: Multiple storefront entrances occur along the front of the
Building. Storefront doors are provided with 1/4" tempered
tinted glass and adjacent storefront entrance windows are
provided with 1" insulated tinted glass, tempered where
required by code.
Clear Height: The Building Shell is provided with a 24' interior clear
height at the roof joists. Note: The bottom of the roof
girders is approximately two feet lower than the bottom of
the roof joists bearing on that girder.
Roofing System: A ballasted single-ply EPDM roof system will be installed on
the Building Shell. Roof drains and overflow drains will be
provided as required to comply with applicable codes. The
roofing system will be warranted for a period of ten years.
Unit Heaters: Twenty five (25) joist-hung, gas-fired unit heaters are
provided to serve the Building Shell.
Interior Lighting: Seventy Four (74) 400 watt, metal halide light fixtures are
provided to serve the Building Shell.
Windows: Sixteen (16) 16' wide x 6' tall windows are provided at the
main level. All windows are 1" insulated and tinted glass
installed in an aluminum framing system. Standard 1"
aluminum horizontal blinds will be installed on all windows.
<PAGE>
Electrical Service: Subject to determination by Virginia Power as to the size of
the transformer to be installed to serve the Buildings the
Building Shell shall be provided with 4000 amp, 3 phase, 480
volt electric service to the Building's main electric
service panel.
Wall Insulation: The perimeter walls are insulated with 6 1/4" FRK (Foil
Reinforced Kraft-faced/flame spread 25) glass fiber
insulation batts from 8'6" above finished floor to the
underside of roof deck. This insulation has an insulation
value of R-19.
Dumpster Pad: Two (2) concrete pads for placement on each of a single
standard size trash dumpster shall be provided in the
exterior of the Building to service the Building.
Water: The Building will be serviced by an eight inch (8") water
main which feeds an eight inch (8") fire line into the
Buildings Sprinkler Room. The Building's Domestic Water
Service will be provided by a two inch (2") water line to a
two inch (2") meter located in an outside crock. The
domestic water line size changes to three inches (3") from
the water meter into the Building.
Gas: The Building will be serviced by a three quarter inch
(3/4") gas line to be installed by Washington Gas.
Sewer: The Building will be serviced by a six inch (6") sanitary,
lateral.
Landlord shall consider in good faith any requests by Tenant for modifications
to the Building Shell made at any time during the course of the construction of
the Building Shell, but Landlord shall have no obligation to make any such
modification to the Building Shell. Tenant acknowledges that the time period
during which Landlord is evaluating and considering any such request may
constitute Tenant Delay. Landlord will use commercially reasonable efforts to
promptly provide Tenant with a commercially reasonable estimate of(i) the cost,
if any, of the requested modification, and (ii) the delay, if any, which will
likely result from the requested modification ("Landlord's Estimate of Cost and
Delay"). If the parties agree to proceed with any requested modification, then,
without regard to Landlord's Estimate of Cost and Delay: (i) Tenant shall be
solely responsible for the actual increase, if any, in the cost of construction
of the Building Shell resulting from the requested modification; and (ii) any
actual delay in the construction of the Building Shell resulting directly or
indirectly from the requested modification shall be considered a Tenant Delay.
2
<PAGE>
EXHIBIT C
---------
RENT SCHEDULE
TransDulles Center, Inc.
HomeGrocer.com, Inc.
Sterling, Virginia 20164
<TABLE>
<CAPTION>
<S> <C>
Total Square Footage 126,231
Lease Term-Months 157
Initial Annual Per Square Foot Rental Rate $ 8.65
Initial Monthly Rental Rate $90,991.51
Annual Rent Escalations 3.0%
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Lease Year Base Rent PRSF* Annual Base Rent* Monthly Base Rent*
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 $8.65 $1,091,898.12 $90,991.51
- ---------------------------------------------------------------------------------------------------------------------
2 $8.91 $1,124,718.24 $93,726.52
- ---------------------------------------------------------------------------------------------------------------------
3 $9.18 $1,158,800.64 $96,566.72
- ---------------------------------------------------------------------------------------------------------------------
4 $9.45 $1,192,882.92 $99,406.91
- ---------------------------------------------------------------------------------------------------------------------
5 $9.74 $1,229,490.00 $102,457.50
- ---------------------------------------------------------------------------------------------------------------------
6 $10.03 $1,266,096.96 $105,508.08
- ---------------------------------------------------------------------------------------------------------------------
7 $10.33 $1,303,966.20 $108,663.85
- ---------------------------------------------------------------------------------------------------------------------
8 $10.64 $1,343,097.84 $111,924.82
- ---------------------------------------------------------------------------------------------------------------------
9 $10.96 $1,383,491.76 $115,290.98
- ---------------------------------------------------------------------------------------------------------------------
10 $11.29 $1,425,147.96 $118,762.33
- ---------------------------------------------------------------------------------------------------------------------
11 $11.62 $1,466,804.28 $122,233.69
- ---------------------------------------------------------------------------------------------------------------------
12 $11.97 $1,510,985.04 $125,915.42
- ---------------------------------------------------------------------------------------------------------------------
13 $12.33 $1,556,428.23 $129,702.35
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* Subject to Revision Following Approval of Amended Site Plan; Excludes
Additional Rent as defined in Paragraph 3(h).
<PAGE>
EXHIBIT D
---------
WORK AGREEMENT
--------------
This Work Agreement (the "Agreement") is attached to and made a part of
that certain Deed of Lease ("Lease") of even date herewith, by and between
TRANSDULLES CENTER., INC. ("Landlord") and HomeGrocer.com, Inc. ("Tenant"). The
terms used in this Agreement that are defined in the Lease shall have the same
meanings as provided in the Lease.
1. General
-------
1.1 Purpose. This Agreement sets forth the terms and conditions governing
-------
the design and construction of tenant improvements to be installed in the
Premises (the "Tenant Work"). The parties contemplate that in addition to
the construction of office space in a portion of the Premises, the Tenant
Work shall include, but not be limited to: installation of HVAC service for
the Premises; installation of substantial refrigeration equipment for the
storage of perishable food products; installation of plumbing, electrical
and mechanical systems necessary for Tenant's operations; racking systems
for storage; and conveyor systems for moving products throughout the
Premises.
1.2 Construction Representatives. Landlord hereby appoints and Tenant
----------------------------
hereby approves the following person as Landlord's representative
("Landlord's Representative") to act for Landlord in all matters regarding
the Tenant Work and Tenant hereby appoints and Landlord hereby approves the
following person as Tenant's representative ("Tenants Representative") to
act for Tenant in all matters regarding the Tenant Work:
Landlord's Representative: Tenant's Representative:
---------------------------------------------------------
Peter S. Scholz HomeGrocer.com, Inc.
Senior Vice President Senior Vice President
The Mark Winkler Company 10230 N.E. Points Drive, Suite 300
4900 Seminary Road, Suite 900 Kirkland, WA 98033
Alexandria, Virginia 22311-1811
(703) 578-7749
With copies to:
Neil Hunter HomeGrocer.com, Inc.
Project Manager Attn: Director of Project Management-
The Mark Winkler Company Rich Buchco
4900 Seminary Road, Suite 900 10230 N.E. Points Drive, Suite 300
Alexandria, Virginia 22311-1811 Kirkland, WA 98033
(703) 578-7770 (425) 201-7875
HomeGrocer.com, Inc.
10230 N.E. Points Drive, Suite 300
Kirkland, WA 98033
Attn: Legal Department-Murray McLeod
HomeGrocer.com, Inc.
10230 N.E. Points Drive, Suite 300
Kirkland, WA 98033
Attn: Director of Real Estate-Daryl
Stromswold
Phone: (425) 201-7520
<PAGE>
Fax: (425) 201-7875
All inquiries, requests, instructions, authorizations or other
communications with respect to the Tenant shall be made to Landlord's
Representative or Tenant's Representative, as the case may be.
Authorizations may each party's Representative shall be binding and each
party shall be responsible for all costs authorized Representative. Either
party may change its Representative at any time by written notice to the
other party. Landlord shall not be obligated to respond to or act upon any
plan, drawing, change order approval or other matter relating the Tenant
Work until it has been executed by Tenant's Representative.
2. Tenant Work Allowance.
---------------------
2.1 Allowance for Tenant Work. Tenant shall receive, to be applied against
-------------------------
the costs associated with the design permitting and construction of the
Tenant Work an amount of Eleven Dollars ($11.00) per rentable square foot
of the Premises (the "Tenant Work Allowance"). Landlord shall pay such
Tenant Work Allowance directly to Tenant or, at Tenant's option, to
Tenant's architect or engineer or Tenant's general contractor, as the case
may be, in accordance with the terms and conditions set forth in section
2.2, below. All costs of the Tenant Work in excess of the Tenant Work
Allowance shall be payable by Tenant. The costs of the Tenant Work shall
include all costs to be expended in connection with the construction of the
Tenant Work, including but not limited to the (i) architectural and
engineering fees in connection with the preparation of the Construction
Drawings and Specifications (as defined below); (ii) governmental agency
plan check, permit and other fees (including any code compliance changes
required by any governmental or authority having jurisdiction thereof);
(iii) sales and use taxes, if any; (iv) insurance fees associated with the
construction of the Tenant Work; (v) testing and inspecting costs; (vi) the
actual costs and charges for material and labor, contractor's profit and
contractor's general overhead incurred in constructing the Tenant Work;
(vii) a fee to Landlord for the review of the Tenant Plans, processing of
Tenant Work Allowance draws, general Landlord representation during the
construction process, and coordination of the construction of the Tenant
Work of Fifteen Thousand Dollars ($15,000.00), and (viii) other project
related expenses (including but not limited to telecommunications cabling,
moving expenses, furniture and furnishings, and professional fees other
than architectural and engineering fees), provided however, that no more
than Two Dollars and Fifty, Cents ($2.50) per rentable square foot may be
used for items other than those encompassed in Section 2.1(i) through
2.1(vii) above. Any portion of the Tenant Work Allowance not utilized by
Tenant for items (i) through (viii) above within the first Lease Year, may
be applied by Tenant to the installment(s) of Base Rent due commencing with
the first and subsequent months of the second Lease Year.
2.2 Disbursement of Tenant Work Allowance for Tenant Work. Except as
-----------------------------------------------------
otherwise set forth herein, Landlord, disburse portions of the Tenant Work
Allowance by check once each month during the period of Tenant's
construction of the Tenant Work, commencing no sooner than thirty (30)
calendar days after Tenant shall have (i) commenced construction of the
Tenant Work hereunder, (ii) provided Landlord written notice of such
commencement of construction, and (iii) satisfied all other conditions set
forth herein. The regular monthly Tenant Work Allowance disbursement date
(the "Disbursement Date") shall be approximately thirty (30) days after
Tenant's delivery to Landlord of a reasonably acceptable request for
payment, in the form, and with supporting documentation, as set forth
below, provided that Tenant submits such request, in proper form, with all
required supporting documentation, no later than the first (1st) day of
each calendar month.
No more often than once each month, Tenant shall deliver to Landlord a
request for payment in form and content reasonably acceptable to Landlord
which shall include, without limitation, (i) a certification by Tenant and
Tenant's architect of the percentage of completion of the Tenant Work; (ii)
a detailed itemization of new costs incurred by Tenant and not previously
reimbursed by Landlord; (iii) interim lien waivers for all preceding
payments from the general contractor and all subcontractors and suppliers,
and (iv) a current lien waiver from the general contractor conditioned upon
the clearance of funds from the payment of that portion of the Tenant Work
Allowance contemplated
2
<PAGE>
by the request for payment. In the event Tenant fails to timely deliver the
required information) Landlord shall have no obligation to disburse the
Tenant Work Allowance to Tenant until the next following Disbursement Date,
provided that the reasonably required information shall have been received.
On the Disbursement Date, Landlord shall disburse to Tenant (or to
Tenant's architect or Tenants general contractor, as directed by Tenant) a
sum equal to the lesser of (i) "Landlord's Share" (as hereinafter defined)
less a ten percent (10%) retention; or (ii) the balance of any remaining
available portion of the Tenant Work Allowance less a ten percent (10%)
retention. "Landlord's Share" shall mean a sum equal to the product
obtained by multiplying the percentage of Tenant Work completed from the
date of the last certification by Tenants architect, as such additional
percentage may be verified by Landlord, by the Tenant Work Allowance, less
the sum credited to Landlord in accordance with Section 2.1 (vii) above.
Landlord shall have the right to withhold from any such disbursement such
amount as Landlord reasonably deems necessary to account for items of
Tenant Work which are not in accordance with the Tenant Plans (as
hereinafter defined), and/or the reasonable standards of quality required
by this Agreement. Disbursement by Landlord of a portion of the Tenant Work
Allowance shall not be deemed to constitute a waiver of any rights or
remedies available to Landlord as a result of Tenant's failure to complete
the Tenant Work in accordance with the standards required by this
Agreement, nor shall it constitute a representation or warranty by Landlord
that such work complies with the Tenant Plans (as hereinafter defined) or
any governmental law, code or regulation and no third party may rely on
such disbursement as evidence that the Tenant Work complies with same.
The sums retained by Landlord from each request for payment (less any
amounts deducted therefrom in accordance with the provisions of this
Agreement) shall be paid to Tenant within fifteen (15) calendar days after
the last to occur of: (i) final completion and acceptance of the Tenant
Work by Landlord's Representative after completion of all punch-list items;
(ii) approval of the Tenant Work by all governmental agencies having
authority therefore and issuance of a certificate of occupancy; or (iii),
Tenants delivery to Landlord of final mechanic's lien releases from
Tenant's subcontractors, laborers, materialmen and suppliers with respect
to the Tenant Work in the form of Schedule I attached hereto and made a
part hereof.
In the event that any mechanic's lien is filed against the Building or
Premises during the course of the Tenant Work, then, unless the same has
previously been released or bonded off, Landlord shall have the right to
withhold from the Tenant Work Allowance a sum equal to two hundred percent
(200%) of the disputed amount. Landlord shall have the right to make
payment of the disputed sum directly to the claimant to cause the release
of any mechanic's lien that has been filed against the Building or Premises
where said lien has not been removed by the recordation of either a release
of mechanic's lien or a statutory lien release bond issued by a corporate
surety reasonably acceptable to Landlord within thirty (30) days following
the date Tenant receives notice of filing of the mechanic's lien.
3. Design and Schedule.
-------------------
3.1 Tenant Plans for Tenant Work.
----------------------------
(a) Space Plan: The "Space Plan" as used herein shall mean a plan
containing, among other things, a partition layout, door location,
location of all freezer and refrigerator units, and some furniture
located in key spaces within the Premises.
(b) Construction Drawings and Specifications: The "Construction
Drawings and Specifications" as used herein shall mean the
construction working drawings, the mechanical, electrical, plumbing)
and other technical specifications, and the finishing details,
including wall finishes and colors and technical and mechanical
equipment installation, if any, all of which details the installation
of the Tenant Work in the Premises. The Construction Drawings and
Specifications shall:
3
<PAGE>
(i) be reasonably compatible with the Base Building Shell, and
with the design, construction and equipment of the
Building;
(ii) comply with all applicable laws, codes and ordinances
(including without limitation the Americans With
Disabilities Act, the Clean Air Act, the Occupational Safety
and Health Act, BOCA and NFPA, to the extent that they are
applicable) and the rules and regulations of all
governmental authorities having jurisdiction;
(iii) comply with all applicable insurance regulations and the
requirements of the Board of Underwriters for a fire
resistant building of this type and use; and
(iv) include locations of all Tenant Work including complete
dimensions.
(c) Except as specified by Landlord pursuant to Section 8 hereof, and
---------
Paragraph 14(b) of the Lease, all Tenant Work, whether covered by the
Tenant Work Allowance or nor, which is permanently affixed to the
Premises or alters the operational systems or structure of the
Building (excluding Tenant's personal property and trade fixtures)
shall in Landlord's sole and absolute discretion become the property
of Landlord upon expiration or earlier termination of the Lease and
shall remain on the Premises at all times during the term of the
Lease.
3.2 Approvals by Landlord. Within thirty (30) calendar days of execution
---------------------
of the Lease by Tenant and Landlord, Tenant shall provide Landlord with
three (3) copies of the Space Plan. Within seven (7) calendar days of its
receipt of the Space Plan, Landlord Shall have given its written approval
of such plan, or shall have provided Tenant with a list of reasonably
recommended changes. If a list of changes is provided, Tenant will address
the changes and resubmit the plan to Landlord for approval, and Landlord
shall review such resubmission in the manner and within the time frames
applicable to the initial submission of the Space Plan. Should Landlord
fail to provide such notice to Tenant within seven (7) calendar days of
Landlord's receipt of notice from Tenant that such notice of approval of
the Space Plan or reasonably recommended changes has not been timely
received, such Space Plan shall conclusively be deemed to have been
approved. Upon approval of the Space Plan by Landlord, Tenant shall cause
its architects and engineers to prepare the Construction Drawings and
Specifications for the Tenant Work, and shall provide Landlord with three
(3) complete sets thereof. Landlord shall provide to Tenant within seven
(7) calendar days of its receipt of three (3) sets of full and final
Construction Drawings and Specifications, notice of any refusal to approve
any aspect of such plans, which notice shall state those elements of the
Construction Drawings as to which Landlord does not approve. Should
Landlord fail to provide such notice to Tenant within seven (7) calendar
days of Landlord's receipt of notice from Tenant that such notice of
approval or refusal to provide approval has not been timely received, such
Construction Drawings and Specifications shall conclusively be deemed to
have been approved. The Construction Drawings and Specifications as
approved by Landlord are referred to herein as the "Tenant Plans." Any
changes, additions or modifications that Tenant desires to make to the
Tenant Plans shall also be subject to Landlord's prior written approval, in
accordance with the time periods and standards set forth herein. Landlord's
approval of the Space Plan and the Construction Drawings and Specifications
shall not be unreasonably withheld, except that Landlord shall have
complete discretion with regard to granting or withholding approval of
Construction Drawings and Specifications to the extent they impact the
Buildings structure, or would be visible from the exterior of the Building.
Landlord's review of the Rooftop Installations contemplated by Paragraph 31
of the Lease shall be governed by such Paragraph 31.
4. Construction of Tenant Work. Following Landlord's final approval of the
---------------------------
Construction Drawings and Specifications and Tenant obtaining the required
permits, Tenant shall commence and diligently proceed with the construction of
the Tenant Work. Landlord and Tenant acknowledge that Tenant shall hire its own
general contractor or contractors to complete the Tenant Work, subject to
Landlord's reasonable approval as provided in subparagraph 4(b) below. The
Tenant Work shall be conducted with such diligence, in a good and workmanlike
manner, lien free, utilizing new materials, and in accordance with the Tenant
4
<PAGE>
Plans, and all applicable laws, codes, ordinances and rules and regulations of
all governmental authorities having jurisdiction and in accordance with the
Specifications for General Contractors attached hereto and made a part hereof as
Schedule II. The Tenant Work shall include any modifications required to the
Building Shell, if any, associated with Tenant's intended and Permitted Use;
Landlord shall use commercially reasonable efforts to cooperate with Tenant in
connection with the design and construction of any modifications to the Building
Shell, so as to attempt to reduce, to the extent commercially reasonable under
the circumstances, the cost of such modifications, and the time necessary for
their design and construction. Tenant shall cause any lien placed on the
Premises or Building as a result of the Tenant Work to be removed as provided in
Paragraph 14(b) of the Lease.
Tenant hereby agrees to indemnify and cause the general contractor and all
subcontractors which it engages to perform the Tenant Work to indemnify Landlord
and its agents, and hold Landlord and its agents harmless from any and all
claims for personal or bodily injury and property damage that may arise in whole
or in part from the performance of the Tenant Work, whether resulting from the
negligence or willful misconduct of its general contractors, subcontractors or
otherwise. Tenant and its contractors and subcontractors shall execute such
additional documents as Landlord deems reasonably appropriate to evidence said
indemnity.
Notwithstanding the foregoing, Tenant shall not commence the Tenant Work until
the following have been provided to Landlord:
(a) Insurance. Prior to construction, Tenant shall provide Landlord
---------
with an original certificate of All-Risk Builder's Risk Insurance (the
"Builder's Risk Insurance Policy"), subject to Landlord's reasonable
approval, in the minimum amount of the replacement cost of the Tenant Work
issued by a company or companies reasonably acceptable to Landlord and
authorized to do business in Virginia, covering the Premises, with premiums
prepaid, and which names the Landlord as an additional insured. Said policy
shall insure the Tenant Work, the Premises, the Building, and all materials
and supplies for the Tenant Work stored on the Premises (or at any other
sites) against loss or damage by fire and the risks and hazards insured
against by the standard form of extended coverage, and against vandalism
and malicious mischief, and such other risks and hazards as Landlord may
reasonably request. Said insurance coverage shall be for 100% of
replacement cost, including architectural fees. The Builder's Risk
Insurance Policy shall contain a provision that the insurance company
waives the right of recovery or subrogation against Landlord, Landlord's
management company, and their agents, servants, invitees, employees, co-
Tenants, co-venturers, affiliate companies, and insurers.
(b) Approved List of Contractors. A list of the general contractors
----------------------------
and all subcontractors that are to supply labor and material for the Tenant
Work, subject to the reasonable approval by Landlord within seven (7)
calendar days of submission of such list, considering the quality,
reputation, experience in type of construction and experience in the
Northern Virginia and Maryland area, personnel, and financial strength of
such general contractor and subcontractors. All general contractors and
major subcontractors shall be bondable. Notwithstanding any other provision
of the Lease or of this Agreement, Tenant shall be required to engage a
roof contractor reasonably designated or approved by Landlord with respect
to any work to be performed on the roof of the Building, including but not
limited to any roof penetrations reasonably approved by Landlord, in order
that Landlord may protect the integrity of the roof, and may maintain in
full force any and all warranties which may have been issued to Landlord in
connection with the installation of the roof.
(c) Governmental Permits. Building permits and other appropriate
--------------------
permits and licenses from the appropriate agency or office of any
governmental or regulatory body having jurisdiction over the Premises and
which are required for the construction of the Tenant Work.
(d) Additional Insurance. Additional insurance in the form of and
--------------------
meeting the requirements of Schedule III attached hereto.
------------
5
<PAGE>
(e) Accepted Bid. Tenant shall provide Landlord with a copy of the
------------
general contractor bid selected (the "Accepted Bid"), including the name of
the general contractor and all subcontractors, materialmen and suppliers.
5. Change Orders. Tenant shall not make any change or addition to or
-------------
subtraction from the Tenant Work ("Change Order") after Tenants and Landlord's
approval of the final and complete Tenant Plans without the prior written
approval of Landlord. Landlord shall respond to Tenants request for consent as
soon as possible, but in no event later than seven (7) calendar days after such
request is received by Landlord. Landlord's consent to any changes, additions or
modifications that Tenant desires to make to the Tenant Plans shall not be
unreasonably withheld, conditioned or delayed, except that Landlord shall have
complete discretion with regard to granting or withholding approval for Change
Orders affecting the Building's structure or with respect to changes which would
be visible from the exterior of the Building.
6. Cooperation With Other Tenants. Tenant shall at no time unreasonably disrupt
------------------------------
or allow unreasonable disruption to any existing tenant's parking vehicles and
pedestrian access, nor allow disruptions of mechanical, electrical, telephone
and plumbing services, or interference with the normal business operations of
any other tenant of TransDulles Centre, except as provided below. Tenant
contemplates that the Tenant Work may, of necessity, involve interruption of
normal mechanical, electrical, telephone and plumbing services, and Tenant shall
cooperate with Landlord and other tenants of TransDulles Centre to avoid
disruption of the normal business operation of any other tenant of TransDulles
Centre. Any such interruption or disruption shall be restricted to after Normal
Business Hours and shall be subject to Landlord's prior consent and approval
regarding scheduling of such work, which consent and approval shall not be
unreasonably withheld, conditioned or delayed.
7. Inspection by Landlord. Landlord shall have the right to inspect the Tenant
----------------------
Work at all reasonable times upon prior notice to Tenant for the purpose of
insuring conformity of the Tenant Work with the Tenant Plans, and applicable
codes. Landlord's failure to inspect the Tenant Work shall in no event
constitute a waiver of any of Landlord's rights hereunder nor shall Landlord's
inspection of the Tenant Work constitute the Landlord's approval of same.
8. Removal of Specialized Tenant Improvements. Portions of the Tenant Work, if
------------------------------------------
any, as reasonably determined by Landlord to be specialized improvements (such
as, by way of example, and nor limitation: raised flooring, refrigeration units,
racking systems, conveyor systems, Rooftop Installations, or Liebert units),
shall, at the election of Landlord, and subject to the provisions of Paragraph
14(b) of the Lease, either be removed by Tenant at its expense before the
expiration of the term or shall remain upon the Premises and be surrendered
therewith at the expiration date or earlier termination of this Lease as the
property of Landlord without disturbance, molestation or injury. If Landlord
requires the removal of all or part of said specialized tenant improvements,
Tenant, at its expense, shall repair any damage to the Premises or the Building
caused by such removal and restore the Premises to its condition prior to the
installation of such specialized tenant improvements. If Tenant fails to remove
said specialized tenant improvements upon Landlord's request, then Landlord may
(but shall not be obligated to) remove the same and the cost of such removal,
repair and restoration, together with any and all damages which Landlord may
suffer and sustain by reason of the failure of Tenant to remove the same, shall
be charged to Tenant and paid upon demand.
9. Completion of Tenant Work. Tenant shall notify Landlord in writing when the
-------------------------
Tenant Work has been substantially completed. Landlord shall thereupon have the
opportunity to inspect the Premises in order to determine if the Premises have
been substantially completed in accordance with the Construction Drawings and
Specifications. If the Tenant Work has not been substantially completed in
accordance with the Tenant Plans, Landlord shall, immediately following
inspection, provide Tenant with written notification in reasonable detail of the
items deemed not to be in accordance with the Tenant Plans, and/or the standards
of quality required by this Agreement. Tenant shall forthwith proceed to correct
the incorrect or incomplete items. Notwithstanding anything to the contrary, the
Tenant Work shall not be considered suitable for review by Landlord until all
designated or required governmental inspections, permits and certifications
necessary for the Tenant Work, including, but not limited to a certificate of
occupancy, have been made, given and/or posted.
10. Drawings and Warranties. Upon completion of the Tenant Work, Tenant shall
-----------------------
provide to Landlord a complete "as built" set of the Construction Drawings and
Specifications. Tenant shall cause all warranties and guarantees issued in
6
<PAGE>
connection with the Tenant Work to be assigned to Landlord upon the expiration
of the Term of the Lease, or the prior termination thereof.
7
<PAGE>
SCHEDULE I
CONTRACTOR'S AFFIDAVIT AND FINAL RELEASE OF LIEN
------------------------------------------------
1. Contractor, pursuant to a contract, hereinafter referred to as
"Contract", with_________Inc., a Tenant of TransDulles Center, Inc., hereinafter
referred to as "Owner", has heretofore furnished, or caused to be furnished,
labor, material and services for the construction of certain improvements
located in the building known as ______________, Sterling, Virginia.
2. Contractor represents that all work to be performed under the Contract
has been fully completed and that all persons and firms who furnished material,
labor and/or services incident to the final completion of said work have been
paid in full.
3. The undersigned affiant for and in consideration of final payment to
him in the amount of _______________________________ ($________), and all
previous payments paid by Tenant to Contractor, does hereby for and on behalf of
the Contractor fully waive, release, remise and relinquish the Contractor's
right to claim, demand or impose a lien or liens for work done or materials
and/or services furnished or any other class whatsoever, on any of the premises
owned by Owner on which improvements have been completed in connection with the
Contract. This final release of lien is contingent upon clearance of all funds
paid to Contractor for construction of the improvements.
4. The affiant herein does hereby represent that he has authority to
execute a final release of lien for and on behalf of the Contractor as set forth
above.
5. This Contractor's Affidavit and Final Release of Lien is made by
affiant with full knowledge of the applicable laws of the Commonwealth of
Virginia. In addition to such rights as may be afforded to Owner under such
applicable laws, the undersigned affiant expressly agrees to indemnify and save
Owner and Tenant harmless from any and all actual costs and expenses, including
reasonable attorney's fees, arising out of claims by laborers, subcontractors or
materialmen who might claim that they have not been paid for services or
material furnished by or through the Contractor in connection with the work
performed under the Contract.
I hereby acknowledge that the statements contained herein are true and
correct.
Dated this______day of_______________, 2000.
CONTRACTOR:
By:_____________________________
STATE OF (S)
COUNTY OF (S)
Sworn to and subscribed before me this_______day of_____________, 2000.
__________________________
Notary Public
<PAGE>
SCHEDULE II
-----------
SPECIFICATIONS FOR GENERAL CONTRACTORS
--------------------------------------
1. Landlord must authorize commencement of construction.
2. Tenant-approved building permit plans must be submitted for approval and/or
comment by Landlord, which shall not be unreasonably withheld, conditioned
or delayed.
3. Contractor shall submit to Landlord a detailed working schedule prior to
beginning construction.
4. Prior to commencement of construction, Contractor must provide the Landlord
with:
a. building permit (if and to the extent legally required),
b. occupational license for County, and State
c. an original Certificate of Insurance for Contractor,
d. original Certificates of Insurance issued by the insurance carriers
for all sub-contractors.
5. Upon completion of the job, the Contractor will provide Landlord with:
a. as-built electrical plans/mechanical and plumbing
b. release of liens for all sub-contractors,
c. a final release of lien from the Contractor,
d. the original building permit plans with the original inspector's
signatures (if and to the extent legally required).
6. Landlord will not be responsible for:
a. Security of materials or work in place.
b. Air conditioning work not being properly performed to allow for proper
cooling of the Premises unless all air conditioning work is done in
coordination with the building engineering staff.
c. Warranty repairs.
d. Window breakage during construction.
e. Work stoppages due to work interfering with other tenants.
f. Delays due to change orders and architect-contractor problems.
7. The Contractor will confine the construction debris and dust to the
construction areas away from completed tenant space or common areas. All areas
of the building, especially access areas and common areas, are to be maintained
in a clean and orderly fashion on a daily basis. The Contractor is to turn the
improved premises over to Tenant in a clean condition, ready for occupancy by
Tenant. Containment or construction dust is required through use of plastic
barriers, if possible.
8. The Contractor will remove all trash and debris, including excess materials
from the construction site and the building and no unreasonable accumulation
will be allowed.
9. The Contractor will coordinate the delivery of materials and removal of
debris with Landlord. Temporary floor coverings will be used to protect all
permanent flooring.
10. The Contractor will supply building standard locks, keyed to the building
master key system.
11. The Contractor will exercise all due diligence in maintaining a safe
working environment and to abide by all OSHA regulations.
<PAGE>
12. Upon completion, the Contractor will remove all foreign materials from
windows, floors, glass, hardware and restroom fixtures.
13. The Contractor will not unduly disturb the peaceful enjoyment of any
tenants of TransDulles Center. All plumbing installations requiring access to
other areas of TransDulles Center, and which may result in interruption of
service to other tenants of TransDulles Center must will be coordinated with the
Landlord. Special care is required when electrical work is to be performed so as
to not to interfere with any other Tenant of TransDulles Center. Safety data
sheets on all products used in construction will be provided to Landlord.
14. All sub-contractors will park personal vehicles in Tenant's parking spaces
or on the outskirts of parking areas after loading or unloading equipment.
Parking is specifically prohibited on the streets adjacent to the Building,
including Glenn Drive, Sally Ride Drive, and Davis Drive.
15. No flammable materials shall be stored in the building. In the event it is
necessary to store flammable materials overnight, Contractor must have specific
permission from Landlord.
16. Damage or injury occurring while working must immediately be reported to
the Landlord.
17. The Landlord reserves the right to have any employee who is not performing
his or her duties in a workmanlike manner immediately removed from the premises.
18. Employees of Contractor must be appropriately attired to include shirt and
shoes at all times. Vulgar language is unacceptable at TransDulles Center, and
anyone using foul language will be asked to leave. No employees of Contractor
will make any complimentary or challenging remarks to any tenant or employee of
tenants of TransDulles Center. Any potential argumentative issues will be
brought up to the Landlord.
19. Employees of Contractor shall use only restrooms specifically designated by
Landlord and will leave the restroom in a clean condition.
20. Contractor shall turn off lights except emergency lighting at the end of
each day.
21. No smoking is permitted throughout the Building.
2
<PAGE>
SCHEDULE III
INSURANCE REQUIREMENTS FOR TENANTS GENERAL CONTRACTOR
-----------------------------------------------------
Tenant must provide Landlord with written evidence of the following minimum
insurance requirements. In no way do the following minimum requirements limit
the liability or obligation to provide insurance assumed elsewhere in the Work
Agreement or the Lease, as amended; in the event of any conflict between the
provisions of this Schedule and the Lease, the provisions of the Lease shall
govern.
A. Workers' Compensation and Employer's Liability.
----------------------------------------------
1. Statutory requirements in the Commonwealth of Virginia, to include all
areas involved in operations covered under the Work Agreement for the
Premises.
2. Coverage "B" - Employer's Liability, limit - $1,000,000.
B. Commercial General Liability.
----------------------------
1. Commercial General Liability: Form providing coverage not less than
that of the occurrence form ISO Standard Commercial General Liability.
Insurance, including but not limited to bodily injury, personal injury,
independent contractors' products, completed operations (construction risks
only), Broad Form Property Damage (including Completed Operations for a
period of not less than three (3) years - construction risk only). For
those contractors selling/manufacturing products, Commercial General
Liability coverage should be specifically endorsed to include products
liability.
2. Contractual Liability, Blanket basis insuring the liability assumed
under this Agreement.
3. Limits of Liability: Bodily Injury and Property Damage - $1,000,000
each occurrence, $1,000,000 aggregate; and Personal Injury - $1,000,000
each occurrence.
C. Commercial Auto Policy
----------------------
1. Commercial Auto Policy form, including all Owned, Non-Owned and Hired
Vehicles.
2. Limits of Liability: Bodily Injury - $1,000,000 each person, $1,000,000
each occurrence; and Property Damage - $1,000,000 each occurrence.
D. Umbrella Liability.
------------------
Such insurance shall provide coverage with limits of not less than $3,000,000
per occurrence/S3,000,000 aggregate, in excess of the underlying coverages
listed in Paragraphs A, B, and C above.
ADDITIONAL REQUIREMENTS
- -----------------------
1. Landlord and Landlord's management company (The Mark Winkler Company) shall
be included as an Additional Insured on all coverages listed above.
2. Tenant shall require the same primary minimum insurance requirements, as
listed above, from its general contractor and any other contractors with
which Tenant contracts directly, and they shall also comply with the
additional requirements listed herein.
<PAGE>
3. All insurance coverages required as herein set forth shall be primary and
at the sole cost and expense of Tenant, and its general contractor and any
other contractors with which Tenant contracts directly, and all deductibles
shall be assumed by, for the account of, and at the sole risk of Tenant,
and its general contractor and any other contractors with which Tenant
contracts directly. Insurance coverages will be in a form and carrier
reasonably acceptable to Landlord with a minimum rating of A:VII or higher.
4. A Certificate of Insurance evidencing all of the above must be presented to
Landlord prior to commencement of the Tenant Work.
5. The cancellation provision of such Certificate of Insurance shall provide
as follows:
"To be effective as to certificate holder, the issuing companies must
provide to the below named certificate holder sixty (60) days' written
notice prior to any cancellation or material modification of the above-
described policies before the expiration dates thereof."
2
<PAGE>
EXHIBIT E
---------
(Form of Letter of Credit)
IRREVOCABLE LETTER OF CREDIT
Date of Issue: _______________ Letter of Credit No.:_____________
Expiration Date:______________ Original Amount: USD $____________
Beneficiary: Applicant:
TransDulles Center, Inc.
c/o The Mark Winkler Company _________________________
4900 Seminary Road, Suite 900 _________________________
Alexandria, Virginia 22311-1811 _________________________
Attn: Mr. Peter S. Scholz
Ladies and Gentlemen:
We hereby establish this Irrevocable Letter of Credit No.______________, in your
favor as Beneficiary for an aggregate amount of up to_____________USD
(USD $_______), available to you by drafts drawn at sight, accompanied by your
dated and signed statement certifying that Landlord is entitled to draw against
the Letter of Credit posted as the Security Deposit pursuant to the terms of
that certain Deed of Lease between Beneficiary and Applicant dated_____________,
2000(the "Lease").
We hereby engage with you that all drafts drawn under and in compliance with the
terms of this Irrevocable Letter of Credit will be honored if presented at [bank
address], no later than [last day of month approximately 90 days after
expiration of first lease year] (the "Expiration Date"). This Letter of Credit
shall be automatically renewed for additional one (1) year periods ("Renewal
Periods") beginning on the first day of [the month after the Expiration Date],
and on the first day of [the month after the expiration date] each year
thereafter through [date 90 days after expiration of lease term and any option
periods], unless we send to you by nationally recognized overnight courier
service at the address shown above (or any other address you provide to us by
notice sent to us by nationally recognized overnight courier service which
references this Letter of Credit by Number) a notice of our intention not to
renew this Letter of Credit at least sixty (60) days prior to the beginning of
any of the Renewal Periods. At all times, we retain absolute discretion
concerning the decision to renew or not renew this Letter of Credit.
Documents may be presented at either ____________________________, New York,
New York, or at _________________________________, Washington, D.C.
Partial and Multiple Drawings are permitted. The amount available under this
Irrevocable Letter of Credit shall be the Original Amount set forth above, less
the sum of any drawings honored by us hereunder. This Letter of Credit letter is
binding upon and shall inure to the benefit of the parties and their respective
successors and permitted assigns. This Letter of Credit is transferable to any
successor in title to Beneficiary's interests as Landlord under the Lease, and
any such successor shall be deemed the Beneficiary hereunder, and shall be
entitled to draw against this Letter of Credit in accordance with the terms
hereof. This Irrevocable Letter of Credit is subject to the Uniform Customs and
Practice for Documentary Credits, 1993 Revision, ICC Publication 500.
Very truly yours,
BANK
By:_________________________
Name:_______________________
Title:______________________
<PAGE>
EXHIBIT F-1
-----------
CONFIDENTIALITY AGREEMENT
(OPERATING EXPENSE AND TAX AUDIT)
THIS CONFIDENTIALITY AGREEMENT (the "Agreement") is made and entered into this
____ day of _______, 2000 by and between TransDulles Center, Inc., a Virginia
corporation ('Landlord'), HomeGrocer.com, Inc., a Delaware corporation
("Tenant") and_____________________________ ("Contractor").
Preamble
Pursuant to the provisions of that certain Deed of Lease between Landlord and
Tenant, dated ,2000 (the "Lease"), Tenant was provided with certain
limited rights to audit the annual Operating Costs (as defined in the Lease). In
this regard, Tenant has engaged the services of Contractor to perform an audit
of the Operating Costs for the _____ Calendar Year (the "Audit"). In connection
with the Audit, Tenant and Contractor will be given access to various documents,
files and other information relating to the Operating Costs for their review and
inspection (the "Confidential Information"). The Confidential Information may
include economic, commercial, marketing and financial information that is
confidential and/or proprietary in nature. Therefore, Landlord has determined to
require Tenant and Contractor to execute and deliver this Agreement as a
condition of their review and inspection of the Confidential Information.
In consideration of being granted the opportunity to review and inspect the
Confidential Information, Tenant and Contractor agree as follows:
Agreement
Section 1. Purpose. Tenant and Contractor agree that their review and
inspection of the Confidential Information shall be solely to conduct an audit,
on Tenant's behalf and not as an agent, representative or broker of any
undisclosed party, to verify the accuracy of Operating Costs for the________
Calendar Year which Tenant paid under the Lease.
Section 2. Non-Disclosure and Use of Confidential Information.
(a) Tenant and Contractor agree that, except as set forth below, all
Confidential Information shall be used by Tenant and Contractor solely for
the purposes stated in Section 1 hereof. Tenant and Contractor further
agree not to disclose any of the Confidential Information without the prior
written consent of Landlord to any third party other than to their
respective (i) employees, officers, directors, and (ii) agents and
representatives, including attorneys, accountants and financial advisors
(collectively, the "Representatives"), in each case who (i) have a need to
know the Confidential Information for the limited purpose stated in Section
1 hereof, and (ii) have entered into an agreement with Tenant and
Contractor substantially in the form of this Agreement.
(b) The term "Confidential Information" shall not include information
which: (a) is already known to Tenant or Contractor from non-Landlord
sources not known by Tenant or Contractor to be subject to any
confidentiality obligations to Landlord; (b) is or becomes generally
available to the public other than as a result of a disclosure by Tenant or
Contractor or any of their Representatives; or (c) is required to be
disclosed by law or by regulatory or judicial process (including without
limitation any action instituted by Tenant to enforce the terms of the
Lease.)
(c) In the event Tenant or Contractor or any of their Representatives
fails in any respect to comply with its obligations under this Agreement,
Tenant and Contractor shall be liable to Landlord for breach of this
Agreement. In addition, in the event of any such failure, Landlord may, in
its sole discretion, refuse to allow Tenant the opportunity to perform an
audit with respect to any other Calendar Years.
<PAGE>
(d) The rights, powers and remedies provided for in the preceding
subsection (c) shall be in addition to and do not preclude the exercise of
any other right, power or remedy available to Landlord under law or in
equity. No forbearance, failure or delay in exercise of any such right,
power or remedy shall operate as a waiver thereof or preclude its further
exercise.
Section 3. Review of Confidential Information. The Confidential Information
will be made available for review by appointment only, at a location determined
by Landlord in the Washington, D.C. metropolitan area, to Representatives of
Tenant and/or Contractor whose duties include the review and inspection of such
information.
Section 4. Duplication. Intentionally Deleted
Section 5. Limited Access. Tenant and Contractor shall inform each of their
Representatives that receives any of the Confidential Information of the
requirements of this Agreement and shall require each such Representative to
comply with such requirements.
Section 6. Tenant Contact. Tenant and Contractor agree not to communicate with
any other tenants in the Project known as TransDulles Center in connection with
the Audit without the prior written consent of Landlord.
Section 7. Entire Agreement. This Agreement represents the entire agreement
between Tenant, Contractor and Landlord relating to the treatment of
Confidential Information heretofore or hereafter reviewed or inspected by Tenant
or Contractor in connection with the Audit. This Agreement supersedes all other
agreements relating to such matters which have previously been executed by
Tenant and/or Contractor in favor of Landlord.
Section 8. Reliance by Landlord's Management Company. Landlord's property
management company, The Mark Winkler Company, and its employees shall be
authorized to accept a copy of this Agreement (as executed by Tenant and
Contractor) as a basis for allowing Tenant or Contractor to review and inspect
the Confidential Information in connection with the Audit.
IN WITNESS WHEREOF, a duly authorized representative for both Tenant and
Contractor have executed this Agreement as of the date set forth below.
TENANT: LANDLORD:
HOMEGROCER.COM, INC. TRANSDULLES CENTER, INC.,
a Delaware corporation a Virginia corporation
By:______________________ By:_______________________________
Name:____________________ Name:_____________________________
Title:___________________ Title:____________________________
Date of Execution:______________ Date of Execution:________________
CONTRACTOR:
By:
Name:
Title:
Date of Execution:
2
<PAGE>
EXHIBIT F-2
-----------
CONFIDENTIALITY AGREEMENT
(SUBLEASE AND ASSIGNMENT AUDIT)
THIS CONFIDENTIALITY AGREEMENT (the "Agreement") is made and entered into this
____day of___________, 2000 by and between TransDulles Center, Inc., a Virginia
corporation ("Landlord"), HomeGrocer.com, Inc., a Delaware corporation
("Tenant") and _____________________ ("Contractor").
Preamble
Pursuant to the provisions of that certain Deed of Lease between Landlord and
Tenant, dated , 2000 (the "Lease"), Landlord was provided
with certain rights to audit the records of Tenant pertaining to the Assignment
and Subletting of the Premises. In this regard, Landlord will be given access to
various documents, files and other information relating to the Assignment and
Subletting of the Premises for its review and inspection (the "Confidential
Information"). The Confidential Information may include economic, commercial,
marketing and financial information that is confidential and/or proprietary in
nature. Therefore, Tenant has determined to require Landlord to execute and
deliver this Agreement as a condition of its review and inspection of the
Confidential Information.
In consideration of being granted the opportunity to review and inspect the
Confidential Information, Landlord agrees as follows:
Agreement
Section 1. Purpose. Landlord agrees that its review and inspection of the
Confidential Information shall be solely to determine the nature and scope of
the consideration paid to Tenant for the Assignment or Subletting of the
Premises.
Section 2. Non-Disclosure and Use of Confidential Information.
(a) Landlord agrees that, except as set forth below, all Confidential
Information shall be used by Landlord solely for the purposes stated in
Section 1 hereof. Landlord further agree not to disclose any of the
Confidential Information without the prior written consent of Tenant to
any third party other than to their respective (i) employees, officers,
directors, and (ii) agents and representatives, including attorneys,
accountants and financial advisors (collectively, the
"Representatives"), in each case who (i) have a need to know the
Confidential Information for the limited purpose stated in Section 1
hereof, and (ii) have entered into an agreement with Landlord
substantially in the form of this Agreement.
(b) The term "Confidential Information" shall not include information
which: (a) is already known to Landlord from non-Tenant sources not
known by Landlord to be subject to any confidentiality obligations to
Tenant (b) is or becomes generally available to the public other than as
a result of a disclosure by Landlord or any of its Representatives; or
(c) is required to be disclosed by law or by regulatory or judicial
process (including without limitation any action instituted by Landlord
to enforce the terms of the Lease.)
(c) In the event Landlord fails in any respect to comply with its
obligations under this Agreement, Landlord shall be liable to Tenant for
breach of this Agreement. In addition, in the event of such failure,
Tenant may, in its sole discretion, refuse to allow Landlord the
opportunity to perform an audit at a future time.
(d) The rights, powers and remedies provided for in the preceding
subsection (c) shall be in addition to and do not preclude the exercise
of any other right, power or remedy available to Tenant under law or in
equity. No forbearance,
<PAGE>
failure or delay in exercising any such right, power or remedy shall
operate as a waiver thereof or preclude its further exercise.
Section 3. Review of Confidential Information. The Confidential Information
will be made available for review by appointment only, at a location determined
by Tenant in the Washington, D.C. metropolitan area.
Section 4. Duplication. Intentionally Deleted.
Section 5. Limited Access. Landlord shall inform each of its
Representatives that receives any of the Confidential Information of the
requirements of this Agreement and shall require each such Representative to
comply with such requirements.
Section 6. Entire Agreement. This Agreement represents the entire agreement
between Tenant and Landlord relating to the treatment of Confidential
Information heretofore or hereafter reviewed or inspected by Landlord in
connection with the Audit. This Agreement supersedes all other agreements
relating to such matters which have previously been executed by Landlord in
favor of Tenant.
Section 7. Reliance by Tenant. Tenant and its employees shall be authorized
to accept a copy of this Agreement as executed by Landlord as a basis for
allowing Landlord to review and inspect the Confidential Information in
connection with the Audit.
IN WITNESS WHEREOF, a duly authorized representative for both Landlord and
Tenant have executed this Agreement as of the date set forth below.
TENANT: LANDLORD:
HOMEGROCER.COM, INC. TRANSDULLES CENTER, INC.,
a Delaware corporation a Virginia corporation
By:_______________________ By:_______________________________
Name:_____________________ Name:_____________________________
Title:____________________ Title:____________________________
Date of Execution:_____________ Date of Execution:________________
2
<PAGE>
EXHIBIT G
PARKING
[SITE PLAN]
<PAGE>
EXHIBIT 10.4
BUILD-TO-SUIT NET LEASE
between
OPUS NORTHWEST, L.L.C.,
as Landlord
and
HOMEGROCER.COM,INC.
as Tenant
March 23, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. DEFINITIONS AND EXHIBITS............................................... 1
1.1 Definitions....................................................... 1
1.2 Exhibits.......................................................... 8
2. GRANT OF LEASE; RENEWAL OPTIONS........................................ 8
2.1 Demise............................................................ 8
2.2 Quiet Enjoyment................................................... 8
2.3 Landlord and Tenant Covenants..................................... 8
2.4 Memorandum of Term................................................ 8
2.5 Tenant's Renewal Options.......................................... 8
2.6 Tenant's Termination Option....................................... 10
3. CONSTRUCTION; DELIVERY AND ACCEPTANCE OF PREMISES...................... 11
3.1 Landlord's Construction Obligations............................... 11
3.2 Delivery of Possession............................................ 11
3.3 Punch List........................................................ 12
3.4 Representatives................................................... 12
3.5 Design Information................................................ 13
3.6 Shell Plans....................................................... 13
3.7 Shell Construction................................................ 13
3.8 Leasehold Improvements Plans...................................... 13
3.9 Tenant's Cost Proposal............................................ 14
3.10 Construction of Leasehold Improvements; Payment of Tenant's Cost.. 14
3.11 Change Orders..................................................... 15
3.12 Tenant's Delays................................................... 16
3.13 Adjustments Upon Completion....................................... 16
3.14 Tenant's Property................................................. 16
4. RENT.................................................................... 16
4.1 Basic Rent........................................................ 16
4.2 Additional Rent for Taxes and Operating Expenses.................. 17
4.3 Net Lease; Additional Rent........................................ 19
4.4 Terms of Payment.................................................. 19
4.5 Late Payments..................................................... 19
4.6 Right to Accept Payments.......................................... 19
</TABLE>
i
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
5. USE, OCCUPANCY AND COMPLIANCE.......................................... 20
5.1 Use............................................................... 20
5.2 Compliance by Landlord............................................ 20
5.3 Compliance by Tenant.............................................. 20
5.4 Contests.......................................................... 20
5.5 Hazardous Substances.............................................. 21
5.6 Americans With Disabilities Act................................... 22
6. SERVICES AND UTILITIES................................................. 22
6.1 Services Provided by Landlord..................................... 22
6.2 Tenant's Utilities................................................ 23
6.3 Interruption of Services.......................................... 23
7. REPAIRS AND MAINTENANCE................................................ 24
7.1 Tenant's Obligations.............................................. 24
7.2 Landlord's Right of Entry......................................... 24
8. INSURANCE, WAIVERS AND INDEMNITY....................................... 24
8.1 Landlord's Insurance.............................................. 24
8.2 Tenant's Insurance................................................ 25
8.3 General Insurance Requirements.................................... 26
8.4 Waivers........................................................... 27
8.5 Landlord's Indemnity.............................................. 27
8.6 Tenant's Indemnity................................................ 27
9. ALTERATIONS; MECHANICS' LIENS.......................................... 27
9.1 Alterations....................................................... 27
9.2 Mechanics' Liens.................................................. 28
10. ASSIGNMENT AND SUBLETTING.............................................. 29
10.1 Permitted Transfers.............................................. 29
10.2 Transfers Requiring Consent...................................... 29
10.3 Deemed Assignments............................................... 29
10.4 Excess Consideration............................................. 29
10.5 General Provisions............................................... 30
</TABLE>
ii
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
11. CASUALTY................................................................ 30
11.1 Termination Options............................................... 30
11.2 Repair Obligations................................................ 31
11.3 Rent Abatement.................................................... 31
12. EMINENT DOMAIN.......................................................... 32
12.1 Termination....................................................... 32
12.2 Award; Restoration................................................ 32
13. END OF TERM............................................................. 33
13.1 Surrender......................................................... 33
13.2 Holding Over...................................................... 34
14. DEFAULTS AND REMEDIES................................................... 34
14.1 General........................................................... 34
14.2 Events of Default................................................. 34
14.3 Landlord's Remedies............................................... 35
14.4 Landlord's Default; Tenant's Remedies............................. 37
15. SUBORDINATION........................................................... 38
15.1 Subordination, Nondisturbance and Attornment...................... 38
15.2 Option to Make Lease Superior..................................... 38
16. SECURITY DEPOSIT........................................................ 38
16.1 Amount and Form................................................... 38
16.2 Use and Restoration............................................... 39
16.3 Transfers......................................................... 39
16.4 Refund............................................................ 40
17. MISCELLANEOUS........................................................... 40
17.1 Roof Installations................................................ 40
17.2 Building Signage.................................................. 40
17.3 Non-competition................................................... 40
17.4 Brokers........................................................... 40
17.5 Estoppel Certificates............................................. 41
</TABLE>
iii
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
17.6 Notices.......................................................... 41
17.7 Actions by Landlord's Agent...................................... 41
17.8 Severability; Governing Law...................................... 41
17.9 Transfers of Landlord's Interest................................. 42
17.10 Headings......................................................... 42
17.11 Complete Agreement; Modification................................. 42
17.12 No Offer......................................................... 42
17.13 Survival......................................................... 42
17.14 Limitation on Landlord's Liability............................... 42
17.15 Tenant's Authority............................................... 43
17.16 No Partnership................................................... 43
17.17 Force Majeure.................................................... 43
17.18 Financial Statements............................................. 43
17.19 Future Covenants................................................. 43
17.20 Binding Effect................................................... 44
17.21 Acquisition Contingency.......................................... 44
Exhibit A LEGAL DESCRIPTION OF THE LAND...................................... A-1
Exhibit B SHELL SPECIFICATIONS............................................... B-1
</TABLE>
iv
<PAGE>
BUILD-TO-SUIT NET LEASE
THIS BUILD-TO-SUIT NET LEASE ("Lease") is entered into as of March 23, 2000
by and between the Landlord and Tenant identified in Section 1.1.
1. DEFINITIONS AND EXHIBITS
1.1 Definitions. In this Lease, the following defined terms have the
meanings set forth for them below or in the section of this Lease indicated
below:
"ADA" means the Americans with Disabilities Act, as amended from time
to time.
"Additional Rent" means all amounts required to be paid by Tenant
under this Lease in addition to Basic Rent including, without limitation,
Operating Expenses and Taxes.
"Affiliates" means, with respect to any party, any entities or
individuals that control, are controlled by or are under common control
with such party, together with its and their respective partners,
venturers, directors, officers, shareholders, trustees, trustors,
beneficiaries, agents, employees and spouses.
"Basic Rent" means the Rent payable according to Section 4.1 based on
a rate per square foot of Rentable Area of the Premises applicable during
each Lease Year of the Term as follows:
Rate of Base Rent Per
Lease Year(s) Square Foot of Rentable Area
------------- ----------------------------
1 - 3 $5.50
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4 - 5 $5.85
-------- -------
6 - 8 $6.10
-------- -------
9 - 10 $6.45
-------- -------
"Building" means the building containing approximately 100,000 square
feet of Rentable Area to be constructed by Landlord for Tenant upon the
Land according to Section 3.
"Change Order" has the meaning set forth in Section 3.11.
"Commencement Date" means the first day of the Term, which will be the
date that is 15 days after the Delivery Date.
"Covenant Documents" means all grants, declarations or agreements that
are now or hereafter recorded in the real property records of Douglas
County, Colorado and that impose or create easements, covenants, conditions
or restrictions on, over, under, through or with respect to property
located within the Project and that relate to the use,
<PAGE>
development or improvement of property within the Project, the operation,
maintenance, repair or replacement of landscaping, streets or other
improvements serving property within the Project or the provision of other
utilities or services to property within the Project.
"Delivery Date" means the date on which Landlord delivers possession
of the Premises to Tenant with Landlord's Work Substantially Completed,
which will be the Projected Delivery Date, unless the Delivery Date is
extended according to Section 3.2.
"Design Information" has the meaning set forth in Section 3.5.
"Environmental Laws" means the Resource Conservation and Recovery Act,
42 U.S.C. Section 6901 et seq., the Comprehensive Environmental Response,
-- ---
Compensation and Liability Act, U.S.C. Section 9601 et seq. (including the
-- ---
so-called "Superfund" amendments thereto), any other applicable Laws
governing or pertaining to any hazardous substances, hazardous wastes,
chemicals or other materials, including, without limitation, asbestos,
polychlorinated biphenyls, radon, petroleum and any derivative thereof or
any common law theory based on nuisance or strict liability.
"Event of Default" has the meaning set forth in Section 14.2.
"Expiration Date" means (i) if the Commencement Date is the first day
of a month, the 10-year anniversary of the day immediately preceding the
Commencement Date; or (ii) if the Commencement Date is not the first day of
a month, the 10-year anniversary of the last day of the month in which the
Commencement Date occurs.
"First Renewal Term" has the meaning set forth in Section 2.5(a).
"Hazardous Substance" means any substance, chemical or material
declared to be, or regulated as, hazardous or toxic under any Environmental
Law or the presence of which may give rise to liability under any
Environmental Law.
"Improvements" means the Building, the Leasehold Improvements and any
other structures, pavement, lighting fixtures or other improvements now or
later constructed or installed upon the Land.
"Interest Rate" means the Prime Rate plus 5% per annum, but if such
rate exceeds the maximum interest rate permitted by law, such rate will be
reduced to the highest rate allowed by law under the circumstances.
"Land" means the real property, located in the Project that is legally
described on Exhibit A and depicted on Exhibit A-1.
---------
"Landlord" means Opus Northwest, L.L.C., a Delaware limited liability
company.
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"Landlord's Notice Address" means:
1855 Blake Street,
Suite 200
Denver, Colorado 80202
with a copy to:
Opus Corporation
10350 Bren Road West
Minnetonka, Minnesota 55343
Attention: Legal Department
"Landlord's Rent Address" means:
1855 Blake Street
Suite 200
Denver, Colorado 80202
"Landlord's Representative" means John M. Shaw, Marshall Burton or
Paul Wolters.
"Landlord's Work" means the construction and installation of the Shell
and the Leasehold Improvements.
"Laws" means any and all present or future federal, state or local
laws, statutes, ordinances, rules, regulations or orders of any and all
governmental or quasi-governmental authorities having jurisdiction,
including, without limitation, Environmental Laws, and the Covenant
Documents.
"Leasehold Improvements" means all leasehold improvements and
installations, in addition to the Shell, that are to be constructed or
installed by Landlord for Tenant according to Section 3.
"Leasehold Improvements Allowance" means an amount equal to $5.00
multiplied by the number of square feet of Rentable Area of the Premises.
"Leasehold Improvements Plans" means construction plans and
specifications for the Leasehold Improvements.
"Lease Year" means each successive period of 12 calendar months during
the Term, ending on the same day and month (but not year, except in the
case of the last Lease Year) as the day and month on which the Expiration
Date will occur. If the Commencement Date is not the first day of a month,
the first Lease Year will be greater than 12 months by the number of days
from the Commencement Date to the last day of the month in which the
Commencement Date occurs.
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"Market Rental Rate" has the meaning set forth in Section 2.5(b).
"Market Escalations" has the meaning set forth in Section 2.5(b).
"Mortgagee" means any mortgagee, ground lessor, trust deed holder or
sale-leaseback lessor of Landlord's interest in the Premises
"Operating Expenses" means all expenses Landlord incurs in any
applicable calendar year to maintain and operate the Premises in accordance
with the terms of this Lease, including, but not limited to, insurance
premiums (including insurance premiums for rent insurance); maintenance and
repair costs (whether capital or not); lighting costs (such as, for
example, lamps, tubes, ballasts and starters); the costs of operating,
maintaining, repairing and replacing the Standard HVAC Equipment (such as,
for example, preventative maintenance contracts and repairs and
replacements), but excluding the cost of utilities (which will be paid for
directly by Tenant) and excluding that portion of the cost of replacing any
Standard HVAC Equipment for which Landlord is responsible, as provided
below; trash and rubbish removal costs; wages payable by Landlord to
employees whose duties are connected with operating and maintaining the
Premises (but only for the portion of the employees' time allocable to work
related to the Premises); amounts payable by Landlord to contractors or
subcontractors for work or services connected with operating and
maintaining the Premises; all costs of uniforms, supplies and materials
used in connection with operating and maintaining the Premises; all payroll
taxes, unemployment insurance costs, vacation allowances, and the cost of
providing disability insurance or benefits, pensions, profit sharing
benefits, hospitalization, retirement or other so-called fringe benefits;
any expense Landlord incurs or its contractors or subcontractors incur
pursuant to Laws or pursuant to any collective bargaining agreement
covering employees; Landlord's cost for all services, supplies, repairs,
replacements or other expenses connected with maintaining and operating the
Premises; reasonable attorneys' fees and costs Landlord incurs in
connection with appealing or contesting real estate or other taxes or
levies; and such other expenses Landlord ordinarily incurs operating and
maintaining the Premises and not specifically described herein, including
management fees in an amount not greater than 3% of all Rent payable by
Tenant hereunder. Operating Expenses also include expenses Landlord incurs
relating to public sidewalks adjacent to the Premises and any pedestrian
walkway system (either above or below ground) or other public facility
which serves the Premises and any assessments, fees or other charges
imposed upon the Premises or upon Landlord as a result of Landlord's
ownership of the Premises under any Covenant Documents. Notwithstanding the
foregoing, Operating Expenses will not include the cost of (1) any repairs
to, or replacements of (whether capital or not), the Building's roof or
structural elements (including foundations, structural columns and beams
and load-bearing walls); (2) correcting or completing any item of
Landlord's Work set forth on the punch list described in Section 3.3 or
performing any Warranty Work pursuant to such section; (3) any items
(including, but not limited to, costs incurred by Landlord for the repair
of damage to the Building) to the extent Landlord receives reimbursement
from insurance proceed or from a third party, however, the deductible
portion of any insured loss may be
4
<PAGE>
included in Operating Expenses as provided in Section 8.1(b); (4) interest
or principal payments or any other financing cost on any mortgage or other
indebtedness of Landlord; (5) any item (including, without limitation, the
cost of repairs or the cost of late filing penalties) necessitated directly
and solely by, or resulting directly and solely from, the negligence of, or
breach of this Lease by, Landlord or any of its agents, employees or
independent contractors; (6) overhead and profit increment paid to Landlord
or its Affiliates for goods and/or services to the Premises to the extent
the same exceeds the cost that would have been charged by an unaffiliated
third party on a competitive basis; or any costs included in Operating
Expenses representing an amount paid to a person, firm, corporation or
other entity related to Landlord which is in excess of the amount which
would have been paid in the absence of such relationship; (7) advertising
and promotional expenditures; (8) costs arising from Landlord's charitable
or political contributions; or (9) any work or service performed for any
facility other than the Premises. Further notwithstanding the foregoing, if
during the Term it becomes necessary to replace any Standard HVAC
Equipment, then Landlord will initially pay for the total cost of the
replacement equipment (the "Replacement Cost"), and the Replacement Cost,
together with interest thereon at the Prime Rate in effect at the time
Landlord purchases the replacement equipment plus 2% per annum, will then
be amortized over the useful life of the replacement equipment, as
reasonably determined by Landlord in accordance with generally accepted
accounting principles, and the annual amortization applicable to each year
of the then-remaining Term (not including any then-unexercised Renewal
Term) will be included in Operating Expenses for such year. The inclusion
of such annual amortization in Operating Expenses will not continue into
any Renewal Term that was not exercised at the time Landlord purchased the
replacement equipment; however, the existence of such replacement equipment
at the Premises will be taken into account in determining the Basic Rent
for such Renewal Term in accordance with Section 2.5(b).
"Premises" means the Land and all Improvements.
"Prime Rate" means the prime interest rate as published from time to
time by The Wall Street Journal, with any changes in such rate to be
-----------------------
effective on the date such change is published.
"Project" means the Compark Business Campus located in Douglas County,
Colorado.
"Projected Delivery Date" means October 31, 2000.
"Rent" means Basic Rent and all Additional Rent.
"Renewal Notice" has the meaning set forth in Section 2.5(a).
"Renewal Term" has the meaning set forth in Section 2.5(a).
5
<PAGE>
"Rentable Area" means gross building area in square feet, calculated
in accordance with the Standard Method for Measuring Floor Area in Office
Buildings published by the Building Owners and Managers Association
International and approved by the American National Standards Institute,
Inc. on June 7, 1996.
"Second Renewal Term" has the meaning set forth in Section 2.5(a).
"Shell" means those portions of the Building and those additional site
Improvements that are specified on the Shell Specifications.
"Shell Plans" means construction plans and specifications for the
Shell.
"Shell Specifications" means the preliminary specifications for the
Shell set forth on Exhibit B.
---------
"Special HVAC Equipment" means the heating, ventilating, air
conditioning and refrigeration equipment installed in order to provide
heating, ventilation, air conditioning or refrigeration to any areas of, or
equipment within, the Premises that are unique to Tenant's business, such
as, for example, the equipment installed to provide cooling to Tenant's
food refrigeration rooms.
"Standard HVAC Equipment" means the heating, ventilating and air
conditioning equipment installed in order to provide ordinary and customary
heating, ventilation and air conditioning to the office and warehouse
portions of the Premises, but excluding any Special HVAC Equipment.
"Substantially Completed" means, with respect to Landlord's Work, that
(a) all utilities called for by the Shell Plans have been installed and
connected to the Premises; (b) all roads necessary to provide access to the
Premises have been graded and paved; (c) all of Landlord's Work
contemplated by Section 3 of this Lease has been substantially completed;
(d) a certificate of occupancy (temporary or final) has been issued by the
appropriate governmental authority permitting use of the Premises for the
use permitted under this Lease (upon Tenant's request, Landlord will
deliver to Tenant a copy of such certificate of occupancy); (e) Landlord
has delivered to Tenant a certificate of completion from Landlord's
architect certifying substantial completion of the matters set forth in the
Shell Plans and the Leasehold Improvements Plans; and (f) any work
remaining to be completed or corrected in the Premises is of such a nature
that it will not materially and adversely interfere with Tenant's use and
occupancy of the Premises and will be able to be completed within 60 days.
"Taxes" means all ad valorem real and personal property taxes and
assessments, special or otherwise, levied upon or with respect to the
Premises, the personal property used in operating the Premises, and the
rents and additional charges payable by Tenant according to this Lease, and
imposed by any taxing authority having jurisdiction; and all taxes, levies
and charges which may be assessed, levied or imposed in replacement of, or
in addition to, all or any part of ad valorem real or personal property
taxes or assessments
6
<PAGE>
as revenue sources, and which in whole or in part are measured or
calculated by or based upon the Premises, the leasehold estate of Landlord
or Tenant in and to the Premises, or the rents and other charges payable by
Tenant according to this Lease. Taxes will not include any net income,
franchise, business and occupation, excise, transfer, gift, inheritance or
other similar taxes of Landlord.
"Tax Year" means a 12-month period for which Taxes are assessed.
"Tenant" means HomeGrocer. com, Inc., a Washington corporation.
"Tenant's Cost" means the total cost of preparing the Leasehold
Improvements Plans, obtaining all necessary permits for, and constructing
and installing, the Leasehold Improvements in the Shell, and providing any
required services during construction of the Leasehold Improvements (such
as electricity and other utilities and refuse removal). Landlord and Tenant
agree that Tenant's Cost will include a general contractor's fee payable to
Landlord in an amount equal to 6% of the costs of constructing and
installing the Leasehold Improvements and a cost of general conditions in
an amount equal to 5% of the costs of constructing and installing the
Leasehold Improvements. Tenant's Cost will also include any increases in
Landlord's costs of designing, constructing or installing the Shell that
result from Change Orders requested by Tenant.
"Tenant's Cost Proposal" has the meaning set forth in Section 3.9.
"Tenant's Notice Address" means,
HomeGrocer.com, Inc.
Attn: Vice President Operations
10230 NE Points Drive, Suite 300
Kirkland, WA 98033
with a copy to:
HomeGrocer. com, Inc.
Attn: Legal Department
10230 NE Points Drive, Suite 300
Kirkland, WA 98033
"Tenant's Representative" means David Brown, or such additional or
alternative person or persons as may be appointed by Tenant pursuant to
Section 3.4
"Term" means the duration of this Lease, which will be approximately
10 years beginning on the Commencement Date and ending on the Expiration
Date, unless terminated earlier or extended further as provided in this
Lease. The Term will also include any exercised Renewal Term.
"Warranty Work" has the meaning set forth in Section 3.3.
7
<PAGE>
1.2 Exhibits. The Exhibits listed below are attached to and incorporated
in this Lease. In the event of any inconsistency between such Exhibits and the
terms and provisions of this Lease, the terms and provisions of the Exhibits
will control. The Exhibits to this Lease are:
Exhibit A - Legal Description of the Land
Exhibit B - Shell Specifications
2. GRANT OF LEASE; RENEWAL OPTIONS
2.1 Demise. Subject to the terms, covenants, conditions and provisions of
this Lease, Landlord leases to Tenant and Tenant leases from Landlord the
Premises for the Term.
2.2 Quiet Enjoyment. Landlord covenants that, so long as no Event of
Default exists, Tenant will have quiet and peaceful possession of the Premises
during the Term.
2.3 Landlord and Tenant Covenants. Landlord covenants to observe and
perform all of the terms, covenants and conditions applicable to Landlord in
this Lease. Tenant covenants to pay the Rent when due, and to observe and
perform all of the terms, covenants and conditions applicable to Tenant in this
Lease.
2.4 Memorandum of Term. After the occurrence of the Delivery Date, either
party will, upon the other's request, execute and acknowledge a recordable
memorandum setting forth the date on which the Commencement Date occurred or
will occur and the date on which the Expiration Date is scheduled to occur.
2.5 Tenant's Renewal Options.
(a) Renewal Terms. Subject to the terms and provisions of this
-------------
Section 2.5, Tenant, at its option, may extend the Term of this Lease for
one five-year period at the end of the initial Term (the "First Renewal
Term") and, if Tenant exercises its option with respect to the First Renewal
Term, for an additional five-year period at the end of the First Renewal
Term (the "Second Renewal Term"). The First Renewal Term and the Second
Renewal Term are individually referred to herein as a "Renewal Term." To
exercise each such option, Tenant must deliver written notice of the
exercise thereof (a "Renewal Notice") to Landlord no earlier than 14 and no
later than 10 months prior to the expiration of (i) the initial Term, in the
case of Tenant's option with respect to the First Renewal Term, or (ii) the
First Renewal Term, in the case of Tenant's option with respect to the
Second Renewal Term. During each Renewal Term, all of the terms and
provisions of this Lease will apply, except that (1) after the Second
Renewal Term there will be no further right of renewal; (2) the Basic Rent
payable for each month of the first Lease Year of each Renewal Term will be
1/12 of the amount obtained by multiplying the Market Rental Rate in effect
at the time Tenant delivers its Renewal Notice with respect to such Renewal
Term (determined as set forth below) by the Rentable Area of the Premises;
and (3) the Basic Rent payable during the remaining Lease Years of each
Renewal Term will be subject to increase in accordance with the Market
Escalations in effect at the time Tenant delivers its Renewal Notice
(determined as set forth below).
8
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(b) Market Rental Rate and Market Escalations. As used herein, "Market
-----------------------------------------
Rental Rate" means a rental rate per square foot of Rentable Area per year
equal to the prevailing first year rental rate then being obtained by
landlords of buildings comparable to the Building in the market area of
southeast suburban Denver in which the Project is located under leases of
comparable space for a comparable term (the "Comparable Transactions");
provided, however, that (i) in determining the Market Rental Rate, there
will be an adjustment to such prevailing rental rate (amortized, without
interest, equally over the subject Renewal Term) to account for (A) any
tenant improvement allowances, free rent concessions, brokerage commissions
or other tenant inducements that are required to be paid by the landlords
in the Comparable Transactions in order to achieve such prevailing rental
rate but which will not be required to be paid by Landlord with respect to
the subject Renewal Term under this Lease, and (B) the value of air
conditioning equipment and other leasehold improvements (but excluding
Tenant's trade fixtures) then existing at the Premises but which do not
exist in the premises demised in the Comparable Transactions; and (ii) in
no event will the Market Rental Rate for any Renewal Term be less than the
annual rate at which Basic Rent was payable by Tenant for the immediately
preceding Lease Year of the Term. "Market Escalations" means both the
rate(s) and frequency by which, in Comparable Transactions, the Market
Rental Rate is increased during the terms of such transactions (for
example, the rental rate may be increased by 3% every other year, or by 2%
every year, or by 4% after two years and by 3% after four years, etc.).
Landlord and Tenant will, for a period of 30 days from and after the date
on which Tenant delivers its Renewal Notice, meet with each other and
negotiate in good faith to agree upon the then-current Market Rental Rate
and the then current Market Escalations acceptable to both parties. If the
parties are unable to agree upon the Market Rental Rate and Market
Escalations during such 30-day period, then, Landlord will, within seven
days after the expiration of such 30-day period, deliver to Tenant a
written determination of the Market Rental Rate and Market Escalations as
determined by Landlord ("Landlord's Determination"). Tenant will have 14
days from the date of Landlord's delivery of Landlord's Determination to
notify Landlord of Tenant's acceptance of Landlord's Determination or
deliver to Landlord Tenant's written determination of the Market Rental
Rate and Market Escalations ("Tenant's Determination"). If Tenant does not
deliver Tenant's Determination to Landlord within such 14-day period,
Tenant will be deemed to have accepted Landlord's Determination and the
rental rate and escalations set forth in Landlord's Determination will be
the Market Rental Rate and Market Escalations. If Tenant does deliver
Tenant's Determination within such 14-day period, then Landlord and Tenant
will have an additional 10 days from the date of delivery of Tenant's
Determination to negotiate a Market Rental Rate and Market Escalations
acceptable to both Landlord and Tenant. If no agreement can be reached as
to the Market Rental Rate and Market Escalations within such 10-day period,
then within seven days after such 10-day period expires, Landlord and
Tenant will mutually appoint a commercial leasing broker that has at least
10 years full-time experience in the market area. If Landlord and Tenant
are unable to mutually agree on a broker, either of the parties to this
Lease, after giving five days prior notice to the other party, may apply to
the then president of the Denver Board of Realtors for the selection of a
broker who meets the foregoing qualifications, which selection will be
9
<PAGE>
made within three days. The broker selected by the president of the Board
of Realtors will be a person who has not previously acted in any capacity
for either party and who meets the foregoing experience qualifications. The
broker will, within 10 days of his or her appointment, review Landlord's
Determination and Tenant's Determination of the Market Rental Rate and the
Market Escalations and such other information as he or she deems necessary
and will determine whether Landlord's Determination or Tenant's
Determination of the Market Rental Rate and the Market Escalations is more
reasonable. The broker will immediately notify the parties of his or her
determination. The Market Rental Rate and Market Escalations determined by
Landlord or Tenant and selected as the more reasonable by the broker will
be the Market Rental Rate and Market Escalations used to determine the
Basic Rent for the subject Renewal Term. Each of the parties will bear 1/2
the cost of the broker.
(c) Limitation on Tenant's Rights. Tenant will have no right to extend
-----------------------------
the Term and a Renewal Notice will be ineffective if an Event of Default
exists at the time such notice is given. Any termination of this Lease
terminates all rights under this Section 2.5.
2.6 Tenant's Termination Option. Tenant, at its option, will have the one
time right to terminate this Lease (the "Termination Option") effective as of
the last day of the fifth Lease Year (the "Early Termination Date"); provided
that: (a) Tenant gives written notice to Landlord of Tenant's exercise of the
Termination Option no earlier than 14 months and no later than l0 months prior
to the Early Termination Date; (b) simultaneously with delivering such notice of
Tenant's exercise of the Termination Option to Landlord, Tenant pays to Landlord
a termination payment in the amount of $750,000; and (c) notwithstanding the
provisions of Section 13.1, on or before the Early Termination Date, Tenant
removes from the Premises all Leasehold Improvements and equipment installed
therein for Tenant's use (including, without limitation, the Special HVAC
Equipment) that Landlord, at its option, specifies in a notice given to Tenant
within 45 days after delivery of Tenant's notice exercising the Termination
Option and Tenant repairs all damage caused by such removal. If Tenant exercises
the Termination Option, makes the termination payment and removes all Leasehold
Improvements and equipment required to be removed in accordance with the
provisions of this Section 2.6, then this Lease will terminate on the Early
Termination Date, whereupon Tenant will surrender the Leased Premises in
accordance with Section 13.1 (except as otherwise provided above), and both
parties will thereafter be relieved of any obligations under this Lease that
would otherwise have accrued subsequent to the Early Termination Date, except
for those obligations which expressly survive any termination of this Lease. At
Landlord's option, Tenant will have no right to exercise the Termination Option
pursuant to this Section 2.6 if an Event of Default exists at the time Tenant
delivers its notice of exercise of the Termination Option. If Tenant fails to
exercise the Termination Option as provided above, then the Termination Option
and this Section 2.6 will automatically and immediately become null and void and
of no further force or effect.
10
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3. CONSTRUCTION; DELIVERY AND ACCEPTANCE OF PREMISES
3.1 Landlord's Construction Obligations. Subject to and in accordance with
the provisions of this Section 3, Landlord will (i) at Landlord's sole cost and
expense, design, construct and install the Shell on the Land; and (ii) at
Landlord's cost up to the amount of the Leasehold Improvements Allowance, and
otherwise at Tenant's sole cost and expense, design, construct and install the
Leasehold Improvements. Landlord will be solely responsible for obtaining all
necessary permits from all applicable governmental and quasi-governmental
agencies having jurisdiction for Landlord's Work. Landlord has estimated that
Landlord's Work will be Substantially Completed by the Projected Delivery Date;
however, Landlord agrees to use reasonable efforts (utilizing ordinary and
customary construction practices) to cause Landlord's Work to be Substantially
Completed as much in advance of the Projected Delivery Date as practicable.
Tenant agrees to reasonably cooperate with such efforts.
3.2 Delivery of Possession. If Landlord is unable to deliver exclusive
possession (i.e., free and clear of any other occupants or rights of occupancy,
but subject to the rights of Landlord under this Lease and the rights of others
under the Covenant Documents) of the Premises with the Landlord's Work
Substantially Completed by the Projected Delivery Date, then, except as provided
below, Landlord will not be in default or liable in damages to Tenant, nor will
the obligations of Tenant be affected, provided, however, that (i) the Delivery
Date will be extended automatically by one day for each day of the period after
the Projected Delivery Date to the day on which Landlord tenders exclusive
possession of the Premises to Tenant with Landlord's Work Substantially
Completed, less any portion of that period attributable to Tenant's delays as
more particularly described in Section 3.12; and (ii) if Landlord does not
tender exclusive possession of the Premises to Tenant with the Landlord's Work
Substantially Completed on or before March 30, 2001 (pins any period of delay
caused by Tenant's delays as more particularly described in Section 3.12),
Tenant will have the right to terminate this Lease by delivering written notice
of termination to Landlord not more than 30 days after such tender deadline
date. Upon a termination under clause (ii) above, each party will, upon the
other's request, execute and deliver an agreement in recordable form containing
an acknowledgement of the termination of this Lease; neither Landlord nor Tenant
will have any further obligations to each other, including, without limitation,
any obligations to pay for work previously performed in the Premises; all
improvements to the Premises will become and remain the property of Landlord;
and Landlord will refund to Tenant any sums paid to Landlord by Tenant in
connection with the Lease, including, without limitation, any payments to
Landlord of portions of Tenant's Cost, prepaid Rent and the Security Deposit.
Such postponement of the commencement of the Term and termination and refund
right will be in full settlement of all claims that Tenant might otherwise have
against Landlord by reason of Landlord's failure to cause Landlord's Work to be
Substantially Completed by the Projected Delivery Date. If Landlord delivers
possession of the Premises with the Landlord's Work Substantially Completed
prior to the Projected Delivery Date, then Tenant may either accept such
delivery (in which case such date will be the Delivery Date hereunder) or may
refuse to accept delivery until any date selected by Tenant that is no later
than the Projected Delivery Date. Landlord agrees to permit Tenant to enter the
Premises for purposes of installing Tenant's trade fixtures and equipment (but
not for the conduct of Tenant's regular business) prior to the Delivery Date to
the extent such
11
<PAGE>
entry will not interfere with Landlord's completion of Landlord's Work and
Landlord agrees to use all reasonable efforts (without interfering with
customary construction scheduling or incurring extraordinary costs such as
overtime) to make such entry for such purposes possible by approximately 45 days
prior to Delivery Date. Such early entry for fixturing purposes will not
constitute Tenant's acceptance of possession of the Premises or any portion
thereof. Tenant will also have the right to occupy the Premises for completing
such installation of fixtures and equipment, for furnishing the Premises, for
stocking the Premises with Tenant's inventory and for the regular conduct of
Tenant's business during the period from the Delivery Date to the Commencement
Date and, during such period, all of the parties' rights and obligations under
this Lease will apply as if the Term had commenced (including, without
limitation, Tenant's obligation to pay Additional Rent for Taxes and Operating
Expenses); provided that Tenant will have no obligation to pay any Basic Rent
until the Commencement Date.
3.3 Punch List. Tenant's taking possession of any portion of the Premises
will be conclusive evidence that such portion of the Premises was in good order
and satisfactory condition, and that all of Landlord's Work in or to such
portion of the Premises was satisfactorily completed, when Tenant took
possession, except as to items requiring repair or completion identified on a
punch list prepared and signed by Landlord's Representative and Tenant's
Representative after an inspection of the Premises by both such parties made
within 15 days after the Delivery Date and except as to any Warranty Work.
Landlord will repair or complete all items set forth on such punch list with
reasonable promptness. Landlord will not be responsible for any items of damage
caused by Tenant, its agents, independent contractors or suppliers. Landlord
covenants to repair or replace, at Landlord's expense and as "Warranty Work,"
any defective item of Landlord's Work of which Tenant notifies Landlord within
one year after the Delivery Date and that requires repair or replacement as a
result of (i) any failure to construct the Shell in material compliance with the
Shell Plans; (ii) any failure to construct the Leasehold Improvements in
material compliance with the Leasehold Improvements Plans; or (iii) any
defective materials or workmanship. Within 10 days after the expiration of the
above-described one-year warranty period, Landlord will assign to Tenant any
manufacturers' or subcontractors' warranties or guaranties that are still then
in effect with respect to the Shell or the Leasehold Improvements, except for
any such warranties or guaranties relating to any portions of the Premises which
Landlord is required under this Lease to maintain and repair at Landlord's
expense. No promises to construct, alter, remodel or improve the Premises have
been made by Landlord to Tenant other than as may be expressly stated in this
Lease.
3.4 Representatives. Landlord appoints Landlord's Representative to act
for Landlord in all matters covered by this Section 3. Tenant appoints Tenant's
Representative to act for Tenant in all matters covered by this Section 3. All
inquiries, requests, instructions, authorizations and other communications with
respect to the matters covered by this Section 3 will be made to Landlord's
Representative or Tenant's Representative, as the case may be. Tenant will not
make any inquiries of or requests to, and will not give any instructions or
authorizations to, any other employee or agent of Landlord, including Landlord's
architect, engineers and contractors or any of their agents or employees, with
regard to matters covered by this Section 3. Either party may change its
representative at any time by three days' prior written notice to the other
party.
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3.5 Design Information. On or before April 10, 2000, Tenant will submit to
Landlord all information in addition to the Shell Specifications necessary for
preparation of the Shell Plans and the Leasehold Improvements Plans (the "Design
Information"). Each day after such date until Tenant has provided such Design
Information will be a day of Tenant's delay.
3.6 Shell Plans. Promptly after receipt of all Design Information,
Landlord will cause its architect to prepare the Shell Plans based on the Shell
Specifications and the submitted Design Information, provided that,
notwithstanding anything set forth in this Lease to the contrary, Landlord's
architect will not be obligated to include in the Shell Plans, and Landlord will
not be obligated to include in the Shell, any items that do not comply with
Laws. Within five business days after receipt of the proposed Shell Plans,
Tenant will either approve the same in writing or notify Landlord in writing of
how the proposed Shell Plans are inconsistent with the Shell Specifications or
the Design Information and how the Shell Plans must be changed in order to make
them consistent with the Shell Specifications and the Design Information. Each
day following the 5th business day after the proposed Shell Plans are submitted
to Tenant until Tenant approves them or delivers such notice of objections will
be a day of Tenant's delay. Upon receipt of Tenant's notice of objections,
Landlord will cause its architect to prepare revised Shell Plans according to
such notice and submit the revised Shell Plans to Tenant. Upon submittal to
Tenant of the revised Shell Plans, and upon submittal of any further revisions,
the procedures described above will be repeated. If the original Shell Plans, or
any revisions thereof, are consistent with the Shell Specifications and the
Design Information, then each day following Landlord's receipt of Tenant's
notice of any objections until the day on which Landlord receives Tenant's
written approval of the Shell Plans will be a day of Tenant's delay.
3.7 Shell Construction. At such time as the Shell Plans have been approved
in writing by both Landlord and Tenant, Landlord will cause the Shell to be
constructed or installed on the Land in a good and workmanlike manner and
according to the approved Shell Plans and all applicable Laws.
3.8 Leasehold Improvements Plans. Promptly after receipt of all Design
Information, Landlord will cause an architect selected by Landlord and approved
by Tenant (which approval will not be unreasonably withheld or delayed and which
approval will be deemed given if Tenant does not notify Landlord to the contrary
within three business days after Landlord notifies Tenant of its proposed
architect), to prepare the Leasehold Improvements Plans based on the submitted
Design Information. Within five business days after receipt of the proposed
Leasehold Improvements Plans, Tenant will either approve the same in writing or
notify Landlord in writing of how the proposed Leasehold Improvements Plans are
inconsistent with the Design Information and how the Leasehold Improvements
Plans must be changed in order to make them consistent with the Design
Information. Each day following the 5th business day after the proposed
Leasehold Improvements Plans are submitted to Tenant until Tenant approves them
or delivers such notice of objections will be a day of Tenant's delay. Upon
receipt of Tenant's notice of objections, Landlord will cause its architect to
prepare revised Leasehold Improvements Plans according to such notice and submit
the revised Leasehold Improvements Plans to Tenant. Upon submittal to Tenant of
the revised Leasehold Improvements Plans, and upon submittal of any further
revisions, the procedures described above
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will be repeated. If the original Leasehold Improvements Plans, or any revisions
thereof, are consistent with the Design Information, then each day following
Landlord's receipt of Tenant's notice of any objections until the day on which
Landlord receives Tenant's written approval of the Leasehold Improvements Plans
will be a day of Tenant's delay.
3.9 Tenant's Cost Proposal. At such time as Leasehold Improvements Plans
that have been approved in writing by both Landlord and Tenant have been
prepared, Landlord will (i) obtain at least three bids for each of the major
trades that will be involved in the construction of the Leasehold Improvements,
unless less than three qualified subcontractors exist for a given trade, in
which case Landlord will obtain a bid from all qualified subcontractors of such
trade, or unless a portion of the Leasehold Improvements will be both designed
and built by a single design/build contractor, in which case Landlord will
obtain the bid of such design/build contractor; (ii) using the lowest qualified
bid from each of the bids so received, prepare a proposed budget for all items
to be included in Tenant's Cost ("Tenant's Cost Proposal"); and (iii) submit
copies of all such bids and Tenant's Cost Proposal to Tenant for Tenant's review
and approval. Tenant, at Tenant's option, may either approve Tenant's Cost
Proposal in writing or elect to eliminate or revise one or more items of
Leasehold Improvements shown on the Leasehold Improvements Plans so as to reduce
Tenant's Cost Proposal and then approve in writing the reduced Tenant's Cost
Proposal (based on the revised Leasehold Improvements Plans). In connection with
Tenant's approval of Tenant's Cost Proposal, Tenant will also have the right to
reasonably approve all subcontractors that Landlord proposes to use. Tenant's
approval of Tenant's Cost Proposal will be deemed also to be Tenant's approval
of the subcontractors whose bids are included in Tenant's Cost Proposal. If
Tenant desires to use a different subcontractor than the one recommended by
Landlord and included in the Tenant's Cost Proposal prepared by Landlord, Tenant
will so notify Landlord as a part of Tenant's response to Tenant's Cost Proposal
and then Tenant's Cost Proposal will be modified as necessary to reflect the bid
of the alternate subcontractor selected by Tenant. Landlord will apply the
Leasehold Improvements Allowance to Tenant's Cost. Tenant will be responsible
for payment of any portion of Tenant's Cost that exceeds the Leasehold
Improvements Allowance. Tenant will receive no credit or other payment for any
unused portion of the Leasehold Improvements Allowance. Each day following the
5th business day after Tenant's receipt of Tenant's Cost Proposal until the day
on which Landlord has received Tenant's written approval of Tenant's Cost
Proposal will be a day of Tenant's delay, Prior to entering into any subcontract
for the Leasehold Improvements, Landlord will deliver to Tenant a copy of the
proposed subcontract for Tenant's review and approval, which approval will not
be unreasonably withheld or delayed and which approval will be deemed given if
Tenant does not notify Landlord to the contrary within three business days after
delivery of the proposed subcontract with Landlord's request for approval.
3.10 Construction of Leasehold Improvements; Payment of Tenant's Cost. At
such time as Tenant has approved Tenant's Cost Proposal, Landlord will cause the
Leasehold Improvements to be constructed or installed in the Shell in a good and
workmanlike manner and according to the Leasehold Improvements Plans and all
applicable Laws. During construction of the Leasehold Improvements, Landlord
will use all reasonable efforts (without interfering with customary construction
scheduling or incurring extraordinary costs such as overtime) to
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coordinate with Tenant and Tenant's vendors for the delivery and installation of
Tenant's trade fixtures and equipment. As construction progresses, Landlord will
make monthly payments for the costs thereof out of the Leasehold Improvements
Allowance, provided that prior to making any payment, Landlord will prepare or
obtain, as applicable, and deliver to Tenant's Representative the following: (i)
invoices from Landlord and from all subcontractors requesting payment reflecting
the amount due for work performed or materials supplied during the preceding
month; (ii) a certificate of the architect for the Leasehold Improvements
confirming that the work for which payment is requested has been completed and
the materials for which payment is requested have been delivered to the
Premises; and (iii) copies of lien releases for all work paid for with the last
month's payments. Tenant's Representative will have three business from delivery
of the foregoing materials to review the same and to verify that the work for
which payment is sought has been completed; if Tenant does not notify Landlord
to the contrary within such three business day period, Tenant will be deemed to
have approved payment and Landlord will be free to make the requested payments
(but the failure of Tenant's Representative to respond will not constitute a
waiver of any of Tenant's other rights hereunder with respect to the proper
completion of the Leasehold Improvements). Landlord will withhold a 10%
retainage from all payments to subcontractors of trades from which retainage is
customarily withheld in the construction industry and will not pay such
retainage to any such subcontractor until all punch list work required to be
performed by such subcontractor has been satisfactorily completed. At such time
as Landlord has paid in full the Leasehold Improvements Allowance, Tenant will
pay Landlord the amount, if any, by which Tenant's Cost exceeds the Leasehold
Improvements Allowance in monthly installments, with each such installment due
within 30 days after receipt from Landlord of the payment request materials
described above. Tenant may also withhold a 10% retainage from its payments for
trades from which retainage is customarily withheld pending completion of any
punch list items. Throughout construction of the Leasehold Improvements and for
a period of six months after Substantial Completion thereof, Tenant will have
the right, during normal business hours and upon reasonable prior notice, to
audit such construction and all of Landlord's books and records relating thereto
to verify that that such construction and all payments therefor are in
accordance with the applicable contracts.
3.11 Change Orders. Tenant's Representative may authorize changes in
Landlord's Work during construction only by written instructions to Landlord's
Representative on a form approved by Landlord. All such changes will be subject
to Landlord's prior written approval, which will not be unreasonably withheld,
delayed or conditioned so long as the proposed change will not increase
Landlord's costs or have a substantial adverse effect on the construction
schedule. Prior to commencing any change, Landlord will prepare and deliver to
Tenant, for Tenant's approval, a change order ("Change Order") identifying the
total cost of such change, which will include associated architectural,
engineering and construction contractor's fees, and the total time that will be
added to the construction schedule by such change. Landlord will deliver each
Change Order to Tenant within five business days after Tenant's request
therefor, except in cases of extraordinary change where the necessary
information is not available to Landlord within such period. If Tenant fails to
approve such Change Order within 10 days after delivery by Landlord, Tenant will
be deemed to have withdrawn the proposed change and Landlord will not proceed to
perform the change. Upon Landlord's receipt of Tenant's approval, Landlord will
proceed to perform the change.
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3.12 Tenant's Delays. As provided in Section 3.2, the Delivery Date will
not occur until Landlord has Substantially Completed Landlord's Work; provided,
however, that if Landlord is delayed in substantially completing Landlord's Work
as a result of: (a) any Tenant delays described in Sections 3.5, 3.6, 3.8, 3.9
or 3.10; (b) any Change Orders or changes in any drawings, plans or
specifications requested by Tenant; (c) Tenant's failure to review or approve in
a timely manner any item requiring Tenant's review or approval; or (d) any other
act or omission of Tenant or Tenant's architects, engineers, contractors or
subcontractors (all of which will be deemed to be delays caused by Tenant), then
the Delivery Date will only be extended under Section 3.2 until the date on
which Landlord would have Substantially Completed the performance of such work
but for such delays.
3.13 Adjustments Upon Completion. As soon as practicable after the
completion of the Shell, Landlord will cause its architect to measure and
certify to Landlord and Tenant the Rentable Area of the Premises, and Tenant
will have the right, at its cost, to have such measurement verified. Upon the
request of either party, Landlord and Tenant will execute a certificate
confirming such Rentable Area (as so verified by Tenant, if Tenant elects to do
so) and the actual amounts (based on such Rentable Area) of the Basic Rent
payable per month during each Lease Year of the Term and the actual amount of
the Leasehold Improvements Allowance. Tenant will pay any additional Basic Rent
or Tenant's Cost owing, or Landlord will refund any Basic Rent or Tenant's Cost
previously overpaid by Tenant, upon the execution of such certificate.
3.14 Tenant's Property. Subject to Section 9.1 (to the extent
applicable), Tenant at its own expense will provide, install and maintain, and
may substitute and alter from time to time, all trade fixtures, equipment and
personal property in addition to the Leasehold Improvements reasonably required
to enable it to conduct its business at the Premises (collectively, "Tenant's
Property"). Tenant's Property will remain the property of Tenant and Tenant may
remove all or part thereof at any time during the Term, subject to the
provisions of Section 13.1. Tenant will repair at its own expense any damage to
the Premises caused by the removal of Tenant's Property by Tenant, ordinary wear
and tear and damages from casualty excepted. Tenant's Property will not be
subject to and will be free of any lien (other than a judgment lien) for the
payment of rent by Tenant or for the performance of any other obligation of
Tenant under this Lease.
4. RENT
4.1 Basic Rent. Commencing on the Commencement Date and then throughout
the Term, Tenant agrees to pay Landlord Basic Rent according to the following
provisions. Basic Rent during each Lease Year of the Term will be payable in
monthly installments in an amount equal to 1/12 of the amount obtained by
multiplying the rate of Basic Rent for such Lease Year set forth in the
definition of Basic Rent in Section 1.1 (or, in the case of Lease Years during
any Renewal Term, as determined in accordance with Section 2.5) by the number of
square feet of Rentable Area of the Premises, in advance, on or before the first
day of each and every month during the Term. If the Commencement Date is a date
other than the first day of a calendar month or if the Term ends on a date other
than the last day of a calendar month, Landlord will
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prorate monthly Basic Rent for the first month of the Term or the last month of
the Term, as the case may be, based upon the ratio that the number of days of
the Term within such month bears to the total number of days in such month.
4.2 Additional Rent for Taxes and Operating Expenses. Tenant agrees to
pay Landlord, as Additional Rent, in the manner provided below for each calendar
year that contains any part of the Term, the Taxes and Operating Expenses for
such calendar year.
(a) Estimated Taxes and Operating Expenses. Prior to the Delivery
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Date (with respect to the calendar year in which the Term commences) and
then prior to the commencement of each calendar year within the Term
thereafter (with respect to such ensuing calendar year), Landlord will
provide Tenant with a written estimate for such calendar year of (i) the
total amount of Taxes and Operating Expenses; and (ii) the monthly payments
of Additional Rent payable by Tenant during such calendar year for Taxes
and Operating Expenses. Landlord will not increase its estimate of Taxes
and Operating Expenses for any calendar year to an amount that is greater
than 105% of the prior calendar year's actual Taxes and Operating Expenses
unless Landlord has reasonable grounds to believe that a greater increase
is probable and provides written substantiation to Tenant of such grounds.
(b) Payment of Additional Rent. Commencing on the Delivery Date,
--------------------------
Tenant will pay, as Additional Rent and, from and after the Commencement
Date, together with Tenant's monthly Basic Rent payment, Taxes and
Operating Expenses for each calendar year, as estimated by Landlord, in
equal monthly installments, in advance, on the first day of each month
during each applicable calendar year. If Landlord delivers its estimate for
a calendar year to Tenant after the first day of January of such year,
Tenant will continue to pay on the basis of the prior calendar year's
estimate until the month after the month in which the estimate for the
current year is delivered. In the month Tenant first pays based on
Landlord's new estimate, Tenant will pay to Landlord 1/12 of the difference
between the new estimate and the prior year's estimate for each month which
has elapsed since the beginning of the current calendar year.
(c) Re-estimates of Excess Taxes and Operating Expenses. From time
---------------------------------------------------
to time during any applicable calendar year, Landlord may re-estimate Taxes
and Operating Expenses if Landlord has reasonable grounds to believe that
the prior estimate is inaccurate, and in such event Landlord will notify
Tenant in writing of such re-estimate in the manner set forth above,
include with such notice written substantiation of the grounds for the re-
estimate, and recalculate Tenant's monthly installments of estimated Taxes
and Operating Expenses for the then remaining balance of such calendar year
in an amount sufficient to pay the re-estimated amount over the balance of
such calendar year. Landlord will appropriately credit Tenant for payments
made by Tenant pursuant to the previous estimate.
(d) Adjustment of Actual Taxes and Operating Expenses. Upon
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completion of each calendar year, Landlord will determine the actual amount
of Taxes and Operating
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Expenses for such calendar year and deliver a written certification of such
actual amounts to Tenant after the end of each calendar year. If Tenant has
paid less than the actual Taxes and Operating Expenses for any calendar
year, Tenant will pay the balance of Taxes and Operating Expenses within 10
days after receiving Landlord's statement. If Tenant has paid more than the
actual Taxes and Operating Expenses for any calendar year, Landlord will
credit such excess against the next monthly installment or installments of
Rent payable by Tenant to Landlord or, if there are no further installments
of Rent due, refund such excess. If the Delivery Date occurs on other than
the first day of a Tax Year or if the Term expires or otherwise terminates
on other than the last day of a Tax Year, Taxes for the Tax Year in which
the Delivery Date occurs or the Term ends, as the case may be, will be
prorated between Landlord and Tenant, based on the most recent levy and
most recent assessment. Such proration will be subsequently adjusted when
the actual bills become available for Taxes for the Tax Year for which
Taxes were prorated. Landlord will also adjust pro rata actual Operating
Expenses for any fractional calendar year occurring during the Term based
upon the number of days of the Term during such calendar year as compared
to 365 days The parties' obligations under this Section 4.2 will survive
the expiration of the Term or other termination of this Lease.
(e) Tenant's Right to Inspect and Audit. Upon reasonable notice to
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Landlord, Tenant, or its authorized representatives, will have the right to
inspect the books and records of Landlord pertaining to projected or actual
Taxes or Operating Expenses. In addition, Tenant may upon reasonable prior
notice to Landlord given within 30 days after the delivery by Landlord of
any annual statement referred to in Section 4.2(d) above, have any or all
of Landlord's books and records relating to Taxes and/or Operating Expenses
for the calendar year covered by such statement audited. If such audit is
performed by an independent certified public accountant who is not
regularly engaged by either Landlord or Tenant and is reasonably approved
by both parties, and if such audit determines that such annual statement
overstated Taxes and Operating Expenses by more than 4% of the total
thereof as determined by such audit, Landlord will reimburse Tenant for the
reasonable costs incurred by Tenant for such audit within 30 days after
receipt of a copy of the audit report. In addition, if such an audit
reveals any overpayment or underpayment by Tenant for the year audited,
within 30 days after the audit report is delivered to Landlord and Tenant,
Landlord will correct its statement for such year and credit Tenant with
the amount of any overpayment and Tenant will pay to Landlord the amount of
any underpayment.
(f) Tenant's Right to Contest Taxes. Tenant will have the right to
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contest any Taxes payable by Tenant pursuant to this Lease, provided that
Tenant continues to pay to Landlord all amounts due under this Lease with
respect to Taxes when and as the same are due notwithstanding the pendency
of any such contest. However, if applicable Laws permit the withholding of
payment without delinquency, Landlord will, upon Tenant's written request
(which must be made at least 60 days prior to the due date of the subject
payment of Taxes), withhold payment of any Taxes that Tenant is contesting
until such time as payment thereof (or of such Taxes as the same may be
reduced by such contest) is required to be made by applicable Laws in order
to avoid delinquency. Tenant will notify
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Landlord within 5 business days of the commencement of any such contest. So
long as Tenant complies with the terms of this Section, Tenant will have
the right, in connection with any such contest, at its sole expense, to
institute and prosecute, in food faith and, with due diligence and in
Landlord's name if necessary, any appropriate proceedings, and Landlord
will, at Tenant's expense, fully cooperate with Tenant's efforts to contest
any such Taxes.
4.3 Net Lease; Additional Rent. It is the intent of the parties that the
Basic Rent provided in this Lease will be, except as otherwise expressly
provided in this Lease, a net payment to Landlord and that, in addition to Basic
Rent, Tenant will pay Additional Rent for Operating Expenses and Taxes according
to Section 4.2, the cost of all utilities consumed at the Premises according to
Section 6.2, and the cost of all repairs and maintenance required to be
performed by Tenant according to Section 7.1. It is the intention of the parties
that, except as otherwise expressly provided herein, this Lease will not be
terminable for any reason by Tenant, and that Tenant will not be entitled to any
abatement of, or reduction in, any Rent payable under this Lease.
4.4 Terms of Payment. All Rent will be paid to Landlord in lawful money
of the United States of America, at Landlord's Rent Address or to such other
person or at such other place as Landlord may from time to time designate in
writing, without notice or demand and without right of deduction, abatement or
setoff, except as otherwise expressly set forth herein. Except to the extent
otherwise expressly provided herein, Tenant's covenants to pay Basic Rent and
Additional Rent are independent of any other covenant, condition, provision or
agreement herein contained.
4.5 Late Payments. Any payment of Rent which is not received within five
days after it is due will be subject to a late charge equal to 5% of the unpaid
payment, or $100.00, whichever is greater. This amount is in compensation of
Landlord's additional cost of processing late payments. In addition, any Rent
which is not paid when due will accrue interest at the Interest Rate from the
date on which it was due until the date on which it is paid in full with accrued
interest. Notwithstanding the foregoing, for the first time in any calendar year
that Tenant fails to make any payment within five days after its due date, such
late charge and interest will not apply unless Tenant fails to make such payment
within 10 days after delivery of Landlord's notice of such failure to pay.
Landlord will not be required to give Tenant such notice more than once in any
calendar year prior to assessing such late charge and interest.
4.6 Right to Accept Payments. No receipt by Landlord of an amount less
than Tenant's full amount due will be deemed to be other than payment "on
account," nor will any endorsement or statement on any check or any accompanying
letter effect or evidence an accord and satisfaction. Landlord may accept such
check or payment without prejudice to Landlord's right to recover the balance or
pursue any right of Landlord. No payments by Tenant to Landlord after the
expiration or other termination of the Term, or after the giving of any notice
(other than a demand for payment of money) by Landlord to Tenant, will
reinstate, continue or extend the Term or make ineffective any notice given to
Tenant prior to such payment. After notice or commencement of a suit, or after
final judgment granting Landlord possession of the Premises,
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Landlord may receive and collect any sums of Rent due under this Lease, and such
receipt will not void any notice or in any manner affect any pending suit or any
judgment obtained. Any amounts received by Landlord may be allocated to any
specific amounts due from Tenant to Landlord as Landlord determines.
5. USE, OCCUPANCY AND COMPLIANCE
5.1 Use. Tenant may use the Premises for any and all uses and purposes
that are from time to time permitted by Laws. Tenant will not keep anything on
or about the Premises which would invalidate any insurance policy required to be
carried on the Premises by Landlord or Tenant pursuant to this Lease. Tenant
will not cause or permit to exist any public or private nuisance on or about the
Premises.
5.2 Compliance by Landlord. Landlord will, at its sole expense, keep and
maintain the Building's roof and structural elements (including foundations,
structural columns and beams and load-beating walls) in a condition that is in
compliance with all applicable Laws, except (subject to Section 8.4) for damages
caused by the negligence of Tenant, its agents, employees, contractors or
invitees. Such obligation will include, without limitation, the obligation to
make such changes to the Building's roof and structural elements (including
foundations, structural columns and beams and load-beating walls) as may be
required from time to time by applicable Laws, except for changes required by
virtue of a change in use of the Premises by Tenant or by any alterations or
other modifications to the Premises undertaken by Tenant.
5.3 Compliance by Tenant. Tenant will comply with all Laws applicable to
the use and occupancy of the Premises during the Term, including, without
limitation, obtaining and maintaining all licenses and permits required to
operate Tenant's business. Tenant will, at its sole expense, keep and maintain
the all of Premises (excluding those portions of the Building that Landlord is
obligated to maintain in compliance with Laws pursuant to Section 5.2, except
for damages to such portions caused by the negligence of Tenant, its agents,
employees, contractors or invitees, which damages Tenant will be required to
repair) in a condition that is in compliance with all applicable Laws. Such
obligation will include, without limitation, the obligation to make such changes
to the Premises, whether interior or exterior, as may be required from time to
time by applicable Laws (excluding changes to those portions of the Building
that Landlord is obligated to maintain in compliance with Laws pursuant to
Section 5.2, except for changes required by virtue of a change in use of the
Premises by Tenant or by any alterations or other modifications to the Premises
undertaken by Tenant, which changes Tenant will be required to make).
5.4 Contests. Landlord and Tenant will each have the right, however, to
contest or challenge by appropriate proceedings the enforceability of any Law or
its applicability to the Premises or the use or occupancy thereof by Tenant or a
Subtenant so long as Landlord or Tenant, as applicable, diligently prosecutes
the contest or challenge to completion and, in the event Landlord or Tenant, as
applicable, loses the contest or challenge, thereafter abides by and conforms to
such Law. In the event of Landlord's or Tenant's challenge or contest of such
Law, Landlord or Tenant, as applicable, may elect not to comply with such Law
during such challenge
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or contest; provided, however, that such election not to comply will not result
in any material risk of forfeiture of the other party's interest in the
Premises. Landlord and Tenant will indemnify and hold the other party harmless
from and against all claims, damages or judgments resulting from any such
election not to comply.
5.5 Hazardous Substances.
(a) Tenant's Covenants. Tenant will not cause any Hazardous
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Substance to be located on the Premises and will not conduct or authorize
the use, generation, transportation, storage, treatment or disposal at the
Premises of any Hazardous Substance other than as may be in compliance with
Environmental Laws and (i) contained in ordinary quantifies of products
used by Tenant for ordinary cleaning of the Premises and associated
janitorial supplies; (ii) contained in ordinary quantities of customary
office supplies (such as copier toner and cleaner) used by Tenant for its
office operations at the Premises; or (iii) contained in packaged products
intended for resale to customers of Tenant's order-by-internet home-
delivery grocery distribution warehouse business. If Tenant desires to
conduct or authorize the use, generation, transportation, storage,
treatment or disposal at the Premises of any Hazardous Substances other
than those expressly permitted above, Tenant must first obtain Landlord's
written consent, which consent may be withheld in Landlord's sole
discretion. If the presence, release, threat of release, placement on or in
the Premises or the generation, transportation, storage, treatment or
disposal at the Premises of any Hazardous Substance as a result of Tenant's
use or occupancy of the Premises (i) gives rise to liability (including,
but not limited to, a response action, remedial action or removal action)
under Environmental Laws; (ii) causes a significant public health effect;
or (iii) pollutes or threatens to pollute the environment, Tenant will
promptly take any and all remedial and removal action necessary to clean up
the Premises and mitigate exposure to liability arising from the Hazardous
Substance, in compliance with Environmental Laws.
(b) Tenant's Indemnity. Tenant will indemnify, defend and hold
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Landlord harmless from and against all damages, costs, losses, expenses
(including, without limitation, actual reasonable attorneys' fees and
engineering fees) arising from or attributable to (i) the existence of any
Hazardous Substance at the Premises as a result of the acts of Tenant or
its agents, employees or contractors or Tenant's use and occupancy of the
Premises, and (ii) any breach by Tenant of any of its covenants contained
in this Section 5.5.
(c) Landlord's Representations and Covenant. Landlord represents to
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Tenant, to Landlord's current actual knowledge (without duty of
investigation), and except as otherwise disclosed in the environmental site
assessment report made with respect to the Premises and certain adjacent
property for Landlord by Hirsch*Gibney and dated November 24, 1999, a copy
of which has been delivered to Tenant, that there are no Hazardous
Substances present on the Premises as of the date of this Lease in any
manner or quantity that violates any Environmental Laws. Landlord further
represents to Tenant that it has not received any Environmental Notices (as
defined below) as of the date of
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this Lease. Landlord covenants that Landlord will not cause any Hazardous
Substances to be incorporated into the Building during its construction
(except standard building materials incorporated in compliance
Environmental Laws) and that, as of the Delivery Date, the Improvements
will not contain any (i) electrical transformers or other equipment
containing polychlorinated biphenyl in excess of 50 parts per million; (ii)
asbestos in any form; or (iii) urea formaldehyde foam insulation.
(d) Landlord's Indemnity. Landlord will indemnify, defend and hold
--------------------
Tenant harmless from and against all damages, costs, losses, expenses
(including, without limitation, actual reasonable attorneys' fees and
engineering fees) arising from or attributable to (i) the existence of any
Hazardous Substance at the Premises as a result of the acts of Landlord or
its agents, employees or contractors, and (ii) any breach by Landlord of
any of its representations or covenants contained in this Section 5.5.
(e) Environmental Notices. Each party will immediately provide the
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other with telephone notice, followed by written notice, of any complaint,
order or other notice with regard to Hazardous Substances issued by any
governmental entity or any other third party with respect to the Premises
or the Project ("Environmental Notices").
(f) Survival. The parties' obligations under this Section 5.5 will
--------
survive the expiration of the Term or other termination of this Lease.
5.6 Americans With Disabilities Act. Tenant will, at its expense, cause
its operation of any business within the Premises to comply with the ADA.
Landlord will cause Landlord's Work to be designed and constructed in accordance
with the ADA. If any work (such as an alteration made pursuant to Section 9.1)
is performed by, through or under Tenant, Tenant will, at Tenant's expense,
cause such work to be designed and constructed in compliance with the ADA.
6. SERVICES AND UTILITIES
6.1 Services Provided by Landlord. During the Term, Landlord will
operate, maintain and repair the Premises (except for any such operation,
maintenance or repair which is expressly the obligation of Tenant pursuant to
this Lease) according to those standards from time to time prevailing for
comparable office/warehouse facilities in the area in which the Premises are
located. Landlord will provide the following services according to such
standards, the costs of which will be included in Operating Expenses to the
extent provided in the definition thereof in Section 1.1:
(a) Maintenance and Repairs. Maintenance (excluding routine
-----------------------
janitorial services), repair and replacement, as necessary, of the
Building's roof and structural elements (including foundations, structural
columns and beams and load-bearing walls), the exterior of the Building,
the lobbies, corridors and restrooms in the Building, the Building's
plumbing and electrical systems and the Standard HVAC Equipment, except
(subject to Section 8.4) for damages caused by the negligence of Tenant,
its agents, employees, contractors or invitees. Landlord will commence any
maintenance or repairs
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required of Landlord under this Lease as soon as possible after being
notified of the need for such maintenance or repair.
(b) Electrical Energy. Electrical energy for lighting the Premises
-----------------
and operating Planned Equipment (as used in this Lease, "Planned Equipment"
means those items of equipment that the Shell electrical system and the
Standard HVAC Equipment are designed to accommodate pursuant to the Shell
Plans and the Leasehold Improvements Plans). Tenant will not install in the
Premises any equipment which requires electrical energy or any electrical
circuits in excess of the energy or circuits available for Planned
Equipment without Landlord's written consent, which consent Landlord will
not unreasonably withhold. Tenant will pay all costs of installing
facilities necessary to furnish such excess electrical energy for such
equipment and for such increased electrical energy usage. Landlord will
replace all electric lighting bulbs and tubes and all ballasts and starters
within the Premises.
(c) Heating and Air Conditioning. Heating, ventilating and air
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conditioning the portions of the Premises served by the Standard HVAC
Equipment at such times and at such temperatures as may be reasonably
established by Tenant (Tenant will have the right, subject to the design
limitations of the Standard HVAC Equipment, to establish the hours and days
of HVAC operations and the temperatures at which the interior portions of
the Premises served by the Standard HVAC Equipment will be maintained
during the hours of HVAC operation) for comfortable use and occupancy under
normal business operations with Planned Equipment. If Tenant installs any
machines, equipment or devices in the Premises that do not constitute
Planned Equipment and such machines, equipment or devices cause the
temperature in any part of the Premises to exceed the temperature the
Standard HVAC Equipment would be able to maintain in the Premises were it
not for such machines, equipment or devices, then Landlord reserves the
right to install supplementary air conditioning units in the Premises, and
Tenant will pay Landlord all costs of installing, operating and maintaining
such supplementary units.
(d) Water. Hot and cold water from the regular Building outlets for
-----
lavatory and restrooms and for drinking purposes.
(e) Parking Facilities and Landscaped Areas. Maintenance in good
---------------------------------------
order, condition and repair, of the parking facilities, driveways,
sidewalks and landscaped areas on the Premises. Landlord will keep such
driveways, sidewalks and parking facilities free from any unreasonable
accumulation of snow.
6.2 Tenant's Utilities. Tenant will pay, before delinquency, directly to
the provider, for all separately metered or separately charged utilities
(electricity, natural gas, telecommunications, water, sewer and any other
utility requirements of Tenant) provided to the Premises or to Tenant. Landlord
will not include such mounts as Operating Expenses.
6.3 Interruption of Services. No interruption in, or temporary stoppage
of, any of the above-described services required to be provided by Landlord that
is caused by reasons beyond Landlord's reasonable control (such as the making,
in a commercially reasonable
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manner, of any repairs that Landlord is required to make hereunder; the making
of any renewals, improvements or alterations by Tenant or by third parties;
strikes, lockouts, labor controversy or accidents; or inability to obtain fuel
or supplies), will constitute an eviction or disturbance of Tenant's use and
possession of the Premises, or render Landlord liable for damages, by abatement
of Rent or otherwise, or relieve Tenant from any obligation described in this
Lease. In no event will Landlord be required to provide any heat, air
conditioning, electricity or other service which exceeds that permitted by
involuntary guidelines or by any Laws. However, in the event that, due to
reasons within Landlord's reasonable control, any utilities or services required
to be furnished by Landlord to the Premises pursuant to this Section 6 are
interrupted, disrupted or terminated and such interruption, disruption or
termination prevents the normal conduct of Tenant's business at the Premises for
a continuous period of three business days, then the Basic Rent will equitably
abate, based upon the portion or portions of the Premises so affected by the
interruption, disruption or termination, for so long as such utilities or
services remain so interrupted, disrupted or terminated for such reasons.
7. REPAIRS AND MAINTENANCE
7.1 Tenant's Obligations. Tenant will, at its expense (a) maintain,
repair and replace as necessary the Special HVAC Equipment and all other
portions of the Premises, except those portions thereof that Landlord is
obligated to maintain, repair and replace pursuant to Sections 6.1(a) and (e),
in as good order, condition and repair as they were at the time Tenant took
possession of the Premises, ordinary wear and tear and damage from fire and
other casualties excepted; (b) keep the Premises free of insects, rodents,
vermin and other pests; (c) provide such janitorial services to the Building as
may be necessary for the operation of Tenant's business and (d) promptly repair,
restore and replace, to Landlord's reasonable satisfaction, all uninsured damage
or injury to the Premises caused by the willful acts or negligence of Tenant,
its agents, employees, contractors or invitees. All such repairs, restorations
and replacements will be equal in quality and class to the original work and
will comply with all requirements of this Lease.
7.2 Landlord's Right of Entry. For purposes of performing Landlord's
obligations under Section 6.1, or any of Tenant's obligations under Section 7.1
that Tenant fails to perform within the cure period provided in Section 14.2, or
to inspect the Premises, Landlord may enter the Premises upon at least 48 hours'
prior notice to Tenant (except in cases of actual or suspected emergency, in
which case no prior notice will be required) without liability to Tenant for any
loss or damage incurred as a result of such entry (except to the extent caused
by Landlord's negligence or willful misconduct), provided that Landlord will
take all reasonable and necessary steps in connection with such entry to
minimize any disruption to Tenant's business or its use of the Premises.
8. INSURANCE, WAIVERS AND INDEMNITY
8.1 Landlord's Insurance. During the period from the Delivery Date to the
Commencement Date and then throughout the Term, Landlord will provide and keep
in force the following insurance, the costs of which will be included in
Operating Expenses:
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(a) bodily injury and property damage liability insurance relating
to Landlord's operation of the Premises, with a combined single occurrence
limit of not less than $5,000,000.00; such insurance will be on a
commercial general liability form including, without limitation, personal
injury and assumed contractual liability for the performance by Landlord
of the indemnity agreements set forth in Section 8.5; such liability
insurance will include cross liability and severability of interests
clauses or endorsements; unless otherwise approved in writing by Tenant,
such policy will have a deductible of $5,000.00 or less and will not have
a retention or self-insurance provision;
(b) all risk or equivalent property insurance (including fire and
standard extended coverage perils, leakage from fire protective devices
and other water damage) covering loss or damage to the Improvements
(including the Shell and the Leasehold Improvements, but excluding any
alterations made to the Premises by Tenant, Tenant's fixtures,
furnishings, equipment, inventory, personal property, documents, files and
work products) on a full replacement cost basis, excluding excavations,
footings and foundations, and with a deductible not in excess of $5,000.00
unless otherwise approved by Tenant (upon the occurrence of any casualty,
the amount expended by Landlord to satisfy such deductible will be
included in Operating Expenses);
(c) loss of rental income insurance in the amount of one year's
Basic Rent and Additional Rent for Taxes and Operating Expenses;
(d) if any boiler or machinery is operated in the Premises, boiler
and machinery insurance;
(e) worker's compensation insurance insuring against and satisfying
Landlord's obligations and liabilities under the worker's compensation
laws of the State of Colorado and employers' liability insurance in the
limit of $100,000/500,000/100,000;
(f) if Landlord operates owned, hired or nonowned vehicles on the
Premises, comprehensive automobile liability will be carried at a limit of
liability not less than $1,000,000.00 combined bodily injury and property
damage; and
(g) such other insurance as is then maintained by prudent owners Of
buildings similar to the Building and that Landlord reasonably elects to
obtain or any Building mortgagee requires.
Insurance effected by Landlord under Sections 8.1(b), (c) and (d) will permit
the release of Tenant from certain liability under Section 8.4.
8.2 Tenant's Insurance. During the period from the Delivery Date to the
Commencement Date and then throughout the Term, Tenant will provide and keep in
force the following insurance:
(a) bodily injury and property damage liability insurance relating
to Tenant's business (carried on, in or from the Premises) and Tenant's
use and occupancy, with a
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combined single occurrence limit of not less than $5,000,000.00; such
insurance will be on a commercial general liability form including,
without limitation, personal injury and assumed contractual liability for
the performance by Tenant of the indemnity agreements set forth in Section
8.6; Landlord and its mortgagee will be named as an additional insureds in
the policy providing such liability insurance, which will include cross
liability and severability of interests clauses or endorsements; unless
otherwise approved in writing by Landlord, such policy will have a
deductible of $5,000.00 or less and will not have a retention or self-
insurance provision;
(b) all risk or equivalent property insurance (including fire and
standard extended coverage perils, leakage from fire protective devices
and other water damage) covering loss or damage to any alterations made to
the Premises by Tenant, Tenant's fixtures, furnishings, equipment,
inventory, personal property, documents, files and work products in the
Premises on a full replacement cost basis in amounts sufficient to prevent
Tenant from becoming a coinsurer and subject only to such deductibles and
exclusions as Landlord may reasonably approve;
(c) if any boiler or machinery is operated in the Premises, boiler
and machinery insurance;
(d) worker's compensation insurance insuring against and satisfying
Tenant's obligations and liabilities under the worker's compensation laws
of the State of Colorado and employers' liability insurance in the limit
of $100,000/500,000/100,000; and
(e) if Tenant operates owned, hired or nonowned vehicles on the
Premises, comprehensive automobile liability will be carried at a limit of
liability not less than $1,000,000.00 combined bodily injury and property
damage.
Insurance effected by Tenant under Sections 82(b) and (c) will permit the
release of Landlord from certain liability under Section 8.4.
8.3 General Insurance Requirements. All insurance required to be
maintained by Landlord or Tenant pursuant to Sections 8.1 and 8.2 will be
maintained with insurors licensed to do business in the State of Colorado and
having a Best's Key Rating of at least A-XII. Landlord and Tenant will file with
the other, on or before the Delivery Date and at least 10 days before the
expiration date of expiring policies, such copies of either current policies or
certificates as may be reasonably required to establish that the insurance
coverage required by Sections 8.1 and 8.2 is in effect from time to time and
that the insuror(s) have agreed to give the other party at least 30 days notice
prior to any cancellation of, or material modification to, the required
coverage. Landlord and Tenant will cooperate with each Other in the collection
of any insurance proceeds which may be payable in the event of any loss,
including the execution and delivery of any proof of loss or other actions
required to effect recovery. All commercial general liability and property
policies required to be maintained by either party hereunder will be written as
primary policies, not contributing with and not supplemental to any coverage
that the other party may carry.
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8.4 Waivers. Except to the extent caused by the willful or negligent act
or omission or breach of this Lease by Landlord or anyone for whom Landlord is
legally responsible, Landlord and its Affiliates will not be liable or in any
way responsible for, and Tenant waives all claims against Landlord and its
Affiliates for, any loss, injury or damage suffered by Tenant or others relating
to (a) loss or theft of, or damage to, property of Tenant or others; (b) injury
or damage to persons or property resulting from fire, explosion, failing
plaster, escaping steam or gas, electricity, water, rain or snow, or leaks from
any part of the Improvements or from any pipes, appliances or plumbing, or from
dampness; or (c) damage caused by persons on or about the Premises, or caused by
the public or by construction of any private or public work. Landlord and its
Affiliates will not be liable or in any way responsible to Tenant for, and
Tenant waives all claims against Landlord and its Affiliates for, any loss,
injury or damage that is insured or required to be insured by Tenant under
Section 8.2(b) or (c). Tenant and its Affiliates will not be liable or in any
way responsible to Landlord for, and Landlord waives all claims against Tenant
and its Affiliates for, any loss, injury or damage that is insured or required
to be insured by Landlord under Section 8.1(b), (c) or (d).
8.5 Landlord's Indemnity. Subject to Sections 6.3 and 8.4 and except to
the extent caused by the willful or negligent act or omission or breach of this
Lease by Tenant or anyone for whom Tenant is legally responsible, Landlord will
indemnify and hold Tenant harmless from and against any and all liability, loss,
claims, demands, damages or expenses (including reasonable attorneys' fees) due
to or arising out of any willful or negligent act or omission or breach of this
Lease by Landlord or anyone for whom Landlord is legally responsible. Landlord's
obligations under this Section 8.5 will survive the expiration or early
termination of the Term.
8.6 Tenant's Indemnity. Except to the extent caused by the willful or
negligence act or omission or breach of this Lease by Landlord or anyone for
whom Landlord is legally responsible, Tenant will indemnify and hold Landlord
harmless from and against any and all liability, loss, claims, demands, damages
or expenses (including reasonable attorneys' fees) due to or arising out of any
accident or occurrence on or about the Premises during the Term (including,
without limitation, accidents or occurrences resulting in injury, death,
property damage or theft) or any willful or negligent act or omission of or
breach of this Lease by Tenant or anyone for whom Tenant is legally responsible.
Tenant's obligations under this Section 8.6 will survive the expiration or early
termination of the Term.
9. ALTERATIONS; MECHANICS' LIENS
9.1 Alterations. Tenant will not make any modifications, improvements,
alterations, additions or installations in or to the Premises that affect the
Building's structure or its mechanical systems, or that will cost more than
$50,000.00 in any calendar year, without Landlord's prior written consent, which
consent will not be unreasonably withheld, conditioned or delayed. Tenant will
notify Landlord prior to making any modifications, improvements, alterations,
additions or installations in or to the Premises (referred to in this section as
the "work"), regardless of whether Landlord's consent is required in connection
with such work. Along with any request for Landlord's consent and at least 15
days before commencement of any work or delivery of any materials to be used in
any work to the Premises, Tenant will furnish
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Landlord with plans and specifications, estimated commencement and completion
dates, the name and address of Tenant's general contractor, and the necessary
permits and licenses. Landlord will have the right to post notices of non-
responsibility or similar notices on the Premises in order to protect the
Premises against any liens resulting from such work. Tenant agrees to indemnify,
defend and hold Landlord harmless from any and all claims and liabilities of any
kind and description which may arise out of or be connected in any way with such
work. Tenant will pay the cost of all such work, and also the cost of painting,
restoring or repairing the Premises occasioned by such work. Upon completion of
the work, Tenant will furnish Landlord with contractor's affidavits that include
full and final waivers of liens and receipts for all amounts due for labor and
materials. In the case of any work that required Landlord's consent, Tenant will
also provide Landlord with as-built plans and specifications of the Premises as
altered by such work. All work will comply with all insurance requirements and
all applicable Laws (including, without limitation, the ADA) and will be
constructed in a good and workmanlike manner, using materials of first-class
quality and free and clear of all liens or claims therefor. Tenant will permit
Landlord to inspect construction operations in connection with any such work in
accordance with Section 7.2. Landlord's approval of any plans for any
modifications, improvements, alterations, additions or installations proposed by
Tenant will not constitute a representation that the same will comply with Laws
or be fit for any particular purpose; such approval will merely constitute
Landlord's consent to construct or install the same in the Premises.
9.2 Mechanics' Liens. Tenant will not permit any mechanic's lien or other
lien to be filed against the Premises by reason of any work performed by or for,
or material furnished to, Tenant (including, without limitation, any work
undertaken by Tenant pursuant to Section 9.1). If any such lien is filed at any
time against the Premises, Tenant will cause the same to be discharged of record
(which discharge may, at Tenant's option, be effected by bonding over such lien
in accordance with applicable law) within 30 days after delivery of notice from
Landlord concerning the filing of such lien. If Tenant fails to discharge any
such lien within such period, then, in addition to any other right or remedy of
Landlord, Landlord may, but will not be obligated to, discharge the same by
paying to the claimant the amount claimed to be due or by procuring the
discharge of such lien as to the Premises by deposit in the court having
jurisdiction of such lien, the foreclosure thereof or other proceedings with
respect thereto, of a cash sum sufficient to secure the discharge of the same,
or by the deposit of a bond or other security with such court sufficient in
form, content and amount to procure the discharge of such lien, or in such other
manner as is now or may in the future be provided by present or future Laws for
the discharge of such lien as a lien against the Premises. Any amount paid by
Landlord, or the value of any deposit so made by Landlord, together with all
costs, fees and expenses in connection therewith (including reasonable
attorney's fees of Landlord), together with interest thereon at the Interest
Rate, will be repaid by Tenant to Landlord on demand by Landlord and if unpaid
may be treated as Additional Rent. Notwithstanding the foregoing, if Tenant
desires to contest any such lien, Tenant may do so provided that, within 15 days
after Landlord notifies Tenant of the filing thereof, Tenant notifies Landlord
of Tenant's intention to do so and, until such time as Tenant causes such lien
to be removed by the payment thereof or by bonding over such lien in the manner
provided by law, posting with Landlord such security as Landlord may reasonably
request to provide funds with which Landlord may discharge such lien in the
event Tenant is
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unsuccessful in its contest and then fails to discharge such lien. Tenant will
indemnify and defend Landlord against and save Landlord and the Premises
harmless from all losses, costs, damages, expenses, liabilities, suits,
penalties, claims, demands and obligations, including, without limitation,
reasonable attorney's fees resulting from the assertion, filing, foreclosure or
other legal proceedings with respect to any such mechanic's lien or other lien.
10. ASSIGNMENT AND SUBLETTING
10.1 Permitted Transfers. Tenant may, upon notice to Landlord but without
obtaining Landlord's consent, assign this Lease or sublet all or any portion of
the Premises to (i) any of Tenant's Affiliates; or (ii) any entity into which or
with which Tenant may be merged or consolidated, or any entity that purchases
substantially all of Tenant's assets, provided that the surviving
entity/transferee or purchaser has a tangible net worth that is at least equal
to the lesser of $100,000,000 or Tenant's net worth immediately prior to the
merger/consolidation or asset purchase transaction. Tenant may reincorporate in
a different state provided that there is no material change to the financial
structure or financial position of the company.
10.2 Transfers Requiring Consent. Except as expressly permitted by Section
10.1, Tenant will not assign this Lease or sublet all or any portion of the
Premises to any assignee or subtenant without first obtaining Landlord's written
consent, which consent will not be unreasonably withheld, conditioned or
delayed. If Tenant desires to effect an assignment or subletting that will
require Landlord's consent, Tenant will seek such written consent of Landlord by
a written request therefor, setting forth the date (which will not be less than
15 days after date of Tenant's notice) on which Tenant desires to assign this
Lease or to sublet all or any portion of the Premises, all of the major terms of
the proposed assignment or sublease, the consideration to be paid by the
assignee or subtenant, the name and address of the proposed assignee or
sublessee and its proposed use of the Premises, copies of the proposed
assignee's or subtenant's financial statements (to the extent available), and
the proposed form of assignment or sublease.
10.3 Deemed Assignments. Any change in the partners or members of Tenant,
if Tenant is a partnership or limited liability company, or, if Tenant is a
corporation, any transfer of any or all of the shares of stock of Tenant,
resulting in a change in the identity of the person or persons owning a majority
of equity or voting interests in Tenant as of the date of this Lease, will be
deemed to be an assignment within the meaning of this Section 10. However, none
of the following sales or transfers will constitute an assignment requiting
Landlord's consent pursuant to this Section 10: (a) a transfer of the stock or
partnership or membership interests of Tenant at any time that Tenant is a
publicly held entity whose equity interests are traded on a national stock
exchange; (b) any merger or consolidation transaction expressly permitted under
Section 10.1; (c) any transfer or sale of stock solely among existing
shareholders; (d) any transfer or sale of stock pursuant to Tenant's stock
option programs; or (e) a private sale of stock wherein the existing
shareholders of Tenant retain over 50% of the voting interests in Tenant.
10.4 Excess Consideration. If Tenant effects an assignment or sublease
that is not one permitted by Section 10.1 or 10.3, then Landlord will be
entitled to receive 50% of the
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amount by which the consideration required to be paid by the transferee for the
use and enjoyment of Tenant's rights under this Lease (after deducting from such
consideration Tenant's reasonable costs incurred in effecting the assignment or
sublease, including, without limitation, real estate commissions, attorneys'
fees and tenant improvement expenses) exceeds the Rent payable by Tenant to
Landlord allocable to the transferred space. Such percentage of such amount will
be payable to Landlord at the time(s) Tenant receives the same from its
transferee (whether in monthly installments, in a lump sum, or otherwise). In
the event such consideration is payable in installments over the term of the
subletting or assignment, Tenant's costs of effecting the subletting or
assignment will be deducted from such consideration payments in equal amortized
installments over such period to determine the amount of the excess
consideration payable to Landlord.
10.5 General Provisions. No subletting or assignment by Tenant hereunder,
regardless of whether the same requires Landlord's consent, will release or
discharge Tenant of or from any liability, whether past, present or future,
under this Lease, and Tenant will continue to be fully liable hereunder. The
sublessee or assignee will agree in a form reasonably satisfactory to Landlord
to comply with and be bound by all of the terms, covenants, conditions,
provisions and agreements of this Lease to the extent of the space sublet or
assigned, and Tenant will deliver to Landlord promptly after execution an
executed copy of each such sublease or assignment and such an agreement of
compliance by each such sublessee or assignee. Consent by Landlord to any
assignment of this Lease or to any subletting of the Premises will not be a
waiver of Landlord's rights under this Section 10 as to any subsequent
assignment or subletting. Any sale, assignment, mortgage, transfer or subletting
of this Lease which is not in compliance with the provisions of this Section 10
will be of no effect and void. Landlord's right to assign its interest in this
Lease will remain unqualified. Landlord may charge Tenant for Landlord's actual
costs, up to a maximum of $1,000.00, for attorneys' fees and administrative
expenses incident to a review of any documentation related to any proposed
assignment or subletting by Tenant with respect to which Landlord's consent is
required and requested.
11. CASUALTY
11.1 Termination Options. If the Improvements are damaged by fire or other
casualty Landlord will, within 45 days after learning of such damage, notify
Tenant in writing of the time necessary to repair or restore such damage, as
estimated by Landlord's architect, engineer or contractor. If such damage
occurred during the 12-month period that ends on the Expiration Date, and if
such estimate states that repair or restoration of all of such damage that was
caused to the Improvements cannot be completed within the lesser of (i) 180 days
from the date of the damage; or (ii) the number of days then remaining in the
Term, then Tenant or Landlord will have the option to terminate this Lease. If
such damage occurred prior to the 12-month period that ends on the Expiration
Date, and if such estimate states that repair or restoration of all of such
damage that was caused to the Improvements cannot be completed within 270 days
from the date of the damage, then Tenant or Landlord will have the option to
terminate this Lease. If such damage is not insured against by the insurance
policies required to be maintained by Landlord according to Section 8.1, then
Landlord will have the option to terminate this Lease (unless Tenant notifies
Landlord, within 15 days after receipt of Landlord's
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notice of termination, as provided below, that Tenant will pay for all costs of
repairing and restoring the damage that are in excess of any available insurance
proceeds, in which case Landlord's exercise of such right of termination will be
deemed void and Tenant will be obligated to pay for such costs as they are
incurred and to provide such reasonable assurance of payment as may be required
by Landlord's contractor). Any option to terminate granted above must be
exercised by written notice to the other party given within 10 days after
Landlord delivers to Tenant the notice of estimated repair time. If either party
exercises its option to terminate this Lease, the Term will expire and this
Lease will terminate 10 days after notice of termination is delivered; provided,
however, that Rent for the period commencing on the date of such damage until
the date this Lease terminates will be reduced to the reasonable value of any
use or occupation of the Premises by Tenant during such period and Landlord will
be entitled to all proceeds of the insurance policy described in Section 8.2(b)
applicable to any damaged alterations in the Premises.
11.2 Repair Obligations. If the Improvements are damaged by fire or other
casualty and neither party terminates this Lease according to Section 11.1, then
Landlord will repair and restore such damage with reasonable promptness, subject
to delays for insurance adjustments and delays caused by matters beyond
Landlord's control. Landlord will have no liability to Tenant and Tenant will
not be entitled to terminate this Lease if such repairs and restoration are not
in fact completed within the estimated time period, provided that Landlord
promptly commences and diligently pursues such repairs and restoration to
completion and provided further that, if Landlord fails to complete such repairs
and restoration within 270 days after the date of the damage, Tenant may
terminate this Lease by notice given to Landlord within 20 days after the
expiration of such 270-day period. In no event will Landlord be obligated to
repair, restore or replace any of the property required to be insured by Tenant
according to Section 8.2; however, if Tenant and Landlord so agree, Landlord
will, in connection with its repair and restoration of such damage, repair and
restore the damage, if any, caused to any or all of the alterations required to
be insured by Tenant according to Section 8.2(b). In such event, Landlord will
be entitled to all proceeds of the insurance policy described in Section 8.2(b)
applicable to the alterations that Landlord will repair or restore.
11.3 Rent Abatement. If any fire or casualty damage renders the Premises
untenantable and if this Lease is not terminated according to Section 11.1, then
Rent will abate beginning on the date of such damage. Such abatement will end on
the date Landlord has substantially completed the repairs and restoration
Landlord is required to perform according to Section 11.2. Such abatement will
be in an amount bearing the same ratio to the total amount of Rent for such
period as the untenantable portion of the Premises bears to the entire Premises.
In no event will Landlord be liable for any inconvenience or annoyance to Tenant
or injury to the business of Tenant resulting in any way from damage caused by
fire or other casualty or the repair of such damage, provided however that, to
the extent Tenant remains in possession of a portion of the Premises, Landlord
will take all reasonable steps to minimize the disruption to Tenant's business
and use of such portion of the Premises during the period of repair.
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12. EMINENT DOMAIN
12.1 Termination. If the whole of the Premises is taken by any public
authority under the power of eminent domain, this Lease will terminate as of the
day possession is taken by such public authority. If more than 15% of the floor
area of the Building is taken, or if so much of the Land is taken that Tenant is
permanently deprived of the use of (i) so much of its loading dock facilities
(including access thereto and parking therefor) that Tenant cannot continue its
business at substantially the same level and scope as before the taking; or (ii)
more than 20% of the parking spaces previously available on the Land (and such
spaces cannot be reconstructed on the remaining Land or any adjacent land
acquired by Landlord for that purpose within 90 days after Tenant is so deprived
of such use), by any public authority under the power of eminent domain, then
Tenant may, by notice to Landlord, terminate this Lease as of the day possession
is taken by such public authority. In case of any such termination, Landlord
will make a pro rata refund of any prepaid Rent. All damages awarded for such
taking under the power of eminent domain or any like proceedings will belong to
and be the property of Landlord, Tenant hereby assigning to Landlord its
interest, if any, in such award.
12.2 Award; Restoration. Anything in this Section l2 to the contrary
notwithstanding, Tenant will have the right to prove in any condemnation
proceedings and to receive any separate award which may be made for (a) damages
to or condemnation of any alterations or improvements paid for and installed by
Tenant or Tenant's movable trade fixtures and equipment; (b) moving expenses;
(c) loss of goodwill; (d) business interruption; and (e) loss of value, as a
result of such taking, of Tenant's fixtures, equipment and inventory, provided,
however, Tenant will in no event have any right to receive any award for its
interest in this Lease or for loss of its leasehold. Anything in this Section 12
to the contrary notwithstanding, in the event of a partial condemnation of the
Premises where this Lease is not terminated, (i) Landlord will, at its sole cost
and expense, restore the Premises (including any alterations or improvements
installed by Landlord and Tenant) to a complete architectural unit (but
Landlord's restoration obligations will be limited to the extent of the
condemnation award for restoration made available to Landlord), and (ii) the
Basic Rent provided for herein (1) shall equitably abate during the period of
restoration to the extent the Premises are rendered untenantable by the taking
in a manner that will be corrected by restoration; and (2) during the period
from and after the date of delivery of possession pursuant to such proceedings
to the termination of this Lease will be reduced by (A) in the case of a taking
of any portion of the Building, a sum equal to the product of the Basic Rent
provided for herein multiplied by a fraction, the numerator of which is the
Rentable Area of the portion of the Building that was taken, and the denominator
of which is the Rentable Area of the entire Building prior to such taking; and
(B) in the case of a taking of any portion of the Premises excluding the
Building, a sum equal to the product of the Basic Rent provided for herein
multiplied by a fraction, the numerator of which is the fair market value of the
portion of the Premises, excluding the Building, that was taken, and the
denominator of which is the fair market value of the entire Premises, excluding
the Building, prior to such taking.
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13. END OF TERM
13.1 Surrender. On the last day of the Term, or on the sooner termination
thereof, Tenant will peaceably surrender the Premises in good condition and
repair (ordinary wear and tear and damage by casualty excepted), consistent with
Tenant's duty to make repairs as herein provided. Tenant will give written
notice to Landlord at least 30 days prior to vacating the Premises for the
express purpose of arranging a meeting with Landlord for a joint inspection of
the Premises (provided that Tenant's failure to do so will not constitute a
default hereunder). On or before the last day of the Term, or the date of sooner
termination thereof, Tenant will, at its sole cost and expense, remove all of
its personal property and trade fixtures and equipment from the Premises
(including, without limitation, Tenant's Property, as defined in Section 3.14,
and Tenant's personal property installed on the roof of the Building pursuant to
Section 17.1 below) and repair all damage to the Premises caused by such
removal. All property not removed will be deemed abandoned. Tenant hereby
appoints Landlord its agent to remove all property of Tenant not so removed from
the Premises upon termination of this Lease and to cause its transportation and
storage for Tenant's benefit, all at the sole cost and risk of Tenant, and
Landlord will not be liable for damage, theft, misappropriation or loss thereof,
nor will Landlord be liable in any manner in respect thereto. Tenant will
reimburse Landlord upon demand for any expenses incurred by Landlord with
respect to removal, transportation or storage of abandoned property and with
respect to restoring such Premises to good order, condition and repair. All
modifications, improvements, alterations, additions and fixtures, other than
Tenant's trade fixtures and equipment, which have been made or installed by
either Landlord or Tenant upon the Premises (excluding any of the same that were
made or installed by Tenant and then subsequently removed by Tenant in
accordance with Section 9.1), will remain the property of Landlord (in the case
of improvements made by Landlord) or become the property of Landlord (in the
case of improvements made by Tenant) upon the expiration of the Term and will be
surrendered with the Premises as a part thereof, except that Tenant will, at its
expense and prior to the expiration of the Term, remove from the Premises (and
repair all damage caused by such removal) (a) any alterations which required
Landlord's consent to make pursuant to Section 9.1 and which Landlord, at the
time it gave its consent to such installation, required that Tenant remove at
the end of the Term; (b) any alterations which did not require Landlord's
consent to make pursuant to Section 9.1 but which are atypical in a distribution
center environment and which Landlord requires Tenant to remove by notice
delivered within five business days after the joint inspection described above
(or, in the event the parties fail to hold such joint inspection, prior to the
expiration of the Term); and (c) if applicable, any items required to be removed
by Landlord pursuant to Section 2.6. If the Premises are not surrendered
promptly at the end of the Term or sooner termination thereof without Landlord's
written permission to not so surrender the Premises, Tenant will indemnify
Landlord against loss or liability resulting from delay by Tenant in so
surrendering the Premises, including, without limitation, claims made by any
succeeding tenants founded on such delay and any attorneys' fees resulting
therefrom. Tenant will promptly surrender all keys for the Premises to Landlord
at the place then fixed for the payment of Rent and will inform Landlord of
combinations on any vaults, locks and safes left on the Premises. Tenant's
obligations under this Section 13.1 will survive the termination of this Lease
or expiration of the Term.
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13.2 Holding Over. In the event Tenant remains in possession of the
Premises after expiration of this Lease, Tenant will be deemed to be occupying
the Premises without claim of right, and Tenant will pay Landlord for all costs
arising out of loss or liability resulting from delay by Tenant in so
surrendering the Premises as above provided and will pay a charge for each day
of occupancy in an amount equal to 150% of the Basic Rent (on a daily basis)
payable immediately prior to such expiration, plus 100% of all Additional Rent
(also on a daily basis).
14. DEFAULTS AND REMEDIES
14.1 General. All rights and remedies of Landlord and Tenant enumerated in
this Lease are cumulative and are not intended to be exclusive of any other
remedies or means of redress at law or in equity to which either party may be
lawfully entitled in case of any breach or threatened breach by the other party
of any provision of this Lease. The failure of either party to insist in any one
or more cases upon the strict performance of any of the covenants of this Lease
or to exercise any option herein contained will not be construed as a waiver or
relinquishment for the future of such covenant or option. A receipt by Landlord
of Rent with knowledge of the breach of any covenant hereof (other than breach
of the obligation to pay the portion of such Rent paid) will not be deemed a
waiver of such breach, and no waiver by either party of any provisions of this
Lease will be deemed to have been made unless expressed in writing and signed by
such party. Each party agrees to pay, upon demand, all of the other party's
costs, charges and expenses, including the reasonable fees and out-of-pocket
expenses of counsel, agents, and others retained, incurred in successfully
enforcing the other party's obligations under this Lease.
14.2 Events of Default. Each of the following events will constitute an
"Event of Default" under this Lease:
(a) Failure to Pay Rent. Tenant fails to pay Basic Rent or any other
-------------------
Rent payable by Tenant under the terms of this Lease when due, and such
failure continues for 10 days after notice is given by Landlord to Tenant
of such failure (provided that, with respect to monthly installments of
Basic Rent and monthly installments of Additional Rent for Operating
Expenses and Taxes, Tenant will only be entitled to two notices of such
failure during any calendar year and if, after two such notices are given
in any calendar year, Tenant fails, during such calendar year, to pay any
further monthly installment of Basic Rent when due, such failure will
constitute an Event of Default hereunder without any further notice from
Landlord or additional cure period).
(b) Failure to Perform Other Obligations. Tenant breaches or fails to
------------------------------------
comply with any provision of this Lease applicable to Tenant other than a
covenant to pay Rent, and such breach or noncompliance continues for a
period of 30 days after notice thereof is given by Landlord to Tenant; or,
if such breach or noncompliance cannot be reasonably cured within such 30-
day period, Tenant does not commence to cure such breach or noncompliance
within such 30-day period or, after commencing to cure such breach or
noncompliance, does not thereafter diligently pursue such cure in good
faith to completion.
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(c) Execution and Attachment Against Tenant. Tenant's interest under
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this Lease or in the Premises is taken upon execution or by other process
of law directed against Tenant, or is subject to any attachment by any
creditor or claimant against Tenant and such attachment is not discharged
or disposed of within 60 days after levy.
(d) Bankruptcy or Related Proceedings. Tenant files a petition in
---------------------------------
bankruptcy or insolvency, or for reorganization or arrangement under any
bankruptcy or insolvency Laws, or voluntarily takes advantage of any such
Laws by answer or otherwise, or dissolves or makes a general assignment for
the benefit of creditors, or involuntary proceedings under any such Laws or
for the dissolution of Tenant are instituted against Tenant, or a receiver
or trustee is appointed for the Premises or for all or substantially all of
Tenant's property, and such involuntary proceedings are not dismissed or
such receivership or trusteeship vacated within 60 days after such
institution or appointment.
14.3 Landlord's Remedies. Time is of the essence for the performance of
obligations by Tenant hereunder. If any Event of Default occurs, Landlord will
have the right, at Landlord's election, then or at any later time, to exercise
any one or more of the following remedies:
(a) Cure by Landlord. Landlord may, at Landlord's option but without
----------------
obligation to do so, and without releasing Tenant from any obligations
under this Lease, make any payment or take any action as Landlord deems
necessary or desirable to cure any Event of Default in such manner and to
such extent as Landlord in good faith deems necessary or desirable. Tenant
will pay Landlord, upon demand, all advances, costs and expenses of
Landlord in connection with making any such payment or taking any such
action, including reasonable attorney's fees, together with interest at the
Interest Rate, from the date of payment of any such advances, costs and
expenses by Landlord.
(b) Termination of Lease and Damages. Landlord may terminate this
--------------------------------
Lease, effective at such time as may be specified by notice to Tenant, and
demand (and, if such demand is refused, recover) possession of the Premises
from Tenant. In such event, Landlord will be entitled to recover from
Tenant, as damages for loss of the bargain and not as a penalty, an
aggregate sum equal to (i) all unpaid Basic Rent and other Rent for any
period prior to the termination date of this Lease (including interest from
the due date to the date of the award at the Interest Rate); plus (ii) the
present value at the time of termination (calculated by discounting on a
monthly basis at a discount rate equal to the rate payable on U.S. Treasury
securities offered at the time of award having a maturity closest to the
date on which the Term would have expired but for such termination) of the
amount, if any, by which (A) the aggregate of the Basic Rent and all other
Rent payable by Tenant under this Lease that would have accrued for the
balance of the Term after termination, exceeds (B) the amount of such Basic
Rent and other Rent which could reasonably be recovered by reletting the
Premises for the remainder of the Term at the then-current fair rental
value; plus (iii) interest on the amount described in (ii) above from the
termination date to the date of the award at the Interest Rate.
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(c) Repossession and Reletting. Landlord may reenter and take
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possession of all or any part of the Premises, with process of law but
without additional demand or notice unless required by applicable Laws, and
repossess the same and expel Tenant and any party claiming by, through or
under Tenant, and remove the effects of both using such force for such
purposes as may be necessary, without being liable for prosecution for such
action or being deemed guilty of any manner of trespass, and without
prejudice to any remedies for arrears of Rent or right to bring any
proceeding for breach of covenants or conditions. No such reentry or taking
possession of the Premises by Landlord will be construed as an election by
Landlord to terminate this Lease unless a notice of such intention is given
to Tenant. No notice from Landlord or notice given under a forcible entry
and detainer statute or similar Laws will constitute an election by
Landlord to terminate this Lease unless such notice specifically so states.
Landlord reserves the right, following any reentry or reletting, to
exercise its right to terminate this Lease by giving Tenant such notice, in
which event the Lease will terminate as specified in such notice. After
recovering possession of the Premises, Landlord will use reasonable efforts
to relet the Premises on commercially reasonable terms and conditions.
Landlord may make such repairs, alterations or improvements as Landlord
considers appropriate to accomplish such reletting, and Tenant will
reimburse Landlord upon demand for all reasonable costs and expenses,
including attorneys' fees, which Landlord may incur in connection with such
reletting. Landlord may collect and receive the rents for such reletting
but Landlord will in no way be responsible or liable for any inability to
relet the Premises or to collect any rent due upon such reletting. Landlord
may apply the same first to the payment of such expenses as Landlord may
have incurred in recovering possession of the Premises, including
attorneys' fees and expenses for putting the same into good order and
condition or preparing or altering the same for re-rental to the extent
Landlord deems necessary or desirable and all other expenses, commissions
and charges paid, assumed or incurred by Landlord in or about reletting the
Premises and then to the fulfillment of the covenants of Tenant hereunder.
Any such reletting herein provided for may be for the remainder of the Term
or any renewal term of this Lease, as originally granted, or for a longer
or shorter period; Landlord will have the right to change the character and
use made of the Premises, and Landlord will not be required to accept any
substitute tenant offered by Tenant or to observe any instructions given by
Tenant about reletting. Regardless of Landlord's recovery of possession of
the Premises, so long as this Lease is not terminated Tenant will continue
to pay (and Landlord may recover, if Tenant fails to do so), on the dates
specified in this Lease, the Basic Rent and other Rent which would be
payable for the remainder of the Term (excluding any Renewal Term with
respect to which Tenant has not exercised its option under Section 2.5) if
such repossession had not occurred, less a credit for the net amounts, if
any, actually received by Landlord through any reletting of the Premises.
(d) Bankruptcy Relief. Nothing contained in this Lease will limit or
-----------------
prejudice Landlord's right to prove and obtain as liquidated damages in any
bankruptcy, insolvency, receivership, reorganization or dissolution
proceeding, an amount equal to the maximum allowable by any Laws governing
such proceeding in effect at the time when
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such damages are to be proved, whether or not such amount be greater, equal
or less than the amounts recoverable, either as damages or Rent, under this
Lease.
14.4 Landlord's Default; Tenant's Remedies. Time is of the essence for the
performance of obligations by Landlord hereunder. If, during the Term, Landlord
defaults in fulfilling any of its covenants, obligations or agreements set forth
in this Lease, Tenant may give Landlord notice of such default and, if at the
expiration of 30 days after delivery of such notice, such default continues to
exist, or in the event of a default which cannot with due diligence be cured
within a period of 30 days, if Landlord fails to proceed promptly after the
delivery of such notice and with all due diligence to commence to cure the same
and thereafter to prosecute the curing of such default with all due diligence to
completion as soon as reasonably possible, then Tenant will be entitled (a)
subject to the limitations set forth below, to cure any default by Landlord
hereunder and, if the default involves an obligation the costs of which Landlord
(and not Tenant, through inclusion in Operating Expenses or otherwise) is
required to pay, to invoice Landlord for the costs incurred by Tenant in so
doing, plus interest at the Interest Rate from the date such costs are paid by
Tenant to the date reimbursed by Landlord with interest, and if Landlord fails
to pay such invoice within 10 days from delivery thereof, to offset the amounts
due from Landlord against the next ensuing payment(s) of Basic Rent due
hereunder; or (b) to exercise any right or remedy available to Tenant at law or
in equity by reason of such default, except to the extent expressly waived or
limited by the terms of this Lease. Notwithstanding the foregoing, in the event
of a bona fide emergency, if Landlord fails to perform an obligation under this
Lease within one business day after delivery of notice thereof from Tenant
(which notice must include reference to this emergency provision), Tenant may
cure such failure and expend up to a maximum of $2,000 per emergency matter in
so doing; if the default involves an obligation that Landlord is required to pay
for under this Lease, then Tenant may invoice Landlord for amount expended to
effect the emergency cure and, if Landlord fails to pay such invoice within 15
days, Tenant may offset the amount thereof against Basic Rent. Notwithstanding
any other provision of this Lease to the contrary, with respect to any provision
of this Lease which grants Tenant the right to deduct or offset any expenses
incurred by Tenant from its payments due Landlord hereunder, after the
expiration of Landlord's applicable notice and cure period, Tenant must first
advise Landlord by notice that Tenant will effect its remedy of deduction or
offset and thereafter Tenant will only be permitted to offset against each
monthly installment of Basic Rent hereunder an amount not exceeding 25% of the
amount of such installment of Basic Rent and Tenant will not be entitled to
offset any amounts against any other Rent under any circumstances. If such
monthly offset does not total the aggregate amount of Tenant's expenses which
are allowable for offset, the remaining balance thereof may be carried forward
and offset against future installments of Basic Rent, but Tenant may never
offset more than 25% of any monthly installment of Basic Rent. Further
notwithstanding the foregoing, if Tenant has been notified of the name and
address of any Mortgagee, then Tenant will not exercise any remedy as a result
of Landlord's default unless and until Tenant has given any such Mortgagee, by
registered or certified mail, a copy of any notice of default served upon
Landlord simultaneously with the delivery of notice to Landlord. Tenant further
agrees that if Landlord fails to cure such default within the time period
prescribed above, then such Mortgagee will have an additional 30-day period to
cure such default or if such default cannot be cured within that time, then such
additional time as may be necessary if within such 30-day period such Mortgagee
has
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commenced and is diligently pursuing the cure of such default (including, but
not limited to, commencement of foreclosure proceedings, if necessary to effect
such cure).
15. SUBORDINATION
15.1 Subordination, Nondisturbance and Attornment. This Lease will be
subject and subordinate to any mortgage, deed of trust, ground lease or sale-
leaseback now or hereafter placed upon the Premises by Landlord, and to
amendments, replacements, renewals and extensions thereof, provided that as long
as Tenant is not in default in the payment of Rent and the performance of all
covenants, agreements and conditions to be performed by Tenant under this Lease,
and provided that Tenant attorns to the party acquiring title to the Premises as
a result of the foreclosure, termination or transfer in lieu thereof of any such
mortgage, deed of trust, ground lease or sale-leaseback (so long as such
acquiring party is obligated for the performance of all obligations of Landlord
hereunder required to be performed from and after such acquisition), then
neither Tenant's right to quiet enjoyment under this Lease, nor the right of
Tenant to continue to occupy the Premises and to conduct its business thereon,
in accordance with the terms of this Lease, will be interfered with by the
holder of any such mortgage, deed of trust, ground lease or sale-leaseback, by
any successor thereto or any successor to Landlord as a result of the
foreclosure or termination thereof or transfer in lieu thereof, or by virtue of
any such foreclosure, termination or transfer. Such subordination will be
effective without the necessity of the execution and delivery of any further
instruments on the part of Tenant to effectuate such subordination. However,
Tenant agrees at any time hereafter, within 10 business days after delivery of
Landlord's written request, to execute and deliver any instruments, releases or
other documents, in form reasonably satisfactory to Tenant, that may be
reasonably required for the purpose of subjecting and subordinating this Lease,
as above provided, to the lien of any such mortgage, deed of trust, ground lease
or sale-leaseback, provided the same include the nondisturbance provisions and
covenant to perform Landlord's obligations set forth above.
15.2 Option to Make Lease Superior. Notwithstanding anything contained in
Section 15.1, in the event the holder of any mortgage, deed of trust, ground
lease or sale-leaseback instrument at any time elects to have this Lease
constitute a prior and superior lien to its mortgage, deed of trust, ground
lease or sale-leaseback instrument, then, and in such event, upon any such
holder or Landlord notifying Tenant to that effect in writing, this Lease will
be deemed prior and superior in lien to such mortgage, deed of trust, ground
lease or sale-leaseback instrument, whether this Lease is dated prior to or
subsequent to the date of such mortgage, deed of trust, ground lease or sale-
leaseback instrument, and Tenant will execute such agreement in form reasonably
acceptable to Tenant as may be reasonably requested by such holder to confirm
such superior status.
16. SECURITY DEPOSIT
16.1 Amount and Form. Upon execution of this Lease, Tenant will deposit
$850,000 with Landlord (such amount, as the same may be reduced in accordance
with the provisions hereof, and whether in the form of cash or a letter of
credit, as provided herein, is referred to as the "Security Deposit"). Landlord
and Tenant intend the Security Deposit to be used solely as
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security for Tenant's faithful and diligent performance of all of Tenant's
obligations under this Lease. The Security Deposit will remain in Landlord's
possession for the entire Term, and Landlord will not be required to segregate
it from Landlord's general funds. Tenant will not be entitled to any interest on
the Security Deposit. Provided that no Event of Default or event which, with the
giving of notice or the passage of time, or both, could become an Event of
Default then exits, at the end of each Lease Year during the initial 10-year
Term, the amount of the Security Deposit required hereunder will be reduced as
follows: (a) at the end of each of the first through the fifth Lease Years the
amount of the Security Deposit will be reduced by $100,000; and (b) at the end
of each of the sixth through the 10th Lease Years, the amount of the Security
Deposit will be reduced by $60,000. Upon each permitted reduction in the amount
of the Security Deposit, Landlord will refund to Tenant the reduction amount if
the Security Deposit is then in the form of cash or will permit Tenant to reduce
the amount of the letter of credit by the reduction amount if the Security
Deposit is then in the form of a letter of credit. Tenant may provide the
Security Deposit in the form of a letter of credit, provided that (i) the form
of the letter of credit and the issuing bank are reasonably acceptable to
Landlord; (ii) the letter of credit provides that Landlord may draw the entire
amount thereof upon presentation of Landlord's sight draft accompanied by a
certification by Landlord that an Event of Default has occurred under this
Lease; and (iii) at least 30 days prior to the expiration of an existing letter
of credit, Tenant will cause the same to be renewed through issuance and
delivery to Landlord of a substitute letter of credit meeting the requirements
hereof and issued in the amount then-required hereunder (and not in any reduced
amount that may become applicable thereafter), and if Tenant fails to timely
deliver such substitute, then Landlord may draw the entire amount of the
existing letter of credit prior to its expiration. Upon any drawing of a letter
of credit posted as the Security Deposit, the proceeds will be held and applied
by Landlord pursuant to the terms hereof as if Tenant had deposited the Security
Deposit in cash.
16.2 Use and Restoration. Upon the occurrence of an Event of Default by
Tenant under this Lease, Landlord may, at its option, use, apply or retain all
or any part of the Security Deposit for the payment of (1) any Rent in arrears;
(2) any expenses Landlord may incur as a direct or indirect result of Tenant's
failure to perform; and (3) any other losses or damages Landlord may suffer as a
direct or indirect result of Tenant's failure to perform. If Landlord so uses or
applies all or any portion of the Security Deposit, Landlord will notify Tenant
of such use or application and Tenant will, within 10 days after the date of
Landlord's notice, deposit with Landlord a sum sufficient to restore the
Security Deposit to the amount held by Landlord immediately prior to such use or
application. Tenant's failure to so restore the Security Deposit within 30 days
after deliver of Landlord's written demand therefor will constitute an Event of
Default.
16.3 Transfers. Tenant will not assign or encumber the Security Deposit
without Landlord's express written consent. Neither Landlord nor its successors
or assigns will be bound by any assignment or encumbrance unless Landlord has
given its consent. Landlord will have the right, at any time and from time to
time, to transfer the Security Deposit to any purchaser or lessee of the entire
Building. Upon any such transfer, and upon delivery to Tenant of a copy of the
purchaser's or lessee's written acknowledgment of its receipt of the Security
Deposit and agreement to perform all of Landlord's obligations arising hereunder
from and after the transfer
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date, Tenant agrees to look solely to the new owner or lessee for the return of
the Security Deposit.
16.4 Refund. Landlord will refund the Security Deposit, or any balance
remaining after application thereof by Landlord pursuant to Section 16.2, to
Tenant within 60 days after the expiration or early termination of the Term and
Tenant's vacation and surrender of the Premises to Landlord in the condition
required by Section 13.1. Landlord may withhold from such refund a reasonable
estimate of the amount that will be due from Tenant pursuant to Section 4.2(d)
for the last year of the Term, pending final settlement between the parties with
the applicable Taxes, assessments and charges are determined for such year.
17. MISCELLANEOUS
17.1 Roof Installations. Subject to obtaining Landlord's prior written
approval as to any specific installation, which approval will not be
unreasonably withheld, conditioned or delayed, Tenant will have the right, at
its expense, to install (a) antennas and satellite dishes; (b) refrigeration
equipment; or (c) heating, ventilating and air conditioning equipment, on the
roof of the Building, provided that any such installation will be effected in a
manner that (1) complies with all applicable Laws (including, without
limitation, zoning Laws and the Covenant Documents); and (2) does not void or
otherwise impair any warranties covering the roof. Landlord will not charge
Tenant any additional Rent for any such use of the Building's roof. Tenant will
not enter into any license or sublease permitting a licensee or subtenant to use
the roof of the Building, except that Tenant may permit a bona fide subtenant of
premises within the Building to use a portion of the roof in connection with
such subtenant's use of its sublet premises within the Building.
17.2 Building Signage. In addition to the monument sign described in the
Shell Specifications (which will be for the exclusive use by Tenant), Tenant
will have the right, at its expense, to install, in a manner and location
reasonably designated by Landlord, one exterior identification sign on the
Building. The size, design and graphics of such sign will be subject to the
Covenant Documents and approval by Douglas County. Landlord will not install,
erect or maintain any signs on the Premises during the Term, except that
Landlord may erect a "For Rent" sign during the last nine months of the Term;
provided, however, that such sign will not obstruct any sign of Tenant or
interfere unreasonably with the conduct of Tenant's business at the Premises.
17.3 Non-competition. Landlord agrees that, so long as no uncured Event of
Default by Tenant exists under this Lease and Tenant is occupying and operating
the Premises for an order-by-internet home-delivery grocery business ("Tenant's
Use"), Landlord will not permit any tenant under any lease of other premises
owned by Landlord within Lots 1, 2, 3, 4 and 5 of the same filing of the Project
as that within which the Premises are located to use such premises for Tenant's
Use.
17.4 Brokers. Landlord will pay the commission due to Jim Bolt/CB Richard
Ellis, Inc. in connection with the negotiation and execution of this Lease.
Landlord will also pay to Tenant an amount equal to $2.19 multiplied by the
number of square feet of the Rentable Area of
40
<PAGE>
the Premises to compensate Tenant for the services of its leasing consultant
with respect to this Lease; 50% of such amount will be paid to Tenant upon
execution and delivery of this Lease and the remaining 50% will be paid on the
Commencement Date. Tenant and Landlord will indemnify and hold each other
harmless from all damages paid or incurred by the indemnified party resulting
from any claims asserted against the indemnified party by brokers, agents or
leasing consultants claiming through the indemnifying party.
17.5 Estoppel Certificates. Tenant agrees, from time to time, upon not
less than 10 business days' prior written request by Landlord, to deliver to
Landlord a statement in writing certifying, to Tenant's actual knowledge (i)
this Lease is unmodified and in full force and effect (or if this Lease is not
in full force and effect, so stating, of if there have been modifications, that
the Lease as modified is in full force and effect and stating the
modifications); (ii) the dates to which Basic Rent and other Rent have been
paid; (iii) Landlord is not in default in any provision of this Lease or, if in
default, the nature thereof specified in detail; (iv) the amount of monthly
Basic Rent currently payable by Tenant; (v) the amount of any prepaid Rent; (vi)
that Tenant has taken possession of the Premises (if Tenant has in fact done so)
and that Landlord has performed all of its obligations under Section 3 with
respect to the design, construction and installation of the Shell and the
Leasehold Improvements, or if there are any such obligations remaining to be
performed, specifying the same in detail; and (vii) such other matters as may be
reasonably requested by Landlord or any Mortgagee or prospective purchaser of
the Premises.
17.6 Notices. All notices required or permitted under this Lease must be
in writing and will only be deemed properly given and received (i) when actually
given and received, if delivered in person to a party who acknowledges receipt
in writing; or (ii) one business day after deposit with a private courier or
overnight delivery service, if such courier or service obtains a written
acknowledgment of receipt; or (iii) three business days after deposit in the
United States mails, certified or registered mail with return receipt requested
and postage prepaid. All such notices must be transmitted by one of the methods
described above to the party to receive the notice at, in the case of notices to
Landlord, Landlord's Notice Address, and in the case of notices to Tenant, the
applicable Tenant's Notice Address, or, in either case, at such other
address(es) as either party may notify the other of according to this Section
17.6
17.7 Actions by Landlord's Agent. All rights and remedies of Landlord
under this Lease or that may be provided by law may be executed by Landlord in
its own name, individually, or in the name of its agent, and all legal
proceedings for the enforcement of any such rights or remedies, including those
set forth in Section 14, may be commenced and prosecuted to final judgment and
execution by Landlord in its own name or in the name of its agent.
17.8 Severability; Governing Law. If any term or provision of this Lease
is to any extent held invalid or unenforceable, the remaining terms and
provisions of this Lease will not be affected thereby, but each term and
provision of this Lease will be valid and enforced to the fullest extent
permitted by law. This Lease will be construed and enforced in accordance with
the laws of the State of Colorado.
41
<PAGE>
17.9 Transfers of Landlord's Interest. The term "Landlord" as used in this
Lease, so far as covenants or obligations on the part of Landlord are concerned,
will be limited to mean and include only the owner or owners of the Premises at
the time in question, and in the event of any transfer or conveyance, provided
either that the transferee agrees in writing (a copy of which will be provided
to Tenant upon request) to perform all of Landlord's obligations hereunder
arising from and after the transfer or that the transferee is required to
perform such obligations under applicable Laws, the then grantor will be
automatically freed and released from all personal liability accruing from and
after the date of such transfer or conveyance as respects the performance of any
covenant or obligation on the part of Landlord contained in this Lease to be
performed, it being intended hereby that the covenants and obligations contained
in this Lease on the part of Landlord will be binding, subject to Section 17.14,
on the then Landlord only during and in respect to its period of ownership. In
the event of a sale or conveyance by Landlord of the Premises, provided either
that the transferee agrees in writing (a copy of which will be provided to
Tenant upon request) to perform all of Landlord's obligations hereunder arising
from and after the transfer or that the transferee is required to perform such
obligations under applicable Laws, the same will operate to release Landlord
from any future liability upon any of the covenants or conditions herein
contained and in such event Tenant agrees to look solely to the responsibility
of the successor in interest of Landlord in and to this Lease. This Lease will
not be affected by any such sale or conveyance, and Tenant agrees to attorn to
the purchaser or grantee, provided either that the purchaser or grantee agrees
in writing (a copy of which will be provided to Tenant upon request) to perform
all of Landlord's obligations hereunder arising from and after the sale or
conveyance or that the purchaser or grantee is required to perform such
obligations under applicable Laws.
17.10 Headings. The marginal or topical headings of the several sections
are for convenience only and do not define, limit or construe the contents of
such sections.
17.11 Complete Agreement; Modification. All of the representations and
obligations of the parties are contained in this Lease and no modification,
waiver or amendment of this Lease or of any of its conditions or provisions will
be binding upon a party unless in writing signed by such party.
17.12 No Offer. The submission of this document for examination does not
constitute an offer to lease, or a reservation of, or option for, the Premises.
This document becomes effective and binding only upon the execution and delivery
hereof by the proper officers of Landlord and Tenant.
17.13 Survival. In addition to those obligations set forth in this Lease
that expressly survive the expiration or earlier termination of the Term, all
obligations of Landlord and Tenant hereunder that, by their nature, cannot be
fully performed prior to the expiration or earlier termination of the Term will
survive the expiration or earlier termination of the Term.
17.14 Limitation on Landlord's Liability. Tenant agrees to look solely to
Landlord's interest in the Premises for the recovery of any judgment from
Landlord, it being agreed that Landlord, and if Landlord is a partnership, its
partners whether general or limited, and if
42
<PAGE>
Landlord is a corporation, its directors, officers or shareholders, and if
Landlord is a limited liability company, its managers or members, will never be
personally liable for any such judgment.
17.15 Tenant's Authority. Tenant will furnish to Landlord promptly upon
demand, a corporate resolution evidencing the due authorization of Tenant to
enter into this Lease.
17.16 No Partnership. This Lease will not be deemed or construed to create
or establish any relationship or partnership or joint venture or similar
relationship or arrangement between Landlord and Tenant hereunder.
17.17 Force Majeure. Whenever a period of time is herein prescribed for
action to be taken by either party, such party will not be liable or responsible
for, and there will 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 reasonable control of such party. A lack of
funds, however, will never be deemed beyond a party's reasonable control.
17.18 Financial Statements. Tenant acknowledges that it has provided
Landlord with its financial statement as a material inducement to Landlord's
agreement to lease the Premises to Tenant, and that Landlord has relied on the
accuracy of such financial statement in entering into this Lease. Tenant
represents and warrants that the information contained in such financial
statement is true, complete and correct in all material aspects. Except during
any time that Tenant constitutes a publicly-traded entity whose financial
statements are available for public inspection, Tenant will make available to
Landlord or to any prospective Mortgagee or purchaser of the Premises, within 10
days from request by Landlord, audited financial statements of Tenant or any
guarantor, provided, that Landlord or any such prospective Mortgagee or
purchaser agrees to maintain such statements in confidence, and provided further
that if audited financial statements of Tenant are not available at the time of
such request, Tenant may deliver unaudited statements prepared in accordance
with generally accepted accounting principles consistently applied and certified
to be true and correct by Tenant's chief financial officer. Tenant will have no
obligation to provide such financial statements more than once in any calendar
year.
17.19 Future Covenants. Landlord agrees that it will not execute or
consent to any future grants, declarations or agreements that may be hereafter
recorded and that impose or create easements, covenants or restrictions on,
over, under, through or with respect to property located within the Project if
the same would materially and adversely affect Tenant's ingress to or egress
from the Premises or would materially and adversely affect Tenant's operation of
a home-delivery grocery distribution warehouse business at the Premises. Tenant
acknowledges that Landlord intends to enter into a Covenant Document that will
permit the owners (and their tenants or other permittees) of both the Land and
the property adjacent thereto on the east to use the common access to such
properties from the adjacent street to the south and the common driveway
consisting of approximately 35 feet on each side of the border between the Land
and such adjacent property for purposes of ingress, egress and truck maneuvering
(but not for parking) and will provide for the sharing of the costs of
maintaining such access and driveway.
43
<PAGE>
Tenant further acknowledges that such an agreement will not be deemed to
materially and adversely affect Tenant's ingress, egress or the conduct of its
business.
17.20 Binding Effect. The covenants and agreements herein contained will
bind and inure to the benefit of Landlord and its successors and assigns, and
Tenant and its permitted successors and assigns.
17.21 Acquisition Contingency. Landlord has disclosed to Tenant that, as
of the date of this Lease, Landlord has not yet acquired title to the Land.
Landlord covenants to proceed in good faith to consummate its acquisition of the
Land. However, if Landlord does not acquire title to the Land by May 15, 2000
due to (i) a default by the seller thereof under its contract with Landlord
which default is not within Landlord's control; or (ii) a good faith failure to
satisfy a condition precedent to Landlord's obligation to purchase under such
contract, then Landlord may terminate this Lease by notice to Tenant given at
any time prior to Landlord's acquisition of such title or June 15, 2000,
whichever occurs first, and upon such termination, (a) all prepaid Rent, the
Security Deposit and all other amounts theretofore paid by Tenant to Landlord
hereunder will be refunded to Tenant; (b) the amount paid by Landlord to Tenant
for leasing consultant services pursuant to Section 17.4 will be refunded by
Tenant to Landlord; (c) Tenant will have no obligation to reimburse Landlord for
any costs incurred by Landlord in designing or constructing the Shell or the
Leasehold Improvements; and (d) except as provided above in this Section 17.21,
both parties will be relieved of any further obligations hereunder. In addition,
if Landlord has not acquired title to the Land by July 31, 2000 for any reason
other than a default by Tenant under this Lease, then Tenant may terminate this
Lease by notice to Landlord given at any time prior to Landlord's acquisition of
such title and, upon the timely giving of such notice, this Lease will terminate
in accordance with the foregoing clauses (a) through (d).
IN WITNESS WHEREOF, the parties have executed this Lease as of the date
first set forth above.
LANDLORD: TENANT:
OPUS NORTHWEST, L.L.C., a HOMEGROCER. COM, INC., a
Delaware limited liability company Washington corporation
By: /s/ [ILLEGIBLE] By: /s/ C.J. Karaffa
------------------- ---------------------------------
Vice President Its: SR.V.P. Operations
---------------------------------
By: /s/ Kristin H. Stred
---------------------------------
Its: Sr. VP and Corporate Secretary
---------------------------------
44
<PAGE>
Exhibit A
---------
LEGAL DESCRIPTION OF THE LAND
A parcel of land located in the Northwest Quarter and the Northeast Quarter of
Section 6, Township 6 South, Range 66 West of the 6th P.M., County of Douglas,
State of Colorado, more particularly described as follows:
Beginning at the Northwest comer of said Northeast Quarter of Section 6, then S
89(Degree)40'35" W, along the north line of said Northwest Quarter of Section 6,
a distance of 57.41 feet; thence S 00(Degree)03'40" E a distance of 580.20 feet;
thence N 89(Degree)56'20" E a distance of 538.50 feet; thence N 00(Degree)03'40"
W a distance of 582.74 feet to the north line of said Northeast Quarter of
Section 6; thence S 89(Degree)40'04" W, along said north line, a distance of
481.09 feet to the point of beginning. The basis of bearings for the foregoing
description assumes the north line of said Northeast Quarter runs N
89(Degree)40'04" E.
Landlord and Tenant acknowledge that, prior to Landlord's acquisition of the
Land, the seller thereof will cause the same to be subdivided (and the parties
anticipate that the Land will become Lot 5 of Compark Filing No. 2, Douglas
County, Colorado). At such time as such plat has been recorded, the parties
agree to execute an amendment to this Lease substituting for the above legal
description a new legal description for the Land based on such recorded plat,
with the Land for such purposes being the lot shown on such plat that has
boundaries substantially in accordance with those set forth above.
A-1
<PAGE>
Exhibit A-1
[FLOOR PLAN APPEARS HERE]
<PAGE>
Exhibit B
---------
SHELL SPECIFICATIONS
General Site Requirements
Access
- ------
A. Separate employee and truck entrances required. Entrances shall be located
such that they do not create any other adverse traffic situations with the
streets or other parking areas.
B. Allow for one (1) 20-yard container for trash and cardboard with easy
access for pick-up and drop-off by local vendor.
C. All required fire lanes shall be provided per local regulations.
Delivery Truck Parking Requirements
- -----------------------------------
A. On-site delivery truck parking shall accommodate 80 spaces with 20 spaces
provided at the dock area and 60 spaces in the parking area.
B. Typical parking stall dimensions shall be 28'd x 12'w. There shall be a
clear drive of 34' for maneuvering.
C. Parking for 4 semi-trailers must also be accommodated up to 65' in length.
Receiving docks shall be located such that the driver of the tractor-
trailer has direct visual contact with the docks while backing in, i.e.
docks at left of approach.
D. All internal and access roads shall be paved.
E. Truck parking shall be for Tenant's exclusive use.
Employee Parking
- ----------------
A. Site shall meet ADA and local code for number of parking spaces and shall
accommodate the forecast of at least 200 striped spaces (includes office
personnel).
B. All visitor and employee access roads and parking areas shall be paved.
C. Employee parking shall be for Tenant's exclusive use.
Site Security
- -------------
Intentionally left blank.
B-1
<PAGE>
Base Building Spec
High Level Space Summary
- ------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Type of Space Minimum Size Minimum Clear Height
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Office 10,000sf 9'-0"
- -------------------------------------------------------------------------------------------------
Shipping/Receiving Dock 14,000sf 22'-0" to 28'-0"
- -------------------------------------------------------------------------------------------------
Shopping Area 50,000sf 22'-0" to 28'-0"
- -------------------------------------------------------------------------------------------------
Produce Prep. And Misc. 3,000sf no restriction
- -------------------------------------------------------------------------------------------------
Cooler/Freezer Area 28,000sf 22'-0" to 28'-0"
- -------------------------------------------------------------------------------------------------
TOTAL 105,000sf
- -------------------------------------------------------------------------------------------------
</TABLE>
*Depth of building perpendicular to dock door opening should be a minimum of 200
feet and would be optimal at 250 feet.
*Column spacing should be maximum achievable. Bays of 40 ft are acceptable.
*Battery charging area and conveyor compressor room are part of the 105,000sf
and should be included in a detailed space summary of the building.
Floor Requirements
- ------------------
A. If new, coordinate freezer/slab requirements prior to placing of slabs,
i.e. sub slab insulation.
B. Slab on grade design shall be 6" thick, 4,000psi and shall be FF50/FL30
minimum in levelness. Soil compaction below must be at least 3,000psf.
C. Provide Tenant requested sealant. The cost associated with Landlord's
standard (one coat) sealant will be credited to the Leasehold Improvement
cost..
Loading Docks
- -------------
A. Door Quantity: Provide a minimum of 20 shipping dock doors, 4 receiving
dock doors, and 1 ramp door.
B. Door Size/Spacing: Typical doors shall be steel, 8'-6" wide x 9'-0" high
and be vertical roll-up in operation. Doors shall be spaced 12'-6" on
center. Door at ramp shall be 10'-0" wide x 12'-0" high and be a motor
driven steel vertical roll-up door.
B-2
<PAGE>
Door Criteria
<TABLE>
<CAPTION>
Vehicle Door Size Center to Dock Truck Clear Total Yard
Type Center Height Length Drive Aisle (min)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shipping 8'-6"x 9'* 12'-0" 38" 28' 34' 63'
Van
- -------------------------------------------------------------------------------------------------------
Receiving 8'-6"x 9' 14'-0" 48" 65' 65' 130'
Truck
- -------------------------------------------------------------------------------------------------------
Ramp 10'x 12' N/A Grade N/A N/A N/A
- -------------------------------------------------------------------------------------------------------
</TABLE>
A. Canopy: Provide a continuous canopy over all dock doorways.
B. Dock Height: 20 shipping dock bays shall be at +/- 38" and the 4 receiving
docks shall be at +/- 48".
C. Mechanical Dock Levelers: provide 3 levelers at the receiving docks.
Levelers shall be 7' wide x 8' long and have a minimum capacity of 25,000
lbs.
D. Dock Ramp: Provide 1 dock ramp with rough broom finish and a landing at the
top prior to entering the building. Maximum slope not to exceed 6%.
Structural Requirements
Roof structure will be capable of accommodating approximately twenty (20) - 10
ton mechanical units, antennas and 1,000 LB point loads for conveyor
connections. The cost associated with providing the 1,000 LB point load will be
a Leasehold Improvement cost.
Mechanical Requirements
HVAC Requirements
- -----------------
A. Air changes are to be per governing code requirements.
Potable Water
- -------------
A. A 3" main supply will be provided and metered to the building. The costs
associated with increasing the supply from 2" to 3" will be included as a
Leasehold Improvement cost.
B-3
<PAGE>
Waste Lines
- -----------
A. Provide 6' sewer main into building.
Natural Gas
- -----------
A. Gas line supporting typical warehouse use will be stubbed to the building.
Fire Protection
- ---------------
A. Landlord will provide a fire protection allowance of $.70 per rentable
square foot for construction of Tenant's sprinkler system.
Electrical Requirements
Overall Electrical Power
- ------------------------
A. Provide a 4 wire, 4,000 amps @ 480v, 3ph, service with a dedicated ground
(includes HVAC). The cost associated with increasing the service from 3,000
to 4,000 amps will be included as a Leasehold Improvement cost.
Break Room
- ----------
Intentionally left blank.
Truck Charging
- --------------
Intentionally left blank.
Lighting Requirements
- ---------------------
A. Site/Yard: 1 fc average each
Emergency Generator - Transfer Switch Only
- ------------------------------------------
Intentionally left blank.
B-4
<PAGE>
Telephone
- ---------
A. Provide one (1) 3" conduit from point of presence to the telephone panel to
accommodate T1 phone service. Point of presence shall be within 250 feet of
the telephone panel. Maximum number of 90 bends not to exceed two (2).
B. All conduit shall be provided with pull cords.
Server Room
- -----------
Intentionally left blank.
Data Cabling
- ------------
Intentionally left blank.
Health Department Requirements (Verify with Local Health Department)
Intentionally left blank.
B-5
<PAGE>
EXHIBIT 10.5
STANDARD WAREHOUSE LEASE AGREEMENT. Approximately 102,297 square feet
Atlanta Industrial/2000 1851 West Oak Parkway
Marietta, Georgia 30062
LEASE AGREEMENT
THIS LEASE AGREEMENT, is made and entered into as of March 31, 2000 by and
--
between 3 Plus Limited Partnership hereinafter referred to as "Landlord", and
HomeGrocer.com, Inc. hereinafter referred to as "Tenant";
WITNESSETH:
1. PREMISES AND TERM. In consideration of the obligation of Tenant to pay rent
as herein provided, and in consideration of the other terms, provisions and
covenants hereof, Landlord hereby demises and leases to Tenant, and Tenant
hereby accepts and leases from Landlord certain premises consisting of a
building containing approximately 102,297 square feet at 1851 West Oak Parkway,
County of Cobb, State of Georgia, (the "Building") together with all site
improvements upon the real property legally described on Exhibit "A" and
depicted on the site plan attached hereto as Exhibit "A-1" (collectively the
"Premises").
TO HAVE AND TO HOLD the same for a term commencing on the "Commencement
Date", as hereinafter defined, and ending One Hundred Twenty Two (122) months
thereafter; provided however, that in the event the Commencement Date is a date
other than the first day of a calendar month, said term shall extend for said
number of months in addition to the remainder of the calendar month following
the Commencement Date. (See also Additional Provisions, Sections 2, 3, and 4)
The Commencement Date shall be the date upon which the Landlord's Work
shall have been substantially completed provided however, that if Landlord shall
be delayed in such Substantial Completion as a result of: (i) Tenant's failure
to agree to plans, specifications, and cost estimates, within a reasonable
period of time; (ii) Tenant's request for materials, finishes or installations
not available in same time period or which require more time to complete than
Landlord's standard; (iii) Tenant's changes in plans; or (iv) the performance or
completion of work by a party employed by Tenant, the Commencement Date and the
payment of rent hereunder shall be accelerated by the number of days of such
delay, and provided further that if Landlord can not substantially complete the
Premises as a result of any of events (i) through (iv) above, Landlord may at
its election complete so much of Landlord's Work as may be practical under the
circumstances and, by written notice to Tenant, establish the Commencement Date
as the date of such partial completion, subject to any applicable accelerations
due to delays resulting from events (i) through (iv) above. Notwithstanding the
preceding Landlord's election, Landlord agrees to pursue the completion of
Landlord's Work in an expeditious manner. Taking of possession by Tenant shall
be deemed conclusively to establish that said buildings and other improvements
have been completed in accordance with the plans and specifications and that the
Premises are in good and satisfactory condition (latent defects, Warranty Work
and punch list items excepted), as of when possession was so taken. Tenant
acknowledges that no representations as to the repair of the Premises have been
made by Landlord, unless such are expressly set forth in this lease. After such
Commencement Date Tenant shall, upon demand, execute and deliver to Landlord a
letter of acceptance of delivery of the Premises. In the event of any dispute as
to Substantial Completion of work performed or required to be performed by
Landlord, the certificate of Landlord's architect impartially given shall be
conclusive. (See Also Additional Provisions, Section 15 and 19). Landlord
covenants to repair or replace, at Landlord's expense and as "Warranty Work,"
any defective item of Landlord's Work of which Tenant notifies Landlord within
one year after the Commencement Date and that requires repair or replacement
(other than normal wear and tear) as a result of (i) any failure to construct
the Building in material compliance with Exhibit "B-1"; (ii) any failure to
construct the leasehold improvements in material compliance with the Basic
Outline Specifications in Exhibit "B-1" or improvements made per Exhibit "B-2";
or (iii) any defective materials or workmanship. Within 10 days after the
expiration of the above-described one-year warranty period, Landlord will assign
to Tenant any manufacturers' or subcontractors' warranties or guaranties that
are still then in effect with respect to the Building or the leasehold
improvements, except for any such warranties or guaranties relating to any
portions of the Premises which Landlord is required under this Lease to maintain
and repair at Landlord's expense.
2. BASE RENT AND SECURITY DEPOSIT.
A. Tenant agrees to pay to Landlord rent for the Premises, in advance
without demand, deduction or set off (except as expressly stated in Paragraph 24
of this Lease Agreement and Additional Provision, Section 21), from sixty days
after the Commencement Date and for the entire remaining term hereof, at the
rate of Forty Thousand Six Hundred Ninety-Two Dollars and 00/100 ($40,692.00)
per month. One such monthly installment shall be due and payable on the date
hereof and a like monthly installment shall be due and payable on or before the
first day of each calendar month succeeding the Commencement Date recited above
during the hereby demised term, except that the rental payment for any
fractional calendar month at the commencement or end of the lease period shall
be prorated.
On each and every January 1/st/ following the Commencement Date during the
term of the lease or extension thereof Tenant agrees to pay an additional
monthly rental for each month during that year an amount equal to Two and One-
Half percent (2.5%) of the previous years December monthly rental.
Page 1 of 27
<PAGE>
B. In addition, Tenant agrees to deposit with Landlord on the date hereof
the Forty Thousand Six Hundred Ninety-Two Dollars and 00/100 ($40,692.00)
Dollars, which sum shall be held by Landlord, without obligation for interest,
as security for the performance of Tenant's covenants and obligations under this
lease, it being expressly understood and agreed that such deposit is not an
advance rental deposit or a measure of Landlord's damages in case of Tenant's
default. Upon the occurrence of any event of default by Tenant, Landlord may,
from time to time, without prejudice to any other remedy provided herein or
provided by law, use such fund to the extent necessary to make good any arrears
of rent or other payments due Landlord hereunder, and any other damage, injury,
expense or liability caused by such event of monetary default; and Tenant shall
pay to Landlord on demand the amount so applied in order to restore the security
deposit to its original amount. Although the security deposit shall be deemed
the property of Landlord, any remaining balance of such deposit shall be
returned by Landlord to Tenant within 60 days of the termination of this lease,
provided that all of Tenant's obligation under this lease have been fulfilled.
3. USE.
A. The demised Premises shall be used only for the purpose of general
office, receiving, storing, shipping and selling (other than retail) products,
materials, merchandise and alcoholic beverages made and/or distributed by Tenant
and for such other lawful purposes as may be incidental thereto, and subject to
the park covenants of record in effect as of the commencement of this Lease.
Outside storage, including without limitation, trucks (other than Tenant's "UPS"
size delivery trucks) and other vehicles, is prohibited without Landlord's prior
written consent. Tenant shall at its own cost and expense obtain any and all
licenses and permits necessary for any such use. Tenant shall comply with all
governmental laws, ordinances and regulations applicable to the use of the
Premises. and shall promptly comply with all governmental orders and directives
for the correction, prevention and abatement of nuisances in or upon, or
connected with. the Premises, all at Tenant's sole expense. Tenant shall not
permit any objectionable or unpleasant odors, smoke, dust, gas, noise or
vibrations to emanate from the Premises, not take any other action which would
constitute a unreasonable nuisance or would disturb or endanger any other
tenants of the building in which their Premises are situated or unreasonably
interfere with their use of their respective Premises. Without Landlord's prior
written consent, Tenant shall not receive, store or otherwise handle any
product, material or merchandise (other than products, in normal quantities,
used by Tenant for ordinary cleaning and janitorial supplies, products used for
office purposes, and typical grocery or drug merchandise) which is explosive or
highly flammable. Tenant will not permit the Premises to be used for any purpose
or in any manner (including without limitation any method of storage) which
would render the insurance thereon void or the insurance risk more hazardous or
cause the State Board of Insurance or other insurance authority to disallow any
sprinkler credits, without assuming additional costs related thereto. (See also
Additional Provisions, Section 13)
B. Tenant agrees that the point pressure resulting from Tenant's racking
system, inventory, forklifts and equipment pertaining to Tenant's use of the
Premises shall not exceed allowable design floor loading for floor slabs on
grade. Tenant shall hold harmless Landlord from any loss, liability, and
expenses arising out of such damage or repair caused by Tenant's negligence or
failure to comply with this paragraph.
4. TAXES.
A. Landlord agrees to pay before they become delinquent all taxes,
assessments and governmental charges of any kind and nature whatsoever
(hereinafter collectively referred to as "taxes") lawfully levied or assessed
against the Premises: provided however, that Tenant shall pay to Landlord as
additional rental, upon demand, the amount of such taxes. In the event any such
amount is not paid within twenty (20) days after the date of Landlord's invoice,
and applicable cure period, to Tenant, the unpaid amount shall bear interest at
the rate of eighteen percent (18%) per annum from the date of such receipt until
payment by Tenant. Landlord reserves the right to require Tenant during each
month of the lease term to pay an escrow deposit to Landlord equal to one-
twelfth of the taxes. If the Tenant's total tax escrow payments are less than
actual taxes, Tenant shall pay to Landlord upon demand the tax payment shortage;
if the total tax escrow payments of Tenant are more than actual taxes, Landlord
shall retain such excess and credit it to Tenant's next accruing tax escrow
payment. For the calendar year in which the Lease commences taxes are estimated
to be $0.35 per square foot.
B. If at any time during the term of this lease, the present method of
taxation shall be changed so that, in lieu of the whole or any part of any
taxes, assessments or governmental charges levied, assessed or imposed on real
estate and the improvements thereon, there shall be levied, assessed or imposed
on Landlord a capital levy or other tax directly on the rents received therefrom
and/or a franchise tax, assessment, levy or charge measured by or based, in
whole or in part, upon such rents for the present or any future building or
buildings on the Premises, then all such taxes, assessments, levies or charges,
or the part thereof so measured or based, shall be deemed to be included within
the term "taxes" for the purposes hereof.
C. The Landlord shall have the reasonable right to employ a tax consulting
firm to attempt to assure a fair tax burden on the building and grounds within
the applicable taxing jurisdiction. Tenant shall pay to Landlord upon demand
from time to time, as additional rent, the reasonable cost of such service.
D. Any payment to be made pursuant to this paragraph 4 with respect to the
real estate tax year in which this lease commences or terminates shall be
prorated.
5. LANDLORD'S REPAIRS AND OBLIGATIONS. Landlord shall at its expense
maintain only the roof, foundation and the structural soundness of the exterior
walls and structural steel of the Building in good repair, reasonable wear and
tear excepted. Landlord shall at its expense keep and maintain such structural
elements (the roof, foundation and exterior walls) in a condition that complies
with
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applicable laws. Tenant shall repair and pay for any damage caused by the
negligence of Tenant, or Tenant's employees, agents or invitees, or caused by
Tenant's default hereunder. The term "walls" as used herein shall not include
windows, glass or plate glass, doors, store fronts or office entries. Tenant
shall immediately give Landlord written notice of defect or need for repairs,
after which Landlord shall have reasonable opportunity to repair same or cure
such defect. Landlord's liability with respect to any defects, repairs or
maintenance for which Landlord is responsible under any of the provisions of
this lease shall be limited to the cost of such repairs or maintenance or the
curing of such defect. Landlord shall not be in default unless Landlord fails to
perform any obligation (monetary or non-monetary) required of Landlord as set
forth in this Lease within a reasonable time depending on the nature thereof,
but not later than thirty (30) days after Landlord's receipt of written notice
from Tenant specifying wherein Landlord has failed to perform such obligation;
provided, however, that if the nature of Landlord's obligation is such that more
than thirty (30) days are required for its cure then Landlord shall have such
longer period as may be reasonably required if Landlord promptly takes
corrective action and proceeds with due diligence to cure the same. (See Also
Additional Provision, Section 21)
6. TENANT'S REPAIRS AND OBLIGATIONS.
A. Tenant shall at its own cost and expense keep and maintain all parts of
the Premises (except those for which Landlord is expressly responsible under the
terms of this lease) in good condition, reasonable wear and tear excepted,
promptly making all repairs, repainting, and replacements, including but not
limited to, windows, glass and plate glass, doors, any office entries, interior
walls and finish work, floors and floor covering, downspouts, gutters, heating
and air conditioning systems, dock boards, truck doors, dock bumpers, paving,
plumbing work and fixtures, termites and pest extermination, regular removal of
trash and debris, grounds maintenance, sewage line plumbing, exterior lighting
(if applicable), dumpster removal and other obligations of the building,
including but not limited to keeping the parking areas, driveways, alleys and
the whole of the Premises in a clean and sanitary condition. Tenant shall not be
obligated to repair any damage caused by fire, tornado or other casualty covered
by the insurance to be maintained by Landlord pursuant to subparagraph 12A
below, except that Tenant shall be obligated to repair all wind damage to glass
except with respect to tornado or hurricane damage.
B. Intentionally Omitted
C. Tenant and its employees, customers and licensees shall have the
exclusive right to use the parking areas as shown on Exhibit "A-1". Landlord
shall not be responsible for enforcing Tenant's exclusive parking rights against
any third parties; provided however, that Landlord will reasonably assist Tenant
in enforcing Tenant's parking rights.
D. If Tenant fails to perform its obligations under this Lease beyond any
applicable notice and cure period, Landlord reserves the right to perform and
provide all or any part of Tenant's repairs and obligations under subparagraph
6A above, and Tenant shall, in lieu of the obligations set forth under
subparagraph 6A above with respect to such items, pay monthly as additional rent
due under subparagraph 2A the reasonable cost and expense, including reasonable
overhead, for those items. If, for any calendar year during which this Lease is
in effect, Tenant's total monthly payments made pursuant to this subparagraph
are less than actual cost of such repairs and obligations, Tenant shall pay to
Landlord the payment shortage. If the total monthly payments are more than
actual cost of such repairs and obligations, Landlord shall retain such excess
and credit it to Tenant's next accruing monthly payment for such repairs and
obligations.
E. Intentionally omitted.
F. Tenant shall, at its own cost and expense, enter into a regularly
scheduled preventive maintenance/service contract with a maintenance contractor
(or shall have on staff a qualified engineer) for servicing all hot water,
heating and air conditioning systems and equipment within the Premises. The
maintenance contractor and the contract (or staff engineer) must be approved by
Landlord, which approval shall not be unreasonably withheld, conditioned or
delayed. The service contract (or Tenant's engineer's service protocol) must
meet industry standards for maintenance of such equipment and must become
effective (and a copy thereof delivered to the Landlord) within thirty (30) days
of the date Tenant takes possession of the Premises.
G. See Additional Provisions, Section 17
7. ALTERATIONS. Tenant shall not make any alterations, additions or
improvements to the Premises (including but not limited to roof and wall
penetrations) without the prior written consent of Landlord, not to be
unreasonably withheld, conditioned or delayed. In the event Landlord consents to
the making of any such alterations, additions or improvements by Tenant, the
same shall be made by Tenant, at Tenant's sole cost and expense, in accordance
with all applicable laws, ordinances and regulations, and all reasonable
requirements of Landlord's and Tenant's insurance policies and only in
accordance with plans and specifications approved by Landlord, such consent not
to be unreasonably withheld, conditioned or delayed. Tenant may, without the
consent of Landlord, but at its own cost and expense and in a good workmanlike
manner erect such shelves, bins, machinery and trade fixtures as it may deem
advisable, without altering the basic character of the building or improvements
and without overloading or damaging such building or improvements, and in each
case complying with all applicable governmental laws, ordinances, regulations
and other requirements. All alterations, additions, improvements and partitions
erected by Tenant shall be and remain the property of Tenant during the term of
this lease and Tenant shall, unless Landlord otherwise elects as hereinafter
provided, remove all alterations, additions, improvements and partitions erected
by Tenant and restore the Premises to their original condition by the date of
termination of this lease or upon earlier vacating of the Premises, reasonable
wear and tear excepted; provided, however, that if Landlord so elects in writing
prior to termination of this lease or upon earlier vacating of the Premises,
such alterations, additions, improvements and partitions (but not Tenant's trade
fixtures) shall become the property of Landlord as of the date of termination of
this lease or upon earlier vacating of the Premises and shall be delivered up to
the Landlord with the Premises
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Notwithstanding the foregoing sentence, all shelves, bins, machinery and trade
fixtures installed by Tenant may be removed by Tenant prior to the termination
of this lease if Tenant so elects, and shall be removed by the date of
termination of this lease or upon earlier vacating of the Premises if required
by Landlord. Upon any such removal Tenant shall restore the Premises to their
original condition, normal wear and tear excepted. All such removals and
restoration shall be accomplished in a good workmanlike manner so as not to
damage the primary structure or structural qualities of the building and other
improvements situated on the Premises. (See Additional Provisions, Section 8)
8. SIGNS. Tenant agrees to conform to Landlord's signage program for the
building; however, all costs and expenses for the sign, sign installation,
removal and repair shall be paid by Tenant, provided Tenant may use a portion of
its Allowance, as hereinafter defined, for such work. Tenant shall have the
right to install standard signs upon the Premises only where first approved in
writing by Landlord and subject to any applicable governmental laws, ordinances,
regulations and other requirements. Tenant shall remove all signs prior to the
termination of this lease. Such installations and removals shall be made in such
a manner as to avoid injury or defacement of the building and other
improvements, and Tenant shall repair any injury of defacement, including
without limitation, caused by installation and/or removal.
9. INSPECTION AND RIGHT OF ENTRY. Landlord and Landlord's agents and
representatives shall have the right to enter the Premises at any time in the
event of an emergency and to enter and inspect the Premises at any reasonable
time during business hours after 48 hours written notice to the manager of the
Premises, for the purpose of ascertaining the condition of the Premises or in
order to make such repairs as may be required or permitted to be made by
Landlord under the terms of this lease. During the period that is six (6) months
prior to the end of the term hereof, Landlord and Landlord's agents and
representatives shall have the right to enter the Premises at any reasonable
time during business hours for the purpose of showing the Premises and shall
have the right to erect on the Premises a suitable sign indicating the Premises
are available. Tenant shall give written notice to Landlord at least thirty (30)
days prior to vacating the Premises and shall arrange to meet with Landlord for
a joint inspection of the Premises prior to vacating. In the event of Tenant's
failure to give such notice or arrange such joint inspection, Landlord's
inspection at or after Tenant's vacating the Premises shall be conclusively
deemed correct for purposes of determining Tenant's responsibility for repairs
and restoration; provided that Landlord has attempted to arrange a joint
inspection and Tenant has failed to respond to Landlord's written request within
five days.
10. UTILITIES. Landlord agrees to provide at its cost water, electricity
and gas (when applicable) service connections at the Building's exterior in
accordance with the specifications, if any, attached hereto or provided by
Tenant pursuant to the provisions of Exhibit "B-1"; but Tenant shall pay for all
water, gas, heat, light, power, telephone, sewer, sprinkler charges and other
utilities and services used on or from the Premises, together with any taxes,
penalties, surcharges or the like pertaining thereto, and any maintenance
charges for utilities, and shall furnish all electric light bulbs and tubes.
Landlord shall in no event be liable for any interruption or failure of utility
services on the Premises not caused by Landlord, its agents or contractors.
Tenant has the right to negotiate and select provider of utilities among those
providers servicing the Premises.
11. ASSIGNMENT AND SUBLETTING.
A. Tenant shall not sell, assign, encumber or otherwise transfer by
operation of law or otherwise, this lease or any interest herein, sublet the
Premises or any portion thereof, or suffer any other person to occupy or use the
Premises or any portion thereof, without the prior written consent of Landlord
as provided herein, not to be unreasonably withheld, conditioned or delayed, nor
shall Tenant permit any lien to be placed on the Tenant's interest by operation
of law. Tenant shall, by written notice, advise Landlord of its desire from and
after a stated date (which shall not be less than thirty (30) days ) to sublet
the Premises or any portion thereof for any part of the term thereof and if such
sublet is for the entire Premises Landlord shall have the right, to be exercised
by giving written notice to Tenant within ten (10) days after receipt of
Tenant's notice, to terminate this lease as of the date stated in Tenant's
notice. Said notice by Tenant shall state the name and address of the proposed
subtenant, and Tenant shall deliver to Landlord a true and complete copy of the
proposed sublease with said notice. If said notice shall specify all of the
Premises and Landlord shall give said termination notice with respect thereto,
this lease shall terminate on the date stated in Tenant's notice
B. Any subletting hereunder by Tenant shall not result in Tenant being
released or discharged from any liability under this lease. As a condition to
Landlord's prior written consent as provided for in subparagraph 11A above, the
subtenant or subtenants shall agree in writing to comply with and be bound by
all of the terms, covenants, conditions, provisions and agreements of this Lease
during the terms of such sublease, and Tenant shall deliver to Landlord promptly
after execution, an executed copy of each sublease and an agreement of said
compliance by each sublessee.
C. Landlord's consent to any sale, assignment, encumbrance, subletting,
occupation, lien or other transfer shall not release Tenant from any of Tenant's
obligations hereunder or be deemed to be a consent to any subsequent occurrence.
Any sale, assignment, encumbrance, subletting, occupation, lien or other
transfer of this lease which does not comply with the provisions of this
paragraph 11 or Section 9 of the Additional Provisions shall be null and void.
(See also Additional Provisions, Section 9)
12. FIRE AND CASUALTY DAMAGE.
A. Landlord agrees to maintain insurance covering the building of which the
Premises are a part in an amount not less than the full replacement cost
thereof, insuring against the perils of Fire, Lightning, Extended Coverage,
Vandalism and Malicious Mischief, extended by Special Extended Coverage
Endorsement to insure against all other Risks of Direct Physical Loss, such
coverages and endorsements to be as defined, provided and limited in the
standard bureau forms prescribed by the insurance regulatory authority for the
state in which the Premises are situated for use by insurance companies admitted
in such state for the writing of such insurance on risks located within such
state. The cost of such insurance coverage as stated above will be the
responsibility of Tenant and Tenant agrees to pay to Landlord, as additional
rental, the amount of such insurance costs. Said payments shall be made to
Landlord within twenty (20) days after presentation to
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Tenant of Landlord's statement setting forth the amount due. Any payment to be
made pursuant to this subparagraph 12A with respect to the year in which this
lease commences or terminates shall bear the same ratio to the payment which
would be required to be made for the full year as the part of such year covered
by the term of this lease bears to a full year. Subject to the provisions of
subparagraphs 12C, 12D and 12E below, such insurance shall be for the benefit of
both Landlord and Tenant, but shall be under Landlord's sole control. For the
calendar year in which the Lease commences insurance costs are estimated to be
$0.065 per square foot.
B. If any increase in the fire and extended coverage insurance premiums
paid by Landlord or other Tenants for the building in which Tenant occupies
space is caused by Tenant's use and occupancy of the Premises, or if Tenant
vacates the Premises of this Lease and causes an increase in such premiums, then
Tenant shall pay as additional rental the amount of such increase to Landlord.
C. If the buildings situated upon the Premises should be damaged or
destroyed by fire, tornado or other casualty, Tenant shall give immediate
written notice thereof to Landlord.
D. If the Building should be totally destroyed by fire, tornado or other
casualty, or if they should be so damaged thereby that rebuilding or repairs
cannot in Landlord's reasonable estimation be completed within two hundred (200)
days after the date upon which Landlord is notified by Tenant of such damage,
this lease shall terminate and the rent shall be abated during the unexpired
portion of this lease, effective upon the date of the occurrence of such damage.
In the event Landlord elects to rebuild or repair, Landlord shall provide notice
of such election within sixty (60) days of Landlord's receipt of notice of such
damage. If Landlord fails to complete the rebuilding or within 260 days of the
date upon which Landlord is notified by Tenant of such damage, Tenant may give
Landlord written notice of its intent to terminate this Lease and if Landlord is
unable to complete such rebuilding or repairs within 30 days from such the date
of Landlord's receipt of such notification from Tenant, such termination shall
become effective. If Landlord estimates that rebuilding and repairs can not be
completed within two hundred (200) days after the date upon which Landlord is
notified by Tenant of such damage and Landlord chooses to terminate this Lease,
Tenant may choose to rebuild or repair the Premises at its sole expense;
provided however, that if Landlord has received insurance proceeds related to
such damage, said insurance proceeds will be applied to the cost of rebuilding
and repairing the Premises.
E. If the Building should be damaged by any peril covered by the insurance
to be provided by Landlord under subparagraph 12A above, but only to such extent
that rebuilding or repairs can in Landlord's estimation be completed within two
hundred (200) days after the date upon which Landlord is notified by Tenant of
such damage, this lease shall not terminate, and Landlord shall at its sole cost
and expense thereupon proceed with reasonable diligence to rebuild and repair
such buildings to substantially the condition in which they existed prior to
such damage, except that Landlord shall not be required to rebuild, repair or
replace any part of the partitions, fixtures, additions and other improvements
which may have been placed in, on or about the Premises by Tenant and except
that Tenant shall pay to Landlord upon demand an amount not to exceed $25,000
per occurrence representing the maximum deductible on the insurance to be
provided by Landlord and except that Landlord may elect not to rebuild if such
damage occurs during the last year of the term of the lease exclusive of any
option which is unexercised at the time of such damage. If the Premises are
untenantable in whole or in part following such damage, the rent payable
hereunder during the period in which they are untenantable shall be reduced to
such extent as may be fair and reasonable under all of the circumstances. In the
event that Landlord should fail to complete such above referenced repairs and
rebuilding within two hundred (200) days after the date upon which Landlord is
notified by Tenant of such damage, Tenant may at its option terminate this lease
by delivering written notice of termination to Landlord as Tenant's exclusive
remedy, whereupon all rights and obligations hereunder shall cease and
terminate.
F. Notwithstanding anything herein to the contrary, in the event the holder
of any indebtedness secured by a mortgage or deed of trust covering the Premises
requires that the insurance proceeds be applied to such indebtedness, then
Landlord shall have the right to terminate this lease by delivering written
notice of termination to Tenant within fifteen (15) days after such requirement
is made by any such holder, whereupon all rights and obligations hereunder shall
cease and terminate. Within fifteen (15) days of receipt of notice Tenant may
notify Landlord in writing that Tenant elects to perform said repairs at
Tenant's sole cost and expense; provided however, that if Landlord has received
insurance proceeds above that applied to such indebtedness, said insurance
proceeds will be applied to the cost of rebuilding and repairing the Premises.
If Tenant elects to make the repairs the lease shall not terminate.
G. Each of Landlord and Tenant hereby releases the other from any loss or
damage to property caused by fire or any other perils insured in policies of
insurance covering such property, even if such loss or damage shall have been
caused by the fault or negligence of the other party, or anyone for whom such
party may be responsible; provided, however, that this release shall be
applicable and in force and effect only with respect to loss or damage occurring
during such times as the releasor's policies shall contain a clause or
endorsement to the effect that any such release shall not adversely affect or
impair said policies or prejudice the right of the releasor to recover
thereunder and then only to the extent of the insurance proceeds payable under
such policies. Each of the Landlord and Tenant agrees that it will request its
insurance carriers to include in its policies such a clause or endorsement. If
extra cost shall be charged therefore, each party shall advise the other thereof
and of the amount of the extra cost, and the other party, at its election, may
pay the same, but it shall not be obligated to do so.
13. LIABILITY.
A. Landlord shall not be liable to Tenant or Tenant's employees, agents,
patrons or visitors, or to any other person whomsoever, for any injury to person
or damage to property on or about the Premises, resulting from and/or caused in
part or whole by the negligence or misconduct of Tenant, its agents, servants or
employees, or of any other person entering upon the Premises, or caused by the
buildings and improvements located on the Premises becoming out of repair,
(through no fault or breach of this lease by Landlord) or caused by leakage of
gas, oil, water or steam or by electricity emanating from the Premises during
the lease term, or due to any cause whatsoever and Tenant
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hereby covenants and agrees that it will at all times indemnify, including the
indemnity for Hazardous Materials set forth herein below, and hold safe and
harmless the property, the Landlord (including without limitation the trustee
and beneficiaries if Landlord is a trust), Landlord's agents and employees from
any loss, liability, claims, suits, costs, expenses, including without
limitation attorney's fees and damages, both real and alleged, arising out of or
relating to any such damage or injury; except injury to persons or damage to
property the cause of which is the negligence or willful misconduct of Landlord,
its agents and contractors or the failure of Landlord to repair any part of the
Premises which Landlord is obligated to repair and maintain hereunder within a
reasonable time after the receipt of written notice from Tenant of needed
repairs.
B. Tenant shall not be liable to Landlord or Landlord's employees, agents,
patrons or visitors, or to any other person whomsoever for any injury to person
or damage to property on or about the Premises, resulting from and/or caused in
part or whole by the negligence or misconduct of Landlord, its agents, servants
or employees, or invitees entering upon the Premises, or caused by the Premises
becoming out of repair, (through no fault or breach of this lease by Tenant),
and Landlord hereby covenants and agrees that it will at all times indemnify,
including the indemnity for Hazardous Materials set forth herein below, and hold
safe and harmless the property, Tenant, Tenant's agents and employees from any
loss, liability, claims, suits, costs, expenses, including without limitation
attorney's fees and damages, both real and alleged, arising out of or relating
to any such damage or injury; except injury to persons or damage to property the
cause of which is the negligence or willful misconduct of Tenant, its agents and
contractors or the failure of Tenant to repair any part of the Premises which
Tenant is obligated to repair and maintain hereunder within any applicable
notice and cure periods.
C. Tenant shall procure and maintain throughout the term of this lease a
policy or policies of insurance, including pollution and site remediation
insurance, at its sole cost and expense, insuring both Landlord and Tenant
against all claims, demands or actions arising out of or in connection with: (i)
the Premises; (ii) the condition of the Premises; (iii) Tenant's operations in
and maintenance and use of the Premises; and (iv) Tenant's liability assumed
under this lease, the limits of such policy or policies to be in the amount of
not less than $1,000,000 per occurrence in respect to injury to persons
(including death), and in the amount of not less than $2,000,000 per occurrence
in respect to property damage or destruction, including loss of use thereof. All
such policies shall be procured by Tenant from responsible insurance companies
satisfactory to Landlord. Certified copies or certificate of such policies shall
be delivered to Landlord prior to the Commencement Date of this lease. Not less
than fifteen (15) days prior to the expiration date of any such policies,
certified copies of the renewals thereof shall be delivered to Landlord. Such
policies shall further provide that not less than thirty (30) days written
notice shall be given to Landlord before such policy may be canceled or changed
to reduce insurance provided thereby.
14. CONDEMNATION.
A. If the whole or any substantial part of the Premises should be taken for
any public or quasi-public use under governmental law, ordinance or regulation,
or by right of eminent domain, or by private purchase in lien thereof, and the
taking would prevent or materially interfere with the use of the Premises for
the purpose for which they are being used, this lease shall terminate and the
rent shall be abated during the unexpired portion of this lease, effective when
the physical taking of said Premises shall occur.
B. If part of the Premises shall be taken for any public or quasi-public
use under any governmental law, ordinance or regulation, or by right of eminent
domain, or by private purchase in lieu thereof, and this lease is not terminated
as provided in subparagraph 14A above, this lease shall not terminate but the
rent payable hereunder during the unexpired portion of this lease shall be
reduced to such extent as may be fair and reasonable under all of the
circumstances.
C. All compensation awarded for any taking (or the proceeds of private sale
in lieu thereof of the Premises, buildings or other improvements, or any part
thereof, shall be the property of Landlord and Tenant hereby assigns its
interest in any such award to Landlord; provided, however, Landlord shall have
no interest in any award made to Tenant for loss of business, the loss of lease
benefits, costs of moving or the taking of Tenant's fixtures and improvements if
a separate award for such items is made to Tenant.
15. HOLDING OVER. Tenant will, at the termination of this lease by lapse of
time or otherwise, yield up immediate possession to Landlord with all repairs
and maintenance required herein to be performed by Tenant completed. If Landlord
agrees in writing that Tenant may hold over after the expiration or termination
of this lease, unless the parties hereto otherwise agree in writing on the terms
of such holding over, the hold over tenancy shall be subject to termination by
Landlord at any time upon not less than twenty (20) days advance written notice,
or by Tenant at any time upon not less than thirty (30) days advance written
notice, and all of the other terms and provisions of this lease shall be
applicable during that period, except that Tenant shall pay Landlord monthly
rental for the period of any hold over, an amount equal to one and one half (1-
1/2) the rent in effect on the termination date, computed on a daily basis for
each day of the hold over period. No holding over by Tenant, whether with or
without consent of Landlord, shall operate to extend this lease except as
otherwise expressly provided. The preceding provisions of this paragraph 15
shall not be construed as consent for Tenant to hold over.
16. QUIET ENJOYMENT. Landlord covenants that it now has, or will acquire
before Tenant takes possession of the Premises, good title to the Premises, free
and clear of all liens and encumbrances, excepting only the lien for current
taxes not yet due, such mortgage or mortgages as are permitted by the terms of
this lease, zoning ordinances and other building and fire ordinances and
governmental regulations relating to the use of such property, and easements,
restrictions and other conditions of record as of the date hereof. Landlord
represents end warrants that it has full right and authority to enter into this
lease and that Tenant, upon paying the rental herein set forth and performing
its other material covenants and agreements herein set forth (within any
applicable notice and cure period), shall peaceably and quietly have, hold and
enjoy the Premises for the term hereof without hindrance or molestation from
Landlord, subject to the terms and
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provisions of this lease. Landlord covenants that it will not grant, without
Tenant's prior written consent, any future easements, licenses or such other
similar restrictions affecting Tenant's use of the Premises and Tenant's ingress
to and egress from the Premises.
17. EVENTS OF DEFAULT. The following events shall be deemed to be events of
default by Tenant under this lease:
A. Tenant shall fail to pay any installment of the rent herein reserved
when due, or any other payment or reimbursement to Landlord required herein when
due, and such failure shall continue for a period of five (5) days from the date
Tenant receives written notice of such failure; or
B. Tenant shall abandon all or a substantial portion of the Premises or
fail to continuously operate its business at the Premises for the permitted use
set forth in Paragraph 3 whether or not Tenant is in default of the rental
payments due under this lease, without providing a commercially reasonable level
of security, or without providing reasonable assurance to minimize potential
vandalism; or
C. Tenant shall fail to discharge or bond against any lien placed upon the
Premises in violation of Paragraph 20 hereof within twenty (20) business days
after any such lien or encumbrance is filed against the Premises; or
D. Tenant shall fail to comply with any term, provision or covenant of this
lease (other than the foregoing in this Paragraph 17), and shall not cure such
failure within twenty (20) business days after written notice thereof to Tenant
or such longer period as may be reasonably required if Tenant promptly takes
corrective action and continually proceeds with due diligence to cure same.
18. REMEDIES
A. Upon each occurrence of an event of default, Landlord shall have the
option to pursue any one or more of the following remedies without any notice or
demand:
(1) Terminate this lease, and/or
(2) Enter upon and take possession of the Premises with or without
terminating this lease; and/or
(3) Alter all locks and other security devices at the Premises with or
without terminating this lease, and pursue, at Landlord's option, one or
more remedies pursuant to this lease, Tenant hereby specifically waiving
any state or federal law to the contrary;
and in any such event Tenant immediately shall surrender its Premises to
Landlord, and if Tenant fails to do so, Landlord, without waiving any other
remedy it may have, may enter upon and take possession of the Premises or any
part thereof and expel or remove Tenant and any other person who may be
occupying such Premises or part thereof, by force if necessary, without being
liable for prosecution or any claim of damages therefor.
B. In the event Tenant fails to pay any installment of rent hereunder as
and when such installment is due, to help defray the additional cost to Landlord
for processing such late payments Tenant shall pay to Landlord on demand a late
charge in an amount equal to five (5%) percent of such installment; and the
failure to pay such amount within five (5) business days after demand therefore
shall be an event of default hereunder. The provision for such late charge shall
be in addition to all of Landlord's other rights and remedies hereunder or at
law and shall not be construed as liquidated damages or as limiting Landlord's
remedies in any manner.
C. In the event Tenant's check given to Landlord in payment, is returned by
the bank for non-payment, Tenant agrees to pay all expenses incurred by Landlord
as a result thereof.
D. In the event of a default or threatened default of this Lease by Tenant,
Landlord shall be entitled to all equitable remedies, including, without
limitation injunction and specific performance. The various rights, remedies,
powers, options and elections of Landlord reserved, expressed or contained in
this lease are cumulative, and no one of them shall be deemed to be exclusive of
the others, or of such other rights, remedies, powers, options or elections as
are now, or may hereafter, be conferred upon Landlord by law or in equity.
Failure by Landlord to enforce one or more of the remedies herein provided shall
not be deemed or construed to constitute a waiver of such default, or any
violation or breach of any of the terms, provisions, or covenants herein
contained, or a waiver of Landlord's right thereafter to insist upon strict
compliance with the terms hereof.
E. In the event Landlord elects to terminate the lease by reason of an
event of default, then notwithstanding such termination, Tenant shall be liable
for and shall pay to Landlord, at the address specified for notice to Landlord
herein, the sum of all rental and other indebtedness accrued to date of such
termination, plus, as damages, an amount equal to the total rent hereunder for
the remaining portion of the lease term (had such term not been terminated by
Landlord prior to the expiration stated in Paragraph 1).
F. In the event Landlord elects to repossess the Premises without
terminating the lease, or in the event Landlord elects to terminate the lease,
then Tenant, at Landlord's option, shall be liable for and shall pay to
Landlord, at the address specified for notice to Landlord herein, all rental and
other indebtedness accrued to the date of such repossession, plus rental
required to be paid by Tenant to Landlord during the remainder of the lease term
until the date of expiration of the term as stated in Paragraph 1 diminished by
any net sums thereafter received by Landlord through releting the Premises
during said period (after deducting expenses incurred by Landlord as provided in
subparagraph 18G below). In no event shall Tenant be entitled to any excess of
any rental obtained by releting over and above the rental herein reserved.
Action to collect amounts due by Tenant to Landlord under this subparagraph may
be brought from time to time, on one or
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<PAGE>
more occasions, without the necessity of Landlord's waiting until the expiration
of the lease term. Landlord agrees to make commercially reasonable efforts to
mitigate its damages.
G. In the case of any event of default or breach by Tenant, or threatened
or anticipated breach or default as a result of bankruptcy, Tenant shall also be
liable for and shall pay to Landlord, at the address specified for notice to
Landlord herein, in addition to any sum provided to paid above, broker's fees
incurred by Landlord in connection with releting the whole or any part of the
Premises; the cost of removing storing Tenant's or other occupant's property;
the cost of repairing, altering, remodeling or otherwise putting the Premises
into condition acceptable to a new tenant or tenants, and all reasonable
expenses incurred by Landlord enforcing or defending Landlord's rights and/or
remedies including reasonable attorney's fees.
H. In the event of termination or repossession of the Premises for an event
of default, Landlord shall not have any obligation to relet or attempt to relet
the Premises, or any portion thereof, or to collect rental after releting; and
in the event of releting, Landlord may relet the whole or any portion of the
Premises for any period to any tenant for any purpose; provided, however, that
Landlord agrees to make commercially reasonable efforts to mitigate its damages.
I. If Tenant should fail to make any payment or cure any default hereunder
within the time herein permitted, Landlord, without being under any obligation
to do so and without thereby waiving such default, may make such payment and/or
remedy such other default for the account of Tenant (and enter the Premises for
such purpose), and thereupon Tenant shall be obliged to, and hereby agrees to
pay Landlord upon demand, all costs, expenses and disbursements (including
reasonable attorney's fees) incurred by Landlord in taking such remedial action.
J. In the event that Landlord shall have taken possession of the Premises
pursuant to the authority herein granted, then Landlord shall have the right to
keep in place and use all of the furniture, fixtures and equipment at the
Premises, including that which is owned by or leased to Tenant at all times
prior to any foreclosure thereon by Landlord or repossession thereof by any
lessor thereof or third party having a lien thereon. Landlord shall also have
the right to remove from the Premises (without the necessity of obtaining a
distress warrant, writ of sequestration or other legal process) all or any
portion of such furniture, fixtures, equipment and other property located
thereon and to place same in storage at any Premises within the County in which
the Premises is located; and in such event, Tenant shall be liable to Landlord
for costs incurred by Landlord in connection with such removal and storage.
Landlord shall also have the right to relinquish possession of all or any
portion of such furniture, fixtures, equipment and other property to any person
("Claimant") claiming to be entitled to possession thereof who presents to
Landlord a copy of any instrument represented to Landlord by Claimant to have
been executed by Tenant (or any predecessor Tenant) granting Claimant the right
under various circumstances to take possession of such furniture, fixtures,
equipment or other property, without the necessity on the part of Landlord to
inquire into the authenticity of said instrument's copy of Tenant's or Tenant's
predecessor's signature(s) thereon and without the necessity of Landlord making
any investigation or inquiry as to the validity of the factual or legal basis
upon which Claimant purports to act; and Tenant agrees to indemnify and hold
Landlord harmless from all cost, expense, loss, damage and liability incident to
Landlord's relinquishment of possession of all or any portion of such furniture,
fixtures, equipment or other property to Claimant. The rights of Landlord herein
stated shall be in addition to any and all other rights which Landlord has or
may hereafter have at law or in equity; and Tenant stipulates and agrees that
the rights herein granted Landlord are commercially reasonable.
19. MORTGAGES.
A. Tenant accepts this lease subject and subordinate to any mortgage(s)
and/or deed(s) of trust now or at any time hereafter constituting a lien or
charge upon the Premises or the improvements situated thereon, provided however,
that if the mortgagee, trustee, or holder of any such mortgage or deed of trust
elects to have Tenant's interest in this lease superior to any such instrument,
then by notice to Tenant from such mortgagee, trustee or holder, this lease
shall be deemed superior to such lien, whether this lease was executed before or
after said mortgage or deed of trust. Tenant shall at any time hereafter on
demand execute any reasonable instruments, releases or other documents which may
be required by any mortgagee for the purpose of subjecting and subordinating
this lease to the lien of any such mortgage, provided that Landlord secures a
non-disturbance agreement in a form as attached in Exhibit "C" or such
reasonably similar agreement from such mortgagee. All mortgages or deeds of
trust referred to in this subparagraph 19A refer to first mortgages or deeds of
trust only. (See also Additional Provisions, Section 10)
B. Tenant agrees not to look to the mortgagee, as mortgagee, mortgagee in
possession, or successor entitled to the property, for accountability for any
security deposit required by the Landlord hereunder, unless said sums have been
received by said mortgagee as security for Tenant's performance of this lease.
20. MECHANICS LIENS AND OTHER TAXES. Tenant shall have no authority,
express or implied, to create or place any lien or encumbrance of any kind or
nature whatsoever upon, or in any manner to bind the interests of Landlord in
the Premises or to charge the rentals payable hereunder for any claim in favor
of any person dealing with Tenant, including those who may furnish materials or
perform labor for any construction or repairs, and each such claim shall affect
and each such lien shall attach to, if at all, only the leasehold interest
granted to Tenant by this instrument. Tenant covenants and agrees that it will
pay or cause to be paid all sums legally due and payable by it on account of any
labor performed or materials furnished in connection with any work performed on
the Premises (provided such work is at Tenant's direction and is not performed
by Landlord or its contractors) on which any lien is or can be validly and
legally asserted against its leasehold interest in the Premises or the
improvements thereon and that it will save and hold Landlord harmless from any
and all loss, cost or expense based on or arising out of asserted claims or
liens against the leasehold estate or against the right, title and interest of
the Landlord in the Premises or under the terms of this lease. Tenant agrees to
give Landlord immediate written notice if any lien or encumbrance is placed on
the Premises.
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<PAGE>
21. NOTICES. Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations and other requirements with reference
to the sending, mailing or delivery of any notice or the making of any payment
by Landlord to Tenant or with reference to the sending, mailing or delivery of
any notice or the making of any payment by Tenant to Landlord shall be deemed to
be complied with when and if the following steps are taken:
A. All rent and other payments required to be made by Tenant to Landlord
hereunder shall be payable to Landlord at the address hereinbelow set forth or
at such other address as Landlord may specify from time to time by written
notice delivered in accordance herewith. Tenant's obligations to pay rent and
any other amounts to Landlord under the terms of this lease shall not be deemed
satisfied until such rent and other amounts have been actually received by
Landlord.
B. All payments required to be made by Landlord to Tenant hereunder shall
be payable to Tenant at the address hereinbelow set forth, or at such other
address within the continental United States as Tenant may specify from time to
time by written notice delivered in accordance herewith.
C. Any notice or document required or permitted to be delivered hereunder
shall be deemed to be delivered whether actually received or not when deposited
in the United States Mail, postage prepaid, Certified or Registered Mail,
addressed to the parties hereto at the respective addresses set out below, or at
such other address as they have theretofore specified by written notice
delivered in accordance herewith:
LANDLORD: TENANT:
3 Plus Limited Partnership HomeGrocer.com, Inc.
3060 Peachtree Road, NW Attn: Vice President Operations
Suite 1750 10230 N.E. Points Drive
Atlanta, Georgia 30305 Kirkland, Washington 98033
And
HomeGrocer.com, Inc.
Attn: Legal Department
10230 N.E. Points Drive
Kirkland, Washington 98033
If and when included within the term "Landlord", as used in this instrument,
there are more than one person, firm or corporation, all shall jointly arrange
among themselves for their joint execution of such a notice specifying some
individual at some specific address for the receipt of notices and payments to
Landlord; if and when included within the term "Tenant", as used in this
instrument, there are more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution of such a notice
specifying some individual at some specific address within the continental
United States for the receipt of notices and payments to Tenant. All parties
included within the terms "Landlord" and "Tenant", respectively, shall be bound
by notices given in accordance with the provisions of this paragraph to the same
effect as if each had received such notice.
22. HAZARDOUS MATERIALS.
A. For purposes of this section, "Hazardous Materials" shall include all
solid, liquid or gaseous materials defined or regulated as wastes under any
federal statute or regulation or any state or local law, regulation or ordinance
and shall further include all other substances defined or regulated as
pollutants or as hazardous, toxic, infectious, or radioactive substances under
any federal statute or regulation or any state or local law, regulation or
ordinance, all as amended from time to time.
B. Tenant shall not cause or permit any Hazardous Materials to be used,
generated, stored or disposed of on, under or about, or transported to or from
the Premises (collectively, "Hazardous Materials Activities") except in
compliance with all applicable federal, state and local laws, regulations,
ordinances and order governing such Hazardous Materials or Hazardous Materials
Activities, which compliance shall be at Tenant's sole cost and expense.
Additionally, Tenant shall not cause or permit any Hazardous Materials to be
disposed of on, under or about the Premises without the express prior written
consent of the Landlord, which may be withheld for any reason and may be revoked
at any time. Tenant further agrees, at all times, to fully disclose in writing
to Landlord the storage, handling, disposal or use of Hazardous Materials under,
on or about the Premises and the property in which the Premises is located.
C. Landlord shall not be liable to Tenant or to any other party for any
Hazardous Materials Activities conducted or permitted on, under or about the
Premises by Tenant or by Tenant's employees, agents, contractors, licensees or
invitees, and Tenant shall indemnify, defend and hold Landlord harmless from any
claims, damages, fines, penalties, losses, judgments, costs and liabilities
arising out of or related to any Hazardous Materials Activities conducted or
permitted on, under or about the Premises by Tenant or by Tenant's employees,
agents, contractors, licensees or invitees, regardless of whether Landlord shall
have consented to, approved of, participated in or had notice of such Hazardous
Materials Activities. The provisions of this paragraph shall survive the
expiration or termination of this lease.
D. At the expiration or earlier termination of this lease, Tenant shall
remove from the Premises, at Tenant's sole expense, all Hazardous Materials
located, stored and disposed of on, under or about the Premises during the lease
term, unless caused by a party other than Tenant or Tenant's employees, agents,
contractors, licensees, invitees, subtenants or assignees. Tenant shall close,
remove or otherwise
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<PAGE>
render safe any buildings, tanks, containers or other facilities related to the
Hazardous Materials Activities conducted or permitted on the Premises during the
lease term in the manner required by all applicable laws, regulations,
ordinances or orders.
E. See Additional Provisions, Section 11
23. INSOLVENCY OR BANKRUPTCY. The appointment of a receiver to take
possession of all or substantially all of the assets of Tenant, or an assignment
of Tenant for the benefit of creditors, or any action taken or suffered by
Tenant under any insolvency, bankruptcy, or reorganization act, shall at
Landlord's option constitute a breach of this Lease by Tenant, unless such
proceedings are involuntary and Tenant is discharged from the same within sixty
(60) days. Upon the happening of any such event or at any time thereafter, this
Lease shall terminate five (5) days after written notice of termination from
Landlord to Tenant. In no event shall this Lease be assigned or assignable by
operation of law or by voluntary or involuntary bankruptcy proceedings or
otherwise and in no event shall this Lease or any rights or privileges hereunder
be an asset of Tenant under any bankruptcy, insolvency, or reorganization
proceedings.
24. LANDLORD'S LIABILITY. Any liability of Landlord hereunder shall be
enforceable only out of the Premises, including the proceeds thereof and
therefrom and in no event out of any other assets of Landlord or the separate
assets of any constituent partner, shareholder or member of Landlord. No holder
or beneficiary of any mortgage or deed of trust on any part of the Property
shall have any liability to Tenant hereunder for any default of Landlord. This
provision is not intended to be a measure or agreed amount of the Landlord's
liability with respect to any particular breach, and shall not be utilized by
any court or otherwise for the purpose of determining any liability of Landlord
hereunder, except only as a maximum amount not to be exceeded in any event.
Notwithstanding the foregoing and subject to section 21 of the Additional
Provisions, in the event Landlord's liability, as established by a court, for
any breach of this Lease exceeds Landlord's equity value in the Building or
Property (the mortgage or deed of trust on the Property is for an amount greater
than the value of the Property) and Tenant has exhausted all other legal
remedies available to Tenant to collect payment, including written notification
to the holder or beneficiary of any mortgage or deed of trust on the Property,
then and only then, Tenant may offset against Base Rent the uncollected amount
of Landlord's liability established by the court that exceeds Landlord's equity
value in the Building or Property.
25. MISCELLANEOUS.
A. Words of any gender used in this lease shall be held and construed to
include any other gender, and words in the singular number shall be held to
include the plural, unless the context otherwise requires.
B. In the event the Premises constitutes a portion of a multiple occupancy
building, building complex or Business Park, Tenant's "proportionate share" as
used in this lease, shall mean a fraction, the numerator of which is the space
contained in the Premises and the denominator of which is the entire leasable
space contained in the building, building complex or Business Park.
C. The terms, provisions and covenants and conditions contained in this
lease shall apply to, insure to the benefit of, and be binding upon the parties
hereto and upon their respective heirs, legal representatives, successors and
permitted assigns, except as otherwise herein expressly provided. Landlord shall
have the right to reasonably assign any of its rights and obligations under this
lease. Each party agrees to furnish to the other, promptly upon demand, a
corporate resolution, proof of due authorization by partners, or other
appropriate documentation evidencing the due authorization of such party to
enter into this lease.
D. The captions inserted in this lease are for convenience only and in no
way define, limit or otherwise describe the scope or intent of this lease, or
any provision hereof, or in any way affect the interpretation of this lease.
E. Tenant agrees from time to time within ten (10) days after request of
Landlord, to deliver to Landlord, or Landlord's designee a certificate of
occupancy (if applicable) and an estoppel certificate stating (to the extent
such statements are then true and within Tenant's knowledge) that this lease is
in full force and effect, the date to which rent has been paid, the unexpired
term of this lease and such other matters pertaining to this lease as may be
requested by Landlord. It is understood and agreed that Tenant's obligation to
furnish such estoppel certificates in a timely fashion is a material inducement
for Landlord's execution of this lease.
F. This lease may not be altered, changed or amended except by an
instrument in writing signed by both parties hereto.
G. All obligations of Tenant or Landlord hereunder not fully performed as
of the expiration or earlier termination of the term of this lease shall survive
the expiration or earlier termination of the term hereof, including without
limitation all payment obligations with respect to taxes and insurance and all
obligations concerning the condition of the Premises. Tenant shall also, prior
to vacating the Premises, pay to Landlord the amount, as estimated by Landlord,
of Tenant's obligation hereunder for real estate taxes and insurance premiums
for the year in which the lease expires or terminates. All such amounts shall be
used and held by Landlord for payment of such obligations of Tenant hereunder,
with Tenant being liable for any additional costs therefor upon demand by
Landlord, or with any excess to be returned to Tenant after all such obligations
have been determined and satisfied, as the case may be. Any security deposit
held by Landlord shall be credited against the amount payable by Tenant under
this subparagraph 25G. The balance of any unused portion of the security deposit
shall be returned to Tenant.
H. If any clause or provision of this lease is illegal, invalid or
unenforceable under present or future laws effective during the term of this
lease, then and in that event, it is the intention of the parties hereto that
the remainder of this lease shall not be affected thereby, and it is also the
intention of the parties to this lease that in lieu of each clause or provision
of this lease that is illegal, invalid or unenforceable, there be added as a
part of this lease contract 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.
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<PAGE>
I. Because the Premises are on the open market and are presently being
shown, this lease shall be treated as an offer with the Premises being subject
to prior lease and such offer subject to withdrawal or non-acceptance by
Landlord or to other use of the Premises without notice, and this lease shall
not be valid or binding unless and until accepted by Landlord in writing and a
fully executed copy delivered to both parties hereto.
J. All references in this lease to "the date hereof" or similar references
shall be deemed to refer to the last date, in point of time, on which all
parties hereto have executed this lease.
K. Time is of the essence of this lease and all of its provisions. This
lease in all respects shall be governed by the laws of the State of Georgia.
L. Tenant shall not install drapes, curtains, blinds or any window
treatment without Landlord's prior written approval, which approval shall not be
unreasonably withheld, conditioned or delayed.
M. The duties and obligations of Tenant herein shall be binding upon all or
any of them. The duties and obligations of Tenant shall run and extend not only
to the benefit of the Landlord, as named herein, but to the following, at the
option of the following or any of them: (i) any person by, through or under
which Landlord derives the right to lease the Premises; (ii) the owner of the
Premises; and (iii) holders of mortgage or rent assignment interests in the
Premises, as their respective interests may appear; provided, however, nothing
contained herein shall be construed to obligate Tenant to pay rent to any person
other than the Landlord until such time as Tenant has been given written notice
of either an exercise of a rent assignment or the succession of some other party
to the interests of Landlord.
N. In order to induce Landlord to enter into this Lease Agreement, Tenant
agrees to provide to Landlord, before the initiation of construction of the
Premises and at any other time when reasonably requested by Landlord, an audited
balance sheet and income statement for the fiscal year most recently concluded.
Such balance sheet and income statement shall be for the legal entity which is
entering into the Lease Agreement with Landlord and/or the entity guaranteeing
the performance of Tenant's obligations under the lease. Tenant fully
understands and agrees that a request for such information by Landlord's lender
or a prospective buyer for the Building will be deemed reasonable.
O. Tenant acknowledges that "smoking" is prohibited in all areas of the
Premises and the building. For purposes hereof, "smoking" means inhaling,
exhaling, burning or carrying any lighted cigar, cigarette, pipe or other
smoking equipment or device in any manner or from. Notwithstanding anything in
this Lease to the contrary, no liability shall attach to the Landlord for any
failure to enforce this provision (or similar provisions in other leases).
[INTENTIONALLY LEFT BLANK]
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26. ADDITIONAL PROVISIONS. See Additional Provisions, Paragraphs 1 through
24, attached hereto and made a part hereof as if fully incorporated herein and
when in conflict with the printed portion of this lease, said Additional
Provisions shall prevail.
EXECUTED BY LANDLORD, this 3/rd/ day of April, 2000.
3 Plus Limited Partnership
By: The Phoenix Foundation, LLC,
its sole general partner
By: /s/ J. Robert Mobley
-----------------------------
J. Robert Mobley, its Member
Witness:
/s/ James M. Mobley
----------------------------------
EXECUTED BY TENANT, this 31st day of March, 2000.
HomeGrocer.com, Inc.
By: /s/ Mary Alice Taylor
-----------------------------
Name: Mary Alice Taylor
---------------------------
Its: Chairman & CEO
----------------------------
Witness:
/s/ Lisa Wirick
----------------------------------
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<PAGE>
ADDITIONAL PROVISIONS
1. Brokers/Advisors. Tenant and Landlord hereby represent and warrant
-----------------
each to the other that no brokers, agents or finders were involved on
their behalf in negotiating or consummating this Lease except
Industrial Brokers and Associates, Inc, whose commission shall be paid
by Landlord per a separate agreement and E+Y Kenneth Leventhal Real
Estate Services Company, LLC ("E+Y), who served as Tenant's real
estate advisor and Landlord will reimburse Tenant for fees paid to E+Y
per the schedule below;
Upon Lease execution: $46,787.00
Upon Commencement of Rent; $46,787.00
Upon the beginning of the 75/th/ month of the Lease $70,545.00
2. Access to the Premises Prior to Completion
------------------------------------------
Landlord shall use commercially reasonable efforts to provide Tenant
access to the Premises for the purpose of installing trade fixtures,
refrigeration, conveyor, racking systems, and other real and personal
property prior to the commencement of the Lease provided that Tenant
does not interfere with or delay the work of Landlord's contractor.
Subject to the reasonable agreement of Landlord's contractor, both
parties acknowledge that, while not guaranteed, Tenant may have access
to parts of the Building approximately 45 days prior to the
Commencement Date and access to other portions of the Building may be
phased in over time up to the Commencement Date. However, Landlord,
its agents and contractors shall not be responsible for; (1) any items
of damage or casualty to the Premises caused by Tenant, its agents,
contractors, suppliers or invitees, and (2) any damage casualty or
loss of Tenant's property installed under this Section 2.
3. Options to Extend Term.
-----------------------
A. First Renewal Period.
Provided this Lease is then in full force and effect and Tenant is not
in default beyond any applicable grace period set forth in this Lease,
Landlord hereby grants Tenant a five (5) year renewal period ("First
Renewal Period"), at a rental rate equal to the Fair Market Base
Rental (as defined below) of comparable space in 1851 West Oak Parkway
(the "Building") or in other buildings comparable to the Building
located in the northwest Atlanta/I-75 Submarket comparable to the
project in which the Building is located.
B. Second Renewal Period.
Furthermore, provided this Lease is then in full force and effect and
Tenant is not in default beyond any applicable grace period set forth
in this Lease, and there is no sublease for the entire Premises or
assignment of any of Tenant's interest in the Lease, other than
Permitted Transfers, Landlord hereby grants Tenant a second five (5)
year renewal period ("Second Renewal Period"), at a rental rate equal
to the Fair Market Base Rental of comparable space in 1851 West Oak
Parkway (the "Building") or in other buildings comparable to the
Building located in the northwest Atlanta/I-75 Submarket comparable to
the project in which the Building is located.
C. Notice.
For each renewal period described above, Tenant shall notify Landlord
no more than eighteen (18) and no less then eight (8) months prior to
the end the lease of Tenant's desire to renew this Lease under the
terms of this paragraph.
D. Fair Market Base Rental
The phrase Fair Market Base Rental as used in this Section 3 of the
Additional Provisions shall take into account the condition of the
Premises; refurbishment cost, if any, required to relet the Premises
(in no event greater than $100,000); possible lease commissions to be
paid to relet the Premises (in no event greater then 2% of the rental
amount); and other relevant factors.
E. Arbitration.
Within thirty (30) days of Tenant's notice of exercise, Landlord
agrees to notify Tenant of the new base rent for the Premises. Tenant
shall have thirty (30) days after receipt of Landlord's notice to
either accept or reject the new base rent by written notice to
Landlord. Failure of Tenant to provide any notice within such thirty
(30) day period shall be deemed to constitute rejection by Tenant of
the new base rent proposed by the Landlord in its notice to Tenant. If
Tenant rejects Landlord's proposed new base rent, it shall state forth
in its notice to Landlord its determination of the then fair market
rent. Thereafter, the parties shall negotiate in good faith to resolve
their difference of opinion.
If the parties are unable to reach and settle upon a mutually
acceptable terms within fifteen (15) days after Tenant's notice of
rejection then either party may require the matter to be submitted to
arbitration in the manner described below. If either party requires
the matter to be submitted to arbitration the Landlord and
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<PAGE>
Tenant shall select a neutral arbitrator. Within fifteen (15) days
following the date either party requires the matter to be submitted to
arbitration, Landlord and Tenant shall each submit their respective
estimates of the fair market rent to the arbitrator. The arbitrator
shall not have the authority to compromise the rates so submitted, but
subject to the limitations in Section 3 F below, will select which
party's rental rate most closely approximates actual market rates. The
arbitrator's determination shall be final and binding upon the
parties. The cost of the Arbitrator, if any, shall be paid by the
party not prevailing in arbitration.
F. Notwithstanding anything else contained in this Lease, including
Section 3 D or 3 E above, in no event shall the rental rate for any
renewal or extension of the term be less than that of the previous
month's rental rate.
4. Option for Early Termination.
-----------------------------
Provided this Lease is then in full force and effect and Tenant is not
in default of this Lease (beyond any applicable notice and cure
period), Landlord hereby grants Tenant a one time right to terminate
this Lease after the 74/th/ full calendar month of the Lease term,
provided that: (i) Tenant notifies Landlord in writing no more than 15
months and no less than 12 months prior to the end of the 74th full
calendar month of the Lease term of Tenant's desire to terminate this
Lease under the terms of this paragraph; and (ii) concurrently with
the aforementioned notice pays to Landlord a termination fee of Five
Hundred Thousand Dollars and 00/100 ($500,000.00).
5. Intentionally Omitted
---------------------
6. Contesting Real Estate Taxes
----------------------------
In any year which Landlord does not protest the real property tax
assessment levied against the real property Tenant may choose to
protest the assessment in Landlord's name. If Tenant chooses to
protest the assessment, Landlord shall fully cooperate with Tenant's
efforts provided Tenant pays all costs and expenses necessary to
conduct such protest. In the event Landlord protests such assessment
and a reduction in the taxes for the Property results, Tenant shall be
entitled to the benefit of such reassessment, either as a credit
against the next payments of Rent and Additional Rent due under this
Lease or as a refund if this Lease has expired.
7. Intentionally Omitted
---------------------
8. Notwithstanding the provisions of Paragraph 7 of this Lease Agreement,
Tenant, subject to the limitations set forth herein and without
Landlord's prior written permission, may make alterations, additions
or improvements to only the interior of the Premises (excluding
floors, roof and wall penetrations) provided that the cost of the
alterations, additions or improvements is less than Twenty Five
Thousand Dollars and 00/100 ($25,000.00) in any one calendar year.
Tenant agrees to provide Landlord within ten days of the commencement
of any work to alter or modify the Premises under this Section 8,
written notification of said alteration or modification, such
notification shall include plans and specifications describing said
alteration or modification. The intent of this Section 8 is only to
provide Tenant a means to make minor alterations, additions or
improvements to the interior of the Premises without the prior written
consent of the Landlord. Other than as expressly stated in this
Section 8, nothing herein shall be construed as a modification of
Paragraph 7 of the Lease Agreement.
Notwithstanding the provisions of Paragraph 7 of this Lease Agreement,
Tenant shall maintain, but is not obligated to replace, the air-
conditioning equipment serving only the warehouse portion of the
Premises that was installed at Tenant's sole expense. Furthermore, in
the event Tenant elects to replace, at Tenant's sole expense, the air-
conditioning equipment, or any portion thereof, serving only the
warehouse portion of the Premises during the last twelve months of the
primary lease term, then and only then, Tenant may remove the air-
conditioning equipment serving only the warehouse portion of the
Premises that was replaced during the last twelve months of the
primary lease term. Any removal of air-conditioning equipment by
Tenant under the provisions of this Section 8 shall be done in such a
manner that the building is satisfactorily repaired. Other than as
expressly stated in this Section 8, nothing herein shall be construed
as a modification of Paragraph 7 of the Lease Agreement.
9. Permitted Transfers.
--------------------
Provided this Lease is then in full force and effect and Tenant is not
in default beyond any applicable grace period set forth in this Lease,
Tenant shall have the right to assign the Lease or sublet the Premises
without Landlord's consent, to (a) a parent, subsidiary, sibling or
affiliate, controlling, controlled by or under common control with,
Tenant; (b) a successor entity related to Tenant by merger,
consolidation, non- bankruptcy reorganization or government action; or
(c) a purchaser of substantially all of Tenant's assets located in the
Premises, provided that (i) any said assignee/subtenant assumes, in
full, the obligations of Tenant under this Lease and has, at a
minimum, a tangible net worth equal to or greater than the lessor of
$250 million or that of Tenant, and (ii) that Tenant gives notice to
Landlord of such assignment of subletting,
Page 14 of 27
<PAGE>
within 10 days of such occurrence ("Permitted Transfers"). Any such
assignment/subletting shall not, in any way, affect or limit the
joint/several liability of Tenant under the terms of this Lease. In
addition, there are no restrictions or consent requirements associated
with a transfer occasioned by the sale or other transfer of Tenant's
stock or partnership or membership interests including: (i) any
transfer in connection with the merger, consolidation or non-
bankruptcy reorganization; (ii) any transaction related to a public
sale or private placement; (iii) any transfer or sale of stock amongst
existing shareholders, or (iv) any activity in any company stock
option programs.
Landlord consents to the reincorporation of Tenant in any State
provided the financial condition of Tenant is not material changed due
to such reincorporation.
10. Intentionally Omitted
---------------------
11. Landlord's Responsibilities Regarding Hazardous Materials.
----------------------------------------------------------
Landlord agrees to furnish Tenant a copy of the current Phase I
Environmental Assessment for the 9.395-acre property upon which the
Premises are located. Landlord and its successors and assigns shall
indemnify and hold Tenant harmless for any loss, fine, penalty,
damage, cost, liability or claim occasioned by an existing on-site
environmental condition reflected in the current Phase I Environmental
Assessment and such other environmental conditions discovered during
the term of the Lease caused by Landlord, its agents or contractors.
Landlord's obligations under this Section 11 shall survive the
expiration or earlier termination of this Lease Agreement.
12. Parking.
--------
Subject to the West Oak Center covenants of record, Tenant shall have
exclusive use of the area depicted on the attached site plan (Exhibit
"A-1") for parking of employee vehicles and delivery fleet for the
entire term and extensions thereof without any additional rent or
other costs charged for such use of the parking, and Tenant shall have
the right to secure the truck parking area with fencing and/or
security cameras.
Landlord agrees that the Premises as shown on Exhibit "A-1", includes
all appurtenances thereunto appertaining, including, but not limited
to, rights of access, ingress and egress at the points shown on the
Site Plan in, to, from and over any and all streets, ways or alleys
adjoining, abutting or adjacent to the property, together with the
right to use, in common with other occupants of the property, any and
all of the common areas pertaining to the property.
Except in the event of an emergency, the parking area depicted in
Exhibit A shall not be disturbed without Tenant's consent which
consent shall be withheld in Tenant's sole discretion. Landlord shall
not use or permit the use of the common areas for any purpose other
than the parking and passage of vehicles and the movement of
pedestrian traffic, lighting, landscaping, directional and traffic
control signals, and Landlord will not, except as shown on Exhibit A,
construct, locate or allow construction or location of any fence,
barricade, structure, buildings, or other obstruction which would
interfere with the intended uses thereof, of the free flow of traffic
to, or access from, the common areas.
13. Noncompete.
-----------
Subject and subordinate to the restrictions of any existing
commitments to other leases in the Business Park, during the term of
this Lease Landlord shall not lease to an internet grocery company
premises in a building which the Landlord has a controlling interest
in the Business Park.
14. Roof Installations.
-------------------
Tenant, at its sole cost and expense, shall have the option to install
antennas and/or satellite dishes, refrigeration, heating, ventilation,
or air conditioning equipment on the roof of the Premises subject to
applicable codes, recorded covenants, and conditions of Landlord's
written approval. There shall be no additional rent or other costs
charged for such use of the roof.
15. Acceptance of Premises.
-----------------------
Upon Substantial Completion Landlord's work in accordance with Exhibit
"B-1" and Exhibit "B-2" and prior to occupancy by Tenant, Tenant shall
provide Landlord with a "punch list" of the items which need to be
corrected or completed, and Landlord will do so as reasonably
expeditiously as possible. Upon completion of Landlord's work in
accordance with Exhibit "B-1" and Exhibit "B-2", Tenant agrees to
execute and deliver to Landlord a letter accepting delivery of the
Premises subject to punch list items. Landlord shall correct or
complete such "punch list" within 30 days, or such longer period as
may be reasonably required if Landlord promptly takes corrective
action and proceeds with due diligence to correct or complete such
"punch list".
Page 15 of 27
<PAGE>
16. Priority of Provisions.
-----------------------
In constructing this Lease, the Additional Provisions shall take
priority over the other Lease Agreement terms.
17. Landscaping and Owner's Association
-----------------------------------
Notwithstanding the provisions of Paragraph 5 and 6 of this Lease,
Landlord agrees to perform routine maintenance of the grounds of the
Premises, including the care of the lawns, irrigation system,
shrubbery, plantings, trees, and general landscaping and shall charge
Tenant for such costs. In additions, Tenant shall pay, Landlord's
actual share of owner's association charges pertaining to the Business
Park. Tenant shall, with respect to such items, pay monthly as
additional rent due under subparagraph 2A the reasonable cost and
expense, including overhead of 15 % of such actual cost or expense,
for those items. For the calendar year in which the Lease commences
these costs are estimated to be $0.17 per square foot.
18. Building Expansion
------------------
Provided this Lease is then in full force and effect and Tenant is not
in default beyond any applicable grace period set forth in this Lease,
and there is no sublease for the entire Premises or assignment of any
of Tenant's interest in the Lease, other than Permitted Transfers,
then at Tenant's option, subject to all government regulations and the
provision of the park covenants of record, the Building may be
expanded up to 20,000 square feet, provided Landlord and Tenant agree
upon the cost, financing and other terms and conditions of said
expansion.
19. Substantial Completion
----------------------
MacGregor Associates Architects shall issue a Certificate of
Substantial Completion (AIA Form G704) for the Building and
Improvements to Landlord and Tenant, including a verification of the
size of the Premises ("Substantial Completion"). Tenant shall have
thirty (30) days from the issuance of the Certificate of Substantial
Completion to verify the same.
20. Governmental Compliance
-----------------------
Landlord represents to Tenant that on the Commencement Date, the
Premises will be in good working order, have a temporary certificate
of occupancy issued by the City of Marietta, GA, and shall be in
compliance with applicable statutes, laws, ordinances, orders, rules,
regulations, and other governmental requirements (including but not
limited to the Americans with Disabilities Act) relating to the
condition and occupancy of the Premises as then enforced by the City
of Marietta, Georgia, or such other appropriate governmental
authority.
21. Right to Cure
-------------
In the event that Landlord fails to so cure any such default following
notice as aforesaid, Tenant may cure such default and thereafter make
written demand (with supporting documentation reasonable in detail)
upon Landlord for the reimbursement of the reasonable cost thereof.
Notwithstanding the foregoing, in the event of a bona fide emergency,
if Landlord fails to perform an obligation under this Lease within
three business day after delivery of notice there of from Tenant
(which notice must include reference to this emergency provision),
Tenant may cure such failure and expend such funds as reasonably
necessary. If repair is an obligation of Landlord then Tenant may
invoice Landlord a maximum of $2,000 per occurrence and if Landlord
fails to pay such invoice within 15 days, Tenant may offset the amount
thereof from Rent. This provision does not limit Tenant's right to
recover the remaining funds from Landlord as allowed per section 24.
22. Force Majeure
-------------
Notwithstanding any other provision of this Lease Agreement, when a
period of time is herein prescribed of any action to be taken by
Landlord or Tenant (except that this provision shall not apply to rent
and any other monetary obligations of Tenant under this Lease
Agreement), such party shall not be liable or responsible for, and
there shall be excluded from the computation for any such period of
time, any delays due to strikes, riots, acts of God, shortages of
labor or materials, war, laws, regulations or restrictions or any
other causes of any other kind whatsoever which are beyond the
reasonable control of such party ("Force Majeure").
23. Projected Delivery Date
-----------------------
A. Provided that this Lease Agreement is executed on or before March
31, 2000, Landlord estimates that the Premises shall be substantially
completed by December 31, 2000 ("Projected Delivery Date"). Landlord
agrees to cause Landlord's general contractor to use reasonable effort
(utilizing ordinary and customary construction practice) to have the
Premises substantially completed prior to the Projected Delivery Date
and Tenant agrees to reasonably cooperate with such efforts.
B. If Landlord is unable to substantially complete the Premises by the
Projected Delivery Date, then, the Landlord will not be in default, or
in any manner whatsoever liable to Tenant, not will Tenant's
obligation to
Page 16 of 27
<PAGE>
Landlord under this Lease Agreement be affected. The Projected
Delivery Date will be extended automatically by one day for each day
of delay caused by Tenant, Tenant's agents, contractors, vendors,
suppliers or invitees; and Force Majeure.
C. Provided that this Lease Agreement is executed on or before March
31, 2000, if Landlord is unable to substantially complete the Premises
by April 30, 2001 ("Termination Notice Date"), then and only then,
Tenant will have the right to terminate this Lease by delivering
written notice to Landlord, not more then thirty (30) days after the
Termination Notice Date of its intent to terminate the Lease if
Landlord is unable to substantially complete the Premises within
thirty (30) days of Landlord's receipt of Tenant's notice. The
Termination Notice Date will be extended automatically by one day for
each day of delay caused by Tenant, Tenant's agents, contractors,
vendors, suppliers or invitees; and Force Majeure.
24. Definitions
-----------
For purposes of this Lease, the following defined terms have the
meanings set forth below or in the section of the Lease indicated
below:
"Business Park" shall mean the West Oak Center as defined as the
Property in the Amended and Restated Declaration of Covenants,
Conditions, Reservations and Restrictions for West Oak Center, Cobb
County Georgia
"Landlord's Work" shall be defined as the construction and
installation of the work described in the Basic Outline Specifications
in Exhibit B-1 and improvements made per Exhibit B-2.
Page 17 of 27
<PAGE>
EXHIBIT "A"
-----------
WEST OAK
ALL THAT TRACT or parcel of land lying and being in Land Lots 804 and 853 of the
16th District, Cobb County, City of Marietta, Georgia, and being more
particularly described as follows:
TO FIND THE POINT OF BEGINNING, begin at a point formed by the intersection of
the northwesterly margin of the right-of-way of West Oak Parkway (100-foot
right-of-way), with the southwesterly margin of the right-of-way of West Oak
Drive (60-foot right-of-way), if said margins were extended to form an angle
instead of a curve; thence running southwesterly along the extended margin of
the right-of-way of West Oak Parkway, a distance of 499.51 feet to a point,
which is the POINT OF BEGINNING; from the POINT OF BEGINNING, as thus
established, thence running along the westerly margin of the right-of-way of
West Oak Parkway, along the arc of a curve to the left (said arc being subtended
by a chord bearing South 11(degrees)22'42" West, a distance of 264.31 feet), a
distance of 269.75 feet to a point; thence leaving the westerly margin of the
right-of-way of West Oak Parkway, and running South 81(degrees)23'17" West, a
distance of 117.87 feet to a point; thence running South 47(degrees)07'24" West,
a distance of 379.68 feet to a point; thence running North 42(degrees)52'36"
West, a distance of 617.86 feet to a point located on the southeasterly margin
of the right-of-way of West Oak Drive North 37(degrees)40'40" East, a distance
of 371.79 feet to a point; thence continuing along the southeasterly margin of
the right-of-way of West Oak Drive, along the arc of a curve to the right (said
arc being subtended by a chord bearing North 55(degrees)45'02" East, a distance
of 229.54 feet), a distance of 233.42 feet to a point; thence leaving the
southeasterly margin of the right-of-way of West Oak Drive, and running South
44(degrees)34'12" East, a distance of 368.54 feet to a point; thence running
South 70(degrees)34'12" East, a distance of 158.00 feet to a point; thence
running South 58(degrees)37'53" East, a distance of 50.00 feet to a point
located on the westerly margin of the right-of-way of West Oak Parkway, which is
the POINT OF BEGINNING, said property containing 9.395 acres, as much more
particularly shown on that certain Survey of Property for 3 Plus Limited
Partnership, dated June 18, 1998, prepared by Urban Engineers, Inc., and bearing
the seal of Nelson F. Goetz, GRLS No. 3844.
TOGETHER WITH AND SUBJECT TO, as an appurtenance to the aforedescribed property,
a non-exclusive, perpetual easement for the construction, maintenance and use of
the sanitary sewer and storm drainage lines and the sanitary sewer and storm
drainage patterns, all as shown on that certain Final Subdivision Plat of West
Oak Center, recorded in Plat Book 129, Pages 88 and 89, Cobb County, Georgia
Records.
TOGETHER WITH AND SUBJECT TO, the rights, easements and obligations set forth in
that certain Joint Driveway Easement Agreement between W. Hogewoning B.V., a
Netherlands corporation, and Collin Equities, Inc., a Texas corporation, and New
Cheshire Limited Partnership, a Georgia limited Partnership, dated April 25,
1994, and recorded in Deed Book 8216, Page 377, aforesaid records.
Subject to: (1) all matters of record as of the date hereof, (2) matters shown
on that certain Final Subdivision Plat of West Oak Center, dated December 1,
1989, prepared by Urban Engineers, Inc. and (3) any deed to secure debt.
Page 18 of 27
<PAGE>
EXHIBIT "A-1"
-------------
[FLOOR PLAN APPEARS HERE]
Page 19 of 27
<PAGE>
EXHIBIT "B-1"
Basic Outline Specifications
For
Building Shell and Sitework
For
HomeGrocer.com, Inc.
(102,297 Square Feet)
3 Plus Limited Partnership
March 6, 2000
Page 20 of 27
<PAGE>
THE SITE
- --------
The site is to be an approximate 9.395-acre tract of land in West Oak Center
located on West Oak Parkway, Marietta, Cobb County, Georgia.
THE BUILDING AND SITE FACILITIES
- --------------------------------
The building gross area will be approximately 102,297 square feet as shown on
the site plan prepared by MacGregor Associates Architects contained in Exhibit
"A-1" (the "Site Plan"). Tenant's exclusive automobile and truck parking to be
approximately as shown on the Site Plan.
PROJECT DESIGN
- --------------
3 Plus Limited Partnership will retain the services of MacGregor Associates
Architects (project architect), McCrary Engineering, Inc. (project civil
engineer) and Doran & Karwoski Architects (project landscape architect) for the
site design, architectural design, structural engineering and landscape design
of the project. The design of the building will comply with the guidelines of
Architectural Committee for West Oak/Atlanta, Inc.
PERMITS, LICENSING, FEES
- ------------------------
All building permit fees and water and sewer tap fees are included. One
vault/manhole and 8' director check is included. One 2" domestic water meter and
one 1" irrigation water meter are included. One 6" sewer main to the Building is
included.
SITEWORK
- --------
1. All grading and excavation will be performed in accordance with the design
documents. A soils engineer will do a soil analysis and his recommendations
followed during the structural design. Soil compaction tests will be taken
during construction to insure compliance with design.
2. A concrete curb will border all paved areas. Sidewalks will be 4" thick
with broomed finished and will be placed in accordance with the final
design. A 6" thick reinforced concrete truck pad will be placed at the 48"
high loading dock area. All exterior concrete will be 3,000 PSI.
3. Paved areas will consist of two types. The automobile parking area and
associated drives will consist of 5' gravel base and 2' of asphalt. The
truck drive and truck court will consist of 6" of gravel base, a 2" asphalt
binder and 1" asphalt topping.
4. All utilities shall be placed underground. Adequate gas, water, electrical
power and sanitary sewer service will be brought to the building. Storm
water runoff from both the building and paved areas will be through an
underground storm sewer system.
5. Offsite storm water detention shall be provided by the master detention
facilities in West Oak Center. A detention pond is not required on the
site.
CONCRETE
- --------
1. Slab on grade shall be 6" thick, with 4,000 PSI unreinforced concrete at 28
days.
2. Vapor barrier under slab is included under office area.
3. All slabs will receive saw-cut control joints at a maximum of 20' on
center.
4. A clear bond sealer/hardener will be sprayed on the warehouse floor.
EXTERIOR WALLS
- --------------
Exterior walls to be 7-1/4" non-insulated, load bearing concrete tilt-up panels
with a jumbo brick veneer for the projected office area.
METALS
- ------
1. Building frame to be steel columns with lightweight joists and joist
girders. The structure is to be designed by a registered structural
engineer.
2. Metal deck to be 22 gage painted gray.
3. Column spacing to be 50'x40' typical per Site Plan.
4. Warehouse height shall be an average of 24' clear to the bottom of bar
joists.
5. Dock canopies with 4'0" projection are included above dock doors.
6. Pipe bollards are included at all dock doors, stairs, transformers and
downspouts.
Page 21 of 27
<PAGE>
THERMAL AND MOISTURE PROTECTION
- -------------------------------
1. Roofing system shall be .45 mil. ballasted EPDM roofing with R-14
insulation. Cost to upgrade to R-19 insulation will be charged against
Allowance provide in Exhibit "B-2", if requested.
2. Roof drainage will be by means of galvanized gutters and downspouts with
standard Kynar finish.
DOORS AND WINDOWS
- -----------------
1. Glass storefront up to 9' high is included. Storefront glass will be tinted
insulated panels. Storefront metal will be painted aluminum (standard
color).
2. Two storefront doors are included.
3. Five exterior hollow metal galvanized doors and frames are included.
4. The building shall have four 9'0"x10'0" 48" dock high doors, sixteen 9'x10'
38" dock high doors and one 12'0"x14'0" drive-in door, uninsulated with
standard prefinished color. One pair of 12"x24" dock bumpers is included
for each overhead door opening. The large overhead door shall be serviced
by a ramp to grade level. Dock levelers, seals, locks, lights, etc. are not
included. Tenant shall have the right to use the standard tenant
improvement allowance or any additional tenant improvement allowance to
install mechanical levelers dock seals and other dock equipment that will
become a permanent improvement to the building.
FIRE PROTECTION
- ---------------
Complete wet pipe fire protection sprinkler system designed for .48 gpm/sf over
the most remote 2,000 S.F. with 286 degrees sprinkler heads is included. Hose
stations, in-rack sprinklers, fire pumps, mechanical smoke ventilation and draft
curtains are not included.
BASIC ELECTRICAL
- ----------------
1. One 4,000-amp 277/480-volt 3-phrase service with main panel is included.
2. Eight 150-watt incandescent soffit lights with twelve 400-watt metal halide
wall packs with photocell are included. Exterior pole mounted security
lights and truck charging plugs are not included.
3. Security and fire alarm systems are not included.
4. Two 4" PVC conduit lines for telephone service are included.
5. Two 110v circuits are included for irrigation and telephone.
MODIFICATIONS TO BASIC OUTLINE SPECIFICATIONS
- ---------------------------------------------
1. Tenant and Landlord acknowledge that the above Basic Outline Specifications
does not include all of the Tenant's project requirements referred to in the
General Requirements Build to Suit, prepared by E & Y Design and Construction,
dated 12/21/99. Tenant agrees to meet with the project architect and engineer
within twenty (20) days of the execution of this Lease Agreement to identify the
Tenant's project requirements that Tenant desires to include as part of
Landlord's shell building construction. In addition, Tenant agrees that Landlord
may deduct from the Allowance provided by Landlord to Tenant in Exhibit "B-2"
any and all design and construction management costs incurred by Landlord for
the required modifications and alterations to the Basic Outline Specifications
herein above.
2. All modifications and alterations to the Basic Outline Specifications (the
"Modifications") are subject to Landlord's and Tenant's written approval within
five (5) days after receipt of the plans. Following Landlord's approval of the
Modifications, Landlord shall negotiate a commercially reasonable "cost plus"
fee arrangement with the general contractor for the Modifications (taking into
account consideration such matters as minimum number of bids and contractor's
charges for general conditions and overhead. The cost of Modifications for the
purpose of billing to Tenant shall equal the cost to Landlord of the design and
construction of Modifications (including contractor's fee (not to exceed 7%) and
a construction management fee to Landlord's agent equal to 4% of the first
$500,000.00 in cost of the Modifications and 2% of the cost of the Modifications
above $500,000.00). The cost of Modifications shall be supported by a change
order or similar document, which shall be approved by Tenant.
3. All costs and expenses incurred in the design and construction of the
Modifications shall be borne by Tenant (the "Tenant Modification Costs") The
Tenant Modification Costs shall be payable as follows:
(a) Tenant shall pay to Landlord, within 5 days from delivery of
Landlord's invoice to Tenant (prior to the commencement of the
contraction of the Modifications) an amount equal to 90% of such
Tenant Modification Costs (as then estimated by Landlord);
(b) Upon completion of the Modifications, Tenant shall pay to Landlord
within 5 days from delivery of Landlord's invoice to Tenant, the
remaining 10% of such Modification Cost;
(c) Following Substantial Completion, Landlord will reconcile Landlord's
estimate of the Tenant Modification Costs with the actual Tenant
Modification Costs. If the amount paid by Tenant as Tenant
Modification Costs per 3 (a) and 3 (b) above, is greater than the
actual Tenant Modification Costs the Landlord will refund the
difference in Tenant Modification
Page 22 of 27
<PAGE>
Costs. If the amount paid by Tenant as Tenant Modification Costs per 3
(a) and 3 (b) above, is less than the actual Tenant Modification Costs
Tenant will pay to Landlord as additional rent the difference in
Tenant Modification Costs.
4. If Tenant requests any changes to the Modifications, Tenant shall present
Landlord with revised drawings and specifications for Landlord's approval.
Landlord's contractor shall produce a change order for such change to the plans
which will include the price and time delay, if any, to the Substantial
Completion of the building. Upon receipt of contractors change order, Tenant
will have 5 days to approve the same, if after five days no approval is given,
then the change order is deemed rejected by the Tenant. Any increase in the
costs of the Modifications as a result of the changes will be the responsibility
of Tenant. In addition, should Tenant's request for a change in the
Modifications cause a delay in the Substantial Completion of the Modifications,
then, without prejudice to the provisions hereof, Landlord shall have the right
to refuse to permit the making of such changes unless and until Tenant shall
have executed then a stipulation and agreement in writing stating that the
Commencement Date of the lease shall occur prior to the Substantial Completion
of the Premises.
5. Tenant shall pay to Landlord in accordance with the provisions of hereof any
actual out-of-pocket costs incurred by Landlord for costs resulting from the
fact that the Modifications are required to be changed in order to conform to
the plans and specifications for the building or governmental requirements, to
the extent that such plans and specifications or government requirements were
modified after approval of the Modifications and were the result of changes
which were beyond Landlord's control.
6. Landlord shall provide Tenant with architectural and engineering drawings
for the Building and sitework as specified in Exhibit B-1 for use in Tenant's
determination of necessary changes and evaluation of costs of change orders.
Page 23 of 27
<PAGE>
EXHIBIT "B-2"
-------------
IMPROVEMENT AGREEMENT
1. The Premises are rented in "as-is" condition, except as expressly stated
elsewhere in this Lease, without any additional improvements to be rendered
by Landlord, other than those improvements as described in this Exhibit B-
2.
2. Tenant shall use the services of MacGregor Associates Architects, subject
to Tenants receipt and approval of the contract between Landlord and
MacGregor Associates Architects, to assist Tenant in the preparation of
drawings, plans and specifications (the "Plans") for the construction of
tenant interior improvements to the Premises (the "Improvements"). Tenant
agrees to diligently pursue the completion of the Plans within twenty (20)
days of the execution of this Lease Agreement. The Plans shall be subject
to Landlord's and Tenant's approval within five (5) days after receipt of
the Plans. All costs of preparing the Plans, including Landlord's architect
costs, shall be applied against the Allowance (as herein defined).
3. Tenant shall receive an improvement allowance ("Allowance") of Four Hundred
Fifty Two Thousand Dollars and 00/100 ($452,500.00) to be applied to the
cost and expense incurred in the design and construction of all standard
Improvements to the Premises and Building, including approximately 10,000
square feet of office area, standard warehouse heating and lighting and
such other improvements as provided in this Lease Agreement. Any costs of
improving the Premises and Building over the amount of the Allowance shall
be payable by Tenant. In the event the Allowance is not fully utilized,
Landlord shall retain any and all unutilized portion of the Allowance.
4. Following the approval in writing by Landlord of the Plans (the "Approved
Plans"), Landlord shall Landlord shall negotiate a commercially reasonable
"cost plus" fee arrangement with the general contractor for the
Improvements (taking into account consideration such matters as minimum
number of bids and contractor's charges for general conditions and
overhead. The cost of Improvements for the purpose of billing to Tenant
shall equal the cost to Landlord of the design and construction of
Improvements (including contractor's fee and a construction management fee
to Landlord's agent equal to 4% of the first $500,000.00 in cost of the
Improvements and 2% of the cost of the Improvements above $500,000.00). In
addition, the cost of Improvements shall be supported by a change order or
similar documentation, which shall be approved by Tenant.
5. All costs and expenses incurred in the design and construction of the
Improvements which exceed the Allowance shall be borne by Tenant (the
"Tenant's Costs"). The Tenant's Costs shall be payable as follows:
(a) Tenant shall pay, within 5 days from delivery of Landlord's invoice to
Tenant, to Landlord prior to the commencement of the construction of
the Improvements, an amount equal to 90% of such Tenant's Costs (as
then estimated by Landlord);
(b) Upon completion of the Improvements, Tenant shall pay to Landlord
within 5 days from delivery of Landlord's invoice to Tenant, the
remaining 10% of such Tenant's Cost;
(c) Upon completion of the Improvements, Landlord will reconcile
Landlord's estimate of the Tenant's Costs with the actual Tenant's
Cost. If the amount paid by Tenant as Tenant's Costs prior to
commencement of construction, par Paragraph 5 (a) of this Exhibit B,
is greater than the actual Tenant's Costs the Landlord will refund the
difference in Tenant's Costs. If the amount paid by Tenant as Tenant's
Costs prior to commencement of construction, per Paragraph 5 (a) of
this Exhibit B, is less than the actual Tenant's Costs the Tenant will
pay to Landlord as additional rent the difference in Tenant's Costs.
6. If Tenant requests any changes in the Approved Plans, Tenant shall present
Landlord with revised drawings and specifications for Landlord's approval.
Landlord's contractor shall produce a change order for such change to the
Approved Plans which will include the price and time delay, if any, to the
Substantial Completion of the building. Upon receipt of contractors change
order, Tenant will have 5 days to approve the same, if after five days no
approval is given, then the change order is deemed rejected by the Tenant.
Any increase in the costs of the Improvements as a result of the changes
will be the responsibility of Tenant. In addition, should Tenant's request
for a change in the Approved Plans cause a delay in the Substantial
Completion of the Improvements, then, without prejudice to the provisions
hereof, Landlord shall have the right to refuse to permit the making of
such changes unless and until Tenant shall have executed then a stipulation
and agreement in writing stating that the Commencement Date of the lease
shall occur prior to the Substantial Completion of the Premises.
7. Tenant shall pay to Landlord in accordance with the provisions of hereof
any actual out-of-pocket costs incurred by Landlord for costs resulting
from the fact that the Approved Plans are required to be changed in order
to conform to the plans and specifications for the building or governmental
requirements, to the extent that such plans and specifications or
government requirements were modified after approval of the Approved Plans
and were the result of changes which were beyond Landlord's control.
Page 24 of 27
<PAGE>
EXHIBIT "C"
-----------
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
-------------------------------------------------------
THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT made this ______
day of _____, _______, among WACHOVIA BANK, N.A., a national banking association
chartered pursuant to the laws of the United States of America (hereinafter
referred to as "Lender") ________________, (hereinafter referred to as
"Tenant") ____________________, (hereinafter collectively referred to as
"Landlord").
WITNESSETH:
----------
WHEREAS, Landlord and Tenant entered into that certain Lease Agreement
(hereinafter referred to as the "Lease") dated as of
__________, relating to the premises described in Exhibit A attached hereto and
---------
by this reference made a part hereof (hereinafter referred to as the
"Premises"); and
WHEREAS, Tenant intends to occupy the Premises as a_____________ store; and
WHEREAS, in reliance upon the foregoing, Lender has made or has committed to
make a loan to Landlord in the principal amount of $__________ (hereinafter
referred to as the "Loan") secured by a deed to secure debt, assignment and
security agreement (hereinafter referred to as the "Security Instrument") which
contains an assignment of leases and rents from Landlord to Lender covering the
Premises; and
WHEREAS, Tenant has agreed that the Lease shall be subject and subordinate to
the Security Instrument held by Lender, provided Tenant is assured of continued
occupancy of the Premises under the terms of the Lease;
NOW, THEREFORE, for and in consideration of the mutual covenants herein
contained, the sum of Ten Dollars ($10.00) and other good and valuable
considerations, the receipt and sufficiency of which are hereby acknowledged,
and notwithstanding anything in the Lease to the contrary, it is hereby agreed
as follows:
1. Lender, Tenant and Landlord do hereby covenant and agree that the Lease
with all rights, options, liens and charges created thereby, is and shall
continue to be subject and subordinate in all respects to the Security
Instrument and to any renewals, modifications, consolidations, replacements and
extensions thereof and to all advancements made thereunder.
2. Lender does hereby agree with Tenant that, in the event Lender becomes the
owner of the Premises by foreclosure, conveyance in lieu of foreclosure or
otherwise, so long as Tenant complies with and performs its obligations under
the Lease, (a) Lender will take no action which will interfere with or disturb
Tenant's possession or use of the Premises or other rights under the Lease, and
(b) the Premises shall be subject to the Lease and Lender shall recognize Tenant
as the tenant of the Premises for the remainder of the term of the Lease
(including renewal options) in accordance with the provisions thereof, provided,
however, that Lender shall not be subject to any offsets or defenses which
Tenant might have against any prior landlord except those which arose under the
provisions of the Lease out of such landlord's default and accrued after Tenant
had notified Lender and given Lender the opportunity to cure same as hereinbelow
provided, nor shall Lender be liable for any act or omission of any prior
landlord, nor shall Lender be bound by any rent or additional rent which Tenant
might have paid for more than the current month to any prior landlord nor shall
it be bound by any amendment or modification of the Lease made without its
consent.
3. Tenant does hereby agree with Lender that, in the event Lender becomes the
owner of the Premises by foreclosure, conveyance in lieu of foreclosure or
otherwise, then Tenant shall attorn to and recognize Lender as the landlord
under the Lease for the remainder of the term thereof (including renewal
options), and Tenant shall perform and observe its obligations thereunder,
subject only to the terms and conditions of the Lease. Tenant further covenants
and agrees to execute and deliver upon request of Lender, or its assigns, an
appropriate agreement of attornment to Lender and any subsequent titleholder of
the Premises.
4. So long as the Security Instrument remains outstanding and unsatisfied,
Tenant will mail or deliver to Lender, at the address and in the manner
hereinbelow provided, a copy of all notices permitted or required to be given to
the Landlord by Tenant under and pursuant to the terms and provisions of the
Lease. At any time before the rights of the Landlord shall have been forfeited
or adversely affected because of any default of the Landlord, or within the time
permitted the Landlord for curing any default under the Lease as therein
provided (but not less than sixty (60) days from the receipt of notice), Lender
may, but shall have no obligation to, pay any taxes and assessments, make any
repairs and improvements, make any deposits or do any other act or thing
required of the Landlord by the terms of the Lease; and all payments so made and
all things so done and performed by Lender shall be as effective to prevent the
rights of the Landlord from being forfeited or adversely affected because of any
default under the Lease as the same would have been if done and performed by the
Landlord. Nothing contained herein shall be construed as an obligation of Lender
to cure such default. Furthermore, nothing contained herein or in the Lease
shall create any express or implied obligation on the part of Lender to complete
construction of the "improvements" under the Lease in the event of default by
Landlord or in the event Lender acquires the Premises by foreclosure or deed in
lieu of foreclosure.
Page 25 of 27
<PAGE>
5. Tenant acknowledges that Landlord will execute and deliver to Lender an
assignment of the Lease as a security for the Loan, and Tenant hereby expressly
consents to such assignment.
6. Landlord and Tenant hereby certify to Lender that the Lease has been duly
executed by Landlord and Tenant and is in full force and effect; that the Lease
and any modifications and amendments specified herein are a complete statement
of the agreement between Landlord and Tenant with respect to the leasing of the
Premises, and the Lease is in default thereunder; that no rent under the Lease
has been paid more than thirty (30) days in advance of its due date; and that
Tenant, as of this date, has no charge, lien or claim of offset under the Lease,
or otherwise, against the rents or other charges due or to become due
thereunder.
7. Unless and except as otherwise specifically provided herein, any and all
notices, elections, approvals, consents, demands, requests and responses thereto
("Communications") permitted or required to be given under this Agreement shall
be in writing, signed by or on behalf of the party giving the same, and shall be
deemed to have been properly given and shall be effective upon the earlier of
receipt thereof or deposit thereof in the United States mail, postage prepaid,
certified with return receipt requested, to the other party at the address of
such other party set forth hereinbelow or at such other address within the
continental United States as such other party may designate by notice
specifically designated as a notice of change of address and given in accordance
herewith; provided, however, that the time period in which a response to any
Communication must be given shall commence on the date of receipt thereof; and
provided further that no notice of change of address shall be effective with
respect to Communications sent prior to the time of receipt thereof. Receipt of
Communications hereunder shall occur upon actual delivery whether by mail
telecopy transmission, messenger, courier service, or otherwise) to an
individual party or to an officer or general or limited partner of a party or to
any agent or employee of such party at the address of such party set forth
hereinbelow, subject to change as provided hereinabove. An attempted delivery in
accordance with the foregoing, acceptance of which is refused or rejected, shall
be deemed to be and shall constitute receipt; and an attempted delivery in
accordance with the foregoing by mail, messenger, or courier service (whichever
is chosen by the sender) which is not completed because of changed address of
which no notice was received by the sender in accordance with this provision
prior to the sending of the Communication shall also be deemed to be and
constitute receipt. Any Communication, if given to Lender, must be addressed as
follows, subject to change as provided hereinabove:
Wachovia Bank, N. A.
Real Estate Finance Division
30th Floor, Mail Code 1810
191 Peachtree Street
Atlanta, Georgia 30303
and, if given to Tenant. must be addressed as follows, subject to change as
provided hereinabove:
_______________________
_______________________
_______________________
and, if given to Landlord, shall be addressed as follows:
_______________________
_______________________
_______________________
8. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective heirs, legal representatives,
successors, successors-in-title and assigns. When used herein, the term
"landlord" refers to landlord and to any successor to the interest of Landlord
under the Lease.
Page 26 of 27
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the date first above written.
LENDER:
-------
As to Lender, signed WACHOVIA BANK, N.A.
sealed and delivered in
the presence of:
___________________________ By:____________________________
Unofficial Witness [Name of Bank Officer]
[Title of Bank Officer]
(BANK SEAL)
___________________________
Notary Public
Commission Expiration Date:
__________________________
(NOTARIAL SEAL)
TENANT:
------
As to Tenant, signed
sealed and delivered in
the presence of: ________________________________
___________________________ By:________________________
Unofficial Witness Its:_______________________
(CORPORATE SEAL)
___________________________
Notary Public
Commission Expiration Date:
__________________________
(NOTARIAL SEAL)
LANDLORD:
--------
As to Landlord, signed, _______________________________
sealed and delivered in _______________________________
the presence of:
__________________________ By:________________________
Unofficial Witness Title:__________________________
__________________________
Notary Public
Commission Expiration Date:
__________________________
(NOTARIAL SEAL)
Page 27 of 27
<PAGE>
EXHIBIT 10.6
STANDARD INDUSTRIAL LEASE AGREEMENT Facility Address:
(Net Form)
7110 Katy Road, Suite 200
Houston, Texas 77024
120,000 Sq. Ft.
- ------------
LEASE AGREEMENT
THIS LEASE AGREEMENT, ("Lease") made and entered into on this 14 day of
April, 2000 by and between CONNECTICUT GENERAL LIFE INSURANCE COMPANY, on
behalf of its Separate Account R hereinafter referred to as "Lessor", and
HOMEGROCER.COM, INC., a Delaware Corporation hereinafter referred to as
"Lessee";
WITNESSETH:
1. PREMISES AND TERM.
A. PREMISES. In consideration of the mutual obligations of Lessor and
--------
Lessee set forth herein, Lessor leases to Lessee, and Lessee hereby leases from
Lessor the Premises located at 7110 Katy Road, Suite 200, Houston, Harris
County, Texas, more particularly described on EXHIBIT "A" ("Site Plan") and
legally described in Paragraph 26A attached hereto and incorporated herein by
reference, (the "Premises"), together with all rights, privileges, easements,
appurtenances, rights of ingress and egress and amenities belonging to or in any
way pertaining to the Premises, the building where the Premises are located (the
"Building") and the project where the Building is located, to have and to hold,
subject to the terms, covenants and conditions in this Lease.
In addition to Lessee's rights to use and occupy the Premises as
hereinafter specified, Lessee shall have exclusive rights to use the Lessee's
parking area and any other vehicle parking or use areas designated on Exhibit A
as exclusive to Lessee ("Lessee's Exclusive Parking Areas"), and Lessee shall
have non-exclusive rights to use the other common areas of the Project except
those parking areas and any other vehicle parking areas that are not designated
as exclusive to Lessee and as otherwise provided herein. The Premises, the
Building, the common areas (the "Common Areas"), the land upon which they are
located, along with all other buildings and improvements thereon, are herein
collectively referred to as the "Project."
B. TERM. The term of this Lease shall commence on the Commencement Date
-----
hereinafter set forth and shall end on the last day of the month that is ONE
HUNDRED TWENTY (120) months after the Commencement Date. The parties anticipate
and intend that Lessor will deliver the Premises to Lessee on or before April 7,
2000 (the "Anticipated Delivery Date") in order to permit Lessee to commence its
tenant improvement work. All terms and conditions of the Lease shall be in
effect from the Anticipated Delivery Date. Unless mutually altered in writing
by Lessee and Lessor, the Commencement Date shall be June 1, 2000.
C. EXISTING BUILDING. Lessor represents and warrants that all electrical,
mechanical, plumbing and other systems serving the Premises, the demising walls
of the Premises and all structural and roof components of the Building will in
good working order and good condition as of the Delivery Date. Lessor shall
complete the construction of the interior center demising and the addition to
Lessee's Exclusive Parking Area within thirty (30) and ninety (90) days,
respectively, from the Anticipated Delivery Date of the Premises. If these items
are not completed within this time, Lessor will make arrangements to provide
comparable parking for Lessee within the Project and beginning on the
Commencement Date one day of rent will be abated for each day the Lessor was
late in completing the interior center demising wall or the addition to Lessee's
Exclusive Parking Area. Subject to and conditioned upon Lessor's representation
and warranty in the prior sentence, Lessee acknowledges that (i) it has
inspected and accepts the Premises, (ii) the improvements comprising the same
will be suitable for the purpose for which the Premises are leased after
completion of Lessee's tenant improvements, (iii) the Premises are in good and
satisfactory condition pre-existing environmental conditions, latent defects and
structural components of the Building, Project, and the Premises excepted), and
(iv) the Premises shall be leased on an "as is" basis, and no representations as
to the repair of the Premises, nor promises to alter, remodel or improve the
Premises have been made by Lessor except those expressly set forth in this
Section 1, in Section 4 and in Paragraph 25B of this Lease. Upon request by
Lessor, Lessee shall execute and deliver to Lessor a Letter Acknowledging
Delivery of the Premises.
D. GENERAL CONDITIONS. Lessee's and Lessor's obligations, privileges,
covenants and agreements contained in this Lease shall be operative and
effective regardless of whether the Premises are ever occupied by Lessee. If
Lessee fails to occupy the Premises for any reason, except due to Lessor's
negligence or willful
1 INITIALS
--------
Lessor:
---------
Lessee: KHS
---------
<PAGE>
misconduct to include, but not limited to Substances on or about the Project,
after delivery of the Premises to Lessee, this Lease shall be deemed to have
commenced automatically on the Commencement Date.
2. BASE RENT, SECURITY DEPOSIT AND OPERATING EXPENSES.
A. Lessee agrees to pay to Lessor base rent ("Base Rent") for the Premises,
in advance, without demand, deduction or set off, except at otherwise provided
in paragraph 4E., at the rate of SEE BELOW per month during the term hereof. One
such monthly installment, plus the other monthly charges set forth in Paragraph
2C below shall be due and payable on the date hereof and a like monthly
installment shall be due and payable on or before the first day of each calendar
month succeeding the commencement date; except that all payments due hereunder
for any fractional calendar month shall be prorated.
B. In addition, Lessee agrees to deposit with Lessor on the date hereof
the sum of ONE HUNDRED FIFTY THOUSAND DOLLARS AND NO/100 Dollars ($150,000.00)
(the "Security Deposit") which shall be held by Lessor, with interest at no less
than three (3%) percent per annum, as security for the performance of Lessee's
obligations under this Lease, it being expressly understood and agreed that the
Security Deposit is not an advance rental deposit or a measure of Lessor's
damages in case of Lessee's default. Upon each occurrence of an event of
default, Lessor may use all or part of the Security Deposit to pay past due rent
or other payments due Lessor under this Lease, and the cost of any other damage,
injury, expense or liability caused by such event of default without prejudice
to any other remedy provided herein or provided by law. On demand, and after
written notice, Lessee shall pay Lessor the amount that will restore the
Security Deposit to its pre-deduction amount. The Security Deposit shall be
deemed the property of Lessor, but any remaining balance of such deposit shall
be returned by Lessor to Lessee when Lessee's obligations under this Lease have
been fulfilled.
C. Lessee agrees to pay as additional rental its proportionate share (as
defined in Paragraph 23B below) of operating expenses ("Operating Expenses")
which are comprised of (i) Taxes (hereinafter defined) payable by Lessor
pursuant to Paragraph 3A below, (ii) the cost of maintaining insurance covering
the of which the Premises is a part, (iii) the cost of utilities payable
pursuant to Paragraph 8 below, and the cost of any common area charges payable
by Lessor in accordance with Paragraph 4 below and (iv) any other charges which
Lessor is entitled to collect under the terms of this. During each month of the
term of this Lease, on the same day that rent is due hereunder, Lessee shall
escrow with Lessor an amount equal to 1/12 of the estimated annual cost of its
proportionate share of such Operating Expenses (which estimated amount shall not
exceed 105% of the actual Operating Expenses for the prior calendar year, unless
a greater increase can be substantiated by Lessor with reasonable supporting
documentation). Lessee authorizes Lessor to use the funds deposited with Lessor
under this Paragraph 2C to pay such costs. The initial monthly escrow payments
are based upon the estimated amounts and shall be increased or decreased
annually to reflect the then current projected cost of all such Operating
Expenses (which estimated amount shall not exceed 105% of the actual Operating
Expenses for the prior calendar year, unless a greater increase can be
substantiated by Lessor with reasonable supporting documentation). Lessor shall
total all Operating Expenses annually, and reconcile Lessee's actual
proportionate share of such expenses against Lessee's total escrow payments by
May 1st of each year. If the Lessee's total escrow payments are less than
Lessee's actual proportionate share of all such, Operating Expenses, Lessee
shall pay the difference to Lessor within ten (10) days after demand. If the
total escrow payments of Lessee are more than Lessee's actual proportionate
share of all such, Operating Expenses, Lessor shall retain such excess and
credit it against Lessee's future liabilities for Operating Expenses. Lessee
shall be entitled to audit Lessor's Operating Expense accounts and Lessor shall
cooperate with Lessee in regard to any such audit. If the audit reveals that
Lessee has overpaid its proportionate share of Operating Expenses, such
overpayment shall be reimbursed to Lessee promptly upon demand. If the results
of such audit show that Operating Expenses have been overstated by two (2%)
percent or more, the cost of such audit up to a maximum of $1,000.00 shall be
reimbursed to Lessee by Lessor promptly upon demand. The amount of the monthly
Base Rent and the initial monthly Operating Expenses escrow payments are as
follows:
<TABLE>
<CAPTION>
Months: 01 - 60: 61 - 120:
<S> <C> <C>
(1) Base Rent as set forth in Paragraph 2A. $42,000.00 $48,700.00
(2) Tax Escrow $ 8,000.00 $ 8,000.00
(3) Insurance Escrow $ 356.00 $ 356.00
(4) Common Area Escrow $ 1,875.00 $ 1,875.00
(5) Management Fee $ 1,567.00 $ 1,567.00
---------- ----------
Total Monthly Rental Payment $53,798.00 $60,498.00
</TABLE>
2 INITIALS
--------
Lessor:
---------
Lessee: KHS
---------
<PAGE>
3. TAXES
A. Lessor agrees to pay all taxes, assessments and governmental charges of
any kind and nature (collectively referred to herein as "Taxes") that accrue
against the Premises, the Building and the Project and Lessee shall be liable
for its proportionate share of the same. If at any time during the term of this
Lease, there shall be levied, assessed or imposed on Lessor a capital levy or
other tax directly on the rents received therefrom and/or a franchise tax,
assessment, levy or charge measured by or based, in whole or in part, upon such
rents from the Premises and/or the land and improvements of which the Premises
are a part, then all such taxes, assessments, levies or charges, or the part
thereof so measured or based, shall be deemed to be included within the term
"Taxes" for the purposes hereof. The Lessor shall have the right to employ a
tax consulting firm to attempt to assure a fair tax burden on the building and
grounds within the applicable taxing jurisdiction. Lessee agrees to pay its
proportionate share of the cost of such consultant. Lessee acknowledges and
agrees that, except as provided in Paragraph 3B. below, Lessor shall have no
obligation to protest or appeal the valuation of the Building or to provide
notice to Lessee of any such protest or appeal or any appraisal or reappraisal
of such building.
B. In any year which Lessor does not protest the real property tax
assessment levied against the real property, Lessee may choose to protest the
assessment in Lessor's name with Lessor's prior written approval which shall not
be unreasonably withheld or delayed. If Lessor grants permission to Lessee to
protest the assessment, Lessor shall fully cooperate with Lessee's efforts
provided Lessee pays all costs and expenses necessary to conduct such protest.
In the event Lessor protests such assessment and a reduction in the taxes for
the Property results, Lessee shall be entitled to its pro rata share of the
benefit of such reassessment, either as a credit against the next payments of
Rent and Additional Rent due under this Lease or as a refund if this Lease has
expired. If Lessee protests the assessment and the taxes for the Property are
reduced as a result of such protest, Lessee shall each be entitled to its pro
rata share of the benefit of such reassessment. Lessee shall also be entitled to
reimbursement of its expenses in conducting such protest, (not to exceed the
reasonable protest fees that Lessor would have paid if Lessee had protested such
assessment) such reimbursement to be in the form of a credit against Rent and
Additional Rent.
C. Lessee shall be liable for all taxes levied or assessed against any
personal property or fixtures placed in the Premises. If any such taxes are
levied or assessed against Lessor or Lessor's property and (i) Lessor pays the
same or (ii) the assessed value of Lessor's property is increased by inclusion
of such personal property and fixtures and Lessor pays the increased taxes,
then, upon demand Lessee shall pay to Lessor such taxes.
4. LESSOR'S REPAIRS AND MAINTENANCE.
A. Lessor, shall maintain the roof, structural steel, center demising wall,
the foundation and the structural soundness of the exterior walls of the
Building in good repair, reasonable wear and tear accepted, and Lessee shall be
liable for its proportionate share of the cost of routine maintenance or repair
provided, however, Lessee shall promptly upon demand, reimburse Lessor for any
damage to the same caused by Lessee's act, neglect, fault or omission. The term
"walls" as used herein shall not include windows, glass or plate glass, doors,
special storefronts or office entries. Lessee shall immediately give Lessor
written notice of defect or need for repairs, after which Lessor shall have
reasonable opportunity to repair the same or cure such defect. Lessor's
obligation to maintain the aforementioned items shall be limited solely to the
cost of such repairs or maintenance or the curing of any defect in the same.
B. Lessor shall perform the paving maintenance, common area and landscape
replacement and maintenance, exterior painting, common electrical connections,
common water and sewage line plumbing, (for Lessee's use and enjoyment of the
Premises,) and any other common maintenance items and Lessee shall be liable for
its proportionate share of the cost and expense of such repair, replacement, and
maintenance, excepting costs relating to Substances not introduced to the
Premises by Lessee or it's agents. Lessor reserves the right to perform any
obligations that are otherwise Lessee's obligations in Paragraph 5, only after
written notice and appropriate cure period, in which event Lessee shall
reimburse upon receipt of invoice with reasonable detail, Lessor for the
entirety of the reasonable costs of such performance.
C. Lessor reserves the right to alter or modify the Building and the Common
Areas associated therewith, when such alterations or modifications are required
by governmental laws, codes, ordinances, regulations, or any other applicable
authorities, including, without limitation, the Americans with Disabilities Act
of 1990 (the "ADA"), provided Lessor shall not materially interfere with
Lessee's use and enjoyment of the Premises. In such event, Lessee shall be
liable for its proportionate share of such cost. If such modification is a
capital modification for the general benefit of the, Project, and is required
regardless of Lessee's particular use of the Premises, then the cost shall be an
operating expense allocated over the useful life of the modification. If such
modification is predicated by the use of another lessee in the Project or is
principally for the benefit of another lessee in the Project, the Lessee shall
not be liable for any portion of these costs. Notwithstanding the foregoing, if
such modification is predicated by Lessee's particular use of the Premises or is
principally for the
3 INITIALS
--------
Lessor:
---------
Lessee: KHS
---------
<PAGE>
benefit of Lessee (and not other lessees of the Building) the cost shall be
borne entirely by Lessee and Lessee shall reimburse Lessor for same promptly
upon demand.
D. Lessee agrees to pay its proportionate share of the cost of (i)
maintenance and/or landscaping of any property that is a part of the Building
and/or the Project, (ii) property management fee (not to exceed market property
management fees), staff salary and benefits allocated to the Building and/or the
Project and (iii) operating and maintaining any property, facilities or
services, including, but not limited to, the cost of the monitoring, repair and
maintenance of water systems or sewer plants, and security systems and service,
if any, provided for the common use or benefit of Lessee and other lessees of
the Project or Building.
All such expenses of Lessor for maintaining and operating the Building
and/or the Project, including, but not limited to, the items set forth in
Paragraphs 4A, 4B, 4C, and 4D, shall be included as additional rental under the
provisions of Paragraph 2C. Lessor agrees that Operating Costs do not and shall
not include any capital costs for roof, foundation, building structural,
provisioning of utilities or parking lot replacement, restoration or other work
occasioned by fire, windstorm or other casualty to the extent of net insurance
proceeds received by Lessor with respect thereto, income and franchise taxes of
Lessor, expenses incurred in leasing to or procuring of lessees, leasing
commissions, advertising expenses, expenses for the renovating of space for new
lessees, interest or principal payments on any mortgage or other indebtedness of
Lessor, or depreciation allowance or expense. In addition, Operating Expenses
shall not include the following:
(1) Attorneys' fees, costs and disbursements and other expenses incurred
in connection with leasing, renovating or improving space for Lessees
or prospective Lessees of the Project;
(2) Costs (including permit, license and inspection fees) incurred in
improving or decorating, painting or redecorating space for Lessees or
vacant space;
(3) Lessor's costs of any services sold to Lessees for which Lessor is
entitled to be reimbursed by such Lessees as an additional charge or
rental over and above the base rental, utility costs and maintenance
costs payable under the lease with such Lessee or other occupant;
(4) Any amortization on the Project except as expressly permitted herein;
(5) Costs incurred due to violation by Lessor of any of the terms and
conditions of this Lease or any other lease relating to the Project;
(6) All items and services for which Lessee pays third persons or which
Lessor provides selectively to one or more Lessees or occupants of the
Project (other than Lessee) without reimbursement;
(7) Promotional expenditures;
(8) Repairs or other work paid for through condemnation proceeds;
(9) Repairs resulting from any defect in the original design or
construction of the Building that are is covered under a warranty or
which are the result of a breach of contract or which are a breach of
guaranty;
(10) Any capital expenditures (except as otherwise provided herein);
(11) Any ground lease, mortgage or debt service payment.
E. In the event that Lessor fails to cure any breach of its obligations to
maintain and repair or fails to cure any breach or any other obligation under
this Lease within thirty (30) days after receipt of Lessee's notice of default,
or if having commenced said cure, Lessor does not diligently pursue it to
completion, then Lessee may elect to cure said breach at Lessee's expense and
may invoice Lessor for the cost of such cure. Lessor after receiving such
invoice and proper supporting documentation shall reimburse Lessee for such
reasonable costs within thirty (30) days. If Lessor has not paid such invoice in
this thirty (30) day period, Lessee shall send a second notice regarding the
payment of this invoice to Lessor. If Lessor has not paid this invoice within
sixty (60) days after receiving said second notice, Lessee shall have the right
to offset the cost of cure from rent until Lessee's reasonable damages caused by
such breach are recovered. If Lessee's reasonable damages exceed the remaining
financial obligations of Lessee under this Lease, Lessor shall reimburse any
remaining balances to Lessee upon the expiration or early termination of this
Lease. Prior to seeking such offset or reimbursement, Lessee shall document the
damages and supply said documentation to Lessor.
4 INITIALS
--------
Lessor:
---------
Lessee: KHS
---------
<PAGE>
5. LESSEE'S REPAIRS AND MAINTENANCE.
A. In regard to the Premises, Lessee, at its own cost and expense, shall
(i) maintain all parts of the Premises (except for those items for which Lessor
is responsible under Paragraph 4) in good condition, reasonable wear and tear
excepted (ii) promptly make all necessary repairs and replacements, including,
but not limited to, windows, glass and plate glass, exterior doors, any special
office entry, interior walls and finish work, interior doors and floor covering,
utility connections located within or serving only the Premises, downspouts,
gutters, heating and air conditioning systems serving only the Premises, light
bulbs and ballasts, dock boards, truck doors, dock bumpers, paving, plumbing
work and fixtures, termite and pest extermination, regular removal of trash and
debris, dedicated sewer lines, and any damage due to vandalism or malicious
mischief (iii) keep Lessee's Exclusive Parking Areas in a clean and sanitary
condition, and (iv) repair all wind damage to glass except with respect to
tornado or hurricane damage, notwithstanding the foregoing, if any damage to the
Premises is caused by the act, neglect, fault or omission of other lessee's in
the Project, then Lessee shall promptly notify Lessor of such damage. Lessor
shall then diligently proceed and pursue to completion the repair of such damage
and recover the cost of these repairs from the applicable lessee's.
B. Lessee and its employees, agents, customers, invitees, and/or licensees
shall have the right to use Lessee's Exclusive Parking Areas, as designated on
Exhibit A, subject to such reasonable rules and regulations as Lessor may from
time to time prescribe after written notice so long as the new rules and
regulations do not unreasonably interfere with Lessee's use or occupancy of the
Premises, and subject to rights of ingress and egress of other lessees. Lessee
shall control for Lessee's exclusive use Lessee's Exclusive Parking Areas
(including the entire truck apron and parking area on the north side of the
Building) for the purpose of car and truck storage and parking. Lessee shall
have the right to secure the car and truck parking area with fencing and/or
security cameras. All of Lessee's truck parking and employee parking shall be
within Lessee's Exclusive Parking Areas and shall be free of charge for the
initial Lease term and all Lease term extensions and renewals. Lessor shall not
be responsible for enforcing Lessee's parking rights against any third parties.
Lessee shall undertake reasonable measures, at its own cost and expense, to keep
its employees, agents, customers, invitees, and/or licensees from parking
outside of Lessee's Exclusive Parking Area on any streets running through or
contiguous to the Building or Project or any other areas as designated by
Lessor. Lessee hereby consents to the removal of any vehicle in violation of the
foregoing designated areas of parking as established by Lessor.
C. Lessee, at its own cost and expense, shall perform regularly scheduled
preventive maintenance by Lessee's employee or by maintenance contractor
approved by Lessor (which approval will not be unreasonably withheld or delayed)
for servicing all hot water, heating and air conditioning systems and equipment
located within the Premises. The maintenance or service contract must include
all generally acceptable services suggested by the equipment manufacturer in its
operations/maintenance manual and must become effective and a copy thereof
delivered to Lessor within thirty (30) days of the date Lessee takes possession
of the Premises.
D. Lessee agrees that no washing of any type (other than reasonable
restroom or kitchen washing or food preparation) will take place in the Premises
provided that truck washing may occur in Lessee's Exclusive Parking Areas.
Lessee shall be fully responsible for all repairs, clean up and any other
consequences of cleaning its trucks in the Exclusive Parking Area, including,
but not limited to, storm sewers, truck apron concrete, subgrade, joints, and
stains.
E. Lessor hereby grants to Lessee all rights of access, ingress and egress
at the points shown on Exhibit A in, to, from and over any and all streets, ways
or alleys adjoining, abutting or adjacent to the Project and the Building,
together with the right to use, in common with other occupants of the Project,
any and all of the Common Areas pertaining to the Project with the exception of
any parking areas that are not designated for Lessee's exclusive use.
F. Lessee's Exclusive Parking Areas shall not be disturbed without
Lessee's consent which consent may be withheld in Lessee's sole discretion. In
the event that unauthorized persons, including tenants or invitees of tenants
occupying the Building, utilize said parking areas for parking or other purposes
to an extent which shall be objectionable to Lessee, Lessor shall, upon written
request from Lessee, immediately take whatever reasonable action as shall be
necessary to prevent said unauthorized utilization. Lessor shall not use or
permit the use of the Common Areas for any purpose other than the parking and
passage of vehicles and the movement of pedestrian traffic, lighting,
landscaping, directional and traffic controls signals, and Lessor will not,
except as shown on Exhibit A, construct, locate or allow construction or
location of any fence, barricade, structure, buildings, or other obstruction
which would interfere with the intended uses thereof, of the free flow of
traffic to, or access from, the Common Areas.
G. During the Lease term, Lessor shall provide and maintain paved
driveways to the Premises in order to provide convenient ingress and egress from
the delivery or service entrances to adjacent public streets and highways for
the purpose of receiving and delivering merchandise and otherwise servicing the
Premises, as
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shown on Exhibit A. Said driveways shall be of sufficient width so
as to permit the passage, unloading, and the turning around of trailer trucks
and other commercial vehicles. Said driveways shall not be removed or changed
without written authorization of Lessee.
H. In making any permitted or required replacement, change, restoration,
alteration, improvement, enlargement or repair of or to the Premises, Lessor and
Lessee and their contractors and suppliers may use the portion of the common
area adjacent to Lessee's Premises for the parking of trucks and delivery
vehicles, storage of materials, temporary structures and other matters
incidental to such work, provided that no such use shall unreasonably interfere
with the operation of the business of any Lessee. In making any permitted or
required replacement, change, restoration, alteration, improvement or repair of
or to any portion of the project other than the Premises, Lessor, or any of
Lessor's tenants and their contractors and suppliers may use such portions of
the common areas as will not materially block the access to the Premises, for
the parking of trucks and delivery vehicles, storage of materials and other
matters incidental to such work, provided that no such use shall unreasonably
interfere with the operation of the business of Lessee or any sublessee or
licensee of Lessee.
I. Throughout the Lease term, no entrance, exit, approach or means of
entrance, exit or approach to and from the Premises or the Project shall be
unreasonably interfered with or disturbed by Lessor or anyone claiming by,
through or under Lessor. Lessee, its customers, sublessees, licensees, employees
and invitees, shall have vehicular and pedestrian ingress and egress at all
times between each of the entrances and exits of the Project and a public street
or highway, except for reasonable periods during which repairs, maintenance or
other work are being performed by utility companies or municipal authorities or
repairs for maintenance are being performed by Lessor.
J. Any and all security of any kind for Lessee, Lessee's agents, employees
or invitees, the Premises, or any personal property thereon (including, without
limitation, any personal property of any sublessee) shall be the sole
responsibility and obligation of Lessee, and shall be provided by Lessee at
Lessee's sole cost and expense. Lessee acknowledges and agrees that Lessor shall
have no obligation or liability whatsoever with respect to the same except due
to Lessor's negligence or willful misconduct. Lessee shall indemnify and hold
Lessor harmless from and against any and all loss, cost, damage or other
liability arising directly or indirectly from security measures or the absence
thereof with respect to the Premises and the building or the project of which
the Premises are a part. Lessee may, at Lessee's sole cost and expense, install
alarm systems in the Premises provided such installation complies with the
provisions of Paragraph 6 hereof. Removal of such alarm systems shall be
Lessee's sole responsibility and, at Lessee's sole cost and expense, shall be
completed prior to lease termination and all affected areas of the Premises
shall be repaired and/or restored in a good and workmanlike manner to the
condition that existed prior to such installation. Notwithstanding the
foregoing, Lessor may elect in Lessor's sole discretion to contract for common
security services, to whatever extent Lessor may deem appropriate, for the
building or the project of which the Premises are a part, provided, however
Lessee acknowledges and agrees that Lessor shall in no event be obligated to
provide any such services and the provision of such services shall not alter or
modify Lessee's indemnification of Lessor or the obligation of Lessee to provide
its own security as set forth herein. The cost of any security services
contracted for by Lessor which are provided for all tenants at the Project,
including Lessee, shall be treated as an operating expense pursuant to Paragraph
2C hereof.
6. ALTERATIONS. Lessee, at any time during the Lease, shall have the option to
make any alterations, additions, partitions or other improvements to the
Premises or installing fixtures on the Premises, as required to operate Lessee's
business at its own cost and expense with no base rent, additional rent, or
supervisory fee due under the Lease for such space or modifications, provided
such improvements are not structural in nature. Such alterations, additions,
partitions, other improvements, and fixtures shall require the prior written
consent of Lessor, which consent will not be unreasonably withheld, conditioned
or delayed, provided that alterations, additions, partitions, or other
improvements that cost less than fifty thousand dollars ($50,000.00) in any
calendar year and do not affect the building's structural integrity or
mechanical systems will not require Lessor's prior written approval. Lessee, at
its own cost and expense, may erect shelves and bins as it desires without
Lessor's consent as well as alterations, additions, partitions, or other
improvements and fixtures which have been specifically consented to in writing
by Lessor (except as otherwise provided above), provided that (a) such items are
consistent with Lessee's permitted use of the Premises, (b) such items do not
overload or cause material damage to the same, (c) such items may be removed
without injury to the Premises, and (d) the construction, erection or
installation thereof complies with all applicable governmental laws, codes,
ordinances, regulations, or any other applicable authorities, including, without
limitation, the Americans with Disabilities Act of 1990 (the "ADA"), and with
Lessor's reasonable details, specifications and other requirements. Any
reasonable architectural, engineering, construction management, permits,
inspections, or other cost or fee required to assure compliance with the
conditions set forth in this Paragraph 6 shall be paid by Lessee promptly upon
demand. All alterations, additions, partitions, or other improvements and
fixtures erected or installed by Lessee shall be and remain the property of
Lessor during the term of this Lease.; provided that Lessor shall have the
option, exercisable in Lessor's sole discretion, to require Lessee either (i)
upon request made prior to the construction of such alterations, additions,
partitions, or other improvements (excluding Lessee's personal
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property) remove at the termination of this Lease, at Lessee's sole cost and
expense, all or part of any alterations, additions, partitions, or other
improvements and fixtures, at which time Lessee shall promptly restore the
Premises to its original condition, or (ii) to keep in place the same in which
case such alterations, additions, improvements, fixtures, and partitions shall
remain the property of Lessor. All shelves, bins, and trade fixtures and
personal property installed by Lessee shall be removed on or before the earlier
to occur of the date of termination of this Lease or vacating the Premises, at
which time Lessee shall restore the Premises to their original condition,
reasonable wear and tear excepted. All alterations, installations, removals and
restoration shall be performed in a good and workmanlike manner so as not to
damage or alter the primary structure or structural qualities of the buildings
and other improvements situated on the Premises or of which the Premises are a
part. Lessee, at its sole cost and expense, may, from time to time, install
antennas and/or satellite dishes, refrigeration, heating, ventilation or air
conditioning equipment on the roof of the Premises subject to applicable codes
and Lessor's prior written consent, which will not be unreasonably withheld,
conditioned or delayed. Such installations must not adversely affect the
structural integrity of the building and must comply with Lessor's reasonable
standard construction and engineering specifications. There shall be no
additional rent charged for such use of the roof. Upon removal of such antennas
and/or satellite dishes, refrigeration, heating, ventilation and air
conditioning equipment, Lessee shall restore the roof to its original condition,
subject to normal wear and tear.
7. SIGNS. Lessee shall have the right to its pro-rata share of exterior
signage on the Premises subject to applicable codes and Lessor's prior written
approval, which shall not be unreasonably withheld, conditioned, or delayed. All
signage installed by Lessee on the Premises shall be done at the sole cost and
expense of Lessee, but may be included as a portion of the anticipated Lessee
Improvements. Lessee shall repair, paint, and/or replace the building facial
surface to which its signs are attached upon vacation of the Premises, or the
removal or alteration of its signage. Lessee shall not (i) make any changes to
the exterior of the Premises, (ii) install any exterior lights, decorations,
balloons, flags, pennants, banners or painting, or (iii) erect or install any
signs, windows or door lettering, placards, decorations or advertising media of
any type which can be viewed from the exterior of the Premises, without Lessor's
prior written consent not to be unreasonably withheld, conditioned or delayed.
All signs, decorations, advertising media, blinds, draperies and other window
treatment or bars or other security installations visible from outside the
Premises shall conform at Lessee's expense with all applicable governmental
laws, ordinances, regulations, or other requirements.
8. UTILITIES. For Lessee's intended use and occupancy, Lessor agrees to
provide water, sewer, electricity, and telephone service connections to the
Premises upon the commencement date hereof, which connections, outside of the
Premises shall be maintained by Lessor and connections inside of the Premises
shall be maintained by Lessee. Lessee shall pay for all water, gas, heat, light,
power, telephone, sewer, sprinkler charges and other utilities and services used
on or at the Premises, and any maintenance or inspection charges for Lessee's
utilities. Lessor shall cause any of said services to be separately metered to
Lessee. Lessee shall pay its pro rata share, as reasonably determined by Lessor,
of all charges for jointly metered utilities. Lessor shall not be liable for any
interruption or failure of utility service on the Premises, provided Lessor's
negligence or willful misconduct do not cause such interruption or failure.
9. INSURANCE.
A. Lessor shall be obligated to maintain industry standard liability and
casualty insurance covering the buildings situated on the Premises or of which
the Premises are a part, except for those items the repair and maintenance of
which are Lessee's responsibility under Paragraph 5, in an amount not less than
one hundred percent (100%) of the "replacement cost" thereof insuring against
the perils of Fire, Lightning, Extended Coverage, Vandalism, and Malicious
Mischief.
B. Lessee, at its own expense, shall maintain during the term of this Lease
a policy or policies of worker's compensation and comprehensive general
liability insurance, including personal injury and property damage, with
contractual liability endorsement, in the amount of One Million Dollars
($1,000,000.00) for property damage and One Million Dollars ($1,000,000.00) per
occurrence for personal injuries or deaths of persons occurring in or about the
Premises. Lessee, at its own expense, also shall maintain during the term of
this Lease, fire and extended coverage insurance covering (i) the replacement
cost of all alterations, additions, partitions and improvements installed or
placed on the Premises by Lessee or by Lessor on behalf of Lessee and (ii) the
replacement cost of all of Lessee's personal property contained within the
Premises and (iii) business interruption of Lessee. Said policies shall (i) name
Lessor as an additional insured (except for the worker's compensation policy,
which instead shall include waiver of subrogation endorsement in favor of
Lessor), (ii) be issued by an insurance company which is reasonably acceptable
to Lessor, (iii) provide that said insurance shall not be canceled unless thirty
(30) days prior written notice shall have been given to Lessor, and (iv) provide
primary coverage to Lessor when any policy issued to Lessor provides duplicate
or similar coverage, and in such circumstance Lessor's coverage under Lessor's
policy shall be deemed excess over and above the coverage provided by Lessee's
policy. Said policy or policies or certificates thereof shall be delivered to
Lessor by Lessee upon commencement of the term of the Lease and upon each
renewal of said insurance.
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C. Lessee will not permit the Premises to be used for any purpose or in any
manner that would (i) void the insurance thereon, (ii) increase the insurance
risk or premium (unless Lessee pays the amount of such increase), or (iii) cause
the disallowance of any sprinkler credits. If any increase in the cost of any
insurance on the Premises or the building of which the Premises are a part is
caused by Lessee's use of the Premises, or because Lessee vacates the Premises,
then Lessee shall promptly pay the amount of such increase to Lessor upon
demand.
D. Anything in this Lease to the contrary notwithstanding, Lessor and
Lessee hereby waive and release each other of and from any and all rights of
recovery, claim, action or cause of action, against each other, their agents,
officers and employees, for any loss or damage that may occur to the Premises,
improvements to the building or buildings of which the Premises are a part, or
personal property (building contents) within the building(s) and/or Premises
covered or required to be covered by the insurance to be provided under this
Lease, EVEN IF SUCH LOSS OR DAMAGE IS CAUSED BY THE FAULT, NEGLIGENCE OR OTHER
TORTIOUS CONDUCT, ACTS OR OMISSIONS OF THE RELEASED PARTY OR THE RELEASED
PARTY'S AGENTS, DIRECTORS, OFFICERS, EMPLOYEES OR INVITEES. Said mutual waivers
shall be in addition to, and not in limitation or derogation of, any other
waiver or release contained in this Lease with respect to any loss or damage to
property of the parties hereto. Without in any way limiting the foregoing
waivers and to the extent permitted by applicable law, the parties hereto each,
on behalf of their respective insurance companies insuring the property of
either Lessor or Lessee against any such loss, waive any right of subrogation
that Lessor or Lessee or their respective insurance companies based upon an
assignment from its insured. Each party to this Lease agrees immediately after
execution of this Lease to give each insurance company which has issued to its
policies of fire and extended coverage insurance, written notice of the terms of
the mutual waivers contained in this subparagraph, and if necessary to prevent
the invalidation of said insurance coverage by reason of said waivers, to have
the insurance policies properly endorsed.
10. FIRE AND CASUALTY DAMAGE.
A. If the Premises or the Building should be damaged or destroyed by fire
or other peril, Lessee immediately shall give written notice to Lessor. If the
building situated upon the Premises or of which the Premises are a part should
be damaged or destroyed by any peril covered by the insurance to be provided by
Lessor under Paragraph 9A above, and in Lessor's estimation, rebuilding or
repairs cannot be completed within one hundred eighty (180) days after the date
of such damage, Lessee may elect to terminate this Lease and the Base Rent and
additional rental shall be abated during the unexpired portion of this Lease,
effective upon the date of the occurrence of such damage.
B. If the Building should be damaged by any peril covered by the insurance
to be provided by Lessor under Paragraph 9A above, and in Lessor's estimation,
rebuilding or repairs can be substantially completed within one hundred eighty
(180) days after the date of such damage, this Lease shall not terminate, and
Lessor shall restore the Premises to substantially its previous condition,
except that Lessor shall not be required to rebuild, repair or replace any part
of the partitions, fixtures, additions and other improvements that may have been
constructed, erected or installed in or about the Premises for the benefit of,
or by, or for, Lessee. If such repairs and rebuilding have not been
substantially completed within one hundred eighty (180) days after the date of
such damage, Lessee, as Lessee's exclusive remedy, may terminate this Lease by
delivering written notice of termination to Lessor in which event the rights and
obligations hereunder shall cease and terminate. For purposes of this Paragraph
10B, if Lessee reasonably determines that the Premises are not suitable for
Lessee's intended use in whole or in part following such damage, the Base Rent
and additional rental payable hereunder during the period in which Lessee
reasonably determines that the Premises are not usable shall be reduced (i)
according to the square footage of the unusable area contained in the Premises,
as reasonably determined by Lessee, or (ii) to such extent as may be fair and
reasonable under the circumstances, as reasonably determined by Lessee.
C. Notwithstanding anything herein to the contrary, in the event the holder
of any indebtedness secured by a mortgage or deed of trust covering the Premises
requires that the insurance proceeds be applied to such indebtedness, then
Lessor shall have the right to terminate this Lease by delivering written notice
of termination to Lessee within fifteen (15) days after such requirement is made
known by any such holder, whereupon all rights and obligations hereunder shall
cease and terminate.
11. LIABILITY AND INDEMNIFICATION. Except for any claims, rights of
recovery and causes of action that Lessee has released, Lessor shall indemnify
Lessee, hold Lessee harmless and defend Lessee against any and all claims or
liability for any injury or damage to any person in, on or about the Premises,
the Building or the Project or any part thereof when such injury or damage shall
be caused by the act, neglect, fault of, or omission of any duty with respect to
the same by Lessor, its agents, servants, contractors, invitees, tenants, or
employees. Notwithstanding the foregoing or anything to the contrary in this
Lease, Lessee hereby agrees that in no event shall Lessor be liable for any
incidental or consequential damages whatsoever resulting from such
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claim or liability, including, without limitation, any damages as a result of
any interruption of Lessee's business or any loss of income therefrom. Except
for any claims, rights of recovery and causes of action that Lessor has
released, Lessee shall indemnify Lessor, hold Lessor harmless from and defend
Lessor against any and all claims or liability for any injury or damage (i) to
any person or property whatsoever occurring in, on or about the Premises or any
part thereof and/or of the building of which the Premises are a part, including
without limitation elevators, stairways, passageways or hallways, the use of
which Lessee may have in accordance with this Lease, when such injury or damage
shall be caused by the act, neglect, fault of, or omission of any duty with
respect to the same by Lessee, its agents, servants, employees, or invitees,
contractors, subtenants, (ii) arising from the conduct of management of any work
done by the Lessee in or about the Premises when such injury or damage shall be
caused by the act, neglect, fault of, or omission of any duty with respect to
the same by Lessee, its agents, servants, employees, or invitees, contractors,
subtenants, (iii) arising from transactions of the Lessee when such injury or
damage shall be caused by the act, neglect, fault of, or omission of any duty
with respect to the same by Lessee, its agents, servants, employees, or
invitees, contractors, subtenants, and (iv) all costs, counsel fees, expenses
and liabilities incurred in connection with any such claim or action or
proceeding brought thereon when such injury or damage shall be caused by the
act, neglect, fault of, or omission of any duty with respect to the same by
Lessee, its agents, servants, employees, or invitees, contractors, subtenants.
The provisions of this Paragraph 11 shall survive the expiration or termination
of this Lease with respect to any claims or liability occurring prior to such
expiration or termination.
12. USE. The Premises shall be used only for the purpose of general office
use, receiving, storing, servicing, shipping, product preparation, grocery store
services (other than on-site retail) and selling (other than by on-site retail)
products, materials, alcoholic beverages and merchandise made and/or distributed
by Lessee and for such other lawful purposes as may be incidental thereto.
Outside storage, (excluding storage of trucks and other vehicles and the washing
thereof) at any time is prohibited without Lessor's prior written consent.
Lessee shall, at its own cost and expense, obtain any and all licenses and
permits necessary for such use (including, but not limited to, a Certificate of
Occupancy), in regard to Lessee's tenant improvements, if required), shall at
all times maintain the Premises in a clean, healthful and safe condition and
comply with all governmental laws, codes, ordinances, regulations or any other
applicable authorities with regard to the use, condition or occupancy of the
Premises including, without limitation, the ADA. Lessee shall be responsible, at
Lessee's sole cost and expense, for the correction, prevention, and abatement of
nuisances in or upon, or connected with, the Premises to the extent caused by
Lessee. Lessee shall not permit any unreasonably objectionable or unpleasant
odors, smoke, dust, gas, noise, vibrations, or pest infestations to emanate from
the Premises, nor take any other action that would constitute an unreasonable
nuisance or would unreasonably disturb, unreasonably interfere with, or endanger
Lessor or any other lessees of the building or project of which the Premises are
a part, excepting pre-existing conditions and Substances. Lessee's use of the
Premises shall at all times comply with the insurance provisions in Paragraph 9C
hereof. Lessee agrees that the point pressure resulting from Lessee's racking
system, inventory, forklifts and equipment pertaining to Lessee's use of the
Premises shall not exceed allowable design floor loading for floor slabs on
grade (provided Lessor shall inform Lessee in writing of the allowable design
floor loading). Lessee shall hold harmless Lessor from any loss, liability, and
expenses, both real and alleged, arising out of any damage or repair caused by
Lessee's negligence or failure to comply with this paragraph.
13. INSPECTION. Lessor and Lessor's agents and representatives shall have
the right to enter the Premises at any reasonable time during business hours,
after first giving Lessee 24 hours prior written notice, except in cases of
emergency when no such notice is required, to inspect the Premises and to make
such repairs as may be required or permitted pursuant to this Lease. Lessor
shall not unreasonably interfere with Lessee's use and enjoyment of the Premises
when Lessor exercises its right of entry under this Section 13. During the
period that is six (6) months prior to the end of the term hereof and at any
time Lessee is in monetary default, Lessor and Lessor's representatives may
enter the Premises during business hours for the purpose of showing the
Premises. Lessee shall neither prevent, prohibit, nor in any way impair such
showing of the Premises. In addition, during the last six months of any term,
including exercised extensions, Lessor shall have the right to erect a suitable
sign on or near the Premises stating the Premises are available. Lessee shall
notify Lessor in writing at least thirty (30) days prior to vacating the
Premises and shall arrange to meet with Lessor for a joint inspection of the
Premises prior to vacating.
14. ASSIGNMENT AND SUBLETTING.
A. Lessee, shall not have the right to assign, sublet, transfer or encumber
this Lease, or any interest therein, without the prior written consent of
Lessor, which consent shall not be unreasonably withheld, conditioned or
delayed. Any attempted assignment, subletting, transfer or encumbrance by Lessee
in violation of the terms and covenants of this Paragraph shall be void.
Notwithstanding the foregoing, Lessee shall have the right to assign this Lease
to any affiliate (as such term is defined in the Securities Act of 1933)
provided that such assignment is in form satisfactory to Lessor and that such
affiliate agrees to and performs all obligations of Lessee under this lease. Any
assignee, sublessee or transferee of Lessee's interest in this Lease (all such
assignees, sublessees and transferees being hereinafter referred to as
"Transferees"), by assuming Lessee's obligations hereunder,
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shall assume liability to Lessor for all amounts paid to persons other than
Lessor by such Transferees in contravention of this Paragraph. No assignment,
subletting, or other transfer, whether consented to by Lessor or not, or
permitted hereunder, shall relieve Lessee of its liability hereunder. If an
event of default occurs while the Premises or any part thereof are assigned or
sublet, then Lessor, in addition to any other remedies herein provided, or
provided by law, may collect directly from such Transferee all rents payable to
the Lessee and apply such rent against any sums due Lessor hereunder. No such
collection shall be construed to constitute a novation or a release of Lessee
from the further performance of Lessee's obligations hereunder. Notwithstanding
the foregoing, without Lessor's consent, Lessee may assign its leasehold
interest to: (a) a parent, subsidiary, sibling or affiliate corporation,
controlling, controlled by or under common control with, Lessee; (b) a successor
corporation related to Lessee by merger, consolidation, non-bankruptcy
reorganization or government action; (c) a reincorporation that strictly
involves changing the state in which Lessee is incorporated; or (d) a purchaser
of substantially all of Lessee's assets located in the Property. In addition,
the restrictions on Transfer (as defined above) do not apply to the sale or
other transfer of Lessee's capital stock including: (i) any transfer in
connection with the merger, consolidation or non-bankruptcy reorganization; (ii)
any transaction related to a public sale or private placement; (iii) any
transfer of any sale of stock amongst existing shareholders; or (iv) an activity
in any company stock option programs.
B. If this Lease is assigned to any person or entity pursuant to the
provision of the Bankruptcy Code, 11 U.S.C. (S) 101 et. seq., (the "Bankruptcy
Code"), any and all monies or other consideration payable or otherwise to be
delivered in connection with such assignment shall be paid or delivered to
Lessor, shall be and remain the exclusive property of Lessor and shall not
constitute property of Lessee or of the estate of Lessee within the meaning of
the Bankruptcy Code. Any and all monies or other considerations constituting
Lessor's property under the preceding sentence not paid or delivered to Lessor
shall be held in trust for the benefit of Lessor and be promptly paid or
delivered to Lessor.
C. Any person or entity to which this Lease is assigned pursuant to the
provisions of the Bankruptcy Code shall be deemed, without further act or deed,
to have assumed all of the obligations arising under this Lease on and after the
date of such assignment. Any such assignee shall upon demand execute and deliver
to Lessor an instrument confirming such assumption.
15. CONDEMNATION. If the Premises, Project, or Exclusive Parking Area, or
any portion thereof should be taken for any public or quasi-public use under
governmental law, ordinance or regulation, or by right of eminent domain, or by
private purchase in lieu thereof and imminent taking, and the taking prevents or
materially interferes with the use of the Premises for the purpose for which
they were leased to Lessee, Lessee shall have the right to terminate this lease
and the Base Rent and additional rental shall be abated during the unexpired
portion of this Lease, effective on the date of such taking. All compensation
awarded in connection with or as a result of any of the foregoing proceedings
shall be the property of Lessor and Lessee hereby assigns any interest in any
such award to Lessor; provided, however, Lessor shall have no interest in any
award made to Lessee for loss of business or goodwill or for Lessee's costs of
relocation, for the taking of Lessee's fixtures and improvements.
16. HOLDING OVER. At the termination of this Lease by its expiration or
otherwise, Lessee immediately shall deliver possession to Lessor with all
repairs and maintenance required herein to be performed by Lessee completed. If,
for any reason, Lessee retains possession of the Premises after the expiration
or termination of this Lease, unless the parties hereto otherwise agree in
writing, such possession shall be subject to termination by either Lessor or
Lessee at any time upon not less than twenty (20) days advance written notice,
and all of the other terms and provisions of this Lease shall be applicable
during such period, except that Lessee shall pay Lessor from time to time, upon
demand, as rental for the period of such possession, an amount equal to one
hundred fifty percent (150%) of the Base Rent in effect on the termination date,
computed on a daily basis for each day of such period. No holding over by
Lessee, whether with or without consent of Lessor shall operate to extend this
Lease except as otherwise expressly provided. The preceding provisions of this
Section 16 shall not be construed as consent for Lessee to retain possession of
the Premises in the absence of written consent thereto by Lessor.
17. QUIET ENJOYMENT. Lessor covenants that on or before the commencement
date it will have good title to the Premises, free and clear of all liens and
encumbrances, excepting only the lien for current taxes not yet due, such
mortgage or mortgages as are permitted by the terms of this Lease, zoning
ordinances and other building and fire ordinances and governmental regulations
relating to the use of such property, and easements, restrictions and other
conditions of record. Lessor represents that it has the authority to enter into
this Lease and that so long as there is not an uncured event of default, Lessee
shall peaceably and quietly have, hold and enjoy the Premises for the term
hereof without hindrance or molestation from Lessor, subject to the terms and
provisions of this Lease.
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18. EVENTS OF DEFAULT. The following events (herein individually referred to as
"event of default") each shall be deemed to be events of nonperformance by
Lessee under this Lease:
A. Lessee shall fail to pay any installment of Base Rent or any additional
rental herein reserved when due, or any other payment or reimbursement to Lessor
required herein when due, and such failure shall continue for a period of five
days after receipt of written notice from Lessor stating that the payment was
not received.
B. Lessee shall (i) become insolvent; (iii) admit in writing its inability
to pay its debts: (iii) make a general assignment for the benefit of creditors;
(iv) commence any case, proceeding or other action seeking to have an order for
relief entered on its behalf as a debtor or to adjudicate it as bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors or seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or of any substantial part of its property; or (v) take any action to
authorize or in contemplation of any of the actions set forth above in this
Paragraph.
C. Any case, proceeding or other action against the Lessee shall be
commenced seeking (i) to have an order for relief entered against it as a debtor
or to adjudicate it as bankrupt or insolvent; (ii) reorganization, arrangement,
adjustment, liquidation, dissolution or composition of it or its debts under any
law relating to bankruptcy, insolvency, reorganization or relief of debtors
(iii) appointment of a receiver, trustee, custodian or other similar official
for it or for all or any substantial part of its property, and such case,
proceeding or other action (a) results in the entry of an order for relief
against it which it is not fully stayed within seven (7) business days after the
entry thereof or (b) shall remain undismissed for a period of forty-five (45)
days.
D. Lessee shall fail to discharge or bond against any lien placed upon the
Premises in violation of Paragraph 21 hereof within thirty (30) days after any
such lien or encumbrance is filed against the Premises.
E. Lessee shall fail to comply with any term, provision or covenant of
this Lease (other than those listed in this Paragraph 18), and shall not cure,
or start to cure, such failure within twenty (20) business days after written
notice thereof to Lessee.
19. REMEDIES
A. Upon each occurrence of an event of default, that Lessee fails to cure
within cure period, Lessor after written notice, shall have the option to
pursue any one or more of the following remedies without any notice or demand:
(1) Terminate this Lease; and/or
(2) Enter upon and take possession of the Premises with or without
terminating this Lease; and/or
(3) Alter all locks and other security devices at the Premises with or
without terminating this Lease, and pursue, at Lessor's option, one or more
remedies pursuant to this Lease, and in any such event Lessee immediately
shall surrender the Premises to Lessor, and if Lessee fails so to do, Lessor,
without waiving any other remedy it may have, may enter upon and take
possession of the Premises and expel or remove Lessee and any other person who
may be occupying such Premises or any part thereof.
B. If Lessor terminates this Lease, at Lessor's option, Lessee shall be
liable for and shall pay to Lessor, the sum of all rental and other payments
owed to Lessor hereunder accrued to the date of such termination, plus, as
liquidated damages, an amount equal to the present value (using the current
"prime" interest rate of Chase Bank, or should such financial institution no
longer exist, a comparable financial institution) of(1) the total rental and
other payments owed hereunder for the remaining portion of the Lease term,
calculated as if such term expired on the date set forth in Paragraph 1, less
(2) the then fair market rental of the Premises for such period.
C. If Lessor repossesses the Premises without terminating the Lease,
Lessee, at Lessor's option, shall be liable for and shall pay Lessor on demand
all rental and other payments owed to Lessor hereunder, accrued to the date of
such repossession, plus all amounts required to be paid by Lessee to Lessor
until the date of expiration of the term as stated in Paragraph 1, diminished by
all amounts received by Lessor through reletting of the Premises during such
remaining term (but only to the extent of the rent herein reserved). Actions to
collect amounts due by Lessee to Lessor under this subparagraph may be brought
from time to time, on one or more occasions, without the necessity of Lessor's
waiting until expiration of the Lease term.
D. Upon an event of default, in addition to any sum provided to be paid
herein, Lessee also shall be liable for and shall pay to Lessor (i) brokers'
fees incurred by Lessor in connection with reletting the whole or any part of
the Premises; which fees shall be prorated based on the remaining term of this
Lease as of the date of reletting compared to the term of the replacement lease;
(ii) the costs of removing and storing Lessee's or other occupant's property;
(iii) the costs of repairing, or otherwise putting the Premises into as good
condition as that in which it was originally delivered to Lessee reasonable wear
and tear excepted); and (iv) all reasonable
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expenses incurred by Lessor in enforcing or defending Lessor's rights and/or
remedies. If either party hereto institutes any action or proceeding to enforce
any provision hereof by reason of any alleged breach of any provision of this
Lease, the prevailing party shall be entitled to receive from the losing party
all reasonable attorneys' fees and all court costs in connection with such
proceeding.
E. In the event Lessee fails to make any payment due hereunder when
payment is due and the period to cure has expired, to help defray the additional
cost to Lessor for collecting and/or processing such late payments, Lessee shall
pay to Lessor on demand a late charge in an amount equal to five percent (5%) of
such installment; and the failure to pay such late charge within ten (10) days
after demand therefore shall be an additional event of default hereunder. The
provision for such late charge shall be in addition to all of Lessor's other
rights and remedies hereunder or at law and shall not be construed as liquidated
damages or as limiting Lessor's remedies in any manner.
F. Exercise by Lessor of any one or more remedies hereunder granted or
otherwise available shall not be deemed to be an acceptance of surrender of the
Premises by Lessor, whether by agreement or by operation of law, it being
understood that such surrender can be effected only by the written agreement of
Lessor and Lessee. Lessee and Lessor further agree that forbearance by Lessor to
enforce its rights pursuant to the Lease at law or in equity, shall not be a
waiver of Lessor's right to enforce one or more of its rights in connection with
any subsequent default.
G. If Lessor fails to perform any of its obligations hereunder within
thirty (30) days after written notice from Lessee specifying such failure,
Lessee's exclusive remedies shall be the remedies set forth in Paragraph 4E
and/or an action for damages, specific enforcement or injunctive relief. Unless
and until Lessor fails to so cure any default after such notice within the
allowable cure period, Lessee shall not have any remedy or cause of action by
reason thereof. All obligations of Lessor hereunder will be construed as
covenants, not conditions; and all such obligations will be binding upon Lessor
only during the period of its possession of the Premises and not thereafter. The
term "Lessor" shall mean only the owner, for the time being of the Premises, and
in the event of the transfer by such owner of its interest in the Premises, such
owner shall thereupon be released and discharged from all covenants and
obligations of the Lessor thereafter accruing, but such covenants and
obligations shall be binding during the Lease term upon each new owner for the
duration of such owner's ownership. Notwithstanding any other provision hereof,
Lessor shall not have any personal liability hereunder. In the event of any
breach or default by Lessor in any term or provision of this Lease, Lessee
agrees to look solely to the equity or interest then owned by Lessor in the
Project and the security deposits, operating income, other assets, and insurance
coverage related to the Project; however, in no event, shall any deficiency
judgment or any money judgment of any kind be sought or obtained against any
Lessor.
H. If Lessor repossesses the Premises pursuant to the authority herein
granted, then Lessor shall have the right to (i) keep in place and use or (ii)
remove and store all of the furniture, fixtures and equipment at the Premises,
including that which is owned by or leased to Lessee at all times prior to any
foreclosure thereon by Lessor or repossession thereof by any lessor thereof or
third party having a lien thereon. Lessor also shall have the right to
relinquish possession of all or any portion of such furniture, fixtures,
equipment and other property to any person ("Claimant") who presents to Lessor a
copy of any instrument represented by Claimant to have been executed by Lessee
(or any predecessor of Lessee) granting Claimant the right under various
circumstances to take possession of such furniture, fixtures, equipment or other
property, without the necessity on the part of Lessor to inquire into the
authenticity or legality of said instrument. The rights of Lessor herein stated
shall be in addition to any and all other rights that Lessor has or may
hereafter have at law or in equity; and Lessee stipulates and agrees that the
rights herein granted Lessor are commercially reasonable.
I. Notwithstanding anything in this Lease to the contrary, all amounts
payable by Lessee to or on behalf of Lessor under this Lease, whether or not
expressly denominated as rent, shall constitute rent.
J. This is a contract under which applicable law excuses Lessor from
accepting performance from (or rendering performance to) any person or entity
other than Lessee.
K. Notwithstanding anything herein to the contrary, Lessor agrees to
undertake commercially reasonable efforts to mitigate its damages resulting from
any default or breach by Lessee.
20. MORTGAGES. Lessee accepts this Lease subject and subordinate to any
mortgages and/or deeds of trust now or at any time hereafter constituting a lien
or charge upon the Premises or the improvements situated thereon or the building
of which the Premises are a part; provided, however, that if the mortgagee,
trustee, or holder of any such mortgage or deed of trust elects to have Lessee's
interest in this Lease superior to any such instrument, then by notice to Lessee
from such mortgagee, trustee or holder, this Lease shall be deemed superior to
such lien, whether this Lease was executed before or after said mortgage or deed
of trust. Lessee, at any time hereafter on demand, shall execute any
instruments, releases or other documents that may be required by any mortgagee
for the purpose of subjecting and subordinating this Lease to the lien of any
such mortgage.
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Lessor shall use commercially reasonable efforts to obtain a commercially
reasonable non-disturbance agreement from any future mortgage holder on terms
reasonably acceptable to Lessee. In addition, Lessee shall not be required to
execute any instrument which materially increases Lessee's obligations or
decreases Lessee's rights under this Lease.
21. MECHANIC'S LIENS. Lessee has no authority, express or implied, to
create or place any lien or encumbrance of any kind or nature whatsoever upon,
or in any manner to bind the interest of Lessor or Lessee in the Premises or to
charge the rentals payable hereunder for any claim in favor of any person
dealing with Lessee, including those who may furnish materials or perform labor
for any construction or repairs. Lessee covenants and agrees that it will pay or
cause to be paid all sums legally due and payable by it on account of any labor
performed or materials furnished in connection with any work performed on the
Premises by or at the direction of Lessee and that it will save and hold Lessor
harmless from any and all loss, cost or expense based on or arising out of
asserted claims or liens against the leasehold estate or against the right,
title and interest of the Lessor in the Premises or under the terms of this
Lease arising out of such work. Lessee agrees to give Lessor immediate written
notice of the placing of any lien or encumbrance against the Premises.
22. HAZARDOUS MATERIALS.
A. The term "Substances," as used in this Lease shall mean pollutants,
contaminants, toxic or hazardous wastes, or any other substances, the use,
storage, handling, disposal, transportation or removal of which is regulated,
restricted, prohibited or penalized by any "Environmental Law," which term shall
mean any federal, state or local law, ordinance or other statute of a
governmental or quasi-governmental authority relating to pollution or protection
of health or the environment and shall specifically include, but not be limited
to, any "hazardous substance" as that term is defined under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 and any
amendments or successors in function thereto.
B. Lessee hereby agrees that (i) no activity will be conducted on the
Premises that will produce any Substance, except for such activities that are
part of the ordinary course for Lessee's business activities (the "Permitted
Activities") provided said Permitted Activities are conducted in accordance with
all Environmental Laws and have been reasonably approved in advance in writing
by Lessor (which approval shall not be unreasonably withheld, conditioned, or
delayed); Lessee shall be responsible for obtaining any required permits and
paying any fees and providing any testing required by any governmental agency;
(ii) the Premises will not be used in any manner for the storage of any
Substances except for the temporary storage of such materials (the "Permitted
Materials") that are used in the ordinary course of Lessee's business (all
products that are typically sold in a retail food or drug store and all related
products used to prepare such products for sale) provided such substances are
properly stored in a manner and location meeting all Environmental Laws and
approved in advance in writing by Lessor (which approval Lessor may grant or
withhold in its sole discretion); Lessee shall be responsible for obtaining any
required permits and paying any fees and providing any testing required by any
governmental agency; (iii) no portion of the Premises will be used as a landfill
or a dump; (iv) Lessee will not install any underground or aboveground tank of
any type; (v) Lessee will not allow any surface or subsurface conditions to
exist or come into existence that constitute, or with the passage of time, may
constitute a public or private nuisance; (vi) Lessee will not permit any
Substances (excepting all products that are typically sold in a retail food or
drug store and all related products used to prepare such products for sale,
("Permitted Materials")) to be brought onto the Premises, except in accordance
with the terms and conditions hereof, and if so brought or found located
thereon, the same shall be immediately removed, and properly disposed, and all
required cleanup procedures shall be diligently undertaken pursuant to all
Environmental Laws; and (vii) Lessee shall in all regards comply with
Environmental Laws including, without limitation, meeting any necessary
financial responsibility requirements. Prior to any Substance being brought upon
or into the Premises by Lessee, excepting (vi) above, whether Lessor's written
permission is required or not, Lessee will provide to Lessor any applicable
material safety data sheets regarding said Substance as well as a written
description of the amount of such Substance to be brought upon or into the
Premises and the common and recognized chemical name of such Substance. Lessee
shall bear responsibility for insuring that all record keeping, reporting and
remediation responsibilities of Lessee under Environmental Laws are met and
Lessee assumes all such responsibility and liability for such legal compliance.
Lessor shall bear responsibility for insuring that all record keeping, reporting
and remediation responsibilities of Lessor under Environmental Laws are met and
Lessor assumes all such responsibility and liability for such legal compliance.
C. After giving at lease twenty-four (24) hours prior written notice
(except in the case of an emergency in which case no prior notice is required),
Lessor or Lessor's representative shall have the right, but not the obligation,
to enter the Premises for, among other purposes, the purposes of inspecting the
storage, use and disposal of any Substances and to review Lessee's compliance
with all Environmental Laws. Should it be determined, in Lessor's sole
commercially reasonable opinion, that any Substances are being improperly
stored, used, or disposed of by Lessee, then Lessee shall after receipt of
written notice, immediately take such corrective action as required by
applicable Environmental Laws. Lessee will provide Lessor written notification
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of the release or disposal of any Substance by Lessee either within the Premises
or outside of Lessee's Premises and will also provide Lessor written notice of
any pending or threatened litigation concerning the breach or purported breach
of any Environmental Laws by Lessee.
D. If at any time during or after the term of the Lease, the Premises is
found to be contaminated by Substances, arising from or as a result of Lessee's
negligence (whether in whole or in part) or any Substances by Lessee or any of
Lessee's agents, employees, assigns or sublessee ("Lessee's Contamination"),
Lessee shall diligently institute proper and thorough cleanup procedures to
remediate Lessee's Contamination in accordance with Environmental Laws at
Lessee's sole cost, and Lessee agrees to indemnify and hold Lessor harmless from
all claims, demands, actions, liabilities, costs, expenses, damages, fines,
reimbursement, restitution, response costs, cleanup costs, and obligations
(including investigative responses and attorney's fees) of any nature to the
extent incurred for the remediation of Lessee's Contamination. The foregoing
indemnification and the responsibilities of Lessee shall apply to Lessee
regardless of whether they arise from any Permitted Activity, Substances or
Permitted Materials (as may be listed below), and shall survive the termination
or expiration of this Lease. Lessor shall be under no obligation to expend any
sums or to seek reimbursement to enforce the indemnification obligations of
Lessee hereunder.
Permitted materials: All products that are typically sold in a retail food
or drug store and all related products used to prepare such products for sale.
E. Lessee acknowledges and agrees that it shall not be unreasonable for
Lessor to withhold its consent to any proposed assignment, subletting, or
transfer of Lessee's interest in this Lease if (i) the anticipated use of the
Premises by the proposed assignee, sublessee, or transferee (collectively, a
"Transferee") involves the generation, storage, use, treatment, or disposal of
Substances excepting Permitted Materials; (ii) the proposed Transferee has been
required by any prior lessor, lender, or governmental authority to make remedial
action in connection with Substances contaminating a property, if the
contamination resulted from such Transferee's actions or use of the property in
question; or (iii) the proposed Transferee is subject to an enforcement order
issued by any governmental authority in connection with the use, disposal, or
storage of a Substance, excepting Permitted Materials.
F. Lessor shall advise Lessee of the existence any toxic materials or
hazardous conditions which exist in or about the Premises, Building, Project and
Common Areas or other parts of the Project site and are in violation of local,
state, or federal environmental regulations. It shall be the sole responsibility
of Lessor if required by any local, state, or federal government entities to
remove any such toxic materials and to indemnify and hold Lessee harmless from
any future action, loss, damage or expense (including attorneys fees) which may
occur as a result of the presence of such materials. Lessor and its successors
and assigns shall indemnify, defend, reimburse and hold Lessee, its employees
and lenders, harmless from and against any and all environmental damages,
including the cost of remediation and other expenses (including attorneys fees),
which existed as a result of hazardous substances on the Project site prior to
the Commencement Date or which are caused by the act or negligent omission of
Lessor, its contractors, invitees, agents or employees after the Commencement
Date. Lessor's obligations, as and when required by the applicable environmental
law requirements, shall include, but not be limited to, the cost of
investigation, removal, remediation, restoration and/or abatement, and shall
survive the expiration or termination of this lease. Lessor shall retain the
responsibility and pay for any investigations or remediation measures required
by governmental entities having jurisdiction with respect to the existence of
hazardous substances on the Premises or the Project site prior to the
Commencement Date. Lessee shall cooperate fully in any such activities at the
request of Lessor, including allowing Lessor and Lessor's agents to have
reasonable access to the premises, upon twenty-four (24) hours prior written
notice, at reasonable times determined by Lessee, in order to carry out Lessor's
investigative and remedial responsibilities.
Lessee and Lessor acknowledge that the Project is on a site that was
entered into the Voluntary Clean-up Program promulgated by the Texas Natural
Resource and Conservation Commission and has received a Certificate of
Completion for such clean-up (a copy of such Certificate has been provided to
Lessee by Lessor).
23. MISCELLANEOUS.
A. Words of any gender used in this Lease shall be held and construed to
include any other gender, and words in the singular number shall be held to
include the plural unless the context otherwise requires. The captions inserted
in this Lease are for convenience only and in no way define, limit or otherwise
describe the scope or intent of this Lease, or any provision hereof, or in any
way affect the interpretation of this Lease.
B. For the purposes of this Lease, Lessor and Lessee agree the area of the
Premises shall be deemed to be the square footage shown on page 1 of this Lease.
Lessee's "proportionate share", as used in this Lease, shall
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mean a fraction, the numerator of which is the area contained in the Premises as
shown on page 1 of this Lease and the denominator of which is the area contained
in the Building (for Operating Expenses affecting only the building) or
contained in all buildings located within the Project (for Operating Expenses
affecting the Project) (each such area being measured in square feet). Such
areas shall be calculated according to the roof dimensions of the particular
areas.
C. The terms, provisions and covenants and conditions contained in this
Lease shall apply to, inure to the benefit of, and be binding upon, the parties
hereto and upon their respective heirs, executors, personal representatives,
legal representatives, successors and assigns, except as otherwise herein
expressly provided. Lessor shall have the right to transfer and assign, in whole
or in part, its rights and obligations in the building and property that are the
subject of this Lease. Each party agrees to furnish to the other, promptly upon
demand, a corporate resolution, proof of due authorization by partners, or other
appropriate documentation evidencing the due authorization of' such party to
enter into this Lease.
D. Lessor and Lessee shall not be held responsible for delays in the
performance of its obligations hereunder when caused by material shortages, acts
of God or labor disputes. Lessee shall not be held responsible for delays in the
performance of its non-monetary obligations hereunder when caused by material
shortages, acts of God or labor disputes.
E. Lessee agrees, from time to time, within ten (10) days after request of
Lessor, to deliver to Lessor, or Lessor's designee, a Certificate of Confirming
Lessee's Occupancy and an estoppel certificate stating (if true) that this Lease
is in full force and effect, the date to which rent has been paid, the unexpired
term of this Lease and such other factual matters pertaining to this Lease as
may be requested by Lessor. It is understood and agreed that Lessee's obligation
to furnish such estoppel certificates in a timely fashion is a material
inducement for Lessor's execution of this Lease.
F. This Lease constitutes the entire understanding and agreement of the
Lessor and Lessee with respect to the subject matter of this Lease, and contains
all of the covenants and agreements of Lessor and Lessee with respect thereto.
Lessor and Lessee each acknowledge that no representations, inducements,
promises or agreements, oral or written, have been made by Lessor or Lessee, or
anyone acting on behalf of Lessor or Lessee, which are not contained herein, and
any prior agreements, promises, negotiations, or representations not expressly
set forth in this Lease are of no force or effect. This Lease may not be
altered, changed or amended except by an instrument in writing signed by both
parties hereto.
G. All obligations of Lessee and Lessor hereunder not fully performed as of
the expiration or earlier termination of the term of this Lease shall survive
the expiration or earlier termination of the term hereof, including without
limitation, all insurance and indemnity obligations, and all of Lessee's payment
obligations with respect to Base Rent and additional rental and all obligations
concerning the condition and repair of the Premises. Upon the expiration or
earlier termination of the term hereof, and prior to Lessee vacating the
Premises, Lessee shall restore the Premises to good condition and repair,
reasonable wear and tear excluded. Prior to Lessee vacating the Premises, Lessee
shall make all repairs as specified in Paragraph 5 hereof, including but not
limited to any repairs necessary so that the heating and air conditioning
systems exclusively serving the Premises are in good working order (reasonable
wear and tear excepted). Upon expiration or earlier termination hereof, the
Premises shall be delivered to Lessor in broom clean condition. If any and all
repairs or restoration required of Lessee hereunder are not completed by the
expiration or earlier termination hereof, Lessor may cause the same to be
completed and the costs shall be paid by Lessee promptly upon demand (including
a five (5%) percent service charge for arranging for and coordinating such
work).
Lessee shall also, prior to vacating the Premises, pay to Lessor the
amount, as estimated by Lessor, of Lessee's obligation hereunder for all
operating expenses including, without limitation, taxes, insurance premiums and
common area charges for the year in which the Lease expires or terminates,
prorated for that portion of the year during which this Lease was in force. All
such amounts shall be used and held by Lessor for payment of such obligations of
Lessee hereunder, with Lessee being liable for any additional costs therefor
upon demand by Lessor, or with any excess to be returned to Lessee after all
such obligations have been determined and satisfied as the case may be. In lieu
of waiting until the close of the calendar year in order to determine any excess
additional rentals for operating expenses as set forth in Paragraph 2C, Lessor
has the option to charge Lessee for Lessee's proportionate share of the
additional rentals based upon the previous year's operating expenses plus five
percent (5%). Any security deposit held by Lessor may, at Lessor's option, be
credited against the amount payable by Lessee under this Paragraph 24G or
otherwise handled in accordance with Paragraph 2B hereof.
H. If any clause or provision of this Lease is illegal, invalid or
unenforceable under present or future laws effective during the term of this
Lease, then and in that event, it is the intention of the parties hereto that
the remainder of this Lease shall not be affected thereby, and it is also the
intention of the parties to this Lease that in lieu of each clause or provision
of this Lease that is illegal, invalid or unenforceable, there be added, as a
part
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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.
I. All references in this Lease to "the date hereof" or similar references
shall be deemed to refer to the last date, in point of time, on which all
parties hereto have executed this Lease.
J. Lessee represents and warrants that it has dealt with no broker, agent
or other person in connection with this transaction or that no broker, agent or
other person brought about this transaction, other than Trammell Crow Houston,
Ltd. (whose fee Lessor shall pay) and Lessee agrees to indemnify and hold Lessor
harmless from and against any claims by any other broker, agent or other person
claiming a commission or other form of compensation by virtue of having been
retained by Lessee with regard to this leasing transaction.
K. If and when included within the term "Lessor", as used in this
instrument, there is more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution of a notice
specifying some individual at some specific address for the receipt of notices
and payments to Lessor. If and when included within the term "Lessee", as used
in this instrument, there is more than one person, firm or corporation, all
shall jointly arrange among; themselves for their joint execution of a notice
specifying some individual at some specific address within the continental
United States for the receipt of notices and payments to Lessee. All parties
included within the terms "Lessor" and "Lessee", respectively, shall be bound by
notices given in accordance with the provisions of Paragraph 25 hereof to the
same effect as if each had received such notice.
L. The building of which the Premises are a part was completed in 1999 and
manufacturers' and installers' warranties still exist on certain building
components. Certain of the items installed as part of the Lessee improvement
work for Lessee shall be under a manufacturer's and installer's warranty, which
shall be used for the benefit of Lessee. Additionally, the building of which the
Premises are a part is currently in compliance with all local, state, and
federal environmental regulations including but not limited to all regulations
regarding Substances. Further, there are no deed restrictions on the building
that will conflict with Lessee's intended use. Other than the representations
and warranties described in this paragraph or elsewhere in this Lease. Lessor
and Lessee expressly agree that there are and shall be no implied warranties of
merchantability, habitability, fitness for a particular purpose or any other
kind arising out of this Lease Agreement and that all express or implied
warranties in connection therewith are expressly disclaimed.
M. This Lease Agreement shall be construed under the laws of the State of
Texas, and Federal laws as applicable.
N. Time is of the essence; and all due dates, time schedules, and
conditions precedent to exercising a right shall be strictly adhered to without
delay except where otherwise expressly provided.
O. Because the Premises are on the open market and are presently being
shown, this Lease shall be treated as an offer subject to non-acceptance by
Lessor, and shall not be valid or binding unless and until accepted by Lessor in
writing and a fully executed copy delivered to both parties hereto.
Notwithstanding the foregoing, Lessee agrees to tender to Lessor an initial sum
with executed originals of this Lease Agreement. Lessor shall for a period of
fifteen (15) days after receipt of such executed Lease and tendered sum have the
ability but not the obligation to review and return an executed original of the
Lease Agreement to Lessee. If Lessor shall notify Lessee of its acceptance or
return an executed original Lease Agreement to the Lessee during, or after the
expiration of, such time period, then this Lease Agreement shall be binding upon
both parties. Upon such occasion, Lessor may retain such sums so deposited by
Lessee and apply such sums to amounts due and owing under the terms of the Lease
Agreement. Lessee agrees that its offer to lease the Premises will be
irrevocably left open during the time period necessary for Lessor to consider
the offer.
24. NOTICES. Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations and other requirements with reference
to the sending, mailing or delivering of notice or the making of any payment by
Lessor to Lessee or with reference to the sending, mailing or delivering of any
notice or the making of any payment by Lessee to Lessor shall be deemed to be
complied with when and if the following steps are taken:
(a) All rent and other payments required to be made by Lessee to Lessor
hereunder shall be payable to Lessor at the address for Lessor set forth below
or at such other address as Lessor may specify from time to time by written
notice delivered in accordance herewith. Lessee's obligation to pay rent and any
other amounts to Lessor under the terms of this Lease shall not be deemed
satisfied until such rent and other amounts have been actually received by
Lessor. In addition to Base Rent due hereunder, all sums of money and all
payments due Lessor hereunder shall be deemed to be additional rental owed to
Lessor.
16 INITIALS
--------
Lessor:
---------
Lessee: KHS
---------
<PAGE>
(b) All payments required to be made by Lessor to Lessee hereunder shall be
payable to Lessee at the address set forth below, or at such other address
within the continental United States as Lessee may specify from time to time by
written notice delivered in accordance herewith.
(c) Any written notice or document required or permitted to be delivered
hereunder shall be deemed to be delivered whether actually received or not when
deposited in the United States Mail, postage prepaid, Certified or Registered
Mail, addressed to the parties hereto at the respective addresses set out below,
or at such other address as they have therefore specified by written notice
delivered in accordance herewith.
25. ADDITIONAL PROVISIONS.
A. Legal Description. For the purposes of this Lease, the rentable square
footage of the Premises shall be deemed to be approximately 120,000 square feet
of office and warehouse space located in a building deemed to be approximately
192,000 square feet on 869,964 square feet of land out of the John Reinerman
Survey, A-642, Harris County, Texas, being all of that 15 acre tract of land as
recorded in Volume 1392, Page 507 of the Harris County Deed Records, and being
all of that 4.9976 acre tract of land as recorded under Harris County Clerk's
File No. C-279243 of the Harris County Real Property Records.
B. Lessee Improvement. Lessee has inspected and agrees to accept the Premises
on an "As Is" basis except as otherwise provided in this Lease.
1. Lessor shall provide Lessee with a tenant improvement allowance of
$420,000.00 (the "Allowance") to complete improvements to the Premises. This
Allowance is to be used specifically for improvements to the Premises and no
other purpose. This Allowance will be used to fund all Lessee improvement
costs which will include, but are not limited to, labor costs, material
costs, general contractor's overhead fees, sales taxes, and permitting fees,
not to include any costs associated with pre-existing environmental
conditions. The cost of the center demising wall and the Lessor's
construction management fees shall not be deducted from the Allowance, but
shall be the sole responsibility of the Lessor. All improvements to the
Premises are required to meet all applicable codes and regulations, as well
as Lessor's standard construction specifications and details. Any space
plans and construction drawings prepared by or for Lessee shall require the
written approval from Lessor prior to commencement of construction; such
approval shall not be unreasonably withheld, conditioned or delayed. Initial
Lessee improvements are listed on Exhibit and Lessor conceptually consents to
all such improvements subject to review of plans. Any improvement costs or
expenses in excess of $420,000.00 shall be the sole responsibility of Lessee.
2. Within ten (10) days of the execution of this Lease by both Lessee and
Lessor, Lessor shall provide Lessee with an architectural and engineering
allowance of $23,000.00 to be used solely for completing the architectural,
mechanical, engineering, electrical, and plumbing drawings for the Premises.
All architectural and engineering drawing costs in excess of $23,000.00
related to the construction of the Improvements shall be the sole
responsibility of Lessee.
3. The northeast section of the water detention area that runs along the east
side of the Project shall be converted by Lessor to additional surface
parking of no less quality than currently exists on the Premises. This
additional surface parking will be of sufficient size to provide parking,
ingress, and egress in accordance with all applicable codes for fifty (50)
automobiles. Lessor shall be solely responsible for all costs to convert
this section of the water detention area to additional surface parking. This
work shall be completed within ninety (90) days after the Anticipated
Delivery Date. If Lessee desires to convert a portion or all of this
additional surface parking area provided by Lessor to accommodate trucks and
delivery vehicles the cost of such conversion shall be the sole
responsibility of Lessee.
4. Upon occupancy of the Premises by Lessee, Lessor shall provide an additional
cash allowance to Lessee of $217,680.00 (4.0% of the Base Monthly Rent for
the first ten (10) years of the lease term) in lieu of Lessor paying any
commission to any outside broker acting on behalf of Lessee.
All improvements will be done in accordance with Lessor's standard construction
specifications and any additional improvements must be approved by Lessor.
C. HVAC Maintenance/Service Contract Requirements. The service contract must
become effective within thirty (30) days of the date of occupancy of the
facility and must be performed on at least a quarterly basis. Lessee shall
include the following items in its maintenance contract:
1. Adjust belt tension;
2. Lubricate all moving parts, as necessary;
3. Inspect and adjust all temperature and safety controls;
4. Check refrigeration system for leaks and operation;
17 INITIALS
--------
Lessor:
---------
Lessee: KHS
---------
<PAGE>
5. Check refrigeration system for moisture;
6. Inspect compressor oil level and crank heaters;
7. Inspect air filters and replace when necessary;
8. Check space conditions;
9. Check condensate drains and drain pans and clean, if necessary;
10. Inspect and adjust all valves;
11. Check and adjust dampers;
12. Run machine through complete cycle.
D. Cancellation Option. So long as Lessee is not in default hereunder and
in consideration of Lessee fulfilling all other terms, conditions, covenants,
and obligations of this Lease, Lessee shall have a one-time right to terminate
this Lease at the end of the sixtieth (60th) month of the lease term ("Early
Termination Date") by paying Lessor a Early Termination Penalty of $650,000.00.
To exercise this early termination option, Lessee must inform Lessor in writing
not less than one hundred and eighty (180) days in advance of the Early
Termination Date and Lessee's payment of the Early Termination penalty must
accompany the notice of early termination. The Early Termination Date shall be
treated as if it were the original termination date on the Lease, and Lessee
shall fully and diligently comply with all provisions and terms of the Lease
governing and applicable to the surrender and the delivery to Lessor by Lessee
of the entire Premises, including without limitation, (i), the repair and
restoration by Lessee of the Premises, (ii) the timely payment of all sums by
Lessee arising or accruing prior to the Early Termination Date, (iii) the
removal by Lessee of any and all liens on the Premises attributable to an act or
omission of Lessee. In the event Lessee fails to comply with these provisions
or is in default subsequent to the notice of early termination, this option
shall be considered null and void, and the Lease shall remain in full force and
effect for the entire one hundred and twenty (120) month term. If no notice of
early termination is received by Lessor in accordance with the above terms, the
Lease shall remain in full force and effect for the entire one hundred twenty
(120) month term.
E. Renewal Option.
1. While this lease is in full force and effect, provided that Lessee is
not in default of any of the terms, covenants and conditions thereof, at the
time Lessee exercises such option, Lessee shall have the right or option to
extend the original term of this lease for two (2) further terms of sixty (60)
months each. Such extension of the original term shall be on the same terms,
covenants or conditions as provided for in the original term except that the
base rental during the extended term shall be at the fair market rental (the
"Fair Market Base Rental") then in effect on equivalent properties, of
equivalent size and condition, in equivalent areas with the length of the lease,
the length of the renewal term, the credit standing of the Lessee to be taken
into account, cost savings of Lessor for not having to pay leasing commission to
outside brokers, tenant allowances, the method for payment of taxes and expenses
or increases in tax. However, in no event shall the base rent for an extended
term be below the base rent in the primary term of the Lease. Notice of
Lessee's intention to exercise the option must be given to Lessor in writing not
less than twelve (12) months prior to the expiration of the original term of
this Lease or twelve (12) months prior to the expiration of the first extended
term.
2. Upon written notice of Lessee's intent to exercise an extension term
option, Lessor shall within twenty (20) days provide Lessee, with written
notice, the amount in which Lessor contends to be the Fair Market Base Rental.
Within twenty (20) days after receipt of Lessor's written notice of the Fair
Market Base Rental, Lessee shall give Lessor written notice ("Lessee's
Response"), either (a) irrevocably exercising Lessee's extension option and
accepting the statement of Fair Market Base Rental set forth in Lessor's notice,
or (b) rejecting the Fair Market Base Rental set forth in Lessor's notice and
specifying the amount lessee contends to be the Fair Market Base Rental. If
Lessee rejects the Fair Market Base Rental specified by Lessor, then Lessor and
Lessee shall endeavor to negotiate a mutually acceptable resolution to their
dispute concerning the Fair Market Base Rental. If they are unable to agree
within thirty (30) days after receipt by Lessee's Response, of the rejection of
Lessor's Fair Market Base Rental, and a mutually acceptable resolution of the
Fair Market Base Rental is not reached, then Lessee shall either (i) revoke its
intent to exercise the extension period, or (ii) provide Lessor with written
notice to arbitrate the Fair Market Base Rental. If Lessee elects to arbitrate
the Fair Market Base Rental, the term of the Lease shall be extended for the
extended term, and the final determination of the Fair Market Base Rental shall
be binding on both Lessor and Lessee. Upon Lessee's written notice, Lessor and
Lessee shall, within ten (10) days, each separately designate a licensed real
estate appraiser who is reasonably active in regard to the valuation of Houston,
Texas, warehouse properties in the area where the Project is located to
participate in determination of the Fair Market Base Rental. If either Lessor
or Lessee fails timely to designate an appraiser as provided above, then the
determination of Fair Market Base Rental shall be made solely by the appraiser
timely designated by the other party and such determination shall be binding on
Lessor and Lessee. Within sixty-five (65) days after receipt by Lessor of
Lessee's notice (or at such other time as Lessor and Lessee may mutually agree),
each party shall state in writing the amount the party contends to be the Fair
Market Base Rental, including whatever support for such contention the party
wishes to have considered by the appraisers. The appraisers shall arrange for
simultaneous exchange of such written contentions and for presentation of such
additional evidence, rebuttals, or other matters as the parties may wish to
present and the
18 INITIALS
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Lessor:
---------
Lessee: KHS
---------
<PAGE>
appraisers may elect to hear or otherwise receive. After presentation of such
additional evidence and argument as the appraisers may elect to receive, if any,
each party may submit a modified statement of contended Fair Market Base Rental.
If the appraisers do not agree upon the actual Fair Market Base Rental, and the
two statements of Fair Market Base Rental are within ten percent (10%) of one
another, then the two statements of Fair Market Base Rental shall be averaged
and such amount shall be binding on Lessor and Lessee as the Fair Market Base
Rental. If the determinations of the two appraisers are greater than ten percent
(10%) from one another, then the two appraisers shall be instructed to appoint,
within ten (10) days thereafter, a third appraiser who has significant
experience and is then active appraising warehouse space in the area. If the two
appraisers designated by Lessor and Lessee cannot agree on the appointment of a
third appraiser within the time period provided, either Lessor or Lessee may
seek the appointment of a third appraiser by the presiding judge for the County
Court where the Project is located. The third appraiser shall then determine
which of the two final contended Fair Market Base Rental amounts submitted by
the parties is closest to the actual Fair Market Base Rental, and such
determination shall be binding on Lessor and Lessee as the Fair Market Base
Rental.
3. All reasonable fees and expenses of the appraisers shall be paid as
follows: Lessor shall advance the fees and expenses of the appraiser designated
by Lessor; Lessee shall advance the fees and expenses of the appraiser
designated by Lessee; and Lessor and Lessee shall each advance one half of any
fees and expenses of the third appraiser. The attorneys' fees and expenses of
counsel for the respective parties and of witnesses shall be paid and borne by
the party engaging such counsel or calling such witness, as the case may be.
4. Payments Pending Determination. If the Fair Market Base Rental for any
Renewal Period has not been determined at such time as Lessee is obligated to
pay Base Rent for such Renewal Period, Lessee shall pay as Base Rent pending
such determination the Base Rent in effect for such space immediately prior to
the Renewal Period; provided, that upon the determination of the applicable Fair
Market Base Rental, any shortage of Base Rent paid shall be paid to Lessor by
Lessee.
F. Additional Parking.
Lessor agrees to assist Lessee in procuring the additional parking adjacent
to the west side of the property from Weingarten Realty Management Company
should Lessee deem such parking is necessary for its operations. Any future
lease agreement for this additional parking between Lessee and Weingarten Realty
Management Company would exclude Lessor as a party to the Lease for such
additional parking. This Lease between Lessor and Lessee is in no way contingent
upon the terms, status, extension, or execution of any parking agreement with
Weingarten. Lessee shall have the right to install a curb cut and driveway to
provide access from the Building to this additional parking. This curb cut and
driveway shall be constructed and maintained at the sole cost of Lessee. Lessee
shall be required to replace this curb cut and remove this driveway upon Lease
termination and restore the affected parking areas, driveways, and truck court
to their original condition, subject to normal wear and tear.
G. Electrical Service.
Lessee shall have the right to use the standard tenant improvement
allowance to upgrade the Premises with 4000 A @ 480 volt, 3 phase electrical
service. Lessee shall have the right to equip each truck parking space and dock
with a 208V, 3 phase, 60 Hz @ 30 Amp power connection for refrigeration
equipment.
19 INITIALS
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Lessor:
---------
Lessee: KHS
---------
<PAGE>
H. Loading Docks.
Lessor, at its sole cost and expense, shall provide thirty (30) dock-high
loading doors and three (3) walk up pedestrian doors. Lessee shall have the
right to use the standard tenant improvements allowance or any additional tenant
improvement allowance to modify the height of the overhead doors, install
mechanical levelers, raise the truck apron grade, or any other modifications
required to meet Lessee's operational requirements.
I. Non-Compete Provision.
Subject and subordinate to the restrictions of any existing commitments to
other lessees at the Project, Lessor agrees that it shall not lease space at the
Project to any Internet grocery service entity.
EXECUTED BY LESSOR, this 14th day of April, 2000.
Attest/Witness Connecticut General Life Insurance Company,
On behalf of its Separate Account R
By: CIGNA Investments, Inc.
Donna [ILLEGIBLE SIGNATURE] By: /s/ JOHN G. EISELO
- ------------------------------ -------------------------------------
Title: Administrative Assistant title: Managing Director
------------------------ ----------------------------------
ADDRESS:
1360 Post Oak Boulevard, Suite 1800
-----------------------------------
Houston, Texas 77056
-----------------------------------
-----------------------------------
"Lessor"
EXECUTED BY LESSEE, this day of , 2000.
Attest/Witness HomeGrocer.com, Inc.
[ILLEGIBLE SIGNATURE] By: /s/ Kristin H. Stred
- ------------------------------ --------------------------------
Title: [ILLEGIBLE TITLE] Title: Senior Vice President and General
Counsel
------------------------ -----------------------------
ADDRESS:
Attn: Vice President, Operations
-----------------------------------
10230 Northeast Points Drive
-----------------------------------
Kirkland, WA 98033
-----------------------------------
And to:
-------
HomeGrocer.com, Inc.
-----------------------------------
Attn: General Counsel
-----------------------------------
10203 N.E. Points Drive
-----------------------------------
Kirkland, WA 98033
-----------------------------------
"Lessee"
20 INITIALS
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Lessor:
---------
Lessee: KHS
---------
<PAGE>
Lessee's Exclusive Parking Areas
[LAYOUT PLAN]
HOMEGROCER.COM SCHEMATIC SITE PLAN
- --------------------------------------------------------------------------------
HOUSTON, TEXAS MARCH 29, 2000
<PAGE>
EXHIBIT "B"
Site: Katy Road, Houston Texas
ANTICIPATED TENANT IMPROVEMENTS
- --------------------------------------------------------------------------------
Summary
Tenant shall have the right, but not the obligation, as allowed and provided
under the terms and conditions of this Lease, to install, construct, modify,
relocate or remove, as reasonably necessary, anticipated Tenant Improvement to
include but not limited to the following:
1. Tenant shall have the ability to equip and provide each of the
delivery truck parking spaces with 280 V, 3 phase, 60 Hz @30 Amp power
connection for refrigeration equipment (to include delivery truck
loading docks and adjacent parking truck parking spaces).
2. Construction of up to approximately 10,000 square feet of office space
and related improvements, which may include the modification or
demolition of existing offices (if any). Exact location of office
space to be determined.
3. Removal of non-structural, non-load bearing walls or partitions.
4. Cutting and reinforcement of entrances in interior or exterior walls
or partitions.
5. Construction, removal or modification of loading docks which may
include dock canopies, dock levelers, heaters and dock lighting as
necessary.
6. Modification or changing grade paving within the proximity of Tenant's
shipping and dock areas.
7. Modification of landscaping, as permitted, to accommodate Tenant's
business needs.
8. Modification to the concrete flooring slab and sewer system, which
may include cutting, for the required installation of under slab
drains for freezers, coolers, product preparation areas and restrooms.
9. Construction, removal or modification of Building and or Premises
systems to include electrical, lighting, HVAC, sprinkler, security and
fire-life safety for Tenant's intended business use.
Page 1 of 2
<PAGE>
EXHIBIT "B"
10. Construction, installation or modification of freezer slab(s) on,
below or above existing slab.
11. Construction, installation or modification of refrigeration room(s).
12. Construction, installation or modification of conveyer system(s).
13. Construction, installation or modification of warehouse racking
system(s).
14. Construction, installation or modification of power generator
system(s).
15. Construction, installation or modification of trash area to include
trash compactor system(s).
16. Construction, installation or modification to and on the roof area to
install (i) antennas and satellite dishes and associated equipment,
(ii) refrigeration unit(s) and associated equipment, and (iii) heating
ventilation and air conditioning unit(s) and associated equipment,
(iv) conveyor, racking and associated equipment.
17. Construction, installation or modification of electrical, data,
telephone, fiber, lighting, HVAC, sprinkler, fire detection, potable
water and sanitary sewer systems of the Building and or the Premises.
18. Re-stripe and reseal Tenant parking areas and construction,
installation or modification to parking area lighting and security
system(s).
19. Re-surface and sealing of slab or floors.
20. Painting or decorating of interior or exterior of the Premises.
21. Construction, installation or modification of Tenant's signage.
22. Any USDA required construction, installation or modification to the
Building or Premises as necessary.
23. Installation of security measures including site lighting, fencing,
gates and electronic monitoring systems in and around the truck court.
Page 2 of 2
<PAGE>
EXHIBIT 10.7
OFFICE BUILDING LEASE
One Twelfth @ Twelfth
Bellevue, Washington
Basic Lease Information Sheet
<TABLE>
<S> <C>
1. Date of Lease April 3, 2000
------------------------------------------------
2. Tenant: HomeGrocer.com, Inc.
3. Tenant's Address 10230 NE Points Drive
Prior to Occupancy: Kirkland, WA 98033
4. Tenant's Address South Building (Building #3)
After Occupancy 1100 - 112th Avenue NE
Bellevue, WA 98004
5. Landlord: Bellevue Hines Development, L.L.C.
6. Landlord's Address: c/o Hines Interests Limited Partnership
10900 NE 4th St., Suite 920
Bellevue, WA 98004
7. Premises: Initial Premises: Floors 4, 5 and 6 of the South Building
-----------------
Expansion Space: Floors 1, 2 and 3 of the South Building (See
---------------
Section 1.1(b) below)
-------------
8. Net Rentable Net Rentable Area of the Initial Premises: Eighty-three Thousand Nine Hundred
Area/Tenant's -----------------------------------------
Proportionate Fifty-six (83,956) square feet
Share:
Useable Area of the Initial Premises: Seventy-eight Thousand Two Hundred
------------------------------------
Fifty-six (78,256) square feet
Net Rentable Area of the Building: One hundred Seventy-two Thousand Eight
---------------------------------
Hundred Eighty-five (172,885) square feet
Net Rentable Area of the Project: Four Hundred Eighty Thousand Three Hundred
--------------------------------
Ninety-two (480,392) square feet
Tenant's Proportionate Share of Building: Fifty-one and 12/100 percent (51.12%)
----------------------------------------
Tenant's Proportionate Share of Project: Eighteen and 40/100 percent (18.40%)
---------------------------------------
The foregoing Proportionate Shares are based only on the Initial Premises
(exclusive of the Expansion Space). The number of square feet of Net Rentable
Area and Useable Area for the Premises, Building and Project shall be subject
to verification as provided in Section 1.4(d) below.
--------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
9. Scheduled February 15, 2001
Commencement Date:
10. Term: Initial Term: Seven (7) Years and Zero (0) Months
------------
Extension Term: Five (5) Years and Zero (0) Months
--------------
11. Base Rent: See Page C below
------
12. Security Deposit See Section 3.1 below
Amount: -----------
13. Parking: Three and 25/100 (3.25) parking passes per one thousand (1,000) square feet of Useable Area in the
Premises, plus any Additional Allocation pursuant to Section 14.22 below. Based on the estimated square
-------------
footages set forth in Item 8 above, if only the Initial Premises are leased, then the number of Parking
------
Passes shall be Two Hundred Fifty-four (254), and the number in the Additional Allocation shall be
Fifty-nine (59). If all of the Expansion Space is leased, then the number of Parking Passes shall be
Five Hundred Twenty-four (524), and the number in the Additional Allocation shall be One Hundred
Twenty-one (121).
14. Tenant's Plan See Exhibit C, Paragraph 20
Delivery Date:
15. Cash Allowance: Twenty-seven Dollars ($27.00) per square foot of Useable Area in the Premises, to be allocated as
provided in Exhibit C
---------
16. Brokers: Tenant's Broker: Geoff Boguch of Colliers International
---------------
Landlord's Brokers: John Black, Paul Sweeney and Jason Furr of Broderick Group, Inc.
------------------
</TABLE>
<PAGE>
Base Rent Schedule:
<TABLE>
<CAPTION>
Annual Base Rent Per Square Foot of Net Rentable Area
- ---------------------------------------------------------------------------------------------------------
Expansion, ROPR and Offer
Initial Premises Space Entire Building
Lease Year (Floors 4,5,6) (Floors 1,2,3) (Floors 1-6)**
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 $24.00 $24.00 $23.00
- ----------------------------------------------------------------------------------------------------------
2 $24.50 $24.50 $23.50
- ----------------------------------------------------------------------------------------------------------
3 $25.00 $25.00 $24.00
- ----------------------------------------------------------------------------------------------------------
4 $25.50 $25.50 $24.50
- ----------------------------------------------------------------------------------------------------------
5 $26.00 $26.00 $25.00
- ----------------------------------------------------------------------------------------------------------
6 $26.50 $26.50 $25.50
- ----------------------------------------------------------------------------------------------------------
7 $27.00 $27.00 $26.00
- ----------------------------------------------------------------------------------------------------------
Extension Term Fair Market Rent determined pursuant to Section 2.6(b) below
--------------
==========================================================================================================
</TABLE>
** This Base Rent schedule will be applicable only if Tenant exercises its
Expansion Option for all of the Expansion Space and commits to lease the
entire Building prior to the Notification Date pursuant to Section 1.1(b)
--------------
below.
<TABLE>
<CAPTION>
Square Footage and Year 1 Annual and Monthly Rent for Premises*
=================================================================================================================================
Useable Monthly
Full Floor Square Feet Annual Rent/ Rent/Floor if
of South (single Net Rentable Floor if Entire Entire Building
Building tenant) Square Feet Annual Rent/Floor Monthly Rent/Floor Building Taken** Taken**
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
6 21,612 23,343 $ 560,232 $ 46,686 $ 536,889 $ 44,741
- ---------------------------------------------------------------------------------------------------------------------------------
5 27,632 29,590 $ 710,160 $ 59,180 $ 680,570 $ 56,714
- ---------------------------------------------------------------------------------------------------------------------------------
4 29,012 31,023 $ 744,552 $ 62,046 $ 713,529 $ 59,461
- ---------------------------------------------------------------------------------------------------------------------------------
Subtotal 78,256 83,956 $2,014,944 $167,912 $1,930,988 $160,916
- ------------- ------- ------- ---------- -------- ---------- --------
- ---------------------------------------------------------------------------------------------------------------------------------
3 29,012 31,023 $ 744,552 $ 62,046 $ 713,529 $ 59,461
- ---------------------------------------------------------------------------------------------------------------------------------
2 28,949 30,979 $ 743,496 $ 61,958 $ 712,517 $ 59,376
- ---------------------------------------------------------------------------------------------------------------------------------
1 25,140 26,927 $ 646,248 $ 53,854 $ 619,321 $ 51,610
- ---------------------------------------------------------------------------------------------------------------------------------
Subtotal 83,101 88,929 $2,134,296 $177,858 $2,045,367 $170,447
- ------------- ------- ------- ---------- -------- ---------- --------
- ---------------------------------------------------------------------------------------------------------------------------------
Total 161,357 172,885 $4,149,240 $345,770 $3,976,355 $331,363
============= ======= ======= ========== ======== ========== ========
=================================================================================================================================
</TABLE>
* The foregoing chart is for information purposes only and the actual amount
of the annual Base Rent and each monthly installment thereof shall be
calculated in accordance with the terms of Section 2.6 of the Lease.
-----------
/s/ TD /March 22, 2000 /s/ TOM / 4/3/00
- ------------------------------------ ----------------------------------
Tenant's Initials/Date Landlord's Initials/Date
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<C> <S> <C>
Basic Lease Information Sheet
ARTICLE 1. Premises.........................................................1
1.1 Lease...............................................................1
1.2 Landlord's Reserved Rights..........................................3
1.3 Common Areas........................................................4
1.4 Calculation of Net Rentable Area; Useable Area......................5
ARTICLE 2. Term, Use of Premises and Base Rent..............................6
2.1 Term................................................................6
2.2 Delay in Delivery...................................................7
2.3 Confirmation........................................................7
2.4 Use.................................................................8
2.5 Payments by Tenant..................................................8
2.6 Payment of Base Rent................................................9
2.7 Partial Months......................................................11
ARTICLE 3. Security Deposit.................................................12
3.1 Security Deposit Amount.............................................12
3.2 Letter of Credit....................................................12
3.3 Use of Security Deposit.............................................13
ARTICLE 4. Payment of Operating Costs.......................................13
4.1 Net Lease...........................................................13
4.2 Estimated Payments..................................................14
4.3 Tenant's Proportionate Share........................................14
4.4 Operating Costs.....................................................14
4.5 Adjustment for Occupancy............................................17
4.6 Computation of Operating Costs Adjustment...........................17
4.7 Adjustment for Variation Between Estimated and Actual...............17
4.8 Books and Records...................................................18
ARTICLE 5. Landlord's Covenants.............................................19
5.1 Basic Services......................................................19
5.2 Hours of Operation..................................................21
5.3 Interruption........................................................21
5.4 Extra Services......................................................22
5.5 Window Coverings....................................................22
5.6 Graphics and Signage................................................23
5.7 Tenant Extra Improvements...........................................23
5.8 Peaceful Enjoyment..................................................23
ARTICLE 6. Tenant's Covenants...............................................24
6.1 Compliance With Exhibit C...........................................24
---------
6.2 Construction of Tenant Improvements.................................24
6.3 Telecommunications..................................................24
6.4 Taxes on Personal Property and Tenant Extra Improvements............25
6.5 Repairs by Tenant...................................................25
6.6 Waste...............................................................25
6.7 Alterations, Additions, Improvements................................25
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
6.8 Liens..............................................................26
6.9 Compliance With Laws and Insurance Standards.......................26
6.10 Entry for Repairs, Inspection, Posting Notices, Etc................27
6.11 No Nuisance........................................................27
6.12 Rules and Regulations..............................................27
6.13 Surrender of Premises On Termination...............................27
6.14 Corporate Authority................................................28
6.15 Utilities..........................................................28
ARTICLE 7. Hazardous Materials.............................................29
7.1 Prohibition and Indemnity With Respect to Hazardous Materials......29
7.2 Definitions........................................................29
ARTICLE 8. Assignment or Sublease..........................................30
8.1 Consent Required...................................................30
8.2 Landlord's Options.................................................31
8.3 Minimum Rental; Division of Excess Rent............................32
8.4 Tenant Not Released................................................32
8.5 Written Agreement..................................................32
8.6 No Transfer Period.................................................32
8.7 Conditions.........................................................32
8.8 Expenses...........................................................33
8.9 No Restriction on Landlord.........................................33
8.10 No Leasehold Financing.............................................33
ARTICLE 9. Condition and Operation of the Project..........................33
9.1 No Warranty........................................................33
9.2 Project Alterations................................................33
ARTICLE 10. Lender Rights..................................................34
10.1 Subordination......................................................34
10.2 Attornment.........................................................34
10.3 REAs...............................................................34
10.4 Estoppel Certificate...............................................34
10.5 Nondisturbance.....................................................35
ARTICLE 11. Insurance......................................................35
11.1 Landlord's Casualty Insurance......................................35
11.2 Liability Insurance................................................35
11.3 Tenant's Additional Insurance......................................36
11.4 Indemnity and Exoneration..........................................36
11.5 Indemnity for Liens................................................37
11.6 Waiver of Subrogation Rights.......................................37
11.7 Concurrent Negligence..............................................37
ARTICLE 12. Casualty and Eminent Domain....................................37
12.1 Damage and Destruction.............................................37
12.2 Condemnation.......................................................39
ARTICLE 13. Default........................................................40
13.1 Events of Default..................................................40
13.2 Remedies Upon Default..............................................41
13.3 Damages Upon Termination...........................................41
13.4 Computation of Rent for Purposes of Default........................42
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
13.5 Late Charge........................................................42
13.6 Remedies Cumulative................................................42
13.7 Tenant's Remedies..................................................42
13.8 Obligation to Mitigate Damages.....................................43
13.9 Dispute Resolution Procedures......................................43
ARTICLE 14. Miscellaneous..................................................43
14.1 No Waiver..........................................................43
14.2 Holding Over.......................................................43
14.3 Attorneys' Fees....................................................44
14.4 Amendments.........................................................44
14.5 Transfers by Landlord..............................................44
14.6 Severability.......................................................44
14.7 Notices............................................................44
14.8 Intentionally Omitted..............................................45
14.9 No Option..........................................................45
14.10 Integration and Interpretation.....................................45
14.11 Quitclaim..........................................................45
14.12 No Easement for Light, Air and View................................46
14.13 No Merger..........................................................46
14.14 Memorandum of Lease................................................46
14.15 Survival...........................................................46
14.16 Financial Statements...............................................46
14.17 No Joint Venture...................................................46
14.18 Successors and Assigns.............................................46
14.19 Applicable Law.....................................................47
14.20 Time of the Essence................................................47
14.21 Interpretation.....................................................47
14.22 Parking............................................................47
14.23 Antennae...........................................................48
14.24 Generator..........................................................49
14.25 Brokers............................................................50
14.26 INTENTIONALLY DELETED..............................................50
14.27 Phased Development.................................................50
</TABLE>
Attachments:
- -----------
Exhibit A-1 Site Plan of the Initial Premises
Exhibit A-2 Site Plan of the Project
Exhibit A-3 Site Plan of Expansion Space
Exhibit B Legal Description of the Project
Exhibit C Initial Improvement of the Premises
Schedule C-1 Base Building Improvements
Schedule C-2 Definition of Building Standard Improvements
Schedule C-3 List of Base Building Plans
Schedule C-4 Description of Prime Contract
Exhibit D Rules and Regulations
Exhibit E Lease Commencement Certificate
Exhibit F Form of Tenant Estoppel
Exhibit G Form of Subordination Agreement
Exhibit H Form of Letter of Credit
Exhibit I Janitorial Specifications
iii
<PAGE>
SCHEDULE OF DEFINED TERMS
<TABLE>
<CAPTION>
Section No. Page No.
----------- --------
<S> <C> <C>
Additional Allocation................... Section 14.22(a).......................47
Additional Security Deposit............. Section 3.1............................12
Adjustment Date......................... Section 2.6(b)(iii)....................10
Alterations............................. Section 6.7............................25
Antennae................................ Section 14.23..........................48
Approval Notice......................... Exhibit C, Paragraph 15(a).............11
Availability Notice..................... Section 1.1(d)..........................3
Base Building Improvements.............. Exhibit C, Paragraph 1..................1
Base Building Plans..................... Exhibit C, Paragraph 1..................1
Basic Services.......................... Section 5.1............................19
Building Components..................... Section 1.2.............................4
Building................................ Section 1.1(a)..........................1
Buildings............................... Section 1.1(a)..........................1
Business Days........................... Section 5.2............................21
CAD..................................... Exhibit C, Paragraph 5..................4
Cash Allowance.......................... Exhibit C, Paragraph 14................10
Chronically Late........................ Section 13.1(i)........................41
Claims.................................. Section 7.1............................29
Common Areas............................ Section 1.3.............................4
Conceptual Plans........................ Exhibit C, Paragraph 4..................3
Construction Payment.................... Exhibit C, Paragraph 9(b)...............8
Cost Proposal........................... Exhibit C, Paragraph 1(a)(ii)...........2
Design Manual........................... Section 5.1(a).........................19
Estimated Operating Costs............... Section 4.2............................14
Estimated Payment....................... Exhibit C, Paragraph 1(a)(iii)..........2
Event of Default........................ Section 13.1...........................40
Expanded Uses........................... Section 2.4.............................8
Expansion Option........................ Section 1.1(b)..........................1
Expansion Space......................... Section 1.1(b)..........................1
Expiration Date......................... Section 2.1(a)..........................6
Extension Option........................ Section 2.1(b)..........................6
Extension Term Adjustment Date.......... Section 2.6(b)(ii)......................9
Extension Term.......................... Section 2.1(b)..........................6
Extra Services.......................... Section 5.4............................22
Fair Market Rent........................ Section 2.6(b)(iii).....................9
Garage.................................. Section 14.22(c).......................48
General Contractor...................... Exhibit C, Paragraph 1..................1
Generator............................... Section 14.24..........................50
Guarantor............................... Section 13.1(d)........................40
Hazardous Material...................... Section 7.2(a).........................29
Hazardous Materials Claims.............. Section 7.2(b).........................30
Hazardous Materials Laws................ Section 7.2(c).........................30
Initial Lease........................... Section 1.1(d)..........................3
Initial Premises........................ Section 1.1(a)..........................1
Initial Term............................ Section 2.1(a)..........................6
Landlord................................ Introduction............................1
Landlord Parties........................ Section 6.5............................25
Landlord's Architect.................... Exhibit C, Paragraph 1..................1
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Landlord's Work......................... Exhibit C, Paragraph 10(a)..............8
Late Delivery Payment................... Section 2.2.............................7
Laws.................................... Section 6.9(a).........................26
Lease................................... Introduction............................1
Lease Year.............................. Section 2.1(a)..........................6
Letter of Credit........................ Section 3..............................13
Major Vertical Penetrations............. Section 1.2.............................4
Market Area............................. Section 2.6(b)(iii)....................10
Net Rentable Area....................... Section 1.4.............................5
Normal Office Hours..................... Section 5.2............................21
Notification Date....................... Section 1.1(b)..........................1
Offer Space Adjustment Date............. Section 2.6(b)(i).......................9
Offer Space............................. Section 1.1(d)..........................2
Operating Costs Adjustment.............. Section 4.6............................17
Operating Costs......................... Section 4.4............................14
Parking Passes.......................... Section 14.22(a).......................47
Permitted Hazardous Materials........... Section 7.2(d).........................30
Permitted Transferee.................... Section 8.1(b).........................31
Permitted Use........................... Section 2.4.............................8
Premises................................ Section 1.1(a)..........................1
Prime Contract.......................... Exhibit C, Paragraph 9(a)(i)(B).........6
Project................................. Section 1.1(a)..........................1
Provider................................ Section 6.3............................24
Qualified Auditor....................... Section 4.8............................18
Real Property........................... Section 1.1(a)..........................1
Real Property Taxes..................... Section 4.4(j).........................15
REAs.................................... Section 10.3...........................34
Rent Commencement Date.................. Section 2.6(a)..........................9
Rent.................................... Section 2.5.............................8
ROM Estimate............................ Exhibit C, Paragraph 1(a)...............1
ROPR Space.............................. Section 1.1(c)..........................2
Security Deposit Amount................. Section 3.1............................12
Security Deposit........................ Section 3.1............................12
Senior Instruments...................... Section 10.1...........................34
Senior Parties.......................... Section 10.1...........................34
Substantial Completion.................. Exhibit C, Paragraph 17................12
Substantially Complete.................. Exhibit C, Paragraph 17................12
Successor............................... Section 10.2...........................34
Tenant Delay............................ Exhibit C, Paragraph 18................13
Tenant Extra Improvements............... Section 5.7............................23
Tenant Improvements..................... Exhibit C, Paragraph 2..................3
Tenant.................................. Introduction............................1
Tenant Parties.......................... Section 6.5............................25
Tenant Sign............................. Section 5.6(b).........................23
Tenant's Personal Property.............. Section 11.1...........................35
Tenant's Proportionate Share............ Section 4.3............................14
Tenant's Work........................... Exhibit C, Paragraph 10(b)..............8
Term Commencement Date.................. Section 2.1(a)..........................6
Term.................................... Section 2.1(a)..........................6
TI Architect............................ Exhibit C, Paragraph 3..................3
TI Bids................................. Exhibit C, Paragraph 9(a)(ii)...........7
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
TI Construction Contract................ Exhibit C, Paragraph 2..................3
TI Contractor........................... Exhibit C, Paragraph 9(a)(ii)...........7
TI Working Drawings..................... Exhibit C, Paragraph 5..................4
Transfer................................ Section 8.1(a).........................30
Transferee.............................. Section 8.1(a).........................30
Upgrade Payment......................... Exhibit C, Paragraph 1(a)(ii)...........2
Upgrade Plans........................... Exhibit C, Paragraph 1(a)(i)............1
Upgrades................................ Exhibit C, Paragraph 1(a)...............1
Useable Area............................ Section 1.4(c)..........................5
</TABLE>
vi
<PAGE>
OFFICE BUILDING LEASE
This Office Building Lease (the "Lease") is made and entered into as of the
date specified in Item 1 of the Basic Lease Information Sheet attached hereto
------
and incorporated herein by this reference, by and between BELLEVUE HINES
DEVELOPMENT, L.L.C., a Delaware limited liability company ("Landlord"), and
HOMEGROCER.COM, INC., a Delaware corporation ("Tenant").
Now, therefore, in consideration of the mutual covenants and agreements
contained in this Lease, the parties agree as follows:
ARTICLE 1.
PREMISES
--------
1.1 Lease.
(a) Initial Premises. Subject to the terms, covenants and conditions
set forth herein, Landlord leases to Tenant and Tenant leases from Landlord
those certain premises identified in the Basic Lease Information Sheet as Item
----
7, which are schematically depicted on the floor plans attached hereto as
- -
Exhibit A-1 (the "Initial Premises"). The term "Premises" as used herein shall
- -----------
mean the Initial Premises and any Expansion Space, ROPR Space or Offer Space
added to the Premises pursuant to Sections 1.1(b), 1.1(c), and 1.1(d) below. The
--------------- ------ ------
Initial Premises are deemed to contain the Net Rentable Area and Useable Area
set forth in Item 8 of the Basic Lease Information Sheet. The number of square
------
feet of Net Rentable Area and Useable Area in the Premises, the Building and the
Project are subject to verification as set forth in Section 1.4(d) below. The
--------------
Premises are located in the South building of the Project located on the real
property situated in the City of Bellevue, County of King, State of Washington,
legally described on Exhibit B (as such real property may be added to or reduced
---------
by Landlord from time to time, the "Real Property"); provided, however, that
-------- -------
such additions or reductions shall not materially, adversely affect Tenant's use
and quite enjoyment of the Premises; shall be consistent with the
characteristics of a Class A office project; shall not reduce the parking
specifically allotted to Tenant under Section 14.22 of this Lease; and shall not
-------------
materially and permanently increase Tenant's out-of-pocket cost of operating in
the Premises. The term "Building" shall mean the building within which the
Premises are located and the term "Buildings" shall mean all buildings located
on the Real Property. The term "Project" shall mean the Real Property and all
improvements located thereon or used in connection therewith from time to time,
including without limitation, the Buildings, the Common Areas (as defined in
Section 1.3 below) and any other present or future improvements included within
- -----------
the office development now known as One Twelfth @ Twelfth in Bellevue,
Washington, the general outlines of which are shown on the Project site plan
attached hereto as Exhibit A-2.
-----------
(b) Expansion Option. Tenant shall have the option to expand (the
"Expansion Option") the square footage of the Premises to include the first,
second and/or third floors in the Building which are schematically depicted on
the floor plans attached hereto as Exhibit A-3 (the "Expansion Space") provided
-----------
that the Expansion Space actually leased, if any, shall be in whole floor
increments and must be contiguous to the Initial Premises. Tenant's Expansion
Option shall be personal to Tenant and may not be exercised by any Transferee
without Landlord's prior written consent. If Tenant wishes to exercise the
Expansion Option, Tenant shall notify Landlord in writing by April 30, 2000 (the
"Notification Date"). Tenant's notice shall not be revocable and must specify
how many floors of the Expansion Space will be included in the Premises. If
Tenant timely exercises the Expansion Option the Expansion Space described in
Tenant's notice shall be added to and become part of the Initial Premises for
all purposes under this Lease, and all of the terms and conditions hereof shall
apply to such Expansion Space, except that Base Rent applicable to the Expansion
Space shall be as set forth in the Basic Lease Information Sheet. If Tenant
exercises the Expansion Option on all of the Expansion Space prior to the
Notification Date then the Base Rent for the entire Premises shall be adjusted
as set forth in the Basic Lease Information Sheet. Notwithstanding anything to
the contrary in this Section 1.1(b), Tenant's right to lease the Expansion Space
--------------
hereunder shall not be exercisable by Tenant at any time during which
<PAGE>
Tenant is in default under this Lease. If Tenant does not deliver a notice to
Landlord exercising the Expansion Option on or before the Notification Date,
Tenant's Expansion Option shall terminate and shall be of no further force and
effect. If Tenant exercises its Expansion Option then Tenant shall include the
Expansion Space in all of its plans pursuant to Exhibit C and Tenant's failure
---------
to do so shall constitute a Tenant Delay thereunder and Landlord shall be
relieved of its obligation to deliver the Expansion Space to Tenant with the
balance of the Initial Premises.
(c) Right of Prior Refusal. After the Notification Date and continuing
through September 15, 2000, Tenant shall have a primary and continuing right of
prior refusal to include within the Premises any space in the Building (the
"ROPR Space") on the terms and conditions of this Section 1.1(c). Tenant may
--------------
not exercise its right to lease any ROPR Space during any period when Tenant is
in default under this Lease. If Landlord submits an initial proposal to lease
any of the ROPR Space to a third party, Landlord shall notify Tenant and Tenant
shall have five (5) Business Days after receipt of Landlord's notice within
which to deliver an irrevocable written notice to Landlord exercising its right
to lease space in the Building equal in size to the ROPR Space identified in
Landlord's notice. If the space identified in the Landlord's notice is not
contiguous to the Premises, then should Tenant exercise its rights under this
Section 1.1(c), Landlord may select and substitute a comparably sized portion of
- --------------
the Building (no more than 10% larger or smaller than the ROPR Space) that is
contiguous to the Premises. The ROPR Space identified in Landlord's notice (or
the comparably sized substitute space) shall be added to and become part of the
Premises on all of the terms and conditions of this Lease (including Exhibit C),
---------
except that (i) the Base Rent rate applicable to the ROPR Space shall be as
described in Item 11 of the Basic Lease Information Sheet, (ii) Base Rent and
-------
Operating Expenses on the ROPR Space shall commence upon delivery of the ROPR
Space to Tenant in the condition required hereunder, and (iii) Landlord shall
not be required to deliver possession of the ROPR Space to Tenant until the date
that is six (6) months after Landlord's approval of Tenant's final working
drawings for the Tenant Improvements to be constructed in the ROPR Space, which
drawings shall be delivered by Tenant within three (3) months following Tenant's
notice accepting the ROPR Space. If Tenant does not deliver a notice to
Landlord within such five (5) Business Day period exercising its right to lease
the ROPR Space identified in Landlord's notice, Landlord may lease all or any
portion of such space to any other person to whom Landlord makes a written
proposal within fifteen (15) Business Days after the expiration of Tenant's
response period, on such terms and conditions as Landlord deems acceptable in
its sole discretion.
(d) Right of First Offer. After September 15, 2000, subject to the terms
and conditions of this Section 1.1(d), Tenant shall have a continuing right of
--------------
first offer to include within the Premises any space which becomes available in
the Building (the "Offer Space"). Within thirty (30) days after the
commencement of each calendar year, Tenant shall notify Landlord in writing if
Tenant is interested in increasing the size of the Premises and stating the
amount of space that Tenant seeks. If Tenant does not deliver such notice to
Landlord within such thirty (30) day period, then Tenant shall have no rights to
lease any Offer Space during that calendar year and Landlord shall not be
required to deliver any Availability Notices (as defined below) to Tenant during
that calendar year. Tenant may not exercise its right to lease any Offer Space
during any period when an Event of Default is outstanding under this Lease
(provided, however, that the cure period for any Event of Default shall be
shortened to coincide with the period during which Tenant must respond to an
Availability Notice under the following paragraph) or if Tenant ceases to occupy
the entire Initial Premises. If less than three (3) years remain on the Initial
Term, Tenant must exercise its Extension Option under Section 2.1(b) in order to
--------------
lease any Offer Space and if no Extension Option remains to be exercised,
Tenant's rights under this Section 1.1(d) shall terminate. For purposes of this
--------------
Section 1.1(d), the phrase "any space which becomes available" shall mean any
- --------------
space in the Building which is vacant at the time of the Availability Notice,
or, if the Offer Space is less than a full floor, is scheduled to be vacated
within six (6) months of the Availability Notice, or, if the Offer Space is a
full floor or more, is scheduled to be vacated within twelve (12) months of the
2
<PAGE>
Availability Notice, but no space shall be considered Offer Space unless it has
been initially leased to another tenant under a written lease agreement (an
"Initial Lease").
Landlord shall not offer to lease nor lease any Offer Space to a party
other than Tenant without first providing Tenant with written notice
("Availability Notice") that the Offer Space is available to lease or will be
available to lease within the next six (6) months after the Availability Notice
for Offer Space that is less than one (1) full floor, or within the next twelve
(12) months after the Availability Notice for Offer Space that is one (1) full
floor or more. Tenant shall have five (5) days after receipt of an Availability
Notice within which to notify Landlord in writing of Tenant's intent to lease
all or a portion (subject to the qualifications set forth in the following
sentence) of the Offer Space identified in such notice. Tenant may elect to
include in the Premises all of the Offer Space identified in such Availability
Notice or may elect to exclude any whole floor increment of the Offer Space
identified in such Availability Notice and to include the balance of the Offer
Space in the Premises; provided, however that if similar size Offer Space is
-------- -------
available on two floors, Tenant may not elect to take only the non-contiguous
portion of the Offer Space. For example, if an Availability Notice indicates
that half of the second floor and half of the third floor are available to
lease, then Tenant may elect to take all of the third floor Offer Space or all
of the second and third floor Offer Space but may not elect to take only the
second floor Offer Space. If Tenant does not exercise its option with respect
to the Offer Space described in an Availability Notice then Landlord may lease
all or any portion of the space identified therein to a third party on any terms
that Landlord may deem acceptable.
Any Offer Space leased by Tenant under this Section 1.1(d) shall be leased
--------------
under all of the terms and conditions of this Lease except that (i) Base Rent
for the Offer Space shall be equal to the Fair Market Rent determined pursuant
to Section 2.6(b) below, (ii) Landlord shall deliver the space to Tenant as
--------------
previously improved but Landlord shall have no obligation to install any Tenant
Improvements in the space or to contribute any money towards any alteration or
improvement thereof, and (iii) Rent shall commence on the Offer Space on the
first day on which both (A) the Tenant is permitted by the Landlord to occupy
such Offer Space, and (B) at least thirty (30) days have passed since Landlord
provided Tenant with the Availability Notice with respect to such space. Any
Offer Space leased by Tenant under this Section 1.1(d) shall become part of the
--------------
Premises and be governed by the terms of this Lease and shall have the same
expiration date, renewal options, and services. Tenant's right to lease the
Offer Space is subject to any renewal or expansion options or similar rights
granted to any other tenant under an Initial Lease. Tenant shall forfeit any
rights under this Section 1.1(d) immediately upon being deemed Chronically Late,
--------------
which forfeiture may not be cured even if Tenant complies with the terms of
Section 3.1 and pays the Additional Security Deposit.
- -----------
(e) Adjustment of Proportionate Share. If Tenant exercises any option to
include Expansion Space, ROPR Space or Offer Space in the Premises, Tenant's
Proportionate Share shall be adjusted and upon Landlord's request, Tenant shall
execute an amendment to this Lease or other written confirmation documenting the
new Net Rentable Area and Useable Area in the Premises, Tenant's Proportionate
Share of the Building and the Project and the applicable Base Rent for such
space.
1.2 Landlord's Reserved Rights. In addition to all other rights reserved by
Landlord under this Lease, Landlord reserves from the leasehold estate
hereunder, and the Premises shall not include, (a) the exterior surfaces of the
walls and windows bounding the Premises, and (b) all space located within the
Premises for Major Vertical Penetrations (as defined below), conduits, electric
and all other utilities, heating ventilation and air-conditioning and fire
protection and life safety systems, sinks or other Building or Project
facilities that do not constitute Tenant Improvements (collectively, "Building
Components"). Landlord shall have the use of the Building Components and access
through the Premises for operation, maintenance, repair or replacement thereof.
Landlord shall have the right from time to time, to install, remove or relocate
any of the Building Components within the Premises to locations that do not
permanently and materially reduce the square footage of the Premises. As used
herein, the term "Major Vertical Penetrations" shall mean the area or areas
within Building stairs (excluding the landing at each
3
<PAGE>
floor), elevator shafts, and vertical ducts that service more than one floor of
the Building. The area of Major Vertical Penetrations shall be bounded and
defined by the dominant interior surface of the perimeter walls thereof (or the
extended plane of such walls over areas that are not enclosed). Major Vertical
Penetrations shall exclude, however, areas for the specific use of Tenant or
installed at the request of Tenant, such as special stairs or elevators.
1.3 Common Areas. Tenant shall have the nonexclusive right (in common with
other tenants or occupants of the Project, Landlord and all others to whom
Landlord has granted or may hereafter grant such rights) to use the Common
Areas, subject to such reasonable rules and regulations as Landlord may from
time to time impose. Landlord may at any time close temporarily any Common Areas
to make repairs or changes therein or to effect construction, repairs, or
changes within the Project, or to prevent the acquisition of public rights in
such areas, or to discourage parking by parties other than tenants of the
Project, and may do such other acts in and to the Common Areas as in its
judgment may be desirable; provided that any such acts shall not prevent Tenant
from reasonable access to, quiet enjoyment and use of the Premises at all times
other than emergencies. Landlord may from time to time permit portions of the
Common Areas to be used exclusively by specified tenants. Landlord may also,
from time to time, place or permit customer service and information booths,
kiosks, stalls, push carts and other merchandising facilities in the Common
Areas, provided, however, that if Landlord receives rent that is calculated
-------- -------
on the basis of the square feet occupied by such installation, such area shall
be excluded from the Common Areas during the period for which such rent is
received. "Common Areas" shall mean (a) with respect to any Building, any of the
following or similar items to the extent they are included in such Building: the
total square footage of areas of the Building devoted to non-exclusive uses such
as ground floor lobbies and elevator foyers; fire vestibules; mechanical areas;
restrooms and corridors on all floors; elevator foyers and lobbies on multi-
tenant floors; electrical and janitorial closets; telephone and equipment rooms;
and other similar facilities maintained for the benefit of Building tenants and
invitees, but shall not mean Major Vertical Penetrations; and (b) all parking
garage vestibules, restrooms (including locker rooms and shower facilities
located in the garage), loading docks, exercise and conference facilities
available for use by Project tenants (if any), walkways, roadways, sidewalks,
surface parking areas, parkways, driveways, trash areas, mechanical areas,
landscaped areas, courtyards or other similar facilities maintained for the
benefit of Project tenants and invitees.
Notwithstanding anything in this Section 1.3 to the contrary, if Tenant
-----------
leases and occupies the entire Building, Landlord shall not place or permit
customer service and information booths, kiosks, stalls, push carts or other
merchandising facilities in the Common Areas inside the Building, nor shall
Landlord permit portions of the Common Areas inside the Building to be
exclusively occupied by other tenants of the Project, without Tenant's prior
written consent. Furthermore, if Tenant leases and occupies the entire
Building, Tenant with consent of Landlord, which shall not be unreasonably
withheld, conditioned or delayed, may use portions of the Common Areas inside
the Building for information booths, kiosks, stalls, push carts, and other
merchandising facilities for use solely by Tenant's employees provided such
items are not visible from outside the Building. Tenant shall not have the
right to install any merchandising facilities for use by any persons other than
its employees without the Landlord's prior written consent which may be given,
withheld or conditioned in Landlord's sole discretion.
1.4 Calculation of Net Rentable Area; Useable Area. Tenant acknowledges that
the term "Net Rentable Area" as used in this Lease shall mean the area or areas
of space within the Project determined by Landlord in accordance with a modified
BOMA standard as described below.
(a) Net Rentable Area on a single tenancy floor shall be determined by
measuring from the inside surface of the outer pane of glass and extensions of
the plane thereof in non-glass areas to the inside surface of the opposite outer
pane of glass and extensions of the plane thereof in non-glass areas and shall
include all areas within the envelope created by extending the dominant plane of
the outside walls of the Building, excluding Major Vertical Penetrations, plus
Tenant's pro rata share of Common Areas. The calculation of Net Rentable Area
set forth in the Basic Lease Information Sheet
4
<PAGE>
includes Tenant's pro rata share of Common Areas. In the event of any changes to
the Project, Landlord shall determine Tenant's pro rata share of Common Areas
using any commercially reasonable allocation formula selected by Landlord. No
deductions from Net Rentable Area shall be made for columns or projections
necessary to the Building except for Major Vertical Penetrations.
(b) Net Rentable Area for a multi-tenant floor shall include all space
within the demising walls (measured from the mid-point of the demising walls
and, in the case of exterior walls, measured as defined in (a) above), plus
Tenant's pro rata share of Common Areas. The calculation of Net Rentable Area
set forth in the Basic Lease Information Sheet includes Tenant's pro rata share
of Common Areas. In the event of any changes to the Project, Landlord shall
determine Tenant's pro rata share of Common Areas using any commercially
reasonable allocation formula selected by Landlord. No deductions from Net
Rentable Area shall be made for columns or projections necessary to the Building
except for Major Vertical Penetrations.
(c) Tenant acknowledges that the term "Useable Area" means the Net Rentable
Area less the Common Areas included in the calculation thereof.
(d) The Net Rentable Area in the Premises and the Project has been
calculated on the basis of the foregoing methodology based on the Base Building
Plans (as defined in Exhibit C) and is stipulated for purposes hereof to be the
amount stated in the Basic Lease Information Sheet as Item 8, subject to
------
verification pursuant to this Section 1.4(d) and to adjustment to reflect
--------------
changes in Net Rentable Area or Useable Area over time and as permitted by this
Lease. Tenant shall have a one-time option to request verification of the Net
Rentable Area in the Initial Premises, the Building or the Project, at Tenant's
sole cost and expense, within thirty (30) days of taking possession of the first
floor of the Initial Premises. Such verification shall be for the sole purpose
of confirming that the space as constructed conforms to the Building Plans. If
any additional space is included within the Premises after the Term Commencement
Date in accordance with Sections 1.1(b), (c), or (d) then Tenant shall have the
--------------- --- ---
option to request verification of the Net Rentable Area included in such space
for the sole purpose of confirming that the space as constructed conforms to
the Building Plans, within thirty (30) days of Landlord delivering possession
thereof to Tenant. Such verification shall be performed by Landlord's
architect in strict accordance with the modified BOMA standards set forth in
this Section 1.4. Landlord's architect's determination shall be conclusive. If
-----------
such verification reveals a variance of one percent (1%) or more from the
figures set forth in the Basic Lease Information Sheet as Item 8 or Landlord's
------
later measurement thereof, such figures shall be adjusted accordingly. Tenant's
failure to request verification within the time allowed under this Section
-------
1.4(d) shall be deemed a waiver of such rights, and the figures set forth in the
- ------
Basic Lease Information Sheet as Item 8 or Landlord's later measurement thereof
------
shall be conclusively deemed to be correct, provided, however, that such figures
-------- -------
are subject to adjustment to reflect changes in Net Rentable Area or Useable
Area over time and as permitted by this Lease.
ARTICLE 2.
TERM, USE OF PREMISES AND BASE RENT
-----------------------------------
2.1 Term.
(a) Except as provided in Exhibit C, Paragraph 18, the term "Term
--------- ------------
Commencement Date" shall mean the later of (i) the date of Substantial
Completion (as defined in Exhibit C to this Lease) of the entire Initial
---------
Premises, and (ii) the Scheduled Commencement Date, as stated in the Basic Lease
Information Sheet as Item 9. The "Initial Term" of this Lease shall mean the
------
number of years and/or months set forth in the Basic Lease Information Sheet as
Item 10, commencing on the first day of the calendar month following the Term
- -------
Commencement Date (or on the Term Commencement Date if it is the first day of a
calendar month) through and including the Expiration Date. "Expiration Date"
shall mean the last day of the Initial Term or any Extension Term under Section
-------
2.1(b) below, or such earlier date upon which this Lease is terminated pursuant
- ------
to the terms hereof. The "Term" of this Lease shall mean the Initial Term and
the Extension Term (as defined in Section 2.1(b)), if any. For all purposes
--------------
5
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hereunder, the term "Lease Year" shall mean a twelve (12) month period starting
on the Term Commencement Date or any anniversary thereof, the first Lease Year
shall begin on the Term Commencement Date and the final Lease Year may include
more than twelve (12) months. The Scheduled Commencement Date represents merely
the parties' estimate of the Term Commencement Date and is the date before which
Tenant is not obligated to accept possession of the Initial Premises. If the
Initial Premises are Substantially Complete prior to the Scheduled Commencement
Date, Tenant shall have the option to take occupancy of the Initial Premises and
the Term Commencement Date shall be the date of such occupancy. Landlord shall
provide Tenant as much notice as circumstances reasonably allow of the date when
Landlord expects to achieve Substantial Completion, based upon the progress of
the work. The covenants and conditions of this Lease shall be effective as of
the mutual execution of this Lease notwithstanding the Term Commencement Date
set forth herein.
(b) Extension Term. Provided that no Event of Default is outstanding at
the time of exercise or at any time thereafter prior to the initially scheduled
Expiration Date, Tenant shall have one (1) option to extend the Initial Term of
this Lease (the "Extension Option") for the number of years and/or months set
forth in the Basic Lease Information Sheet as "Extension Term" in Item 10,
-------
commencing on the day after the expiration of the Initial Term and continuing
through the Expiration Date, subject to all of the terms and conditions of this
Lease, except that Base Rent shall be adjusted as provided below. Tenant shall
provide Landlord with irrevocable written notice of Tenant's intent to exercise
its Extension Option no later than twelve (12) months prior to the expiration of
the Initial Term. Tenant's Extension Option shall be personal to Tenant and may
not be exercised by any Transferee, other than a Permitted Transferee, without
Landlord's prior written consent. Base Rent for the Extension Term shall be
determined as provided in Section 2.6(b). Tenant shall forfeit any rights under
--------------
this Section 2.1(b) immediately upon being deemed Chronically Late, which
--------------
forfeiture may not be cured even if Tenant complies with the terms of Section
-------
3.1 and pays the Additional Security Deposit.
- ---
(c) Early Access. Landlord shall provide Tenant with access and entry to
each floor of the Initial Premises as provided in Exhibit C, during the thirty
---------
(30) days prior to Substantial Completion of such floor for performance of
Tenant's Work (as defined in Exhibit C), at times consistent with the schedule
---------
for completion of Landlord's Work, subject to all the terms and conditions of
the Lease including all of the terms of Exhibit C hereto. Any early access
---------
allowed under this Section 2.1(c) shall be for the sole purpose of completing
--------------
Tenant's Work as described herein. Landlord shall have no duty or obligation to
accelerate or modify the schedule for completion of Landlord's Work to
accommodate Tenant's rights under this Section. If Tenant's access in
accordance with this Section 2.1(c) delays Substantial Completion, such delay
--------------
will be deemed to be a Tenant Delay (as defined in Exhibit C hereto). Tenant
---------
shall be solely responsible for any increased costs incurred by Landlord as a
result of or in connection with Tenant's access to the Premises under this
Section.
2.2 Delay in Delivery. If Landlord, for any reason whatsoever, cannot
deliver possession of the Initial Premises in the condition required under this
Lease to Tenant on the Scheduled Commencement Date (as such date may be extended
by any period of Tenant Delay (as defined in Exhibit C) and by any delay
---------
attributable to Force Majeure (as defined in Section 14.20 below)), this Lease
-------------
shall not be void or voidable, nor shall Landlord be liable to Tenant for any
loss or damage resulting therefrom, except as stated in this Section 2.2. Tenant
------------
understands and agrees that the Term Commencement Day may be delayed beyond the
Scheduled Commencement Date. The provisions of this Section 2.2 shall not apply
-----------
to the ROPR Space or Offer Space.
(a) Late Delivery Payment. Notwithstanding the foregoing, if Landlord does
not deliver possession of (i) one (1) full floor of the Initial Premises to
Tenant within ninety (90) days after the Scheduled Commencement Date (as such
date may be extended by any period of Tenant Delay and by any delay attributable
to Force Majeure), and (ii) the entire Initial Premises to Tenant within one
hundred twenty (120) days after the Scheduled Commencement Date (as such date
may be extended by any period of Tenant Delay and by any delay attributable to
Force Majeure), then Landlord shall pay to Tenant the
6
<PAGE>
sum of Thirty Thousand Dollars ($30,000) per month until Landlord delivers
possession of the entire Initial Premises in the condition required under this
Lease, up to a maximum payment of One Hundred Eighty Thousand Dollars ($180,000)
(the "Late Delivery Payment") as liquidated damages but not as a penalty. The
Late Delivery Payment shall be prorated for any partial month (based on the
actual days in that month) and applied as a credit against the first
installments of Rent falling due hereunder or shall be paid on any termination
of this Lease pursuant to Section 2.2(b) below. Tenant acknowledges that
--------------
actual damages may be difficult to ascertain and that this provision does not
constitute a penalty. The parties acknowledge that the Late Delivery Payment has
been specifically negotiated between Landlord and Tenant and that the amount of
such payment represents a reasonable estimation of the damages that Tenant would
suffer in the event Landlord fails to deliver possession of the Premises in a
timely manner. Except as provided in Section 2.2(c) below, Tenant waives any
--------------
other rights or remedies available to it at law or equity for such late
delivery.
(b) Termination for Delayed Delivery. If Landlord does not deliver
possession of the Initial Premises to Tenant (i) within one hundred eighty (180)
days (plus any additional period of delay attributable to Force Majeure or
Tenant Delay) after the Scheduled Commencement Date, or (ii) within two hundred
seventy (270) days (plus any additional period of delay attributable to casualty
or condemnation proceedings, Force Majeure or Tenant Delay, provided, however
-------- -------
that such period may be extended for Force Majeure for a maximum of one hundred
eighty (180) days) after the Scheduled Commencement Date, then in either such
event, Landlord or Tenant may terminate this Lease by delivery of written notice
to the other party but in no event shall Landlord be liable to Tenant for any
loss or damage resulting from such delay except for the Late Delivery Payment.
Tenant must provide an irrevocable written termination notice to Landlord within
thirty (30) days after the expiration of either such period or shall be deemed
to have waived its right to terminate this Lease. If Tenant notifies Landlord
that it wishes to terminate the Lease pursuant to this provision and Landlord
delivers possession of the Initial Premises to Tenant within thirty (30) days
after receipt of such notice from Tenant, then the notice of termination shall
be void and this Lease shall remain in full force and effect. If the Lease is
terminated pursuant to this provision then the Lease shall terminate as of the
effective date of such notice and thereafter neither party shall be liable to
the other for any loss or damage resulting from such delay, except for
Landlord's obligation to pay the Late Delivery Payment.
2.3 Confirmation. When the actual Term Commencement Date and the Rent
Commencement Dates are determined, Tenant shall, within ten (10) days after
receipt thereof, execute and return to Landlord a Lease Commencement Certificate
in the form of Exhibit E attached hereto, or any similar form requested by
---------
Landlord, confirming the information thereon. Failure within such time to
execute and return or to object in writing to the Lease Commencement Certificate
shall be conclusively deemed to be an acknowledgement that Tenant agrees to the
terms shown thereon and Tenant shall be deemed to have confirmed that the
certificate is correct as presented.
2.4 Use. Subject to the restrictions set forth in Section 7.1, Tenant
-----------
shall use the Premises solely for executive, professional, corporate or
administrative offices (the "Permitted Use"). So long as HomeGrocer.com, Inc. or
a Permitted Transferee is the tenant hereunder, Tenant may use the Premises for
the following ancillary uses if such uses are allowed by law and provided such
ancillary uses are related to Tenant's internal operations or are offered only
to Tenant's employees: a call center, data center (including without limitation
computer server and data warehousing rooms and with custom HVAC and construction
requirements to be provided by Tenant at its sole cost and expense), employee
lunch room with accommodations for catering and food kiosks operated by or
contracted for by Tenant, day care facility (for children of Tenant's employees
only) operated by or contracted for by Tenant, exercise and shower facilities
for Tenant's employees only, electrical and telecommunications closets on each
floor with risers between floors for cabling, telecommunications and back-up
power supply facilities, a company store and/or concierge service for Tenant's
employees (the "Expanded Uses") and for no other use or purpose without
Landlord's prior written consent, which may be withheld or conditioned in
7
<PAGE>
Landlord's sole discretion. Notwithstanding the foregoing, Tenant may enter into
Transfers (as defined in Section 8.1 below) that permit the Transferees to
-----------
use the Premises for Expanded Uses, provided that (a) no individual Transferee
may use more than twenty-five percent (25%) of its transferred space for
Expanded Uses, and (b) all Transferees collectively may not use more than
twenty-five percent (25%) of the total transferred space for Expanded Uses.
Landlord makes no representation or warranty that the Premises may be used or
are suitable for any of the Expanded Uses and Tenant shall have no right to seek
any land use variance to allow any Expanded Use without Landlord's prior
approval. Landlord shall not be required to construct the Building or the
Project to accommodate any Expanded Use, and any modification or alteration of
the Building or the Premises to accommodate such uses shall be subject to
Landlord's prior written consent and shall be performed at Tenant's sole cost
and expense. Notwithstanding the foregoing, for the purpose of limiting the
type of use permitted by Tenant, or any party claiming through Tenant, but
without limiting Landlord's right to lease any portion of the Project to a
tenant of Landlord's choice, the Permitted Use shall not include: (a) offices
of any agency or bureau of the United States or any state or political
subdivision thereof; (b) offices or agencies of any foreign government or
political subdivision thereof; (c) offices of any health care professionals or
service organization, except for administrative offices where no diagnostic,
treatment or laboratory services are performed; (d) schools or other training
facilities that are not ancillary to executive, professional or corporate
administrative office use; (e) retail or restaurant uses except as provided
above; (f) broadcast studios or other broadcast production facilities, such as
radio and/or television stations, except for internal corporate communications;
(g) product display or demonstration facilities except interior displays
directed at Tenant's employees and guests and not visible from outside the
Building; (h) offices at which deposits or bills are regularly paid in person by
customers; or (i) personnel agencies, except offices of executive search firms.
2.5 Payments by Tenant. As used herein, the term "Rent" shall include Base
Rent, Operating Costs (as defined in Article 4 below) and all other sums payable
---------
by Tenant to Landlord. Tenant shall pay Rent at the times and in the manner
herein provided. All obligations of Tenant hereunder to make payments to
Landlord shall constitute Rent and failure to pay the same when due shall give
rise to the rights and remedies provided in Section 13.2.
------------
2.6 Payment of Base Rent.
(a) General. Tenant's obligation to pay Rent and its other obligations
under this Lease with respect to occupancy shall commence upon the Rent
Commencement Date for each floor of the Initial Premises and for the ROPR Space
and Offer Space as set forth above (except as expressly otherwise provided
herein with respect to obligations arising earlier). The "Rent Commencement
Date" shall mean with respect to each full floor of the Initial Premises, the
earlier of: (i) the date of Substantial Completion of the Tenant Improvements
and the Base Building Improvements on such floor, or (ii) the date on which
Tenant takes possession of such floor; provided, however that Tenant's access
-------- -------
pursuant to Section 2.1(c) above shall not trigger the Rent Commencement Date.
--------------
Tenant shall pay the Base Rent in the amounts set forth in the Basic Lease
Information Sheet as Item 11 (as the same may be adjusted from time to time
-------
hereunder) in advance on or before the Rent Commencement Date for each floor and
thereafter the first day of each calendar month during the Term and any
extensions or renewals thereof; provided, however, that after the Rent
-------- --------
Commencement Date for each floor, Base Rent and Tenant's Proportionate Share of
Operating Costs for such floor for each month prior to the Term Commencement
Date shall be paid in advance on the first day of each month even though the
Term has not commenced. All payments of Rent due under this Lease shall be
payable in advance, without demand (except as specifically provided herein) and
without reduction, abatement (except as such right is specifically granted to
Tenant under this Lease), counterclaim or setoff, at the address specified in
the Basic Lease Information Sheet as Item 6, or at such other address as may be
------
designated by notice to Tenant from Landlord.
8
<PAGE>
(b) Adjustment of Base Rent. In the event that Tenant exercises its right
to lease any Offer Space under Section 1.1(d) and/or exercises its Extension
--------------
Option under Section 2.1(b), the Base Rent for such space or such period shall
--------------
be determined as follows:
(i) Offer Space Base Rent. Base Rent for the Offer Space shall be
equal to the greater of (A) the Fair Market Rent, as defined in Section
-------
2.6(b)(iii), as of the date the Offer Space is included in the Premises (the
- -----------
"Offer Space Adjustment Date"), or (B) the Base Rent rate set forth for the
Offer Space in the Basic Lease Information Sheet.
(ii) Extension Term Base Rent. Base Rent for the Extension Term shall
be the greater of (A) the Fair Market Rent (as defined in Section 2.6(b)(iii)
-------------------
below) based on a five (5) year term to begin on the first day of the Extension
Term (the "Extension Term Adjustment Date"), or (B) the Base Rent in effect on
the last day of the Initial Term.
(iii) "Fair Market Rent" as of any date shall mean the per-square-
foot rental rate obtained by Landlord under at least two (2) direct leases,
including fair market expansions and renewals, for comparable space in the
Project executed in the previous six (6) month period. Space in the Project
shall be deemed comparable space if it is of comparable quality construction
(considering existing tenant improvements or tenant improvement allowances to
construct new improvements), has been leased for a comparable term, and is of
comparable size. If no comparable space has been leased in the Project during
the prior six (6) months, then the Fair Market Rent shall mean the per-square-
foot rental rate for a direct lease, including expansions or renewals, for
comparable space, leased for a comparable term, with comparable quality
construction (considering existing tenant improvements or tenant improvement
allowances to construct new improvements), in comparable Class A office projects
in the Market Area, taking into consideration: location in the Building or
other building, extent of service provided or to be provided, the ownership of
the comparable space, the time the particular rate under consideration became or
is to become effective and any other relevant terms or conditions. "Market
Area" shall mean projects and buildings located in the highway corridor
beginning at the Plaza at Yarrow Bay, continuing along the State Highway 520 to
Interstate Highway 405 and terminating at the Newport Corporate Center located
at the southeast quadrant of the intersections of I-405 and Interstate Highway
90, but excluding projects located east of 100th Avenue NE, west of 112th Avenue
NE, north of NE 2nd Street and south of NE 10th Street, all in the City of
Bellevue.
The term "Adjustment Date" shall mean each of the Offer Space Adjustment
Date and the Extension Term Adjustment Date, as applicable to the calculation of
Fair Market Rate then under consideration. Fair Market Rent as of any
Adjustment Date shall be determined by Landlord with written notice given to
Tenant not later than ninety (90) days prior to such Adjustment Date, subject to
Tenant's right of arbitration pursuant to the provisions of Section 2.6(b)(iv)
------------------
following the failure to resolve any disagreement in accordance with Section
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13.9. Failure on the part of Landlord to give such notice in a timely manner
- ----
shall not vitiate the right to require adjustment of Base Rent, but such delay
shall result in deferral of the Adjustment Date to the date ninety (90) days
after the date of such notice. After the process provided in Section 13.9 has
------------
been undertaken, Tenant may by written notice demand arbitration within thirty
(30) days after receipt of notice from Landlord of Landlord's determination of
Fair Market Rent, and if no such notice is delivered, Tenant shall be deemed to
have accepted the Fair Market Rent as determined by Landlord. Should Tenant
elect to arbitrate and should the arbitration not be concluded prior to the
Adjustment Date, Tenant shall pay Rent to Landlord after the Adjustment Date,
including Base Rent adjusted to reflect Fair Market Rent as Landlord has so
determined. If the amount of Fair Market Rent as determined by arbitration is
greater than or less than Landlord's determination, then any adjustment required
to correct the amount previously paid shall be made by payment by the
appropriate party within ten (10) days after such determination of Fair Market
Rent by arbitration.
(iv) Arbitration of Fair Market Rent. If Tenant disputes the amount
claimed by Landlord as Fair Market Rent, the parties shall attempt to agree on
Fair Market Rent within
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<PAGE>
thirty (30) days thereafter, and in accordance with Section 13.9. If such
------------
dispute cannot be resolved by mutual agreement, the dispute may be submitted to
arbitration. The award rendered in any such arbitration may be entered in any
court having jurisdiction and shall be final and binding between the parties.
The arbitration shall be conducted and determined in the City of Bellevue,
Washington, in accord with the then-prevailing commercial arbitration rules of
the American Arbitration Association or its successor for arbitration of
commercial disputes except that the procedures mandated by said rules shall be
modified as follows:
(A) Tenant shall make demand for arbitration in writing within
thirty (30) days after receipt of Landlord's determination of Fair Market Rent.
Tenant's arbitration demand shall specify (a) the name and address of the person
to act as the arbitrator on its behalf, and (b) Tenant's determination of Fair
Market Rent. The arbitrator shall be qualified as a real estate appraiser with
at least five (5) years experience appraising first-class commercial office
space in the Market Area who would qualify as an expert witness over objection
to give testimony addressed to the issue in a court of competent jurisdiction.
Failure on the part of Tenant to make a timely and proper demand for arbitration
shall constitute a waiver of the right to arbitration. Within ten (10) Business
Days after receipt of Tenant's demand for arbitration, Landlord shall have the
right to give notice in writing to Tenant of Landlord's adjusted determination
of Fair Market Rent. Within ten (10) Business Days following Tenant's receipt of
such notice, if Tenant and Landlord have not agreed upon Fair Market Rent,
Tenant shall notify Landlord in writing that Tenant desires to renew its demand
for arbitration. Failure on the part of Tenant to give such notice shall
constitute a waiver of the right to arbitration, and Tenant shall be deemed to
have accepted Landlord's determination of Fair Market Rent. Within ten (10)
Business Days after the receipt of a notice renewing the demand for arbitration,
Landlord shall give notice to Tenant, specifying the name and address of the
person designated by Landlord to act as arbitrator on its behalf who shall be
similarly qualified. If Landlord fails to notify Tenant of the appointment of
its arbitrator, within or by the time above specified, then the arbitrator
appointed by Tenant shall be the arbitrator to determine the issue.
(B) If two (2) arbitrators are chosen pursuant to the preceding
Section, the arbitrators so chosen shall meet within ten (10) Business Days
after the second arbitrator is appointed and, if within ten (10) Business Days
after such first meeting the two arbitrators have not agreed upon a
determination of Fair Market Rent, they shall appoint a third arbitrator, who
shall be a competent and impartial person with qualifications similar to those
required of the first two arbitrators. If they are unable to agree upon such
appointment within five (5) Business Days after expiration of said ten (10) day
period, the third arbitrator shall be selected by the parties themselves if they
can agree thereon, within a further period of ten (10) Business Days. If the
parties do not so agree, then either party, on behalf of both, may request
appointment of such a qualified person by a court of the State of Washington
sitting in King County pursuant to RCW 7.04.050. Request for appointment shall
be made in writing with a copy given to the other party. Each party agrees that
said court shall have the power to make the appointment, provided, however, if
-------- -------
the court does not make a determination within ten (10) days of request by
either party for the appointment of a third arbitrator, appointment of such
third arbitrator shall be made in accordance with the selection procedure of the
commercial arbitration rules of the American Arbitration Association or its
successor for arbitration of commercial disputes. The three (3) arbitrators
shall decide the dispute, if it has not previously been resolved, by following
the procedure set forth below.
(C) The arbitrator selected by each of the parties shall state
in writing his determination of the Fair Market Rent, supported by the reasons
therefor, and shall deliver a copy to each party. The arbitrators shall arrange
for a simultaneous exchange of such proposed resolutions. The role of the third
arbitrator shall be to select which of the two (2) proposed resolutions most
closely approximates his determination of Fair Market Rent. The third arbitrator
shall have no right to propose a middle ground or any modification of either of
the proposed resolutions. The resolution he
10
<PAGE>
chooses as most closely approximating his determination of Fair Market Rent
shall constitute the decision of the arbitrators and shall be final and binding
upon the parties.
(D) If any arbitrator fails, refuses or is unable to act, his
successor shall be appointed by him, but in the case of the third arbitrator,
his successor shall be appointed in the same manner as provided for appointment
of the third arbitrator. The arbitrators shall attempt to decide the issue
within ten (10) Business Days after the appointment of the third arbitrator.
Any decision in which the arbitrator appointed by Landlord and the arbitrator
appointed by Tenant concur shall be binding and conclusive upon the parties.
Each party shall pay the fees and costs of its own counsel. The losing party
shall pay the fees and costs of the arbitrators and of the expert witnesses (if
any) of the prevailing party as well as those of its expert witnesses. For
purposes hereof, the losing party shall be that party whose selected
arbitrator's statement of Fair Market Rent was not selected by the third
arbitrator.
(E) The arbitrators shall have the right to consult experts and
competent authorities with factual information or evidence pertaining to a
determination of Fair Market Rent, but any such consultation shall be made in
the presence of both parties with full right on their part to cross-examine.
The arbitrators shall render their decision and award in writing and shall
deliver copies to each party. The arbitrators shall have no power to modify the
provisions of this Lease.
2.7 Partial Months. If a Rent Commencement Date occurs on other than the
first day of a calendar month, then Base Rent and Operating Costs for such
partial calendar month shall be prorated using the actual number of days the
applicable portion of the Premises is leased and the prorated installment shall
be paid on such Rent Commencement Date together with any other amounts payable
on that day. If the Expiration Date occurs on other than the last day of a
calendar month, then Base Rent and Operating Costs for such partial calendar
month shall be prorated using the actual number of days the Premises are leased
and the prorated installment shall be paid on the first day of the calendar
month in which the Expiration Date occurs.
ARTICLE 3.
SECURITY DEPOSIT
----------------
3.1 Security Deposit Amount. Concurrently with execution hereof, Tenant
shall deliver to Landlord a security deposit in an amount equal the number of
square feet of Net Rentable Area in the Initial Premises multiplied by Twenty-
nine and 88/100 Dollars ($29.88) (the "Security Deposit Amount") as security for
the full and faithful performance of Tenant's obligations under this Lease (the
"Security Deposit"). If Tenant exercises the Expansion Option in a timely manner
and leases the entire Building pursuant to its Expansion Option, the Security
Deposit Amount shall be equal to the number of square feet of Net Rentable Area
in the Premises multiplied by Twenty-nine and 57/100 Dollars ($29.57). If Tenant
leases any Offer Space, the Security Deposit Amount shall be increased by
Sixteen and 50/100 Dollars ($16.50) per square foot of Net Rentable Area added
to the Premises. If Tenant leases any ROPR Space, the Security Deposit Amount
shall be increased by Twenty-nine and 88/100 Dollars ($29.88) per square foot of
Net Rentable Area added to the Premises. Tenant shall deliver such increased
amount to Landlord within five (5) days after exercising any such options and if
Tenant does not deposit such additional amount then Tenant's exercise of such
rights shall be void and of no further force and effect.
Each time Tenant receives notice from Landlord that Tenant is Chronically
Late, Tenant shall pay an additional Security Deposit equal to three (3) months
Base Rent (at the Base Rent rate then in effect) (the "Additional Security
Deposit"). Tenant shall pay the Additional Security Deposit to Landlord within
ten (10) days following receipt of written notice from Landlord that Tenant is
Chronically Late and if such sum is received in a timely manner, Tenant shall no
longer be deemed to be Chronically Late; provided, however, that Landlord may,
-------- -------
at its option, elect within ten (10) days thereafter to reject the Additional
Security Deposit and to exercise its remedies under Section 13 with respect to
----------
the Event of Default. If Landlord accepts payment of the Additional Security
Deposit, the Additional Security Deposit
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may be applied in any manner permitted for the Security Deposit and, upon
expiration of the Lease shall be applied to Base Rent for the final months of
the Term.
On the fifth (5th) anniversary of the Term Commencement Date, the Security
Deposit Amount shall be reduced by fifty percent (50%) for the balance of the
Term (including the Extension Term). Tenant shall forfeit its rights under the
prior sentence immediately upon being deemed Chronically Late, which forfeiture
may not be cured even if Tenant complies with the terms of the prior paragraph
and pays the Additional Security Deposit. If Tenant's Standard & Poor's
corporate credit rating reaches a level of BBB or better, then Tenant shall not
be required to furnish a Security Deposit for the initial Security Deposit
Amount and the initial Security Deposit Amount (or the balance thereof then in
Landlord's possession), shall be returned to Tenant within ten (10) days
following Landlord's receipt of written notice from Tenant that it has achieved
such credit rating together with proof of such rating reasonably satisfactory to
Landlord; provided, however, that if Tenant's Standard & Poor's corporate credit
-------- -------
rating subsequently falls below a level of BBB, Tenant shall be required to
provide a Security Deposit in the Security Deposit Amount within thirty (30)
days thereafter. Upon request, Tenant shall provide evidence to Landlord of its
Standard & Poor's corporate credit rating. The foregoing provision shall not
apply to the Additional Security Deposit which shall be held by Landlord and
applied as set forth in the preceding paragraph.
3.2 Letter of Credit. In lieu of depositing cash to satisfy its obligation
with respect to the Security Deposit, Tenant may provide an irrevocable, fully
assignable, and unconditional standby letter of credit, issued by a financial
institution acceptable to Landlord and with a term of at least one (1) year,
drawable by Landlord upon presentation, and substantially in the form attached
hereto as Exhibit H (the "Letter of Credit"). Landlord may draw upon the Letter
---------
of Credit under the same terms and conditions as Landlord may apply a cash
security deposit. In addition, Landlord may draw upon the Letter of Credit if
Tenant fails to deliver to Landlord a renewal or extension of the Letter of
Credit for a term of not less than one (1) year at least thirty (30) days prior
to the expiration date of the existing Letter of Credit.
3.3 Use of Security Deposit. Landlord may (but shall not be required to) use
the Security Deposit or any portion thereof to cure any defaults on the part of
Tenant or to compensate Landlord for any damage or costs Landlord incurs as a
result of Tenant's failure to perform any of its covenants or obligations
hereunder. In such event, and upon written notice from Landlord to Tenant
specifying the amount of the Security Deposit so utilized by Landlord and the
purpose for which such amount was applied, Tenant shall immediately deposit with
Landlord an amount sufficient to return the Security Deposit to the full
Security Deposit Amount. Tenant acknowledges that any use of the Security
Deposit shall not constitute a bar or defense to any of Landlord's remedies
under this Lease, at law or in equity. Within sixty (60) days after expiration
of the Term or earlier termination of this Lease for any reason other than an
Event of Default by Tenant, the Security Deposit shall be returned to Tenant,
reduced by those amounts that may be required by Landlord to remedy defaults on
the part of Tenant in the payment of Rent or otherwise, to repair damages to the
Premises caused by Tenant and to restore the Premises to the condition required
by this Lease. Landlord shall have no obligation to segregate the Security
Deposit from its general funds or to pay interest thereon. If Landlord conveys
or transfers its interest in the Premises, and as a part of such conveyance or
transfer, assigns its interest in this Lease, then Landlord shall be released
and discharged from any further liability to Tenant with respect to the Security
Deposit provided Landlord has delivered the Security Deposit to the transferee
or assignee or the transferee or assignee has assumed Landlord's obligations
under this Lease. Any assignment of the Lease by Landlord, whether voluntary or
through involuntary assignment or transfer such as bankruptcy or foreclosure,
will automatically and without further action by either party cause an
assignment of the Security Deposit (whether cash or a letter of credit) to the
assignee and the parties will execute such documents as necessary to reflect
such assignment and in such circumstances Tenant agrees to look solely to such
transferee or assignee for the return of the Security Deposit provided Landlord
has delivered the Security Deposit to the transferee or assignee or the
transferee or assignee has assumed Landlord's obligations
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under this Lease. Landlord and its successors and assigns will not be bound by
any actual or attempted assignment or encumbrance of the Security Deposit by
Tenant and if Tenant's interest in the Lease has been assigned, Landlord may
return the Security Deposit to such assignee in accordance with the terms and
conditions hereof. If Landlord returns the Security Deposit to Tenant's assignee
as aforesaid, Landlord will have no further obligation to any party with respect
thereto.
ARTICLE 4.
PAYMENT OF OPERATING COSTS
--------------------------
4.1 Net Lease. This is a net lease. Base Rent shall be paid to Landlord
absolutely net of all costs and expenses as more fully provided herein. The
provisions of this Article 4 for payment of Operating Costs by means of periodic
---------
payment of Tenant's Proportionate Share (as defined in Section 4.3) of Estimated
-----------
Operating Costs (as defined in Section 4.2) and the Operating Costs Adjustment
-----------
(as defined in Section 4.6) are intended to pass on to Tenant and reimburse
-----------
Landlord for Tenant's Proportionate Share of Operating Costs.
4.2 Estimated Payments. Tenant shall pay Tenant's Proportionate Share of
Estimated Operating Costs in advance on or before the first day of each calendar
month during the Term and any extensions or renewals thereof commencing on each
Rent Commencement Date. "Estimated Operating Costs" for any calendar month shall
mean Landlord's estimate of Operating Costs for the calendar year within which
such month falls, divided into twelve (12) equal monthly installments. Landlord
shall provide Tenant with a statement setting forth the Estimated Operating
Costs and Tenant's Proportionate Share thereof within ninety (90) days after the
Term Commencement Date and the commencement of each calendar year thereafter,
Landlord may adjust such estimate from time to time by written notice. Until a
new statement of Estimated Operating Costs is received Tenant shall continue to
make the monthly payment of Estimated Operating Costs based on the last
applicable statement thereof.
4.3 Tenant's Proportionate Share. "Tenant's Proportionate Share"' shall be
calculated by Landlord for each calendar year of the Term and shall mean (1)
with respect to Tenant's Proportionate Share of the Building, a percentage equal
to the Net Rentable Area of the Premises divided by the greater of (a) ninety-
five percent (95%) of the Total Rentable Area in the Building leased or held for
lease, or (b) the Net Rentable Area of the Building actually leased to tenants;
and (2) with respect to Tenant's Proportionate Share of the Project, a
percentage equal to the Net Rentable Area of the Premises divided by the greater
of (x) ninety-five percent (95%) of the total Net Rentable Area of the Project
leased or held for lease, or (y) the Net Rentable Area in the Project actually
leased to tenants. As of the date hereof, Tenant's Proportionate Share is the
percentage set forth in the Basic Lease Information Sheet as Item 8, subject to
------
verification as provided in Section 1.4(d).
--------------
4.4 Operating Costs. "Operating Costs" shall mean all expenses and costs
(but not specific costs that are separately billed to and paid by specific
tenants) of every kind and nature that Landlord shall pay or incur or become
obligated to pay or incur (including, without limitation, costs incurred by
managers and agents that are reimbursed by Landlord) because of or in connection
with the management, repair, maintenance, replacement, preservation, ownership
and operation of the Project and any supporting facilities directly serving the
Project (as allocated to the Project in accordance with standard accounting
practices, consistently applied). Tenant acknowledges that Operating Costs may
include expenses and costs associated with the management, preservation,
ownership and operation of the Project that are, from time to time, allocated by
Landlord, in its sole but reasonable discretion, between the Building and other
Buildings, presently or hereafter existing at the Project, and Tenant agrees to
pay as additional Rent, Tenant's share, as reasonably determined by Landlord, of
such Operating Costs as so allocated by Landlord. Operating Costs shall include,
but not be limited to the following types of expenses:
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(a) Wages, salaries, reimbursable expenses and benefits of all on-site and
off-site personnel directly engaged in the operation, repair, maintenance and
security of the Project and the direct costs of training such employees.
(b) Costs (including allocated rental at no more than Landlord's good faith
estimate of the fair market rent determined once during each calendar year) for
the property management office (provided that the allocated rental shall be on
no more than two thousand five hundred (2,500) square feet of Useable Area) and
office operation; costs of operating exercise facilities in the Project, if any,
available for use by tenants, including the cost of acquiring or leasing
equipment therein; and costs of operating any conference facilities in the
Project, if any, available for use by tenants, including the cost of acquiring
or leasing equipment therein (less revenues received in connection with the use
thereof).
(c) All supplies, materials and rental equipment used in the operation and
maintenance of the Project, including, without limitation, the cost of erecting,
maintaining and dismantling art work and similar decorative displays
commensurate with operation of a Class A office project.
(d) Utilities, including, without limitation, water, power, sewer, waste
disposal, communication and cable television facilities, heating, cooling,
lighting and ventilation of the Project not paid for directly by tenants of the
Project.
(e) All maintenance, extended warranties (amortized over the period of such
warranty), janitorial and service agreements for the Project and the equipment
therein, including, but not limited to, alarm service, window cleaning, elevator
maintenance, and maintenance and repair of the Project and all Building
Components.
(f) A management fee equal to the lesser of (A) three percent (3%) of all
revenue (excluding such management fee) derived from the Project, including
without limitation, all Rent hereunder, all rent and other payments derived from
other tenants in the Project, parking revenues and other revenues derived from
licenses of any other part of or right in the Project; or (B) provided that
Tenant is not in default under this Lease and leases and occupies at least three
(3) full floors of space in the Project, the lowest management fee permitted to
be included in Operating Costs under any other lease between Landlord and any
tenant leasing at least two (2) full floors of space in the Project.
(g) Legal and accounting services for the Project, including, but not
limited to, the costs of audits by certified public accountants of Operating
Costs records; provided, however, that Operating Costs shall not include legal
-------- -------
fees related to (i) negotiating lease terms for prospective tenants, (ii)
negotiating termination or extension of leases with existing tenants, (iii)
proceedings against tenants relating solely to the collection of rent or other
sums due to Landlord from such tenants, or (iv) the initial development and/or
initial construction of the Project.
(h) All insurance premiums and costs, including but not limited to, the
premiums and cost of fire, casualty, liability, rental abatement or interruption
and earthquake insurance applicable to the Project and Landlord's personal
property used at the Project in connection therewith (and all amounts paid as a
result of loss sustained that would be covered by such policies but for
"deductible" provisions).
(i) Repairs, replacements and general maintenance of the Project (except
for repairs and replacements (x) paid for from the proceeds of insurance, or (y)
paid for directly by Tenant, other tenants or any third party).
(j) All real and personal property taxes, assessments, local improvement or
special benefit district charges and other governmental charges, special and
general, known and unknown, foreseen and unforeseen, of every kind and nature
whatsoever payable during or attributable to periods after the Term Commencement
Date (i) attributable to the Real Property or the Project or levied, assessed or
imposed on, the Real Property or the Project, or any portion thereof, or
interest therein; (ii) attributable
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<PAGE>
to or levied upon Landlord's personal property located in, or used in connection
with the Project; (iii) surcharges and all local improvement or special benefit
and other assessments levied with respect to the Project, the Real Property, and
all other property of Landlord used directly in connection with the operation of
the Project; (iv) any taxes levied or assessed in lieu of, in whole or in part,
or in addition to such real or personal property taxes; (including, but not
limited to, leasehold taxes, business and occupation taxes and taxes or license
fees upon or measured by the leasing of the Project or the rents or other income
collected therefrom (v) any and all costs, expenses and attorneys' fees paid or
incurred by Landlord in connection with any proceeding or action to contest in
whole or in part, formally or informally, the imposition, collection or validity
of any of the foregoing taxes, assessments, charges or fee (collectively, "Real
Property Taxes"). If by law any Real Property Taxes may be paid in installments
at the option of the taxpayer, then Landlord shall include within Real Property
Taxes for any year only those installments (including interest, if any) which
would become due by exercise of such option. Real Property Taxes shall not
include (x) inheritance or estate taxes imposed upon or assessed against the
Project, or any part thereof or interest therein, or (y) income taxes computed
upon the basis of the Landlord's net income, or (z) any real estate excise tax
payable in connection with a transfer or conveyance of the Project or any part
thereof.
(k) Amortization (together with reasonable financing charges) of capital
improvements made to the Project (i) to comply with the requirements of law,
ordinance rule or regulation, (ii) to replace items which Landlord would be
obligated to maintain under this Lease; or (iii) to improve the operating
efficiency or reduce Operating Costs of the Project. As used in this Section,
"amortization" shall mean allocation of the cost equally to each year of useful
life of the items being amortized. Notwithstanding the foregoing, however,
Landlord may treat as expenses (chargeable in the year incurred), and not as
capital costs, items that are less than two percent (2%) of Estimated Operating
Costs for the year in question.
(l) All charges of any kind and nature imposed, levied, assessed, charged
or collected by any governmental authority or other entity either directly or
indirectly payable during or attributable to periods after the first Rent
Commencement Date (i) for or in connection with public improvements, user,
maintenance or development fees, transit, parking, housing, employment, police,
fire, open space, streets, sidewalks, utilities, job training, child care or
other governmental services or benefits, (ii) for environmental matters or as a
result of the imposition of mitigation measures, including compliance with any
transportation management plan, or fees, charges or assessments as a result of
the treatment of the Project, or any portion thereof or interest therein, as a
source of pollution or storm water runoff.
Notwithstanding the foregoing, Operating Costs shall not include:
(m) Any sums collected from other Building tenants for special services
provided to such tenant, in excess of the services provided to Tenant hereunder,
any sums collected from other Building tenants for Operating Costs separately
billed to and paid by tenants, or costs incurred in connection with services
made available to one or more tenants but not to tenants of the Project
generally;
(n) Amounts received from insurance claims and costs of repair and
reconstruction related thereto to the extent of such insurance proceeds (other
than deductible amounts under applicable insurance policies);
(o) Ground rent (if any);
(p) Interest or loan fees incurred in connection with any loan secured by
the Building or the Real Property or any other costs (including attorneys fees)
directly related to any such financing or refinancing;
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(q) Costs of work to the Project that are necessary to comply with
applicable laws, regulations, ordinances or codes relating to the initial
construction of the Project in effect as of the date of this Lease;
(r) Leasing commissions and costs of marketing or advertising materials
designed to specifically market space in the Project for lease;
(s) Except as permitted under Section 4.4.1(k) above, depreciation or
----------------
amortization of the Building or Building Components or expenses that should be
capitalized in accordance with standard accounting practices, consistently
applied;
(t) If Tenant is paying separately for parking privileges in the Garage,
costs incurred for day-to-day operations or maintenance of the Garage (except
for Real Property Taxes);
(u) Any penalties due to violation of law or fines imposed for late payment
of any Operating Costs by Landlord or interest thereon, unless such penalties,
interest or fines were caused directly or indirectly by Tenant;
(v) Damages incurred by Landlord for any default, breach, claim, judgment
or settlement arising out of this Lease or any other lease of space in the
Project;
(w) Expenses for the repair or replacement of any item to the extent such
repair or replacement is reimbursed, or is received at no cost, through
applicable warranty or insurance proceeds;
(x) Costs incurred to test, survey, cleanup, contain, abate, remove, or
otherwise remedy Hazardous Materials from the Project to the extent such
Hazardous Materials were installed by Landlord and were considered hazardous
under applicable Hazardous Materials Laws as and when installed;
(y) Costs of initial construction of the Project in accordance with the
plans approved for building permits by the City of Bellevue, including all costs
of correcting defects in the initial construction for which Landlord is
otherwise responsible under the Lease;
(z) Costs incurred for repairs and replacements resulting from an uninsured
casualty to the extent such costs exceed ten percent (10%) of the Base Rent per
square foot per calendar year;
(aa) Attorneys and outside accountants fees incurred in connection with
leasing space in the Project or any sale or attempted sale of the Project; and
(bb) Costs incurred relating to any additional real property added to the
Project until such additional real property is developed.
4.5 Adjustment for Occupancy. Notwithstanding any other provision herein to
the contrary, if during any year of the Term the Project is not fully occupied
or all premises within the Project do not receive Basic Services (as defined in
Section 5.1 below), then an adjustment shall be made in computing Operating
- -----------
Costs for such year so that Operating Costs shall be computed as though the
Project had been fully occupied and provided with Basic Services during such
year; provided, however, that in no event shall Landlord collect in total, from
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Tenant and all other tenants of the Project, an amount greater than one hundred
percent (100%) of Operating Costs during any year of the Term.
4.6 Computation of Operating Costs Adjustment. The term "Operating Costs
Adjustment" for any calendar year shall mean the difference, if any, between
Estimated Operating Costs and actual Operating Costs for that calendar year.
Landlord shall, within a reasonable period of time after the end of any calendar
year for which Estimated Operating Costs differs from actual Operating Costs,
give written notice thereof to Tenant. The notice shall include a statement of
the total Operating Costs applicable to such calendar year and the computation
of the Operating Costs Adjustment. Landlord's failure to give such notice and
statement within a reasonable period of time after the end of any calendar
16
<PAGE>
year for which a Operating Costs Adjustment is due shall not release either
party from the obligation to make the adjustment provided for in Section 4.7.
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4.7 Adjustment for Variation Between Estimated and Actual. If Tenant's
Proportionate Share of Operating Costs for any calendar year exceeds the
payments received by Landlord towards Tenant's Proportionate Share of Estimated
Operating Costs for such year, Tenant shall pay to Landlord Tenant's
Proportionate Share of the Operating Costs Adjustment within thirty (30) days
after the date of the Landlord's statement of the Operating Costs Adjustment. If
the Tenant's Proportionate Share of Operating Costs for any calendar year is
less than the payments received by Landlord towards Tenant's Proportionate Share
of Estimated Operating Costs for such year, then Landlord, at Landlord's option,
shall either (a) pay Tenant's Proportionate Share of the Operating Costs
Adjustment to Tenant in cash, or (b) credit said amount against future
installments of Estimated Operating Costs payable by Tenant hereunder. If the
Term commences or terminates at any time other than the first day of a calendar
year, Tenant's Proportionate Share of the Operating Costs Adjustment shall be
calculated based upon the exact number of calendar days during such calendar
year that fall within the Term, and any payment by Tenant required hereunder
shall be paid even if the Term has expired when such determination is made.
4.8 Books and Records. Provided that Tenant delivers written notice of its
intent to audit within ninety (90) days after receipt by Tenant of Landlord's
annual statement of total Operating Costs as provided in Section 4.6, and
-----------
completes such audit within one hundred and twenty (120) days thereafter, Tenant
shall have the right to conduct a reasonably and specifically defined audit of
Landlord's books and records relating to Operating Costs during the immediately
preceding calendar year in accordance with the following terms and provisions:
(a) No Event of Default with respect to payment of Base Rent and Tenant's
Proportionate Share of Operating Costs is outstanding at the time of Tenant's
notice or at the time of the audit.
(b) Tenant shall have the right to have an employee of Tenant or a
Qualified Auditor (as defined below) inspect Landlord's accounting records at
Landlord's office no more than once per calendar year.
(c) Neither the employee of Tenant nor the Qualified Auditor shall be
employed or engaged on a contingency basis, in whole or in part.
(d) Prior to commencing the audit, Tenant and the auditor shall: (i)
provide Landlord with evidence that the auditor is from a nationally recognized
accounting firm or one of the top five (5) accounting firms in the Seattle
metropolitan area and that the individual performing the audit is a certified
public accountant (a "Qualified Auditor"); (ii) each sign a confidentiality
letter to be provided by Landlord, consistent with the provisions of this
Section 4.8; (iii) provide a signed representation certified by the auditor's
- -----------
chief financial officer, chief executive officer or managing partner (or
equivalent) that such auditing firm is acting as an independent accountant in
the conduct of the audit; and (iv) provide Landlord with a full copy of all
correspondence, instructions and engagement letters between the auditor and
Tenant.
(e) The audit shall be limited solely to: (i) confirming that the
Operating Costs reported in the Landlord's annual statement are consistent with
Landlord's books and records; (ii) confirming that Landlord has reasonable
support for the expenses and items of expenses as reported by Landlord; (iii)
confirming that Landlord has not accidentally or fraudulently charged the same
item of expenses on a duplicate basis to the Building; (iv) confirming that
Landlord has not charged any item specifically excluded from Operating Costs in
this Lease; (v) reviewing the procedure for gross-up to confirm that it is
consistent with the terms of this Lease relative to such procedures; and (vi)
confirming that Tenant has been properly allocated Tenant's Proportionate Share
of Operating Costs. The auditor
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shall not make any judgments as to the reasonableness of any item of expense
and/or the total Operating Costs of the Building, nor shall such reasonableness
be subject to audit.
(f) If Tenant's auditor finds errors or over or under charges in
Landlord's annual statement of Operating Costs, said findings must be
immediately and simultaneously reported to both Landlord and Tenant, with full
written support for such findings and specific reference to the relevant Lease
provisions disqualifying such expenses, if applicable. If Landlord agrees with
said findings, appropriate rebates or charges shall be made to Tenant in
accordance therewith. If Landlord does not agree, Landlord shall engage its own
auditor to review the findings of Tenant's auditor and Landlord's books and
records. The two auditors shall then meet to resolve any difference between the
audits. If agreement cannot be reached within two (2) weeks after the auditors'
initial meeting, then the auditors shall together select a third auditor (who
shall be a Qualified Auditor) to which they shall each promptly submit their
findings in a final report, with copies submitted simultaneously to the first
two auditors, Tenant and Landlord. The third auditor shall leave submitted
findings unopened for a period of two (2) weeks, during which time Landlord and
Tenant may attempt to reach a negotiated settlement. If no settlement is
reached, then within fifteen (15) days following the completion of such two-week
period, the third auditor shall determine which of the two reports best meets
the terms of this Lease, which report shall become the "Final Finding". The
third auditor shall not have the option of selecting a compromise between the
first two auditors' findings, nor to make any other finding.
(g) If the Final Finding determines that Landlord has overcharged Tenant,
Landlord shall credit Tenant toward the payment of the Base Rent next due and
payable under this Lease the amount of such overcharge. If the Final Finding
determines that Tenant was undercharged, then within thirty (30) days after the
Final Finding, Tenant shall reimburse Landlord the amount of such undercharge.
(h) If the Final Finding results in a credit to Tenant in excess of three
percent (3%) of Tenant's Proportionate Share of the total Operating Costs for
the calendar year subject to the audit, Landlord shall pay its own audit costs
and reimburse Tenant for its costs associated with said audits. If the Final
Finding results in a credit to Tenant of less than one percent (1%) of Tenant's
Proportionate Share of the total Operating Costs for the calendar year subject
to the audit, Tenant shall pay its own costs and shall reimburse Landlord for
Landlord's costs associated with said audits. In all other events, each party
shall pay its own audit costs, including one half (1/2) of the cost of the third
auditor.
(i) The results of any audit of Operating Costs hereunder shall be
treated by Tenant, all auditors, and their respective employees and agents as
confidential, and shall not be discussed with nor disclosed to any third party.
ARTICLE 5.
LANDLORD'S COVENANTS
--------------------
5.1 Basic Services. So long as no Event of Default is outstanding during
Tenant's occupancy of the Premises Landlord shall operate the Building as a
Class A office building and shall provide the following ("Basic Services"):
(a) Administration of construction of the Tenant Improvements (as defined
in Section 5.7) in the Premises in accordance with Exhibit C and the Tenant
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Design Manual which is incorporated herein by this reference (the "Design
Manual").
(b) Hot and cold water at those points of supply provided for general use
of other tenants in the Project as provided for in the TI Working Drawings
(excluding supply points included to accommodate Expanded Uses).
(c) Central heat and air conditioning in season, and ventilation at such
temperatures and in such amounts as are standard for Class A office buildings in
the Market Area or as may be permitted or controlled by applicable laws,
ordinances, rules and regulations, during Normal Office
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Hours. Landlord shall use commercially reasonable efforts to ensure that indoor
air quality complies with all applicable laws, ordinances, rules and regulations
but shall not be responsible for correcting any air quality problems caused by
tenants of the Project.
(d) Routine maintenance, repairs, structural and exterior maintenance
(including exterior glass and glazing), painting and electric lighting service
for all public areas and special service areas of the Project in the manner and
to the extent deemed by Landlord to be necessary or desirable. Landlord's
obligation with respect to repair as part of Basic Services under this Section
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5.1 shall be limited to (i) the structural portions of the Building, (ii) the
- ---
exterior walls of the Buildings, including glass and glazing, gutters and
downspouts, (iii) the roof, (iv) mechanical, electrical, plumbing and life
safety systems that are considered Base Building Improvements (as defined
Exhibit C attached hereto), (v) heating, ventilating and air-conditioning
- ---------
equipment, ducts and appurtenances serving the Premises and Building to the
extent such equipment is considered Building Standard Improvements, and provided
that Landlord shall have no responsibility to maintain such equipment, ducts and
appurtenances that were installed by Tenant as Tenant Extra Improvements; (vi)
sewer, water, gas, telephone, and power lines and meters to the extent owned by
Landlord and serving the Premises and the Building but only to the extent such
lines and meters are located outside the Premises and were installed as part of
Base Building Improvements; and (vii) Common Areas.
(e) Janitorial service on a five (5) day per week basis, excluding
holidays recognized by Landlord, not to exceed twelve (12) holidays in any
calendar year, plus any additional federal or state holidays established after
the date of this Lease. Janitorial service shall be of comparable scope and
quality to that provided in other Class A office buildings in the Market Area,
and shall initially be provided according to the specifications described on
Exhibit I attached hereto and incorporated herein by this reference. Any
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janitorial service contracted with by Landlord shall be bonded. Landlord shall
have no liability for losses resulting from janitorial service or caused by
janitorial service employees. Landlord shall take reasonable steps, after
written notice from Tenant, to correct problems arising from the quality of
janitorial service provided, and to respond to security concerns believed to be
caused by such janitorial service provider.
(f) An electrical system to convey power delivered by public utility or
by another provider of comparable quality and service selected by Landlord, in
amounts sufficient for normal office operations during Normal Office Hours as
provided in similar office buildings in the greater Bellevue area, but not to
exceed a total allowance of four (4) watts per square foot of Net Rentable Area
(which includes an allowance for lighting of the Premises), provided that no
single item of electrical equipment consumes more than one-half (0.5) kilowatt
at rated capacity or requires a voltage other than 120 volts, single phase. If
Tenant's electrical requirements, as estimated by Landlord based upon rated
capacity (or based upon metered consumption), exceed such amounts, Tenant shall
pay the full amount of such excess together with any additional cost necessary
to provide such excess capacity. If the installation and operation of Tenant's
electrical equipment requires additional air conditioning capacity above that
provided by the Building Standard Improvements (as defined in Exhibit C), then
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the cost of installing additional air conditioning and operation thereof
(including utilities) shall be paid by Tenant and shall be considered an Extra
Service, subject to the provisions of Section 5.4 below. Landlord may require
-----------
Tenant to pay for the installation and operation of utility metering devices to
measure actual utility consumption in the Premises. Notwithstanding the
foregoing, after Landlord has approved Tenant's TI Working Drawings pursuant to
Exhibit C, Landlord shall make good faith efforts to identify Upgrades (as
- ---------
defined in Exhibit C to the electrical facilities that will be required to
---------
accommodate the approved TI Working Drawings. Landlord's approval of Upgrades
shall be governed by Exhibit C. Tenant will have use of the approved Upgrades
---------
to the electrical system throughout the Term unless Tenant indicates that it no
longer needs such additional electrical facilities; provided, that the cost of
providing the Upgrades shall be at Tenant's sole cost and expense.
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(g) Installation, maintenance and replacement of building standard lamps,
bulbs and ballasts used in the Premises.
(h) Security service for the Project, including electronic card key
access to the Building and Garage, a staffed security station, call boxes,
motion sensors, electromagnetic locks and surveillance cameras, or such other
comparable systems as Landlord deems appropriate; provided, however, that the
-------- --------
security service shall be provided by unarmed personnel and shall not include
alarm systems for special surveillance of the Premises; and provided, further,
-------- -------
that Landlord shall not be liable to Tenant or any third party for any breach of
security or any losses due to theft, burglary, battery or for damage done or
injury inflicted by persons in or on the Project.
(i) Public elevator service to the Garage and the floors on which the
Premises are situated during Normal Office Hours; provided, however, that Tenant
-------- -------
shall have access to the Premises and the Garage twenty-four (24) hours per day,
seven (7) days per week, 365 days per year.
(j) Correction of latent defects in the initial construction of the
Project to the extent Landlord reasonably deems necessary.
(k) Except to the extent that Tenant or another tenant of the Project is
otherwise required to do so under the terms of any applicable lease, from and
after the Term Commencement Date Landlord shall comply with all Laws (as defined
in Section 6.9(a)), as amended from time to time, related to the condition of
--------------
the Building and Project, including without limitation, all applicable Hazardous
Materials Laws (as defined in Section 7.2(a)), and the Americans with
--------------
Disabilities Act of 1990, as amended; provided, however, that Landlord shall
-------- -------
have the right to contest the applicability or validity of such Laws as applied
to the Project.
(l) Operation of the Garage during Normal Office Hours; provided,
--------
however, that Tenant shall have access to the Garage twenty-four (24) hours per
- -------
day, seven (7) days per week, 365 days per year.
5.2 Hours of Operation. The term "Business Days" shall mean Monday through
Friday, excluding State and Federal holidays and all days that maintenance
employees of the Project are entitled to take off or to receive extra
compensation for, from time to time under their union contract or other
agreement, provided that all such holidays shall not exceed twelve (12) in any
calendar year, plus any additional state or federal holidays enacted after the
date of this Lease. The term "Normal Office Hours" shall mean Business Days from
7:00 a.m. to 6:00 p.m., and Saturdays from 8:00 a.m. to 1:00 p.m.
5.3 Interruption. Landlord shall not be liable for damages to either person
or property, nor shall Landlord be deemed to have evicted Tenant, nor shall
there be any abatement of Rent, nor shall Tenant be relieved from performance of
any covenant on its part to be performed hereunder by reason of (a) interruption
of, or variation or deficiency in, or failure of, the provision of Basic
Services; (b) breakdown or malfunction of lines, cables, wires, pipes, equipment
or machinery utilized in supplying or permitting Basic Services or
telecommunications; or (c) curtailment or cessation of Basic Services due to
causes or circumstances beyond the reasonable control of Landlord, including but
not limited to (i) strikes, lockouts or other labor disturbance or labor dispute
of any character, (ii) governmental regulation, moratorium or other governmental
action, (iii) inability, despite the exercise of reasonable diligence, to obtain
electricity, water or fuel from the providers thereof, and (iv) acts of God.
Landlord shall use reasonable diligence to make such repairs as may be required
to lines, cables, wires, pipes, equipment or machinery within the Project to
provide restoration of Basic Services and, where the cessation or interruption
of Basic Services has occurred due to circumstances or conditions beyond Project
boundaries or outside the Landlord's control, to cause the same to be restored,
by application or request to the provider thereof.
Notwithstanding the foregoing, if an interruption or curtailment of any
Basic Service occurs by reason of Landlord's negligence, omission or breach of
its obligations hereunder, and (i) the interruption
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causes the Premises or a portion thereof to be untenantable, (ii) Tenant ceases
to use the Premises or the untenantable portion thereof, and (iii) Tenant has
given Landlord (and all Senior Parties to the extent required by Section 14.7
------------
below) notice of such interruption, then, on the tenth (10th) consecutive
Business Day following the date on which all of the foregoing conditions are
satisfied, Base Rent shall abate (in whole or in part based on the number of
square feet that are untenantable) until the Premises are rendered tenantable;
provided, however, that in no event shall Tenant be entitled to an abatement
- -------- -------
of Base Rent if the interruption was caused in whole or in part by any action or
inaction by Tenant or its employees, agents, contractors or invitees or by
events outside the direct control of Landlord. If Tenant is entitled to a rent
abatement under the prior provision and ten (10) Business Days after the date of
Tenant's notice under clause (iii) above Landlord has not commenced or is not
diligently pursuing a cure of the interruption, then Tenant may provide a second
notice to Landlord (and all Senior Parties to the extent required by Section
-------
14.7 below) stating that if such interruption is not cured within ten (10)
- ----
Business Days thereafter, Tenant intends to commence cure and specifying the
steps that Tenant will take to cure the interruption. If Landlord has not
commenced or is not diligently pursuing a cure of the interruption within ten
(10) days after receipt of such second notice, Tenant may take steps to cure the
interruption as outlined in its notice to Landlord. Notwithstanding the
foregoing, Tenant shall not be permitted access to any equipment or facilities
that serve other tenants' premises in the Project. Tenant shall be solely
responsible for any loss or damage arising from its efforts to cure the
interruption.
5.4 Extra Services. Landlord shall provide to Tenant, subject to capacity
limitations and the needs of other tenants, and at Tenant's cost and expense
(and subject to the other limitations hereinafter set forth) the additional
services described below ("Extra Services"). Tenant shall pay Landlord for the
cost (including capital costs, out-of-pocket expenses and the allocated cost of
Landlord's employees) of providing any Extra Services, together with an
administrative fee equal to fifteen percent (15%) of such cost, within ten (10)
days following presentation of an invoice therefor by Landlord to Tenant.
Landlord shall credit the administrative fee collected from Tenant on a line-
item basis against Operating Costs if such fee is charged in connection with an
item that would otherwise be included within Operating Costs. The cost
chargeable to Tenant for Extra Services shall constitute additional Rent.
(a) Any extra cleaning and janitorial services in excess of that required
for Building Standard Improvements. Landlord shall, upon reasonable advance
notice, arrange for weekend janitorial service on terms acceptable to the
service provider, Tenant and Landlord.
(b) Additional air conditioning and ventilating capacity (24 hours a day,
seven days a week, 365 days a year) required by reason of any electrical, data
processing or other equipment or facilities or services required to support the
same, in excess of that which would be required for Building Standard
Improvements.
(c) Heating, ventilation, air conditioning or extra electrical equipment
or service during hours other than Normal Office Hours up to 24 hours a day,
seven days a week, 365 days a year. Landlord shall provide said heating,
ventilation and air conditioning or extra service solely upon the prior request
of Tenant given in compliance with the notice requirements and procedures that
Landlord may establish from time to time.
(d) Repair and maintenance for which Tenant is responsible hereunder.
(e) Any Basic Service in amounts reasonably determined by Landlord to
exceed the amounts required to be provided under Section 5.1, but only if
-----------
Landlord elects to provide such additional or excess service.
(f) Any other item described in this Lease as an Extra Service or which
Landlord is not required to provide as part of Basic Services.
5.5 Window Coverings. All window coverings shall be provided by Landlord as
Building Standard Improvements. Tenant shall not remove, replace or install any
window coverings, blinds or
21
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drapes on any exterior window without Landlord's prior written approval. Tenant
acknowledges that breach of this covenant shall directly and adversely affect
the exterior appearance of the Project and the operation of the heating,
ventilation and air conditioning systems.
5.6 Graphics and Signage.
(a) Building Standard. Landlord shall provide the initial identification
of Tenant's name on the directory board in the main lobby of the Building and,
if the Premises is on a multi-tenant floor, in the elevator lobby, and the cost
thereof may be paid from the Cash Allowance. All signs, notices and graphics of
every kind or character, visible in or from public corridors, the Common Areas
or the exterior of the Premises shall comply with the Design Manual and any
deviation shall be subject to Landlord's prior written approval.
(b) Limited Right to Exterior Signage. Provided that Tenant is leasing
and occupying a minimum of two and one half (2.5) floors in the Building and no
Event of Default is outstanding under this Lease, Tenant shall have the
exclusive right, at Tenant's sole cost and expense, to install and maintain a
sign identifying HomeGrocer.com, Inc. (the "Tenant Sign") on the upper portion
of the south side of the Building above the uppermost windows. Unless Tenant is
leasing the entire Building, Landlord shall have the right to install signage on
the Building below the glass line on the third (3rd) floor of the Building. The
design (including the design of any replacement sign) and method of installation
of the Tenant Sign shall be subject to Landlord's reasonable approval and all
City of Bellevue and other applicable governmental requirements. Tenant must
submit detailed plans for the Tenant Sign to Landlord for review and approval
before Tenant installs the Tenant Sign on the exterior of the Building. At the
end of the Lease Term or if Tenant no longer leases and occupies two and one
half (2.5) floors in the Building, Tenant shall remove the Tenant Sign and shall
restore the Building to its condition prior to installation of the signage, at
Tenant's sole cost and expense. The right to install and maintain the Tenant
Sign is personal to HomeGrocer.com, Inc. and shall not be assignable to any
other party without the consent of Landlord, which may be withheld or
conditioned in Landlord's sole discretion.
5.7 Tenant Extra Improvements. Landlord shall administer construction and
installation of all Tenant Extra Improvements in the Premises, at Tenant's
expense, such installation to be made and paid for pursuant to the provisions of
Exhibit C in the same manner as the Building Standard Improvements. Landlord
- ---------
shall not seek the benefits of depreciation deductions or income tax credit
allowances for federal income tax reporting purposes with respect to any Tenant
Extra Improvements for which Tenant has fully reimbursed Landlord under this
Section 5.7. "Tenant Extra Improvements" shall mean the extent to which
- -----------
the Tenant Improvements in the Premises differ materially from the Building
Standard Improvements as determined in Landlord's discretion. In instances where
this Lease refers to Tenant Extra Improvements as a standard for the provision
of services, maintenance, repair or replacement by Tenant or Landlord, such
reference shall be to the difference in required services, maintenance, repairs
or replacements between the Tenant Improvements as constructed in the Premises
and the Building Standard Improvements, had the Building Standard Improvements
been constructed in the Premises. Tenant Improvements (as defined in Exhibit C)
---------
shall be installed on behalf of Tenant and approved by Landlord pursuant to
Exhibit C. The Cash Allowance (as defined in Exhibit C) shall not be applied
- ---------
to the cost of any Tenant Extra Improvements.
5.8 Peaceful Enjoyment. Tenant shall peacefully have, hold and enjoy the
Premises, subject to the other terms hereof, provided that Tenant pays the Rent
and performs all of Tenant's covenants and agreements herein contained. This
covenant and the other covenants of Landlord contained in this Lease shall be
binding upon Landlord and its successors only with respect to breaches occurring
during its and their respective ownerships of Landlord's interest hereunder.
22
<PAGE>
ARTICLE 6.
TENANT'S COVENANTS
------------------
6.1 Compliance With Exhibit C. Tenant shall comply with the terms and
---------
conditions and deadlines set forth in Exhibit C and the Design Manual with
---------
respect to the construction of the Tenant Improvements in the Premises.
6.2 Construction of Tenant Improvements. Tenant shall reimburse Landlord for
all costs incurred by Landlord to construct or install Tenant Extra Improvements
on Tenant's behalf pursuant to Exhibit C and the Design Manual. All additions to
---------
or improvements of the Premises, whether of Building Standard Improvements or
Tenant Extra Improvements, shall be and become the property of Landlord upon
installation and shall be surrendered to Landlord upon termination of this Lease
by lapse of time or otherwise, except as otherwise stated herein or as stated in
any subsequent approval of such additions or improvements. Although Tenant Extra
Improvements become the property of Landlord upon installation, they are
intended to be for the convenience of Tenant and are not intended to be a
substitute for Rent or any part thereof.
6.3 Telecommunications. Tenant shall install and maintain all required
intrabuilding network cable and other communications wires and cables necessary
to serve the Premises from the point of presence in the Building. Tenant shall
obtain any telecommunications services within the Building from vendors selected
by Landlord or approved by Landlord in its sole discretion (a "Provider"). In
the event that Tenant desires to obtain telecommunications services from a
Provider not selected by Landlord, Tenant shall submit to Landlord a list of
such proposed vendor(s) together with such other information regarding the
vendors as Landlord may request, including financial information, references
from at least two (2) owners of comparable projects in which the vendor has
experience and a description of the vendor's business activities in downtown
Bellevue. Landlord shall notify Tenant within thirty (30) Business Days of
receipt of the list if Landlord approves any of Tenant's proposed vendors.
Failure to notify Tenant shall be deemed disapproval. If Landlord approves any
telecommunications Provider selected by Tenant, the Provider must agree in
writing to abide by all of Landlord's policies and procedures for
telecommunications vendors and to pay for the use of any space outside the
Premises needed to install the vendor's equipment at the rate established by
Landlord from time to time. If Tenant desires to utilize the services of a
Provider not selected by Landlord, such Provider must obtain the written consent
of Landlord to the plans and specifications for its lines or equipment within
the Building prior to installation in the Building and must install such lines
and equipment in locations designated by Landlord. Tenant shall obtain any
necessary governmental permits relating to the installation, use or operation of
Provider's lines and equipment. Landlord shall provide Tenant and its Provider
and contractors with reasonable access to portions of the Building outside the
Premises to the extent necessary to install, maintain or replace any
telecommunications equipment serving the Premises. Landlord's consent to a
Provider shall not be deemed to constitute a representation or warranty as to
the suitability, capability or financial strength of any Provider. To the extent
the service by a Provider is interrupted, curtailed or discontinued for any
reason whatsoever, Landlord shall have no obligation or liability in connection
therewith. The provisions of this Section are solely for the benefit of Tenant
and Landlord, are not for the benefit of any third party, and no telephone or
telecommunications provider shall be deemed a third party beneficiary hereof.
Tenant acknowledges and agrees that Landlord has not represented or warranted
that Tenant will have unlimited access to riser space or other space outside the
Premises for the purpose of the installing telecommunications equipment and
Landlord shall have no obligation to construct or designate additional riser
space or equipment space to accommodate the Tenant's or its Provider's
telecommunications equipment. Tenant acknowledges that roof and riser space are
a finite commodity and that Landlord may in its discretion limit Tenant's total
use of such space to accommodate and take into account use of the Project
systems and the needs of other Project tenants. Notwithstanding the foregoing,
after Landlord has approved Tenant's TI Working Drawings pursuant to Exhibit C,
---------
Landlord
23
<PAGE>
shall make the riser space or other space outside the Premises as shown in the
approved TI Working Drawings available to Tenant throughout the Term at Tenant's
expense.
6.4 Taxes on Personal Property and Tenant Extra Improvements. In addition
to, and wholly apart from its obligation to pay Tenant's Proportionate Share of
Operating Costs, Tenant shall be responsible for, and shall pay prior to
delinquency, all 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 Tenant's Personal
Property (as defined in Section 11.1), on the value of its Tenant Extra
------------
Improvements, on its interest pursuant to this Lease or on any use made of the
Premises or the Common Areas by Tenant in accordance with 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 within ten
(10) days following receipt of such invoice.
6.5 Repairs by Tenant. Except to the extent that Landlord is responsible for
such repair or maintenance under Section 5.1 above, Tenant shall maintain and
-----------
repair the Premises and keep the same in good condition, ordinary wear and tear
and damage by casualty and condemnation which is not required to be restored
pursuant to Section 12 and damage due solely to acts of Landlord (except to the
----------
extent such damage is covered by Tenant's insurance) excepted. Tenant's
obligation shall include, without limitation, the obligation to maintain and
repair all walls, floors, ceilings and fixtures and to repair all damage caused
by Tenant or Tenant's employees, agents, contractors, officers, directors,
partners, members, licensees, invitees and guests ("Tenant Parties") to the
Premises or the Project, whatever the scope of the work of maintenance or repair
required. Tenant shall repair all damage caused by removal of Tenant's movable
equipment or furniture or the removal of any Tenant Extra Improvements or
Alterations (as defined in Section 6.7) permitted or required by Landlord, all
-----------
as provided in Section 6.13. Any repair or maintenance that Tenant is required
------------
to perform under this Lease shall be performed at Tenant's expense by Landlord's
employees as an "Extra Service" subject to Section 5.4, or by contractors
-----------
selected by Landlord. If Tenant fails or refuses to perform such work in a
timely and efficient manner, then Landlord may perform such work for the account
of Tenant as an Extra Service. Any work of repair and maintenance performed by
or for the account of Tenant by persons other than Landlord shall be performed
at Tenant's risk using contractors approved by Landlord prior to commencement of
the work and in accordance with procedures Landlord shall from time to time
establish. All such work shall be performed in compliance with all applicable
laws, ordinances, rules and regulations and Tenant shall provide to Landlord
copies of all permits and records of inspection issued or obtained by Tenant in
connection therewith to establish such compliance. Tenant shall not be required
to perform any maintenance or repair required solely by reason of the negligence
or wrongful acts of Landlord or its employees, agents, contractors, officers,
directors, partners, licensees, invitees and guests, Landlord's affiliates or
Landlord's members ("Landlord Parties"). Tenant shall promptly notify Landlord
of any needed repairs in the Premises or to the Building Components.
6.6 Waste. Tenant shall not commit or allow Tenant Parties to commit any
waste or damage in any portion of the Premises or the Project.
6.7 Alterations, Additions, Improvements. Tenant shall not make or allow to
be made any alterations, additions or improvements in or to the Premises
(collectively, "Alterations") without obtaining the prior written consent of
Landlord which shall not be unreasonably withheld or delayed if the proposed
Alterations satisfy the requirements of (a) through (f) below. Landlord's
consent shall not be required for Alterations provided that Tenant, prior to
commencing any Alteration, provides evidence satisfactory to Landlord that the
Alterations (a) comply with all applicable laws, ordinances, rules and
regulations; (b) are compatible with the Design Manual and the Building, its
architecture and its mechanical, electrical, HVAC and life safety systems; (c)
do not interfere with the use and occupancy of any other portion of the Building
by any other tenant or their invitees; (d) do not affect the structural portions
of the Building; (e) do not and shall not, whether alone or taken together with
other improvements, require the construction of any other improvements or
alterations within the Building;
24
<PAGE>
(f) do not reduce the value of the Premises or increase the cost to Landlord of
reletting the Premises; and (g) are reasonably expected to cost less than Ten
Thousand Dollars ($10,000). Where Landlord's consent is required, in determining
whether to consent to the proposed Alterations, Landlord shall have the right to
review plans and specifications for proposed Alterations, construction means and
methods, the identity of any contractor or subcontractor to be employed on the
work for Alterations, and the time for performance of such work. Tenant shall
supply to Landlord any documents and information requested by Landlord in
connection with any Alterations to the Premises. Landlord may hire outside
consultants to review such documents and information and Tenant shall reimburse
Landlord for the cost thereof as well as Landlord's internal costs as an Extra
Service subject to Section 5.4. All Alterations permitted hereunder shall
-----------
be made and performed by Tenant or, at Landlord's election, may be performed by
Landlord or by contractors selected by Landlord, without cost or expense to
Landlord and as an Extra Service. Landlord may supervise and administer the
installation of Alterations as an Extra Service. Upon completion of any
Alterations, Tenant shall provide Landlord, at Tenant's expense, with a complete
set of "as built" plans on mylar and specifications reflecting the actual
conditions of the Alterations as constructed in the Premises, together with a
copy of such plans on diskette in the AutoCAD format or such other format as may
then be in common use for computer assisted design purposes. The obligations of
the parties with respect to removal of Alterations shall be controlled by
Section 6.13.
- ------------
6.8 Liens. Tenant shall keep the Premises and the Project free from any
liens arising out of any (a) work performed or material furnished to or for the
Premises, and (b) obligations incurred by or for Tenant or any person claiming
through or under Tenant. Tenant shall, within twenty (20) days following the
imposition of any such lien, cause such lien to be released of record by payment
or posting of a bond fully satisfactory to Landlord in form and substance and in
compliance with RCW 60.04. Landlord shall have the right at all times to post
and keep posted on the Premises any notices permitted or required by law, or
that Landlord shall deem proper for the protection of Landlord, the Premises,
the Project and any other party having an interest therein, from mechanics',
materialmen's and other liens. After the expiration of the foregoing twenty (20)
day period, if the lien has not been released or a bond posted, then Landlord
may cause such liens to be released by any means it deems proper, including,
without limitation, payment of any such lien, at Tenant's sole cost and expense.
All costs and expenses incurred by Landlord in causing such liens to be released
shall be repaid by Tenant to Landlord immediately upon demand, together with an
administrative fee equal to twenty percent (20%) of such costs and expenses. In
addition to all other requirements contained in this Lease, Tenant shall give
Landlord at least ten (10) Business Days prior written notice before
commencement of any construction on the Premises.
6.9 Compliance With Laws and Insurance Standards.
(a) Tenant shall comply with all federal, state and local laws,
ordinances, orders, rules, regulations and policies (collectively, "Laws"), now
or hereafter in force, as amended from time to time, in any way related to the
use, condition or occupancy of the Premises, regardless of when such Laws become
effective, including, without limitation, all applicable Hazardous Materials
Laws (as defined in Section 7.2(a)), the Americans with Disabilities Act of
--------------
1990, as amended and any laws prohibiting discrimination against, or segregation
of, any person or group of persons on account of race, color creed, religion,
sex, marital status, national origin or ancestry. Tenant shall also comply with
the terms of any transportation management program or similar programs affecting
the Building and required by any governmental authority. Tenant shall
immediately deliver to Landlord a copy of any notices received from any
governmental agency in connection with the Premises. It is the intention of
Tenant and Landlord that the obligations of Tenant under this Section 6.9 shall
-----------
apply irrespective of the scope of work required to achieve such compliance.
Tenant shall not use or occupy the Premises in any manner that creates, requires
or causes imposition of any requirement by any governmental authority for
structural or other upgrading of or improvement to the Building or the Project.
(b) Tenant shall not occupy or use, or permit any portion of the Premises
to be occupied or used, for any business or purpose that is disreputable or
constitutes a fire hazard. Tenant
25
<PAGE>
shall not permit anything to be done that would increase the rate of fire or
other insurance coverage on the Project and/or its contents. If Tenant does or
permits anything to be done that increases the cost of any insurance policy
carried by Landlord, then Tenant, at Landlord's option, shall not be in default
under this Lease, but shall reimburse Landlord, upon demand, for any such
additional premiums as an Extra Service.
6.10 Entry for Repairs, Inspection, Posting Notices, Etc. After reasonable
notice (except in emergencies where no such notice shall be required), Landlord
or Landlord Parties shall have the right to enter the Premises to inspect the
same, to clean, to perform such work as may be permitted or required hereunder,
to make repairs to or alterations of the Project or other tenant spaces therein,
to deal with emergencies, to post such notices as may be permitted or required
by law to prevent the perfection of liens against Landlord's interest in the
Project or to exhibit the Premises to prospective tenants (during the last
twelve (12) months of the Term), purchasers, encumbrancers or others, or for any
other purpose as Landlord may deem necessary or desirable; provided, however,
-------- -------
that Landlord shall make reasonable efforts not to unreasonably interfere with
Tenant's business operations, and further provided that upon request by Tenant
and if Tenant makes a representative available upon demand, Landlord shall enter
the Premises only when accompanied by a representative of Tenant. In no event
shall Tenant be entitled to any abatement of Rent by reason of the exercise of
any such right of entry. Upon request by Tenant, Landlord shall request that any
direct competitor of Tenant entering the Premises with Landlord under this
Section 6.10 execute a commercially reasonable non-disclosure agreement on
- ------------
a form to be provided by Tenant before entering the Premises.
6.11 No Nuisance. Tenant shall not create any nuisance, or interfere with,
annoy, endanger or disturb any other tenant or Landlord in its operation of the
Project. Tenant shall not place any loads upon the floor, walls or ceiling of
the Premises that endanger the structure nor place any harmful liquids or
Hazardous Material (as defined in Section 7.2) in the drainage system of the
-----------
Building. Tenant shall not permit any vibration, noise or odor to escape from
the Premises and shall not do or permit anything to be done within the Premises
which would adversely affect the quality of the air in the Building.
6.12 Rules and Regulations. Tenant shall comply with the rules and
regulations for the Project attached as Exhibit D and such amendments or
---------
supplements thereto as Landlord may adopt from time to time with prior notice to
Tenant, provided such rules and regulations are applicable to all tenants of the
Project, do not discriminate against Tenant and do not materially and
permanently increase Tenant's costs of operating in the Premises. Landlord shall
not be liable to Tenant for or in connection with the failure of any other
tenant of the Project to comply with any rules and regulations applicable to
such other tenant under its lease. In the event of any conflict between the
rules and regulations and the express terms of this Lease, the terms of this
Lease shall control.
6.13 Surrender of Premises On Termination. On or before the ninetieth (90th)
day preceding the Expiration Date, Tenant shall notify Landlord in writing of
the precise date upon which Tenant plans to surrender the Premises to Landlord.
On expiration of the Term, Tenant shall quit and surrender the Premises to
Landlord, broom clean, in good order, condition and repair as required by this
Lease, with all of Tenant's movable equipment, furniture, trade fixtures and
other personal property removed therefrom (ordinary wear and tear and damage to
an extent consistent with the Premises remaining in good condition and repair by
casualty and condemnation which is not required to be restored pursuant to
Section 12 excepted). In addition, Tenant shall remove all telecommunications
- ----------
and computer networking wiring and cabling serving the Premises from the
Building, unless Landlord requires such materials to be surrendered to Landlord.
All Alterations and Tenant Improvements shall be surrendered with the Premises
in good condition and repair, reasonable wear and tear (but only to an extent
consistent with the Premises remaining in good condition and repair) and
casualty damage which is not required to be restored pursuant to Section 12
----------
excepted, unless (a) Tenant has obtained Landlord's agreement in writing that it
can remove an Alteration or item of Tenant Improvements, or (b) Landlord has
notified Tenant that Tenant must remove an Alteration or item of Tenant
Improvements pursuant to the following paragraph. Any property of Tenant not
removed from the Premises shall be deemed, at Landlord's
26
<PAGE>
option, to be abandoned by Tenant and Landlord may store such property in
Tenant's name at Tenant's expense, and/or dispose of the same in any manner
permitted by law. If Landlord desires to have the Premises, or any part or parts
thereof, restored to a condition that existed prior to installation of any
Tenant Extra Improvements or to the condition prior to making any Alterations,
Landlord may so notify Tenant in writing at any time prior to the regularly
scheduled Expiration Date (or if this Lease is sooner terminated, within ten
(10) days after the date of such termination); and upon receipt of such notice,
Tenant shall, at Tenant's sole cost and expense, so restore the Premises, or
such part or parts thereof, reasonable wear and tear (but only to an extent
consistent with the Premises remaining in good condition and repair) and
casualty damage excepted, before the regularly scheduled Expiration Date (or if
this Lease is sooner terminated, within ten (10) days after receipt of notice).
Tenant shall repair at its sole cost and expense, all damage caused to the
Premises or the Project by removal of Tenant's movable equipment or furniture
and such Tenant Improvements and Alterations as Tenant shall be allowed or
required to remove from the Premises by Landlord. If the Premises are not
surrendered as of the end of the Term in the manner and condition herein
specified, Tenant shall indemnify, defend, protect and hold Landlord and
Landlord Parties harmless from and against any and all damages resulting from or
caused by Tenant's delay or failure in so surrendering the Premises, including,
without limitation, any claims made by any succeeding tenant due to such delay
or failure. Tenant acknowledges that Landlord shall be attempting to lease the
Premises with any such lease to be effective upon expiration of the Term, and
failure to surrender the Premises could cause Landlord to incur liability to
such successor tenant for which Tenant shall be responsible.
At the time Landlord gives its approval to any Alterations or Tenant Extra
Improvements, if requested by Tenant, Landlord shall inform Tenant as to which
elements or components of such Alterations or Tenant Extra Improvements Landlord
may require Tenant to remove from the Premises (and to have the Premises
restored as provided above) at the end of the Term. Landlord shall notify
Tenant no later than sixty (60) days prior to the end of the Term (or within
thirty (30) days after an earlier termination of this Lease) which of the
components so identified must be removed by Tenant and, if no such notice is
provided, Landlord shall be deemed to have elected to have all such elements and
components removed by Tenant and to have the Premises restored as provided
above.
6.14 Corporate Authority. If Tenant is a corporation or limited liability
company or partnership or if Tenant is a partnership on whose behalf a partner
which is a corporation or limited liability company executes this Lease, then in
any such case, each individual executing this Lease on behalf of such
corporation, limited liability company, or partnership represents and warrants
that he or she is duly authorized to execute and deliver this Lease on behalf of
said corporation, limited liability company and/or partnership, as the case may
be.
6.15 Utilities. Tenant shall not obtain any electrical or other utility
services (other than telecommunications services) from vendors other than those
selected by Landlord or approved by Landlord in writing.
ARTICLE 7.
HAZARDOUS MATERIALS
-------------------
7.1 Prohibition and Indemnity With Respect to Hazardous Materials. Except as
stated below, Tenant shall not cause or permit any Hazardous Material to be
brought upon, kept or used in or about the Premises by Tenant or Tenant Parties
without the prior written consent of Landlord. Tenant may, at Tenant's risk,
bring, store and use reasonable quantities of Permitted Hazardous Materials in
the Premises for their intended use. If Tenant violates this provision, or if
contamination of the Premises or the Real Property by Hazardous Material occurs
for which Tenant or any Tenant Party is responsible, or if Tenant's activities
or those of Tenant Parties result in or cause a Hazardous Materials Claim, then
Tenant shall indemnify, defend, protect and hold Landlord and Landlord Parties
harmless from and against any and all claims, judgments, damages, penalties,
fines, costs, expenses, liabilities or losses (including,
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without limitation, diminution in value of the Premises or the Project, damages
for the loss or restriction on use of rentable or usable space or of any amenity
of the Premises or the Project, damages arising from any adverse impact on
marketing of space, and sums paid in settlement of claims, attorneys' fees,
consultants' fees and experts' fees) (collectively, "Claims") which arise during
or after the Term as a result of such contamination. This indemnification of
Landlord by Tenant includes, without limitation, costs incurred in connection
with any investigation of site conditions or any cleanup, remedial, removal or
restoration work required by any federal, state or local government agency or
political subdivision because of any Hazardous Material present in the soil or
ground water on or under the Premises. The foregoing indemnity shall survive the
expiration or earlier termination of this Lease.
Landlord may, at Landlord's risk, bring, store, and use reasonable
quantities of Permitted Hazardous Materials in the Building or Project for their
intended use. With respect to any Hazardous Materials kept on or about the
Project or Building by Landlord, Landlord shall comply with all governmental
rules, regulations and requirements regarding the proper and lawful use, sale,
transportation, generation, treatment and disposal of Hazardous Materials.
7.2 Definitions. The following terms shall have the meanings given below for
purposes of this Lease.
(a) "Hazardous Material" shall mean any (a) oil, diesel fuel, flammable
substances, explosives, radioactive materials, hazardous wastes or substances,
toxic wastes or substances or any other wastes, materials or pollutants which
(i) pose a hazard to the Project or to persons on or about the Project or (ii)
cause the Project to be in violation of any Hazardous Materials Laws; (b)
asbestos in any form, urea formaldehyde foam insulation, transformers or other
equipment that contain dielectric fluid containing levels of polychlorinated
biphenyls, or radon gas; (c) chemical, material or substance defined as or
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous waste," "restricted hazardous
waste," "moderate risk waste," or "toxic substances" or words of similar import
under any applicable local, state or federal law or under the regulations
adopted or publications promulgated pursuant thereto, including, but not limited
to, the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, 42 U.S.C. (S) 9601, et seq.; the Hazardous Materials
-------
Transportation Act, as amended, 49 U.S.C. (S) 1801, et seq.; the Federal Water
-------
Pollution Control Act, as amended, 33 U.S.C. (S) 1251, et seq.; and the Model
-------
Toxics Control Act, as amended, RCW 70.105D; (d) chemicals, materials or
substances, exposure to which is prohibited, limited or regulated by any
governmental authority or may or could pose a hazard to the health and safety of
the occupants of the Project or the owners and/or occupants of property adjacent
to or surrounding the Project, or any other person coming upon the Project or
adjacent property; and (e) other chemicals, materials or substances which may or
could pose a hazard to the environment.
(b) "Hazardous Materials Claims" shall mean any enforcement, cleanup,
removal, remedial or other governmental or regulatory actions, agreements or
orders instituted pursuant to any Hazardous Materials Laws; and any claims made
by any third party against Landlord, Tenant or the Project relating to damage,
contribution, cost recovery compensation, loss or injury resulting from the
presence, release or discharge of any Hazardous Materials. Tenant shall
promptly cure and satisfy all Hazardous Materials Claims arising out of or by
reason of the activities or business of Tenant, Tenant Parties or any party
claiming by or through Tenant and its employees, agents, contractors, officers,
directors, partners, licensees, invitees and guests.
(c) "Hazardous Materials Laws" shall mean any federal, state or local
laws, ordinances, orders, rules, regulations or policies, now or hereafter in
force, as amended from time to time, in any way relating to the environment,
health and safety, and Hazardous Materials (including, without limitation, the
use, handling, transportation, production, disposal, discharge or storage
thereof) or to industrial hygiene or the environmental conditions on, under or
about the Project, including, without limitation, soil, groundwater and indoor
and ambient air conditioning.
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(d) "Permitted Hazardous Materials" shall mean diesel fuel in amounts
that can be stored in the Generator and related fuel tank, batteries (including
those used in equipment providing uninterrupted power supply), as well as
Hazardous Materials which are contained in ordinary office supplies of a type
and in quantities typically used in the ordinary course of business within
executive offices of similar size and location, but only if and to the extent
that such fuel and supplies are transported, stored and used in full compliance
with all Hazardous Materials Laws and their packaging instructions and otherwise
in a safe and prudent manner. Hazardous Materials which are contained in
ordinary office supplies or diesel fuel which are transported, stored and used
in a manner which is not in full compliance with all Hazardous Material Laws and
their packaging instructions or which is not in any respect safe and prudent
shall not be deemed to be "Permitted Hazardous Materials" for the purposes of
this Lease.
ARTICLE 8.
ASSIGNMENT OR SUBLEASE
----------------------
8.1 Consent Required.
(a) Prohibited Transactions. Tenant shall not assign this Lease in
whole or in part, sublease all or any part of the Premises or otherwise sell,
transfer or hypothecate this Lease or grant any right to use or occupy the
Premises to another party (all of such events shall be referred to herein as a
"Transfer" and any such assignee, purchaser, subtenant or other transferee shall
be a "Transferee" for purposes of this Article) without Landlord's prior written
consent, which shall not be unreasonably withheld (after due consideration is
given to the factors listed in Section 8.2 below), conditioned or delayed.
-----------
Landlord shall not be required to consent to any Transfer in violation of the
terms of this Section 8. If Tenant intends to enter into a Transfer, Tenant
---------
shall give Landlord at least thirty (30) days written notice of such intent.
Tenant's notice shall set forth the effective date of such Transfer and, except
in the case of a Permitted Transferee, shall be accompanied by an exact copy of
the proposed agreements between Tenant and the proposed Transferee and complete
financial information regarding the proposed Transferee. Other than in the case
of a Permitted Transferee, if requested by Landlord, Tenant shall provide
Landlord with (a) any additional information or documents reasonably requested
by Landlord relating to the proposed Transfer or the Transferee, and (b) an
opportunity to meet and interview the proposed Transferee. This Lease may not be
transferred by operation of law. All of the following shall constitute Transfers
subject to this Article 8: (x) if Tenant is a corporation that is not publicly
---------
traded on a national exchange, then any transfer of this Lease by merger,
consolidation or liquidation, or any direct, indirect or cumulative change in
the ownership of, or power to vote the majority of Tenant's outstanding voting
stock, shall constitute a Transfer; (y) if Tenant is a partnership, then a
change in general partners in, or voting or decision-making control of, the
partnership shall constitute a Transfer; and (z) if Tenant is a limited
liability company, then a change in members in, or voting or decision-making
control of, the limited liability company shall constitute a Transfer. Any
change in ownership of Tenant's parent of the type described in (x), (y) or (z)
above shall also constitute a Transfer subject to this Article 8. These
---------
provisions shall apply to any single transaction or any series of related or
unrelated transactions having the effect described.
(b) Permitted Transactions. The Landlord now consents to the
reincorporation of Tenant in Washington and to the public stock offering now
being contemplated by Tenant and agrees that such transactions will not
constitute a Transfer subject to this Article 8. In addition, Tenant may
---------
transfer the Lease in connection with any corporate restructuring within the
family of parent and subsidiary corporations or entities owned or controlled by
Tenant for tax and other legitimate business purposes without the Landlord's
consent but after notice as set forth below, provided that after such
restructuring (i) Tenant must be and must remain part of a consolidated group
that contains the same assets and management as prior to the restructuring, (ii)
Tenant shall have a creditworthiness which is equal to or greater than that of
Tenant at the time of the proposed Transfer, as determined by Landlord in its
reasonable discretion and (iii) the "tenant" after such transfer must be and
remain the entity at the highest
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level within the corporate structure. So long as the requirements of (i) through
(iii) are satisfied, each of the foregoing entities shall be considered a
"Permitted Transferee". In the event Tenant desires to effect any Transfer to
Permitted Transferee, Tenant must provide Landlord with at least thirty (30)
days prior written notice of such proposed Transfer, together with such evidence
as Landlord may request to establish that the proposed Transferee is a Permitted
Transferee.
8.2 Landlord's Options. If Tenant proposes a Transfer, other than to a
Permitted Transferee, then Landlord may elect to (a) terminate this Lease as to
the space so affected as of the date so specified by Tenant in its notice under
Section 8.1, in which event Tenant shall be relieved of all further obligations
- -----------
hereunder as to such space unless within ten (10) days following notice from
Landlord that it has elected this option, Tenant withdraws its Transfer
proposal; (b) permit Tenant to complete the Transfer on the terms set forth in
such notice, subject, however, to such reasonable conditions as Landlord may
require and to the balance of this Article 8, or (c) deny the request to
---------
Transfer the Lease. Landlord shall have a period of twenty (20) days following
any interview and receipt of such additional information as Landlord requests
(or thirty (30) days from the date of Tenant's original notice if Landlord does
not request additional information or an interview) within which to respond to
Tenant's request. If Landlord fails to notify Tenant in writing of such election
within said period, Landlord shall be deemed to have waived options (a) and (b)
above and to have elected option (c) and denied consent to the proposed
Transfer. In deciding whether to consent to a proposed Transfer, Landlord may
consider any factors that Landlord deems relevant, including but not limited to
the following: (i) whether the use of the Premises by the proposed Transferee
would be a Permitted Use; (ii) whether the proposed Transferee is of sound
financial condition and has sufficient financial resources and business
expertise, as determined by Landlord, to perform under this Lease; (iii) whether
the proposed Transferee's use involves the storage, use, treatment or disposal
of any Hazardous Materials; (iv) whether the proposed use or the proposed
Transferee could cause the violation of any covenant or agreement of Landlord to
any third party or sublessee or permit any other tenant to terminate its lease;
(v) whether the proposed Transferee leases or occupies any other space in the
Building; (vi) whether the terms of the Proposed Transfer are reasonable; and
(vii) whether there is other comparable space available for lease in the
Project. Failure by Landlord to approve a proposed Transfer shall not cause a
termination of this Lease, and the sole remedy of Tenant shall be an action for
injunctive or declaratory relief.
Notwithstanding the foregoing, Landlord shall not have the right to
recapture under Section 8.2(a) above if Tenant proposes a Transfer, which (i)
--------------
when added to the space subject to any previous Transfers by Tenant shall result
in total space transferred equal to less than one-third (1/3) of the Net
Rentable Area in the Premises; and (ii) is for a period of less than fifty
percent (50%) of the remaining Term under this Lease, measured from the
commencement date of the proposed Transfer; provided, however, that Landlord
-------- -------
shall have right to recapture under Section 8.2(a) for any Transfer proposed
--------------
during the final two (2) years of the Term, including any Extension Term
although Tenant shall have the right to exercise its Extension Option (if any)
in order to avoid such recapture.
8.3 Minimum Rental; Division of Excess Rent. In any Transfer of this
Lease, Tenant shall seek to obtain from the Transferee consideration reflecting
the then-current Fair Market Rent (as defined in Section 2.6(b)(iii) above but
-------------------
such determination shall not be subject to arbitration) for the space subject to
such Transfer. Any rent or other consideration realized by Tenant in connection
with or as a result of any Transfer in excess of the Base Rent payable
hereunder, after first deducting all reasonable and customary costs actually
incurred by Tenant to effect such Transfer (such as tenant improvements,
brokerage fees, advertising costs and the like) shall be divided equally between
Landlord and Tenant and Landlord's share shall be paid promptly to Landlord as
Rent hereunder; provided, however, that Landlord shall be entitled to receive
-------- -------
the total rent and other consideration if an Event of Default is then
outstanding under this Lease.
8.4 Tenant Not Released. No Transfer by Tenant shall relieve Tenant of any
obligation under this Lease. Any Transfer that conflicts with the provisions
hereof shall be void. No consent by
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Landlord to any Transfer shall constitute a consent to any other Transfer nor
shall it constitute a waiver of any of the provisions of this Article 8 as they
---------
apply to any such future Transfers. Following any Transfer, the obligations for
which the Tenant or subsequent transferor remains liable under this Lease shall
include, without limitation, any obligations arising in connection with any
amendments to this Lease executed by Landlord and the Transferee, whether or not
such amendments are made with knowledge or consent of the transferor.
8.5 Written Agreement. Any Transfer must be in writing and the Transferee
shall assume in writing, for the express benefit of Landlord, all of the
obligations of Tenant under this Lease with respect to the space transferred,
provided that no such assumption shall be deemed a novation or other release of
the transferor. Tenant shall provide to Landlord true and correct copies of the
executed Transfer documents and any amendment thereto during the Term.
8.6 No Transfer Period. Tenant shall not enter into any Transfer of this
Lease, other than a Permitted Transfer, until the earlier of (a) two (2) years
after the Term Commencement Date, or (b) the date on which the Project is
eighty-five percent (85%) leased and occupied, provided, however, that during
such period, Tenant may enter into a Transfer for a term of eighteen (18) months
or less, subject to all other terms and conditions of this Article 8.
---------
8.7 Conditions. Landlord may condition its consent to any proposed
Transfer on such conditions as Landlord may require including, construction of
any improvements deemed necessary or appropriate by Landlord by reason of the
Transfer. Any improvements, additions, or alterations to the Building or the
Project that are required by any law, ordinance, rule or regulation, or are
deemed necessary or appropriate by Landlord as a result of any Transfer
hereunder, shall be installed and provided by Tenant in accordance with Section
-------
6.7, without cost or expense to Landlord.
- ---
8.8 Expenses. Landlord may hire outside consultants to review the Transfer
documents and information. Tenant shall reimburse Landlord for all costs and
expenses incurred by Landlord in connection with any request for consent under
this Article 8 (even if consent is denied or the request is withdrawn) and such
---------
reimbursement shall include the allocated cost of Landlord's or its management
company's staff plus all out-of-pocket expenses, including reasonable attorneys'
fees, on demand.
8.9 No Restriction on Landlord. Without liability to Tenant, Landlord
shall have the right to offer and to lease space in the Project, or in any other
property, to any party, including without limitation parties with whom Tenant is
negotiating, or with whom Tenant desires to negotiate, a Transfer.
8.10 No Leasehold Financing. Tenant shall not encumber, pledge or mortgage
the whole or any part of the Premises or this Lease, nor shall this Lease or any
interest thereunder be assignable or transferable by operation of law or by any
process or proceeding of any court or otherwise without the prior written
consent of Landlord, which consent may be given or withheld in Landlord's sole
discretion.
ARTICLE 9.
CONDITION AND OPERATION OF THE PROJECT
--------------------------------------
9.1 No Warranty. Landlord's entire obligation with respect to the
condition of the Premises, its suitability for Tenant's uses and the
improvements to be installed therein shall be as stated in Exhibit C. Landlord
----------
shall have no other obligation of any kind or character, express or implied,
with respect to the condition of the Premises, Building or Project or the
suitability thereof for Tenant's purposes, and Tenant acknowledges that it has
neither received nor relied upon any representation or warranty made by or on
behalf of Landlord with respect to such matters.
9.2 Project Alterations. Landlord may, in its sole discretion, at any time
and from time to time: (a) make alterations, structural modifications, seismic
modifications or additions to the Building (including building additional
stories) or the Project; (b) change, add to, eliminate or reduce the extent,
size, shape or configuration of any aspect of or improvement (including the
Buildings) within the Project
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or its operations; (c) change the arrangement, character, use or location of
corridors, stairs, toilets, mechanical, plumbing, electrical or other operating
systems or any other parts of the Building; (d) change the name, number or
designation by which the Building or the Project is commonly known; or (e) alter
or relocate any portion of the Common Areas or any other common facility. None
of the foregoing acts shall be deemed an actual or constructive eviction of
Tenant, entitle Tenant to any reduction of Rent or result in any liability of
Landlord to Tenant. Except as otherwise provided in this Lease, Landlord shall
have the exclusive rights to the airspace above and around, and the subsurface
below, the Premises and the Project, including, without limitation, the
exclusive right to use all exterior walls, roofs and other portions of the
Building for signs, notices and other promotional purposes. Except as otherwise
provided in this Lease, Landlord shall have the sole and exclusive right to
possession and control of the Common Areas and all other areas of the Project
outside the Premises. Notwithstanding the foregoing, Landlord's exercise of its
rights under this Section 9.2: (i) shall not materially, adversely interfere
-----------
with Tenant's use and quiet enjoyment of the Premises, (ii) shall be consistent
with the characteristics of a Class A office project, (iii) shall not reduce the
parking specifically allotted to Tenant under this Lease, and (iv) shall not
materially and permanently increase Tenant's out-of-pocket cost of operating in
the Premises.
ARTICLE 10.
LENDER RIGHTS
-------------
10.1 Subordination. This Lease is subject and subordinate to each ground or
land lease which may now or hereafter cover all or any portion of the Project
and to each mortgage, deed of trust or other financing or security agreement
which may now or hereafter encumber all or any portion of the Project and to all
renewals, modifications, consolidations, replacements and extensions thereof
(collectively, the "Senior Instruments"). This Section 10.1 shall be self-
------------
operative and no further instrument of subordination need be required by any
lessor or any holder or beneficiary of any Senior Instrument (collectively, the
"Senior Parties"). Tenant, however, upon Landlord's or any Senior Party's
request, shall execute promptly any certificate or instrument in the form
required by any Senior Party to confirm such subordination, including but not
limited to an agreement in substantially the form attached hereto as Exhibit G,
---------
and shall deliver the same to such party within ten (10) days following receipt
thereof. Tenant's failure to execute any such certificate or instrument and
deliver the same as required hereunder shall be a material default under this
Lease.
10.2 Attornment. In the event of the enforcement by any Senior Party under
any Senior Instrument provided for by law or by such Senior Instrument, Tenant
shall attorn to any person or party succeeding to the interest of Landlord as a
result of such enforcement including any purchaser of all or any portion of the
Project at a public or private foreclosure sale or exercise of a power of sale
under such mortgage or deed of trust (collectively, "Successor") and shall
recognize such Successor as the Landlord under this Lease without change in the
terms or other provisions of this Lease; provided, however, that such Successor
-------- -------
shall not be (a) subject to any credits, offsets, defenses or claims which
Tenant may have against any prior landlord; (b) bound by any payment of Rent for
more than one (1) month in advance; (c) bound by any amendment or modification
of this Lease made after the applicable Senior Instrument is placed against the
Project (and Tenant has been given notice thereof) without the written consent
of such Senior Party; (d) liable for any act, omission, neglect or default of
any prior landlord; or (e) required to make any capital improvements to the
Project or the Premises which Landlord may have agreed to make but had not
completed. Notwithstanding the foregoing, a Senior Party may elect at any time
to cause its interest in the Project to be subordinate and junior to Tenant's
interest under this Lease by filing an instrument in the real property records
of King County, Washington effecting such election and providing Tenant with
notice of such election. In no event shall any Senior Party or any Successor
have any liability or obligation whatsoever to Tenant or Tenant's successors or
assigns for the return of all or any part of the Security Deposit unless, and
then only to the extent that, such Senior Party or Successor actually receives
all or any part of the Security Deposit. Tenant, upon Landlord's or any
Successor's request, shall execute promptly a written agreement to confirm such
attornment and if Tenant fails or
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refuses to do so within ten (10) days after written request therefor, such
failure or refusal shall constitute a material default by Tenant under this
Lease.
10.3 REAs. Tenant agrees that this Lease and the rights of Tenant hereunder
are subject and subordinate to any reciprocal access or easement agreements
whether now or in the future affecting the Project (the "REAs"); provided,
--------
however, any future REAs shall not materially adversely affect any specific
- --------
rights granted to Tenant hereunder with respect to parking or access.
10.4 Estoppel Certificate. Within ten (10) days of a written request from
Landlord, Tenant shall execute and deliver to Landlord any estoppel certificate
addressed to Landlord and/or to any Senior Party or prospective Senior Party or,
any purchaser or prospective purchaser of all or any portion of, or interest in,
the Project, on the form attached hereto as Exhibit F or such other form
---------
supplied by Landlord or such other addressee, certifying as to such facts (if
true) and agreeing to such reasonable notice and cure provisions and other
matters as the addressee may reasonably require. In the event that Tenant fails
or refuses to deliver an estoppel certificate to Landlord within ten (10) days
of a written request, then Tenant shall conclusively be deemed, without
exception, to have acknowledged the correctness of the statements set forth in
the form of certificate provided and Tenant shall be estopped from denying the
correctness of each such statement, and the addressee thereof may rely on the
correctness of the statements in such form of certificate, as if made and
certified by Tenant. Tenant hereby constitutes and appoints Landlord as Tenant's
attorney-in-fact to execute any such certificate for and on behalf of Tenant in
the event Tenant fails to execute such certificate or instrument and deliver the
same within ten (10) days following Landlord's request.
10.5 Nondisturbance. Landlord shall use reasonable efforts to obtain a Non-
Disturbance and Attornment Agreement in the form attached as Exhibit G from its
---------
current construction lender on the Project as soon as possible following
execution of this Lease. Any subordination and attornment agreement required of
Tenant under this Lease shall include a non-disturbance provision similar to
that provided in Exhibit G.
---------
ARTICLE 11.
INSURANCE
---------
11.1 Landlord's Casualty Insurance. Landlord shall maintain, or cause to be
maintained, a policy or policies of insurance with the premiums thereon fully
paid in advance, issued by and binding upon an insurance company of good
financial standing, insuring the Project against loss or damage by fire or other
insurable hazards (including earthquake loss if Landlord elects to maintain such
coverage) and contingencies for the full insurable value thereof or, in the
alternative, insuring for one hundred percent (100%) of the replacement cost
thereof (or such minimum amount as shall be required to eliminate operation of
coinsurance provisions), exclusive of excavations and foundations(as determined
by Landlord and its insurer from time to time). Landlord shall not be obligated
to insure any of Tenant's furniture, equipment, machinery, trade-fixtures,
personal property, goods or supplies ("Tenant's Personal Property"), or any
Tenant Extra Improvements or Alterations that Tenant may make upon the Premises.
If the annual premiums paid by Landlord for such casualty insurance exceed the
standard premium rates because the nature of Tenant's operations result in
extra-hazardous or higher than normal risk exposure, then Tenant shall, within
ten (10) days of receipt of appropriate premium invoices, reimburse Landlord for
such increases in premium. All insurance proceeds payable under Landlord's
insurance carried hereunder shall be payable solely to Landlord and Tenant shall
have no interest therein.
11.2 Liability Insurance. Landlord (with respect to the Project) and Tenant
(with respect to the Premises and Project) shall each maintain or cause to be
maintained a policy or policies of commercial general liability insurance with
the premiums thereon fully paid in advance, issued by and binding upon an
insurance company of good financial standing, such insurance to afford minimum
protection of not less than Five Million Dollars ($5,000,000.00), per
occurrence, combined single limit, for bodily injury (including death and
property damage). The coverages required to be carried shall be
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<PAGE>
extended to include, but not to be limited to, blanket contractual liability,
personal injury liability (libel, slander, false arrest and wrongful eviction),
and broad form property damage liability. Tenant's contractual liability
insurance shall apply to Tenant's indemnity obligations under this Lease. The
certificate evidencing Tenant's insurance coverage required hereunder shall
state that the insurance includes the liability assumed by Tenant under this
Lease. Tenant's insurance required hereunder shall be written to be primary with
any other insurance available to Landlord being excess. Upon request of Tenant,
Landlord shall provide Tenant reasonable evidence that the insurance required to
be maintained hereunder by Landlord is in full force and effect.
11.3 Tenant's Additional Insurance.
(a) All Risk Coverage. Tenant shall provide insurance coverage during
the Term against loss or damage by fire and such other risks as are from time to
time included in an "all risk" policy (including without limitation sprinkler
leakage and water damage), insuring the full replacement cost of any Tenant
Extra Improvements, any Alterations and Tenant's Personal Property.
(b) Workers' Compensation Insurance. Throughout the Lease Term,
Tenant, at its own expense, shall keep and maintain in full force and effect
workers' compensation insurance in an amount equal to at least the minimum
statutory amount then currently required in the State of Washington.
(c) Other. Such other form or forms of insurance as are generally
required or obtained for similar projects, as Landlord or any mortgagee of
Landlord may reasonably require from time to time, against the same or other
insurable hazards which at the time are commonly insured against in the case of
premises similarly situated, due regard being given to the height and type of
buildings thereon and their construction, use and occupancy.
(d) Form of Policy. All policies required to be carried by Tenant,
under this Article 11 shall be written with financially responsible companies
----------
with a Best & Company rating of "B+IX" or better, and shall name Landlord,
Landlord's property manager and any Senior Party as an additional insured, and
each insurer shall agree not to cancel or alter the policy without at least
thirty (30) days prior written notice to Landlord and all named and additional
insureds. Any deductible or self-insurance provisions under any insurance
policies maintained by Tenant shall be subject to Landlord's prior written
approval, which shall not be unreasonably withheld, conditioned, or delayed.
(e) Certificates. Prior to commencement of the Term, and thereafter
during the Term, within twenty (20) days prior to the expiration date of any
such coverage, Tenant shall deliver to Landlord a certificate or certificates of
the insurance required hereunder. If Tenant fails to provide such proof of
insurance, Landlord shall be authorized (but not required) to procure such
coverage in the amounts stated with all costs thereof to be charged to Tenant
and paid within ten (10) days of written invoice therefor as an Extra Service.
11.4 Indemnity and Exoneration.
(a) Landlord shall not be liable to Tenant for any loss, damage or
injury to person or property caused by (i) theft, fire, vandalism, assault,
battery, act of God, acts of the public enemy, acts of terrorists or criminals,
riot, strike, insurrection, war, court order, requisition or order of
governmental body or authority, whether or not the negligence of Landlord was a
partial cause of such loss, damage or injury, or (ii) the active negligence or
willful misconduct of Tenant or Tenant Parties, or (iii) repair or alteration of
any part of the Project or failure to make any such repair except as expressly
otherwise provided in this Lease.
/s/ TD
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Tenant's Initials
(b) Tenant shall indemnify, defend, protect and hold Landlord and
Landlord Parties harmless from and against any and all Claims arising out of or
related to claims of injury to or death of
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persons, damage to property occurring or resulting directly or indirectly from
the use or occupancy of the Premises or activities of Tenant or Tenant Parties
in or about the Premises or Project; provided, however, that the foregoing
-------- --------
indemnity shall not be applicable to claims arising solely by reason of the
active negligence or willful misconduct of Landlord, unless such claims are or
should be covered by insurance required to be carried by Tenant under the terms
of this Lease, in which case such claims shall be subject to the terms of this
indemnity.
(c) Landlord shall indemnify, defend, protect and hold Tenant and
Tenant Parties harmless from and against any and all claims, judgments, damages,
penalties, fines, costs, expenses, liabilities or losses arising solely out the
active negligence or willful misconduct of Landlord, unless such claims are or
should be covered by insurance required to be carried by Tenant under the terms
of this Lease, in which case such claims shall not be subject to the terms of
this indemnity; provided, however, that the foregoing indemnity shall not
-------- --------
include claims arising, in whole or in part, by reason of the negligence or
willful misconduct of Tenant or Tenant Parties.
(d) To the extent, but only to the extent, necessary to fully
indemnify the parties from claims made by the indemnifying party or its
employees, the indemnities herein constitute a waiver of the indemnifying
party's immunity under the Washington Industrial Insurance Act, RCW Title 51, as
between Landlord and Tenant only.
11.5 Indemnity for Liens. Tenant shall indemnify, defend and protect
Landlord and hold and save Landlord harmless of and from any and all loss,
claims, proceedings, cost, damage, injury, causes of action, liabilities or
expense arising out of or in any way related to work or labor performed,
materials or supplies furnished to or at the request of Tenant or in connection
with performance of any work done for the account of Tenant in the Premises or
the Project.
11.6 Waiver of Subrogation Rights. Anything in this Lease to the contrary
notwithstanding, Landlord and Tenant each waive all rights of recovery, claim,
action or cause of action, against the other, Tenant Parties or Landlord
Parties, as applicable, for any loss or damage that may occur to the Premises,
or any improvements thereto, or the Project or any personal property of such
party therein, by reason of fire, the elements, or any other cause that could be
insured against under the term of an "all risk" insurance policy or other
casualty insurance coverages which are required to be obtained pursuant to this
Lease, regardless of cause or origin, including negligence of the other party,
Landlord Parties or Tenant Parties, as applicable, and each party covenants that
no insurer shall hold any right of subrogation against such other party. Tenant
shall advise its insurers of the foregoing and such waiver shall be a part of
each policy maintained by Tenant that applies to the Premises, any part of the
Project or Tenant's use and occupancy of any part thereof.
11.7 Concurrent Negligence. Notwithstanding Section 11.4 above, in the
------------
event of concurrent negligence of Tenant or Tenant Parties, on the one hand, and
Landlord, on the other hand, which concurrent negligence results in injury to
damage to persons or property occurring in, on or about the Premises, Building
or Project, either party's obligation to indemnify the other party as set forth
in Section 11.4 shall be limited to the extent of the negligence of the
------------
indemnifying party or such other parties for whom the indemnifying party is
responsible, including the indemnifying party's proportional share of reasonable
attorneys' fees and costs incurred in connection with any claim, action or
proceeding brought with respect to such injury or damage.
ARTICLE 12.
CASUALTY AND EMINENT DOMAIN
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12.1 Damage and Destruction. If a fire or other casualty in the Premises or
the Project occurs, Tenant shall immediately give notice thereof to Landlord.
The following provision shall apply to any fire or other casualty:
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(a) If the damage is limited solely to the Premises and the Premises can,
in the reasonable opinion of Landlord, be made tenantable with all damage
repaired within six (6) months from the date of damage or destruction, then
Landlord shall diligently rebuild the same; provided, however, that Landlord
-------- -------
shall not be obligated to expend for such repair an amount in excess of the
insurance proceeds recovered or recoverable as a result of such damage.
(b) If portions of the Project outside the boundaries of the Premises are
damaged or destroyed (whether or not the Premises are also damaged or destroyed)
and (i) the Premises and the Project can both, in the reasonable opinion of
Landlord, be made tenantable with all damage repaired within six (6) months from
the date of damage or destruction, and (ii) Landlord determines that such
reconstruction is economically feasible, then Landlord shall diligently rebuild
the same; provided, however, that Landlord shall not be obligated to expend for
-------- -------
such repair an amount in excess of the insurance proceeds recovered or
recoverable as a result of such damage and Landlord shall have no obligation to
repair or restore Tenant Extra Improvements or Alterations.
(c) If (i) the Premises should be damaged by any occurrence not covered by
Landlord's insurance, or (ii) the Premises or the Building should be damaged to
the extent that the damage cannot, in Landlord's reasonable opinion be restored
within six (6) months from the date of damage, or (iii) the Building should be
damaged to the extent of more than fifty percent (50%) of the cost of
replacement thereof, notwithstanding that the Premises may be undamaged, or (iv)
if the damage occurs during the last two (2) years of the Term (including any
Extension Term), Landlord may elect either to repair or rebuild the Premises or
the Building or to terminate this Lease upon giving notice in writing of such
election to Tenant within sixty (60) days after the happening of the event
causing the damage.
(d) During any period when the Premises are rendered untenantable because
of any casualty and Tenant does not occupy the Premises, Base Rent shall abate
proportionately until such time as the Premises are made tenantable as
reasonably determined by Landlord, and no portion of the Rent so abated shall be
subject to subsequent recapture; provided, however, that there shall be no such
-------- --------
abatement if the damage is caused by Tenant or any Tenant Party.
(e) The proceeds from any insurance paid by reason of damage to or
destruction of the Project or the Building or any part thereof, the Building
Standard Improvements or any other element, component or property insured by
Landlord shall belong to and be paid to Landlord subject to the rights of any
mortgagee of Landlord's interest in the Project or the beneficiary of any deed
of trust that constitutes an encumbrance thereon. If this Lease is terminated
by either party as a consequence of a casualty in accordance with any of the
provisions of this Section 12.1, all proceeds of insurance required to be
------------
maintained either by Landlord or Tenant shall be paid to Landlord subject to the
rights of any mortgagee of Landlord's interest in the Project or the beneficiary
of any deed of trust that constitutes an encumbrance thereon; provided, however,
-------- --------
that Tenant shall be paid all proceeds of insurance payable in connection with
Tenant's trade fixtures, furnishings, equipment and all other items of personal
property of Tenant.
(f) If the Premises, or any part thereof, or any portion of the Building
necessary for Tenant's use of the Premises, are damaged or destroyed during the
last twelve (12) months of the Term, or any extension thereof, Landlord or
Tenant may terminate this Lease by giving written notice thereof to the other
party within thirty (30) days after the date of the casualty, in which case this
Lease shall terminate as of the later of the date of the casualty or the date of
Tenant's vacation of the Premises.
(g) Except to the extent expressly provided in this Lease, nothing
contained in this Lease shall relieve Tenant of any liability to Landlord or to
Landlord's insurance carriers that Tenant may have under law or under the
provisions of this Lease in connection with any damage to the Premises or the
Building by fire or other casualty.
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(h) If Landlord rebuilds the Premises under any provision of this
Article 12, Tenant shall repair and restore Building Standard Improvements at
- ----------
Tenant's expense so that the Premises are restored to a tenantable condition, in
compliance with all Laws, and suitable for general office use consistent with a
Class A office project, or, at Landlord's election, Landlord may repair and
rebuild the Building Standard Improvements so that the Premises are in such
condition, at Tenant's sole cost and expense in accordance with Section 6.7 of
-----------
this Lease. So long as it does not delay completion of the restoration, Tenant
may elect, at its expense, to update or redecorate the Premises in connection
with the restoration but any changes shall be considered Alterations subject to
the provisions of Section 6.7 above.
-----------
(i) Notwithstanding any other provision of this Section 12.1, within
------------
ninety (90) days after the occurrence of any casualty, Landlord shall notify
Tenant as to the expected period of time needed to complete any repair or
restoration. If (i) Landlord estimates that it will take more than three hundred
(300) days to complete the repair or restoration after receipt of insurance
proceeds, and (ii) the damage or destruction renders a material portion of the
Premises untenantable and Tenant ceases to occupy such portion of the Premises,
then Tenant may elect to terminate this Lease by giving Landlord written notice
of termination within twenty (20) days after receipt of Landlord's notice. If
Tenant does not provide written notice within such time period, Tenant shall
have permanently waived its right to terminate the Lease pursuant to this
provision. In addition, if Landlord has not completed any restoration within
three hundred sixty-five (365) days after receipt of sufficient insurance
proceeds (as such period may be extended by any period of Force Majeure) and is
not diligently pursuing completion of restoration then Tenant may notify
Landlord in writing that Tenant wishes to terminate the Lease. If Landlord has
not completed restoration and delivered possession of the restored Premises to
Tenant within thirty (30) days after the date of such notice then this Lease
shall terminate and be of no further force and effect. If Landlord completes
restoration and delivers possession of the restored Premises to Tenant within
thirty (30) days after the date of such notice then this Lease shall continue in
full force and effect.
12.2 Condemnation.
(a) If such portion of the Premises or any portion of the Project
shall be taken or condemned for any public purpose and the remainder of the
Premises are rendered untenantable, as reasonably determined by Landlord, this
Lease shall, at the option of either party, terminate as of the date of such
taking. If this Lease is not terminated in its entirety then it shall terminate
only as to the portion of the Premises taken and Base Rent and Tenant's
Proportionate Share shall be adjusted to reflect the new Net Rentable Area of
the Premises and/or the Project. If any portion of the Project shall be taken or
condemned for any public purpose to such an extent as to render the Project not
economically viable in Landlord's discretion, then whether or not the Premises
or any part thereof is taken or conveyed, Landlord may by notice in writing to
Tenant terminate this Lease, and the Base Rent and other charges shall be paid
or refunded as of the date of termination.
(b) If during the Term of this Lease the entire Premises shall be
taken by eminent domain or destroyed by the action of any public or quasi-public
authority or in the event of conveyance in lieu thereof, this Lease shall
terminate as of the day possession shall be taken by such authority, and Tenant
shall pay Rent up to that date with an appropriate refund by Landlord of such
Rent as shall have been paid in advance for a period subsequent to the date of
the taking of possession.
(c) If a temporary taking of all or a portion of the Premises occurs,
there shall be no abatement of Rent and Tenant shall remain fully obligated for
performance of all of the covenants and obligations on its part to be performed
pursuant to the terms of this Lease. All proceeds awarded or paid with respect
thereto shall belong to Tenant.
(d) All compensation awarded for any such taking or conveyance whether
for the whole or a part of the Premises shall be the property of Landlord,
whether such damages shall be awarded as compensation for diminution in the
value of the leasehold or of the fee of or underlying leasehold interest in the
Premises, and Tenant waives all claims against Landlord and the condemning
authority for
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<PAGE>
damages for termination of its leasehold interest or interference with its
business and hereby assigns to Landlord all of Tenant's right, title and
interest in and to any and all such compensation; provided, however, that Tenant
-------- -------
shall be entitled to claim, prove and receive in separate proceedings such
separate award as may under the laws of the State of Washington be expressly
allocated to Tenant's personal property or relocation expenses, and for the
value of Tenant's leasehold interest, provided that such award shall be made by
the court in addition to and shall not result in a reduction of the award made
to Landlord.
ARTICLE 13.
DEFAULT
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13.1 Events of Default. The occurrence of any of the following shall
constitute an event of default ("Event of Default") on the part of Tenant:
(a) Intentionally Omitted.
(b) Non-payment of Rent. Failure to pay any installment of Base Rent,
Operating Costs or the fee for Parking Passes under Section 14.22 when payment
-------------
is due, or failure to pay any other items of Rent within five (5) days after
receiving notice that same is past due;
(c) Other Obligations. Failure to perform any obligation, agreement or
covenant under this Lease other than those matters specified in Section 13.1(b),
---------------
such failure continuing for twenty (20) days after written notice of such
failure (or with respect to non-monetary obligations only, such longer period as
is reasonably necessary to remedy such default, provided that Tenant shall
continuously and diligently pursue such remedy at all times until such default
is cured);
(d) General Assignment. A general assignment for the benefit of
creditors by Tenant or any guarantor of Tenant's obligations hereunder
("Guarantor");
(e) Bankruptcy. The filing of any voluntary petition in bankruptcy by
Tenant or Guarantor, or the filing of an involuntary petition by Tenant's or
Guarantor's creditors, which involuntary petition remains undischarged for a
period of sixty (60) days. If under applicable law the trustee in bankruptcy or
Tenant has the right to affirm this Lease and continue to perform the
obligations of Tenant hereunder, such trustee or Tenant shall, in such time
period as may be permitted by the bankruptcy court having jurisdiction, cure all
defaults of Tenant hereunder outstanding as of the date of the affirmance of
this Lease and provide to Landlord such adequate assurances as may be necessary
to ensure Landlord of the continued performance of Tenant's obligations under
this Lease;
(f) Receivership. The employment of a receiver to take possession of
substantially all of Tenant's assets or the Premises, if such receivership
remains undissolved for a period of sixty (60) days after creation thereof;
(g) Attachment. The attachment, execution or other judicial seizure of
all or substantially all of Tenant's assets or the Premises, if such attachment
or other seizure remains undismissed or undischarged for a period of sixty (60)
days after the levy thereof;
(h) Insolvency. The admission by Tenant or Guarantor in writing of its
inability to pay its debts as they become due, the filing by Tenant or Guarantor
of a petition seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, the filing by Tenant or Guarantor of an
answer admitting or failing timely to contest a material allegation of a
petition filed against Tenant or Guarantor in any such proceeding or, if within
sixty (60) days after the commencement of any proceeding against Tenant or
Guarantor seeking any reorganization, or arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation, such proceeding shall not have been dismissed.
(i) Chronically Late Payment of Rent. If Tenant fails to make any
payment of Base Rent , Estimated Operating Costs or the fee for Parking Passes
under Section 14.22 when due more
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<PAGE>
than two (2) times in any Lease Year, then Landlord shall have the right to
issue written notice to Tenant that any subsequent default for late payment of
Rent in that same Lease Year will result in Tenant being deemed "Chronically
Late." If after such notice Tenant subsequently fails to make any payment of
Rent on the date such payment is due then Tenant shall be deemed to be
Chronically Late and in default under this Lease. Tenant may be permitted to
cure such Chronically Late condition by payment of all arrearages and the
Additional Security Deposit as set forth in Section 3.1 above but shall have
-----------
permanently forfeited certain rights as set forth herein.
13.2 Remedies Upon Default.
(a) Termination. If an Event of Default occurs, Landlord shall have
the right, with or without notice or demand, immediately (after expiration of
the applicable grace periods specified herein) to terminate this Lease, and at
any time thereafter recover possession of the Premises or any part thereof and
expel and remove therefrom Tenant and any other person occupying the same, by
any lawful means, and again repossess and enjoy the Premises without prejudice
to any of the remedies that Landlord may have under this Lease, or at law or
equity by reason of Tenant's Event of Default or of such termination.
(b) Continuation After Default. Even though Tenant has breached this
Lease and/or abandoned the Premises, this Lease shall continue in effect for so
long as Landlord does not terminate Tenant's right to possession under Section
-------
13.2(a) hereof, and Landlord may enforce all of its rights and remedies under
- -------
this Lease, including (but without limitation) the right to recover Rent as it
becomes due. Acts of maintenance, preservation or efforts to lease the Premises
or the appointment of receiver upon application of Landlord to protect
Landlord's interest under this Lease shall not constitute an election to
terminate Tenant's right to possession.
(c) Cure. Landlord may cure such default or perform such obligation on
Tenant's behalf and at Tenant's expense as an Extra Service, provided that,
except as permitted elsewhere in this Lease, Landlord shall not perform such
obligations during any period in which Tenant is diligently pursuing cure in
accordance with Section 13.1(c) for up to a total of thirty (30) days after the
---------------
occurrence of such default. Tenant shall reimburse Landlord on demand pursuant
to Section 5.4.
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13.3 Damages Upon Termination. Should Landlord terminate this Lease
pursuant to the provisions of Section 13.2(a) hereof, Landlord shall have all
---------------
the rights and remedies of a landlord under applicable law and, in addition,
Landlord shall be entitled to recover from Tenant: (a) the worth at the time of
award of the unpaid Rent and other amounts 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 the Tenant 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 proves could be reasonably
avoided; (d) all costs incurred by Landlord in reletting the Premises, including
without limitation, reasonable, market-based brokerage commissions, attorneys'
fees, marketing and advertising expenses and expenses of cleaning, restoring or
remodeling the Premises to the extent required for general office use; and (e)
any other amount necessary to compensate Landlord for all the detriment
proximately caused by Tenant's failure to perform its obligations under this
Lease or which, in the ordinary course of things, would be likely to result
therefrom. The "worth at the time of award" of the amounts referred to in (a)
and (b) shall be computed with interest at eighteen percent (18%) per annum or
the highest lawful commercial interest rate, whichever is the lower. The "worth
at the time of award" of the amount referred to in (c) shall be computed by
discounting such amount at the "discount rate" of the Federal Reserve Bank of
San Francisco in effect as of time of award plus one percent (1%) and, where
rental value is a material issue, shall be based upon competent appraisal
evidence.
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13.4 Computation of Rent for Purposes of Default. For purposes of computing
unpaid Rent that would have accrued and become payable under this Lease pursuant
to the provisions of Section 13.3, unpaid Rent shall consist of the sum of:
------------
(a) the total Base Rent for the balance of the Term, plus
(b) a computation of the Operating Costs for the balance of the Term,
the assumed Operating Costs for the calendar year in which the Event of Default
occurs and each future calendar year in the Term to be equal to the Operating
Costs for the calendar year prior to the year in which the Event of Default
occurs compounded at a per annum rate equal to the mean average rate of
inflation for the preceding five (5) calendar years as determined by reference
to the Consumer Price Index - All Items for Seattle-Tacoma-Bremerton, All Urban
Consumers, published by the Bureau of Labor Statistics of the United States
Department of Labor (Base Year 1982-84=100), or such successor index as may be
established to provide a measure of the current purchasing power of the dollar
(provided, however, that if no successor index is published by the United States
-------- --------
Department of Labor, Landlord may select in its reasonable discretion a
substitute index or method of measuring inflation).
13.5 Late Charge. In addition to its other remedies, if any payment of Rent
is not received by the fifth (5th) day after the due date thereof, Tenant shall
pay a late fee in an amount equal to Two Hundred Fifty Dollars ($250.00) plus
five percent (5%) of the delinquency for each month or portion thereof that the
delinquency remains outstanding, the parties agreeing that Landlord's damage by
virtue of such delinquencies would be difficult to compute and the amount stated
herein represents a reasonable estimate thereof. The provision for a late charge
set forth in this Section 13.5, and any collection of a late charge by Landlord,
------------
shall not be deemed a waiver of any breach or Event of Default by Tenant under
this Lease. If Tenant is deemed Chronically Late and does not post the
increased Security Deposit within the time permitted under Section 3.1 above,
-----------
then it shall be a non-curable default under this Lease and Landlord shall be
entitled to reject any subsequent late payment and exercise its remedies under
Section 13.2. If Tenant's Rent checks are returned by the bank without payment
- ------------
then Landlord may require Tenant to pay future installments of Rent by certified
or cashiers' check.
13.6 Remedies Cumulative. All of the remedies permitted or available to
Landlord under this Lease, or at law or in equity, shall be cumulative and not
alternative and invocation of any such right or remedy shall not constitute a
waiver or election of remedies with respect to any other permitted or available
right or remedy.
13.7 Tenant's Remedies. Landlord shall not be in default unless Landlord
fails to cure a default by Landlord of its obligations under this Lease within
sixty (60) days after its receipt of notice thereof from Tenant, or if such
default is not capable of being cured within said sixty (60) day period,
Landlord has failed to commence such cure and diligently pursue such cure until
completion. In no event shall Landlord be liable for consequential damages.
Tenant shall not sue, seek any remedy or enforce any right against Landlord
until (a) Tenant gives written notice to all Senior Parties, and (b) a
reasonable time for such Senior Party, at its option, to remedy the act or
omission has elapsed following the giving of notice by Tenant to Senior Party
required hereunder, including, without limitation, time to obtain possession
from Landlord by power of sale or judicial foreclosure, it being agreed that the
Senior Party shall have no obligation to Tenant to cure or remedy any act or
omission of Landlord. Tenant shall look solely to Landlord's interest in the
Building for recovery of any judgment from Landlord whether from a breach hereof
or from a right created by statute or at common law. Landlord and Landlord
Parties shall not be personally liable for any such judgment. Tenant agrees that
no other property or assets of Landlord or any partner or member of Landlord
shall be subject to levy, execution or other enforcement procedures for
satisfaction of any such judgment or decree; no partner or member of Landlord
shall be sued or named as a party in any suit or action (except as may be
necessary to secure jurisdiction over Landlord); no service of process shall be
made against any partner or member of Landlord (except as may be necessary to
secure jurisdiction over Landlord); no judgment shall be taken against partner
or member of Landlord;
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<PAGE>
no writ of execution shall ever be levied against the assets of any partner or
member of Landlord; and these covenants, limitations and agreements are
enforceable both by Landlord and by any partner or member of Landlord. Any lien
obtained to enforce any such judgment and any levy of execution thereon shall be
subject and subordinate to any Senior Instrument.
13.8 Obligation to Mitigate Damages. Both Landlord and Tenant shall have
the obligation to take reasonable steps to mitigate their damages arising from
any default under this Lease.
13.9 Dispute Resolution Procedures. The parties agree to attempt to resolve
any disputes under this Lease in good faith prior to resorting to litigation.
Each party agrees to provide a person authorized and empowered to resolve a
particular dispute to meet face to face with the person from the other party so
authorized and empowered. Such meeting shall take place at a mutually convenient
location within ten (10) days after receipt of a written request. Each party
shall negotiate in good faith to attempt to resolve the dispute for as long as
either party so desires and in good faith believes progress can be made, but in
no event for longer than ten (10) days. This provision shall not apply to Events
of Default described in Sections 13.1(b), (d), (e), (f), (g), (h) or (i).
---------------- --- --- --- --- --- ---
ARTICLE 14.
MISCELLANEOUS
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14.1 No Waiver. Failure of Landlord or Tenant to declare any default
immediately upon occurrence thereof, or delay in taking any action in connection
therewith, shall not waive such default, but Landlord or Tenant, as the case may
be, shall have the right to declare any such default at any time thereafter. No
waiver by Landlord of an Event of Default, or any agreement, term, covenant or
condition contained in this Lease, shall be effective or binding on Landlord
unless made in writing and no such waiver shall be implied from any omission by
Landlord to take action with respect to such Event of Default or other such
matter. No express written waiver by Landlord of any Event of Default, or other
such matter, shall affect or cover any other Event of Default, matter or period
of time, other than the Event of Default, matter and/or period of time specified
in such express waiver. One or more written waivers by Landlord of any Event of
Default, or other matter, shall not be deemed to be a waiver of any subsequent
Event of Default, or other matter, in the performance of the same provision of
this Lease. Acceptance of Rent by Landlord hereunder, or endorsement of any
check, shall not, in and of itself, constitute a waiver of any breach or Event
of Default or of any agreement, term, covenant or condition of this Lease,
except as to the payment of Rent so accepted, regardless of Landlord's knowledge
of any concurrent Event of Default or matter. Landlord may, at its election,
apply any Rent received from Tenant to the oldest obligation outstanding from
Tenant to Landlord, any endorsement or other statement of Tenant to the contrary
notwithstanding. No course of conduct between Landlord and Tenant, and no
acceptance of the keys to or possession of the Premises before the termination
of the Term by Landlord or any employee of Landlord shall constitute a waiver of
any such breach or of any term, covenant or condition of this Lease or operate
as a surrender of this Lease.
14.2 Holding Over. If Tenant (or anyone claiming under Tenant) remains in
possession after expiration or termination of this Lease without the written
consent of Landlord, Tenant shall comply with all terms and conditions of this
Lease except that Tenant shall pay Base Rent for each month or partial month of
occupancy thereafter at a rate equal to two hundred percent (200%) of the Base
Rent for the last month of the Term, together with such other amounts as may
become due hereunder. No occupancy or payment of Rent by Tenant after expiration
of the Term shall operate to renew or extend the Term. If Tenant remains in
possession after the expiration or termination of this Lease without Landlord's
consent, in addition to the payment described in the first sentence of this
Section 14.2, Tenant shall indemnify, defend, protect and hold Landlord and
- ------------
Landlord Parties harmless from and against any and all Claims for damages by any
other tenant or third person to whom Landlord may have leased or offered to
lease all or any part of the Premises effective on or after the termination of
this Lease, together with all loss, cost, expense, damages and liabilities in
connection with any such reletting, including, without limitation,
41
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attorneys' fees and Landlord's lost revenues. If Tenant holds over with the
consent of Landlord in writing Tenant shall thereafter occupy the Premises under
this Lease on a month-to-month basis and Base Rent shall be increased to one
hundred twenty five percent (125%) of the Base Rent for the last month of the
Term.
14.3 Attorneys' Fees. If either party places the enforcement of this Lease,
or any part thereof, or the collection of any Rent due, or to become due
hereunder, or recovery of the possession of the Premises in the hands of an
attorney or collection agency, or files suit upon the same, or seeks a judicial
declaration of rights hereunder, the prevailing party shall recover its
reasonable attorneys' fees, court costs and collection agency charges. As used
herein, "prevailing party" shall mean the party who substantially prevails in
the matter at issue, including without limitation, a party who dismisses an
action for recovery hereunder in exchange for payment of the sums allegedly due,
performance of covenants allegedly breached or consideration substantially equal
to the relief sought in the action.
14.4 Amendments. This Lease may not be altered, changed or amended, except
by an instrument in writing signed by both parties.
14.5 Transfers by Landlord. Landlord shall have the right to transfer and
assign, in whole or in part, all of its rights and obligations hereunder and in
the Project. If Landlord sells or otherwise transfers the Building or the
Project, or if Landlord assigns its interest in this Lease, other than an
assignment solely for security purposes, such purchaser, transferee or assignee
thereof shall be deemed to have assumed Landlord's obligations hereunder, and
Landlord shall thereupon be relieved of all liabilities hereunder arising
thereafter, but this Lease shall otherwise remain in full force and effect.
Landlord or any person or party succeeding to possession of the Project as a
successor to Landlord shall be subject to Landlord's obligations hereunder only
during the period of such person's or party's ownership.
14.6 Severability. If any term or provision of this Lease, or the
application thereof to any person or circumstances, shall to any extent be
invalid or unenforceable, the remainder of this Lease, or the application of
such provision to persons or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected thereby, and each provision of
this Lease shall be valid and shall be enforceable to the extent permitted by
law.
14.7 Notices. All notices, demands, consents and approvals that may or are
required to be given by either party to the other hereunder shall be in writing
and shall be deemed to have been fully given by personal delivery or three (3)
days following deposit in the United States mail, certified or registered,
postage prepaid, and addressed to the party to be notified at the address for
such party specified on the Basic Lease Information Sheet, or to such other
place as the party to be notified may from time to time designate by at least
fifteen (15) days notice to the notifying party. Tenant shall deliver a copy of
any notice given to Landlord to (a) Landlord's property manager, (b) any Senior
Party whose address is known to Tenant, and (c) to 2800 Post Oak Boulevard, 50th
floor, Houston Texas 77056-6118, Attention: C. Hastings Johnson. Notwithstanding
the foregoing, personal delivery of notices to Tenant may be made by leaving a
copy of the notice, addressed to Tenant, at the Premises. Tenant appoints as its
agent to receive service of all default notices and notice of commencement of
unlawful detainer proceedings the person in charge of or apparently in charge of
or occupying the Premises at the time, and, if there is no such person, then
such service may be made by attaching the same on the main entrance of the
Premises. A courtesy copy of any notice required hereunder to be given to Tenant
shall be delivered to (a) General Counsel, HomeGrocer.com, Inc. Legal Department
at Tenant's address for notice, and (b) to Gordon W. Tanner, Stoel Rives, LLP,
600 University Street, #3600, Seattle, Washington 98101-3197
14.8 Intentionally Omitted.
14.9 No Option. Submission of this instrument for examination or signature
by Tenant does not constitute a reservation of or an option to lease, and it is
not effective as a lease or otherwise until
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<PAGE>
execution and delivery by both Landlord and Tenant. Landlord shall not be deemed
to have made an offer to Tenant by furnishing Tenant with a copy of this Lease
with particulars inserted. No contractual or other rights shall exist or be
created between Landlord and Tenant until all parties hereto have executed this
Lease and until it has been approved in writing by any Senior Party and fully
executed copies have been delivered to Landlord and Tenant. Tenant agrees to
make such changes herein as may be requested by any Senior Party so long as such
do not increase Rent or other charges due from Tenant hereunder or otherwise
materially alter Tenant's rights hereunder.
14.10 Integration and Interpretation. The terms of this Lease are intended
by the parties as a final expression of their agreement with respect to such
terms as are included in this Lease and may not be contradicted by evidence of
any prior or contemporaneous agreement, arrangement, understanding or
negotiation (whether oral or written). The parties further intend that this
Lease constitutes the complete and exclusive statement of its terms, and no
extrinsic evidence whatsoever may be introduced in any judicial proceeding
involving this Lease. The language in all parts of this Lease shall in all cases
be construed as a whole and in accordance with its fair meaning and not
construed for or against any party, regardless of which party may have drafted
the provision in question, it being agreed that this is a negotiated agreement.
The following exhibits and schedules are attached hereto and incorporated by
this reference as if fully set forth herein:
Exhibit A-1 Site Plan of the Premises
Exhibit A-2 Site Plan of the Project
Exhibit A-3 Site Plan of Expansion Space
Exhibit B Legal Description of the Project
Exhibit C Initial Improvement of the Premises
Schedule C-1 Base Building Improvements
Schedule C-2 Definition of Building Standard Improvements
Schedule C-3 List of Base Building Plans
Schedule C-4 Description of Prime Contract
Exhibit D Rules and Regulations
Exhibit E Lease Commencement Certificate
Exhibit F Form of Tenant Estoppel
Exhibit G Form of Subordination Agreement
Exhibit H Form of Letter of Credit
Exhibit I Janitorial Specifications
14.11 Quitclaim. Upon expiration or earlier termination of this Lease,
Tenant shall, immediately upon request of Landlord, execute, acknowledge and
deliver to Landlord a recordable deed quit-claiming to Landlord all interest of
Tenant in the Premises, the Project and this Lease.
14.12 No Easement for Light, Air and View. Except as otherwise provided in
this Section, this Lease conveys to Tenant no rights for any light, air or view
except as provided in this Section 14.12. No diminution of light, air or view,
-------------
or any impairment of the visibility of the Premises from inside or outside the
Building, by any structure or other object that may hereafter be erected on any
property other than the Real Property (whether or not by Landlord) shall entitle
Tenant to any reduction of Rent under this Lease, constitute an actual or
constructive eviction of Tenant, result in any liability of Landlord to Tenant,
or in any other way affect this Lease or Tenant's obligations hereunder;
provided, however, that Landlord shall not construct any improvements on the
- -------- -------
Real Property, as described on Exhibit B, that interfere with the visibility of
----------
the Tenant Sign or with the view from the south side of the Premises.
14.13 No Merger. The voluntary or other surrender or termination of this
Lease by Tenant, or a mutual cancellation thereof shall not work a merger, but,
at Landlord's sole option, shall either terminate all existing subleases or
subtenancies or shall operate as an assignment to Landlord of all such subleases
or subtenancies.
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14.14 Memorandum of Lease. Tenant shall, upon request of Landlord,
execute, acknowledge and deliver a short form memorandum of this Lease (and any
amendment hereto or consolidation hereof), in form suitable for recording. In no
event shall this Lease or any memorandum thereof be recorded without the prior
written consent of Landlord, and any attempt to do so shall constitute a default
by Tenant.
14.15 Survival. All of the covenants and obligations contained in this
Lease shall survive the expiration or earlier termination of this Lease. No
provision of this Lease providing for termination in certain events shall be
construed as a limitation or restriction of the parties' rights and remedies at
law or in equity available upon a breach of this Lease.
14.16 Financial Statements. If Landlord intends to sell all or any portion
of the Building or Project (or any interest therein), or obtain a loan secured
by the Building or Project (or any interest therein), then Tenant shall, within
fifteen (15) days of Landlord's written request, furnish Landlord with financial
statements, dated no earlier than one (1) year before such request, certified as
accurate by Tenant, or, if available, audited financial statements prepared by
an independent certified public accountant with copies of the auditor's
statement, reflecting Tenant's then current financial condition, or the
financial condition of the individuals comprising Tenant, in such form and
detail as Landlord may reasonably request. In addition, if Landlord finances the
construction of improvements on and to the Building or Project, or otherwise
procures financing secured by Building or Project, or any portion thereof or
interest therein, then the terms and provisions of this Lease may be subject to
review and approval by the source providing such financing.
14.17 No Joint Venture. This Lease shall not be construed to create a
partnership, joint venture or similar relationship or arrangement between
Landlord and Tenant hereunder.
14.18 Successors and Assigns. Except as otherwise provided herein, this
Lease shall be binding upon and inure to the benefit of Landlord, its successors
and assigns; and shall be binding upon and inure to the benefit of Tenant, its
successors, and to the extent assignment may be approved by Landlord hereunder,
Tenant's assigns.
14.19 Applicable Law. All rights and remedies of Landlord and Tenant under
this Lease shall be construed and enforced according to the laws of the State of
Washington. Any actions or proceedings brought under this Lease, or with respect
to any matter arising under or out of this Lease, shall be brought and tried
only in courts located in the County of King, Washington (excepting appellate
courts).
14.20 Time of the Essence. Time is of the essence of each and every
covenant herein contained. If either party to this Lease, as the result of any
(i) strikes, lockouts, or labor disputes that the party does not have the
ability to resolve directly and independently; (ii) failure of power or other
utilities not caused directly by such party; (iii) inability to obtain labor or
materials or reasonable substitutes therefor; (iv) war, governmental action,
court order, condemnation, civil unrest, riot, fire or other casualty; (v)
extreme or unusual weather conditions, acts of God or unforeseen soil
conditions; or (vi) other conditions similar to those enumerated in this Section
beyond the reasonable control of the party obligated to perform (except for
financial inability), fails punctually to perform any obligation on its part to
be performed under this Lease, then such failure shall be excused and not be a
breach of this Lease by the party in question but only to the extent occasioned
by such event. If any right or option of either party to take any action under
or with respect to this Lease is conditioned upon the same being exercised
within any prescribed period of time or at or before a named date, then such
prescribed period of time and such named date shall be deemed to be extended or
delayed, as the case may be, for a period equal to the period of the delay
occasioned by any event described above. Notwithstanding anything herein
contained, however, the provisions of this Section shall not be applicable to
Tenant's obligation to pay Rent under this Lease or its obligations to pay any
other sums, monies, costs, charges or expenses required to be paid by Tenant
hereunder.
44
<PAGE>
14.21 Interpretation. Except as specifically provided otherwise in this
Lease, Landlord may act in its sole and absolute discretion when required to act
hereunder or when deciding to grant its approval of any Tenant act. The term,
"including" shall mean "including, without limitation." All indemnities
contained herein shall survive termination of this Lease with respect to any
act, condition or event that is the subject matter of such indemnity and that
occurs prior to the Expiration Date. Notwithstanding anything herein to the
contrary, all provisions of this Lease which require the payment of money or the
delivery of property after the Expiration Date shall survive termination of the
Lease.
14.22 Parking.
(a) Parking Passes. Landlord shall provide and Tenant shall purchase
parking stickers and/or cards (the "Parking Passes") equal to the number of
Parking Passes calculated in accordance with Item 13 of the Basic Lease
-------
Information Sheet each month of the Term, starting with the Term Commencement
Date. In addition to Tenant's initial allocation of Parking Passes (as set forth
in the Basic Lease Information Sheet), upon the terms and conditions set forth
in this Section, Landlord, unless precluded by any governmental authority, shall
provide and Tenant shall purchase, an additional allocation of Parking Passes
equal to three-fourths (.75) of a Parking Pass for each one thousand (1,000)
square feet of Useable Area in the Premises (the "Additional Allocation").
Tenant acknowledges that providing the Additional Allocation may only be
achieved by instituting special parking management procedures and that Landlord
may adopt any and all such procedures as Landlord, in its discretion, deems
necessary to achieve its responsibility to provide parking under this Lease, any
other lease in the Project, and under any requirements imposed by any
governmental authority. Tenant shall provide Landlord with ninety (90) days
prior written notice if Tenant wishes to purchase the Additional Allocation of
Parking Passes. Thereafter, so long as Landlord makes the Additional Allocation
of Parking Passes available to Tenant, Tenant shall purchase the Additional
Allocation of Parking Passes each month, except that Tenant may, upon ninety
(90) days written notice to Landlord, elect to permanently terminate its right
and obligation to purchase the Additional Allocation of Parking Passes. If
Tenant terminates its obligation to purchase the Additional Allocation of
Parking Passes, such termination shall be irrevocable and Landlord shall have no
further obligation to make the Additional Allocation of Parking Passes available
to Tenant. If Tenant does not purchase the number of Parking Passes allocated to
Tenant herein, then Landlord may, at its option in its sole discretion, treat
such failure as a default under this Lease, or Landlord may permanently reduce
Tenant's allocation of Parking Passes by the number of Parking Passes allocated
to Tenant but not purchased by Tenant.
(b) Cost. Tenant shall pay the monthly fee per Parking Pass
established by Landlord from time to time for the applicable type of permit,
which monthly fee shall be no more than the fair market rate for such parking,
plus any tax or assessment imposed by any governmental authority in connection
with such parking privileges. The base monthly fee (exclusive of taxes) as of
the Term Commencement Date shall be Seventy-five Dollars ($75.00) and is subject
to change at any time as required to maintain a fair market rate for such
Parking Passes.
(c) Use of the Garage. Each Parking Pass shall entitle the vehicle
on which the Parking Permit is presented to park in the parking garage located
beneath the Buildings (the "Garage") at any time twenty-four (24) hours per day,
seven (7) days a week, 365 days a year on a non-preferential and non-exclusive
basis. Landlord shall have exclusive control over the day-to-day operations of
the Garage. No specific spaces in the Garage shall be assigned to Tenant.
Landlord may make, modify and enforce reasonable rules and regulations relating
to the parking of vehicles in the Garage, and Tenant shall abide by such rules
and regulations and shall cause its employees and invitees to abide by such
rules and regulations. In lieu of providing parking stickers or cards, Landlord
may use any reasonable alternative means of identifying and controlling vehicles
authorized to be parked in the Garage. Landlord may designate areas within the
Garage for short term or non-tenant parking only and Landlord may change such
designations from time to time. Landlord reserves the right to alter the size of
the Garage and the configuration of parking spaces and driveways therein.
Landlord may assign any unreserved and
45
<PAGE>
unassigned parking spaces and/or make all or a portion of such spaces reserved
or institute any other measures, including but not limited to valet, assisted or
tandem parking, that Landlord determines are necessary or desirable for tenant
requirements or orderly and efficient parking, provided, however, that Landlord
-------- -------
shall not discriminate against Tenant or unduly favor another tenant if Landlord
elects to reserve all or a substantial majority of the spaces in the Garage.
(d) Third Party Operator. Landlord may operate the Garage or, in its
discretion, may arrange for the Garage to be operated by a third party and, for
purposes of this Section 14.22, such operator shall be entitled to exercise any
-------------
rights granted to Landlord under this Section. Upon request, Tenant will
execute and deliver a parking agreement with the operator of the Garage on the
operator's standard form of agreement used generally for the tenants of the
Project. If Landlord hires a third party to operate the Garage then the monthly
parking charges shall be paid to such operator at such place as the operator may
direct but the parking charges shall be considered additional Rent hereunder.
14.23 Antennae. Tenant shall have the right to install, maintain and
repair communications equipment on the roof of the Building for the sole purpose
of serving and providing Tenant's non-commercial, corporate communications (the
"Antennae"), at Tenant's sole cost and expense, provided that Tenant shall not
be permitted to use more than Tenant's Proportionate Share of the space on the
roof available to tenants in the Building. Tenant's Antennae may, subject to
Landlord's approval which shall not be unreasonably withheld, include microwave
antenna and satellite dishes. Tenant shall not be required to pay any rent for
the space on the roof where the Antennae are located. The right granted herein
is personal to HomeGrocer.com, Inc. and shall not be assignable to any other
party in connection with any assignment of this Lease or any sublease of all or
any part of the Premises and Tenant may not grant any other party any right to
use the Antennae for any purpose whatsoever. The design, appearance, size,
location and method of installation of the Antennae shall be subject to
Landlord's approval, the Design Manual, and to all applicable laws and
regulations. Landlord shall not unreasonably withhold its approval if the
Antennae are located within the area on the roof designated for tenant use.
Landlord may withhold or condition its approval of any equipment located outside
the area on the roof designated for tenant use, in its sole discretion, and,
once Landlord's consent is obtained for the installation of Antennae outside the
area designated for tenant use, Tenant acknowledges that it may be required at
any time, and at Tenant's expense, to relocate such Antennae, and may be unable
to relocate such Antennae outside the area on the roof designated for tenant
use. Landlord does not represent that the Antennae will be permitted under
applicable laws or that the Antennae will function and Tenant shall be solely
responsible for designing the Antennae to comply with laws and to be compatible
with the design of the Building and the other equipment located on the roof.
Except as provided herein, Landlord reserves all rights to use the roof of the
Building for any purpose whatsoever and shall have no obligation to ensure that
any equipment installed on the roof is compatible with Tenant's Antennae. If at
any time the Antennae cease to be permitted under applicable laws, Tenant's
rights under this Section shall terminate and be of no further force and effect.
Tenant's rights under this Section 14.23 shall terminate and be of no
-------------
further force and effect during any time Tenant ceases to occupy at least two
and one half (2.5) floors in the Building or if an Event of Default is
outstanding under this Lease. Upon termination of Tenant's rights under this
Section or upon Lease termination, upon notice by Landlord, Tenant at its sole
cost and expense shall promptly remove the Antennae and all related wiring and
equipment from the Building and shall restore the Building to its condition
prior to such installation. Tenant shall be solely responsible for installation
and maintenance of the Antennae and shall ensure that installation and
maintenance do not void or limit any warranty Landlord may have on the roof or
roof membrane. Tenant shall provide Landlord with full plans and specifications
for the Antennae prior to installation thereof and such plans shall include
details regarding Tenant's proposed method of installation.
Subject to availability of such space, Tenant shall be permitted to
install, maintain, remove and replace cables or lines within the Building
outside the Premises (at locations designated by Landlord) to
46
<PAGE>
connect the Antennae to the Premises at no charge to Tenant. Prior to
commencement of any work hereunder, Tenant shall obtain and deliver to Landlord
all necessary governmental permits for the Antennae and related equipment.
Tenant shall indemnify and hold harmless Landlord from any Claims arising out or
in connection with the Antennae or the related equipment in the Building. Tenant
acknowledges and agrees that Landlord has not represented or warranted that
Tenant will have unlimited access to riser space or other space outside the
Premises for the purpose of connecting the Antennae to the Premises and Landlord
shall have no obligation to construct or designate additional riser space or
equipment space to accommodate the Antennae or related equipment. Tenant
acknowledges that riser space is a finite commodity and that Landlord may in its
discretion limit Tenant's total use of such space to accommodate and take into
account use of the Building systems and the needs of other Building tenants.
14.24 Generator. The Project shall be equipped with a generator sufficient
in Landlord's reasonable judgment to provide emergency power services for life
safety systems of the Project, including the Premises. Landlord reserves the
right to alter such backup generator or replace such generator with alternative
emergency power services solely for life safety systems of the Project,
including the Premises, as Landlord deems appropriate throughout the Term.
Landlord shall provide Tenant with space in a location designated by
Landlord for installation and maintenance of a diesel fuel powered generator and
a diesel fuel tank (collectively, the "Generator"). If the space for the
Generator is located in the Garage, it shall be no larger than the size of three
(3) parking stalls and if the space for the Generator is elsewhere in the
Building, the size and cost of such shall be subject to Landlord's discretion.
Tenant shall be solely responsible for complying with all laws, rules and
regulations with respect to the Generator and, prior to commencement of
installation, Tenant shall obtain all necessary governmental permits therefor.
Tenant shall obtain insurance (naming Landlord as an additional insured)
insuring against any loss or damage arising out of or relating to any
contamination or release of any fuel from the Generator and shall not be
permitted to install the fuel tank until Tenant has provided a certificate of
such policy to Landlord. Tenant shall be permitted to install, maintain, remove
and replace cables or lines and ducts within the Building outside the Premises
to connect the Generator to the Premises and to exhaust fumes at locations
designated by Landlord. If the Generator is located in the Garage, Landlord
will be prevented from selling parking permits for the space occupied by the
Generator and Tenant shall pay Landlord, as Rent for the space occupied by the
Generator, a sum equal to the rate charged by Landlord for reserved parking
spaces in the Garage which shall initially be equal to two hundred percent
(200%) of the fee for a non-reserved Parking Pass under Section 14.22. The
-------------
number of parking spaces eliminated to accommodate the Generator shall be
deducted from Tenant's allocation of Parking Passes. Prior to the end of the
Lease Term, Tenant shall, if requested by Landlord, remove the Generator and
associated equipment (including the diesel fuel tank) and properly dispose of
same and shall restore the Building to its condition prior to installation of
the Generator. If the Generator fails to work properly or to provide power to
the Premises, Landlord shall have no obligation or liability whatsoever with
respect to such failure. Tenant shall pay all costs of designing, installing,
operating and maintaining the Generator. Tenant acknowledges and agrees that
Landlord has not represented or warranted that Tenant will have unlimited access
to riser space or other space outside the Premises for the purpose of the
Generator, and Landlord shall have no obligation to construct or designate
additional riser space or other space outside the Premises to accommodate the
Generator beyond what is included in the Base Building Improvements or any
changes or upgrades to the Base Buildings Improvements initially designed and
approved by Landlord and paid for by Tenant pursuant to Exhibit C. Tenant
---------
acknowledges that roof and riser space are a finite commodity and that Landlord
may in its discretion limit Tenant's total use of such space to accommodate and
take into account use of the Building systems and the needs of other Building
tenants.
14.25 Brokers. Tenant and Landlord each represent and warrant to the other
that it has had no dealing with any broker or agent other than the Brokers
identified in the Basic Lease Information Sheet as
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Item 16. Landlord has a separate listing agreement with the Brokers which sets
- -------
forth the commission and any other compensation payable in connection with this
Lease. Tenant and Landlord shall each indemnify, defend and hold the other party
harmless from and against any and all liabilities for commissions or other
compensation or charges claimed by any other broker or agent based on dealings
with the indemnifying party with respect to this Lease. The foregoing indemnity
shall survive termination or earlier expiration of this Lease.
14.26 INTENTIONALLY DELETED.
14.27 Phased Development. Tenant acknowledges that the Project and some of
the Buildings or Common Areas may be under construction after the Term
commences. Tenant shall have no claim against Landlord for any loss or damage
relating to such construction or lack of construction so long as Tenant has
access to the Premises and to the number of parking spaces in the Garage
required hereunder, and further provided that Tenant's use of the Premises is
not materially, adversely affected.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the
day and year first above written.
LANDLORD: BELLEVUE HINES DEVELOPMENT, L.L.C.
By: /s/ Tom Owens
----------------------------------
Name: Thomas D. Owens
Title: Manager
TENANT: HOMEGROCER.COM, INC.
a Delaware corporation
By: /s/ Terry Drayton
----------------------------------
Name: J. Terrence Drayton
--------------------------------
Title: President
-------------------------------
NOTE: Both parties must initial Basic Lease Information Sheet and Tenant must
initial Section 11.4(a)
48
<PAGE>
STATE OF TEXAS )
) ss.
COUNTY OF HARRIS )
On this 5th day of April, 2000, before me, a Notary Public in and for the
State of Texas, personally appeared Thomas D. Owens, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person who
executed this instrument, on oath stated that he was authorized to execute the
instrument, and acknowledged it as the Manager of BELLEVUE HINES DEVELOPMENT,
L.L.C. to be the free and voluntary act and deed of said limited liability
company for the uses and purposes mentioned in the instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the day
and year first above written.
/s/ Gena M. Murphy
------------------------------------------------------------
NOTARY PUBLIC in and for the State of Texas,
residing at Harris County
------------------------------------------------
My appointment expires 3/23/2000
Print Name Gena M. Murphy
-------------------------------------------------
STATE OF WASHINGTON )
) ss. [NOTARY STAMP OF GENA M. MURPHY]
COUNTY OF KING )
On this 22nd day of March, 2000, before me, a Notary Public in and for the
State of Washington, personally appeared J. Terrence Drayton, personally known
to me (or proved to me on the basis of satisfactory evidence) to be the person
who executed this instrument, on oath stated that he/she was authorized to
execute the instrument, and acknowledged it as the President of HOMEGROCER.COM,
INC. to be the free and voluntary act and deed of said corporation for the uses
and purposes mentioned in the instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the day
and year first above written.
/s/ Ursula M. Lazo
--------------------------------------------------
[NOTARY SEAL OF NOTARY PUBLIC in and for the State of Washington,
URSULA LAZO] residing at Kirkland
--------------------------------------
My appointment expires 8-4-2003
---------------------------
Print Name Ursula Lazo
---------------------------------------
49
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EXHIBIT A-1
PREMISES SITE PLANS
Floor Plan South Building - Floor 4
Floor Plan South Building - Floor 5
Floor Plan South Building - Floor 6
A-1 - 1
<PAGE>
EXHIBIT A-2
PROJECT SITE PLAN
Site Map 112th Avenue NE
A-2 - 1
<PAGE>
EXHIBIT A-3
EXPANSION SPACE SITE PLANS
Floor Plan South Building - Floor 1
Floor Plan South Building - Floor 2
Floor Plan south Building - Floor 3
A-3 - 1
<PAGE>
EXHIBIT B
LEGAL DESCRIPTION OF THE PROJECT
PARCEL A
- --------
THE SOUTH 30 FEET OF THE SOUTHWEST QUARTER OF THE NORTHEAST QUARTER OF THE
SOUTHEAST QUARTER OF SECTION 29, TOWNSHIP 25 NORTH, RANGE 5 EAST, WILLAMETTE
MERIDIAN, IN KING COUNTY, WASHINGTON;
EXCEPT THAT PORTION THEREOF CONVEYED TO THE CITY OF BELLEVUE BY DEED RECORDED
UNDER RECORDING NUMBER 6615029; AND
EXCEPT ANY PORTION THEREOF CONVEYED TO THE STATE OF WASHINGTON FOR PRIMARY STATE
HIGHWAY NO. 1 UNDER RECORDING NUMBER 6685642.
PARCEL B
- --------
THAT PORTION OF THE EAST 264 FEET OF THE WEST 434 FEET OF THE SOUTHWEST QUARTER
OF THE NORTHEAST QUARTER OF THE SOUTHEAST QUARTER OF SECTION 29, TOWNSHIP 25
NORTH, RANGE 5 EAST, WILLAMETTE MERIDIAN, IN KING COUNTY WASHINGTON;
EXCEPT THE SOUTH 30 FEET THEREOF, LYING SOUTHEASTERLY OF THE FOLLOWING LINE:
BEGINNING AT THE SOUTHWEST CORNER OF THE ABOVE-DESCRIBED PARCEL;
THENCE SOUTH 88 degrees 6'55" EAST ALONG THE SOUTH LINE THEREOF 103.65 FEET;
THENCE NORTH 73 degrees 0'26" EAST 72.90 FEET;
THENCE NORTH 54 degrees 30'00" EAST 111.33 FEET TO THE EAST LINE OF SAID
PROPERTY AND THE TERMINUS OF SAID LINE;
EXCEPT ANY PORTION THEREOF CONVEYED TO THE STATE OF WASHINGTON FOR PRIMARY STATE
HIGHWAY NO. 1 UNDER RECORDING NUMBER 6685642.
PARCEL C
- --------
THE NORTH 464.40 FEET OF THE NORTHWEST QUARTER OF THE SOUTHEAST QUARTER OF THE
SOUTHEAST QUARTER OF SECTION 29, TOWNSHIP 25 NORTH, RANGE 5 EAST, WILLAMETTE
MERIDIAN, IN KING COUNTY WASHINGTON;
EXCEPT THE EAST 250 FEET THEREOF; AND
EXCEPT THAT PORTION THEREOF LYING WITHIN F.A. NISONGER ROAD (112TH AVENUE
NORTHEAST); AND
EXCEPT THOSE PORTIONS CONVEYED TO THE STATE OF WASHINGTON FOR SECONDARY STATE
HIGHWAY NO. 2-A MIDLAKES TO KIRKLAND BY DEEDS BEARING RECORDING NUMBERS 4354524
AND 4354525; AND
EXCEPT THOSE PORTIONS CONVEYED TO THE STATE OF WASHINGTON FOR PRIMARY STATE
HIGHWAY NO. 1, UNDER RECORDING NUMBERS 4927203 AND 6685642; AND
EXCEPT THAT PORTION CONVEYED TO THE CITY OF BELLEVUE BY DEED RECORDED UNDER
RECORDING NUMBER 6615029; AND
EXCEPT THAT PORTION CONDEMNED BY THE CITY OF BELLEVUE IN KING COUNTY SUPERIOR
COURT CAUSE NUMBER 90-2-03249-3.
B-1
<PAGE>
EXHIBIT C
INITIAL IMPROVEMENT OF THE PREMISES
1. Base Building. Landlord shall design, develop, construct or install those
items listed on the attached Schedule C-1, and more fully described in the
------------
drawings and plans listed on the attached Schedule C-3 (collectively, "Base
------------
Building Improvements") without cost or expense to Tenant. Landlord shall be
solely responsible for the design, development, construction and installation of
the Base Building Improvements in accordance with the Base Building Plans (as
defined below). Landlord has contracted with Kendall Heaton Associates
("Landlord's Architect"') for design services and preparation of the detailed
construction drawings and final plans and specifications describing the Base
Building Improvements (as the same may be modified from time to time hereafter,
the "Base Building Plans"), and has contracted with PCL Construction ("General
Contractor") for construction of the Base Building Improvements. In the event
of any conflict between the description on Schedule C-1 and the Base Building
------------
Plans, the Base Building Plans shall control. If the Base Building Plans
include any items listed on Schedule C-2, such items shall not be considered
------------
Base Building Improvements and any items designated as Tenant's responsibility
in Schedule C-1 shall be Tenant's responsibility notwithstanding the fact that
------------
they appear in the Base Building Plans.
(a) Tenant Upgrades. Landlord shall have no obligation to alter any
---------------
portion of the Base Building Improvements or the Base Building Plans to
accommodate the Tenant Improvements. If Tenant desires any changes, relocations
or other modifications or upgrades to the Base Building Improvements to
accommodate the Tenant Improvements (collectively "Upgrades"), Tenant shall
notify Landlord of its requested change in writing providing sufficient detail
for Landlord to evaluate the proposal. All Upgrades shall require Landlord's
prior approval which may be given, withheld or subject to such conditions as
Landlord in its sole discretion desires, provided that Landlord agrees to
consider such requests in good faith. If Landlord approves the Upgrades and
Tenant's requested Upgrades will increase the cost of construction or will cause
a delay in completing construction of the Project, Landlord's approval notice
shall include Landlord's rough order of magnitude estimate based on the General
Contractor's and/or the Landlord's Architect's estimates of the amount of delay
that would be caused by the proposed Upgrades and/or the increased costs
associated with the proposed Upgrades (the "ROM Estimate"). Upon receipt of
Landlord's approval notice and ROM Estimate, if applicable, if Tenant still
wishes the Upgrades to be made, Tenant shall so notify Landlord in writing
within three (3) Business Days thereafter or within any shorter response period
specified in Landlord's notice). If Tenant does not respond within the
designated response time then it shall be deemed to have withdrawn its request.
If Tenant elects to proceed with a proposed Upgrade, then the parties shall
proceed under subparagraph (ii) below if there is sufficient time to follow such
-----------------
procedures before the work must begin, or under subparagraph (iii) if the work
------------------
must commence immediately.
(i) Plans. If Tenant decides to proceed with the approved Upgrades,
-----
Tenant shall hire through Landlord, at Tenant's sole cost and expense,
Landlord's Architect to prepare all required documentation and make necessary
changes to the Base Building Plans to construct the Upgrades and shall present
them to Landlord for review and approval (the "Upgrade Plans"). Tenant's
Upgrade Plans must be approved by Landlord's Architect and by Landlord in
writing, which approval may be given, withheld or subject to such conditions as
Landlord in its sole discretion desires. Landlord's approval of the Upgrade
Plans shall not be deemed to be a representation or warranty that the Upgrades
will be adequate to meet Tenant's needs.
(ii) Timely Requests. After Landlord has approved the Upgrade Plans,
---------------
Landlord will obtain from the General Contractor a cost proposal for the
Upgrades as shown in the Upgrade Plans in a lump sum amount or as a guaranteed
maximum price for the actual work described therein ("Cost Proposal"). Tenant
shall promptly deposit the full amount of the Cost Proposal with
C-1
<PAGE>
Landlord (the "Upgrade Payment"). Landlord shall not authorize the General
Contractor to proceed with construction of the Upgrades until it has received
Tenant's Upgrade Payment.
(iii) Late Requests. If the ROM Estimate is based on work
-------------
proceeding before the General Contractor has prepared a Cost Proposal, Tenant's
decision to proceed shall indicate that it wishes to proceed with the work with
out full pricing information. Tenant must deposit the full amount of the costs
identified in the ROM Estimate with Landlord (the "Estimated Payment").
Landlord shall not authorize the General Contractor to proceed with construction
of the Upgrades until it has received Tenant's Estimated Payment. Thereafter,
Landlord shall obtain a Cost Proposal as described in subparagraph (ii) above
and any variance between Tenant's Estimated Payment and the Upgrade Payment,
shall be paid in accordance with Paragraph 13 below.
------------
(iv) Costs. Notwithstanding the ROM Estimate or the Cost Proposal,
-----
Tenant shall be responsible for all costs of the Upgrades, anticipated or
unanticipated, direct or indirect, including all costs to re-design or
reconstruct the Base Building Improvements to accommodate such Upgrades, costs
for changes to the Base Building Plans, additional permitting or fees which may
be required in connection with such Upgrades, and any increased costs of
construction of the Base Building Improvements. Tenant shall pay Landlord for
all costs associated with any Upgrades approved by Landlord (including
additional architectural and engineering fees) plus an administrative fee equal
to ten percent (10%) of the costs of such Upgrades. Tenant shall be responsible
for any out-of-pocket costs incurred by Landlord or the General Contractor to
prepare a Cost Proposal even if Tenant subsequently rejects the Cost Proposal.
(v) General. Tenant and Landlord have discussed Tenant's desire to
-------
include a data center in the Premises and to include some or all of the Expanded
Uses in the Premises, which may require Upgrades, including additional power,
backup power, and additional HVAC and telecommunications systems. Landlord is
amenable in concept to such proposed changes but any such changes or Upgrades
shall be subject to all of the terms of this Paragraph 1. Tenant acknowledges
-----------
that time is of the essence and that construction of the Base Building
Improvements is already in progress and design thereof has been completed. If
Tenant wishes to request Landlord's approval of any Upgrades, it should make
specific requests as soon as possible because the costs of Upgrades will
increase as construction progresses. Landlord shall not be required to modify
Landlord's schedule for construction of the Base Building Improvements to
accommodate any Upgrades requested by Tenant even if approved by Landlord. To
the extent feasible in Landlord's good faith but sole discretion, Landlord will
cooperate with Tenant to determine the scope of any such Upgrades and, to the
extent reasonably feasible, to include the approved Upgrades in the initial
construction of the Base Building Improvements to prevent or minimize any Tenant
Delay.
(b) Mandatory Changes and Landlord-Initiated Changes. Tenant
------------------------------------------------
acknowledges the Base Building Plans may be modified by Landlord from time to
time. Tenant understands and agrees that Landlord may make any changes to the
Base Building Plans that are required by governmental authorities, Landlord's
value engineering efforts or to address any and all physical conditions of the
Real Property or the Project arising during construction. Material changes to
the Base Building Improvements initiated by Landlord (and not covered by the
preceding sentence) may be made by Landlord in its sole discretion provided that
such discretionary changes shall not (i) materially increase the cost of the
Tenant Improvements unless Landlord pays for such increased costs, or (ii)
materially adversely affect the quality or scope of the Base Building
Improvements or the Project as described in the plans listed in Schedule C-3.
------------
Landlord shall notify Tenant of potential material changes arising under this
Paragraph as such changes occur and shall inform Tenant of the impacts of such
changes on the Tenant Improvements, to the extent Landlord believes there is an
impact. The cost of all changes to the Base Building Plans made under this
Paragraph 1(b) shall be paid by Landlord as part of Landlord's payment of Base
- --------------
Building Improvements costs except that Tenant shall be responsible for the cost
of revising the TI Working Drawings to accommodate any changes described in the
first sentence of this Paragraph 1(b).
--------------
C-2
<PAGE>
2. Improvements. Any work in addition to Base Building Improvements and any
Upgrades approved by Landlord is referred to herein as "Tenant Improvements" and
shall be furnished and installed within the Premises substantially in accordance
with the Design Manual and the TI Working Drawings (as defined below) to be
prepared by the TI Architect (as defined below) and approved by Landlord in
accordance with this Exhibit C. All Tenant Improvements shall be furnished and
---------
installed by Landlord at the expense of Tenant, except for the amount of the
Cash Allowance (as defined in Paragraph 14 below). For purposes hereof, the
------------
cost of the Tenant Improvements shall include all costs associated with the
design and construction of the Tenant Improvements, including, without
limitation, all building permit fees, payments to design consultants for
services and disbursements, all demolition and other preparatory work, premiums
for insurance and bonds, such inspection fees as Landlord may incur, sales tax,
reimbursement to Landlord for permit and other fees Landlord may incur that are
fairly attributable to the Tenant Improvement work. The cost of Upgrades and
Tenant Extra Improvements shall not be paid from the Cash Allowance unless
Landlord determines at the time of its approval that such items will add
permanent value to the Building.
Landlord shall enter a construction contract ("TI Construction Contract")
with the general contractor selected by the process described in Paragraph 9
-----------
below for the construction of the Tenant Improvements. The TI Construction
Contract shall incorporate the terms of the TI Bid (as defined in Paragraph 9
-----------
below) approved by Tenant. The Tenant Improvements shall be constructed in
accordance with the TI Construction Contract and the TI Working Drawings
prepared by Tenant and approved by Landlord and as permitted by the City of
Bellevue.
3. Tenant's Architect. Tenant, at its sole cost and expense, shall hire
Callison Architectural, Inc. (the "TI Architect") to design the Tenant
Improvements and to obtain all required building or other permits to allow
construction of the Tenant Improvements in the Premises. TI Architect shall, on
Tenant's behalf, retain the consultants designing the Building's structural,
mechanical, electrical, plumbing and telecommunication systems to design these
components of the Tenant Improvements. The cost of preparing all plans and
specifications for the Tenant Improvements (including without limitation the
Conceptual Plans and the TI Working Drawings), and the cost of preparing any
changes thereto and the cost of obtaining all required permits shall be paid by
Tenant, although Tenant may apply a portion of the Cash Allowance equal to no
more than two dollars ($2.00) per square foot of Net Rentable Area to the
payment of Tenant's design costs.
4. Submittal of Conceptual Plans. Tenant shall submit to Landlord conceptual
plans (i.e. design development drawings) for the Tenant Improvements, including
architectural, electrical, mechanical and reflected ceiling drawings
(collectively, the "Conceptual Plans") by no later than the deadline set forth
in Paragraph 20 below. Within ten (10) Business Days after receipt of the
------------
complete Conceptual Plans, Landlord shall review, comment on and return the
Conceptual Plans to Tenant, marked "Approved," "Approved as Noted" or
"Disapproved as Noted, Revise and Resubmit." Such Conceptual Plans shall be for
the general information of Landlord, and to assist in the coordination of the
design and construction of the Tenant Improvements, and failure to respond to
the Conceptual Plans shall not constitute approval by Landlord of the design or
specifications shown thereon.
(a) If the Conceptual Plans are returned to Tenant marked "Approved,"
the Conceptual Plans shall be deemed approved by Landlord and the procedure set
forth in Paragraph 5 below shall be followed.
------------
(b) If the Conceptual Plans are returned to Tenant marked "Approved as
Noted," the Conceptual Plans so submitted shall be deemed approved by Landlord
and the procedure set forth in Paragraph 5 below shall be followed; provided,
----------- --------
however, in preparing the TI Working Drawings, Tenant shall cause the TI
- -------
Architect to incorporate Landlord's noted items into the TI Working Drawings.
(c) If the Conceptual Plans are returned to Tenant marked "Disapproved
as Noted, Revise and Resubmit," Tenant shall cause the Conceptual Plans to be
revised, taking into account the
C-3
<PAGE>
reasons for Landlord's disapproval, and shall resubmit revised plans to Landlord
for review within five (5) days after return of the Conceptual Plans to Tenant
by Landlord. Landlord shall review and return the revised Conceptual Plans to
Tenant within five (5) Business Days after receipt of a complete set of the
revised Conceptual Plans. The same procedure shall be repeated until Landlord
approves the Conceptual Plans. In order to meet later deadlines, Tenant should
ensure that the Conceptual Plans are revised and resubmitted in time to meet
the deadline for approval set forth in Paragraph 20 below but failure to do so
------------
shall not in itself constitute a Tenant Delay. Landlord shall not be required to
review the Conceptual Plans more than three (3) times and if Landlord does not
approve the third set of Conceptual Plans Landlord may elect to terminate this
Lease by written notice to Tenant.
5. Submittal of TI Working Drawings. Following Landlord's approval of the
Conceptual Plans, Tenant shall deliver to Landlord one (1) set of reproducible
sepia and three (3) sets of blue-lined prints of detailed construction drawings,
final plans and specifications (hereinafter referred to collectively as the "TI
Working Drawings") for the Tenant Improvements. Tenant shall also deliver to
Landlord a diskette containing the TI Working Drawings in the AutoCAD format (or
other computer assisted design format approved by Landlord) ("CAD"). The TI
Working Drawings shall be consistent with, and a logical extension of, the
Conceptual Plans approved by Landlord. Within ten (10) Business Days after
receipt of a full and complete draft of the TI Working Drawings from Tenant,
Landlord shall return to Tenant one (1) sepia set of the TI Working Drawings
marked "Approved," "Approved as Noted" or "Disapproved as Noted, Revise and
Resubmit"; provided, however, that failure to respond to the TI Working Drawings
-------- -------
shall not constitute approval by Landlord of the design or specifications shown
thereon.
(a) If the TI Working Drawings are returned to Tenant marked
"Approved," the TI Working Drawings, as so submitted, shall be deemed approved
by Landlord
(b) If the TI Working Drawings are returned to Tenant marked "Approved
as Noted," the draft of the TI Working Drawings shall be deemed approved by
Landlord; provided, however, in preparing the final approved TI Working
-------- --------
Drawings, Tenant shall cause TI Architect to incorporate Landlord's noted items
into the TI Working Drawings.
(c) If the TI Working Drawings are returned to Tenant marked
"Disapproved as Noted, Revise and Resubmit," Tenant shall cause such TI Working
Drawings to be revised, taking into account the reasons for Landlord's
disapproval and shall resubmit revised plans to Landlord for review. The same
procedure shall be repeated until Landlord fully approves the TI Working
Drawings.
(d) Tenant shall be solely responsible for: (i) the completeness of
the TI Working Drawings; (ii) subject to Paragraph 8 below, the conformity of
-----------
the TI Working Drawings with the existing conditions in the Building and the
Premises and the Base Building Plans; (iii) the compatibility of the TI Working
Drawings with the Base Building Improvements including the mechanical, plumbing,
life safety or electrical systems of the Building; and (iv) the compliance of
the TI Working Drawings with all applicable regulations, laws, ordinances, codes
and rules, including, without limitation, the Americans With Disabilities Act.
(e) When the TI Working Drawings are approved by Landlord and Tenant,
the parties shall each acknowledge their approval by signing or initialing each
sheet of the TI Working Drawings. Tenant shall also deliver to Landlord a
diskette containing the approved TI Working Drawings in the CAD format. Tenant
shall be solely responsible for ensuring that the approved TI Working Drawings
are submitted for permitting by the TI Architect so that permits are obtained by
the deadline set forth in Paragraph 20 below (subject to the terms of Paragraph
------------ ---------
6 below) and any failure to do so shall constitute Tenant Delay. Tenant may
- -
submit draft TI Working Drawings for permits provided that any submission must
be revised to include any changes required by Landlord prior to Landlord's
approval of the TI Working Drawings.
C-4
<PAGE>
6. Deadlines for Approval.
(a) Tenant shall cause the Conceptual Plans and TI Working Drawings to
be prepared by the TI Architect, submitted to Landlord and, where required,
revised so as to obtain the approval of the TI Working Drawings by Landlord on
or before milestone date set forth in Paragraph 20 below. If Landlord fails to
------------
respond to Tenant's submittal of the Conceptual Plans or the TI Working Drawings
within the time periods set forth herein, then the milestone dates under
Paragraph 20 below shall be extended by one (1) Business Day for each Business
- ------------
Day of Landlord's delay in responding. Notwithstanding the foregoing, if any
delay is made up in any later period, then subsequent deadlines shall not be
extended. If any deadline would end on a Saturday, Sunday or holiday, the
deadline shall be extended to the next Business Day.
(b) Any consent or approval to any act or matter required under this
Exhibit C shall, to the extent reasonably practical, be in writing and shall
- ---------
apply only with respect to the particular act or matter to which such consent or
approval is given, and shall not relieve any party from the obligation to obtain
consent or approval, as applicable, whenever required under this Exhibit C for
---------
any other act or matter. To the extent any approval given by Tenant or Landlord
is verbal, a written confirmation of such verbal approval shall be submitted to
the other party promptly thereafter, or shall be reflected in the notes of any
meetings of the parties or their representatives; provided, however, Landlord
-------- -------
shall not be liable to Tenant for any failure to provide written notes of any
meetings.
(c) Except as otherwise stated in this Exhibit C, Tenant or Landlord,
---------
as the case may be, shall be deemed to have acted promptly if a response is made
within three (3) Business Days from the date of receipt of any request for
response or approval or within such longer or shorter period as is expressly
provided herein or as is specified in the request for approval. Tenant's
failure to respond within the required response period shall constitute Tenant's
approval of the matter submitted for approval or consent. Landlord's failure to
respond within the required response period shall constitute Landlord's
disapproval of the matter submitted for approval or consent.
7. Landlord's Review Responsibilities. Tenant acknowledges and agrees that
Landlord's review and approval, if granted, of all Conceptual Plans and TI
Working Drawings is solely for the benefit of Landlord and to protect the
interests of Landlord in the Building and the Premises, and Landlord shall not
be the guarantor of, nor in any way or to any extent responsible for, the
correctness or accuracy of any Conceptual Plans or TI Working Drawings or of the
compliance of the Conceptual Plans or TI Working Drawings with applicable
regulations, laws, ordinances, codes and rules or of the conformance or
compatibility of the Conceptual Plans or TI Working Drawings with the Base
Building Plans or with existing conditions in the Building or Premises or with
the Base Building Improvements to be constructed by Landlord. Landlord shall
make a good faith effort to identify for Tenant any irregularity or lack of
compliance identified by Landlord or Landlord's Architect during review of
Conceptual Plans and TI Working Drawings but shall not be liable to Tenant if
Landlord or Landlord's Architect fails to do so.
8. Existing Conditions. Prior to commencement of construction of the Tenant
Improvements, Tenant shall require and shall be solely responsible for insuring
that the TI Architect and the engineers and contractors employed by Tenant or
the TI Architect verify all existing conditions in the Building, insofar as they
are relevant to, or may affect, the design and construction of the Tenant
Improvements. Tenant shall be solely responsible for the completeness of the TI
Working Drawings and for conformity of the TI Working Drawings with the Base
Building Plans and existing conditions in the Building and the Premises. Tenant
shall ensure that the TI Architect inspects the Premises to verify existing
conditions and construction prior to the start of construction of the Tenant
Improvements. Tenant shall notify Landlord immediately following such
inspection of any discrepancy between existing conditions and/or construction
and the Base Building Plans; otherwise, Landlord shall be conclusively deemed to
have met its obligations relating to the construction of the Premises to the
extent the Premises
C-5
<PAGE>
are complete as of the date of such inspection. If Tenant notifies Landlord of
any discrepancy under the preceding sentence, Landlord shall either (i) correct
the discrepancy at Landlord's expense, or (ii) reimburse Tenant for the cost of
revising the TI Working Drawings to accommodate such existing conditions. In the
absence of notice from Tenant of any discrepancies, Tenant shall be responsible
for any modifications to the TI Working Drawings necessary to accommodate
existing conditions and construction. Except as provided otherwise herein,
Landlord shall have no liability to Tenant for any inaccuracy or incorrectness
in any of the information supplied by Landlord with regard to existing
conditions. Tenant shall be solely responsible for, and Landlord specifically
reserves the right to require Tenant to make at any time and from time to time
during the construction of the Tenant Improvements, any changes to the
Conceptual Plans and/or the TI Working Drawings necessary (a) to obtain any
permit, (b) to comply with all applicable regulations, laws, ordinances, codes
and rules, (c) to achieve the compatibility, as reasonably determined by
Landlord's Architect of the Conceptual Plans and TI Working Drawings with the
Base Building Plans, or (d) to avoid impairing or voiding any third-party
warranties.
9. Pricing the Work. Upon approval of the TI Working Drawings by Landlord,
Tenant shall cause TI Architect to deliver to Landlord the number of copies of
the TI Working Drawings which Landlord may reasonably request for use in
obtaining bids for the work and in the course of construction.
(a) Procedures for Construction by General Contractor.
-------------------------------------------------
(i) By no later than May 15, 2000, Tenant shall elect to proceed under
one of the following options and if Tenant fails to make such election in a
timely manner, Landlord shall decide which alternative to proceed under in its
sole discretion.
(A) Upon receipt of the copies of the TI Working Drawings from Tenant
or TI Architect Landlord shall solicit bids from at least two (2) general
contractors (one of whom may be the General Contractor) for the work shown on
the TI Working Drawings, in accordance with the procedures set forth in
Paragraph 9(a)(ii) - (iv) below. Landlord may solicit bids from general
- -------------------------
contractors selected by Landlord unless Tenant, upon delivery to Landlord of the
TI Working Drawings, notifies Landlord in writing of the name of not more than
one (1) general contractor from whom Tenant would like bids solicited; provided,
--------
however, firms other than those on the list of approved general contractors for
- -------
the Project (which shall be obtained from Landlord and shall include Unimark and
Lease Crutcher Lewis) must be approved in advance by Landlord in writing, which
approval may be granted or withheld in the sole discretion of Landlord.
Landlord shall solicit bids from the general contractor named in the notice from
Tenant and from any other contractors from which Landlord desires to solicit
bids.
(B) Tenant may agree to use the General Contractor as the TI
Contractor based on the fee and general terms and conditions included in the
contract for the Base Building Improvements between Landlord and the General
Contractor (the "Prime Contract") as summarized on Schedule C-4 attached hereto.
------------
If Tenant elects to have the General Contractor serve as the TI Contractor, then
the provisions of Paragraph 9(a)(ii) - (iv) shall apply to the selection of the
-------------------------
major subcontractors (which shall include at least the electrical, mechanical,
and plumbing subcontractors for the Tenant Improvements) instead of to the
selection of the General Contractor, but as modified by Paragraph 9(a)(v) below.
-----------------
(C) Tenant may select two (2) general contractors from the list of
contractors approved by Landlord to work in the Project (which shall include
Unimark and Lease Crutcher Lewis). Landlord and Tenant shall meet with each of
the contractors selected by Tenant to discuss the scope of the Tenant
Improvements and the contractor's fee and the general conditions. After
consultation with Tenant and good faith consideration of Tenant's preference,
Landlord shall select, in its sole discretion, one (1) of the general
contractors with whom to negotiate a contract for construction of the Tenant
Improvements and that contractor shall be the TI Contractor. If the TI
Contractor is selected under this option then the provisions of Paragraph 9(a)
--------------
(ii) - (iv) shall apply to the selection of the major subcontractors (which
- -----------
shall include at least the electrical, mechanical, and plumbing subcontractors
for
C-6
<PAGE>
the Tenant Improvements) instead of to the selection of the General Contractor,
but as modified by Paragraph 9(a)(v) below.
-----------------
(ii) Upon receipt of bids ("TI Bids") from the contractors from whom
bids were solicited (excluding any contractor that does not submit a bid within
the time period specified by Landlord in the request for bids) Landlord shall
notify Tenant of the amount of each of the bids and the general contractor (the
"TI Contractor") selected by Landlord (taking into account, in Landlord's good
faith judgment, all factors associated with the bids, including without
limitation, price, quality of materials to be used, estimated completion time
and reputation of subcontractors to be used). Upon request, Landlord shall
allow Tenant to review Landlord's complete copies of the TI Bids (including, to
the extent such items are included and separately shown in the TI Bid, the
General Conditions and General Requirements to be included in the TI
Construction Contract, a cost breakdown of the pricing for the Tenant
Improvements) at times and at a place acceptable to Landlord.
(iii) Tenant shall have five (5) Business Days after receipt of
notice from Landlord regarding the selection of the TI Contractor in which to
give written notice to Landlord of Tenant's specific objection to the selected
TI Bid. If Tenant accepts or fails to object within the time set forth above,
the TI Bid selected by Landlord shall be deemed approved and the identified TI
Contractor shall construct the Tenant Improvements. If Tenant timely objects to
the bid, Tenant shall meet with Landlord, TI Architect and/or the selected TI
Contractor within five (5) Business Days to discuss mutually acceptable
revisions to the TI Bid or to Tenant's TI Working Drawings. All costs of
changes required by any such revisions shall be the sole responsibility of
Tenant. Following such revisions, Landlord shall submit to Tenant, as soon as
reasonably practicable, a revised TI Bid from the selected TI Contractor, and
the same procedure shall be followed as set forth above until Tenant has no
reasonable objection to the TI Bid. In revising the TI Bid Landlord may, if it
deems appropriate, resolicit bids from the other originally solicited
contractors. Following such revisions and/or resolicitation, Landlord shall
submit to Tenant, as soon as reasonably practicable, a revised bid from the
successful bidder, and the same procedure shall be followed as set forth above
until Tenant has no reasonable objection to the TI Bid; provided, however, that
-------- -------
Tenant shall not have the right to compel Landlord to retain any TI Contractor
that is not reasonably acceptable to Landlord or any subcontractor that is not
reasonably acceptable to Landlord and the TI Contractor.
(iv) Landlord shall be entitled to receive an administrative fee for
the supervision of the TI Contractor in an amount equal to the sum of (A) three
percent (3%) of the first Thirty Dollars ($30.00) of costs per square foot of
Useable Area of constructing the Tenant Improvements in the Premises, and (B)
one percent (1%) of any additional costs of constructing the Tenant Improvements
in the Premises. The administrative fee shall be included in the cost of the
Tenant Improvements.
(v) If Tenant elects to use the General Contractor as the TI
Contractor pursuant to Option B above or proceeds under Option C above, then the
Landlord and TI Contractor shall obtain a minimum of two (2) competitive bids
from qualified subcontractors for the major trades involved in the Tenant
Improvements (one of whom may be the designated subcontractor for the Base
Building Improvements); provided, however, that Landlord shall not be required
-------- -------
to solicit bids from two (2) subcontractors for any portion of the work for
which two (2) qualified subcontractors are not available. In such event,
Landlord shall consult with Tenant and consider Tenant's preferences before
selecting the subcontractors. The subcontractor's bids shall be available for
Tenant's review and comment as provided in this Section for the TI Bids.
(vi) If Tenant selects Option B or if the General Contractor is
selected as the TI Contractor pursuant to Option A, then the TI Construction
Contract shall consist of a change order/cost proposal to the Prime Contract in
the amount of the actual cost of the TI Bid. Tenant acknowledges that
C-7
<PAGE>
the Prime Contract includes the terms and conditions generally described on
Schedule C-4 attached hereto.
- ------------
(b) Payment of Tenant's Share of Costs. When Tenant has approved the
----------------------------------
TI Bid or subcontractor bids, as applicable, Tenant shall deposit with Landlord,
for payment in accordance with Paragraph 14 below, an amount (the "Construction
------------
Payment") equal to the difference between the Cash Allowance and the total
amount of the approved TI Bid plus Landlord's administrative fee as described in
Paragraphs 1(a)(iv) and 9(a)(iv). Landlord shall not authorize construction of
- ------------------- --------
the Tenant Improvements to commence until Landlord has received the Construction
Payment.
10. Administration of Work.
(a) After acceptance of the TI Bid and receipt of the Construction
Payment, Landlord shall administer the construction of Tenant Improvements in
accordance with the final, approved and permitted TI Working Drawings
("Landlord's Work"'); provided, however, that Landlord shall not be required to
-------- --------
install any Tenant Improvements that do not conform to the approved TI Working
Drawings, or conflict with elements of the approved TI Working Drawings, or do
not comply with applicable regulations, laws, ordinances, codes and rules; such
conformity being the obligation of Tenant.
(b) All Tenant Improvements shall be constructed by the TI Contractor
and its subcontractors selected pursuant to Paragraph 9 with the exception of
-----------
work stations, wall finishes (other than paint), built-in custom bookcases and
other nonstandard millwork, office equipment and information technology and
telecommunications equipment and wiring ("Tenant's Work"') which shall be
designed, constructed, installed or provided by Tenant in accordance with the
Design Manual.
(c) Landlord shall provide Tenant with the opportunity to have access
and entry to each floor of the Initial Premises prior to installation of the
ceiling grid for installation of Tenant's cabling at times consistent with the
schedule for completion of Landlord's Work, subject to all the terms and
conditions of the Lease including all of the terms of this Exhibit C. Tenant
---------
shall be solely responsible for arranging such early access with Landlord and
its contractors based on the construction schedules that Landlord will provide
to Tenant pursuant to Paragraph 16. Tenant acknowledges that the estimated date
------------
on which Tenant may access the Initial Premises for installation of such cabling
may change from time to time and Landlord shall not be liable to Tenant for any
such changes in schedule. Landlord shall have no obligation to alter its
construction schedule or to cease or delay any portion of Landlord's Work to
permit Tenant to install such cabling. Tenant shall be solely responsible for
arranging such early access and Landlord shall not be liable nor shall
Substantial Completion or Rent Commencement be delayed because Tenant is not
able to complete such work while Landlord's Work is in progress. All Tenant's
Work shall be installed in a manner that conforms with the General Contractor's
and the TI Contractor's and/or subcontractors' schedules for completion of the
Base Building Improvements and the Tenant Improvements and the work of
installation shall be handled in such a manner as to maintain harmonious labor
relations and as not to interfere with or delay Landlord's Work. No portion of
the Landlord's Work shall be dependent upon completion of any Tenant's Work and
the Landlord's Work shall have priority over any Tenant's Work. The
contractors, subcontractors and materialmen performing Tenant's Work shall be
subject to prior approval by Landlord and shall be subject to the administrative
supervision of Landlord or Landlord's general contractor and rules of the site.
Contractors, subcontractors and materialmen performing Tenant's Work shall take
all necessary steps to insure, so far as may be possible, the progress of the
work without interruption on account of strikes, work stoppage or similar causes
for delay. In the event that the contractors or subcontractors performing
Tenant's Work do not promptly cause any pickets to be withdrawn and all other
disruptions to the operations of the Building promptly to cease, or in the event
that Landlord notifies Tenant that Landlord has in good faith concluded that
picketing or other disruptive activities are an imminent threat, Tenant shall
immediately cause the withdrawal from the job of all its contractors,
subcontractors or materialmen involved in the dispute. Any delay caused to the
General Contractor or the TI Contractor attributable to Tenant's Work shall
constitute
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Tenant's Delay, and in addition to the obligations set forth elsewhere herein,
Tenant shall be obligated to pay all cost and expense incurred by Landlord in
connection therewith, including lost rental income. No portion of Tenant's Work
shall be taken into account in determining whether or not the Premises are
Substantially Complete.
(d) Landlord and Tenant shall each require that each of its
contractors, subcontractors and materialmen maintain commercial general
liability insurance in an amount of not less than Two Million Dollars
($2,000,000.00) on a combined single limit basis and all worker's compensation
insurance required by law.
(e) Landlord shall provide Tenant with access and entry to the
Premises only at times consistent with the schedule for completion of Landlord's
Work, subject to all the terms and conditions of the Lease and this Exhibit C
---------
and in accordance with any site rules imposed by the General Contractor and the
TI Contractor. Upon and following any entry into the Premises by Tenant prior
to Substantial Completion, Tenant shall perform all of the obligations of Tenant
applicable under the Lease during the Term (except the obligation to pay Base
Rent and Tenant's Proportionate Share of Operating Costs, unless a Rent
Commencement Date has occurred), including, without limitation, obligations
pertaining to insurance, indemnity, compliance with laws and Hazardous
Materials. In addition to the indemnity obligations of Tenant under the Lease,
Tenant shall indemnify, defend and protect Landlord and hold Landlord harmless
from and against any and all claims, proceedings, losses, costs, damages, causes
of action, liabilities, injuries or expenses arising out of or related to claims
of injury to or death of persons or damage to property occurring or resulting
directly or indirectly from the presence in the Premises or the Project of
Tenant's contractors or representatives or the activities of Tenant or its
contractors or representatives in or about the Premises or Project during the
construction period, such indemnity to include, without limitation, the
obligation to provide all costs of defense against any such claims. This
indemnity shall survive the expiration or sooner termination of the Lease.
11. Obligation of Tenant to Provide As Built Plans. Within sixty (60) days of
Substantial Completion, Tenant shall cause TI Architect to provide Landlord with
a complete set of plans on mylar and specifications reflecting the actual
conditions of the Tenant Improvements as constructed in the Premises, together
with a copy of such plans on diskette in the CAD format.
12. Reimbursement and Compensation. Tenant shall reimburse Landlord for all
actual costs incurred by Landlord in connection with the design and review of
Conceptual Plans and TI Working Drawings for the Tenant Improvements, and
Landlord shall be entitled to receive the administrative fee provided in
Paragraph 9 of this Exhibit C. Landlord may obtain any reimbursement or
- ----------- ---------
compensation required hereunder by deducting the amount of such reimbursement or
compensation from Cash Allowance and the Construction Payment. Tenant shall be
responsible for delays and additional costs incurred by Landlord in completing
the Base Building Improvements due to inadequacies in the TI Working Drawings or
Tenant requested changes to the Base Building Improvements.
13. Tenant Payments. Landlord shall make progress payments for Landlord's Work
on a pro rata basis from Cash Allowance and the Construction Payment (in the
proportion that the Cash Allowance and Construction Payment bear to the total
cost for construction of the Tenant Improvements) from time to time as the
Tenant Improvements are constructed. If for any reason the Cash Allowance and
Construction Payment are not adequate to make all required payments, Tenant
shall pay to Landlord such additional required amount as determined by Landlord
within ten (10) days after Landlord's submittal to Tenant of a request for
payment together with the documentation called for in this Section. Statements
or invoices may be rendered by Landlord during the progress of the work so as to
enable Landlord to pay the TI Contractor, subcontractors, Landlord's Architect
or engineers without advancing Landlord's funds to pay the cost of Tenant
Improvements. If for any reason the Construction Payment is not fully utilized
to make all required payments, Landlord shall upon completion of the Tenant
Improvements refund to Tenant any unused portion of the Construction Payment.
Landlord shall be entitled to suspend or
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terminate construction of the Tenant Improvements and to declare Tenant in
default in accordance with the terms of the Lease if payment by Tenant of any
amounts required to be paid by Tenant under this Exhibit C is not received
---------
when due, subject to any applicable notice and cure period under the Lease.
(a) On a monthly basis during construction of the Tenant Improvements,
Landlord shall provide Tenant with a summary on Landlord's standard form that it
uses for internal purposes, documenting the status of any change orders and the
budget for the Tenant Improvements. All Landlord's requests for additional
payments from Tenant during construction of the Tenant Improvements shall have
attached thereto legible copies of applicable statements or invoices and copies
of the documentation required from the TI Contractor under the TI Construction
Contract as a condition to payment thereunder.
(b) Not later than one hundred twenty (120) days after Landlord has
received the as-built plans from Tenant, Landlord shall submit to Tenant
Landlord's standard form of project summary, including copies of any
documentation required from the TI Contractor under the TI Construction Contract
to reconcile costs actually incurred for changes and costs due to Tenant Delay.
14. Cash Allowance. Landlord shall provide a total of up to Twenty-seven
Dollars ($27.00) per square foot of Useable Area in the Premises ("Cash
Allowance") toward the payment for the design, development, construction and
installation of the Tenant Improvements in the Premises. The Cash Allowance
shall be used solely for the construction of Tenant Improvements above the Base
Building Improvements and other costs permitted herein. Subject to the
limitations set forth elsewhere herein, Landlord shall in accordance with this
Exhibit C apply the Cash Allowance to the cost of designing and constructing
- ---------
the Building Standard Improvements, space planning fees, design fees,
architectural and engineering fees, permit fees, recovery of Landlord's
construction administration fee and Washington State sales tax and for the other
purposes specifically provided in this Exhibit C. The obligation of Landlord
---------
to make any one or more payments pursuant to the provisions of this Paragraph
---------
14 or to proceed with the construction of the Tenant Improvements shall be
- --
suspended without further act of the parties during any such time as there
exists an Event of Default under the Lease or any event or condition which, with
the passage of time or the giving of notice or both would constitute such an
Event of Default. Nothing in this Paragraph 14 shall affect the obligations of
------------
Tenant under the Lease with respect to any alterations, additions and
improvements within the Premises, including, without limitation, any obligation
to obtain the prior written consent of Landlord thereto. The Cash Allowance
shall not be used to pay for Tenant Extra Improvements or Upgrades unless
Landlord determines that such items will add permanent value to the Building.
Notwithstanding the foregoing, Landlord agrees that the Cash Allowance may be
applied to the cost of upgraded carpeting and raceways and conduits (excluding
cabling) that are placed above the ceiling in a standard configuration that is
acceptable to Landlord and does not impede or interfere with the base building
systems.
15. Tenant Modifications.
(a) Discretionary Changes. If Tenant desires to change or revise the
---------------------
Tenant Improvements specified by the approved TI Working Drawings, then Tenant
shall submit such change in writing for Landlord's approval, which shall not be
unreasonably withheld, conditioned or delayed and such request shall be
accompanied by plans, specifications and details as may be required to fully
identify and quantify such changes. Landlord shall not be required to approve
any modifications if, in Landlord's judgment such modification would delay
completion of the Base Building Improvements or have an adverse impact on the
mechanical, electrical, life safety or HVAC systems in the Building. Landlord
shall notify Tenant in writing (an "Approval Notice") whether it will approve
the requested change within ten (10) Business Days after the date Landlord
receives Tenant's request; provided, however, that Landlord's response time will
-------- -------
be extended by any need to obtain information or estimates from the TI
Contractor or any subcontractor as to time or cost of the proposed changes. If
the change is requested less than ten (10) Business Days before that portion of
Landlord's Work is scheduled to begin, Landlord shall
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make a reasonable effort to expedite its response. If Landlord approves such
changes, then Tenant will provide Landlord with revised Working Drawings
incorporating the changes. If Tenant's request will increase the cost of
construction or will cause a delay in completing the construction, Landlord's
Approval Notice shall include Landlord's good faith estimate of the amount of
delay it will cause and/or the increased costs associated with the change. Upon
receipt of an Approval Notice, if Tenant still wishes the change to be made,
Tenant shall so notify Landlord in writing within three (3) Business Days
thereafter and shall pay Landlord any sum necessary to pay for such change
whereupon Landlord shall execute a change order directing the TI Contractor to
make the approved changes. If Tenant does not respond and increase the
Construction Payment within three (3) Business Days then it shall be deemed to
have withdrawn its request. Landlord shall be entitled to its administrative fee
for overseeing the change order. If, incident to a requested change to the
Working Drawings or Landlord's Work, Landlord stops work pending resolution of
whether Tenant finally approves or disapproves the additional costs or delay of
a proposed change, then whether or not Tenant ultimately approves or disapproves
the proposed change and its attendant additional cost and delays, any delay
resulting from the work stoppage will constitute a Tenant Delay. Tenant shall be
responsible for any costs incurred by Landlord or the contractor to prepare a
proposed change order even if Tenant subsequently rejects the change order.
Tenant shall be responsible for all costs of any resulting delay in the
completion of the Premises or the Base Building Improvements due to modification
of the TI Working Drawings even if the costs are not included in Landlord's good
faith estimate as set forth in the Approval Notice. The actual cost of any
approved changes shall be added to the Construction Payment, unless the Cash
Allowance is sufficient to pay the cost of such change.
(b) Mandatory Changes. Tenant shall modify the TI Working Drawings to
-----------------
include any changes required by any applicable government authority during the
permitting process and such changes shall be subject to Landlord's approval
which shall not be unreasonably withheld. During the course of construction,
Landlord shall be authorized to make any changes to the Tenant Improvements if
required by governmental authority and the cost thereof shall be paid by Tenant.
Except to the extent of ongoing minor "field changes" by the TI Contractor at
the time of construction, any material discretionary change to Tenant
Improvements shall be authorized in writing by Tenant and Landlord, on one or
more forms to be prepared by the TI Contractor and approved by Landlord and
Tenant. All such proposed changes shall be presented to Tenant by written
notice as soon as they become known. Tenant shall approve or reject such
proposed changes promptly and acknowledges that this may require decisions to be
made immediately during the course of construction. If Tenant does not respond
promptly then Landlord may direct the TI Contractor to delay that portion of
construction and any delay shall be a Tenant Delay. Any costs of such changes
including Landlord's costs associated with Tenant Delay shall be included in the
Tenant Improvements Costs
16. Designation of Construction Representatives. Tenant hereby designates
Paul Klansnic as its representative to act on its behalf and represent its
interests with respect to all matters requiring Tenant action in this Exhibit C
---------
and Landlord shall be entitled to rely upon the decisions and agreements made by
such representative as binding upon Tenant. Landlord hereby appoints Michael
Welebit and/or Dan Matheson as its representative to act on its behalf and
represent its interests with respect to all matters requiring Landlord action in
this Exhibit C. The parties may change the identity of their representatives by
---------
notice in writing to each other. All inquiries, requests, instructions,
authorizations, and other communications under this Exhibit C may be made by the
---------
parties to the other party's representative, and any approvals to be given by a
party under this Exhibit C may be given by that party's representative.
---------
Landlord and Tenant hereby expressly recognize and agree that no other person
claiming to act on behalf of Tenant or Landlord is authorized to do so. Landlord
and Tenant shall each be entitled to rely upon the decisions and agreements made
by the other party's representative with respect to matters covered by this
Exhibit C as binding upon it but neither party's representative shall have any
- ---------
authority to amend or modify the terms of the Lease (including this Exhibit C)
---------
or to act with respect to any matters except those expressly covered by this
Exhibit C. No consent, authorization or other action shall bind a party unless
- ---------
in
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writing and signed by their respective representative. If a party complies
with any request or direction presented to it by anyone claiming to act on
behalf of the other party other than the designated representative, then such
compliance shall be at such party's sole risk and responsibility and shall not
in any way alter or diminish the obligations and requirements created and
imposed by this Exhibit. Both parties shall have the right to enforce
compliance with this Exhibit without suffering any waiver, dilution or
mitigation of any of their rights hereunder. Notice of all disputes arising
under this Exhibit C shall be given to the parties and the parties'
---------
representative by notice as provided in the Lease.
Landlord shall have the right to observe the construction of the Tenant
Improvements. Landlord shall include Tenant on the distribution list for updates
to the construction schedule for the Building and the Tenant Improvements but
neither Landlord, the General Contractor nor the TI Contractor shall be required
to provide any special reports, updates or schedules for Tenant's benefit.
During construction of the Tenant Improvements, the representatives of Landlord
and Tenant, General Contractor, TI Architect, and TI Contractor shall meet upon
request of either party (but no more often than two (2) times per month unless
otherwise agreed by the parties) in order to review status and scheduling for
construction of the Tenant Improvements and possible changes required, delays
anticipated, costs being incurred and related matters. Tenant shall inform
Landlord of all construction meetings with respect to Tenant's Work and Landlord
shall have the right to attend all meetings of Tenant and its contractor and
subcontractors, and the Tenant's construction contract(s) shall so provide.
Landlord shall inform Tenant of all regularly scheduled construction meetings
regarding Tenant Improvements and Tenant shall have the right to attend such
meetings. Tenant acknowledges that the Tenant Improvements may be constructed
at the same time as Landlord is constructing the Base Building Improvements.
Subject to the limitation set forth in Section 10 above, each party shall cause
----------
its architects, engineers and contractors to cooperate fully and promptly with
each other as and when deemed necessary by such party in its good faith
determination in the course of construction of the Tenant Improvements. If
Tenant's Work interferes with Landlord's Work and Tenant fails to comply with
Landlord's requests for cooperation then Landlord may require Tenant to cease
work in the Premises.
17. Substantial Completion. As used herein, "Substantial Completion" shall
mean (and each floor of the Premises shall be deemed "Substantially Complete")
when (i) installation of Building Standard Improvements and Tenant Extra
Improvements in such portion of the Premises has occurred, to the extent such
improvements can, in Landlord's reasonable judgment, be installed within the
timeframe for completion of Building Standard Improvements, (ii) Tenant has
direct access to the elevator lobby on the floor (or floors) where the Premises
are located, (iii) Basic Services are available to the Premises, and (iv) the
City of Bellevue has issued a temporary or permanent certificate of occupancy
permitting Tenant to occupy such portion of the Premises for the Permitted Use
or has taken such other action as may be customary to permit occupancy or use
thereof for the Permitted Use. Notwithstanding the foregoing, Substantial
Completion shall be deemed to have occurred on the date on which Tenant takes
occupancy of the Premises and commences to do business therein. Substantial
Completion shall be deemed to have occurred even if a "punch-list" or similar
corrective work remains to be completed. Within ten (10) days after Landlord
delivers possession of the Premises to Tenant, Landlord, Tenant, and the
Landlord's Architect shall prepare a "punch-list" which shall consist of the
items that have not been, but should have been, finished or furnished prior to
such date or which do not conform to the TI Working Drawings or the Base
Building Drawings (but only to the extent that the Base Building Improvements
were not complete at the time of Tenant's inspection under Paragraph 8 above).
-----------
Landlord shall complete and furnish all punch-list items within thirty (30) days
after Substantial Completion or as soon thereafter as is possible with the
exercise of due diligence. The cost thereof shall be borne by the General
Contractor under its contract to construct the Base Building Improvements or
Upgrades, or the TI Contractor under the TI Construction Contract, as the case
may be.
18. Tenant's Delay. If Substantial Completion shall be delayed as a result of
any of the following causes, such delay shall be considered a "Tenant Delay":
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(a) Tenant's failure to obtain approval of the TI Working Drawings by
Landlord or to obtain permits from the City by the dates set forth in Paragraph
---------
20 below (as such dates may be extended or modified pursuant to the terms of
- --
this Exhibit C);
---------
(b) Change(s) in TI Working Drawings requested by Tenant after
approval of the TI Working Drawings by Landlord;
(c) Any delays in starting construction due Tenant's disapproval of
any TI Bids or the need to revise TI Bids or TI Working Drawings to reduce
costs; or
(d) Tenant's request for materials, finishes or installations other
than Building Standard Improvements which require a longer time than Building
Standard Improvements to obtain, install or complete; or
(e) Tenant's failure to comply with the TI Contractor's or the General
Contractor's or any subcontractor's schedule or to meet any deadline or to
respond within any time limit provided herein; or
(f) An Event of Default by Tenant under the Lease or the existence of
any event or condition which, with the passage of time or the giving of notice
or both would constitute such an Event of Default;
(g) Any delay caused by or attributable to Tenant's desire to include
Expanded Uses in the Premises, including delays in issuance of certificates of
occupancy or construction; or
(h) Delays caused by Tenant in construction.
In the event of a Tenant Delay, Landlord shall, to the extent feasible
based on the type of delay, the stage of construction and other factors, make
good faith efforts to make up for the period of Tenant Delay by paying overtime
or other methods acceptable to Landlord, the TI Contractor, the General
Contractor and their subcontractors; provided that Tenant shall be solely
responsible for all costs related thereto. If Landlord's efforts are successful
and all or a portion of the period of a Tenant Delay is made up through such
efforts, then the following sentence shall not apply to the period of Tenant
Delay that is made up. In the event of any Tenant Delay, notwithstanding any
provision to the contrary contained in the Lease, or if Substantial Completion
is delayed due to Tenant Delay, the Term Commencement Date and the Rent
Commencement Date for each floor shall be the earlier of the date of Substantial
Completion of such floor or the date when Substantial Completion of such floor
would have occurred if there had been no Tenant Delay. Tenant acknowledges that
the length of any Tenant Delay is to be measured by the duration of the delay in
Substantial Completion caused by the event or conduct constituting Tenant Delay,
which may exceed the duration of such event or conduct due to the necessity of
rescheduling work or other causes.
19. Reliance on Plans. Landlord and Tenant shall each be entitled to rely on
the Base Building Plans and the TI Working Drawings for work to be done by Land
lord or Tenant. If (a) Tenant notifies Landlord of any construction
discrepancies following its inspection pursuant to Paragraph 8 above, or (b)
-----------
Tenant is required to modify the TI Working Drawings due to changes in the
Base Building Plans initiated by Landlord for value-engineering purposes or for
discretionary reasons after Landlord's approval of the TI Working Drawings, then
Landlord shall reimburse Tenant for the actual, out-of-pocket cost of revising
the TI Working Drawings to accommodate such existing conditions or changes in
the Base Building Plans. In addition, if Landlord changes the Base Building
Plans after Tenant submits the TI Working Drawings to Landlord for approval and
Tenant is required to change the TI Working Drawings to comply with Landlord's
changes to the Base Building Plans, then the milestone dates under Paragraph 20
------------
may be extended for such reasonable period of time (not to exceed five (5)
Business Days) as is necessary for Tenant to modify the Working Drawings to
conform to the changes to the Building Plans; provided, however, that the dates
-------- -------
shall not be extended unless Tenant notifies Landlord, within two
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(2) Business Days after Tenant receives notice of the changes, of the number of
days Tenant will need to make such revisions. Notwithstanding the foregoing, if
any delay is made up in any later period, then subsequent deadlines shall not be
extended. If any deadline would end on a Saturday, Sunday or holiday, the
deadline shall be extended to the next Business Day.
20. Schedule of Milestone Dates. Tenant shall be responsible for meeting the
following deadlines except as otherwise provided herein. If Landlord sells the
Project prior to completion of the Tenant Improvements then each of the
following deadlines shall be extended by fifteen (15) days.
Tenant's Delivery of Conceptual Plans to Landlord: May 15, 2000
Tenant's Plan Delivery Date (approval of TI Working Drawings): August
1, 2000
TI Construction Contract Finalized, Permits in Place and Final
Construction Drawings Completed: September 1, 2000
Substantial Completion/Scheduled Commencement Date: February 15, 2001
21. Warranties. Landlord shall obtain from the General Contractor, TI
Contractor, Landlord's Architect and all other consultants, design
professionals, engineers, contractors, subcontractors, and suppliers providing
design services, material, labor or equipment in the construction of the Base
Building Improvements and Tenant Improvements such warranties as Landlord deems
to be commercially necessary or desirable for their respective materials, labor
or equipment. If there exists any defect in the Base Building Improvements or
Tenant Improvements which is covered by an express or implied warranty obtained
by Landlord, then Landlord shall seek to enforce such warranties in accordance
with their terms for the benefit of the Landlord and the Tenant (with respect to
the Tenant Improvements). To the extent permitted by law and by the warranty to
be assigned, Landlord hereby assigns all warranties with respect to workmanship
and materials supplied in connection with the Tenant Improvements to Tenant (in
common with Landlord) and Tenant may enforce any warranties on the Tenant
Improvements if Landlord fails to do so after notice from Tenant.
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SCHEDULE C-1
DEFINITION OF BASE BUILDING IMPROVEMENTS
The following work is to be provided by Landlord as the Base Building
Improvements constructed in accordance with the drawings submitted to the City
of Bellevue for building permits (and as further described on Schedule C-3),
------------
which may be modified to accommodate City requirements, value engineering, and
changes made at Tenant's request and with Landlord's approval in Landlord's sole
discretion. Except as otherwise provided in the Lease or in Exhibit C to the
---------
Lease, Tenant shall accept the Base Building Improvements "AS IS" upon
completion of construction.
Sitework:
1. Plaza
a. Provide cement concrete pavements, curbs and sidewalks in the plaza;
b. Provide adequate site drainage per local requirements for storm water
control;
c. Provide cast in place colored concrete paving;
d. Furnish and install steel ornamental fences and its accessories;
e. Furnish and install site benches and trash receptacle complete with
accessories;
f. Furnish and install tree grates, trench grates, traffic bollards;
2. Landscaping
a. Provide site landscaping of trees, shrubs, groundcover, including
existing stored plant materials, seeding and sodding in conformance with
the requirement of local codes and ordinances for aesthetics and
identity;
b. Furnish and install irrigation as required by local code;
3. Parking Garage
a. Provide a four-level underground parking structure;
b. Provide men and women shower facilities on the P1 level of the garage;
4. Exterior Lighting
a. Provide surface mounted lighting in the garage as required by code;
b. Furnish and install lighting fixtures complete with lamps on the plaza,
building exterior and grounds per local code for safety, security,
aesthetics and identity;
5. Signage
a. Provide signage per local code for direction, information, public safety
and security;
Building Systems
6. Sanitary Sewer:
a. Provide connections to existing sanitary sewer systems in predetermined
locations per local code;
b. Furnish and install sanitary sewer piping, cleanouts and manholes with
connections to building plumbing systems for the Base Building
Improvements in conformance with local codes and ordinances;
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<PAGE>
c. Provide common under slab sanitary sewer lines per local code with any
additional plumbing services required for Tenant Premises be constructed
at Tenant cost;
7. Storm Sewer:
a. Furnish and install catch basins, control structures, spill control
structures, storm drainage piping, and foot drains necessary for the
Base Building Improvement in conformance with the requirements of local
codes and ordinances;
8. Electrical
a. Provide electrical service through 480Y/277 volt power from main panel
board in garage in locations determined by Landlord that are in
conformance with the requirements of local codes and ordinances. Any
additional electrical distribution requested by Tenant is a Tenant
Improvement;
b. Provide a minimum of one (1) K13 electrical transformer per Building
floor;
c. Provide 120/208 volt panel boards on each floor or equivalent to supply
a minimum of 1.5 watts per usable square foot for tenant lighting loads
and 2.5 watts per usable square foot for tenant convenience loads;
d. Provide sufficient electrical capacity for all common area loads and
building standard HVAC loads.
e. Provide an emergency power system to serve the fire pump, life safety
loads, legally required standby loads and optional building standby
loads in a location as determined by Landlord and in conformance with
the requirement of local codes and ordinances.
9. Mechanical System
a. Provide a four (4) air-cooled rooftop DX units system with 100% fresh
air economizer mode for each Building;
b. Provide access to condenser water from a roof-mounted cooling tower,
including a vertical riser with stub-outs on each floor. All
distribution from the vertical riser and all other costs associated with
using the condenser water loop shall be Tenant Improvements;
c. Provide a Heating, Ventilation, and Air Conditioning (HVAC) system to
sufficiently handle building standard and common area electrical loads
based on the following design criteria:
. Summer outdoor design conditions: ASHRAE Design Data: 85 degrees F dry
bulb, 67 degrees F wet bulb;
. Winter outdoor design conditions: ASHRAE Design Data: 17 degrees F dry
bulb
. Summer indoor temperature will be 74 degrees F (+-2 degrees);
. Winter indoor temperature will be 72 degrees F (+-2 degrees);
. Humidity is variable with no direct control provided;
. Outside air is at 20 cfm/person minimum (7 people per 1000 rentable
square feet), which can be increased to 100 percent outside air by
operating with an air economizer cycle;
. Acoustical criteria is NC-40 (+-2) within 15 feet of the core;
d. Provide a digital climate control system for after-hours service
requests made by tenants, through an on-demand touch-tone phone menu or
other automated system;
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<PAGE>
e. Provide the main-loop HVAC distribution system to each floor and control
equipment that includes:
. Installation of all vertical ductwork;
. Installation of the main horizontal air distribution loop on each
floor;
. Stock variable air volume series Fan Powered Terminal Units (FPTUs)
ready for installation in accordance with building standard mechanical
layouts prepared by Flack + Kurtz Consulting Engineers. Installation
costs are a Building Standard Improvement and is a Tenant's cost;
Installation of all other air distribution is to be completed as a
Tenant Improvement;
10. Plumbing System
a. Provide common overhead water supply line in sizes and location
determined by Landlord to serve the Base Building Improvements, namely
restrooms on each floor, including lavatories, toilets and drinking
fountains. Any additional plumbing services requested by Tenant for the
Premises shall be constructed as a Tenant Extra Improvement at Tenant's
sole cost;
11. Life Safety Systems
a. Provide a fully sprinklered Building with quick-response semi-concealed
type heads in lobby and areas with finished ceilings at a minimum
density required by code for the Base Building Improvements;
b. Provide plain brass, upright pendant or side wall sprinklers heads in
unfinished tenant areas; at a minimum density required by code for the
Base Building Improvements;
c. Provide smoke detectors in all common areas at a minimum density
required by code for the Base Building Improvements;
d. Provide smoke detectors in the HVAC ductwork ceilings at a minimum
density required by code for Base Building Improvements;
e. Provide fire control panels as required by code;
f. Manual fire alarm pull stations, exit lights, and audible fire alarm
speakers shall be provided at the Building stair doors and elevator
lobbies.
12. Security Systems
a. Provide a 24 hours per day, 7 days per week accessible security system
in a location determined by Landlord having:
. Card controlled access to the Building and the garage;
. Card readers in each elevator cab;
. Closed circuit security camera system;
13. Telecommunications
a. Provide separate telecommunication access pathways from an off-site
location to a central telecom site located on the P-1 level of garage or
a location determined by Landlord;
b. Provide at least one (1) telephone closet with punch-down boards
(terminations) on each floor of Building;
c. Provide conduit from the Project to telecommunications providers in the
street;
C-1 - 3
<PAGE>
d. Provide multiple sleeves in each Building to accommodate vertical
distribution for tenant telecommunications service providers with any
other vertical or horizontal distribution required for Tenant be
constructed at Tenant's cost;
Building Shell
14. Frame:
a. Provide building foundation and structure;
b. Provide a steel structure with structural concrete on metal deck having
lateral resistance achieved through braced frames;
c. Provide typical floor to floor heights of 13'-0" from finished floor to
finished floor;
15. Roof:
a. Provide a multiple-ply SBS polymer modified asphalt sheet roofing with
mineral granule surfacing that includes roof membrane traffic pad and
membrane protection materials, aggregate ballast and decorative ballast;
b. Provide a roof that includes an extended roof warranty of 20 years
including the costs of repairing leaks that result from defects in any
component(s) of the system or the workmanship involved in installation;
c. Provide sheet metal items related to roofing work, waterproofing,
including metal gutters and downspouts, scupper and flashings;
16. Exterior Building Walls:
a. Provide an exterior building wall comprised of pre-cast concrete, a
panelized brick system and curtain wall;
b. Install perimeter panels and exterior glass windows to enclose each
floor of the Premises;
17. Lighting Fixtures / Controls:
a. Stock two (2) lamp, 18 cell parabolic light fixtures ready for
installation of a quantity not to exceed one (1) 2'x4' recessed
fluorescent lighting fixture per 80 square feet of usable area less
Common Areas as provided by Landlord. Installation of the Base Building
Improvement fixtures is a Building Standard Improvement and any fixtures
provided and installed in excess of the Base Building Improvements are
considered a Tenant Extra Improvement;
b. Provide building standard lighting in Common Area locations in locations
determined by Landlord.
c. Provide a microprocessor lighting control system for timed lighting
control in predetermined locations including an automatic shutoff,
occupancy sensors for restrooms and photocell control and time clock
control for external lighting.
Interior Building Finishes
18. Tenant Premises
a. Install drywall, finish taped and ready for paint covering core walls,
stairwells, surfaces beneath or above exterior windows and columns where
appropriate;
b. Provide and install building standard window covering on perimeter
windows;
c. Stock on the floor the suspended metal grid system, complete with Class
A acoustical mineral and/or ceramic fiber 24"x 48" lay in ceiling panels
for typical floor lease space;
C-1 - 4
<PAGE>
d. Provide concrete floors that are constructed to a plane, flat surface
with variations not to exceed F(L) 17 floor levelness, F(F) 20 floor
flatness in accordance with ASTME 1155. Floor shall be left broom clean;
e. Install door and hardware at all vertical shafts used as exits;
19. Multi-Tenant Floors
a. Finish all multi-tenant corridors with standard materials including
paint, carpeting, and lighting;
b. Finish all elevator lobbies on multi-tenant floors with standard
materials including paint, carpeting and lighting.;
c. Install the suspended metal grid system, complete with Class A
acoustical mineral and/or ceramic fiber 24"x 48" lay in ceiling panels
for typical floor lease space in multi-tenant corridors and lobbies;
20. Common Areas
a. Provide fire stairs designed to meet current governmental codes;
b. Provide high-speed traction elevators with 3500-pound capacity. Finish
elevator cabs with materials that are consistent in quality to the
building lobby;
c. Provide and install door and hardware at all electrical rooms, telephone
closets and janitor closets constructed as part of the Base Building
Improvement;
d. Provide and install door and hardware at all vertical shafts used as
exits;
e. Finish ground floor lobbies, including carpeting, drywall and wood
paneling, lighting, mail alcove, and security station;
f. Finish men's and women's restrooms on each office floor including
vitreous china fixtures as required by code, tile flooring and wet
walls, stone vanities, hung painted metal toilet partitions, lay-in
ceiling, paint and lighting. In locker rooms on the P1 level, install
lockers and showers.
C-1 - 5
<PAGE>
SCHEDULE C-2
DEFINITION OF BUILDING STANDARD IMPROVEMENTS
For the purposes of this Lease, Building Standard Improvements shall consist of:
1. Partitions.
One (1) linear foot of ceiling height partition per twelve (12) square feet
of Net Rentable Area less Common Areas. All required partitions shall be
5/8" gypsum board, painted with two coats of latex on 2-1/2" metal studs at
24" on center, with 2-1/2" base.
2. Doors and Hardware.
One (1) full height, solid core, hardwood veneer door with a aluminum frame
and lever handle latch set hardware per three hundred (300) square feet of
Net Rentable Area less Common Areas.
3. Ceiling.
Installation of the suspended metal grid system, complete with Class A
acoustical mineral and/or ceramic fiber 24"x 48" lay in ceiling panels for
typical floor lease space throughout the Premises as selected or provided
by Landlord.
4. Lighting.
Installation of two (2) lamp, 18 cell parabolic light fixtures ready for
installation per Tenant's plans of a quantity not to exceed one (1) 2'x4'
recessed fluorescent lighting fixture per 80 square feet of usable area of
a fixture selected or provided by Landlord.
5. Electrical Outlets.
One (1) duplex wall-mounted convenience outlet mounted at standard
locations with white plastic cover plate for each one hundred twenty (120)
square feet of Net Rentable Area less Common Areas.
6. Telephone Outlets.
One (1) telephone wall outlet mounted at standard locations for each two
hundred ten (210) square feet of Net Rentable Area less Common Areas with
pull wire through the partition.
7. Floor Covering.
Building Standard carpet or a credit of $15.00 per square yard of carpeted
area.
8. Switch.
One (1) dual light switch, rocker type, mounted at standard locations with
white plastic cover plate for each three hundred (300) square feet of Net
Rentable Area less Common Areas.
9. Life Safety Systems.
Rapid Response fire sprinkler heads to conform with typical Tenant
partition layout, utilizing the Building Standard partition and lighting,
for light hazard occupancy design criteria. Manual fire alarm pull
stations, exit lights, and audible fire alarm speakers, if any, in excess
of the Base Building Improvements.
10. HVAC.
Installation of the variable air volume series Fan Powered Terminal Units
(FPTUs) provided by Landlord and installed in accordance with building
standard mechanical layouts to suit normal general office space.
C-2 - 1
<PAGE>
SCHEDULE C-3
LIST OF BASE BUILDING PLANS
1. Bid Documents issued by Kendall/Heaton Associates, Inc.
<TABLE>
<S> <C>
. Landscape Drawings L0.01-L2.02 dated April 7, 1999 Addendum No. 4
By Weisman Design Group Includes Addendum No 4 & 11
. Civil Drawings C0.0-C7.0 dated March 1, 1999 & April 7, 1999
By Coughlin Porter Lundeen Includes Construction & Addendum No 4
. Architectural Drawings A1.01-A9.31 dated April 22, 1999 & May 17, 1999, & June 11, 99.
By G2 & Kendall Heaton Includes Construction drawings, Addendum No. 10 & 11.
. Security Drawings SS1.01-SS4.02 dated April 22, 1999
By Kendall Heaton Includes Construction drawings
. Window Washing Drawings WW1.10-WW1.30 dated April 22, 1999
By Kendall Heaton Includes Construction drawings
. Parking Control Drawings PL-101 dated April 22, 1999
. By Kendall Heaton Includes Construction drawings
. Soil Nail Drawings N1.01-N3.01 dated June 11, 1999 & March 1, 1999
By Couglin Porter Lundeen Includes Construction drawings & Addendum No. 11
. Structural Drawings S1.010-SH3 dated April 7, 1999 & June 11, 1999
By Couglin Porter Lundeen Addendum No 4 & Addendum No 11
. Mechanical Drawings M1.01-M5.02P dated April 22, 1999 & June 11, 1999
By Flack + Kurtz Includes Construction & Addendum No. 11
. Electrical Drawings E1.0-E6.1 dated June 11, 1999 & April 22, 1999 & May 17, 1999
By Flack + Kurtz Includes Construction, Addendum No. 11, Addendum 10
. Electrical Drawings UT0.01-UT0.4 dated June 11, 1999 Addendum No 11
By Flack + Kurtz
. Plumbing Drawings P1.01-P6.2 April 22, 1999 & June 11, 1999 & May 17, 1999
By Flack + Kurtz Includes Construction, Addendum No. 11, Addendum 10
</TABLE>
2. Project Manual (Specifications) issued by Kendall Heaton Associated Inc.
dated March, 1999. Project 9838
These plans and specification are subject to revision as stated in the
Lease.
C-3 - 1
<PAGE>
SCHEDULE C-4
DESCRIPTION OF PRIME CONTRACT
The General Conditions and Contractor's fee from the Prime Contract will be
increased by an amount equal to seven and one half percent (7.5%) of the actual
Cost of the Work for the Tenant Improvements provided that Tenant's TI Working
Drawings are delivered to the General Contractor before August 15, 2000, and
provided that there is no material difference between the TI Working Drawings
presented on such date and the TI Working Drawings used in construction. If the
TI Working Drawings are delivered after such date or if the TI Working Drawings
used in construction are materially different, then General Contractor shall be
entitled to increased General Conditions.
Under the Prime Contract, "General Conditions" means the TI Contractor's
costs for (i) project staff, (ii) project overhead (excluding security services,
inspections, testing, design fees, other consulting services and legal
expenses), (iii) completion bond, (iv) contractor's license, (v) builder's risk
and liability insurance, (vi) B&O tax, necessary to complete the Tenant
Improvements.
Under the Prime Contract, "Cost of the Work" means the sum of money for
performance of work to be performed pursuant to the Prime Contract that is paid
by the General Contractor for labor, materials, supplies and transportation
necessary for the proper execution of the subject work.
C-4 - 1
<PAGE>
EXHIBIT D
RULES AND REGULATIONS
1. Sidewalks, doorways, halls, stairways, vestibules and other similar areas
shall not be obstructed by any Tenant or used by them for purpose other than
ingress to and egress from their respective Premises, and for going from one
part of the Building to another part.
2. Plumbing fixtures shall be used only for their designated purpose, and no
foreign substances of any kind shall be deposited therein. Damage to any such
fixture resulting from misuse by Tenant or any employee or invitee of Tenant
shall be repaired at the expense of Tenant.
3. Nails, screws and other attachments to the Building require prior written
consent from Landlord.
4. All contractors and technicians rendering any installation service to
Tenant shall be subject to Landlord's approval and supervision prior to
performing services. This applies to all work performed in the Building,
including, but not limited to, installation of telecommunications equipment, and
electrical devices, as well as all installation affecting floors, walls,
woodwork, windows, ceilings, and any other physical portion of the Building.
5. Movement in or out of the Building of furniture, office equipment, or other
bulky material which requires the use of elevators, stairways, or Building
entrance and lobby shall be restricted to hours established by Landlord. All
such movement shall be under Landlord's supervision, and the use of an elevator
for such movements shall be made restricted to the Building's freight elevators,
or an elevator for such movements shall be made restricted to the Building's
freight elevators. Prearrangements with Landlord shall be made regarding the
time, method, and routing of such movement, and Tenant shall assume all risks of
damage and pay the cost of repairing or providing compensation for damage to the
Building, to articles moved and injury to persons or public resulting from such
moves. Landlord shall not be liable for any acts or damages resulting from any
such activity.
6. Corridor doors, when not is use, shall be kept closed.
7. Tenant shall cooperate with Landlord in maintaining the Premises. Tenant
shall not employ any person for the purpose of cleaning the Premises other than
the Building's cleaning and maintenance personnel.
8. Deliveries of water, soft drinks, newspapers, or other such items to any
Premises shall be restricted to hours established by Landlord and made by use of
the freight elevators if Landlord so directs.
9. Nothing shall be swept or thrown into the corridors, halls, elevator
shafts, or stairways. No birds, fish, or animals of any kind shall be brought
into or kept in, on or about the Premises.
10. No cooking shall be done in the Premises except in connection with
convenience lunch room or beverage service for employees and guests (on a non-
commercial basis) in a manner which complies with all of the provisions of the
Lease and which does not produce fumes or odors.
11. Food, soft drink or other vending machines shall not be placed within the
Premises without Landlord's prior written consent.
12. Tenant shall not use or keep on its Premises any kerosene, gasoline, or
inflammable or combustible fluid or material other than limited quantities
reasonably necessary for the operation and maintenance of office equipment.
13. Tenant shall not tamper with or attempt to adjust temperature control
thermostats in the Premises. Landlord shall make adjustments in thermostats on
call from Tenant.
D-1
<PAGE>
14. Tenant shall comply with all requirements necessary for the security of
the Premises, including the use of service passes issued by Landlord for after
hours movement of office equipment/packages, and signing security register in
Building lobby after hours.
15. Landlord shall furnish Tenant with a reasonable number of initial keys for
entrance doors into the Premises and may charge Tenant for additional keys,
thereafter. All such keys shall remain the property of Landlord. No additional
locks are allowed on any door of the Premises without Landlord's prior written
consent and Tenant shall not make any duplicate keys, except those provided by
Landlord. Upon termination of this Lease, Tenant shall surrender to Landlord
all keys to the Premises, and give to Landlord the combination of all locks for
safes and vault doors, if any, in the Premises.
16. Landlord retains the right, without notice or liability to any tenant, to
change the name and street address of the Building.
17. Canvassing, peddling, soliciting, and distribution of handbills in the
Building are prohibited and each tenant shall cooperate to prevent these
activities.
18 . The Building public hours of operation are (excluding holidays):
8:00 A.M. to 6:00 P.M. Monday through Friday
9:00 A.M. to 1:00 P.M. Saturday
19. Tenant shall take reasonable steps to prevent the unnecessary generation
of refuse (e.g., choosing and using products, packaging, or other materials in
business that minimize solid waste or that are durable, reusable, or
recyclable). Tenant shall provide or obtain recycling containers in its business
for use by employees and customers, shall recycle acceptable materials in the
recycling containers provided by Landlord, and shall otherwise participate in
the recycling program established by Landlord for the Project. Acceptable
recyclable materials may include, but are not limited to, the following:
newspaper, cardboard, paperboard, office paper and other mixed paper, aluminum,
tin and other metal, glass, and #1 (PETE) and #2 (HDPE) plastics.
20. Tenant shall not and shall cause its employees, agents, contractors,
invitees, customers and visitors, not to smoke in the Premises or in any portion
of the Project except those areas expressly designated as smoking areas by
Landlord. Persons may smoke cigarettes in designated areas only if the smoker
uses designated receptacles for ashes and cigarette butts and does not annoy any
non-smoking persons using the area or interfere with access to the Buildings.
21. Landlord reserves the right to rescind or modify any of these rules and
regulations and to make future rules and regulations required for the safety,
protection, and maintenance of the Building, the operation and preservation of
good order thereof, and the protection and comfort of the tenants and their
employees and visitors. Such rules and regulations, when made and written
notice given to Tenant, shall be binding as if originally included herein.
D-2
<PAGE>
EXHIBIT E
SAMPLE FORM OF
LEASE COMMENCEMENT CERTIFICATE
Re: HomeGrocer.com, Inc.
[Suite No.]
----------
One Twelfth @ Twelfth
______________________
Bellevue, Washington
This is to certify that pursuant to the terms of that certain Office Lease
Agreement dated as of ______________, between [Tenant's Name] ("Tenant") and
-------------
Bellevue Hines Development L.L.C., Tenant has taken possession of Premises
described above. Tenant hereby certifies and agrees that the following
information is true and correct:
1. Term Commencement Date:
--------------------------------------
2. Lease Expiration Date:
----------------------------------------
3. Net Rentable Area of Premises:
--------------------------------
4. Total Construction Payment (Exhibit C to Lease) Due From Tenant to Landlord:
------------------------------------------
5. Security Deposit Paid:
----------------------------------------
6. Total Prepaid Rent:
-------------------------------------------
7. Months to Which Prepaid Rent Applies:
-------------------------
8. Attached hereto is a the Insurance Certificate required by Article 11 of the
Lease
[Name of Tenant]
--------------
By:
-----------------------
Name:
---------------------
Title:
--------------------
Date:
---------------------
E-1
<PAGE>
EXHIBIT F
TENANT ESTOPPEL AGREEMENT
The undersigned is the tenant ("Tenant") under a Lease dated __________,
20__, between BELLEVUE HINES DEVELOPMENT, L.L.C., as landlord and
HOMEGROCER.COM, INC., as tenant [as amended by amendments dated __________ ___,
20___ and ________ ___, 20__] (the "Lease") of premises located at
_____________________, _________________, Bellevue, Washington (the "Premises").
BELLEVUE HINES DEVELOPMENT, L.L.C., is the current landlord under the Lease (the
"Landlord").
For valuable consideration paid, the receipt and adequacy of which is
hereby acknowledged, the undersigned Tenant represents and warrants to
BankBoston, N.A., as Agent (the "Mortgagee"), and to each Bank which will be the
holder of a Note secured or to be secured by a mortgage upon the above Premises
and a collateral assignment of all leases pertaining to the above Premises, and
to its successors and assigns, that the following statements are true as of the
date of this agreement.
1. The Lease is a complete statement of the agreement between the parties
with respect to the letting of the Premises referred to therein.
2. A true and complete copy of the Lease including all amendments is
attached hereto as Exhibit A.
---------
3. The Lease is presently in full force and effect according to its terms
and is the valid and binding obligation of the undersigned as of the
date hereof.
4. The term of the Lease has commenced [and the full rental is now
accruing thereunder].
5. The undersigned has accepted possession of the Premises and any
improvements required by the terms of the Lease to be made by the
Landlord have been completed to the satisfaction of the undersigned.
6. No rent under the Lease has been paid more than 30 days in advance of
its due date.
7. The address for notices to be sent to the undersigned is as set forth
in the Lease.
8. The undersigned, as of this date, is not in default under the terms of
the Lease and has no charge, lien, or claim of offset (under the Lease
or otherwise) against rents or other charges due or to become due to
Landlord thereunder. Landlord is not in default in the performance of
its obligations to Tenant under the Lease.
9. The undersigned has not made nor is there presently contemplated any
assignment by the undersigned for the benefit of creditors or any
filing by the undersigned of a proceeding under the United States
Bankruptcy Code or bankruptcy or similar laws of any State seeking its
liquidation or reorganization, and, to the undersigned's knowledge, no
such proceedings are currently pending or threatened against the
undersigned.
The undersigned understands that the Mortgagee is relying on these
representations and warranties as a basis for making a loan to the Landlord or
its affiliates or one or more of the Landlord and its affiliates.
This Agreement shall be binding on the undersigned and its successors and
assigns and shall inure to the benefit of the Mortgagee and its successors and
assigns, and may not be amended or modified except by an agreement in writing
signed by Mortgagee and the undersigned.
F-1
<PAGE>
This Estoppel Agreement has been executed as an instrument under seal,
governed by the laws of the Commonwealth of Massachusetts and effective as of
the date set forth below.
Dated: _______________, 20___ [Name of Tenant]
By:
--------------------
Name:
Title:
STATE OF _______________
County of _________________ _________ __, 20___
Then personally appeared ___________________________, acknowledged that he is
the _______________________ of ______________________, the Tenant named above,
and that he executed the foregoing Estoppel Agreement as the free act and deed
of such corporation by order of its Board of Directors, before me,
--------------------------------
Notary Public
My Commission Expires:
--------------------
F-2
<PAGE>
EXHIBIT G
FORM OF NON-DISTURBANCE, ATTORNMENT
AND SUBORDINATION AGREEMENT
This Agreement is made and entered into as of this ____ day of _________,
2000, by and among BANKBOSTON, N.A., a national banking association (hereinafter
called the "Lender") as administrative agent for itself and the other Lenders
who become parties to a certain Construction and Term Loan Agreement dated June
30, 1999, HOMEGROCER.COM, INC., a Delaware corporation (hereinafter called the
"Tenant") and BELLEVUE HINES DEVELOPMENT, L.L.C. (hereinafter called the
"Landlord").
WITNESSETH:
WHEREAS, Landlord owns certain real Property located in King County,
Washington, and more particularly described in Exhibit A attached hereto and
---------
made a part hereof (said Property being hereinafter called the "Property"); and
WHEREAS, Landlord and Tenant made and entered into that certain Office
Building Lease, dated _______________________, 2000, with respect to certain
premises constituting a portion of the property therein described (said Lease
being hereinafter called the "Lease" and said premises being hereinafter called
the "Leased Premises"); and
WHEREAS, as of June 30, 1999, Landlord has entered into and delivered that
certain Deed of Trust, Assignment of Leases and Rents and Security Agreement in
favor of Lender recorded in the King County Recorder's Office prior to the
recording of this Agreement (said Deed of Trust, Assignment of Leases and Rents
and Security Agreement being hereinafter called the "Security Deed"), conveying
the Property to secure the payment of the indebtedness described in the Security
Deed; and
WHEREAS, as of June 30, 1999, Landlord has entered into and delivered that
certain Assignment of Leases and Rents in favor of Lender recorded in the King
County Recorder's Office prior to the recording of this Agreement (said
Assignment of Leases and Rents being hereinafter called the "Assignment of
Leases"), assigning all of Landlord's right, title and interest as lessor under
the Lease to further secure the indebtedness described in the Security Deed; and
WHEREAS, the parties hereto desire to enter into this Non-Disturbance,
Attornment and Subordination Agreement;
NOW, THEREFORE, for and in consideration of the mutual covenants
hereinafter set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Lender, Tenant and Landlord hereby
covenant and agree as follows:
1. Estoppel. Tenant hereby certifies to Lender that (i) the Lease, as
described above, is the true, correct and complete Lease, and has not been
modified or amended and constitutes the entire agreement between Landlord and
Tenant, and (ii) as far as is known to Tenant, there are no defaults of Landlord
under the Lease and there are no existing circumstances which with the passage
of time, or giving of notice, or both, would give rise to a default under the
Lease and/or allow Tenant to terminate the Lease.
2. Non-Disturbance. So long as no default exists, nor any event has
occurred which has continued to exist for such period of time (after notice, if
any, required by the Lease) as would entitle the lessor under the Lease to
terminate the Lease or would cause, without any further action on the part of
such lessor, the termination of the Lease or would entitle such lessor to
dispossess the lessee thereunder, the Lease shall not be terminated, nor shall
such lessee's use, possession or enjoyment of the Leased Premises or rights
under the Lease be interfered with in any foreclosure or other action or
proceeding in the nature of foreclosure instituted under or in connection with
the Security Deed or in case Lender takes
G-1
<PAGE>
possession of the Property pursuant to any provisions of the Security Deed or
the Assignment of Leases, unless the lessor under the Lease would have had such
right if the Security Deed or the Assignment of Leases had not been made, except
that neither the person or entity acquiring the interest of the lessor under the
Lease as a result of any such action or proceeding or deed in lieu of any such
action or proceeding (hereinafter called the "Purchaser") nor Lender if Lender
takes possession of the Property shall be (a) liable for any act or omission of
any prior lessor under the Lease; or (b) liable for the return of any security
deposit which lessee under the Lease has paid to any prior lessor under the
Lease; or (c) subject to any offsets or defenses which the lessee under the
Lease might have against any prior lessor under the Lease; or (d) bound by any
base rent, percentage rent or any other payments which the lessee under the
Lease might have paid for more than the current month to any prior lessor under
the Lease; or (e) bound by any amendment or modification of the Lease made
without Lender's prior written consent; or (f) bound by any consent by any
lessor under the Lease to any assignment or sublease of the lessee's interest in
the Lease made without also obtaining Lender's prior written consent; or (g)
personally liable for any default under the Lease or any covenant or obligation
on its part to be performed thereunder as lessor, it being acknowledged that
Tenant's sole remedy in the event of such default shall be to proceed against
Purchaser's or Lender's interest in the Property. Notwithstanding anything
contained herein to be contrary, Lender shall have absolutely no obligation to
perform any of Landlord's construction covenants under the Lease, provided that
if Lender shall not perform such covenants in the event of foreclosure or deed
in lieu thereof and within a reasonable time following taking of possession by
Lender, then Tenant shall have the right to terminate its obligations under the
Lease and to pursue any and all legal remedies it may have against Landlord and
any third parties other than Lender.
3. Attornment. Unless the Lease is terminated in accordance with
paragraph 2, if the interests of the lessor under the Lease shall be transferred
by reason of the exercise of the power of sale contained in the Security Deed
(if applicable), or by any foreclosure or other proceeding for enforcement of
the Security Deed, or by deed in lieu of foreclosure or such other proceeding,
or if Lender takes possession of the Property pursuant to any provisions of the
Security Deed or the Assignment of Leases, the lessee thereunder shall be bound
to the Purchaser or Lender, as the case may be, under all of the terms,
covenants and conditions of the Lease for the balance of the term thereof and
any extensions or renewals thereof which may be effected in accordance with any
option therefor in the Lease, with the same force and effect as if the Purchaser
or Lender were the lessor under the Lease, and Tenant, as lessee under the
Lease, does hereby attorn to the Purchaser and Lender if it takes possession of
the Property, as its lessor under the Lease. Such attornment shall be effective
and self-operative without the execution of any further instruments upon the
succession by Purchaser to the interest of the lessor under the Lease or the
taking of possession of the Property by Lender. Nevertheless, Tenant shall,
from time to time, execute and deliver such instruments evidencing such
attornment as Purchaser or Lender may require. The respective rights and
obligations of Purchaser, Lender and of the lessee under the Lease upon such
attornment, to the extent of the then remaining balance of the term of the Lease
and any such extensions and renewals, shall be and are the same as now set forth
in the Lease except as otherwise expressly provided in Paragraph 2.
4. Subordination. Tenant hereby subordinates all of its right, title and
interest as lessee under the Lease to the right, title and interest of Lender
under the Security Deed, and Tenant further agrees that the Lease now is and
shall at all times continue to be subject and subordinate in each and every
respect to the Security Deed (including, without limitation, the casualty and
condemnation provisions of the Lease, which are hereby specifically subordinated
to the Security Deed) and to any and all increases, renewals, modifications,
extensions, substitutions, replacements and/or consolidations of the Security
Deed.
5. Assignment of Leases. Tenant hereby acknowledges that all of
Landlord's right, title and interest as lessor under the Lease is being duly
assigned to Lender pursuant to the terms of the Assignment of Leases, and that
pursuant to the terms thereof all rental payments under the Lease shall
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<PAGE>
continue to be paid to landlord in accordance with the terms of the Lease unless
and until Tenant is otherwise notified in writing by Lender. Upon receipt of any
such written notice from Lender, Tenant covenants and agrees to make payment of
all rental payments then due or to become due under the Lease directly to Lender
or to Lender's agent designated in such notice and to continue to do so until
otherwise notified in writing by Lender. Landlord hereby irrevocably directs and
authorizes Tenant to make rental payments directly to Lender following receipt
of such notice, and covenants and agrees that Tenant shall have the right to
rely on such notice without any obligation to inquire as to whether any default
exists under the Security Deed or the Assignment of Leases or the indebtedness
secured thereby, and notwithstanding any notice or claim of Landlord to the
contrary, and that Landlord shall have no right or claim against Tenant for or
by reason of any rental payments made by Tenant to Lender following receipt of
such notice. Tenant further acknowledges and agrees: (a) that under the
provisions of the Assignment of Leases, the Lease cannot be terminated (nor can
Landlord accept any surrender of the Lease) or modified in any of its terms, or
consent be given to the waiver or release of Tenant from the performance or
observance of any obligation under the Lease, without the prior written consent
of Lender, and without such consent no rent may be collected or accepted by
Landlord more than one month in advance; and (b) that the interest of Landlord
as lessor under the Lease has been assigned to Lender for the purposes specified
in the Assignment of Leases, and Lender assumes no duty, liability or obligation
under the Lease, except only under the circumstances, terms and conditions
specifically set forth in the Assignment of Leases.
6. Notice of Default by Lessor. Tenant, as lessee under the Lease,
hereby covenants and agrees to give Lender written notice properly specifying
wherein the lessor under the Lease has failed to perform any of the covenants or
obligations of the lessor under the Lease, simultaneously with the giving of any
notice of such default to the lessor under the provisions of the Lease. Tenant
agrees that Lender shall have the right, but not the obligation, within thirty
(30) days after receipt by Lender of such notice (or within such additional time
as is reasonably required to correct any such default) to correct or remedy, or
cause to be corrected or remedied, each such default before the lessee under the
Lease may take any action under the Lease by reason of such default. Such
notices to Lender shall be delivered in duplicate to:
BankBoston, N.A.
100 Federal Street
Boston, Massachusetts 02110
Attn: James L. Keough, Real Estate Division
and
Goulston & Storrs P.C.
400 Atlantic Avenue
Boston, Massachusetts 02110
Attn: James H. Lerner, Esquire
or to such other address as the Lender shall have designated to Tenant by giving
written notice to Tenant at 10230 NE Points Drive, Kirkland, Washington 98033,
or to such other address as may be designated by written notice from Tenant to
Lender.
7. No Further Subordination. Except as expressly provided to the
contrary in Paragraph 4 hereof, Landlord and Tenant covenant and agree with
Lender that there shall be no further subordination of the interest of lessee
under the Lease to any lender or to any other party without first obtaining the
prior written consent of Lender. Any attempt to effect a further subordination
of lessee's interest under the Lease without first obtaining the prior written
consent of Lender shall be null and void.
G-3
<PAGE>
8. As to Landlord and Tenant. As between Landlord and Tenant, Landlord
and Tenant covenant and agree that nothing herein contained nor anything done
pursuant to the provisions hereof shall be deemed or construed to modify the
Lease.
9. As to Landlord and Lender. As between Landlord and Lender, Landlord
and Lender covenant and agree that nothing herein contained nor anything done
pursuant to the provisions hereof shall be deemed or construed to modify the
Security Deed or the Assignment of Leases.
10. Title of Paragraphs. The titles of the paragraphs of this agreement
are for convenience and reference only, and the words contained therein shall in
no way be held to explain, modify, amplify or aid in the interpretation,
construction or meaning of the provisions of this agreement.
11. Governing Law. This agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
12. Provisions Binding. The terms and provisions hereof shall be binding
upon and shall inure to the benefit of the heirs, executors, administrators,
successors and permitted assigns, respectively, of Lender, Tenant and Landlord.
The reference contained to successors and assigns of Tenant is not intended to
constitute and does not constitute a consent by Landlord or Lender to an
assignment by Tenant, but has reference only to those instances in which the
lessor under the Lease and Lender shall have given written consent to a
particular assignment by Tenant thereunder.
IN WITNESS WHEREOF, the parties have hereunto set their respective hands
and seals as of the day, month and year first above written.
TENANT:
HOMEGROCER.COM, INC., a Delaware corporation
By:
------------------------------
Title:
---------------------------
LENDER:
BANKBOSTON, N.A., a national banking association, as agent
By:
------------------------------
Title:
---------------------------
G-4
<PAGE>
LANDLORD:
BELLEVUE HINES DEVELOPMENT, L.L.C.,
a Delaware limited liability company
By: Hines 1997 U.S. Office Development Fund, L.P.,
a Delaware limited partnership,
its sole member
By: Hines 1997 U.S. ODF GP Limited Partnership, a Texas
limited partnership, its general partner
By: Hines 1997 U.S. ODF LLC,
a Delaware limited liability company,
its general partner
By: Hines Interests Limited Partnership,
a Delaware limited partnership,
its sole member
By: Hines Holdings, Inc.,
a Texas close corporation,
its general partner
By:
--------------------------
Thomas D. Owens
Vice President
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this _____ day of April, 2000, before me, a Notary Public in and for the
State of Washington, personally appeared ____________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person who executed this instrument, on oath stated that ___ was
authorized to execute the instrument, and acknowledged it as the
____________________ ________________________ of HomeGrocer.Com, Inc., to be the
free and voluntary act and deed of said Delaware corporation for the uses and
purposes mentioned in the instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the day
and year first above written.
--------------------------------------------------
NOTARY PUBLIC in and for the State of Washington,
residing at
--------------------------------------
My appointment expires
---------------------------
Print Name
---------------------------------------
G-5
<PAGE>
COMMONWEALTH OF MASSACHUSETTS (S)
COUNTY OF _______________ (S)
The foregoing instrument was acknowledged before me on the _____ day of
_________________, ______, by ______________________, ___________________ of
BANKBOSTON, N.A., a national banking association, on behalf of said association.
--------------------------------------------
Notary Public In And For The Commonwealth Of
Massachusetts
Printed Name
--------------------------------
My commission expires:
----------------------
STATE OF TEXAS (S)
COUNTY OF ________ (S)
The foregoing instrument was acknowledged before me on the _____ day of
_________, ______, by ______________, ____________ of Hines Holdings, Inc., a
Texas close corporation, the general partner of Hines Interests Limited
Partnership, a Delaware limited partnership, the sole member of Hines 1997 U.S.
ODF LLC, a Delaware limited liability company, the general partner of Hines 1997
U.S. ODF GP Limited Partnership, a Texas limited partnership, the general
partner of Hines 1997 U.S. Office Development Fund, L.P., a Delaware limited
partnership, the sole member of BELLEVUE HINES DEVELOPMENT, L.L.C., a Delaware
limited liability company, on behalf of said entities.
-------------------------------------
Notary Public in and for the State of
Printed Name :
-----------------------
My Commission Expires:
---------------
G-6
<PAGE>
EXHIBIT A
Property Legal Description
PARCEL A
THE SOUTH 30 FEET OF THE SOUTHWEST QUARTER OF THE NORTHEAST QUARTER OF THE
SOUTHEAST QUARTER OF SECTION 29, TOWNSHIP 25 NORTH, RANGE 5 EAST, WILLAMETTE
MERIDIAN, IN KING COUNTY, WASHINGTON;
EXCEPT THAT PORTION THEREOF CONVEYED TO THE CITY OF BELLEVUE BY DEED RECORDED
UNDER RECORDING NUMBER 6615029; AND
EXCEPT ANY PORTION THEREOF CONVEYED TO THE STATE OF WASHINGTON FOR PRIMARY STATE
HIGHWAY NO. 1 UNDER RECORDING NUMBER 6685642.
PARCEL B
THAT PORTION OF THE EAST 264 FEET OF THE WEST 434 FEET OF THE SOUTHWEST QUARTER
OF THE NORTHEAST QUARTER OF THE SOUTHEAST QUARTER OF SECTION 29, TOWNSHIP 25
NORTH, RANGE 5 EAST, WILLAMETTE MERIDIAN, IN KING COUNTY WASHINGTON;
EXCEPT THE SOUTH 30 FEET THEREOF, LYING SOUTHEASTERLY OF THE FOLLOWING LINE:
BEGINNING AT THE SOUTHWEST CORNER OF THE ABOVE-DESCRIBED PARCEL;
THENCE SOUTH 88 degrees 6'55" EAST ALONG THE SOUTH LINE THEREOF 103.65 FEET;
THENCE NORTH 73 degrees 0'26" EAST 72.90 FEET;
THENCE NORTH 54 degrees 30'00" EAST 111.33 FEET TO THE EAST LINE OF SAID
PROPERTY AND THE TERMINUS OF SAID LINE;
EXCEPT ANY PORTION THEREOF CONVEYED TO THE STATE OF WASHINGTON FOR PRIMARY STATE
HIGHWAY NO. 1 UNDER RECORDING NUMBER 6685642.
PARCEL C
THE NORTH 464.40 FEET OF THE NORTHWEST QUARTER OF THE SOUTHEAST QUARTER OF THE
SOUTHEAST QUARTER OF SECTION 29, TOWNSHIP 25 NORTH, RANGE 5 EAST, WILLAMETTE
MERIDIAN, IN KING COUNTY WASHINGTON;
EXCEPT THE EAST 250 FEET THEREOF; AND
EXCEPT THAT PORTION THEREOF LYING WITHIN F.A. NISONGER ROAD (112TH AVENUE
NORTHEAST); AND
EXCEPT THOSE PORTIONS CONVEYED TO THE STATE OF WASHINGTON FOR SECONDARY STATE
HIGHWAY NO. 2-A MIDLAKES TO KIRKLAND BY DEEDS BEARING RECORDING NUMBERS 4354524
AND 4354525; AND
EXCEPT THOSE PORTIONS CONVEYED TO THE STATE OF WASHINGTON FOR PRIMARY STATE
HIGHWAY NO. 1, UNDER RECORDING NUMBERS 4927203 AND 6685642; AND
EXCEPT THAT PORTION CONVEYED TO THE CITY OF BELLEVUE BY DEED RECORDED UNDER
RECORDING NUMBER 6615029; AND
EXCEPT THAT PORTION CONDEMNED BY THE CITY OF BELLEVUE IN KING COUNTY SUPERIOR
COURT CAUSE NUMBER 90-2-03249-3.
G-7
<PAGE>
EXHIBIT H
FORM OF LETTER OF CREDIT
[U.S. BANK LOGO] U.S. BANK NATIONAL ASSOCIATION
INTERNATIONAL DEPARTMENT,
1420 FIFTH AVENUE, 9TH FLOOR
SEATTLE, WA 98101 U.S.A.
PHONE: 206-344-2398
FAX: 206-344-5374
------------------------------------
IRREVOCABLE STANDBY LETTER OF CREDIT
------------------------------------
DATE
- --------------------------------------------------------------------------------
BENEFICIARY: APPLICANT:
Bellevue Hines Development, L.L.C. HOMEGROCER.COM, INC.
or its assigns 10230 N.E. POINTS DRIVE
10900 NE 4th St, Suite 920 KIRKLAND, WA 98033
Bellevue WA 98004
- --------------------------------------------------------------------------------
LETTER OF CREDIT NUMBER: SLCSSEA00
************
- --------------------------------------------------------------------------------
EXPIRY DATE:
AT: OUR COUNTERS PRESENTLY LOCATED AT 1420 FIFTH AVENUE, 9TH FLOOR,
INTERNATIONAL DEPARTMENT, SEATTLE, WA. 98101 ON OR BEFORE 4:00 P.M.
- --------------------------------------------------------------------------------
AMOUNT:
NOT EXCEEDING $2,508,605.28
- --------------------------------------------------------------------------------
WE HEREBY ISSUE THIS IRREVOCABLE STANDBY LETTER OF CREDIT AVAILABLE BY YOUR
DRAFT(S) DRAWN AT SIGHT ON U.S. BANK NATIONAL ASSOCIATION AND ACCOMPANIED BY THE
FOLLOWING DOCUMENTS:
1. BENEFICIARY'S SIGNED STATEMENT, OR SIGNED STATEMENT FROM BENEFICIARY'S
AGENT, THAT HOMEGROCER.COM, INC. HAS DEFAULTED UNDER THE TERMS AND
CONDITIONS OF THE LEASE AGREEMENT DATED ________________ BETWEEN
HOMEGROCER.COM, INC. AND Bellevue Hines Development, L.L.C., OR THAT
BENEFICIARY IS ENTITLED UNDER THE TERMS AND CONDITIONS OF SAID LEASE TO
DRAW UPON THE LETTER OF CREDIT.
2. THE ORIGINAL OF THIS LETTER OF CREDIT INCLUDING ANY AMENDMENTS.
ADDITIONAL CONDITIONS:
1. ALL BANKING CHARGES OTHER THAN THOSE OF THE ISSUING BANK ARE FOR ACCOUNT OF
THE BENEFICIARY.
2. PARTIAL DRAWINGS ALLOWED.
3. THIS LETTER OF CREDIT IS TRANSFERABLE BY U.S. BANK NATIONAL ASSOCIATION
ONLY, UPON RECEIPT OF YOUR WRITTEN INSTRUCTIONS SUBMITTED IN ACCORDANCE
WITH THE ATTACHED TRANSFER FORM AND THE ORIGINAL OF THIS LETTER OF CREDIT.
TRANSFER FEES ARE FOR ACCOUNT OF THE BENEFICIARY.
DRAFTS DRAWN UNDER THIS CREDIT MUST BEAR THE CLAUSE: "DRAWN UNDER U.S. BANK
NATIONAL ASSOCIATION IRREVOCABLE STANDBY LETTER OF CREDIT NO. SLCSSEA00XXX."
PURSUANT TO U.S. LAW WE ARE PROHIBITED FROM ISSUING, TRANSFERRING ACCEPTING OR
PAYING LETTERS OF CREDIT TO ANY PARTY OR ENTITY IDENTIFIED BY THE OFFICE OF
FOREIGN ASSETS
THIS PAGE 1 FORMS AN INTEGRAL PART OF LETTER OF CREDIT NO. SLCSSEA00XXX
[U.S. BANK LOGO]
CONTROL, U.S. DEPT. OF TREASURY, OR SUBJECT TO THE DENIAL OF EXPORT PRIVILEGES
BY THE U.S. DEPT. OF COMMERCE.
THIS CREDIT IS SUBJECT TO "THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY
CREDITS" (1993 REVISION) INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO. 500
WE HEREBY ENGAGE WITH YOU THAT DRAFT(S) DRAWN AND/OR DOCUMENTS PRESENTED UNDER
AND IN COMPLIANCE WITH THE TERMS OF THIS IRREVOCABLE STANDBY LETTER OF CREDIT
WILL BE DULY HONORED UPON PRESENTATION TO US
U.S. BANK NATIONAL ASSOCIATION
INTERNATIONAL BANKING DIVISION
------------------------------
AUTHORIZED SIGNATURE
THIS PAGE 2 FORMS AN INTEGRAL PART OF LETTER OF CREDIT NO. SLCSSEA00XXX
[U.S. BANK LOGO]
FORM OF TRANSFER INSTRUCTION
DATE: __________________________
U.S. BANK NATIONAL ASSOCIATION
1420 FIFTH AVENUE, 9TH FLOOR
SEATTLE, WA 98101
ATTENTION: LETTER OF CREDIT DEPARTMENT
RE: IRREVOCABLE LETTER OF CREDIT NO. ________ ISSUED BY U.S. BANK NATIONAL
ASSOCIATION
LADIES AND GENTLEMEN:
FOR VALUE RECEIVED THE UNDERSIGNED BENEFICIARY (THE "TRANSFEROR") HEREBY
IRREVOCABLE TRANSFERS TO:
(NAME OF TRANSFEREE)
(ADDRESS)
(THE "TRANSFEREE) ALL RIGHTS OF THE TRANSFEROR WITH RESPECT TO THE ABOVE
REFERENCED IRREVOCABLE LETTER OF CREDIT") INCLUDING THE RIGHT TO DRAW UNDER SAID
LETTER OF CREDIT IN THE AMOUNT OF THE FULL UNUTILIZED BALANCE THEREOF. SAID
TRANSFEREE HAS SUCCEEDED THE TRANSFEROR AS BENEFICIARY UNDER THAT CERTAIN
STANDBY LETTER OF CREDIT NO. __________ DATED _____________ BY AND BETWEEN THE
APPLICANT AND THE BENEFICIARY.
BY VIRTUE OF THIS TRANSFER, THE TRANSFEREE SHALL HAVE THE SOLE RIGHT AS
BENEFICIARY OF SAID LETTER OF CREDIT, INCLUDING SOLE RIGHTS RELATING TO ANY PAST
OR FUTURE AMENDMENTS THEREOF, WHETHER DECREASES OR EXTENSIONS OR OTHERWISE. ALL
AMENDMENTS ARE TO BE ADVISED DIRECTLY TO THE TRANSFEREE WITHOUT NECESSITY OF ANY
CONSENT OF OR NOTICE TO THE TRANSFEROR.
BY ITS SIGNATURE BELOW, THE TRANSFEREE ACKNOWLEDGES THAT IT HAS DULY SUCCEEDED
THE TRANSFEROR AS TRUSTEE UNDER THE INDENTURE, AND AGREES TO BE BOUND BY TERMS
OF THE INDENTURE AS IF IT WERE THE ORIGINAL TRUSTEE THEREUNDER.
WE ARE DELIVERING HEREWITH THE LETTER OF CREDIT AND WE ASK YOU TO ENDORSE THE
LETTER OF CREDIT DIRECTLY TO THE TRANSFEREE.
VERY TRULY YOURS,
BY:
------------------------------
NAME:
----------------------------
TITLE:
---------------------------
ACKNOWLEDGED BY (INSERT NAME OF TRANSFEREE)
AS TRANSFEREE AND SUCCESSOR
BY:
-----------------------------------------
(INSERT NAME AND TITLE OF AUTHORIZED OFFICER)
THIS PAGE 3 FORMS AN INTEGRAL PART OF LETTER OF CREDIT NO. SLCSSEA00XXX
H-1
<PAGE>
EXHIBIT I
BUILDING STANDARD JANITORIAL AND CLEANING SERVICES
The following building standard janitorial and cleaning services shall be
done by Landlord between 5:30 p.m. and 11:30 p.m. on Monday through Friday and
at such other times as may be mutually agreed upon between Landlord and Tenant.
A. 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. Vacuum nightly all rugs and carpeted areas in the Premises, lobbies
and corridors.
3. Nightly hand dust and wipe clean with damp or treated cloth all office
furniture, files, fixtures, window sills and all other horizontal
surfaces; once every three weeks for vertical paneled surfaces; wash
window sills when necessary.
4. Nightly damp wipe all glass furniture tops.
5. Nightly remove finger marks and smudges from vertical surfaces,
including doors, door frames, glass, around light switches, private
entrance glass and partitions.
6. Wash clean all water coolers nightly.
7. Sweep all private stairways nightly, vacuum nightly if carpeted.
8. Police all Common Area stairwells throughout the Project daily and
keep in clean condition.
9. Nightly damp mop spillage in non-carpeted office and public areas.
10. Nightly damp dust all telephones, desks and other furniture tops.
B. Washrooms (Including Private Washrooms)
---------------------------------------
1. Wet mop and rinse floors nightly.
2. Scrub floors as necessary.
3. Clean all mirrors, bright work and enameled surfaces nightly.
4. Wash and disinfect all basins, urinals and bowls nightly using non-
abrasive cleaners to remove stains and nightly clean undersides of rim
of urinals and bowls.
5. Wash both sides of all toilet seats with soap, water and disinfectant
nightly.
6. Nightly damp wipe and wash with disinfectant when necessary,
partitions, tile walls and outside surface of dispensers and
receptacles.
7. Empty and sanitize receptacles and sanitary disposals nightly;
thoroughly clean and wash at least once per week.
8. Fill toilet tissue, soap and sanitary napkin dispensers nightly.
9. Clean flushometer, piping, toilet set hinges and other metal work
nightly.
10. Wash and polish walls, partitions, tile walls and enamel surfaces from
trim to floor monthly.
11. Vacuum all louvers, ventilating grilles and dust light fixtures
weekly.
I-1
<PAGE>
NOTE: It is the intention to keep washrooms thoroughly cleaned and not to use a
disinfectant to kill odor. If a disinfectant is necessary, an
odorless product will be used.
C. Floors
------
1. Ceramic tile, marble and terrazzo floors to be swept nightly and
washed, scrubbed and buffed as needed.
2. Asphalt, vinyl, rubber or other composition floors and bases to be
swept nightly using dust down preparation; such floors in public areas
on multitenancy floors to be waxed and buffed monthly.
3. Tile floors in office areas will be waxed and buffed monthly.
4. Floors re-waxed and old wax removed as necessary.
5. Carpeted areas and rugs unobstructed by furnishings to be vacuum
cleaned nightly.
6. Carpet shampooing of public and common areas will be performed as
necessary.
7. Carpet shampooing of Tenant areas will be performed at Tenant's
request and billed to Tenant as an Extra Service.
8. All floor areas to be spot cleaned nightly.
9. Clean chair mats weekly.
D. Glass
-----
1. Clean all perimeter glass every six (6) months outside and every six
(6) months inside. Any additional cleaning to be at Tenant's expense.
2. Clean glass entrance doors and adjacent glass panels nightly.
3. Clean partition glass and interior glass doors quarterly.
4. Clean exterior of ground floor glass as needed.
E. High Dusting (Quarterly)
------------------------
1. Dust and wipe clean closet shelving when empty and carpet sweep and
dry mop floors in closets if such are empty.
2. Dust clean all vertical surfaces such as walls, partitions, doors,
door bucks and other surfaces above shoulder height.
3. Damp dust ceiling air-conditioning diffusers, wall grilles, registers
and other ventilating louvers.
4. Dust the exterior surfaces of lighting fixtures, including glass and
plastic enclosures and aluminum louvers.
F. Day Service
------------
1. At least once, but not more than twice during the day, check men's
washrooms for toilet tissue replacement (excluding private restrooms).
2. At least once, but not more than twice during the day, check women's
washrooms for toilet tissue and sanitary napkin replacement (excluding
private restrooms).
3. Supply toilet tissue, soap and towels in men's and women's washrooms
and sanitary napkins in women's washroom (excluding private
restrooms).
4. As needed, vacuuming of elevator cabs will be performed.
I-2
<PAGE>
5. There will be a constant surveillance of public areas to insure
cleanliness.
G. 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 windows is washed.
2. Keep janitor rooms in a clean, neat and orderly condition at all
times.
3. Wipe clean all metal hardware fixtures nightly and polish bright work
as necessary.
4. Dust and/or wash all directory boards as required and remove
fingerprints and smudges nightly.
5. Maintain building lobby, corridors, elevators and other public areas
in a clean condition.
6. Empty and clean all ash trays, screen all sand urns nightly and supply
and replace sand as necessary.
H. Special
-------
It is understood that no services of the character provided for in this
Exhibit shall be provided on Saturdays, Sundays or days recognized as
holidays pursuant to this Lease, unless specifically stated above.
This cleaning specification may be changed or altered by Landlord from time to
time to facilitate conformity with the latest methods of maintenance and
cleaning technology generally recognized as acceptable for Class A office
buildings in Bellevue, Washington, and Landlord reserves the right to alter the
level of such services from time to time as determined by Landlord to be
appropriate for a Class A office building. In the event Tenant requires a
higher level of services to suit its particular needs, the cost of such service
shall be at Tenant's expense and billed as an Extra Service per the terms of the
Lease.
I-3
<TABLE> <S> <C>
<PAGE>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-2000
<PERIOD-START> JAN-02-2000
<PERIOD-END> APR-01-2000
<CASH> 257,144
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 3,579
<CURRENT-ASSETS> 271,718
<PP&E> 101,075
<DEPRECIATION> 6,200
<TOTAL-ASSETS> 387,357
<CURRENT-LIABILITIES> 33,171
<BONDS> 0
0
0
<COMMON> 498,249
<OTHER-SE> (174,889)
<TOTAL-LIABILITY-AND-EQUITY> 387,357
<SALES> 21,215
<TOTAL-REVENUES> 21,215
<CGS> 17,515
<TOTAL-COSTS> 17,515
<OTHER-EXPENSES> 48,167
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 663
<INCOME-PRETAX> (43,465)
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<NET-INCOME> (43,465)
<EPS-BASIC> (0.98)
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