LEASE
BY AND BETWEEN
PROSPECT GREEN PARTNERS,
a California Joint Venture
as "Landlord"
AND
E*TRADE GROUP, INC.,
a California corporation
as "Tenant"
LEASE
-----
TABLE OF CONTENTS
-----------------
Page
----
1. TERMS AND DEFINITIONS; SCHEDULES.................................... 1
--------------------------------
2. PREMISES............................................................ 6
--------
4. IMPROVEMENTS BY LANDLORD; POSSESSION................................ 23
------------------------------------
5. PROJECT SERVICES.................................................... 24
----------------
6. TENANT'S COVENANTS.................................................. 26
------------------
7. LANDLORD'S RESERVED RIGHTS.......................................... 37
--------------------------
8. CASUALTY AND UNTENANTABILITY........................................ 38
----------------------------
9. CONDEMNATION........................................................ 42
------------
10. INDEMNITY, SUBROGATION AND WAIVER................................... 43
----------------------------------------
11. TENANT'S DEFAULT AND LANDLORD'S REMEDIES............................ 45
----------------------------------------
12. TERMINATION......................................................... 49
----------------------------------------
13. MISCELLANEOUS....................................................... 51
----------------------------------------
Schedule 1 Description of the Premises
and Floor Plan
Schedule 2 Rules and Regulations
Schedule 3 Prospect Green Business Park Common
Area Charges
Schedule 4 Intentionally Deleted
Schedule 5 Work Letter Agreement
Schedule 5-A Construction Schedule
Schedule 6 Certificate of Acceptance
Schedule 7 Base Rent and Management Fee
Schedule 8 Parking
-i-
LEASE
-----
This Lease is made the 21st day of June, 1996, by and between PROSPECT
GREEN PARTNERS, a California Joint Venture ("Landlord"), and E*TRADE GROUP,
INC., a California corporation ("Tenant") on the terms, covenants and conditions
set forth below.
1. TERMS AND DEFINITIONS; SCHEDULES.
--------------------------------
1.1 Terms and Definitions.
---------------------
1.1.1 "Leased Premises" shall mean the entirety of the Building (as
hereinafter defined) and as more fully described in the drawing attached hereto
as Schedule 1.
1.1.2 "Building" shall mean the two-story office building located at
10951 White Rock Road, Rancho Cordova, California, 95670.
1.1.3 "Project" shall mean, collectively, (i) the Building; (ii) the
parcel of real property on which the Building is situated (the "Land"); (iii)
the other improvements on the Land, including, without limitation, a parking
lot, driveways, lighting and landscaping, which Building, Land and other
improvements are commonly known as Prospect Green II, in the multi-building
project known as Prospect Green Business Park, Rancho Cordova, California; and
(iv) the pro rata share attributed to Prospect Green II for the common area
charges of Prospect Green Business Park (which charges are more particularly
described in Schedule 3 attached) and which pro rata share is thirty-five and
54/100 percent (35.54%)(but which share shall be reduced as and when additional
buildings are developed in Prospect Green Business Park).
-1-
1.1.4 "Tenant's Square Footage" shall mean the total Rentable square
footage in the Leased Premises for which Base Rent shall be payable, and shall,
for the first twelve (12) months of the Lease Term, consist of only that area of
the Leased Premises which has been built-out by Tenant in accordance with
Schedule 5 attached and shown as Areas 1A, 1B and 2 on the drawing attached
hereto as Schedule 1 (the "Initial Space"), but to be not less than Thirty-five
Thousand (35,000) Rentable square feet (which Rentable square footage number
represents approximately Thirty-one Thousand Nine Hundred Ninety-two (31,992)
Useable square feet). Such number is subject to change in accordance with
Subparagraph 2.4 below, dealing with Tenant's Expansion Obligation and Tenant's
Accelerated Timing Option, the final result of which obligation shall be that as
of not later than the commencement of the thirteenth (13th) month of the Lease
Term, Tenant's Square Footage shall equal the Total Rentable Square Footage of
the Building. The actual Rentable area will be calculated by Landlord's
representative (and certified by Tenant upon execution, pursuant to Subparagraph
4.2 hereof, of the Certificate of Acceptance in form attached as Schedule 6)
using the method for determining Rentable Area as set forth in the "Method for
Measuring Floor Area in Office Buildings," published by the Building Owners and
Managers Association International, approved July 31, 1980 ("BOMA Method").
"Total Rentable Square Footage of the Building" shall mean the actual Rentable
area of the Building using the BOMA Method, consisting of Seventy Thousand and
Sixty-five (70,065) Rentable square feet. The Total Rentable Square Footage of
the Building may be adjusted pursuant to Subparagraph 7.1(c) below. Landlord
shall certify to Tenant, using
-2-
the "as built" plan of Landlord's architects, the actual Total Rentable Square
Footage of the Building and Tenant's Square Footage.
1.1.5 "Lease Commencement Date" shall mean June 24, 1996. "Lease
Expiration Date" shall mean June 23, 2006. "Lease Term" shall mean the one
hundred twenty (120) month period between Lease Commencement Date and Lease
Expiration Date.
1.1.6 "Renewal Options" shall mean Tenant's right to renew this
Lease for two (2) additional successive periods of sixty (60) months each. Each
such sixty (60) month period shall constitute a "Renewal Term", and shall be
entered into on the terms and conditions set forth in Subparagraph 2.3 below. In
addition to the Renewal Options, which are exercisable at Tenant's election,
Tenant shall have certain obligations to extend the term of this Lease in the
event that Tenant exercises its rights under that certain Annex Expansion Option
entered into by and between Landlord and Tenant of even date herewith, as more
particularly described in Subparagraph 2.5 below.
1.1.7 "Base Rent" shall refer to the basic rental payments payable
by Tenant to Landlord pursuant to Schedule 7 attached, and initially shall mean
One and 17/100 Dollars ($1.17) per square foot of Tenant's Square Footage per
month or approximately Forty Thousand Nine Hundred Fifty and No/100 Dollars
($40,950) per month for the Initial Space, and shall be adjusted as set forth on
Schedule 7 attached hereto. An "Adjustment Date" is a date on which Base Rent
shall be adjusted as provided in Schedule 7.
-3-
1.1.8 "Tenant's Share" shall mean one hundred percent (100%).
"Additional Operating Costs" shall mean those Operating Costs (as defined in
Subparagraph 3.4 below) which are not paid directly by Tenant to the supplier,
vendor or provider thereof, in accordance with the terms hereof, but which shall
be reimbursed by Tenant to Landlord as set forth in Section 3 below.
1.1.9 "Security Deposit" shall mean an amount equal to the amount
of the first installment of Base Rent due and payable hereunder or approximately
Forty Thousand Nine Hundred Fifty and no/100 Dollars ($40,950). The Security
Deposit shall be tendered by Tenant upon execution of this Lease and shall be
held by Landlord as security for the faithful performance by Tenant of all of
the terms, covenants and conditions of this Lease. If there occurs an uncured
Event of Default (as defined in Subparagraph 11.1 below), Landlord may (but
shall not be obligated to) retain, use or apply such Security Deposit for the
payment of Rent or any other sum in default, or for payment of any amount which
Landlord may spend or become obligated to spend by reason of Tenant's default,
or to compensate Landlord for any loss or damage which Landlord may suffer by
reason of Tenant's default. In any such event, then, upon written notice from
Landlord, Tenant shall deposit with Landlord sufficient cash to restore the
Security Deposit to its original sum, and Tenant's failure to do so within ten
(10) days after the effective date of such written notice shall constitute an
Event of Default.
1.1.10 "Permitted Purpose" means that Tenant may use the Leased
Premises for general office and computer operations and any lawful purpose
incidental thereto. Landlord hereby acknowledges
-4-
that such purpose is permitted under the development agreement currently
applicable to the Project.
1.1.11 "Permitted Parking" shall mean four (4) parking spaces
provided to Tenant for each one thousand (1,000) Rentable square feet of the
Leased Premises, or two hundred eighty (280) spaces. Landlord agrees that,
despite the phased build-out of the Leased Premises, Tenant shall be entitled to
use of all of the parking spaces allocated to the Building, effective as of the
Lease Commencement Date. Tenant's Permitted Parking shall be on the terms and
conditions set forth in Schedule 8. Landlord reserves the right to reduce the
number of parking spaces allocated to Tenant due to the adoption of any local
ordinance or regulation imposing air quality/auto emissions restrictions upon
employers of more then forty (40) employees.
1.1.12 "Managing Agent" shall mean Lankford & Associates, Inc., 3100
Zinfandel Drive, Suite 160, Rancho Cordova, California 95670, or any other agent
specified in writing by Landlord pursuant to the provisions for Notice in this
Lease.
1.1.13 Landlord's mailing address: 3100 Zinfandel Drive, Suite 160,
Rancho Cordova, California 95670.
1.1.14 Tenant's mailing address: Four Embarcadero Place, 2400 Geng
Road, Palo Alto, California 94303-3317, with a copy to the Leased Premises.
1.2 Schedules. The schedules and exhibits listed below are incorporated
---------
into this Lease by reference unless stated to be Intentionally Deleted. The
terms of schedules, exhibits and typewritten addenda, if any, attached or added
hereto shall control over any inconsistent provisions in the paragraphs of this
Lease.
-5-
(a) Schedule 1: Description of Leased Premises and Floor Plan.
(b) Schedule 2: Rules and Regulations.
(c) Schedule 3: Prospect Green Business Park Common Area Charges.
(d) Schedule 4: Intentionally Deleted.
(e) Schedule 5: Work Letter Agreement.
(f) Schedule 5-A: Construction Schedule.
(g) Schedule 6: Certificate of Acceptance.
(h) Schedule 7: Base Rent and Management Fee
(i) Schedule 8: Parking.
2. PREMISES.
--------
2.1 Lease of Premises. In consideration of the Rent (as such term is
-----------------
defined in Subparagraph 3.1 hereof) and the provisions of this Lease, Landlord
leases to Tenant and Tenant accepts from Landlord the Leased Premises, subject
to the terms, covenants and conditions set forth herein.
2.2 Prior Occupancy. Except as provided in the Work Letter Agreement
---------------
attached hereto as Schedule 5, Tenant shall not occupy the Leased Premises prior
to the Lease Commencement Date except with the express prior written consent of
Landlord. If Tenant occupies the Leased Premises (to conduct Tenant's business
as opposed to occupying or entering to perform work required to make the Leased
Premises ready for occupancy pursuant to Schedule 5 hereof, including testing
and training procedures that may involve actual accounts but shall not be
construed to be the performance of business) prior to such Date with Landlord's
consent, Tenant shall pay Landlord for the period from the first (1st) day of
such
-6-
occupancy to the Lease Commencement Date, Base Rent in the amount of the first
installment of Base Rent due and payable by Tenant. A prorated monthly
installment shall be paid for the fraction of the month if Tenant's occupancy of
the Leased Premises commences on any day other than the first (1st) day of the
month. If Tenant shall occupy the Leased Premises prior to the Lease
Commencement Date, all covenants and conditions of this Lease shall be binding
on the parties commencing upon the date of such prior occupancy.
2.3 Renewal Options.
---------------
2.3.1 Grant of Options. Landlord hereby grants to Tenant two (2)
----------------
successive Renewal Options for a term of sixty (60) months each. During each
such Renewal Term, all covenants and conditions applicable to the immediately
preceding Lease Term or Renewal Term (as appropriate) shall apply, except as
otherwise set forth herein.
2.3.2 Exercise of Options. As long as there does not exist an
-------------------
uncured Event of Default (as defined in Subparagraph 11.1 below), the Renewal
Options may be exercised by Tenant's delivery to Landlord of a written notice of
Tenant's intention to exercise its Renewal Option, delivered not later than six
(6) months prior to the expiration of the Lease Term or immediately preceding
Renewal Term, as applicable ("Notice of Exercise"). The failure of Tenant to
exercise the first Renewal Option as required by this Subparagraph 2.3.2 shall
constitute Tenant's election to terminate this Lease at the end of the original
Lease Term, the second Renewal Option shall terminate and be of no further force
and effect, and Landlord's acceptance of any Rent (as such term is defined in
Subparagraph 3.1 hereof) subsequent to the expiration of
-7-
such Lease Term shall not constitute a waiver by Landlord of the requirement
that Tenant timely exercise the Renewal Option in writing.
2.4 Expansion Obligation/Accelerated Timing Option.
-----------------------------------------------
2.4.1 Expansion Obligation. The parties acknowledge and agree that, as
---------------------
of the date of execution of this Lease, Tenant has not yet completed its space
plan for the entire Leased Premises. The parties have agreed that Tenant shall
be entitled to build out and utilize the Leased Premises on a phased basis but
shall be obligated to pay Base Rent for the entirety of the Leased Premises by
the first day of the thirteenth (13th) month of the Lease Term (the "Expansion
Obligation"), as follows: (i) for the first twelve months of the Lease Term,
Tenant shall pay Base Rent for not less than Thirty-five Thousand (35,000)
Rentable square feet of space (the "Initial Space"); and (ii) it shall pay Base
Rent for the remainder of the Leased Premises (the "Secondary Space"), up to the
total of Seventy Thousand Sixty-five (70,065) Rentable square feet commencing
not later than the first day of the thirteenth (13th) month of the Lease Term.
The Initial Space and the Secondary Space are as described more fully on
Schedule 1 attached hereto. Tenant hereby agrees that, by virtue of the
Expansion Obligation, effective as of the first day of the thirteenth (13th)
month of the Lease Term, the Leased Premises shall be deemed to be Seventy
Thousand Sixty-five (70,065) Rentable square feet. Except for payment of Base
Rent, which shall commence on the first day of the thirteenth (13th) month of
the Lease Term, all terms and conditions of this Lease shall be applicable to
the Secondary Space, including the Lease Expiration Date and the per square foot
allowance for
-8-
tenant improvements; provided that such allowance shall be paid in periodic
advances at the direction of Landlord, during the course of construction of the
tenant improvements for the Secondary Space (as hereinafter provided) or, if
construction has not yet commenced on the first day of the thirteenth month of
hte Lease Term, then such funds shall be placed in an interest-bearing escrow
account designated by Landlord, with instructions that they shall be released
only upon the signature of Landlord, following verification of invoices for
improvements performed to or for the benefit of the Secondary Space. In the
event that not all of such funds are utilized by Tenant for improvements to the
Secondary Space, the excess shall be returned to Landlord, along with all
interest accrued on said escrowed funds from the date of deposit to the date of
withdrawl. Notwithstanding the fact that Tenant shall be responsible for
construction of the tenant improvements to the Initial Space in accordance with
Schedule 5 attached, Tenant shall be responsible for constuction of the
improvements to the Secondary Space but will enter into an agreement with
Landlord (as a part of the Work Letter to be executed by and between the parties
in connection with the build-out of such Secondary Space, as described in
Subparagraph 2.4.2 below) whereby Landlord as owner of the Project shall perform
such work for a fee. Such agreement with Landlord shall be on the following
basic economic terms: (i) Landlord shall receive a fee of five percent (5%) (of
the total cost of the work to be performed), and Landlord's general conditions
shall be four percent (4%); (ii) Landlord shall competitively bid all major
trades and will permit Tenant to review and approve such bids (which approval
shall not be unreasonably
-9-
withheld or delayed); and (iii) Tenant shall be responsible for all increases in
the cost of the work caused by overruns, change orders, and other causes beyond
the reasonable control of Landlord.
2.4.2 Accelerated Timing Option. The foregoing notwithstanding,
-------------------------
the parties acknowledge that while the Expansion Obligation provides for
Tenant's occupancy of the Secondary Space on or before the commencement of the
thirteenth (13th) month of the Lease Term, Tenant shall be entitled to cause the
tenant improvements to be performed and occupy such space prior to the
thirteenth (13th) month (the "Accelerated Timing Option"). In the event Tenant
exercises such Accelerated Timing Option, Tenant's obligation for payment of
Base Rent as to such space shall not commence until the first day of the
thirteenth (13th) month of the Lease Term; however, all other sums due and
payable hereunder as to such space shall commence on the actual date of
occupancy. The Secondary Space shall be built-out - whether by exercise of the
Accelerated Timing Option or otherwise - by Tenant's delivery to Landlord of
written notice pursuant to the terms hereof of Tenant's desire to commence
construction of improvements for the Secondary Space. The parties shall, within
a reasonable period of time, not to exceed fifteen (15) days thereafter, execute
(i) an addendum to this Lease confirming the terms and conditions upon which the
Secondary Space, shall be leased to Tenant, including, without limitation, the
date upon which Tenant's occupancy of such space shall commence (the "Expansion
Commencement Date"), the dollar amount for Base Rent, Tenant's Square Footage
and other variables affected by such expansion; and (ii) a Work Letter Agreement
in the
-10-
form of Schedule 5 attached, covering Leasehold Improvements to be performed in
such space, which are mutually agreeable to Landlord and Tenant, and including
the terms on which Landlord shall construct such improvements, as described
above. The Expansion Commencement Date shall be the earlier to occur of (i)
Tenant's actual conduct of business in such space, or (ii) the date of
Substantial Completion of such space, as determined in accordance with the Work
Letter Agreement executed by the parties in connection with such space, as
provided above, but in no event later that the first day of the thirteenth
(13th) month, of the Lease Term. Tenant's obligation for payment of Base Rent
for the entire Building shall begin on such date regardless of whether
Substantial Completion has yet been achieved, and regardless of whether Tenant
has delivered written notice of its desire to build out such space.
2.5 Annex Expansion Option. Concurrently with the execution of this
----------------------
Lease, the parties are entering into that certain Annex Expansion Option,
whereby the parties have made separate arrangements for addressing the possible
future expansion needs of Tenant by way of a companion building to be located on
real property adjacent to the Building which is owned by Landlord. In the event
of an assignment or other transfer of Landlord's interest in this Lease, or a
permitted transfer of Tenant's interest in this Lease, the Annex Expansion
Option shall not be transferred therewith, it being understood that the parties'
---
agreements thereunder are separate and distinct from this Lease. Notwithstanding
the separate nature of the Annex Expansion Option, it shall be a condition of
exercise of such option that the initial
-11-
Lease Term of this Lease shall and must be automatically extended to be co-
terminous with the lease to be entered into by the parties for such annex
building. Such extended period shall be referred to herein as the "Annex
Extension Period" and shall be on the same terms and conditions as this Lease;
provided that the Base Rent for such Annex Extension Period shall be increased
to ninety-five percent (95%) of Fair Market Rental in accordance with the
procedure for determining Fair Market Rental set forth in Subparagraph 3.3
below. Such increase shall be calculated as of that date on which the Lease Term
would have expired had the Annex Expansion Option not been exercised by Tenant;
provided, however, that notwithstanding such Fair Market Rental calculation, in
no event shall Base Rent for such Annex Expansion Period be less than the Base
Rent in effect as of the effective date of such calculation.
3. PAYMENT OF RENT AND OPERATING COSTS.
-----------------------------------
3.1 Lease Term Rent.
---------------
3.1.2 Base Rent. Each monthly installment of Base Rent in the
---------
amount set forth in Schedule 7 shall be payable no later than the first (1st)
calendar day of each month, together with each monthly installment of Tenant's
Share of Additional Operating Costs. Monthly installments for any fractional
calendar month, at the beginning or end of the Lease Term or any Renewal Term,
shall be prorated based on the number of days in such month. Base Rent and
Tenant's Share of Additional Operating Costs, together with all other amounts
payable by Tenant to Landlord under this Lease, shall be sometimes referred to
collectively as "Rent."
-12-
Tenant shall pay all Rent, without deduction or set off, to Landlord or Managing
Agent at a place specified by Landlord.
3.1.3 Late Charge. Rent not paid on or before the expiration of
-----------
four (4) business days following the date that such sums are due, shall be
subject to a late charge until paid equal to one and one-half percent (1-1/2%)
per month from such fourth (4th) business day following the date when due, until
paid, but in no event greater than that rate which is permitted under applicable
laws prohibiting the charging or collection of usurious interest. Tenant
acknowledges that late payment of Rent will cause Landlord to incur costs not
contemplated by this Lease, the exact amount of which is extremely difficult and
impracticable to ascertain at this time. Accordingly, the parties agree that
the foregoing late charge represents a reasonable estimate of the loss and
expense to be suffered by Landlord by reason of Tenant's late payment.
3.2 Base Rent Adjustment. Base Rent shall be subject to adjustment as
--------------------
provided on Schedule 7 attached.
3.3 Renewal Term Rent. During the first Renewal Term, the Base Rent shall
-----------------
be ninety-five percent (95%) of the fair market rental ("Fair Market Rental")
for the Leased Premises as of the end of the just expired Lease Term. During
the second Renewal Term, the Base Rent shall be ninety-five percent (95%) of the
Fair Market Rental for the Leased Premises as of the end of the just expired
first Renewal Term.
3.3.1 Fair Market Rental Defined. As used herein, Fair Market
--------------------------
Rental shall mean the annual amount per square foot that a willing comparable
entity, non-renewal, non-expiration new tenant would pay and a willing,
comparable Landlord of a similar class
-13-
building which is situated along the Interstate Highway 50 corridor between Watt
Avenue and Sunrise Boulevard, in Sacramento County, California, would accept at
arm's length, giving appropriate consideration to annual rental rate per square
foot, types of escalation clauses, abatement provisions reflecting free rent
and/or no rent during a lease term, brokerage commissions, if any, length of
lease term, size and location of premises, building standard work letter and/or
tenant improvement allowances, and other generally applicable terms and
conditions of tenancy.
3.3.2 Procedure for Determining Fair Market Rental.
--------------------------------------------
(a) The Fair Market Rental shall be determined by Landlord
and Tenant within thirty (30) days after Landlord receives Tenant's Notice of
Exercise. If the parties are unable to agree on such Rental, they shall select
an appraiser within ten (10) days after the expiration of such thirty (30) days
following the Notice of Exercise. If they are unable to select a single
appraiser, each party shall select its own appraiser within ten (10) days
thereafter, and the two (2) appraisers shall meet promptly and attempt to
determine the Fair Market Rental. If the two (2) appraisers are able to agree,
within thirty (30) days after their selection, on a Fair Market Rental that
varies five percent (5%) or less (among the two (2) appraisers), their values
shall be averaged to arrive at Fair Market Rental. If the two (2) appraisers are
unable to agree, within thirty (30) days after their selection, on a Fair Market
Rental that varies five percent (5%) or less (as among the two (2) appraisers),
the two (2) appraisers shall select a third (3rd) appraiser within ten (10) days
following expiration of the thirty (30) days. The third (3rd) appraiser shall in
all
-14-
events be a person who has not previously acted in any capacity for either
Landlord or Tenant. If the two (2) appraisers are unable to agree on a third
(3rd) appraiser (or if either party should within the time specified fail to
appoint its appraiser), then either party, upon written application with ten
(10) days' prior written notice to the other, may request such appointment be
made by the then presiding judge of the Superior Court of the County of
Sacramento acting pursuant to Code of Civil Procedure Section 1281.6.
(b) The determination of a majority of the appraisers shall
be binding upon the parties and shall be made not later than thirty (30) days
following selection of the third (3rd) appraiser. If a majority of the
appraisers are unable to set the Fair Market Rental within the stipulated period
of time, the three (3) appraisals shall be added together and their totals
divided by three (3); the resulting quotient shall be such Rental; provided,
however, if the low appraisal and/or the high appraisal are/is more than seven
percent (7%) lower and/or higher than the middle appraisal, the low and/or high
appraisal shall be disregarded. If only one (1) appraisal is disregarded, the
remaining two (2) appraisals shall be added together and their total divided by
two (2); the resulting quotient shall be the Fair Market Rental. If both the low
appraisal and the high appraisal are disregarded, the middle appraisal shall be
the Fair Market Rental. Each party shall bear the cost of the appraisers
selected by it; the expenses of the third (3rd) appraiser shall be borne one-
half (1/2) by Landlord and one-half (1/2) by Tenant.
-15-
3.3.3 Qualifications of Appraiser. Any person selected as an
---------------------------
appraiser under this Subparagraph 3.3 shall be a member in good standing of the
American Institute of Real Estate Appraisers or successor organizations and
shall have had at least five (5) years experience in appraising commercial real
estate similar to the Building in the same general location.
3.3.4 Redecorating Allowance. Upon Tenant's exercise of either the
----------------------
first or both of the Renewal Options, Landlord shall provide Tenant (upon each
such exercise) an allowance of Five and No/100 Dollars ($5.00) per Rentable
square foot of space in the Leased Premises, to be used by Tenant solely for
redecorating the Leased Premises in accordance with plans and specifications
subject to the prior written approval of Landlord, and, if all of such allowance
is not utilized for redecorating, then the remainder may be utilized by Tenant
for other improvements to the Leased Premises in accordance with plans and
specifications approved by Landlord. Furthermore, as to such allowance for the
first Renewal Term, if all of such allowance is not utilized, then Tenant shall
be entitled to carry it forward to be applied to the second Renewal Term, should
the second Renewal Option be exercised by Tenant.
3.4 Operating Costs. The parties acknowledge and agree that this Lease is
---------------
what is commonly known as a "triple net lease" or a "net, net, net lease".
Throughout the entire term hereof, the Base Rent is intended to be and shall be
paid to Landlord absolutely net of all impositions, taxes (except as otherwise
provided herein), liens, charges, mortgages (with the exception of mortgages
initiated by and securing financial obligations of Landlord), costs
-16-
or expenses (with the exception of certain maintenance costs specifically
provided in Subparagraph 5.1.2.1 below) of any nature whatsoever in connection
with the ownership and operation of the Project. Each of the foregoing costs and
charges to be paid by Tenant shall be part of Operating Costs as hereinafter
defined, and shall be paid in one of three ways, as follows: (1) directly by
Tenant to the supplier, vendor or provider thereof ("Tenant's Direct Costs");
(2) monthly payment from Tenant to Landlord of Tenant's Share - in this case,
one hundred percent (100%) - of certain of the Additional Operating Costs,
calculated by Landlord on an annual basis and billed 1/12 per month ("Monthly
Additional Operating Costs"); and (3) Additional Operating Costs payable upon
demand from Landlord to Tenant ("Demand Additional Operating Costs"). The
Operating Costs are defined below, along with a more specific description of the
manner of payment of the same, as follows:
3.4.1 Definition. "Operating Costs" shall mean all expenses
----------
relating to the Leased Premises or the Project, including, but not limited to:
real estate taxes and assessments (including debt service payments on amortizing
bonds); gross rents, sales, use, business, corporation or other taxes (except
net income taxes other than taxes levied or assessed in substitution for any
other tax constituting an Operating Cost); any fees or charges (for example,
traffic, parking or air quality mitigation, child care, low income housing, or
other such fees) imposed by governmental authorities having jurisdiction over
the Project; utilities; costs attributable to the Project for utilization of the
common area of Prospect Green Business Park (as more fully described in Schedule
-17-
3 attached); insurance premiums and (to the extent used) deductibles for all
insurance being carried by Landlord against the Project or its operation;
maintenance, repairs and replacements; refurbishing and repainting; cleaning,
janitorial and other services, equipment, tools, materials and supplies; air
conditioning, heating and elevator service; property management fees in the
amounts set forth on Schedule 7 attached; security; resurfacing and restripping
of walks, drives and parking areas; signs, directories and markers; exterior
cleaning of the Building; landscaping; and snow and rubbish removal. Operating
Costs shall not include expenses for legal services, real estate brokerage and
leasing commissions, Landlord's net income taxes, income tax accounting,
interest, depreciation, general corporate overhead, or capital improvements to
the Building or Project except for capital improvements installed for the
purpose of reducing or controlling expenses (and, in such case, to the extent of
such savings or reduction in expenses; provided, however, that Landlord's
statement as to such reduction or savings shall be presumed contolling on the
issue and Tenant shall have the burden of disproving such statement), or
required by any governmental or other authority having jurisdiction over the
Project, which shall be amortized by Landlord in accordance with Generally
Accepted Accounting Principles. In computing Additional Operating Costs for
purposes of Subparagraph 3.4.2 below, Landlord's estimate of Operating Costs
shall be used, and for purposes of Subparagraph 3.4.3 below, Landlord's actual
Operating Costs for any calendar year shall be used.
-18-
3.4.2 Payment of Monthly Additional Operating Costs. Tenant shall
---------------------------------------------
pay, in equal monthly installments, beginning on the first day of the first
month of this Lease, Tenant's Share of any Additional Operating Costs for each
calendar year which falls (in whole or in part) during the Lease Term (prorated
for any partial calendar year at the beginning or end of the Lease Term), in the
following categories: landscaping (including utilities not billed on the same
meter as the Leased Premises which shall be paid directly by Tenant as provided
below), parking lot maintenance and refurbishment (including utilities not
billed on the same meter as the Leased Premises, which shall be paid directly by
Tenant as provided below); common area charges for Prospect Green Business Park;
management fees; Project sign, directory and marker maintenance; and any other
Operating Costs not paid directly by Tenant or billed separately by Landlord to
Tenant in accordance with the procedures set forth below. Annually, or from
time to time, based on actual and projected Operating Costs data, Landlord may
adjust its estimate of Monthly Additional Operating Costs upward or downward.
All monthly installments of Monthly Additional Operating Costs payable after
notice to Tenant of a revised estimate of Operating Costs shall be paid in equal
monthly amounts sufficient to pay in full the unpaid balance of Tenant's Share
of any Monthly Additional Operating Costs by the end of the calendar year in
which such adjustment is made, and thereafter Monthly Additional Operating Costs
shall be paid in equal monthly amounts sufficient to pay in full Tenant's Share
of any Monthly Additional Operating Costs by the end of each succeeding calendar
year.
-19-
3.4.3 Actual Operating Cost Adjustment. As soon as possible each
--------------------------------
year, Landlord shall compute the actual Additional Operating Costs for the prior
calendar year, and shall give notice thereof to Tenant. Within thirty (30) days
after receipt of such notice, Tenant shall pay any deficiency in Tenant's Share
of any Monthly Additional Operating Costs for the prior calendar year (prorated
for any partial calendar year prior to or at the beginning or end of the Lease
or Renewal Term). In the event of overpayment by Tenant, Landlord shall apply
the excess to the next payment of Rent when due, until such excess is exhausted
or until no further payments of Rent are due, in which case Landlord shall pay
to Tenant the balance of such excess within thirty (30) days thereafter.
3.4.4 Demand Additional Operating Costs. The parties acknowledge
---------------------------------
and agree that certain Additional Operating Costs shall be periodically billed
to Tenant by Landlord in addition to the Monthly Additional Operating Cost
calculation, and shall be payable by Tenant upon demand, as follows:
(i) all real property taxes and assessments (including debt
service on amortizing bonds);
(ii) insurance premiums and deductibles (to the extent used);
(iii) fees and other charges (such as traffic, parking or air quality
mitigation charges and child care fees) imposed by governmental authorities
having or asserting jurisdiction over the Project; and
(iv) any and all taxes payable (a) upon, measured by or reasonably
attributable to the cost or value of Tenant's equipment,
-20-
fixtures and other personal property located in the Leased Premises or by the
cost or value of any leasehold improvements made in or to the Leased Premises by
Tenant, regardless of whether title to such improvements is in Tenant or
Landlord; (b) upon or measured by the monthly Rental payable hereunder,
including, without limitation, any gross receipts tax or excise tax, unless paid
as an Operating Cost; (c) upon or with respect to the possession, leasing,
operating, management, maintenance, alteration, repair, use or occupancy by
Tenant of the Leased Premises or any portion thereof; and (d) upon this
transaction or any document to which Tenant is a party creating or transferring
an interest or an estate in the Leased Premises.
Each of the foregoing shall be additional Rent hereunder and, unless this Lease
provides otherwise, shall be due and payable not later than thirty (30) days
after demand therefor.
3.4.5 Tenant's Direct Operating Costs. The parties
-------------------------------
acknowledge and agree that, in addition to Tenant's responsibility for payment
of the foregoing Additional Operating Costs, Tenant shall be responsible for
directly paying to the supplier, vendor or provider thereof, certain Operating
Costs (some of which are also articulated in Subparagraph 5 below, dealing with
Tenant's responsibility for payment and performance of certain maintenance
obligations), as follows:
(i) janitorial services for the Leased Premises in accordance with
specifications (both as to frequency and scope of service) commensurate with
similar class A buildings in the same
-21-
vacinity as the Building and approved by Landlord in its reasonable discretion;
(ii) electrical, gas, water and other utility charges for provision
of light, general electrical power and water supplied to the Leased Premises
(including sewer and waste removal), which shall be separately metered and
billed to Tenant, at Tenant's sole cost and expense;
(iii) telephone installation and service supplied to the Leased
Premises;
(iv) routine, periodic elevator maintenance service and HVAC systems
service in accordance with specifications (both as to scope and frequency)
commensurate with similar Class A buildings in the vacinity of the Building, and
approved by Landlord in its reasonable discretion; and
(v) routine, periodic pest control service in accordance with
specifications (both as to frequency and scope of service) commensurate with
similar Class A buildings in the vacinity of the Building, and approved by
Landlord in its reasonable discretion. If the foregoing costs are not timely
paid by Tenant and Landlord is required to pay them, they shall be additional
Rent hereunder. Should Tenant fail to provide adequate janitorial, pest control,
elevator or HVAC systems services and/or timely pay for such services or those
utility charges separately billed to Tenant, then, in addition to Landlord's
remedies hereunder for an Event of Default by Tenant, Landlord shall have the
right to assume responsibility for such costs (including the right to make
arrangements for janitorial, pest control, elevator and/or HVAC
-22-
systems services to the Leased Premises) and to charge Tenant for the same.
4. IMPROVEMENTS BY LANDLORD; POSSESSION.
------------------------------------
4.1 Construction Conditions. Tenant shall construct the improvements
-----------------------
described in the Work Letter Agreement attached hereto as Schedule 5 and
Schedule 5-B (the "Leasehold Improvements"). The expenses to be incurred as
between Landlord and Tenant for construction of the Leasehold Improvements are
specified in Schedule 5.
4.2 Commencement of Possession. If the Leased Premises are not
--------------------------
Substantially Complete (as defined in Schedule 5 attached), by the scheduled
Lease Commencement Date, subject only to items which do not materially affect
the use thereof, then the Lease Commencement Date shall be extended to the date
on which Substantial Completion shall have been achieved; provided, however,
that in no event shall the Lease Commencement Date be extended beyond October 1,
1996. If Tenant fails to cause the Leased Premises to be ready for occupancy at
the time of the scheduled Lease Commencement Date, the Lease Term shall
nevertheless commence effective as of the scheduled Lease Commencement Date),
and neither Landlord nor Landlord's agents, officers, employees or contractors
shall be liable for any damage, loss, liability or expense caused thereby; nor
shall this Lease become void or voidable unless such failure continues for more
than one hundred eighty (180) days, in which case, Landlord, only, shall have
the right to terminate this Lease upon twenty (20) days' prior written notice to
Tenant; provided that the time for Tenant to perform shall be extended by any
delay caused by Landlord and force majeure events. As soon as
-23-
possible following the establishment of the Lease Commencement Date in
accordance with the terms of this subparagraph 4.2, Tenant shall execute and
deliver to Landlord a letter in the form attached as Schedule 6, acknowledging
the Lease Commencement Date and certifying that the Leasehold Improvements have
been substantially completed and that Tenant has examined and accepted the
Leased Premises. Tenant hereby authorizes an officer of Tenant who receives the
keys, cardkeys, or other security devices to the Leased Premises on behalf of
Tenant to execute and deliver such letter in Tenant's name. If Tenant fails to
deliver such letter, Tenant shall conclusively be deemed to have made such
acknowledgment and certification effective as of the date of Substantial
Completion, as certified by Landlord's architect, in accordance with Schedule 5
attached.
5. PROJECT SERVICES.
----------------
5.1 Project Services. Tenant and Landlord shall furnish services to the
----------------
Project, as follows:
5.1.1 Utility Services. Tenant shall arrange for and pay directly
-----------------
to the supplier thereof, all utility services to the Project, as set forth in
Subparagraph 3.6 above (the "Utility Services").
5.1.2 Maintenance Services.
---------------------
5.1.2.1 Landlord's Maintenance. Landlord, at its cost,
----------------------
shall be obligated to maintain, repair, and replace the following: (a) the
structural parts of the Building, which structural parts include only the
foundations, bearing and exterior walls (excluding glass and doors),
subflooring and roof; and (b) the unexposed electrical, plumbing and
sewage systems (but not in
-24-
the tenant improvements), including, without limitation, those portions of the
systems lying outside the Building. All of the foregoing shall be at the expense
of Landlord unless the need for such maintenance and/or repair is caused in part
or in whole by the act, neglect fault or omission of any duty of Tenant, its
agents, employees or invitees, in which case Tenant shall pay Landlord the
reasonable cost of such maintenance and/or repairs, within twenty (20) days
following Landlord's demand therefor. Landlord shall also maintain the parking
area and the other portions of the Land, including the landscaped portions
thereof; however, the cost of such maintenance shall be included by Landlord as
an Operating Cost for purposes of computing Additional Operating Costs as
provided in Subparagraph 3.4 above.
5.1.2.2 Tenant's Maintenance. Tenant, at its sole cost and
--------------------
expense, shall be responsible for repair, maintenance and replacement of all
portions of the Leased Premises for which Landlord is not expressly obligated
hereunder to maintain and repair, including, without limitation, the following:
(a) the Leasehold Improvements; (b) Tenant's personal property and signs; (c)
the plate glass and windows of the Leased Premises; (d) the exposed electrical,
plumbing and sewage systems of the Leased Premises (and any unexposed portions
within the tenant improvements); (e) the floor covering, wall covering and
interior non-structural fixtures of the Building; (f) the heating, ventilating
and air conditioning equipment serving the Building (the "HVAC Equipment"); and
(g) the elevator. The parties specifically agree the Tenant shall, at its cost,
engage a maintenance firm reasonably acceptable to Landlord, to perform
-25-
preventative maintenance services on the HVAC Equipment and the elevator, and
Landlord shall be entitled to reasonably approve the nature and extent of such
maintenance services. All of the foregoing shall be at the cost and expense of
Tenant unless the need for such repair and/or maintenance is caused in whole or
in part by the act, neglect, fault or omission of any duty by Landlord, its
agents, employees or invitees, in which case Landlord shall to Tenant the
reasonable cost of the same within twenty (20) days of Landlord' approval of
such costs.
5.1.2.3 Remedies. Should either party fail to commence and
--------
diligently persue performance of the foregoing respective maintenance
obligations, within twenty (20) days after notice from the other party (except
for an emergency or hazardous situation, in which case the performance shall be
immediate), then the other party shall be entitled to perform the same. In such
case, the cost of any such performance shall be due and payable by the party
failing to perform the same, within twenty (20) days following demand therefor
by the other party.
5.1.3 Project Services. Utility Services and Maintenance Services,
----------------
described above, shall be collectively referred to as "Project Services."
6. TENANT'S COVENANTS.
------------------
6.1 Use of Leased Premises. Tenant agrees to:
----------------------
6.1.1 Permitted Usage. Use the Leased Premises for the Permitted
---------------
Purpose only and for no other purposes.
6.1.2 Compliance With Laws. Comply with the pro visions of all
----------------------
recorded covenants, conditions and restrictions (including, without limitation,
any applicable to the Prospect
-26-
Green Business Park, of which the Project is a part) and all building, zoning,
fire and other governmental laws, ordinances, rules or regulations applicable to
the Leased Premises and all requirements of the carriers of insurance covering
the Project. Landlord shall provide Tenant with a copy of any notice it
receives from an insurance carrier pertaining to the Leased Premises insofar as
such notice sets forth an alleged failure to meet the carrier's requirements,
and Tenant shall have ten (10) days thereafter to remedy any failure to so
comply; provided, however, that such compliance shall not increase Tenant's
insurance requirements hereunder.
6.1.3 Nuisances or Waste.
------------------
(a) Not do or permit anything to be done in or about the
Leased Premises, or bring or keep anything in the Leased Premises that may
increase Landlord's fire and extended coverage insurance premium, damage the
Building or the Project, constitute waste, constitute an immoral purpose, or be
a nuisance, public or private, or menace or other disturbance to tenants of
adjoining premises or anyone else, or use or store any toxic chemicals, wastes,
elements or substances in the Leased Premises, unless such toxic chemicals,
waste, elements or substances are used or stored in full compliance with any
local, state or federal laws, ordinances, rules and regulations presently in
effect or hereafter enacted pertaining to such use or storage and then only if
used or stored in connection with Tenant's ordinary and usual business
operations (that is, for example, white-out correction fluid and photocopy
toner). This Subparagraph 6.1.3. is in addition to those provisions set forth in
Subparagraph 13.13 below.
-27-
(b) Tenant further agrees to defend, indemnify and hold
harmless Landlord, or any partner, officer or director of Landlord, against any
and all claims, demands, liabilities, costs and expenses (including without
limitation reasonable attorneys' fees and expenses, expert witness fees and
post-judgment collection costs) which Landlord may sustain at any time as a
result of, arising out of, or in any way connected with a breach of Subparagraph
6.1.3(a). Additionally, Tenant agrees to cease the activity which amounts to
such breach immediately upon receipt of written notice from Landlord or any
regulatory or governmental agency that, such activity is in violation of any
governmental laws, ordinances, regulations or rules. Tenant shall give notice to
Landlord of any hazardous substances that come to be located on the Leased
Premises pursuant to Health & Safety Code section 25359.7.
6.1.4 Alterations and Improvements. Make no alterations or
----------------------------
improvements to the Leased Premises the cost of which exceeds Fifteen Thousand
and No/100 Dollars ($15,000) or, notwithstanding the cost, the effect of which
is to modify the lobby or the existing mechanical, electrical and/or structural
systems of the Building, without the prior written approval of Landlord; and
make no alterations or improvements the cost of which is less than Fifteen
Thousand and No/100 Dollars ($15,000) without prior notice to Landlord
specifying the nature of such improvements. The foregoing right to make certain
alterations without Landlord's prior consent shall be subject to the terms and
conditions of the documents evidencing and securing the mortgage liens, if any,
against the Project. In the event of any such conflict, Landlord
-28-
shall prompty notify Tenant in accordance with the terms hereof. Any such
alterations or improvements by Tenant shall be done in a good and workmanlike
manner, at Tenant's expense, by a licensed contractor reasonably approved by
Landlord in conformity with plans and specifications reviewed by Landlord.
Tenant shall obtain all necessary governmental approvals and permits. On any
alterations or improvements requiring Landlord's prior written approval, at
Landlord's option, Tenant shall contract with Landlord for the construction of
such alterations or improvements, but only if Landlord's price for such work is
the lowest of the qualified written bids submitted to Tenant in a competitive
bid process. In the case of any alterations, whether or not Landlord's approval
is required hereunder, Tenant shall give Landlord no less than ten (10) business
days' notice prior to commencement of construction of any kind so that Landlord
may post a notice of nonresponsibility on the Leased Premises.
6.1.5 Liens. Keep the Leased Premises, the Building and the Project
-----
free from liens arising out of any work performed, materials furnished or
obligations incurred by or for Tenant. If requested by Landlord, Tenant shall
post a bond or other security reasonably satisfactory to Landlord to protect
Landlord against such liens. If, at any time, a lien or encumbrance is filed
against the Leased Premises, the Building or the Project as a result of Tenant's
work, materials or obligations, Tenant shall promptly discharge such lien or
encumbrance. If such lien or encumbrance has not been removed within sixty (60)
days from the date it is filed, Tenant agrees to post a bond in at least the
-29-
amount prescribed by applicable California statute then in effect as security
for the lien being discharged.
6.1.6 Rules and Regulations. Observe, perform and abide by all the
---------------------
rules and regulations promulgated by Landlord from time to time on a reasonable
basis for the benefit of the Project and its tenants, including any such rules
and regulations with overall applicability to Prospect Green Business Park.
Schedule 2 sets forth Landlord's rules and regulations in effect on the date
hereof.
6.1.7 Signage. Obtain the prior approval of the Landlord before
-------
placing any sign or symbol in doors or windows or elsewhere in or about the
Leased Premises, or upon any other part of the Building or Project, including
building directories. The parties acknowledge and agree that Tenant shall have
the right to install exterior signage on the Building, so long as the location
and specifications (style, materials, etc.) of such signage have received the
prior written approval of Landlord and the County of Sacramento. Any signs or
symbols which have been placed without Landlord's approval may be removed by
Landlord. Upon expiration or termination of this Lease, all signs installed by
Tenant shall be removed and any damage resulting therefrom shall be promptly
repaired by Tenant, or such removal and repair may be done by Landlord and the
cost charged to Tenant as Rent.
6.2 Insurance.
---------
6.2.1 Insurance Obtained by Tenant. Tenant shall, at its own
----------------------------
expense, procure and maintain during the Lease Term commercial general liability
insurance with respect to the Leased Premises and Tenant's activities in the
Leased Premises and in the
-30-
Project, providing bodily injury, broad form property damage with a maximum One
Thousand Dollar ($1,000.00) deductible, unless otherwise approved by Landlord,
as follows:
(a) One Million Dollars ($1,000,000) with respect to bodily
injury or death to any one (1) person;
(b) Three Million Dollars ($3,000,000) with respect to bodily
injury or death arising out of any one (1) occurrence;
(c) One Million Dollars ($1,000,000) with respect to
property damage or other loss arising out of any one (1) occurrence;
(d) Fire and extended casualty insurance covering Tenant's
trade fixtures, merchandise and other personal property in an amount not less
than one hundred percent (100%) of their actual replacement cost or highest
insurable value;
(e) Workers' compensation insurance in at least the statutory
amounts; and
(f) Business interruption insurance equal to all Rent and
other sums due hereunder for a period of not less than twelve (12) months.
Should Tenant be unable to procure such business interruption insurance at a
resonable cost, then Landlord shall be entitled to procure comparable coverage
and include the cost thereof as an Operating Cost.
6.2.2 Coverage Increase. Not more frequently than each three (3)
-----------------
years if, in the reasonable business judgment of Landlord, the amount of public
liability and property damage insurance coverage maintained by Tenant is at that
time not adequate, Tenant shall increase the insurance coverage to an amount
-31-
which is determined to be adequate by Landlord in the exercise of reasonable
business judgment.
6.2.3 Blanket Policy. Nothing in this Subparagraph 6.2 shall prevent
--------------
Tenant from obtaining insurance of the kind and in the amounts provided for
under this Paragraph under a blanket insurance policy covering other properties
as well as the Leased Premises; provided, however, that any such policy of
blanket insurance (i) shall specify the amounts of the total insurance allocated
to the Leased Premises, which amounts shall not be less than the amounts
required by Subparagraphs 6.2.1(a) through (c) hereof, and (ii) such amounts so
specified shall be sufficient to prevent any one of the insureds from becoming a
co-insurer within the terms of the applicable policy, and (iii) shall, as to the
Leased Premises, otherwise comply as to endorsements and coverage with the
provisions of the Paragraph.
6.2.4 Acceptable Insurance. Tenant's insurance shall be with a
--------------------
Best's Insurance Reports A+ rated company (or A rated if Class XIII or larger).
Landlord and Landlord's mortgagee, if any, shall be named as "additional
insureds" under Tenant's general liability insurance (except as to the insurance
required by Subparagraph 6.2.1(d) above), and such Tenant's insurance shall be
primary and noncontributing with Landlord's insurance. Tenant's insurance
policies shall contain endorsements requiring thirty (30) days' notice to
Landlord and Landlord's mortgagee, if any, prior to any cancellation, lapse or
nonrenewal or any reduction in amount of coverage.
6.2.5 Evidence of Insurance. Tenant shall deliver to Landlord, as a
---------------------
condition precedent to its taking occupancy of the
-32-
Leased Premises, a certificate or certificates evidencing such insurance.
6.3 Repairs. Subject to the obligation of Landlord to provide certain
-------
Maintenance Services as provided in Subparagraph 5.1.2.1 above, Tenant, at its
sole expense, agrees to maintain the interior of the Leased Premises in a neat,
clean and sanitary condition. If Tenant fails to maintain or keep the Leased
Premises in good repair and such failure continues for thirty (30) days after
receipt of written notice from Landlord, or if such failure results in a
nuisance or health or safety risk, Landlord may perform any such required
maintenance and repairs and the cost thereof shall be payable by Tenant as Rent
within ten (10) business days of receipt of an invoice from Landlord. Tenant
shall also pay to Landlord the costs of any repair to the Leased Premises,
Building or Project necessitated by any act or neglect of Tenant. Tenant waives
the provisions of Sections 1941 and 1942 of the Civil Code of the State of
California and any other statutes or laws permitting repairs by a tenant at the
expense of a landlord or termination of a lease by reason of the condition of
the Leased Premises.
6.4 Assignment and Subletting.
-------------------------
6.4.1 Landlord's Consent Required. Tenant shall not assign,
---------------------------
mortgage, pledge or encumber this Lease, or permit all or any part of the Leased
Premises to be subleased to another, without the prior written consent of
Landlord, which consent shall not be unreasonably withheld or delayed. Any
transfer of this Lease by merger, consolidation, reorganization or liquidation
of Tenant, or by operation of law, or change in the ownership of or power to
vote
-33-
the majority of the outstanding voting stock of a corporate Tenant, or by change
in ownership of a controlling partnership interest in a partnership Tenant,
shall constitute an assignment for purposes of this Paragraph.
6.4.2 Basis for Withholding Consent. Landlord agrees that it will
-----------------------------
not unreasonably withhold its consent to Tenant's assigning this Lease or
subletting the Leased Premises. In addition to other reasonable bases, Tenant
hereby agrees that Landlord shall be deemed to be reasonable in withholding its
consent if (a) the proposed assignment or sublease is for a rental rate less
than seventy-five percent (75%) of the then current Fair Market Rental (as
defined in Subparagraph 3.3.1 hereof); or (b) for the first four (4) years of
the term, the proposed assignment or sublease is to any party who is then a
tenant of the Building or the Project, and thereafter only if Landlord has
comparable area available at that time, at a rental rate not less than seventy-
five percent (75%) of the then current Fair Market Rental; or (c) the proposed
sublease or assignment results in more than five (5) tenants in the Leased
Premises; or (d) there exists an Event of Default (as defined in Subparagraph
11.1 below) at the time of request for consent or on the effective date of such
subletting or assigning; or (e) the proposed subtenant or assignee is, in
Landlord's good faith judgment, incompatible with other tenants in the Building,
or seeks to use any portion of the Leased Premises for a use not consistent with
other uses in the Building, or is financially incapable of assuming the
obligations of this Lease (notwithstanding the fact that the Tenant as primary
obligee is not released). Tenant shall submit to Landlord the name of a
proposed
-34-
assignee or subtenant, the terms of the proposed assignment or subletting, the
nature of the proposed subtenant's or assignee's business, and such information
as to the assignee's or subtenant's financial responsibility and general
reputation as Landlord may reasonably require. Landlord may also consider the
amount of square feet of the Leased Premises proposed to be subleased and the
number of employees the subtenant anticipates it will utilize the subleased
premises.
6.4.3 No Release of Obligations. No subletting or assignment, even
-------------------------
with the consent of Landlord, shall relieve Tenant of its primary obligation to
pay the Rent and to perform all of the other obligations to be performed by
Tenant hereunder. The acceptance of Rent by Landlord from any other person
shall not be deemed to be a waiver by Landlord of any provision of this Lease or
to be a consent to any assignment, subletting or other transfer. Consent to one
assignment, subletting or other transfer shall not be deemed to constitute
consent to any subsequent assignment, subletting or other transfer.
6.4.5 Recapture. As material consideration for the execution of
---------
this Lease by Landlord, Tenant hereby agrees that whenever it delivers notice to
Landlord that it desires approval of a sublease or assignment, Landlord shall
have the right to review the terms and conditions of such proposed sublease or
assignment and, should the proposed assignment or sublease be for the remaining
Lease Term or the remainder of any Renewal Term then in effect, then Landlord
shall have a right for a period of fifteen (15) business days, to cancel this
Lease as to the portion of the Leased Premises to be assigned or subleased, and
enter into a
-35-
direct Lease with any prospective sublessee or assignee. Such fifteen (15) day
period shall commence upon Tenant's delivery to Landlord of written notice of
the terms of the proposed assignment or sublease and financial statements for
the proposed assignee or sublessee. If Landlord exercises its right to cancel
this Lease, Tenant shall surrender possession of all, or the applicable portion,
of the Leased Premises which is the subject of this right to cancel, as the case
may be, not later than the date on which the proposed sublease or assignment
term would commence. If this lease is cancelled as to a portion of the Premises
only, the Rent after the date of cancellation shall be reduced proportionately
on a square footage basis.
6.4.6 Proceeds of Sublease or Assignment. One-half ( 1/2) of any
----------------------------------
proceeds (net of any costs incurred by Tenant in subletting to subtenant) in
excess of Base Rent and Tenant's Share of Additional Operating Costs which is
received by Tenant pursuant to an assignment or subletting consented to by
Landlord shall be remitted to Landlord as extra Rent within ten (10) days of
receipt by Tenant net of any costs Tenant incurs in subletting space. For
purposes of this Paragraph, all money or value in whatever form received by
Tenant from or on account of any party as consideration for an assignment or
subletting shall be deemed to be proceeds received by Tenant pursuant to an
assignment or subletting.
6.5 Estoppel Certificate. From time to time and within ten (10) days
--------------------
after request by Landlord, Tenant shall execute and deliver a certificate to any
proposed lender or purchaser, or to Landlord, certifying, with any appropriate
exceptions, (a) that this Lease is in full force and effect without modification
except
-36-
as noted, (b) the amount, if any, of Prepaid Rent and Deposit paid by Tenant to
Landlord (and not returned to Tenant), (c) the nature and kind of concessions,
rental or otherwise, if any, which Tenant has received or is entitled to
receive, (d) that Landlord has performed all of its obligations due to be
performed under this Lease and that there are no defenses, counterclaims,
deductions or offsets outstanding or other excuses for Tenant's performance
under this Lease as of such date, and (e) any other fact reasonably requested by
Landlord or such proposed lender or purchaser. Should Tenant fail to deliver
such estoppel certificate within such ten (10)-day period, then (i) the truth of
the statements in the document submitted to Tenant for execution shall be
conclusively presumed, and (ii) Landlord shall have the right, at its option, to
immediately declare an Event of Default and pursue all remedies provided under
Subparagraph 11.2 below.
6.6 Brokerage Commissions. Each of Tenant and Landlord represents to the
---------------------
other that no broker or agent other than CB Commercial was instrumental in
procuring or negotiating or consummating this Lease, and each party agrees to
defend and indemnify the other party against any loss, expense or liability
incurred by the other party as a result of a claim by any broker or finder
claiming representation of the indemnifying party in connection with this Lease
or its negotiation.
7. LANDLORD'S RESERVED RIGHTS.
--------------------------
7.1 Additional Rights Reserved to Landlord. Without notice and without
--------------------------------------
liability to Tenant, or without effecting an eviction or disturbance of Tenant's
use or possession, Landlord shall have the right to (a) grant utility easements
or other easements in, or
-37-
replant, subdivide or make other changes in the legal status of the land
underlying the Leased Premises, the Building or the Project as Landlord shall
deem appropriate in its sole discretion; provided such changes do not materially
interfere with Tenant's use of the Leased Premises for the Permitted Purpose;
(b) enter the Leased Premises at reasonable times following twenty-four (24)
hours' prior notice to Tenant (or such shorter period as is reasonable under the
circumstances, giving Tenant sufficient opportunity to arrange for a
representative of Tenant to accompany Landlord), and at any time in the event of
an emergency, to inspect, alter or repair the Leased Premises or the Building
and to perform any acts related to the safety, protection, reletting, sale or
improvement of the Leased Premises or the Building; (c) add to or take away from
the Project any building or portion thereof, in which event Total Square Footage
of the Building shall be adjusted accordingly; (d) install and maintain signs on
and in the Building and the Project; and (e) make such rules and regulations as,
in the reasonable judgment of Landlord, may be needed from time to time for the
safety of the tenants, the care and cleanliness of the Leased Premises, the
Building and the Project and the preservation of good order therein.
8. CASUALTY AND UNTENANTABILITY.
----------------------------
8.1 Destruction Due To Risk Covered By Insurance. If the Leased Premises
--------------------------------------------
are made wholly or partially untenantable by a risk covered by insurance, and
the Leased Premises can, in the reasonable judgment of Landlord, be restored
within two hundred forty (240) days after the date of destruction, Landlord
shall restore the Leased Premises to substantially the same condition as
-38-
they were prior to the destruction; provided that Tenant shall assign to
Landlord all insurance proceeds applicable to personal property and/or
improvements for which Landlord shall have such restoration responsibility.
8.2 Destruction Due To Risk Not Covered By Insurance. If the Leased
------------------------------------------------
Premises are made partially (meaning for purposes of this Subparagraph 8.2, at
least ten percent (10%) of the replacement cost of the Building, as determined
by Landlord in its reasonable discretion) or wholly untenantable by a risk not
covered by insurance, Landlord shall have the election to either restore the
Leased Premises or terminate this Lease, effective as of the date of such
destruction. Such termination shall be made by Landlord's delivery to Tenant,
within sixty (60) days following the destruction, of notice of Landlord's
election to so terminate. Should Landlord elect to restore the Leased Premises,
Tenant shall assign to Landlord all insurance proceeds, if any, covering
Tenant's tenant improvements and personal property carried by Tenant under
Subparagraph 6.2.1 above, to the extent that Landlord shall be undertaking
restoration of the same. Tenant waives the provisions of Section 1932 of the
Civil Code of the State of California and any other statute or law permitting
Tenant to terminate this Lease in the event of casualty to the Leased Premises.
In the event of a damage or destruction as to which the Leased Premises are not
partially or wholly untenantable - that is, the damage is less than ten percent
(10%) of the replacement cost of the Building - then Landlord shall be obligated
to restore the Leased Premises. In any event that Landlord undertakes
restoration under this Subparagraph 8.2, whether by election or by requirement
-39-
hereunder, then Tenant shall be responsible for payment of one hundred percent
(100%) of all costs incurred by Landlord in connection with such restoration
(including, without limitation, all financing costs), until such time as the
amount incurred by Landlord is equal to ten percent (10%) of the replacement
cost of the Building, after which Landlord shall be responsible for payment of
all additional costs. All such amounts payable by Tenant shall be amortized by
Landlord and reimbursed by Tenant to Landlord over the shorter of (i) the useful
life of such restored improvements, or (ii) the remainder of the Lease Term or
Renewal Term then in effect.
8.3 Termination by Tenant. If the Landlord does not terminate this Lease
---------------------
as provided above, and Landlord fails within two hundred forty (240) days from
the date of such casualty, to restore the damaged areas, thereby eliminating
substantial interference with Tenant's use and occupancy of the Leased Premises,
Tenant may notify Landlord of its intention to terminate this Lease, and Tenant
shall have the right to so terminate as of the end of the aforementioned two
hundred forty (240) day period.
8.4 Rent; Prorations. In the event of termination of this Lease pursuant
----------------
to the immediately preceding Paragraph, Rent shall be prorated on a per diem
basis and paid to the date of the casualty, unless the Leased Premises shall be
tenantable, in which case Rent shall be payable to the date of the Lease
termination and if only partly tenantable, Tenant shall receive abatement to the
extent that portion is untenantable, commencing on the date of the casualty. If
the Leased Premises are wholly untenantable and this Lease is not terminated,
Rent shall abate on a per diem basis from
-40-
the date of the casualty until the Leased Premises are ready for occupancy by
Tenant. If part of the Leased Premises are untenantable, and this Lease is not
terminated, then as of the date of the casualty, Rent shall be prorated on a per
diem basis and partially abated in accordance with the part of the Leased
Premises which is usable by Tenant until the damaged part is ready for Tenant's
occupancy. Notwithstanding the foregoing, if any damage was proximately caused
by an act or omission of Tenant, its employees, agents, contractors, licensees
or invitees, then, in such event, Tenant agrees that (i) Rent shall not abate or
be diminished during the term of this Lease; (ii) Tenant shall have no right to
terminate this Lease in any case; and (iii) Tenant shall reimburse Landlord the
full cost of any repair and restoration, such sums to be Additional Rent
hereunder. Furthermore, in no case shall Landlord have any obligation to repair
and/or restore any improvements, alterations or additions made by or on behalf
of Tenant which are not improvements paid for by Landlord pursuant to any work
letter agreement entered into by the parties pursuant to this Lease.
8.5 Damage Near The End of The Lease Term. Notwithstanding anything to
-------------------------------------
the contrary, Landlord shall have no obligation to undertake any restoration
(i)during the next to last year of the Lease Term or any Renewal Term, as to any
destruction, the cost of restoration of which is greater than twenty percent
(20%) of the value of the Leased Premises; or (ii) during the last year of the
Lease Term, as to any destruction, regardless of the cost of restoration, unless
and until Tenant has agreed to extend the Lease
-41-
Term or Renewal Tterm then in effect, for an additional period of three (3)
years, on terms reasonably acceptable to both parties.
9. CONDEMNATION.
------------
9.1 Rent Abatement. If all or any part of the Leased Premises shall be
--------------
taken under power of eminent domain or sold under imminent threat to any public
authority or private entity having such power, this Lease shall terminate as to
the part of the Leased Premises so taken or sold, effective as of the date
possession is required to be delivered to such authority. In such event Base
Rent and Tenant's Share of Additional Operating Costs shall abate in the ratio
that the portion of Tenant's Square Footage taken or sold bears to Tenant's
Square Footage.
9.2 Lease Termination. If a partial taking or sale of the Leased
-----------------
Premises, the Building or the Project (a) substantially reduces the Tenant's
Square Footage, resulting in an inability of Tenant to reasonably use the Leased
Premises for the Permitted Purpose, or (b) renders the Building or the Project
commercially unviable to Landlord, in Landlord's sole opinion, either Tenant in
the case of (a), or Landlord in the case of (b), may terminate this Lease by
notice to the other party within thirty (30) days after the terminating party
receives written notice of the portion to be taken or sold. Such termination
shall be effective one hundred eighty (180) days after notice thereof, or when
the portion is taken or sold, whichever is sooner. All condemnation awards and
similar payments shall be paid and belong to Landlord, except for any amounts
awarded or paid specifically to Tenant by the acquiring agency for removal and
reinstallation of Tenant's trade fixtures and personal property, Tenant's moving
costs or Tenant's goodwill.
-42-
10. INDEMNITY, SUBROGATION AND WAIVER.
---------------------------------
10.1 Indemnity. Tenant agrees to defend, indemnify and save harmless
---------
Landlord against and from any and all claims, demands, actions, damages,
liability and expense in connection with or for loss of or damage to property or
injury or death to any person from any cause whatsoever while in, upon or about
the Leased Premises, or from any such claim, demand or the like arising from or
out of any occurrence in, upon or at the Leased Premises, by or on behalf of any
person, firm or corporation arising from Tenant's use of the Leased Premises or
the conduct of its business or from any activity, work, or thing done, permitted
or suffered by Tenant, in or about the Leased Premises, and Tenant shall further
defend, indemnify and save Landlord harmless against and from any and all claims
arising from any breach or default on Tenant's part in the performance of any
covenant or agreement on Tenant's part to be performed, pursuant to the terms of
this Lease, or arising from any act or negligence of Tenant, or any of its
agents, contractors, servants, employees or licensees, and from and against all
costs, attorneys' fees, expenses and liabilities incurred in or arising from any
such claim or action or proceeding brought thereon; and in case any action or
proceeding is brought against Landlord by reason of any such claim, Tenant upon
notice from Landlord covenants to resist or defend at Tenant's expense such
action or proceeding by counsel reasonably satisfactory to Landlord. Tenant, as
a material part of the consideration to Landlord, hereby assumes all risk of
damage to property in, upon or about the Leased Premises, the Building or the
Project from any source and to whomever belonging, and Tenant hereby waives all
claims in respect thereof against
-43-
Landlord, except to the extent such damage is caused by Landlord's gross
negligence or willful misconduct. The foregoing waiver shall inure only to the
benefit of Landlord and its agents, and the exception to such waiver for
Landlord's gross negligence or willful misconduct shall inure only to the
benefit of Tenant and its agents and to no other party.
10.2 Waiver of Subrogation. Tenant and Landlord release each other and
---------------------
waive any right of recovery against each other for any claims for loss or damage
to any person or the Leased Premises, which occurs on or about the Leased
Premises, the Building or the Project, whether due to the negligence of either
party, their agents, employees, officers, contractors, licensees, invitees or
otherwise, if such loss or damage is insured against under insurance policy
carried by the releasing party and in force at the time of such loss or damage,
and to the extent of the proceeds received from such policy. Tenant and
Landlord agree that all liability and extended casualty policies of insurance
obtained by either of them in connection with the Leased Premises shall contain
appropriate waiver of subrogation clauses. The provisions of this Subparagraph
10.2 shall survive the expiration or termination of this Lease with respect to
any claims or liability arising from events occurring prior to such expiration.
10.3 Limitation of Landlord's Liability. The obligations of Landlord
----------------------------------
under this Lease do not constitute personal obligations of the individual
partners, shareholders, directors, officers, employees, or agents of Landlord,
and Tenant shall look solely to Landlord's interest in the Leased Premises and
to no other assets of Landlord, for satisfaction of any liability in respect of
this
-44-
Lease. Tenant will not seek recourse against the individual partners,
shareholders, directors, officers, employees or agents of Landlord or any of
their personal assets for such satisfaction. Notwithstanding any other
provisions contained herein, Landlord shall not be liable to Tenant, its
contractors, agents or employees for any consequential damages or damages for
loss of profits, except and only to the extent of any amounts recovered by
Landlord from third parties which is directly attributed to and designated as
compensation for such consequential damages or lost profits of Tenant, which
amounts shall also be limited to Landlord's interest in the Leased Premises.
11. TENANT'S DEFAULT AND LANDLORD'S REMEDIES.
----------------------------------------
11.1 Tenant's Default. It shall be an "Event of Default" if Tenant shall
----------------
(a) fail to pay any monthly installment of Base Rent or of Tenant's Share of
Additional Operating Costs, or any other sum payable by Tenant to Landlord
hereunder, on or before the third (3rd) business day following the effective
date of written notice from Landlord to Tenant that any such monthly installment
of Base Rent or of Tenant's Share of Additional Operating Costs, or any other
sum has not been received when due; (b) violate or fail to perform any of the
other conditions, covenants or agreements herein made by Tenant, and such
violation or failure shall continue for thirty (30) days after written notice
thereof to Tenant by Landlord except that if within the thirty (30) day period
Tenant commences and thereafter proceeds diligently to remedy the violation or
failure, Tenant shall not be in default hereunder; provided, however, that in no
event shall such remedy extend beyond sixty (60) days from the effective date of
such notice from Landlord to
-45-
Tenant of such violation or failure; (c) make a general assignment for the
benefit of its creditors or file a petition for bankruptcy or other
reorganization, liquidation, dissolution or similar relief; (d) have a
proceeding filed against Tenant seeking any relief mentioned in (c) above which
is not discharged within ninety (90) days thereafter; (e) have a trustee,
receiver or liquidator appointed for Tenant or a substantial part of its
property; (f) abandon or vacate the Leased Premises for more than six (6)
consecutive months; or (g) default under any other space lease within the
Building or Project.
11.2 Remedies on Default. Landlord shall have the following remedies if
-------------------
Tenant commits an Event of Default. These remedies are not exclusive; they are
cumulative in addition to any remedies now or later allowed by law.
11.2.1 Continue Lease. Landlord may continue this Lease in full
--------------
force and effect. In such case, the Lease will continue in effect so long as
Landlord does not terminate Tenant's right to possession, and Landlord shall
have the right to collect Rent when due. During the period Tenant is in
Default, Landlord can enter the Leased Premises and relet them, or any part of
them, to third parties for Tenant's account. Tenant shall be liable immediately
to Landlord for all costs Landlord incurs in reletting the Leased Premises
including, without limitation, broker's commissions, expenses of remodeling the
Leased Premises required by the reletting, and like costs. Reletting can be for
a period shorter or longer than the remaining term of this Lease. Tenant shall
pay to Landlord the Rent due under this Lease on the date the Rent is due, less
the Rent Landlord receives from any reletting.
-46-
No act by Landlord allowed by this Paragraph shall terminate this Lease unless
Landlord notifies Tenant that Landlord elects to terminate this Lease. After
Tenant's Default and for as long as Landlord does not terminate Tenant's right
to possession of the Leased Premises, if Tenant obtains Landlord's consent
Tenant shall have the right to assign or sublet its interest in this Lease, but
Tenant shall not be released from liability.
11.2.2 Terminate Lease. Landlord can terminate Tenant's right to
---------------
possession of the Leased Premises at any time. No act by Landlord other than
giving notice to Tenant shall terminate this Lease. Acts of maintenance,
efforts to relet the Leased Premises or the appointment of a receiver on
Landlord's initiative to protect Landlord's interest under this Lease shall not
constitute a termination of Tenant's right to possession. On termination,
Landlord has the right to recover from Tenant:
(a) The worth, at the time of the award, of the unpaid
Rent that had been earned at the time of termination of this Lease;
(b) The worth, at the time of the award, of the amount
by which the unpaid Rent that would have been earned after the date of
termination of this Lease until the time of the award exceeds the amount of the
loss of Rent that Tenant proves could have been reasonably avoided;
(c) The worth, at the time of the award, of the amount
by which the unpaid Rent for the balance of the term after the time of the award
exceeds the amount of the loss of Rent that Tenant proves could have been
reasonably avoided;
-47-
(d) Any other amount, and court costs, necessary to
compensate Landlord for all detriment proximately caused by Tenant's Default,
including, without limitation, any unamortized brokerage commissions
attributable to this Lease, or any unamortized costs of tenant improvements as
set forth on Schedule 5 attached hereto.
"The worth, at the time of the award," as used in Subparagraph (a) and
(b) of this Subparagraph 11.2.2 is to be computed by allowing interest at the
maximum rate allowed by applicable usury law at that time. "The worth, at the
time of the award," as referred to in Subparagraph (c) of this Subparagraph
11.2.2 is to be computed by discounting the amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of the award, plus one percent
(1%).
11.2.3 Receiver. Landlord shall have the right to have a
--------
receiver appointed to collect Rent. Neither the filing of a petition for the
appointment of a receiver nor the appointment itself shall constitute an
election by Landlord to terminate this Lease.
11.2.4 Cost of Reletting Premises. In the event of Tenant's
--------------------------
Default and Landlord's reentering of the Premises, Tenant agrees to pay to
Landlord, as an additional item of damages, the cost of repairs, alterations,
redecorating (according to standards commensurate with those contemplated by
this Lease), lease commissions and Landlord's other expenses incurred in
reletting the Leased Premises to a new tenant, but not to be duplicative of
costs previously incurred by Landlord in connection with this Lease and fully
amortized during the Term hereof.
-48-
11.2.5 Waiver. Tenant hereby waives any right of redemption or
------
relief from forfeiture under California Code of Civil Procedure Sections 1174 or
1179, or under any other present or future law, if Tenant is evicted or Landlord
takes possession of the Leased Premises by reason of any Default by Tenant
hereunder.
12. TERMINATION.
-----------
12.1 Surrender of Leased Premises. On expiration of this Lease, if no
----------------------------
Event of Default exists, Tenant shall surrender the Leased Premises in the same
condition as when the Lease Term commenced, ordinary wear and tear excepted.
Except for furnishings, trade fixtures and other personal property installed at
Tenant's expense, all alterations, additions or improvements, whether temporary
or permanent in character, made in or upon the Leased Premises, either by
Landlord or Tenant, shall be Landlord's property and at the expiration or
earlier termination of the Lease or any Renewal Term shall remain on the Leased
Premises without compensation to Tenant; provided that, if Landlord requests in
writing at the time permission is given for the alteration, addition or
improvement, Tenant shall, at its expense and without delay, remove any
alterations, additions or improvements, that are made to the Leased Premises by
Tenant and designated by Landlord to be removed, and repair any damage to the
Leased Premises or the Building caused by such removal. If Tenant fails to
repair the Leased Premises, Landlord may complete such repairs and Tenant shall
reimburse Landlord for such repair and restoration. If Tenant fails to remove
such property as required under this Lease, Landlord may dispose of such
property in its sole discretion
-49-
without any liability to Tenant, and further may charge the cost of any such
disposition to Tenant.
12.2 Hold Over Tenancy. If Tenant shall hold over after the Lease
-----------------
Expiration Date or at the end of any Renewal Term, Tenant shall be deemed, at
Landlord's option, to occupy the Leased Premises as a tenant from month to
month, which tenancy may be terminated by one (1) month's written notice.
During such tenancy, Tenant agrees to pay Landlord, monthly in advance, an
amount equal to one hundred twenty-five percent (125%) of all Rent which would
become due (based on Base Rent and Tenant's Share of Additional Operating Costs
payable for the last month of the Lease Term or Renewal Term as applicable,
together with all other amounts payable by Tenant to Landlord under this Lease),
and to be bound by all of the terms, covenants and conditions herein specified.
If Landlord relets the Leased Premises or any portion thereof to a new tenant
and the term of such new lease commences during the period for which Tenant
holds over, Landlord shall be entitled to recover from Tenant all costs and
expenses, reasonable attorneys' fees, post-judgment collection costs, damages
(including any reasonable relocation costs or other damages occasioned to such
new tenant and asserted against Landlord) and loss of profits incurred by
Landlord as a result of Tenant's failure to deliver possession of the Leased
Premises to Landlord when required under this Lease, together with any other
remedies provided to Landlord hereunder. If Tenant is holding over with
Landlord's consent, then Landlord shall give Tenant sixty (60) days' prior
written notice of Landlord's intention to terminate such permissible holdover,
and the foregoing costs and damages recoverable by Landlord for Tenant's failure
to
-50-
timely vacate, shall commence on the date specified in such sixty (60) day
notice.
13. MISCELLANEOUS.
-------------
13.1 Quiet Enjoyment. Subject to the rights of Landlord to enter into
---------------
the Leased Premises as provided in Subparagraph 7.1 hereof, if and so long as
Tenant pays all Rent and timely keeps and performs each and every term, covenant
and condition herein contained on the part of Tenant to be kept and performed,
Tenant shall quietly enjoy the Leased Premises without hindrance by Landlord.
13.2 Accord and Satisfaction. No receipt and retention by Landlord of
-----------------------
any payment tendered by Tenant in connection with this Lease shall constitute an
accord and satisfaction, or a compromise or other settlement, notwithstanding
any accompanying statement, instruction or other assertion to the contrary
unless Landlord expressly agrees to an accord and satisfaction, or a compromise
or other settlement, in a separate writing duly executed by Landlord. Landlord
will be entitled to treat any such payments as being received on account of any
item or items of Rent, interest, expense or damage due in connection herewith,
in such amounts and in such order as Landlord may reasonably determine, at its
sole option.
13.3 Severability. The parties intend this Lease to be legally valid and
------------
enforceable in accordance with all of its terms to the fullest extent permitted
by law. If any term hereof shall be stricken from this Lease to the extent
unenforceable, the same shall be as if it never had been contained herein. Such
invalidity or unenforceability shall not extend to any other term of this Lease,
and the remaining terms hereof shall continue in effect to
-51-
the fullest extent permitted by law, the same as if such stricken term never had
been contained herein.
13.4 Subordination and Attornment. Tenant agrees, upon request of
------------------------------
Landlord, to subordinate this Lease and Tenant's rights hereunder to the lien of
any mortgage, deed of trust or other encumbrance, together with any conditions,
renewals, extensions or replacements thereof ("Superior Instruments"), now or
hereafter placed, charged or enforced against any interest of Landlord in this
Lease, in the leasehold estate thereby created or in the Leased Premises or the
Building or the Project, together with any improvements included therein. If
requested in writing by Landlord or any mortgagee, beneficiary or ground lessor
of Landlord, Tenant agrees to execute a subordination agreement required to
effect the provisions of this Paragraph; provided such party acquires and
accepts the Leased Premises subject to this Lease and that, so long as Tenant is
not in default under this Lease, the rights of Tenant hereunder shall not be
disturbed by reason of the terms of such Superior Instrument, and that such
party executes a written non-disturbance agreement to such effect. If Tenant
fails to execute and deliver any such documents or instruments within ten (10)
business days following request therefor by Landlord, Tenant irrevocably
constitutes and appoints Landlord as Tenant's special attorney-in-fact to
execute and deliver any such documents or instruments.
In the event of any transfer in lieu of foreclosure or termination of
a lease in which Landlord is lessee or the foreclosure of any Superior
Instrument, or sale of the Property pursuant to any Superior Instrument, Tenant
shall attorn to such
-52-
purchaser, transferee or lessor and recognize such party as landlord under this
Lease. The agreement of Tenant to attorn contained in the immediately preceding
sentence shall survive any such foreclosure sale, termination of Landlord's
interest, or transfer.
13.5 Applicable Law/Construction. This Lease shall be construed
---------------------------
according to the laws of the State of California and the provisions hereof shall
be construed in accordance with their fair meaning. Each of the parties has
agreed to the use of the particular language hereof (and in all attached
Schedules), and any questions of doubtful interpretation shall not be resolved
solely by any rule or interpretation providing for interpretation against the
party who causes the uncertainty to exist or against the draftsman. The subject
captions have been inserted for convenience only and shall not be used to alter
or interpret the content of this Lease.
13.6 Binding Effect. The covenants, conditions, warranties and
--------------
agreements contained in this Lease shall be binding upon and inure to the
benefit of the parties and their respective successors and permitted assigns.
13.7 Time. Time is of the essence of this Lease.
----
13.8 Entire Agreement. This Lease and the schedules attached set forth
----------------
all the covenants, promises, agreements, representations, conditions, statements
and understandings between Landlord and Tenant concerning the Leased Premises,
the Building and the Project, and there are no representations, either oral or
written between the parties other than those in this Lease. This Lease shall
not be amended or modified except in a writing signed
-53-
by both parties. Failure to exercise any right in one or more instance shall
not be construed as a waiver of the right to strict performance or as an
amendment to or modification of this Lease.
13.9 Notices. All notices pursuant to this Lease shall be in writing and
-------
shall be effective on the earlier to occur of actual receipt or if mailed, three
(3) days after posting at a United States Post Office, when mailed by certified
mail or overnight mail, delivered (a) to Landlord or Tenant at the address
designated in Subparagraph 1.1 with a copy to the Managing Agent, or (b) to such
other address as may hereafter be designated by either party by written notice.
13.10 Force Majeure. Except as otherwise provided in this Lease, the
-------------
obligations of Tenant to pay Rent and perform all of the terms, covenants and
conditions on the part of Tenant to be performed hereunder shall in no way be
affected, impaired or excused because Landlord, due to Unavoidable Delay (as
defined below), (a) is unable to fulfill any of its obligations under this
Lease, or (b) is delayed in providing any service, equipment or fixtures
expressly or impliedly to be provided, or (c) is unable to make or is delayed in
making any repairs, replacements, additions, alterations or decorations.
Landlord shall in each instance exercise reasonable diligence to effect
performance when and as soon as possible. Landlord, however, shall not be
obligated to pay overtime labor rates.
"Unavoidable delay" shall mean any and all delay beyond Landlord's
reasonable control, including without limitation, delays caused by Tenant;
governmental restrictions, regulations, controls, preemptions or delays;
orders of civil, military or
-54-
naval authorities; strikes, labor disputes, lock-outs, shortages of labor or
materials or reasonable substitutes therefor;
Acts of God; fire, earthquake, floods, explosions or other casualties; extreme
weather conditions or other actions of the elements; enemy action, civil
commotion, riot or insurrection.
13.11 Attorneys' Fees; Prejudgment Interest. If the services of an
-------------------------------------
attorney are required by any party to secure the performance hereof or otherwise
upon the breach or Default of another party to this Lease, or if any judicial
remedy or arbitration is necessary to enforce or interpret any provision of this
Lease, the prevailing party shall be entitled to reasonable attorneys' fees,
costs, expert witnesses fees, post-judgment collection costs, and other
expenses, in addition to any other relief to which such party may be entitled.
Any award of damages following judicial remedy or arbitration as a result of the
breach of this Lease or any of its provisions shall include an award of
prejudgment interest from the date of the breach at the maximum amount of
interest allowed by law.
13.12 Authority. Tenant warrants and represents that it has full
---------
authority to enter into this Lease; that this Lease constitutes a binding
obligation on behalf of Tenant, and that the individual signing on behalf of
Tenant is duly authorized to bind Tenant hereto.
13.13 Hazardous Materials.
-------------------
13.13.1 Landlord's Representations and Warranties. Landlord
-----------------------------------------
hereby warrants and represents to Tenant that Landlord has no knowledge of the
presence within the Leased Premises, the Building, or the Project, of any
asbestos, polychlorinated
-55-
biphenyls or other hazardous substances. (As used in this Section 13.13, the
term "hazardous substances" shall mean those substances included within the
definition of "hazardous substances," "hazardous materials," "toxic substances"
or "solid waste" under applicable local, state or federal law (the
"Environmental Laws") or which are now regulated under the Environmental Laws,
including, without limitation, asbestos. Landlord hereby agrees to indemnify and
hold Tenant harmless from and against any claims, demands, actions, liabilities
and expenses incurred by Tenant as a direct result of Landlord's willful breach
of the foregoing representation and warranty.
13.13.2 Hazardous Substances Prohibited. Landlord and Tenant (in
-------------------------------
addition to the provisions of Subparagraph 6.1.3 above) each agrees that it
shall not, under any circumstances, cause or permit any hazardous substance to
be used, released, discharged, disposed of, handled, possessed or stored within
the Building, or any part or parts thereof, on the Project. The foregoing
covenant shall not apply to the use, handling, possession or storage of ordinary
office products such as, for example, "white-out" correction fluid and
photocopier toner (the "Permitted Products"), so long as such products are used,
handled, possessed, stored and disposed of in accordance with Environmental
Laws.
13.13.3 Notice. In the event that either Landlord or Tenant
------
discovers or is informed that a hazardous substance (other than the Permitted
Products) exists in the Leased Premises, in the Building, or any part or parts
thereof or in the Project, it shall immediately notify the other in writing of
such discovery or information.
-56-
13.14 Building Directory. Landlord shall list the Tenant's name and the
------------------
designated names of the officers and personnel of Tenant on the Building
directory at Landlord's sole cost and expense.
13.15 Parties' Approvals. Except as otherwise herein expressly provided,
------------------
whenever consent or approval of either party is required, that party shall not
unreasonably withhold or delay such consent or approval.
13.16 Deviation From Project Rules and Regulations. Notwithstanding the
--------------------------------------------
Rules and Regulations attached hereto as Schedule 2, the parties agree as
follows:
13.16.1 Tenant anticipates that it shall install a special
security system for the Leased Premises. The parties shall coordinate the access
under such system and Landlord's rights hereunder to enter into the Leased
Premises in the event of after-hours and/or emergency access requirements.
13.16.2 Landlord and Tenant shall address Tenant's need for
special electrical systems during the process of approval of the Leasehold
Improvements provided by Schedule 5 attached.
13.16.3 Tenant's preliminary plans for the Leased Premises include
an emergency generator and a diesel storage tank, each of which is hereby
approved by Landlord subject to Tenant's obtaining all necessary governmental
permits and approvals, and subject to Landlord's approval of the final
placement/location of the same.
-57-
SUBMISSION OF THIS INSTRUMENT FOR EXAMINATION OR SIGNATURE BY TENANT
DOES NOT CONSTITUTE A RESERVATION OF OR OPTION FOR LEASE, AND IT IS NOT
EFFECTIVE AS A LEASE OR OTHERWISE UNTIL EXECUTION AND DELIVERY BY BOTH LANDLORD
AND TENANT.
This Lease is executed as of the 21st day of June, 1996.
LANDLORD:
PROSPECT GREEN PARTNERS, a
California Joint Venture
By: L&T PROSPECT PARTNERS, L.P., a
California limited partnership,
Managing Venturer
By: LANKFORD & ASSOCIATES, INC.,
a Colorado corporation,
General Partner
By: /s/ David S. Taylor
---------------------------
David S. Taylor,
Executive Vice President
TENANT:
E*TRADE GROUP, INC.,
a California corporation
By: /s/ Kathy Levinson
----------------------------
Kathy Levinson,
Senior Vice President
By: /s/ Stephens Richards
--------------------------------
Stephens Richards,
Senior Vice President and
Chief Financial Office
Where Tenant is a corporation, this Lease shall be signed by a President or Vice
President and Secretary or Assistant Secretary of Tenant. Any other signatories
shall require a certified corporate resolution.
-58-
SCHEDULE 1
DESCRIPTION OF THE PREMISES AND FLOOR PLAN
------------------------------------------
The Leased Premises is the entire Building, the floor plans for which
are as shown on the drawing attached hereto as a part of Schedule 1; however,
for purposes of calculating Base Rent, the Leased Premises shall initially
consist of the areas shown as Areas 1A, 1B and 2 on the drawing attached hereto,
the Rentable square footage of which shall be calculated as provided in
Subparagraph 1.1 of this Lease. The foregoing calculation notwithstanding, the
initial square footage for purposes of determining Base Rent shall be not less
than thirty-five thousand (35,000) Rentable square feet. Effective as of the
thirteenth (13th) month of the Lease Term, for purposes of determining Base
Rent, the Leased Premises shall, whether or not Tenant has built-out all of the
Building, be deemed to be the entire Rentable square footage of the Building, or
seventy thousand sixty-five (70,065) Rentable square feet, which shall be the
addition of the areas shown as areas 3 and 4 on the drawing attached hereto as a
part of Schedule 1.
[ARTWORK OF PHASE 1B, PHASE 2, PHASE 3, PHASE 4]
SCHEDULE 2
RULES AND REGULATIONS
---------------------
Except as otherwise provided in any provision of the Lease, as provided in
Subparagraph 1.2, the following Rules and Regulations shall apply:
1. The sidewalks, entrances, halls, corridors, elevators and stairways of
the Building and Project shall not be obstructed or used as a waiting or
lounging place by Tenants, and their agents, servants, employees, invitees,
licensees and visitors.
2. In case of invasion, riot, public excitement or other commotion,
Landlord reserves the right to prevent access to the Building during the
continuance of same. Landlord shall in no case be liable for damages for the
admission or exclusion of any person to or from the Building.
3. Tenant shall not alter any lock, or install new or additional locks or
bolts on any door without the prior written approval of Landlord. In the event
of such alteration or installation approved by Landlord, the Tenant making such
alteration shall supply Landlord with a key for any such lock or bolt. Each
Tenant, upon the expiration or termination of its tenancy, shall deliver to
Landlord all keys and access cards in any such Tenant's possession for all locks
and bolts in the Building.
4. Intentionally Deleted.
5. No iron safe or other heavy or bulky object shall be delivered to or
removed from the Building, except by experienced safe men, movers or riggers
approved in writing by Landlord. There shall not be used in any space, or in
the public halls of the Building, either by Tenant or by jobbers or others, in
the delivery or receipt of merchandise, any hand trucks, except those equipped
with rubber tires.
6. The walls, partitions, skylights, windows, doors and transoms that
reflect or admit light into passageways or into any other part of the Building
shall not be covered or obstructed.
7. The toilet rooms, toilets, urinals, wash bowls and water apparatus
shall not be used for any purposes other than for those for which they were
constructed or installed, and no sweepings, rubbish, chemicals, or other
unsuitable substances shall be thrown or placed therein. The expense of any
breakage, stoppage or damage resulting from violation(s) of this rule shall be
borne by Tenant.
8. No sign, name, placard, advertisement or notice shall be inscribed,
painted or affixed by Tenant on any part of the Building or Project without the
prior written approval of Landlord. All signs or letterings on doors, or
otherwise approved by Landlord shall be inscribed, painted or affixed at the
sole cost and expense of the Tenant, by a person approved by Landlord.
2-1
9. No signalling, telegraphic or telephonic instruments or devices, or
other wires, instruments or devices, shall be installed without the prior
written approval of Landlord. Such installations, and the boring or cutting for
wires, shall be made at the sole cost and expense of the Tenant and under
control and direction of Landlord. Landlord retains, in all cases, the right to
require (i) the installation and use of such electrical protecting devices that
prevent the transmission of excessive currents of electricity into or through
the Building, (ii) the changing of wires and of their installation and
arrangement underground or otherwise as Landlord may direct, and (iii)
compliance on the part of all using or seeking access to such wires with such
rules as Landlord may establish relating thereto. All such wires must be
clearly tagged at the distribution boards and junction boxes and elsewhere in
the Building, with the purpose for which said wires are used, and the name of
the company operating same.
10. Tenant, their agents, servants or employees, shall not (a) go on the
roof of the Building, (b) use any additional method of heating or air
conditioning in the Leased Premises, (c) bring in or keep in or about the Leased
Premises any vehicles or animals of any kind, (e) install any radio or
television antenna or any other devise or item on the roof, exterior walls,
windows or window sills of the Building (except in connection with the Tenant
Improvements approved by Landlord), (f) place objects against glass partitions,
doors or windows which would be unsightly from the exterior of the Building, (g)
use any Leased Premises: (1) for lodging or sleeping, (2) for a kitchen an/or
cooking area, except in compliance with all applicable law and all insurance
policies applicable to the Leased Premises), (3) for any manufacturing, storage
or sale of merchandise or property of any kind; and (h) cause or permit unusual
or objectionable odor to be produced or permeate from the Leased Premises,
including, without limitation, duplicating or printing equipment fumes. Tenant,
its agents, servants and employees, invitees, licensees, or visitors shall not
permit the operation of any musical or sound producing instruments or device
which may be heard outside the Leased Premises, Building or garage facility, or
which may emit electrical waves which will impair radio or television broadcast
or reception from or into the Building. Landlord acknowledges and agrees that
Tenant shall be entitled to operate a cafeteria for the use of its employees and
business guests.
11. Tenants shall not store or use in any Leased Premises any (a) other,
naphtha, phosphorous, benzol, gasoline, benzine, petroleum, crude or refined
earth or coal oils, flashlight power, kerosene or camphene, (b) any other
flammable, combustible, explosive or illuminating fluid, gas or material of any
kind, and (c) any other fluid, gas or material of any kind having an offensive
odor, without the prior written consent of Landlord.
12. No canvassing, soliciting, distribution of hand bills or other written
material, or peddling shall be permitted in the Building or the Project, and
Tenants shall reasonably cooperate with Landlord in prevention and elimination
of same.
2-2
13. Tenant shall give Landlord prompt notice of all accidents to or defects
in air conditioning equipment, plumbing, electrical facilities or any part of
appurtenances of Leased Premises.
14. Intentionally Deleted.
15. No curtains, blinds, shades, screens, awnings or other coverings or
projections of any nature shall be attached to or hung in, or used in connection
with any door, window or wall of the Building without the prior written consent
of the Landlord, which consent shall not be unreasonably withheld or delayed.
16. Landlord shall have the right to prohibit any advertising by Tenant at
the Project which, in Landlord's opinion, tends to impair the reputation of
Landlord or of the Building, or its desirability as an office building for
prospective tenants who require the highest standards of integrity and
respectability, and upon written notice from Landlord, Tenant shall refrain from
or discontinue such advertising.
17. Wherever the word "Tenant" occurs, it is understood and agreed that it
shall also mean Tenant's associates, employees, agents and any other person
entering the Building or Leased Premises under the express or implied invitation
of Tenant. Tenant shall cooperate with Landlord to assure compliance by all
such parties with rules and regulations.
18. Landlord reserves the right to make reasonable amendments,
modifications and additions to the rules and regulations heretofore set forth,
and to make additional reasonable rules and regulations, as in Landlord's sole
judgement may from time to time be needed for the safety, care, cleanliness and
preservation of good order of the Building.
19. Tenant shall not do anything in the Leased Premises, or bring or keep
anything herein, which will in any way increase or tend to increase the risk of
fire or rate of insurance, or which shall conflict with the Regulations of the
Fire Department or the fire laws or with any insurance policy on the Building or
any part thereof, or with any rules or ordinances established by Municipal
Authority.
20. The requirements of Tenant will be attended to only upon application at
Landlord's office. Employees of Landlord shall not perform any work or do
anything outside of their regular duties unless under special instruction from
Landlord, and no employee will admit any person (Tenant or otherwise) to any
office without specific instructions from Landlord.
21. Landlord shall have the right, exercisable without notice and without
liability to Tenant, to change the name and the street address of the Building
which the Premises are a part. Landlord will pay for all reasonable costs
incurred by Tenant as a result of changing the street address of the Building
unless the change is requested by an authorized governmental agency.
2-3
22. No Tenant shall obtain for use upon the Leased Premises ice, drinking
water, towel or other similar service or accept barbering or bootblacking
services on the Leased Premises, except from persons authorized by Landlord and
at the hours and under regulations fixed by Landlord. Notwithstanding the
foregoing, Tenant shall have the right to provide bottled water service of its
choice.
LANDLORD:
PROSPECT GREEN PARTNERS, a
California Joint Venture
By: L&T PROSPECT PARTNERS, L.P., a
California limited partnership,
Managing Venturer
By: LANKFORD & ASSOCIATES, INC.,
a Colorado corporation,
General Partner
By: /s/ David S. Taylor
---------------------------
David S. Taylor,
Executive Vice President
WITNESS:
__________________________
__________________________
TENANT:
E*TRADE GROUP, INC.,
a California corporation
WITNESS:
__________________________ By: /s/ Kathy Levinson
-----------------------------
Kathy Levinson,
__________________________ Senior Vice President
By: /s/ Stephen Richards
-----------------------------
Stephen Richards,
Senior Vice President and
Chief Financial Office
2-4
SCHEDULE 3
PROSPECT GREEN BUSINESS PARK COMMON AREA CHARGES
------------------------------------------------
The common area charges for Prospect Green Business Park are comprised of
all costs relating to the common green and grove areas (including the
amphitheater), located in the area shown on the drawing attached hereto as a
part of Schedule 3 (the "Common Area"), as follows: landscaping; utilities
(including, without limitation, water for irrigation and electricity for outdoor
lighting); maintenance, repair and refurbishment of the walkways, sidewalks,
amphitheater, light fixtures and poles, and misting/fogging machines and
apparatuses; rubbish and snow removal; insurance (and deductibles, to the extent
utilized), real property taxes and assessments; equipment, tools, materials and
supplies; maintenance, repair and refurbishment of signs and markers; fees
imposed by governmental authorities having or asserting jurisdiction;
administrative fees incurred in operation and management of the Common Area;
and any other costs incurred in connection with the Common Area.
Tenant shall be deemed to have accepted as correct Landlord's annual notice
of Common Area charges (given by Landlord in accordance with Section 3.4 of the
attached Lease) unless, within ten (10) days following Tenant's receipt thereof,
Tenant shall notify Landlord (in accordance with the terms of the attached
Lease) of Tenant's desire to conduct an audit of the records supporting such
statement. Thereafter, Landlord and Tenant shall arrange a time, during regular
business hours, (within thirty (30) days following Tenant's said notice to
Landlord), at Landlord's (or Managing Agent's) office when Tenant may cause an
impartial, reputable certified public accountant (or other impartial
professional auditor or comparable individual or entity whose expertise includes
the audit contemplated hereby) who is reasonably acceptable to Landlord) to
audit the accounts and records supporting the annual statement in question
(which shall be restricted to records for Common Area charges, should such
statement include other matters). Such audit shall be restricted (a) to
verification that (i) such books and records are being maintained in accordance
with GAAP and (ii) the statements delivered to Tenant were prepared in
accordance with the terms of this Lease, and (b) to only the time period covered
by such statement (unless a problem is found, and then earlier years can be
reviewed as to that problem only). Tenant shall not be entitled to make
photocopies of any account ledgers or back-up documentation. Landlord's
employees shall cooperate with Tenant in providing books and records for on-
premises review; provided that such audit shall not exceed one (1) business day
in duration. The cost of such audit shall be borne by Tenant. Tenant shall,
during the pendency of such audit, pay the amounts specified in such statement.
Tenant hereby covenants to hold in confidence all information obtained from any
such audit. Should Tenant have any questions or concerns following such audit,
the parties shall meet and confer within a reasonable period of time and attempt
to resolve such concerns.
3-1
[ARTWORK OF PROSPECT GREEN II]
SCHEDULE 4
INTENTIONALLY DELETED
---------------------
4-1
SCHEDULE 5
PROSPECT GREEN BUSINESS PARK
Sacramento, California
Date: June 21, 1996
WORK LETTER AGREEMENT
---------------------
E*TRADE GROUP, INC.
Four Embarcadero Center
2400 Geng Road
Palo Alto, California 94303-3317
Attention: Mr. Robert Clegg
Re: Suite 100, 10951 White Rock Road, Rancho Cordova, CA
Ladies and Gentlemen:
You (referred to as "Tenant"), and we (referred to as "Landlord") are
executing, simultaneously with this Work Letter Agreement, a written lease (the
"Lease") pertaining to the space referred to above (the "Leased Premises").
This Work Letter Agreement is attached to the Lease as Schedule 5 and made a
part hereof.
To induce Tenant and Landlord, each, to enter into the Lease (which is
hereby incorporated by reference to the extent that the provisions of this Work
Letter Agreement may apply thereto) and in consideration of the mutual covenants
hereinafter contained, Landlord and Tenant mutually agree as follows:
1. Definitions. The terms defined in this paragraph, for purposes of this
-----------
Work Letter Agreement, shall have the meanings specified herein, and in addition
to the terms defined herein, terms defined in the Lease shall, for the purposes
of this Work Letter Agreement, have the meanings specified therein.
1.1 "Base Tenant Improvements" means the Building Standard and other
mutually agreed upon Tenant Improvements (as defined in paragraph 1.2 below)
items set forth in Exhibit I attached which are supplied, installed and finished
by Tenant (in accordance with the construction schedule attached hereto as
Schedule 5-A), and which shall be paid for by Landlord as provided for in
paragraph 2.3 below. Landlord shall be responsible for payment of the maximum
amount of Twenty-eight and No/100 Dollars ($28.00) per Useable square foot of
Tenant's Square Footage for construction of the Base Tenant Improvements (the
Tenant Improvement Allowance). For the purposes hereof, Useable square footage
shall be determined in accordance with the BOMA method.
5-1
1.2 "Building Standard" means the quantity and quality of materials,
finishing and workmanship specified by Tenant and approved by Landlord for the
Building, as set forth on Exhibit I attached hereto and made a part hereof.
1.3 "Construction Documents" means the construction drawings, plans
and specifications referred to in paragraphs 2.2 and 2.3 below, to be attached.
1.4 "Extraordinary Tenant Improvements" means any work Tenant requests
that it be permitted to do, or requests Landlord to do in connection with the
Leased Premises, the cost of which is in excess of the Tenant Improvement
Allowance.
1.5 "Leasehold Improvements" means the aggregate of Base Tenant
Improvements, as contemplated by the Construction Documents, and Extraordinary
Tenant Improvements, if any.
1.6 "Substantial Completion" means that the Leasehold Improvements
have been substantially completed according to the Construction Documents,
except for items which will not materially affect the use of the Leased Premises
and which customarily are deemed to be "punchlist work", as certified by
Landlord's architect.
2. Construction Documents; Payments.
--------------------------------
2.1 Tenant shall prepare and submit to Landlord for its approval a
preliminary floor plan for the Leased Premises, a copy of which shall be
attached to the Lease as part of Schedule 5-A (the "Preliminary Plan") in
accordance with the Construction Schedule attached as Schedule 5-A. Tenant
shall complete the Base Tenant Improvements in accordance with the Building
Standard, but Landlord, its agents, contractors and employees shall have the
ongoing, unfettered right to supervise all work being done by or for the the
benefit of Tenant in the Building. Tenant shall provide Landlord with a written
estimate of the cost of completing the Base Tenant Improvements according to the
Preliminary Plan (the "Estimate"). The Estimate represents Tenant's good faith
estimate of the cost of completing the Base Tenant Improvements. Landlord shall
have no liability if the Final Cost (as such term is defined in paragraph 2.3
below) of the Base Tenant Improvements is greater than the Estimate.
2.2 Tenant shall, within the timeframes set forth on the Construction
Schedule attached as Schedule 5-A, cause the Consultants (defined below) to
prepare and submit to Landlord for approval or disapproval all drawings, plans
and specifications necessary to construct the Leasehold Improvements. The
following companies shall prepare the drawings, plans and specifications which
are to comprise the Construction Documents:
Architectural: Columbus Architecture
Engineering: KPFF Engineering
5-2
Electrical: Nutter Electric
Mechanical: AIRCO Mechanical
(collectively, the "Consultants"). All such consultants shall be acceptable to
Landlord in its reasonable discretion; and (iii) neither Tenant, nor such
consultant shall arrange or conduct any meetings (relevant to the Leased
Premises or the Tenant Improvements) with any governmental agencies having
jurisdiction over the Building without first notifying Landlord, and Landlord
shall have the absolute right to participate in all such meetings. The fees and
expenses of the Consultants for preparing the initial drawings, plans and
specifications which are to comprise the Construction Documents shall be
included in the Final Cost (defined in paragraph 2.3 below) and allocated
accordingly between Base Tenant Improvements and Extraordinary Tenant
Improvements.
2.3 Upon Landlord's approval of the final form of the drawings,
plans and specifications in accordance with the timeframes set forth on Schedule
5-A attached,, which when approved by Landlord shall constitute the Construction
Documents, Tenant shall cause to be prepared an analysis of the cost of
construction of the Leasehold Improvements according to the Construction
Documents (the "Final Cost"). An analysis of the cost of Extraordinary Tenant
Improvements shall be submitted to Landlord for its approval. That portion of
the Final Cost attributable to the Base Tenant Improvements shall be paid for by
Landlord (the "Landlord's Share") and that portion of the Final Cost
attributable to the construction of the Extraordinary Tenant Improvements shall
be paid for by Tenant (the "Tenant's Share"). Within ten (10) business days of
receipt of the statement of Final Cost, Landlord shall either approve or
disapprove the portion thereof attributed to Base Tenant Improvements, the sole
basis for disapproval of which shall be as to items representing a change in
specification or a change in cost from the original documents and estimates
approved by Landlord. However, if Landlord requires additional information
regarding the Final Cost, Tenant shall promptly supply same and Landlord shall
have a reasonable additional time period, not to exceed an additional five (5)
business days to approve the Final Cost. If Landlord does not approve the Final
Cost attributed to the Base Tenant Improvements, it shall promptly notify Tenant
thereof; in which case Tenant and Landlord shall use their best efforts to amend
the Construction Documents in a manner satisfactory to each. Tenant acknowledges
that Landlord's sole obligation is to pay the costs attributable to the
construction of the Base Tenant Improvements, and Tenant shall pay all other
costs of the construction of the Leasehold Improvements as the Tenant's Share.
If the Construction Documents require the construction or installation of
additional improvements beyond those regularly provided by Landlord in the core
of the building in which the Leased Premises are located (including, without
limitation, extra sprinklers, fire hose cabinets and other safety devices),
Tenant agrees to pay all costs and expenses arising from the construction and
installation of such additional improvements. All costs attributable to changes
and variations from the Construction Documents (including, without limitation,
fees and expenses of the
5-3
Consultants and any increased costs of construction) shall be paid by Tenant.
Notwithstanding anything herein to the contrary, in no event shall Landlord be
obligated to advance any of the Tenant Improvement Allowance until such time as
Tenant has provided adequate conditional lien waivers or other documentation
reasonably requested by Landlord to insure that neither the Building nor the
Project is or shall be the subject of a lien claim.
3. Leasehold Improvements
----------------------
3.1 The following provisions shall apply to the construction of the
Leasehold Improvements:
(a) All work involved in the completion of the Leasehold \
Improvements shall be carried out by Tenant and its agents and contractors under
the supervision of Landlord (which supervision shall be at no cost to Tenant).
Tenant shall cooperate with Landlord and its agents and contractors to promote
the efficient and expeditious completion of the Leasehold Improvements; and
/s/ /s/
---------------------- ----------------------
Tenant Landlord
(b) Tenant agrees to construct the Base Tenant Improvements in
accordance with the Construction Documents, and in compliance with all the
applicable provisions of this Work Letter Agreement and the Lease, including,
the covenant to keep the Project free from all liens and encumbrances.
3.2 If Tenant requests any changes in the Leasehold Improvements from
the work as reflected in the Construction Documents, each such change must
receive the prior written approval of Landlord, and Tenant shall bear the cost
resulting from such changes.
3.3 Tenant shall have no authority to commence construction of any
work in the Leased Premises until (a) Landlord has approved the construction of
the Base Tenant Improvements as required by the provisions hereof, and (b)
Landlord shall have received evidence of Tenant's ability to pay Tenant's Share,
such evidence to be in form reasonably acceptable to Landlord.
4. Lease Commencement Date.
-----------------------
4.1 Tenant shall notify Landlord when it believes that Substantial
Completion has been achieved, and thereafter the Lease Commencement Date shall
be established as set forth in the Lease. Notwithstanding anything to the
contrary contained in the Lease or this Work Letter Agreement, the Lease
Commencement Date shall not be extended for any delay in Substantial Completion
to the extent that such delay is caused by any act or omission attributable to
Tenant, including without limitation:
5-4
(a) Tenant's request for any Extraordinary Tenant Improvements
or for any changes in the work that is reflected in the final plans and
specifications for such Improvements;
(b) Tenant's failure to furnish promptly, information concerning
Tenant's requirements pertaining to construction of the Base Tenant Improvements
or any other information requested by the Consultants necessary or useful to
prepare the initial drawings, plans and specifications which are to comprise the
Construction Documents;
(c) Tenant's failure to approve the initial drawings, plans and
specifications, which are to comprise the Construction Documents within five (5)
days of receipt of said Construction Documents;
(d) Tenant's request for any changes in the Leasehold
Improvements from the work as reflected in the Construction Documents.
4.2 In any event, Rent payable under the Lease shall not abate by
reason of any delay, expense or other burden arising out of or incurred in
connection with the design or construction of the Leasehold Improvements to the
extent that such delay, expense or other burden is caused by any act or omission
attributable to Tenant (including, without limitation, the acts and omissions
referred to in subparagraphs (a) through (d) of paragraph 4.1 above).
5. Tenant's Access to Leased Premises.
----------------------------------
5.1 Landlord hereby grants Tenant and Tenant's agents or independent
contractors license to enter the Leased Premises prior to the scheduled Lease
Commencement Date in order that Tenant may (i) perform the work contemplated by
this Work Letter Agreement; and (ii) do other work as may be required by Tenant
to make the Leased Premises ready for Tenant's use and occupancy, including
training employees; provided that such prior occupancy is in accordance with
approvals by the County of Sacramento. As a condition to all such prior entry,
Tenant and Tenant's agents, contractors, workmen, mechanics, suppliers and
invitees shall not interfere with Landlord and its agents or with other tenants
and occupants of the Building or the Project. If at any time such entry shall
cause or threaten to cause disharmony or interference, or shall be in violation
of any regulations, permits or approvals of the County of Sacramento, Landlord,
in its sole discretion, shall have the right to withdraw and cancel such license
upon notice to Tenant. Tenant agrees that any such entry into the Leased
Premises shall be deemed to be under all of the terms, covenants, conditions and
provisions of the Lease, except the covenant to pay periodic Rent. Tenant
further agrees that, to the extent permitted by law, Landlord and its principals
shall not be liable in any way for any injury or death to any person or persons,
loss or damage to any of the Leasehold Improvements or installations made in the
Leased Premises or loss or damage to
5-5
property placed therein or thereabout, the same being at Tenant's sole risk.
5.2 In addition to any other conditions or limitations on such
license to enter the Leased Premises prior to the Lease Commencement Date,
Tenant expressly agrees that none of its agents, contractors, workmen,
mechanics, suppliers or invitees shall enter the Leased Premises prior to the
Lease Commencement Date unless and until each of them shall furnish Landlord
with satisfactory evidence of insurance coverage, financial responsibility and
appropriate written releases of mechanic's or materialmen's lien claims.
6. Miscellaneous Provisions. Landlord and Tenant further agree as
------------------------
follows:
6.1 Except as may be provided in the Lease and as herein expressly set
forth with respect to the Leasehold Improvements, Landlord has no agreement with
Tenant and has no obligation to do any work with respect to the Leased Premises.
Any other work in the Leased Premises which may be permitted by Landlord
pursuant to the terms and conditions of the Lease, including any alterations or
improvements as contemplated by Subparagraph 6.1.4 of the Lease, shall be done
at Tenant's sole cost and expense and in accordance with the terms and
conditions of the Lease.
6.2 This Work Letter Agreement shall not be deemed applicable to:
(i) any additional space added to the original Leased Premises at any time,
whether by the exercise of any options under the Lease or otherwise, or (ii) any
portion of the original Leased Premises or any additions thereto in the event of
a renewal or extension of the original Lease Term, whether by exercise of any
options under the Lease or any amendment or supplement thereto. The construction
of any additions or improvements to the Leased Premises not contemplated by this
Work Letter Agreement shall be effected pursuant to a separate work letter
agreement, in the form then being used by Landlord and specifically addressing
the allo cations of costs relating to such construction.
6.3 Any person signing this Work Letter Agreement on behalf of Tenant
warrants and represents he/she has authority to do so.
6.4 This Work Letter Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, legal representatives,
successors and assigns.
5-6
If the foregoing correctly sets forth our understanding, kindly
acknowledge your approval in the space provided below for that purpose and
return to us two signed counterparts of this Work Letter Agreement.
Very truly yours,
PROSPECT GREEN PARTNERS, a
California Joint Venture
By: L&T PROSPECT PARTNERS, L.P., a
California limited partnership,
Managing Venturer
By: LANKFORD & ASSOCIATES, INC.,
a Colorado corporation,
General Partner
By: /s/ David S. Taylor
-----------------------------------
David S. Taylor,
Executive Vice President
Agreed to and accepted the 21st day of June, 1996.
E*TRADE GROUP, INC.,
a California corporation
By: /s/ Kathy Levinson
-----------------------------
Kathy Levinson,
Senior Vice President
By: /s/ Stephen Richards
-----------------------------
Stephen Richards,
Senior Vice President and
Chief Financial Officer
5-7
EXHIBIT I PROSPECT GREEN II
TYPICAL BUILDING STANDARDS
--------------------------
Partitions:
- ----------
A. Demising and Corridor Partition. 25 gauge, minimum 2-1/2" metal studs,
-------------------------------
24" o.c., between floor slab and structure above with R-7 insulation.
5/8" type "X" gypsum board on each face, painted with 2 coats of flat
latex paint and vinyl base on both sides.
B. Interior Partition. 25 gauge, 2-1/2" metal studs, 24" o.c., between
------------------
floor slab and suspended ceiling grid. No insulation. 5/8" type "C"
gypsum board on each face, painted with flat latex paint and vinyl base
on both sides.
Doors:
- -----
A. Building Entry Door. 16 gauge, pressed steel frame, welded one-piece
-------------------
unit, to accept 3'0" x 7'0" x 1-3/4" solid core rotary natural birch
door. Door to be finished with 2 coats of clear sealer/varnish. Brushed
chrome hardware - Schlage L-9000 Series hardware with closer, brushed
chrome finish.
B. Suite Interior Door. K.D. Metal to accept 3'0" x 9'" x 1-3/4" solid core
-------------------
birch veneer door. Door to be finished with 2 coats of sealer/varnish.
Schlage L-9000 Series hardware, brushed chrome finish.
Electric:
- --------
A. Fluorescent Lights. 2 x 4 Parabolic; Lithonia PM3 Series, GEB
------------------
(Electronic Ballast). Fixtures to be factory lamped with F.O. 32700
lamps - color w/w #3000K.
B. Convenience Outlets. Leviton #16242-W, or equal, 125-volt grounded
-------------------
duplex devices or equal.
C. Telephone Outlet. Standard junction box, cover plate, pull-string to top
----------------
of wall. Device cover plate and Teflon cabling furnished and installed by
Tenant's telephone vendor.
D. Light Switch. Leviton 5601-W, or equal, 277-volt standard rocker (line
------------
voltage) switch. Provide hi-low level switch as required by code.
Heating, Ventilating and Air Conditioning:
- ------------------------------------------
As required for building standard space. Does not include, for example,
air conditioning for computer rooms.
Ceiling System:
- --------------
5-8
2 x 2 recessed grid acoustic tile or equal.
Carpet:
- ------
DESIGNWEAVE - New Sabre, or equal.
38 oz. cut pile, direct glue down. Choice of colors.
Window Coverings:
- ----------------
Levelor vertical blinds, or equal. 3-1/2" perforated slates.
Miscellaneous:
- -------------
Exit lights, smoke detectors and fire sprinklers as required by code.
5-9
SCHEDULE 5-A
CONSTRUCTION SCHEDULE
---------------------
TENANT IMPROVEMENT CONSTRUCTION SCHEDULE
A. Design Development:
------------------
1. Preparation of Construction Documents (Tenant) 4/1/96
2. Preparation of Statement of Final Cost (Tenant) 5/1/96
3. Approval of Construction Documents and
Final Cost (Tenant and Landlord) 5/15/96
B. Construction:
-------------
1. Submit Application for Tenant Improvement 4/18/96
Permit
2. Commence Construction 4/22/96
3. Commence Tenant's Fixturing 6/13/96
4. Substantial Completion of Construction 6/18/96
5. Tenant Move-In 6/18/96
5A-1
SCHEDULE 6
CERTIFICATE OF ACCEPTANCE
-------------------------
TENANT: ______________________________________
LOCATION: SUITE ______, PROSPECT GREEN II, PROSPECT GREEN BUSINESS PARK
This letter is to certify that:
1. The above referenced space has been accepted by the Tenant for
possession.
2. The subject space is substantially complete in accordance with the plans
and specifications used in construction of the demised premises.
3. The subject space can now be used for intended purposes.
Commencement Date ____________________, 19__.
Expiration Date ____________________, 19__.
Tenant's Total
Square Footage ____________________________
Executed this ____day of _______________, 19__.
"Tenant"
_______________________________
By:________________________________
Its:_____________________________
By:________________________________
Its:_____________________________
6-1
SCHEDULE 7
BASE RENT
---------
Period Monthly * Annual *
------
Initial Term (Months) Base Rent Management Fee
- --------------------- --------- --------------
1 - 24 $1.17 $0.33
25 - 60 $1.22 $0.344
61 - 120 $1.27 $0.358
* Per Tenant's Total Rentable Square Feet
7-1
SCHEDULE 8
PARKING
-------
Landlord hereby grants to Tenant a license to the use during the term of
this Lease the space described in Subparagraph 1.1.11. Tenant agrees to comply
with such reasonable rules and regulations as may be made by Landlord from time
to time in order to insure the proper operation of the parking facilities.
Tenant agrees not to overburden the parking facilities and agrees to cooperate
with Landlord and other tenants in the use of parking facilities. Landlord
reserves the right in its sole discretion to determine whether parking
facilities are becoming crowded, and in such event, to allocate specific parking
spaces among Tenant and other tenants or to take such other steps necessary to
correct such condition, including but not limited to policing and towing, and if
Tenant, its agents, officers, employees, contractors, licensees or invitees are
deemed by Landlord to be contributing to such condition, to charge to Tenant as
Rent that portion of the cost thereof which Landlord reasonably determines to be
caused thereby. Landlord may, in its sole discretion, change the location and
nature of the reserved parking spaces available to Tenant, if any, provided that
after such change, there shall be available to Tenant approximately the same
number of reserved spaces as available before such change. Each of Tenant's
non-reserved spaces shall be provided at no cost to Tenant.
Tenant acknowledges that a Sacramento County air quality ordinance is
pending and, when adopted would require Tenant to encourage on auto emissions
reduction by Tenant's employees, and may cause a reduction in the number of
parking spaces available to Tenant. Landlord shall provide a transportation
manager to assist Tenant in developing a transportation management plan to
comply with such ordinance.
TENANT: LANDLORD:
E*TRADE GROUP, INC. PROSPECT GREEN PARTNERS, a
California Joint Venture
By: /s/ Kathy Levinson
--------------------------
Kathy Levinson
Senior Vice President By: L&T PROSPECT PARTNERS, L.P.,
a California limited
partnership, Managing
Venturer
By: /s/ Stephen Richards
--------------------------
Stephen Richards,
Senior Vice President and
Chief Financial Officer By: LANKFORD & ASSOCIATES, INC.,
a Colorado corporation,
General Partner
By: /s/ David S.Taylor
--------------------------
David S. Taylor,
Executive Vice President
EXHIBIT A
SITE PLAN SHOWING ANNEX PROPERTY AND PROSPECT GREEN II
ANNEX EXPANSION OPTION
This ANNEX EXPANSION OPTION (this "Option"), is entered into as of the 21st
day of June, 1996, by and between PROSPECT GREEN PARTNERS, a California joint
venture ("Landlord") and E*TRADE GROUP, INC., a California corporation
("Tenant").
RECITALS
A. Landlord currently owns that certain real property labelled as the
"Annex Parcel" on the site plan attached hereto as Exhibit A and made a part
hereof for all purposes, and described as Lot 2 of that certain Lot Line
Adjustment recorded December 26, 1995, in Book 95-12-26, Page 471, of the
Official Records of Sacramento County, California (the "Annex Property").
B. Contemporaneously with the execution of this Option, Landlord and Tenant
have entered into a lease (the "PGII Lease") whereby Landlord has agreed to
lease to Tenant and Tenant has agreed to lease from Landlord a portion of the
building known as Prospect Green II which is situated on that certain real
property adjacent to the Annex Property and labelled as the "PG II Parcel" on
Exhibit A attached hereto.
C. Tenant desires to obtain the right to negotiate for future development
of the Annex Property for purposes of meeting Tenant's future needs for
additional office space not available in Prospect Green II, and Landlord is
willing to afford Tenant such right, on the terms and conditions set forth
below.
AGREEMENT
In consideration of the foregoing, and other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. So long as Tenant is not in default under the terms and conditions of
the PGII Lease, Landlord hereby agrees to negotiate in good faith to make
available the Annex Property for Tenant's future expansion needs, on the
following terms and conditions:
1.1 Annex Expansion Option.
----------------------
(1) Grant of Option. For the first thirty-six (36) months of the
---------------
Lease Term under the PGII Lease (the "Annex Option Period"), Tenant shall have
the option to lease (the "Annex Expansion Option") the Annex Property on
substantially the same terms and conditions of the PGII Lease
including, without limitation, (i) a tenant improvement allowance in the maximum
amount of twenty-eight and no/100 per Useable square foot of area in the
building to be constructed on the Annex Property (the "Annex Building") and (ii)
a term of ten (10) years; provided, however, that initial Base Rent shall be
equal to an eleven percent (11%) return on the cost to Landlord to develop the
Annex Building, not to exceed One and 18/100 Dollars ($1.18) per Rentable square
foot per month (on a standard triple net basis), and such rental rate shall be
adjusted upward during the term to reflect then prevailing market adjustments.
(2) Exercise of Option. Tenant may elect to exercise the Annex
------------------
Expansion Option by delivering to Landlord written notice of its exercise of the
Annex Expansion Option (the "Notice of Exercise") on or before the expiration of
the Annex Option Period. As a condition of the effectiveness of the Notice of
Exercise, Tenant shall, no later than twelve (12) months prior to the expiration
of the Annex Option Period, deliver a written notice to Landlord of Tenant's
intention to exercise the Annex Expansion Option (the "Notice of Intent"). The
Notice of Intent shall set forth the amount of Rentable square feet of space in
the Annex Building that Tenant intends to lease - Tenant having the election of
a single story building containing approximately fifteen thousand (15,000)
square feet, or - subject to a special development permit or similar requirement
that Landlord hereby agrees to use its reasonable business efforts to obtain - a
two story building containing approximately thirty thousand (30,000) Rentable
square feet (the "Additional Premises"), the proposed configuration of the
building and other improvements to be constructed in the Additional Premises,
and the outside date by when the Additional Premises, with the improvements
substantially completed thereon, must be delivered to Tenant for occupancy,
which date shall be no sooner than ten (10) months following execution of the
Additional Premises Lease described below (the "Additional Premises Delivery
Date"). Within ten (10) days after Landlord's receipt of the Notice of Intent,
Landlord and Tenant shall meet and shall negotiate in good faith to agree to and
execute within thirty (30) days thereafter a letter of intent (the "Letter of
Intent") containing all of the material terms and conditions of a lease for the
Additional Premises (the "Additional Premises Lease") including, without
limitation, the rental rate for the Additional Premises, the configuration of
the Additional Premises, and the Additional Premises Delivery Date. Thereafter,
Tenant may, but is not obligated to, in its sole and absolute discretion,
deliver its Notice of Exercise to Landlord as described above.
(3) Additional Premises Lease. If Tenant delivers the Notice of
-------------------------
Exercise, Landlord and Tenant shall, within sixty (60) days after execution of
the Letter of Intent, execute and deliver to each other the Additional Premises
Lease which shall reflect the terms and conditions of the
Letter of Intent. In addition, the Additional Premises Lease shall contain
substantially the same terms and conditions as provided in this Lease, including
without limitation, the representations and warranties as to environmental
matters. If Tenant fails to timely deliver the Notice of Exercise, Landlord
shall have the right to develop and lease the Annex Property to another party,
subject to the Annex First Right of Refusal described below.
1.2 Annex First Right of Refusal.
----------------------------
(1) Grant of First Right of Refusal. If at any time after the
-------------------------------
expiration of the Annex Option Period (and prior to the expiration or earlier
termination of the PGII Lease), a bona fide offer for the lease of the Annex
Property is made to Landlord, which offer Landlord in good faith intends to
accept (an "Offer"), then, provided there does not then exist an uncured Event
of Default under the PGII Lease, Landlord shall send Tenant notice (the "Offer
Notice") of such offer, and Tenant shall have the first right of refusal to
accept such Offer (the "Annex First Right of Refusal"). The Offer Notice shall
state the rent and other terms and conditions of the proposed transaction.
(2) Effect of Transfer Notice. Delivery of the Offer Notice to
-------------------------
Tenant shall be deemed to be an offer by Landlord to lease the Annex Property to
Tenant on the same terms and conditions as the Offer. The offer contained in the
Offer Notice may be accepted within five (5) working days following the date of
delivery of the Offer Notice to Tenant (the "Offer Period") and may not be
withdrawn by Landlord within the Offer Period. Pursuant to the offer, Tenant
shall have the right to lease the Annex Property on the terms and conditions
stated in the Offer Notice.
(3) Acceptance of Offer. On or before the last day of the Offer
-------------------
Period, Tenant shall deliver to Landlord notice of its acceptance or rejection
of the offer. Delivery of a notice of acceptance to Landlord by Tenant shall
create a binding contract between Landlord and Tenant. Tenant's failure to
timely deliver such notice shall be deemed a rejection of Landlord's offer.
(4) Lease. Within thirty (30) days following Tenant's acceptance
-----
of the Offer, the parties shall diligently and in good faith pursue negotiation
and execution of a lease agreement to reflect the terms of the Offer.
(5) Release of Annex Property. In the event that Tenant shall
-------------------------
not elect to lease the Annex Property pursuant to the Offer Notice, Landlord may
lease the Annex Property to the proposed transferee on the terms and conditions
contained in the Offer Notice, and the foregoing First Right of Refusal shall
not apply to future renewal negotiations of the lease
with such transferee. If such lease is not consummated, the provisions of the
foregoing Annex First Right of Refusal shall again apply to any proposed lease
of the Annex Property. If Tenant exercises its rights hereunder and delivers a
notice of acceptance but fails to complete the lease of the Annex Property
solely due to Tenant's default, then Tenant's rights under the Annex First Right
of Refusal shall terminate.
1.3 Effect of Expansion on PGII Lease. In the event that Tenant exercises
---------------------------------
either of the foregoing Annex Expansion Option or Annex First Right of Refusal,
then Tenant shall be obligated to extend the term of the PGII Lease to be co-
terminous with the lease entered into by Landlord and Tenant in connection with
such expansion. Such extended term under the PG II Lease shall be at a Base Rent
equal to ninety-five percent (95%) of Fair Market Rental (as defined in the PG
II Lease), but not less than the Base Rent in effect as of that date on which
the initial Lease Term would have otherwise expired under the PG II Lease
(without regard to any renewal options therein).
2. Assignment. The covenants and agreements contained herein shall be
----------
binding upon and inure to the benefit of the successors and permitted assigns of
the respective parties hereto. The foregoing notwithstanding, the parties
acknowledge and agree that no transfer or other assignment of this Option by
Tenant shall be valid except in connection with an assignment of Tenant's
interest under the PGII Lease which has been approved by Landlord in accordance
with the terms and conditions of such lease. Landlord shall have the right to
assign this Option along with a transfer of the Annex Property; however, an
assignment or other transfer of Landlord's rights under the PGII Lease may be
made without regard to this Option. It is expressly agreed that an assignment by
Landlord of the PGII Lease does not necessarily constitute nor shall it be
construed to be an assignment of this Option; and the ownership of the Annex
Property may be separate and distinct from ownership of Prospect Green II.
3. Governing Law. This Option shall be governed by and, construed in
-------------
accordance with the laws of the State of California.
4. Attorney's Fees. In the event that any of the parties to this Option
---------------
undertakes any action to enforce the provisions of this Option against any
other party, the non-prevailing party shall reimburse the prevailing party for
all reasonable costs and expenses incurred in connection with such enforcement,
including reasonable attorneys' fees and paralegals' fees at the investigative,
pretrial, trial and appellate levels. Attorneys' fees and costs incurred in
enforcing any judgment or in connection with any appeal shall
be recoverable separately from and in addition to any other amount included in
such judgment.
IN WITNESS WHEREOF, the Parties have executed this Option as of the date
first above written.
"LANDLORD"
PROSPECT GREEN PARTNERS,
a California joint venture
By: L&T PROSPECT PARTNERS, L.P.,
a California limited partnership,
Managing Venturer
By: Lankford & Associates, Inc.,
a colorado corporation,
Managing General Partner
By: /s/ David S. Taylor
-------------------------
David S. Taylor,
Executive Vice President
"TENANT"
E*TRADE GROUP, INC.,
a California corporation
By: /s/ Kathy Levinson
----------------------
Kathy Levinson,
Senior Vice President
By: /s/ Stephen Richards
----------------------
Stephen Richards,
Senior Vice President and
Chief Financial Officer