-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GRtxXoMplH8WpW90jjkjqX+z3Invlrui38vv2LFKWBd8HNgABxH1IDFxod8GAqYu 3pey/Djg08liu7VuFLc1hg== /in/edgar/work/20000814/0000804731-00-000011/0000804731-00-000011.txt : 20000921 0000804731-00-000011.hdr.sgml : 20000921 ACCESSION NUMBER: 0000804731-00-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TENERA INC CENTRAL INDEX KEY: 0000804731 STANDARD INDUSTRIAL CLASSIFICATION: [8711 ] IRS NUMBER: 943213541 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09812 FILM NUMBER: 697205 BUSINESS ADDRESS: STREET 1: ONE MARKET, SPEAR TOWER STREET 2: SUITE 1850 CITY: SAN FRANCISCO STATE: CA ZIP: 94105-1018 BUSINESS PHONE: 4155364744 MAIL ADDRESS: STREET 1: ONE MARKET, SPEAR TOWER STREET 2: SUITE 1850 CITY: SAN FRANCISCO STATE: CA ZIP: 94105-1018 FORMER COMPANY: FORMER CONFORMED NAME: TENERA LP DATE OF NAME CHANGE: 19920703 10-Q 1 0001.txt QUARTERLY REPORT FOR PERIOD ENDED JUNE 30, 2000 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------------- FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2000 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from __________ to __________ Commission File Number 1-9812 TENERA, INC. (Exact name of registrant as specified in its charter) Delaware 94-3213541 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Market, Spear Tower, Suite 1850, San Francisco, California 94105-1018 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (415) 536-4744 ---------------------------- Securities registered pursuant to Section 12(b) of the Act: Common Stock Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . --------- ---------- The number of shares outstanding on June 30, 2000, was 9,948,759. TABLE OF CONTENTS
PAGE PART I -- FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) .......................................................... 1 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition ..... 8 Item 3. Quantitative and Qualitative Disclosures of Market Risk.................................... 10 PART II -- OTHER INFORMATION Item 1. Legal Proceedings ......................................................................... * Item 2. Changes in Securities ..................................................................... * Item 3. Defaults Upon Senior Securities ........................................................... * Item 4. Submission of Matters to a Vote of Security Holders ....................................... 11 Item 5. Other Information ......................................................................... * Item 6. Exhibits and Reports on Form 8-K .......................................................... 11
_____________________ * None. i PART I -- FINANCIAL INFORMATION Item 1. Financial Statements TENERA, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share amounts)
- ------------------------------------------------------------------------------------------------------------------ Three Months Ended June 30, Six Months Ended June 30, ------------------------------ ----------------------------- 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------------------------------ Revenue................................... $ 8,339 $ 9,412 $ 17,986 $ 18,694 Direct Costs.............................. 6,675 7,215 14,396 14,500 General and Administrative Expenses....... 1,619 1,515 3,400 3,004 Other Income ............................. -- 1 4 1 ------------ ------------- ------------ ------------- Operating Income........................ 45 683 194 1,191 ------------ ------------- ------------ ------------- Net Earnings Before Income Tax Expense...................... 82 709 282 1,244 Income Tax Expense........................ 33 305 113 535 ------------ ------------- ------------ ------------- Net Earnings.............................. $ 49 $ 404 $ 169 $ 709 ============ ============= ============ ============= Net Earnings per Share-- Basic ........... $ 0.01 $ 0.04 $ 0.02 $ 0.07 ============ ============= ============ ============= Net Earnings per Share-- Diluted ......... $ 0.01 $ 0.04 $ 0.02 $ 0.07 ============ ============= ============ ============= Weighted Average Number of Shares Outstanding-- Basic...... 9,949 10,122 9,944 10,126 ============ ============= ============ ============= Weighted Average Number of Shares Outstanding-- Diluted.... 10,142 10,574 10,331 10,558 ============ ============= ============ ============= - ------------------------------------------------------------------------------------------------------------------
See accompanying notes. 1 TENERA, INC. CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except share amounts)
- ---------------------------------------------------------------------------------------------------------------- June 30, December 31, 2000 1999 - ---------------------------------------------------------------------------------------------------------------- ASSETS Current Assets Cash and cash equivalents ............................................... $ 3,035 $ 3,493 Receivables, less allowance of $1,184 (1999 - $1,298) Billed ................................................................ 3,860 3,587 Unbilled .............................................................. 2,776 2,968 Other current assets .................................................... 653 369 ------------- ------------ Total Current Assets ................................................ 10,324 10,417 Property and Equipment, Net ............................................... 403 237 Other Assets .............................................................. 319 56 ------------- ------------ Total Assets ..................................................... $ 11,046 $ 10,710 ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable ........................................................ $ 2,719 $ 3,110 Accrued compensation and related expenses ............................... 2,127 1,838 Deferred revenue ........................................................ 202 2 Income taxes payable .................................................... 58 -- ------------- ------------ Total Current Liabilities ........................................... 5,106 4,950 Commitments and Contingencies Stockholders' Equity Common Stock, $0.01 par value, 25,000,000 authorized, 10,417,345 issued and outstanding.......................................................... 104 104 Paid in capital, in excess of par ....................................... 5,693 5,699 Retained earnings........................................................ 676 507 Treasury stock-- 468,586 shares (1999 - 483,586 shares).................. (533) (550) ------------- ------------ Total Shareholders' Equity ........................................ 5,940 5,760 ------------- ------------ Total Liabilities and Stockholders' Equity ....................... $ 11,046 $ 10,710 ============= ============ - ----------------------------------------------------------------------------------------------------------------
See accompanying notes. 2 TENERA, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) (In thousands, except share amounts)
- --------------------------------------------------------------------------------------------------------------- Paid-In Capital Common in Excess Retained Treasury Stock of Par Earnings Stock Total - ---------------------------------------------------------------------------------------------------------------- December 31, 1999........... $ 104 $ 5,699 $ 507 $ (550) $ 5,760 Issuance of 15,000 Common Stock Shares from Treasury............... -- (6) -- 17 11 Net Earnings ............... -- -- 120 -- 120 ------------ ------------ ------------ ------------ ------------ March 31, 2000 ............. $ 104 $ 5,693 $ 627 $ (533) $ 5,891 Net Earnings................ -- -- 49 -- 49 ------------ ------------ ------------ ------------ ------------ June 30, 2000 .............. $ 104 $ 5,693 $ 676 $ (533) $ 5,940 ============ ============ ============ ============ ============ - ----------------------------------------------------------------------------------------------------------------
See accompanying notes. 3 TENERA, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
- ---------------------------------------------------------------------------------------------------------------- Six Months Ended June 30, ------------------------------ 2000 1999 - ---------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings ............................................................. $ 169 $ 709 Adjustments to reconcile net earnings to cash provided (used) by operating activities: Depreciation and amortization .......................................... 150 83 Gain on sale of assets ................................................. (4) (1) Decrease in allowance for sales adjustments ............................ (114) -- Changes in assets and liabilities: Receivables ........................................................... 33 (1,784) Other current assets .................................................. (304) 82 Other assets .......................................................... (170) -- Accounts payable ...................................................... (391) 940 Accrued compensation and related expenses ............................. 289 229 Deferred revenue ...................................................... 200 2 Income taxes payable .................................................. 58 (100) ------------- ------------ Net Cash Used By Operating Activities ............................. (84) (549) CASH FLOWS FROM INVESTING ACTIVITIES Net acquisition of property and equipment ................................ (267) (102) Acquisition of application development software .......................... (125) -- Proceeds from sale of assets ............................................. 7 1 ------------- ------------ Net Cash Used in Investing Activities ............................. (385) (101) CASH FLOWS FROM FINANCING ACTIVITIES Repurchase of equity ..................................................... -- (66) Issuance of common stock from Treasury ................................... 11 -- ------------- ------------ Net Cash Provided (Used) by Financing Activities ................. 11 (66) NET DECREASE IN CASH AND CASH EQUIVALENTS ................................. (458) (7) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .......................... 3,493 3,361 ------------- ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD ................................ $ 3,035 $ 3,354 ============= ============ - ----------------------------------------------------------------------------------------------------------------
See accompanying notes. 4 TENERA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2000 and 1999 (Unaudited) Note 1. Organization TENERA, Inc.(the "Company"), a Delaware corporation, is the parent company of the subsidiaries described below. TENERA Rocky Flats, LLC ("Rocky Flats"), a Colorado limited liability company, was formed by the Company in 1995, to provide consulting services in connection with participation in the Performance Based Integrating Management Contract ("Rocky Flats Contract") at the Department of Energy's ("DOE") Rocky Flats Environmental Technology Site. In May 1997, the Company's other government business was consolidated within the Rocky Flats subsidiary. This business provides consulting and management services to the DOE directly and through subcontracts with DOE prime contractors. These services provide assistance to DOE-owned nuclear facilities in devising, implementing, and monitoring strategies to upgrade from an operational, safety, and environmental perspective. TENERA Energy, LLC ("Energy"), a Delaware limited liability company, was formed by the Company in May 1997, to consolidate its commercial electric power utility business into a separate legal structure. The Energy subsidiary provides professional technical consulting and management services, environmental outsourcing and monitoring, risk analysis and modeling. TENERA GoTrain.Net, LLC ("GoTrain.net"), a Delaware limited liability company, was formed by the Company in October 1999, as a joint venture operation to design, develop, market, and maintain a web-based Corporate Distance Learning Center ("CDLC"). The joint venture was established with its minority interest partner, SoBran, Inc., an Ohio corporation specializing in Internet technologies. In February 2000, the Company purchased certain Internet-based development assets from SoBran, Inc. for $307,000, including SoBran's minority interest in GoTrain.net. The purchase consideration was allocated to the acquired assets based on deemed fair values as follows: computer equipment and software ($289,000); office equipment ($18,000). After the asset acquisition from SoBran, the Company consolidated its technology enhanced training services group into GoTrain.net. Note 2. Summary of Significant Accounting Policies Basis of Presentation. The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries and are unaudited. All intercompany accounts and transactions have been eliminated. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position at March 31, 2000, and the results of operations and cash flows for the three-month periods ended March 31, 2000 and 1999, have been made. For further information, refer to the financial statements and notes thereto contained in TENERA, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999, filed with the Securities and Exchange Commission. Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. Cash and Cash Equivalents. Cash and cash equivalents consist of demand deposits, money market accounts, and commercial paper issued by companies with strong credit ratings. Cash and cash equivalents are carried at cost, which approximates fair value. The Company includes in cash and cash equivalents, all short-term, highly liquid investments which mature within three months of acquisition. 5 Concentrations of Credit Risk and Credit Risk Evaluations. Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents and accounts receivable. Cash and cash equivalents consist principally of demand deposit, money market accounts, and commercial paper issued by companies with strong credit ratings. Cash and cash equivalents are held with various domestic financial institutions with high credit standing. The Company has not experienced any significant losses on its cash and cash equivalents. The Company conducts business with companies in various industries primarily in the United States. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. Allowances are maintained for potential credit issues, and such losses to date have been within management's expectations. Property and Equipment. Property and equipment are stated at cost ($2,775,000 and $2,531,000 at June 30, 2000 and December 31, 1999, respectively), net of accumulated depreciation ($2,372,000 and $2,294,000 at June 30, 2000 and December 31, 1999, respectively). Depreciation is calculated using the straight line method over the estimated useful lives, which range from three to five years. Other Assets. Included in this asset category are the costs of internal-use CDLC software, both acquired and developed by the Company, and certain software costs related to the development of the Company's technology enhanced training courses. These costs have been capitalized in accordance with Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use", and Financial Accounting Standards No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed". The Company capitalized $389,000 of software costs during the first six months of 2000. The estimated useful life of costs capitalized during 2000 ranged from one to three years. For the six month period ended June 30, 2000, the amortization of capitalized costs totaled $51,000. No software development costs were capitalized in the first half of 1999. Revenue. The Company primarily offers its services to the electric power industry and the DOE. Revenue from time-and-material and cost plus fixed-fee contracts is recognized when costs are incurred; from fixed-price contracts, on the basis of percentage of work completed (measured by costs incurred relative to total estimated project costs). The Company performs credit evaluations of these clients and normally does not require collateral. Reserves are maintained for potential sales adjustments and credit losses; such losses to date have been within management's expectations. Actual revenue and cost of contracts in progress may differ from management estimates and such differences could be material to the financial statements. During the first six months of 2000, two clients accounted for 60% and 13% of the Company's total revenue. During the same period in 1999, three clients accounted for 31%, 26% and 18% of the total revenue. Income Taxes. The Company uses the liability method to account for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. Per Share Computation. Basic earnings per share is computed by dividing net earnings by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities by adding other common stock equivalents, including stock options, warrants and convertible preferred stock, in the weighted average number of common shares outstanding for a period, if dilutive. 6 The following table sets forth the computation of basic and diluted earnings per share as required by Financial Accounting Standards Board Statement No. 128: (In thousands, except for per share amounts)
- ------------------------------------------------------------------------------------------------------------------- Three Months Ended June 30, Six Months Ended June 30, ------------------------------- -------------------------------- 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------------------------------- Numerator: Net earnings .......................... $ 49 $ 404 $ 169 $ 709 ============= ============== ============= ============== Denominator: Denominator for basic earnings per share --weighted-average shares outstanding... 9,949 10,122 9,944 10,126 Effect of dilutive securities: Employee & Director stock options (Treasury stock method) ............. 193 452 387 432 ------------- -------------- ------------- -------------- Denominator for diluted earnings per share--weighted-average common and common equivalent shares ............... 10,142 10,574 10,331 10,558 ============= ============== ============= ============== Basic earnings per share ................ $ 0.01 $ 0.04 $ 0.02 $ 0.07 ============= ============== ============= ============== Diluted earnings per share .............. $ 0.01 $ 0.04 $ 0.02 $ 0.07 ============= ============== ============= ============== - -------------------------------------------------------------------------------------------------------------------
Comprehensive Income. The Company does not have material components of other comprehensive income. Therefore, comprehensive income is equal to net earnings reported for all periods presented. Disclosures about Segments of an Enterprise. The Company has one reportable operating segment, which is providing services with respect to operations, maintenance, safety, strategic business and risk management, and environmental/ecological issues for electric utility and DOE facilities. Recent Accounting Pronouncements. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"), which establishes accounting and reporting standards for derivative instruments and hedging activities. FAS 133 requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. The Company will be required to adopt FAS 133 effective January 1, 2001. Management of the Company does not believe the adoption of this statement will have a material effect on the Company's consolidated financial position, results of operations, or cash flows. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101 provides guidance on the recognition, presentation, and disclosure of revenue in financial statements of all public registrants. Any change in the Company's revenue recognition policy resulting from the interpretation of SAB 101 would be reported as a change in accounting principle in the quarter ending December 31, 2000. While the Company has not fully assessed the impact of the adoption of SAB 101, the implementation of SAB 101 may have a material adverse impact on its reported results of operations from longer term contracts. Reclassifications. Certain reclassifications of prior year amounts have been made to conform with current presentation. 7 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition TENERA, INC. Results of Operations (Unaudited)
- ------------------------------------------------------------------------------------------------------------------ Percent of Revenue Percent of Revenue ------------------------ ----------------------- Three Months Ended Six Months Ended June 30, June 30, ------------------------ ----------------------- 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------------------------------ Revenue ................................................ 100.0% 100.0% 100.0% 100.0% Direct Costs ........................................... 80.0 76.7 80.0 77.6 General and Administrative Expenses .................... 19.4 16.1 18.9 16.0 Other Income ........................................... -- * * * --------- --------- --------- --------- Operating Income .................................... .6 7.2 1.1 6.4 Interest Income, Net ................................... 0.4 0.3 0.5 0.3 --------- --------- --------- --------- Net Earnings Before Income Tax Expense.................. 1.0% 7.5% 1.6% 6.7% ========= ========= ========= ========= - ------------------------------------------------------------------------------------------------------------------
* Less than 0.05% Results of Operations Net earnings before income tax expense for the three and six-month periods ended June 30, 2000 were $82,000 and $282,000, respectively, compared to $709,000 and $1,244,000, respectively, for the same periods in 1999. Revenue decreased 11% in the second quarter and 4% in the first half of 2000, compared to a year ago, primarily due to a decline in the commercial strategic consulting business area. For the second quarter and first half of 2000, the concentration of revenue from the government sector increased to 85% and 86% of total revenue, respectively, from 81% and 82% for the same periods in 1999. Direct costs were lower in the second quarter and first half of 2000, compared to a year ago, primarily as a result of decreased revenue generation. However, gross margins decreased to 20% for the three and six-month periods ended June 30, 2000, from 23% for the same periods in 1999, primarily due to an increase in the proportion of lower margin government projects. General and administrative costs were 7% and 13% higher in the second quarter and first half of 2000, respectively, compared to a year ago, primarily reflecting increased costs associated with the infrastructure and business development of GoTrain.net's technology enhanced training services, and the purchase of the Internet-based development and support business of SoBran, Inc. (see Note 1 to Consolidated Financial Statements). Net interest income in 2000 and 1999 represents earnings from the investment of cash balances in short-term, high-quality, money market accounts and corporate debt instruments. The higher net interest income in 2000, as compared to a year ago, primarily reflects larger average cash balances and higher interest rates. The Company had no borrowings under its line of credit during the first three months of 2000 and 1999. 8 During the second quarter and first six months of 2000, the Company received written contracts and orders having an estimated value of approximately $5.4 million and $14.9 million, respectively. The activity primarily reflects the additional funding of the Company's contract at the DOE's Rocky Flats Environmental Technology Site, a $.4 million extension of a consulting contract with a large electric utility client, and a $.6 million GoTrain.net contract involving the development of technology enhanced training courses and future CDLC usage. Contracted backlog for current, active projects totaled approximately $13.2 million as of June 30, 2000, down from $15.3 million at December 31, 1999. In July 2000, the prime contractor at the Rocky Flats Site requested that the Company, along with other Rocky Flats subcontractors, submit proposals to recompete the professional support services presently performed by these companies at the Site. The Company's current Rocky Flats contract is scheduled to expire September 30, 2000. Awards for the new contracts, which are expected to be six years in duration, will be known in the fourth quarter of 2000. Until the Company's award of a new contract is granted, the Company is unable to predict the effect of such recompetition on its future revenue and income. Liquidity and Capital Resources Cash and cash equivalents decreased by $458,000 during the first half of 2000. The decrease was due to cash used by operations ($84,000)and the net acquisition of fixed assets ($385,000) associated primarily with the SoBran asset acquisition (see Note 1), partially offset by cash received from the exercising of stock options ($11,000). Receivables decreased by $33,000 from December 31, 1999, primarily due to a decrease in the rate of revenue generation in the first half of 2000, offset by a temporary slowdown in collections related to the Rocky Flats Contract due to an administrative change imposed by the contractor in the second quarter. The allowance for sales adjustments decreased by $114,000 from December 31, 1999, related to the closure and settlement of old government contracts. Accounts payable decreased by $391,000 since the end of 1999, primarily associated with lower direct costs supporting decreased revenues. Accrued compensation and related expenses increased by $289,000 during the period, primarily reflecting the annual merit increases in employee salaries, fewer holiday and vacation days in the first half of the year, and the growth of GoTrain.net personnel. No cash dividend was declared in the first six months of 2000. The impact of inflation on project revenue and costs of the Company was minimal. At June 30, 2000, the Company had available $2,500,000 of a $3,000,000 revolving loan facility. The Company has no outstanding borrowing against the line; however, $500,000 is assigned to support standby letters of credit. The line of credit expires in May 2001. Management believes that cash expected to be generated by operations, the Company's working capital, and its loan facility are adequate to meet its anticipated liquidity needs through the next twelve months. In the event, however, that it elects to accelerate investment in GoTrain.net, the Company will be required to seek alternative sources of capital to meet such needs. Forward-Looking Statements Statements contained in this report which are not historical facts are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those projected. Such risks and uncertainties include the reliance on major customers and concentration of revenue from the government sector; the uncertainty of future profitability; uncertainty regarding industry trends and customer demand; uncertainty of access to additional capital; reliance on key personnel; government contract audits; uncertainty regarding competition; and unknown Year 2000 issues of third party vendors. Additional risks are detailed in the Company's filings with the Securities and Exchange Commission ("SEC"), including its Form 10-K for the year ended December 31, 1999. 9 Item 3. Quantitative and Qualitative Disclosures of Market Risk The Company has minimal exposure to market and interest risk as the Company invests its excess cash in short-term instruments which mature within 90 days from the date of purchase. The Company does not have any derivative instruments. 10 PART II -- OTHER INFORMATION Item 4. Submission of Matter to a Vote of Security Holders On June 27, 2000, the Company held its Annual Meeting of Stockholders. The following individuals were elected to the Board of Directors:
- ---------------------------------------------------------------------------------------------------------------- Votes Votes For Withheld - ---------------------------------------------------------------------------------------------------------------- Andrea W. O'Riordan ....................................................... 7,959,574 94,627 Thomas S. Loo ............................................................. 7,968,574 85,627 - ----------------------------------------------------------------------------------------------------------------
The following proposals were approved at the Company's Annual Meeting:
- ---------------------------------------------------------------------------------------------------------------- Votes Votes Broker For Against Abstained Non-Votes - ---------------------------------------------------------------------------------------------------------------- Proposal to ratify the selection of the Company's independent auditors........... 8,004,901 29,950 19,350 0 - ----------------------------------------------------------------------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 11.0 Statement regarding computation of per share earnings: See Notes to Consolidated Financial Statements. 10.1* Registrant's lease, dated May 3, 2000, on its property located in Knoxville, Tennessee. 10.2* Registrant's lease, dated May 30, 2000, on its headquarters located in San Francisco, California. 27.0* Financial Data Schedule (b) Reports on Form 8-K None. _____________________________ * Filed herewith. 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: August 14, 2000 TENERA, INC. By /s/ JEFFREY R. HAZARIAN ---------------------------------------------------- Jeffrey R. Hazarian Executive Vice President and Chief Financial Officer 12 EX-10.1 2 0002.txt REGISTRANT'S KNOXVILLE, TENNESSEE LEASE LEASE AGREEMENT by and between The Equitable Life Assurance Society of the United States ("Landlord") and Tenera, Inc. ("Tenant") dated May 3, 2000 for Suite Number D-150 containing 12,786 square feet of Rentable Floor Area 9111 Cross Park Drive, Knoxville, Tennessee Term: 43 months TABLE OF CONTENTS Page 1. Certain Definitions 1 2. Lease of Premises 1 3. Term 1 4. Possession 2 5. Rental Payments 2 6. Base Rental 2 7. Rental Adjustment 2 8. Additional Rental 2 9. Operating Expenses 3 10. Tenant Taxes 4 11. Payments 4 12. Late Charges 5 13. Use Rules 5 14. Alterations 5 15. Repairs 5 16. Landlord's Right of Entry 5 17. Insurance 5 18. Waiver of Subrogation 6 19. Default 6 20. Waiver of Breach 6 21. Assignment and Subletting 7 22. Destruction 7 23. Landlord's Lien 7 24. Services by Landlord 7 25. Attorneys' Fees and Homestead 8 26. Time 8 27. Subordination and Attornment 8 28. Estoppel Certificates 8 29. No Estate 8 30. Cumulative Rights 8 31. Holding Over 8 32. Surrender of Premises 8 33. Notices 9 34. Damage or Theft of Personal Property___________________________9 35. Eminent Domain 9 36. Parties 9 37. Liability of Tenant 9 38. Relocation of the Premises 9 39. Force Majeure 10 40. Landlord's Liability 10 41. Landlord's Covenant of Quiet Enjoyment________________________10 42. Security Deposits 10 43. Hazardous Substances 10 44. Submission of Lease 11 45. Severability 11 46. Entire Agreement 11 47. Headings 11 48. Broker 11 49. Governing Law 11 50. Authority 11 51. Joint and Several Liability 11 52. Special Stipulations 12 Rules and Regulations Exhibit "A" - Legal Description Exhibit "B" - Floor Plan Exhibit "C" - Supplemental Notice Exhibit "D" - Landlord's Construction Exhibit "E" - Building Standard Services Exhibit "F" - Guaranty Exhibit "G" - Special Stipulations LEASE AGREEMENT THIS LEASE AGREEMENT ("Lease") is made and entered into this ____ day of _______________, 2000 by and between Landlord and Tenant. W I T N E S S E T H: 1. Certain Definitions. For purposes of this Lease, the following terms shall have the meanings hereinafter ascribed thereto: (a)Landlord: The Equitable Life Assurance Society of the United States (bi)Landlord's Correspondence Address: Equitable Life Assurance Society of the US 3424 Peachtree Road, Suite 800 Atlanta, GA 30326-1102 (bii)Landlord's Address for Rent:: 3751465535 ELAS AAF General Account Cross Park II/CB Richard Ellis Atlanta, GA 30384-2081 (c)Tenant: Tenera, Inc. PO Box 402081 (di)Tenant's Correspondence Address: One Market, Spear Tower Suite 1850 San Francisco, CA 94105-1018 (dii)Tenant's Billing Address: Same (e)Building Address: 9111 Cross Park Drive Knoxville, TN 37923 (f)Suite Number: D-150 (g)Rentable Floor Area of Demised Premises: 12,786 square feet 13.03% (h)Rentable Floor Area of Building: ________________ square feet. (i)Lease Term: 43 months. (j)Base Rental Rate: 6/1/00-12/31/01 $12.50 RSF 1/1/02-12/31/02 $12.75 RSF 1/1/03-12/31/03 $13.00 RSF (k)Rental Commencement Date: June 1, 2000 (l)Tenant Improvement Allowance: $31,965.00 (m)Security Deposits: (i) $13,318.75 [Article 42(a)]. (ii) $13,318.75 [Article 42(b)]. (n)Broker(s): NAI Collins, Sharp & Koella, Inc (o) 2.Lease of Premises. Landlord, in consideration of the covenants and agreements to be performed by Tenant, and upon the terms and conditions hereinafter stated, does hereby rent and lease unto Tenant, and Tenant does hereby rent and lease from Landlord, certain premises (the "Demised Premises") in the building (the "Building") located on that certain tract of land (the "Land") more particularly described on Exhibit "A" attached hereto and by this reference made a part hereof, which Demised Premises are outlined in red or cross-hatched on the floor plan attached hereto as Exhibit "B" and by this reference made a part hereof, with no easement for light, view or air included in the Demised Premises or being granted hereunder. The "Project" is comprised of the Building, the Land, the Building's parking facilities, any walkways, covered walkways, tunnels or other means of access to the Building and the Building's parking facilities, all common areas, including any lobbies or plazas, and any other improvements or landscaping on the Land. 3.Term. The term of this Lease (the "Lease Term") shall commence on the date first hereinabove set forth (the "Term Commencement Date"), and, unless sooner terminated as provided in this Lease, shall end on the expiration of the period designated in Article 1(i) above, which period shall commence on the Rental Commencement Date, unless the Rental Commencement Date shall be other than the first day of a calendar month, in which event such period shall commence on the first day of the calendar month following the month in which the Rental Commencement Date occurs. Promptly after the Rental Commencement Date, Landlord shall send to Tenant a Supplemental Notice in the form of Exhibit "C" attached hereto by this reference made a part hereof and executed by Landlord's authorized agent, specifying the Rental Commencement Date, the date of expiration of the Lease Term in accordance with Article 1(i) above and certain other matters as therein set forth. The date set forth in said Notice shall be determinative of the Rental Commencement Date of this Lease. 4.Possession. The obligations of Landlord and Tenant with respect to the initial leasehold improvements to the Demised Premises are set forth in Exhibit "D" attached hereto and by this reference made a part hereof. Taking of possession by Tenant shall be deemed conclusively to establish that Landlord's construction obligations with respect to the Demised Premises have been completed in accordance with the plans and specifications approved by Landlord and Tenant and that the Demised Premises, to the extent of Landlord's construction obligations with respect thereto, are in good and satisfactory condition. 5.Rental Payments. _______________________(a) Commencing on the Rental Commencement Date, and continuing thereafter throughout the Lease Term, Tenant hereby agrees to pay all Rent due and payable under this Lease. As used in this Lease, the term "Rent" shall mean the Base Rental, Rental Adjustment, Tenant's Forecast Additional Rental, Tenant's Additional Rental, and any other amounts that Tenant assumes or agrees to pay under the provisions of this Lease that are owed to Landlord, including, without limitation, any and all other sums that may become due by reason of any default of Tenant or failure on Tenant's part to comply with the agreements, terms, covenants and conditions of this Lease to be performed by Tenant. Base Rental, together with Tenant's Forecast Additional Rental, shall be due and payable in twelve (12) equal installments on the first day of each calendar month, commencing on the Rental Commencement Date and continuing thereafter throughout the Lease Term and any extensions or renewals thereof. Tenant hereby agrees to pay such Rent to Landlord at Landlord's address as provided herein (or such other address as may be designated by Landlord from time to time) monthly in advance. Tenant shall pay all Rent and other sums of money as shall become due from and payable by Tenant to Landlord under this Lease at the times and in the manner provided in this Lease, without demand, set-off or counterclaim. __________________________(b) If the Rental Commencement Date is other than the first day of a calendar month or if this Lease terminates on a day other than the last day of a calendar month, then the installments of Base Rental and Tenant's Forecast Additional Rental for such month or months shall be prorated on a daily basis and the installment or installments so prorated shall be paid in advance. Also, if the Rental Commencement Date occurs on a day other than the first day of a calendar year, or if this Lease expires or is terminated on a day other than the last day of a calendar year, Tenant's Additional Rental shall be prorated for such commencement or termination year, as the case may be, by multiplying such Tenant's Additional Rental by a fraction, the numerator of which shall be the number of days of the Lease Term (from and after the Rental Commencement Date) during the commencement or expiration or termination year, as the case may be, and the denominator of which shall be 365, and the calculation described in Article 8 hereof shall be made as soon as possible after the expiration or termination of this Lease, Landlord and Tenant hereby agreeing that the provisions relating to said calculation shall survive the expiration or termination of this Lease. 6.Base Rental. From and after the Rental Commencement Date, Tenant shall pay to Landlord a base annual rental (herein called "Base Rental") equal to the Base Rental Rate set forth in Article 1(j) above multiplied by the Rentable Floor Area of the Demised Premises as set forth in Article 1(g) above. 7.Rental Adjustment. __________________________(a)Tenant shall pay to Landlord as additional rental a rental adjustment (the "Rental Adjustment") which shall be determined as of the first anniversary of the Rental Commencement Date and as of each January 1 thereafter during the Lease Term in the manner hereinafter provided (each such date being hereinafter in this Article 7 called an "Adjustment Date", and each period of time from any given Adjustment Date through the day before the next succeeding Adjustment Date being herein called an "Adjustment Period"). Each such Rental Adjustment shall be payable in monthly installments in advance on the first day of every such calendar month during the Adjustment Period for which such Rental Adjustment was determined. A prorated monthly installment, based on the number of days in the partial month, shall be paid for any fraction of a month if the Rental Commencement Date falls on any day other than the first day of a calendar month, or if the Lease Term is terminated or expires on any other day than the last day of a calendar month. Landlord shall use reasonable efforts to notify Tenant in writing of the monthly amount of the Rental Adjustment for each Adjustment Period at least ten (10) days prior to the date on which the first installment of such Rental Adjustment is due and payable, or as soon thereafter as is practicable. Failure by Landlord to notify Tenant of the monthly amount of such Rental Adjustment shall not prejudice Landlord's right to collect the full amount of such Rental Adjustment, nor shall Landlord be deemed to have forfeited or surrendered its rights to collect such Rental Adjustment which may have become due pursuant to this Article 7, and Tenant agrees to pay upon demand all accrued but unpaid Rental Adjustment. _________________________(b)For each Adjustment Period, each monthly installment of the Rental Adjustment shall be an amount equal to one-twelfth (1/12th) of the product of: (i) the annual Base Rental set forth in Article 6 hereof, multiplied by (ii) the "percentage increase" (as hereinafter defined), if any, in the "Index" (as hereinafter defined), as such percentage increase is determined with respect to the Adjustment Date beginning such Adjustment Period. __________________________(c) For purposes of Articles 7(a) and (b) above, the "percentage increase," if any, in the Index for each Adjustment Date shall mean and equal the quotient (expressed as a decimal) determined by dividing (i) the difference obtained by subtracting the Index for the calendar month in which the Rent Commencement Date falls from the Index for the calendar month of October immediately preceding the Adjustment Date in question [if the difference so obtained is negative, then this factor (i) shall be deemed to be zero], by (ii) the Index for the calendar month in which the Rental Commencement Date falls. __________________________(d) The term "Index" as used in Articles 7(b) and (c) above shall mean the Consumer Price Index for All Urban Consumers, U.S. City Average, All Items (1982-84 = 100), published by the Bureau of Labor Statistics of the United States Department of Labor. If the Bureau of Labor Statistics should discontinue the publication of the Index, or publish the same less frequently, or alter the same in some manner, then Landlord shall adopt a substitute Index or substitute procedure which reasonably reflects and monitors consumer prices. _______________________(e)Nothing contained in this Article 7 shall be construed at any time so to reduce the monthly installments of Base Rental payable hereunder below the amount set forth in Article 6 of this Lease. Notwithstanding anything contained in this Lease to the contrary, it is agreed that (i) the Rental Adjustment for any given Adjustment Period shall not be less than the Rental Adjustment for the immediately preceding Adjustment Period, and (ii) Tenant's payments pursuant to this Article 7 shall not be deemed payments of rent as that term is construed relative to governmental wage and price controls or analogous governmental actions affecting the amount of rent which Landlord may charge Tenant. 8._________Additional Rental. ________________________(a) For purposes of this Lease, "Tenant's Forecast Additional Rental" shall mean Landlord's reasonable estimate of Tenant's Additional Rental for each calendar year or portion thereof during the Lease Term. If at any time it appears to Landlord that Tenant's Additional Rental for the current calendar year then at hand will vary from Landlord's estimate, Landlord shall have the right to revise, by notice to Tenant, its estimate for such year, and subsequent payments by Tenant for such year shall be based upon such revised estimate of Tenant's Additional Rental. Failure to make a revision contemplated by the immediately preceding sentence shall not prejudice Landlord's right to collect the full amount of Tenant's Additional Rental. Prior to the first day of January immediately following the expiration of the Base Year, and thereafter prior to the beginning of each calendar year during the Lease Term, including any extensions or renewals thereof, Landlord shall present to Tenant a statement of Tenant's Forecast Additional Rental for such calendar year; provided, however, that if such statement is not given prior to the beginning of any calendar year as aforesaid, Tenant shall continue to pay during the next ensuing calendar year on the basis of the amount of Tenant's Forecast Additional Rental payable during the calendar year just ended until the month after such statement is delivered to Tenant. __________________________(b) For purposes of this Lease, "Tenant's Additional Rental" shall mean for each calendar year (or portion thereof) during the Lease Term the excess of (x) the Operating Expense Amount (defined below) multiplied by the number of square feet of Rentable Floor Area of the Demised Premises, over (y) the Base Operating Expenses (defined below) multiplied by the number of square feet of Rentable Floor Area of the Demised Premises. As used herein, "Operating Expense Amount" shall mean the amount of Operating Expenses (as defined below) for such calendar year divided by the greater of (i) ninety-five percent (95%) of the number of square feet of Rentable Floor Area of the Building, or (ii) the total number of square feet of Rentable Floor Area occupied in the Building for such calendar year on an average annualized basis; provided, however, if the amount is calculated under (i) above, the Operating Expenses actually incurred with respect to such calendar year shall be adjusted to reflect the amount of Operating Expenses which would have been incurred if the Building were ninety-five percent (95%) occupied throughout such calendar year. As used herein, the term "Base Operating Expenses" shall mean the Operating Expenses paid or incurred by Landlord in the Base Year (as hereinafter defined) as if the Building was ninety-five percent (95%) occupied throughout the Base Year, divided by ninety-five percent (95%) of the number of square feet of Rentable Floor Area of the Building. If the Building was not ninety-five percent (95%) occupied throughout the Base Year, then the Base Operating Expenses shall be an amount which fairly reflects what the Operating Expenses would have been in the Base Year had the Building been ninety-five percent (95%) occupied throughout the Base Year, as determined by Landlord in its reasonable opinion. As used herein, "Base Year" shall mean calendar year 2000 [the calendar year in which the Rental Commencement Date occurs, if no year is inserted]. _________________________(c)Within one hundred fifty (150) days after the end of the calendar year in which the Rental Commencement Date occurs and of each calendar year thereafter during the Lease Term, or as soon thereafter as practicable, Landlord shall provide Tenant a statement showing the Operating Expenses for said calendar year, as prepared by an authorized representative of Landlord, and a statement prepared by Landlord comparing Tenant's Forecast Additional Rental with Tenant's Additional Rental. In the event Tenant's Forecast Additional Rental exceeds Tenant's Additional Rental for said calendar year, Landlord shall credit such amount against the Forecast Additional Rental next due hereunder or, if the Lease Term has expired or is about to expire, refund such excess to Tenant if Tenant is not in default under this Lease (in the instance of a default, such excess shall be held as additional security for Tenant's performance, may be applied by Landlord to cure any such default, and shall not be refunded until any such default is cured). In the event that the Tenant's Additional Rental exceeds Tenant's Forecast Additional Rental for said calendar year, Tenant shall pay Landlord, within thirty (30) days of receipt of the statement, an amount equal to such difference. The provisions of this Lease concerning the payment of Tenant's Additional Rental shall survive the expiration or earlier termination of this Lease. __________________________(d) Landlord's books and records pertaining to the calculation of Operating Expenses for any calendar year within the Lease Term may be audited by Tenant or its representatives at Landlord's office where Operating Expense records are kept, at Tenant's expense, at any time within ninety (90) days after Landlord's annual statement is delivered to Tenant for such calendar year; provided that Tenant shall give Landlord not less than thirty (30) days' prior written notice of any such audit. If Landlord's calculations of Tenant's Additional Rental for the audited calendar year was incorrect, then Tenant shall be entitled to a prompt refund of any overpayment or Tenant shall promptly pay to Landlord the amount of any underpayment, as the case may be. 9.________Operating Expenses. _________________________(a)For the purposes of this Lease, "Operating Expenses" shall mean all expenses, costs and disbursements (but not specific costs billed to specific tenants of the Building) of every kind and nature, computed on an accrual basis, relating to or incurred or paid in connection with the ownership, management, operation, repair and maintenance of the Project, including but not limited to, the following: _____________________________ (1) wages, salaries and other costs of all on-site and off-site employees engaged either full or part time in the operation, management, maintenance or access control of the Project, including taxes, insurance and benefits relating to such employees, allocated based upon the time such employees are engaged directly in providing such services; _____________________________ (2) the cost of all supplies, tools, equipment and materials used in the operation, management, maintenance and access control of the Project; _____________________________ (3) the cost of all utilities for the Project, including but not limited to the cost of electricity, gas, water, sewer services and power for heating, lighting, air conditioning and ventilating; _____________________________ (4) the cost of all maintenance and service agreements for the Project and the equipment therein, including, but not limited to, security service, garage operators, window cleaning, elevator maintenance, HVAC maintenance, janitorial service, landscaping maintenance and customary landscaping replacement; _____________________________ (5) the cost of inspections, repairs and general maintenance of the Project; _____________________________ (6) amortization (together with reasonable financing charges, whether or not actually incurred) of the cost of acquisition and/or installation of capital investment items (including security equipment), amortized over their respective useful lives, which are installed for the purpose of reducing operating expenses, promoting safety, complying with governmental requirements, or maintaining the nature of the Project; _____________________________ (7) the cost of casualty, rental loss, liability and other insurance applicable to the Project and Landlord's personal property used in connection therewith; _____________________________ (8) the cost of trash and garbage removal, vermin extermination, and snow, ice and debris removal; _____________________________ (9) the cost of legal and accounting services incurred by Landlord in connection with the management, maintenance, operation and repair of the Project, excluding the owner's or Landlord's general accounting, such as partnership statements and tax returns, and excluding services described in Article 9(b)(14) below; _____________________________ (10) all taxes, assessments and governmental charges, whether or not directly paid by Landlord, whether federal, state, county or municipal and whether they be by taxing districts or authorities presently taxing the Project or by others subsequently created or otherwise, and any other taxes and assessments attributable to the Project or its operation (and the costs of monitoring and contesting any of the same), including business license taxes and fees (all of the foregoing are herein sometimes collectively referred to as "Taxes"), excluding, however, taxes and assessments imposed on the personal property of the tenants of the Project, federal and state taxes on income, death taxes, franchise taxes, and any taxes (other than business license taxes and fees) imposed or measured on or by the income of Landlord from the operation of the Project; provided, however, that if at any time during the Lease Term, the present method of taxation or assessment shall be so changed that the whole or any part of the taxes, assessments, levies, impositions or charges now levied, assessed or imposed on real estate and the improvements thereon shall be discontinued and as a substitute therefor, or in lieu of or in addition thereto, taxes, assessments, levies, impositions or charges shall be levied, assessed and/or imposed wholly or partially as a capita levy or otherwise on the rents received from the Project or the rents reserved herein or any part thereof, then such substitute or additional taxes, assessments, levies, impositions or charges, to the extent so levied, assessed or imposed, shall be deemed to be included within the Operating Expenses to the extent that such substitute or additional tax would be payable if the Project were the only property of the Landlord subject to such tax; and it is agreed that Tenant will be responsible for ad valorem taxes on its personal property and on the value of the leasehold improvements in the Demised Premises to the extent that the same exceed building standard allowances, if said taxes are based upon an assessment which includes the cost of such leasehold improvements in excess of building standard allowances (and if the taxing authorities do not separately assess Tenant's leasehold improvements, Landlord may make an appropriate allocation of the ad valorem taxes allocated to the Project to give effect to this sentence); _____________________________ (11) the cost of operating the management office for the Project, including cost of office supplies, telephone expenses and non-capital investment equipment and amortization (together with reasonable financing charges) of the cost of capital investment equipment; and _____________________________ (12) Tenant acknowledges that the Project is part of a development, which will or may include other improvements and that certain of the costs of management, operation and maintenance of the development shall, from time to time, be allocated among and shared by two or more of the improvements in the development (including the Project). The determination of such costs and their allocation shall be made by Landlord in its sole but reasonable discretion. In addition, Landlord reserves the right to recompute and adjust the base year of any component of Operating Expenses at any time during the Lease Term as a result of any reallocation within the Project. Accordingly, the term "Operating Expenses" as used in this Lease shall, from time to time, include some costs, expenses and taxes enumerated above which were incurred with respect to other improvements in the development but which were allocated to and shared by the Project in accordance with the foregoing. Notwithstanding the foregoing, Tenant understands and agrees that its rights to use other portions of the development of which the Project is a part are those available to the general public and that this Lease does not grant to Tenant additional rights of use. __________________________(b) For purposes of this Lease, and notwithstanding anything in any other provision of this Lease to the contrary, "Operating Expenses" shall not include the following: _____________________________ (1) the cost of any special work or service performed for any tenant (including Tenant) at such tenant's cost; _____________________________ (2) the cost of installing, operating and maintaining any specialty service, such as an observatory, broadcasting facility, luncheon club, restaurant, cafeteria, retail store, sundry shop, newsstand, or concession, but only to the extent such costs exceed those which would normally be expected to be incurred had such space been general office space; _____________________________ (3) the cost of correcting defects in construction; _____________________________ (4) compensation paid to officers and executives of Landlord (but it is understood that the on-site building manager and other on-site employees below the grade of building manager may carry a title such as vice president and the salaries and related benefits of these officers/employees of Landlord would be allowable Operating Expenses under Article 9[a][ 1] above); _____________________________ (5) the cost of any items for which Landlord is reimbursed by insurance, condemnation or otherwise, except for costs reimbursed pursuant to provisions similar to Articles 8 and 9 hereof; _____________________________ (6) the cost of any additions, changes, replacements and other items which are made in order to prepare for a new tenant's occupancy; _____________________________ (7) the cost of repairs incurred by reason of fire or other casualty; _____________________________ (8) insurance premiums to the extent Landlord may be directly reimbursed therefor, except for premiums reimbursed pursuant to provisions similar to Articles 8 and 9 hereof; _____________________________ (9) interest on debt or amortization payments on any mortgage or deed to secure debt (except to the extent specifically permitted by Article 9[a]) and rental under any ground lease or other underlying lease; _____________________________ (10) any real estate brokerage commissions or other costs incurred in procuring tenants or any fee in lieu of such commission; _____________________________ (11) any advertising expenses incurred in connection with the marketing of any rentable space; (12) rental payments for base building equipment such as HVAC equipment and elevators; _____________________________ (13) any expenses for repairs or maintenance which are covered by warranties and service contracts, to the extent such maintenance and repairs are made at no cost to Landlord; and _____________________________ (14) legal expenses arising out of the construction of the improvements on the Land or the enforcement of the provisions of any lease affecting the Land or Building, including without limitation this Lease. 10.Tenant Taxes. Tenant shall pay promptly when due all taxes directly or indirectly imposed or assessed upon Tenant's gross sales, business operations, machinery, equipment, trade fixtures and other personal property or assets, whether such taxes are assessed against Tenant, Landlord or the Building. In the event that such taxes are imposed or assessed against Landlord or the Building, Landlord shall furnish Tenant with all applicable tax bills, public charges and other assessments or impositions and Tenant shall forthwith pay the same either directly to the taxing authority or, at Landlord's option, to Landlord. 11.Payments. All payments of Rent and other payments to be made to Landlord shall be made on a timely basis and shall be payable to Landlord or as Landlord may otherwise designate. All such payments shall be mailed or delivered to Landlord's Address designated in Article 1(b) above or at such other place as Landlord may designate from time to time in writing. If mailed, all payments shall be mailed in sufficient time and with adequate postage thereon to be received in Landlord's account by no later than the due date for such payment. Tenant agrees to pay to Landlord Fifty Dollars ($50.00) for each check presented to Landlord in payment of any obligation of Tenant which is not paid by the bank on which it is drawn, together with interest from and after the due date for such payment at the rate of ten percent (10%) per annum on the amount due. 12.Late Charges. Any Rent or other amounts payable to Landlord under this Lease, if not paid by the fifth day of the month for which such Rent is due, or by the due date specified on any invoices from Landlord for any other amounts payable hereunder, shall incur a late charge of Fifty Dollars ($50.00) for Landlord's administrative expense in processing such delinquent payment and in addition thereto shall bear interest at the rate of ten percent (10%) per annum from and after the due date for such payment. Notwithstanding anything to the contrary contained in this Lease, in no event shall the rate of interest payable on any amount due under this Lease exceed the legal limits for such interest enforceable under applicable law. 13.Use Rules. The Demised Premises shall be used for executive, general administrative and office space purposes and no other purposes and in accordance with all applicable laws, ordinances, rules and regulations of governmental authorities and the Rules and Regulations attached hereto and made a part hereof. Tenant covenants and agrees that it will, at its expense, comply with all laws, ordinances, orders, directions, requirements, rules and regulations of all governmental authorities (including federal, state, county and municipal authorities), now in force or which may hereafter be in force, which shall impose any duty upon Landlord or Tenant with respect to the use, occupancy or alteration of the Demised Premises, and of all insurance bodies applicable to the Demised Premises or to the Tenant's use or occupancy thereof. Tenant covenants and agrees to abide by the Rules and Regulations in all respects as now set forth and attached hereto or as hereafter promulgated by Landlord. Landlord shall have the right at all times during the Lease Term to publish and promulgate and thereafter enforce such rules and regulations or changes in the existing Rules and Regulations as it may reasonably deem necessary in its sole discretion to protect the tenantability, safety, operation, and welfare of the Demised Premises and the Project. 14.Alterations. Except for any initial improvement of the Demised Premises pursuant to Exhibit "D", which shall be governed by the provisions of said Exhibit "D", Tenant shall not make, suffer or permit to be made any alterations, additions or improvements to or of the Demised Premises or any part thereof, or attach any fixtures or equipment thereto, without first obtaining Landlord's written consent. With respect to any alteration, addition or improvement which does not affect the structure of the Building, does not affect any of the Building's systems (e.g., mechanical, electrical or plumbing), does not diminish the capacity of such Building systems available to other portions of the Building, is not visible from the common areas or exterior of the Building, and is in full compliance with all laws, orders, ordinances, directions, requirements, rules and regulations of all governmental authorities, Landlord's consent shall not be unreasonably withheld. Any such alterations, additions or improvements to the Demised Premises consented to by Landlord shall be made by Landlord or under Landlord's supervision for Tenant's account and Tenant shall reimburse Landlord for all costs thereof (including a reasonable charge for Landlord's overhead), as Rent, within ten (10) days after receipt of a statement. All such alterations, additions and improvements shall become Landlord's property at the expiration or earlier termination of the Lease Term and shall remain on the Demised Premises without compensation to Tenant unless Landlord elects by notice to Tenant to have Tenant remove such alterations, additions and improvements, in which event, notwithstanding any contrary provisions respecting such alterations, additions and improvements contained in Article 32 hereof, Tenant shall promptly restore, at its sole cost and expense, the Demised Premises to its condition prior to the installation of such alterations, additions and improvements, normal wear and tear excepted. 15.Repairs. __________________________(a) Landlord shall maintain in good order and repair, subject to normal wear and tear and subject to casualty and condemnation, the Building (excluding the Demised Premises and other portions of the Building leased to other tenants), the Building parking facilities, the public areas and the landscaped areas. Notwithstanding the foregoing obligation, the cost of any repairs or maintenance to the foregoing necessitated by the intentional acts or negligence of Tenant or its agents, contractors, employees, invitees, licensees, tenants or assigns, shall be borne solely by Tenant and shall be deemed Rent hereunder and shall be reimbursed by Tenant to Landlord upon demand. Landlord shall not be required to make any repairs or improvements to the Demised Premises except structural repairs necessary for safety and tenant ability. __________________________(b) Tenant covenants and agrees that it will take good care of the Demised Premises and all alterations, additions and improvements thereto and will keep and maintain the same in good condition and repair, except for normal wear and tear. Tenant shall at once report, in writing, to Landlord any defective or dangerous condition known to Tenant. To the fullest extent permitted by law, Tenant hereby waives all rights to make repairs at the expense of Landlord or in lieu thereof to vacate the Demised Premises as may be provided by any law, statute or ordinance now or hereafter in effect. Landlord has no obligation and has made no promise to alter, remodel, improve, repair, decorate or paint the Demised Premises or any part thereof, except as specifically and expressly herein set forth. 16.Landlord's Right of Entry. Landlord shall retain duplicate keys to all doors of the Demised Premises and Landlord and its agents, employees and independent contractors shall have the right to enter the Demised Premises at reasonable hours to inspect and examine same, to make repairs, additions, alterations and improvements, to exhibit the Demised Premises to mortgagees, prospective mortgagees, purchasers or tenants, and to inspect the Demised Premises to ascertain that Tenant is complying with all of its covenants and obligations hereunder, all without being liable to Tenant in any manner whatsoever for any damages arising therefrom; provided, however, that Landlord shall, except in case of emergency, afford Tenant such prior notification of an entry into the Demised Premises as shall be reasonably practicable under the circumstances. Landlord shall be allowed to take into and through the Demised Premises any and all materials that may be required to make such repairs, additions, alterations or improvements. During such time as such work is being carried on, in or about the Demised Premises, the Rent provided herein shall not abate, and Tenant waives any claim or cause of action against Landlord for damages by reason of interruption of Tenant's business or loss of profits therefrom because of the prosecution of any such work or any part thereof. 17.Insurance. Tenant shall procure at its expense and maintain throughout the Lease Term a policy or policies of commercial property insurance, issued on an "all risks" basis insuring the full replacement cost of its furniture, equipment, supplies and other property owned, leased, held or possessed by it and contained in the Demised Premises, together with the excess value of the improvements to the Demised Premises over the Tenant Improvement Allowance (with a replacement cost endorsement sufficient to prevent Tenant from becoming a co-insurer), and workmen's compensation insurance as required by applicable law. Tenant shall also procure at its expense and maintain throughout the Lease Term a policy or policies of commercial general liability insurance, including but not limited to, insurance assumed or contractual liability under this Lease, written on an occurrence basis and insuring Tenant, Landlord and any other person designated by Landlord, against any and all liability for injury to or death of a person or persons and for damage to property occasioned by or arising out of any construction work being done on the Demised Premises, or arising out of the condition, use or occupancy of the Demised Premises, or in any way occasioned by or arising out of the activities of Tenant, its agents, contractors, employees, guests or licensees in the Demised Premises, or other portions of the Building or the Project, the limits of such policy or policies to be in combined single limits for both damage to property and personal injury and in amounts not less than Three Million Dollars ($3,000,000.00) for each occurrence. Such insurance shall, in addition, extend to any liability of Tenant arising out of the indemnities provided for in this Lease. Tenant shall require any contractor performing work on the Demised Premises to carry and maintain, at no expense to Landlord, non-deductible comprehensive general liability insurance, including but not limited to, contractor's liability coverage, contractual liability coverage, completed operations coverage, broad form property damage endorsement and contractor's protection liability coverage in such amounts and with such companies as Landlord shall approve. Tenant shall also carry such other types of insurance in form and amount which Landlord shall reasonably deem to be prudent for Tenant to carry, should the circumstances or conditions so merit Tenant carrying such type of insurance. All insurance policies procured and maintained by Tenant pursuant to this Article 17 shall name Landlord and any additional parties designated by Landlord as additional insured, shall be carried with companies licensed to do business in the State of Tennessee reasonably satisfactory to Landlord and shall be non-cancellable and not subject to material change except after thirty (30) days' written notice to Landlord. Such policies or duly executed certificates of insurance with respect thereto, accompanied by proof of payment of the premium therefor, shall be delivered to Landlord prior to the Rental Commencement Date, and renewals of such policies shall be delivered to Landlord at least thirty (30) days prior to the expiration of each respective policy term. 18.Waiver of Subrogation. Landlord and Tenant shall each have included in all policies of commercial property insurance, commercial general liability insurance, and business interruption and other insurance respectively obtained by them covering the Demised Premises, the Building and contents therein, a waiver by the insurer of all right of subrogation against the other in connection with any loss or damage thereby insured against. Any additional premium for such waiver shall be paid by the primary insured. To the full extent permitted by law, Landlord and Tenant each waives all right of recovery against the other for, and agrees to release the other from liability for, loss or damage to the extent such loss or damage is covered by valid and collectible insurance in effect at the time of such loss or damage or would be covered by the insurance required to be maintained under this Lease by the party seeking recovery. 19.Default. __________________________(a) The following events shall be deemed to be events of default by Tenant under this Lease: (i) Tenant shall fail to pay any installment of Rent or any other charge or assessment against Tenant pursuant to the terms hereof within five (5) days after the due date thereof; (ii) Tenant shall fail to comply with any term, provision, covenant or warranty made under this Lease by Tenant, other than the payment of the Rent or any other charge or assessment payable by Tenant, and shall not cure such failure within fifteen (15) days after notice thereof to Tenant; (iii) Tenant or any guarantor of this Lease shall make a general assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts as they become due, or shall file a petition in bankruptcy, or shall be adjudicated as bankrupt or insolvent, or shall file a petition in any proceeding seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, or shall file an answer admitting or fail timely to contest the material allegations of a petition filed against it in any such proceeding; (iv) a proceeding is commenced against Tenant or any guarantor of this Lease seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, and such proceeding shall not have been dismissed within forty-five (45) days after the commencement thereof; (v) a receiver or trustee shall be appointed for the Demised Premises or for all or substantially all of the assets of Tenant or of any guarantor of this Lease; (vi) Tenant shall abandon or vacate all or any portion of the Demised Premises or fail to take possession thereof as provided in this Lease; (vii) Tenant shall do or permit to be done anything which creates a lien upon the Demised Premises or the Project and such lien is not removed or discharged within fifteen (15) days after the filing thereof; (viii) Tenant shall fail to return a properly executed instrument to Landlord in accordance with the provisions of Article 27 hereof within the time period provided for such return following Landlord's request for same as provided in Article 27; or (ix) Tenant shall fail to return a properly executed estoppel certificate to Landlord in accordance with the provisions of Article 28 hereof within the time period provided for such return following Landlord's request for same as provided in Article 28. __________________________(b) Upon the occurrence of any of the aforesaid events of default, Landlord shall have the option to pursue any one or more of the following remedies without any notice or demand whatsoever: (i) terminate this Lease, in which event Tenant shall immediately surrender the Demised Premises to Landlord and if Tenant fails to do so, Landlord may without prejudice to any other remedy which it may have for possession or arrearages in Rent, enter upon and take possession of the Demised Premises and expel or remove Tenant and any other person who may be occupying said Demised Premises or any part thereof, by force, if necessary, without being liable for prosecution or any claim of damages therefor; Tenant hereby agreeing to pay to Landlord on demand the amount of all loss and damage which Landlord may suffer by reason of such termination, whether through inability to relet the Demised Premises on satisfactory terms or otherwise; (ii) terminate Tenant's right of possession (but not this Lease) and enter upon and take possession of the Demised Premises and expel or remove Tenant and any other person who may be occupying said Demised Premises or any part thereof, by entry (including the use of force, if necessary), dispossessory suit or otherwise, without thereby releasing Tenant from any liability hereunder, without terminating this Lease, and without being liable for prosecution or any claim of damages therefor and, if Landlord so elects, make such alterations, redecorations and repairs as, in Landlord's judgment, may be necessary to relet the Demised Premises, and Landlord may, but shall be under no obligation to do so, relet the Demised Premises or any portion thereof in Landlord's or Tenant's name, but for the account of Tenant, for such term or terms (which may be for a term extending beyond the Lease Term) and at such rental or rentals and upon such other terms as Landlord may deem advisable, with or without advertisement, and by private negotiations, and receive the rent therefor, Tenant hereby agreeing to pay to Landlord the deficiency, if any, between all Rent reserved hereunder and the total rental applicable to the Lease Term hereof obtained by Landlord re-letting, and Tenant shall be liable for Landlord's expenses in redecorating and restoring the Demised Premises and all costs incident to such re-letting, including broker's commissions and lease assumptions, and in no event shall Tenant be entitled to any rentals received by Landlord in excess of the amounts due by Tenant hereunder; or (iii) enter upon the Demised Premises by force, if necessary, without being liable for prosecution or any claim of damages therefor, and do whatever Tenant is obligated to do under the terms of this Lease; and Tenant agrees to reimburse Landlord on demand for any expenses including, without limitation, reasonable attorneys' fees which Landlord may incur in thus effecting compliance with Tenant's obligations under this Lease and Tenant further agrees that Landlord shall not be liable for any damages resulting to Tenant from such action, whether caused by negligence of Landlord or otherwise. If this Lease is terminated by Landlord as a result of the occurrence of an event of default, Landlord may declare the entire amount of Rent and other charges and assessments which in Landlord's reasonable determination would become due and payable during the remainder of the Lease Term (including, but not limited to, increases in Rent pursuant to Article 7 hereof), discounted to present value by using a discount factor of eight percent (8%) per annum, to be due and payable immediately. Upon the acceleration of such amounts, Tenant agrees to pay the same at once, together with all Rent and other charges and assessments theretofore due, at Landlord's address as provided herein; provided, however, that such payment shall not constitute a penalty or forfeiture but shall constitute liquidated damages for Tenant's failure to comply with the terms and provisions of this Lease (Landlord and Tenant agreeing that Landlord's actual damages in such event arc impossible to ascertain and that the amount set forth above is a reasonable estimate thereof). Upon making the entire such payment, Tenant shall receive from Landlord all rents received by Landlord from other tenants renting the Demised Premises or any portion thereof during the Lease Term (with appropriate allocations of such rents in the event such other tenants lease space in addition to the Demised Premises), provided that the monies to which Tenant shall so become entitled shall in no event exceed the entire amount actually paid by Tenant to Landlord pursuant to the preceding sentence, less all of Landlord's costs and expenses (including, without limitation, Landlord's expenses in redecorating and restoring the Demised Premises and all costs incident to such reletting, including broker's commissions and lease assumptions) incurred in connection with or in any way related to the reletting of the Demised Premises. __________________________(c) Pursuit of any of the foregoing remedies shall not preclude pursuit of any other remedy herein provided or any other remedy provided by law or at equity, nor shall pursuit of any remedy herein provided constitute an election of remedies thereby excluding the later election of an alternate remedy, or a forfeiture or waiver of any Rent or other charges and assessments payable by Tenant and due to Landlord hereunder or of any damages accruing to Landlord by reason of violation of any of the terms, covenants, warranties and provisions herein contained. No reentry or taking possession of the Demised Premises by Landlord or any other action taken by or on behalf of Landlord shall be construed to be an acceptance of a surrender of this Lease or an election by Landlord to terminate this Lease unless written notice of such intention is given to Tenant. Forbearance by Landlord to enforce one or more of the remedies herein provided upon an event of default shall not be deemed or construed to constitute a waiver of such default. In determining the amount of loss or damage which Landlord may suffer by reason of termination of this Lease or the deficiency arising by reason of any reletting of the Demised Premises by Landlord as above provided, allowance shall be made for the expense of repossession. Tenant agrees to pay to Landlord all costs and expenses incurred by Landlord in the enforcement of this Lease, including without limitation, the fees of Landlord's attorneys as provided in Article 25 hereof. 20.Waiver of Breach. No waiver of any breach of the covenants, warranties, agreements, provisions, or conditions contained in this Lease shall be construed as a waiver of said covenant, warranty, provision, agreement or condition or of any subsequent breach thereof, and if any breach shall occur and afterwards be compromised, settled or adjusted, this Lease shall continue in full force and effect as if no breach had occurred. 21.Assignment and Subletting. Tenant shall not, without the prior written consent of Landlord, assign this Lease or any interest herein or in the Demised Premises, or mortgage, pledge, encumber, hypothecate or otherwise transfer or sublet the Demised Premises or any part thereof or permit the use of the Demised Premises by any party other than Tenant. Consent to one or more such transfers or subleases shall not destroy or waive this provision, and all subsequent transfers and subleases shall likewise be made only upon obtaining the prior written consent of Landlord. Without limiting the foregoing prohibition, in no event shall Tenant assign this Lease or any interest herein, whether directly, indirectly or by operation of law, or sublet the Demised Premises or any part thereof or permit the use of the Demised Premises or any part thereof by any party if such proposed assignment, subletting or use would contravene any restrictive covenant (including any exclusive use) granted to any other tenant of the Building or would contravene the provisions of Article 13 of this Lease. Sublessees or transferees of the Demised Premises for the balance of the Lease Term shall become directly liable to Landlord for all obligations of Tenant hereunder, without relieving Tenant (or any guarantor of Tenant's obligations hereunder) of any liability therefor, and Tenant shall remain obligated for all liability to Landlord arising under this Lease during the entire remaining Lease Term including any extensions thereof, whether or not authorized herein. If Tenant is a partnership, a withdrawal or change, whether voluntary, involuntary or by operation of law, of partners owning a controlling interest in the Tenant shall be deemed a voluntary assignment of this Lease and subject to the foregoing provisions. If Tenant is a corporation, any dissolution, merger, consolidation or other reorganization of Tenant, or the sale or transfer of a controlling interest in the capital stock of Tenant, whether in a single transaction or in a series of transactions, shall be deemed a voluntary assignment of this Lease and subject to the foregoing provisions. Landlord may, as a prior condition to considering any request for consent to an assignment or sublease, require Tenant to obtain and submit current financial statements of any proposed subtenant or assignee and such other financial documentation relative to the proposed subtenant or assignee as Landlord may reasonably require. In the event Landlord consents to an assignment or sublease, Tenant shall pay to Landlord a fee to cover Landlord's accounting costs plus any legal fees incurred by Landlord as a result of the assignment or sublease. The consent of Landlord to any proposed assignment or sublease may be withheld by Landlord in its sole and absolute discretion. Landlord may require an additional security deposit from the assignee or subtenant as a condition of its consent. Any consideration, in excess of the Rent and other charges and sums due and payable by Tenant under this Lease, paid to Tenant by any assignee of this Lease for its assignment, or by any sublessee under or in connection with its sublease, or otherwise paid to Tenant by another party for use and occupancy of the Demised Premises or any portion thereof, shall be promptly remitted by Tenant to Landlord as additional rent hereunder and Tenant shall have no right or claim thereto as against Landlord. No assignment of this Lease consented to by Landlord shall be effective unless and until Landlord shall receive an original assignment and assumption agreement, in form and substance satisfactory to Landlord, signed by Tenant and Tenant's proposed assignee, whereby the assignee assumes due performance of this Lease to be done and performed for the balance of the then remaining Lease Term of this Lease. No subletting of the Demised Premises, or any part thereof, shall be effective unless and until there shall have been delivered to Landlord an agreement, in form and substance satisfactory to Landlord, signed by Tenant and the proposed sublessee, whereby the sublessee acknowledges the right of Landlord to continue or terminate any sublease, in Landlord's sole discretion, upon termination of this Lease, and such sublessee agrees to recognize and to attorn to Landlord in the event that Landlord under such circumstances agrees to continue such sublease. Upon Landlord's receipt of a request by Tenant to assign this Lease or any interest herein or in the Demised Premises or to transfer or sublet the Demised Premises or any part thereof or permit the use of the Demised Premises by any party other than Tenant, Landlord shall have the right, at Landlord's option, to exercise in writing any of the following options: (a) To terminate this Lease as to the portion of the Demised Premises proposed to be assigned or sublet; (b) to consent to the proposed assignment or sublease, subject to the other terms and conditions set forth in this Article 21; or (c) to refuse to consent to the proposed assignment or sublease, which refusal shall be deemed to have been exercised unless Landlord gives Tenant written notice providing otherwise. 22.Destruction. __________________________(a) If the Demised Premises are damaged by fire or other casualty, the same shall be repaired or rebuilt as speedily as practical under the circumstances at the expense of Landlord, unless this Lease is terminated as provided in this Article 22, and during the period required for restoration, a just and proportionate part of Base Rental shall be abated until the Demised Premises are repaired or rebuilt. __________________________(b) If the Demised Premises are (i) damaged to such an extent that repairs cannot, in Landlord's judgment, be completed within one hundred eighty (180) days after the date of the commencement of repair of the casualty, or (ii) damaged or destroyed as a result of a risk which is not insured under the insurance policies required hereunder, or (iii) damaged or destroyed during the last eighteen (18) months of the Lease Term, or (iv) if the Building is damaged in whole or in part (whether or not the Demised Premises are damaged) to such an extent that the Building cannot, in Landlord's judgment, be operated economically as an integral unit, then and in any such event Landlord may at its option terminate this Lease by notice in writing to Tenant within sixty (60) days after the day of such occurrence. If the Demised Premises are damaged to such an extent that repairs cannot, in Landlord's judgment, be completed within one hundred eighty (180) days after the date of the commencement of repair of the casualty or if the Demised Premises are substantially damaged during the last eighteen (18) months of the Lease Term, then in either such event Tenant may elect to terminate this Lease by notice in writing to Landlord within fifteen (15) days after the date of such occurrence. Unless Landlord or Tenant elects to terminate this Lease as hereinabove provided, this Lease will remain in full force and effect and Landlord shall repair such damage at its expense to the extent required under subparagraph (c) below as expeditiously as possible under the circumstances. (c) If Landlord should elect or be obligated pursuant to subparagraph (a) above to repair or rebuild because of any damage or destruction, Landlord's obligation shall be limited to the original Building and any other work or improvements which were originally performed or installed at Landlord's expense as described in Exhibit "D" hereto or with the proceeds of the Tenant Improvement Allowance. If the cost of performing such repairs exceeds the actual proceeds of insurance paid or payable to Landlord on account of such casualty, or if Landlord's mortgagee or the lessor under a ground or underlying lease shall require that any insurance proceeds from a casualty loss be paid to it, Landlord may terminate this Lease unless Tenant, within fifteen (15) days after demand therefor, deposits with Landlord a sum of money sufficient to pay the difference between the cost of repair and the proceeds of the insurance available to Landlord for such purpose. __________________________(d) In no event shall Landlord be liable for any loss or damage sustained by Tenant by reason of casualties mentioned hereinabove or any other accidental casualty. 23.Landlord's Lien. Landlord shall at all times have a valid first lien upon all of the personal property of Tenant situated in the Demised Premises to secure payment of Rent and other sums and charges due hereunder from Tenant to Landlord and to secure the performance by Tenant of each and all of the covenants, warranties, agreements and conditions hereof. Said personal property shall not be removed from the Demised Premises without the consent of Landlord until all arrearage in Rent and other charges as well as any and all other sums of money due hereunder shall first have been paid and discharged and until this Lease and all of the covenants, conditions, agreements and provisions hereof have been fully performed by Tenant. Tenant shall from time to time execute any financing statements and other instruments necessary to perfect the security interest granted herein. The lien herein granted may be foreclosed in the manner and form provided by law for the foreclosure of security instruments or chattel mortgages, or in any other manner provided by law. This Lease is intended as and constitutes a security agreement within the meaning of the Uniform Commercial Code of the State of Tennessee. 24.Services by Landlord. Landlord shall provide the Building Standard Services described on Exhibit "E" attached hereto and by this reference made a part hereof. 25.Attorneys' Fees and Homestead. If any Rent or other debt owing by Tenant to Landlord hereunder is collected by or through an attorney-at-law, Tenant agrees to pay an additional amount equal to fifteen percent (15%) of such sum as attorneys' fees. If Landlord uses the services of any attorney in order to secure compliance with any other provisions of this Lease, to recover damages for any breach or default of any other provisions of this Lease, or to terminate this Lease or evict Tenant, Tenant shall reimburse Landlord upon demand for any and all attorneys' fees and expenses so incurred by Landlord. Tenant waives all homestead rights and exemptions which it may have under any law against any obligation owing under this Lease, and assigns to Landlord its homestead and exemptions to the extent necessary to secure payment and performance of its covenants and agreements hereunder. 26.Time. Time is of the essence of this Lease and whenever a certain day is stated for payment or performance of any obligation of Tenant or Landlord, the same enters into and becomes a part of the consideration hereof. 27.Subordination and Attornment. __________________________(a) Tenant agrees that this Lease and all rights of Tenant hereunder are and shall be subject and subordinate to any ground or underlying lease which may now or hereafter be in effect regarding the Project or any component thereof, to any mortgage now or hereafter encumbering the Demised Premises or the Project or any component thereof, to all advances made or hereafter to be made upon the security of such mortgage, to all amendments, modifications, renewals, consolidations, extensions and restatements of such mortgage, and to any replacements and substitutions for such mortgage. The terms of this provision shall be self-operative and no further instrument of subordination shall be required. Tenant, however, upon request of any party in interest, shall execute promptly such instrument or certificates as may be reasonably required to carry out the intent of this provision. __________________________(b) If any mortgagee or lessee under a ground or underlying lease elects to have this Lease superior to its mortgage or lease and signifies its election in the instrument creating its lien or lease or by separate recorded instrument, then this Lease shall be superior to such mortgage or lease, as the case may be. The term "mortgage", as used in this Lease, includes any deed to secure debt, deed of trust or security deed and any other instrument creating a lien in connection with any other method of financing or refinancing. The term "mortgagee", as used in this Lease, refers to the holder(s) of the indebtedness secured by a mortgage. __________________________(c) In the event any proceedings are brought for the foreclosure of, or in the event of exercise of the power of sale under, any mortgage covering the Demised Premises or the Project, or in the event the interests of Landlord under this Lease shall be transferred by reason of deed in lieu of foreclosure or other legal proceedings, or in the event of termination of any Lease under which Landlord may hold title, Tenant shall, at the option of the transferee or purchaser at foreclosure or under power of sale, or the lessor of the Landlord upon such Lease termination, as the case may be (sometimes hereinafter called "such person"), attorn to such person and shall recognize and be bound and obligated hereunder to such person as the Landlord under this Lease; provided, however, that no such person shall be (i) bound by any payment of Rent for more than one (1) month in advance, accept prepayments, in the nature of security for the performance by Tenant of its obligation under this Lease (and then only if such prepayments have been deposited with and are under the control of such person); (ii) bound by any amendment or modification of this Lease made without the express written consent of the mortgagee or lessor of the Landlord, as the case may be; (iii) obligated to cure any defaults under this Lease of any prior landlord (including Landlord); (iv) liable for any act or omission of any prior landlord (including Landlord); (v) subject to any offsets or defenses which Tenant might have against any prior landlord (including Landlord); or (vi) bound by any warranty or representation of any prior landlord (including Landlord) relating to work performed by any prior landlord (including Landlord) under this Lease. Tenant agrees to execute any attornment agreement not in conflict herewith requested by Landlord, the mortgagee or such person. Tenant's obligation to attorn to such person shall survive the exercise of any such power of sale, foreclosure or other proceeding. Tenant agrees that the institution of any suit, action or other proceeding by any mortgagee to realize on Landlord's interest in the Demised Premises or the Building pursuant to the powers granted to a mortgagee under its mortgage, shall not, by operation of law or otherwise, result in the cancellation or termination of the obligations of Tenant hereunder. Landlord and Tenant agree that notwithstanding that this Lease is expressly subject and subordinate to any mortgages, any mortgagee, its successors and assigns, or other holder of a mortgage or of a note secured thereby, may sell the Demised Premises or the Building, in the manner provided in the mortgage and may, at the option of such mortgagee, its successors and assigns, or other holder of the mortgage or note secured thereby, make such sale of the Demised Premises or Building subject to this Lease. 28.Estoppel Certificates. Within ten (10) days after request therefor by Landlord, Tenant agrees to execute and deliver to Landlord in recordable form an estoppel certificate addressed to Landlord, any mortgagee or assignee of Landlord's interest in, or purchaser of, the Demised Premises or the Building or any part thereof, certifying (if such be the case) that this Lease is unmodified and is in full force and effect (and if there have been modifications, that the same is in full force and effect as modified and stating said modifications); that there are no defenses or offsets against the enforcement thereof or stating those claimed by Tenant; and stating the date to which Rent and other charges have been paid. Such certificate shall also include such other information as may reasonably be required by such mortgagee, proposed mortgagee, assignee, purchaser or Landlord. Any such certificate may be relied upon by Landlord, any mortgagee, proposed mortgagee, assignee, purchaser and any other party to whom such certificate is addressed. 29.No Estate. This Lease shall create the relationship of landlord and tenant only between Landlord and Tenant and no estate shall pass out of Landlord. Tenant shall have only an usufruct, not subject to levy and sale and not assignable in whole or in part by Tenant accept as herein provided. 30.Cumulative Rights. All rights, powers and privileges conferred hereunder upon the parties hereto shall be cumulative to, but not restrictive of, or in lieu of those conferred by law. 31.Holding Over. If Tenant remains in possession after expiration or termination of the Lease Term with or without Landlord's written consent, Tenant shall become a tenant at sufferance, and there shall be no renewal of this Lease by operation of law. During the period of any such holding over, all provisions of this Lease shall be and remain in effect accept that the monthly rental shall be double the amount of Rent (including any adjustments provided herein) payable for the last full calendar month of the Lease Term including renewals or extensions. The inclusion of the preceding sentence in this Lease shall not be construed as Landlord's consent for Tenant to hold over. 32.Surrender of Premises. Upon the expiration or other termination of this Lease, Tenant shall quit and surrender to Landlord the Demised Premises and every part thereof and all alterations, additions and improvements thereto, broom clean and in good condition and state of repair, reasonable wear and tear only accepted. If Tenant is not then in default, Tenant shall remove all personalty and equipment not attached to the Demised Premises which it has placed upon the Demised Premises, and Tenant shall restore the Demised Premises to the condition immediately preceding the time of placement thereof. If Tenant shall fail or refuse to remove all of Tenant's effects, personalty and equipment from the Demised Premises upon the expiration and termination of this Lease for any cause whatsoever or upon Tenant being dispossessed by process of law or otherwise, such effects, personalty and equipment shall be deemed conclusively to be abandoned and may be appropriated, sold, stored, destroyed or otherwise disposed of by Landlord without written notice to Tenant or any other party and without obligation to account for them. Tenant shall pay Landlord on demand any and all expenses incurred by Landlord in the removal of such property, including, without limitation, the cost of repairing any damage to the Building or Project caused by the removal of such property and storage charges (if Landlord elects to store such property). The covenants and conditions of this Article 32 shall survive any expiration of termination of this Lease. 33.Notices. All notices required or permitted to be given hereunder shall be in writing and shall be deemed to have been fully given, whether actually received or not, when deposited, postage prepaid, in the United States Mail, certified, return receipt requested, and addressed to Landlord or Tenant at their respective address set forth hereinabove or at such other address as either party shall have theretofore given to the other by notice herein provided. Tenant hereby designates and appoints as its agent to receive notice of all distraint proceedings and all other notices required under this Lease, the person in charge of the Demised Premises at the time said notice is given or occupying said Demised Premises at said time; and, if no person is in charge of or occupying the said Demised Premises, then such services or notice may be made by attaching the same, in lieu of mailing, on the main entrance to the Demised Premises. 34.Damage or Theft of Personal Property. All personal property brought into the Demised Premises by Tenant, or Tenant's employees, agent, or business visitors, shall be at the risk of Tenant only, and Landlord shall not be liable for theft thereof or any damage thereto occasioned by any act of co-tenants, occupants, invitees or other users of the Building or any other person. Landlord shall not be at any time be liable for damage to any property. 35.Eminent Domain. __________________________(a) If all or part of the Demised Premises shall be taken for any public or quasi-public use by virtue of the exercise of the power of eminent domain or by private purchase in lieu thereof, this Lease shall terminate as to the part so taken as of the date of taking, and, in the case of a partial taking, either Landlord or Tenant shall have the right to terminate this Lease as to the balance of the Demised Premises by written notice to the other within thirty (30) days after such date; provided, however, that a condition to the exercise by Tenant of such right to terminate shall be that the portion of the Demised Premises taken shall be of such extent and nature as substantially to handicap, impede or impair Tenant's use of the balance of the Demised Premises. If title to so much of the Project is taken that a reasonable amount of reconstruction thereof will not in Landlord's sole discretion result in the Building being a practical improvement and reasonably suitable for use for the purpose for which it is designed, then this Lease shall terminate on the date that the condemning authority actually takes possession of the part so condemned or purchased. __________________________(b) If this Lease is terminated under the provisions of this Article 35, Rent shall be apportioned and adjusted as of the date of termination. Tenant shall have no claim against Landlord or against the condemning authority for the value of any leasehold estate or for the value of the unexpired Lease Term provided that the foregoing shall not preclude any claim that Tenant may have against the condemning authority for the unamortized cost of leasehold improvements, to the extent the same were installed at Tenant's expense (and not with the proceeds of the Tenant Improvement Allowance), or for loss of business, moving expenses or other consequential damages, in accordance with subparagraph (d) below. __________________________(c) If there is a partial taking of the Project and this Lease is not thereupon terminated under the provisions of this Article 35, then this Lease shall remain in full force and effect, and Landlord shall, within a reasonable time thereafter, repair or reconstruct the remaining portion of the Building to the extent necessary to make the same a complete architectural unit; provided, that in complying with its obligations hereunder, Landlord shall not be required to expend more than the net proceeds of the condemnation award which are paid to Landlord. Upon any such partial taking, Landlord shall have the right to reduce the figure described in Article 8(b)(y) hereof by an amount equal to the product of (x) the amount of tax savings arising from such partial taking, as determined by Landlord in its sole but reasonable discretion, divided by the number of square feet of Rentable Floor Area of the Building, multiplied by (y) the number of square feet of Rentable Floor Area of the Demised Premises. __________________________(d) All compensation awarded or paid to Landlord upon a total or partial taking of the Demised Premises or the Project shall belong to and be the property of Landlord without any participation by Tenant. Nothing herein shall be construed to preclude Tenant from prosecuting any claim directly against the condemning authority for loss of business, for damage to, and cost of removal of, trade fixtures, furniture and other personal property belonging to Tenant, and for the unamortized cost of leasehold improvements to the extent the same were installed at Tenant's expense (and not with the proceeds of the Tenant Improvement Allowance); provided, however, that no such claim shall diminish or adversely affect Landlord's award. __________________________(e) Notwithstanding anything to the contrary contained in this Article 35, if, during the Lease Term, the use or occupancy of any part of the Project or the Demised Premises shall be taken or appropriated temporarily for any public or quasi-public purpose under any governmental law, ordinance or regulation, or by right of eminent domain, this Lease shall be and remain unaffected by such taking or appropriation and Tenant shall continue to pay in full all Rent payable hereunder by Tenant during the Lease Term. In the event of any such temporary appropriation or taking, Tenant shall be entitled to receive that portion of any award which represents compensation for the loss of use or occupancy of the Demised Premises during the Lease Term, and Landlord shall be entitled to receive that portion of any award which represents the cost of restoration and compensation for the loss of use or occupancy of the Demised Premises after the end of the Lease Term. 36.Parties. The term "Landlord", as used in this Lease, shall include Landlord and its successors and assigns. It is hereby covenanted and agreed by Tenant that should Landlord's interest in the Demised Premises cease to exist for any reason during the Lease Term, then notwithstanding the happening of such event, this Lease nevertheless shall remain in full force and effect, and Tenant hereby agrees to attorn to the then owner of the Demised Premises. The term "Tenant" shall include Tenant and its heirs, legal representatives and successors, and shall also include Tenant's assignees and sublessees, if this Lease shall be validly assigned or the Demised Premises sublet for the balance of the Lease Term or any renewals or extensions thereof. In addition, Landlord and Tenant covenant and agree that Landlord's right to transfer or assign Landlord's interest in and to the Demised Premises, or any part or parts thereof, shall be unrestricted, and that in the event of any such transfer or assignment by Landlord which includes the Demised Premises, Landlord's obligations to Tenant hereunder shall cease and terminate, and Tenant shall look only and solely to Landlord's assignee or transferee for performance thereof. 37. Liability of Tenant. Tenant hereby indemnifies Landlord from and agrees to hold Landlord harmless against, any and all liability, loss, cost, damage or expense, including, without limitation, court costs and reasonably attorneys' fees, imposed on Landlord by any person whomsoever, caused in whole or in part by any act or omission of Tenant, or any of its employees, contractors, servants, agents, subtenants, assignees, representatives or invitees, or otherwise occurring in connection with any default of Tenant hereunder. The provisions of this Article 37 shall survive any termination of this Lease. 38.Relocation of the Premises. __________________________(a) In the event the Demised Premises leased to Tenant contain less than one-half (1/2) of the total square feet of Rentable Floor Area on the floor on which the Demised Premises are located, Landlord reserves the right as any time or from time to time, at its option and upon giving not less than thirty (30) days' prior written notice to Tenant, to transfer and remove Tenant from the Demised Premises herein specified to any other available rooms and offices of substantially equal size and area in the Building (or other building in the development of which the Building is a part) and at an equivalent Base Rental. Landlord shall bear the expense of said removal together with the reasonable expense of replacement business cards and stationery and the expense of any renovation or alterations to said substituted space necessary to make the same substantially conform in arrangement and layout to the original space described in this Lease. If Landlord exercises such option, then the substituted space shall for all purposes hereof be deemed to be and to constitute the Demised Premises under this Lease and all terms, conditions, covenants, warranties, agreements and provisions of this Lease including but not limited to the same Base Rental Rate per square foot of Rentable Floor Area shall continue in full force and effect and shall apply to the substituted space. Tenant agrees to vacate the Demised Premises herein specified and relocate to said substituted space promptly after the substituted space is ready for Tenant's occupancy as provided herein, and Tenant's failure to do so shall constitute an event of default by Tenant under this Lease. __________________________(b) In the event the Demised Premises leased to Tenant contain less than one-half (1/2) of the total square feet of Rentable Floor Area on the floor on which the Demised Premises are located, Landlord shall have the right to terminate this Lease effective at any time during the final twelve (12) months of the Lease Term upon giving written notice of such election to Tenant at least ninety (90) days prior to the effective date of such termination. In the event Landlord shall exercise such option to terminate this Lease, Landlord shall bear the cost of moving Tenant's furniture, files and other personal property from the Demised Premises to other office space in the Metropolitan Knoxville, Tennessee area selected by Tenant, and in addition, the Base Rental for the last month of Tenant's occupancy of the Demised Premises shall be waived. 39.Force Majeure. In the event of strike, lockout, labor trouble, civil commotion, Act of God, or any other cause beyond a party's control (collectively "force majeure") resulting in Landlord's inability to supply the services or perform the other obligations required of Landlord hereunder, this Lease shall not terminate and Tenant's obligation to pay Rent and all other charges and sums due and payable by Tenant shall not be affected or excused and Landlord shall not be considered to be in default under this Lease. If, as a result of force majeure, Tenant is delayed in performing any of its obligations under this Lease, other than Tenant's obligation to take possession of the Demised Premises on or before the Rental Commencement Date and to pay Rent and all other charges and sums payable by Tenant hereunder, Tenant's performance shall be excused for a period equal to such delay and Tenant shall not during such period be considered to be in default under this Lease with respect to the obligation, performance of which has thus been delayed. 40.Landlord's Liability. Landlord shall have no personal liability with respect to any of the provisions of this Lease. If Landlord is in default with respect to its obligations under this Lease, Tenant shall look solely to the equity of Landlord in and to the Building and the Land for satisfaction of Tenant's remedies, if any. It is expressly understood and agreed that Landlord's liability under the terms of this Lease shall in no event exceed the amount of its interest in and to said Land and Building. In no event shall any partner of Landlord nor any joint venturer in Landlord, nor any officer, director or shareholder of Landlord or any such partner or joint venturer of Landlord be personally liable with respect to any of the provisions of this Lease. 41.Landlord's Covenant of Quiet Enjoyment. Provided Tenant performs the terms, conditions and covenants of this Lease, and subject to the terms and provisions hereof, Landlord covenants and agrees to take all necessary steps to secure and to maintain for the benefit of Tenant the quiet and peaceful possession of the Demised Premises, for the Lease Term, without hindrance, claim or molestation by Landlord or any other person lawfully claiming under Landlord. 42.Security Deposits. __________________________(a) As security for Tenant's obligations to take possession of the Demised Premises in accordance with the terms of this Lease and to comply with all of Tenant's covenants, warranties and agreements hereunder, Tenant shall deposit with Landlord the sum set forth in Article 1(m)(i) above on the date Tenant executes and delivers this Lease to Landlord. Such amount shall be applied by Landlord, without interest, to the first monthly installment(s) of Base Rental as they become due hereunder. In the event Tenant fails to take possession of the Demised Premises as aforesaid, said sum shall be retained by Landlord for application in reduction, but not in satisfaction, of damages suffered by Landlord as a result of such breach by Tenant. __________________________(b) As additional security for the faithful performance by Tenant throughout the Lease Term, and any extensions or renewals thereof, of all the terms and conditions of the Lease on the part of Tenant to be performed, Tenant shall deposit with COMPASS Management & Leasing, Inc., as agent for Landlord, the sum set forth in Article 1(m)(ii) above on the date Tenant executes and delivers this Lease to Landlord. Such amount shall be returned to Tenant, without interest, within twenty (20) days after the day set for the expiration of the Lease Term, or any extension or renewal thereof, provided Tenant has fully and faithfully observed and performed all of the terms, covenants, agreements, warranties and conditions hereof on its part to be observed and performed. Landlord shall have the right to apply all or any part of said deposit toward the cure of any default of Tenant. If all or any part of said security deposit is so applied by Landlord, then Tenant shall immediately pay to Landlord an amount sufficient to return said security deposit to the balance on deposit with Landlord prior to said application. __________________________(c) In the event of a sale or transfer of Landlord's interest in the Demised Premises or the Building or a lease by Landlord of the Building, Landlord shall have the right to transfer the within described security deposits to the purchaser or lessor, as the case may be, and Landlord shall be relieved of all liability to Tenant for the return of such security deposits. Tenant shall look solely to the new owner or lessor for the return of said security deposits. The security deposits shall not be mortgaged, assigned or encumbered by Tenant. In the event of a permitted assignment under this Lease by Tenant, the security deposits shall be held by Landlord as a deposit made by the permitted assignee and Landlord shall have no further liability with respect to the return of said security deposits to the original Tenant. __________________________(d) Neither Landlord nor its agents shall be required to keep the security deposits separate from their general accounts, it being agreed that the security deposits may be commingled with other funds of Landlord or of its agents. It is further agreed and acknowledged by Tenant that Landlord or its agents shall have the right to deposit the security deposits in an interest-bearing account, and all interest accrued on the security deposits shall belong to Landlord and will be retained by Landlord as its property. 43.Hazardous Substances. Tenant hereby covenants and agrees that Tenant shall not cause or permit any "Hazardous Substances" (as hereinafter defined) to be generated, placed, held, stored, used, located or disposed of at the Project or any part thereof, except for Hazardous Substances as are commonly and legally used or stored as a consequence of using the Demised Premises for general office and administrative purposes, but only so long as the quantities thereof do not pose a threat to public health or to the environment or would necessitate a "response action", as that term is defined in CERCLA (as hereinafter defined), and so long as Tenant strictly complies or causes compliance with all applicable governmental rules and regulations concerning the use or production of such Hazardous Substances. For purposes of this Article 43, "Hazardous Substances" shall mean and include those elements or compounds which are contained in the list of Hazardous Substances adopted by the United States Environmental Protection Agency (EPA) or the list of toxic pollutants designated by Congress or the EPA which are defined as hazardous, toxic, pollutant, infectious or radioactive by any other federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to or imposing liability (including, without limitation, strict liability) or standards of conduct concerning, any hazardous, toxic or dangerous waste, substance or material, as now or at any time hereinafter in effect (collectively "Environmental Laws"). Tenant hereby agrees to indemnify Landlord and hold Landlord harmless from and against any and all losses, liabilities, including strict liability, damages, injuries, expenses, including reasonable attorneys' fees, costs of settlement or judgment and claims of any and every kind whatsoever paid, incurred or suffered by, or asserted against, Landlord by any person, entity or governmental agency for, with respect to, or as a direct or indirect result of, the presence in, or the escape, leakage, spillage, discharge, emission or release from, the Demised Premises of any Hazardous Substances (including, without limitation, any losses, liabilities, including strict liability, damages, injuries, expenses, including reasonable attorneys' fees, costs of any settlement or judgment or claims asserted or arising under the Comprehensive Environmental Response, Compensation and Liability Act ["CERCLA"], any so-called federal, state or local "Superfund" or "Superlien" laws or any other Environmental Law); provided, however, that the foregoing indemnity is limited to matters arising solely from Tenant's violation of the covenant contained in this Article. The obligations of Tenant under this Article shall survive any expiration or termination of this Lease. 44.Submission of Lease. The submission of this Lease for examination does not constitute an offer to lease and this Lease shall be effective only upon execution hereof by Landlord and Tenant and upon execution of any required Guaranty Agreement annexed hereto and incorporated herein as Exhibit "F". 45.Severability. If any clause or provision of the Lease is illegal, invalid or unenforceable under present or future laws, the remainder of this Lease shall not be affected thereby, and in lieu of each clause or provision of this Lease which is illegal, invalid or unenforceable, there shall be added as a part of this Lease a clause or provision as nearly identical to the said clause or provision as may be legal, valid and enforceable. 46.Entire Agreement. This Lease contains the entire agreement of the parties and no representations, inducements, promises or agreements, oral or otherwise, between the parties not embodied herein shall be of any force or effect. No failure of Landlord to exercise any power given Landlord hereunder, or to insist upon strict compliance by Tenant with any obligation of Tenant hereunder, and no custom or practice of the parties at variance with the terms hereof, shall constitute a waiver of Landlord's right to demand exact compliance with the terms hereof. This Lease may not be altered, waived, amended or extended except by an instrument in writing signed by Landlord and Tenant. This Lease is not in recordable form, and Tenant agrees not to record or cause to be recorded this Lease or any short form or memorandum thereof. 47.Headings. The use of headings herein is solely for the convenience of indexing the various paragraphs hereof and shall in no event be considered in construing or interpreting any provision of this Lease. 48.Broker. Broker(s) [as defined in Article 1(n)] is(are) entitled to a leasing commission from Landlord by virtue of this Lease, which leasing commission shall be paid by Landlord to Broker(s) in accordance with the terms of a separate agreement between Landlord and Broker(s). Tenant hereby authorizes Broker(s) and Landlord to identify Tenant as a tenant of the Building and to state the amount of space leased by Tenant in advertisements and promotional materials relating to the Building. Tenant represents and warrants to Landlord that [except with respect to any Broker(s) identified in Article 1(n) hereinabove, which has(have) acted as agent for Tenant (and not for Landlord) in this transaction] no broker, agent, commission salesperson, or other person has represented Tenant in the negotiations for and procurement of this Lease and of the Demised Premises and that except with respect to any Broker(s) identified in Article 1(n) hereinabove] no commissions, fees or compensation of any kind are due and payable in connection herewith to any broker, agent, commission salesperson or other person as a result of any act or agreement of Tenant. Tenant agrees to indemnify and hold Landlord harmless from all loss, liability, damage, claim, judgment, cost or expense (including reasonable attorneys' fees and court costs) suffered or incurred by Landlord as a result of a breach by Tenant of the representation and warranty contained in the immediately preceding sentence or as a result of Tenant's failure to pay commissions, fees or compensation due to any broker who represented Tenant, whether or not disclosed, or as a result of any claim for any fee, commission or similar compensation with respect to this Lease made by any broker, agent or finder [other than the Broker(s) identified in Article 1(n) hereinabove] claiming to have dealt with Tenant, whether or not such claim is meritorious. The parties hereto do hereby acknowledge and agree that COMPASS Management & Leasing, Inc., a subsidiary of Equitable Real Estate Investment Management, Inc., has acted as agent for Landlord in this transaction and shall be paid a commission by Landlord in connection with this transaction pursuant to the terms of a separate written commission agreement. COMPASS Management & Leasing, Inc. has not acted as agent for Tenant in this transaction. Landlord hereby warrants and represents to Tenant that Landlord has not dealt with any broker, agent or finder other than COMPASS Management & Leasing, Inc. in connection with this Lease, and, Landlord hereby agrees to indemnity and hold Tenant harmless from and against any and all loss, damage, liability, claim, judgment, cost or expense (including, but not limited to, reasonable attorneys' fees and court costs) that may be incurred or suffered by Tenant because of any claim for any fee, commission or similar compensation with respect to this Lease made by any broker, agent or finder claiming to have represented Landlord. 49.Governing Law. The laws of the State of Tennessee shall govern the performance and enforcement of this Lease. 50.Authority. If Tenant executes this Lease as a corporation, each of the persons executing this Lease on behalf of Tenant does hereby personally represent and warrant that Tenant is a duly incorporated or a duly qualified (if a foreign corporation) corporation and is fully authorized and qualified to do business in the State in which the Demised Premises are located, that the corporation has full right and authority to enter into this Lease, and that each person signing on behalf of the corporation is an officer of the corporation and is authorized to sign on behalf of the corporation. If Tenant signs as a partnership, joint venture or sole proprietorship or other business entity (each being herein called "Entity"), each of the persons executing on behalf of Tenant does hereby covenant and warrant that Tenant is a duly authorized and existing Entity, that Tenant has full right and authority to enter into this Lease, that all persons executing this Lease on behalf of the Entity are authorized to do so on behalf of the Entity, and that such execution is fully binding upon the Entity and its partners, joint venturers or principal, as the case may be. Upon the request of Landlord, Tenant shall deliver to Landlord documentation satisfactory to Landlord evidencing Tenant's compliance with this Article, and Tenant agrees to promptly execute all necessary and reasonable applications or documents as reasonably requested by Landlord, required by the jurisdiction in which the Demised Premises is located, to permit the issuance of necessary permits and certificates for Tenant's use and occupancy of the Demised Premises. 51.Joint and Several Liability. If Tenant comprises more than one person, corporation, partnership or other entity, the liability hereunder of all such persons, corporations, partnerships or other entities shall be joint and several. 52.Special Stipulations. The special stipulations attached hereto as Exhibit "G" are hereby incorporated herein by this reference as though fully set forth (if none, so state). To the extent the special stipulations conflict with or are inconsistent with the foregoing provisions of this Lease or any exhibit to this Lease, the special stipulations shall control. IN WITNESS WHEREOF, the parties have hereunto set their hands and seals as of the day, month and year first above written. _____________________________ "LANDLORD": The Equitable Life Assurance Society of the United States, a New York corporation By/s/ Terrell E. Daffer _____________________________ Date _May 3, 2000 Title:Investment Officer _____________________________ "TENANT": By:/s/ Jeffrey R. Hazarian _____________________________ Date Title:__CFO_________________ Witness:__/s/ James A.Robison _____________________________ Title:___Treasurer__________ RULES AND REGULATIONS 1. No sign, picture, advertisement or notice visible from the exterior of the Demised Premises shall be installed, affixed, inscribed, painted or otherwise displayed by Tenant on any part of the Demised Premises or the Building unless the same is first approved by Landlord. Any such sign, picture, advertisement or notice approved by Landlord shall be painted or installed for Tenant at Tenant's cost by Landlord or by a party approved by Landlord. No awnings, curtains, blinds, shades or screens shall be attached to or hung in, or used in connection with any window or door of the Demised Premises without the prior consent of Landlord, including approval by Landlord of the quality, type, design, color and manner of attachment. 2. Tenant agrees that its use of electrical current shall never exceed the capacity of existing feeders, risers or wiring installation. 3. The Demised Premises shall not be used for storage of merchandise held for sale to the general public. Tenant shall not do or permit to be done in or about the Demised Premises or Building anything which shall increase the rate of insurance on said Building or obstruct or interfere with the rights of other lessees of Landlord or annoy them in any way, including, but not limited to, using any musical instrument, making loud or unseemly noises, or singing, etc. The Demised Premises shall not be used for sleeping or lodging. No cooking or related activities shall be done or permitted by Tenant in the Demised Premises except with permission of Landlord. Tenant will be permitted to use for its own employees within the Demised Premises a small microwave oven and Underwriters' Laboratory approved equipment for brewing coffee, tea, hot chocolate and similar beverages, provided that such use is in accordance with all applicable federal, state, county and city laws, codes, ordinances, rules and regulations. No vending machines of any kind will be installed, permitted or used on any part of the Demised Premises without the prior consent of Landlord. No part of said Building or Demised Premises shall be used for gambling, immoral or other unlawful purposes. No intoxicating beverage shall be sold in said Building or Demised Premises without the prior written consent of Landlord. No area outside of the Demised Premises shall be used for storage purposes at any time. 4. No birds or animals of any kind shall be brought into the Building (other than trained seeing-eye dogs required to be used by the visually impaired). No bicycles, motorcycles or other motorized vehicles shall be brought into the Building. 5. The sidewalks, entrances, passages, corridors, halls, elevators and stairways in the Building shall not be obstructed by Tenant or used for any purposes other than those for which same were intended as ingress and egress. No windows, floors or skylights that reflect or admit light into the Building shall be covered or obstructed by Tenant. Toilets, wash basins and sinks shall not be used for any purpose other than those for which they were constructed, and no sweeping, rubbish or other obstructing or improper substances shall be thrown therein. Any damage resulting to them, or to heating apparatus, from misuse by Tenant or its employees, shall be borne by Tenant. 6. Only one (I) key for the Demised Premises will be furnished to Tenant without charge. Landlord may make a reasonable charge for any additional keys. Only one (I) access card for the Building will be furnished to Tenant without charge. Landlord may make a reasonable charge for any additional access cards. No additional lock, latch or bolt of any kind shall be placed upon any door nor shall any changes be made in existing locks without written consent of Landlord and Tenant shall in each such case furnish Landlord with a key for any such lock. At the termination of the Lease, Tenant shall return to Landlord all keys and access cards furnished to Tenant by Landlord, or other vise procured by Tenant, and in the event of loss of any keys or access cards so furnished, Tenant shall pay to Landlord the cost thereof. 7. Landlord shall have the right to prescribe the weight, position and manner of installation of heavy articles such as safes, machines and other equipment brought into the Building. No safes, furniture, boxes, large parcels or other kind of freight shall be taken to or from the Demised Premises or allowed in any elevator, hall or corridor except at times allowed by Landlord. No deliveries shall be made in passenger elevators. Tenant shall make prior arrangements with Landlord for use of freight elevator for the purpose of transporting such articles and such articles may be taken in or out of said Building only between or during such hours as may be arranged with and designated by Landlord. The persons employed to move the same must be approved by Landlord. No hand trucks, except those equipped with rubber tires and side guards, shall be permitted in the Building. No hand trucks shall be permitted in any passenger elevator. In no event shall any weight be placed upon any floor by Tenant so as to exceed the design conditions of the floors at the applicable locations. 8. Tenant shall not cause or permit any gases, liquids or odors to be produced upon or permeate from the Demised Premises, and no flammable, combustible or explosive fluid, chemical, substance or item (including, without limitation, natural Christmas trees) shall be brought into the Building. 9. Every person, including Tenant, its employees and visitors, entering and leaving the Building may be questioned by a watchman as to that person's business therein and may be required to sign such person's name on a form provided by Landlord for registering such person; provided that, except for emergencies or other extraordinary circumstances, such procedures shall not be required between the hours of 7:00 a.m. and 6:00 p.m., on all days except Saturdays, Sundays and Holidays. Landlord may also implement a card access security system to control access during such other times. Landlord shall not be liable for excluding any person from the Building during such other times, or for admission of any person to the Building at any time, or for damages or loss for theft resulting therefrom to any person, including Tenant. 10. Unless agreed to in writing by Landlord, Tenant shall not employ any person other than Landlord's contractors for the purpose of cleaning and taking care of the Demised Premises. Cleaning service will not be furnished on nights when rooms are occupied after 6:30 p.m., unless, by agreement in writing, service is extended to a later hour for specifically designated rooms. Landlord shall not be responsible for any loss, theft. 11. No connection shall be made to the electric wires or gas or electric fixtures, without the consent in writing on each occasion of Landlord All glass, locks and trimmings in or upon the doors and windows of the Demised Premises shall be kept whole and in good repair. Tenant shall not injure, overload or deface the Building, the woodwork or the walls of the Demised Premises, nor permit any noisome, noxious, noisy or offensive business. 12. If Tenant requires wiring for a bell or buzzer system, such wiring shall be done by the electrician of Landlord only, and no outside wiring persons shall be allowed to do work of this kind unless by the written permission of Landlord or its representatives. If telegraph or telephonic service is desired, the wiring for same shall be approved by Landlord, and no boring or cutting for wiring shall be done unless approved by Landlord or its representatives, as stated. The electric current shall not be used for power or heating unless written permission to do so shall first have been obtained from Landlord or its representatives in writing, and at an agreed cost to Tenant. 13. Tenant and its employees and invitees shall observe and obey all parking and traffic regulations imposed by Landlord. All vehicles shall be parked only in areas designated therefor by Landlord. 14. Canvassing, peddling, soliciting and distribution of handbills or any other written materials in the Building are prohibited, and Tenant shall cooperate to prevent the same. 15. Landlord shall have the right to change the name of the Building and to change the street address of the Building, provided that in the case of a change in the street address, Landlord shall give Tenant not less than 180 days' prior notice of the change, unless the change is required by governmental authority. 16. The directory of the Building will be provided for the display of the name and location of the tenants. Any additional name which Tenant shall desire to place upon said directory must first be approved by landlord, and if so approved, a reasonable charge will be made therefor. 17. Tenant, in order to obtain minimum effectiveness of the cooling system, shall lower and close the blinds (at not less than a 450 angle) or drapes when the sun's rays are directly in windows of the Demised Premises. Tenant shall not remove the standard blinds installed in the Demised Premises. Tenant shall not place items on window sills in the Demised Premises. 18. Smoking is prohibited in the main building lobby, public corridors, elevator lobbies, service elevator vestibules, stairwells, restrooms and other common areas within the Building. 19. Landlord may waive any one or more of these Rules and Regulations for the benefit of any particular Lessee, but no such waiver by Landlord shall be construed as a waiver of such Rules and Regulations in favor of any other Lessee, nor prevent Landlord from thereafter enforcing any such Rules and Regulations against any or all of the other lessees of the Building. 20. These Rules and Regulations are supplemental to, and shall not be construed to in any way modify or amend, in whole or in part, the terms, covenants, agreements and conditions of any lease of any premise in the Building. 21. Landlord reserves the right to make such other and reasonable Rules and Regulations as in its judgment may from time to time be needed for the safety, care and cleanliness of the Building and the Land, and for the preservation of good order therein. Exhibit "A" Page 1 of 1 EXHIBIT "A" LEGAL DESCRIPTION CROSS PARK I ----------------------------- The property subject to the attached Leasehold Agreement is described as follows: SITUATED in District 6 of Knox County, Tennessee, without the corporate limits of the City of Knoxville, and being more particularly bounded and described as follows: Beginning on an iron pin in the north line of Cross Park drive located 493.80 feet in the westerly direction from the western line of Park Village Road; thence with said northern line of Cross Park Drive, South 67 deg. 10 min. West, 220.23 feet to an iron pin; thence leaving Cross Park Drive and with the severance line, North 23 deg. 08 min. West, 571.82 feet to a pipe in the Rankin line; thence with Rankin, North 65 deg. 46 min. East, 82.28 feet to an iron pin; thence North 23 deg. 09 min. West, 22.03 feet to an iron pin corner to Rankin and Gray; thence with Gray, North 77 deg. 46 min. East, 302.24 feet to an iron pin; thence South 12 deg. 14 min. East, 18.40 feet to an iron pin; thence South 47 deg. 00 min. East, 53.18 feet to an iron pin; thence South 34 deg. 25 min. West, 216.23 feet to an iron pin; thence South 57 deg. 25 min. East, 160.29 feet to an iron pin; thence South 15 deg. 43 min. East, 162.37 feet to an iron pin; thence South 65 deg. 42 min. West, 69.39 feet to an iron pin; thence South 28 deg. 38 min. East, 61.92 feet to the point of BEGINNING, containing 3.85 acres LEGAL DESCRIPTON CROSS PARK II TRACT NO. 1 The property subject to the attached Leasehold Agreement is described as follows: SITUATED in the Sixth (6th) Civil District of Knox county, Tennessee, and lying on the western side of Park Village Road and the northern line of Cross Park Drive and being more fully described as follows: BEGINNING AT AN IRON PIN, said pin standing at the point of intersection of the western line of Park Village Road with the northern line of Cross Park Drive; thence with a curve to the right, the radius of which is 948.87 feet, through a central angle of 18 deg. 26 min., the chord bearing being South 79 deg. 23 min. West, for a distance of 173.87 feet to an iron pin, a point of reverse curve; thence with a curve to the left, the radius of which is 998.87 feet, through a central angle of 18 deg. 26 min., the chord bearing being south 76 deg. 43 min. West for a distance of 319.97 feet to an iron pin; thence leaving Cross Park Drive and running North 28 deg. 38 min. West, 61.92 feet to an iron pin; thence North 65 deg. 42 min. East, 69.39 feet to an iron pin; thence North 15 deg. 43 min. West, 162.37 feet to an iron pin; thence North 57 deg. 25 min. West, 160.25 feet to an iron pin; thence North 34 deg. 25 min. East, 216.23 feet to an iron pin; thence North 47 deg. 00 min. West, 53.18 feet to an iron pin; thence North 12 deg. 14 min. West, 18.40 feet to an iron pin; thence North 77 deg. 46 min. East, 326.74 feet to an iron pin in the western line of Park Village Road; thence with the western line of said road to the following courses and distances; South 19 deg. 30 min. East, 112.78 feet to an iron pin; thence South 24 deg. 52 min. East, 456.99 feet to the point of beginning. Containing 5.29 acres as shown on survey of T.J. Hatmaker, bearing date of November 22, 1978. TRACT NO. 2 SITUATED in the Sixth (6th) Civil District of Knox county, Tennessee, and lying on the western side of Park Village Road and the northern line of Cross Park Drive and being more fully described as follows: BEGINNING AT AN IRON PIN, said pin standing at the extreme northeastern corner of the above described tract and also standing in a northwesterly direction 569.77 feet from the point of intersection of the northern line of Cross Park Drive with the western line of Park Village Road; thence with the northern line of the above described tract, South 77 deg. 46 min. West, 628.98 feet to an iron pin; thence with a fence line, North 33 deg. 03 min. East, 355.40 feet to an iron pin; thence South 12 deg. 14 min. East, 223.72 feet to an iron pin; thence North 77 deg. 46 min. East, 370.00 feet to an iron pin in the western line of Park Village Road; thence with the western line of same, South 19 deg. 30 min. East, 25.75 feet to the point of beginning. As shown on survey of T.J. Hatmaker bearing date of November 22, 1978. Exhibit "B" Page 1 of 1 EXHIBIT "B" FLOOR PLAN Exhibit "C" Page 1 of 1 EXHIBIT "C" SUPPLEMENTAL NOTICE __________________________RE: Lease dated as of ____________________, 2000 by and between _____________________________ The Equitable Life Assurance Society of the United States, as Landlord, and _____________________________ Tenera, Inc., as Tenant. Dear Sir: Pursuant to Article 3 of the captioned Lease, please be advised as follows: 1.The Rental Commencement Date is the ______ day of _______________, 2000, and the expiration date of the Lease Term is the _____ day of _______________, _____, subject however to the terms and provisions of the Lease. 2.The Rentable Floor Area of the Demised Premises is _______ square feet. 3.Terms denoted herein by initial capitalization shall have the meanings ascribed thereto in the Lease. _____________________________ "LANDLORD" _____________________________ The Equitable Life Assurance Society of the United States ----------------------------- _____________________________ By: CB Richard Ellis _____________________________ By:________________________________________ Date _____________________ Title:_________________________ Exhibit "D" Page 1 of 1 LANDLORD'S CONSTRUCTION ----------------------------- . 1. Subject to the terms of the above provisions concerning Tenant Improvement Allowance, Landlord shall provide the Demised Premises to Tenant consistent with the floor plans and specifications shown on the approved construction documents, dated EXHIBIT "D" 2000, (hereinafter shall be referred as "Construction Documents") subject to the terms of Tenant Improvement Allowance below. A.The Demised Premises shall be deemed "ready for occupancy" [as that term is used in Article 1 paragraph (k) in the Lease] when Landlord's construction, as provided above, is substantially completed. In the event of any dispute as to when Landlord's construction has been substantially completed as aforesaid, the determination by Landlord's architect and/or designer shall be final and binding upon the parties. B.Any work or improvements which exceed the amount of the Tenant Improvement Allowance or any Tenant requests which deviates from the improvements provided in the Construction Documents shall be at Tenant's sole cost, and Landlord shall not be liable for any delays caused by Tenant's deviations. C.Tenant acknowledges and agrees that the Demised Premises consist of second generation space, and that, except for the modifications to the Demised Premises made pursuant to the Construction Documents Tenant accept the Demised Premises in its "as is, where is" condition as of the date of the Lease. 2. Landlord shall provide Tenant a Tenant Improvement Allowance for expenses incurred in the construction of the tenant improvements below a finished ceiling in the Demised Premises and all Construction Documents in an amount not to exceed$2.50 per rentable square foot or $31,965.00. If the final pricing of the final Construction Documents exceeds the Tenant Improvement Allowance, then before a construction contract is awarded and work begins, for work to be paid for from the Tenant Improvement Allowance, Tenant shall have the right to approve all pricing of the Tenant Improvement items for which the Tenant Improvement Allowance shall be the source of payment. Tenant shall not unreasonably withhold its approval. ----------------------------- Exhibit "E" Page 1 of 1 EXHIBIT "E" BUILDING STANDARD SERVICES Landlord shall furnish the following services to Tenant during the Lease Term (the "Building Standard Services"): (a)Hot and cold domestic water and common-use restrooms and toilets at locations provided for general use and as reasonably deemed by Landlord to be in keeping with the first-class standards of the Building. (b)Subject to curtailment as required by governmental laws, rules or mandatory regulations and subject to the design conditions set forth in Paragraph 3(a) of Exhibit "D" attached hereto, central heat and air conditioning in season, as such temperatures and in such amounts as are reasonably deemed by Landlord to be in keeping with the first-class standards of the Building. Such heating and air conditioning shall be furnished between 8:00 a.m. and 6:00 p.m. on weekdays (from Monday through Friday, inclusive) and between 9:00 a.m. and 12:00 p.m. on Saturdays, all exclusive of Holidays, as defined below (the 'Building Operating Hours'). (c)Electric lighting service for all public areas and special service areas of the Building in the manner and to the extent reasonably deemed by Landlord to be in keeping with the first-class standards of the Building. (d)Janitor service shall be provided five (5) days per week, exclusive of Holidays (as herein below defined), in a manner that Landlord reasonably deems to be consistent with the first-class standards of the Building. (e)Security services for the Building comparable as to coverage, control and responsiveness (but not necessarily as to means for accomplishing same) to other similarly situated first-class, multi-tenant office buildings in Knoxville, Tennessee; provided, however, Landlord shall have no responsibility to prevent, and shall not be liable to Tenant for, any liability or loss to Tenant, its agents, employees and visitors arising out of losses due to theft, burglary, or damage or injury to persons or property caused by persons gaining access to the Demised Premises, and Tenant hereby releases Landlord from all liability for such losses, damages or injury. (f)Sufficient electrical capacity to operate (i) incandescent lights, typewriters, calculating machines, photocopying machines and other machines of the same low voltage electrical consumption (120/208 volts), provided that the total rated electrical design load for said lighting and machines of low electrical voltage shall not exceed 4.0 watts per square foot of rentable area; and (ii) lighting (277/480 volts), provided that the total electrical design load for said lighting shall not exceed 1.5 watts per square foot of rentable area (each such rated electrical design loan to be hereinafter referred to as the "Building Standard Rated Electrical Design Load"). Should Tenant's total rated electrical design load for the entire Premises or any portion thereof (including, but not limited to, computer or telephone rooms) exceed the Building Standard Rated Electrical Design Load for either low or high voltage electrical consumption, or if Tenant's electrical design requires low voltage or high voltage circuits in excess of Tenant's share of the building standard circuits, Landlord will (at Tenant's expense) install such additional circuits and associated high voltage panels and/or additional low voltage panels with associated transformers (which additional circuits, panels and transformers shall be hereinafter referred to as the "Additional Electrical Equipment"). If the Additional Electrical Equipment is installed because Tenant's low voltage or high voltage rated electrical design load exceeds the applicable Building Standard Rated Electrical Design Load, then a meter shall also be added (at Tenant's expense) to measure the electricity used through the Additional Electrical Equipment. The design and installation of any Additional Electrical Equipment (or any related meter) required by Tenant shall be subject to the prior approval of Landlord (which approval shall not be unreasonably withheld). All expenses incurred by Landlord in connection with the review and approval of any Additional Electrical Equipment shall also be reimbursed to Landlord by Tenant. Tenant shall also pay on demand the actual metered cost of electricity consumed through the Additional Electrical Equipment (if applicable), plus any actual accounting expenses incurred by Landlord in connection with the metering thereof. If any of Tenant's electrical equipment requires conditioned air in excess of building standard air conditioning, the same shall be installed by Landlord (on Tenant's behalf), and Tenant shall pay all design, installation, metering, operating and maintenance costs relating thereto. If Tenant requires that certain areas within Tenant's Demised Premises must operate in excess of the normal Building Operating Hours (as hereinabove defined), the electrical service to such areas shall be separately circuited and metered (at Tenant's expense) such that Tenant shall be billed the costs associated with electricity consumed during hours other than Building Operating Hours. (g)All building standard fluorescent bulb replacement in all areas and all incandescent bulb replacement in public areas, toilet and restroom areas, and stairwells. (h)Non-exclusive multiple cab passenger service to the Demised Premises during Building Operating Hours (as hereinabove defined) and at least one (1) cab passenger service to the floor(s) on which the Demised Premises are located twenty-four (24) hours per day and non-exclusive freight elevator service during Building Operating Hours (all subject to temporary cessation for ordinary repair and maintenance and during times when life safety systems override normal Building operating systems) with such freight elevator service available at other times upon reasonable prior notice and the payment by Tenant to Landlord of any additional expense actually incurred by Landlord in connection therewith. To the extent the services described above require electricity and water supplied by public utilities, Landlord's covenants thereunder shall only impose on Landlord the obligation to use its reasonable efforts to cause the applicable public utilities to furnish same. Except for deliberate and willful acts of Landlord, failure by Landlord to furnish the services described herein, or any cessation thereof, shall not render Landlord liable for damages to either person or property, nor be construed as an eviction of Tenant, nor work an abatement of rent, nor relieve Tenant from fulfillment of any covenant or agreement hereof. In addition to the foregoing, should any of the equipment or machinery, for any cause, fail to operate or function properly, Tenant shall have no claim for rebate of rent or damages on account of an interruption in service occasioned thereby or resulting therefrom; provided, however, Landlord agrees to use reasonable efforts to promptly repair said equipment or machinery and to restore said services during normal business hours. The following dates shall constitute "Holidays", as that term is used in this Lease: New Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Friday following Thanksgiving Day, Christmas, and any other holiday generally recognized as such by landlords of office space in the metropolitan Nashville office market, as determined by Landlord in good faith. If, in the case of any specific holiday mentioned in the preceding sentence, a different day shall be observed than the respective day mentioned, then that day which constitutes the day observed by national banks in Knoxville, Tennessee on account of said holiday shall constitute the Holiday under this Lease. Exhibit "F" Page 3 of 3 EXHIBIT "F" GUARANTY (Intentionally left blank) ----------------------------- ----------------------------- Exhibit "G" Page 1 of 1 EXHIBIT "G" SPECIAL STIPULATIONS (Intentionally left blank.) EX-10.2 3 0003.txt REGISTRANT'S SAN FRANCISCO, CALIFORNIA LEASE THE SHELL BUILDING LANDLORD: 100 Bush Corporation, a California corporation TENANT: Tenera, Inc. DATE: May 30, 2000 THE SHELL BUILDING OFFICE LEASE TABLE OF CONTENTS
Page 1. Definitions..............................................................................................1 A. Premises...............................................................................1 B. Building...............................................................................1 C. Term...................................................................................1 D. Base Monthly Rental....................................................................1 E. Additional Rental......................................................................1 F. Rent...................................................................................1 G. Security Deposit.......................................................................1 H. Purpose................................................................................1 I. Tenant's Address for Notices...........................................................1 J. Landlord's Address for Notices.........................................................1 K. Business Hours.........................................................................1 L. Broker.................................................................................1 M. Guarantor..............................................................................1 N. Addendums and Exhibits to Lease........................................................1 2. Lease....................................................................................................1 3. Possession...............................................................................................1 4. Base Monthly Rental......................................................................................1 5. Additional Rental........................................................................................2 6. Security Deposit; Late Charge............................................................................3 7. Use of Premises..........................................................................................3 8. Alterations; Mechanics' Liens............................................................................3 9. Work to be Performed by Landlord.........................................................................4 10. Restrictions on Use......................................................................................4 11. Compliance with Law, Environmental.......................................................................4 12. Indemnity and Exculpation................................................................................5 13. Public Liability and Property Damage Insurance...........................................................5 A. Public Liability and Property Damage Insurance.........................................6 B. Business Interruption Insurance........................................................6 C. Workers' Compensation Insurance........................................................6 D. Extended Coverage and "All Risk" Insurance.............................................6 E. Builder's Risk Insurance...............................................................6 F. Waiver of Subrogation..................................................................6 G. Other Insurance Matters................................................................6 H. Construction...........................................................................6 14. Rules and Regulations....................................................................................6 15. Utilities................................................................................................7 16. Personal Property Taxes..................................................................................7 17. Maintenance..............................................................................................8 18. Restoration of Premises..................................................................................8 19. Entry by Landlord........................................................................................8 20. Estoppel Certificates....................................................................................8 21. Abandonment of Premises..................................................................................9 22. Removal of Trade Fixtures of Tenant at End of Term.......................................................9 23. Surrender of Lease.......................................................................................9 24. Holding Over.............................................................................................9 25. Grace Period.............................................................................................9 26. Landlord's Remedies Upon Default.........................................................................9 27. Attorneys' Fees on Default..............................................................................10 28. Insolvency..............................................................................................10 29. Assignment or Subletting................................................................................11 30. Transfer by Landlord - Release from Liability...........................................................12 31. Damage..................................................................................................12 32. Condemnation............................................................................................13
33. Subordination to Encumbrances...........................................................................13 34. Relocation..............................................................................................14 35. Communications and Computer Lines.......................................................................14 36. Effect of Exercise of or Failure to Exercise Privilege..................................................14 37. Waiver..................................................................................................15 38. Labor Relations.........................................................................................15 39. Notices.................................................................................................15 40. Entire Agreement; Amendments............................................................................15 41. Landmark................................................................................................15 42. Light and Air...........................................................................................15 43. Auctions and Signs......................................................................................15 44. Execution, Recordation..................................................................................15 45. Tenant's Authority......................................................................................15 46. Limitation of Tenant's Remedies.........................................................................15 47. Time and Applicable Law.................................................................................15 48. Name....................................................................................................16 49. Provisions are Covenants and Conditions.................................................................16 50. Severability............................................................................................16 51. Captions................................................................................................16 52. Successors..............................................................................................16 53. Relationship of Parties.................................................................................16 54. Temporary Space.........................................................................................16 55. Brokers.................................................................................................16 56. Interpretation..........................................................................................16 57. Force Majeure...........................................................................................16 58. Asbestos................................................................................................16 EXHIBIT AFloor Plan.............................................................................................A-1 EXHIBIT BWork Letter Agreement .................................................................................B-1 EXHIBIT CRules and Regulations of the Building..................................................................C-1 A. Signs................................................................................C-1 B. Window Coverings.....................................................................C-1 C. Building Directory...................................................................C-1 D. Hallways and Passages................................................................C-1 E. Locks................................................................................C-1 F. Restrooms............................................................................C-1 G. Moving In and Out of Premises; Heavy Equipment.......................................C-1 H. Janitorial Services and Cleaning.....................................................C-2 I. Use of Premises......................................................................C-2 J. Communications and Computer Equipment................................................C-2 K. Floor Coverings......................................................................C-2 L. Deliveries...........................................................................C-2 M. Access Refused.......................................................................C-2 N. Soliciting on Premises...............................................................C-2 O. Landlord's Employees.................................................................C-2 P. Vending Machines.....................................................................C-3 Q. Building Name and Address............................................................C-3 R. Trash................................................................................C-3 S. Doors................................................................................C-3 T. Equipment............................................................................C-3 U. Air Conditioning.....................................................................C-3 V. Energy Conservation..................................................................C-3 W. Disorderly Persons...................................................................C-3 X. Smoking..............................................................................C-3 Y. Water Conservation...................................................................C-3 Z. Safety and Security Devices..........................................................C-3 AA. Amendments...........................................................................C-3 EXHIBIT DGuarantee..............................................................................................D-1 EXHIBIT ETerm Commencement Agreement............................................................................E-1 EXHIBIT FProposition 65 NoticeandMaterial Safety Data Sheet.....................................................F-1 EXHIBIT GSpace Plan.............................................................................................G-1 OTHER EXHIBITS (if any):...........................................................................................
............................................................................--- ............................................................................--- ............................................................................--- ............................................................................--- THE SHELL BUILDING OFFICE LEASE This lease ("Lease") is made in San Francisco, California, on May __, 2000, between 100 BUSH CORPORATION, a California corporation ("Landlord") and Tenera, Inc., a Delaware Corporation ("Tenant"). If Tenant consists of more than one person or entity, the obligations under this Lease imposed on Tenant will be joint and several. 1. Definitions. As used throughout this Lease, the following words have the stated meanings. 1. Premises: Suite 850, consisting of 4,101 rentable square feet, and Suite 820, consisting of 1,284 rentable square feet, for a total of 5,385 rentable square feet, as shown on Exhibit A attached, being a portion of the 8th floor of the Building. The rentable square feet have been stipulated to between Landlord and Tenant. The rentable square feet includes the usable area, without deduction for columns or projections, multiplied by a load factor to reflect a share of certain areas, which may include lobbies, corridors, mechanical, utility, janitorial, boiler and service rooms and closets, restrooms and other public, common and service areas of the Building. 2. Building: The Shell Building, 100 Bush Street, San Francisco, California 94104. 3. Term: For Suite 820, commencing on the later of September 1, 2000 or upon Landlord's substantial completion of the Tenant Improvements described in Paragraph 9 hereof for Suite 820; and for Suite 850, commencing on the later of November 15, 2000 or upon Landlord's substantial completion of the Tenant Improvements described in Paragraph 9 hereof for Suite 850 ( "Commencement Date"); for both Suites 820 and 850, the lease shall terminate 60 months after the Commencement Date on the day before the anniversary of such Commencement Date ("Termination Date"). 4. Base Monthly Rental: $70.00 per rentable square foot of Premises per annum, which isr $31,412.50 per month. The rent shall increase by $1.00 per rentable square foot per annum, on the anniversary of the Commencement Date. 5. Additional Rental: 2.504% of the increase in "Direct Expenses" and 2.418% of the increase in "Direct Tax Expenses" (as Paragraphs 5D, 5E and 5F define those terms) of the Building over said expenses in the calendar year 2000 (the "Base Year"); provided, however, there shall be no Additional Rent for the first twelve (12) months of the term. The percentage for Direct Expenses is the rentable square feet of the Premises divided by the Building rentable square footage of 215,055 and for Direct Tax Expenses is the rentable square feet of the Premises divided by the Building Total Rentable Square Footage of 222,667. Landlord may recalculate this percentage from time to time to reflect reconfigirations, additions or modifications to the Building. 6. Rent: Base Monthly Rental, Additional Rental, and all other charges payable by Tenant to Landlord. 7. Security Deposit: An amount equal to $31,412.50. 8. Purpose: General office and executive administration. 9. Tenant's Address for Notices: 100 Bush Street, Suite 850, San Francisco, California 94104. 10. Landlord's Address for Notices: The term "Landlord's Address for Notices" shall mean 100 Bush Corporation, 100 Bush Street, San Francisco, California 94104. 11. Business Hours: The term "Normal Business Hours" shall mean reasonable hours determined by Landlord from time to time (federal and state holidays excepted) during which the building is serviced. 12. Broker: The term "Broker" shall mean Colliers International as the Listing Broker and Insignia ESG as the Procuring Broker. 13. Guarantor: N/A. 14. Addendums and Exhibits to Lease: Exhibit A (Floor Plan), Exhibit B (Work Letter Agreement or Tenant Improvement Agreement), Exhibit C (Rules and Regulations of the Building), Exhibit D (Guarantee), Exhibit E (Term Commencement Agreement), Exhibit F (Proposition 65 Notice and Material Safety Data Sheet) and Exhibit G (Renewal Option). O. 2. Lease. Landlord leases to Tenant and Tenant leases from Landlord the Premises upon and subject to the terms, covenants and conditions herein set forth. Tenant covenants as a material part of the consideration for this Lease to keep and perform each and all of said terms, covenants and conditions. Tenant agrees that this Lease is made upon the condition of such performance. Except as set forth in this Lease, Tenant accepts the Premises in their "as is" state of repair and condition, and Landlord has made no representations to Tenant regarding the condition of the Premises or the Building. 3. Possession. If Landlord, for any reason whatever, is unable to deliver possession of the Premises to Tenant by the Commencement Date (a "Delay"), Landlord will not be liable for any loss resulting therefrom, and this Lease will not be either void or voidable but the Commencement Date and the Termination Date, unless the Work Letter Agreement or Tenant Improvement Agreement referred to in Paragraph 9 specifically provides otherwise, will be deferred for the number of days of the Delay. If Landlord tenders possession of the Premises to Tenant before the Commencement Date, and Tenant accepts such prior tender, such occupancy will be subject to all of the terms, covenants and conditions of this Lease including, without limitation, the payment of Rent. 4. Base Monthly Rental. 1. Tenant agrees to pay Base Monthly Rental, without notice, in advance, on the first day of each calendar month of the Term. The Base Monthly Rental for the first month of the Term will be paid upon execution of the Lease. In the event the Term commences or ends on a day other than the first day of a calendar month, then the Base Monthly Rental for such fractional month will be prorated based on a 30-day month. 2. Base Monthly Rental will be paid by Tenant to Landlord, without deduction or offset, in lawful money of the United States of America, at the Building office or to such other person and/or at such other place as Landlord may from time to time designate in a notice to Tenant. 3. All other charges payable by Tenant under the Lease shall be due as of the first day of the following calendar month and paid as part of Base Monthly Rental unless a different payment date is specified in this Lease. 5. Additional Rental. 1. Tenant further agrees to pay Additional Rental, in monthly installments, on the first day of each month of the Term commencing on the first day of the calendar year following the calendar year set forth in Paragraph 1E. If the Term ends on a day other than the last day of a calendar month, then, upon the first day of the last calendar month of the Term, Tenant will pay Landlord a portion of Additional Rental for such fractional month prorated based on a 30-day month. 2. Additional Rental will be paid by Tenant to Landlord, without notice and without deduction or offset, in lawful money of the United States of America, at the Building office or to such other person and/or at such other place as Landlord may from time to time designate in a notice to Tenant. 3. Landlord will try to give Tenant advance notice of Additional Rental payable by Tenant, but failure by Landlord to give advance notice is not a waiver by Landlord of its right to receive from Tenant any Additional Rental. In addition, Landlord may, but is not required to, at or after the start of the calendar year following the calendar year set forth in Paragraph 1E, notify Tenant of Landlord's estimate of Tenant's liability for Additional Rental for the ensuing year, which amount will be divided into twelve (12) equal portions and added to the monthly payments of rent required to be made by Tenant in such year. If Tenant's actual payment of Additional Rental is finally determined by Landlord to be greater or less than the total amounts actually paid by Tenant pursuant to this paragraph during the applicable year ("Landlord's Statement"), a credit or payment will be made by Landlord or Tenant, whichever the case may be, within the thirty (30) days following the issuance of Landlord's Statement. Upon written request by Tenant within thirty (30) days of issuance of Landlord's Statement, Landlord will make its prior year records pertaining to Direct Expenses available to Tenant to allow Tenant, at its sole cost and expense, to verify their accuracy. Absent such request, Landlord's Statement shall be final as to such year. 4. Direct Expenses include all costs of operation and maintenance of the Building as determined by Landlord including, but not limited to, the following costs by way of illustration only: premiums for property, casualty, liability, rent interruption or any other insurance carried by Landlord; salaries, wages and other amounts paid or payable for personnel including the Building manager, superintendent, operation and maintenance staff, and other employees of Landlord involved in the maintenance, management and operation of the Building, including contributions and premiums towards fringe benefits, unemployment, disability insurance, worker's compensation insurance, pension plan contributions and similar premiums and contributions and the total charges of any independent contractors or property managers engaged in the operation, repair, care, maintenance and cleaning of any portion of the Building; fair market rental and other costs with respect to Building Management office; costs of accounting services incurred in the preparation of statements and financial reports, audit fees; cleaning expenses, including without limitation janitorial services, window cleaning and garbage and refuse removal; landscaping expenses, including without limitation irrigating, trimming, fertilizing, replacing plants and floral arrangements; heating, plumbing, mechanical, elevator, sprinklers, fire/life safety systems, security and energy management systems and steam/utilities expenses, including fuel, gas, electricity, water, sewer, telephone, advertising, public relations, tenant relations and activities and other services, maintaining, operating and repairing components of any equipment or machinery used in connection with the Building, and the rental of same or any office or other equipment for the management of the Building; any other items of repair and maintenance of the Building; cost of policing, security and supervision of the Building; audit and accounting fees; any capital improvements (or amortization thereof) (i) made primarily to reduce Direct Expenses or to comply with governmental requirements, (ii) for replacements (as opposed to additions or new improvements) of nonstructural items located in the common areas of the Property required to keep such areas in good condition or (iii) expenditures that are consistent with Direct Expenses as defined above, although the benefits of the expenditures survive the current year; payments under any easement, operating agreement, declaration, restrictive covenant or instrument pertaining to sharing of costs in a planned development; fee for administration and management of the building as determined by Landlord. Direct Expenses do not include depreciation on the Building loan payments, real estate brokerage commissions, and costs directly attributed to one tenant and not to other tenants of the Building generally. Permitted capital improvements and repairs may be amortized in the Landlord's reasonable discretion over: (i) their useful lives, (ii) the period during which capital improvements reduce Direct Expenses or (iii) three (3) years. Landlord may allocate costs of operation and maintenance between the building where the Premises are located and other properties owned by landlord or its affiliates and under common management, as determined by landlord in the exercise of its reasonable discretion. Similarly, Landlord may make other allocations of Direct Expenses in accordance with sound management and accounting principles. 5. Direct Tax Expenses include all real property taxes and annual installments of real estate assessments on the Building; personal property taxes on personal property of Landlord used in the operation or maintenance of the Building; supplemental assessments that may result from changes in ownership or from the completion of new construction; escape assessments; taxes on the gross or net rental income of Landlord derived from the Building (excluding, however, state and federal personal or corporate income taxes measured by the income of Landlord from all sources); impositions created to pay for or supplement the cost of governmental services that the Building or its tenants may use; transit or transportation charges; housing subsidies and/or housing fund assessments; possessory interest taxes; business or license taxes or fees; job training subsidies and/or assessments; open space charges; excises; business or other license or use fees; and the reasonable costs of contesting by appropriate proceedings the amount or validity of any of the foregoing. If, during the Term of this Lease, the present real property tax is wholly or partly replaced or supplemented by another form of tax, there will be included within the definition of Direct Tax Expenses any such tax, levy, or assessment (other than federal, state, or city and county net income taxes or estate, gift, or other similar taxes) that, whether or not now customary or within the contemplation of the parties to this Lease, may be charged to Landlord and is by way of example and not limitation (i) levied upon, allocable to, or measured by the Rent payable hereunder; (ii) levied upon the business of owning and operating rental properties to the extent such tax is applicable to the Premises; (iii) levied upon or with respect to the possession, leasing, operation, management, or occupancy by Tenant of the Premises or any portion thereof, or (iv) levied upon or measured by the value of Tenant's personal property or leasehold improvements. Direct Tax Expenses also include all expenses incurred, including attorneys' and consultants' fees, in seeking a reassessment, reduction of, or limit on the increase in any Direct Tax Expenses, whether or not successful. Property taxes for any calendar year shall include property taxes which are due for payment as well as those paid in such year. 6. If the Building rentable square footage is not one hundred percent (100%) occupied during an entire calendar year, including the Base Year, then the variable component of Direct Expenses and Direct Tax Expenses will be equitably adjusted so that the total amount of Direct Tax Expenses and Direct Expenses equals the amount which would have been paid or incurred by Landlord had the Building been one hundred percent (100%) occupied for the entire calendar year. In no event will Landlord be entitled to receive from Tenant and the other tenants in the Building an aggregate amount in excess of actual Direct Expenses and Direct Tax Expenses as a result of the foregoing provision. 6. Security Deposit; Late Charge. Upon the execution of this Lease, Tenant will pay Landlord the Security Deposit to secure the faithful performance by Tenant of all of the terms, covenants, and conditions of this Lease to be kept and performed by Tenant. The Security Deposit is not being held in trust, and Landlord is not required to segregate the Security Deposit from its other funds or pay interest or any other return on such Security Deposit. Landlord has the right (but not the obligation) at any time or times to apply the Security Deposit, or any portion thereof, to any Rent or other sums due and unpaid by Tenant under this Lease. If Landlord elects to so apply, Landlord will deliver notice to Tenant of the nature and amount so applied. Tenant must then deposit with Landlord an amount sufficient to replace the amount so applied to return such funds to an amount equal to the original Security Deposit. If Tenant fails to make such deposit within five (5) days after Landlord's notice, Landlord at its option may resort to any or all remedies available to it for the nonpayment of Rent. Following the termination of the Term of this Lease or, if Tenant has held over beyond such termination, following the end of such hold over, provided Tenant has vacated the Premises and fully performed all of its obligations hereunder, Landlord will return to Tenant the Security Deposit, or such portion thereof then held by Landlord, after all applications have been made by Landlord on account of Tenant's breach or default hereunder; provided, however, any such return is not an admission by Landlord that Tenant has performed all of its obligations hereunder. It is specifically understood that Tenant has no right at any time to apply the Security Deposit, or any portion thereof, to any of its Rent obligations (including its last months Rent) or to any other sums due and payable by Tenant under this Lease. No beneficiary, mortgagee, secured party, or other holder of any encumbrance (hereinafter, "lender"), nor any purchaser at any judicial or private foreclosure sale of the Building, will ever be responsible to Tenant for its Security Deposit unless the lender or purchaser has actually received the same. Tenant acknowledges that late payment by Tenant to Landlord of Rent or other sums due hereunder will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which would be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges that may be imposed upon Landlord. Accordingly, if Landlord does not receive any installment of Rent or any other sum due from Tenant within ten (10) days after due, Tenant will pay to Landlord, in addition to any other sums payable hereunder, a late charge of ten percent (10%) of the amount due, plus any attorneys' fees incurred by Landlord because of Tenant's failure to pay Rent and/or other charges when due hereunder; provided, however, that in the first instance of late payment only, Tenant will pay a late charge of five percent (5%). The parties agree that such late charge represents a fair and reasonable estimate of the costs that Landlord will incur because of the late payment by Tenant. Acceptance of such late charges by the Landlord will in no event be a waiver of Tenant's default with respect to any such overdue amount, nor prevent Landlord from exercising any of the other rights and remedies granted hereunder. In addition, Tenant will pay Landlord $50.00 as additional Rent for each check tendered by Tenant that is not honored for payment by Tenant's bank for whatever reason. 7. Use of Premises. The Premises will be used for the Purpose and for no other purposes without the prior written consent of Landlord, which consent Landlord may withhold in its absolute discretion. 8. Alterations; Mechanics' Liens. 1. Tenant will not make or suffer to be made, directly or indirectly, any addition or change to or modification of the Premises, including, without limitation, the installation of fixtures, trade fixtures, and leasehold improvements (hereinafter, "alteration") without first obtaining the written consent of Landlord, which consent will not be unreasonably withheld and which consent may be conditioned upon such matters as Landlord's prior written approval of the reasonable time or times when the alterations are to be performed, employment only of contractors and subcontractors who will not cause labor disharmony, and other reasonable conditions prior to Landlord's approval. However, no alteration will be permitted if it is structural or will affect the Building's HVAC, electrical, or plumbing systems. Any alteration (excluding trade fixtures and movable furniture installed by Tenant that belongs to Tenant) becomes at once a part of the realty and belongs to Landlord subject to Landlord's rights under Paragraph 17. Any alterations will be done in accordance with plans and specifications approved by Landlord. Landlord may charge Tenant a reasonable amount for approval of plans and specifications for alterations costing more than $5,000. 2.All alterations will be made by fully licensed, insured and bonded contractors approved in writing by Landlord in advance. 3. If Tenant makes alterations, it will obtain all permits required and perform the work in accordance with all applicable laws, rules, regulations and ordinances. All such work will be performed in a first class manner causing no interference with the operation of the Building and no unreasonable noise, odors or inconvenience to Landlord or the other tenants of the Building. 4. In making any alterations, Tenant will keep the Premises and the Building free from any liens arising out of any work performed, materials furnished, or obligations incurred by Tenant. Tenant may not make any alterations of the Premises until seven (7) days after receipt by it of the written consent of Landlord in order that Landlord may post or request Tenant to post any appropriate notices to avoid any possible liability with respect to liens. Tenant will, at Landlord's request, prepare, record and post such notices and at all times permit such notices to be posted and to remain posted until the completion and acceptance of such work. In addition, at Landlord's request, Tenant will secure at Tenant's own cost and expense a completion and lien indemnity bond, satisfactory to Landlord, for all such work. Tenant further agrees that there will be no construction, partitions, or other obstructions which might interfere with Landlord's free access to mechanical installations or service facilities of the Building or with the moving of Landlord's equipment to or from the enclosures containing said installations or facilities. Tenant must notify Landlord if the Alterations include the handling of any Hazardous Materials1 and whether these materials are of a customary and typical nature for industry practices. Upon completion of the Alterations, Tenant will provide Landlord with copies of as-built plans. Neither the approval by Landlord of plans and specifications relating to any Alterations nor Landlord's supervision or monitoring of any Alterations constitute any warranty by Landlord to Tenant of the adequacy of the design for Tenant's intended use or the proper performance of the Alterations. 5. If, as a result of any alterations made by Tenant it is necessary for Landlord to make any other improvements or repairs to the Building, whether within or without the Premises, such work will be at Tenant's expense. 9. Work to be Performed by Landlord. Landlord is not required to perform any work upon the Premises of any type or nature, unless there is attached to this Lease upon execution a Work Letter Agreement or Tenant Improvement Agreement initialed by the Landlord which specifies such work (the "Tenant Improvements"). The cost of any Tenant Improvements is borne by the Tenant unless the Work Letter Agreement specifies otherwise. Upon substantial completion of the Tenant Improvements, Landlord will so notify Tenant. Such notice will constitute delivery of possession by the Landlord. 10. Restrictions on Use. 1. No use will be made or permitted to be made of the Premises, nor acts done, that will increase the existing rate of insurance upon the Building or cause a cancellation of any insurance policy covering the Building or any part thereof, nor may Tenant sell, or permit to be kept, used, or sold in, on or about the Premises, any article that may be prohibited by the standard form of fire insurance policy. Tenant will, at its sole cost and expense, comply with all requirements pertaining to the Premises of any insurance organization or company necessary for the maintenance of reasonable fire and public liability insurance covering the Building and its appurtenances. 2. Tenant will not do or permit anything to be done in or about the Premises which will in any way obstruct or interfere with the rights of other tenants or occupants of the Building or injure or annoy them, nor shall Tenant use or allow the Premises to be used for any immoral, unlawful, or objectionable purposes, without limiting the generality of the foregoing, Tenant will not make or permit any unreasonable or unnecessary noises or odors in or upon the Premises. Tenant will not commit, or suffer to be committed, any waste upon the Premises or any nuisance (public or private) or other act or thing of any kind or nature whatsoever that may disturb the quiet enjoyment or cause unreasonable annoyance of any other tenant in the Building. The provisions of this paragraph are for the benefit of Landlord only and are not, and will not be construed to be, for the benefit of any tenant or occupant of the Building or any third party. 11. Compliance with Law, Environmental. 1. Tenant will, at its sole cost and expense, comply with all laws pertaining to Tenant's use of the Premises, and faithfully observe all laws and the provisions of all recorded documents in the use of the Premises and all requirements of any board of fire underwriters or other similar body now or hereafter constituted related to or affecting the condition, use, or occupancy of the Premises. The judgment of any court of competent jurisdiction, or the admission of Tenant in any action or proceeding against Tenant, whether or not Landlord is a party thereto, that Tenant has violated any law pertaining to the Purpose of this Lease or Tenant's use of the Premises will be conclusive of that fact as between Landlord and Tenant. Without limiting the generality of the foregoing, the duties of Tenant under this provision will include the making of all such alterations of the Premises as may be required by law by reason of Tenant's use of the Premises, or occasioned by reason of the failure of Tenant to effect repairs, maintenance, replacement or cleaning of the Premises as required under this Lease. 2. As used herein, the following items have the following meanings: (1) Environmental Activity is any actual, proposed or threatened use, storage, treatment, existence, release, emission, discharge, generation, manufacture, disposal or transportation of any Hazardous Materials from, into, on, under or about the Premises, or any other activity or occurrence that causes or would cause any such event to exist. (2) Environmental Requirements means all present and future federal, state, regional or local laws relating to the use, storage, treatment, existence, release, emission, discharge, generation, manufacture, disposal or transportation of any Hazardous Materials. (3) Hazardous Material is any chemical, substance or material which is classified or considered to be hazardous or toxic under any present of future federal, state, regional or local laws, regulations or guidelines. Tenant will not engage in nor permit the occurrence of any Environmental Activity except in the ordinary course of Tenant's business and only in compliance with all Environmental Requirements and prudent industry practices. Tenant will, at its own expense, procure, maintain in effect and comply with all conditions of any and all permits, licenses, and other governmental and regulatory approvals required under any Environmental Requirements for any Environmental Activity by Tenant, including, without limitation, the discharge of (appropriately treated) materials or wastes into or through any sanitary sewer serving the Premises, and upon termination of this Lease will cause all of its Hazardous Materials to be removed from the Premises in accordance with and in compliance with all applicable Environmental Requirements. 3. Upon having knowledge thereof, Tenant will immediately notify Landlord in writing of (i)any regulatory action that has been instituted, or threatened by any governmental agency or court with respect to Tenant that relates to any Environmental Activity; (ii) any claim relating to any Environmental Activity by Tenant in, on or about the Premises, or that arises out of or in connection with any Hazardous Materials in, on, under or about the Premises or removed from the Premises; or (iii) any actual or threatened material release on, under or about the Premises or any adjacent property of any Hazardous Material, except any Hazardous Material whose discharge or emission is expressly authorized by and in compliance with a permit issued by a federal, state, regional or local governmental agency pursuant to Environmental Requirements. 4. Tenant will provide Landlord with copies of any communications with federal, state, regional or local governments, agencies or courts with respect to any Environmental Activity or Environmental Requirement relating to the Premises and any communications with any third party relating to any claim made or threatened with respect to any Environmental Activity by Tenant in, on or about the Premises. 5. Tenant will indemnify, defend (by counsel reasonably acceptable to Landlord), protect, and hold Landlord and each of Landlord's partners, employees, agents, attorneys, successors and assigns, free and harmless from and against any and all claims, liabilities, penalties, forfeitures, losses or expenses (including attorneys' fees) arising from or caused in whole or in part, directly or indirectly, by (i) an Environmental Activity by Tenant or Tenant's agents, contractors, invitees, employees or partners; or (ii) Tenant's failure to comply with any Environmental Requirement. Tenant's obligations under this Section 11 includes, without limitation, and whether foreseeable or unforeseeable, all costs of any repair or cleanup, removal or remediation action, or detoxification or decontamination of the Premises, or the preparation and implementation of any closure, remedial action or other plans in connection therewith that are required as a result of any Environmental Activity by Tenant, and survives the expiration or earlier termination of the Term. 12. Indemnity and Exculpation. As a material part of the consideration for this Lease, Tenant hereby agrees that Landlord and any lender holding a mortgage or deed of trust covering the Premises will not be liable to Tenant for any damage to Tenant's property, and Tenant waives all claims against such persons for damage to property from any cause whatsoever. Tenant further agrees that, except to the extent arising from the intentional or negligent acts of Landlord or Landlord's agents or employees, Tenant will indemnify, defend, and hold Landlord harmless from and against any and all claims, demands, liabilities, damages, judgments, orders, decrees, actions, proceedings, fines, penalties, costs and expenses, including without limitation, court costs and attorneys' fees arising from or relating to any loss of life, damage or injury to person, property or business occurring in or from the Premises, or caused by or in connection with any violation of this Lease or the use of the Premises or the Building by, or any other act or omission of, Tenant, any other occupant of the Premises, or any of their respective agents, employees, contractors or guests. Without limiting the generality of the foregoing, Tenant specifically acknowledges that this indemnity will apply to claims in connection with or arising out of any alterations or improvements to the Premises and the transportation, use, storage, maintenance, generation, manufacturing, handling, disposal, release or discharge of any hazardous materials, except to the extent that any of the same arises from the intentional or negligent acts of Landlord or Landlord's agents or employees. 13. Public Liability and Property Damage Insurance. 1. Public Liability and Property Damage Insurance. (1) Tenant at its sole cost and expense will maintain during the entire Term (including any additional period that Tenant will have possession of or otherwise occupy or conduct activities in or about the Premises whether before or after the Term) public liability and property damage insurance with liability limits of not less than $2,000,000 per occurrence, combined single limit bodily injury and/or property damage liability. Landlord will be named as an additional insured under such policy or policies, and the policy or policies will be primary insurance insofar as Landlord is concerned. (2) If Tenant fails, at any time during the Term, to keep such insurance in full force and effect, Landlord may pay the necessary premiums therefor and the repayment thereof will be deemed to be a part of the Rent due hereunder, payable as such on the next date upon which Base Rental becomes due. (3) All public liability insurance and property damage insurance will insure performance by Tenant of the indemnity provisions of Paragraph 12; however, the procuring of insurance within the limits herein set forth is not satisfaction of Tenant's obligation to indemnify under Paragraph 12. (4) Not more frequently than every three years, if, in the opinion of Landlord's lender or of the insurance broker retained by Landlord, the amount of public liability and/or property damage insurance coverage at that time is not adequate, Tenant will increase the insurance coverage as reasonably required by either such lender or insurance broker. 2. Business Interruption Insurance. At all times during the Lease Term, Tenant shall procure and maintain business interruption insurance in such amount as will reimburse Tenant for direct or indirect loss of earnings attributable to all perils. 3. Workers' Compensation Insurance. Tenant will also carry and maintain in full force and effect during the entire Term hereof (and during any additional period that Tenant will have possession of or otherwise occupy or conduct activities in or about the Premises whether before or after the Term) employer's liability and workers' compensation insurance as required by law. 4. Extended Coverage and "All Risk" Insurance. Tenant will also carry and maintain in full force and effect during the entire Term hereof (and during any additional period that Tenant will have possession of or otherwise occupy or conduct activities in, on or about the Premises whether before or after the Term), at Tenant's sole cost and expense, a policy or policies of insurance for damage caused by the perils insured under Standard Fire, Extended Coverage and "All Risk" coverage forms on Tenant's furniture, fixtures, equipment, improvements, alterations, trade fixtures, and other personal property. Landlord will be named as an additional insured on such policy or policies, to the extent of its interest in such property, and the limits of coverage will be equal to 90% of the full current replacement value of such property. 5. Builder's Risk Insurance. If Tenant makes any alterations of the Premises, Tenant will, at Tenant's sole cost and expense, carry "All-Risk" builder's risk insurance, completed value form, in an amount satisfactory to Landlord. 6. Waiver of Subrogation. With respect to any loss or damage to property, the parties each hereby waive all rights of subrogation of their respective insurers, provided such waiver of subrogation will not affect the right of the insured to recover thereunder. The parties agree that their respective insurance policies are now, or will be, endorsed such that said waiver of subrogation will not affect the right of the insured to recover thereunder, so long as no material additional premium is charged therefor. 7. Other Insurance Matters. All the insurance required under this Lease will: (1) Be issued by insurance companies authorized to do business in California, with a financial rating of at least an A-10 status as rated in the most recent edition of Best's Insurance Reports. (2) Contain an endorsement requiring thirty (30) days' written notice from the insurance company to both parties and to Landlord's lender before cancellation or change in coverage, scope, or amount of any policy. (3) Be renewed not less than twenty (20) days before expiration of the term of the policy. (4) If Tenant fails to obtain Business Interruption Insurance as provided in subparagraph B above, Tenant waives all claims against Landlord for losses that would have been covered by such insurance, and Tenant covenants not to sue Landlord for any reason whatsoever on account of any direct or indirect loss of earnings . Each policy of insurance required under this Lease, or a certificate of the policy, together with evidence of payment of premiums, will be deposited with Landlord at the commencement of the Term and on each renewal of the policy. 8. Construction. Nothing in this Paragraph 13 will be construed as creating or implying the existence of (i) any ownership by Tenant of any alterations in, on or about the Premises or (ii) any right of Tenant to make any alterations in, on or about the Premises. 1. 14. Rules and Regulations. The Rules and Regulations attached hereto as Exhibit C are hereby incorporated by reference herein and made a part hereof. Tenant shall abide by, and faithfully observe and comply with the Rules and Regulations and any reasonable and non-discriminatory amendments, modifications and/or additions thereto as may hereafter be adopted and published by written notice to tenants by Landlord for the safety, care, security, good order and/or cleanliness of the Premises and/or the Building. Landlord shall not be liable to Tenant for any violations of such rules and regulations by any other tenant or occupant of the Building. 15. Utilities and Services. 1. Landlord agrees to furnish or cause to be furnished to the Premises, during reasonable hours determined by Landlord and subject to applicable law and the rules and regulations of the Building, the following utilities and services, subject to the conditions and standards set forth herein: (i) non-attended automatic elevator service (if the Building has such equipment serving the Premises), in common with Landlord and other tenants and occupants and their agents and invitees, (ii) water for drinking and rest room purposes, (iii) reasonable janitorial and cleaning services, provided that the Premises are used exclusively for office purposes and are kept reasonably in order by Tenant (if the Premises are not used exclusively as offices, Landlord, at Landlord's sole discretion, may require that the Premises be kept clean and in order by Tenant, at Tenant's expense, to the satisfaction of Landlord and by persons approved by Landlord; and, in all events, Tenant will pay Landlord for the cost of removing Tenant's refuse and rubbish, to the extent the same exceeds the refuse and rubbish attendant to normal office usage), (iv) radiant heat and air conditioning, (v) at all reasonable times, electric current as required for building standard lighting and customary office equipment. However: (a) without Landlord's consent, Tenant may not install, or permit the installation, in the Premises of any space heaters, air conditioning equipment, electronic equipment or other type of equipment or machines which will increase Tenant's use of electric current in excess of that which Landlord is obligated to provide hereunder (provided, however, that the foregoing will not preclude the normal use of personal computers or similar office equipment); (b) if Tenant requires electric current which may disrupt the provision of electrical services to other Tenants or which exceeds normal usage for Tenants in the Building, Landlord may refuse to grant its consent or may condition its consent upon Tenant's paying the cost of installing and providing any additional facilities required to furnish such excess power to the Premises and upon the installation in the Premises of electric current meters to measure the amount of electric current consumed, Tenant will pay for the cost of such meter(s) and the cost of installation, maintenance and repair thereof, as well as for all excess electric current consumed at the rates charged by the applicable local public utility, plus a reasonable amount to cover the additional expenses incurred by Landlord in keeping account of the electric current so consumed; and (c) if Tenant's increased electrical requirements will materially affect the temperature level in the Premises or the Building, Landlord's consent may be conditioned upon Tenant's requirement to pay such amounts as will be incurred by Landlord to install and operate any machinery or equipment necessary to restore the temperature level to that otherwise required to be provided by Landlord, including but not limited to the cost of modifications to any air conditioning system. Landlord will not, in any way, be liable or responsible to Tenant for any loss or damage or expense which Tenant may incur or sustain if, for any reasons beyond Landlord's reasonable control, either the quantity or character of electric service is changed or is no longer available or suitable for Tenant's requirements. Tenant covenants that at all times its use of electric current will never exceed the capacity of the feeders, risers or electrical installations of the Building. If submetering of electricity in the Building will not be permitted under future laws or regulations, the Rent will be equitably and periodically adjusted to include an additional payment to Landlord reflecting the cost to Landlord for furnishing electricity to Tenant in the Premises. Any amounts which Tenant is required to pay to Landlord pursuant to this section are due within ten (10) business days after demand by Landlord and are Additional Rental. 2. Landlord is not liable for any failure to furnish, stoppage of, or interruption in furnishing any of services or utilities, when such failure is caused by accident, breakage, repairs, strikes, lockouts, labor disputes, labor disturbances, governmental regulation, civil disturbances, acts of war, moratorium or other governmental action, or any other cause beyond Landlord's reasonable control, and, in such event, Tenant is not entitled to any damages nor will any failure or interruption abate or suspend Tenant's obligation to pay Base Monthly Rental and Additional Rental or be construed as a constructive or other eviction of Tenant. Further, in the event any governmental authority or public utility promulgates or revises any law, ordinance, rule or regulation, or issues mandatory controls, or voluntary controls relating to the use or conservation of energy, water, gas, light or electricity, the reduction of automobile or other emissions, or the provision of any other utility or service, Landlord may take any reasonably appropriate action to comply with such law, ordinance, rule, regulation, mandatory control or voluntary guideline and Tenant's obligations hereunder will not be affected by any such action of Landlord. The parties acknowledge that safety and security devices, services and programs provided by Landlord, if any, while intended to deter crime and ensure safety, may not in given instances prevent theft or other criminal acts, or ensure safety of persons or property. The risk that any safety or security device, service or program may not be effective, or may malfunction, or be circumvented by a criminal, is assumed by Tenant with respect to Tenant's property and interests, and Tenant must obtain insurance coverage to the extent Tenant desires protection against such criminal acts and other losses, as further described in this Lease. Tenant agrees to cooperate in any reasonable safety or security program developed by Landlord or required by Law. The foregoing notwithstanding, in the event that such services are interrupted for a period of more than ten (10) consecutive days and such interruption prevents Tenant from conducting its business at the Premises, Tenant's Base Rent hereunder will be abated for the period of interruption. 16. Personal Property Taxes. Tenant is responsible for and will pay before delinquency all taxes and other governmental charges and impositions levied against Tenant, Tenant's improvements, fixtures, trade fixtures, alterations, furniture, fixtures, equipment, or other personal property, Tenant's leasehold interest, the Rent or other charges payable by Tenant, any business carried on at the Premises, or in connection with the use or occupancy thereof, including, without limitation, City of San Francisco Gross Receipts Taxes, payroll taxes, any general or special assessments, levies, fees or charges, transit or transportation charges, housing subsidies and/or housing fund assessments, possessory interest taxes, business or license taxes or fees, job training subsidies and/or assessments, or open space charges, irrespective of whether any of the foregoing is assessed or designated as a real or personal property tax, and irrespective of whether any of the foregoing is assessed to or against Landlord or Tenant. Should any of the foregoing be applied in any manner to the real property taxes levied on the Building or appurtenances thereto, Tenant, upon demand, will pay such personal property taxes to Landlord who in turn will pay the same to the property tax collector. 17. Maintenance. 1. Upon occupancy, Tenant accepts the Premises as being in good and sanitary order, condition and repair. Tenant, at its sole cost and expense, will keep the Premises and every part thereof in good and sanitary condition and repair, damage thereto by fire, earthquake, act of God or the elements excepted unless caused by Tenant's negligence or willful act. Tenant agrees to carry out promptly all maintenance that at any time may become necessary to put and keep the Premises in as good and sanitary a condition as when received by Tenant from Landlord, reasonable wear and tear excepted, and, the preceding sentence notwithstanding, to replace immediately all interior glass now or hereafter installed in the Premises, however broken. Maintenance or repair required because of burglary or vandalism will be the sole responsibility of Tenant, unless required as a result of Landlord's grossly negligent or intentional misconduct. 2. If, during the Term, because of the Tenant's use of the Premises, any alterations or improvements to the Premises are required by law, whether or not such law was within the contemplation of the parties upon execution of this Lease, Tenant will be obligated to make such alterations or improvements at its sole cost and expense. However, if such alterations are required on a Building-wide basis, and are not related to Tenant's particular use of the Premises, Tenant's obligation under this Paragraph B will be limited to $5,000. 3. Tenant hereby waives all rights under, and the benefits of, Subsection 1 of Section 1932 and Sections 1941 and 1942 of the California Civil Code, and under any similar law, permitting Tenant to make repairs at the expense of Landlord or to terminate a lease by reason of the condition of the leased premises. 18. Restoration of Premises. Tenant agrees that upon the expiration of the Term, the earlier termination of the Lease for whatever reason, or Tenant's abandonment of the Premises, whichever occurs first, Tenant will surrender or leave the Premises in the same condition as when received, reasonable wear and tear excepted, and damage by fire, earthquake, acts of God, or the elements excepted, unless caused by Tenant's negligent or willful act or omission, and if Tenant has made any alteration or improvement of the Premises, without Landlord's consent as required by this Lease, Tenant will effect the restoration of the Premises unless Landlord has expressly set forth in writing that a particular alteration or improvement will not be removed. As used throughout this paragraph, "restoration" means the reconstruction, rebuilding, rehabilitation, and repairs necessary to return altered, improved, or damaged portions of the Premises and other damaged property in, on or about the Premises to substantially the same physical condition in which they were immediately before the alteration, improvement, or damage. 19. Entry by Landlord. Landlord reserves the right and Tenant will permit Landlord and its authorized representatives to enter the Premises at all reasonable times for purposes of (i) inspecting, performing maintenance or making alterations of the Premises or any other portion of the Building, including the erection and maintenance of such scaffolding, canopies, fences, and props as Landlord may reasonably require; (ii) posting notices of nonresponsibility or nonliability for alterations or repairs; (iii) placing upon the Premises any usual or ordinary "for rent" signs; or (iv) showing or submitting the Premises to prospective purchasers or tenants, all of which actions Landlord may take without any abatement of Rent. Tenant hereby waives any claim for damages for any injury or inconvenience to or interferences with Tenant's business, any loss of occupancy or quiet enjoyment of the Premises, and any other loss occasioned by such entry. Landlord will use reasonable efforts in order that the entrance to the Premises will not be blocked by the making of such alterations or the performing of such maintenance and that the business of Tenant will not thereby be interfered with unreasonably. For each of the aforesaid purposes, Landlord will at all times have and retain a key with which to unlock all of the doors in, upon, and about the Premises, excluding Tenant's vaults, safes, file cabinets and desks, and Landlord may use any means which Landlord deems proper to open said doors in an emergency in order to obtain entry to the Premises. Any entry to the Premises obtained by Landlord by any of said means, or otherwise, will not under any circumstances be construed or deemed to be a forcible or unlawful entry into or a detainer of the Premises, or an eviction of Tenant from the Premises or any portion thereof. Landlord has the right to make alterations to or demolish the Building or erect other buildings on the real property adjacent thereto. Tenant will not in such event be entitled to any direct or consequential damages for any damage or inconvenience occasioned thereby, but Landlord will use its best efforts to accomplish such work in such a manner as to inconvenience Tenant as little as possible. In the event Tenant is deprived of the use of the Premises by reason of the demolition of the Building, this Lease will terminate without any liability of Landlord to Tenant. 20. Estoppel Certificates. At any time not more than ten (10) days after a request is received from Landlord, Tenant will execute, acknowledge and deliver to Landlord, or to such party as Landlord may designate a written statement certifying the date of commencement of this Lease, that this Lease is unmodified and in full force and effect (or, if there have been any modifications of this Lease, that the Lease is in full force and effect as modified and stating the date and nature of the modification or modifications), that Landlord is not in default under this Lease (or, if there is any claimed default, stating the nature and extent thereof), that Tenant is not in default under this Lease (or, if Tenant is in default, specifying the nature and extent thereof), the current amounts of and the dates up to which Rent has been paid, the period for which Rent and other charges have been paid in advance, and any additional matters or information that may reasonably be requested by Landlord. It is expressly understood and agreed that any such statement delivered pursuant to this paragraph may be relied upon by any prospective purchaser of the Building or any lender, prospective lender, or any assignee or prospective assignee of any lender, and by any third person. Tenant's failure to deliver such a statement within said 10-day period will be conclusive against Tenant (i) that this Lease is in full force and effect, without modifications except as may be represented by Landlord, (ii) that there are no defaults in Landlord's performance hereunder, and (iii) that not more than one month's Rent has been paid in advance. 21. Abandonment of Premises. Tenant will not vacate or abandon the Premises at any time during the Term. If Tenant abandons, vacates or surrenders the Premises, or is dispossessed by process of law or otherwise, any personal property belonging to Tenant and left in or on the Premises will be deemed to be abandoned, except as to such property as may be mortgaged to Landlord, and, at the option of Landlord, such property may be removed and stored in any public warehouse or elsewhere at the cost of and for the account of Tenant, and Landlord shall have a lien thereupon for the costs of removal and storage as well as all other sums which Tenant owes Landlord. At Landlord's option, such property shall conclusively be deemed to have been conveyed by Tenant to Landlord as if by bill of sale without payment by Landlord. 22. Removal of Trade Fixtures of Tenant at End of Term. If Tenant fully and faithfully performs all of Tenant's obligations under this Lease, then Tenant may remove, and upon the request of Landlord will remove, at Tenant's sole cost and expense, all trade fixtures and movable furniture installed in, on or about the Premises by Tenant, provided that such removal may be effected without damage to the Premises. 23. Surrender of Lease. The voluntary or other surrender of this Lease by Tenant, accepted by Landlord, or the mutual cancellation hereof, will not work a merger and, at the option of Landlord, will either terminate any or all existing subleases or subtenancies or operate as an assignment to Landlord of any or all of such subleases or subtenancies. 24. Holding Over. Any holding over after the expiration of the Term with the written consent of Landlord will be construed to be a tenancy from month to month at a rent equal to 150% of the Rent payable under this Lease during the last full month before the date of such expiration, provided that Landlord may specify a higher rent upon thirty (30) day's notice. In addition, Tenant will indemnify Landlord and hold it harmless from and against all damages, costs, claims, causes of action, liabilities, and expenses (including, without limitation attorneys' fees and expenses and claims for damages by any other person to whom Landlord may have leased all or any part of the Premises effective upon such expiration) sustained by Landlord by reason of such retention. 25. Grace Period. 1. No default or breach of any of the terms, covenants or conditions of this Lease will exist on the part of Landlord until (i) Tenant serves Landlord with a notice specifying with particularity the default or breach alleged to exist and (ii) Landlord fails to perform or observe said term, covenant or condition, as the case may be, within a reasonable time not to exceed thirty (30) days after receiving the notice. 2. If the Landlord is delayed or prevented from performing the act required by reason of acts of God, strikes, lockouts, labor troubles, inability to procure materials, restrictive laws, or any other cause beyond Landlord's reasonable control, the performance of the act will be excused for the period of the delay, and the period for the performance of the act will be extended for a period equivalent to the period of such delay. 26. Landlord's Remedies Upon Default. Landlord has the following remedies if Tenant breaches or defaults on this Lease. These remedies are not exclusive but are in addition to any rights and remedies now or later allowed by law or in equity. 1. Landlord may either terminate Tenant's right of possession to the Premises, thereby terminating this Lease, or have this Lease continue in full force and effect with Tenant having the right of possession to the Premises. If Landlord elects to terminate Tenant's right of possession to the Premises, then Landlord will have the immediate right of entry to and may remove all persons and property from the Premises. Such property so removed may be stored in a public warehouse or elsewhere at the cost and for the account of Tenant. Upon such termination Landlord, in addition to any other rights and remedies, including rights and remedies under Subparagraphs (1), (2) and (4) of Subdivision (a) of Section 1951.2 of the California Civil Code, or any amendment to or any successor law of that section, will be entitled to recover from Tenant the worth at the time of award of the amount by which the unpaid Rent for the balance of the Term after the time of the award exceeds the amount of such rental loss that the Tenant proves could be reasonably avoided. The amount Landlord may recover under Subparagraph (4) of Subdivision (a) of Section 1951.2 of the California Civil Code will include, without limitation, the cost of recovering possession of the Premises, expenses of reletting (including advertising), brokerage commissions and fees, costs of placing the Premises in good order, condition and repair, including necessary maintenance and restoration of the Premises, attorneys' fees, court costs and costs incurred in the appointment of and performance by a receiver to protect the Premises or Landlord's interest under this Lease. The worth at the time of the award of the amount referred to in Subparagraph (3) of Subdivision (a) of Section 1951.2 of the California Civil Code will be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of the award plus one percent (1%). The worth at the time of the award referred to in Subparagraphs (1) and (2) of Subdivision (a) of Section 1951.2 of the California Civil Code will be computed by allowing interest at the maximum rate permitted by law. Prior to such award, Landlord may relet the Premises for the purpose of mitigating damages suffered by Landlord because of Tenant's failure to perform its obligations hereunder. 2. Any proof by Tenant under Subparagraphs (2) or (3) of Subdivision (a) of Section 1951.2 of the California Civil Code of the amount of rental loss that could be reasonably avoided will be made in the following manner: Landlord and Tenant will each select a licensed real estate broker in the business of renting property of the same type and Purpose as the Premises and in the same geographic vicinity; these two brokers will select a third licensed real estate broker of similar qualifications; the two brokers selected by the parties will determine the amount of rental loss that could be reasonably avoided for the balance of the Term after the time of the award. The third broker will then decide which of the two brokers has made the better determination of the worth at the time of the award, and his decision will be final and binding on the parties. 3. If Landlord elects to keep this Lease in full force and effect with Tenant retaining the right of possession to the Premises (notwithstanding the fact that Tenant may have vacated or abandoned the Premises), Landlord may enforce all of its rights and remedies under this Lease or allowed by law or in equity including, but not limited to, the right to recover the installments of Rent as they become due under this Lease; additionally, the Landlord has the remedy described in California Civil Code Section 1951.4 (lessor may continue lease in effect after lessee's breach and abandonment and recover rent as it becomes due, if lessee has right to sublet or assign, subject only to reasonable limitations). Notwithstanding any such election to have this Lease remain in full force and effect, Landlord may at any time thereafter elect to terminate Tenant's right of possession to the Premises, thereby terminating this Lease, for any previous breach or default which remains uncured, or for any existing or subsequent breach or default. For purposes of Landlord's right to continue this Lease in effect upon Tenant's breach or default, acts of maintenance or preservation or efforts by Landlord to relet the Premises or the appointment of a receiver on initiative of Landlord to protect its interest under this Lease do not constitute a termination of Tenant's right of possession. 4. If Landlord elects to keep this Lease in full force and effect, Landlord may, as attorney-in-fact of Tenant, sublet the Premises, or any part thereof, from time to time and for such tenant, at such rent, and upon such other terms, covenants and conditions as Landlord in its sole discretion may deem advisable with the unqualified right to make alterations, effect restoration, and perform maintenance to the Premises. Upon each such subletting (i) Tenant will be responsible for, in addition to Tenant's indebtedness to Landlord other than Rent due hereunder, the costs of such subletting and of such alterations, restoration and maintenance incurred by Landlord, and the amount by which the Rent hereunder for the period of such subletting (to the extent such period does not exceed the Term hereof) exceeds the amount agreed to be paid as Rent for the Premises for the period of such subletting, or (ii) at the option of Landlord, rents received from such subletting will be applied: first, to the payment of Tenant's indebtedness to Landlord other than Rent due hereunder; second, to the payment of costs of such subletting and of such alterations, restoration and maintenance; third, to the payment of Rent due and unpaid hereunder; and fourth, the residue, if any, to be held by Landlord and applied in payment of future Rent as the same becomes due hereunder. If Tenant has been credited with any rent to be received by such subletting and such rent is not promptly paid to Landlord by the subtenant(s), or if such rent received from such subletting during any month is less than the Rent to be paid during that month by Tenant hereunder, Tenant will pay any such deficiency to Landlord. Such deficiency will be calculated and paid monthly on the date Rent is due and payable hereunder. No taking possession of the Premises by Landlord, as attorney-in-fact for Tenant, will be construed as an election on Landlord's part to terminate this Lease unless a notice of such election is given to Tenant. Notwithstanding any such subletting without termination of this Lease, Landlord may at any time thereafter elect to terminate this Lease for any previous, existing or subsequent breach or default. At Landlord's option and application, a receiver for Tenant will be appointed to take possession of the Premises, to exercise Landlord's right to sublet the Premises as attorney-in-fact for Tenant, and to apply any rent collected from the Premises as provided herein. 5. Nothing in this paragraph affects Landlord's right of to indemnification for liability arising prior to the termination of the Lease for damage to person or property. 6. If Tenant is in default in the performance of any term, covenant or condition to be performed by it under this Lease, then, after notice and without waiving or releasing Tenant from the performance of such term, covenant or condition, Landlord may, but will not be obligated to, perform the same, and, in exercising any such right, may pay necessary and incidental costs and expenses in connection therewith. All sums so paid by Landlord, together with interest thereon at the maximum rate of interest allowed by law, will be deemed Additional Rent hereunder and will be payable to Landlord by Tenant on the next rent-paying day. 7. Rent not paid when due bears interest, in addition to any late charge provided hereunder, at the maximum rate of interest allowed by law from the date due until paid. 8. No security or guaranty which may now or hereafter be furnished Landlord for the payment of the Base Rental or for performance by Tenant of the other terms, covenants or conditions of this Lease will in any way be a bar or defense to any action in unlawful detainer, for the recovery of the Premises, or to any action which Landlord may at any time commence for a breach of any of the terms, covenants or conditions of this Lease. 27. Attorneys' Fees on Default. If either Landlord or Tenant obtain legal counsel or bring an action against the other for any reason relating to or arising out of this Lease, the unsuccessful party will pay to the prevailing party its attorneys' fees, which will be payable whether or not such action is prosecuted to judgment. The term "prevailing party" includes, without limitation, a party who obtains substantially the relief sought whether by compromise, settlement or judgment. 28. Insolvency. Any of the following is a breach of this Lease by Tenant and a default hereunder: 1. The appointment of a receiver to take possession of all or substantially all of the assets of Tenant; or 2. A general assignment by Tenant for the benefit of creditors; or 3. Any action taken or suffered by Tenant under any insolvency, bankruptcy, or reorganization act; or 4. The admission by Tenant in writing of its inability to pay its debts as they become due; or 5. The levying of execution upon any interest of Tenant in or under this Lease or upon the property of Tenant within the Premises, unless the same will be bonded against or discharged within twenty (20) days following the levy or within five (5) days prior to the proposed sale thereunder, whichever is earlier; or 6. The attachment or garnishment of any interest of Tenant in, to, or under this Lease or upon the property of Tenant in the Premises, unless it is discharged within twenty (20) days after the levy thereof. Upon any such event, this Lease terminates five (5) days after receipt by Tenant of notice of termination; provided, however, that notwithstanding such termination, Landlord may enforce its remedies under Paragraph 26 and provided further that neither such termination nor such exercise of remedies will terminate the right of Landlord or any lender to enforce any indemnities given by Tenant under this Lease. In no event will this Lease be assigned or assignable by reason of any voluntary or involuntary bankruptcy proceedings, nor will any rights or privileges hereunder be an asset of Tenant in any bankruptcy, insolvency, or reorganization proceedings, except at the election of Landlord so to treat the same. In the event this Lease is assumed and assigned by Tenant's trustee in bankruptcy, Landlord will require that such assignee deposit with it security in an amount equal to Landlord's then standard security deposit requirements for similar tenants of the Building. 29. Assignment or Subletting. 1. Tenant will not, directly or indirectly, voluntarily or involuntarily, assign, pledge, encumber, or otherwise transfer this Lease or any interest therein, and will not sublet the Premises or any part thereof or any right or privilege appurtenant thereto, or permit any other person (the authorized representatives of Tenant excepted) to occupy or use the Premises or any portion thereof (collectively "assign") without first receiving the written consent of Landlord. Landlord agrees not to unreasonably withhold such consent, but may in lieu of granting such consent terminate this Lease or exercise its other rights as hereinafter provided. Any such assignment without Landlord's consent will be void and will, at the option of Landlord, constitute a default hereunder entitling Landlord to terminate this Lease and giving rise to all other remedies available to Landlord for breach of this Lease. A consent to one assignment will not be deemed to be a consent to any other or further assignment. This Lease and any interest in it will not be assignable as to the interest of Tenant by operation of law without the prior written consent of Landlord. 2. If Tenant contemplates an action under Subparagraph A, Tenant will give Landlord forty-five (45) days' notice thereof, designating the terms proposed and, if a sublease, the term thereof and space proposed to be sublet. Tenant will also provide a current financial statement of any proposed assignee and any further information which Landlord may reasonably request . Landlord may, upon notice to Tenant within thirty (30) days after receipt of Tenant's notice of intention to assign, (i) assign from Tenant any portion of the Premises proposed by Tenant to be assigned, for the term for which such portion is proposed to be assigned, but at the same Rent as Tenant is required to pay to Landlord under this Lease for the same space, computed on a pro rata share of rentable square footage basis, (ii) terminate this Lease as it pertains to the portion of the Premises so proposed by Tenant to be assigned, (iii) approve Tenant's proposal to assign, subject to Landlord's subsequent written approval of the specific agreement between Tenant and the proposed assignee, or (iv) terminate this Lease in its entirety if, after said subleasing or assignment, Tenant will have then subleased or assigned more than 25% of the original square footage of the Premises. Upon acceptance of the offer to terminate this Lease as it pertains to the portion of the Premises Tenant seeks to assign or upon acceptance of the offer to terminate this Lease in its entirety, this Lease (in its entirety or as it pertains to said portion, as the case may be) will terminate as of the end of the calendar month in which such notice of acceptance is given to Tenant. Tenant must then vacate and surrender all or such portion of the Premises and the provisions of this Lease applicable to termination upon expiration of the Term will apply to all or to such portion of the Premises. Such termination will not relieve Tenant from liability for any breach or default with respect to all or such portion of the Premises occurring prior to termination. 3. For purposes of this paragraph, the following events will be deemed an assignment of this Lease or a sublease of the Premises, as appropriate: (i) the issuance of an equity interest (whether a stock or partnership interest or otherwise) to any person or group of related persons, in a single transaction or a series of related or unrelated transactions such that, following such issuance, such person or group will have control of Tenant; or (ii) a transfer of control in a single transaction or a series of related or unrelated transactions (including, without limitation, by consolidation, merger, or reorganization), except that the transfer of the outstanding stock of any corporate Tenant by persons or parties other than "insiders" within the meaning of the Securities Exchange Act of 1934, as amended, through any recognized national or international securities exchange or through the "over-the-counter" market will not be included in the determination of whether control has been transferred. For purposes of this paragraph, "control" will mean ownership of not less than 50% of the voting stock of a corporation or of not less than 50% of the legal or equitable interest in any other business entity. 4. A corporate Tenant will have the right in the event of a merger, consolidation, reorganization, or recapitalization, whether or not Tenant survives as the surviving corporation, to assign or transfer this Lease to such surviving corporation; provided, however, such right of assignment or transfer will be limited to an assignee whose net worth is equal to or greater than the net worth of Tenant at the time of such assignment or transfer. In the event Tenant contemplates making an assignment or transfer as provided in this subparagraph, Tenant will give thirty (30) days' notice to Landlord of its intention to make such assignment or transfer and will furnish Landlord with all pertinent information as to the net worth of the proposed assignee or transferee. 5. In all events, if this Lease is assigned other than to Landlord, Tenant will continue to be primarily liable under this Lease and the assignee will execute an agreement by which it assumes and agrees to be jointly and severally liable for the complete performance by Tenant of its obligations hereunder. 6. Tenant irrevocably assigns to Landlord, as security for the performance of Tenant's obligations under this Lease, all rent from any assignment of all or any part of the Premises. A receiver for Tenant, appointed on Landlord's application, may collect such rent and apply it toward Tenant's obligations under this Lease except that, until the occurrence of an act of default by Tenant, Tenant will have the right to collect such rent. 7. In no event may Tenant assign this Lease or sublet the Premises, or any portion thereof, to any then-existing or prospective tenant of the Building. In addition, neither Tenant nor any other person having an interest in the possession, use, occupancy, or utilization of the Premises will enter into any lease, sublease, license, concession, or other agreement for use, occupancy, or utilization of space in the Premises which provides for rental or other payment for such use, occupancy, or utilization based in whole or in part on the net income or profits derived by any person from the property leased, used, occupied, or utilized (other than an amount based on a fixed percentage or percentages of receipt or sales) and any such purported lease, sublease, license, concession, or other agreement is void and ineffective as a conveyance of any right or interest in the possession, use, occupancy, or utilization of any part of the Premises. 8. Tenant will pay to Landlord the amount of Landlord's reasonable cost of processing every proposed assignment (including, without limitation, the cost of attorneys' and other professional fees and the administrative, accounting, and clerical time of Landlord), and the amount of all reasonable direct and indirect expenses as well as a minimum fee to Landlord of $500 arising from any assignee's or subtenant's taking occupancy (including, without limitation, the expenses of freight elevator operation for the moving of furnishings, trade fixtures and other personal property, security service, janitorial and cleaning service, and rubbish removal service). Notwithstanding anything to the contrary contained in this Lease, Landlord will have no obligation to process any request for its consent to assignment or sublease prior to Landlord's receipt of payment by Tenant of the amount of Landlord's estimate of the processing costs and expenses and all other direct and indirect costs and expenses of Landlord and its authorized representatives arising from such matter. 9. If Landlord consents to any assignment or subletting, sixty-six (66) percent of the amount by which all consideration received by Tenant in connection with such assignment or subletting, whether denominated as rent or otherwise, exceeds the consideration which Tenant is obligated to pay Landlord under this Lease will be paid to Landlord promptly after receipt as additional Rent under the Lease without affecting or reducing any other obligation of Tenant hereunder. If less than the entire Premises is assigned or sublet, Tenant's rental obligations shall be prorated based upon the amount of space assigned or sublet. (For example, if Tenant was leasing space at $3.00 per rentable square foot per month and subleased four (4) offices in the Premises, containing a total of 1,000 rentable square feet, for $4,000 per month, Tenant would owe the Landlord the sum of $666.00 per month, calculated as follows: Sublease rent of $4000 minus Tenant's prorated rent for that space of $3000 (1,000 sq. ft. sublet times $3.00/sq. ft. times .66). 30. Transfer by Landlord - Release from Liability. If Landlord sells or transfers the Building, or assigns its interest as Landlord in this Lease, then, from the effective date of such sale, assignment or transfer, Landlord will be released from all further liability to Tenant, express or implied, under this Lease, and Tenant agrees to look solely to the successor in interest of Landlord in and to the Building or this Lease, except as to any matters of liability based upon Landlord's action prior to transfer or that have accrued and remain unsatisfied as of the date of such sale, assignment or transfer. It is intended that the covenants and obligations contained in this Lease on the part of Landlord will be binding upon Landlord and its successors and assigns only during their respective periods of ownership of the fee or leasehold estate, as the case may be. If any security is given by Tenant to secure the faithful performance of all or any part of the terms, covenants and conditions of this Lease on the part of Tenant, Landlord may transfer and deliver the security to the successor in interest of Landlord, and thereupon Landlord will be discharged from any further liability in reference thereto. Landlord may enter into any transaction described in this paragraph without the consent of Tenant. 31. Damage. If the Premises or the Building is damaged from any cause covered by Landlord's standard fire and extended coverage insurance, Landlord will forthwith repair such damage provided the cost of repair does not exceed the insurance proceeds and provided further such repairs can be made within sixty (60) days after such damage occurs. This Lease will remain in full force and effect during the period such repairs are being made. Such damage will not in any way void or render voidable this Lease or any provision hereof, and provided such damage was not caused by Tenant's negligent or willful act, Tenant will be entitled to a proportionate reduction of Rent while such repairs are being made in an amount that is in the same proportion to the Rent as the rentable area of the portion of the Premises so damaged bears to the total rentable area of the Premises. If such damage was caused by any risk not covered by Landlord's insurance, or if the cost of repairs exceeds the insurance proceeds payable, Landlord may, at its option, make such repairs, provided the repairs can be made within sixty (60) days after such damage occurs, and, in such event, this Lease will remain in full force and effect and will be neither void nor voidable, but Tenant will be entitled to a proportionate reduction of Rent while such repairs are being made in an amount that is in the same proportion to the Rent as the rentable area of the portion of the Premises so damaged bears to the total rentable area of the Premises. If Landlord elects not to make repairs it is not obligated to make, or if such repairs cannot be made within the 60-day period, this Lease may be terminated by either party upon notice and without liability to the other party. If either Landlord or Tenant gives notice of termination as provided herein, this Lease and all interests of Tenant in the Premises will terminate on the date specified in the notice. Landlord will under no circumstances be required to repair any damage by fire or any other cause, whether of a similar or dissimilar nature, to the property of Tenant. Tenant hereby specifically waives the provisions of Section 1932, Subdivision 2 and Section 1933, Subdivision 4, of the California Civil Code. In the event the Building is damaged to the extent of more than twenty percent (20%) of the then replacement cost thereof, Landlord (or Tenant if Tenant will be unable to conduct its business on the Premises for more than sixty (60) consecutive days) may elect to terminate this Lease, whether the Premises are damaged or not and without liability to Tenant. A total destruction of the Premises or of the Building will terminate this Lease without liability to Tenant. 32. Condemnation. 1. As used in this Lease, "condemn" is coextensive with the phrase "right of eminent domain", i.e., the right of people or government to take property for government or public use, and will include the intention to condemn expressed in writing as well as the filing of any action or proceeding for condemnation. 2. If any action or proceeding is commenced for the condemnation of the Building or any part thereof, or if Landlord is advised in writing by any agency, entity or body having the right or power of condemnation of its intention to condemn the same, then Landlord may: (1) Without any obligation or liability to Tenant, and without affecting the validity and existence of this Lease other than as hereinafter provided, agree to sell or convey to the condemnor the part or portion of the Premises or Building sought by the condemnor free from this Lease and the rights of Tenant hereunder. Such agreement may be made without first requiring that any action or proceeding be instituted, or if such action or proceeding will have been instituted, without requiring any trial or hearing thereof, and Landlord is expressly empowered to stipulate to judgment therein. (2) Terminate this Lease and all rights of Tenant hereunder. (3) Continue this Lease in full force and effect, provided that such condemnation does not result in a taking of the Premises. If this Lease continues in full force and effect and by reason of the condemnation an alteration of the Building is required, and such alteration materially interferes with Tenant's business in the Premises, then Tenant will be entitled to a reasonable abatement in Rent during the period of such modification or alteration to the extent such work interferes with Tenant's business. 3. If a portion of the Premises is permanently condemned and taken, and such condemnation and taking materially affects Tenant's business in the Premises, then Tenant will have the option of either terminating all of its obligations under this Lease or continuing this Lease in full force and effect with respect to such portion of the Premises not taken. In such latter event, Rent for the remainder of the Term will be reduced in the proportion which the rentable square footage of the Premises taken bears to the total rentable square footage of the original Premises. 4. If, as a result of any such condemnation proceedings, a leasehold interest or right of possession only is so condemned or taken for a period of time less than the then unexpired Term of this Lease, this Lease will continue in full force and effect and any condemnation award will be payable to Landlord and will be credited by Landlord against the Rent payable by Tenant for said period. If the amount received by Landlord is in excess of said Rent, Tenant will be entitled to receive such excess, and, if the amount so received by Landlord is less than said Rent, then Tenant will pay the amount of such deficiency to Landlord, if such condemnation is for a period of time extending beyond the expiration of the Term of this Lease, the foregoing provisions will apply only up to the date of expiration of the Term. Upon said expiration, Landlord will receive all awards thereafter payable, and no accounting will be made to Tenant for such period extending beyond said expiration. 5. All compensation and damages awarded for the taking of the Premises, Building, or any portion or portions thereof, will, except as otherwise herein provided, belong to and be the sole property of Landlord, and Tenant will not have any claim or be entitled to any award for diminution in value of its leasehold interest hereunder or for the value of any unexpired Term of this Lease; provided, however, Tenant will be entitled to any separate award that may be made for the taking of or damage to, or on account of any cost or damage Tenant may sustain in the removal of, Tenant's merchandise, fixtures, trade fixtures, equipment and furnishings. 1. 6. If this Lease is terminated, in whole or in part, under this paragraph, all Rent and other charges payable by Tenant to Landlord hereunder and attributable to the Premises taken will be paid up to the date upon which actual physical possession will be taken by the condemnor, and the parties will thereupon be released from all further liability in relation thereto. 33. Subordination to Encumbrances. This Lease, and the leasehold estate created hereby, is at all times subject to and subordinate to any lien or encumbrance, and replacements thereof, in any amount whatsoever now existing or hereafter placed on or against the Building or any part thereof, or against Landlord's interest or estate therein, without the necessity of having further instruments executed on the part of Tenant to effectuate such subordination. However, Landlord or any lender may elect to make this Lease prior and superior to any lien and encumbrance placed or to be placed by Landlord upon or against the Premises or Building, or any part thereof, which election will, of and by itself and without further notice to or act or agreement of Tenant, make this Lease and the estate created hereby prior and superior to any lien or encumbrance, whether presently existing or hereinafter created. Notwithstanding the foregoing, Tenant covenants and agrees to execute and deliver upon demand such further instruments evidencing such superiority or subordination of this Lease to such liens or encumbrances as may be required by Landlord or any lender. Tenant hereby irrevocably appoints Landlord its attorney-in-fact to execute and deliver any instrument or instruments for or in the name of Tenant to effectuate such actions. In the event of foreclosure or exercise of any power of sale under any lien or encumbrance superior to this Lease or to which this Lease is subject or subordinate, Tenant will, upon demand, attorn to the purchaser at any foreclosure sale or pursuant to the exercise of any power of sale, in which event this Lease will not terminate, and Tenant will automatically be and become the Tenant of said purchaser upon the same terms, covenants and conditions as are contained in this Lease. In the event of attornment, no lender shall be: (i) liable for any act or omission of Landlord, or subject to any offsets or defenses which Tenant might have against Landlord (prior to such lender becoming Landlord under such attornment), (ii) liable for any security deposit or bound by any prepaid Rent not actually received by lender, or (iii) bound by any future modifications of this Lease not consented to by such lender. If, in connection with Landlord's obtaining financing for the Building, the lender requests reasonable modifications in this Lease as a condition to such financing, Tenant will not unreasonably withhold, delay or defer its consent thereto, provided that such modifications do not increase the obligations of Tenant hereunder or materially adversely affect the leasehold interest hereby created or Tenant's rights hereunder. In the event of any default on the part of Landlord, Tenant will file notice by registered or certified mail to any beneficiary of a deed of trust or mortgagee under a mortgage covering the Property or the Building whose address has been disclosed to Tenant, and offer such beneficiary or mortgagee a reasonable opportunity to cure the default, not less than thirty (30) days in any event, including time to obtain possession of the Property or the Building by power of sale or a judicial foreclosure, if such should prove necessary to effect a cure. Tenant shall execute such documentation as Landlord may reasonably request from time to time, in order to confirm the matters set forth in this paragraph in recordable form. 34. Relocation. Landlord shall have the right, at its option upon not less than sixty (60) days prior written notice to Tenant, to relocate Tenant and to substitute for the Premises described above other space in the Building containing at least as much rentable area as the Premises described in Section 1A above. If Tenant is already in occupancy of the Premises, then Landlord shall approve in advance the relocation expenses for purposes of reimbursement for Tenant's reasonable moving and telephone relocation expenses and for reasonable quantities of new stationery upon submission to Landlord of receipts for such expenditures incurred by Tenant. The relocation premises will then become the Premises hereunder and the Rent and other sums payable hereunder will be adjusted, if necessary, to reflect any increase or decrease in the square footage of the Premises. Notwithstanding the foregoing, if Tenant is unwilling to accept any relocation premises proposed by Landlord, Tenant may terminate this Lease upon written notice to Landlord delivered within ten days following the date Tenant receives Landlord's notice as set forth above. In the event of such termination, Tenant will vacate the Premises within sixty (60) days following the date written notice of termination is delivered to Landlord and, in such event, this Lease will be terminated on the date the Premises are vacated and possession thereof is returned to Landlord. 35. Communications and Computer Lines. 1. Tenant may, in a manner consistent with the provisions and requirements of this Lease, install, maintain, replace, remove or use any communications or computer wires, cable and related devices (collectively the "Lines") at the Building in or serving the Premises, provided: (a) Tenant obtains Landlord's prior written consent, which consent may be conditioned as required by Landlord, (b) if Tenant at any time uses any equipment that may create an electromagnetic field exceeding the normal insulation ratings of ordinary twisted pair riser cable or cause radiation higher than normal background radiation, the Lines therefor (including riser cables) must be appropriately insulated to prevent such excessive electromagnetic fields or radiation, and (c) Tenant will pay all costs in connection therewith. Landlord reserves the right to require that Tenant remove any Lines which are installed in violation of these provisions. 2. Landlord may, but is not obligated to: (i) install new Lines at the Property, and (ii) create additional space for Lines at the Property, and adopt reasonable and uniform rules and regulations with respect to the Lines. 3. Tenant may not, without the prior written consent of Landlord in each instance, grant to any third party a security interest or lien in or on the Lines, and any such security interest or lien granted without Landlord's written consent is null and void. Except to the extent arising from the intentional or negligent acts of Landlord or Landlord's agents or employees, Landlord has no liability for damages arising from, and Landlord does not warrant that Tenant's use of any Lines will be free from the following (collectively called "Line Problems'): (x) any eavesdropping or wire-tapping by unauthorized parties, (y) any failure of any Lines to satisfy Tenant's requirements, or (z) any shortages, failures, variations, interruptions, disconnections, loss or damage caused by the installation, maintenance, replacement, use or removal of Lines by or for other tenants or occupants at the Property. Under no circumstances will any Line Problems be deemed an actual or constructive eviction of Tenant, render Landlord liable to Tenant for abatement of Rent, or relieve Tenant from performance of Tenant's obligations under this Lease. Landlord will in no event be liable for damages by reason of loss of profits, business interruption or other consequential damage arising from any Line Problems. 36. Effect of Exercise of or Failure to Exercise Privilege. Neither the exercise of nor failure to exercise any right, option, or privilege hereunder by Landlord or Tenant will exclude such party from exercising any and all other rights, options, or privileges hereunder at any other time, nor will such exercise or nonexercise relieve Landlord or Tenant from their obligation to perform each and every term, covenant and condition to be performed hereunder, or from damages or other remedy for failure to perform or meet their obligations under this Lease. 37. Waiver. The waiver by Landlord or Tenant of any performance or breach of any term, covenant or condition contained herein will not be deemed to be a waiver of such term, covenant or condition, or of any subsequent or continuing breach of the same, or of any other term, covenant or condition contained herein. Nor will any custom or practice that may arise between the parties in the administration of the provisions of this Lease be deemed a waiver of, or in any way affect, the right of Landlord or Tenant to insist upon the performance by the other party hereto in strict accordance with the provisions of this Lease. The subsequent acceptance of Rent hereunder by Landlord will not be deemed to be a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease other than Tenant's breach in failing to pay the particular Rent so accepted regardless of Landlord's knowledge of such additional preceding breach at the time of the acceptance of such Rent. 38. Labor Relations. Tenant will conduct its labor relations and its relations with its employees so as to attempt to avoid all strikes, picketing, and boycotts of, on, or about the Premises or the Building. If any of Tenant's employees strike or if a picket line or a boycott is established, conducted or carried out against Tenant or its employees, or any of them, Tenant, on Landlord's request, will forthwith cease operations in and upon the Premises and remain closed until all disputes are settled. 39. Notices. All notices under this Lease will be in writing personally delivered or sent by United States certified or registered mail, postage prepaid, return receipt requested, and addressed: if to Tenant, at the Premises, or at such other address as Tenant may from time to time designate by giving notice thereof to Landlord under this paragraph; and if to Landlord, at the Building office, or at such other address as Landlord may from time to time designate by giving notice thereof to Tenant under this paragraph. Mailed notice will be deemed given 48 hours after the date of postmark. 40. Entire Agreement; Amendments. This Lease represents the entire agreement of the parties with respect to the parties' rights and duties under this Lease, and no promises or representations, express or implied, whether written or oral, not set forth herein will be binding upon or inure to the benefit of Landlord or Tenant. Tenant acknowledges that neither Landlord nor any authorized representative of Landlord, or any other person purporting to act on Landlord's behalf, has made any representation, warranty, or statement with respect to the amount of taxes that may or will be assessed against the Premises, the cost of any insurance required to be maintained by Tenant hereunder, or any other matter relating to this Lease that is not expressly covered in this Lease. With respect to such matters, Tenant is relying upon its own independent investigation and sources of information, and Tenant expressly waives any right Tenant might otherwise have to rescind this Lease or to claim damages by reason of Tenant's misunderstanding or mistake. This Lease will not be amended or modified by any oral agreement, either express or implied; all amendments and modifications hereof will be in writing and signed by both Landlord and Tenant. 41. Landmark. Tenant acknowledges that the Building has been declared a Historical Landmark in the City and County of San Francisco, and agrees to be bound by all of the applicable rules and regulations related thereto. 42. Light and Air. Tenant covenants and agrees that no diminution of light, air or view by any structure which may hereafter be erected (whether or not by Landlord) will entitle Tenant to any reduction of Rent hereunder, result in any liability of Landlord to Tenant, or in any other way affect this Lease. 43. Auctions and Signs. Tenant will not conduct any auctions in, upon, or from the Premises, affix any signs, awnings, notices, or other advertising matter to the Premises, or issue or circulate any advertising matter in the Building without the prior written consent of Landlord. The design and character of any such signs, awnings, notices, or other advertising matter will also be subject to Landlord's prior written approval. 44. Execution, Recordation. Submission of this instrument for examination or signature by Tenant does not constitute a reservation of an option for a lease, and this instrument will not be effective as a lease or otherwise until execution and delivery by both Landlord and Tenant. Tenant will not record this Lease or any memorandum of this Lease. 45. Tenant's Authority. If Tenant is a corporation, partnership, trust, association, or other entity, Tenant and each person executing this Lease on behalf of Tenant hereby covenant and warrant that (i) Tenant is duly incorporated or otherwise established or formed and validly existing under the laws of its state of incorporation, establishment, or formation; (ii) Tenant has and is duly qualified to do business in California; (iii) Tenant has full corporate, partnership, trust, association, or other appropriate power and authority to enter into this Lease and to perform all of Tenant's obligations hereunder; (iv) each person (and all persons if more than one signs) signing this Lease on behalf of Tenant is duly and validly authorized to do so; and (v) when executed by both parties, this Lease and all of the terms and conditions contained herein will be binding and enforceable against Tenant. 46. Limitation of Tenant's Remedies. If Tenant obtains a judgment against Landlord, Tenant agrees to look solely to Landlord's interest in the Building for recovery. 47. Time and Applicable Law. Time is of the essence of this Lease and each and all of its provisions. This Lease will be construed and interpreted in accordance with the laws of the State of California. Tenant, Landlord and any Guarantor, consent to the exclusive jurisdiction of any federal or state court located within the City and County of San Francisco, California and any other court in which Landlord may initiate equitable or legal proceedings which has subject matter jurisdiction over the matter in controversy. Borrower waives any objection of forum non conveniens and venue. Tenant, and any guarantor, waives personal service of process and consents to service of process being made in the same manner as notices are given. 48. Name. Tenant will not use the name of the Building for any purpose other than as the address of the business conducted by Tenant in the Premises. 49. Provisions are Covenants and Conditions. All provisions, whether set forth herein as covenants or conditions on the part of Tenant, are deemed both covenants and conditions. 50. Severability. The unenforceability, invalidity, or illegality of any provision of this Lease, for any reason, will not render its other provisions unenforceable, invalid, or illegal. In such an event, this Lease will be equitably construed as if it did not contain the invalid, illegal, or unenforceable provision to the extent permitted by applicable law, it being the intent of the parties that this Lease will be enforced to the greatest extent possible. 51. Captions. The table of contents and the headings to the paragraphs of this Lease are for convenience only, are not part of this Lease, and will have no effect on the construction or interpretation hereof. 52. Successors. This Lease, subject to the provisions as to assignment and sublease, apply to, inure to the benefit of, and bind the heirs, successors, administrators, executors, and assigns of the parties hereto. 53. Relationship of Parties. Neither anything contained in this Lease nor any acts of the parties will be construed to create any relationship between the parties other than that of Landlord and Tenant. 54. Temporary Space. If the Premises are not ready for Tenant's occupancy by ____________________, then Landlord may, if available, provide Tenant with temporary space in the Building to be used and occupied by Tenant, at its sole cost and expense, with the obligation to pay Rent at a discounted rate of 75% of market as determined by Landlord in its sole and absolute discretion, until such time as possession of the Premises is delivered to Tenant. 55. Brokers. Tenant warrants and represents to Landlord that it has had no dealings with any real estate broker or agent or any other party who could be entitled to a commission or finder's fee in connection with the negotiation of this lease, except as set forth in paragraph 1.L. above. 56. Interpretation. The parties acknowledge that each party has reviewed and revised, and has been provided the opportunity of its respective counsel to review and revise, this Lease, and no rule of construction to the effect that any ambiguities are to be resolved against the drafting party may be employed in the interpretation or construction of this Lease, or any amendments or exhibits hereto, or any other document executed and delivered by either party in connection herewith. 57. Force Majeure. Except as may be otherwise specifically provided herein, time periods for performance under this Lease not involving the payment of money will be extended for periods of time during which the nonperforming party's performance is prevented due to circumstances beyond the party's control, including, without limitation, strikes, embargoes, governmental regulations, inability to obtain permits, acts of God, war or other strife. Tenant waives its right to terminate this Lease under Section 1932(l) of the California Civil Code or under any similar law, statute or ordinance now or hereafter in effect. 58. Asbestos. Tenant acknowledges that it has been expressly disclosed to Tenant by Landlord's Managing Agent that the Building and the Premises contain asbestos-containing materials ("ACM"). The acknowledgment by Tenant of the ACM does not in any manner impose any liability or responsibility on Tenant for removal, treatment or abatement of such ACM or any responsibility whatsoever regarding such ACM provided, however, that Tenant shall comply with all applicable laws and regulations in connection with any work in the Premises including, but not limited to, work which requires entry into the ceiling and Exhibit F. 59. Accuracy of Tenant Information. Tenant represents and warrants that all information which Tenant has provided to Landlord prior to execution of this Lease is true and complete in all material respects; tenant further represents and warrants that all information provided to Landlord by Tenant during the term of the Lease shall be true and correct in all material respects. Executed as of the date first above written. LANDLORD: _____________________________ 100 BUSH CORPORATION By: Unreadable Its: President TENANT: _____________________________ By: /s/ Jeffrey R. Hazarian Its: Executive Vice President (Chairman, President or Vice President) By: /s/ James A. Robison Its: Treasurer (Secretary or Chief Financial Officer) EXHIBIT A Floor Plan EXHIBIT B Tenant Improvement Agreement (Landlord performs work) Landlord at its cost shall provide new Building Standard paint and carpet. Landlord shall install sprinklers and air conditioning in any portion of the Premises that currently does not have them. EXHIBIT C Rules and Regulations of the Building 1. Signs. No sign, placard, picture, advertisement, name or notice will be inscribed, displayed, printed, or affixed on or to any part of the outside or inside of the Building without the prior written consent of Landlord, and Landlord will have the right to remove any such sign, placard, picture, advertisement, name, or notice without notice to and at the expense of Tenant. All approved signs or approved lettering on doors will be printed, painted, affixed or inscribed at the expense of Tenant by a person approved by Landlord. All signs located in the interior of the Premises shall be in good taste so as not to detract from the general appearance of the Premises or the Building. Tenant shall not place on or permit to be suspended from the ceiling and interior walls of the Premises any pennants, banners or other advertising. Tenant shall not solicit business in the lobby or other common areas nor distribute any advertising matter to, in or upon the common areas or other tenants' premises nor use handbills, balloons or other giveaways or promotional items for advertising at or around the Building. In the event of the violation of the foregoing by any tenant, Landlord may remove the same without any liability, and may charge the expense incurred in such removal to the tenant violating this rule. 2. Window Coverings. Only the standard Building window coverings as established by Landlord will be hung in the windows in the Premises and the use of any other curtains, blinds, shades, or screens attached to or hung in or used in connection with any window or door of the Premises will be discontinued immediately by the Tenant. No awning will be permitted on any part of the Premises. Except as otherwise specifically approved by Landlord, all electrical ceiling fixtures along the perimeter of the Building must be fluorescent and of a quality, type, design and bulb color approved by Landlord. Tenant shall not place anything or allow anything to be placed near the glass of any window, door, partition or wall which may appear unsightly from outside the Premises. 3. Building Directory. The bulletin board or directory of the Building will be provided exclusively for the display of the name and location of tenants, and Landlord reserves the right to exclude any other names therefrom, including subtenants. Additional names, if approved by Landlord, and name changes are to be paid by Tenant. 4. Hallways and Passages. The sidewalks, halls, passages, exits, entrances, elevators, and stairways in the Building will not be obstructed by Tenant or used for any purpose other than for ingress to and egress from the Premises. The halls, passages, exits, entrances, elevators, stairways, balconies and roof are not for the use of the general public, and the Landlord will in all cases retain the right to control and prevent access thereto by all persons whose presence in the judgment of the Landlord will be prejudicial to the safety, character, reputation, and interest of the Building and its tenants, provided that nothing herein contained will be construed to prevent such access to persons with whom the Tenant normally deals in the ordinary course of Tenant's business unless such persons are engaged in illegal or improper activities. The doors, windows, glass lights, and any lights or skylights that reflect or admit light into the halls or other places of the Building will not be covered or obstructed. Neither Tenant nor any employees or invitees of Tenant will go upon the roof of the Building. 5. Locks. Tenant will not alter any lock nor install any new or additional locks or any bolts on any door on the Premises. Tenant will make sure that Landlord, at all times, has a key to each lock on the Premises. Tenant, upon the termination of the tenancy, will deliver to the Landlord the keys to all offices, rooms, and toilet rooms which will have been furnished to the Tenant or which the Tenant will have made. Tenant shall pay to Landlord the cost of replacing lost keys or of changing the lock or locks opened by such lost key if Landlord shall deem it necessary to make such change. 6. Restrooms. The toilet rooms, toilets, urinals, wash bowls, and other restroom apparatus within the Building will not be used for any purpose other than that for which they were constructed, and no foreign substance of any kind whatsoever will be thrown therein, and the expense of any breakage, stoppage, or damage resulting from the violation of this rule by Tenant or his employees or invitees will be borne by Tenant. 7. Moving In and Out of Premises; Heavy Equipment. No furniture, freight, or equipment of any kind will be brought into the Building without the consent of Landlord, and all moving of the same into or out of the Building will be done at such time and in such manner as Landlord will designate. All persons employed to move furniture,freight or equipment of any kind must be approved by Landlord in writing in advance. No hand trucks except those equipped with rubber tires and side guards or such other material handling equipment as Landlord may approve will be used in any space, including the common areas, of the Building, either by Tenant or by others. No other vehicles of any kind will be brought by Tenant into the Building or kept in, on or about the Premises. Tenant will not overload the floor of the Premises and Landlord will have the right to prescribe the weight, size, and position of all safes and other heavy equipment brought into the Building and also the times and manner of moving the same in and out of the Building. Safes or other heavy objects will, if considered necessary by Landlord, stand on wood strips of such thickness as is necessary to properly distribute the weight. Landlord reserves the right to inspect all safes, freight or other bulky articles to be brought into the Building and to exclude from the Building all safes, freight or other bulky articles which violate any of these Rules and Regulations or the Lease of which these Rules and Regulations are a part. Landlord reserves the right to prohibit or impose conditions upon the installation in the Premises of heavy objects which might overload the building floors. Landlord will not be responsible for loss of or damage to any such safe or property from any cause. All damage done to the Building by moving or maintaining any such safe or other property will be repaired at the expense of Tenant. 1. 8. Janitorial Services and Cleaning. Tenant will not employ any person or persons other than the janitor of Landlord for the purpose of cleaning the Premises unless otherwise agreed by Landlord. Except with the written consent of Landlord, no person or persons other than those approved by Landlord will be permitted to enter the Building for the purpose of cleaning the same. Tenant will not cause any unnecessary labor by reason of Tenant's carelessness or indifference in the preservation of good order and cleanliness. Landlord will not be responsible to Tenant for any loss of property on the Premises, however occurring, or for any damage done to the effects of Tenant by the janitor or any other employee or any other person. Janitor service will include ordinary dusting and cleaning by the janitor assigned to such work, and janitor service will not be furnished on Saturdays, Sundays or holidays. Window cleaning will be done only by Landlord's employees, and only between 6:00 a.m. and 5:00 p.m. No article will be hung out of any window of the Building, and Tenant will not sweep or throw or permit to be swept or thrown from the Premises any dirt or other substance into any of the corridors, halls, elevators, or stairways, or out of the doors or windows of the Building. 9. Use of Premises. Tenant will not mark, drive nails, screw, or drill into the partitions, woodwork, or plaster, (except in connection with the installation of normal office wall art) or in any way deface the Premises or any part thereof. No loudspeaker or other similar device, system, or apparatus which can be heard or experienced outside the Premises will, without the prior written approval of Landlord, be used in or at the Premises. No tenant or its officers, agents, employees or invitees shall mark, paint, drill into, or in any way deface any part of the Premises or the Building. Tenant will not use, keep, or permit to be used or kept any foul or noxious gas or substance in or on the Premises; permit any odor, smell, or vapor to escape from the Premises to other portions of the Building; or permit or suffer the Premises to be occupied or used in a manner offensive or objectionable to the Landlord or other occupants of the Building by reason of noise, odors, and/or vibrations, or interfere in any way with other tenants or those having business therein, nor will any animals or birds be brought in or kept in or about the Premises or the Building. No cooking will be done or permitted by Tenant on the Premises, (with the exception of ordinary office coffee brewing and microwave cooking) nor will the Premises be used for the storage of merchandise, for washing clothes, for lodging, or for any improper, objectionable, or immoral purposes. Tenant will not use or keep in or on the Premises or in the Building any kerosene, gasoline, or inflammable or combustible fluid or material, or use any method of heating or air conditioning other than that supplied by the Landlord. Tenant will close and securely lock the windows, transoms, and doors of the Premises before leaving the Building and observe strict care not to leave windows open when it rains. Tenant will exercise care and caution that all water faucets or water apparatus are entirely shut off before Tenant or Tenant's employees leave the Building and that all electricity, gas, or air conditioning will likewise be carefully shut off, so as to prevent waste or damage. For any default or carelessness Tenant will make good all injuries sustained by Landlord or other tenants or occupants of the Building. 10. Communications and Computer Equipment. If Tenant desires telephone or other communications or computer connections, the Landlord will direct electricians at Tenant's expense as to where and how the wires are to be introduced. No boring, cutting or stringing of wires will be allowed without the consent of Landlord. The location of telephones, call boxes, and other office equipment and computer or communications equipment affixed to or installed in the Premises will be subject to the approval of Landlord. All costs of installation will be paid for by Tenant. 11. Floor Coverings. Tenant will not lay linoleum, tile, carpet, or other floor covering so that the same will be affixed to the floor of the Premises in any manner except as approved by the Landlord. The expense of repairing any damage resulting from a violation of this rule or removal of any floor covering by Tenant or his contractors, employees, or invitees will be borne by Tenant. 12. Deliveries. No furniture, packages, supplies, equipment, or merchandise will be received in the Building or carried up or down in the elevators, except between such hours and in such elevators as will be designated by the Landlord. 13. Access Refused. On Sundays and legal holidays, and on other days between the hours of 6:30 p.m. and 6:00 a.m., access to the Building, or to the halls, corridors, elevators, or stairways in the Building, or to the Premises, may be refused unless the person seeking access complies with the requirements of Landlord's security personnel. Landlord shall furnish and approve passes to persons for whom any tenant requests the same in writing. Each tenant shall be responsible for all persons for whom he requests passes and shall be liable to Landlord for all acts of such persons. In the case of invasion, mob, riot, public excitement or other commotion, Landlord reserves the right to prevent access to the Building during the continuance of the same, by the closing of the gates and doors or otherwise, for the safety of the tenants and others and the protection of the Building and the property therein. Landlord will in no case be liable for damages for any error with regard to the admission to or exclusion from the Building of any person. 14. Soliciting on Premises. Canvassing, peddling, soliciting and the distribution of handbills or any other written materials in the Building are prohibited, and Tenant will cooperate to prevent the same. 15. Landlord's Employees. The requirements of Tenant will be attended to only upon application at the office of the Building. Employees of Landlord will not perform any work or do anything outside of their regular duties unless under special instructions from the Landlord, and no employee will admit any person (Tenant or otherwise) to any office without specific instructions from the Landlord. The costs of Landlord's employees or agents performing services for a particular tenant and not for all tenants in general shall be billed to the particular tenant together with a reasonable administration fee and payable as additional rent. 16. Vending Machines. No vending machines or similar machines of any description will be installed, maintained, or operated upon the Premises without the written consent of the Landlord. 17. Building Name and Address. Landlord will have the right, exercisable without notice and without liability to Tenant, to change the name and the street address of the Building. 18. Trash. Tenant will store all of its trash and garbage within its Premises. No material will be placed in the trash boxes or receptacles if such material is of such nature that it may not be removed or disposed of in the ordinary and customary manner of removing or disposing of trash and garbage in the City and County of San Francisco. All garbage and refuse removal and disposal will be made only through entrances and elevators provided for such purposes and at such times as Landlord will designate. Landlord will have the right to charge Tenant for the removal of any trash and garbage in excess of that resulting from normal office use. 19. Doors. All doors opening onto service corridors shall be kept closed, except when in use for ingress and egress, and left locked when not in use. 20. Equipment. All equipment of any electrical or mechanical nature shall be placed by tenants in the premises in settings approved by Landlord, to absorb or prevent any vibration, noise or annoyance. 21. Air Conditioning. No air conditioning unit or other similar apparatus shall be installed or used by any tenant without the written consent of Landlord. 22. Energy Conservation. Tenants shall cooperate with Landlord in the conservation of energy used in or about the Building. Tenant shall not obstruct, alter or in any way impair the efficient operation of Landlord's heating, lighting, ventilating and air conditioning system, if any, and shall not place bottles, machines, parcels or any other articles on the induction unit enclosure so as to interfere with air flow. Tenant shall not tamper with or change the setting of any thermostats or temperature control valves, and shall in general use heat, gas, electricity, air conditioning equipment, if any, and heating equipment in a manner compatible with sound energy conservation practices and standards. 23. Disorderly Persons. Landlord reserves the right to exclude or expel from the Building any person who, in the judgment of Landlord, is intoxicated or under the influence of liquor or drugs, or who shall in any manner do any act in violation of any of the rules and regulations of the Building. 24. Smoking. Tenant and its employees, agents, subtenants, contractors and invitees shall comply with all applicable "no-smoking" ordinances and, irrespective of such ordinances, shall not smoke or permit smoking of cigarettes, cigars or pipes outside of Tenant's Premises (including plaza areas) in any portions of the Building except areas specifically designated as smoking areas by Landlord. If required by applicable ordinance, Tenant shall provide smoking areas within Tenant's Premises. 25. Water Conservation. Tenants shall cooperate with Landlord in the conservation of water and avoidance of penalties for water used in or about the Building, including without limitation installation of low flow toilets, water sub-meters if applicable, and water conservation devices of any kind. The tenant shall have total responsibility for such compliance relating to its Premises. 26. Safety and Security Devices. Tenant acknowledges that safety and security devices, services and programs provided by Landlord, if any, while intended to deter crime and ensure safety, may not in given instances prevent theft or other criminal acts or ensure the safety of persons or property. The risk that any safety or security device may not be effective, or may malfunction or may be circumvented by a criminal, is assumed by Tenant, and Tenant shall obtain insurance coverage to the extent Tenant desires protection against such criminal acts and other losses. Tenant agrees to cooperate with any easonable safety program developed by Landlord 27. Amendments. Landlord reserves the right to expand, modify or otherwise change or amend these Rules and Regulations from time to time with or without notice to Tenant, but provided that any such changes will not unreasonable affect Tenant's ability to conduct its business in the Premises, and such changed rules and regulations will be complied with by all tenants in the Building. Each tenant may obtain a copy of the most current Rules and Regulations at the Building Office. EXHIBIT D Guarantee EXHIBIT E Term Commencement Agreement THIS AGREEMENT, made as of the _____ day of ____________________, 19___, by and between ("Landlord") and - ("Tenant"). - -------------------------------------------- A. Landlord and Tenant are parties to that certain lease agreement dated ____________________, 19___, for premises described as ("Premises") located in the property ("Property") commonly known as . B. The Lease contemplated a Term commencing on ____________________, 19___, and ending on ____________________, 20___ (subject to any extensions provided for in the Lease). C. The parties desire to enter this Agreement confirming an adjustment to the commencement and/or expiration dates of the Term, all on the terms and conditions set forth hereinafter. NOW, THEREFORE, in consideration of the foregoing recitals, the parties agree as follows. 1. The parties hereby confirm and agree that the Term commenced on ___________________, 19___, and shall expire on ____________________, 20___, unless sooner terminated, or extended pursuant to the terms of the Lease. 2. The parties confirm and agree that all work and improvements, if any, required to be performed by Landlord under the Lease or any other agreement or document entered in connection therewith, relating to the Premises, have been completed, except as may be specified in any Schedule 1 attached hereto, which may set forth certain additional "punch list items," which Landlord agrees to complete promptly hereafter. LANDLORD TENANT _________________________ __________________________ _________________________ __________________________ _________________________ __________________________ By: By: ----------------------------- --------------------------------- Its: Its: ----------------------------- --------------------------------- EXHIBIT F Proposition 65 Notice and Material Safety Data Sheet At the time the Shell Building was constructed and during the time when some of the interior spaces were built out or remodeled, asbestos was commonly used in the construction industry throughout the United States for insulation, fireproofing, floor tiling and acoustical ceiling. Accordingly, as described in the following report, asbestos may be present in one or more products in the Shell Building. Under the California Safe Drinking Water and Toxic Enforcement Act of 1986 (Proposition 65, or the "Act"), asbestos is one of the many chemicals known to cause cancer. Pursuant to the Act, if any product, including but not limited to asbestos, contains certain chemical substances which the State of California believes can cause cancer, birth defects or other reproductive defects, an appropriate warning must be given to individuals exposed to these products--even if such chemical substances are present at extremely low levels. Therefore, in compliance with the Act, the 100 Bush Corporation, the Landlord, issues this notice: WARNING Detectable amounts of chemicals known to the State of California to cause cancer, birth defects and/or other reproductive harm may be found around this facility. (Health and Safety Codess. 25249.6) PROJECT DESCRIPTION 100 Bush Corporation, requested Health Science Associates (HSA) to conduct an updated comprehensive Asbestos Survey, and to provide a written report on the Shell Building located at 100 Bush Street, San Francisco, California. The survey was designed to augment the previous building asbestos surveys. The survey was conducted March 27 through April 3,1997. ASBESTOS-CONTAINING MATERIALS (ACM) ASSESSMENT The ACM (asbestos-containing materials) survey focuses attention on friable and non-friable, asbestos-containing building materials (ACBM). The Environmental Protection Agency (EPA) defines asbestos-containing materials (ACM) as materials which contain one percent (1.0%) or greater concentrations of asbestos. An ACM assessment generally consists of three distinct phases: 1) review of the facility historical records, as available; 2) physical inspection of the facility; and 3) the identification and collection of suspect ACM specimens for subsequent laboratory analysis (dispersion staining/polarized light microscopy - EPA 600/M4-82-020). The general approach was to conduct the assessment by building systems such as the floor, interior walls, HVAC, roof, mechanical rooms, etc. HSA's survey focused on the interior walls, ceilings, floor covering materials and exterior surfacing materials. A total of one-hundred-eight (108) suspect ACM samples were collected and delivered to HSA's accredited laboratory (AIHA, NVLAP, NIST, and the state of California). ASSESSMENT RESULTS ASBESTOS-CONTAINING MATERIALS (ACM) SUMMARY The following section of this report contains a simplified description of the asbestos-containing materials discovered by building systems. Ceilings & Walls - A total of eighteen (18) suspect bulk samples were collected from ceiling and walls from various locations. Of these, three (3) were positive for asbestos: two (2) transit wall panels and a plaster skim coat. Unless otherwise tested, assume all skim coat to contain asbestos. Floor Covering/Mastic - Twelve (12) different types vinyl asbestos tile (VAT) and their associated mastic are positive for asbestos. Twenty (20) vinyl floor tile samples and cove-base and two (2) floor leveling compound materials tested negative. Thermal Systems Insulation (TSI) - Abatement of various TSI pipe runs and elbows have taken place during the previous 1 0 years which include the parking structure, pipe chases, and several floors. The canvas jacket around the 'cork" insulated pipe system was negative for asbestos. However, TSI is still present in various locations throughout the building including: pipe chases; above the suspended ceilings; and the boiler. All TSI concealed in walls, columns, above the suspended ceiling and pipe chases not previously abated are assumed to contain asbestos. Roofing Systems - The built-up and roll-up type roofs located on the 29th floor contain asbestos. The 11th and 29th floor roofing associated components, such as pipe vent flashing and caulking also contain asbestos. The 11th floor roof membrane and the 29th floor roof walking "pads" were negative. Window Caulking & Glazing - The exterior window caulking on the second floor tested positive. All exterior window caulking, therefore, must be assumed to be positive. The window materials tested negative. Miscellaneous Materials - The following miscellaneous materials tested negative: electrical wire insulation; parapet wall grout; HVAC duct expansion joint; and fire door insulation. The gasket material located in the Sub-basement mechanical room was found to contain 60% Chrysotile asbestos. NON-ASBESTOS MATERIALS SUMMARY The following section of this report contains a simplified description of the non-asbestos materials discovered during the assessment. The results generally are described by building system. The major systems materials determined not to contain asbestos include: o Vinyl cove bases and associated adhesive o Roof walking pads o Floor white leveling compound o Pipe (cork) insulation canvas jacket o Parapet wall grout o Plaster walls o Plaster walls - skim coat (one tested at <1 %) o Sheet-rock walls - drywall and taping compound o Concrete walls and skim coat o Concrete ceiling - skim coat o Stucco wall o Electrical system wiring insulation o Exterior window glazing MATERIALS NOT SAMPLED Following are the materials not sampled and a brief explanation of why they were not sampled: Concrete Roof Slab - No samples were collected and typically this material does not contain asbestos. Building Exterior - No samples were collected and typically this material does not contain asbestos. Pipe Insulation - This system was extensively sampled in previous surveys and was shown to contain asbestos except where recently abated. CONCLUSIONS ACM Conclusion - The ACM assessment survey performed at the Shell Building shows that both friable and non-friable ACM were found in numerous building systems. HSA recommends complete removal of any ACM prior to demolition or construction activity which may impact the ACM. o All asbestos-containing materials (ACM) which are friable, or could become friable during renovation activities, should be removed prior to scheduled major renovations or demolition. o All ACM removed should be considered for disposal as asbestos waste even of nonfriable. o ? All ACM in the building should be protected and left undisturbed to the extent possible until abatement. o All ACM should only be handled by qualified and registered asbestos abatement companies. o ? Any and all persons who come in contact with ACM should be advised of the hazardous nature of asbestos and only qualified properly equipped persons should work with ACM. o Continued implementation of the building O&M (Operations& Maintenance) Program. This report present HSA's professional determinations, which are dependent upon information obtained during performance of consulting services. HSA assumes no responsibility for omissions or errors resulting from inaccurate information provided by sources outside of HSA. No warranty or guarantee, expressed or implied, is made regarding the finding, conclusions or recommendations contained in this report. The limitations presented above supersede those stated or acknowledged herein. EXHIBIT G Renewal Option 1. Renewal Option. Tenant shall have an option (the "Renewal Option") to renew the initial term with respect to all (but not less than all) of the Premises demised under or pursuant to this Lease as of the expiration date of the Term for one additional term (the "Renewal Term") of five (5) years, commencing on the day immediately following the expiration date of the initial Term, under the following terms and conditions and subject to credit approval by Landlord: (1) Tenant gives Landlord written notice of its election to exercise the Renewal Option no earlier than the date which is two hundred seventy (270) days prior to the expiration date of the initial Term and no later than the date which is one hundred eighty (180) days prior to the expiration date of the initial Term. 2) Tenant has not been in breach or default under this Lease through the date Tenant exercise the Renewal Option and does not breach the Lease or become in default at any time through and including the proposed commencement date of the Renewal Term. (3) Tenant's notice of election shall be binding, and Tenant shall thereupon be obligated to renew the Lease for the Rent as determined below. 2. Term. If tenant timely and properly exercises the Renewal Option in accordance with the provisions of Section 1: The Rent payable for the Renewal Term shall be based on the then prevailing rent for comparable deals in the market place, but in no event shall the rental rate be less than the adjusted rental rate payable under this Lease on the expiration date of the initial Term. Landlord agrees to provide a written notice setting forth the prevailing rental rate for comparable deals for the Tenant's space within thirty (30) days after receiving a written request from Tenant for such information. The request for information must be made no earlier than two hundred seventy (270) days prior to the expiration date and no later than one hundred eighty (180) days prior to the expiration date of the initial term. "Comparable deals" shall mean leases which are approximately as long, and commencing at approximately the same time, as the Renewal Term and are for comparable space in comparable buildings (with occupancy rates similar to the Building) subject to reasonable adjustments for (1) the desirability of the applicable floor or location in the building, and (2) the desirability of the geographic location of the applicable building. "Comparable deals" shall explicitly exclude from consideration any transactions where the landlord of the subject building is in default of its mortgage or other indebtedness on the building, or is currently, or has within the prior six months, been involved in foreclosure proceedings on the applicable building. "Comparable deals" shall also exclude transactions whereby the Tenant has some form of equity participation in the deal. Landlord's good faith determination of the "prevailing rental rate" shall be conclusive and binding as to Landlord and Tenant. 3. No Improvements. Landlord shall not be obligated to perform any leasehold improvement work in the Premises or give Tenant an allowance or other economic concession for any such work or for any other purposes for the Renewal Term. 4. Tenant shall have no further options to renew the term of this Lease beyond the expiration date of the Renewal Term. 5. Except as otherwise provided herein, all of the terms and provisions of this Lease shall remain the same and in full force and effect during the Renewal term. 6. Amendment. If Tenant exercises the Renewal Option, Landlord and Tenant shall execute and deliver an amendment to this Lease (or, at Landlord's option, a new Lease on the form then in use for the Building) reflecting the lease of the Premises by Landlord to Tenant for the Renewal Term on the terms provided above, which amendment (or new lease, as the case may be) shall be executed and delivered at least sixty (60) days before the commencement date of the Renewal Term. 7. Termination. The Renewal Option shall automatically terminate and become null and void and of no force or effect upon the earlier to occur of (1) the expiration or termination of this Lease, (2) the termination of the Tenant's right to possession of the Premises, (3) the assignment of this Lease by Tenant, (4) the sublease by Tenant of all or part of the Premises, (5) the failure of Tenant to timely or properly exercise the Renewal Option, or (6) the default by Tenant under the Lease. EX-27.0 4 0004.txt FINANCIAL DATA SCHEDULE
5 1,000 6-MOS Dec-31-2000 Jan-01-2000 Jun-30-2000 3,035 0 7,820 1,184 0 10,324 403 0 11,046 5,106 0 5,797 0 0 0 11,046 0 17,986 0 14,396 3,396 0 (88) 282 113 169 0 0 0 169 0.02 0.02
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