Health Net 2009 Annual Report Download - page 321

2.6 Extension Option.
(a) So long as no Event of Default shall have occurred under this Lease, Tenant shall have two options to extend the
Term of this Lease for periods of five years each (the “Extension Options”). Tenant shall exercise each Extension Option by giving
written notice to Landlord at least nine months before the applicable Extension Option term would begin. Tenant’s use and occupancy
of the Premises during the extended Term shall be subject to all the terms and conditions of this Lease except that Base Rent for the
first year of the Extension Option term shall be at 95% of the Market Rate and Base Rent for subsequent years may be subject to
increase as provided below. For purposes of this Section 2.6, “Market Rate” means the then-prevailing market rate in the relevant
office submarket for rental of space in buildings of the same age, construction, size and location as the Premises with the
improvements installed therein at Landlord’s expense and shall take into account Tenant’s obligation to pay additional rent under this
Lease and other tenants’ obligations to pay similar amounts under comparable leases. “Market Rate” shall include periodic scheduled
rental increases then being included in leases under prevailing custom. The determination of Market Rate shall not include any
alterations installed in the Premises at Tenant’s expense.
(b) Within thirty days after written request, Landlord shall designate a proposed Market Rate for the Extension
Option term, provided, however, under no circumstances shall Landlord be obligated to respond earlier than eleven months before the
applicable Extension Option term would begin. Except as provided below, if Tenant exercises the Extension Option without
demanding arbitration as provided below, it shall be deemed to have accepted the Market Rate proposed by Landlord.
(c) If Tenant contests Landlord’s proposed Market Rate, it shall so notify Landlord within ten days after receipt of
such proposed Market Rate, and the parties shall proceed to attempt to negotiate an agreed Market Rate within the following ten days.
If no agreement is reached, Tenant may by written notice to Landlord exercise the Extension Option and demand that the matter be
submitted to binding arbitration as provided below, in which case each party shall prepare a written notice (the “Final Offer Notice”)
to the other: (i) setting forth its Final Offer with respect to what constitutes Market Rate; and (ii) designating a qualified real estate
broker that has at least five years of experience leasing office space in the relevant submarket containing the Building and that has no
business or other relationship with either Landlord or Tenant. The Final Offer Notices shall be prepared within five business days
after receipt of Tenant’s demand for arbitration and the parties shall cooperate to arrange for the simultaneous exchange of the Final
Offer Notices. Failure of a party to prepare its Final Offer Notice in a timely manner shall constitute agreement with the Final Offer o
f
the other party.
(d) The two brokers so designated shall jointly select a third impartial broker with the same qualifications, and such
third broker shall serve as the sole arbitrator. The arbitrator shall promptly schedule a hearing at which each party may present its
position and arguments and the arbitrator may conduct such further inquiry as he or she deems necessary or appropriate at no
additional cost to any party. The arbitrator, based upon his or her experience and the information submitted, shall decide whether
Landlord’s Final Offer or Tenant’s Final
-4-