Item 1.01 Entry into a Material Definitive Agreement.
On December 2, 2017, Okta, Inc. (the “Company”) entered into an Office Lease (the “Lease”) with KR 100 First Street Owner, LLC (the “Landlord”) to lease approximately 207,066 rentable square feet in an office building located at 100 First Street, San Francisco, California (the “Premises”) expected to become the Company’s new corporate headquarters. The Premises will be delivered in phases during the total term of the Lease. One floor, or approximately 19,060 square feet, of the Premises is scheduled to be delivered on or about February 1, 2018, as phase one, and nine floors, or approximately 188,006 square feet, of the Premises are scheduled to be delivered on or about June 1, 2018, as phase two. The lease payments associated with phases one and two will be approximately $170.6 million, and annual lease payments are approximately $1.3 million and $8.7 million for the first and second year, respectively (net of 11 and eight months of rent abatement in the first year related to phase one and phase two, respectively, and five months of rent abatement in the second year related to phase two). The Lease has a ten-year term, which is expected to expire in October 2028. The Company is entitled to two five-year options to extend the Lease, subject to certain requirements.
In addition, the Landlord will provide a tenant improvement allowance of up to $20.7 million for leasehold improvements in phases one and two, as the phases are delivered, beginning in February 2018.
Subject to certain terms and conditions, the Lease requires the Company to lease two and a half additional floors, or approximately 47,939 square feet, of the Premises, beginning in February 2020, as phase three. The lease payments associated with phase three will be approximately $35.6 million, and annual lease payments for the first year are approximately $2.2 million (net of five months of rent abatement). In addition, the Landlord will provide a tenant improvement allowance of up to $4.0 million for leasehold improvements in phase three.
The Company has obtained a standby letter of credit (the “Letter of Credit”) in the amount of $8.0 million, which may be drawn down by the Landlord to be applied for certain purposes upon the Company’s breach of any provisions under the Lease. Subject to certain terms and conditions, the Lease requires the Company to increase the amount of the Letter of Credit by $1.9 million in connection with phase three. Provided that no default occurs under the terms of the Lease, the Company will be entitled to reduce the amount of the Letter of Credit down to $4.0 million upon meeting certain conditions.
The Lease contains customary provisions allowing the Landlord to terminate the Lease if the Company fails to remedy a breach of any of its obligations within specified time periods, or upon bankruptcy or insolvency of the Company. Subject to certain terms and conditions, the Company also has the right to sublease, assign or transfer the Premises.
The description of the Lease contained in this Item 1.01 is qualified in its entirety by the full text of the Lease. A copy of the Lease is attached hereto as Exhibit 10.1.