Exhibit 10.1

TABLE OF CONTENTS

 

                 Page   1.      PARTIES:      1    2.      PREMISES:      1   
3.      USE:      1        

A.

   Permitted Uses:      1        

B.

   Uses Prohibited:      1        

C.

   Advertisements and Signs:      2        

D.

   Covenants, Conditions and Restrictions:      2        

E.

   Sustainability Requirements:      2    4.      TERM AND RENTAL:      3   
    

A.

   Term; Base Monthly Rent:      3        

B.

   Late Charge:      3    5.      SECURITY DEPOSIT:      4        

A.

   Amount and Purpose:      4        

B.

   Requirements:      4    6.      ACCEPTANCE OF POSSESSION AND COVENANTS TO
SURRENDER:      5        

A.

   Landlord’s Work      5        

B.

   Delivery and Acceptance:      5        

C.

   Condition Upon Surrender:      5        

D.

   Failure to Surrender:      6    7.      ALTERATIONS & ADDITIONS:      7   
    

A.

   General Provisions:      7        

B.

   Free From Liens:      7        

C.

   Compliance With Governmental Regulations:      7        

D.

   Insurance Requirements:      8    8.      MAINTENANCE OF PREMISES:      8   
    

A.

   Landlord’s Obligations:      8        

B.

   Tenant’s Obligations:      9        

C.

   Obligations Regarding Reimbursable Operating Costs:      9        

D.

   Reimbursable Operating Costs:      10        

E.

   Tenant’s Allocable Share:      11        

F.

   Waiver of Liability:      12    9.      INSURANCE:      12        

A.

   Tenant’s Use:      12        

B.

   Landlord’s Insurance:      12        

C.

   Tenant’s Insurance:      12        

D.

   Waiver:      13    10.      TAXES:      13    11.      UTILITIES:      13   
12.      TOXIC WASTE AND ENVIRONMENTAL DAMAGE:      14        

A.

   Use of Hazardous Materials:      14         B.    Tenant’s Indemnity
Regarding Hazardous Materials:      15   

 

-i-

--------------------------------------------------------------------------------

     C.    Notice of Release or Violation:      15         D.    Remediation
Obligations:      16         E.    Environmental Monitoring:      16    13.     
TENANT’S DEFAULT      16         A.    Events of Default      16         B.   
Remedies:      17         C.    Right to Re-enter:      18         D.   
Continuation of Lease:      18         E.    No Termination:      18         F.
   Non-Waiver:      18         G.    Performance by Landlord:      18         H.
   Habitual Default:      19    14.      LANDLORD’S LIABILITY:      19        
A.    Limitation on Landlord’s Liability:      19         B.    Limitation on
Tenant’s Recourse:      19         C.    Indemnification of Landlord:      20   
15.      DESTRUCTION OF PREMISES:      20         A.    Landlord’s Obligation to
Restore:      20         B.    Limitations on Landlord’s Restoration Obligation:
     20    16.      CONDEMNATION:      21    17.      ASSIGNMENT OR SUBLEASE:   
  21         A.    Consent by Landlord:      21         B.    Assignment or
Subletting Consideration:      22         C.    No Release:      23         D.
   Reorganization of Tenant:      23         E.    Permitted Transfers      24
        F.    Effect of Default:      24         G.    Conveyance by Landlord:
     25         H.    Successors and Assigns:      25         I.    Sublease
Requirements:      25    18.      OPTION TO EXTEND THE LEASE TERM:      25   
     A.    Grant and Exercise of Option:      25         B.    Determination of
Fair Market Rental:      26         C.    Resolution of a Disagreement over the
Fair Market Rental:      26         D.    Personal to Tenant:      27    19.
     GENERAL PROVISIONS:      27         A.    Attorney’s Fees:      27        
B.    Authority of Parties:      27         C.    Brokers:      27         D.   
Choice of Law:      28         E.    ARBITRATION OF DISPUTES:      28         F.
   Entire Agreement:      29         G.    Entry by Landlord:      29         H.
   Estoppel Certificates:      29         I.    Exhibits:      30         J.   
Interest:      30         K.    Modifications Required by Lender:      30   
     L.    No Presumption Against Drafter:      30        

M.

   Notices:      30   

 

-ii-

--------------------------------------------------------------------------------

     N.    Property Management:      30         O.    Rent:      30         P.
   Representations:      30         Q.    Rights and Remedies:      31        
R.    Severability:      31         S.    Submission of Lease:      31        
T.    Subordination:      31         U.    Survival of Indemnities:      31   
     V.    Time:      31         W.    Transportation Demand Management
Programs:      31         X.    Waiver of Right to Jury Trial:      32        
Y.    General:      32         Z.    Furniture, Fixtures and Equipment:      32
  

 

EXHIBIT “A” – Premises & Building

     34   

EXHIBIT “B” - Project

     35   

EXHIBIT “G” – Landlord’s Work

     36   

 

-iii-

--------------------------------------------------------------------------------

Lease between

SI 37, LLC and Cavium Networks, Inc.

 

1. PARTIES:

THIS LEASE, is entered into on this 17th day of March, 2011, (“Effective Date”)
between SI 37, LLC, a California Limited Liability Company, whose address is
10600 North De Anza Boulevard, Suite 200, Cupertino, CA 95014 and Cavium
Networks, Inc., a Delaware Corporation, whose address, prior to the Commencement
Date is 805 East Middlefield Road, Mountain View, CA 94043, and after the
Commencement Date is at the Premises, hereinafter called respectively Landlord
and Tenant. Landlord and Tenant are collectively referred to in this Lease as
the “Parties”.

 

2. PREMISES:

Landlord hereby leases to Tenant, and Tenant hires from Landlord those certain
Premises situated in the City of San Jose, County of Santa Clara, State of
California, commonly known and designated as 2315 N First Street and the
adjacent historical structure (collectively, the “Premises”). For purposes of
this Lease, the primary building is 110,881 rentable square feet and the
historical structure is 2,500 rentable square feet, for a total combined 113,381
rentable square feet (collectively, the “Building”), plus parking for
approximately 374 cars as outlined in red on Exhibit “A”. Subject to compliance
with the rules and regulations promulgated by Landlord from time to time for the
Project (if any), Tenant shall be permitted to have access to the entire
Premises 24 hours per day, 7 days a week unless such access is prohibited,
limited or restricted by any governmental law, ordinance, rule or regulation,
damage or destruction or condemnation or due to an emergency.

Tenant shall also have the nonexclusive right to use all common area (“Common
Area”) including but not limited to parking areas and structures, landscaping,
sidewalks, service areas and other common facilities. The Building and Common
Area are situated within a project site shared with 1 additional building owned
by Landlord as outlined in Exhibit “B” attached

hereto (“Project”). Unless expressly provided otherwise, the term Premises as
used herein shall include the Landlord’s Work (defined in Section 6.A below).

 

3. USE:

 

  A. Permitted Uses:

Tenant shall use the Premises as permitted under applicable zoning laws only for
the following purposes and shall not change the use of the Premises without the
prior written consent of Landlord: Office, research and development, marketing,
light manufacturing, ancillary storage and other incidental uses. Tenant shall
use only the number of parking spaces allocated to Tenant under this Lease. All
commercial trucks and delivery vehicles shall (i) be parked at the rear of the
Building, (ii) loaded and unloaded in a manner which does not interfere with the
businesses of other occupants of the Project, and (iii) permitted to remain
within the Project only so long as is reasonably necessary to complete the
loading and unloading. Landlord reserves the right to impose such additional
rules and regulations as Landlord deems reasonably necessary to operate the
Project in a manner which protects the quiet enjoyment of all tenants in the
Project. Landlord makes no representation or warranty that any specific use of
the Premises desired by Tenant is permitted pursuant to any Laws (as defined in
Section 7.C below).

 

  B. Uses Prohibited:

Tenant shall not commit or suffer to be committed on the Premises or any portion
of the Project any waste, nuisance, or other act or thing which may disturb the
quiet enjoyment of any other tenant or user of in the Project, nor allow any
sale by auction or any other use of the Premises for an unlawful purpose. Tenant
shall not (i) damage or overload the electrical, mechanical or plumbing systems
of the Premises, (ii) attach, hang or suspend anything from the ceiling, walls
or columns of the Building in excess of the load limits for which such ceiling,

 

 

-1-

--------------------------------------------------------------------------------

walls or columns are designed, or set any load on the floor in excess of the
load limits for which such floors are designed, or (iii) generate dust, fumes or
waste products which create a fire or health hazard or damage the Premises or
any portion of the Project, including without limitation the soils or ground
water in or around the Project. No materials, supplies, equipment, finished
products or semi-finished products, raw materials or articles of any nature, or
any waste materials, refuse, scrap or debris, shall be stored upon or permitted
to remain on any portion of the Premises outside of the Building by Tenant or
Tenant’s Agents (defined below) without Landlord’s prior approval, which
approval may be withheld in its sole and absolute discretion.

 

  C. Advertisements and Signs:

Tenant shall not place or permit to be placed, in, upon or about the Premises
any signs not approved by the city and other governing authority having
jurisdiction. Tenant will not place or permit to be placed upon the Premises any
signs, advertisements or notices without the written consent of Landlord as to
type, size, design, lettering, coloring and location, which consent will not be
unreasonably withheld. Any sign placed on the Premises shall be removed by
Tenant, at its sole cost, prior to the expiration or sooner termination of the
Lease, and Tenant shall repair, at its sole cost, any damage or injury to the
Premises caused thereby, and if not so removed, then Landlord may have same so
removed at Tenant’s expense.

Tenant shall install, in accordance with Landlord’s signage criteria and
applicable Laws, at Tenant’s expense, (A) Tenant’s name at the entrance to the
Premises, (B) Tenant’s name on any exterior Common Area monument sign, and
(C) Tenant’s name on the exterior of the Building, in a design and location
mutually agreeable to the Parties. All signs placed on the Premises by or for
Tenant shall comply with all recorded documents affecting the Premises, and
applicable laws, ordinances, guidelines, rules and regulations of the City of
San Jose. Any sign placed on the Premises by or for Tenant shall be removed by
Tenant, at its sole cost, prior to the expiration or sooner termination of the
Lease, and Tenant shall repair, at its sole cost, any damage or

injury to the Premises caused thereby, and if not so removed, then Landlord may
have same so removed at Tenant’s expense.

 

  D. Covenants, Conditions and Restrictions:

This Lease is subject to the effect of (i) any covenants, conditions,
restrictions, easements, mortgages or deeds of trust, ground leases, rights of
way of record and any other matters or documents of record; and (ii) any zoning
laws of the city, county and state where the Building is situated (collectively
referred to herein as “Restrictions”) and Tenant will conform to and will not
violate the terms of any such Restrictions.

 

  E. Sustainability Requirements:

As used in this Lease, “Sustainability Requirements” means any and all Laws
relating to any “green building” or other environmental sustainability practices
and requirements now or hereafter in effect or imposed by any governmental
authority or applicable Laws from time to time (“Sustainability Requirements”).
Without limiting the scope of any Sustainability Requirements that may be in
effect from time to time, Tenant acknowledges that Sustainability Requirements
may address whole-building or premises operations, construction issues,
maintenance issues and other issues, including without limitation requirements
relating to: chemical use; indoor air quality; energy and water efficiency;
recycling programs; interior and exterior maintenance programs; systems upgrades
to meet green or sustainable building energy, water, air quality, and lighting
performance standards; construction methods and procedures; material purchases;
disposal of garbage, trash, rubbish and other refuse and waste; and the use of
proven energy and carbon reduction measures. Neither Tenant nor Tenant’s Agents
shall use or operate the Premises in a manner that will cause any part of the
Project to be in non-compliance with any Sustainability Requirements in effect
from time to time.

 

 

-2-

--------------------------------------------------------------------------------

4. TERM AND RENTAL:

 

  A. Term; Base Monthly Rent:

The Lease term (“Lease Term”) shall be for Ninety-Three (93) months, commencing
on June 1, 2011 (“Commencement Date”), and ending February 28, 2019 (“Expiration
Date”). Notwithstanding the Parties’ agreement that the Lease Term begins on the
Commencement Date, this Lease and all of the obligations of Landlord and Tenant
shall be binding and in full force and effect from and after the Effective Date.

Landlord agrees to allow Tenant access to the Premises from and after full
execution of this Lease, for installation of Tenant’s furniture, fixtures,
cabling and equipment; provided, that such early access by Tenant shall in no
way materially interfere with or cause delays in the completion of Landlord’s
Work. Any such early access or occupancy by Tenant shall be subject to the terms
and conditions of this Lease (including, without limitation, any required
insurance coverage) except that Tenant shall not be required to pay Base Monthly
Rent or Reimbursable Operating Costs during or with respect to such early access
period.

In addition to all other sums payable by Tenant under this Lease, Tenant shall
pay as base monthly rent (“Base Monthly Rent”) for the Premises in accordance
with the following schedule:

 

06/01/11-08/31/11

   $0.00

09/01/11-03/31/12

   $97,020.00

04/01/12-12/31/12

   $150,230.00

01/01/13-06/30/13

   $204,086.00

07/01/13-06/30/14

   $210,209.00

07/01/14-06/30/15

   $216,515.00

07/01/15-06/30/16

   $223,011.00

07/01/16-06/30/17

   $229,701.00

07/01/17-06/30/18

   $236,592.00

07/01/18-02/28/19

   $243,690.00

*Base Monthly Rent and Reimbursable Operating Costs shall be completely abated
for the first three (3) months of the Lease Term.

Base Monthly Rent shall be due in advance on or before the first day of each
calendar month

during the Lease Term. All sums payable by Tenant under this Lease shall be paid
to Landlord in lawful money of the United States of America, without offset or
deduction and except as otherwise expressly provided in this Lease without prior
notice or demand, at the address specified in Section 1 of this Lease or at such
place or places as may be designated in writing by Landlord during the Lease
Term. Base Monthly Rent for any period less than a calendar month shall be a pro
rata portion of the monthly installment based on the number of days in the
partial calendar month; provided that if this Lease terminates due to Tenant’s
default, Tenant shall not be relieved of the obligation to pay future accruing
rent, and the provisions of Section 13 shall control. Concurrently with Tenant’s
execution of this Lease, Tenant shall pay to Landlord the sum of Ninety Seven
Thousand Twenty Dollars ($97,020.00) as a deposit to be applied on the
Commencement Date against the Base Monthly Rent due for the fourth month of the
Lease Term.

 

  B. Late Charge:

Tenant hereby acknowledges that late payment by Tenant to Landlord of Base
Monthly Rent and other sums due hereunder will cause Landlord to incur costs not
contemplated by this Lease, the exact amount of which is extremely difficult to
ascertain. Such costs include but are not limited to: administrative,
processing, accounting, and late charges which may be imposed on Landlord by the
terms of any contract, revolving credit, mortgage, or trust deed covering the
Premises. Accordingly, if any installment of Base Monthly Rent or other sum due
from Tenant shall not be received by Landlord or its designee within five
(5) days after it is due, Tenant shall pay to Landlord a late charge equal to
five (5%) percent of such overdue amount, which late charge shall be due and
payable on the same date that the overdue amount was due. The parties agree that
such late charge represents a fair and reasonable estimate of the costs Landlord
will incur by reason of late payment by Tenant, excluding interest and attorneys
fees and costs. If any Base Monthly Rent or other sum due from Tenant remains
delinquent for a period in excess of thirty (30) days then, in addition to such
late charge, Tenant

 

 

-3-

--------------------------------------------------------------------------------

shall pay to Landlord interest on any rent that is not paid when due at the
Agreed Interest Rate (defined in Section 13.B) from the date such amount became
due until paid. Acceptance by Landlord of such late charge shall not constitute
a waiver of Tenant’s default with respect to such overdue amount nor prevent
Landlord from exercising any of the other rights and remedies granted hereunder.
In the event that a late charge is payable hereunder, whether or not collected,
for three (3) consecutive installments of Base Monthly Rent, then the Base
Monthly Rent shall automatically become due and payable quarterly in advance,
rather than monthly, notwithstanding any provision of this Lease to the
contrary. In no event shall this provision for a late charge be deemed to grant
to Tenant a grace period or extension of time within which to pay any amount due
under this Lease.

 

5. SECURITY DEPOSIT:

 

  A. Amount and Purpose:

Concurrently with Tenant’s execution of this Lease, Tenant shall provide
Landlord a cash Security Deposit in the amount of Two Hundred Forty Three
Thousand Six Hundred Ninety Dollars ($243,690.00) (the “Security Deposit”). If
Tenant defaults with respect to any provisions of the Lease, including but not
limited to (i) the provisions relating to payment of Base Monthly Rent or other
charges in default, or any other amount which Landlord may spend or become
obligated to spend by reason of Tenant’s default, or (ii) breach of any of
Tenant’s obligations under this Section 5, Landlord shall be entitled to draw
upon the Security Deposit to cure such default or breach. Tenant’s failure to
timely comply with its obligations under this Section 5 shall constitute a
material default of Tenant, for which no notice or opportunity to cure shall
apply or be required before Landlord is entitled to draw upon the Security
Deposit. The Security Deposit shall be held by Landlord as security for the
faithful performance by Tenant of every term, covenant and condition of this
Lease applicable to Tenant, and not as prepayment of rent. Landlord may, but
shall not be obligated to, and without waiving or releasing Tenant from any
obligation under this Lease, use, apply or retain the whole or any part of the
Security Deposit reasonably necessary for

the payment of any amount which Landlord may spend by reason of Tenant’s default
or as necessary to compensate Landlord for any loss or damage which Landlord may
suffer by reason of Tenant’s default, including without limitation loss of
future rents due under this Lease upon termination of this Lease due to a
default by Tenant and other damages recoverable under California Civil Code
Section 1951.2. Landlord shall not be deemed a trustee of the Security Deposit
or any other funds held by Landlord, and Landlord shall not be required to keep
the Security Deposit or any such other funds separate from its general funds.
The Security Deposit and such other funds shall not bear interest for the
benefit of Tenant. If Tenant shall default more than three (3) times in any
twelve (12) month period, irrespective of whether or not such default is cured,
then the Security Deposit held by Landlord shall, within ten (10) days after
demand by Landlord, be increased by Tenant to an amount equal to three (3) times
the Base Monthly Rent then payable.

 

  B. Requirements:

In the event Landlord draws against the Security Deposit, Tenant shall replenish
the remaining Security Deposit such that the aggregate amount of Security
Deposit available to Landlord at all times during the Lease Term is the amount
of the Security Deposit originally required, as the same may be required to be
increased as provided below. If Tenant performs every provision of this Lease to
be performed by Tenant, the Security Deposit shall be returned to Tenant within
thirty (30) days after the Expiration Date and surrender of the Premises to
Landlord in the condition required by this Lease, less any amount deducted in
accordance with this Section 5, together with Landlord’s written notice
itemizing the amounts and purposes for such deduction. Tenant hereby waives
California Civil Code Section 1950.7, or any similar law now or hereafter in
effect (including, without limitation, any federal law) which may have the
effect of limiting the circumstances under which Landlord would be allowed to
use or apply the Security Deposit or amount that could be so used or applied, or
imposing a deadline for the return of the Security Deposit. In the event of
termination of Landlord’s interest in this Lease, Landlord

 

 

-4-

--------------------------------------------------------------------------------

shall have the right to deliver the Security Deposit to Landlord’s successor in
interest in the Premises and thereupon be relieved of further responsibility
with respect to the Security Deposit. Landlord shall have the right to grant a
security interest therein to Landlord’s lenders, and shall have the right to
deliver any portion of any Security Deposit to Landlord’s lenders in connection
therewith, provided the Security Deposit shall only be used in accordance with,
and shall continue to be governed by, the terms and provisions of this
Section 5.

 

6. ACCEPTANCE OF POSSESSION AND COVENANTS TO SURRENDER:

 

  A. Landlord’s Work

Prior to the Commencement Date, Landlord agrees to complete the improvements to
the Premises (“Landlord’s Work”) outlined in Exhibit “G” in compliance with all
applicable Laws.

 

  B. Delivery and Acceptance:

On the Commencement Date, Landlord shall deliver and Tenant shall accept
possession of the Premises and enter into occupancy of the Premises. By
accepting possession, Tenant acknowledges that it has had an opportunity to
conduct, and has conducted, such inspections of the Premises as it deems
necessary to evaluate its condition. Except as otherwise specifically provided
herein, Tenant agrees to accept possession of the Premises in its existing
condition as of the Commencement Date, subject to all Restrictions and without
representation or warranty by Landlord (except as otherwise set forth herein).
Tenant’s taking possession of any part of the Premises shall be deemed to be an
acceptance of any work of improvement done by Landlord in such part as complete
and in accordance with the terms of this Lease except for “Punch List” type
items of which Tenant has given Landlord written notice within thirty (30) days
after Tenant takes possession. At the time Landlord delivers possession of the
Premises to Tenant, Landlord and Tenant shall together execute an acceptance
agreement. Landlord shall have no obligation to deliver possession, nor shall
Tenant be entitled to take occupancy, of the Premises until such acceptance
agreement has

been executed, and Tenant’s obligation to pay Base Monthly Rent and all other
rent due under this Lease shall not be excused or delayed because of Tenant’s
failure to execute such acceptance agreement. Landlord’s “delivery of possession
of” and Tenant’s “taking possession of” the Premises, as used in this Section 6,
shall mean and refer to delivery of and taking possession of the Premises as of
the Commencement Date, not as of the early access period.

Notwithstanding the foregoing or anything else to the contrary contained in this
Lease, Landlord shall deliver the Premises to Tenant with the load bearing
walls, foundations, roof and other structural elements of the Premises and the
plumbing, electrical systems, fire sprinkler system, lighting, air conditioning
and heating systems and all other Building systems serving the Premises in good
operating condition and repair. Any failure of the Premises to be in such
condition on delivery shall be promptly remedied by Landlord, at Landlord’s sole
cost and expense, provided that Tenant notifies Landlord of such failure within
ninety (90) days following the Commencement Date and such failure was not caused
by Tenant or Tenant’s Agents.

 

  C. Condition Upon Surrender:

Tenant further agrees on the expiration or sooner termination of this Lease, to
surrender the Premises to Landlord in good condition and repair, excepting
normal wear and tear, damage by casualty and maintenance, repair and replacement
obligations that are the responsibility of Landlord hereunder. In this regard,
“normal wear and tear” shall be construed to mean wear and tear caused to the
Premises by the natural aging process which occurs in spite of prudent
application of the best standards for maintenance, repair, replacement, and
janitorial practices, and does not include items of neglected or deferred
maintenance. In any event, Tenant shall cause the following to be done prior to
the Expiration Date or sooner termination of this Lease: (i) all interior walls
shall be paint-ready, (ii) all tiled floors shall be cleaned and waxed,
(iii) all carpets (other than those beyond their useful lives) shall be cleaned
and shampooed, (iv) all broken, marred, stained or nonconforming acoustical
ceiling tiles shall be

 

 

-5-

--------------------------------------------------------------------------------

replaced, (v) all cabling placed above the ceiling by Tenant or Tenant’s
contractors shall be removed, (vi) all windows shall be washed, (vii) the HVAC
system shall be serviced by a reputable and licensed service firm and left in
“good operating condition and repair”, which condition shall be so certified by
such firm, and (viii) the plumbing and electrical systems and lighting shall be
placed in good order and repair (including replacement of any burned out,
discolored or broken light bulbs, ballasts, or lenses). On or before the
Expiration Date or sooner termination of this Lease, Tenant shall remove all its
personal property and trade fixtures from the Premises. All property and trade
fixtures not so removed shall be deemed as abandoned by Tenant. Tenant shall
ascertain from Landlord and Landlord shall inform Tenant, at the time Landlord
grants its consent to any Alteration (as defined in Section 7 below) to be made
by Tenant, whether Landlord desires to have any Alterations made by Tenant (as
defined in Section 7 below) removed and the Premises or any parts thereof
restored to a standard open office plan with materials and finishes consistent
with the other open office areas of the Premises, or to cause Tenant to
surrender all Alterations in place to Landlord. If Landlord fails to specify, at
the time of its consent, whether any Alteration is to be removed upon the
Expiration Date, then Landlord shall be deemed to have required its removal,
unless otherwise specified in writing to Tenant. If Landlord does require
removal, Tenant shall, at Tenant’s sole cost and expense, remove such
Alterations as Landlord requires and shall repair and restore said Premises or
such parts thereof before the Expiration Date or sooner termination of this
Lease. Such repair and restoration shall include causing the Premises to be
brought into compliance with all applicable building codes and laws in effect at
the time of the removal, repair and restoration to the extent such compliance is
necessitated by the removal, repair and restoration work. Notwithstanding the
foregoing or anything else to the contrary contained in this Lease, Tenant shall
not be required to remove any of Landlord’s Work.

 

  D. Failure to Surrender:

If the Premises are not surrendered at the Expiration Date or sooner termination
of this

Lease in the condition required by Section 6.C and other provisions of this
Lease, Tenant shall indemnify, defend with counsel reasonably acceptable to
Landlord, and hold Landlord and Landlord’s trustees, beneficiaries,
shareholders, directors, officers, members, employees, partners, affiliates,
agents, successors and assigns (collectively “Landlord Related Parties”)
harmless from and against all claims, liabilities, obligations, penalties,
fines, actions, losses, damages, costs or expenses (including without limitation
reasonable attorneys fees) resulting from delay by Tenant in so surrendering the
Premises including, without limitation, any claims made by any succeeding tenant
founded on such delay and costs incurred by Landlord in returning the Premises
to the required condition, plus interest thereon at the Agreed Interest Rate. If
Tenant remains in possession of the Premises after the Expiration Date or sooner
termination of this Lease without Landlord’s consent, such hold over shall not
constitute a renewal or extension of the Lease Term, Tenant’s continued
possession shall be on the basis of a tenancy at sufferance, and Tenant shall be
liable to Landlord for the reasonable rental value of the Premises (which shall
in no event be less than one hundred fifty percent (150%) of the Base Monthly
Rent due in the month preceding the earlier termination or Expiration Date, as
applicable) plus all other amounts payable by Tenant under this Lease. In
addition, if Tenant holds over without Landlord’s consent, Tenant shall
indemnify, defend with counsel reasonably acceptable to Landlord, and hold
Landlord and the Landlord Related Parties harmless from and against all claims,
liabilities, obligations, penalties, fines, actions, losses, damages, costs or
expenses (including without limitation reasonable attorneys fees) resulting from
delay by Tenant in timely surrendering the Premises. If Tenant holds over after
the Expiration Date or sooner termination of this Lease with Landlord’s consent,
such holding over shall be construed as a month to month tenancy, at one hundred
fifty percent (150%) of the Base Monthly Rent for the month preceding expiration
or sooner termination of this Lease in addition to all other rent due under this
Lease, and shall otherwise be on the terms and conditions of this Lease, except
those provisions relating to the Lease Term and any options to extend or renew,
which provisions shall be of no further force and

 

 

-6-

--------------------------------------------------------------------------------

effect. This provision shall survive the termination or expiration of the Lease.

 

7. ALTERATIONS & ADDITIONS:

 

  A. General Provisions:

Tenant shall not make, or suffer to be made, any alteration or addition to the
Premises (“Alterations”), or any part thereof, without obtaining Landlord’s
prior written consent, not to be unreasonably withheld, conditioned or delayed;
provided, however, that Tenant shall be permitted to make Alterations, following
ten (10) business days notice to Landlord, but without Landlord’s prior consent,
to the extent that such Alterations (i) do not affect the Building systems or
equipment, (ii) are not visible from the exterior of the Building, and
(iii) cost less than $50,000.00 for a particular job of work and less than
$250,000.00 per year in the aggregate. With respect to any Alterations for which
Landlord’s consent is required, Tenant shall deliver to Landlord the proposed
architectural and structural plans for all such Alterations at least fifteen
(15) days prior to the start of construction. If such Alterations affect the
structure of the Building, Tenant additionally agrees to reimburse Landlord its
reasonable out-of-pocket costs incurred in reviewing Tenant’s plans, not to
exceed $1,500.00. After obtaining Landlord’s consent, Tenant shall not proceed
to make such Alterations (a) until Tenant has obtained all required governmental
approvals and permits, and (b) if such Alterations cost in excess of $50,000.00,
then, upon Landlord’s request, provides Landlord reasonable security, in form
reasonably approved by Landlord, to protect Landlord against mechanics’ lien
claims. Tenant agrees to provide Landlord (i) not less than twenty (20) days
prior written notice of the anticipated and actual start-date of the work,
(ii) a complete set of half-size (15” X 21”) vellum as-built drawings, and
(iii) a certificate of occupancy for the work upon completion of the
Alterations. All Alterations shall be constructed by a licensed general
contractor in compliance with all applicable Laws including, without limitation,
all building codes, Sustainability Requirements and the Americans with
Disabilities Act of 1990 as amended from time to time. Upon the Expiration Date
or sooner termination of this Lease, all Alterations, except

movable furniture and trade fixtures, shall become a part of the realty and
belong to Landlord but shall nevertheless be subject to removal by Tenant as
provided in Section 6.C. Alterations which are not deemed as trade fixtures
include without limitation heating, lighting, electrical systems, air
conditioning, walls, carpeting, or any installation which has become an integral
part of the Premises. All Alterations shall be maintained, replaced or repaired
by Tenant at its sole cost and expense. In no event shall Landlord’s approval
of, or consent to, any contractor, Alterations, or any plans, specifications and
drawings for any Alterations constitute a representation or warranty by Landlord
of (i) the accuracy or completeness of the plans, specifications, drawings and
Alterations or the absence of design defects or construction flaws therein, or
the qualification of any person or entity, or (ii) compliance with applicable
Laws, and Tenant agrees that Landlord shall incur no liability by reason of such
approval or consent. Once any Alterations begin, Tenant shall diligently and
continuously pursue their completion.

 

  B. Free From Liens:

Tenant shall keep the Premises free from all liens arising out of work
performed, materials furnished, or obligations incurred by Tenant or claimed to
have been performed for or furnished to Tenant. In the event Tenant fails to
discharge any such lien within ten (10) business days after receiving notice of
the filing, Landlord shall immediately be entitled to discharge the lien at
Tenant’s expense and all resulting costs incurred by Landlord, including
attorney’s fees shall be due immediately from Tenant as additional rent.

 

  C. Compliance With Governmental Regulations:

The term Laws or Governmental Regulations shall include all federal, state,
county, city or governmental agency laws, statutes, ordinances, codes,
standards, rules, requirements, regulations, Sustainability Requirements or
orders now in force or hereafter enacted, promulgated, or issued. The term also
includes government measures regulating or enforcing public access, traffic
mitigation, occupational, health, or safety

 

 

-7-

--------------------------------------------------------------------------------

standards for employers, employees, landlords, or tenants. Tenant, at Tenant’s
sole expense will comply with all such Governmental Regulations applicable to
the Premises or the Tenant’s use of the Premises and shall make all repairs,
replacements, alterations, or improvements necessary to comply with said
Governmental Regulations. The judgment of any court of competent jurisdiction or
the admission of Tenant in any action or proceeding against Tenant (whether
Landlord be a party thereto or not) that Tenant has violated any such law,
regulation or other requirement in its use of the Premises shall be conclusive
of that fact as between Landlord and Tenant. Tenant’s obligations pursuant to
this Section 7.C shall include, without limitation, maintaining and restoring
the Premises and making structural and nonstructural alterations and additions
to the Premises, Building and Common Area in compliance and conformity with all
Laws and recorded documents to the extent required because of Tenant’s
particular use of the Premises or any work or Alteration made by or on behalf of
Tenant during the Lease Term. The foregoing shall include, without limitation,
compliance with and improvements required by the Americans With Disabilities Act
or any similar Laws, as they may be amended from time to time. Landlord’s
approval of any Alteration or other act by Tenant shall not be deemed to be a
representation by Landlord that said Alteration or act complies with applicable
Laws, and Tenant shall remain solely responsible for said compliance.
Notwithstanding the foregoing provisions of this Section 7.C, Landlord will be
responsible for causing the Premises, the Building and the Common Areas, to
comply with applicable Laws and Government Regulations as of the Commencement
Date.

 

  D. Insurance Requirements:

Tenant shall maintain during the course of construction of its Alterations, at
its sole cost and expense, builders’ risk insurance for the amount of the
completed value of the Alterations on an all-risk non-reporting form covering
all improvements under construction, including building materials, and other
insurance in amounts and against such risks as Landlord shall reasonably require
in connection with the Alterations. In addition to and without limitation

on the generality of the foregoing, Tenant shall ensure that its contractors
procure and maintain in full force and effect during the course of construction
a “broad form” commercial general liability and property damage policy of
insurance naming Landlord, Tenant, any property manager designated by Landlord
and Landlord’s lenders as additional insureds. The minimum limit of coverage of
the aforesaid policy shall be in the amount of not less than One Million Dollars
($1,000,000.00) per occurrence and One Million Dollars ($1,000,000.00) annual
aggregate, and shall contain a severability of interest clause or a cross
liability endorsement. If Commercial General Liability Insurance or other form
with a general aggregate limit is used, either the general aggregate limit shall
apply separately to this project/location or the general aggregate limit shall
be twice the required occurrence limit.

 

8. MAINTENANCE OF PREMISES:

 

  A. Landlord’s Obligations:

Landlord, at its sole cost and expense, shall maintain in good condition, order,
and repair, and replace as and when necessary, the structural components of the
Building including the foundation, exterior load bearing walls and roof
structure, except that the cost to repair any damage caused by Tenant or
Tenant’s Agents shall be paid for by Tenant to the extent the cost of repair is
not fully paid to Landlord from available insurance proceeds.

Landlord shall also operate, manage and maintain (including, without limitation,
contracting for regular maintenance and service), and replace as and when
necessary, (i) the Common Area in such manner reasonably determined by Landlord,
(ii) the parking lot and all underground utility facilities servicing the
Premises, (iii) all waterscape, landscaping and shrubbery, and (iv) exterior
window washing; and to the extent Tenant elects not to maintain and repair, and
replace as and when necessary, the following: (1) the Building’s automatic fire
extinguisher equipment, (2) elevator equipment, and (3) the Building’s roof
membrane system. The cost of the foregoing, to the extent undertaken by
Landlord, shall be part of

 

 

-8-

--------------------------------------------------------------------------------

Reimbursable Operating Costs (defined in Section 8.D).

 

  B. Tenant’s Obligations:

Tenant shall clean, maintain, repair and replace when necessary the Building and
every part thereof, except to the extent Landlord is required by Section 8.A. to
maintain the same or undertake the following as Reimbursable Operating Costs (as
defined in Section 8.D below), through regular inspections and servicing,
including but not limited to the following: (i) all plumbing and sewage
facilities serving the Premises, (ii) all heating ventilating and air
conditioning facilities and equipment serving the Premises, (iii) all fixtures,
interior walls, floors, carpets and ceilings, (iv) all windows, door entrances,
plate glass and glazing systems including caulking, and skylights (other than
exterior window washing), and (v) all electrical facilities and equipment. All
wall surfaces and floor tile are to be maintained in an as good a condition as
when Tenant took possession free of holes, gouges, or defacements. \With respect
to item (ii) above, Tenant shall provide Landlord a copy of a service contract
between Tenant and a licensed service contractor providing for periodic
maintenance of all such systems or equipment in conformance with the
manufacturer’s recommendations. Tenant shall provide Landlord a copy of such
preventive maintenance contracts and paid invoices for the recommended work if
requested by Landlord. To the extent that any item in (i) through (v) above is
determined by Landlord to be for the benefit of more than one (1) tenant or
occupant of the Building or Project, Landlord shall assume the obligation to
clean, maintain, repair and replace the same as Reimbursable Operating Costs (as
defined in Section 8.D below) and Tenant shall have no obligation to clean,
maintain, repair or replace such item. Tenant shall arrange for and pay directly
for regular janitorial service for the Premises.

 

  C. Obligations Regarding Reimbursable Operating Costs:

In addition to the direct payment by Tenant of expenses as provided in
Section 8.B, 9, 10 and 11 of this Lease, Tenant agrees to reimburse

Landlord for Tenant’s Allocable Share (as defined in Section 8.E below) of
Reimbursable Operating Costs (as defined in Section 8.D below) resulting from
Landlord payment of expenses related to the Building or Project which are not
otherwise paid by Tenant directly. Landlord shall have the right to periodically
provide Tenant with a written estimate of Reimbursable Operating Costs for the
next twelve (12) months and Tenant shall thereafter, until Landlord revises such
estimate, pay to Landlord as additional rental, along with its Base Monthly
Rent, one twelfth of Tenant’s Allocable Share of the Reimbursable Operating
Costs as estimated by Landlord. Within ninety (90) days after the end of each
calendar year during the Term Landlord shall deliver to Tenant a statement
(“Annual Statement”) in which Landlord shall set forth the actual expenditures
for Reimbursable Operating Costs for such calendar year and Tenant’s Allocable
Share thereof. The Annual Statement shall be certified by an authorized officer
of Landlord to be correct. If the Annual Statement shows that Tenant’s payments
of estimated Reimbursable Operating Costs exceeded Tenant’s actual obligation in
respect of such calendar year, Landlord shall accompany said Annual Statement
with a payment to Tenant of the amount of such excess. If the Annual Statement
shows that Tenant’s payments of estimated Reimbursable Operating Costs were less
than its actual obligation in respect of such calendar year, Tenant shall pay
said difference to Landlord within thirty (30) days of Tenant’s receipt of the
Annual Statement.

Provided no event of default exists hereunder and Tenant has timely paid the
amount set forth in the applicable Annual Statement, Tenant, through an
independent certified public accounting firm hired by Tenant on a non-contingent
fee basis, shall have the right, during regular business hours, at the
management office for the Project, and after giving at least thirty (30) days’
advance written notice to Landlord, to commence to have Landlord’s books and
records related to Reimbursable Operating Costs for the subject Lease year
reviewed. Any review of a particular Lease year’s Reimbursable Operating Costs
must be completed within ninety (90) days after Tenant’s receipt of the
applicable Annual Statement. In the event the results of the review

 

 

-9-

--------------------------------------------------------------------------------

of records reveals that Tenant was overcharged with respect to Reimbursable
Operating Costs for the preceding Lease year, then Tenant shall be credited the
overage applicable to Tenant against Tenant’s subsequent installment of rent or
other payments due to Landlord under the Lease. In the event that such results
show that Tenant has underpaid its obligations for a preceding period, the
amount of such underpayment shall be paid by Tenant to Landlord within thirty
(30) days of such determination. All costs and expenses of any such review shall
be paid by Tenant; provided, however, that if the amount of Reimbursable
Operating Costs were overstated by Landlord by more than ten percent (10%),
Landlord shall reimburse Tenant for the commercially reasonable, out of pocket
expense incurred by Tenant in connection with Tenant’s review.

 

  D. Reimbursable Operating Costs:

For purposes of calculating Tenant’s Allocable Share of Building and Project
costs, the term “Reimbursable Operating Costs” is defined as all costs and
expenses which are incurred by Landlord in connection with ownership and
operation of the Building or the Project in which the Premises are located,
together with such additional facilities as may be determined by Landlord to be
reasonably desirable or necessary to the ownership and operation of the Building
and/or Project. All costs and expenses shall be determined in accordance with
generally accepted accounting principles which shall be consistently applied
(with accruals appropriate to Landlord’s business). Reimbursable Operating Costs
shall include, but not be limited to, the following to the extent the obligation
therefor is not that of Tenant under the provisions of Section 8.B above:
(i) common area utilities, including water, power, telephone, heating, lighting,
air conditioning, ventilating, and Building utilities to the extent not
separately metered; (ii) common area maintenance and service agreements for the
Building and/or Project and the equipment therein, including without limitation,
common area janitorial services, alarm and security services, exterior window
cleaning, and maintenance of the sidewalks, landscaping, waterscape, roof
membrane, parking areas, driveways, service areas, mechanical rooms,

elevators, and the building exterior; (iii) insurance premiums and costs,
including without limitation, the premiums and cost of fire, casualty and
liability coverage and rental abatement and, if required by Landlord’s Mortgagee
(defined below) or elected by Tenant, earthquake insurance applicable to the
Building or Project; (iv) repairs, replacements and general maintenance
(excluding repairs and general maintenance paid by proceeds of insurance or by
Tenant or other third parties other than as Reimbursable Operating Costs, and
repairs or alterations attributable solely to tenants of the Building or Project
other than Tenant); (v) all real estate taxes and assessment installments or
other impositions or charges which may be levied on the Building or Project,
upon the occupancy of the Building or Project and including any substitute or
additional charges which may be imposed during, or applicable to the Lease Term
including real estate tax increases due to a sale, transfer or other change of
ownership of the Building or Project, as such taxes are levied or appear on the
City and County tax bills and assessment rolls, but excluding the actual
transfer tax; (vi) costs of complying with Sustainability Requirements;
(vii) deductibles under insurance policies, up to $50,000 (or such other
commercially reasonable amount); (viii) capital expenditures, which shall be
amortized over their useful lives as reasonably determined by Landlord, together
with interest on the unpaid portion of such expenditure at the Agreed Interest
Rate; and any of items (i) through (vi) in Section 8.B above to the extent
Landlord has elected to assume with respect thereto the obligations for
cleaning, maintenance, repair and/or replacement.

Notwithstanding the foregoing, Reimbursable Operating Costs hereunder shall not
include: (1) charges for electricity, water or other utilities or services and
applicable taxes to the extent Tenant is obligated to pay the same directly
pursuant to other provisions of this Lease, or to the extent any other tenant,
occupant, person or other party directly reimburses Landlord (other than as a
Reimbursable Operating Cost or on the basis of its proportionate share thereof);
(2) commissions, concessions, allowances, tenant improvements, advertising and
other expenses incurred in connection with preparing, staging and leasing space
in the Project; (3) depreciation and costs

 

 

-10-

--------------------------------------------------------------------------------

required to be capitalized in accordance with generally accepted accounting
practices, except for amortization of capital costs as provided above; (4) costs
for which reimbursement is received from Landlord’s insurer, under warranty, by
condemnation or by other third party; (5) ground rental payments or payments of
mortgage fees, interest and/or principal; (6) the cost of initial design and
construction of the Project and repair of defects associated therewith;
(7) costs, fines or penalties incurred due to a violation by Landlord of any
applicable Law or a violation of any other tenant leases at the Project; (8) any
cost representing an amount paid to a person, firm, corporation or other entity
controlled by or related to Landlord to the extent materially in excess of the
amount which would have been paid in an arms-length negotiation under
then-current market conditions; (9) Landlord’s general overhead except to the
extent reasonably attributable and allocated, if appropriate, to the operation
and management of the Project; (10) costs of acquiring and securing sculptures,
paintings and other works of art; (11) charitable or political contributions;
(12) bad debt loss, rent loss, or reserves for bad debts or rent loss; (13) the
costs of abating or removing Hazardous Materials (defined below) that
(A) existed at the Premises or Project prior to the Commencement Date,
(B) migrated thereon after the Commencement Date due to no fault of Tenant or
any of Tenant’s Agents, or (C) were brought to the Premises or Project by
Landlord or any Landlord Related Party (defined below); and (14) legal fees and
costs incurred in connection with the negotiation of leases or disputes with
other tenants of the Project, a violation of law by Landlord or Landlord’s
agents, employees or contractors, or the sale, transfer, financing or
re-financing of the Project.

Landlord shall have no obligation to provide guard services or other security
measures for the benefit of the Project. Tenant assumes all responsibility for
the protection of Tenant and Tenant’s Agents from acts of third parties;
provided, however, that nothing contained herein shall prevent Landlord, at its
sole option, from providing security measures for the Project. This is a “Net”
Lease, meaning that Base Monthly Rent is paid to Landlord absolutely net of all
costs and expenses, except only those costs which

this Lease expressly states shall be paid by Landlord at Landlord’s sole cost.
The provision for payment of Reimbursable Operating Costs by means of monthly
payment of Tenant’s Allocable Share of Building and/or Project Costs is intended
to pass on to Tenant and reimburse Landlord for all costs of operating and
managing the Building and/or Project, other than those costs which this Lease
expressly states shall be paid by Landlord at Landlord’s sole cost. If less than
one hundred percent of the Building and other Project buildings is leased at any
time during the Lease Term, Landlord shall adjust Reimbursable Operating Costs
to equal Landlord’s reasonable estimate of what Reimbursable Operating Costs
would be had one hundred percent (100%) of the Building and the other Project
buildings been leased.

 

  E. Tenant’s Allocable Share:

For purposes of prorating Reimbursable Operating Costs which Tenant shall pay,
Tenant’s Allocable Share of Reimbursable Operating Costs shall be computed by
multiplying the Reimbursable Operating Costs by a fraction, the numerator of
which is the rentable square footage of the Premises and the denominator of
which is either (i) the total rentable square footage of the Building if the
service or cost is allocable only to the Building, or (ii) the total rentable
square footage of the buildings in the Project if the service or cost is
allocable to the entire Project, or (iii) the total rentable square footage of
the premises of those tenant’s or occupants that Landlord determines to be
benefiting from such service or facility. Tenant’s obligation to share in
Reimbursable Operating Costs shall be adjusted to reflect the Lease Commencement
and Expiration Dates and is subject to recalculation in the event of expansion
or contraction of the rentable square footage of the Building or Project.
Notwithstanding the foregoing or anything else to the contrary contained in the
Lease, for purposes of calculating the Reimbursable Operating Costs, the
rentable square footage of the Premises shall be deemed to be 55,440 for months
1-10 of the Lease Term, 83,440 for months 11-19 of the Lease Term, and then
113,381 for the remainder of the Lease Term.

 

 

-11-

--------------------------------------------------------------------------------

  F. Waiver of Liability:

Failure by Landlord to perform any defined services, or any cessation thereof,
when such failure is caused by accident, breakage, repairs, strikes, lockout or
other labor disturbances or labor disputes of any character or by any other
cause, similar or dissimilar, shall not render Landlord liable to Tenant in any
respect, including damages to either person or property, nor be construed as an
eviction of Tenant, nor cause an abatement of rent, nor relieve Tenant from
fulfillment of any covenant or agreement hereof. Should any equipment or
machinery utilized in supplying the services listed herein break down or for any
cause cease to function properly, upon receipt of written notice from Tenant of
any deficiency or failure of any services, Landlord shall use reasonable
diligence to repair the same promptly, but Tenant shall have no right to
terminate this Lease and shall have no claim for rebate of rent or damages on
account of any interruptions in service occasioned thereby or resulting
therefrom. Tenant waives the provisions of California Civil Code Sections 1941
and 1942 concerning the Landlord’s obligation of tenantability and Tenant’s
right to make repairs and deduct the cost of such repairs from the rent, and any
similar Law now or hereafter in effect. Landlord shall not be liable for a loss
of or injury to person or property, however occurring, through or in connection
with or incidental to furnishing, or its failure to furnish, any of the
foregoing.

 

9. INSURANCE:

 

  A. Tenant’s Use:

Tenant shall not use or permit the Premises, or any part thereof, to be used for
any purpose other than that for which the Premises are hereby leased; and no use
of the Premises shall be made or permitted, nor acts done, which will cause an
increase in premiums or a cancellation of any insurance policy covering the
Premises or any part thereof, nor shall Tenant sell or permit to be sold, kept,
or used in or about the Premises, any article prohibited by the standard form of
fire insurance policies. Tenant shall, at its sole cost, comply with all
requirements of any insurance company or organization necessary for the
maintenance of reasonable fire and public liability

insurance covering the Premises and appurtenances.

 

  B. Landlord’s Insurance:

Landlord agrees to purchase and keep in force All Risk and fire insurance in an
amount equal to the replacement cost of the Building excluding any improvements
made by Tenant not typically required for office uses (“Specialized Tenant
Improvements”) or Alterations as determined by Landlord’s insurance company’s
appraisers. In addition, if required by its Mortgagee or if Tenant elects,
Landlord may elect to purchase insurance coverage for perils including
earthquake, flood and/or terrorist acts, in amounts and with deductibles
reasonably determined by Landlord and acceptable to Mortgagee and Tenant.
Landlord may also maintain a policy of (i) commercial general liability
insurance insuring Landlord (and such others designated by Landlord) against
liability for personal injury, bodily injury, death and damage to property
occurring or resulting from an occurrence in, on or about the Premises or
Project in an amount as Landlord determines is reasonably necessary for its
protection, and (ii) rental loss insurance covering a twelve (12) month period.
Tenant agrees to pay Landlord as additional rent, within ten (10) business days
after written invoice to Tenant, Tenant’s Allocable Share of the amount of any
deductible under such policy, provided that if damage is confined to the
Premises, Tenant shall pay the entire deductible to Landlord; provided, however,
Tenant’s portion of any deductible shall not exceed $50,000 (or such other
commercially reasonable amount). It is understood and agreed that Tenant’s
obligation under this Section 9.B will be prorated to reflect the Lease
Commencement and Expiration Dates.

 

  C. Tenant’s Insurance:

Tenant agrees, at its sole cost, to insure its personal property, trade
fixtures, Specialized Tenant Improvements and Alterations against damage for
their full replacement value (without depreciation). Said insurance shall
provide All Risk and fire coverage equal to the replacement cost of said
property. The property insurance provided by Tenant as required by this
paragraph shall be carried in favor of Landlord and Tenant

 

 

-12-

--------------------------------------------------------------------------------

as their respective interests may appear and shall provide that any loss to
Alterations shall be adjusted with and be payable to both Landlord and Tenant.
Tenant shall deliver a copy of the policy and renewal certificate to Landlord.
Tenant agrees, at its sole cost, to obtain and maintain throughout the Lease
Term Commercial General Liability insurance for occurrences within the Project
with a combined single limit of not less than Five Million Dollars
($5,000,000.00) and worker’s compensation insurance with limits as required by
Law. Tenant’s liability insurance shall be primary insurance containing a
cross-liability endorsement, and shall provide coverage on an “occurrence”
rather than on a “claims made” basis. All such insurance shall provide for
severability of interests; shall provide that an act or omission of one of the
named (additional) insureds shall not reduce or avoid coverage to the other
named (additional insureds). Tenant shall name Landlord and Landlord’s lenders
as additional insureds and shall deliver a copy of the policies and renewal
certificates to Landlord. All insurance policies required under this Section 9.C
shall provide for thirty (30) days’ prior written notice to Landlord of any
cancellation, termination, or reduction in coverage. Notwithstanding the above,
Landlord retains the right to have Tenant provide other forms of insurance which
may be reasonably required to cover future risks.

 

  D. Waiver:

Landlord and Tenant hereby waive all tort, contract or other rights each may
have against the other on account of any loss or damage sustained by Landlord or
Tenant, as the case may be, or to the Premises or its contents, which may arise
from any risk covered by their respective insurance policies (or which would
have been covered had such insurance policies been maintained in accordance with
this Lease) as set forth above; provided that such waiver shall be effective
only to the extent permitted by the insurance covering such loss. The Parties
shall each obtain from their respective insurance companies a waiver of any
right of subrogation which said insurance company may have against Landlord or
Tenant, as the case may be.

10. TAXES:

Tenant shall be liable for and shall pay as additional rent, prior to
delinquency, all taxes and assessments levied against Tenant’s personal property
and trade or business fixtures. All real estate taxes shall be prorated to
reflect the Lease Commencement and Expiration Dates. If, at any time during the
Lease Term a tax, excise on rents, business license tax or any other tax,
however described, is levied or assessed against Landlord as a substitute or
addition, in whole or in part, for taxes assessed or imposed on land or
buildings, Tenant shall pay and discharge its pro rata share of such tax or
excise on rents or other tax before it becomes delinquent; except that this
provision is not intended to cover net income taxes, documentary stamp or
transfer tax, inheritance, gift or estate tax imposed upon Landlord. In the
event that a tax is placed, levied, or assessed against Landlord and the taxing
authority takes the position that Tenant cannot pay and discharge its pro rata
share of such tax on behalf of Landlord, then at Landlord’s sole election,
Landlord may demand from Tenant, as additional rent, the exact amount of such
tax and Tenant shall pay such increase.

 

11. UTILITIES:

Tenant shall arrange for and pay directly to the providing utility all water,
gas, electric, telephone, and other utilities supplied to the Premises. Landlord
shall not be liable for loss of or injury to person or property, however
occurring, through or in connection with or incidental to furnishing or the
utility company’s failure to furnish utilities to the Premises or any other
portion of the Project, and in such event Tenant shall not be entitled to
abatement or reduction of any portion of Base Monthly Rent or any other amount
payable under this Lease.

Notwithstanding the foregoing, if all or a material portion of the Premises is
made untenantable or inaccessible for more than five (5) consecutive business
days, after notice from Tenant to Landlord, by a service interruption caused by
the gross negligence or willful misconduct of Landlord or Landlord’s agents or
employees, then, as Tenant’s sole remedy, Base Monthly Rent shall abate for the
period beginning

 

 

-13-

--------------------------------------------------------------------------------

on the day immediately following such 5-business-day period and ending on the
day such service interruption ends, but only in proportion to the percentage of
the rentable square footage of the Premises made untenantable or inaccessible.

 

12. TOXIC WASTE AND ENVIRONMENTAL DAMAGE:

 

  A. Use of Hazardous Materials:

Without the prior written consent of Landlord, neither Tenant, nor any subtenant
of the Premises (of any tier in the chain of title) or any of Tenant’s or such
subtenant’s agents, employees, representatives, affiliates, architects,
contractors (including without limitation subcontractors of all tiers),
suppliers, vendors, subtenants, licensees or invitees (collectively “Tenant’s
Agents”), shall cause or permit any Hazardous Materials, as defined below, to be
generated, brought onto, used, stored, created, released or disposed of in or
about the Premises or Project, except that Tenant may use and store small
quantities of common household cleaners and office supplies on the Premises
provided such use and storage is in strict compliance with all Environmental
Laws, as defined below.

As used herein, the term “Hazardous Materials” shall mean any and all
substances, materials or wastes (whether liquid, solid or gaseous), which are a
pollutant or contaminant, or which are hazardous, toxic, ignitable, reactive,
corrosive, dangerous, harmful or injurious, or which present a risk to public
health or the environment, or which are or may become regulated by or under the
authority of any Environmental Laws, as defined below, including, without
limitation, asbestos or asbestos containing materials, petroleum products,
pesticides, polychlorinated biphenyls, flammable explosives, radioactive
materials and urea formaldehyde. As used herein, the term “Environmental Laws”
shall mean any present or future federal, state or local Laws, whether common
law, statute, rule, regulation or ordinance, judgment, order, or other
governmental restriction, guideline, listing or requirement, relating to the
environment or any Hazardous Materials, including without limitation, the
Comprehensive Environmental

Response, Compensation, and Liability Act of 1980, 42 U.S.C. §9601 et seq., the
Resource Conservation and Recovery Act of 1976, 42 U.S.C. §6901 et seq., and
applicable provisions of the California Health and Safety Code and the
California Water Code, all as heretofore or hereafter may be amended from time
to time. As used in this Section 12, the phrase “by anyone else at the Premises
with the permission of Tenant” assumes that Tenant has used commercially
reasonable efforts to secure the Premises from trespassers and intruders.

In order to obtain consent, Tenant shall deliver to Landlord its written
proposal describing the Hazardous Materials to be brought onto the Premises,
measures to be taken for storage and disposal thereof, and safety measures to be
employed to prevent pollution or contamination of the air, soil, surface and
ground water. Landlord’s approval may be withheld in its reasonable judgment. In
the event Landlord consents to Tenant’s use of Hazardous Materials on the
Premises or such consent is not required, Tenant represents and warrants that it
shall comply with all Governmental Regulations applicable to Hazardous Materials
including doing the following: (i) adhere to all reporting and inspection
requirements imposed by Federal, State, County or Municipal Laws and provide
Landlord a copy of any such reports or agency inspections; (ii) obtain and
provide Landlord copies of all necessary permits required for the use and
handling of Hazardous Materials on the Premises; (iii) enforce Hazardous
Materials handling and disposal practices consistent with industry standards;
(iv) surrender the Premises and Project free from any and all Hazardous
Materials generated, brought, used, stored, created, released, or disposed of by
Tenant or Tenant’s Agents or by anyone else at the Premises with the permission
of Tenant (other than Landlord or Landlord’s agents, employees or contractors)
coming onto the Premises; and (v) properly close the facility with regard to
Hazardous Materials including the removal or decontamination of any process
piping, mechanical ducting, storage tanks, containers, or trenches which have
come into contact with Hazardous Materials and obtaining a closure certificate
from the local administering agency

 

 

-14-

--------------------------------------------------------------------------------

prior to the Expiration Date or sooner termination of this Lease.

 

  B. Tenant’s Indemnity Regarding Hazardous Materials:

Tenant shall, at its sole cost and expense and with counsel reasonably
acceptable to Landlord, indemnify, defend and hold harmless Landlord and the
Landlord Related Parties from and against any and all claims, liabilities,
obligations, penalties, fines, actions, losses, damages, costs or expenses
(including without limitation reasonable attorneys fees) incurred or suffered
arising from generating, bringing, using, storing, creating, releasing or
disposing of Hazardous Materials in or about the Premises or Project by Tenant
or Tenant’s Agents, or by anyone else coming onto the Premises with the
permission of Tenant (other than Landlord or Landlord’s agents, employees and
contractors), or the violation of any Governmental Regulation or Environmental
Laws by Tenant or Tenant’s Agents or by anyone else coming onto the Premises
with the permission of Tenant (other than Landlord or Landlord’s agents,
employees or contractors). This indemnification, defense and hold harmless
obligation applies whether or not the concentrations of any such Hazardous
Materials exceed applicable maximum contaminant or action levels or any
governmental agency has issued a cleanup order. Tenant’s indemnification,
defense, and hold harmless obligations include, without limitation, the
following: (i) claims, liabilities, costs or expenses resulting from or based
upon administrative, judicial (civil or criminal) or other action, legal or
equitable, brought by any private or public person under present or future Laws,
including Environmental Laws; (ii) claims, liabilities, costs or expenses
pertaining to the assessment and identification, monitoring, cleanup,
containment, or removal of Hazardous Materials from soils, riverbeds or aquifers
including the provision of an alternative public drinking water source;
(iii) losses attributable to diminution in the value of the Premises, Building
or Project (iv) loss or restriction of use of rentable space in the Building or
Project; and (v) all other liabilities, obligations, penalties, fines, claims,
actions (including remedial or enforcement actions of any kind and
administrative or judicial proceedings, orders or judgments), damages

(including consequential and punitive damages), and costs (including attorney,
consultant, and expert fees and expenses) resulting from the release or
violation. This Section 12.B shall survive the expiration or termination of this
Lease.

Notwithstanding anything to the contrary contained in the foregoing, Tenant
shall have no liability or responsibility with respect to Hazardous Materials
(a) present at or about the Premises, Building or Project prior to the
Commencement Date and not introduced by Tenant or Tenant’s Agents, (b) that
emanate onto the Premises, Building or Project from outside thereof that are not
the responsibility of Tenant or Tenant’s Agents under this Section 12, or
(c) that are introduced to the Premises, Building or Project by Landlord, any
Landlord Related Party or other tenants of the Building or Project. This
Section 12.B shall survive the expiration or termination of this Lease.

 

  C. Notice of Release or Violation:

If, during the Lease Term (including any extensions), Tenant becomes aware of
(i) any actual or threatened release of a Hazardous Materials on, under or about
the Premises or Project or (ii) any inquiry, investigation, proceeding, claim,
notice or order by any private or public person or entity regarding the presence
of Hazardous Materials on, under or about the Premises or Project, including
without limitation alleged violations of Environmental Laws by Tenant or
Tenant’s Agents, Tenant shall give Landlord written notice of the release or
investigation within five (5) days after learning of it and shall simultaneously
and thereafter furnish Landlord with copies of any claims, notices of violation,
reports, or other writings received by Tenant concerning the release or
investigation. In the event of an actual release of Hazardous Materials, Tenant
shall also give Landlord immediate verbal notice of such release. In the event
of any release on or into the Premises or any portion of the Project or into the
soil or ground water under the Premises, the Building or the Project of any
Hazardous Materials used, treated, stored or disposed of by Tenant or Tenant’s
Agents or by anyone else at the Premises or Project with the permission of
Tenant

 

 

-15-

--------------------------------------------------------------------------------

(other than Landlord or Landlord’s agents, employees or contractors) coming onto
the Premises, Tenant agrees to comply, at its sole cost, with all laws,
regulations, ordinances and orders of any federal, state or local agency
relating to the monitoring or remediation of such Hazardous Materials. In the
event of any such release of Hazardous Materials Tenant shall immediately give
verbal and follow-up written notice of the release to Landlord, and Tenant
agrees to meet and confer with Landlord and any lender designated by Landlord to
attempt to eliminate and mitigate any financial exposure to such lender and
resultant exposure to Landlord under California Code of Civil Procedure
Section 736(b) as a result of such release, and promptly to take reasonable
monitoring, cleanup and remedial steps given, inter alia, the historical uses to
which the Project has and continues to be used, the risks to public health posed
by the release, the then available technology and the costs of remediation,
cleanup and monitoring, consistent with acceptable customary practices for the
type and severity of such contamination and all applicable Laws. Nothing in the
preceding sentence shall eliminate, modify or reduce the obligation of Tenant
under 12.B of this Lease to indemnify, defend and hold Landlord and the Landlord
Related Parties harmless. Tenant shall provide Landlord prompt written notice of
Tenant’s monitoring, cleanup and remedial steps. In the absence of an order of
any federal, state or local governmental or quasi-governmental agency relating
to the cleanup, remediation or other response action required by applicable law,
any dispute arising between Landlord and Tenant concerning Tenant’s obligation
to Landlord under this Section 12.C concerning the level, method, and manner of
cleanup, remediation or response action required in connection with such a
release of Hazardous Materials shall be resolved by mediation and/or arbitration
pursuant to this Lease.

 

  D. Remediation Obligations:

In the event of any release on, under or about the Premises or the Project of
any Hazardous Materials generated, brought onto, used, stored, created or
disposed of by Tenant or Tenant’s Agents or by anyone else at the Premises or
Project with the permission of Tenant (other than

Landlord or Landlord’s agents, employees or contractors) coming onto the
Premises, Tenant shall, at its sole cost, promptly take all necessary and
appropriate actions, in compliance with applicable Environmental Laws, to remove
or remediate such Hazardous Materials, whether or not any governmental agency
has issued a cleanup order, so as to return the Premises and Project to the
condition that existed before the introduction of such Hazardous Materials.
Tenant shall obtain Landlord’s written consent prior to implementing any
proposed removal or remedial action, provided, however, that Tenant shall be
entitled to respond immediately to an emergency without first obtaining
Landlord’s written consent. Nothing in the preceding sentence shall in any way
eliminate, modify or reduce the obligation of Tenant under 12.B of this Lease to
indemnify, defend and hold Landlord and the Landlord Related Parties harmless.

 

  E. Environmental Monitoring:

Landlord and its agents shall have the right to inspect, investigate, sample and
monitor the Premises, including any air, soil, water, ground water, or to
conduct any other sampling or testing, digging, drilling or analysis, to
determine whether Tenant is complying with the terms of this Section 12. If
Landlord discovers that Tenant is not in compliance with the terms of this
Section 12, any costs incurred by Landlord in determining Tenant’s non
compliance, including attorneys’, consultants’ and experts’ fees, shall be due
and payable by Tenant to Landlord within five (5) days following Landlord’s
written demand therefor.

 

13. TENANT’S DEFAULT

 

  A. Events of Default

The occurrence of any of the following shall constitute a material default and
breach of this Lease by Tenant: (i) Tenant’s failure to pay the Base Monthly
Rent or any other payment due under this Lease (including additional rent) by
the date such amount is due, which failure continues for five (5) days past due,
(ii) the abandonment or vacation of the Premises by Tenant in excess of thirty
(30) consecutive days; (iii) Tenant’s failure to observe and perform any other
required

 

 

-16-

--------------------------------------------------------------------------------

provision of this Lease, where such failure continues for thirty (30) days after
written notice from Landlord, except that if this Lease expressly provides that
no notice or cure is required for a breach or default to exist then such thirty
(30) day notice and cure period shall not apply; (iv) Tenant’s making of any
general assignment for the benefit of creditors; (v) the filing by or against
Tenant of a petition to have Tenant adjudged a bankrupt or of a petition for
reorganization or arrangement under any law relating to bankruptcy (unless, in
the case of a petition filed against Tenant, the same is dismissed within thirty
(30) days after the filing); (vi) the appointment of a trustee or receiver to
take possession of substantially all of Tenant’s assets located at the Premises
or of Tenant’s interest in this Lease, where possession is not restored to
Tenant within thirty (30) days; (vii) the attachment, execution or other
judicial seizure of substantially all of Tenant’s assets located at the Premises
or of Tenant’s interest in this Lease, where such seizure is not discharged
within thirty (30) days; or (viii) the occurrence of any other event described
as a default elsewhere in this Lease or any amendment thereto regardless of
whether such event is defined as a material default and breach of this Lease in
this Section 13.

 

  B. Remedies:

In the event of any default by Tenant, then in addition to other remedies
available to Landlord at law or in equity, Landlord shall have the immediate
option to terminate this Lease and all rights of Tenant hereunder by giving
written notice of such intention to terminate. In the event Landlord elects to
so terminate this Lease, Landlord may recover from Tenant all the following:
(i) the worth at time of award of any unpaid rent which had been earned at the
time of such termination; (ii) the worth at time of award of the amount by which
the unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss for the same period that Tenant
proves could have been reasonably avoided; (iii) the worth at time of award of
the amount by which the unpaid rent for the balance of the Lease Term after the
time of award exceeds the amount of such rental loss that Tenant proves could be
reasonably avoided; (iv) any other amount

necessary to compensate Landlord for all detriment proximately caused by
Tenant’s failure to perform its obligations under this Lease, or which in the
ordinary course of things would be likely to result therefrom; including the
following: (x) expenses for repairing, altering or remodeling the Premises for
purposes of reletting, (y) broker’s fees, advertising costs or other expenses of
reletting the Premises, and (z) costs of carrying the Premises such as taxes,
insurance premiums, utilities and security precautions; and (v) at Landlord’s
election, such other amounts in addition to or in lieu of the foregoing as may
be permitted by applicable California law. The term “rent”, as used in this
Lease, is defined as the minimum monthly installments of Base Monthly Rent and
all other sums required to be paid by Tenant pursuant to this Lease, all such
other sums being deemed as additional rent due hereunder. As used in (i) and
(ii) above, “worth at the time of award” shall be computed by allowing interest
at a rate equal to the greater of the following (the “Agreed Interest Rate”)
(i) the discount rate of the Federal Reserve Bank of San Francisco plus five
(5%) percent per annum, as of the twenty-fifty (25th) day of the month
immediately preceding Tenant’s default, on advances to member banks under
Section 13 and 13(a) of the Federal Reserve Act, as now in effect or hereafter
from time to time amended, or (ii) ten percent (10%) per annum. As used in
(iii) above, “worth at the time of award” shall be computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at the
time of award plus one (1%) percent. Furthermore, in the event of a default as
described in clause (iv), (v), (vi) or (vii) in Section 13.A above, Landlord
reserves the right to compensation for all damages and costs incurred by
Landlord as a result of Tenant’s default, including without limitation those
based upon a tort claim or contractual claim, and without any cap other than
that imposed by the United States Bankruptcy Code (as amended, and as
interpreted by case law, the “Code”) with respect to rent, as defined in the
Code. Tenant hereby waives the protection of any limitation in the Code imposed
upon such damages to the extent such waiver is enforceable under the Code, and
Tenant hereby agrees that the Security Deposit may be retained by Landlord for
purposes of compensation for any and all tort or contractual or other claims by
Landlord against

 

 

-17-

--------------------------------------------------------------------------------

Tenant. Any obligation Landlord may have to mitigate damages upon a termination
due to Tenant’s default shall not include the obligation to relet the Premises
if Landlord has other comparable available space within the Building or Project.

 

  C. Right to Re-enter:

In the event of any such default by Tenant, Landlord shall have the right, after
terminating this Lease, to re-enter the Premises and remove all persons and
property in accordance with applicable law. Such property may be removed and
stored in a public warehouse or elsewhere at the cost of and for the account of
Tenant, and disposed of by Landlord, in any manner permitted by law.

 

  D. Continuation of Lease:

If Landlord does not elect to terminate this Lease as provided in Section 13.B
above, then the provisions of California Civil Code Section 1951.4, (Landlord
may continue the Lease in effect after Tenant’s breach and abandonment and
recover rent as it becomes due if Tenant has a right to sublet and assign,
subject only to reasonable limitations) as amended from time to time, shall
apply, this Lease shall continue in effect, and Landlord may enforce all of its
rights and remedies under this Lease, including without limitation, the right to
recover payment of rent as it becomes due.

 

  E. No Termination:

Neither efforts by Landlord to mitigate damages caused by a breach or default of
Tenant, nor acts of maintenance or preservation or efforts to relet the Premises
shall constitute an election by Landlord to terminate the Lease or a termination
of Tenant’s right to possession of the Premises.

 

  F. Non-Waiver:

Landlord may accept Tenant’s payments without waiving any rights under this
Lease, including rights under a previously served notice of default. No payment
by Tenant or receipt by Landlord of a lesser amount than any installment

of rent due shall be deemed as other than payment on account of the amount due.
If Landlord accepts payments after serving a notice of default, Landlord may
nevertheless commence and pursue an action to enforce rights and remedies under
the previously served notice of default without giving Tenant any further notice
or demand. Furthermore, the Landlord’s acceptance of rent from the Tenant when
the Tenant is holding over without express written consent does not convert
Tenant’s tenancy from a tenancy at sufferance to a month to month tenancy. No
waiver of any provision of this Lease shall be implied by any failure of
Landlord to enforce any remedy for the violation of that provision, even if that
violation continues or is repeated. Any waiver by Landlord of any provision of
this Lease must be in writing. Such waiver shall affect only the provision
specified and only for the time and in the manner stated in the writing. No
delay or omission in the exercise of any right or remedy by Landlord shall
impair such right or remedy or be construed as a waiver thereof by Landlord. No
act or conduct of Landlord, including, without limitation, the acceptance of
keys to the Premises, shall constitute acceptance of the surrender of the
Premises by Tenant before the Expiration Date. Only written notice from Landlord
to Tenant of acceptance shall constitute such acceptance of surrender of the
Premises. Landlord’s consent to or approval of any act by Tenant which requires
Landlord’s consent or approvals shall not be deemed to waive or render
unnecessary Landlord’s consent to or approval of any subsequent act by Tenant.
The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation thereof, shall not work a merger and shall, at the option of
Landlord, terminate all or any existing subleases or subtenants, or may, at the
option of Landlord, operate as an assignment to Landlord of any or all such
subleases or subtenants

 

  G. Performance by Landlord:

If Tenant fails to perform any obligation required under this Lease or by Laws,
Landlord in its sole and absolute discretion may, without notice, without
waiving any rights or remedies and without releasing Tenant from its obligations
hereunder, perform such obligation, in which event Tenant shall pay Landlord as
additional rent

 

 

-18-

--------------------------------------------------------------------------------

all sums paid by Landlord in connection with such substitute performance,
including interest at the Agreed Interest Rate within ten (10) days of
Landlord’s written notice for such payment.

 

  H. Habitual Default:

The provisions of Section 13 notwithstanding, the Parties agree that if Tenant
shall have defaulted in the performance of any (but not necessarily the same)
term or condition of this Lease for three (3) or more times during any twelve
(12) month period during the Lease Term, then such conduct shall, at the
election of the Landlord, represent a separate event of default which cannot be
cured by Tenant. Tenant acknowledges that the purpose of this provision is to
prevent repetitive defaults by Tenant, which work a hardship upon Landlord and
deprive Landlord of Tenant’s timely performance under this Lease.

 

14. LANDLORD’S LIABILITY:

 

  A. Limitation on Landlord’s Liability:

In the event of Landlord’s failure to perform any of its covenants or agreements
under this Lease, Tenant shall give Landlord written notice of such failure and
shall give Landlord thirty (30) days to cure or commence to cure such failure
prior to any claim for breach or resultant damages, provided, however, that if
the nature of the default is such that it cannot reasonably be cured within the
30-day period, Landlord shall not be deemed in default if it commences within
such period to cure, and thereafter diligently prosecutes the same to
completion. In addition, upon any such failure by Landlord, Tenant shall give
notice by registered or certified mail to any person or entity with a security
interest in the Premises (“Mortgagee”) that has provided Tenant with notice of
its interest in the Premises, and shall provide Mortgagee a reasonable
opportunity to cure such failure, including such time to obtain possession of
the Premises by power of sale or judicial foreclosure, if such should prove
necessary to effectuate a cure. Tenant agrees that each of the Mortgagees to
whom this Lease has been assigned is an express third-party beneficiary hereof.
Tenant waives any right under California Civil Code Section 1950.7 or

any other present or future law to the collection of any payment or deposit from
Mortgagee or any purchaser at a foreclosure sale of Mortgagee’s interest unless
Mortgagee or such purchaser shall have actually received and not refunded the
applicable payment or deposit. Tenant further waives any right to terminate this
Lease and to vacate the Premises on Landlord’s default under this Lease.
Tenant’s sole remedy on Landlord’s default is an action for damages or
injunctive or declaratory relief; provided, however, Landlord and the Landlord
Related Parties shall not be liable to Tenant for any consequential damages
suffered or incurred by Tenant on account of Landlord’s default including,
without limitation, on account of lost profits or the interruption of Tenant’s
business. Tenant hereby agrees that Landlord shall not be liable for injury to
Tenant’s business or any loss of income therefrom or for damage to the goods,
wares, merchandise, or other property of Tenant, Tenant’s employees, invitees,
customers, or any other person in or about the Premises or the Project, nor
shall Landlord be liable for injury to the person of Tenant, Tenant’s employees,
agents, contractors, or any other person in or about the Premises or Project,
whether such damage or injury is caused by or results from fire, steam,
electricity, gas, water, or rain, or from the breakage, leakage, obstruction, or
other defects of pipes, sprinklers, wires, appliances, plumbing, air
conditioning, or lighting fixtures, or from any other cause, whether said damage
or injury results from conditions arising upon the Premises or upon other
portions of the Project or from other sources or places and regardless of
whether the cause of such damage or injury or the means of repairing the same is
inaccessible to Tenant. Landlord shall not be liable for any damages arising
from any act or neglect of any other tenant, occupant, or user of the Project,
nor from the failure of Landlord to enforce the provisions of any other lease of
the Project.

 

  B. Limitation on Tenant’s Recourse:

If Landlord is a corporation, trust, partnership, joint venture, unincorporated
association or other form of business entity, then the obligations of Landlord
shall not constitute personal obligations of the Landlord Related Parties.
Tenant shall have recourse only to the

 

 

-19-

--------------------------------------------------------------------------------

interest of Landlord in the Premises for the satisfaction of the obligations of
Landlord and shall not have recourse to any other assets of Landlord for the
satisfaction of such obligations.

 

  C. Indemnification of Landlord:

As a material part of the consideration rendered to Landlord, Tenant hereby
waives all claims against Landlord for damages to goods, wares and merchandise,
and all other personal property in, upon or about said Premises and for injuries
to persons in or about said Premises or Project, from any cause arising at any
time to the fullest extent permitted by law, and, except to the extent due to
the negligence or willful misconduct of Landlord or any Landlord Related Party,
Tenant shall indemnify, defend with counsel reasonably acceptable to Landlord
and hold Landlord and the Landlord Related Parties harmless from and against all
claims, liabilities, obligations, penalties, fines, actions, losses, damages,
costs or expenses (including without limitation reasonable attorneys fees)
incurred or suffered arising from the use or occupancy of the Premises or any
part of the Project by Tenant or Tenant’s Agents, the acts or omissions of
Tenant or Tenant’s Agents, Tenant’s breach of this Lease, or any damage or
injury to person or property from any cause, including but not limited to the
use or occupancy of the Premises or any part of the Project by Tenant or
Tenant’s Agents, the acts or omissions of Tenant or Tenant’s Agents, Tenant’s
breach of this Lease or from the failure of Tenant to keep the Premises in good
condition and repair as herein provided. Further, in the event Landlord is made
party to any litigation due to the acts or omission of Tenant or Tenant’s
Agents, Tenant shall indemnify, defend (with counsel reasonably acceptable to
Landlord) and hold Landlord and the Landlord Related Parties harmless from and
against all claims, liabilities, obligations, penalties, fines, actions, losses,
damages, costs or expenses (including without limitation reasonable attorneys
fees) incurred in connection with such litigation.

15. DESTRUCTION OF PREMISES:

 

  A. Landlord’s Obligation to Restore:

In the event of damage or destruction of the Premises during the Lease Term
Landlord, and Tenant to the extent of its Specialized Tenant Improvements and
Alterations, shall repair the same to a similar condition to that which existed
prior to such damage or destruction. Such damage or destruction shall not annul
or void this Lease; however, Tenant shall be entitled to a proportionate
reduction of Base Monthly Rent while repairs are being made, such proportionate
reduction to be based upon the extent to which the repairs interfere with
Tenant’s business in the Premises, as reasonably determined by Tenant. In no
event shall Landlord be required to replace or restore Alterations, Specialized
Tenant Improvements or Tenant’s trade fixtures or personal property. Tenant
shall be obligated to replace and restore all Specialized Tenant Improvements
and Alterations.

 

  B. Limitations on Landlord’s Restoration Obligation:

Notwithstanding the provisions of Section 15.A above, Landlord shall have no
obligation to repair or restore the Premises if any of the following occur:
(i) if Landlord reasonably estimates the repairs cannot be made in one hundred
eighty (180) days from the date of receipt of all governmental approvals
necessary under applicable Laws of State, Federal, County or Municipal
authorities, as reasonably determined by Landlord, (ii) if the holder of the
first deed of trust or mortgage encumbering the Building elects not to permit
the insurance proceeds payable upon damage or destruction to be used for such
repair or restoration, (iii) the damage or destruction is not fully covered by
the insurance maintained by Landlord, (iv) the damage or destruction occurs in
the last twenty four (24) months of the Lease Term, (v) Tenant is in default
pursuant to the provisions of Section 13 above, or (vi) Tenant has vacated the
Premises for more than ninety (90) days. In any such event Landlord may elect
either to (i) complete the repair or restoration, or (ii) terminate this Lease
by providing Tenant written notice of its election within sixty (60) days
following the damage or

 

 

-20-

--------------------------------------------------------------------------------

destruction. If Landlord elects to repair or restore, this Lease shall continue
in full force and effect. Tenant hereby waives the benefits and rights provided
to Tenant by the provisions of Civil Code Sections 1932 and 1933, or any similar
Law now or hereafter in effect.

Notwithstanding the foregoing, Tenant shall have the option to terminate this
Lease: (i) if Landlord reasonably estimates the repairs cannot be made in one
hundred eighty (180) days from the date of damage or destruction, or (ii) the
damage or destruction occurs in the last twenty four (24) months of the Lease
Term. In any such event, Tenant may terminate this Lease by providing Landlord
written notice of its election within fifteen (15) days following (a) with
respect to the preceding clause (i), receipt of Landlord’s repair estimate, or
(b) with respect to the preceding clause (ii), the damage or destruction.

 

16. CONDEMNATION:

If any part of the Premises shall be taken for any public or quasi-public use,
under any statute or by right of eminent domain or private purchase in lieu
thereof, and only a part thereof remains which is susceptible of occupation
hereunder, this Lease shall, as to the part so taken, terminate as of the day
before title vests in the condemnor or purchaser (“Vesting Date”) and Base
Monthly Rent payable hereunder shall be adjusted so that Tenant is required to
pay for the remainder of the Lease Term only such portion of Base Monthly Rent
as the value of the part remaining after such taking bears to the value of the
entire Premises prior to such taking, as reasonably determined by Landlord.
Further, in the event of such partial taking, Landlord shall have the option to
terminate this Lease as of the Vesting Date. If all of the Premises or such part
thereof be taken so that there does not remain a portion susceptible for
occupation hereunder, this Lease shall terminate on the Vesting Date. If part or
all of the Premises be taken, all compensation awarded upon such taking shall go
to Landlord, and Tenant shall have no claim thereto; except Landlord shall
cooperate with Tenant, without cost to Landlord, to recover compensation for the
unamortized cost of any Specialized Tenant Improvements and Alterations, or for
Tenant’s moving costs. Tenant hereby waives the

provisions of California Code of Civil Procedures Section 1265.130 and any
similar Law now or hereafter in effect, and the provisions of this Section 16
shall govern in the case of a taking.

 

17. ASSIGNMENT OR SUBLEASE:

 

  A. Consent by Landlord:

Except as specifically provided in Section 17.E below, Tenant may not
voluntarily, involuntarily or by operation of law, assign, sell or otherwise
transfer all or any part of Tenant’s interest in this Lease or in the Premises,
cause or permit any part of the Premises to be sublet, occupied or used by
anyone other than Tenant, or permit any person to succeed to any interest in
this Lease or the Premises (all of the foregoing being a “Transfer”) without the
express written consent of Landlord, not to be unreasonably withheld. In the
event Tenant desires to effectuate a Transfer, Tenant shall deliver to Landlord
(i) executed counterparts of any agreement and of all ancillary agreements with
the proposed transferee, (ii) current financial statements of the transferee
covering the preceding three years, (iii) the nature of the proposed
transferee’s business to be carried on in the Premises, (iv) a statement
outlining all consideration to be given on account of the Transfer, and (v) a
current financial statement of Tenant. Landlord may condition its approval of
any Transfer on receipt of a certification from both Tenant and the proposed
transferee of all consideration to be paid to Tenant in connection with such
Transfer. At Landlord’s request, Tenant shall also provide additional
information reasonably required by Landlord to determine whether it will consent
to the proposed Transfer. Landlord shall have a ten (10) day period following
receipt of all the foregoing within which to notify Tenant in writing that
Landlord elects to: (i) permit Tenant to Transfer such space to the named
transferee on the terms and conditions set forth in the notice; or (ii) refuse
consent. If Landlord should fail to notify Tenant in writing of such election
within the 10-day period, Landlord shall be deemed to have elected option
(i) above. Landlord’s consent to the proposed Transfer shall not be unreasonably
withheld, provided and upon the condition that: (i) the proposed transferee is
engaged in a

 

 

-21-

--------------------------------------------------------------------------------

business that is limited to the use expressly permitted under this Lease;
(ii) the proposed transferee is a company with sufficient financial worth and
management ability to undertake the financial obligation of this Lease and
Landlord has been furnished with reasonable proof thereof; (iii) the proposed
transfer agreement, if it is a sublease, conforms to the requirements of
Section 17.I below or if it is an assignment, is in a form reasonably
satisfactory to Landlord; (iv) the proposed Transfer will not result in there
being greater than two (2) subtenants or other occupants (not including
employees) within the Premises at any time during the Lease Term; (v) Tenant
reimburses Landlord on demand for any costs that may be incurred by Landlord in
connection with said Transfer, including the costs of making investigations as
to the acceptability of the proposed transferee and legal costs incurred in
connection with the granting or denial of any requested consent, not to exceed
$1,500.00; and (vi) Tenant shall not have advertised or publicized in any way
the availability of the Premises without prior notice to Landlord. In the event
all or any one of the foregoing conditions are not satisfied (without limiting
other factors that may be considered or conditions that may be imposed by
Landlord in connection with a requested Transfer), Landlord shall be considered
to have acted reasonably if it withholds its consent. Tenant shall not
hypothecate, mortgage, pledge or otherwise encumber Tenant’s interest in this
Lease or the Premises or otherwise use the Lease as a security device in any
manner without the consent of Landlord, (all of the foregoing being an
“Hypothecation”) which consent Landlord may withhold in its reasonable
discretion. Tenant shall reimburse Landlord on demand for any costs that may be
incurred by Landlord in connection with an Hypothecation, including legal costs
incurred in connection with the granting or denial of any requested consent, not
to exceed $1,500.00. Landlord’s consent to one or more Transfers or
Hypothecations shall not operate to waive Tenant’s obligation to obtain
Landlord’s consent to other Transfers or Hypothecations nor constitute consent
to an assignment or other Transfer following foreclosure of any permitted lien,
mortgage or other encumbrance. If Tenant is a corporation, limited liability
company, unincorporated association, partnership or other legal entity, the

sale, assignment, cancellation, surrender, exchange, conversion or any other
transfer or hypothecation of any stock, membership or other ownership interest
in such entity (whether occurring at one time or over a period of time) in the
aggregate of more than fifty percent (50%) (determined cumulatively) shall be
deemed an assignment of this Lease; in the case of a partnership, any withdrawal
or substitution (whether occurring at one time or over a period of time) of any
partners owning fifty percent (50%) or more (cumulatively) of the partnership,
or the dissolution of the partnership shall be deemed an assignment of this
Lease; provided that, subject to Section 17.D below the foregoing provisions of
this sentence shall not apply to (i) a transfer set forth in Section 17.E below,
(ii) a transfer of stock in a corporation whose stock is, or as a result of such
transfer becomes, publicly traded on a public stock exchange , or (iii) transfer
of stock or other ownership interest in connection with a bonafide financing or
capitalization for the benefit of Tenant. If Tenant is an entity, any sale of
all or substantially all of its assets shall be deemed an assignment of this
Lease , except as set forth in Section 17.E below. . If Tenant is a corporation
whose stock is not publicly traded on a public stock exchange, any dissolution,
merger, consolidation or reorganization of Tenant shall be deemed a Transfer,
except as set forth in Section 17.E below. Tenant acknowledges and agrees that
the provision of this Section 17 are not unreasonable standards or conditions
for purposes of Section 1951.4 of the California Civil Code, as amended from
time to time, under bankruptcy laws, or for any other purpose.

 

  B. Assignment or Subletting Consideration:

Landlord and Tenant hereby agree that Fifty percent (50%) of any rent or other
economic consideration (including without limitation, payments for trade
fixtures and personal property in excess of the fair market value thereof,
stock, warrants, and options) in excess of the Base Monthly Rent payable
hereunder (after deducting therefrom Reasonable Transfer Costs (defined below))
(i) realized by Tenant in connection with any Transfer by Tenant, and/or
(ii) realized by a subtenant or any other person or entity (other than Tenant)
(any such subtenant, person or entity

 

 

-22-

--------------------------------------------------------------------------------

being a “Subsequent Transferor”) in connection with a sublease, assignment or
other Transfer by such Subsequent Transferor, shall be paid by Tenant to
Landlord promptly after such amounts are paid to Tenant or a Subsequent
Transferor, regardless of the amount of subrent the Subsequent Transferor pays
to Tenant or any prior Subsequent Transferor. The foregoing shall not apply to a
Permitted Transfer. As used in this Section 17.B, “Reasonable Transfer Costs”
shall mean the following costs, to the extent reasonably incurred in connection
with the Transfer in question: (i) advertising costs and brokerage commissions
payable to unaffiliated third parties, and (ii) tenant improvement and legal
costs incurred solely in connection with such Transfer. In the case of a
Transfer other than an assignment of Tenant’s entire interest in the Lease and
Premises, Reasonable Transfer Costs shall be amortized on a straight line basis,
without interest, over the initial term of the Transfer. Tenant’s obligation to
pay over Landlord’s portion of the consideration constitutes an obligation for
additional rent hereunder. The above provisions relating to Landlord’s right to
terminate the Lease and relating to the allocation of excess rent are
independently negotiated terms of the Lease which constitute a material
inducement for the Landlord to enter into the Lease, and are agreed by the
Parties to be commercially reasonable. No Transfer by Tenant shall relieve it of
any obligation under this Lease. Any Transfer which conflicts with the
provisions of this Lease shall be voidable by Landlord at any time following
such Transfer.

 

  C. No Release:

Any Transfer shall be made only if and shall not be effective until the
transferee shall execute, acknowledge, and deliver to Landlord an agreement, in
form and substance satisfactory to Landlord, whereby the transferee shall assume
all the obligations of this Lease on the part of Tenant to be performed or
observed to the extent of the interest being transferred and shall be subject to
all the covenants, agreements, terms, provisions and conditions in this Lease to
the extent applicable to the interest being transferred. Notwithstanding any
Transfer and the acceptance of rent or other sums by Landlord from any
transferee, Tenant and any guarantor shall remain

fully liable for the payment of Base Monthly Rent and additional rent due, and
to become due hereunder, for the performance of all the covenants, agreements,
terms, provisions and conditions contained in this Lease on the part of Tenant
to be performed and for all acts and omissions of any transferee or any other
person claiming under or through any transferee that shall be in violation of
any of the terms and conditions of this Lease, and any such violation shall be
deemed a violation by Tenant. Tenant shall indemnify, defend with counsel
reasonably acceptable to Landlord and hold Landlord and the Landlord Related
Parties harmless from and against all claims, liabilities, obligations,
penalties, fines, actions, losses, damages, costs or expenses (including without
limitation reasonable attorneys fees) resulting from any claims that may be made
against Landlord by the proposed transferee or by any real estate brokers or
other persons claiming compensation in connection with the proposed Transfer.

 

  D. Reorganization of Tenant:

Notwithstanding any other provision of this Lease, the provisions of this
Section 17.D shall apply if Tenant is a publicly-held corporation and: (i) there
is a dissolution, merger, consolidation, or other reorganization of or affecting
Tenant, where Tenant is not the surviving corporation, or there is a sale of all
or substantially all of the assets of Tenant, or (ii) there is a sale,
cancellation, surrender, exchange, conversion or any other transfer of stock
involving or consisting of more than fifty percent (50%) of the total combined
voting power of all classes of Tenant’s capital stock issued, outstanding and
entitled to vote for the election of directors, or there is any merger,
consolidation or other reorganization of or affecting Tenant, whether the
foregoing occurs in a single transaction or in multiple steps, and after any one
or more of such events Tenant’s stock is no longer publicly traded. In a
transaction under clause (i) of this Section 17.D, the surviving or acquiring
corporation or entity (“Surviving Entity”) shall promptly execute and deliver to
Landlord an agreement in form reasonably satisfactory to Landlord under which
the Surviving Entity assumes the obligations of Tenant hereunder. In a
transaction or series of

 

 

-23-

--------------------------------------------------------------------------------

transactions under clause (ii) of this Section 17.D, the entities which as a
result of such transaction(s) own a greater than fifty percent (50%) interest in
Tenant (including, without limitation as a result of a reverse triangular merger
or a triangular merger) (collectively the “Acquiring Entity”) shall promptly
execute and deliver to Landlord a guaranty of lease in form reasonably
satisfactory to Landlord under which the Acquiring Entity guarantees the full
payment and performance of the obligations of Tenant under the Lease (“Lease
Guaranty”). The foregoing notwithstanding, in the event the Surviving Entity or
Acquiring Entity is itself not a publicly-traded corporation, but is instead the
subsidiary of a publicly-traded corporation (or a subsidiary of a subsidiary of
a publicly-traded corporation, or a subsidiary in a chain of entities in which
one or more parent corporations are publicly traded), then each publicly-traded
parent corporation in such chain shall be required to execute and deliver to
Landlord the Lease Guaranty. In addition, in the event that after such
acquisition Tenant no longer prepares audited financial statements, then in
addition to the financial statements required to be delivered by Tenant
hereunder, the entity required to execute the Lease Guaranty shall provide
Landlord its audited financial statements at the times and in the manner
required of Tenant hereunder. It is the intent of the parties that after such
any transaction or series of transactions described in this Section 17.D,
Landlord shall be entitled to rely on the creditworthiness of publicly-traded
corporations and to receive audited financial information from publicly-traded
corporations.

 

  E. Permitted Transfers

Provided that Tenant otherwise complies with the provisions of this Section 17,
except the provision requiring prior consent, but otherwise including without
limitation the provisions of Section 17.D, Tenant may enter into any of the
following Transfers (a “Permitted Transfer”) without Landlord’s prior consent,
and Landlord shall not be entitled to terminate the Lease or to receive any part
of any subrent resulting therefrom that would otherwise be due pursuant to
Sections 17.A and 17.B. Tenant may sublease all or part of the Premises or
assign its interest in this Lease to (i) any corporation which controls,

is controlled by, or is under common control with the original Tenant to this
Lease by means of an ownership interest of more than fifty percent (50%); (ii) a
corporation which results from a merger, consolidation or other reorganization
in which Tenant is not the surviving corporation, so long as the surviving
corporation has a net worth at the time of such assignment or sublease that is
equal to or greater than the net worth of Tenant immediately prior to such
transaction; and (iii) a corporation which purchases or otherwise acquires all
or substantially all of the assets of Tenant so long as such acquiring
corporation has a net worth at the time of such assignment or sublease that is
equal to or greater than the net worth of Tenant immediately prior to such
transaction.

 

  F. Effect of Default:

In the event of Tenant’s default, Tenant hereby assigns all amounts due to
Tenant from any Transfer as security for performance of Tenant’s obligations
under this Lease, and Landlord as assignee of Tenant, or a receiver for Tenant
appointed on Landlord’s application, may collect such amounts and apply it
toward Tenant’s obligations under this Lease, except that Tenant may collect
such amounts unless a default occurs as described in Section 13 above.
Landlord’s collection of any amounts due from a Transfer shall not constitute an
acceptance by Landlord of attornment by any subtenants, and upon Tenant’s
default Landlord shall have all rights provided by this Lease and applicable
Laws, including without limitation terminating this Lease and any or all
occupants’ rights to possession of the Premises as Landlord shall determine in
Landlord’s sole and absolute discretion. A termination of the Lease due to
Tenant’s default shall not automatically terminate a Transfer then in existence;
rather at Landlord’s election (1) such Transfer shall survive the Lease
termination, (2) the transferee shall attorn to Landlord, and (3) Landlord shall
undertake the obligations of Tenant under the transfer agreement; except that
Landlord shall not be liable for prepaid rent, security deposits or other
defaults of Tenant to the transferee, or for any acts or omissions of Tenant and
Tenant’s Agents.

 

 

-24-

--------------------------------------------------------------------------------

  G. Conveyance by Landlord:

In the event of any transfer of Landlord’s interest in this Lease, the Landlord
herein named (and in case of any subsequent transfer, the then transferor) shall
be automatically freed and relieved from and after the date of such transfer of
all liability for the performance of any covenants or obligations on the part of
Landlord contained in this Lease thereafter to be performed; provided, however,
that any funds in the hands of Landlord or the then transferor at the time of
such transfer, in which Tenant has an interest shall be turned over to the
transferee and any amount then due and payable to Tenant by Landlord or the then
transferor under any provision of this Lease shall be paid to Tenant; and
provided, further, that upon any such transfer, the transferee shall be deemed
to have assumed, subject to the limitations of this Section 17 above all of the
agreements, covenants and conditions in this Lease to be performed from and
after the transfer on the part of Landlord, it being intended hereby that the
covenants and obligations contained in this Lease to be performed on the part of
Landlord shall, subject as aforesaid, be binding on each Landlord, its
successors and assigns, only during its period of ownership.

 

  H. Successors and Assigns:

Subject to the provisions this Section 17, the covenants and conditions of this
Lease shall apply to and bind the heirs, successors, executors, administrators
and assigns of all Parties hereto; and all parties hereto comprising Tenant
shall be jointly and severally liable hereunder.

 

  I. Sublease Requirements:

With respect to any permitted sublet of the Premises by Tenant to an approved
Subtenant (“Subtenant”), the sublet transaction shall be evidenced by a written
sublease between Tenant and Subtenant (the “Sublease”). The Sublease shall
comply with the following requirements: (i) The form of the Sublease and the
terms and conditions thereof shall be subject to Landlord’s approval which shall
not be withheld unreasonably; (ii) The Sublease shall provide that it is subject
to and shall incorporate by reference all of the terms and conditions of this
Lease,

except those terms and conditions relating to Rent, Additional Rent, and any
other amount due under this Lease; (iii) The Sublease shall provide that the
Subtenant shall have no right to exercise any option or other right granted to
Tenant in this Lease, unless the Sublease resulted from a Permitted Transfer;
(iv) The Sublease shall contain a mutual waiver of subrogation among the
subtenant, Tenant and Landlord, and each shall require it’s insurance policies
to acknowledge such waiver of subrogation; (v) The Sublease shall provide that
all requirements of the Lease applicable to subleases shall be applicable to
sub-subleases; (vi) The Sublease shall require Subtenant, acting through Tenant,
to obtain Landlord’s prior written approval, not to be unreasonably withheld, to
any alteration to the Premises to the same extent Tenant is required by this
Lease to obtain such consent; (vii) The Sublease shall require Subtenant to send
Landlord copies of any and all material notices concerning the Premises that
Subtenant is obligated to provide to Tenant and Tenant to send Landlord copies
of any and all material notices concerning the Premises that Tenant is obligated
to provide to Subtenant; (viii) The Sublease shall provide that, at Landlord’s
option, the Sublease shall not terminate in the event that this Lease terminates
and shall require Subtenant to execute an attornment agreement if Landlord, in
its sole and absolute discretion, shall elect to have the Sublease continue
beyond the date of termination of this Lease; and (ix) The Sublease shall
require the Subtenant to agree that on receipt of notice from Landlord that
Tenant has defaulted, Subtenant shall pay all sums due under the Sublease to
Landlord.

 

18. OPTION TO EXTEND THE LEASE TERM:

 

  A. Grant and Exercise of Option:

Landlord grants to Tenant, subject to the terms and conditions set forth in this
Section 18 Two (2) options (each an “Option” and collectively the “Options”) to
extend the Lease Term for an additional term (each an “Option Term”). Each
Option Term shall be for a period of Sixty (60) months and shall be exercised,
if at all, by written notice to Landlord no earlier than eighteen (18) months
prior to the date the Lease

 

 

-25-

--------------------------------------------------------------------------------

Term would expire but for such exercise but no later than twelve (12) months
prior to the date the Lease Term would expire but for such exercise, time being
of the essence for the giving of such notice. If Tenant exercises an Option, all
of the terms, covenants and conditions of this Lease shall apply except for the
grant of additional Options pursuant to this Section 18, provided that Base
Monthly Rent for the Premises payable by Tenant during the Option Term shall be
the greater of (i) the Base Monthly Rent applicable to the period immediately
prior to the commencement of the Option Term, or (ii) one hundred percent
(100%) of the Fair Market Rental as hereinafter defined. Notwithstanding
anything herein to the contrary, (i) if Tenant is in monetary or material
non-monetary default under any of the terms, covenants or conditions of this
Lease, or (ii) if Tenant does not have the financial ability to meet its
obligations under this Lease, as reasonably determined by Landlord, either at
the time Tenant exercises the Option or at any time thereafter prior to the
commencement date of the Option Term, then Landlord shall have, in addition to
all of Landlord’s other rights and remedies provided in this Lease, the right to
terminate the Option upon notice to Tenant, in which event the Lease Term shall
not be extended pursuant to this Section 18.A. As used herein, the term “Fair
Market Rental” is defined as the rental and all other monetary payments,
including any abatements, escalations and adjustments thereto (including without
limitation Consumer Price Indexing) that Landlord could obtain during the Option
Term from a third party desiring to lease the Premises, based upon the
(i) current use and other potential uses of the Premises, as determined by the
rents (as may be abated) then obtainable for renewals of leases of space
comparable in age and quality to the Premises in the same real estate submarket
as the Building and (ii) the credit standing and financial stature of the
Tenant.

 

  B. Determination of Fair Market Rental:

If Tenant exercises an Option, Landlord shall send Tenant a notice setting forth
the Fair Market Rental for the Option Term within thirty (30) days following the
date of exercise. If Tenant disputes Landlord’s determination of Fair Market
Rental for the Option Term, Tenant shall, within

thirty (30) days after delivery to Tenant of Landlord’s notice setting forth
Fair Market Rental for the Option Term, send to Landlord a notice stating that
Tenant either elects to terminate its exercise of the Option, in which event the
Option shall lapse and this Lease shall terminate on the Expiration Date, or
that Tenant disagrees with Landlord’s determination of Fair Market Rental for
the Option Term and elects to resolve the disagreement as provided in
Section 18.C below. If Tenant does not timely send Landlord a notice as provided
in the previous sentence, Landlord’s determination of Fair Market Rental shall
be the Base Monthly Rent payable by Tenant during the Option Term. If Tenant
elects to resolve the disagreement as provided in Section 18.C below and such
procedures are not concluded prior to the commencement date of the Option Term,
Tenant shall pay to Landlord as Base Monthly Rent the Fair Market Rental as
determined by Landlord in the manner provided above. If the Fair Market Rental
as finally determined pursuant to Section 18.C is greater than Landlord’s
determination, Tenant shall pay Landlord the difference between the amount paid
by Tenant and the Fair Market Rental as so determined in Section 18.C within
thirty (30) days after such determination. If the Fair Market Rental as finally
determined in Section 18.C is less than Landlord’s determination, the difference
between the amount paid by Tenant and the Fair Market Rental as so determined in
Section 18.C shall be credited against the next installments of Base Monthly
Rent due from Tenant to Landlord hereunder.

 

  C. Resolution of a Disagreement over the Fair Market Rental:

Any disagreement regarding Fair Market Rental shall be resolved as follows:
Within thirty (30) days after Tenant’s response to Landlord’s notice setting
forth the Fair Market Rental, Landlord and Tenant shall meet at a mutually
agreeable time and place, in an attempt to resolve the disagreement. If within
the 30-day consultation period referred to above, Landlord and Tenant cannot
reach agreement as to Fair Market Rental, each party shall select one appraiser
to determine Fair Market Rental. Each such appraiser shall arrive at a
determination of Fair Market Rental and submit their conclusions

 

 

-26-

--------------------------------------------------------------------------------

to Landlord and Tenant within thirty (30) days after the expiration of the
30-day consultation period described above. If only one appraisal is submitted
within the requisite time period, it shall be deemed as Fair Market Rental. If
both appraisals are submitted within such time period and the two appraisals so
submitted differ by less than ten percent (10%) of the higher appraisal, the
average of the two shall be deemed as Fair Market Rental. If the two appraisals
differ by more than 5% of the higher appraisal, the appraisers shall immediately
select a third appraiser who shall, within thirty (30) days after his selection,
make and submit to Landlord and Tenant a determination as to whether Tenant’s
appraiser’s determination or Landlord’s appraiser’s determination is the Fair
Market Rental. All appraisers specified pursuant to this Section 18.C shall be
members of the American Institute of Real Estate Appraisers with not less than
ten (10) years experience appraising office and industrial properties in the
Santa Clara Valley. Each party shall pay the cost of the appraiser selected by
such party and one-half of the cost of the third appraiser.

 

  D. Personal to Tenant:

All Options provided to Tenant in this Lease are personal and granted to Cavium
Networks, Inc. (and it Permitted Transferees) and are not exercisable by any
third party (other than a Permitted Transferee) should Tenant assign or sublet
all or a portion of its rights under this Lease, unless Landlord consents to
permit exercise of any option by any assignee or subtenant, in Landlord’s sole
and absolute discretion. In the event Tenant has multiple options to extend this
Lease, a later Option to extend the Lease cannot be exercised unless the prior
Option has been properly exercised and the Option Term for that exercised prior
Option has commenced.

 

19. GENERAL PROVISIONS:

 

  A. Attorney’s Fees:

In the event a suit or alternative form of dispute resolution is brought for the
possession of the Premises, for the recovery of any sum due hereunder, to
interpret the Lease, or because of

the breach of any other covenant herein; then the losing party shall pay to the
prevailing party reasonable attorney’s fees and costs incurred in connection
with such proceeding, including the expense of expert witnesses, depositions and
court testimony. The prevailing party shall also be entitled to recover all
costs and expenses including reasonable attorney’s fees incurred in enforcing
any judgment or award against the other party. The foregoing provision relating
to post-judgment costs is severable from all other provisions of this Lease.

 

  B. Authority of Parties:

If Tenant is a corporation, partnership or other entity, Tenant represents and
warrants that Tenant is duly formed and in good standing, that each individual
signing this Lease is duly authorized to execute and deliver this Lease on
behalf of Tenant and to bind Tenant to this Lease in accordance with Tenant’s
governing documents, and that this Lease is binding upon Tenant in accordance
with its terms. At Landlord’s request, Tenant shall provide Landlord with
corporate resolutions or other proof in a form acceptable to Landlord, of the
authorizations described in this Section 19.B.

If Landlord is a corporation, partnership or other entity, Landlord represents
and warrants that Landlord is duly formed and in good standing, that each
individual signing this Lease is duly authorized to execute and deliver this
Lease on behalf of Landlord and to bind Landlord to this Lease in accordance
with Landlord’s governing documents, and that this Lease is binding upon
Landlord in accordance with its terms.

 

  C. Brokers:

Tenant represents it has not utilized or contacted a real estate broker or
finder with respect to this Lease other than Cornish and Carey Commercial
Newmark Knight Frank and Tenant agrees to indemnify, defend with counsel
reasonably acceptable to Landlord and hold Landlord and the Landlord Related
Parties harmless from and against all claims, liabilities, obligations,
penalties, fines, actions, losses, damages, costs or expenses (including without

 

 

-27-

--------------------------------------------------------------------------------

limitation reasonable attorneys fees) asserted by any other broker or finder
claiming through Tenant.

Landlord represents it has not utilized or contacted a real estate broker or
finder with respect to this Lease, and Landlord agrees to indemnify, defend with
counsel reasonably acceptable to Tenant and hold Tenant and Tenant’s Agents
harmless from and against all claims, liabilities, obligations, penalties,
fines, actions, losses, damages, costs or expenses (including without limitation
reasonable attorneys fees) asserted by any other broker or finder claiming
through Landlord.

 

  D. Choice of Law:

This Lease shall be governed by and construed in accordance with California law.
Venue for all court proceedings or alternative forms of dispute resolution
proceedings shall be Santa Clara County, California.

 

  E. ARBITRATION OF DISPUTES:

LANDLORD AND TENANT AND ANY OTHER PARTY THAT MAY BECOME A PARTY TO THIS LEASE OR
BE DEEMED A PARTY TO THIS LEASE, AND THEIR RESPECTIVE SUCCESSORS, ASSIGNS AND
SUBTENANTS, AGREE THAT, EXCEPT FOR ANY CLAIM BY LANDLORD FOR (I) UNLAWFUL
DETAINER, (II) TENANT’S FAILURE TO PAY THE BASE MONTHLY RENT, OR (III) WITHIN
THE JURISDICTION OF THE SMALL CLAIMS COURT (WHICH SMALL CLAIMS COURT SHALL BE
THE SOLE COURT OF COMPETENT JURISDICTION FOR SUCH SMALL CLAIMS MATTER), ANY
CONTROVERSY, DISPUTE, OR CLAIM OF WHATEVER NATURE ARISING OUT OF, IN CONNECTION
WITH OR IN RELATION TO THE INTERPRETATION, PERFORMANCE OR BREACH OF THIS LEASE,
INCLUDING ANY CLAIM BASED ON CONTRACT, TORT, OR STATUTE, SHALL BE RESOLVED AT
THE REQUEST OF ANY PARTY TO THIS LEASE, OR THEIR RESPECTIVE SUCCESSORS, ASSIGNS
AND SUBTENANTS, THROUGH DISPUTE RESOLUTION PROCESS

ADMINISTERED BY J.A.M.S. OR ANOTHER JUDICIAL MEDIATION SERVICE MUTUALLY
ACCEPTABLE TO THE PARTIES LOCATED IN SANTA CLARA COUNTY, CALIFORNIA. THE DISPUTE
RESOLUTION PROCESS SHALL CONSIST OF A FINAL AND BINDING ARBITRATION ADMINISTERED
BY AND IN ACCORDANCE WITH THE THEN EXISTING RULES AND PRACTICES OF J.A.M.S. OR
OTHER JUDICIAL MEDIATION SERVICE SELECTED, AND JUDGMENT UPON ANY AWARD RENDERED
BY THE ARBITRATOR(S) MAY BE ENTERED BY ANY STATE OR FEDERAL COURT HAVING
JURISDICTION THEREOF AS PROVIDED BY CALIFORNIA CODE OF CIVIL PROCEDURE SECTION
1280 ET. SEQ, AS SAID STATUTES THEN APPEAR, INCLUDING ANY AMENDMENTS TO SAID
STATUTES OR SUCCESSORS TO SAID STATUTES OR AMENDED STATUTES, EXCEPT THAT IN NO
EVENT SHALL THE PARTIES BE ENTITLED TO PROPOUND INTERROGATORIES OR REQUESTS FOR
ADMISSIONS DURING THE ARBITRATION PROCESS. THE ARBITRATOR SHALL BE A RETIRED
JUDGE OR A LICENSED CALIFORNIA ATTORNEY. THE VENUE FOR ANY SUCH ARBITRATION
SHALL BE IN SANTA CLARA COUNTY, CALIFORNIA.

NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE
ARISING OUT OF THE MATTERS INCLUDED IN THIS “ARBITRATION OF DISPUTES” PROVISION
DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING
UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY
TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS
TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THIS
“ARBITRATION OF DISPUTES” PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION
AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE
AUTHORITY OF

 

 

-28-

--------------------------------------------------------------------------------

THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION
PROVISION IS VOLUNTARY.

WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING
OUT OF THE MATTERS INCLUDED IN THIS “ARBITRATION OF DISPUTES” PROVISION TO
NEUTRAL ARBITRATION.

Landlord: /s/ JMS Tenant: /s/ ADC

 

  F. Entire Agreement:

This Lease and the exhibits attached hereto contain all of the agreements and
conditions made between the Parties hereto and may not be modified orally or in
any other manner other than by written agreement signed by all parties hereto or
their respective successors in interest. This Lease supersedes and revokes all
previous negotiations, letters of intent, lease proposals, brochures,
agreements, representations, promises, warranties, and understandings, whether
oral or in writing, between the parties or their respective representatives or
any other person purporting to represent Landlord or Tenant.

 

  G. Entry by Landlord:

Upon prior notice to Tenant (except in case of emergency, where no prior notice
shall be required) and subject to Tenant’s reasonable security regulations,
Tenant shall permit Landlord and Landlord’s agents to enter into and upon the
Premises at all reasonable times, and without any rent abatement or reduction or
any liability to Tenant for any loss of occupation or quiet enjoyment of the
Premises thereby occasioned, for the following purposes: (i) inspecting and
maintaining the Premises; (ii) making repairs, alterations or additions to the
Premises; (iii) erecting additional building(s) and improvements on the land
where the Premises are situated or on adjacent land owned by Landlord;
(iv) performing any obligations of Landlord under the Lease including
remediation of Hazardous Materials if determined to be the responsibility of
Landlord, (v) posting and keeping posted thereon notices of non responsibility
for any construction, alteration

or repair thereof, as required or permitted by any law, and (vi) placing “For
Sale” signs, and showing the Premises to Landlord’s existing or potential
successors, purchasers and lenders. Tenant shall permit Landlord and Landlord’s
agents, (i) at any time Tenant vacates the Premises (other than in connection
with a Permitted Transfer or a sublease of the entire Premises) and (ii) at any
time within nine (9) months prior to the Expiration Date (or at any time during
the Lease Term that Tenant is in default hereunder), to place upon the Premises
or within the exterior Common Areas “For Lease” signs, and exhibit the Premises
to real estate brokers and prospective tenants at reasonable hours. At any time
when Tenant does not rent all rentable space in the Project Landlord shall have
the right to place “For Lease” signs within the exterior Common Areas fronting
North First Street. In addition, at any time within twelve (12) months prior to
the Expiration Date (or at any time during the Lease Term that Tenant is in
default hereunder), Landlord shall have the right to place “For Lease” signs
within the exterior Common Areas.

 

  H. Estoppel Certificates:

At any time during the Lease Term, Tenant shall, within seven (7) business days
following written notice from Landlord, execute and deliver to Landlord a
written statement certifying, if true, the following: (i) that this Lease is
unmodified and in full force and effect (or, if modified, stating the nature of
such modification); (ii) the date to which rent and other charges are paid in
advance, if any; (iii) acknowledging that there are not, to Tenant’s knowledge,
any uncured defaults on Landlord’s part hereunder (or specifying such defaults
if they are claimed); and (iv) such other information as Landlord may reasonably
request. Any such statement may be conclusively relied upon by any prospective
purchaser or encumbrancer of Landlord’s interest in the Premises. Tenant’s
failure to deliver such statement within such time shall be conclusive upon the
Tenant that this Lease is in full force and effect without modification, except
as may be represented by Landlord, and that there are no uncured defaults in
Landlord’s performance. Tenant agrees to provide, within five (5) days of
Landlord’s request, Tenant’s most recent three (3)

 

 

-29-

--------------------------------------------------------------------------------

years of audited (or if audited is unavailable, certified) financial statements
for Landlord’s use in financing or sale of the Premises or Landlord’s interest
therein.

 

  I. Exhibits:

All exhibits referred to are attached to this Lease and incorporated by
reference.

 

  J. Interest:

All rent due hereunder, if not paid when due, shall bear interest at the Agreed
Interest Rate. This provision shall survive the expiration or sooner termination
of the Lease. Despite any other provision of this Lease, the total liability for
interest payments shall not exceed the limits, if any, imposed by the usury laws
of the State of California. Any interest paid in excess of those limits shall be
refunded to Tenant by application of the amount of excess interest paid against
any sums outstanding in any order that Landlord requires. If the amount of
excess interest paid exceeds the sums outstanding, the portion exceeding those
sums shall be refunded in cash to Tenant by Landlord. To ascertain whether any
interest payable exceeds the limits imposed, any non-principal payment
(including late charges) shall be considered to the extent permitted by law to
be an expense, fee or premium rather than interest.

 

  K. Modifications Required by Lender:

If any lender of Landlord or ground lessor of the Premises requires a
modification of this Lease that will not increase Tenant’s cost or expense or
materially or adversely change Tenant’s rights and obligations, this Lease shall
be so modified and Tenant shall execute whatever documents are required and
deliver them to Landlord within ten (10) days after the request.

 

  L. No Presumption Against Drafter:

Landlord and Tenant understand, agree and acknowledge that this Lease has been
freely negotiated by both Parties; and that in any controversy, dispute, or
contest over the meaning, interpretation, validity, or enforceability of this
Lease or any of its terms or conditions, there shall

be no inference, presumption, or conclusion drawn whatsoever against either
party by virtue of that party having drafted this Lease or any portion thereof.

 

  M. Notices:

All notices, demands, requests, or consents required to be given under this
Lease shall be sent in writing by U.S. certified mail, return receipt requested,
or by personal delivery addressed to the party to be notified at the address for
such party specified in Section 1 above of this Lease, or to such other place as
the party to be notified may from time to time designate by at least fifteen
(15) days prior notice to the notifying party. When this Lease requires service
of a notice, that notice shall be deemed to constitute and satisfy the
requirements of any equivalent or similar statutory notice, including any
notices required by Code of Civil Procedure Section 1161 or any similar or
successor statute..

 

  N. Property Management:

In addition, Tenant agrees to pay Landlord along with the expenses to be
reimbursed by Tenant a monthly fee for management services rendered by either
Landlord or a third party manager engaged by Landlord (which may be a party
affiliated with Landlord), in the amount of three percent (3%) of the Base
Monthly Rent.

 

  O. Rent:

All monetary sums due from Tenant to Landlord under this Lease, including,
without limitation those referred to as “additional rent”, shall be deemed as
rent.

 

  P. Representations:

Except for the provisions of this Lease, Tenant acknowledges that neither
Landlord nor any of its employees or agents have made any agreements,
representations, warranties or promises with respect to the Premises or Project
or with respect to present or future rents, expenses, operations, tenancies or
any other matter. Except as herein expressly set forth herein, Tenant relied on
no statement of Landlord or its employees or agents for that purpose.

 

 

-30-

--------------------------------------------------------------------------------

  Q. Rights and Remedies:

Subject to Section 13 above, all rights and remedies hereunder are cumulative
and not alternative to the extent permitted by law, and are in addition to all
other rights and remedies in law and in equity.

 

  R. Severability:

If any term or provision of this Lease is held unenforceable or invalid by a
court of competent jurisdiction, the remainder of the Lease shall not be
invalidated thereby but shall be enforceable in accordance with its terms,
omitting the invalid or unenforceable term.

 

  S. Submission of Lease:

Submission of this document for examination or signature by the Parties does not
constitute an option or offer to lease the Premises on the terms in this
document or a reservation of the Premises in favor of Tenant. This document is
not effective as a lease or otherwise until executed and delivered by both
Landlord and Tenant.

 

  T. Subordination:

This Lease is subject and subordinate to ground and underlying leases, mortgages
and deeds of trust (collectively “Encumbrances”) which may now affect the
Premises, to any covenants, conditions or restrictions of record, and to all
renewals, modifications, consolidations, replacements and extensions thereof;
provided, however, if the holder or holders of any such Encumbrance (“Holder”)
require that this Lease be prior and superior thereto, within ten (10) business
days after written request of Landlord to Tenant, Tenant shall execute, have
acknowledged and deliver all documents or instruments, in the form presented to
Tenant, which Landlord or Holder deems necessary or desirable for such purposes.
Landlord shall have the right to cause this Lease to be and become and remain
subject and subordinate to any and all Encumbrances which are now or may
hereafter be executed covering the Premises or any renewals, modifications,
consolidations, replacements or extensions thereof, for the full amount of all
advances made or to be made thereunder and

without regard to the time or character of such advances, together with interest
thereon and subject to all the terms and provisions thereof; provided only, that
with respect to Encumbrances created after the Effective Date, in the event of
termination of any such lease or upon the foreclosure of any such mortgage or
deed of trust, Holder agrees to recognize Tenant’s rights under this Lease as
long as Tenant is not then in default and continues to pay Base Monthly Rent and
additional rent and observes and performs all required provisions of this Lease.
Within ten (10) business days after Landlord’s written request, Tenant shall
execute any documents required by Landlord or the Holder to make this Lease
subordinate to any lien of the Encumbrance; provided the same include the above
referenced acknowledgement and non-distburbance. If Tenant fails to do so, then
in addition to such failure constituting a default by Tenant, it shall be deemed
that this Lease is so subordinated to such Encumbrance. Notwithstanding anything
to the contrary in this Section 19.T, Tenant hereby attorns and agrees to attorn
to any entity purchasing or otherwise acquiring the Premises at any sale or
other proceeding or pursuant to the exercise of any other rights, powers or
remedies under such Encumbrance.

 

  U. Survival of Indemnities:

All indemnification, defense, and hold harmless obligations of Landlord and
Tenant under this Lease shall survive the expiration or sooner termination of
the Lease.

 

  V. Time:

Time is of the essence hereunder.

 

  W. Transportation Demand Management Programs:

Should a government agency or municipality require Landlord to institute TDM
(Transportation Demand Management) facilities and/or programs, Tenant agrees
that the cost of TDM imposed facilities and programs required on the Premises,
including but not limited to employee showers, lockers, cafeteria, or lunchroom
facilities, shall be paid by Tenant. Further, any ongoing costs or expenses
associated

 

 

-31-

--------------------------------------------------------------------------------

with a TDM program which are required for the Premises and not provided by
Tenant, such as an on-site TDM coordinator, shall be provided by Landlord with
such costs being included as additional rent and reimbursed to Landlord by
Tenant within thirty (30) days after demand. If TDM facilities and programs are
instituted on a Project wide basis, Tenant shall pay its allocable share of such
costs in accordance with Section 8.E above.

 

  X. Waiver of Right to Jury Trial:

To the extent then authorized by law as of the time of any actual litigation
between them and to the extent not already encompassed within the various
agreements to arbitrate otherwise contained herein, and as an alternative to
arbitration should arbitration for any reason not be enforced, Landlord and
Tenant waive their respective rights to trial by jury of any contract or tort
claim, counterclaim, cross-complaint, or cause of action in any action,
proceeding, or hearing brought by either party against the other on any matter
arising out of or in any way connected with this Lease, the relationship of
Landlord and Tenant, or Tenant’s use or occupancy of the Premises, including any
claim of injury or damage or the enforcement of any remedy under any current or
future law, statute, regulation, code, or ordinance.

 

  Y. General:

The captions and section headings of this Lease are for convenience of reference
only, and shall not be used to limit, extend or interpret the meaning of any
part of this Lease. This Lease may be executed in multiple counterparts, each of
which shall be deemed an original and all of which together shall constitute one
and the same document. All agreements by Tenant contained in this Lease, whether
expressed as covenants or conditions, shall be construed to be both covenants
and conditions, conferring upon Landlord, in the event of a breach thereof, the
right to terminate this Lease.

 

  Z. Furniture, Fixtures and Equipment:

Landlord shall deliver to Tenant, upon the Commencement Date, (i) the existing
furniture

and AV system at the Premises in their current condition, (ii) the existing
security and card key systems at the Premises in operational condition and
separated, at Landlord’s cost, from the security and card key systems for the
adjacent building at 2345 North First Street, and (iii) the generator at the
Premises in good working order (collectively, the “FF&E”). Except for the
foregoing, Landlord shall have no obligation for the condition, maintenance or
repair of the FF&E at any time during the Lease Term. Tenant shall have the
right to use the FF&E for the term of the Lease at not charge. At the expiration
or sooner termination of the Lease, Tenant shall return the FF&E to Landlord in
the condition it was received normal wear and tear excepted.

 

 

-32-

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease on the day and
year first above written.

 

Landlord:

SI 37, LLC,

a California limited liability company

By:  

Sobrato Interests 1,

a California limited partnership

Its:   Sole Member       By:  

Sobrato Development Companies, LLC,

a California limited liability company

      Its:   General Partner         By:  

/s/ John Michael Sobrato

              John Michael Sobrato         Its:   Manager

 

Tenant:

 

Cavium Networks, Inc.

 

a Delaware Corporation

By:  

/s/ Arthur Chadwick

        Arthur Chadwick, CFO

 

-33-

--------------------------------------------------------------------------------

EXHIBIT “A” – Premises & Building

 

-34-

--------------------------------------------------------------------------------

EXHIBIT “B” - Project

 

-35-

--------------------------------------------------------------------------------

EXHIBIT “G” – Landlord’s Work

 

A. Create lunch room with upper and lower cabinetry, sink, disposal, dishwasher
and tile floor and an outside patio area accessible directly from the lunch
room.

 

B. Repair stretched and worn out carpet.

 

C. Install ESD tile and distribute no more than 5 additional power plugs in all
labs and shipping/receiving operations areas.

 

D. Replace cubicles and wire/electricity similar to all of the existing cubes in
the area where they have been removed.

 

E. Replace stained ceiling tiles and repair the cause.

 

F. Patch and paint walls where needed.

 

G. Remove one wall in the first floor lab area.

 

-36-