Exhibit 10.27
Lease between
Sobrato Development Companies #871
And
Terayon Communication Systems, Inc.

                  Section       Page # 1.   Parties     1   2.   Premises     1
  3.   Use     1  
 
  A.   Permitted Uses     1  
 
  B.   Uses Prohibited     1  
 
  C.   Advertisements and Signs     1  
 
  D.   Covenants, Conditions and Restrictions     1   4.   Term and Rental     2
 
 
  A.   Base Monthly Rent     2  
 
  B.   Late Charges     2  
 
  C.   Security Deposit     2  
 
  D.   Habitual Default         5.   Construction     3   6.   Acceptance of
Possession and Covenants to Surrender     3  
 
  A.   Delivery and Acceptance     3  
 
  B.   Condition Upon Surrender     3  
 
  C.   Failure to Surrender     4   7.   Alterations and Additions     4  
 
  A.   Tenant’s Alterations     4  
 
  B.   Free from Liens     5  
 
  C.   Compliance with Governmental Regulations     5  
 
  D.   Conduit and Communications Equipment         8.   Maintenance of Premises
    6  
 
  A.   Landlord’s Obligations     6  
 
  B.   Tenant’s Obligations     6  
 
  C.   Waiver of Liability     6  
 
  D.   Capital Improvements     6   9.   Hazard Insurance     7  
 
  A.   Tenant’s Use     7  
 
  B.   Landlord’s Insurance     7  
 
  C.   Tenant’s Insurance     7  
 
  D.   Waiver     7   10.   Taxes     8   11.   Utilities     8   12.   Toxic
Waste and Environmental Damage     8  
 
  A.   Use of Hazardous Material     8  
 
  B.   Tenant’s Indemnity Regarding Hazardous Material     9  
 
  C.   Notice of Release or Violation     9  
 
  D.   Remediation Obligations     10  
 
  E.   Environmental Monitoring     10  
 
  F.   Landlord Indemnification     10   13.   Tenant’s Default     11  
 
  A.   Remedies     11  
 
  B.   Right to Re-enter     11  
 
  C.   Continuation of Lease     11  
 
  D.   No Termination     12  
 
  E.   Non-Waiver     12  
 
  F.   Performance by Landlord     12  
 
  G.   Habitual Default     12  

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                  Section       Page # 14.   Landlord’s Liability     12  
 
  A.   Limitation on Landlord’s Liability     12  
 
  B.   Limitation on Tenant’s Recourse     13  
 
  C.   Indemnification of Landlord     13   15.   Destruction of Premises     13
 
 
  A.   Landlord’s Obligation to Restore     13  
 
  B.   Limitations on Landlord’s Restoration Obligation     14   16.  
Condemnation     14   17.   Assignment or Sublease     14  
 
  A.   Consent by Landlord     14  
 
  B.   Assignment or Subletting Consideration     15  
 
  C.   No Release     16  
 
  D.   Reorganization of Tenant     16  
 
  E.   Permitted Transfers     17  
 
  F.   Effect of Default     17  
 
  G.   Effects of Conveyance     17  
 
  H.   Successors and Assigns     17  
 
  I.   Sublease Requirements     17   18.   Option to Extend the Lease Term    
18  
 
  A.   Grant and Exercise of Option     18  
 
  B.   Determination of Fair Market Rental     18  
 
  C.   Resolution of a Disagreement over the Fair Market Rental     19  
 
  D.   Personal to Tenant     19   19.   General Provisions     19  
 
  A.   Attorney’s Fees     19  
 
  B.   Authority of Parties     19  
 
  C.   Brokers     19  
 
  D.   Choice of Law     19  
 
  E.   Dispute Resolution     19  
 
  F.   Entire Agreement     20  
 
  G.   Entry by Landlord     21  
 
  H.   Estoppel Certificates     21  
 
  I.   Exhibits     21  
 
  J.   Interest     21  
 
  K.   Modifications Required by Lender     21  
 
  L.   No Presumption Against Drafter     21  
 
  M.   Notices     21  
 
  N.   Property Management     22  
 
  O.   Rent     22  
 
  P.   Representations     22  
 
  Q.   Rights and Remedies     22  
 
  R.   Severability     22  
 
  S.   Submission of Lease     22  
 
  T.   Subordination     22  
 
  U.   Survival of Indemnities     22  
 
  V.   Time     23  
 
  W.   Waiver of Right to Jury Trial     23   EXHIBIT “A” – Premises & Building
    25   EXHIBIT “B” – Initial Alterations     26  

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1. PARTIES: THIS LEASE, is entered into on this 28th day of July 2006 (subject
to the last sentence in this Section 1, “Effective Date”) between Sobrato
Development Companies #871, a California limited partnership whose address is
10600 North De Anza Boulevard, Suite 200, Cupertino, CA 95014 and Terayon
Communication Systems, Inc., a Delaware corporation whose address is 4988 Great
America Parkway, Santa Clara, California, 95054, hereinafter called respectively
Landlord and Tenant. Landlord and Tenant are collectively referred to in this
Lease as the “Parties”. Notwithstanding anything contained in this Lease to the
contrary, this Lease shall not be effective until:
     [(i)] the commencement of the Triple Net Sub-sublease, dated as of June 27,
2006, by and between Tenant and Citrix Systems, Inc. (“Citrix”), as amended by
that certain letter agreement dated July 20, 2006 (collectively, the
“Sub-sublease”), including the occurrence of all the Conditions Precedent (as
defined in the Sub-sublease) or Citrix’ waiver of Conditions Precedents that
remain unsatisfied, if any, by the date required under the Sub-sublease
2. PREMISES: Landlord hereby leases to Tenant, and Tenant hires from Landlord
those certain premises with the appurtenances, situated in the City of Santa
Clara, County of Santa Clara, State of California, commonly known and designated
as 2450 Walsh Avenue (“Premises”). For purposes of this Lease the building is
deemed to be 63,069 rentable square feet (“Building”) including parking for
approximately 240 cars as cross-hatched on Exhibit “A” and all improvements
located therein including but not limited to buildings, parking areas and
structures, landscaping, loading docks, sidewalks, service areas and other
facilities.
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 space,
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 Premises, and (iii) permitted to remain within the Premises
only so long as is reasonably necessary to complete the loading and unloading.
Landlord makes no representation or warranty that any specific use of the
Premises desired by Tenant is permitted pursuant to any Laws.
     B. Uses Prohibited: Tenant shall not commit or suffer to be committed on
the Premises any waste, nuisance, or other act or thing which may disturb the
quiet enjoyment of any other tenant in or around the Premises, 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,
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,
including without limitation the soils or ground water in or around the
Premises. 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 without Landlord’s prior
approval, which approval may be withheld in its sole discretion.
     C. Advertisements and Signs: Tenant will 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 or delayed. Any sign
placed on the Premises shall be removed by Tenant, at its sole cost, prior to
the Expiration Date (as defined in Section 4.A. below) or promptly following the
earlier 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, 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

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to and will not violate the terms of any such Restrictions.
4. TERM AND RENTAL:
     A. Base Monthly Rent: The term (“Lease Term”) shall be for [thirty six
(36)] months, commencing on October 1, 2006 (the “Commencement Date”) and ending
on September 30, 2009, (“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. In addition to all other sums
payable by Tenant under this Lease, Tenant shall pay base monthly rent (“Base
Monthly Rent”) for the Premises according to the following schedule:

     
10/1/06 - 09/30/07:
  $63,069.00 per month
10/01/07 - 09130/08:
  $64,961.00 per month
10/01/08 - 09/30/09:
  $66,910.00 per month

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 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. Concurrently with Tenant’s execution of this Lease, Tenant shall
pay to Landlord the sum of Sixty Three Thousand Sixty Nine and No/100 Dollars
($63,069.00) as a deposit to be applied on the Commencement Date against the
Base Monthly Rent due for the first month of the Lease Term.
     B. Late Charges: 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 Tenant’s receipt of Landlord’s written notice of such
failure to pay rent (“Late Rent Notice”), 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. If
Landlord sent a Late Rent Notice to Tenant three (3) times within the Lease
Term, all late charges subsequent to the third Late Rent noticed shall become
due automatically after Tenant’s failure to pay such Base Monthly Rent or other
sum due from Tenant within five (5) days after the same is due without any
obligation of Landlord to provide any Late Rent Notice to Tenant. 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 attorney’s fees and costs. If any 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 shall pay to Landlord interest on any rent that is
not paid when due at the Agreed Interest Rate (as defined in Section 19.J.
below) following 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.
     C. Security Deposit: Concurrently with Tenant’s execution of this Lease,
Tenant shall provide Landlord a letter of credit (“Letter of Credit”) in the
amount of Sixty Three Thousand Sixty Nine and No/100 Dollars ($63,069.00) and in
a form reasonably acceptable to Landlord (the Letter of Credit and all proceeds
thereof being referred to as the “Security “Deposit”). If Tenant defaults with
respect to any provisions of the Lease, including but not limited to the
provisions relating to payment of (i) Base Monthly Rent or other charges in
default; or (ii) any other amount which Landlord may spend or become obligated
to spend by reason of Tenant’s default, Landlord shall be entitled to draw the
full amount of the Letter of Credit at any time by certifying the occurrence of
such default to the issuer. 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

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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. Tenant shall keep the Letter of Credit in effect during the
entire Lease Term, as the same may be extended, plus a period of four (4) weeks
following the Expiration Date. At least thirty (30) days prior to expiration of
any Letter of Credit, the term thereof shall be renewed or extended for a period
of at least one (1) year. Tenant’s failure to so renew or extend the Letter of
Credit shall be a material default of this Lease by Tenant. In the event
Landlord draws against the Letter of Credit, Tenant shall replenish the existing
Letter of Credit or cause a new Letter of Credit to be issued such that the
aggregate amount of Letter of Credit available to Landlord at all times during
the Lease Term is the amount of the Security Deposit originally required. If
Tenant performs every provision of this Lease to be performed by Tenant, the
Letter of Credit shall be returned to Tenant within thirty (30) days alter the
Expiration Date and surrender of the Premises to Landlord, less any amount
deducted in accordance with this Section 4.C., 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 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 shall deliver the Letter of Credit to Landlord’s successor in
interest in the Premises and thereupon be relieved of further responsibility
with respect to the Letter of Credit. 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 Letter of Credit 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.
5. CONSTRUCTION:
          Except as otherwise specifically provided in this Lease, The parties
acknowledge that Landlord is not performing any construction pursuant to this
Lease.
6. ACCEPTANCE OF POSSESSION AND COVENANTS TO SURRENDER:
     A. 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 on the Commencement Date; provided, however, that
Landlord shall be responsible to put the existing heating, ventilating and air
conditioning (“HVAC”) systems, plumbing, sprinklers, electrical (including
panels and outlets), structural elements, and Building foundation into good
operating condition and repair, and replace all broken, marred, stained or
inconsistent acoustical ceiling tiles. 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 then existing condition, subject to all
Restrictions and without representation or warranty by Landlord.
     B. Condition Upon Surrender: Tenant further agrees on the Expiration Date
or on the sooner termination of this Lease, to surrender the Premises to
Landlord in good condition and repair, normal wear and tear excepted. 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 patched, cleaned, and otherwise made paint-ready, (ii) all tiled floors
shall be cleaned and waxed, (iii) all carpets shall be cleaned and shampooed,
(iv) all broken, marred, stained or nonconforming acoustical ceiling tiles shall
be 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” as 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 (including Tenant’s phone switch and security systems) from the
Premises. All

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property and fixtures not so removed shall be deemed as abandoned by Tenant.
Tenant shall ascertain from Landlord at least ninety (90) days before the
Expiration Date whether Landlord desires to have any Alterations (as defined in
Section 7), with the exception of Initial Alterations as defined in Section 7
below, removed and the Premises or any parts thereof restored to their condition
as of the Commencement Date, or to cause Tenant to surrender all Alterations in
place to Landlord. If Landlord shall so desire, 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. 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 to the extent such compliance is necessitated by the repair and
restoration work. As an alternative to Tenant performing the restoration work as
set forth in this Section 6.B, Tenant may request in writing, no later than one
hundred twenty (120) days prior to the Lease Expiration Date, that Landlord
provide an estimate of Tenant’s total surrender cost, and Tenant shall have the
option to pay Landlord such estimated amount in lieu of actually completing its
surrender and restoration obligations under this paragraph, such payment to be
made to Landlord within fifteen (15) days of Tenant’s receipt of such estimate.
     C. Failure to Surrender: If the Premises are not surrendered at the
Expiration Date or sooner termination of this Lease in the condition required by
this Section 6, Tenant shall be deemed in a holdover tenancy pursuant to this
Section 6.C. and Tenant shall indemnify, defend, and hold Landlord harmless
against loss or liability 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 at the Agreed Interest Rate as defined
in Section 19.J. below. If Tenant remains in possession of the Premises after
the Expiration Date or sooner termination of this Lease without Landlord’s
consent, Tenant’s continued possession shall be on the basis of a tenancy at
sufferance and Tenant shall pay as rent during the holdover period an amount
equal to 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. Any holding over shall
otherwise be on the terms and conditions herein specified, except those
provisions relating to the Lease Term and any options to extend or renew, which
provisions shall be of no further force and effect. This provision shall survive
the termination or expiration of the Lease.
7. ALTERATIONS AND ADDITIONS:
     A. Tenant’s Alterations: 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, which consent shall not be
unreasonably withheld, conditioned or delayed, and delivering 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. After
obtaining Landlord’s consent, which consent shall state whether or not Landlord
will require Tenant to remove such Alteration at the expiration or earlier
termination of this Lease, Tenant shall not proceed to make such Alterations
until Tenant has obtained all required governmental approvals and permits, and
provides Landlord reasonable security, in form reasonably approved by Landlord,
to protect Landlord against mechanics’ lien claims. Tenant agrees to provide
Landlord (i) 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
(provided, however, that Landlord shall not require Tenant to update any of
Landlord’s existing “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
building codes and laws including, without limitation, the Americans with
Disabilities Act of 1990 as amended from time to time. Upon the Expiration Date,
all Alterations, except movable furniture and trade fixtures (including Tenant’s
phone switch and security systems), 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 above. Alterations which are not deemed as trade fixtures include
heating, lighting, electrical systems, air conditioning, walls, carpeting, or
any other 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.
The parties acknowledge that Tenant intends to make certain improvements to the
Premises (“Initial Alterations”) prior to initial occupancy of the

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Premises, as shown on the attached Exhibit “B”. Landlord hereby consents to such
Initial Alterations and waives any right to have such Initial Alterations
removed at the expiration or sooner termination of this Lease, provided Tenant
first obtains all necessary governmental approvals and permits associated with
construction, and thereafter complies with all provisions of the items (i),
(ii) and (iii) of this Section 7.A.
     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 Tenant. In the event Tenant fails
to discharge any such lien within ten (10) 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, standards, rules, 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 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.
     D. Rooftop Communications Equipment: Notwithstanding the provisions of
Section 7.A above, Tenant shall have the right, at its sole cost and expense, to
install antennae, satellite dishes and other communications systems and
equipment (“Rooftop Communications Systems”) on the roof of the Building at no
additional rent cost to Tenant and at a location reasonably acceptable to Tenant
and consistent with the intended use of the equipment while at the same time
reasonably minimizing its visibility. All permits, application fees, and all
costs associated with the Rooftop Communications Systems shall be Tenant’s
responsibility. Tenant, at its sole cost and expense, shall have the exclusive
right to install, maintain, and from time to time replace all or a portion of
the Rooftop Communications Systems on the roof of the Building, provided that
prior to commencing any installation or maintenance, Tenant shall (i) obtain
Landlord’s prior approval (which approval shall not be unreasonably withheld,
conditioned or delayed) of the proposed size, weight and location of such
Rooftop Communications Systems and method for fastening such Rooftop
Communications Systems to the roof, (ii) such installation and/or replacement
shall comply strictly with all Laws and the conditions of any bond or warranty
maintained by Landlord on the roof, and (iii) obtain, at Tenant’s sole cost and
expense, any necessary federal, state, and municipal permits, licenses and
approvals, and deliver copies thereof to Landlord. Tenant agrees that all
installation, construction and maintenance shall be performed in a neat,
responsible, and workmanlike manner, using generally acceptable construction
standards, consistent with such reasonable requirements as shall be imposed by
Landlord. Tenant shall repair any damage to the Building caused by Tenant’s
installation, maintenance, replacement, use or removal of the Rooftop
Communications Systems. The Rooftop Communications Systems shall remain the
property of Tenant, and Tenant may remove the Rooftop Communications Systems at
its cost at any time during the Term. Tenant shall remove the Rooftop
Communications Systems at Tenant’s cost and expense upon the expiration or
termination of this Lease and shall repair any damage to the Building caused by
such removal. Landlord makes no warranty or representation that the Building or
any portions thereof are suitable for the use of the Rooftop Communications
Systems. Except to the extent caused by Landlord’s gross negligence or willful
misconduct, Tenant shall protect, defend, indemnify and hold harmless Landlord
and Landlord’s agents, employees, shareholders, directors, officers, trustees,
partners, affiliates, contractors, subtenants or invitees (“Landlord’s Agents”)
from and against claims, damages, liabilities, costs and expenses of every kind
and nature, including attorneys’ fees, incurred by or asserted against Landlord
arising out of Tenant’s installation, maintenance, replacement, use or removal
of the Rooftop Communications Systems.

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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 foundation, exterior load bearing walls and roof structure of the
Building Shell.
     B. Tenant’s Obligations: Tenant shall clean, maintain, repair and replace
when necessary the Premises and every part thereof through regular inspections
and servicing, including but not limited to: (i) all plumbing and sewage
facilities, (ii) all heating ventilating and air conditioning facilities and
equipment, (iii) all fixtures, interior walls floors, carpets and ceilings,
(iv) all windows, door entrances, plate glass and glazing systems including
caulking, and skylights, (v) all electrical facilities and equipment, (vi) all
automatic fire extinguisher equipment, (vii) the parking lot and all underground
utility facilities servicing the Premises, (viii) all elevator equipment,
(ix) the roof membrane system (subject to Section 8.D below); and (x) all
waterscape, landscaping and shrubbery. 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 items (ii), (viii) and
(ix) 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.
     C. 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. 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 unless such loss or injury is due to Landlord’s gross negligence or
willful misconduct.
     D. Capital Improvements: If as a part of Tenant’s fulfillment of its
maintenance obligations under this Section 8, a capital improvement or
replacement to the Premises (with the exception of the roof membrane) is paid
for by Tenant which costs in excess of Ten Thousand Dollars ($10,000.00),
Landlord shall reimburse Tenant for the cost of the replacement less the sum of
(i) Ten Thousand Dollars ($10,000.00) plus (ii) that portion of the remaining
cost equal to the product of such total cost multiplied by a fraction, the
numerator of which is the number of years remaining in the Lease Term, the
denominator of which is the useful life (in years) of the replacement, as
reasonably determined in accordance with generally accepted accounting
principles. If the capital improvement is made during the Lease Term, Tenant’s
share shall initially be based on the Lease Term and if Tenant thereafter
exercises its renewal Option (as defined in Section 18.A. below), then upon the
commencement of the Option Term (as defined in Section 18.A. below), an
adjustment shall be made so that during the Option Term Tenant shall reimburse
Landlord an amount determined by multiplying the cost of the capital improvement
by a fraction, the numerator of which is the sum of the Lease Term remaining at
the time the capital expenditure was made and the Option Term and the
denominator of which is the useful life of the capital improvement.
If Landlord and Tenant reasonably agree that a new roof membrane is necessary,
Landlord shall reimburse Tenant for the cost of the new roof membrane less the
cost equal to the product of such total cost multiplied by a fraction, the
numerator of which is the number of years remaining in the Lease Term, the
denominator of which is the useful life (in years) of the roof membrane, as
reasonably determined in accordance with generally accepted accounting
principles. If the roof membrane is installed during the Lease Term, Tenant’s
share shall initially be based on the Lease Term and if Tenant thereafter
exercises its Option, then upon the commencement of the Option Term, an
adjustment

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shall be made so that during the Option Term Tenant shall reimburse Landlord an
amount determined by multiplying the cost of the roof membrane by a fraction,
the numerator of which is the sum of the Lease Term remaining at the time the
roof membrane was installed and the Option Term and the denominator of which is
the useful life of the roof membrane.
9. HAZARD 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 (not including any Initial Alterations or Alterations paid for by
Tenant) as determined by Landlord’s insurance company’s appraisers. At
Landlord’s election, such fire and property damage insurance may be endorsed to
cover loss caused by such additional perils against which Landlord may elect to
insure, including earthquake, flood or terrorist acts, and shall contain
reasonable deductibles. Additionally Landlord may 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 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, on demand, the full
cost of said insurance as evidenced by insurance billings to Landlord, and in
the event of damage covered by said insurance, the amount of any deductible
under such policy. Payment shall be due to Landlord within ten (10) days after
written invoice to Tenant. It is understood and agreed that Tenant’s obligation
under this Section 9 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, Initial Alterations, 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 casualty insurance provided by Tenant as required by this paragraph
shall be carried in favor of Landlord and Tenant as their respective interests
may appear and shall provide that any loss to Initial 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, and to obtain worker’s compensation and Commercial General Liability
insurance for occurrences within the Premises with a combined single limit of
not less than Five Million Dollars ($5,000,000.00). 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, and 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 lender as an additional insureds and shall deliver
a copy of the policies and renewal certificates to Landlord. All insurance
policies required under this Section 9 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 he 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. 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.

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10. TAXES: Tenant shall be liable for and shall pay as additional rental, prior
to delinquency, the following: (i) all taxes and assessments levied against
Tenant’s personal property and trade or business fixtures; (ii) all real estate
taxes and assessment installments or other impositions or charges which may be
levied on the Premises or upon the occupancy of the Premises, including any
substitute or additional charges which may be imposed applicable to the Lease
Term; and (iii) real estate tax increases due to an increase in assessed value
resulting from a sale, transfer or other change of ownership of the Premises as
it appears on the City and County tax bills during the Lease Term. 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 the Premises’ 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, 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
increase the Base Monthly Rent by the exact amount of such tax and Tenant shall
pay such increase. If by virtue of any application or proceeding brought by
Landlord, there results a reduction in the assessed value of the Premises during
the Lease Term, Tenant agrees to pay Landlord a fee consistent with the fees
charged by a third party appeal firm for such services.
11. UTILITIES: Tenant shall 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, with the exception of any loss or injury resulting from Landlord’s
own gross negligence or willful misconduct, through or in connection with or
incidental to furnishing or the utility company’s failure to furnish utilities
to the Premises, 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.
12. TOXIC WASTE AND ENVIRONMENTAL DAMAGE:
     A. Use of Hazardous Material: Without the prior written consent of
Landlord, Tenant or Tenant’s agents, employees, contractors, subtenants or
invitees (“Tenant’s Agents”) shall not cause or permit any Hazardous Material,
as defined below, to be generated, brought onto, used, stored, created, released
or disposed of in or about the Premises, 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
Material” shall mean any substance, material or waste (whether liquid, solid or
gaseous), which is a pollutant or contaminant, or which is hazardous, toxic,
ignitable, reactive, corrosive, dangerous, harmful or injurious, or which
presents a risk to public health or the environment, or which is 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
law, 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 Material, 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. In order to obtain
consent, Tenant shall deliver to Landlord its written proposal describing the
Hazardous Material 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 Material including
doing the following: (i) adhere to all reporting and inspection requirements
imposed by Federal, State, County or Municipal laws, ordinances or regulations
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

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and handling of Hazardous Material on the Premises; enforce Hazardous Material
handling and disposal practices consistent with industry standards; surrender
the Premises free from any Hazardous Materials arising from Tenant’s generating,
bringing, using, storing, creating, releasing, or disposing of Hazardous
Material; and (v) properly close the facility with regard to Hazardous Material
including the removal or decontamination of any process piping, mechanical
ducting, storage tanks, containers, or trenches which have come into contact
with Hazardous Material and obtaining a closure certificate from the local
administering agency prior to the Expiration Date.
     B. Tenant’s Indemnity Regarding Hazardous Material: Tenant shall, at its
sole cost and expense and with counsel reasonably acceptable to Landlord,
indemnify, defend and hold harmless Landlord, Landlord’s Agents, successors and
assigns from, and against any and all claims, liabilities, obligations,
penalties, fines, actions, costs or expenses incurred or suffered by the
foregoing parties arising from generating, bringing, using, storing, creating,
releasing or disposing of Hazardous Material by Tenant or Tenant’s Agents in or
about the Premises, or the violation of any Governmental Regulation or
Environmental Laws by Tenant or Tenant’s Agents. This indemnification applies
whether or not the concentrations of any such Hazardous Material 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
Material 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 or the Building (iv) loss or restriction
of use of rentable space in the Building; 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 12B 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 Material on, under or about the Premises or (ii) any inquiry,
investigation, proceeding, claim, notice or order by any private or public
person or entity regarding the presence of hazardous Material on, under or about
the Premises, including 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 into the soil
or ground water under the Premises or the Building of any Hazardous Materials
used, treated, stored or disposed of by Tenant or Tenant’s Agents, 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
its Lender 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 Property 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 harmless from any claims liabilities, costs or expenses incurred or
suffered by Landlord. Tenant shall provide Landlord prompt written notice of
Tenant’s monitoring, cleanup and remedial steps.

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          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 of any Hazardous Material generated, brought onto, used, stored,
created or disposed of by Tenant or Tenant’s Agents, 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 Material,
whether or not any governmental agency has issued a cleanup order, so as to
return the Premises to the condition that existed before the introduction of
such Hazardous Material. 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 Section 12.B.
above to indemnify, defend and hold Landlord harmless from any claims,
liabilities, costs or expenses incurred or suffered by Landlord.
     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.
     F. Landlord Indemnification: Landlord shall indemnify and hold Tenant
harmless from any claims, liabilities, costs or expenses (including, without
limitation, all litigation costs, expert witness fees and reasonable attorneys’
fees) incurred or suffered by Tenant related to the removal, investigation,
monitoring or remediation of Hazardous Materials which are present as of the
Effective Date or which come to be present on the Premises as a result of
Landlord’s actions after the Effective Date. Landlord’s indemnification and hold
harmless obligations include, without limitation, (i) claims, liability, 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 common law or under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (“CERCLA”), the Resource Conservation and
Recovery Act of 1980 (“RCRA”) or any other Federal, State, County or Municipal
law, ordinance or regulation, (ii) claims, liabilities, costs or expenses
pertaining to the identification, monitoring, cleanup, containment, or removal
of Hazardous Materials from soils, riverbeds or aquifers including the provision
of an alternative public drinking water source, and (iii) all costs of defending
such claims. In no event shall Landlord be liable for any consequential damages
suffered or incurred by Tenant as a result of any such contamination. To the
best of Landlord’s knowledge, there are no Hazardous Materials on or beneath the
Premises, nor does Landlord have reasonable cause to believe Hazardous Materials
are present on or beneath the Premises.

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13. TENANT’S 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 including additional rent or any other payment due under
this Lease where such failure continues for five (5) business days after Tenants
receipt of Landlord’s notice that Rent was not received, (ii) the abandonment of
the Premises by Tenant; (iii) Tenant’s failure to observe and perform any other
required provision of this Lease, where such failure continues for thirty
(30) days after written notice from Landlord; provided however, that if the
nature of the default is such that it cannot reasonably be cured within the
30-day period, Tenant shall not be deemed in default if it commences within such
period to cure, and thereafter diligently prosecutes the same to completion;
(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 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.
     A. Remedies: In the event of any such 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: (a) expenses for
repairing, altering or remodeling the Premises for purposes of reletting,
(b) broker’s fees, advertising costs or other expenses of reletting the
Premises, (c) costs of carrying the Premises such as taxes, insurance premiums,
utilities and security precautions; and (d) 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 herein, 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 discount
rate of the Federal Reserve Bank of San Francisco plus five (5%) percent 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.
     B. 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. 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.
     C. Continuation of Lease: If Landlord does not elect to terminate this
Lease as provided in Section 13.A or 13.B above, then the provisions of
California Civil Code Section 1951.4, (Landlord may continue to keep this 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 and Landlord may from
time to time, without terminating this Lease, either recover all rental as it
becomes due or relet the Premises or any part thereof for such term or terms and
at such rental or rentals and upon such other terms and conditions as Landlord
in its sole discretion may deem advisable, with the right to make alterations
and repairs to the Premises. In the event that Landlord elects to so relet,
rentals received

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by Landlord from such reletting shall be applied in the following order to:
(i) the payment of any indebtedness other than Base Monthly Rent due hereunder
from Tenant to Landlord; (ii) the payment of any cost of such reletting;
(iii) the payment of the cost of any alterations and repairs to the Premises;
and (iv) the payment of Base Monthly Rent and other sums due and unpaid
hereunder. The residual rentals, if any, shall be held by Landlord and applied
in payment of future Base Monthly Rent as the same may become due and payable
hereunder. Landlord shall the obligation to market the space but shall have no
obligation to relet the Premises following a default if Landlord has other
comparable available space within the Building or Premises. In the event the
portion of rentals received from such reletting which is applied to the payment
of rent hereunder during any month be less than the rent payable during that
month by Tenant hereunder, then Tenant shall pay such deficiency to Landlord
immediately upon demand. Such deficiency shall be calculated and paid monthly.
Tenant shall also pay to Landlord, as soon as ascertained, any costs and
expenses incurred by Landlord in such reletting or in making such alterations
and repairs not covered by the rentals received from such reletting.
     D. No Termination: Landlord’s re-entry or taking possession of the Premises
pursuant to 13.B or 13.C shall not be construed as an election to terminate this
Lease unless written notice of such intention is given to Tenant or unless the
termination is decreed by a court of competent jurisdiction. Notwithstanding any
reletting without termination by Landlord because of any default by Tenant,
Landlord may at any time after such reletting elect to terminate this Lease for
any such default.
     E. 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.
     F. Performance by Landlord: If Tenant fails to perform any obligation
required under this Lease or by law or governmental regulation, Landlord in its
sole 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 all sums
paid by Landlord in connection with such substitute performance, including
interest at the Agreed Interest Rate (as defined in Section 19.J) within ten
(10) days of Landlord’s written notice for such payment.
     G. 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 or more
times during any twelve (12) month period during the Lease Term (beyond
applicable notice and cure periods), 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

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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 expressed 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 its partners, trustees, beneficiaries and employees 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, nor shall Landlord be liable for injury to the person
of Tenant, Tenant’s employees, agents, or contractors, 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 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, with the exception of damage resulting from Landlord’s
gross negligence or willful misconduct.
     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 officers, directors, trustees, partners, joint venturers,
members, owners, stockholders, or other principals or representatives except to
the extent of their property interest in the Premises. Tenant shall have
recourse only to the 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: Except to the extent due to the negligence
or willful misconduct 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, from any cause arising at any time to the fullest extent permitted by
law, and Tenant shall indemnify, defend with counsel reasonably acceptable to
Landlord and hold harmless Landlord and Landlord’s Agents from any claims,
liabilities, costs or expenses incurred or suffered arising from the use or
occupancy of the Premises 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 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 will indemnify,
defend (with counsel reasonably acceptable to Landlord) and hold Landlord
harmless from any such claim or liability including Landlord’s costs and
expenses and reasonable attorney’s fees incurred in defending such claims.
15. DESTRUCTION OF PREMISES:
     A. Landlord’s Obligation to Restore: In the event of a destruction of the
Premises during the Lease Term Landlord and Tenant, to the extent of its Initial
Alterations and Alterations, shall repair the same to a similar condition to
that which existed prior to such destruction. Such destruction shall not annul
or void this Lease; however, Tenant shall be entitled to a proportionate
reduction of Base Monthly Rent

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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 Landlord. In no event shall Landlord be required to
replace or restore Initial Alterations, Alterations, or Tenant’s fixtures or
personal property. Tenant shall be obligated to replace and restore all Initial
Alterations and Alterations.
     B. Limitations on Landlord’s Restoration Obligation: Notwithstanding the
provisions of Section 15.A, Landlord shall have no obligation to repair, or
restore the Promises if any of the following occur: (i) if the repairs cannot be
made in one hundred eighty (180) days from the date of receipt of all
governmental approvals necessary under the laws and regulations 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,
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 destruction if Landlord elects to
repair or restore, this Lease shall continue in full force and effect. Tenant
shall also have the right to terminate this Lease in the event of either (i) or
(iv) above, by providing Landlord with written notice of its election to do so
as follows: in the case of clause (i) above, written notice fifteen (15) days
after Landlord’s notice of the time period required for repair or restoration;
and in the case of clause (ii) above, within thirty (30) days following the
damage or destruction. Tenant hereby waives the benefits and rights provided to
Tenant by the provisions of Civil Code Sections 1932 and 1933.
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. 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 damage to or taking of any Initial
Alterations, Alterations, or for Tenant’s moving costs. Tenant hereby waives the
provisions of California Code of Civil Procedures Section 1265.130 and any other
similarly enacted statue, 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, which consent shall not be
unreasonably withheld, conditioned or delayed. 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 if such statements exist and are otherwise available,
(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 fifteen (15) day
period following receipt of all the foregoing within which to notify Tenant in

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writing that Landlord elects to: (i) terminate this Lease as to the portion of
the Premises proposed to be transferred; (ii) permit Tenant to Transfer such
space to the named transferee on the terms and conditions set forth in the
notice; or (iii) refuse consent, provided Landlord shall be required to specify
its reasons for refusing consent. If Landlord should fail to notify Tenant in
writing of such election within the aforementioned 15-day period, Landlord shall
be deemed to have elected option (ii) above. In the event Landlord elects option
(i) above, this Lease shall expire with respect to such part of the Premises on
the date upon which the proposed Transfer was to commence, and from such date
forward, Base Monthly Rent and Tenant’s allocable share of all other costs and
charges shall be adjusted based upon the proportion that the rentable area of
the Premises remaining bears to the total rentable area of the Building. In the
event Landlord does not elect option (i) above, Landlord’s consent to the
proposed Transfer shall not be unreasonably withheld, conditioned or delayed,
provided and upon the condition that: (i) the proposed transferee is engaged in
a 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 (Sublease Requirements) 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; provided, however, that such reimbursement payment by Tenant to
Landlord shall not exceed One Thousand Five Hundred and No/100 Dollars
($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 (all of the foregoing being an “Hypothecation”) without the consent of
Landlord, which consent Landlord may withhold in its sole 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. 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, 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 a transfer of stock in a corporation whose
stock is publicly traded on a public stock exchange. 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.
     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 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

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Subsequent Transferor pays to Tenant or any prior Subsequent Transferor. 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 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 void.
     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
and hold Landlord harmless from and against all losses, liabilities, damages,
costs and expenses (including reasonable attorney 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),
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 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 verse 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

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transactions described in this Section 17.D above, 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: Notwithstanding anything contained in this
Section 17, so long as Tenant otherwise complies with the provisions of this
Section 17, 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 may collect such amounts
as Tenant’s attorney-in-fact, except that Tenant may collect such amounts unless
a default occurs as described in Section 13 above. A termination of the Lease
due to Tenant’s default shall not automatically terminate a Transfer then in
existence; rather at Landlord’s election: (i) such Transfer shall survive the
Lease termination; (ii) the transferee shall attorn to Landlord, and
(iii) 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.
     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, all of the agreements, covenants and conditions
in this Lease to be performed 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: If Landlord consents to any sublet of the
premises by Tenant to an approved Subtenant (“Subtenant”), every 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 withhold
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; (iv) the Sublease shall contain a waiver of subrogation against
Landlord and shall require Subtenant’s insurance policies to acknowledge such
waiver of subrogation; (v) the Sublease shall provide that all requirements of
this 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, to any alteration to the Premises to the same
extent Tenant is

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required by this Lease to obtain such consent; (vii) the Sublease shall require
Subtenant to send Landlord copies of any and all notices concerning the Premises
that Subtenant is obligated to provide to Tenant and Tenant to send Landlord
copies of any and all notices concerning the Premises that Tenant is obligated
to provide to Subtenant; and (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.
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.A, an option (“Option”) to
extend the Lease Term for an additional term (the “Option Term”) of sixty
(60) months. The Option shall be exercised, if at all, by written notice to
Landlord no earlier than eighteen (18) months prior to the date the Lease 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 the Option, all of
the terms, covenants and conditions of this Lease shall apply except for the
grant of additional Options pursuant to this Section, provided that Base Monthly
Rent for the Premises payable by Tenant during the Option Term shall be the
greater of (i) the initial Base Monthly Rent payable under this Lease, and
(ii) ninety five percent (95%) 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 either at the time Tenant exercises the Option or at
any time thereafter prior to the commencement date of the Option Term, or
(ii) if the net worth of Tenant as reported in Tenant’s most recent financial
statements is less than the net worth of Tenant as of the date of execution of
this Lease, 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 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 then obtainable for new 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. The appraisers shall be instructed that the foregoing five percent
(5.0%) discount is intended to offset comparable rents that include the
following costs which Landlord will not incur in the event Tenant exercises its
option (i) brokerage commissions, (ii) tenant improvement or relocation
allowances, (iii) vacancy costs, or (iv) other concessions or inducements.
     B. Determination of Fair Market Rental: If Tenant exercises the Option,
Landlord shall send Tenant a notice setting forth the Fair Market Rental for the
Option Term within thirty (30) days following the Exercise Date. If Tenant
disputes Landlord’s determination of Fair Market Rental for the Option Term,
Tenant shall, within thirty (30) days after the date 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 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 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.

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     C. Resolution of a Disagreement over the Fair Market Rental: Any
disagreement regarding Fair Market Rental shall be resolved as follows:
          1. 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.
          2. If within the 30-day 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 to Landlord and
Tenant within thirty (30) days after the expiration of the 30-day consultation
period described above.
          3. 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%), the average of the two shall be deemed as Fair
Market Rental. If the two appraisals differ by more than 10%, 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 of
Fair Market Rental. This third appraisal will then be averaged with the closer
of the two previous appraisals and the result shall be Fair Market Rental.
          4. All appraisers specified pursuant to this Section 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 Terayon Communication Systems, Inc. and are not
exercisable by any third party 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.
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 including the expense of expert witnesses,
depositions and court testimony as part of its costs which shall be deemed to
have accrued on the commencement of such action. 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: Tenant represents and warrants that it is duly
formed and in good standing, and is duly authorized to execute and deliver this
Lease on behalf of said corporation, in accordance with a duly adopted
resolution of the Board of Directors of said corporation or in accordance with
the by-laws of said corporation, and that this Lease is binding upon said
corporation 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, authorizing the execution of the Lease.
     C. Brokers: Except for Cornish & Carey Commercial/ONCOR International,
which is acting as Tenant’s broker, each party hereunder represents that it has
not utilized or contacted a real estate broker or finder with respect to this
Lease and agrees to indemnify, defend and hold the other party harmless against
any claim, cost, liability or cause of action asserted by any other broker or
finder claiming through such indemnifying party.
     D. Choice of Law: This Lease shall be governed by and construed in
accordance with California law. Except as provided in Section 19.E below, venue
shall be Santa Clara County.
     E. Dispute Resolution: Landlord and Tenant and any other party that may
become a party to this Lease or be deemed a party to this Lease including any
subtenants agree that, except for any claim by Landlord for unlawful detainer or
any claim within the jurisdiction of the small claims court (which small claims
court shall be the sole court of competent jurisdiction), any controversy,
dispute, or claim of whatever nature arising out of in connection with or in
relation to the interpretation, performance

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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 agreement through
a two-step 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 involve first,
mediation, followed, if necessary, by 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. In the event of any dispute subject
to this provision, either party may initiate a request for mediation and the
parties shall use reasonable efforts to promptly select a J.A.M.S. mediator and
commence the mediation. In the event the parties are not able to agree on a
mediator within thirty (30) days, J.A.M.S. or another judicial mediation service
mutually acceptable to the parties shall appoint a mediator. The mediation shall
be confidential and in accordance with California Evidence Code § 1119 et. seq.
The mediation shall be held in Santa Clara County, California and in accordance
with the existing rules and practice of J.A.M.S. (or other judicial and
mediation service selected). The parties shall use reasonable efforts to
conclude the mediation within sixty (60) days of the date of either party’s
request for mediation. The mediation shall be held prior to any arbitration or
court action (other than a claim by Landlord for unlawful detainer or any claim
within the jurisdiction of the small claims court which are not subject to this
mediation/arbitration provision and may be filed directly with a court of
competent jurisdiction). In order for the prevailing party to be entitled to the
payment of attorney’s fees, the prevailing party must have followed the
provisions of this Section 19.E. and have attempted to mediate any dispute prior
to invoking arbitration.
IF A MEDIATION IS CONDUCTED BUT IS UNSUCCESSFUL, IT SHALL BE FOLLOWED BY FINAL
AND BINDING ARBITRATION ADMINISTERED BY AND IN ACCORDANCE WITH THE THEN EXISTING
RULES AND PRACTICES OF J.A.M.S. OR THE OTHER JUDICIAL AND 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 REQUEST FOR ADMISSIONS DURING THE ARBITRATION
PROCESS. THE ARBITRATOR SHALL BE A RETIRED JUDGE OR A LICENSED CALIFORNIA
ATTORNEY. THE VENUE FOR ANY SUCH ARBITRATION OR MEDIATION 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 THE “MEDIATION AND 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 THE “MEDIATION AND 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 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 THE “MEDIATION AND ARBITRATION OF DISPUTES”
PROVISION TO NEUTRAL ARBITRATION.
LANDLORD:  JMS  TENANT:  JDC 
     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

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representatives or any other person purporting to represent Landlord or Tenant.
     G. Entry by Landlord: Upon twenty-four (24) hours’ prior notice to Tenant
and subject to Tenant’s reasonable security regulations and procedures, Tenant
shall permit Landlord and his 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 and actions, so long as such actions do
not have a material adverse effect on Tenant’s parking, use, or access to the
Building: (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) showing the Premises to Landlord’s or
the Master Landlord’s existing or potential successors, purchaser, tenants and
lenders. Tenant shall permit Landlord and his agents, at any time within twelve
(12) months prior to the Expiration Date (or at any time during the Lease if
Tenant is in default hereunder), to place upon the Premises “For Lease” signs
and exhibit the Premises to real estate brokers and prospective tenants at
reasonable hours.
     H. Estoppel Certificates: At any time during the Lease Term, Tenant shall,
within ten (10) 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) years of
audited 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 rate of the Reference Rate published by Bank of America, San
Francisco Branch, plus two percent (2%) per annum from that date until paid in
full (“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 stuns 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 or a fee, premium, or penalty 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

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receipt requested, or by personal delivery addressed to the party to be notified
at the address for such party specified in Section 1 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 replace rather than supplement
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 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.
     Q. Rights and Remedies: Subject to Section 14 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 seven (7) 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 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) 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, subject to Holder’s agreement to recognize Tenant’s
rights as set forth in the preceding sentence. 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, 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. Within sixty (60) days after the Commencement Date,
Landlord shall obtain a subordination and nondisturbance agreement from all
existing Holders in a form mutually and reasonably agreeable to all parties
hereunder.
     U. Survival of Indemnities: All indemnification, defense, and hold harmless
obligations of Landlord and Tenant under this Lease

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shall survive the expiration or sooner termination of the Lease.
     V. Time: Time is of the essence hereunder.
     W. Waiver of Right to Jury Trial: 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.

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

                Landlord:           Sobrato Development Companies #871,  
Tenant: Terayon Communication Systems, Inc., a California Limited Partnership  
a Delaware corporation
 
             
By:
  /s/ John M. Sobrato     By:   /s/ Jerry D. Chase
 
             
Its:
  General Partner     Its:   CEO

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