EXHIBIT 10.1

 

LEASE

(Single Tenant; Net)

 

BETWEEN

 

THE IRVINE COMPANY LLC

 

AND

 

BIOLASE TECHNOLOGY, INC.

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INDEX TO LEASE

 

ARTICLE I. BASIC LEASE PROVISIONS

   1

ARTICLE II. PREMISES

   3

SECTION 2.1.

   LEASED PREMISES    3

SECTION 2.2.

   ACCEPTANCE OF PREMISES    3

SECTION 2.3.

   BUILDING NAME AND ADDRESS    3

SECTION 2.4.

   LANDLORD’S RESPONSIBILITIES    3

ARTICLE III. TERM

   4

SECTION 3.1.

   GENERAL    4

SECTION 3.2.

   DELAY IN POSSESSION    4

SECTION 3.3.

   RIGHT TO EXTEND THIS LEASE    4

ARTICLE IV. RENT AND OPERATING EXPENSES

   5

SECTION 4.1.

   BASIC RENT    5

SECTION 4.2.

   OPERATING EXPENSES    5

SECTION 4.3.

   SECURITY DEPOSIT    8

SECTION 5.1.

   USE    9

SECTION 5.2.

   SIGNS    9

SECTION 5.3.

   HAZARDOUS MATERIALS    10

ARTICLE VI. COMMON AREAS; SERVICES

   11

SECTION 6.1.

   UTILITIES AND SERVICES    11

SECTION 6.2.

   OPERATION AND MAINTENANCE OF COMMON AREAS    12

SECTION 6.3.

   USE OF COMMON AREAS    12

SECTION 6.4.

   PARKING    12

SECTION 6.5.

   CHANGES AND ADDITIONS BY LANDLORD    13

ARTICLE VII. MAINTAINING THE PREMISES

   13

SECTION 7.1.

   TENANT’S MAINTENANCE AND REPAIR    13

SECTION 7.2.

   LANDLORD’S MAINTENANCE AND REPAIR    13

SECTION 7.3.

   ALTERATIONS    14

SECTION 7.4.

   MECHANIC’S LIENS    14

SECTION 7.5.

   ENTRY AND INSPECTION    15

ARTICLE VIII. TAXES AND ASSESSMENTS ON TENANT’S PROPERTY

   15

ARTICLE IX. ASSIGNMENT AND SUBLETTING

   15

SECTION 9.1.

   RIGHTS OF PARTIES    15

SECTION 9.2.

   EFFECT OF TRANSFER    16

SECTION 9.3.

   SUBLEASE REQUIREMENTS    17

SECTION 9.4.

   CERTAIN TRANSFERS    17

ARTICLE X. INSURANCE AND INDEMNITY

   17

SECTION 10.1.

   TENANT’S INSURANCE    17

SECTION 10.2.

   LANDLORD’S INSURANCE    18

SECTION 10.3.

   JOINT INDEMNITY    18

SECTION 10.4.

   LANDLORD’S NONLIABILITY    18

SECTION 10.5.

   WAIVER OF SUBROGATION    18

ARTICLE XI. DAMAGE OR DESTRUCTION

   19

SECTION 11.1.

   RESTORATION    19

SECTION 11.2.

   LEASE GOVERNS    20

ARTICLE XII. EMINENT DOMAIN

   20

SECTION 12.1.

   TOTAL OR PARTIAL TAKING    20

SECTION 12.2.

   TEMPORARY TAKING    20

SECTION 12.3.

   TAKING OF PARKING AREA    20

ARTICLE XIII. SUBORDINATION; ESTOPPEL CERTIFICATE; FINANCIALS

   20

SECTION 13.1.

   SUBORDINATION    20

SECTION 13.2.

   ESTOPPEL CERTIFICATE    21

SECTION 13.3.

   FINANCIALS    21

ARTICLE XIV. EVENTS OF DEFAULT AND REMEDIES

   21

SECTION 14.1.

   TENANT’S DEFAULTS    21

SECTION 14.2.

   LANDLORD’S REMEDIES    22

SECTION 14.3.

   LATE PAYMENTS    23

SECTION 14.4.

   RIGHT OF LANDLORD TO PERFORM    24

SECTION 14.5.

   DEFAULT BY LANDLORD    24

 

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SECTION 14.6.

   EXPENSES AND LEGAL FEES    24

SECTION 14.7.

   WAIVER OF JURY TRIAL/JUDICIAL REFERENCE    24

SECTION 14.8.

   SATISFACTION OF JUDGMENT    25

SECTION 14.9.

   LIMITATION OF ACTIONS AGAINST LANDLORD    25

ARTICLE XV. END OF TERM

   25

SECTION 15.1.

   HOLDING OVER    25

SECTION 15.2.

   MERGER ON TERMINATION    26

SECTION 15.3.

   SURRENDER OF PREMISES; REMOVAL OF PROPERTY    26

ARTICLE XVI. PAYMENTS AND NOTICES

   26

ARTICLE XVII. RULES AND REGULATIONS

   26

ARTICLE XVIII. BROKER’S COMMISSION

   26

ARTICLE XIX. TRANSFER OF LANDLORD’S INTEREST

   27

ARTICLE XX. INTERPRETATION

   27

SECTION 20.1.

   GENDER AND NUMBER    27

SECTION 20.2.

   HEADINGS    27

SECTION 20.3.

   JOINT AND SEVERAL LIABILITY    27

SECTION 20.4.

   SUCCESSORS    27

SECTION 20.5.

   TIME OF ESSENCE    27

SECTION 20.6.

   CONTROLLING LAW/VENUE    27

SECTION 20.7.

   SEVERABILITY    27

SECTION 20.8.

   WAIVER AND CUMULATIVE REMEDIES    27

SECTION 20.9.

   INABILITY TO PERFORM    27

SECTION 20.10.

   ENTIRE AGREEMENT    27

SECTION 20.11.

   QUIET ENJOYMENT    27

SECTION 20.12.

   SURVIVAL    28

SECTION 20.13.

   INTERPRETATION    28

ARTICLE XXI. EXECUTION AND RECORDING

   28

SECTION 21.1.

   COUNTERPARTS    28

SECTION 21.2.

   CORPORATE, LIMITED LIABILITY COMPANY AND PARTNERSHIP AUTHORITY    28

SECTION 21.3.

   EXECUTION OF LEASE; NO OPTION OR OFFER    28

SECTION 21.4.

   RECORDING    28

SECTION 21.5.

   AMENDMENTS    28

SECTION 21.6.

   EXECUTED COPY    28

SECTION 21.7.

   ATTACHMENTS    28

ARTICLE XXII. MISCELLANEOUS

   28

SECTION 22.1.

   NONDISCLOSURE OF LEASE TERMS    28

SECTION 22.2.

   [Intentionally Omitted.]    28

SECTION 22.3.

   CHANGES REQUESTED BY LENDER    28

SECTION 22.4.

   MORTGAGEE PROTECTION    29

SECTION 22.5.

   COVENANTS AND CONDITIONS    29

SECTION 22.6.

   SECURITY MEASURES    29

SECTION 22.7.

   STANDARD FOR CONSENT    29

 

EXHIBITS

    

Exhibit A

   Description of Premises

Exhibit B

   Environmental Questionnaire

Exhibit C

   Landlord’s Disclosures

Exhibit D

   Insurance Requirements

Exhibit E

   Rules and Regulations

Exhibit F

   HVAC Units to be Replaced

Exhibit X

   Work Letter

Exhibit X-1

   Preliminary Plans

Exhibit X-2

   ADA Exhibit

Exhibit Y

   Project Site Plan

 

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LEASE

(Single Tenant; Net)

 

THIS LEASE is made as of the 10th day of January, 2006 by and between THE IRVINE
COMPANY LLC, a Delaware limited liability company hereafter called “Landlord,”
and BIOLASE TECHNOLOGY, INC., a Delaware corporation, hereinafter called
“Tenant.”

 

ARTICLE I. BASIC LEASE PROVISIONS

 

Each reference in this Lease to the “Basic Lease Provisions” shall mean and
refer to the following collective terms, the application of which shall be
governed by the provisions in the remaining Articles of this Lease.

 

1. Premises: The Premises are more particularly described in Section 2.1.

 

Address of Building: 4 Cromwell, Irvine, CA

 

2. Project Description (if applicable): Bake Technology Park Phase II (as
depicted on Exhibit Y attached hereto and consisting of approximately 149,318
rentable square feet).

 

3. Use of Premises: Research, development, manufacturing and distribution of
advanced medical and dental lasers, corporate headquarters, sales, marketing and
administrative offices (to the extent permitted by the City’s 5.4 Industrial
Zoning Ordinance).

 

4. Estimated Commencement Date: Twenty (20) weeks following the date of this
Lease.

 

5. Term: Sixty (60) months, plus such additional days as may be required to
cause this Lease to terminate on the final day of the calendar month.

 

6. Basic Rent: Commencing on the Commencement Date, the Basic Rent shall be
Thirty Eight Thousand Six Hundred Ninety-Two Dollars ($38,692.00) per month,
based on $.68 per rentable square foot.

 

Basic Rent is subject to adjustment as follows:

 

Commencing twelve (12) months following the Commencement Date, the Basic Rent
shall be Forty Thousand Three Hundred Ninety-Nine Dollars ($40,399.00) per
month, based on $.71 per rentable square foot.

 

Commencing twenty-four (24) months following the Commencement Date, the Basic
Rent shall be Forty Two Thousand One Hundred Six Dollars ($42,106.00) per month,
based on $.74 per rentable square foot.

 

Commencing thirty-six (36) months following the Commencement Date, the Basic
Rent shall be Forty Three Thousand Eight Hundred Thirteen Dollars ($43,813.00)
per month, based on $.77 per rentable square foot.

 

Commencing forty-eight (48) months following the Commencement Date, the Basic
Rent shall be Forty Five Thousand Five Hundred Twenty Dollars ($45,520.00) per
month, based on $.80 per rentable square foot.

 

7. Guarantor(s): None

 

8. Floor Area: Approximately 56,900 rentable square feet

 

9. Security Deposit: $300,000.00

 

10. Broker(s): CB Richard Ellis

 

11. Additional Insureds: None

 

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12. Address for Notices:

 

LANDLORD

  TENANT

THE IRVINE COMPANY LLC

550 Newport Center Drive

Newport Beach, CA 92660

Attn: Senior Vice President, Operations

          Irvine Office Properties

 

BIOLASE TECHNOLOGY, INC.

4 Cromwell

Irvine, CA 92618

with a copy of notices to:   With a copy of notices to:

THE IRVINE COMPANY LLC

550 Newport Center Drive

Newport Beach, CA 92660

Attn: Vice President, Operations

          Irvine Office Properties, Technology Portfolio

 

PILLSBURY WINTHROP SHAW PITTMAN LLP

101 West Broadway, Suite 1800

San Diego, CA 92101

Attn: Steven Hamilton, Esq.

 

13. Address for Payments: All payments due under this Lease shall be made to the
address shown on the invoice for the payment due, or if no address is shown, to
Landlord’s notice address above.

 

14. Tenant’s Liability Insurance Requirement: $2,000,000.00

 

15. Vehicle Parking Spaces: One Hundred Sixty-Eight (168), four (4) of which may
be designated as “visitor” in a location acceptable to Landlord.

 

16. Plan Approval Date: January 16, 2006

 

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ARTICLE II. PREMISES

 

SECTION 2.1. LEASED PREMISES. Landlord leases to Tenant and Tenant leases from
Landlord the premises shown in Exhibit A (the “Premises”), containing
approximately the rentable square footage set forth as the “Floor Area” in
Item 8 of the Basic Lease Provisions. The Premises consist of all of the Floor
Area within the building identified in Item 1 of the Basic Lease Provisions (the
Premises together with such building and the underlying real property, are
called the “Building”), and is a portion of the project identified in Item 2 of
the Basic Lease Provisions and shown in Exhibit Y, if any (the “Project”). If
the Project is not already completed, Landlord makes no representation that the
Project, if any, as shown on Exhibit Y, (a) will be completed or that it will be
constructed as shown on Exhibit Y without change, or (b) to the extent the
Project is constructed, it will not be changed from the Project as shown on
Exhibit Y. All references to “Floor Area” in this Lease shall mean the rentable
square footage set forth in Item 8 of the Basic Lease Provisions. The rentable
square footage set forth in Item 8 may include or have been adjusted by various
factors, including, without limitation, a load factor for any vertical
penetrations, stairwells or similar features or areas of the Building. Tenant
agrees that the Floor Area set forth in Item 8 shall be binding on Landlord and
Tenant for purposes of this Lease regardless of whether any future or differing
measurements of the Premises or the Building are consistent or inconsistent with
the Floor Area set forth in Item 8.

 

SECTION 2.2. ACCEPTANCE OF PREMISES. Except as expressly provided in Section 2.4
of this Lease, Tenant acknowledges that neither Landlord nor any representative
of Landlord has made any representation or warranty with respect to the
Premises, the Building or the Project. No representation or warranty is made
respecting the suitability or fitness for any purpose of the Premises, the
Building or the Project nor regarding the compliance of Tenant’s use of the
Premises with the applicable zoning nor regarding any other land use matters,
and Tenant shall be solely responsible as to such matters. Further, neither
Landlord nor any representative of Landlord has made any representations or
warranties regarding (i) what other tenants or uses may be permitted or intended
in the Building or the Project, (ii) any exclusivity of use by Tenant with
respect to its permitted use of the Premises as set forth in Item 3 of the Basic
Lease Provisions, or (iii) any construction of portions of the Project not yet
completed. Tenant further acknowledges that neither Landlord nor any
representative of Landlord has agreed to undertake any alterations or additions
or to construct any improvements to the Premises except as expressly provided in
this Lease and/or the Work Letter, if any, attached hereto as Exhibit X (the
“Work Letter”), and that the flooring materials which may be installed within
portions of the Premises located on the ground floor of the Building may be
limited by the moisture content of the Building slab and underlying soils. As of
the Commencement Date, Tenant shall be conclusively deemed to have accepted the
Premises and those portions of the Building and Project in which Tenant has any
rights under this Lease, which acceptance shall mean that it is conclusively
established that the Premises and those portions of the Building and Project in
which Tenant has any rights under this Lease were in satisfactory condition and
in conformity with the provisions of this Lease, subject only to: (A) those
defective or incomplete portions of the Tenant Improvements constructed by
Landlord pursuant to the Work Letter, which Tenant shall have itemized on a
written punch list and delivered to Landlord within thirty (30) days after the
Commencement Date (as defined in Section 3.1), and (B) Landlord’s obligations
expressly set forth in Section 2.4 of this Lease. Nothing contained in this
Section shall affect the commencement of the Term or the obligation of Tenant to
pay rent. Landlord shall diligently complete all punch list items of which it is
notified as provided above.

 

SECTION 2.3. BUILDING NAME AND ADDRESS. Tenant shall not utilize any name
selected by Landlord from time to time for the Building and/or the Project as
any part of Tenant’s corporate or trade name. Landlord shall have the right to
change the name, address, number or designation of the Building or Project
without liability to Tenant except as described below in this Section 2.3.
Landlord shall provide Tenant with sixty (60) days written notice of any change
in name, address, number or designation of the Building or Project. Landlord
shall reimburse Tenant for all reasonable out-of-pocket expenses incurred by
Tenant, including without limitation, Tenant’s costs of obtaining new business
cards, stationery and informing Tenant’s customers and vendors of Tenant’s new
address, not to exceed Five Thousand Dollars ($5,000.00) in the aggregate,
resulting from any changed name, address, number or designation of the Building
or Project initiated by Landlord.

 

SECTION 2.4. LANDLORD’S RESPONSIBILITIES.

 

(a) Landlord warrants to Tenant that the roof, plumbing, fire sprinkler system,
lighting, heating, ventilation and air conditioning systems and electrical
systems serving the Premises shall be in good operating condition on the
Commencement Date. Provided that Tenant shall notify Landlord of a
non-compliance with the foregoing warranty not later than sixty (60) days
following the Commencement Date, then Landlord shall, except as otherwise
provided in this Lease, promptly after receipt of written notice from Tenant
setting forth the nature and extent of such non-compliance, rectify same at
Landlord’s cost and expense. Notwithstanding the foregoing, Landlord’s
obligations contained in this Section 2.4(a) to bear such costs and expenses
shall not apply: (i) to the costs and expenses of periodic maintenance of the
roof, walls, foundations and footings of the Building, nor (ii) to the extent of
the negligence or willful misconduct by Tenant, its employees, agents,
contractors, licensees or invitees (in which case Tenant shall be responsible
for the reasonable costs of such repairs and/or replacements).

 

(b) Landlord shall correct, repair or replace, at Landlord’s sole cost and
expense and not as a Project Cost, any non-compliance of the Building or the
Premises and the Common Areas with all applicable building permits and codes in
effect as of the Commencement Date, including, without limitation, the
provisions of Title III of the Americans With Disabilities Act (“ADA”) in effect
as of the Commencement Date, except to the extent such correction, repair or
replacement resulted from the Tenant Improvement Work (as defined in the Work
Letter) affecting areas other than the Existing Office Area (as defined in the
Work Letter). Landlord shall correct, repair or replace any non-compliance of
the Building or the Premises and the Common Areas with any laws enacted or

 

3

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effective after the Commencement Date, including, without limitation, revisions
or amendments to the ADA provided that the amortized cost of such repairs or
replacements (amortized over the useful life thereof using a market cost of
funds reasonably determined by Landlord) shall be included as Project Costs
payable by Tenant, and if applicable, prorated with other tenants within the
Project. All other ADA compliance issues which pertain to the Premises,
including, without limitation, those arising as a result of construction by
Tenant of any Alterations (as defined below) or other improvements in the
Premises (and any resulting ADA compliance requirements in the Common Areas),
and the operation of Tenant’s business and employment practices in the Premises,
shall be the responsibility of Tenant at its sole cost and expense. The repairs,
corrections or replacements required of Landlord or of Tenant under the
foregoing provisions of this Section shall be made promptly following notice of
non-compliance from any applicable governmental agency. Tenant shall promptly
forward any such notice that Tenant receives to Landlord.

 

(c) Landlord represents and warrants that the roof of the Building was replaced
in the year 2000.

 

(d) Prior to the Commencement Date, Landlord shall replace those heating,
ventilating and air conditioning units serving the Building which are identified
on Exhibit F attached hereto, at Landlord’s sole cost and expense (but subject
to the applicable provisions of Section 4.2(g) for recovery of the amortized
amount of capital replacement costs as part of “Project Costs”).

 

(e) Landlord shall, except as otherwise provided in this Lease, maintain and
repair the structural integrity of the foundation, load-bearing exterior walls,
structural components of the roof and the main sewer line serving the Premises
(exterior to the Building) at Landlord’s sole cost and expense and not as a
Project Cost. Notwithstanding the foregoing, Landlord’s obligations contained in
this Section 2.4(e) to bear such costs and expenses shall not apply: (i) to the
costs and expenses of periodic maintenance of the roof, walls, foundations and
footings of the Building, nor (ii) to the extent of the negligence or willful
misconduct by Tenant, its employees, agents, contractors, licensees or invitees
(in which case Tenant shall be responsible for the reasonable costs of such
repairs and/or replacements).

 

ARTICLE III. TERM

 

SECTION 3.1. GENERAL. The term of this Lease (“Term”) shall be for the period
shown in Item 5 of the Basic Lease Provisions. Subject to the provisions of
Section 3.2 below, the Term shall commence (“Commencement Date”) on the earlier
of (a) the date Tenant commences business operations within the Premises for any
purpose other than any construction permitted to be performed by Tenant pursuant
to the Work Letter, or (b) the date the Premises are tendered to Tenant,
provided that the Premises shall not be tendered to Tenant until any approvals
by relevant governmental authorities of the tenant improvements constructed by
Landlord pursuant to the Work Letter (and substantially completed but for minor
“punch list” matters) (“Tenant Improvements”) which are required for occupancy
of the Premises have been obtained (as evidenced by written approval thereof in
accordance with the building permits issued for the Tenant Improvements or
issuance of a temporary or final certificate of occupancy for the Premises). The
date on which this Lease is scheduled to terminate is referred to as the
“Expiration Date.” Prior to Tenant’s taking of possession of the Premises, the
parties shall memorialize on a form provided by Landlord the actual Commencement
Date and the Expiration Date of this Lease. Tenant’s failure to execute that
form shall not affect the validity of Landlord’s determination of those dates or
Tenant’s obligation to pay rent hereunder.

 

SECTION 3.2. DELAY IN POSSESSION. If Landlord, for any reason whatsoever, cannot
deliver possession of the Premises to Tenant on or before the Estimated
Commencement Date as set forth in Item 4 of the Basic Lease Provisions
(“Estimated Commencement Date”), except as provided below, this Lease shall not
be void or voidable nor shall Landlord be liable to Tenant for any resulting
loss or damage. However, Tenant shall not be liable for any rent and the
Commencement Date shall not occur until Landlord tenders possession of the
Premises in accordance with Section 3.1(b) above, except that if Landlord cannot
so tender possession of the Premises on or before the Estimated Commencement
Date due to any action or inaction of Tenant (including without limitation any
Tenant Delay described in the Work Letter, if any, attached to this Lease), then
the Commencement Date shall be deemed to have occurred and Landlord shall be
entitled to full performance by Tenant (including the payment of rent) from the
date Landlord would have been able to deliver the Premises to Tenant but for
Tenant’s action or inaction, including without limitation any Tenant Delay
described in the attached Work Letter, if any. If for any reason other than
“Tenant Delays” (as defined in the Work Letter) or other matters beyond
Landlord’s reasonable control, the Commencement Date has not occurred by the
date that is ninety (90) days following the Estimated Commencement Date, then
Tenant may, by written notice to Landlord given at any time thereafter but prior
to the actual occurrence of the Commencement Date, elect to terminate this
Lease. Notwithstanding the foregoing, if at any time during the construction
period, Landlord reasonably believes that the Commencement Date will not occur
on or before ninety (90) days following the Estimated Commencement Date,
Landlord shall notify Tenant in writing of such fact and of a new outside date
on or before which the Commencement Date will occur, and Tenant must elect
within ten (10) days of receive of such notice to either terminate this Lease or
waive its right to terminate this Lease provided the Commencement Date occurs on
or prior to the new outside date established by Landlord in such note to Tenant.
Tenant’s failure to elect to terminate this Lease within such ten (10) day
period shall be deemed Tenant’s waiver of its right to terminate this Lease as
provided in this Section 3.2 as to the previous outside date, but not as to the
new outside date established by said notice. If Tenant elects to terminate this
Lease, Landlord shall promptly return all prepaid rents and the Security Deposit
to Tenant.

 

SECTION 3.3. RIGHT TO EXTEND THIS LEASE. Provided that there is no uncured Event
of Default has occurred under any provision of this Lease, either at the time of
exercise of the extension right granted herein or at the time of the
commencement of such extension, and provided further that as of the date the
extension would take effect, Tenant has not assigned any of its interest in this
Lease nor sublet more than fifty percent (50%)

 

4

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of the Floor Area of the Premises (except in connection with a “Permitted
Transfer” as defined in Section 9.4 below), then Tenant may extend the Term of
this Lease for one (1) period of sixty (60) months. Tenant shall exercise its
right to extend the Term by and only by delivering to Landlord, not less than
nine (9) months or more than twelve (12) months prior to the expiration date of
the Term, Tenant’s irrevocable written notice of its commitment to extend (the
“Commitment Notice”). The Basic Rent payable under the Lease during any
extension of the Term shall be determined as provided in the following
provisions.

 

If Landlord and Tenant have not by then been able to agree upon the Basic Rent
for the extension of the Term, then within one hundred twenty (120) and ninety
(90) days prior to the expiration date of the Term, Landlord shall notify Tenant
in writing of the Basic Rent that would reflect the prevailing market rental
rate for a 60-month renewal of comparable space in the Project (together with
any increases thereof during the extension period) as of the commencement of the
extension period (“Landlord’s Determination”). Should Tenant disagree with the
Landlord’s Determination, then Tenant shall, not later than twenty (20) days
thereafter, notify Landlord in writing of Tenant’s determination of those rental
terms (“Tenant’s Determination”). Within ten (10) days following delivery of the
Tenant’s Determination, the parties shall attempt to agree on an appraiser to
determine the fair market rental. If the parties are unable to agree in that
time, then each party shall designate an appraiser within ten (10) days
thereafter. Should either party fail to so designate an appraiser within that
time, then the appraiser designated by the other party shall determine the fair
market rental. Should each of the parties timely designate an appraiser, then
the two appraisers so designated shall appoint a third appraiser who shall,
acting alone, determine the fair market rental for the Premises. Any appraiser
designated hereunder shall have an MAI certification with not less than five
(5) years experience in the valuation of commercial industrial buildings in the
vicinity of the Project.

 

Within thirty (30) days following the selection of the appraiser and such
appraiser’s receipt of the Landlord’s Determination and the Tenant’s
Determination, the appraiser shall determine whether the rental rate determined
by Landlord or by Tenant more accurately reflects the fair market rental rate
for the 60-month renewal of the Lease for the Premises, as reasonably
extrapolated to the commencement of the extension period. Accordingly, either
the Landlord’s Determination or the Tenant’s Determination shall be selected by
the appraiser as the fair market rental rate for the extension period. In making
such determination, the appraiser shall consider rental comparables for the
Project and for similarly improved space within comparable buildings and
projects in the vicinity of the Project with appropriate adjustment for location
and quality of project, including factors for market tenant improvements
allowances then being granted by landlords for lease renewals, but the appraiser
shall not attribute any factor for brokerage commissions in making its
determination of the fair market rental rate. At any time before the decision of
the appraiser is rendered, either party may, by written notice to the other
party, accept the rental terms submitted by the other party, in which event such
terms shall be deemed adopted as the agreed fair market rental. The fees of the
appraiser chosen by each party shall be borne by that party and the fees of the
third appraiser shall be borne entirely by the party whose determination of the
fair market rental rate was not accepted by the third appraiser.

 

Within twenty (20) days after the determination of the fair market rental,
Landlord shall prepare an appropriate amendment to this Lease for the extension
period, and Tenant shall execute and return same to Landlord within ten
(10) days after Tenant’s receipt of same. Should the fair market rental not be
established by the commencement of the extension period, then Tenant shall
continue paying rent at the rate in effect during the last month of the initial
Term, and a lump sum adjustment shall be made promptly upon the determination of
such new rental.

 

If Tenant fails to timely exercise the extension right granted herein within the
time period expressly set forth for exercise by Tenant in the initial paragraph
of this Section 3.3, Tenant’s right to extend the Term shall be extinguished and
the Lease shall automatically terminate as of the expiration date of the Term,
without any extension and without any liability to Landlord. Except for a
Permitted Transfer, any attempt to assign or transfer any right or interest
created by this paragraph shall be void and of no force and effect. Tenant shall
have no other right to extend the Term beyond the single sixty (60) month
extension period created by this Section 3.3. Unless agreed to in a writing
signed by Landlord and Tenant, any extension of the Term, whether created by an
amendment to this Lease or by a holdover of the Premises by Tenant, or
otherwise, shall be deemed a part of, and not in addition to, any duly exercised
extension period permitted by this Section 3.3.

 

ARTICLE IV. RENT AND OPERATING EXPENSES

 

SECTION 4.1. BASIC RENT. From and after the Commencement Date, Tenant shall pay
to Landlord without deduction or offset, the rental amount for the Premises
shown in Item 6 of the Basic Lease Provisions (the “Basic Rent”), including
subsequent adjustments, if any. If the Commencement Date is other than the first
day of the calendar month, any rental adjustments shown in Item 6 occurring with
reference to the monthly anniversary of the Commencement Date, shall be deemed
to occur on the first day of the next calendar month following the specified
monthly anniversary of the Commencement Date. The rent shall be due and payable
in advance commencing on the Commencement Date (as prorated for any partial
month) and continuing thereafter on the first day of each successive calendar
month of the Term. No demand, notice or invoice shall be required for the
payment of Basic Rent. An installment of rent in the amount of one (1) full
month’s Basic Rent at the initial rate specified in Item 6 of the Basic Lease
Provisions and one (1) month’s estimated Tenant’s Share of Operating Expenses
(as defined in Section 4.2) shall be delivered to Landlord concurrently with
Tenant’s execution of this Lease and shall be applied against the Basic Rent and
Operating Expenses first due hereunder.

 

SECTION 4.2. OPERATING EXPENSES.

 

(a) From and after the Commencement Date, Tenant shall pay to Landlord, as
additional rent, Tenant’s Share of all Operating Expenses, as defined in
Section 4.2(f), incurred by Landlord in the operation of the Building and the
Project. The term “Tenant’s Share” means one hundred percent (100%) of Operating
Expenses

 

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reasonably determined by Landlord to benefit or relate substantially to the
Building rather than the entire Project, plus that portion of any Operating
Expenses determined by multiplying the cost of such item by a fraction, the
numerator of which is the Floor Area and the denominator of which is the total
rentable square footage, as reasonably determined from time to time by Landlord,
of (i) the Building, for expenses reasonably determined by Landlord to benefit
or relate substantially to the Building rather than the entire Project, (ii) all
or some of the buildings in the Project, for expenses reasonably determined by
Landlord to benefit or relate substantially to all or some of the buildings in
the Project rather than any specific building, or (iii) all or some of the
buildings within the Project as well as all or a portion of other property owned
by Landlord and/or its affiliates, for expenses reasonably determined by
Landlord to benefit or relate substantially to such buildings within the Project
and such other property. Notwithstanding the foregoing, Landlord reserves the
right to allocate to the entire Project any Operating Expenses which may benefit
or substantially relate to a particular building within the Project in order to
maintain greater consistency of Operating Expenses among buildings within the
Project. In the event that Landlord reasonably determines that the Premises or
the Building incur a non-proportional benefit from any expense, or is the
non-proportional cause of any such expense, Landlord may allocate a greater
percentage of such Operating Expense to the Premises or the Building. In the
event that any management and/or overhead fee payable or imposed by Landlord for
the management of Tenant’s Premises is calculated as a percentage of the rent
payable by Tenant and other tenants of Landlord, then the full amount of such
management and/or overhead fee which is attributable to the rent paid by Tenant
shall be additional rent payable by Tenant, in full, provided, however, that
Landlord may elect to include such full amount as part of Tenant’s Share of
Operating Expenses.

 

(b) Prior to the start of each full Expense Recovery Period (as defined in this
Section 4.2), Landlord shall give Tenant a written estimate of the amount of
Tenant’s Share of Operating Expenses for the applicable Expense Recovery Period.
Any delay or failure by Landlord in providing such estimate shall not relieve
Tenant from its obligation to pay Tenant’s Share of Operating Expenses or
estimated amounts thereof, if and when Landlord provides such estimate or final
payment amount. Tenant shall pay the estimated amounts to Landlord in equal
monthly installments, in advance concurrently with payments of Basic Rent. If
Landlord has not furnished its written estimate for any Expense Recovery Period
by the time set forth above, Tenant shall continue to pay monthly the estimated
Tenant’s Share of Operating Expenses in effect during the prior Expense Recovery
Period; provided that when the new estimate is delivered to Tenant, Tenant
shall, at the next monthly payment date, pay any accrued estimated Tenant’s
Share of Operating Expenses based upon the new estimate. For purposes hereof,
“Expense Recovery Period” shall mean every twelve month period during the Term
(or portion thereof for the first and last lease years) commencing July 1 and
ending June 30, provided that Landlord shall have the right to change the date
on which an Expense Recovery Period commences in which event appropriate
reasonable adjustments shall be made to Tenant’s Share of Operating Expenses so
that the amount payable by Tenant shall not materially vary as a result of such
change.

 

(c) Within one hundred twenty (120) days after the end of each Expense Recovery
Period, Landlord shall furnish to Tenant a statement (a “Reconciliation
Statement”) showing in reasonable detail the actual or prorated Tenant’s Share
of Operating Expenses incurred by Landlord during such Expense Recovery Period,
and the parties shall within thirty (30) days thereafter make any payment or
allowance necessary to adjust Tenant’s estimated payments of Tenant’s Share of
Operating Expenses, if any, to the actual Tenant’s Share of Operating Expenses
as shown by the Reconciliation Statement. Any delay or failure by Landlord in
delivering any Reconciliation Statement shall not constitute a waiver of
Landlord’s right to require Tenant to pay Tenant’s Share of Operating Expenses
pursuant hereto. Any amount due Tenant shall be credited against installments
next coming due under this Section 4.2, and any deficiency shall be paid by
Tenant together with the next installment. Should Tenant fail to object in
writing to Landlord’s determination of Tenant’s Share of Operating Expenses, or
give written notice of Tenant’s intent to audit pursuant to the paragraph next
below, within one hundred twenty (120) days following delivery of Landlord’s
Reconciliation Statement, Landlord’s determination of Tenant’s Share of
Operating Expenses for the applicable Expense Recovery Period shall be
conclusive and binding on the parties for all purposes and any future claims to
the contrary shall be barred.

 

Provided there is no uncured Event of Default, Tenant shall have the right to
cause a certified public accountant, engaged on a non-contingency fee basis, to
audit Operating Expenses by inspecting Landlord’s general ledger of expenses not
more than once during any Expense Recovery Period. However, to the extent that
insurance premiums or any other component of Operating Expense is determined by
Landlord on the basis of an internal allocation of costs utilizing information
Landlord in good faith deems proprietary, such expense component shall not be
subject to audit so long as it does not exceed the amount per square foot
typically imposed by landlords of other first class business parks in Orange
County, California. Tenant shall give notice to Landlord of Tenant’s intent to
audit within one hundred twenty (120) days after Tenant’s receipt of Landlord’s
Reconciliation Statement which sets forth Tenant’s Share of Landlord’s actual
Operating Expenses. Such audit shall be conducted at a mutually agreeable time
during normal business hours at the office of Landlord or its management agent
where such accounts are maintained. If Tenant’s audit determines that actual
Operating Expenses have been overstated by more than five percent (5%), then
subject to Landlord’s right to review and/or contest the audit results, Landlord
shall reimburse Tenant for the reasonable out-of-pocket costs of such audit.
Tenant’s rent shall be approximately adjusted to reflect any overstatement in
Operating Expenses. In the event of a dispute between Landlord and Tenant
regarding such audit, such dispute shall be submitted and resolved by binding
arbitration pursuant to Article III of the attached Work Letter. All of the
information obtained by Tenant and/or its auditor in connection with such audit,
as well as any compromise, settlement, or adjustment reached between Landlord
and Tenant as a result thereof, shall be held in strict confidence and, except
as may be require pursuant to litigation, shall not be disclosed to any third
party, directly or indirectly, by Tenant or its auditor or any of their
officers, agents or employees, Landlord may require Tenant’s auditor to execute
a separate confidentiality agreement affirming the foregoing as a condition
precedent to any audit. In the event of a violation of this confidentiality
covenant in connection with any audit, then in addition to any other legal or
equitable remedy available to Landlord, Tenant shall forfeit its right to any
reconciliation or cost reimbursement payment from Landlord due to said audit
(and any such payment theretofore made by Landlord shall be promptly returned by
Tenant), and Tenant shall have no further audit rights under this

 

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Lease. Notwithstanding the foregoing, and except for the initial Expense
Recovery Period, Tenant shall have no right of audit with respect to any Expense
Recovery Period unless the total Operating Expenses per square foot for such
Expense Recovery Period, as set forth in Landlord’s annual Reconciliation
Statement, exceed the total Operating Expenses per square foot during the
initial Expense Recovery Period during the Term, as increased by the percentage
change in the United States Department of Labor, Bureau of Labor Statistics,
Consumer Price Index for all Urban Consumers, Los Angeles – Riverside – Orange
County Area Average, all items (1982-84 = 100) (the “Index”), which change in
the Index shall be measured by comparing the Index published for January of the
Initial Expense Recovery Period during the Term with the Index published for
January of the applicable Expense Recovery Period.

 

(d) Even though this Lease has terminated and the Tenant has vacated the
Premises, when the final determination is made of Tenant’s Share of Operating
Expenses for the Expense Recovery Period in which this Lease terminates, Tenant
shall within thirty (30) days of written notice pay the entire increase over the
estimated Tenant’s Share of Operating Expenses already paid. Conversely, any
overpayment by Tenant shall be rebated by Landlord to Tenant not later than
thirty (30) days after such final determination.

 

(e) If, at any time during any Expense Recovery Period, any one or more of the
Operating Expenses are increased to a rate(s) or amount(s) in excess of the
rate(s) or amount(s) used in calculating the estimated Tenant’s Share of
Operating Expenses for the year, then the estimate of Tenant’s Share of
Operating Expenses may be increased by written notice from Landlord for the
month in which such rate(s) or amount(s) becomes effective and for all
succeeding months by an amount equal to the estimated amount of Tenant’s Share
of the increase. If Landlord gives Tenant written notice of the amount or
estimated amount of the increase and the month in which the increase will or has
become effective, then Tenant shall pay the increase to Landlord as a part of
Tenant’s monthly payments of the estimated Tenant’s Share of Operating Expenses
as provided in Section 4.2(b), commencing with the month following Tenant’s
receipt of Landlord’s notice, provided Tenant received Landlord’s notice at
least ten (10) days prior to Tenant’s next scheduled payment date. In addition,
Tenant shall pay upon written request any such increases which were incurred
prior to the Tenant commencing to pay such monthly increase.

 

(f) The term “Operating Expenses” shall mean and include all Project Costs, as
defined in subsection (g), and Property Taxes, as defined in subsection (h).

 

(g) The term “Project Costs” shall include all expenses of operation,
management, repair, replacement and maintenance of the Building and the Project,
including without limitation all appurtenant Common Areas (as defined in
Section 6.2), and shall include the following charges by way of illustration but
not limitation: water and sewer charges; insurance premiums and deductibles
and/or reasonable premium and deductible equivalents should Landlord elect to
self-insure all or any portion of any risk that Landlord is authorized to insure
hereunder; license, permit, and inspection fees; light; power; window washing;
trash pickup; janitorial services to any interior Common Areas; heating,
ventilating and air conditioning; supplies; materials; equipment; tools; the
cost of any environmental, insurance, tax, legal or other consultant utilized by
Landlord in connection with the Building and/or Project; establishment of
reasonable reserves for replacements and/or repairs; costs incurred in
connection with compliance with any laws or changes in laws applicable to the
Building or the Project; the cost of any capital improvements or replacements
(other than tenant improvements for specific tenants) to the extent of the
amortized amount thereof over the useful life of such capital improvements or
replacements (or, if such capital improvements or replacements are anticipated
to achieve a cost savings as to the Operating Expenses, any shorter estimated
period of time over which the cost of the capital improvements or replacements
would be recovered from the estimated cost savings) calculated at a market cost
of funds, all as determined by Landlord, for each year of useful life or shorter
recovery period of such capital expenditure whether such capital expenditure
occurs during or prior to the Term; costs associated with the maintenance of an
air conditioning, heating and ventilation service agreement; capital costs
associated with a requirement related to demands on utilities by Project
tenants, including without limitation the cost to obtain additional phone
connections; labor; reasonably allocated wages and salaries, fringe benefits,
and payroll taxes for administrative and other personnel directly applicable to
the Building and/or Project, including both Landlord’s personnel and outside
personnel; any expense incurred pursuant to Sections 6.1, 6.2, 6.4, 7.2, and
10.2; and reasonable overhead and/or management fees for the professional
operation of the Project. It is understood and agreed that Project Costs may
include competitive charges for direct services (including, without limitation,
management and/or operations services) provided by any subsidiary, division or
affiliate of Landlord.

 

(h) The term “Property Taxes” as used herein shall include any form of federal,
state, county or local government or municipal taxes, fees, charges or other
impositions of every kind (whether general, special, ordinary or extraordinary)
which shall be paid or are accrued during the Term and which are related to the
ownership, leasing or operation of the Premises, Building or Project, including
without limitation, the following: (i) all real estate taxes or personal
property taxes, as such property taxes may be reassessed from time to time; and
(ii) other taxes, charges and assessments which are levied with respect to this
Lease or to the Building and/or the Project, and any improvements, fixtures and
equipment and other property of Landlord located in the Building and/or the
Project, (iii) all assessments and fees for public improvements, services, and
facilities and impacts thereon, including without limitation arising out of any
Community Facilities Districts, “Mello Roos” districts, similar assessment
districts, and any traffic impact mitigation assessments or fees; (iv) any tax,
surcharge or assessment which shall be levied in addition to or in lieu of real
estate or personal property taxes, other than taxes covered by Article VIII; and
(v) taxes based on the receipt of rent (including gross receipts or sales taxes
applicable to the receipt of rent), and (vi) costs and expenses incurred in
contesting the amount or validity of any Property Tax by appropriate
proceedings. Notwithstanding the foregoing, all excess profits taxes, capital
stock taxes, inheritance and succession taxes, estate taxes, federal and state
income taxes and other taxes applicable to the Landlord’s general or net income
(as opposed to rents, receipts, or income attributable to operations at the
Project) shall be excluded.

 

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(i) Notwithstanding the provisions of this Section 4.2 to the contrary,
Operating Expenses shall not include any of the following:

 

(1) Leasing commissions, attorneys’ fess, costs, disbursements and other
expenses incurred by Landlord or its agents in connection with negotiations for
leases with tenants, other occupants or prospective tenants or other occupants
of the Project, and similar costs incurred in connection with disputes with
and/or enforcement of any lease with tenants, other occupants, or prospective
tenants or other occupants of the Project;

 

(2) “Tenant allowances,” “tenant concessions,” work letter payments and other
costs or expenses (including permit, license and inspection fees) incurred in
completing, fixturing, furnishing, renovating or otherwise improving, decorating
or redecorating space for tenants or other occupants of the Project, or vacant,
leasable space in the Project, including space planning/interior design fees for
same;

 

(3) Except as specifically authorized in Section 4.2(g) or elsewhere in this
Lease, costs of a capital nature, including, but not limited to, capital
additions, capital improvements capital alterations, capital replacements,
capital equipment and capital tools, and/or capital redesign;

 

(4) The cost of services, items and benefits for which Tenant specifically
separately reimburses Landlord;

 

(5) Costs or expenses (including fines, penalties and legal fees) incurred due
to the breach by Landlord of its obligations, under this Lease (that would not
have been incurred but for such breach);

 

(6) Penalties for late payment of any Operating Expenses by Landlord, including
without limitation, with respect to Property Taxes, equipment leases, etc.;

 

(7) Payments in respect to overhead and/or profit to any subsidiary or affiliate
of Landlord for services, goods, supplies or other materials to the extent that
the costs of such services, goods, supplies or materials exceed the costs that
would have been paid if the services, goods, supplies or materials had been
provided by parties unaffiliated with Landlord, of similar skill, competence and
experience;

 

(8) Payments of principal, finance charges or interest on debt or amortization
on any deed of trust or other debt encumbering the Project, and rental payments
(or increases in same) under any ground or underlying lease or leases
encumbering the Project (except to the extent the same may be made to pay or
reimburse, or may be measured by Property Taxes);

 

(9) Except for a management fee which is reasonable and commercially competitive
for similar projects in the area, costs of Landlord’s general overhead and
general administrative expenses (individual, partnership or corporate, as the
case may be), and wages, salaries and other compensation and benefits (as well
as adjustments thereto) for all employees and personnel of Landlord above the
level of manager or building engineer for the Project;

 

(10) Advertising and promotional expenses;

 

(11) Costs or expenses for the acquisition of sculpture, paintings or other
works of art, but not the reasonable expenses of maintaining, repairing and
insuring same;

 

(12) Costs for which Landlord is actually reimbursed by insurance;

 

(13) Contributions to political or charitable organizations;

 

(14) Costs incurred in removing the property of former tenants and/or other
occupants of the Project;

 

(15) The costs of any “tap fees” or one time lump sum sewer, water or other
utility connection fees paid in connection with the initial construction of the
Project;

 

(16) “In house” legal and/or accounting fees;

 

(17) Any costs for the fulfillment of obligations which are specifically
allocated to the “sole cost and expense” of Landlord pursuant to the provisions
of this Lease; and

 

(18) Costs incurred by Landlord in connection with the removal, remediation,
disposal, neutralization, or other treatment of Hazardous Materials which costs
are not specifically allocated to Tenant pursuant to the provisions of
Section 5.3 of this Lease.

 

SECTION 4.3. SECURITY DEPOSIT. Concurrently with Tenant’s delivery of this
Lease, Tenant shall deposit with Landlord the sum, if any, stated in Item 9 of
the Basic Lease Provisions, to be held by Landlord as security for the full and
faithful performance of all of Tenant’s obligations under this Lease (the
“Security Deposit”). Landlord shall not be required to keep this Security
Deposit separate from its general funds, and Tenant shall not be entitled to
interest on the Security Deposit. Subject to the last sentence of this Section,
the Security Deposit shall be understood and agreed to be the property of
Landlord upon Landlord’s receipt thereof, and may be utilized by Landlord in its
sole and absolute discretion towards the payment of all expenses by Landlord for
which

 

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Tenant would be required to reimburse Landlord under this Lease, including
without limitation brokerage commissions and Tenant Improvement costs. Upon any
Event of Default by Tenant (as defined in Section 14.1), Landlord may, in its
sole and absolute discretion, retain, use or apply the whole or any part of the
Security Deposit to pay any sum which Tenant is obligated to pay under this
Lease including, without limitation, amounts estimated by Landlord as the
amounts due it for prospective rent and for damages pursuant to
Section 14.2(a)(i) of this Lease and/or Civil Code Section 1951.2, sums that
Landlord may expend or be required to expend by reason of the Event of Default
by Tenant or any loss or damage that Landlord may suffer by reason of the Event
of Default or costs incurred by Landlord in connection with the repair or
restoration of the Premises pursuant to Section 15.3 of this Lease upon
expiration or earlier termination of this Lease. In no event shall Landlord be
obligated to apply the Security Deposit upon an Event of Default and Landlord’s
rights and remedies resulting from an Event of Default, including without
limitation, Tenant’s failure to pay Basic Rent, Tenant’s Share of Operating
Expenses or any other amount due to Landlord pursuant to this Lease, shall not
be diminished or altered in any respect due to the fact that Landlord is holding
the Security Deposit. If any portion of the Security Deposit is applied by
Landlord as permitted by this Section, Tenant shall within five (5) days after
written demand by Landlord deposit cash with Landlord in an amount sufficient to
restore the Security Deposit to its original amount. If Tenant fully performs
its obligations under this Lease, the Security Deposit shall be returned to
Tenant (or, at Landlord’s option, to the last assignee of Tenant’s interest in
this Lease) within thirty (30) days after the expiration of the Term, provided
that Tenant agrees that Landlord may retain the Security Deposit to the extent
and until such time as all amounts due from Tenant in accordance with this Lease
have been determined and paid in full and Tenant agrees that Tenant shall have
no claim against Landlord for Landlord’s retaining such Security Deposit to the
extent provided in this Section.

 

Provided that: (a) no “Event of Default” has occurred more than one (1) time
during the then preceding twelve (12) calendar months during the Term,
(b) Tenant has not at any time been more than ten (10) days late with respect to
any payments of Basic Rent or Operating Expenses due under the Lease more than
twice during the Term, and (c) Tenant shall demonstrate by the delivery to
Landlord of its audited financial statements that Tenant has achieved either
(i) four (4) consecutive quarters of positive net income over the then most
recent four (4) quarter period or (ii) a positive net income over the then most
recently ended fiscal year of Tenant (in each case as determined by generally
accepted accounting principles, consistently applied, and as demonstrated by
Tenant’s audited financial statements prepared by a nationally recognized
accounting firm), then, upon written request of Tenant, Landlord shall authorize
and return to Tenant a portion of the Security Deposit in the form of credits,
each in the amount of Sixty Thousand Dollars ($60,000.00), against Basic Rent
due for the twenty-fifth (25th), thirty-seventh (37th) and forty-ninth
(49th) months of the Term. Following the credit to Basic Rent of any portion of
the Security Deposit pursuant to this paragraph (a “Deposit Credit”), any
requirement for restoration of the Security Deposit pursuant to this Section 4.3
shall be deemed to require restoration only to the amount held after such
Deposit Credit.

 

ARTICLE V. USES

 

SECTION 5.1. USE. Tenant shall use the Premises only for the purposes stated in
Item 3 of the Basic Lease Provisions, all in accordance with applicable laws and
restrictions and pursuant to approvals to be obtained by Tenant from all
relevant and required governmental agencies and authorities. The parties agree
that any contrary use shall be deemed to cause material and irreparable harm to
Landlord and shall entitle Landlord to injunctive relief in addition to any
other available remedy. Tenant, at its expense, shall procure, maintain and make
available for Landlord’s inspection throughout the Term, all governmental
approvals, licenses and permits required for the proper and lawful conduct of
Tenant’s permitted use of the Premises. Tenant shall not do or permit anything
to be done in or about the Premises which will in any way interfere with the
rights of other occupants of the Building or the Project, or use or allow the
Premises to be used for any unlawful purpose, nor shall Tenant permit any
nuisance or commit any waste in the Premises or the Project. Tenant shall not
perform any work or conduct any business whatsoever in the Project other than
inside the Premises. Tenant shall not do or permit to be done anything which
will invalidate or increase the cost of any insurance policy(ies) covering the
Building, the Project and/or their contents (unless Tenant elects to pay such
increased costs), and shall comply with all applicable insurance underwriters
rules. Tenant shall comply at its expense with all present and future laws,
ordinances, restrictions, regulations, orders, rules and requirements of all
governmental authorities that pertain to Tenant or its use of the Premises,
including without limitation all federal and state occupational health and
safety requirements, whether or not Tenant’s compliance will necessitate
expenditures or interfere with its use and enjoyment of the Premises. Tenant
shall comply at its expense with all present and future covenants, conditions,
easements or restrictions now or hereafter affecting or encumbering the Building
and/or Project, and any amendments or modifications thereto, including without
limitation the payment by Tenant of any periodic or special dues or assessments
charged against the Premises or Tenant which may be allocated to the Premises or
Tenant in accordance with the provisions thereof. Tenant shall promptly upon
demand reimburse Landlord for any additional insurance premium charged by reason
of Tenant’s failure to comply with the provisions of this Section, and shall
indemnify Landlord from any liability and/or expense resulting from Tenant’s
noncompliance. Subject to the express provisions of this Lease (including,
without limitation Articles VI, XI and XII hereof), Tenant shall have access to
the Premises twenty-four (24) hours per day, three hundred sixty-five (365) days
per year.

 

SECTION 5.2. SIGNS. Except for two (2) “building top” signs identifying Tenant’s
name and/or logo and installed in locations mutually agreed upon by Tenant and
Landlord on the facades of the Building facing Cromwell and Bake Parkway, and
except for Landlord’s standard suite signage and other identifying logos in
Tenant’s lobby to the Premises, Tenant shall have no right to maintain signs in
any location in, on or about the Premises, the Building or the Project and shall
not place or erect any signs that are visible from the exterior of the Building.
The size, design, graphics, material, style, color and other physical aspects of
any permitted sign shall be subject to Landlord’s written determination, as
reasonably determined by Landlord prior to installation, that the signage is in
compliance with any covenants, conditions or restrictions encumbering the
Premises and Landlord’s signage program for the Project, as in effect from time
to time and approved by the City in which the Premises are

 

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located (“Signage Criteria”). Prior to placing or erecting any such signs,
Tenant shall obtain and deliver to Landlord a copy of any applicable municipal
or other governmental permits and approvals and comply with any applicable
insurance requirements for such signage. Tenant shall be responsible for all
costs of any permitted sign, including, without limitation, the fabrication,
installation, maintenance and removal thereof and the cost of any permits
therefor. If Tenant fails to maintain its sign in good condition, or if Tenant
fails to remove same upon termination of this Lease and repair and restore any
damage caused by the sign or its removal, Landlord may do so at Tenant’s
expense. Landlord shall have the right to temporarily remove any signs in
connection with any repairs or maintenance in or upon the Building. The term
“sign” as used in this Section shall include all signs, designs, monuments,
displays, advertising materials, logos, banners, projected images, pennants,
decals, pictures, notices, lettering, numerals or graphics.

 

SECTION 5.3. HAZARDOUS MATERIALS.

 

(a) For purposes of this Lease, the term “Hazardous Materials” includes (i) any
“hazardous material” as defined in Section 25501(o) of the California Health and
Safety Code, (ii) hydrocarbons, polychlorinated biphenyls or asbestos, (iii) any
toxic or hazardous materials, substances, wastes or materials as defined
pursuant to any other applicable state, federal or local law or regulation, and
(iv) any other substance or matter which may result in liability to any person
or entity as a result of such person’s possession, use, storage, release or
distribution of such substance or matter under any statutory or common law
theory.

 

(b) Tenant shall not cause or permit any Hazardous Materials to be brought upon,
stored, used, generated, released or disposed of on, under, from or about the
Premises (including without limitation the soil and groundwater thereunder)
without the prior written consent of Landlord, which consent may be given or
withheld in Landlord’s sole and absolute discretion. Notwithstanding the
foregoing, Tenant shall have the right, without obtaining prior written consent
of Landlord, to utilize within the Premises a reasonable quantity of standard
office products that may contain Hazardous Materials (such as photocopy toner,
“White Out,” common office cleaning supplies and the like), provided however,
that (i) Tenant shall maintain such products in their original retail packaging,
shall follow all instructions on such packaging with respect to the storage, use
and disposal of such products, and shall otherwise comply with all applicable
laws with respect to such products, and (ii) all of the other terms and
provisions of this Section 5.3 shall apply with respect to Tenant’s storage, use
and disposal of all such products. Landlord may, in its sole and absolute
discretion, place such conditions as Landlord deems appropriate with respect to
Tenant’s use, storage and/or disposal of any Hazardous Materials requiring
Landlord’s consent. Tenant understands that Landlord may utilize an
environmental consultant to assist in determining conditions of approval in
connection with the storage, use, release, and/or disposal of Hazardous
Materials by Tenant on or about the Premises, and/or to conduct periodic
inspections of the storage, generation, use, release and/or disposal of such
Hazardous Materials by Tenant on and from the Premises, and Tenant agrees that
any costs incurred by Landlord in connection therewith shall be reimbursed by
Tenant to Landlord as additional rent hereunder upon demand; however, Tenant
shall have no obligation to reimburse Landlord for any costs incurred in
connection with any periodic inspections of the Premises pursuant to this
Section 5.3(b) unless Tenant shall be in default of its obligations under this
Section 5.3.

 

(c) Prior to the execution of this Lease, Tenant shall complete, execute and
deliver to Landlord an Environmental Questionnaire and Disclosure Statement (the
“Environmental Questionnaire”) in the form of Exhibit B attached hereto. The
completed Environmental Questionnaire shall be deemed incorporated into this
Lease for all purposes, and Landlord shall be entitled to rely fully on the
information contained therein. Upon the written request of Landlord, on each
anniversary of the Commencement Date until the expiration or sooner termination
of this Lease, Tenant shall disclose to Landlord in writing the names and
amounts of all Hazardous Materials which were stored, generated, used, released
and/or disposed of on, under or about the Premises for the twelve-month period
prior thereto, and which Tenant desires to store, generate, use, release and/or
dispose of on, under or about the Premises for the succeeding twelve-month
period. In addition, to the extent Tenant is permitted to utilize Hazardous
Materials upon the Premises, Tenant shall promptly provide Landlord with
complete and legible copies of all the following environmental documents
relating thereto: reports filed pursuant to any self-reporting requirements;
permit applications, permits, monitoring reports, emergency response or action
plans, workplace exposure and community exposure warnings or notices and all
other reports, disclosures, plans or documents (even those which may be
characterized as confidential) relating to water discharges, air pollution,
waste generation or disposal, and underground storage tanks for Hazardous
Materials; orders, reports, notices, listings and correspondence (even those
which may be considered confidential) of or concerning the release,
investigation, compliance, cleanup, remedial and corrective actions, and
abatement of Hazardous Materials; and all complaints, pleadings and other legal
documents filed by or against Tenant related to Tenant’s storage, generation,
use, release and/or disposal of Hazardous Materials.

 

(d) Landlord and its agents shall have the right, but not the obligation, to
inspect, sample and/or monitor the Premises and/or the soil or groundwater
thereunder at any time to determine whether Tenant is complying with the terms
of this Section 5.3, and in connection therewith Tenant shall provide Landlord
with full access to all facilities, records and personnel related thereto. The
foregoing inspections, sampling and/or monitoring shall be at Landlord’s sole
cost and expense unless Tenant shall be in default of its obligations under this
Section 5.3. If Tenant is not in compliance with any of the provisions of this
Section 5.3, or in the event of a release of any Hazardous Material on, under,
from or about the Premises caused or permitted by Tenant, its agents, employees,
contractors, licensees or invitees, Landlord and its agents shall have the
right, but not the obligation, without limitation upon any of Landlord’s other
rights and remedies under this Lease, to immediately enter upon the Premises
without notice and to discharge Tenant’s obligations under this Section 5.3 at
Tenant’s expense, including without limitation the taking of emergency or
long-term remedial action. Landlord and its agents shall endeavor to minimize
interference with Tenant’s business in connection therewith, but shall not be
liable for any such interference. In addition, Landlord, at Tenant’s expense,
shall have the right, but not the obligation, to join and

 

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participate in any legal proceedings or actions initiated in connection with any
claims arising out of the storage, generation, use, release and/or disposal by
Tenant or its agents, employees, contractors, licensees or invitees of Hazardous
Materials on, under, from or about the Premises.

 

(e) If the presence of any Hazardous Materials on, under, from or about the
Premises or the Project caused or permitted by Tenant or its agents, employees,
contractors, licensees or invitees results in (i) injury to any person,
(ii) injury to or any contamination of the Premises or the Project, or
(iii) injury to or contamination of any real or personal property wherever
situated, Tenant, at its expense, shall promptly take all actions necessary to
return the Premises and the Project and any other affected real or personal
property owned by Landlord to the condition existing prior to the introduction
of such Hazardous Materials and to remedy or repair any such injury or
contamination, including without limitation, any cleanup, remediation, removal,
disposal, neutralization or other treatment of any such Hazardous Materials.
Notwithstanding the foregoing, Tenant shall not, without Landlord’s prior
written consent, which consent may be given or withheld in Landlord’s sole and
absolute discretion, take any remedial action in response to the presence of any
Hazardous Materials on, under, from or about the Premises or the Project or any
other affected real or personal property owned by Landlord or enter into any
similar agreement, consent, decree or other compromise with any governmental
agency with respect to any Hazardous Materials claims; provided however,
Landlord’s prior written consent shall not be necessary in the event that the
presence of Hazardous Materials on, under, from or about the Premises or the
Project or any other affected real or personal property owned by Landlord
(i) imposes an immediate threat to the health, safety or welfare of any
individual and (ii) is of such a nature that an immediate remedial response is
necessary and it is not possible to obtain Landlord’s consent before taking such
action. To the fullest extent permitted by law, Tenant shall indemnify, hold
harmless, protect and defend (with attorneys acceptable to Landlord) Landlord
and any successors to all or any portion of Landlord’s interest in the Premises
and the Project and any other real or personal property owned by Landlord from
and against any and all liabilities, losses, damages, diminution in value,
judgments, fines, demands, claims, recoveries, deficiencies, costs and expenses
(including without limitation attorneys’ fees, court costs and other
professional expenses), whether foreseeable or unforeseeable, arising directly
or indirectly out of the use, generation, storage, treatment, release, on- or
off-site disposal or transportation of Hazardous Materials on, into, from, under
or about the Premises, the Building or the Project and any other real or
personal property owned by Landlord caused or permitted by Tenant, its agents,
employees, contractors, licensees or invitees. Such indemnity obligation shall
specifically include, without limitation, the cost of any required or necessary
repair, restoration, cleanup or detoxification of the Premises, the Building and
the Project and any other real or personal property owned by Landlord, the
preparation of any closure or other required plans, whether such action is
required or necessary during the Term or after the expiration of this Lease and
any loss of rental due to the inability to lease the Premises or any portion of
the Building or Project as a result of such Hazardous Materials the remediation
thereof or any repair, restoration or cleanup related thereto. If it is at any
time discovered that Tenant or its agents, employees, contractors, licensees or
invitees may have caused or permitted the release of any Hazardous Materials on,
under, from or about the Premises, the Building or the Project or any other real
or personal property owned by Landlord, Tenant shall, at Landlord’s request,
immediately prepare and submit to Landlord a comprehensive plan, subject to
Landlord’s approval, specifying the actions to be taken by Tenant to return the
Premises, the Building or the Project or any other real or personal property
owned by Landlord to the condition existing prior to the introduction of such
Hazardous Materials. Upon Landlord’s approval of such plan, Tenant shall, at its
expense, and without limitation of any rights and remedies of Landlord under
this Lease or at law or in equity, immediately implement such plan and proceed
to cleanup, remediate and/or remove all such Hazardous Materials in accordance
with all applicable laws and as required by such plan and this Lease. The
provisions of this Section 5.3(e) shall expressly survive the expiration or
sooner termination of this Lease.

 

(f) Landlord hereby discloses to Tenant, and Tenant hereby acknowledges, certain
facts relating to Hazardous Materials at the Project known by Landlord to exist
as of the date of this Lease, as more particularly described in Exhibit C
attached hereto. Tenant shall have no liability or responsibility with respect
to the Hazardous Materials facts described in Exhibit C, nor with respect to any
Hazardous Materials which Tenant proves were not caused or permitted by Tenant,
its agents, employees, contractors, licensees or invitees. Notwithstanding the
preceding two sentences, Tenant agrees to notify its agents, employees,
contractors, licensees, and invitees of any exposure or potential exposure to
Hazardous Materials at the Premises that Landlord brings to Tenant’s attention.
Tenant hereby acknowledges that this disclosure satisfies any obligation of
Landlord to Tenant pursuant to California Health & Safety Code Section 25359.7,
or any amendment or substitute thereto or any other disclosure obligations of
Landlord.

 

ARTICLE VI. COMMON AREAS; SERVICES

 

SECTION 6.1. UTILITIES AND SERVICES. Tenant shall be responsible for and shall
pay promptly, directly to the appropriate supplier, all charges for water, gas,
electricity, sewer, heat, light, power, telephone, telecommunications service,
refuse pickup, janitorial service, interior landscape maintenance and all other
utilities, materials and services furnished directly to Tenant or the Premises
or used by Tenant in, on or about the Premises during the Term, together with
any taxes thereon. If any utilities or services are not separately metered or
assessed to Tenant, Landlord shall make a reasonable determination of Tenant’s
proportionate share of the cost of such utilities and services, and Tenant shall
pay such amount to Landlord, as an item of additional rent, within ten (10) days
after receipt of Landlord’s statement or invoice therefor. Alternatively,
Landlord may elect to include such cost in the definition of Project Costs in
which event Tenant shall pay Tenant’s proportionate share of such costs in the
manner set forth in Section 4.2. Tenant shall also pay to Landlord as an item of
additional rent, within ten (10) days after receipt of Landlord’s statement or
invoice therefor, Landlord’s “standard charges” (as hereinafter defined, which
shall be in addition to the electricity charge paid to the utility provider) for
“after hours” usage by Tenant of each HVAC unit servicing the Premises. “After
hours” shall mean more than three hundred sixty (360) hours of usage of each
HVAC unit servicing the Premises during any month during the Term, and shall be
determined based upon the operation of the applicable HVAC unit during each
month on a “non-cumulative” basis (without regard to

 

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Tenant’s usage or nonusage of said unit during other months during the Term).
Landlord shall not be liable for damages or otherwise for any failure or
interruption of any utility or other service furnished to the Premises, and no
such failure or interruption shall be deemed an eviction or entitle Tenant to
terminate this Lease or withhold or abate any rent due hereunder. As used
herein, “standard charges” shall mean the following charges for each hour of
“after hours” use (in addition to the applicable electricity charges paid to the
utility provider) of the following described HVAC units: (i) $5.00 per hour for
1-5 ton HVAC units, (ii) $7.50 per hour for 6-30 ton HVAC units and (iii) $10.00
per hour for HVAC units of greater than 30 tons. Landlord shall at all
reasonable times have free access to the Building and Premises to install,
maintain, repair, replace or remove all electrical and mechanical installations
of Landlord. Tenant acknowledges that the costs incurred by Landlord related to
providing above-standard utilities to Tenant, including, without limitation,
telephone lines, may be charged to Tenant.

 

Notwithstanding the foregoing, if as a result of the actions of Landlord, its
agents, contractors or employees or the inactions of Landlord if Landlord is
required to act under this Lease, for more than three (3) consecutive business
days following written notice to Landlord there is no HVAC service or
electricity service to all or a portion of the Premises, or such an interruption
of other essential utilities and building services, such as fire protection or
water, so that all or a portion of the Premises cannot be used by Tenant, then
Tenant’s obligation to pay Basic Rent and Operating Expenses (or an equitable
portion of such Basic Rent and Operating Expenses to the extent that less than
all of the Premises are affected) shall thereafter be abated until the Premises
are again usable by Tenant; provided, however, that if Landlord is diligently
pursuing the repair of such utilities or services and Landlord provides
substitute services reasonably suitable for Tenant’s purposes, as for example,
bringing in portable air-conditioning equipment, then there shall not be an
abatement of Basic Rent or Operating Expenses. Any disputes concerning the
foregoing shall be resolved by JAMS arbitration pursuant to Article III of the
Work Letter. The foregoing provisions shall be Tenant’s sole recourse and remedy
in the event of such an interruption of services, and shall not apply in case of
the actions of parties other than Landlord, its employees, contractors or
authorized agents, or in the case of damage to, or destruction of, the Premises
(which shall be governed by the provisions of Article XI of the Lease).

 

SECTION 6.2. OPERATION AND MAINTENANCE OF COMMON AREAS. During the Term,
Landlord shall operate all Common Areas within the Project in the manner
Landlord may determine to be appropriate. All costs incurred by Landlord for the
maintenance and operation of the Common Areas shall be included in Project Costs
except to the extent any particular cost incurred is related to or associated
with a specific tenant and can be charged to such tenant of the Project. The
term “Common Areas” shall mean all areas which are not held for exclusive use by
persons entitled to occupy space, and all other appurtenant areas and
improvements within the Project provided by Landlord for the common use of
Landlord and tenants and their respective employees and invitees, including
without limitation parking areas and structures, driveways, sidewalks,
landscaped and planted areas, hallways and interior stairwells not located
within the premises of any tenant, common electrical rooms and roof access
entries, common entrances and lobbies, elevators, and restrooms not located
within the premises of any tenant.

 

SECTION 6.3. USE OF COMMON AREAS. The occupancy by Tenant of the Premises shall
include the use of the Common Areas in common with Landlord and with all others
for whose convenience and use the Common Areas may be provided by Landlord,
subject, however, to compliance with all nondiscretionary rules and regulations
as are prescribed from time to time by Landlord. Landlord shall at all times
during the Term have exclusive control of the Common Areas, and may restrain or
permit any use or occupancy, except as authorized by Landlord’s rules and
regulations. Tenant shall keep the Common Areas clear of any obstruction or
unauthorized use related to Tenant’s operations or use of Premises, including
without limitation, planters and furniture. Nothing in this Lease shall be
deemed to impose liability upon Landlord for any damage to or loss of the
property of, or for any injury to, Tenant, its invitees or employees. Landlord
may temporarily close any portion of the Common Areas for repairs, remodeling
and/or alterations, to prevent a public dedication or the accrual of
prescriptive rights, or for any other reason deemed sufficient by Landlord,
without liability to Tenant, Landlord’s temporary closure of any portion of the
Common Areas for such purposes shall not deprive Tenant of reasonable access to
the Premises.

 

SECTION 6.4. PARKING. Tenant shall be entitled to the number of vehicle parking
spaces set forth in Item 15 of the Basic Lease Provisions, which spaces shall be
unreserved and unassigned, on those portions of the Common Areas designated by
Landlord for parking. Tenant shall not use more parking spaces than such number.
All parking spaces shall be used only for parking of vehicles no larger than
full size passenger automobiles, sport utility vehicles or pickup trucks
(“Full-Sized Vehicles”). Tenant shall not permit or allow any vehicles that
belong to or are controlled by Tenant or Tenant’s employees, suppliers,
shippers, customers or invitees to be loaded, unloaded or parked in areas other
than those designated by Landlord for such activities. If Tenant permits or
allows any of the prohibited activities described above, then Landlord shall
have the right, without notice, in addition to such other rights and remedies
that Landlord may have, to remove or tow away the vehicle involved and charge
the costs to Tenant. Parking within the Common Areas shall be limited to striped
parking stalls, and no parking shall be permitted in any driveways, access ways
or in any area which would prohibit or impede the free flow of traffic within
the Common Areas. There shall be no parking of any vehicles for longer than a
forty-eight (48) hour period unless otherwise authorized by Landlord, and
vehicles which have been abandoned or parked in violation of the terms hereof
may be towed away at the owner’s expense. Notwithstanding the foregoing, Tenant
shall have the right to park any company-owned Full-Sized Vehicles within the
Common Area for more than forty-eight (48) hours, so long as such vehicles are
identified to Landlord and such vehicles are maintained in good working order.
Nothing contained in this Lease shall be deemed to create liability upon
Landlord for any damage to motor vehicles of visitors or employees, for any loss
of property from within those motor vehicles, or for any injury to Tenant, its
visitors or employees, unless ultimately determined to be caused by the sole
active negligence or willful misconduct of Landlord. Landlord shall have the
right to establish, and from time to time amend, and to enforce against all
users all reasonable rules and regulations (including the designation of areas
for employee parking) that Landlord may deem necessary and advisable for the
proper and efficient operation and maintenance of parking within the

 

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Common Areas. Landlord shall have the right to construct, maintain and operate
lighting facilities within the parking areas; to change the area, level,
location and arrangement of the parking areas and improvements therein; to
restrict parking by tenants, their officers, agents and employees to employee
parking areas; subsequent to the expiration of the initial 60-month Term of this
Lease, to enforce parking charges (by operation of meters or otherwise); and to
do and perform such other acts in and to the parking areas and improvements
therein as, in the use of good business judgment, Landlord shall determine to be
advisable. Any person using the parking area shall observe all directional signs
and arrows and any posted speed limits. In no event shall Tenant interfere with
the use and enjoyment of the parking area by other tenants of the Project or
their employees or invitees. Parking areas shall be used only for parking
vehicles. Washing, waxing, cleaning or servicing of vehicles, or the storage of
vehicles for longer than 48-hours, is prohibited unless otherwise authorized by
Landlord. Tenant shall be liable for any damage to the parking areas caused by
Tenant or Tenant’s employees, suppliers, shippers, customers or invitees,
including without limitation damage from excess oil leakage. Tenant shall have
no right to install any fixtures, equipment or personal property in the parking
areas.

 

SECTION 6.5. CHANGES AND ADDITIONS BY LANDLORD. Landlord reserves the right to
make alterations or additions to the Building or the Project, or to the
attendant fixtures, equipment and Common Areas. Landlord may at any time
relocate or remove any of the various buildings, parking areas, and other Common
Areas, and may add buildings and areas to the Project from time to time. No
change shall entitle Tenant to any abatement of rent or other claim against
Landlord. No such change shall deprive Tenant of reasonable access to or use of
the Premises.

 

ARTICLE VII. MAINTAINING THE PREMISES

 

SECTION 7.1. TENANT’S MAINTENANCE AND REPAIR. Tenant at its sole expense shall
maintain and make all repairs and replacements necessary to keep the Premises
and the Building in the condition as existed on the Commencement Date (or on any
later date that the improvements may have been installed), excepting ordinary
wear and tear, including without limitation all interior glass, doors, door
closures, hardware, fixtures, electrical, plumbing, fire extinguisher equipment
and other equipment (including without limitation supplemental HVAC equipment
serving the second floor server room) installed in the Premises and all
Alterations constructed by Tenant pursuant to Section 7.3 below. Any damage or
deterioration of the Premises shall not be deemed ordinary wear and tear if the
same could have been prevented by good maintenance practices by Tenant. As part
of its maintenance obligations hereunder, Tenant shall promptly alleviate and/or
repair any moisture conditions resulting from Tenant’s operations which could
cause mold in the Premises, and Tenant shall, at Landlord’s request, provide
Landlord with copies of all maintenance schedules, reports and notices prepared
by, for or on behalf of Tenant. All repairs and replacements shall be at least
equal in quality to the original work, shall be made only by a licensed
contractor approved in writing in advance by Landlord and shall be made only at
the time or times approved by Landlord; however, Landlord’s prior approval shall
not be required for repairs costing less than Five Thousand Dollars ($5,000.00),
provided that such repairs do not require a governmental permit nor affect any
of the mechanical, electrical, plumbing or HVAC systems, facilities or equipment
serving the Building. Any contractor utilized by Tenant shall be subject to
Landlord’s standard reasonable requirements for contractors, as modified from
time to time. Landlord may impose reasonable restrictions and requirements with
respect to repairs and replacements, as provided in Section 7.3, and the
provisions of Section 7.4 shall apply to all repairs and replacements.
Alternatively, Landlord may elect to perform any repair and maintenance of the
electrical and mechanical systems and any air conditioning, ventilating or
heating equipment serving the Premises and include the cost thereof as part of
Tenant’s Share of Operating Expenses. If Tenant fails to properly maintain
and/or repair the Premises as herein provided following Landlord’s notice and
the expiration of the applicable cure period (or earlier if Landlord determines
that such work must be performed prior to such time in order to avoid damage to
the Premises or Building or other detriment), then Landlord may elect, but shall
have no obligation, to perform any repair or maintenance required hereunder on
behalf of Tenant and at Tenant’s expense, and Tenant shall reimburse Landlord
upon demand for all reasonable costs incurred.

 

SECTION 7.2. LANDLORD’S MAINTENANCE AND REPAIR. Subject to Section 7.1 and
Article XI, Landlord shall provide service, maintenance and repair with respect
to any air conditioning, ventilating or heating equipment which serves the
Premises (exclusive, however, of supplemental HVAC equipment serving the second
floor server room), and shall maintain in good repair the roof, foundations,
footings, the exterior surfaces of the exterior walls of the Building (including
exterior glass), the structural, electrical and mechanical systems (including
elevators, if any, serving the Building), except that Tenant at its expense
shall make all repairs which Landlord deems reasonably necessary as a result of
the act or negligence of Tenant, its agents, employees, invitees, subtenants or
contractors. Landlord shall have the right to employ or designate any reputable
person or firm, including any employee or agent of Landlord or any of Landlord’s
affiliates or divisions, to perform any service, repair or maintenance function.
Landlord need not make any other improvements or repairs except as specifically
required under this Lease, and nothing contained in this Section shall limit
Landlord’s right to reimbursement from Tenant for maintenance, repair costs and
replacement costs as provided elsewhere in this Lease. Tenant understands that
it shall not perform any maintenance or make any repairs or replacements at
Landlord’s expense and shall have no right to any rental offset for any
maintenance, repairs or replacements performed by Tenant. Tenant further
understands that Landlord shall not be required to make any repairs to the roof,
foundations, footings, the exterior surfaces of the exterior walls of the
Building (excluding exterior glass), or structural, electrical or mechanical
systems unless and until Tenant has notified Landlord in writing of the need for
such repair and Landlord shall have a reasonable period of time thereafter to
commence and complete said repair, if warranted. Subject to the express
provisions of Section 2.4 of this Lease, all costs of any maintenance, repairs
and replacements on the part of Landlord provided hereunder shall be considered
part of Project Costs. Tenant further agrees that, unless Landlord has actual
knowledge of the need for such repair, if Tenant fails to report any such need
for repair in writing within sixty (60) days of its discovery by Tenant, Tenant
shall be responsible for any costs and expenses and other damages

 

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related to such repair which are in excess of those which would have resulted
had such need for repair been reported to Landlord within such sixty (60) day
period.

 

SECTION 7.3. ALTERATIONS. Except as otherwise provided in this Section, Tenant
shall make no alterations, additions, fixtures or improvements (“Alterations”)
to the Premises or the Building without the prior written consent of Landlord,
which consent may be granted or withheld in Landlord’s sole and absolute
discretion. In the event that any requested Alteration would result in a change
from Landlord’s building standard materials and specifications for the Project
(“Standard Improvements”), Landlord may withhold consent to such Alteration in
its sole and absolute discretion. In the event Landlord so consents to a change
from the Standard Improvements (such change being referred to as a “Non-Standard
Improvement”), Tenant shall be responsible for the cost of replacing such
Non-Standard Improvement with the applicable Standard Improvement
(“Replacements”) which Replacements shall be completed prior to the Expiration
Date or earlier termination of this Lease. Landlord shall not unreasonably
withhold its consent to any Alterations which cost less than Fifty Thousand
Dollars ($50,000.00) in the aggregate in any calendar year during the Term,
provided that no such Alterations shall: (i) affect the exterior of the Building
or outside areas (or be visible from adjoining sites), or (ii) affect or
penetrate any of the structural portions of the Building, including but not
limited to the roof, or (iii) require any change to the basic floor plan of the
Premises (including, without limitation, the adding of any additional “office”
square footage) or any change to any structural or mechanical systems of the
Premises, or (iv) fail to comply with any applicable governmental requirements
or require any governmental permit as a prerequisite to the construction
thereof, or (v) result in the Premises requiring building services beyond the
level normally provided to other tenants, or (vi) interfere in any manner with
the proper functioning of, or Landlord’s access to, any mechanical, electrical,
plumbing or HVAC systems, facilities or equipment located in or serving the
Building, or (vii) materially diminish the value of the Premises including,
without limitation, using lesser quality materials than those existing in the
Premises, or (viii) alter or replace Standard Improvements. Landlord may impose
any condition to its consent, including but not limited to a requirement that
the installation and/or removal of all Alterations and Replacements be covered
by a lien and completion bond satisfactory to Landlord in its sole and absolute
discretion and requirements as to the manner and time of performance of such
work. Landlord shall in all events, whether or not Landlord’s consent is
required, have the right to approve prior to the commencement of any work the
contractor performing the installation and removal of Alterations and
Replacements and Tenant shall not permit any contractor not approved by Landlord
to perform any work on the Premises or on the Building. Tenant shall obtain all
required permits for the installation and removal of Alterations and
Replacements and shall perform the installation and removal of Alterations and
Replacements in compliance with all applicable laws, regulations and ordinances,
including without limitation the ADA, all covenants, conditions and restrictions
affecting the Project, and the Rules and Regulations as described in Article
XVII. Tenant understands and agrees that Landlord shall be entitled to a
supervision fee in the amount of five percent (5%) of such Alterations either
requiring a permit from the City of Irvine or affecting any mechanical,
electrical, plumbing or HVAC systems, facilities or equipment serving the
Building. Under no circumstances shall Tenant make any Alterations or
Replacements which incorporate any Hazardous Materials, including without
limitation asbestos-containing construction materials into the Premises, the
Building or the Common Area. In no event shall Tenant prosecute any Alterations
that result in picketing or labor demonstrations in or about the Building or
Project. If any governmental entity requires, as a condition to any proposed
Alterations by Tenant, that improvements be made to the Common Areas, and if
Landlord consents to such improvements to the Common Areas (which consent may be
withheld in the sole and absolute discretion of Landlord), then Tenant shall, at
Tenant’s sole expense, make such required improvements to the Common Areas in
such manner, utilizing such materials, and with such contractors, architects and
engineers as Landlord may require in its sole and absolute discretion. Landlord
shall have the right, but not the obligation, to elect to make any such
improvements to be made to the Common Areas at Tenant’s expense, in which case
Tenant shall reimburse Landlord upon demand for all reasonable costs incurred in
making such improvements. Any request for Landlord’s consent to any proposed
Alterations shall be made in writing and shall contain architectural plans
describing the work in detail reasonably satisfactory to Landlord. Landlord may
elect to cause its architect to review Tenant’s architectural plans, and the
reasonable cost of that review shall be reimbursed by Tenant. Should the work
proposed by Tenant and consented to by Landlord modify the basic floor plan of
the Premises, then Tenant shall, at its expense, furnish Landlord with as-built
drawings and CAD disks compatible with Landlord’s systems and standards. Unless
Landlord otherwise agrees in writing, all Alterations made or affixed to the
Premises, the Building or to the Common Area (excluding moveable trade fixtures
and furniture), including without limitation all Tenant Improvements constructed
pursuant to the Work Letter (except as otherwise provided in the Work Letter)
and all telephone and data cabling, shall become the property of Landlord and
shall be surrendered with the Premises at the end of the Term; except that
Landlord may, by notice to Tenant given at the time such Alterations are
approved by Landlord, require Tenant to remove by the Expiration Date, or sooner
termination date of this Lease, all or any of the Alterations installed either
by Tenant or by Landlord at Tenant’s request, and all telephone and data
cabling, and to repair any damage to the Premises, the Building or the Common
Area arising from that removal and restore the Premises to their condition prior
to making such Alterations.

 

SECTION 7.4. MECHANIC’S LIENS. Tenant shall keep the Premises free from any
liens arising out of any services or work performed, materials furnished, or
obligations incurred by or for Tenant. Upon request by Landlord, Tenant shall
promptly (but in no event later than five (5) business days following such
request) cause any such lien to be released by posting a bond in accordance with
California Civil Code Section 3143 or any successor statute, and upon posting
such bond Tenant may continue to contest such lien in Tenant’s sole discretion.
In the event that Tenant shall not, within thirty (30) days following the
imposition of any lien, cause the lien to be released of record by payment or
posting of a proper bond, Landlord shall have, in addition to all other
available remedies, the right to cause the lien to be released by any means it
deems proper, including payment of or defense against the claim giving rise to
the lien. All expenses so incurred by Landlord, including Landlord’s attorneys’
fees, and any consequential or other damages incurred by Landlord arising out of
such lien, shall be reimbursed by Tenant upon demand, together with interest
from the date of payment by Landlord at the maximum rate permitted by law until
paid. Tenant shall give Landlord no less than twenty (20) days’ prior notice in
writing before commencing construction of any kind on the Premises or Common
Area and shall again notify Landlord that construction has

 

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commenced, such notice to be given on the actual date on which construction
commences, so that Landlord may post and maintain notices of nonresponsibility
on the Premises or Common Area, as applicable, which notices Landlord shall have
the right to post and which Tenant agrees it shall not disturb. Tenant shall
also provide Landlord notice in writing within ten (10) days following the date
on which such work is substantially completed. The provisions of this Section
shall expressly survive the expiration or sooner termination of this Lease.

 

SECTION 7.5. ENTRY AND INSPECTION. Landlord shall at all reasonable times, upon
written or oral notice (except in emergencies, when no notice shall be required)
have the right to enter the Premises to inspect them, to supply services in
accordance with this Lease, to perform any work required or permitted to be
performed by Landlord within the Premises, to have access to install, repair,
maintain, replace or remove all electrical and mechanical installations of
Landlord and to protect the interests of Landlord in the Premises, and to submit
the Premises to prospective or actual purchasers or encumbrance holders (or,
during the last one hundred and eighty (180) days of the Term or when an uncured
Event of Default exists, to prospective tenants), all without being deemed to
have caused an eviction of Tenant and without abatement of rent except as
provided elsewhere in this Lease; provided, however, except for emergencies, any
such entry shall be performed in a manner so as not to unreasonably interfere
with Tenant’s use of the Premises. Landlord shall have the right, if desired, to
retain a key which unlocks all of the doors in the Premises, excluding Tenant’s
vaults and safes, and Landlord shall have the right to use any and all means
which Landlord may deem proper to open the doors in an emergency in order to
obtain entry to the Premises, and any entry to the Premises obtained by Landlord
as provided in this Section 7.5 shall not be deemed to be a forcible or unlawful
entry into, or a detainer of, the Premises, or any eviction of Tenant from the
Premises.

 

ARTICLE VIII. TAXES AND ASSESSMENTS ON TENANT’S PROPERTY

 

Tenant shall be liable for and shall pay, at least ten (10) days before
delinquency, all taxes and assessments levied against all personal property of
Tenant located in the Premises, and, if required by Landlord, against all Non
Standard Improvements to the Premises (as defined in Section 7.3) made by
Landlord or Tenant, and against any Alterations (as defined in Section 7.3) made
to the Premises or the Building by or on behalf of Tenant. If requested by
Landlord, Tenant shall cause its personal property, Non-Standard Improvements
and Alterations to be assessed and billed separately from the real property of
which the Premises form a part. If any taxes required to be paid by Tenant on
Tenant’s personal property, Non-Standard Improvements and/or Alterations are
levied against Landlord or Landlord’s property and if Landlord pays the same, or
if the assessed value of Landlord’s property is increased by the inclusion of a
value placed upon Tenant’s personal property, Non-Standard Improvements and/or
Alterations and if Landlord pays the taxes based upon the increased assessment,
Landlord shall have the right to require that Tenant pay to Landlord the taxes
so levied against Landlord or the proportion of the taxes resulting from the
increase in the assessment. In calculating what portion of any tax bill which is
assessed against Landlord separately, or Landlord and Tenant jointly, is
attributable to Tenant’s Non-Standard Improvements, Alterations and personal
property, Landlord’s reasonable determination shall be conclusive.

 

ARTICLE IX. ASSIGNMENT AND SUBLETTING

 

SECTION 9.1. RIGHTS OF PARTIES.

 

(a) Notwithstanding any provision of this Lease to the contrary, and except as
to transfers expressly permitted without Landlord’s consent pursuant to
Section 9.4, Tenant will not, either voluntarily or by operation of law, assign,
sublet, encumber, or otherwise transfer all or any part of Tenant’s interest in
this Lease or the Premises, or permit the Premises to be occupied by anyone
other than Tenant, without Landlord’s prior written consent, which consent shall
not unreasonably be withheld in accordance with the provisions of
Section 9.1(b). No assignment (whether voluntary, involuntary or by operation of
law), subletting or other transfer shall be valid or effective without
Landlord’s prior written consent and, at Landlord’s election, any such
assignment, subletting or other transfer shall be void and of no force and
effect and any such attempted assignment, subletting or other transfer shall
constitute an Event of Default of this Lease. Landlord shall not be deemed to
have given its consent to any assignment, subletting or other transfer by any
course of action, including without limitation its acceptance of rent or any
other payment due under this Lease from any person or entity other than Tenant
or its acceptance of any name for listing in the Building directory, other than
Landlord’s other than written consent. To the extent not prohibited by
provisions of the Bankruptcy Code, 11 U.S.C. Section 101 et seq., (the
“Bankruptcy Code”), including Section 365(f)(1), Tenant on behalf of itself and
its creditors, administrators and assigns waives the applicability of
Section 365(e) of the Bankruptcy Code unless the proposed assignee of the
Trustee for the estate of the bankrupt meets Landlord’s standard for consent as
set forth in Section 9.1(b) of this Lease. If this Lease is assigned to any
person or entity pursuant to the provisions of the Bankruptcy Code, any and all
monies or other considerations to be delivered in connection with the assignment
shall be delivered to Landlord, shall be and remain the exclusive property of
Landlord and shall not constitute property of Tenant or of the estate of Tenant
within the meaning of the Bankruptcy Code. Any person or entity to which this
Lease is assigned pursuant to the provisions of the Bankruptcy Code shall be
deemed to have assumed all of the obligations arising under this Lease on and
after the date of the assignment, and shall upon demand execute and deliver to
Landlord an instrument confirming that assumption.

 

(b) If Tenant desires to assign, sublease or otherwise transfer an interest in
this Lease or the Premises, it shall first notify Landlord of its desire and
shall submit in writing to Landlord: (i) the name and address of the proposed
assignee, subtenant or transferee; (ii) the nature of any proposed assignee’s,
subtenant’s or transferee’s business to be carried on in the Premises; (iii) the
terms and provisions of any proposed assignment, sublease or other transfer,
including a copy of the proposed assignment, sublease or transfer form;
(iv) evidence that the proposed assignee, subtenant or transferee will comply
with the insurance requirements of Exhibit D hereto; (v) a completed
Environmental Questionnaire from the proposed assignee, subtenant or transferee;
(vi) any other information requested by Landlord and reasonably related to the
transfer and (vii) the fee described in Section 9.1(e).

 

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Except as provided in Section 9.1 (c), Landlord shall not unreasonably withhold
its consent, provided that the parties agree that it shall be reasonable for
Landlord to withhold its consent if: (1) the use of the Premises will not be
consistent with the provisions of this Lease or with Landlord’s commitment to
other tenants of the Building and Project; (2) the proposed assignee, subtenant
or transferee has been required by any prior landlord, lender or governmental
authority to take remedial action in connection with Hazardous Materials
contaminating a property arising out of the proposed assignee’s, subtenant’s or
transferee’s actions or use of the property in question or is subject to any
enforcement order issued by any governmental authority in connection with the
use, disposal or storage of a Hazardous Material; (3) the proposed assignee or
subtenant cannot comply with Landlord’s insurance requirements as set forth in
Exhibit D; (4) the proposed assignee, subtenant or transferee has not
demonstrated to the reasonable satisfaction of Landlord that it is financially
responsible or has failed to submit to Landlord all reasonable information as
requested by Landlord concerning the proposed assignee, subtenant or transferee,
including, but not limited to, a certified balance sheet of the proposed
assignee, subtenant or transferee as of a date within ninety (90) days of the
request for Landlord’s consent, statements of income or profit and loss of the
proposed assignee, subtenant or transferee for the two-year period preceding the
request for Landlord’s consent, and/or a certification signed by the proposed
assignee, subtenant or transferee that it has not been evicted from or been in
arrears in rent at any other leased premises for the 3-year period preceding the
request for Landlord’s consent; (5) the proposed assignee, subtenant or
transferee has not demonstrated to Landlord’s reasonable satisfaction a record
of successful experience in business; (6) the proposed subtenant, assignee or
transferee is a prospect with whom Landlord is actively negotiating to become a
tenant at the Building or Project; or (7) the proposed assignment sublease or
transfer will impose additional burdens or adverse tax effects on Landlord. If
Tenant has any exterior sign rights under this Lease, such rights are personal
to Tenant and may not be assigned or transferred to any assignee of this Lease
or subtenant of the Premises without Landlord’s prior written consent, which
consent may be withheld in Landlord’s sole and absolute discretion.

 

If Landlord consents to the proposed transfer, Tenant may within ninety
(90) days after the date of the consent effect the transfer upon the terms
described in the information furnished to Landlord; provided that any material
change in the terms shall be subject to Landlord’s consent as set forth in this
Section 9.1. Landlord shall approve or disapprove any requested transfer within
fifteen (15) business days following receipt of Tenant’s written request, the
information set forth above, and the fee set forth below.

 

(c) Notwithstanding the provisions of Section 9.1(b) above, in lieu of
consenting to a proposed assignment or subletting, Landlord may elect, within
the fifteen (15) business day period permitted for Landlord to approve or
disapprove a requested transfer, to (i) sublease the Premises (or the portion
proposed to be subleased), or take an assignment of Tenant’s interest in this
Lease, upon substantially the same terms as offered to the proposed subtenant or
assignee (excluding terms relating to the purchase of personal property, the use
of Tenant’s name or the continuation of Tenant’s business), respectively, or
(ii) terminate this Lease as to the portion of the Premises proposed to be
subleased or assigned with a proportionate abatement in the rent payable under
this Lease, and the sublease, assignment or termination elected by Landlord
shall be effective thirty (30) days following written notice by Landlord of its
election. Landlord may thereafter, at its option, assign, sublet or re-let any
space so sublet, obtained by assignment or obtained by termination to any third
party, including without limitation the proposed transferee of Tenant.

 

(d) In the event that Landlord approves the requested assignment, subletting or
other transfer, Landlord shall be entitled to receive fifty percent (50%) of any
amounts paid by the assignee or subtenant, however described, in excess of
(i) the Basic Rent payable by Tenant hereunder, or in the case of a sublease of
a portion of the Premises, in excess of the Basic Rent reasonably allocable to
such portion as determined by Landlord, plus (ii) Tenant’s direct out-of-pocket
costs which Tenant certifies to Landlord have been paid to provide occupancy
related services to such assignee or subtenant of a nature commonly provided by
landlords of similar space, with such costs to be amortized on a straight-line
basis over the then remaining term of this Lease or any shorter term of any
sublease of the Premises or a portion thereof. The amounts due Landlord under
this Section 9.1(d), shall be payable directly to Landlord by the assignee or
subtenant concurrently with such assignee’s or subtenant’s payment(s) to Tenant,
or, at Landlord’s option, by Tenant within ten (10) days of Tenant’s receipt
thereof. Landlord shall have the right to review or audit the books and records
of Tenant, or have such books and records reviewed or audited by an outside
accountant, to confirm any such direct out-of-pocket costs. In the event that
such direct out-of-pocket costs claimed by Tenant are overstated by more than
five percent (5%), Tenant shall reimburse Landlord for any of Landlord’s costs
related to such review or audit. At Landlord’s request, a written agreement
shall be entered into by and among Tenant, Landlord and the proposed assignee or
subtenant confirming the requirements of this Section 9.1(d).

 

(e) Tenant shall pay to Landlord a fee equal to the greater of (i) Landlord’s
actual and reasonable costs related to such assignment, subletting or other
transfer or (ii) Five Hundred Dollars ($500.00), to process any request by
Tenant for an assignment, subletting or other transfer under this Lease. Tenant
shall pay Landlord the sum of Five Hundred Dollars ($500.00) concurrently with
Tenant’s request for consent to any assignment, subletting or other transfer,
and Landlord shall have no obligation to consider such request unless
accompanied by such payment. Tenant shall pay Landlord upon demand any costs in
excess of such payment to the extent Landlord’s actual and reasonable costs
related to such request exceeds $500.00. Such fee is hereby acknowledged as a
reasonable amount to reimburse Landlord for its costs of review and evaluation
of a proposed transfer.

 

SECTION 9.2. EFFECT OF TRANSFER. Except in the event of an election by Landlord
pursuant to Subsection 9.1( c)(ii) above, no assignment, subletting or other
transfer, even with the consent of Landlord, shall relieve Tenant of its
obligation to pay rent and to perform all its other obligations under this
Lease. Moreover, Tenant shall indemnify and hold Landlord harmless, as provided
in Section 10.3, for any act or omission by an assignee, subtenant or
transferee. Each assignee, other than Landlord, shall assume all obligations of
Tenant under this Lease and shall be liable jointly and severally with Tenant
for the payment of all rent, and for the due

 

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performance of all of Tenant’s obligations, under this Lease. No assignment,
subletting or transfer shall be effective or binding on Landlord unless
documentation in form and substance satisfactory to Landlord in its reasonable
discretion evidencing the transfer, and in the case of an assignment, the
assignee’s assumption of the obligations of Tenant under this Lease, is
delivered to Landlord, and both the assignee/subtenant and Tenant deliver to
Landlord an executed consent to transfer instrument prepared by Landlord and
consistent with the requirements of this Article. Consent by Landlord to one or
more transfers shall not operate as a waiver or estoppel to the future
enforcement by Landlord of its rights under this Lease or as a consent to any
subsequent transfer.

 

SECTION 9.3. SUBLEASE REQUIREMENTS. The following terms and conditions shall
apply to any subletting by Tenant of all or any part of the Premises and shall
be deemed included in each sublease:

 

(a) Each and every provision contained in this Lease (other than with respect to
the payment of rent hereunder) is incorporated by reference into and made a part
of such sublease, with “Landlord” hereunder meaning the sublandlord therein and
“Tenant” hereunder meaning the subtenant therein.

 

(b) Tenant hereby irrevocably assigns to Landlord all of Tenant’s interest in
all rentals and income arising from any sublease of the Premises, and Landlord
may collect such rent and income and apply same toward Tenant’s obligations
under this Lease; provided, however, that until there is an Event of Default by
Tenant, Tenant shall have the right to receive and collect the sublease rentals.
Landlord shall not, by reason of this assignment or the collection of sublease
rentals, be deemed liable to the subtenant for the performance of any of
Tenant’s obligations under the sublease. Tenant hereby irrevocably authorizes
and directs any subtenant, upon receipt of a written notice from Landlord
stating that an uncured Event of Default exists in the performance of Tenant’s
obligations under this Lease, to pay to Landlord all sums then and thereafter
due under the sublease. Tenant agrees that the subtenant may rely on that notice
without any duty of further inquiry and notwithstanding any notice or claim by
Tenant to the contrary. Tenant shall have no right or claim against the
subtenant or Landlord for any rentals so paid to Landlord.

 

(c) In the event of the termination of this Lease for any reason, including
without limitation as the result of an Event of Default by Tenant or by the
mutual agreement of Landlord and Tenant, Landlord may, at its sole option, take
over Tenant’s entire interest in any sublease and, upon notice from Landlord,
the subtenant shall attorn to Landlord. In no event, however, shall Landlord be
liable for any previous act or omission by Tenant under the sublease or for the
return of any advance rental payments or deposits under the sublease that have
not been actually delivered to Landlord, nor shall Landlord be bound by any
sublease modification executed without Landlord’s consent or for any advance
rental payment by the subtenant in excess of one month’s rent. The provisions of
this Lease (other than with respect to the payment of rent), including without
limitation those pertaining to insurance and indemnification, shall be deemed
incorporated by reference into the sublease despite the termination of this
Lease. In the event Landlord does not elect to take over Tenant’s interest in a
sublease in the event of any such termination of this Lease, such sublease shall
terminate concurrently with the termination of this Lease and such subtenant
shall have no further rights under such sublease and Landlord shall have no
obligations to such subtenant.

 

SECTION 9.4. CERTAIN TRANSFERS. Except as otherwise described herein, the
following shall be deemed to constitute an assignment of this Lease; (a) the
sale of all or substantially all of Tenant’s assets (other than bulk sales in
the ordinary course of business), (b) if Tenant is a corporation, an
unincorporated association, a limited liability company or a partnership, the
transfer, assignment or hypothecation of any stock or interest in such
corporation, association, limited liability company or partnership in the
aggregate of twenty-five percent (25%) (except for publicly traded shares of
stock constituting a transfer of twenty-five percent (25%) or more in the
aggregate, so long as no change in the controlling interest of Tenant occurs as
a result thereof), or (c) any other direct or indirect change of control of
Tenant, including, without limitation, change of control of Tenant’s parent
company or a merger by Tenant or its parent company. Notwithstanding the
foregoing, Landlord’s consent shall not be required for the assignment of this
Lease to: (A) an entity resulting from a merger or consolidation of Tenant with
or into another entity or a reorganization of Tenant, (B) Any entity succeeding
to the business and assets of Tenant, (C) any entity controlling, controlled by,
or under common control with Tenant (collectively, “Permitted Transfer” so long
as (i) the net worth of the successor or reorganized entity after such merger is
at least equal to the greater of the net worth of Tenant as of the execution of
this Lease by Landlord or the net worth of Tenant immediately prior to the date
of such Permitted Transfer, evidence of which, reasonably satisfactory to
Landlord, shall be presented to Landlord prior to such Permitted Transfer,
(ii) Tenant shall provide to Landlord, prior to such merger or reorganization,
written notice of such Permitted Transfer and such assignment documentation and
other information as Landlord may require in connection therewith, and (iii) all
of the terms and requirements of Section 9.2 and 9.3 shall apply with respect to
such assignment. Notwithstanding the foregoing provisions of this Section 9.4, a
sale of stock by Tenant in connection with a private equity or venture capital
financing shall not be considered an assignment requiring advance notice to or
approval by Landlord provided the tangible net worth of Tenant is not impaired
as a result of such financing and provided further that such financing is not
structured as a subterfuge to avoid the obligations and restrictions of this
Lease. For the purposes of this Section 9.4, “tangible net worth” means
stockholders equity as shown on a financial statement prepared in accordance
with GAAP less the amounts shown on such statement as goodwill and other
intangible assets.

 

ARTICLE X. INSURANCE AND INDEMNITY

 

SECTION 10.1. TENANT’S INSURANCE. Tenant, at its sole cost and expense, shall
provide and maintain in effect the insurance described in Exhibit D. Evidence of
that insurance must be delivered to Landlord prior to the Commencement Date or
any earlier date on which Tenant may enter upon or take possession of the
Premises for any reason whatsoever.

 

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SECTION 10.2. LANDLORD’S INSURANCE. Landlord may, at its election, provide any
or all of the following types of insurance, with or without deductible and in
amounts and coverages as may be determined by Landlord in its sole and absolute
discretion: property insurance, subject to standard exclusions, covering the
Building and/or Project (which shall be maintained or self-insured by Landlord
up to the full replacement cost thereof less the cost of footings, foundations
and other typical exclusions), and such other risks as Landlord or its
mortgagees may from time to time deem appropriate, including coverage for the
Tenant Improvements constructed by Landlord pursuant to the Work Letter attached
hereto, and commercial general liability coverage. Landlord shall not be
required to carry insurance of any kind on Tenant’s Alterations or on Tenant’s
other property, including, without limitation, Tenant’s trade fixtures,
furnishings, equipment, signs and all other items of personal property, and
Landlord shall not be obligated to repair or replace that property should damage
occur. All proceeds of insurance maintained by Landlord upon the Building and/or
Project shall be the property of Landlord, whether or not Landlord is obligated
to or elects to make any repairs. At Landlord’s option, Landlord may self-insure
all or any portion of the risks for which Landlord may elect to provide
insurance hereunder.

 

SECTION 10.3. JOINT INDEMNITY.

 

(a) To the fullest extent permitted by law, Tenant shall defend, indemnify,
protect, save and hold harmless Landlord, its agents, and any and all affiliates
of Landlord, including, without limitation, any corporations or other entities
controlling, controlled by or under common control with Landlord, from and
against any and all claims, demands, actions, losses, liabilities, costs or
expenses arising either before or after the Commencement Date from Tenant’s use
or occupancy of the Premises, the Building or the Common Areas, including,
without limitation, the use by Tenant, its agents, employees, invitees or
licensees of any recreational facilities within the Common Areas; the conduct of
Tenant’s business; any activity, work, or thing done, permitted or suffered by
Tenant or its agents, employees, invitees or licensees in or about the Premises,
the Building or the Common Areas; any Event of Default in the performance of any
obligation on Tenant’s part to be performed under this Lease; or any act or
negligence of Tenant or its agents, employees, visitors, patrons, guests,
invitees or licensees. Landlord may, at its option, require Tenant to assume
Landlord’s defense in any claim, action or proceeding covered by this Section
through counsel reasonably satisfactory to Landlord. The provisions of this
Section shall expressly survive the expiration or sooner termination of this
Lease. Tenant’s obligations under this Section shall not apply in the event that
the claim, demand, action, loss, liability, cost or expense is caused solely by
the active negligence or willful misconduct of Landlord.

 

(b) To the fullest extent permitted by law, but subject to the express
limitations on liability contained in this Lease (including, without limitation,
the provisions of Sections 10.4, 10.5 and 14.8 of this Lease), Landlord shall
defend, indemnify, protect, save and hold harmless Tenant, its agents and any
and all affiliates of Tenant, including without limitation, any corporations, or
other entities controlling, controlled by or under common control with Tenant,
from and against any and all claims, liabilities, costs or expenses arising
either before or after the Commencement Date from the active negligence or
willful misconduct of Landlord, its employees or authorized agents in connection
with the operation, maintenance or repair of the Premises and the Common Areas
of the Project. Tenant may, at its option, require Landlord to assume Tenant’s
defense in actions covered by this Section 10.3(b) through counsel reasonably
satisfactory to Tenant. The provisions of this Section 10.3(b) shall expressly
survive the expiration or sooner termination of this Lease. Landlord’s
obligations under this Section 10.3(b) shall not apply in the event that the
claim, liability, cost or expense is (i) caused by the active negligence or
willful misconduct of Tenant, or (ii) is covered by Tenant’s indemnity
obligations set forth in Section 10.3(a) above.

 

SECTION 10.4. LANDLORD’S NONLIABILITY. Except to the extent of Landlord’s
obligations contained in Section 10.3(b) above, Landlord, its agents, and any
and all affiliates of Landlord, shall not be liable to Tenant, its employees,
agents and/or invitees, and Tenant hereby waives all claims against Landlord,
its agents, and any and all affiliates of Landlord, for and knowingly assumes
the risk of loss of or damage to any property, or loss or interruption of
business or income, or any other loss, cost, damage, injury or liability
whatsoever (including without limitation any consequential damages and lost
profit or opportunity costs) resulting from, but not limited to, Acts of God,
acts of civil disobedience or insurrection, acts or omissions of third parties
and/or of other tenants within the Project or their agents, employees,
contractors, guests or invitees, the negligence of Landlord, its agents, or any
and all affiliates of Landlord, fire, explosion, falling plaster, steam, gas,
electricity, water or rain which may leak or flow from or into any part of the
Premises, mold, or from the breakage, leakage, obstruction or other defects of
the pipes, sprinklers, wires, appliances, plumbing, air conditioning, electrical
works, roof, windows or other fixtures in the Building, whether the damage or
injury results from conditions arising in the Premises or in other portions of
the Building. It is understood that any such condition may require the temporary
evacuation or closure of all or a portion of the Building. Landlord shall have
no liability whatsoever (including without limitation consequential damages and
lost profit or opportunity costs) and, except as expressly provided in this
Lease (including without limitation, in Sections 11.1 and 12.1 below), there
shall be no abatement of rent, by reason of any injury to or interference with
Tenant’s business arising from the making of any repairs, alterations or
improvements to any portion of the Building, including repairs to the Premises,
nor shall any related activity by Landlord constitute an actual or constructive
eviction. In making repairs, alterations or improvements, however, Landlord
shall interfere as little as reasonably practicable with the conduct of Tenant’s
business in the Premises. Should Tenant elect to receive any service or products
from a concessionaire, licensee or third party tenant of Landlord, Landlord
shall have no liability for any services or products so provided or for any
breach of contract by such third party provider. Neither Landlord nor its agents
shall be liable for interference with light or other similar intangible
interests. Tenant shall immediately notify Landlord in case of fire or accident
in the Premises, the Building or the Project and of defects in any improvements
or equipment.

 

SECTION 10.5. WAIVER OF SUBROGATION. Landlord and Tenant each hereby waives all
rights of recovery against the other and the other’s agents on account of loss
and damage occasioned to the property of such waiving party to the extent that
the waiving party is entitled to proceeds for such loss or damage under any
property

 

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insurance policies carried or required to be carried by the provisions of this
Lease; provided however, that the foregoing waiver shall not apply to the extent
of Tenant’s obligations to pay deductibles under any such policies and this
Lease. By this waiver it is the intent of the parties that neither Landlord nor
Tenant shall be liable to any insurance company (by way of subrogation or
otherwise) insuring the other party for any loss or damage insured against under
any property insurance policies contemplated by this Lease, even though such
loss or damage might be occasioned by the negligence of such party, its agents,
employees, contractors, guests or invitees.

 

ARTICLE XI. DAMAGE OR DESTRUCTION

 

SECTION 11.1. RESTORATION.

 

(a) If the Premises or the Building or a part thereof are materially damaged by
any fire, flood, earthquake or other casualty, Landlord shall have the right to
terminate this Lease upon written notice to Tenant if: (i) Landlord reasonably
determines that proceeds necessary to pay the full cost of repair are not
available from Landlord’s insurance, including without limitation earthquake
insurance, plus such additional amounts Tenant elects, at its option, to
contribute, excluding however the deductible (for which Tenant shall be
responsible for Tenant’s Share); (ii) Landlord reasonably determines that the
Premises cannot, with reasonable diligence, be fully repaired by Landlord (or
cannot be safely repaired because of the presence of hazardous factors,
including without limitation Hazardous Materials, earthquake faults, and other
similar dangers) within two hundred seventy (270) days after the date of the
damage; (iii) an uncured Event of Default by Tenant has occurred and is
continuing; or (iv) the material damage occurs during the final twelve
(12) months of the Term. Landlord shall notify Tenant in writing (“Landlord’s
Notice”) within sixty (60) days after the damage occurs as to (A) whether
Landlord is terminating this Lease as a result of such material damage and
(B) if Landlord is not terminating this Lease, the number of days within which
Landlord estimates that the Premises, with reasonable diligence, are likely to
be fully repaired. In the event Landlord elects to terminate this Lease, this
Lease shall terminate as of the date specified for termination by Landlord’s
Notice (which termination date shall in no event be later than sixty (60) days
following the date of the damage, or, if no such date is specified, such
termination shall be the date of Landlord’s Notice).

 

(b) If Landlord has the right to terminate this Lease pursuant to
Section 11.1(a) and does not elect to so terminate this Lease, and provided that
at the time of Landlord’s Notice neither an Event of Default exists nor has
Landlord delivered Tenant a notice of any failure by Tenant to fulfill an
obligation under this Lease which, unless cured by Tenant within the applicable
grace period, would constitute an Event of Default, then within ten (10) days
following delivery of Landlord’s Notice pursuant to Section 11.1(a), Tenant may
elect to terminate this Lease by written notice to Landlord, but only if
(i) Landlord’s Notice specifies that Landlord has determined that the Premises
cannot be repaired, with reasonable diligence, within two hundred seventy
(270) days after the date of damage or (ii) the casualty has occurred within the
final twelve (12) months of the Term and such material damage has a materially
adverse impact on Tenant’s continued use of the Premises. If Tenant fails to
provide such termination notice within such ten (10) day period, Tenant shall be
deemed to have waived any termination right under this Section 1l.1(b) or any
other applicable law.

 

(c) In the event that neither Landlord nor Tenant terminates this Lease pursuant
to this Section 11.1 as a result of material damage to the Building or Premises
resulting from a casualty, Landlord shall repair all material damage to the
Premises or the Building as soon as reasonably possible and this Lease shall
continue in effect for the remainder of the Term. Subject to any provision to
the contrary in the Work Letter, such repair by Landlord shall include repair of
material damage to the Tenant Improvements constructed pursuant to the Work
Letter. Landlord’s repair of material damage shall be at Landlord’s sole cost
and expense except for any insurance deductible (for which Tenant shall be
responsible for Tenant’s Share). Landlord shall have the right, but not the
obligation, to repair or replace any other leasehold improvements made by Tenant
or any Alterations (as defined in Section 7.3) constructed by Tenant as part of
Landlord’s repair of material damage, in which case Tenant shall make available
to Landlord upon demand insurance proceeds from insurance required to be
maintained by Tenant. If Landlord elects to repair or replace such leasehold
improvements and/or Alterations, all insurance proceeds available for such
repair or replacement shall be made available to Landlord. Landlord shall have
no liability to Tenant in the event that the Premises or the Building has not
been fully repaired within the time period specified by Landlord in Landlord’s
Notice to Tenant as described in Section 11.1(a). Notwithstanding the provisions
of this Article XI, the repair of damage to the Premises to the extent such
damage is not material shall be governed by Sections 7.1 and 7.2.

 

Notwithstanding anything to the contrary contained in this Section 11.1( c), if
for any reasons other than delays caused by Tenant, or other matters beyond
Landlord’s reasonable control, the Premises and/or the Building have not been
substantially repaired within the time period specified in Landlord’s Notice to
Tenant as described in Section 11.1(a), then Tenant may, by written notice to
Landlord given at any time thereafter but prior to the actual date of the
substantial completion of the repair of the Premises or the Building, elect to
terminate this Lease. Notwithstanding the foregoing, if at any time during the
construction period, Landlord reasonably determines that the substantial
completion of said repairs will be delayed beyond the time period specified in
Landlord’s Notice (for reasons other than Tenant-caused delays and/or force
majeure delays) then Landlord may notify Tenant in writing of such determination
and of a new outside date for completion of such repairs, and Tenant must elect
within ten (10) days of receipt of such notice to either terminate this Lease or
waive its right to terminate this Lease provided such repairs are substantially
completed prior to the new outside date established by Landlord in such notice
to Tenant. Tenant’s failure to elect to terminate this Lease within such ten
(10) day period shall be deemed Tenant’s waiver of its right to terminate this
Lease as provided in this paragraph as to the previous outside date, but not as
to the new outside date established by said notice.

 

(d) Commencing on the date of such material damage to the Building, and ending
on the sooner of the date the damage is repaired or the date this Lease is
terminated, the rental to be paid under this Lease shall be abated in the same
proportion that the Floor Area of the Premises that is rendered unusable by the
damage from time to

 

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time bears to the total Floor Area of the Premises, as determined by Landlord,
but only to the extent that Landlord is entitled to reimbursement from the
proceeds of the business interruption insurance required to be maintained by
Tenant pursuant to Exhibit D.

 

(e) Landlord shall not be required to repair or replace any improvements or
fixtures that Tenant is obligated to repair or replace pursuant to Section 7.1
or any other provision of this Lease and Tenant shall continue to be obligated
to so repair or replace any such improvements or fixtures, notwithstanding any
provisions to the contrary in this Article XI. In addition, but subject to the
provisions of Section 10.5, in the event the damage or destruction to the
Premises or Building are due in substantial part to the fault or neglect of
Tenant or its employees, subtenants, invitees or representatives, the costs of
such repairs or replacement to the Premises or Building shall be borne by
Tenant, and in addition, Tenant shall not be entitled to terminate this Lease as
a result, notwithstanding the provisions of Section 11.1(b).

 

(f) Tenant shall fully cooperate with Landlord in removing Tenant’s personal
property and any debris from the Premises to facilitate all inspections of the
Premises and the making of any repairs. Notwithstanding anything to the contrary
contained in this Lease, if Landlord in good faith believes there is a risk of
injury to persons or damage to property from entry into the Building or Premises
following any damage or destruction thereto, Landlord may restrict entry into
the Building or the Premises by Tenant, its employees, agents and contractors in
a non-discriminatory manner, without being deemed to have violated Tenant’s
rights of quiet enjoyment to, or made an unlawful detainer of, or evicted Tenant
from, the Premises. Upon request, Landlord shall consult with Tenant to
determine if there are safe methods of entry into the Building or the Premises
solely in order to allow Tenant to retrieve files, data in computers, and
necessary inventory, subject however to all indemnities and waivers of liability
from Tenant to Landlord contained in this Lease and any additional indemnities
and waivers of liability which Landlord may require.

 

SECTION 11.2. LEASE GOVERNS. Tenant agrees that the provisions of this Lease,
including without limitation Section 11.1, shall govern any damage or
destruction and shall accordingly supersede any contrary statute or rule of law.

 

ARTICLE XII. EMINENT DOMAIN

 

SECTION 12.1. TOTAL OR PARTIAL TAKING. If all or a material portion of the
Premises is taken by any lawful authority by exercise of the right of eminent
domain, or sold to prevent a taking, either Tenant or Landlord may terminate
this Lease effective as of the date possession is required to be surrendered to
the authority. In the event title to a portion of the Building or Project,
whether or not including a portion of the Premises, is taken or sold to prevent
a taking, and if Landlord elects to restore the Building in such a way as to
alter the Premises materially, either party may terminate this Lease, by written
notice to the other party, effective on the date of vesting of title. In the
event neither party has elected to terminate this Lease as provided above, then
Landlord shall promptly, after receipt of a sufficient condemnation award,
proceed to restore the Premises to substantially their condition prior to the
taking, and a proportionate allowance shall be made to Tenant for the rent
corresponding to the time during which, and to the part of the Premises of
which, Tenant is deprived on account of the taking and restoration. In the event
of a taking, Landlord shall be entitled to the entire amount of the condemnation
award without deduction for any estate or interest of Tenant; provided that
nothing in this Section shall be deemed to give Landlord any interest in, or
prevent Tenant from seeking any award against the taking authority for, the
taking of personal property and fixtures belonging to Tenant or for relocation
or business interruption expenses recoverable from the taking authority.

 

SECTION 12.2. TEMPORARY TAKING. No temporary taking of the Premises shall
terminate this Lease or give Tenant any right to abatement of rent, and any
award specifically attributable to a temporary taking of the Premises shall
belong entirely to Tenant. A temporary taking shall be deemed to be a taking of
the use or occupancy of the Premises for a period of not to exceed ninety
(90) days.

 

SECTION 12.3. TAKING OF PARKING AREA. In the event there shall be a taking of
the parking area such that Landlord can no longer provide sufficient parking to
comply with this Lease, Landlord may substitute reasonably equivalent parking in
a location reasonably close to the Building; provided that if Landlord fails to
make that substitution within ninety (90) days following the taking and if the
taking materially impairs Tenant’s use and enjoyment of the Premises, Tenant
may, at its option, terminate this Lease by written notice to Landlord. If this
Lease is not so terminated by Tenant, there shall be no abatement of rent and
this Lease shall continue in effect.

 

ARTICLE XIII. SUBORDINATION; ESTOPPEL CERTIFICATE; FINANCIALS

 

SECTION 13.1. SUBORDINATION. At the option of Landlord or any lender of
Landlord’s that obtains a security interest in the Building, this Lease shall be
either superior or subordinate to all ground or underlying leases, mortgages and
deeds of trust, if any, which may hereafter affect the Building, and to all
renewals, modifications, consolidations, replacements and extensions thereof;
provided, that so long as no Event of Default exists and is continuing under
this Lease, Tenant’s possession and quiet enjoyment of the Premises shall not be
disturbed and this Lease shall not terminate in the event of termination of any
such ground or underlying lease, or the foreclosure of any such mortgage or deed
of trust, to which this Lease has been subordinated pursuant to this Section.
Tenant shall execute and deliver any commercially reasonable documents or
agreements requested by Landlord or such lessor or lender which provide Tenant
with the non-disturbance protections set forth in this Section. In the event of
a termination or foreclosure, Tenant shall become a tenant of and attorn to the
successor-in-interest to Landlord upon the same terms and conditions as are
contained in this Lease, and shall execute any instrument reasonably required by
Landlord’s successor for that purpose. Tenant shall also, upon written request
of Landlord, execute and deliver any commercially reasonable instruments as may
be required from time to time to

 

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subordinate the rights of Tenant under this Lease to any ground or underlying
lease or to the lien of any mortgage or deed of trust (provided that such
instruments include the nondisturbance and attornment provisions set forth
above), or, if requested by Landlord, to subordinate, in whole or in part, any
ground or underlying lease or the lien of any mortgage or deed of trust to this
Lease. Tenant agrees that any purchaser at a foreclosure sale or lender taking
title under a deed-in-lieu of foreclosure shall not be responsible for any act
or omission of a prior landlord, shall not be subject to any offsets or defenses
Tenant may have against a prior landlord, and shall not be liable for the return
of the security deposit to the extent it is not actually received by such
purchaser or bound by any rent paid for more than the current month in which the
foreclosure occurred.

 

Provided Tenant shall pay all costs in connection therewith, Landlord agrees to
use its commercially reasonable efforts to cause the holder of any mortgage
encumbering the Project as of the date of this Lease to execute a commercially
reasonable nondisturbance and attornment agreement by and between such holder
and Tenant.

 

SECTION 13.2. ESTOPPEL CERTIFICATE.

 

(a) Tenant shall within ten (10) days following written request from Landlord,
execute, acknowledge and deliver to Landlord, in any form that Landlord may
reasonably require, a statement in writing (i) certifying that this Lease is
unmodified and in full force and effect (or, if modified, stating the nature of
the modification and certifying that this Lease, as modified, is in full force
and effect) and the dates to which the rental, additional rent and other charges
have been paid in advance, if any, and (ii) acknowledging that, to Tenant’s
knowledge, there are no uncured defaults on the part of Landlord, or specifying
each default if any are claimed, and (iii) setting forth all further information
that Landlord or any prospective purchaser or encumbrancer may reasonably
require. Tenant’s statement may be relied upon by any prospective purchaser or
encumbrancer of all or any portion of the Building or Project.

 

(b) Notwithstanding any other rights and remedies of Landlord, Tenant’s failure
to deliver any estoppel statement within the provided time shall be conclusive
upon Tenant that (i) this Lease is in full force and effect, without
modification except as may be represented by Landlord, (ii) there are no uncured
Events of Default in Landlord’s performance, and (iii) not more than one month’s
rental has been paid in advance.

 

SECTION 13.3. FINANCIALS.

 

(a) Tenant shall deliver to Landlord, prior to the execution of this Lease and
thereafter at any time and from time to time within ten (10) days following
Landlord’s written request, Tenant’s current tax returns and financial
statements, certified to be true, accurate and complete by the chief financial
officer of Tenant, including a balance sheet and profit and loss statement for
the most recent prior year, or, in the event Tenant is a publicly traded
corporation on a nationally recognized stock exchange, Tenant’s current
financial reports filed with the Securities and Exchange Commission
(collectively, the “Statements”), which Statements shall accurately and
completely reflect the financial condition of Tenant. Landlord agrees that it
will keep the Statements confidential, except that Landlord shall have the right
to deliver the same to any proposed purchaser of the Building or Project, and to
any encumbrancer or proposed encumbrancer of all or any portion of the Building
or Project. Notwithstanding the foregoing, for so long as Tenant is a
publicly-traded corporation whose stock is traded on a nationally recognized
exchange or on NASDAQ, the “Statements” shall consist of Tenant’s most recently
publicly disclosed financial statements.

 

(b) Tenant acknowledges that Landlord is relying on the Statements in its
determination to enter into this Lease, and Tenant represents to Landlord, which
representation shall be deemed made on the date of this Lease and again on the
Commencement Date, that no material change in the financial condition of Tenant,
as reflected in the Statements, has occurred since the date Tenant delivered the
Statements to Landlord. The Statements are represented and warranted by Tenant
to be correct and to accurately and fully reflect Tenant’s true financial
condition as of the date of submission of any Statements to Landlord.

 

ARTICLE XIV. EVENTS OF DEFAULT AND REMEDIES

 

SECTION 14.1. TENANT’S DEFAULTS. The occurrence of any one or more of the
following events (following the expiration of any cure period set forth below,
if any is provided) shall constitute an “Event of Default” by Tenant:

 

(a) The failure by Tenant to make any payment of Basic Rent or additional rent
required to be made by Tenant, as and when due, where the failure continues for
a period of five (5) days after written notice from Landlord to Tenant;
provided, however, that any such notice shall be in lieu of, and not in addition
to, any notice required under California Code of Civil Procedure Section 1161
and 1161(a) as amended. For purposes of these Events of Default and remedies
provisions, the term “additional rent” shall be deemed to include all amounts of
any type whatsoever other than Basic Rent to be paid by Tenant pursuant to the
terms of this Lease and the Work Letter.

 

(b) The assignment, sublease, encumbrance or other transfer of this Lease by
Tenant, either voluntarily or by operation of law, whether by judgment,
execution, transfer by intestacy or testacy, or other means, without the prior
written consent of Landlord when consent is required by this Lease.

 

(c) The discovery by Landlord that any financial statement provided by Tenant,
or by any affiliate, successor or guarantor of Tenant, was materially false.

 

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(d) The failure of Tenant to timely and fully provide any subordination
agreement, estoppel certificate or financial statements in accordance with the
requirements of Article XIII, where the failure continues for a period of five
(5) days after written notice from Landlord to Tenant.

 

(e) The failure or inability by Tenant to observe or perform any of the express
or implied covenants or provisions of this Lease to be observed or performed by
Tenant, other than as specified in this Section 14.1, where the failure
continues for a period of thirty (30) days after written notice from Landlord to
Tenant or such shorter period as is specified in any other provision of this
Lease; provided, however, that any such notice shall be in lieu of, and not in
addition to, any notice required under California Code of Civil Procedure
Section 1161 and 1161(a) as amended. However, if the nature of the failure is
such that more than thirty (30) days are reasonably required for its cure, then
an Event of Default shall not be deemed to have occurred if Tenant commences the
cure within thirty (30) days, and thereafter diligently pursues the cure to
completion.

 

(f) (i) The making by Tenant of any general assignment for the benefit of
creditors; (ii) the filing by or against Tenant of a petition to have Tenant
adjudged a Chapter 7 debtor under the Bankruptcy Code, to have debts discharged
or for reorganization or arrangement under any law relating to bankruptcy
(unless, in the case of a petition filed against Tenant, the same is dismissed
within thirty (30) days); (iii) 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, if possession is not restored to Tenant within
thirty (30) days; (iv) 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 the seizure is not discharged within thirty
(30) days; (v) Tenant’s convening of a meeting of its creditors for the purpose
of effecting a moratorium upon or composition of its debts or (vi) the failure
of Tenant to pay its material obligations to creditors as and when they become
due and payable, other than as a result of a good faith dispute by Tenant as to
the amount due to such creditors. Landlord shall not be deemed to have knowledge
of any event described in this Section 14.1(f) unless notification in writing is
received by Landlord, nor shall there be any presumption attributable to
Landlord of Tenant’s insolvency. In the event that any provision of this
Section 14.1(f) is contrary to applicable law, the provision shall be of no
force or effect.

 

(g) Another breach of this Lease which this Lease provides is an Event of
Default

 

SECTION 14.2. LANDLORD’S REMEDIES.

 

(a) If an Event of Default by Tenant (beyond any applicable cure period without
cure by Tenant) occurs, then in addition to any other remedies available to
Landlord, Landlord may exercise the following remedies:

 

(i) Landlord may terminate Tenant’s right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Tenant shall
immediately surrender possession of the Premises to Landlord. Such termination
shall not affect any accrued obligations of Tenant under this Lease. Upon
termination, Landlord shall have the right to reenter the Premises and remove
all persons and property. Landlord shall also be entitled to recover from Tenant
(and to retain, use or apply any Security Deposit held by Landlord towards
amounts estimated by Landlord as):

 

(1) The worth at the time of award of the unpaid Basic Rent and additional rent
which had been earned at the time of termination;

 

(2) The worth at the time of award of the amount by which the unpaid Basic Rent
and additional rent which would have been earned after termination until the
time of award exceeds the amount of such loss that Tenant proves could have been
reasonably avoided;

 

(3) The worth at the time of award of the amount by which the unpaid Basic Rent
and additional rent for the balance of the Term after the time of award exceeds
the amount of such loss that Tenant proves could be reasonably avoided;

 

(4) Any other amount necessary to compensate Landlord for all the 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 from
Tenant’s Event of Default, including, but not limited to, the cost of recovering
possession of the Premises, refurbishment of the Premises, marketing costs,
commissions and other expenses of reletting, including necessary repair, the
unamortized portion of any tenant improvements and brokerage commissions funded
by Landlord in connection with this Lease, reasonable attorneys’ fees, and any
other reasonable costs; and

 

(5) At Landlord’s election, all other amounts in addition to or in lieu of the
foregoing as may be permitted by law. The term “rent” as used in the Lease shall
be deemed to mean the Basic Rent, Tenant’s Share of Operating Expenses and any
other sums required to be paid by Tenant to Landlord pursuant to the terms of
this Lease whether or not designated as additional rent hereunder, including,
without limitation, any sums that may be owing from Tenant pursuant to
Section 4.3 of this Lease. Any sum, other than Basic Rent, shall be computed on
the basis of the average monthly amount accruing during the twenty-four
(24) month period immediately prior to the Event of Default, except that if it
becomes necessary to compute such rental before the twenty-four (24) month
period has occurred, then the computation shall be on the basis of the average
monthly amount during the shorter period. As used in Sections 14.2(a)(i) (1) and
(2) above, the “worth at the time of award” shall be computed by allowing
interest at the rate of ten percent (10%) per annum. As used in
Section 14.2(a)(i)(3) above, the “worth at the time of award” shall be computed
by discounting the amount at the discount rate of the Federal Reserve Bank of
San Francisco at the time of award plus one percent (1%).

 

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(ii) Landlord may elect not to terminate Tenant’s right to possession of the
Premises and to continue to enforce all of its rights and remedies under this
Lease, including the right to collect all rent as it becomes due as provided in
Civil Code Section 1951.4. Efforts by the Landlord to maintain, preserve or
relet the Premises, or the appointment of a receiver to protect the Landlord’s
interests under this Lease, shall not constitute a termination of the Tenant’s
right to possession of the Premises. In the event that Landlord elects to avail
itself of the remedy provided by this Section 14.2(a)(ii), Landlord shall not
unreasonably withhold its consent to an assignment or subletting of the Premises
subject to the reasonable standards for Landlord’s consent as are contained in
this Lease.

 

(b) Landlord shall be under no obligation to observe or perform any covenant of
this Lease on its part to be observed or performed which accrues after the date
of any Event of Default by Tenant unless and until the Event of Default is cured
by Tenant, it being understood and agreed that the performance by Landlord of
its obligations under this Lease are expressly conditioned upon Tenant’s full
and timely performance of its obligations under this Lease. The various rights
and remedies reserved to Landlord in this Lease or otherwise shall be cumulative
and, except as otherwise provided by California law, Landlord may pursue any or
all of its rights and remedies at the same time.

 

(c) No delay or omission of Landlord to exercise any right or remedy shall be
construed as a waiver of the right or remedy or of any breach or Event of
Default by Tenant. The acceptance by Landlord of rent shall not be a (i) waiver
of any preceding breach or Event of Default by Tenant of any provision of this
Lease, other than the failure of Tenant to pay the particular rent accepted,
regardless of Landlord’s knowledge of the preceding breach or Event of Default
at the time of acceptance of rent, or (ii) a waiver of Landlord’s right to
exercise any remedy available to Landlord by virtue of the breach or Event of
Default. The acceptance of any payment from a debtor in possession, a trustee, a
receiver or any other person acting on behalf of Tenant or Tenant’s estate shall
not waive or cure a breach or Event of Default under Section 14.1. No payment by
Tenant or receipt by Landlord of a lesser amount than the rent required by this
Lease shall be deemed to be other than a partial payment on account of the
earliest due stipulated rent, nor shall any endorsement or statement on any
check or letter be deemed an accord and satisfaction and Landlord shall accept
the check or payment without prejudice to Landlord’s right to recover the
balance of the rent or pursue any other remedy available to it. No act or thing
done by Landlord or Landlord’s agents during the Term shall be deemed an
acceptance of a surrender of the Premises, and no agreement to accept a
surrender shall be valid unless in writing and signed by Landlord. No employee
of Landlord or of Landlord’s agents shall have any power to accept the keys to
the Premises prior to the termination of this Lease, and the delivery of the
keys to any employee shall not operate as a termination of this Lease or a
surrender of the Premises.

 

(d) Any agreement for free or abated rent or other charges, or for the giving or
paying by Landlord to or for Tenant of any cash or other bonus, inducement or
consideration for Tenant’s entering into this Lease or any other concession
agreed to by Landlord hereunder (“Inducement Provisions”) shall be deemed
conditioned upon Tenant’s full and faithful performance of the terms, covenants
and conditions of this Lease. Upon an uncured Event of Default under this Lease
by Tenant, any such Inducement Provisions shall automatically be deemed deleted
from this Lease and of no further force or effect and the amount of any rent
reduction or abatement or other bonus, inducement or consideration or other
concession already given by Landlord or received by Tenant as an inducement
shall be immediately due and payable by Tenant to Landlord, notwithstanding any
subsequent cure of said Event of Default by Tenant. The acceptance by Landlord
of rent or the cure of the Event of Default which initiated the operation of
this Section 14.1 shall not be deemed a waiver by Landlord of the provisions of
this Section 14.2(d).

 

SECTION 14.3. LATE PAYMENTS.

 

(a) Any payment due to Landlord under this Lease, including without limitation
Basic Rent, Tenant’s Share of Operating Expenses or any other payment due to
Landlord under this Lease whether or not designated as additional rent
hereunder, that is not received by Landlord within ten (10) days following the
date due shall bear interest at the lesser of (i) the per annum rate of ten
percent (10%) or (ii) the maximum rate permitted by law from the date due until
fully paid. The payment of interest shall not cure any breach or Event of
Default by Tenant under this Lease. In addition, Tenant acknowledges that the
late payment by Tenant to Landlord of Basic Rent and Tenant’s Share of Operating
Expenses will cause Landlord to incur costs not contemplated by this Lease, the
exact amount of which will be extremely difficult and impracticable to
ascertain. Those costs may include, but are not limited to, administrative,
processing and accounting charges, and late charges which may be imposed on
Landlord by the terms of any ground lease, mortgage or trust deed covering the
Premises. Accordingly, if any Basic Rent or Tenant’s Share of Operating Expenses
due from Tenant shall not be received by Landlord or Landlord’s designee within
ten (10) days following the date due, then Tenant shall pay to Landlord, in
addition to the interest provided above, a late charge, which the Tenant agrees
is reasonable, in a sum equal to the greater of five percent (5%) of the amount
overdue or One Hundred Dollars ($100.00) for each delinquent payment. Acceptance
of a late charge by Landlord shall not constitute a waiver of Tenant’s breach or
Event of Default with respect to the overdue amount, nor shall it prevent
Landlord from exercising any of its other rights and remedies.

 

(b) Following each second installment of Basic Rent and/or the payment of
Tenant’s Share of Operating Expenses within any twelve (12) month period that is
not paid within ten (10) days following the date due, Landlord shall have the
option to require that beginning with the first payment of Basic Rent next due,
Basic Rent and the Tenant’s Share of Operating Expenses shall no longer be paid
in monthly installments but shall be payable quarterly three (3) months in
advance. Should Tenant deliver to Landlord, at any time during the Term, two
(2) or more insufficient checks, the Landlord may require that all monies then
and thereafter due from Tenant be paid to Landlord by cashier’s check. If any
check for any payment to Landlord hereunder is returned by the bank for any
reason, such payment shall not be deemed to have been received by Landlord and
Tenant shall be responsible for any applicable late charge, interest payment and
the charge to Landlord by its bank for such returned check. Nothing in this
Section shall be construed to compel Landlord to accept Basic Rent, Tenant’s
Share of Operating

 

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Expenses or any other payment from Tenant if there exists an Event of Default
unless such payment fully cures any and all such Events of Default. Any
acceptance of any such payment shall not be deemed to waive any other right of
Landlord under this Lease. Any payment by Tenant to Landlord may be applied by
Landlord, in its sole and absolute discretion, in any order determined by
Landlord to any amounts then due to Landlord.

 

SECTION 14.4. RIGHT OF LANDLORD TO PERFORM. All covenants and agreements to be
performed by Tenant under this Lease shall be performed at Tenant’s sole cost
and expense and without any abatement of rent or right of set-off. If Tenant
fails to pay any sum of money, other than rent payable to Landlord, or fails to
perform any other act on its part to be performed under this Lease, and the
failure continues beyond any applicable grace period set forth in Section 14.1,
then in addition to any other available remedies, Landlord may, at its election
make the payment or perform the other act on Tenant’s part and Tenant hereby
grants Landlord the right to enter onto the Premises in order to carry out such
performance. Landlord’s election to make the payment or perform the act on
Tenant’s part shall not give rise to any responsibility of Landlord to continue
making the same or similar payments or performing the same or similar acts nor
shall Landlord be responsible to Tenant for any damage caused to Tenant as the
result of such performance by Landlord. Tenant shall, promptly upon demand by
Landlord, reimburse Landlord for all sums paid by Landlord and all necessary
incidental costs, together with interest at the lesser of (i) the per annum rate
of ten percent (10%) or (ii) the maximum rate permitted by law from the date of
the payment by Landlord.

 

SECTION 14.5. DEFAULT BY LANDLORD. Landlord shall not be deemed to be in default
in the performance of any obligation under this Lease, and Tenant shall have no
rights to take any action against Landlord, unless and until Landlord has failed
to perform the obligation within thirty (30) days after written notice by Tenant
to Landlord specifying in reasonable detail the nature and extent of the
failure; provided, however, that if the nature of Landlord’s obligation is such
that more than thirty (30) days are required for its performance, then Landlord
shall not be deemed to be in default if it commences performance within the
thirty (30) day period and thereafter diligently pursues the cure to completion.
In the event of Landlord’s default under this Lease, Tenant’s sole remedies
shall be to seek damages or specific performance from Landlord, provided that
any damages shall be limited to Tenant’s actual out-of-pocket expenses and shall
in no event include any consequential damages, lost profits or opportunity
costs.

 

SECTION 14.6. EXPENSES AND LEGAL FEES. All sums reasonably incurred by Landlord
in connection with any Event of Default by Tenant under this Lease or holding
over of possession by Tenant after the expiration or earlier termination of this
Lease, or any action related to a filing for bankruptcy or reorganization by
Tenant, including without limitation all costs, expenses and actual accountants,
appraisers, attorneys and other professional fees, and any collection agency or
other collection charges, shall be due and payable to Landlord on demand, and
shall bear interest at the lesser of (i) the rate of ten percent (10%) per annum
or (ii) the maximum rate permitted by law. Should either Landlord or Tenant
bring any action in connection with this Lease, the prevailing party shall be
entitled to recover as a part of the action its reasonable attorneys’ fees, and
all other costs. The prevailing party for the purpose of this Section shall be
determined by the trier of the facts.

 

SECTION 14.7. WAIVER OF JURY TRIAL/JUDICIAL REFERENCE.

 

(a) LANDLORD AND TENANT EACH ACKNOWLEDGES THAT IT IS AWARE OF AND HAS HAD THE
ADVICE OF COUNSEL OF ITS CHOICE WITH RESPECT TO ITS RIGHTS TO TRIAL BY JURY,
AND, TO THE EXTENT ENFORCEABLE UNDER CALIFORNIA LAW, EACH PARTY DOES HEREBY
EXPRESSLY AND KNOWINGLY WAIVE AND RELEASE ALL SUCH RIGHTS TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY HERETO AGAINST
THE OTHER (AND/OR AGAINST ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, OR
SUBSIDIARY OR AFFILIATED ENTITIES) ON ANY MATTERS WHATSOEVER ARISING OUT OF OR
IN ANY WAY CONNECTED WITH THIS LEASE, TENANT’S USE OR OCCUPANCY OF THE PREMISES
AND/OR ANY CLAIM OF INJURY OR DAMAGE. FURTHERMORE, THIS WAIVER AND RELEASE OF
ALL RIGHTS TO A JURY TRIAL IS DEEMED TO BE INDEPENDENT OF EACH AND EVERY OTHER
PROVISION, COVENANT, AND/OR CONDITION SET FORTH IN THIS LEASE.

 

(b) IN THE EVENT THAT THE JURY WAIVER PROVISIONS OF SECTION 14.7(a) ARE NOT
ENFORCEABLE UNDER CALIFORNIA LAW, THEN THE PROVISIONS OF THIS SECTION 14.7(b)
SHALL APPLY. IT IS THE DESIRE AND INTENTION OF THE PARTIES TO AGREE UPON A
MECHANISM AND PROCEDURE UNDER WHICH CONTROVERSIES AND DISPUTES ARISING OUT OF
THIS LEASE OR RELATED TO THE PREMISES WILL BE RESOLVED IN A PROMPT AND
EXPEDITIOUS MANNER. ACCORDINGLY, EXCEPT WITH RESPECT TO ACTIONS FOR UNLAWFUL OR
FORCIBLE DETAINER OR WITH RESPECT TO THE PREJUDGMENT REMEDY OF ATTACHMENT, ANY
ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY HERETO AGAINST THE
OTHER (AND/OR AGAINST ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR SUBSIDIARY
OR AFFILIATED ENTITIES) ON ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY
CONNECTED WITH THIS LEASE, TENANT’S USE OR OCCUPANCY OF THE PREMISES AND/OR ANY
CLAIM OF INJURY OR DAMAGE, SHALL BE HEARD AND RESOLVED BY A REFEREE UNDER THE
PROVISIONS OF THE CALIFORNIA CODE OF CIVIL PROCEDURE, SECTIONS 638 – 645.1,
INCLUSIVE (AS SAME MAY BE AMENDED, OR ANY SUCCESSOR STATUTE(S) THERETO) (THE
“REFEREE SECTIONS”). ANY FEE TO INITIATE THE JUDICIAL REFERENCE PROCEEDINGS
SHALL BE PAID BY THE PARTY INITIATING SUCH PROCEDURE; PROVIDED HOWEVER, THAT THE
COSTS AND FEES, INCLUDING ANY INITIATION FEE, OF SUCH PROCEEDING SHALL
ULTIMATELY BE BORNE IN ACCORDANCE WITH SECTION 14.6 ABOVE. THE VENUE OF THE
PROCEEDINGS SHALL BE IN THE COUNTY IN

 

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WHICH THE PREMISES ARE LOCATED. WITHIN TEN (10) DAYS OF RECEIPT BY ANY PARTY OF
A WRITTEN REQUEST TO RESOLVE ANY DISPUTE OR CONTROVERSY PURSUANT TO THIS SECTION
14.7(b), THE PARTIES SHALL AGREE UPON A SINGLE REFEREE WHO SHALL TRY ALL ISSUES,
WHETHER OF FACT OR LAW, AND REPORT A FINDING AND JUDGMENT ON SUCH ISSUES AS
REQUIRED BY THE REFEREE SECTIONS. IF THE PARTIES ARE UNABLE TO AGREE UPON A
REFEREE WITHIN SUCH TEN (10) DAY PERIOD, THEN ANY PARTY MAY THEREAFTER FILE A
LAWSUIT IN THE COUNTY IN WHICH THE PREMISES ARE LOCATED FOR THE PURPOSE OF
APPOINTMENT OF A REFEREE UNDER CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS 638
AND 640, AS SAME MAY BE AMENDED OF ANY SUCCESSOR STATUTE(S) THERETO. IF THE
REFEREE IS APPOINTED BY THE COURT, THE REFEREE SHALL BE A NEUTRAL AND IMPARTIAL
RETIRED JUDGE WITH SUBSTANTIAL EXPERIENCE IN THE RELEVANT MATTERS TO BE
DETERMINED, FROM JAMS/ENDISPUTE, INC., THE AMERICAN ARBITRATION ASSOCIATION OR
SIMILAR MEDIATION/ARBITRATION ENTITY. THE PROPOSED REFEREE MAY BE CHALLENGED BY
ANY PARTY FOR ANY OF THE GROUNDS LISTED IN SECTION 641 OF THE CALIFORNIA CODE OF
CIVIL PROCEDURE, AS SAME MAY BE AMENDED OR ANY SUCCESSOR STATUTE(S) THERETO. THE
REFEREE SHALL HAVE THE POWER TO DECIDE ALL ISSUES OF FACT AND LAW AND REPORT HIS
OR HER DECISION ON SUCH ISSUES, AND TO ISSUE ALL RECOGNIZED REMEDIES AVAILABLE
AT LAW OR IN EQUITY FOR ANY CAUSE OF ACTION THAT IS BEFORE THE REFEREE,
INCLUDING AN AWARD OF ATTORNEYS’ FEES AND COSTS IN ACCORDANCE WITH CALIFORNIA
LAW. THE REFEREE SHALL NOT, HOWEVER, HAVE THE POWER TO AWARD PUNITIVE DAMAGES,
NOR ANY OTHER DAMAGES WHICH ARE NOT PERMITTED BY THE EXPRESS PROVISIONS OF THIS
LEASE, AND THE PARTIES HEREBY WAIVE ANY RIGHT TO RECOVER ANY SUCH DAMAGES. THE
PARTIES SHALL BE ENTITLED TO CONDUCT ALL DISCOVERY AS PROVIDED IN THE CALIFORNIA
CODE OF CIVIL PROCEDURE, AND THE REFEREE SHALL OVERSEE DISCOVERY AND MAY ENFORCE
ALL DISCOVERY ORDERS IN THE SAME MANNER AS ANY TRIAL COURT JUDGE, WITH RIGHTS TO
REGULATE DISCOVERY AND TO ISSUE AND ENFORCE SUBPOENAS, PROTECTIVE ORDERS AND
OTHER LIMITATIONS ON DISCOVERY AVAILABLE UNDER CALIFORNIA LAW. THE REFERENCE
PROCEEDING SHALL BE CONDUCTED IN ACCORDANCE WITH CALIFORNIA LAW (INCLUDING THE
RULES OF EVIDENCE), AND IN ALL REGARDS, THE REFEREE SHALL FOLLOW CALIFORNIA LAW
APPLICABLE AT THE TIME OF THE REFERENCE PROCEEDING. IN ACCORDANCE WITH SECTION
644 OF THE CALIFORNIA CODE OF CIVIL PROCEDURE, THE DECISION OF THE REFEREE UPON
THE WHOLE ISSUE MUST STAND AS THE DECISION OF THE COURT, AND UPON THE FILING OF
THE STATEMENT OF DECISION WITH THE CLERK OF THE COURT, OR WITH THE JUDGE IF
THERE IS NO CLERK, JUDGMENT MAY BE ENTERED THEREON IN THE SAME MANNER AS IF THE
ACTION HAD BEEN TRIED BY THE COURT. THE PARTIES SHALL PROMPTLY AND DILIGENTLY
COOPERATE WITH ONE ANOTHER AND THE REFEREE, AND SHALL PERFORM SUCH ACTS AS MAY
BE NECESSARY TO OBTAIN A PROMPT AND EXPEDITIOUS RESOLUTION OF THE DISPUTE OR
CONTROVERSY IN ACCORDANCE WITH THE TERMS OF THIS SECTION 14.7(b). TO THE EXTENT
THAT NO PENDING LAWSUIT HAS BEEN FILED TO OBTAIN THE APPOINTMENT OF A REFEREE,
ANY PARTY, AFTER THE ISSUANCE OF THE DECISION OF THE REFEREE, MAY APPLY TO THE
COURT OF THE COUNTY IN WHICH THE PREMISES ARE LOCATED FOR CONFIRMATION BY THE
COURT OF THE DECISION OF THE REFEREE IN THE SAME MANNER AS A PETITION FOR
CONFIRMATION OF AN ARBITRATION AWARD PURSUANT TO CODE OF CIVIL PROCEDURE SECTION
1285 ET SEQ. (AS SAME MAY BE AMENDED OR ANY SUCCESSOR STATUTE(S) THERETO).

 

SECTION 14.8. SATISFACTION OF JUDGMENT. The obligations of Landlord do not
constitute the personal obligations of the individual partners, trustees,
directors, officers, members or shareholders of Landlord or its constituent
partners or members. Should Tenant recover a money judgment against Landlord,
such judgment shall be satisfied only from the interest of Landlord in the
Project and out of the rent or other income from such property receivable by
Landlord or out of consideration received by Landlord from the sale or other
disposition of all or any part of Landlord’s right, title or interest in the
Project and no action for any deficiency may be sought or obtained by Tenant.

 

SECTION 14.9. LIMITATION OF ACTIONS AGAINST LANDLORD. Any claim, demand or right
of any kind by Tenant which is based upon or arises in connection with this
Lease, including without limitation any arising under a tort or contract cause
of action, shall be barred unless Tenant commences an action thereon within
twelve (12) months after the date that the act, omission, event or default upon
which the claim, demand or right arises, has occurred.

 

ARTICLE XV. END OF TERM

 

SECTION 15.1. HOLDING OVER. This Lease shall terminate without further notice
upon the expiration of the Term, and any holding over by Tenant after the
expiration shall not constitute a renewal or extension of this Lease, or give
Tenant any rights under this Lease, except when in writing signed by both
parties. Any period of time following the Expiration Date or earlier termination
of this Lease required for Tenant to remove its property or to place the
Premises in the condition required pursuant to Section 15.3 (or for Landlord to
do so if Tenant fails to do so) shall be deemed a holding over by Tenant. If
Tenant holds over for any period after the Expiration Date (or earlier
termination) of the Term without the prior written consent of Landlord, such
possession shall constitute a tenancy at sufferance only and an Event of Default
under this Lease; such holding over with the prior written consent of Landlord
shall constitute a month-to-month tenancy commencing on the first (1st) day
following the termination of this Lease and terminating thirty (30) days
following delivery of written notice of termination by either Landlord or Tenant
to the other. In either of such events, possession shall be subject to all of

 

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the terms of this Lease, except that the monthly Basic Rent shall be the greater
of: (a) one hundred fifty percent (150%) of the Basic Rent for the month
immediately preceding the date of termination for the initial three (3) months
of holdover, and two hundred percent (200%) of the Basic Rent for the month
immediately preceding the date of termination for each month of holdover
thereafter, or (b) the then currently scheduled Basic Rent for comparable space
in the Project. The acceptance by Landlord of monthly holdover rental in a
lesser amount shall not constitute a waiver of Landlord’s right to recover the
full amount due for any holdover by Tenant, unless otherwise agreed in writing
by Landlord. If Tenant fails to surrender the Premises upon the expiration of
this Lease despite demand to do so by Landlord, Tenant shall indemnify and hold
Landlord harmless from all loss or liability, including without limitation, any
claims made by any succeeding tenant relating to such failure to surrender. The
foregoing provisions of this Section are in addition to and do not affect
Landlord’s right of re-entry or any other rights of Landlord under this Lease or
at law.

 

SECTION 15.2. MERGER ON TERMINATION. The voluntary or other surrender of this
Lease by Tenant, or a mutual termination of this Lease, shall terminate any or
all existing subleases unless Landlord, at its option, elects in writing to
treat the surrender or termination as an assignment to it of any or all
subleases affecting the Premises.

 

SECTION 15.3. SURRENDER OF PREMISES; REMOVAL OF PROPERTY. Subject to the
provisions of Section 7.3 of this Lease and of the Work Letter, if any, attached
hereto, upon the Expiration Date or upon any earlier termination of this Lease,
Tenant shall quit and surrender possession of the Premises to Landlord in as
good order, condition and repair as when received or as hereafter may be
improved by Landlord or Tenant, reasonable wear and tear and repairs which are
Landlord’s obligation excepted, and shall, without expense to Landlord, remove
or cause to be removed from the Premises all personal property, removable trade
fixtures, and equipment and debris and perform all work required under
Section 7.3 of this Lease and/or the Work Letter, if any, attached hereto, as to
Replacements of Non-Standard Improvements and removal of Alterations, except for
any items that Landlord may by written authorization allow to remain. Tenant
shall repair all damage to the Premises resulting from the removal, which repair
shall include the patching and filling of holes and repair of structural damage,
provided that Landlord may instead elect to repair any structural damage at
Tenant’s expense. If Tenant shall fail to comply with the provisions of this
Section, Landlord may effect the removal and/or make any repairs, and the cost
to Landlord shall be additional rent payable by Tenant upon demand. If Tenant
fails to remove Tenant’s personal property from the Premises upon the expiration
of the Term, Landlord may remove, store, dispose of and/or retain such personal
property, at Landlord’s option, in accordance with then applicable laws, all at
the expense of Tenant. If requested by Landlord, Tenant shall execute,
acknowledge and deliver to Landlord an instrument in writing releasing and
quitclaiming to Landlord all right, title and interest of Tenant in the
Premises.

 

ARTICLE XVI. PAYMENTS AND NOTICES

 

All sums payable by Tenant to Landlord shall be deemed to be rent under this
Lease and shall be paid, without deduction or offset, in lawful money of the
United States to Landlord at the address specified in Item 13 of the Basic Lease
Provisions, or at any other place as Landlord may designate in writing. Unless
this Lease expressly provides otherwise, as for example in the payment of Basic
Rent and the Tenant’s Share of Operating Costs pursuant to Sections 4.1 and 4.2,
all payments shall be due and payable within ten (10) days after demand. All
payments requiring proration shall be prorated on the basis of the number of
days in the pertinent calendar month or year, as applicable. Any notice,
election, demand, consent, approval or other communication to be given or other
document to be delivered by either party to the other may be delivered in person
or by courier or overnight delivery service to the other party, or may be
deposited in the United States mail, duly registered or certified, postage
prepaid, return receipt requested, and addressed to the other party at the
address set forth in Item 12 of the Basic Lease Provisions, or if to Tenant, at
that address or, from and after the Commencement Date, at the Premises (whether
or not Tenant has departed from, abandoned or vacated the Premises). Either
party may, by written notice to the other, served in the manner provided in this
Article, designate a different address. If any notice or other document is sent
by mail, duly registered or certified, it shall be deemed served or delivered
seventy-two (72) hours after mailing. If more than one person or entity is named
as Tenant under this Lease, service of any notice upon any one of them shall be
deemed as service upon all of them.

 

ARTICLE XVII. RULES AND REGULATIONS

 

Tenant agrees to observe faithfully and comply strictly with the Rules and
Regulations, attached as Exhibit E, and any reasonable and nondiscriminatory
amendments, modifications and/or additions as may be adopted and published by
written notice to tenants by Landlord for the safety, care, security, good
order, or cleanliness of the Premises, Building, Project and Common Areas.
Landlord shall not be liable to Tenant for any violation of the Rules and
Regulations or the breach of any covenant or condition in any lease by any other
tenant or such tenant’s agents, employees, contractors, guests or invitees. One
or more waivers by Landlord of any breach of the Rules and Regulations by Tenant
or by any other tenant(s) shall not be a waiver of any subsequent breach of that
rule or any other. Tenant’s failure to keep and observe the Rules and
Regulations shall constitute a breach of this Lease. In the case of any conflict
between the Rules and Regulations and this Lease, this Lease shall be
controlling.

 

ARTICLE XVIII. BROKER’S COMMISSION

 

The parties recognize as the broker(s) who negotiated this Lease the firm(s), if
any, whose name(s) is (are) stated in Item 10 of the Basic Lease Provisions, and
agree that Landlord shall be responsible for the payment of brokerage
commissions to those broker(s) unless otherwise provided in this Lease. Tenant
warrants that it has had no dealings with any other real estate broker or agent
in connection with the negotiation of this Lease, and Tenant agrees to indemnify
and hold Landlord harmless from any cost, expense or liability (including
reasonable attorneys’ fees) for any compensation, commissions or charges claimed
by any other real estate broker or agent employed or

 

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claiming to represent or to have been employed by Tenant in connection with the
negotiation of this Lease. The foregoing agreement shall survive the termination
of this Lease.

 

ARTICLE XIX. TRANSFER OF LANDLORD’S INTEREST

 

In the event of any transfer of Landlord’s interest in the Premises, the
transferor shall be automatically relieved of all further obligations on the
part of Landlord, and the transferor shall be relieved of any obligation to pay
any funds in which Tenant has an interest to the extent that such funds have
been turned over, subject to that interest, to the transferee and Tenant is
notified of the transfer as required by law. No beneficiary of a deed of trust
to which this Lease is or may be subordinate, and no landlord under a so-called
sale-leaseback, shall be responsible in connection with the Security Deposit,
unless the mortgagee or beneficiary under the deed of trust or the landlord
actually receives the Security Deposit. It is intended that the covenants and
obligations contained in this Lease on the part of Landlord shall, subject to
the foregoing, be binding on Landlord, its successors and assigns, only during
and in respect to their respective successive periods of ownership.

 

ARTICLE XX. INTERPRETATION

 

SECTION 20.1. GENDER AND NUMBER. Whenever the context of this Lease requires,
the words “Landlord” and “Tenant” shall include the plural as well as the
singular, and words used in neuter, masculine or feminine genders shall include
the others.

 

SECTION 20.2. HEADINGS. The captions and headings of the articles and sections
of this Lease are for convenience only, are not a part of this Lease and shall
have no effect upon its construction or interpretation.

 

SECTION 20.3. JOINT AND SEVERAL LIABILITY. If more than one person or entity is
named as Tenant, the obligations imposed upon each shall be joint and several
and the act of or notice from, or notice or refund to, or the signature of, any
one or more of them shall be binding on all of them with respect to the tenancy
of this Lease, including, but not limited to, any renewal, extension,
termination or modification of this Lease.

 

SECTION 20.4. SUCCESSORS. Subject to Articles IX and XIX, all rights and
liabilities given to or imposed upon Landlord and Tenant shall extend to and
bind their respective heirs, executors, administrators, successors and assigns.
Nothing contained in this Section is intended, or shall be construed, to grant
to any person other than Landlord and Tenant and their successors and assigns
any rights or remedies under this Lease.

 

SECTION 20.5. TIME OF ESSENCE. Time is of the essence with respect to the
performance of every provision of this Lease.

 

SECTION 20.6. CONTROLLING LAW/VENUE. This Lease shall be governed by and
interpreted in accordance with the laws of the State of California. Any
litigation commenced concerning any matters whatsoever arising out of or in any
way connected to this Lease shall be initiated in the Superior Court of the
county in which the Project is located.

 

SECTION 20.7. SEVERABILITY. If any term or provision of this Lease, the deletion
of which would not adversely affect the receipt of any material benefit by
either party or the deletion of which is consented to by the party adversely
affected, shall be held invalid or unenforceable to any extent, the remainder of
this Lease shall not be affected and each term and provision of this Lease shall
be valid and enforceable to the fullest extent permitted by law.

 

SECTION 20.8. WAIVER AND CUMULATIVE REMEDIES. One or more waivers by Landlord or
Tenant of any breach of any term, covenant or condition contained in this Lease
shall not be a waiver of any subsequent breach of the same or any other term,
covenant or condition. Consent to any act by one of the parties shall not be
deemed to render unnecessary the obtaining of that party’s consent to any
subsequent act. No breach by Tenant of this Lease shall be deemed to have been
waived by Landlord unless the waiver is in a writing signed by Landlord. The
rights and remedies of Landlord under this Lease shall be cumulative and in
addition to any and all other rights and remedies which Landlord may have.

 

SECTION 20.9. INABILITY TO PERFORM. In the event that either party shall be
delayed or hindered in or prevented from the performance of any work or in
performing any act required under this Lease by reason of any cause beyond the
reasonable control of that party, other than financial inability, then the
performance of the work or the doing of the act shall be excused for the period
of the delay and the time for performance shall be extended for a period
equivalent to the period of the delay. The provisions of this Section shall not
operate to excuse Tenant from the prompt payment of rent or from the timely
performance of any other obligation under this Lease within Tenant’s reasonable
control.

 

SECTION 20.10. ENTIRE AGREEMENT. This Lease and its exhibits and other
attachments cover in full each and every agreement of every kind between the
parties concerning the Premises, the Building, and the Project, and all
preliminary negotiations, oral agreements, understandings and/or practices,
except those contained in this Lease, are superseded and of no further effect.
Tenant waives its rights to rely on any representations or promises made by
Landlord or others which are not contained in this Lease. No verbal agreement or
implied covenant shall be held to modify the provisions of this Lease, any
statute, law, or custom to the contrary notwithstanding.

 

SECTION 20.11. QUIET ENJOYMENT. Upon the observance and performance of all the
covenants, terms and conditions on Tenant’s part to be observed and performed,
and subject to the other provisions of this

 

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Lease, Tenant shall have the right of quiet enjoyment and use of the Premises
for the Term without hindrance or interruption by Landlord or any other person
claiming by or through Landlord.

 

SECTION 20.12. SURVIVAL. All covenants of Landlord or Tenant which reasonably
would be intended to survive the expiration or sooner termination of this Lease,
including without limitation any warranty or indemnity hereunder, shall so
survive and continue to be binding upon and inure to the benefit of the
respective parties and their successors and assigns.

 

SECTION 20.13. INTERPRETATION. This Lease shall not be construed in favor of or
against either party, but shall be construed as if both parties prepared this
Lease.

 

ARTICLE XXI. EXECUTION AND RECORDING

 

SECTION 21.1. COUNTERPARTS. This Lease may be executed in one or more
counterparts, each of which shall constitute an original and all of which shall
be one and the same agreement.

 

SECTION 21.2. CORPORATE, LIMITED LIABILITY COMPANY AND PARTNERSHIP AUTHORITY. If
Tenant is a corporation, limited liability company or partnership, each
individual executing this Lease on behalf of the corporation, limited liability
company or partnership represents and warrants that he or she is duly authorized
to execute and deliver this Lease on behalf of the corporation, limited
liability company or partnership, and that this Lease is binding upon the
corporation, limited liability company or partnership in accordance with its
terms.

 

SECTION 21.3. EXECUTION OF LEASE; NO OPTION OR OFFER. The submission of this
Lease to Tenant shall be for examination purposes only, and shall not constitute
an offer to or option for Tenant to lease the Premises. Execution of this Lease
by Tenant and its return to Landlord shall not be binding upon Landlord,
notwithstanding any time interval, until Landlord has in fact executed and
delivered this Lease to Tenant, it being intended that this Lease shall only
become effective upon execution by Landlord and delivery of a fully executed
counterpart to Tenant.

 

SECTION 21.4. RECORDING. Tenant shall not record this Lease without the prior
written consent of Landlord. Tenant, upon the request of Landlord, shall execute
and acknowledge a “short form” memorandum of this Lease for recording purposes.

 

SECTION 21.5. AMENDMENTS. No amendment or termination of this Lease shall be
effective unless in writing signed by authorized signatories of Tenant and
Landlord, or by their respective successors in interest. No actions, policies,
oral or informal arrangements, business dealings or other course of conduct by
or between the parties shall be deemed to modify this Lease in any respect.

 

SECTION 21.6. EXECUTED COPY. Any fully executed photocopy or similar
reproduction of this Lease shall be deemed an original for all purposes.

 

SECTION 21.7. ATTACHMENTS. All exhibits, amendments, riders and addenda attached
to this Lease are hereby incorporated into and made a part of this Lease.

 

ARTICLE XXII. MISCELLANEOUS

 

SECTION 22.1. NONDISCLOSURE OF LEASE TERMS. Tenant acknowledges and agrees that
the terms of this Lease are confidential and constitute proprietary information
of Landlord. Disclosure of the terms could adversely affect the ability of
Landlord to negotiate other leases and impair Landlord’s relationship with other
tenants. Accordingly, Tenant agrees that it, and its partners, members,
shareholders, officers, directors, employees and attorneys, shall not
intentionally and voluntarily disclose, by public filings or otherwise, the
terms and conditions of this Lease (“Confidential Information”) to any third
party, either directly or indirectly, without the prior written consent of
Landlord, which consent may be given or withheld in Landlord’s sole and absolute
discretion. The foregoing restriction shall not apply if either: (i) Tenant is
required to disclose the Confidential Information in response to a subpoena or
other regulatory, administrative or court order, (ii) independent legal counsel
to Tenant delivers a written opinion to Landlord that Tenant is required to
disclose the Confidential Information to, or file a copy of this Lease with, any
governmental agency or any stock exchange; provided however, that in such event,
Tenant shall, before making any such disclosure (A) provide Landlord with prompt
written notice of such required disclosure, (B) at Tenant’s sole cost, take all
reasonable legally available steps to resist or narrow such requirement,
including without limitation preparing and filing a request for confidential
treatment of the Confidential Information and (C) if disclosure of the
Confidential Information is required by subpoena or other regulatory,
administrative or court order, Tenant shall provide Landlord with as much
advance notice of the possibility of such disclosure as practical so that
Landlord may attempt to stop such disclosure or obtain an order concerning such
disclosure. The form and content of a request by Tenant for confidential
treatment of the Confidential Information shall be provided to Landlord at least
five (5) business days before its submission to the applicable governmental
agency or stock exchange and is subject to the prior written approval of
Landlord. In addition, Tenant may disclose the terms of this Lease to
prospective assignees of this Lease and prospective subtenants under this Lease
with whom Tenant is actively negotiating such an assignment or sublease.

 

SECTION 22.2. [Intentionally Omitted.]

 

SECTION 22.3. CHANGES REQUESTED BY LENDER. If, in connection with obtaining
financing for the Project, the lender shall request reasonable modifications in
this Lease as a condition to the financing, Tenant

 

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will not unreasonably withhold or delay its consent, provided that the
modifications do not materially increase the obligations of Tenant or materially
and adversely affect the leasehold interest created by this Lease.

 

SECTION 22.4. MORTGAGEE PROTECTION. No act or failure to act on the part of
Landlord which would otherwise entitle Tenant to be relieved of its obligations
hereunder shall result in such a release or termination unless (a) Tenant has
given notice by registered or certified mail to any beneficiary of a deed of
trust or mortgage covering the Building whose address has been furnished to
Tenant and (b) such beneficiary is afforded a reasonable opportunity to cure the
default by Landlord (which in no event shall be less than sixty (60) days),
including, if necessary to effect the cure, time to obtain possession of the
Building by power of sale or judicial foreclosure provided that such foreclosure
remedy is diligently pursued. Tenant agrees that each beneficiary of a deed of
trust or mortgage covering the Building is an express third party beneficiary
hereof, Tenant shall have no right or claim for the collection of any deposit
from such beneficiary or from any purchaser at a foreclosure sale unless such
beneficiary or purchaser shall have actually received and not refunded the
deposit, and Tenant shall comply with any written directions by any beneficiary
to pay rent due hereunder directly to such beneficiary without determining
whether a default exists under such beneficiary’s deed of trust.

 

SECTION 22.5. COVENANTS AND CONDITIONS. All of the provisions of this Lease
shall be construed to be conditions as well as covenants as though the words
specifically expressing or imparting covenants and conditions were used in each
separate provision.

 

SECTION 22.6. SECURITY MEASURES. Tenant hereby acknowledges that Landlord shall
have no obligation whatsoever to provide guard service or other security
measures for the benefit of the Premises or the Project. Tenant assumes all
responsibility for the protection of Tenant, its employees, agents, invitees and
property from acts of third parties. Nothing herein contained shall prevent
Landlord, at its sole option, from providing security protection for the Project
or any part thereof, in which event the cost thereof shall be included within
the definition of Project Costs.

 

SECTION 22.7. STANDARD FOR CONSENT. Except with respect to any consents or
approvals required pursuant to this Lease where the standard is specifically set
forth, including, without limitation, those subject to Landlord’s “sole” or
“sole and absolute” discretion, any time the consent of Landlord or Tenant is
required, such consent shall not be unreasonably withheld, conditioned or
delayed.

 

LANDLORD:

      TENANT:

THE IRVINE COMPANY LLC

     

BIOLASE TECHNOLOGY, INC.,

a Delaware corporation

By:   /s/    WILLIAM R. HALFORD               By:   /s/    ROBERT E.
GRANT             William R. Halford       Name (Print):   Robert E. Grant    
President, Office Properties       Title (Print):   President & CEO By:  
/s/    STEVEN M. CASE               By:   /s/    JEFFREY W. JONES            
Steven M. Case,       Name:   Jeffrey W. Jones     Senior Vice President      
Title:   Chief Technology Officer     Leasing, Office Properties            

 

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EXHIBIT B

 

THE IRVINE COMPANY – INVESTMENT PROPERTIES GROUP

 

HAZARDOUS MATERIAL SURVEY FORM

 

The purpose of this form is to obtain information regarding the use of hazardous
substances on Investment Properties Group (“IPG”) property. Prospective tenants
and contractors should answer the questions in light of their proposed
activities on the premises. Existing tenants and contractors should answer the
questions as they relate to ongoing activities on the premises and should update
any information previously submitted.

 

If additional space is needed to answer the questions, you may attach separate
sheets of paper to this form. When completed, the form should be sent to the
following address:

 

THE IRVINE COMPANY MANAGEMENT OFFICE

8105 Irvine Center Drive, Suite 350

Irvine, CA 92618

 

Your cooperation in this matter is appreciated. If you have any questions,
please call your property manager at (949) 720-4400 for assistance.

 

1. GENERAL INFORMATION.

 

Name of Responding Company:

    

Check all that apply:

  Tenant    (     )             Contractor    (     )        

Prospective

   (     )             Existing    (     )    

Mailing Address:

   

Contact person & Title:

   

Telephone Number:

  (     ) __________________

Current TIC Tenant(s):

   

Address of Lease Premises:

   

Length of Lease or Contract Term:

   

Prospective TIC Tenant(s):

   

Address of Leased Premises:

   

Address of Current Operations:

   

 

Describe the proposed operations to take place on the property, including
principal products manufactured or services to be conducted. Existing tenants
and contractors should describe any proposed changes to ongoing operations.

 

     

 

2. HAZARDOUS MATERIALS. For the purposes of this Survey Form, the term
“hazardous material” means any raw material, product or agent considered
hazardous under any state or federal law. The term does not include wastes which
are intended to be discarded.

 

  2.1 Will any hazardous materials be used or stored on site?

 

Chemical Products

   Yes    (     )   No    (     )

Biological Hazards/
Infectious Wastes

   Yes    (     )   No    (     )

Radioactive Materials

   Yes    (     )   No    (     )

Petroleum Products

   Yes    (     )   No    (     )

 

1

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  2.2 List any hazardous materials to be used or stored, the quantities that
will be on-site at any given time, and the location and method of storage (e.g.,
bottles in storage closet on the premises).

 

Hazardous Materials

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

 

Location and Method

of Storage

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

 

Quantity

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

__________________________   __________________________  
__________________________ __________________________  
__________________________   __________________________
__________________________   __________________________  
__________________________ __________________________  
__________________________   __________________________

 

  2.3 Is any underground storage of hazardous materials proposed or currently
conducted on the premises? Yes (    ) No (    )

 

If yes, describe the materials to be stored, and the size and construction of
the tank. Attach copies of any permits obtained for the underground storage of
such substances.      

 

3. HAZARDOUS WASTE. For the purposes of this Survey Form, the term “hazardous
waste” means any waste (including biological, infectious or radioactive waste)
considered hazardous under any state or federal law, and which is intended to be
discarded.

 

  3.1 List any hazardous waste generated or to be generated on the premises, and
indicate the quantity generated on a monthly basis.

 

Hazardous Materials

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

 

Location and Method

of Storage

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

 

Quantity

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

__________________________   __________________________  
__________________________ __________________________  
__________________________   __________________________
__________________________   __________________________  
__________________________ __________________________  
__________________________   __________________________

 

  3.2 Describe the method(s) of disposal (including recycling) for each waste.
Indicate where and how often disposal will take place.

 

Hazardous Materials

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

 

Location and Method

of Storage

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

 

Disposal Method

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

__________________________   __________________________  
__________________________ __________________________  
__________________________   __________________________
__________________________   __________________________  
__________________________ __________________________  
__________________________   __________________________

 

  3.3 Is any treatment or processing of hazardous, infectious or radioactive
wastes currently conducted or proposed to be conducted on the premise?

 

Yes (    ) No (    )

 

If yes, please describe any existing or proposed treatment methods.      

 

  3.4 Attach copies of any hazardous waste permits or licenses issued to your
company with respect to its operations on the premises.

 

2

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4. SPILLS

 

  4.1 During the past year, have any spills or releases of hazardous materials
occurred on the premises? Yes (    ) No (    )

 

If so, please describe the spill and attach the results of any testing conducted
to determine the extent of such spills.

     

 

  4.2 Were any agencies notified in connection with such spills? Yes (    ) No
(    )

 

If so, attach copies of any spill reports or other correspondence with
regulatory agencies.

 

  4.3 Were any clean-up actions undertaken in connection with the spills?

 

Yes (    ) No (    )

 

If so, briefly describe the actions taken. Attach copies of any clearance
letters obtained from any regulatory agencies involved and the results of any
final soil or groundwater sampling done upon completion of the clean-up work.

     

 

5. WASTEWATER TREATMENT/DISCHARGE

 

  5.1 Do you discharge industrial wastewater to:

 

¨ storm drain?

   ¨ sewer?

¨ surface water?

   ¨ no industrial discharge

 

  5.2 Is your industrial wastewater treated before discharge? Yes (    ) No
(    )

 

If yes, describe the type of treatment conducted.

     

 

  5.3 Attach copies of any wastewater discharge permits issued to your company
with respect to its operations on the premises.

 

6. AIR DISCHARGES.

 

  6.1 Do you have any air filtration systems or stacks that discharge into the
air?

 

Yes (    ) No (    )

 

  6.2 Do you operate any equipment that requires air emissions permits?

 

Yes (    ) No (    )

 

  6.3 Attach copies of any air discharge permits pertaining to these operations.

 

7. HAZARDOUS MATERIALS DISCLOSURES.

 

  7.1 Does your company handle an aggregate of at least 500 pounds, 55 gallons
or 200 cubic feet of hazardous material at any given time? Yes (    ) No (    )

 

  7.2 Has your company prepared a Hazardous Materials Disclosure – Chemical
Inventory and Business Emergency Plan or similar disclosure document pursuant to
state or county requirements? Yes (    ) No (    )

 

If so, attach a copy.

 

3

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  7.3 Are any of the chemicals used in your operations regulated under
Proposition 65?

 

If so, describe the procedures followed to comply with these requirements.

     

 

  7.4 Is your company subject to OSHA Hazard Communication Standard
Requirements? Yes (    ) No (    )

 

If so, describe the procedures followed to comply with these requirements.

     

 

8. ANIMAL TESTING.

 

  8.1 Does your company bring or intend to bring live animals onto the premises
for research or development purposes? Yes (    ) No (    )

 

If so, describe the activity.

     

 

  8.2 Does your company bring or intend to bring animal body parts or bodily
fluids onto the premises for research or development purposes? Yes (    ) No
(    )

 

If so, describe the activity.

     

 

9. ENFORCEMENT ACTIONS, COMPLAINTS.

 

  9.1 Has your company ever been subject to any agency enforcement actions,
administrative orders, lawsuits, or consent orders/decrees regarding
environmental compliance or health and safety? Yes (    ) No (    )

 

If so, describe the actions and any continuing obligations imposed as a result
of these actions.

     

 

  9.2 Has your company ever received any request for information, notice of
violation or demand letter, complaint, or inquiry regarding environmental
compliance or health and safety? Yes (    ) No (    )

 

  9.3 Has an environmental audit ever been conducted which concerned operations
or activities on premises occupied by you? Yes (    ) No (    )

 

4

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

  9.4 If you answered “yes” to any questions in this section, describe the
environmental action or complaint and any continuing compliance obligation
imposed as a result of the same.

 

         

 

   

 

By:

   

Name:

   

Title:

   

Date:

   

 

5

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EXHIBIT C

 

LANDLORD’S DISCLOSURES

 

SPECTRUM

 

The capitalized terms used and not otherwise defined in this Exhibit shall have
the same definitions as set forth in the Lease. The provisions of this Exhibit
shall supersede any inconsistent or conflicting provisions of the Lease.

 

1. Landlord has been informed that the El Toro Marine Corps Air Station (MCAS)
has been listed as a Federal Superfund site as a result of chemical releases
occurring over many years of occupancy. Various chemicals including jet fuel,
motor oil and solvents have been discharged in several areas throughout the MCAS
site. A regional study conducted by the Orange County Water District has
estimated that groundwaters beneath more than 2,900 acres have been impacted by
Trichloroethlene (TCE), an industrial solvent. There is a potential that this
substance may have migrated into the ground water underlying the Premises. The
U.S. Environmental Protection Agency, the Santa Ana Region Quality Control
Board, and the Orange County Health Care Agency are overseeing the
investigation/cleanup of this contamination. To the Landlord’s current actual
knowledge, the ground water in this area is used for irrigation purposes only,
and there is no practical impediment to the use or occupancy of the Premises due
to the El Toro discharges.

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

EXHIBIT D

 

TENANT’S INSURANCE

 

The following requirements for Tenant’s insurance shall be in effect at the
Building, and Tenant shall also cause any subtenant to comply with these
requirements. Landlord reserves the right to adopt reasonable nondiscriminatory
modifications and additions to these insurance requirements. Tenant agrees to
obtain and present evidence to Landlord that it has fully complied with the
insurance requirements.

 

1. Tenant shall, at its sole cost and expense, commencing on the date Tenant is
given access to the Premises for any purpose and during the entire Term,
procure, pay for and keep in full force and effect: (i) commercial general
liability insurance with respect to the Premises and the operations of or on
behalf of Tenant in, on or about the Premises, including but not limited to
coverage for personal injury, independent contractors, broad form property
damage, fire and water legal liability, products liability (if a product is sold
from the Premises), and liquor law liability (if alcoholic beverages are sold,
served or consumed within the Premises), which policy(ies) shall be written on
an “occurrence” basis and for not less than the amount set forth in Item 13 of
the Basic Lease Provisions, with a combined single limit (with a $50,000 minimum
limit on fire legal liability) per occurrence for bodily injury, death, and
property damage liability, or the current limit of liability carried by Tenant,
whichever is greater, and subject to such increases in amounts as Landlord may
determine from time to time; (ii) workers’ compensation insurance coverage as
required by law, together with employers’ liability insurance of at least One
Million Dollars ($1,000,000.00); (iii) with respect to Alterations and the like
required or permitted to be made by Tenant under this Lease, builder’s risk
insurance, in an amount equal to the replacement cost of the work;
(iv) insurance against fire, vandalism, malicious mischief and such other
additional perils as may be included in a standard “special form” policy,
insuring Tenant’s Alterations, trade fixtures, furnishings, equipment and items
of personal property of Tenant located in the Premises, in an amount equal to
not less than ninety percent (90%) of their actual replacement cost (with
replacement cost endorsement); and (v) business interruption insurance in
amounts satisfactory to cover one (1) year of loss. In no event shall the limits
of any policy be considered as limiting the liability of Tenant under this
Lease.

 

2. In the event Landlord consents to Tenant’s use, generation or storage of
Hazardous Materials on, under or about the Premises pursuant to Section 5.3 of
this Lease, Landlord shall have the continuing right to require Tenant, at
Tenant’s sole cost and expense (provided the same is available for purchase upon
commercially reasonable terms), to purchase insurance specified and approved by
Landlord, with coverage not less than Five Million Dollars ($5,000,000.00),
insuring (i) any Hazardous Materials shall be removed from the Premises,
(ii) the Premises shall be restored to a clean, healthy, safe and sanitary
condition, and (iii) any liability of Tenant, Landlord and Landlord’s officers,
directors, shareholders, agents, employees and representatives, arising from
such Hazardous Materials.

 

3. All policies of insurance required to be carried by Tenant pursuant to this
Exhibit D containing a deductible exceeding Ten Thousand Dollars ($10,000.00)
per occurrence must be approved in writing by Landlord prior to the issuance of
such policy. Tenant shall be solely responsible for the payment of all
deductibles.

 

4. All policies of insurance required to be carried by Tenant pursuant to this
Exhibit D shall be written by responsible insurance companies authorized to do
business in the State of California and with a general policyholder rating of
not less than “A-” and financial rating of not less than “VIII” in the most
current Best’s Insurance Report. Any insurance required of Tenant may be
furnished by Tenant under any blanket policy carried by it or under a separate
policy. A true and exact copy of each paid up policy evidencing the insurance
(appropriately authenticated by the insurer) or a certificate of insurance,
certifying that the policy has been issued, provides the coverage required by
this Exhibit D and contains the required provisions, together with endorsements
acceptable to Landlord evidencing the waiver of subrogation and additional
insured provisions required below, shall be delivered to Landlord prior to the
date Tenant is given the right of possession of the Premises. Proper evidence of
the renewal of any insurance coverage shall also be delivered to Landlord not
less than thirty (30) days prior to the expiration of the coverage. Landlord may
at any time, and from time to time, inspect and/or copy any and all insurance
policies required by this Lease.

 

5. Each policy evidencing insurance required to be carried by Tenant pursuant to
this Exhibit D shall contain the following provisions and/or clauses
satisfactory to Landlord: (i) with respect to Tenant’s commercial general
liability insurance, a provision that the policy and the coverage provided shall
be primary and that any coverage carried by Landlord shall be noncontributory
with respect to any policies carried by Tenant, together with a provision
including Landlord, the Additional Insureds identified in Item 11 of the Basic
Lease Provisions, and any other parties in interest designated by Landlord, as
additional insureds; (ii) except with respect to Tenant’s commercial general
liability insurance, a waiver by the insurer of any right to subrogation against
Landlord, its agents, employees, contractors and representatives which arises or
might arise by reason of any payment under the policy or by reason of any act or
omission of Landlord, its agents, employees, contractors or representatives; and
(iii) a provision that the insurer will not cancel or change the coverage
provided by the policy without first giving Landlord thirty (30) days prior
written notice.

 

6. In the event that Tenant fails to procure, maintain and/or pay for, at the
times and for the durations specified in this Exhibit D, any insurance required
by this Exhibit D, or fails to carry insurance required by any governmental
authority, Landlord may at its election procure that insurance and pay the
premiums, in which event Tenant shall repay Landlord all sums paid by Landlord,
together with interest at the maximum rate permitted by law and any related
costs or expenses incurred by Landlord, within ten (10) days following
Landlord’s written demand to Tenant.

 

1

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NOTICE TO TENANT: IN ACCORDANCE WITH THE TERMS OF THIS LEASE, TENANT MUST
PROVIDE EVIDENCE OF THE REQUIRED INSURANCE TO LANDLORD’S MANAGEMENT AGENT PRIOR
TO BEING AFFORDED ACCESS TO THE PREMISES.

 

2

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EXHIBIT E

 

RULES AND REGULATIONS

 

This Exhibit sets forth the rules and regulations governing Tenant’s use of the
Premises leased to Tenant pursuant to the terms, covenants and conditions of the
Lease to which this Exhibit is attached and therein made part thereof. In the
event of any conflict or inconsistency between this Exhibit and the Lease, the
Lease shall control.

 

1. Tenant shall not place anything or allow anything to be placed near the glass
of any window, door, partition or wall, which may appear unsightly from outside
the Premises.

 

2. The walls, walkways, sidewalks, entrance passages, elevators, stairwells,
courts and vestibules shall not be obstructed or used for any purpose other than
ingress and egress of pedestrian travel to and from the Premises, and shall not
be used for smoking, loitering or gathering, or to display, store or place any
merchandise, equipment or devices, or for any other purpose. The walkways,
sidewalks, entrance passageways, courts, vestibules and roof are not for the use
of the general public and Landlord shall in all cases retain the right to
control and prevent access thereto by all persons whose presence in the judgment
of the Landlord shall be prejudicial to the safety, character, reputation and
interests of the Building and its tenants, provided that nothing herein
contained shall be construed to prevent such access to persons with whom Tenant
normally deals in the ordinary course of Tenant’s business unless such persons
are engaged in illegal activities. Smoking is permitted outside the building and
within the project only in areas designated by Landlord. Except in the case of
emergency, no tenant or employee or invitee or agent of any tenant shall be
permitted upon the roof of the Building without prior written approval from
Landlord.

 

3. No awnings or other projection shall be attached to the outside walls of the
Building. No security bars or gates, curtains, blinds, shades or screens shall
be attached to or hung in, or used in connection with, any window or door of the
Premises without the prior written consent of Landlord. Neither the interior nor
exterior of any windows shall be coated or otherwise sunscreened without the
express written consent of Landlord.

 

4. Tenant shall not mark, nail, paint, drill into, or in any way deface any part
of the Premises or the Building except to affix standard pictures or other wall
hangings on the interior walls of the premises. Tenant shall not lay linoleum,
tile, carpet or other similar floor covering so that the same shall be affixed
to the floor of the Premises in any manner except as approved by Landlord in
writing. The expense of repairing any damage resulting from a violation of this
rule or removal of any floor covering shall be borne by Tenant.

 

5. The toilet rooms, urinals, wash bowls and other plumbing apparatus shall not
be used for any purpose other than that for which they were constructed and no
foreign substance of any kind whatsoever shall be thrown therein. Any pipes or
tubing used by Tenant to transmit water to an appliance or device in the
Premises must be made of copper or stainless steel, and in no event shall
plastic tubing be used for that purpose. The expense of any breakage, stoppage
or damage resulting from the violation of this rule shall be borne by the tenant
who, or whose employees or invitees, caused it.

 

6. Landlord shall direct electricians as to the manner and location of any
future telephone wiring. No boring or cutting for wires will be allowed without
the prior consent of Landlord. The locations of the telephones, call boxes and
other office equipment affixed to the Premises shall be subject to the prior
written approval of Landlord.

 

7. No exterior storage shall be allowed at any time without the prior written
approval of Landlord. The Premises shall not be used for cooking (except for
normal cooking activities typically found in break rooms, including, without
limitation, reasonable use of a coffee maker, microwave oven, toaster or toaster
oven) or washing clothes without the prior written consent of Landlord, or for
lodging or sleeping or for any immoral or illegal purposes.

 

8. Tenant shall not make, or permit to be made, any unseemly or disturbing
noises or disturb or interfere with occupants of this or neighboring buildings
or premises or those having business with them, whether by the use of any
musical instrument, radio, phonograph, noise, or otherwise. Tenant shall not
use, keep or permit to be used, or kept, any foul or obnoxious gas or substance
in the Premises or permit or suffer the Premises to be used or occupied in any
manner offensive or objectionable to Landlord or other occupants of this or
neighboring buildings or premises by reason of any odors, fumes or gases.

 

9. No animals, except for seeing eye dogs, shall be permitted at any time within
the Premises.

 

10. Tenant shall not use the name of the Building or the Project in connection
with or in promoting or advertising the business of Tenant, except as Tenant’s
address, without the written consent of Landlord. Landlord shall have the right
to prohibit any advertising by any Tenant which, in Landlord’s reasonable
opinion, tends to impair the reputation of the Project or its desirability for
its intended uses, and upon written notice from Landlord any Tenant shall
refrain from or discontinue such advertising.

 

11. Canvassing, soliciting, peddling, parading, picketing, demonstrating or
otherwise engaging in any conduct that unreasonably impairs the value or use of
the Premises or the Project are prohibited and each Tenant shall cooperate to
prevent the same. Landlord shall have full and absolute authority to regulate or
prohibit the entrance to the Premises of any vendor, supplier, purveyor,
petitioner, proselytizer or other similar person if, in the good faith judgment
of Landlord, such person will be involved in general solicitation activities, or
the proselytizing, petitioning, or disturbance of other tenants or their
customers or invitees, or engaged or likely to engage in conduct which may in
Landlord’s opinion distract from the use of the Premises for its intended
purpose. Notwithstanding

 

1

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

the foregoing, Landlord reserves the absolute right and discretion to limit or
prevent access to the Buildings by any food or beverage vendor, whether or not
invited by Tenant, and Landlord may condition such access upon the vendor’s
execution of an entry permit agreement which may contain provisions for
insurance coverage and/or the payment of a fee to Landlord.

 

12. No equipment of any type shall be placed on the Premises which in Landlord’s
opinion exceeds the load limits of the floor or otherwise threatens the
soundness of the structure or improvements of the Building.

 

13. [Intentionally Omitted.]

 

14. The entire Premises, including vestibules, entrances, parking areas, doors,
fixtures, windows and plate glass, shall at all times be maintained in a safe,
neat and clean condition by Tenant. All trash, refuse and waste materials shall
be regularly removed from the Premises by Tenant and placed in the containers at
the locations designated by Landlord for refuse collection. All cardboard boxes
must be “broken down” prior to being placed in the trash container. All
styrofoam chips must be bagged or otherwise contained prior to placement in the
trash container, so as not to constitute a nuisance. Pallets must be immediately
disposed of by tenant and may not be disposed of in the Landlord provided trash
container or enclosures. Pallets may be neatly stacked in an exterior location
on a temporary basis (no longer than 5 days) so long as Landlord has provided
prior written approval. The burning of trash, refuse or waste materials is
prohibited.

 

15. Tenant shall use at Tenant’s cost such pest extermination contractor as
Landlord may direct and at such intervals as Landlord may require.

 

16. All keys for the Premises shall be provided to Tenant by Landlord and Tenant
shall return to Landlord any of such keys so provided upon the termination of
the Lease. Tenant shall not change locks or install other locks on doors of the
Premises, without the prior written consent of Landlord. In the event of loss of
any keys furnished by Landlord for Tenant, Tenant shall pay to Landlord the
costs thereof. Upon the termination of its tenancy, Tenant shall deliver to
Landlord all the keys to lobby(s), suite(s) and telephone & electrical room(s)
which have been furnished to Tenant or which Tenant shall have had made.

 

17. No person shall enter or remain within the Project while intoxicated or
under the influence of liquor or drugs. Landlord shall have the right to exclude
or expel from the Project any person who, in the absolute discretion of
Landlord, is under the influence of liquor or drugs.

 

18. [Intentionally Omitted.]

 

19. Tenant shall not install equipment, such as but not limited to electronic
tabulating or computer equipment, requiring electrical or air conditioning
service in excess of that to be provided by Landlord under the Lease without
prior written consent of Landlord.

 

20. Landlord may from time to time grant other tenants of the project individual
and temporary variances from these Rules, provided that any variance does not
have a material adverse effect on the use and enjoyment of the Premises by
Tenant.

 

21. Landlord reserves the right to amend or supplement the foregoing Rules and
Regulations and to adopt and promulgate additional rules and regulations
applicable to the Premises. Notice of such rules and regulations and amendments
and supplements thereto, if any, shall be given to the Tenant.

 

2

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EXHIBIT F

 

HVAC UNITS TO BE REPLACED

 

Type of Unit

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

 

Manufacturer

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

 

Model Number

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

 

Serial Number

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

 

Capacity

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

Heat Pump   Carrier   50NQ060   0892C37832   5 TON Heat Pump   Carrier  
50QJ005610   4790G35408   4 TON Heat Pump   Carrier   50QJ005610   4790G35407  
4 TON Heat Pump   Carrier   5QJ008-600   3991634244   8 TON Heat Pump   Carrier
  50QJ005610   5090G3987   4 TON Heat Pump   Carrier   50QJ004600   1290G03825  
3.5 TON Heat Pump   Payne   654BE048AA   0792C36537   4 TON Heat Pump   Payne  
654BE048   0592C32611   4 TON Heat Pump   Payne   654BE048   0492C29110   4 TON
Heat Pump   Carrier   50NQ060   0892C37830   5 TON Heat Pump   Carrier   50NQ060
  0892C37831   5 TON Heat Pump   Payne   654AN024   4691C15326   2 TON Heat Pump
  Carrier   654BE048   0592C32609   4 TON Heat Pump   Payne   654AN018  
0592C3213   1.5 TON Heat Pump   Payne   654AN018   0592C32116   1.5 TON Heat
Pump   Carrier   654BE048   0492C29105   4 TON Heat Pump   Payne   654AN024  
4691C153252   2 TON Heat Pump   Payne   50NQ048   0592C32633   4 TON Heat Pump  
Payne   50NQ060   0892C37833   5 TON Heat Pump   Payne   654BE036   4191C04943  
3 TON Heat Pump   Trane   TTA030   N/A   2 TON

 

Exhibit F

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EXHIBIT X

 

INDUSTRIAL WORK LETTER

 

DOLLAR ALLOWANCE

 

The tenant improvement work to be contracted for by Landlord hereunder (“Tenant
Improvement Work”) shall consist of the design and construction of all tenant
improvements (“Tenant Improvements”), including work in place as of the date
hereof, required for the Premises pursuant to the approved final Working
Drawings and Specifications (as hereinafter defined). All of the Tenant
Improvement Work shall be performed by a contractor selected by Landlord and in
accordance with the procedures and requirements set forth below.

 

I. ARCHITECTURAL AND CONSTRUCTION PROCEDURES.

 

  A. Tenant and Landlord have approved a detailed space plan for the Premises,
dated December 29, 2005 and prepared by Tenant’s architect, Gensler
(“Architect”), (“Preliminary Plan”) a copy of which is attached hereto as
Exhibit X-1, and (ii) an estimate of the cost to complete the Tenant
Improvements in accordance with the Preliminary Plan (“Preliminary Cost
Estimate”) dated ________ and prepared by Turelk. The Preliminary Plan shall
include Landlord’s building standard tenant improvements, materials and
specifications for the Project as set forth in Schedule I attached hereto
(“Building Standard Improvements”), except for changes and additions
specifically requested by Tenant and approved by Landlord in its sole and
absolute discretion in writing (any such addition or variation from the Standard
Improvements shall be referred to herein as a (“Non-Standard Improvement”).
Non-Standard Improvement(s) shown in the Preliminary Plan are hereby approved by
Landlord and are included in the Preliminary Cost Estimate and Landlord hereby
agrees that such Non-Standard Improvements shown in the Preliminary Plan may be
included within Landlord’s Maximum Contribution.

 

  B. On or before the date set forth in Section 15 of the Basic Lease Provisions
(the “Plan Approval Date”), Tenant shall cause the Architect to prepare and
deliver to Landlord and Tenant working drawings and specifications (“Working
Drawings and Specifications”) in form approved by Tenant, and within five
(5) business days following Landlord’s receipt of the Working Drawings and
Specifications, Landlord’s contractor shall prepare a final construction cost
estimate (“Final Cost Estimate”) for the Tenant Improvements in conformity with
the Working Drawings and Specifications. Landlord shall have five (5) days from
the receipt of the Working Drawings and Specifications to approve or disapprove
the same. A copy of the Final Cost Estimate shall be delivered to Tenant. Any
delays in Tenant providing the Working Drawings and Specifications shall
constitute a “Tenant Delay” (as defined in Section 1. E. below).

 

  C.

In the event that Tenant submits in writing any revision to the Working Drawings
and Specifications (“Change”), and Landlord so approves such Change as provided
in Section I.D. herein, Landlord shall advise Tenant by written change order as
soon as is practical of any increase in the Completion Cost such Change would
cause. Tenant shall approve or disapprove such change order, if any, in writing
within two (2) business days following Tenant’s receipt of such change order. If
Tenant approves any such change order, Tenant shall pay the increase in the
Completion Cost attributable to such change order within ten (10) days after
delivery of invoices for same, provided however, that the Tenant Contribution
must in any event be paid in full prior to Tenant’s commencing occupancy of the
Premises. If Tenant disapproves any such change order, Tenant shall nonetheless
be responsible for the reasonable architectural and/or planning fees incurred in
preparing such change order. Landlord shall have no obligation to interrupt or
modify the Tenant Improvement Work pending Tenant’s approval of a change order,
but if Tenant fails to timely approve a change order, Landlord may (but shall
not be required to) suspend the applicable Tenant Improvement Work, in which

 

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event any related critical path delays because of such suspension shall
constitute Tenant Delays hereunder.

 

  D. Landlord agrees it shall not unreasonably withhold its consent to Tenant’s
request for a Change, including any modification of the Working Drawings and
Specifications, submitted by Tenant, or to Tenant’s requested Changes to
previously approved Non-Standard Improvements, unless Landlord reasonably
determines that such requested Change (i) is of a lesser quality than the
applicable Improvement previously approved by Landlord, (ii) fails to conform to
applicable governmental requirements, (iii) would result in the Premises
requiring building services beyond the level normally provided to other tenants,
(iv) would delay construction of the Tenant Improvements and Tenant declines to
accept such delay in writing as a Tenant Delay, (v) interferes in any manner
with the proper functioning of, or Landlord’s access to, any mechanical,
electrical, plumbing or HVAC systems, facilities or equipment in or serving the
Building, or (vi) would have an adverse aesthetic impact to the Premises or
cause additional substantial expenses to Landlord in reletting the Premises.
Unless Landlord otherwise agrees in writing, in its sole and absolute
discretion: (a) the cost of any Non-Standard Improvements shall be part of
Tenant’s Contribution (as hereinafter defined), and (b) all Standard Tenant
Improvements and Non-Standard Improvements shall become the property of Landlord
and shall be surrendered with the Premises at the end of the Term; except that
Landlord may, by notice to Tenant given at the time the applicable Change is
approved, require Tenant either to remove all or any of the Improvements
approved by way of the Change, to repair any damage to the Premises or the
Common Area arising from such removal, and to replace any Non-Standard
Improvements approved by way of the Change with the applicable Building
Standard, or to reimburse Landlord for the reasonable cost of such removal,
repair and replacement upon demand. Any such removals, repairs and replacements
by Tenant shall be completed by the Expiration Date or sooner termination of
this Lease.

 

  E. Notwithstanding any provision in the Lease to the contrary, and not by way
of limitation of any other rights or remedies of Landlord, if Tenant fails to
comply with any of the time periods specified in this Work Letter, fails
otherwise to approve or reasonably disapprove any submittal within the time
period specified herein for such response (or if no time period is so specified,
within five (5) days following Tenant’s receipt thereof), fails to provide the
Working Drawings and Specifications by the Plan Approval Date, fails to timely
deliver the Tenant’s Contribution as required hereunder, requests any Changes
which actually cause any critical path delays, furnishes inaccurate or erroneous
specifications or other information, or otherwise delays in any manner the
completion of the Tenant Improvements (including without limitation by
specifying materials that are not readily available) or the issuance of an
occupancy certificate (any of the foregoing being referred to in this Lease as a
“Tenant Delay”), then Tenant shall bear any resulting additional construction
cost or other expenses, and the Commencement Date of this Lease shall be deemed
to have occurred for all purposes, including without limitation Tenant’s
obligation to pay rent, as of the date Landlord reasonably determines that it
would have been able to deliver the Premises to Tenant but for the collective
Tenant Delays. Should Landlord determine that the Commencement Date should be
advanced in accordance with the foregoing, it shall so notify Tenant in writing.
Landlord’s determination shall be conclusive unless Tenant notifies Landlord in
writing, within five (5) business days thereafter, of Tenant’s election to
contest same by arbitration pursuant to Paragraph III below. Pending the outcome
of such arbitration proceedings, Tenant shall make timely payment of all rent
due under this Lease based upon the Commencement Date set forth in the aforesaid
notice from Landlord.

 

  F.

Landlord shall permit Tenant and its agents to enter the Premises not earlier
than January 15, 2006 in order that Tenant may install fixtures, furniture and
cabling through Tenant’s own contractors prior to the Commencement Date. Any
such work shall be subject to Landlord’s prior written approval, and shall be
performed in a manner and upon terms and conditions and at times satisfactory to
Landlord’s

 

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representative. The foregoing license to enter the Premises prior to the
Commencement Date is, however, conditioned upon Tenant’s contractors and their
subcontractors and employees working in harmony and not interfering with the
work being performed by Landlord as determined by Landlord in Landlord’s sole
and absolute discretion. If at any time that entry shall cause disharmony or
interfere with the work being performed by Landlord as defined by Landlord in
Landlord’s reasonable discretion, this license may be withdrawn by Landlord upon
twenty-four (24) hours written notice to Tenant. That license is further
conditioned upon the compliance by Tenant’s contractors with all requirements
imposed by Landlord on third party contractors, including without limitation the
maintenance by Tenant and its contractors and subcontractors of workers’
compensation and public liability and property damage insurance in amounts and
with companies and on forms satisfactory to Landlord, with certificates of such
insurance being furnished to Landlord prior to proceeding with any such entry.
The entry shall be deemed to be under all of the provisions of the Lease except
as to the covenants to pay rent. Except in the case of Landlord’s active
negligence or willful misconduct, Landlord shall not be liable in any way for
any injury, loss or damage which may occur to any such work being performed by
Tenant, the same being solely at Tenant’s risk. In no event shall the failure of
Tenant’s contractors to complete any work in the Premises extend the
Commencement Date of this Lease beyond the date that Landlord has completed its
Tenant Improvement Work and tendered the Premises to Tenant.

 

  G. Tenant hereby designates Jim Gacki (“Tenant’s Construction
Representative”), Telephone No. (949) 226-8109, as its representative, agent and
attorney-in-fact for all matters related to the Tenant Improvement Work,
including but not by way of limitation, for purposes of receiving notices,
approving submittals and issuing requests for Changes, and Landlord shall be
entitled to rely upon authorizations and directives of such person(s) as if
given directly by Tenant. The foregoing authorization is intended to provide
assurance to Landlord that it may rely upon the directives and decision making
of the Tenant’s Construction Representative with respect to the Tenant
Improvement Work and is not intended to limit or reduce Landlord’s right to
reasonably rely upon any decisions or directives given by other officers or
representatives of Tenant. Tenant may amend the designation of its Tenant’s
Construction Representative(s) at any time upon delivery of written notice to
Landlord.

 

II. COST OF TENANT IMPROVEMENTS

 

  A. Landlord shall complete, or cause to be completed, the Tenant Improvements,
at the construction cost shown in the Final Cost Estimate (subject to increases
for Landlord approved Changes and as otherwise provided in this Work Letter), in
accordance with final Working Drawings and Specifications approved by Landlord.

 

  B.

Landlord shall pay up to Five Hundred Sixty Nine Thousand Dollars ($569,000.00),
based on $10.00 per rentable square foot of the Premises (“Landlord’s Maximum
Contribution”), of the final “Completion Cost” (as defined below), but
applicable only to “Building Standard Improvements” (as defined below) and the
approved Non-Standard Improvements shown in the Preliminary Plan. Tenant
acknowledges that the Landlord’s Maximum Contribution is intended only as the
maximum amount Landlord will pay toward Building Standard Improvements and the
approved Non-Standard Improvements shown in the Preliminary Plan, and not by way
of limitation, any partitions, modular office stations, fixtures, cabling,
furniture and equipment requested by Tenant are not included in Building
Standards and are in no event subject to payment as part of Landlord’s
Contribution. In the event the sum of the cost of the Building Standard
Improvements and the approved Non-Standard Improvements shown in the Preliminary
Plan for the Tenant Improvements is less than the Landlord’s Maximum
Contribution, Landlord’s actual contribution toward the Completion Cost
(“Landlord’s Contribution”) shall equal such lesser amount, and Tenant shall
have no right to receive any credit, refund or allowance of any kind for any
unused portion of the Landlord’s Maximum

 

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Contribution nor shall Tenant be allowed to make revisions to an approved
Preliminary Plan, Working Drawings and Specifications or request a Change in an
effort to apply any unused portion of Landlord’s Maximum Contribution.

 

  C. Tenant shall pay all Completion Costs attributable to Non-Standard
Improvements other than the approved Non-Standard Improvements shown in the
Preliminary Plan (“Non-Standard Improvement Costs”), including, but not by way
of limitation: (i) costs for each variance or upgrade which increases the cost
of a Building Standard Improvement, and (ii) the entire cost of any improvements
or work which are additions (as opposed to variances or upgrades) to the
Standard Improvements (e.g., supplemental or back-up power or HVAC, extra
finishes or millwork or partitions). In addition, Tenant shall pay all
Completion Costs attributable to any Changes requested by the Tenant, any costs
due to inaccurate or incomplete Programming Information and the amount, if any,
by which aggregate costs for the Building Standard Improvements and the approved
Non-Standard Improvements shown in the Preliminary Plan exceeds the Landlord’s
Maximum Contribution. The amounts to be paid by Tenant for the Tenant
Improvements pursuant to this Section II.C. are sometimes cumulatively referred
to herein as the “Tenant’s Contribution”.

 

  D. The “Completion Cost” shall mean all costs of Landlord in completing the
Tenant Improvements in accordance with the approved Working Drawings and
Specifications, including but not limited to the following: (i) payments made to
Landlord’s architects, engineers, contractors, subcontractors and other third
party consultants in the performance of the work, (ii) payment to the Architect
in an amount not to exceed $113,800.00, (iii) industry-competitive salaries and
fringe benefits of persons, if any, in the direct employ of Landlord performing
any part of the construction work, (iv) permit fees and other sums paid to
governmental agencies, and (v) costs of all materials incorporated into the work
or used in connection with the work. The Completion Cost shall also include an
administrative/supervision fee to be paid to Landlord or to Landlord’s
management agent in the amount equal to the sum of five percent (5%) of
Landlord’s Contribution plus three percent (3%) of Tenant’s Contribution. Unless
expressly authorized in writing by Landlord, and except as otherwise set forth
in clause (ii), above, the Completion Cost shall not include (and no portion of
the Landlord Contribution shall be paid for) any costs incurred by Tenant,
including without limitation, any costs for space planners, managers, advisors
or consultants retained by Tenant in connection with the Tenant Improvements.

 

  E. Prior to start of construction of the Tenant Improvements, Tenant shall pay
to Landlord one-half of the full the amount of the Tenant’s Contribution set
forth in the approved Preliminary Cost Estimate or in the Final Cost Estimate
(once approved by Tenant). If the actual Completion Cost of the Tenant
Improvements is greater than the Final Cost Estimate because of Changes,
modifications or extras not reflected on the approved Working Drawings and
Specifications, or because of Tenant Delays, then Tenant shall pay all such
additional costs within ten (10) days after written demand for same. The balance
of any sums not otherwise paid by Tenant shall be due and payable as follows:
twenty-five percent (25%) of the full amount of Tenant’s Contribution shall be
paid on or before the date estimated by Landlord’s contractor as the mid-point
of the construction of the Tenant Improvements, twenty-five percent (25%) of the
full amount of Tenant’s Contribution and any other sums not otherwise paid by
Tenant shall be paid on or before the Commencement Date of this Lease. If Tenant
defaults in the payment of any sums due under this Work Letter, Landlord shall
(in addition to all other remedies) have the same rights as in the case of
Tenant’s failure to pay rent under the Lease, including, without limitation, the
right to terminate this Lease and recover damages from Tenant and/or to charge a
late payment fee and to collect interest on delinquent payments, and Landlord
may (but shall not be required to) suspend the Tenant Improvement Work following
such default, in which event any delays because of such suspension shall
constitute Tenant Delays hereunder.

 

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  F. To the extent that any work is required to cause the Premises to comply
with ADA requirements or other applicable codes or building permits as a result
of or in connection with the installation of the Tenant Improvements (other than
ADA requirements in the office areas on the second floor of the Premises and the
office areas on the first floor of the Premises which are shown on Exhibit X-2
attached hereto and incorporated herein by this reference (the “Existing Office
Area”)), such work shall be included as part of the Tenant Improvements and
shall be shown in the Working Drawings and Specifications prepared by Architect.
The cost of any such work shall constitute a part of the Completion Cost, and
may be included within the amount available from Landlord’s Maximum
Contribution. The cost of any work required to cause the Existing Office Area to
comply with ADA requirements as a result of or in connection with the
installation of the Tenant Improvements shall be the responsibility of Landlord
in accordance with Section 2.4 of the Lease. The Architect has also identified
that the following work may be required to be performed in order to comply with
ADA requirements or other applicable codes or building permits, the costs of
which shall be the parties’ respective responsibility as set forth below:

 

1. The existing lighting system will be required to be placed on motion sensors
to comply with Title 24 requirements, and Landlord will be responsible for up to
$38,000 of the costs of such work in addition to Landlord’s Maximum
Contribution. Any cost of such work in excess of $38,000 shall be a part of
Tenant’s Contribution.

 

2. There may be a requirement that all or some of the three (3) electrical
meters currently serving the Premises be combined to one electrical meter as a
requirement of the electrical utility serving the Premises. In such event,
Landlord shall be responsible for the costs of the removal of any meters
required to be removed, and any modifications necessary to combine the required
meters, in addition to Landlord’s Maximum Contribution.

 

III. DISPUTE RESOLUTION

 

  A. All claims or disputes between Landlord and Tenant arising out of, or
relating to, this Work Letter shall be decided by the JAMS/ENDISPUTE (“JAMS”),
or its successor, with such arbitration to be held in Orange County, California,
unless the parties mutually agree otherwise. Within ten (10) business days
following submission to JAMS, JAMS shall designate three arbitrators and each
party may, within five (5) business days thereafter, veto one of the three
persons so designated. If two different designated arbitrators have been vetoed,
the third arbitrator shall hear and decide the matter. If less than two
(2) arbitrators are timely vetoed, JAMS shall select a single arbitrator from
the non-vetoed arbitrators originally designated by JAMS, who shall hear and
decide the matter. Any arbitration pursuant to this section shall be decided
within thirty (30) days of submission to JAMS. The decision of the arbitrator
shall be final and binding on the parties. In no event shall the arbitrator be
empowered or authorized to award consequential or punitive damages (including
any award for lost profit or opportunity costs or loss or interruption of
business or income). All costs associated with the arbitration shall be awarded
to the prevailing party as determined by the arbitrator.

 

  B. Notice of the demand for arbitration by either party to the Work Letter
shall be filed in writing with the other party to the Work Letter and with JAMS
and shall be made within a reasonable time after the dispute has arisen. The
award rendered by the arbitrator shall be final, and judgment may be entered
upon it in accordance with applicable law in any court having jurisdiction
thereof. Except by written consent of the person or entity sought to be joined,
no arbitration arising out of or relating to this Work Letter shall include, by
consolidation, joinder or in any other manner, any person or entity not a party
to the Work Letter unless (1) such person or entity is substantially involved in
a common question of fact or law, (2) the presence of such person or entity is
required if complete relief is to be accorded in the arbitration, or (3) the
interest or responsibility of such person or entity in the matter is not
insubstantial.

 

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  C. The agreement herein among the parties to arbitrate shall be specifically
enforceable under prevailing law. The agreement to arbitrate hereunder shall
apply only to disputes arising out of, or relating to, this Work Letter, and
shall not apply to other matters of dispute under the Lease except as may be
expressly provided in the Lease.

 

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