Exhibit 10.11

 

LEASE AGREEMENT

 

By and Between

 

VIA VERDE VENTURE, LLC,

a Delaware limited liability company

 

(“Landlord”)

 

and

 

SYPRIS DATA SYSTEMS, INC.,

a Delaware corporation

 

(“Tenant”)

 

September 24, 2003

 

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LEASE AGREEMENT

 

WITNESSETH:

 

THIS LEASE AGREEMENT, (this “Lease”) is made and entered into as of September
24, 2003 by and between VIA VERDE VENTURE, LLC, a Delaware limited liability
company (“Landlord”) and SYPRIS DATA SYSTEMS, INC., a Delaware corporation
(“Tenant”).

 

ARTICLE 1.

PREMISES

 

1.1 Subject to all of the terms and conditions hereinafter set forth, Landlord
hereby leases to Tenant and Tenant hereby leases from Landlord the premises (the
“Premises”), outlined on Exhibit B to this Lease, comprised of the ground floor
containing 26,308 rentable square feet of the building commonly known as 160
East Via Verde, San Dimas, California (the “Building”). Tenant shall also have
the right to ingress and egress thereto and therefrom as provided in Article 44.
The land described on Exhibit A to this Lease and all improvements thereon and
appurtenances on that land thereto, including, but not limited to, the Building,
two other office buildings, access roadways, and all other related areas, shall
be collectively hereinafter referred to as the “Project.” The buildings in the
Project other than the Building are sometimes referred to herein as the “Other
Buildings.”

 

1.2 Notwithstanding anything to the contrary in this Lease, the recital of the
rentable area set forth above is for descriptive purposes only. The inaccuracy
of such recital shall create no right to terminate this Lease and neither
Landlord nor Tenant shall receive any adjustment or rebate of any Base Rent or
Additional Rent (as hereinafter defined) payable under this Lease if that
recital is incorrect. Tenant has inspected the Premises and is fully familiar
with the scope and size thereof and agrees to pay the full Base Rent and
Additional Rent set forth in this Lease in consideration for the use and
occupancy of that space, regardless of the actual number of square feet
contained therein. For purposes of this Lease, (1) “rentable area” and “usable
area” shall be calculated pursuant to the Standard Method for Measuring Floor
Area in Office Buildings (ANSI/BOMA Z65.1, 1996) (the “Measurement Standard”);
(2) “rentable square feet” and “rentable footage” shall have the same meaning as
the term “rentable area;” and (3) “usable square feet” and “usable square
footage” shall have the same meaning as the term “usable area.”

 

ARTICLE 2.

TERM AND CONDITION OF PREMISES

 

2.1 The term of this Lease (the “Term”) shall commence on February 1, 2004 (the
“Commencement Date”) and end on January 31, 2015 (the “Expiration Date”) unless
sooner terminated (the “Termination Date”) as hereinafter provided.
Notwithstanding the foregoing, if Landlord’s Work (as hereinafter defined) has
not been substantially completed by February 1, 2004 for any reason other than a
Tenant Delay (as defined in Exhibit C), then the Commencement Date shall be
postponed until the date of substantial completion. In that event, the
Expiration Date shall be eleven (11) years after the Commencement Date.
Landlord’s Work shall be deemed substantially completed upon issuance of a
temporary or permanent Certificate of Occupancy by the local building authority
(or such other evidence of the authorization to occupy the Premises as is
customarily given by the City of San Dimas), notwithstanding that minor or
unsubstantial details or construction, mechanical adjustment or decoration
remains to be performed; provided such details or adjustments do not prevent
Tenant from occupying the Premises and conducting its business therein. The
Commencement Date of this Lease and the obligation of Tenant to pay Base Rent,
Additional Rent and all other charges hereunder shall not be delayed or
postponed by reason of any delay by Tenant in performing changes or alteration
in the Premises not required to be performed by Landlord. In the event the Term
shall commence on a day other than the first day of a month, then the Base Rent
shall be immediately paid for such partial month prorated on the basis of a
thirty (30) day month.

 

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2.2 Landlord shall perform the construction work as provided in Exhibit C hereto
(“Landlord’s Work”). Except for Landlord’s Work, Landlord has no obligation to
construct improvements in the Premises.

 

2.3 Tenant shall give Landlord written notice of any incomplete work,
unsatisfactory conditions or defects (the “Punch List Items”) which were part of
Landlord’s Work in the Premises within thirty (30) days after the Commencement
Date and Landlord shall, at its sole expense and using its commercially
reasonable efforts, complete said work and/or remedy such unsatisfactory
conditions or defects as soon as possible. The existence of any incomplete work,
unsatisfactory conditions or defects as aforesaid shall not affect the
Commencement Date or the obligation of Tenant to pay Base Rent, Additional Rent
and all other charges hereunder. If Landlord does not complete those Punch List
Items within ninety (90) days after the Commencement Date, such failure is not
due to any Force Majeure Event and Landlord is not diligently attempting to
complete the Punch List Items, then Tenant may give Landlord notice that Tenant
intends to correct the remaining Punch List Items (the “Correction Notice”). If
Landlord does not commence the completion of the Punch List Items within five
(5) business days after that Correction Notice and diligently pursue that
completion thereafter (subject to Force Majeure Events), then Tenant may
undertake the completion of the Punch List Items; provided that Tenant shall use
the Contractor and subcontractors who initially performed Landlord’s Work. If
Tenant so proceeds with correcting the Punch List Items, and Landlord does not
reimburse Tenant for Tenant’s reasonable out-of-pocket costs to complete the
Punch List Items within thirty (30) days after Tenant’s written request
accompanied by reasonable evidence of the costs incurred, then Tenant may seek
to have its entitlement to reimbursement under this Section 2.3 resolved by
arbitration pursuant to Article 12. If Tenant is the prevailing party in that
arbitration and Landlord does not pay the amount determined by the arbitration
to be due Tenant for reimbursement under this Section 2.3 within thirty (30)
days after the final determination by that arbitration, the Tenant may offset
that amount against Base Rent next coming due under this Lease.

 

2.4 Subject to completion of the Punch List Items, the taking of possession of
the Premises by Tenant shall be conclusive evidence that the Premises and the
Building were in good and satisfactory condition at the time possession was
taken by Tenant. Notwithstanding the foregoing, in the event Tenant gives
Landlord written notice within one (1) year after the Commencement Date of any
latent defects in Landlord’s Work that affect Tenant’s use of the Premises,
Landlord shall cause such latent defects to be corrected at Landlord’s or its
contractor’s cost as soon as reasonable possible after receipt of that notice
from Tenant. Neither Landlord nor Landlord’s agents have made any
representations or promises with respect to the condition of the Building, the
Premises, the land upon which the Building is constructed, or any other matter
or thing affecting or related to the Building or the Premises, except as herein
expressly set forth, and no rights, easements or licenses are acquired by Tenant
by implication or otherwise except as expressly set forth in this Lease.

 

2.5 Tenant shall be permitted to enter into and occupy the Premises prior to the
Commencement Date, without the obligation for payment of rent; provided that (a)
Tenant shall not interfere with Landlord’s construction of the Landlord’s Work,
(b) Tenant first provides Landlord with all insurance required by the terms of
this Lease, (c) all construction by Tenant shall be performed in accordance with
the terms of this Lease, including without limitation Article 15, (d) Tenant has
coordinated its schedule of early entry with Landlord to Landlord’s reasonable
satisfaction, and (e) Tenant has obtained any necessary approvals from any
governmental authorities of that early occupancy.

 

2.6 Tenant shall have the one-time right to terminate this Lease effective as of
the date (the “Early Termination Date”) that is sixty-six (66) months after the
Commencement Date upon satisfaction of each of the conditions set forth in this
Section 2.4. If Tenant wishes to exercise its right to terminate this Lease,
Tenant must (1) deliver written notice to Landlord by no later than the date
(the “Termination Notice Date”) that is 57 months after the Commencement Date of
its election to terminate; and (2) pay to Landlord in cash on or before the date
that is sixty-five (65) months after the Commencement Date an amount equal to
the Termination Fee (as defined below). As used herein, the term “Termination
Fee” means the unamortized portion, calculated on a straight line basis with no
interest rate cost factor (i.e., one-half of the sum of: (i) that portion of the
Tenant Improvement Allowance actually disbursed by Landlord pursuant to the
Tenant Work Letter, (ii) the value of the free Base Rent (i.e.,

 

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$236,745.00), and (iii) the amount of all commissions paid by Landlord in order
to procure this Lease (i.e., $342,109.23). If Tenant exercises its termination
right in accordance with the terms of this Section 2.4, the Early Termination
Date shall thereafter be deemed the effective termination date for all purposes
under this Lease and Tenant shall vacate the Premises prior to the Early
Termination Date and shall comply with all terms of this Lease with respect to
the condition of the Premises as of the Expiration Date and the terms of
surrender thereof. The rights of Tenant under this Section 2.4 shall be personal
to the named Tenant hereunder and any assignee of Tenant’s interest in this
Lease consented to by Landlord pursuant to Article 18 or as to which Landlord’s
consent is not required pursuant to Article 18.

 

ARTICLE 3.

USE, NUISANCE, OR HAZARD

 

3.1 The Premises shall be used and occupied by Tenant solely for administrative
offices, engineering and testing with light repair and assembly of specialized
equipment; provided that the light assembly is an accessory use to the
administrative office and engineering function and that deliveries to and from
the Premises are by means of small trucks (i.e., UPS-type trucks) only
(collectively, the “Stated Use”) and for any other legally permitted uses unless
expressly prohibited hereby.

 

3.2 Tenant shall not use, occupy, or permit the use or occupancy of the Premises
for any purpose which is illegal or dangerous; permit any public or private
nuisance; do or permit any act or thing which may disturb the quiet enjoyment of
any other tenant of the Project; keep any substance or carry on or permit any
operation which introduces offensive odors or conditions into other portions of
the Project, use any apparatus which make undue noise or set up vibrations in or
about the Project; permit anything to be done which would increase the premiums
paid by Landlord for fire and extended coverage insurance on the Project or its
contents (unless Tenant pays the entire amount of that increase within ten (10)
business days after demand from Landlord) or cause a cancellation of any
insurance policy covering the Project or any part thereof or any of its
contents; or permit anything to be done which is prohibited by or which shall in
any way conflict with any law, statute, ordinance, or governmental rule,
regulation or covenants, conditions and restrictions affecting the Project,
including without limitation the CC&R’s (as defined below) now or hereinafter in
force, except as the CC&R’s may be limited as provided below in Section 3.3.
Without limiting the generality of the foregoing, (a) Tenant shall not be open
to the public (i.e., to persons other than employees) in the Premises later than
10:00 p.m. or earlier than 6:00 a.m. without the prior approval of the
Development Plan Review Board of the City of San Dimas, California, to operate
during those hours, and (b) Significant Notice and Nuisance Generating
Activities (as defined below) by Tenant are prohibited between the hours of
10:00 p.m. and 7:00 a.m. Monday through Friday, and the hours of 9:00 p.m. to
8:00 a.m., Saturday and Sunday. As used herein, the term “Significant Notice and
Nuisance Generating Activities” shall mean landscape maintenance activity, trash
collection and parking lot cleaning, car alarms and horns, diesel truck engines,
operation of heavy equipment for non-emergency purposes, and delivery or loading
truck noises. Should Tenant do any of the foregoing without the prior written
consent of Landlord, and the same is not cured within ten (10) business days
after notice from Landlord (which ten (10) business day period shall be subject
to extension if the nature of the breach is such that it is not possible to cure
the same within such ten (10) business day period so long as the Tenant
commences the cure of such breach within such ten (10) business day period and
diligently prosecutes the same to completion) it shall constitute an Event of
Default (as hereinafter defined) and shall enable Landlord to resort to any of
its remedies hereunder.

 

3.3 The ownership, operation, maintenance and use of the Project shall be
subject to certain conditions and restrictions contained in an instrument
(“CC&R’s”) recorded or to be recorded against title to the Project. Tenant
agrees that regardless of when those CC&R’s are so recorded, this Lease and all
provisions hereof shall be subject and subordinate thereto, except as provided
below in this Section 3.3, except as provided below in this Section 3.3. Tenant
has received and approved a form of First Amended and Restated Declaration of
Restrictions for Via Verde Corporate Plaza (the “CC&R Amendment”) and agrees
that this Lease and all provisions hereof shall be subject and subordinate
thereto upon its recording, except as provided below in this Section 3.3.
Accordingly, as a consequence of that subordination, during any period in which
the entire Project is not owned by Landlord, (a) the portion of Operating
Expenses and Taxes (each as defined below) for the Common Areas shall be
allocated among

 

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the owners of the Project as provided in the CC&R’s, and (b) the CC&R’s shall
govern the maintenance and insuring of the portions of the Project not owned by
Landlord to the extent consistent herewith. Tenant shall, promptly upon request
of Landlord, sign all documents reasonably required to carry out the foregoing
into effect. No modification of the CC&R’s that materially impacts use of the
Premises for the Stated Use or Tenant’s other rights and responsibilities under
this Lease without Tenant’s prior written consent, which shall not be
unreasonably withheld, conditioned or delayed by Tenant, shall be binding on
Tenant. Landlord agrees to comply with the terms of the CC&R’s. The amounts
payable by Landlord under the CC&R’s with respect to any working capital and
contingency fund shall be excluded from Operating Expenses, except to the extent
the amounts paid into that fund are otherwise amounts the expenditure of which
would be an Operating Expense under the terms of this Lease. Neither the term
“New Rules” as used in Section 5.1(a)(viii) of this Lease nor the subordination
described in Section 30.1 of this Lease shall include any modification to the
CC&R’s or any similar non-governmental rule established by Landlord, that
materially impacts use of the Premises for the Stated Use or Tenant’s other
rights and responsibilities under this Lease without Tenant’s prior written
consent, which shall not be unreasonably withheld, conditioned or delayed by
Tenant. Without limiting the terms of this Lease, the provisions of Section 9.4
and 9.9 of the CC&R Amendment shall not apply to Tenant.

 

ARTICLE 4.

RENT

 

4.1 Tenant hereby agrees to pay Landlord a base annual rental (the “Base Rent”)
as follows subject to recalculation as provided in Section 1.2:

 

(a) As an inducement to Tenant entering into this Lease, Base Rent in the amount
of $39,462.00 per month shall be abated for the first six (6) months after the
Commencement Date (the “Rent Abatement Period”) and Tenant shall receive a rent
credit in the amount of the actual cost to Tenant for electrical power during
the Rent Abatement Period, which shall be applied against Base Rent first coming
due after the Rent Abatement Period; provided that if Landlord is submetering
electrical service to the Premises, then in lieu of that rent credit, Landlord
shall not charge Tenant for electrical service to the Premises during the Rent
Abatement Period. Landlord and Tenant agree for tax reporting purposes that none
of the Base Rent due in periods in which the Base Rent is not being abated shall
be allocated to any other period unless required by applicable law.

 

(b) Commencing on the first day after expiration of the Rent Abatement Period
and continuing through and including the last day of the twenty-fourth (24th)
month of the Term, the Base Rent shall be $1.50 per rentable square foot per
month.

 

(c) Commencing on the first day of the twenty-fifth (25th) month of the Term and
continuing through and including the last day of the forty-eighth (48th) month
of the Term, the Base Rent shall be $1.55 per rentable square foot per month.

 

(d) Commencing on the first day of the forty-ninth (49th) month of the Term and
continuing through and including the last day of the seventy-second (72nd) month
of the Term, the Base Rent shall be $1.60 per rentable square foot per month.

 

(e) Commencing on the first day of the seventy-third (73rd) month of the Term
and continuing through and including the last day of the ninety-sixth (96th)
month of the Term, the Base Rent shall be $1.65 per rentable square foot per
month.

 

(f) Commencing on the first day of the ninety-seventh (97th) month of the Term
and continuing through and including the last day of the one-hundred twentieth
(120th) month of the Term, the Base Rent shall be $1.70 per rentable square foot
per month.

 

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(g) Commencing on the first day of the one hundred twenty-first (121st) month of
the Term and continuing through the remainder of the initial Term hereof, the
Base Rent shall be $1.75 per rentable square foot per month.

 

For purposes of rent adjustment under the Lease, the number of months is
measured from the Commencement Date. Each monthly installment (the “Monthly
Rent”) shall be payable in advance by check or by money order on or before the
first day of each calendar month. In addition to the Base Rent, Tenant also
agrees to pay Tenant’s Share of increases in the Operating Expenses and Taxes
(each as hereinafter defined), and any and all other sums of money as shall
become due and payable by Tenant as hereinafter set forth, all of which shall
constitute additional rent under this Lease (the “Additional Rent”). The Monthly
Rent and the Additional Rent are sometimes hereinafter collectively called
“Rent” and shall be paid when due in lawful money of the United States without
demand, deduction, abatement, or offset to c/o Unire Real Estate Group, Inc., 10
Pointe Drive, Suite 150, Brea, California 92821 or as Landlord may designate
from time to time. Landlord expressly reserves the right to apply any payment
received to Base Rent or any other items of Rent that are not paid by Tenant.

 

4.2 In the event any Monthly or Additional Rent or other amount payable by
Tenant hereunder is not paid within ten (10) days after its due date, Tenant
shall pay to Landlord a late charge (the “Late Charge”), as Additional Rent, in
an amount of four percent (4%) of the amount of such late payment. Failure to
pay any Late Charge shall be deemed a Monetary Default (as hereinafter defined).
Provision for the Late Charge shall be in addition to all other rights and
remedies available to Landlord hereunder, at law or in equity, and shall not be
construed as liquidated damages or limiting Landlord’s remedies in any manner.
Failure to charge or collect such Late Charge in connection with any one (1) or
more such late payments shall not constitute a waiver of Landlord’s right to
charge and collect such Late Charges in connection with any other similar or
like late payments. Notwithstanding the foregoing provisions of this Section
4.2, the 4% Late Charge shall not be imposed with respect to the first late
payment in the twelve (12) months following the Commencement Date or with
respect to the first late payment in any succeeding twelve (12) month period
during the Term unless the applicable payment due from Tenant is not received by
Landlord within ten (10) days following written notice from Landlord that such
payment was not received when due. Following the first such written notice from
Landlord in the twelve (12) months following the Commencement Date falls and the
first such written notice in any succeeding twelve (12) month period during the
Term (but regardless of whether such payment has been received within such ten
(10) day period), the Late Charge will be imposed without notice for any
subsequent payment due from Tenant during such applicable twelve (12) month
period which is not received within ten (10) days after its due date.

 

4.3 Simultaneously with the execution hereof, Tenant shall deliver to Landlord
(i) the sum of $39,457.50 as payment of the first of Monthly Rent due hereunder
and (ii) an amount equal to $39,457.50 to be held by Landlord as security for
Tenant’s faithful performance of all of the terms, covenants, conditions, and
obligations required to be performed by Tenant hereunder (the “Security
Deposit”). After an Event of Default by Tenant, Landlord may, from time to time
and without prejudice to any other remedy, apply the Security Deposit to the
extent necessary to (a) make good any arrears of Rent; (b) pay any sums owed to
Landlord by Tenant; (c) pay for any damage, injury, expense, or liability
sustained by Landlord as a result of any Event of Default, including, but not
limited to, any damages or deficiencies incurred in the reletting of the
Premises, regardless of whether the accrual of such damages or deficiencies
occurs before or after an eviction; and (d) pay for the reasonable costs of
cleaning the Premises following termination if Tenant has failed to perform such
cleaning as required by this Lease. Should Landlord use all or any portion of
the Security Deposit to cure any Event of Default by Tenant, Tenant shall be
required to replace and replenish all or any portion of the Security Deposit
within ten (10) days of demand therefor and Tenant’s failure to replace and
replenish all or any portion of the Security Deposit within said time shall
constitute an Event of Default (as hereinafter defined) and shall enable
Landlord to resort to any of its remedies hereunder. The Security Deposit shall
not be considered an advance payment of Rent nor a measure of Landlord’s damages
in case of an Event of Default by Tenant. Landlord shall not be required to
account separately for the Security Deposit and may commingle same with any of
Landlord’s funds. No trust relationship is created herein between Landlord and
Tenant with respect to the Security Deposit.

 

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4.4 If the Term commences on a date other than the first day of a calendar month
or expires or terminates on a date other than the last day of a calendar month,
the Rent for any such partial month shall be prorated to the actual number of
days Tenant is in occupancy of the Premises for such partial month.

 

4.5 All Rents and any other amount payable by one party to the other hereunder,
if not paid when due, shall bear interest from the date due until paid at a rate
equal to the prime commercial rate established from time to time by Bank of
America (the “Prime Rate”), plus two percent (2%) per annum; but not in excess
of the maximum legal rate permitted by law. Failure to charge or collect such
interest in connection with any one (1) or more delinquent payments shall not
constitute a waiver of either party’s right to charge and collect such interest
in connection with any other or similar or like delinquent payments.

 

4.6 If Tenant fails to make when due two (2) consecutive payments of Monthly
Rent or makes two (2) consecutive payments of Monthly Rent which are returned to
Landlord by Tenant’s financial institution for insufficient funds, Landlord may
require, by giving written notice to Tenant, that all future payments of Rent
shall be made in cashier’s check or by money order. The foregoing is in addition
to any other remedy of Landlord hereunder, at law or in equity.

 

ARTICLE 5.

RENT ADJUSTMENT

 

5.1 Definitions.

 

(a) “Operating Expenses”, as said term is used herein, shall mean all expenses,
costs, and disbursements of every kind and nature which Landlord shall pay or
become obligated to pay because of or in connection with the ownership,
operation, or maintenance of the Project; provided that in no event shall any
costs of the ownership, operation or maintenance of the Other Buildings be
included in Operating Expenses. Operating Expenses shall be computed in
accordance with generally accepted real estate practices, consistently applied,
and shall include, but not be limited to, the items as listed below:

 

(i) Wages, salaries, and any and all taxes, insurance and benefits of the
Building manager and any clerical, maintenance, or other management employees
directly associated with the operation of the Building;

 

(ii) All expenses for the Building management office including rent, office
supplies, and materials therefor; provided that rental may only be included for
an on-site management office and that rent shall not exceed the rent on 500
square feet of that management office;

 

(iii) All supplies, materials, and tools directly associated with the operation,
maintenance or repair of the Project (excluding the Other Buildings);

 

(iv) All costs incurred in connection with the operation, maintenance, and
repair of the Project (excluding the Other Buildings) including, but not limited
to, the following: elevators; heating, ventilating and air conditioning systems;
security; cleaning and janitorial; parking lot and landscape; window washing;
building painting; and license, permit and inspection fees, but in each event
subject to the limitations on inclusion of the cost of capital improvements as
provided in this Section 5.1.

 

(v) Costs of water, pure water, sewer, electric, and any other utility charges;

 

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(vi) Costs of casualty, rental interruption, and liability insurance, and any
deductibles payable thereunder;

 

(vii) The cost of any capital improvements made to the Project (excluding the
Other Buildings) by Landlord after the date of this Lease which are or may be
required, by any law, ordinance, rule, regulation or otherwise that was not
applicable or in effect at the Commencement Date (“New Rules”), including, but
not limited to, New Rules under the Americans with Disabilities Act of 1990
(“the Americans with Disabilities Act”), amortized over the period of such
improvement’s useful life as Landlord shall reasonably determine, together with
interest on the unamortized balance at a rate equal to the Prime Rate in effect
at the time the cost is incurred plus one percent (1%);

 

(viii) The cost of any labor or energy saving device or other equipment
installed by Landlord which improves the operating efficiency of any system
within the Project (excluding the Other Buildings) and thereby reduces Operating
Expenses as set forth below. Landlord may add to Operating Expenses in each
Lease Year during the useful life of such device or equipment an amount equal to
the annual amortization allowance of the cost of such device or equipment as
determined in accordance with generally accepted real estate practices,
consistently applied, together with interest on the unamortized balance thereof,
provided, however, that the amount of such allowance and interest shall not
exceed the annual cost or expense reduction attributed by Landlord to such
device or equipment; and

 

(ix) legal, accounting, inspection, and consultation fees incurred in connection
with the operation of the Project (excluding the Other Buildings).

 

Expressly excluded from Operating Expenses are the following items:

 

(x) Advertising and leasing commissions;

 

(xi) Repairs, restoration and other expenses paid for by the proceeds of any
insurance policies (or which would have been paid by such proceeds if Landlord
had maintained the insurance Landlord is required to maintain under this Lease)
or amounts otherwise reimbursed to Landlord or paid by any other source (other
than by tenants paying their share of Operating Expenses);

 

(xii) Principal, interest, and other costs incurred in connection with financing
the Project or ground lease rental or depreciation;

 

(xiii) The cost of special services to tenants (including Tenant) for which a
special charge is made;

 

(xiv) The costs of repair of casualty damage or for restoration following
condemnation to the extent covered by insurance proceeds (or which would have
been paid by such proceeds if Landlord had maintained the insurance Landlord is
required to maintain under this Lease) or condemnation awards;

 

(xv) The costs of any capital expenditures except as expressly permitted to be
included in Operating Expenses as provided under clauses (vi), (vii) and (viii)
above;

 

(xvi) The costs, including permit, license and inspection costs and supervision
fees, incurred with respect to the installation of tenant improvements within
the Project or incurred in renovating or otherwise improving, decorating,
painting or

 

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redecorating vacant space within the Project or promotional or other costs in
order to market space to potential tenants;

 

(xvii) The legal fees and related expenses and legal costs incurred by Landlord
(together with any damages awarded against Landlord) (a) due to the bad faith or
other tortious violation by Landlord or any tenant of the terms and conditions
of any lease of space in the Project; (b) due to a final determination by a
court of competent jurisdiction (including arbitration) that Landlord has
breached a lease; or (c) in connection with any other dispute involving or
arising out of any alleged breach of any lease between Landlord and any other
tenant, except to the extent the dispute relates to the Landlord’s good faith
enforcement of that lease for the benefit of other tenants;

 

(xviii) The costs arising from the presence of any Hazardous Materials which (a)
existed on the Property as of the Commencement Date, and/or (b) were placed
within, upon or beneath the Project by Landlord or any other tenant, or other
respective employees, agents, contractors, assignees, licensees, invitees, or
subtenants;

 

(xix) The attorneys’ fees in connection with the negotiation and preparation of
letters, deal memos, letters of intent, leases, subleases and/or assignments,
space planning costs, and other costs and expenses incurred in connection with
lease, sublease and/or assignment negotiations and transactions with present or
prospective tenants or other occupants of the Project;

 

(xx) The expenses in connection with services or other benefits which are not
available to Tenant;

 

(xxi) The overhead and profit paid to Landlord or to subsidiaries or affiliates
of Landlord for goods and/or services in the Project to the extent the same
exceeds the costs of such goods and/or services rendered by qualified,
unaffiliated third parties on a competitive basis;

 

(xxii) The costs arising from Landlord’s charitable or political contributions;

 

(xxiii) The costs (other than ordinary maintenance and insurance) for sculpture,
paintings and other objects of art;

 

(xxiv) The interest and penalties resulting from Landlord’s failure to pay any
items of Operating Expense when due;

 

(xxv) The Landlord’s general corporate overhead and general and administrative
expenses, costs of entertainment, dining, automobiles or travel for Landlord’s
employees, and costs associated with the operation of the business of the
partnership or entity which constitutes Landlord as the same are distinguished
from the costs of the operation of the Project, including partnership accounting
and legal matters, costs of defending any lawsuits with any mortgagee, costs of
selling, syndicating, financing, mortgaging or hypothecating any of Landlord’s
interest in the Project, costs of any disputes between Landlord and its
employees (if any) not engaged in the operation of the Project, disputes of
Landlord with management, or outside fees paid in connection with disputes with
other Project tenants or occupants (except to the extent such dispute is based
on Landlord’s good faith efforts to benefit Tenant or meet Landlord’s
obligations under this Lease);

 

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(xxvi) The costs arising from the gross negligence or willful misconduct or from
any bad faith contractual breach of Landlord or due to a final determination by
a court of competent jurisdiction (including arbitration) that Landlord has
breached a lease;

 

(xxvii) The offsite management office rental;

 

(xxviii) The costs of correction of latent defects in the Project to the extent
covered by warranties;

 

(xxix) The costs of Landlord’s membership in professional organizations (such
as, by way of example and without limitation, BOMA) in excess of $2,500.00 per
year;

 

(xxx) The costs of earthquake insurance unless earthquake insurance is
maintained as an item of Operating Expenses in the Base Year;

 

(xxxi) an allocable portion of the salaries, wages or other compensation paid to
employees of any property management organization being paid a fee by Landlord
for its services or to any employees of Landlord who are not assigned to the
operation, management, maintenance or repair of the Building on a full-time
basis, representing that portion of such personnel’s time devoted to projects
other than the Building;

 

(xxxii) Contributions to operating expense reserves;

 

(xxxiii) Bad debts loss, rent loss, or reserves for either;

 

(xxxiv) Costs, expenses or expenditures relating to the duties, obligations of
other tenants in the Building;

 

(xxxv) Costs of compliance, fines or penalties incurred by Landlord due to
violations of or non-compliance with any applicable governmental rule,
regulation or authority;

 

(xxxvi) Lease payments for rented equipment, the cost of which equipment would
constitute a capital expenditure that is otherwise excluded from Operating
Expenses under this Section 5.1 if the equipment were purchased, except for
rentals for temporary use in the maintenance and operation of the Building, and
any late fees, penalties, interest charges or similar fees incurred by Landlord
in connection with the same;

 

(xxxvii) Amounts paid as ground rental;

 

(xxxviii) Insurance premiums for increased premiums due to acts or omissions of
other tenants of the Building causing increased risk to the Building; and

 

(xxxix) Costs of electrical service to any space other than Common Areas.

 

(b) “Taxes” shall mean all ad valorem taxes, personal property taxes, and all
other taxes, assessments, embellishments, use and occupancy taxes, transit
taxes, water, sewer and pure water charges not included in Section 5.1.(a)(v)
above, excises, levies, license fees or taxes, and all other similar charges,
levies, penalties, or taxes, if any, which are levied, assessed, or imposed, by
any Federal, State, county, or municipal authority, whether by taxing districts
or

 

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authorities presently in existence or by others subsequently created, upon, or
due and payable in connection with, or a lien upon, all or any portion of the
Project, the Building, or facilities used in connection therewith, and rentals
or receipts therefrom and all taxes of whatsoever nature that are imposed in
substitution for or in lieu of any of the taxes, assessments, or other charges
included in its definition of Taxes, and any costs and expenses of contesting
the validity of same, less any refunds of such amounts or other reimbursements
from any source, excluding any amounts otherwise expressly excluded from
Operating Expenses, and less any federal or state tax levied upon the income of
Landlord, its assignees or any other person receiving taxable income from the
Premises or any substitute for such income tax.

 

(c) “Lease Year” shall mean the twelve (12) month period commencing January 1st
and ending December 31st.

 

(d) “Tenant’s Building Percentage” shall mean Tenant’s percentage of the entire
Building as determined by dividing the Rentable Area of the Premises by the
total Rentable Area of the Building, which is 53,795 square feet. For the
purposes of this Section, Tenant’s Building Percentage is 48.9042%. If there is
a change in the total Building Rentable Area as a result of an addition to the
Building, partial destruction, modification or similar cause, which event causes
a reduction or increase on a permanent basis, Landlord shall cause adjustments
in the computations as shall be necessary to provide for any such changes.
Landlord shall segregate Operating Expenses and Taxes into two (2) separate
categories, one (1) such category, to be applicable only to Operating Expenses
and Taxes incurred for the Building and the other category applicable to
Operating Expenses and Taxes incurred for the Common Areas as a whole.
Accordingly, two (2) Tenant’s Building Percentages shall apply, one (1) such
Tenant’s Building Percentage shall be calculated by dividing the number of
rentable square feet of the Premises by the total number of rentable square feet
in the Building (“Tenant’s Building Only Percentage”), and the other Tenant’s
Building Percentage to be calculated by dividing the number of rentable square
feet of the Premises by the total number of rentable square feet of all
buildings in the Project (“Tenant’s Common Area Building Percentage”).
Consequently, any reference in this Lease to “Tenant’s Building Percentage”
shall mean and refer to both Tenant’s Building Only Percentage and Tenant’s
Common Area Building Percentage of Operating Expenses and Taxes.

 

(e) “Common Areas” shall mean those portions of the Project which are provided,
from time to time, for use in common by Landlord, Tenant and any other tenants
of the Project, whether or not those areas are open to the general public,
together with such other portions of the Project designated by Landlord, in its
discretion, including certain areas to be shared by Landlord and all tenants,
and may include, without limitation, any parking facilities, fixtures, systems,
signs, facilities, lakes, gardens, parks or other landscaping used in connection
with the Project, and may include any city sidewalks adjacent to the Project,
pedestrian walkway system, whether above or below grade, park or other
facilities open to the general public and roadways, sidewalks, walkways,
parkways, driveways, and landscape areas appurtenant to the Project.

 

(f) “Market Area” shall mean, collectively, the San Gabriel Valley.

 

(g) “Comparable Buildings” shall mean comparable Class ”A” office use buildings
located in the Market Area.

 

(h) “Controllable Operating Expenses” shall mean actual Operating Expenses other
than the cost of insurance and utilities.

 

(i) “First-Year Controllable Operating Expenses” shall mean the total amount of
Controllable Operating Expenses incurred during the portion of the Term in
calendar year 2004, adjusted pursuant to Section 5.6 and proportionally
increased to reflect the partial year (i.e., annualized by (i) dividing the
Controllable Operating Expenses (adjusted pursuant to Section 5.6) for the
period (the “Measurement Period”) from the Commencement Date to December 31,

 

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2004 by the number of days in the Measurement Period, and (ii) multiplying that
per diem amount by 366) further adjusted to reflect any one-time payments made
during 2004 that caused the Operating Expenses in the Measurement Period to be
higher or lower than they otherwise would have been had that one-time payment
been averaged over the entire 2004 calendar year.

 

(j) “Controllable Operating Expenses Cap” means the First Year Controllable
Operating Expenses multiplied by the applicable “Growth Factor” set forth in the
following schedule for such 12-month Lease Year:

 

Lease Year

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

   Growth Factor

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

Calendar Year 2005

   1.04

Calendar Year 2006

   1.08

Calendar Year 2007

   1.12

Calendar Year 2008

   1.16

Calendar Year 2009

   1.20

Calendar Year 2010

   1.24

Calendar Year 2011

   1.28

Calendar Year 2012

   1.32

Calendar Year 2013

   1.36

Calendar Year 2014

   1.40

Calendar Year 2015

   1.44

 

(k) “First-Year Taxes” shall mean the total amount of Taxes incurred during the
portion of the Term in calendar year 2004, adjusted to include the additional
assessed value of all improvements to the Building made with the Tenant
Improvement Allowance, adjusted pursuant to Section 5.11 and proportionally
increased to reflect the partial year (i.e., annualized by (i) dividing the
Taxes (adjusted pursuant to Section 5.11) with respect to the period (the
“Measurement Period”) from the Commencement Date to December 31, 2004 by the
number of days in the Measurement Period, and (ii) multiplying that per diem
amount by 366).

 

(l) “Taxes Cap” means the First-Year Taxes multiplied by the applicable “Growth
Factor” set forth in the following schedule for such 12-month Lease Year:

 

Lease Year

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

   Growth Factor

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

Calendar Year 2005

   1.03

Calendar Year 2006

   1.06

Calendar Year 2007

   1.09

Calendar Year 2008

   1.12

Calendar Year 2009

   1.15

Calendar Year 2010

   1.18

Calendar Year 2011

   1.21

Calendar Year 2012

   1.24

Calendar Year 2013

   1.27

Calendar Year 2014

   1.30

Calendar Year 2015

   1.33

 

5.2 Subject to Section 5.13, in the event that the Operating Expenses of
Landlord’s operation of the Project (excluding the Other Buildings) during any
Lease Year of the Term shall exceed the Operating Expenses for the Project
(excluding the Other Buildings) for the 2004 calendar year adjusted pursuant to
Section 5.6 (the “Base Year”), Tenant shall pay to Landlord, as Additional Rent,
Tenant’s Share (as hereinafter defined) of the difference between the Operating
Expenses for a particular Lease Year and the Base Year. “Tenant’s Share” shall
be determined by multiplying any such difference between Operating Expenses for
any Lease Year and the Base Year or pro rata portion thereof, respectively, by
Tenant’s Building Percentage. Landlord shall, in advance of each Lease Year,
reasonably estimate what

 

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Tenant’s Share will be for such Lease Year based, in part, on Landlord’s
operating budget for such Lease Year, and Tenant shall pay Tenant’s Share as so
estimated each month (the “Monthly Escalation Payments”). The Monthly Escalation
Payments shall be due and payable at the same time and in the same manner as the
Monthly Rent. Base Year Operating Expenses shall not include market-wide
labor-rate increases due to extraordinary circumstances, including, but no
limited to, boycotts and strikes, and utility rate increases due to
extraordinary circumstances including, but not limited to, unusual conservation
surcharges (above 5-year average surcharges), boycotts, or embargoes. In the
event that the scope of coverage and the coverage limits of the insurance
maintained by Landlord, the cost of which is included in Operating Expenses,
materially changes after the Base Year, the cost of insurance during the Base
Year shall be adjusted to what it would have been had that same level of
coverage and limits been carried in the Base Year. Notwithstanding the
foregoing, the actual coverage and limits maintained by The Prudential Insurance
Company of America with respect to its portfolio of investment properties from
time to time shall be deemed not to have materially changed from the Base Year
notwithstanding that the coverage and limits may have actually changed.

 

5.3 Landlord shall, within one hundred fifty (150) days after the end of each
Lease Year other than the Base Year, or as soon thereafter as reasonably
possible, provide Tenant with a written statement of the actual Operating
Expenses incurred during such Lease Year for the Project (excluding the Other
Buildings) and such statement shall specify Operating Expenses by major line
items and set forth a calculation of Tenant’s Share of increases in such
Operating Expenses, subject to Section 5.13. Tenant shall pay Landlord, as
Additional Rent, the excess of Tenant’s Share of Operating Expenses over the
amount of Monthly Escalation Payments made by Tenant attributable to said Lease
Year, such payment to be made within thirty (30) days of the date of Tenant’s
receipt of said statement (except as provided in Section 5.4 below); similarly,
Tenant shall receive a credit if Tenant’s Share is less than the amount of
Monthly Escalation Payments collected by Landlord during said Lease Year, such
credit to be applied to future Monthly Escalation Payments to become due
hereunder. If utilities, janitorial services or any other components of
Operating Expenses increase or decrease during any Lease Year, Landlord may
revise Monthly Escalation Payments due during such Lease Year by giving Tenant
written notice to that effect; and thereafter, Tenant shall pay, in each of the
remaining months of such Lease Year, a sum equal to the amount of revised
difference in Operating Expenses multiplied by Tenant’s Building Percentage
divided by the number of months remaining in such Lease Year.

 

5.4 If, within sixty (60) days following Tenant’s receipt of the Operating
Expense statement, neither party hereto delivers to the other party a notice
referring in reasonable detail to one (1) or more errors in such statement, or a
notice that Tenant will conduct or require an audit it shall be deemed
conclusively that the information set forth in such statement is correct. Prior
to commencing any audit, Tenant may request that Landlord provide additional
reasonable detail as to the Operating Expenses included in that Operating
Expense Statement. Tenant shall, however, be entitled to conduct or require an
audit to be conducted, provided that (a) not more than one (1) such audit may be
conducted during any Lease Year of the Term, (b) the records for each Lease Year
may be audited only once, and (c) such audit is commenced within sixty (60) days
following Tenant’s receipt of the applicable statement. In no event shall
payment of Rent ever be contingent upon the performance of such audit. For
purposes of any audit, Tenant or Tenant’s duly authorized representative, at
Tenant’s sole cost and expense, shall have the right, upon fifteen (15) days’
written notice to Landlord, to inspect Landlord’s books and records pertaining
to Operating Expenses at the offices of Landlord or Landlord’s managing agent
during ordinary business hours, provided that such audit must be conducted so as
not to unreasonably interfere with Landlord’s business operations and must be
reasonable as to scope and time. If Landlord disagrees with the results of
Tenant’s audit, Landlord shall provide an audit of such books and records
prepared by a nationally or regionally recognized certified public accounting
firm of Landlord’s selection (the “Final Auditor”), prepared at Tenant’s
expense, which shall be deemed to be conclusive for the purposes of this Lease.
If actual Tenant’s Share of Operating Expenses are finally determined to have
been overstated or understated by Landlord for any calendar year, then the
parties shall within thirty (30) days thereafter make such adjustment payment or
refund as is applicable, and if Tenant’s Share of actual Operating Expenses are
determined to have been overstated by Landlord for any calendar year by in
excess of five percent (5%), then Landlord shall pay the reasonable cost of
Tenant’s audit and any Final Auditor. If Tenant’s share of Operating Expenses
have been overstated or understated by Landlord for any calendar year (including
any

 

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excess or shortfall in the amount of the Monthly Escalation Payments above or
below the actual Tenant’s Share of Operating Expenses for that calendar year),
then the amount of the excess of shortfall shall bear interest as follows: an
amount equal to one twelfth of the excess or shortfall shall be deemed to be due
the applicable party on the last day of each calendar month of the applicable
calendar year. For example, if the total amount of the Monthly Escalation
Payments exceeds the actual Tenant’s Share of Operating Expenses by $12,000, an
amount equal to $1,000 shall be deemed to have been due from Landlord to Tenant
on the last day of each month of the applicable calendar year. Interest on that
excess or shortfall shall be payable by Landlord to Tenant in the case of excess
amounts and from Tenant to Landlord in the case of shortfall amounts from the
date each amount is deemed due until paid at an annual interest rate equal to
the Prime Rate. Continuing with the preceding example, the $1,000 amount
allocable to January of the applicable year shall bear interest from the last
day of January of the applicable year until paid. Similarly, the excess amount
of $1,000 allocable to December of the applicable year, shall bear interest from
the last day of December of the applicable year until paid. Notwithstanding the
foregoing, if the Final Auditor making the determination of the amount of
Operating Expenses pursuant to an audit under this Section 5.4 expressly finds
that Landlord willfully overstated the Operating Expenses, the portion of the
amount due Tenant that bears the same proportion that the willfully misstated
Operating Expenses bears to the total Operating Expenses shall instead bear
interest at an annual interest rate equal to the Prime Rate plus 2%.

 

5.5 If the Expiration Date or Termination Date under this Lease does not fall on
December 31 of any given year, then: (i) the period commencing on the January 1
immediately preceding said Expiration Date or Termination Date and continuing
through, to and, including said Expiration Date or Termination Date shall be
referred to in this Lease as the “Last Partial Year” and (ii) Tenant’s Share of
Operating Expenses for the Last Partial Year shall be, calculated by
proportionately reducing the Base Year Operating Expenses to reflect the number
of calendar months in said Last Partial Year (the “Adjusted Base Operating
Expenses”). The Adjusted Base Operating Expenses shall then be compared with the
actual Operating Expenses for said Last Partial Year to determine the amount of
any increases or decreases in the actual Operating Expenses for said Last
Partial Year over the Adjusted Base Operating Expenses. Tenant shall pay its
Tenant’s Share of any such increases within thirty (30) days following the
receipt of a final statement or, as applicable, Landlord shall refund any
overpayment concurrently with delivery of such final statement.

 

5.6 If the occupancy of the Building during any part of any Lease Year
(including the Base Year) is less than 100%, Landlord shall make an appropriate
adjustment of the variable components of Operating Expenses for that Lease Year,
using generally accepted management principles, to determine the amount of
Operating Expenses that would have been incurred had the Building been 100%
occupied. This amount shall be considered to have been the amount of Operating
Expenses for that Lease Year. For purposes of this Section 5.6, “variable
components” include only those component expenses that are affected by
variations in occupancy levels.

 

5.7 Subject to Section 5.14, in the event that the Taxes during any Lease Year
of the Term shall exceed the Taxes for the Project for the Base Year, Tenant
shall pay to Landlord, as Additional Rent, “Tenant’s Share” (as hereinafter
defined) of the difference between the Taxes for a particular Lease Year and the
Base Year. “Tenant’s Share” shall be determined by multiplying any such
difference between Taxes for any Lease Year and the Base Year or pro rata
portion thereof, respectively, by Tenant’s Building Percentage. Landlord shall,
in advance of each Lease Year, estimate what Tenant’s Share will be for such
Lease Year and Tenant shall pay Tenant’s Share as so estimated each month (the
“Monthly Tax Payments”). The Monthly Tax Payments shall be due and payable at
the same time and in the same manner as the Monthly Rent.

 

5.8 Landlord shall, within one hundred fifty (150) days after the end of each
Lease Year other than the Base Year, or as soon thereafter as reasonably
possible, provide Tenant with an itemized written statement of the actual Taxes
incurred during such Lease Year for the Project (excluding the Other Buildings)
and such statement shall set forth Tenant’s Share of such Taxes. Tenant shall
pay Landlord, as Additional Rent, the excess of Tenant’s Share of any increases
in Taxes over the amount of Monthly Tax Payments made by Tenant attributable to
said Lease Year, such payment to be made within thirty (30) days of the date of
Tenant’s receipt of said statement; similarly, Tenant shall receive a credit if

 

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Tenant’s Share is less than the amount of Monthly Tax Payments collected by
Landlord during said Lease Year, such credit to be applied to future Monthly Tax
Payments to become due hereunder. If Taxes increase or decrease during any Lease
Year, Landlord may revise Monthly Tax Payments due during such Lease Year by
giving Tenant written notice to that effect; and, thereafter, Tenant shall pay,
in each of the remaining months of such Lease Year, a sum equal to the amount of
revised difference in Taxes multiplied by Tenant’s Building Percentage divided
by the number of months remaining in such Lease Year.

 

5.9 If, within sixty (60) days following receipt of the Taxes statement or that
Tenant shall conduct or require an audit, neither party hereto delivers to the
other party a notice referring in reasonable detail to one (1) or more errors in
such statement or that Tenant shall conduct or require an audit, it shall be
deemed conclusively that the information set forth in such statement is correct.
Tenant shall, however, be entitled to conduct or require an audit to be
conducted, provided that (a) not more than one (1) such audit may be conducted
during any Lease Year of the Term; (b) the records for each Lease Year may be
audited only once, and (c) such audit is commenced within sixty (60) days
following Tenant’s receipt of the applicable statement. In no event shall
payment of Rent ever be contingent upon the performance of such audit. For
purposes of any audit, Tenant or Tenant’s duly authorized representative, at
Tenant’s sole cost and expense, shall have the right, upon fifteen (15) days’
written notice to Landlord, to inspect Landlord’s books and records pertaining
to Taxes at the offices of Landlord or Landlord’s managing agent during ordinary
business hours, provided that such audit must be conducted so as not to
unreasonably interfere with Landlord’s business operations and must be
reasonable as to scope and time. If Landlord disagrees with the results of
Tenant’s audit, Landlord shall provide an audit of such books and records
prepared by a certified public accountant of Landlord’s selection, prepared at
Tenant’s expense, which shall be deemed to be conclusive for the purposes of
this Lease. If Tenant’s Share of actual Taxes are determined to have been
overstated or understated by Landlord for any calendar year, then the parties
shall within thirty (30) days thereafter make such adjustment payment or refund
as is applicable. If Tenant’s Share of actual Taxes is determined to have been
overstated by Landlord for any calendar year by an excess of five percent (5%),
then Landlord shall pay the reasonable cost of Tenant’s audit and any Final
Auditor; provided that there shall be excluded from that five percent (5%)
threshold any changes in Taxes resulting from the contest of such Taxes or an
assessment of the Building or any error made by the tax assessor. Despite any
other provision of this Article 5, Landlord may adjust Operating Expenses and/or
Taxes and submit a corrected statement to account for Taxes or other government
public-sector charges (including utility charges) that are for that given year
but that were first billed to Landlord after the date that is ten (10) business
days before the date on which the statement was furnished.

 

5.10 Tenant’s Share of Taxes for the Last Partial Year, if any, shall be
calculated by proportionately reducing the Base Year Taxes to reflect the number
of calendar months in said Last Partial Year (the “Adjusted Base Taxes”). The
Adjusted Base Taxes shall then be compared with the actual Taxes for said Last
Partial Year to determine the amount of any increases or decreases in the actual
Taxes for such Last Partial Year over the Adjusted Base Taxes Tenant shall pay
its Tenant’s Share of any such increases within thirty (30) days following the
receipt of a final statement or, as applicable, Landlord shall refund any
overpayment concurrently with delivery of such final statement.

 

5.11 If the Taxes for the Base Year or any Lease Year are changed as a result of
protest, appeal or other action taken by a taxing authority, the Taxes as so
changed (the “Revised Taxes”) shall be deemed the Taxes for such Lease Year or
Base Year, as applicable. If in any year the Building is less than 100%
occupied, the elements of Taxes which vary depending upon the occupancy of the
Building (e.g., Taxes attributable to the build out of leasable floor area),
shall be adjusted to reflect such amount as would have been incurred had the
Building been at least 100% occupied during such year. Any expenses incurred by
Landlord in attempting to protest, reduce or minimize Taxes shall be included in
Taxes in the Lease Year in which those expenses are paid. Landlord shall have
the exclusive right to conduct such contests, protests and appeals of the Taxes
as Landlord shall determine is appropriate in Landlord’s sole discretion;
provided that not more often than once in any Lease Year, Tenant may request
that Landlord appeal the Taxes, and Landlord agrees to undertake that appeal at
Tenant’s sole cost and expense unless Landlord’s tax consultants advise Landlord
against that appeal. If the Building is not reassessed to include the assessed
value of the improvements being constructed by Tenant to the extent that the
cost or value of those leasehold improvements do not exceed the Tenant
Improvement Allowance, then the Taxes for the

 

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Base Year shall be appropriately adjusted to reflect the additional Taxes that
would have been payable in the Base Year had that reassessment been made.

 

5.12 Tenant’s obligation with respect to Additional Rent and the payment of
Tenant’s Share of Operating Expenses and Tenant’s Share of Taxes shall survive
the Expiration Date or Termination Date of this Lease and Landlord shall have
the right to retain the Security Deposit, to the extent necessary, to secure
payment of Tenant’s Share of Operating Expenses and Tenant’s Share of Taxes for
the final year of the Lease, or part thereof, during which Tenant was obligated
to pay such expenses.

 

5.13 In the event that during any Lease Year during the initial eleven (11) year
Term of this Lease, the Controllable Operating Expenses exceed the applicable
Controllable Operating Expenses Cap, then (a) for purposes of calculating
Tenant’s Share, Operating Expenses shall be deemed reduced by the amount by
which Controllable Operating Expenses exceed the applicable Controlling
Operating Expenses Cap, and (b) such excess may be carried over into the
following Lease Years without interest for purposes of determining Tenant’s
Share with respect to such following Lease Years by adding such excess to
Controllable Operating Expenses for such following Lease Years.

 

5.14 In the event that during any Lease Year during the initial eleven (11) year
Term of this Lease, the Taxes exceed the applicable Taxes Cap, then (a) for
purposes of calculating Tenant’s Share, Taxes shall be deemed reduced by the
amount by which Taxes exceed the applicable Taxes Cap, and (b) such excess may
be carried over into the following Lease Years without interest for purposes of
determining Tenant’s Share with respect to such following Lease Years by adding
such excess to Taxes for such following Lease Years.

 

ARTICLE 6.

SERVICES TO BE PROVIDED BY LANDLORD

 

6.1 Subject to Articles 5 and 10 herein and Section 6.7, Landlord shall pay for
and furnish to the Premises, the following services:

 

(a) Electrical facilities to furnish approximately 667 Kilowatts to the first
floor of the Building.

 

(b) Basic janitorial service, as described more fully in Exhibit F, on a five
(5) day week basis consistent with the services provided in Comparable
Buildings. Carpet cleaning, except as provided in normal business services,
shall be performed at Tenant’s request and at Tenants expense;

 

(c) Air conditioning and heating as reasonably required for comfortable use and
occupancy under ordinary office conditions during the following periods (“Normal
Business Hours”): 7:00 a.m. to 6:00 p.m., Mondays through Fridays, and 8:00 a.m.
to 1:00 p.m., Saturdays, but not on Sundays or any legal holidays recognized by
the United States Government. During other hours Landlord will provide such air
conditioning and heating through Premises heat pump override system which shall
be connected to the Building HVAC system. The cost for override or after-hours
service per hour shall be Landlord’s actual costs of providing such after hour
service including without limitation the reasonable allocation of supervision
costs and depreciation with respect to such after hours’ usage and an
administrative fee of five percent (5%), but excluding the cost of electricity
paid for by Tenant pursuant to Section 6.7. Landlord agrees that such cost,
depreciation and administrative fee shall not exceed $10.00 per hour during the
Term of this Lease. The Buildings energy management system shall create an
accurate invoice on a monthly basis and Landlord shall present that invoice to
Tenant along with monthly rent statement. Within thirty (30) days of
presentation of that invoice, Tenant shall pay Landlord for such service, in
addition to Tenant’s rental obligation, as Additional Rent. Except as herein
otherwise provided, Landlord shall in no event be required to supply central
heating or air conditioning other than during Normal Business Hours;

 

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(d) Replacement of all standard fluorescent bulbs in all areas and all
incandescent bulbs in public areas, rest room areas, and stairwells and in the
Premises. Routine maintenance and electric lighting service for all public areas
of the Project in a manner and to the extent deemed by Landlord to be standard;

 

(e) Subject to provisions set forth below, Landlord shall at all times furnish
the Premises with elevator service, and water for lavatory, lunchroom, coffee
area and for Tenant’s reasonable commercial needs and drinking purposes in the
Building core areas; and

 

(f) Landlord may impose reasonable charges for any utilities or services
required to be provided by Landlord by reason of any substantial recurrent use
of the Premises at any time other than Normal Business Hours. In connection with
such after-hours electrical usage, Landlord may (but shall not be obligated to)
install separate meters to measure such excess usage at Landlord’s expense.

 

6.2 Landlord shall not be liable for any loss or damage arising or alleged to
arise in connection with the failure, stoppage, or interruption of any such
services; nor shall the same be construed as an eviction of Tenant, work an
abatement of Rent, entitle Tenant to any reduction in Rent, or relieve Tenant
from the operation of any covenant or condition herein contained; it being
further agreed that Landlord reserves the right to discontinue temporarily such
services or any of them at such times as may be necessary by reason of repair or
capital improvements performed within the Project, accident, unavailability of
employees, repairs, alterations or improvements, or whenever by reason of
strikes, lockouts, riots, acts of God, or any other happening or occurrence
beyond the reasonable control of Landlord. In the event of any such failure,
stoppage or interruption of services, Landlord shall use reasonable diligence to
have the same restored. Neither diminution nor shutting off of light or air or
both, nor any other effect on the Project by any structure erected or condition
now or hereafter existing on lands adjacent to the Project, shall affect this
Lease, abate Rent, or otherwise impose any liability on Landlord.

 

6.3 Landlord shall have the right to reduce heating, cooling, or lighting within
the Premises and in the public area in the Building as required by any
government mandatory fuel or energy-saving program.

 

6.4 Unless otherwise provided by Landlord, Tenant shall separately arrange with
the applicable local public authorities or utilities, as the case may be, for
the furnishing of and payment of all telephone and facsimile services as may be
required by Tenant in the use of the Premises. Tenant shall directly pay for
such telephone and facsimile services as may be required by Tenant in the use of
the Premises. Tenant shall directly pay for such telephone and facsimile
services, including the establishment and connection thereof, at the rates
charged for such services by said authority or utility; and the failure of
Tenant to obtain or to continue to receive such services for any reason
whatsoever shall not relieve Tenant of any of its obligations under this Lease.
Landlord shall provide physical access to the Building for telecommunication
providers in keeping with the general standards of physical access for such
providers provided by Comparable Buildings.

 

6.5 Subject to Landlord’s prior approval, which shall not be unreasonably
withheld, and to the capacity of the Building electrical system and structure,
Tenant shall have the right to install in the Premises additional air
conditioning units as required by the business requirements of Tenant for the
Stated Use at Tenant’s sole cost and expense. Any such supplemental air
conditioning units shall be separately metered at Tenant’s sole cost and expense
and Tenant shall pay Landlord the entire cost of electrical service as evidenced
by that separate meter.

 

6.6 Notwithstanding anything to the contrary in Section 6.2 or elsewhere in this
Lease, if (a) Landlord fails to provide Tenant with the HVAC service, electrical
service or any other utility service or elevator service described in Section
6.1, or Landlord enters the Premises and such entry interferes with Tenant’s
reasonable use of the Premises (b) such failure or interference by Landlord’s
entry is not due to any one or more Force Majeure Events or to an event covered
by Article 19, (c) Tenant has given Landlord reasonably prompt written notice of
such failure or that such entry by Landlord is

 

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unreasonably interfering with Tenant’s use of the Premises and (d) as a result
of such failure or interference all or any part of the Premises are rendered
untenantable (and, as a result, all or such part of the Premises are not used by
Tenant during the applicable period) for more than five (5) consecutive business
days, then Tenant shall be entitled to an abatement of Rent proportional to the
extent to which the Premises are thereby rendered unusable by Tenant, commencing
with the later of (i) the sixth business day during which such untenantability
continues or (ii) the sixth business day after Landlord receives such notice
from Tenant, until the Premises (or part thereof affected) are again usable or
until Tenant again uses the Premises (or part thereof rendered unusable) in its
business, whichever first occurs. The foregoing rental abatement shall be
Tenant’s exclusive remedy therefor. Notwithstanding the foregoing, the
provisions of Article 19 below and not the provisions of this subsection shall
govern in the event of casualty damage to the Premises or Building and the
provisions of Article 20 below and not the provisions of this subsection shall
govern in the event of condemnation of all or a part of the Premises or
Building.

 

6.7 Landlord shall use reasonable efforts to cause the electrical service for
the Premises to be separately metered by the utility providing that service. If
the electrical service is separately metered by the utility providing that
service, Tenant shall obtain electrical service directly from that utility and
pay all costs incurred in connection with that electrical service directly to
that utility service provider. In the event that the electrical service cannot
be separately metered by the providing utility, Landlord, at Landlord’s cost,
shall install a submeter for electrical service to Premises and Tenant shall pay
for all electrical service to the Premises based on invoices from Landlord
provided from time to time, but not more often than monthly; provided that the
charges by Landlord for electricity shall not exceed the cost therefor charged
to Landlord by the utility service provider. Payments to Landlord for electrical
service shall be due within ten (10) business days after delivery of a written
invoice.

 

ARTICLE 7.

REPAIRS AND MAINTENANCE BY LANDLORD

 

7.1 Landlord shall provide for the refurbishment, repair, cleaning and
maintenance of the public portions of the Project in keeping with the ordinary
standard for Comparable Buildings as part of Operating Expenses. Unless
otherwise expressly stipulated herein, Landlord shall not be required to make
any improvements or repairs of any kind or character to the Premises during the
Term, except such repairs as may be required to the exterior walls, corridors,
windows, roof, integrated Building utility and mechanical systems and other Base
Building elements and other structural elements and equipment of the Project,
and subject to Section 13.4, below, such additional maintenance as may be
necessary because of the damage caused by persons other than Tenant, its agents,
employees, licensees, or invitees.

 

7.2 Landlord or Landlord’s officers, agents, and representatives (subject to any
security regulations imposed by any governmental authority and to Tenant’s
reasonable security restraints (e.g., regarding classified work projects)) shall
have the right to enter all parts of the Premises at all reasonable hours upon
reasonable prior notice to Tenant (other than in an emergency, in which case
Tenant shall be notified as soon as possible under the circumstances) to Tenant
to inspect, clean, make repairs, alterations, and additions to the Project or
the Premises which are provided for hereunder, to make repairs to adjoining
spaces, to cure any Events of Default of Tenant hereunder that Landlord elects
to cure pursuant to Section 22.5, below, to show the Premises to prospective
tenants (during the final nine (9) months of the Term or at any time after the
occurrence of an Event of Default that remains uncured), mortgagees or
purchasers of the Building, or to provide any service which it is obligated or
elects to furnish to Tenant; and Tenant shall not be entitled to any abatement
or reduction of Rent by reason thereof. Landlord shall have the right to enter
the Premises at any time and by any reasonable and proportionate means in the
case of an emergency that threatens the material and imminent injury to persons
or property.

 

7.3 Except as otherwise expressly provided in this Lease, Tenant hereby waives
all rights it would otherwise have under California Civil Code Sections 1932(1)
and 1942(a) or any successor statutes to deduct repair costs from Rent and/or
terminate this Lease as the result of any failure by Landlord to maintain or
repair.

 

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ARTICLE 8.

REPAIRS AND CARE OF PROJECT BY TENANT

 

8.1 If the Building, or any portion thereof, including but not limited to, the
elevators, boilers, engines, pipes, and other apparatus, or members of elements
of the Building (or any of them) used for the purpose of climate control of the
Building or operating of the elevators, or of the water pipes, drainage pipes,
electric lighting, or other equipment of the Building or the roof or outside
walls of the Building and also the Premises improvements, including but not
limited to, the carpet, wall coverings, doors, and woodwork, become damaged or
are destroyed through the negligence, carelessness, or misuse of Tenant, its
servants, agents, employees, or anyone permitted by Tenant to be in the
Building, or through it or them (other than the extent of ordinary and normal
usage, wear and tear), then the reasonable cost of the necessary repairs,
replacements, or alterations shall be borne by Tenant who shall pay the same to
Landlord as Additional Rent within ten (10) days after demand, subject to
Section 13.4 below. Landlord shall have the exclusive right, but not the
obligation, to make any repairs necessitated by such damage.

 

8.2 Subject to Section 13.4 below, Tenant agrees, at its sole cost and expense,
to repair or replace any damage or injury done to the Project, or any part
thereof, caused by Tenant, Tenant’s agents, employees, licensees, or invitees
which Landlord elects not to repair. Tenant shall not injure the Project or the
Premises and shall maintain the elements of the Premises not to be maintained by
Landlord pursuant to this Lease in a clean, attractive condition and in good
repair, wear and tear excepted, provided that Tenant shall have no duty to leave
the Premises in any condition that is materially improved beyond the condition
of the Premises on the Commencement Date, reasonable wear and tear excepted. If
Tenant fails to keep such elements of the Premises in such good order,
condition, and repair as required hereunder to the reasonable satisfaction of
Landlord, Landlord may restore the Premises to such good order and condition and
make such repairs without liability to Tenant for any loss or damage that may
accrue to Tenant’s property or business by reason thereof, and within thirty
(30) days after completion thereof and written demand therefor, Tenant shall pay
to Landlord, as Additional Rent, upon demand, the cost of restoring the Premises
to such good order and condition and of the making of such repairs, plus an
additional charge of ten percent (10%) thereof. Tenant shall leave the Premises
at the end of each business day in reasonably condition, consistent with the
nature of Tenant’s business operations, for the purpose of allowing the
performance of Landlord’s cleaning services. Upon the Expiration Date or the
Termination Date, Tenant shall surrender and deliver up the Premises to Landlord
in substantially the same condition in which it existed at the Commencement
Date, excepting only ordinary wear and tear and damage arising from any cause
not required to be repaired by Tenant. Upon the Expiration Date or the
Termination Date, Landlord shall have the right to re-enter and take possession
of the Premises.

 

8.3 Tenant may provide additional janitorial or cleaning services from time to
time in the Premises as determined by Tenant with reasonable advanced notice to
Landlord. Landlord at its sole cost may elect to provide supervision of those
services.

 

ARTICLE 9.

TENANT’S EQUIPMENT AND INSTALLATIONS

 

9.1 If heat-generating machines or equipment, including telephone equipment,
cause the temperature in the Premises, or any part thereof, to exceed the
temperatures the Building’s air conditioning system would be able to maintain in
such Premises were it not for such heat-generating equipment, then Landlord
reserves the right to install supplementary air conditioning units in the
Premises, and the cost thereof, including the cost of installation and the cost
of operation and maintenance thereof, including water, shall be paid by Tenant
to Landlord within fifteen (15) days after demand by Landlord.

 

9.2 Except for desk or table-mounted typewriters, adding machines, office
calculators, dictation equipment, personal computers, and other equipment
consistent with the Stated Use, Tenant shall not install within the Premises any
fixtures, equipment, facilities, or other improvements without the specific
written consent of Landlord, subject to Article 15, below.

 

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ARTICLE 10.

FORCE MAJEURE

 

10.1 It is understood and agreed that with respect to any service or other
obligation to be furnished or obligations to be performed by either party that
in no event shall either party be liable for failure to furnish or perform the
same when prevented from doing so by strike, lockout, breakdown, accident,
supply, or inability by the exercise of reasonable diligence to obtain supplies,
parts, or employees necessary to furnish such service or meet such obligation;
or because of war or other emergency; or for any cause beyond the reasonable
control with the party obligated for such performance; or for any cause due to
any act or omission of the other party or its agents, employees, licensees,
invitees, or any persons claiming by, through, or under the other party; or
because of the failure of any public utility to furnish services; or because of
order or regulation of any federal, state, county or municipal authority
(collectively, “Force Majeure Events”), except to the extent that any Force
Majeure Event is caused by the gross negligence, willful misconduct or material
breach of this Lease of or by the obligated party. Nothing in this Section 10.1
shall limit or otherwise modify or waive either party’s obligation to pay
amounts due to the other as and when due pursuant to the terms of this Lease.

 

ARTICLE 11.

CONSTRUCTION, MECHANICS’ AND MATERIALMAN’S LIENS

 

11.1 Tenant shall not suffer or permit any construction, mechanics’ or
materialman’s lien to be filed against the Premises or any portion of the
Project by reason of work, labor services, or materials supplied to Tenant.
Nothing herein contained shall be deemed or construed in any way as constituting
the consent or request of Landlord, expressed or implied, by inference or
otherwise, for any contractor, subcontractor, laborer, or materialman to perform
any labor or to furnish any materials or to make any specific improvement,
alteration, or repair of or to the Premises or any portion of the Project; nor
of giving Tenant any right, power, or authority to contract for, or permit the
rendering of, any services or the furnishing of any materials that could give
rise to the filing of any construction, mechanics’ or materialman’s lien against
the Premises or any portion of the Project.

 

11.2 If any such construction, mechanics’ or materialman’s lien shall at any
time be filed against the Premises or any portion of the Project as the result
of any act or omission of Tenant, Tenant covenants that it shall, within twenty
(20) days after Tenant has notice of the claim for lien, procure the discharge
thereof by payment or by giving security or in such other manner as is or may be
required or permitted by law or which shall otherwise satisfy Landlord and
Tenant’s causing the removal of a mechanic’s lien by means of bonding within
that 20-day period shall be deemed to cure the default by Tenant of Section 11.1
in permitting the filing of that lien. If Tenant fails to take such action,
Landlord, in addition to any other right or remedy it may have, may take such
action as may be reasonably necessary to protect its interests. Any amounts paid
by Landlord in connection with such action and all other expenses of Landlord
incurred in connection therewith, including reasonable attorneys’ fees, court
costs, and other necessary disbursements (but excluding attorneys’ fees, court
costs and other litigation expenses incurred by Landlord in connection with an
action against Tenant, which shall be governed by Article 25) shall be repaid by
Tenant to Landlord within ten (10) business days after demand.

 

ARTICLE 12.

ARBITRATION

 

12.1 In the event that a dispute arises under Sections 2.3, 5.3 or 5.8 above,
the same shall be submitted to arbitration in accordance with the provisions of
applicable state law, if any, as from time to time amended. Arbitration
proceedings, including the selection of an arbitrator, shall be conducted
pursuant to the rules, regulations, and procedures from time to time in effect
as promulgated by the American Arbitration Association (the “Association”).
Prior written notice of application by either party for arbitration shall be
given to the other at least ten (10) days before submission of the application
to the said Association’s office in the city wherein the Building is situated
(or the nearest other city having an Association office). The arbitrator shall
hear the parties and their evidence. The decision of the arbitrator may be
entered in the appropriate court of law; and the parties consent to the
jurisdiction of such court and

 

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further agree that any process or notice of motion or other application to the
court or a judge thereof may be served outside the state wherein the Building is
situated by registered mail or by personal service, provided a reasonable time
for appearance is allowed. The costs and expenses of each arbitration hereunder
and their apportionment between the parties shall be determined by the
arbitrator in his award or decision, subject to the last sentence of this
section. No arbitrable dispute shall be deemed to have arisen under this Lease
(a) prior to the expiration of the period of twenty (20) days after the date of
the giving of written notice by the party asserting the existence of the
dispute, together with a description thereof sufficient for an understanding
thereof, and (b) where Tenant disputes the amount of a Tenant payment required
hereunder (e.g., Operating Expense excess under Section 5.3 hereof), prior to
Tenant paying in full the amount billed by Landlord, including the disputed
amount. The prevailing party in such arbitration shall be reimbursed for its
expenses, including reasonable attorneys’ fees. Notwithstanding the foregoing,
in no event shall this Article 12 affect or delay Landlord’s unlawful detainer
rights under California law.

 

ARTICLE 13.

INSURANCE

 

13.1 Landlord shall maintain, as a part of Operating Expenses, fire and extended
coverage insurance on the Project in an amount equal to the full replacement
cost of the Project, subject to such deductibles as Landlord may determine.
Landlord shall not be obligated to insure, and shall not assume any liability of
risk of loss for, any of Tenant’s furniture, equipment, machinery, goods,
supplies, improvements or alterations upon the Premises other than the Covered
Tenant Improvements (as defined below). As used herein, the term “Covered Tenant
Improvements” means the Tenant Improvements constructed by Landlord pursuant to
the Work Letter and any other improvements permanently attached to the Building
that will become the property of Landlord on the expiration or earlier
termination of this Lease and in any event excludes any furniture, trade
fixtures, equipment or personal property; provided that no portion of any
alterations to the Premises shall be Covered Tenant Improvements prior to their
completion and delivery by Tenant’s contractor and the expiration of 30 days
after written notice from Tenant to Landlord of the completion of those
alterations and the value thereof. Such insurance shall be maintained with an
insurance company selected, and in amounts desired, by Landlord or Landlord’s
mortgagee, and payment for losses thereunder shall be made solely to Landlord
subject to the rights of the holder of any mortgage or deed of trust which may
now or hereafter encumber the Project. Additionally Landlord may maintain such
additional insurance, including, without limitation, earthquake insurance, flood
insurance, liability insurance and/or rent insurance, as Landlord may in its
sole discretion elect. The cost of all such additional insurance shall also be
part of the Operating Expenses. Landlord shall not be obligated to insure, and
shall not assume any liability of risk of loss for, any of Tenant’s furniture,
equipment, machinery, goods, supplies, improvements or alterations upon the
Premises. Any or all of Landlord’s insurance may be provided by blanket coverage
maintained by Landlord or any affiliate of Landlord under its insurance program
for its portfolio of properties or by Landlord or any affiliate of Landlord’s
program of self insurance, and in such event Operating Expenses shall include
the portion of the reasonable cost of blanket insurance or self-insurance that
is allocated to the Project.

 

13.2 Tenant, at its own or any parent’s or affiliate’s, expense shall maintain
with licensed insurers authorized to do business in the State of California and
which are rated A- and have a financial size category of at least VIII in the
most recent Best’s Key Rating Guide, or any successor thereto (or if there is
none, an organization having a national reputation), (a) commercial general
liability insurance, including Broad Form Property Damage and Contractual
Liability with the following minimum limits: General Aggregate $2,000,000.00;
Products/Completed Operations Aggregate $2,000,000.00; Each Occurrence
$1,000,000.00; Personal and Advertising Injury $1,000,000.00; Medical Payments
$5,000.00 per person, (b) Umbrella/Excess Liability on a following form basis
with the following minimum limits: General Aggregate $10,000,000.00; Each
Occurrence $10,000,000.00; (c) Workers’ Compensation with statutory limits; (d)
Employer’s Liability insurance with the following limits: Bodily injury by
disease per person $1,000,000.00; Bodily injury by accident policy limit
$1,000,000.00; Bodily injury by disease policy limit $1,000,000.00; and (e)
property insurance on special causes of loss insurance form covering any and all
personal property of Tenant including but not limited to alterations,
improvements (exclusive of the initial improvements constructed pursuant to
Exhibit C), betterments, furniture, fixtures and equipment in an amount not less
than their full replacement cost, with a deductible not to exceed $100,000.00.
At all

 

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times during the Term, such insurance shall be maintained, and Tenant shall
cause a current and valid certificate of such policies to be deposited with
Landlord. If Tenant fails to have a current and valid certificate of such
policies on deposit with Landlord at all times during the Term and such failure
is not cured within five (5) business days following Tenant’s receipt of notice
thereof from Landlord, Landlord shall have the right, but not the obligation, to
obtain such an insurance policy, and Tenant shall be obligated to pay Landlord
the amount of the premiums applicable to such insurance within ten (10) business
days after Tenant’s receipt of Landlord’s request for payment thereof. Said
policy of liability insurance shall name Landlord, Landlord’s managing agent and
Tenant as the insureds and shall be noncancellable with respect to Landlord
except after thirty (30) days’ written notice from the insurer to Landlord.

 

13.3 Tenant shall adjust annually the amount of coverage established in Article
13.2 hereof to such amount as in Landlord’s reasonable opinion, adequately
protects Landlord’s interest; provided the same is consistent with the amount of
coverage customarily required of comparable tenants in Comparable Buildings by
institutional owners.

 

13.4 Notwithstanding anything herein to the contrary, Landlord and Tenant each
hereby waives any and all rights of recovery, claim, action, or cause of action
against the other, its agents, employees, licensees, or invitees for any loss or
damage to or at the Premises or the Project or any personal property of such
party therein or thereon by reason of fire, the elements, or any other cause
which would be insured against under the terms of (i) fire and extended coverage
insurance or (ii) the liability insurance referred to in Article 13.2 regardless
of cause or origin, including omission of the other party hereto, its agents,
employees, licensees, or invitees. Landlord and Tenant covenant that no insurer
shall hold any right of subrogation against either of such parties to such
extent. This waiver shall be ineffective against any insurer of Landlord or
Tenant to the extent that such waiver is prohibited by the laws and insurance
regulations of the State of California. The parties hereto agree that any and
all such insurance policies required to be carried by either shall be endorsed
with a subrogation clause, substantially as follows: “This insurance shall not
be invalidated should the insured waive, in writing prior to a loss, any and all
right of recovery against any party for loss occurring to the property described
therein, “ and shall provide that such party’s insurer waives any right of
recovery against the other party in connection with any such loss or damage.

 

In the event Tenant’s occupancy or conduct of business in or on the Premises,
whether or not Landlord has consented to the same, results in any increase in
premiums for the insurance carried from time to time by Landlord with respect to
the Building, Tenant shall pay any such increase in premiums as Rent within ten
(10) business days after bills for such additional premiums shall be rendered by
Landlord. In determining whether increased premiums are a result of Tenant’s use
or occupancy of the Premises, a schedule issued by the organization computing
the insurance rate on the Building showing the various components of such rate,
shall be presumptive evidence of the several items and charges which make up
such rate. Tenant shall promptly comply with all reasonable requirements of the
insurance authority or of any insurer now or hereafter in effect relating to the
Premises. Tenant shall pay the entirety of any insurance deductible allocable to
the Covered Tenant Improvements and to the extent the cost to Landlord of
insuring the Covered Tenant Improvements exceeds the cost of insuring the tenant
improvements of other tenants in the Project on a per square foot basis, Tenant
shall pay the entire amount of that excess allocable to the Covered Tenant
Improvements (i.e., the per square foot excess multiplied by the rentable area
of the Premises) to Landlord within 30 days after Landlord’s delivery to Tenant
of a written invoice therefor with reasonable documentation as to the amount of
that excess insurance cost.

 

ARTICLE 14.

QUIET ENJOYMENT

 

14.1 Provided no Event of Default has occurred under this Lease, Tenant shall
peaceably and quietly have, hold and enjoy the Premises for the Term, without
hindrance by Landlord or anyone claiming under Landlord, subject to the
provisions and conditions set forth in this Lease.

 

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ARTICLE 15.

ALTERATIONS

 

15.1 Tenant agrees that it shall not make or allow to be made any alterations,
physical additions, or improvements in or to the Premises without first
obtaining the written consent of Landlord in each instance. As used herein, the
term “Minor Alteration” refers to an alteration that (a) does not affect the
outside appearance of the Building and is not visible from the Common Areas, (b)
is non-structural and does not impair the strength or structural integrity of
the Building, and (c) does not materially affect the mechanical, electrical,
HVAC or other systems of the Building. Landlord agrees not to unreasonably
withhold its consent to any Minor Alteration. Landlord’s consent to any other
alteration may be conditioned, given, or withheld in Landlord’s sole discretion.
Notwithstanding the foregoing, Landlord irrevocably consents to any repainting,
recarpeting, or other purely cosmetic changes or upgrades to the Premises, so
long as (i) the aggregate cost of such work is less than $26,308.00 per
occurrence and two months’ rent in any twelve-month period, (ii) such work
constitutes a Minor Alteration (iii) no building permit is required in
connection therewith, and (iv) such work conforms the then existing
Specifications (as defined in Exhibit C). In addition, Landlord irrevocably
consents to the rearrangement of telephone cabling and jacks and electrical
outlets, security wiring and modular furniture so long as none of that work
materially affects the electrical system of the Building or requires a building
permit. At the time of said request, Tenant shall submit to Landlord plans and
specifications of the proposed alterations, additions, or improvements; and
Landlord shall have a period of fifteen (15) days therefrom in which to review
and approve or disapprove said plans; provided that if Landlord determines in
good faith that Landlord requires a third party to assist in reviewing such
plans and specifications, Landlord shall instead have a period of thirty (30)
days in which to review and approve or disapprove said plans. Except for Minor
Alterations, Tenant shall pay to Landlord upon demand the reasonable cost and
expense of Landlord up to a maximum of three percent (3%) of the construction
costs as a supervision fee in (a) reviewing said plans and specifications, and
(b) inspecting the alterations, additions, or improvements to determine whether
the same are being performed in accordance with the approved plans and
specifications and all laws and requirements of public authorities, including,
without limitation, the fees of any architect or engineer employed by Landlord
for such purpose. In any instance where Landlord grants such consent, and
permits Tenant to use its own contractors, laborers, materialmen, and others
furnishing labor or materials for Tenant’s construction (collectively, “Tenant’s
Contractors”), Landlord’s consent shall be deemed conditioned upon each of
Tenant’s Contractors (a) working in harmony and not interfering with any laborer
utilized by Landlord, Landlord’s contractors, laborers, or materialmen; (b)
furnishing Landlord with evidence of acceptable liability insurance, worker’s
compensation coverage and if required by Landlord, completion bonding, and if at
any time such entry by one or more persons furnishing labor or materials for
Tenant’s work shall cause such disharmony or interference, the consent granted
by Landlord to Tenant may be withdrawn if Tenant fails to cure that disharmony
within twenty-four hours after written notice from Landlord to Tenant; provided
that Tenant shall not be obligated to hire union labor to resolve any labor
disharmony. Tenant, at its expense, shall obtain all necessary governmental
permits and certificates for the commencement and prosecution of alterations,
additions, or improvements and for final approval thereof upon completion, and
all cause any alterations, additions, or improvements to be performed in
compliance therewith and with all applicable laws and requirements of public
authorities and with all applicable requirements of insurance bodies. All
alterations, additions, or improvements shall be diligently performed in a good
and workmanlike manner, using materials and equipment at least equal in quality
and class to the original installations of the Building. Upon the completion of
work and upon request by Landlord, Tenant shall provide Landlord copies of all
waivers or releases of lien from each of Tenant’s Contractors. No alterations,
modifications, or additions to the Project or the Premises shall be removed by
Tenant either during the Term or upon the Expiration Date or the Termination
Date without the express written approval of Landlord. Tenant shall not be
entitled to any reimbursement or compensation resulting from its payment of the
cost of constructing all or any portion of said improvements or modifications
thereto unless otherwise expressly agreed by Landlord in writing. Tenant agrees
specifically that no food, soft drink, or other vending machine shall be
installed within the Premises, without the prior written consent of Landlord.
Landlord hereby irrevocably consents to the installation of vending machines
solely for the purpose of use by Tenant’s employees.

 

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15.2 Landlord’s approval of Tenant’s plans for work shall create no
responsibility or liability on the part of Landlord for their completeness,
design sufficiency, or compliance with all laws, rules, and regulations of
governmental agencies or authorities, including, but not limited to, the
Americans with Disabilities Act. Landlord may, at its option, at Tenant’s
expense, require that Landlord’s contractors be engaged for any work upon the
integrated Building mechanical or electrical systems or other Building or
leasehold improvements.

 

15.3 At least five (5) days prior to the commencement of any work permitted to
be done by persons requested by Tenant on the Premises, Tenant shall notify
Landlord of the proposed work and the names and addresses of Tenant’s
Contractors. During any such work on the Premises, Landlord, or its
representatives, shall have the right to go upon and inspect the Premises at all
reasonable times, and shall have the right to post and keep posted thereon
building permits or to take any further action which Landlord may reasonably
deem to be proper for the protection of Landlord’s interest in the Premises.

 

ARTICLE 16.

FURNITURE, FIXTURES, AND PERSONAL PROPERTY

 

16.1 Tenant, at its sole cost and expense, may remove its trade fixtures, office
supplies and moveable office furniture, equipment not attached to the Building
or Premises and equipment attached to the Premises that was not installed as
part of the Tenant Improvements constructed by Landlord pursuant to the Work
Letter (the “Removable Items”) provided:

 

(a) Such removal is made prior to the Expiration Date or the Termination Date;
and

 

(b) Tenant promptly repairs all damage caused by such removal.

 

16.2 If Tenant does not remove its trade fixtures, office supplies, and moveable
furniture and equipment as herein above provided prior to the Expiration Date or
the Termination Date (unless prior arrangements have been made with Landlord and
Landlord has agreed in writing to permit Tenant to leave such items in the
Premises for an agreed period), then, in addition to its other remedies, at law
or in equity, Landlord shall have the right at any time after ten (10) days’
notice to Tenant to have such items removed and stored at Tenant’s sole cost and
expense and all damage to the Project or the Premises resulting from said
removal shall be repaired at the cost of Tenant; Landlord may elect that such
items automatically become the property of Landlord upon the Expiration Date or
the Termination Date, and Tenant shall not have any further rights with respect
thereto or reimbursement therefor subject to the provisions of applicable law.
All other property in the Premises, any alterations, or additions to the
Premises (including wall-to-wall carpeting, paneling, wall covering, specially
constructed or built-in cabinetry or bookcases), and any other article attached
or affixed to the floor, wall, or ceiling of the Premises (other than the
Removable Items) shall become the property of Landlord and shall remain upon and
be surrendered with the Premises as a part thereof at the Expiration or
Termination Date regardless of who paid therefor; and Tenant hereby waives all
rights to any payment or compensation therefor. If, however, Landlord so
requests, in writing, Tenant shall remove, prior to the Expiration Date or the
Termination Date, any and all alterations, additions, fixtures, equipment, and
property placed or installed in the Premises (other than the initial
improvements constructed pursuant to the Work Letter) and shall repair any
damage caused by such removal. Prior to commencing any Alteration, Tenant may
require by written request that Landlord notify Tenant whether or not the
proposed Alteration will be required by Landlord to be removed at the end of the
term.

 

16.3 All the furnishings, fixtures, equipment, effects, and property of every
kind, nature, and description of Tenant and of all persons claiming by, through,
or under Tenant which, during the continuance of this Lease or any occupancy of
the Premises by Tenant or anyone claiming under Tenant, may be on the Premises
or elsewhere in the Project shall be at the sole risk and hazard of Tenant, and
if the whole or any part thereof shall be destroyed or damaged by fire, water,
or otherwise, or by the leakage or bursting of water pipes, steam pipes, or
other pipes, by theft, or from any other cause, no part of

 

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said loss or damage is to be charged to or be borne by Landlord unless due to
the gross negligence or willful misconduct of Landlord or its employees, agents
or contractors.

 

ARTICLE 17.

PERSONAL PROPERTY AND OTHER TAXES

 

17.1 During the Term hereof, Tenant shall pay, prior to delinquency, all
business and other taxes, charges, notes, duties, and assessments levied, and
rates or fees imposed, charged, or assessed against or in respect of Tenant’s
occupancy of the Premises or in respect of the personal property, trade
fixtures, furnishings, equipment, and all other personal and other property of
Tenant contained in the Project (including without limitation taxes and
assessments attributable to the cost or value of any leasehold improvements made
in or to the Premises by or for Tenant (to the extent that the cost or value of
those leasehold improvements exceeds the cost or value of the Tenant Improvement
Allowance regardless of whether title to those improvements is vested in Tenant
or Landlord)), and shall hold Landlord harmless from and against all payment of
such taxes, charges, notes, duties, assessments, rates, and fees, and against
all loss, costs, charges, notes, duties, assessments, rates, and fees, and any
and all such taxes. Tenant shall use commercially reasonable efforts to cause
said fixtures, furnishings, equipment, and other personal property to be
assessed and billed separately from the real and personal property of Landlord.
In the event any or all of Tenant’s fixtures, furnishings, equipment, and other
personal property shall be assessed and taxed with Landlord’s real property,
Tenant shall pay to Landlord Tenant’s share of such taxes within ten (10)
business days after delivery to Tenant by Landlord of a statement in writing
setting forth the amount of such taxes applicable to Tenant’s property.

 

ARTICLE 18.

ASSIGNMENT AND SUBLETTING

 

18.1 Tenant shall not, without the prior written consent of Landlord, which
consent shall not be unreasonably withheld (except that Landlord shall in no
event be obligated to consent to an encumbrance of this Lease or any transfer of
this Lease by operation of law): (i) assign, convey, mortgage or otherwise
transfer this Lease or any interest hereunder, or sublease the Premises, or any
part thereof, whether voluntarily or by operation of law; or (ii) permit the use
of the Premises or any part thereof by any person other than Tenant, its
employees, its business invitees, and employees of Tenant’s Affiliates (as
defined below) who may be in the Premises in the ordinary course of the Tenant’s
business operations. Any such transfer, sublease or use described in the
preceding sentence (a “Transfer”) occurring without the prior written consent of
Landlord shall, at Landlord’s option, be void and of no effect. Landlord’s
consent to any Transfer shall not constitute a waiver of Landlord’s right to
withhold its consent to any future Transfer. Landlord may require as a condition
to its consent to any assignment of this Lease that the assignee execute an
instrument in which such assignee assumes the remaining obligations of Tenant
hereunder; provided that the acceptance of any assignment of this Lease by the
applicable assignee shall automatically constitute the assumption by such
assignee of all of the remaining obligations of Tenant that accrue following
such assignment. The voluntary or other surrender of this Lease by Tenant or a
mutual cancellation hereof shall not work a merger and shall, at the option of
Landlord, terminate all or any existing sublease or may, at the option of
Landlord, operate as an assignment to Landlord of Tenant’s interest in any or
all such subleases.

 

18.2 A sale, transfer, pledge, or hypothecation by Tenant of all or
substantially all of its assets or all or substantially all of its stock, or if
Tenant is a publicly traded corporation, a merger of Tenant with another
corporation or a sale of ten percent (10%) or more of its stock or a sale of
substantially all its assets; or the sale, transfer, pledge, or hypothecation of
fifty percent (50%) or more of the stock of Tenant if Tenant’s stock is not
publicly traded; or the sale, transfer, pledge, or hypothecation of fifty
percent (50%) or more of the beneficial ownership interest in Tenant if Tenant
is a partnership or other business association, without the prior written
consent of Landlord, shall, in any of the foregoing cases and whether or not
accomplished by one or more related or unrelated transactions, constitute a
Transfer for purposes of this Article 18.

 

18.3 If Tenant desires the consent of Landlord to a Transfer, Tenant shall
submit to Landlord, at least thirty (30) business days prior to the proposed
effective date of the Transfer, a written

 

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notice (the “Transfer Notice”) which includes (a) the name of the proposed
sublessee or assignee, (b) the nature of the proposed sublessee’s or assignee’s
business, (c) the terms and provisions of the proposed sublease or assignment,
and (d) current financial statements and information on the proposed sublessee
or assignee. Upon receipt of the Transfer Notice, Landlord may request
reasonable additional information concerning the Transfer or the proposed
sublessee or assignee (the “Additional Information”). Subject to Landlord’s
rights under Section 18.6, Landlord shall not unreasonably withhold its consent
to any assignment or sublease (excluding an encumbrance or transfer by operation
of law), which consent or lack thereof shall be provided within thirty (30)
business days of receipt of Tenant’s Transfer Notice; provided, however, Tenant
hereby agrees that it shall be a reasonable basis for Landlord to withhold its
consent if Landlord has not received the Additional Information requested by
Landlord. Without limiting any other reasonable basis upon which Landlord may
withhold its consent, Landlord shall not be deemed to have unreasonably withheld
its consent if, in the judgment of Landlord: (i) the transferee is of a
character or engaged in a business which is not in keeping with the standards or
criteria used by Landlord in leasing the Building, or the general character or
quality of the Building; (ii) in the case of an assignment, the financial
condition of the assignee is such that it may not be able to perform its
obligations in connection with this Lease; (iii) the transferee is a tenant of
or negotiating for space in the Building; provided that there is or will be
sufficient space in the Building for such tenant, (iv) the transferee is a
governmental unit; (v) an Event of Default by Tenant has occurred; or (vi) such
a Transfer would materially violate any term, condition, covenant, or agreement
of Landlord involving the Project or any other tenant’s lease within. Tenant
hereby waives any right to terminate the Lease and/or recover damages as
remedies for Landlord wrongfully withholding its consent to any Transfer and
agrees that Tenant’s sole and exclusive remedy therefor shall be to seek
specific performance of Landlord’s obligation to consent to such Transfer.

 

18.4 Landlord and Tenant agree that, in the event of any approved assignment or
subletting, the rights of any such assignee or sublessee of Tenant herein shall
be subject to all of the terms, conditions, and provisions of this Lease,
including, without limitation, restriction on use, assignment, and subletting
and the covenant to pay Rent. Landlord may collect Rent directly from such
assignee or sublessee and apply the amount so collected to the Rent herein
reserved. No such consent to or recognition of any such assignment or subletting
shall constitute a release of Tenant or any guarantor of Tenant’s performance
hereunder from further performance by Tenant or such guarantor of covenants
undertaken to be performed by Tenant herein. Tenant and any such guarantor shall
remain liable and responsible for all Rent and other obligations herein imposed
upon Tenant, and Landlord may condition its consent to any Transfer upon the
receipt of a written reaffirmation from each such guarantor in a form acceptable
to Landlord (which shall not be construed to imply that the occurrence of a
Transfer without such a reaffirmation would operate to release any guarantor).
Consent by Landlord to a particular assignment, sublease, or other transaction
shall not be deemed a consent to any other or subsequent transaction. In any
case where Tenant desires to assign, sublease or enter into any related or
similar transaction, whether or not Landlord consents to such assignment,
sublease, or other transaction, Tenant shall pay any reasonable attorneys’ fees
incurred by Landlord in connection with reviewing documents relating to, or
evidencing, said assignment, sublease, or other transaction, which shall not
exceed $750 with respect to any single Transfer without the Tenant’s consent.
All documents utilized by Tenant to evidence any subletting or assignment for
which Landlord’s consent has been requested and is required hereunder, shall be
subject to prior approval (not to be unreasonably withheld, conditioned or
delayed) by Landlord or its attorney.

 

18.5 Tenant shall be bound and obligated to pay Landlord a portion of the net
profit or net proceeds from economic consideration payable to Tenant by any
sublessee, assignee, licensee, or other transferee, within ten (10) business
days following receipt thereof by Tenant from such sublessee, assignee,
licensee, or other transferee, as the case might be, as follows:

 

(a) In the case of an assignment, 50% of any sums or other economic
consideration received by Tenant as a result of such assignment shall be paid to
Landlord after first deducting the unamortized cost of reasonable leasehold
improvements paid for by Tenant in connection with such assignment and
reasonable cost of any real estate commissions incurred by Tenant in connection
with such assignment.

 

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(b) In the case of a subletting, 50% of any sums or economic consideration
received by Tenant as a result of such subletting shall be paid to Landlord
after first deducting (i) the Rent due hereunder prorated to reflect only Rent
allocable to the sublet portion of the Premises, (ii) the unamortized cost of
reasonable tenant improvements made to the sublet portion of the Premises at
Tenant’s cost in connection with such sublease, (iii) the reasonable cost of
tenant improvements made by Tenant for the specific benefit of the sublessee,
which shall be amortized over the term of the sublease, and (iv) the reasonable
cost of any real estate commissions incurred by Tenant in connection with such
subletting, which shall be amortized over the term of the sublease.

 

18.6 If this Lease is assigned to any person or entity pursuant to the
provisions of the Bankruptcy Code, 11 U.S.C. Section 101 et seq. or any
successor or substitute therefor (the “Bankruptcy Code”), any and all monies or
other consideration payable or otherwise to be delivered in connection with such
assignment shall be paid or 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 such
monies or other consideration not paid or delivered to Landlord shall be held in
trust for the benefit of Landlord and shall be promptly paid or delivered to
Landlord. Any person or entity to whom this Lease is so assigned shall be
deemed, without further act or deed, to have assumed all of the remaining
obligations arising under this Lease as of the date of such assignment. Any such
assignee shall, upon demand therefor, execute and deliver to Landlord an
instrument confirming such assumption.

 

18.7 Notwithstanding anything to the contrary contained in this Article 18,
Tenant may assign this Lease or sublet the Premises without the need for
Landlord’s prior consent if such assignment or sublease is to any parent,
subsidiary or affiliate business entity which the initially named Tenant
controls, is controlled by or is under common control with (each, an
“Affiliate”) provided that: (i) at least thirty (30) days prior to such
assignment or sublease, Tenant delivers to Landlord the financial statements or
other financial and background information of the assignee or sublessee as
required for other transfers, subject to Landlord’s obligation to maintain the
confidentiality of the such financial statements as provided in Section 30.3;
(ii) if the transfer is an assignment, the assignee assumes, in full, the
obligations of Tenant under this Lease (or if a sublease, the sublessee of a
portion of the Premises or term assumes, in full, the obligations of Tenant with
respect to such portion); (iii) the financial net worth of the assignee or
sublessee as of the time of the proposed transfer is equal to or in excess of
that of Tenant’s as Tenant’s net worth existed on the date of this Lease; (iv)
Tenant remains fully liable under this Lease; and (v) unless Landlord consents
to the same, the use of the Premises set forth herein remains unchanged. As used
in this section, “control” (including, with its correlative meanings,
“controlled by” and “under common control with”) shall mean possession, directly
or indirectly, of power to direct or cause the direction of management or
policies through ownership of at least 51% of the securities or partnership or
other ownership interests of the entity subject to control.

 

ARTICLE 19.

FIRE AND CASUALTY

 

19.1 If the Premises or any part thereof shall be damaged by fire or other
casualty, Tenant shall give prompt written notice thereof to Landlord. If the
Project shall be damaged by fire or other casualty and any of the following
applies: (a) substantial alteration or reconstruction of the Building is, in
Landlord’s reasonable opinion, required (whether or not the Premises shall have
been damaged by such fire or other casualty), (b) any mortgagee under a mortgage
or deed of trust covering the Project requires that more than $50,000.00 of the
insurance proceeds payable as a result of said fire or other casualty be used to
retire all or any portion of the mortgage debt, (c) the Project is damaged as a
result of a risk that is not covered by Landlord’s insurance (unless covered by
another tenant’s insurance and Landlord has unconditional access to the proceeds
of that insurance and those proceeds are sufficient to pay all of the costs of
the applicable restoration and repair), or (d) the Premises is materially
damaged during the last year of the Term, then Landlord may, at its option,
terminate this Lease by notifying Tenant in writing of such termination within
thirty (30) days after the date of such damage or casualty, in which event the
Rent hereunder shall be abated as of the date that is the later of the date of
the damage or casualty or the date upon which Tenant ceases to occupy the
Premises; provided that if Tenant is unable to occupy a portion of

 

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the Premises by reason of that damage or casualty then the abatement as to that
portion shall commence upon the date after the damage or destruction that Tenant
ceases to occupy that portion of the Premises. In cases of less than such
substantial damage and upon receipt of the insurance proceeds for the damage,
Landlord shall restore and repair the Premises, provided, Landlord shall not be
required to repair (i) any damage caused by Tenant for which Landlord has not
received insurance proceeds, (ii) any of Tenant’s trade fixtures, personal
property, machinery or equipment or (iii) any alterations installed by Tenant.

 

19.2 If the Building or the Premises is destroyed or damaged by fire or other
casualty such that Tenant is deprived of access to all or a Material Portion (as
defined below) of the Premises or the use and occupancy of a Material Portion
thereof and a reputable contractor or architect designated by Landlord
(“Landlord’s Architect or Contractor”) estimates in a notice provided to Tenant
by Landlord within sixty (60) days after the casualty that the Building or the
Premises is damaged to such an extent that Tenant will be deprived of access to
the Premises or use and occupancy of the Premises for a period in excess of 270
days, then Tenant may terminate this Lease by giving Landlord notice within
thirty (30) days after delivery of such contractor’s or architect’s estimate,
whereupon this Lease shall terminate as of the date of the casualty. If the
Building or the Premises is destroyed or damaged by fire or other casualty and
Landlord’s Architect or Contractor has estimated (in a notice delivered to
Tenant pursuant to the previous sentence) that Tenant will be deprived of access
to the Premises or use and occupancy of the Premises for a period of 270 days or
less, but the Premises and access thereto and the use and occupancy thereof are
not actually restored within 270 days from the date (the “Untenantability Date”)
that Tenant is first deprived of such access or use and occupancy due to such
casualty (the “Outside Date”), Tenant may terminate this Lease as of the
Untenantability Date by giving Landlord notice within thirty (30) days after the
Outside Date. If the Premises is materially damaged during the last year of the
Term, then Tenant may, at its option, terminate this Lease by notifying Landlord
in writing of such termination within 30 days after the date of such damage or
casualty, in which event for the Rent hereunder shall be abated as of the date
of such notice. The purposes of this Section 19.2, “materially damaged” means
that the restoration of the damage is estimated by Landlord’s Architect or
Contractor to require a time period that is more than one-third of the remaining
term of the Lease as of the estimated commencement date of the restoration work.
For purposes of Article 19 and Article 20, the term “Material Portion” means a
portion of the Premises in excess of 35% of the total rentable area of the
Premises.

 

19.3 To the extent of the insurance proceeds available to Landlord therefor (or
that would have been available if the Landlord had carried the insurance
Landlord is required to carry under Article 13), Landlord shall repair and
restore the Project and/or the Premises, including the Covered Tenant
Improvements to substantially the same condition in which they were immediately
prior to the fire or other casualty, except that Landlord shall not be required
to rebuild, repair, or replace any part of Tenant’s furniture, fixtures,
furnishings, or equipment or any alterations, additions, or improvements made by
Tenant to the Premises pursuant to Article 15 of this Lease, except to the
extent the same constitute Covered Tenant Improvements; provided, however,
Tenant shall reimburse Landlord for the entire amount of any deductible
allocable to the Covered Tenant Improvements. Landlord shall have no obligation
to repair or restore any improvements or alterations made by Tenant that are not
Covered Tenant Improvements. Upon completion of Landlord’s restoration, Tenant
shall promptly repair and replace all of its furniture, fixtures, furnishings,
equipment, trade fixtures and improvements and alterations that are not Covered
Tenant Improvements to substantially the same functional condition that existed
prior to the damage. Landlord’s repair or restoration work shall not exceed the
scope of work done in originally constructing the Project and the Premises.
Landlord shall not be liable for any inconvenience, annoyance, or injury done to
the business of Tenant resulting in any way from such damage or the repair
thereof and Tenant’s obligations to pay Rent shall continue unabated, except (a)
there shall be an equitable reduction of Rent during the time and to the extent
the Premises are unfit for occupancy, save for Tenant’s fault or negligence
herein below described and (b) subject to Section 13.4, nothing in this sentence
shall limit Landlord’s liability for injuries to natural persons or damage to
property to the extent caused by the sole active negligence or willful
misconduct of Landlord.

 

19.4 If the Premises or the Project shall be totally or partially damaged by
fire or other casualty resulting from the fault or negligence of Tenant, or its
agents, employees, licensees, or invitees, such damage shall be repaired by and
at the expense of Tenant (to the extent that such destruction

 

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or damage is not covered by the fire and extended coverage insurance carried by
Landlord as provided herein), under the direction and supervision of Landlord,
and Rent shall continue without abatement, except to the extent Landlord
actually receives proceeds of rent abatement insurance attributable to Tenant’s
lease.

 

19.5 The provisions of this Lease, including this Article 19, constitute an
express agreement between Landlord and Tenant with respect to damage to, or
destruction of, all or any portion of the Premises or the Project, and any
statute or regulation of the State of California, including without limitation
Sections 1932(2) and 1933(4) of the California Civil Code, with respect to any
rights or obligations concerning damage or destruction in the absence of an
express agreement between the parties (and any other statute or regulation now
or hereafter in effect with respect to such rights or obligations), shall have
no application to this Lease or to any damage or destruction to all or any
portion of the Premises or the Project.

 

ARTICLE 20.

CONDEMNATION

 

20.1 If there shall be taken by exercise of the power of eminent domain, or by
conveyance in lieu, during the Term any material part of the Premises, the
Building or the Project, Landlord may elect to terminate this Lease upon written
notice to Tenant within thirty (30) days after the date of such taking or
transfer in lieu thereof or to continue the same in effect. All compensation
awarded for any taking (or the proceeds of private sale in lieu thereof) of the
Premises, Building or Project shall be the property of Landlord, and Tenant
hereby assigns its interest in any such award to Landlord; provided, however,
Landlord shall have no interest in any award made to Tenant for the taking of
Tenant’s fixtures and other personal property or moving expenses if a separate
award for such items is made to Tenant. If this Lease is terminated as a result
of any such exercise of the power of eminent domain, Rent shall be payable up to
the date that possession is taken by the condemning authority; Landlord shall
refund to Tenant any prepaid unaccrued Rent, less any sum then owing by Tenant
to Landlord; and Tenant shall have no claim against Landlord for the value of
any unexpired portion of the Term. If such condemnation does not result in the
termination of this Lease, the Rent thereafter to be paid shall be
proportionately reduced as to the space affected. Tenant hereby waives any and
all rights it might otherwise have pursuant to Section 1265.130 of the
California Code of Civil Procedure.

 

20.2 If there shall be taken by exercise of the power of eminent domain, or by
conveyance in lieu, during the Term, a Material Portion of the Premises such
that it objectively prevents the conduct of Tenant’s business in the Premises,
Tenant may terminate this Lease by giving Landlord notice to that effect within
thirty (30) days after the date of the taking or transfer in lieu thereof.

 

ARTICLE 21.

HOLD HARMLESS

 

21.1 Tenant agrees to defend, with counsel approved by Landlord, all actions
against Landlord, any partner, trustee, stockholder, officer, director,
employee, or beneficiary of Landlord, holders of mortgages secured by the
Premises or the Project and any other party having an interest therein (the
“Indemnified Parties”) with respect to, and to pay, protect, indemnify, and save
harmless, to the extent permitted by law, all Indemnified Parties from and
against, any and all liabilities, losses, damages, costs, expenses (including
reasonable attorneys’ fees and expenses), causes of action, suits, claims,
demands, or judgments of any nature to which any Indemnified Party is subject
because of its estate or interest in the Premises or the Project arising from
(i) injury to or death of any person, or damage to or loss of property on the
Premises, connected with the use, condition, or occupancy of the Premises,
except to the extent, if any, determined by a court of competent jurisdiction to
have been caused by the negligence or willful misconduct of Landlord or its
employees, contractors or agents (ii) any violation of this Lease by or
attributable to Tenant, or (iii) subject to Section 13.4, any act, fault,
omission, or other misconduct of Tenant or its agents, contractors, licenses,
sublessees, or invitees.

 

21.2 Tenant agrees that Landlord shall not be responsible or liable to Tenant,
its agents, employees, or invitees for fatal or non-fatal bodily injury or
property damage occasioned by the acts

 

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or omissions of any other tenant, or such other tenant’s agents, employees,
licensees, or invitees, of the Project. Landlord shall not be liable to Tenant
for losses due to theft, burglary, or damages done by persons on the Project.

 

21.3 To the extent permitted by law and covered by Landlord’s insurance
maintained pursuant to Article 13 (or that would have been covered if Landlord
had maintained the insurance it is required to carry under Article 13), Landlord
shall indemnify Tenant and hold it harmless from and against any and all
liability for any loss of or damage or injury to any person (including death
resulting therefrom) or property occurring in, on or about the Project excluding
the Premises, caused by the negligence or willful misconduct of Landlord, its
employees or agents. Landlord’s obligation to indemnify Tenant hereunder shall
include the duty to defend against any claims asserted by reason of such loss,
damage or injury and to pay any judgments, settlements, costs, fees and
expenses, including reasonable attorneys’ fees incurred in connection therewith.

 

ARTICLE 22.

DEFAULT BY TENANT

 

22.1 The term “Event of Default” refers to the occurrence of any one (1) or more
of the following:

 

(a) Failure of Tenant to pay when due any sum required to be paid hereunder (the
“Monetary Default”) within ten (10) days of receipt of written notice from
Landlord; provided, however, that after the first failure to pay any sum
required to be paid hereunder in any twelve (12) month period, in the event that
Tenant fails a second time to pay when due any sum required to be paid hereunder
during such twelve (12) month period, such failure shall be deemed to
automatically constitute a Monetary Default without any obligation on Landlord
to provide any additional written notice, and provided further that the Tenant
acknowledges that any such written notice provided hereunder shall be in lieu
of, and not in addition to, any notice to pay rent or quit pursuant to any
applicable statutes;

 

(b) Failure of Tenant, after thirty (30) days written notice thereof, to perform
any of Tenant’s obligations, covenants, or agreements except a Monetary Default;
provided that if the cure of any such failure is not reasonably susceptible of
performance within such thirty (30) day period, then an Event of Default of
Tenant shall not be deemed to have occurred so long as Tenant has promptly
commenced and thereafter diligently prosecutes such cure to completion and
(subject to Article 10) completes that cure within ninety (90) days;

 

(c) Tenant, or any guarantor of Tenant’s obligations under this Lease (the
“Guarantor”), admits in writing that it cannot meet its obligations as they
become due; or is declared insolvent according to any law; or assignment of a
material portion of Tenant’s or Guarantor’s property is made for the benefit of
creditors; or a receiver or trustee is appointed by a court of competent
jurisdiction for Tenant or Guarantor or its property; or the interest of Tenant
or Guarantor under this Lease is levied on under execution or other legal
process; or any petition is filed by or against Tenant or Guarantor to declare
Tenant bankrupt. Any such levy, execution, legal process, or petition filed
against Tenant or Guarantor shall not constitute a breach of this Lease provided
Tenant or Guarantor shall vigorously contest the same by appropriate proceedings
and shall remove or vacate the same within ninety (90) days from the date of its
creation, service, or filing;

 

(d) The abandonment of the Premises by Tenant, which shall mean that Tenant has
vacated the Premises for thirty (30) consecutive days, whether or not Tenant is
in Monetary Default and such abandonment has materially impaired Landlord’s
insurance coverage for the Premises or the Building;

 

(e) The discovery by Landlord that any financial statement given by Tenant or
any of its assignees, subtenants, successors-in-interest, or Guarantors was
materially

 

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false and in the case of financial statements from other than Tenant or
Guarantor, Tenant knew the financial statements were materially false when
delivered; or

 

(f) If Tenant or any Guarantor shall die, cease to exist as a corporation or
partnership, or be otherwise dissolved or liquidated or become insolvent, or
shall make a transfer in fraud of creditors.

 

22.2 In the event of any Event of Default by Tenant, Landlord, at its option,
may pursue one or more of the following remedies without additional notice or
demand in addition to all other rights and remedies provided for at law or in
equity:

 

(a) Landlord may continue this Lease in full force and effect, and this Lease
shall continue in full force and effect as long as Landlord does not terminate
Tenant’s right to possession, and Landlord shall have the right to collect Rent
when due. Landlord may enter the Premises and relet it, or any part of it, to
third parties for Tenant’s account, provided that any Rent in excess of the
payments due hereunder shall be payable to Landlord. Tenant shall be liable
immediately to Landlord for all costs Landlord incurs in reletting the Premises,
including, without limitation, brokers’ commissions, expenses of cleaning the
Premises required by the reletting and like costs. Reletting may be for a period
shorter or longer than the remaining Term of this Lease. Tenant shall pay to
Landlord the Rent and other sums due under this Lease on the dates the Rent is
due, less the Rent and other sums Landlord receives from any reletting. No act
by Landlord allowed by this Section 22.2(a) shall terminate this Lease unless
Landlord notifies Tenant in writing that Landlord elects to terminate this
Lease.

 

“The lessor has the remedy described in Civil Code Section 1951.4 (lessor may
continue the lease in effect after lessee’s breach and abandonment and recover
rent as it becomes due, if lessee has the right to sublet or assign subject only
to reasonable limitations).”

 

(b) Landlord may terminate Tenant’s right to possession of the Premises at any
time by giving written notice to that effect. No act by Landlord other than
giving written notice to Tenant shall terminate this Lease. Acts of maintenance,
efforts to relet the Premises or the appointment of a receiver on Landlord’s
initiative to protect Landlord’s interest under this Lease shall not constitute
a termination of Tenant’s right to possession. On termination, Landlord shall
have the right to remove all personal property of Tenant and store it at
Tenant’s cost and to recover from Tenant as damages: (i) the worth at the time
of award of unpaid Rent and other sums due and payable which had been earned at
the time of termination; plus (ii) the worth at the time of award of the amount
by which the unpaid Rent and other sums due and payable which would have been
payable after termination until the time of award exceeds the amount of the Rent
loss that Tenant proves could have been reasonably avoided; plus (iii) the worth
at the time of award of the amount by which the unpaid Rent and other sums due
and payable for the balance of the Term after the time of award exceeds the
amount of the Rent loss that Tenant proves could be reasonably avoided; plus
(iv) any other amount necessary to compensate Landlord for all the detriment
proximately caused by Tenant’s failure to perform Tenant’s obligations under
this Lease, or which, in the ordinary course of things, would be likely to
result therefrom, including, without limitation, any costs or expenses incurred
by Landlord: (A) in retaking possession of the Premises, including reasonable
attorneys’ fees and costs therefor; (B) maintaining or preserving the Premises
for reletting to a new tenant, including repairs or alterations to the Premises
for the reletting; (C) leasing commissions; (D) any other costs necessary or
appropriate to relet the Premises; and (E) at Landlord’s election, such other
amounts in addition to or in lieu of the foregoing as may be permitted from time
to time by the laws of the State of California.

 

The “worth at the time of award” of the amounts referred to in Sections
22.2(b)(i) and 22.2(b)(ii) shall be calculated by allowing interest at the
lesser of an annual rate equal to the Prime Rate plus 2% per annum or the
maximum rate permitted by law, on the unpaid Rent and other sums due and payable
from the termination date through the date of award. The “worth at the time of
award” of the amount referred to in

 

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Section 22.2(b)(iii) shall be calculated 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%). Tenant waives redemption or relief from forfeiture under
California Code of Civil Procedure Sections 1174 and 1179, or under any other
present or future law, if Tenant is evicted or Landlord takes possession of the
Premises by reason of any Event of Default by Tenant.

 

22.3 If Landlord shall exercise any one or more remedies hereunder granted or
otherwise available, it shall not be deemed to be an acceptance or surrender of
the Premises by Tenant whether by agreement or by operation of law; it is
understood that such surrender can be effected only by the written agreement of
Landlord and Tenant. No alteration of security devices and no removal or other
exercise of dominion by Landlord over the property of Tenant or others in the
Premises shall be deemed unauthorized or constitute a conversion, Tenant hereby
consenting to the aforesaid exercise of dominion over Tenant’s property within
the Premises after any Event of Default.

 

22.4 Each right and remedy provided for in this Lease shall be cumulative and
shall be in addition to every other right or remedy provided for in this Lease
or now or hereafter existing at law or in equity or by statute or otherwise,
including, but not limited to, suits for injunctive relief and specific
performance. The exercise or beginning of the exercise by Landlord of any one or
more of the rights or remedies provided for in this Lease or now or hereafter
existing at law or in equity, or by statute or otherwise shall not preclude the
simultaneous or later exercise by Landlord for any or all other rights or
remedies provided for in this Lease or now or hereafter existing at or in equity
or by statute or otherwise. All such rights and remedies shall be considered
cumulative and non-exclusive. All costs incurred by Landlord in connection with
collecting any Rent or other amounts and damages owing by Tenant pursuant to the
provisions of this Lease, or to enforce any provision of this Lease, including
reasonable attorneys’ fees from the date such matter is turned over to an
attorney, whether or not one or more actions are commenced by Landlord, shall
also be recoverable by Landlord from Tenant. If any notice and grace period
required under subparagraphs 22.1(a) or (b) was not previously given, a notice
to pay rent or quit, or to perform or quit, as the case may be, given to Tenant
under any statute authorizing the forfeiture of leases for unlawful detainer
shall also constitute the applicable notice for grace period purposes required
by subparagraphs 22.1(a) or (b). In such case, the applicable grace period under
subparagraphs 22.1(a) or (b) and under the unlawful detainer statute shall run
concurrently after the one such statutory notice, and the failure of Tenant to
cure the default within the greater of the two such grace periods shall
constitute both an unlawful detainer and an Event of Default entitling Landlord
to the remedies provided for in this Lease and/or by said statute.

 

22.5 If Tenant should fail to make any payment or cure any Event of Default
hereunder within the time herein permitted and such failure constitutes an Event
of Default (except in the case where if Landlord in good faith believes that
action prior to the expiration of any cure period under Section 22.1 is
necessary to prevent damage to persons or property, in which case Landlord may
act without waiting for such cure period to expire), Landlord, without being
under any obligation to do so and without thereby waiving such Event of Default,
may make such payment and/or remedy such Event of Default for the account of
Tenant (and enter the Premises for such purpose), and thereupon, Tenant shall be
obligated and hereby agrees to pay Landlord, upon demand, all reasonable costs,
expenses, and disbursements, plus ten percent (10%) overhead cost incurred by
Landlord in connection therewith.

 

22.6 In addition to Landlord’s rights set forth above, if Tenant fails to pay
its Rent or any other amounts owing hereunder on the due date thereof more than
two (2) times during any calendar year during the Term, then upon the occurrence
of the third or any subsequent default in the payment of monies during said
calendar year, Landlord, at its sole option, shall have the right to require
that Tenant, as a condition precedent to curing such default, pay to Landlord,
in check or money order, in advance, the Rent and all other amounts which will
become due and owing hereunder by Tenant for a period of two (2) months
following said cure. All such amounts shall be paid by Tenant within thirty (30)
days after notice from Landlord demanding the same. All monies so paid shall be
retained by Landlord, without interest, for the balance of the Term and any
extension thereof, and shall be applied by Landlord to the last due amounts
owing hereunder by Tenant.

 

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22.7 Nothing contained in this Section shall limit or prejudice the right of
Landlord to prove and obtain as damages in any bankruptcy, insolvency,
receivership, reorganization, or dissolution proceeding, an amount equal to the
maximum allowed by any statute or rule of law governing such a proceeding and in
effect at the time when such damages are to be proved, whether or not such
amount be greater, equal, or less than the amounts recoverable, either as
damages or Rent, referred to in any of the preceding provisions of this Article.
Notwithstanding anything contained in this Article to the contrary, any such
proceeding or action involving bankruptcy, insolvency, reorganization,
arrangement, assignment for the benefit of creditors, or appointment of a
receiver or trustee, as set forth above, shall be considered to be an Event of
Default only when such proceeding, action, or remedy shall be taken or brought
by or against the then holder of the leasehold estate under this Lease.

 

22.8 Landlord is entitled to accept, receive, in check or money order, and
deposit any payment made by Tenant for any reason or purpose or in any amount
whatsoever, and apply them at Landlord’s option to any obligation of Tenant, and
such amounts shall not constitute payment of any amount owed, except that to
which Landlord has applied them. No endorsement or statement on any check or
letter of Tenant shall be deemed an accord and satisfaction or recognized for
any purpose whatsoever. The acceptance of any such check or payment shall be
without prejudice to Landlord’s rights to recover any and all amounts owed by
Tenant hereunder and shall not be deemed to cure any other default nor prejudice
Landlord’s rights to pursue any other available remedy, Landlord’s acceptance of
partial payment of rent does not constitute a waiver of any rights, including
without limitation any right Landlord may have to recover possession of the
Premises.

 

22.9 Tenant waives the right to terminate this Lease on Landlord’s default under
this Lease. Tenant’s sole remedy on Landlord’s default is an action for damages
or injunctive or declaratory relief. Landlord’s failure to perform any of its
obligations under this Lease shall constitute a default by Landlord under this
Lease if the failure continues for thirty (30) days after written notice of the
failure from Tenant to Landlord. If the required performance cannot be completed
within thirty (30) days, Landlord’s failure to perform shall constitute a
default under the Lease unless Landlord undertakes to cure the failure within
thirty (30) days and diligently and continuously attempts to complete this cure
as soon as reasonably possible. All obligations of each party hereunder shall be
construed as covenants, not conditions.

 

ARTICLE 23.

[INTENTIONALLY OMITTED]

 

ARTICLE 24.

[INTENTIONALLY OMITTED]

 

ARTICLE 25.

ATTORNEYS’ FEES

 

25.1 If either party hereto shall file any action or bring any proceeding
against the other party arising out of this Lease or for the declaration of any
rights hereunder, the prevailing party in such action shall be entitled to
recover from the other party all costs and expenses, including reasonable
attorneys’ fees incurred by the prevailing party, as determined by the trier of
fact in such legal proceeding. For purposes of this provision, the terms
“attorneys’ fees” or “attorneys’ fees and costs,” or “costs and expenses” shall
mean the fees and expenses of legal counsel (including external counsel and
in-house counsel) of the parties hereto, which include printing, photocopying,
duplicating, mail, overnight mail, messenger, court filing fees, costs of
discovery, and fees billed for law clerks, paralegals, investigators and other
persons not admitted to the bar for performing services under the supervision
and direction of an attorney. For purposes of determining in-house counsel fees,
the same shall be considered as those fees normally applicable to a partner in a
law firm with like experience in such field. In addition, the prevailing party
shall be entitled to recover reasonable attorneys’ fees and costs incurred in
enforcing any judgment arising from a suit or proceeding under this Lease,
including without limitation post-judgment motions, contempt proceedings,
garnishment, levy and debtor and third party examinations, discovery and
bankruptcy litigation, without regard to schedule or rule of court purporting to
restrict such award. This post-judgment award of attorneys’ fees and costs
provision shall be severable from any other provision of

 

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this Lease and shall survive any judgment/award on such suit or arbitration and
is not to be deemed merged into the judgment/award or terminated with the Lease.

 

ARTICLE 26.

NON-WAIVER

 

26.1 Neither acceptance of any payment by Landlord from Tenant nor, failure by
Landlord to complain of any action, non-action, or default of Tenant shall
constitute a waiver of any of Landlord’s rights hereunder. Time is of the
essence with respect to the performance of every obligation of each party under
this Lease in which time of performance is a factor. Waiver by either party of
any right or remedy arising in connection with any default of the other party
shall not constitute a waiver of such right or remedy or any other right or
remedy arising in connection with either a subsequent default of the same
obligation or any other default. No right or remedy of either party hereunder or
covenant, duty, or obligation of any party hereunder shall be deemed waived by
the other party unless such waiver is in writing, signed by the other party or
the other party’s duly authorized agent.

 

ARTICLE 27.

RULES AND REGULATIONS

 

27.1 Such reasonable rules and regulations applying to all lessees in the
Project for the safety, care, and cleanliness of the Project and the
preservation of good order thereon are hereby made a part hereof as Exhibit D,
and Tenant agrees to comply with all such rules and regulations. Landlord shall
have the right at all times to change such rules and regulations or to amend
them in any reasonable and non-discriminatory manner as may be deemed advisable
by Landlord, all of which changes and amendments shall be sent by Landlord to
Tenant in writing and shall be thereafter carried out and observed by Tenant;
provided that no such new rules and regulations may materially and adversely
affect Tenant’s right to use the Premises for the Stated Use. Landlord shall not
have any liability to Tenant for any failure of any other lessees of the Project
to comply with such rules and regulations.

 

ARTICLE 28.

ASSIGNMENT BY LANDLORD

 

28.1 Landlord shall have the right to transfer or assign, in whole or in part,
all its rights and obligations hereunder and in the Premises and the Project. In
such event, no liability or obligation shall accrue or be charged to Landlord
with respect to the period from and after such transfer or assignment and
assumption of Landlord’s obligations by the transferee or assignee, except those
which expressly survive the expiration or earlier termination of this Lease
which are not assumed by Landlord’s transferee.

 

ARTICLE 29.

LIABILITY OF LANDLORD

 

29.1 It is expressly understood and agreed that the obligations of Landlord
under this Lease shall be binding upon Landlord and its successors and assigns
and any future owner of the Project only with respect to events occurring during
its and their respective ownership of the Project. In addition, Tenant agrees to
look solely to Landlord’s interest in the Project for recovery of any judgment
against Landlord arising in connection with this Lease, it being agreed that
neither Landlord nor any successor or assign of Landlord nor any future owner of
the Project, nor any partner, shareholder, or officer of any of the foregoing
shall ever be personally liable for any such judgment.

 

ARTICLE 30.

SUBORDINATION AND ATTORNMENT

 

30.1 This Lease, at Landlord’s option, shall be subordinate to any present or
future: mortgage, ground lease or declaration of covenants regarding maintenance
and use of any areas contained

 

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in any portion of the Building, and to any and all advances made under any
present or future mortgage and to all renewals, modifications, consolidations,
replacements, and extensions of any or all of same. Tenant agrees, with respect
to any of the foregoing documents, that no documentation other than this Lease
shall be required to evidence such subordination. If any holder of a mortgage
shall elect for this Lease to be superior to the lien of its mortgage and shall
give written notice thereof to Tenant, then this Lease shall automatically be
deemed prior to such mortgage whether this Lease is dated earlier or later than
the date of said mortgage or the date of recording thereof. Tenant agrees to
execute such documents as may be further required to evidence such subordination
or to make this Lease prior to the lien of any mortgage or deed of trust, as the
case may be, and failure to do so within ten (10) days after written demand
shall, at Landlord’s election, be an Event of Default. Tenant hereby attorns to
all successor owners of the Building, whether or not such ownership is acquired
as a result of a sale through foreclosure or otherwise.

 

30.2 Each party shall, at such time or times as the other party may request,
upon not less than ten (10) days’ prior written request by the requesting party,
sign and deliver to the requesting party a certificate stating whether this
Lease is in full force and effect; whether any amendments or modifications
exist; whether any Monthly Rent has been prepaid and, if so, how much; whether
to the knowledge of the certifying party there are any defaults hereunder; and
in the circumstance where Landlord is the requesting party, such other
information as may be reasonably requested, it being intended that any such
statement delivered pursuant to this Article may be relied upon by the
requesting party and by any prospective purchaser of all or any portion of the
requesting party’s interest herein, or a holder or prospective holder of any
mortgage encumbering the Building. Tenant’s failure to deliver such statement
within five (5) days after Landlord’s second written request therefor shall
constitute an Event of Default (as that term is defined elsewhere in this Lease)
and shall conclusively be deemed to be an admission by Tenant of the matters set
forth in the request for an estoppel certificate.

 

30.3 Tenant shall deliver to Landlord prior to the execution of this Lease and
thereafter at any time upon Landlord’s request, Tenant’s or Tenant’s Guarantor’s
financial statements, including a balance sheet and profit and loss statement
for the most recent prior year (collectively, the “Statements”), which
Statements shall materially reflect the financial condition of Tenant and
Guarantor. The Statements for Guarantor shall be audited and the Statements for
Tenant may be unaudited. Landlord shall have the right to deliver the same to
any proposed purchaser of the Building or the Project, and to any encumbrancer
of all or any portion of the Building or the Project. To the extent any
Statements delivered to Landlord pursuant to this Article 30 or Section 18.7 are
marked “confidential” when delivered, Landlord shall make reasonable efforts to
maintain the confidentiality of that financial information; provided, however,
Landlord may disclose those financial statements as required by law, or to its
auditors, regulators, attorneys, accountants and property managers; provided
that each agrees to similarly maintain the confidentiality of the applicable
financial statements.

 

30.4 Tenant acknowledges the 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 financial condition
as of the date they were prepared.

 

30.5 As a condition to Tenant’s subordination obligations as set forth in
Section 30.1, above, Landlord agrees to deliver to Tenant from any future
mortgagee or beneficiary a written subordination and non-disturbance agreement
in recordable form acceptable to such mortgagee or beneficiary in its sole
discretion providing that so long as there has been no uncured Event of Default
by Tenant, Tenant’s possession or quiet enjoyment under this Lease shall not be
disturbed and Tenant shall not be joined by the holder of any mortgage or deed
of trust in any action or proceeding to foreclose thereunder, except where such
is necessary for jurisdictional or procedural reasons. Landlord represents to
Tenant that as of the date of this Lease there is no mortgage or deed of trust
encumbering the Project.

 

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ARTICLE 31.

HOLDING OVER

 

31.1 In the event Tenant, or any party claiming under Tenant, retains possession
of the Premises after the Expiration Date or Termination Date, such possession
shall be that of a holdover tenant and an unlawful detainer. No tenancy or
interest shall result from such possession, and such parties shall be subject to
immediate eviction and removal. Tenant or any such party shall pay Landlord, as
Base Rent for the period of such holdover, an amount equal to 125% of the Base
Rent otherwise provided for herein, during the time of holdover together with
all other Additional Rent and other amounts payable pursuant to the terms of
this Lease. Tenant shall also be liable for any and all damages sustained by
Landlord as a result of such holdover. Tenant shall vacate the Premises and
deliver same to Landlord immediately upon Tenant’s receipt of notice from
Landlord to so vacate. The Rent during such holdover period shall be payable to
Landlord on demand. No holding over by Tenant, whether with or without consent
of Landlord, shall operate to extend the term of this Lease.

 

31.2 Tenant at any time prior to the date that is one hundred eighty (180) days
before the expiration of the Term may by written notice to Landlord elect to
waive all of its options and rights not theretofore exercised to extend pursuant
to Article 51 and in lieu thereof extend the Term of this Lease for a period
(the “Stub Period”) not to exceed ninety (90) days from the Expiration Date;
provided that the Rent during such Stub Period shall be 110% of the Rent payable
prior to the commencement of the Stub Period.

 

ARTICLE 32.

SIGNS

 

32.1 No sign, symbol, or identifying marks shall be put upon the Project,
Building, in the common halls, elevators, staircases, entrances, parking areas,
or upon the exterior doors or walls, without the prior written approval of
Landlord. Tenant shall have the right to post signs in halls, entrances, doors
and walls located within Tenant’s Premises without prior approval so long as
that signage is not visible from the exterior of the Building. Tenant shall also
be allowed to install Tenant’s logo or signage identifying Tenant’s entrance to
the Premises as shown on Schedule 32.1. Should such approval ever be granted,
all signs or lettering shall conform in all respects to the sign and/or
lettering criteria established by Landlord. Landlord, at Landlord’s sole cost
and expense, reserves the right to change the door plaques as Landlord deems
reasonably desirable.

 

32.2 Tenant shall be allowed to have prominent signage in the shared lobby area
identifying Tenant’s name and/or logo (the “Lobby Signage”). Other than
directory signage, the Lobby Signage shall be the only signage in the lobby area
identifying tenants of the Building. The graphics, materials, color, design,
lettering, size and specifications of Tenant’s Lobby Signage shall be subject to
the approval of Landlord and all applicable governmental authorities and shall
conform to Landlord’s approved sign plan for the Building. Landlord hereby
approves the Lobby Signage shown on Schedule 32.2. At the expiration or earlier
termination of this Lease, Landlord shall, at Tenant’s sole cost and expense,
cause the Lobby Signage to be removed and the area of the lobby affected by the
Lobby Signage to be restored to the condition existing prior to the installation
of Tenant’s Lobby Signage, wear and tear excepted.

 

32.3 Landlord shall, at Tenant’s sole cost and expense (including payment from
the Tenant Improvement Allowance), install lighted signage (the “Tenant’s
Signage”) on the top of one side of the Building identifying Tenant’s name and
logo. The graphics, materials, color, design, lettering, size, location and
specifications of Tenant’s Signage shall be subject to the approval of Landlord
and all applicable governmental authorities and the Owners Association. Landlord
hereby approves of Tenant’s Signage shown on Schedule 32.3. Landlord will use
reasonable efforts, at no cost to Landlord, to assist Tenant in seeking approval
from the City of San Dimas for larger signage than that shown on Schedule 32.3,
provided that such larger signage shall be subject to Landlord’s approval, which
shall not be unreasonably withheld. At the expiration or earlier termination of
this Lease or termination of Tenant’s sign rights as provided below, Landlord
shall, at Tenant’s sole cost and expense, cause the Tenant’s Signage to be
removed and the area of the Building affected by Tenant’s Signage to be restored
to the condition existing prior to the installation of Tenant’s Signage, wear
and tear excepted. The right to Tenant’s Signage

 

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is personal to the initially named Tenant in this Lease and any assignee of
Tenant’s entire interest in the Lease to which Landlord has consented pursuant
to Article 18 or as to which Landlord’s consent is not required pursuant to
Article 18.

 

ARTICLE 33.

HAZARDOUS SUBSTANCES

 

33.1 Except for Hazardous Material (as defined below) contained in products used
by Tenant for ordinary cleaning and office purposes in quantities not violative
of applicable Environmental Requirements, Tenant shall not permit or cause any
party to bring any Hazardous Material upon the Premises and/or the Project or
transport, store, use, generate, manufacture, dispose, or release any Hazardous
Material on or from the Premises and/or the Project without Landlord’s prior
written consent. Tenant, at its sole cost and expense, shall operate its
business in the Premises in strict compliance with all Environmental
Requirements (as defined below) and all requirements of this Lease. Tenant shall
complete and certify to disclosure statements as requested by Landlord from time
to time relating to Tenant’s transportation, storage, use, generation,
manufacture, or release of Hazardous Materials on the Premises, and Tenant shall
promptly deliver to Landlord a copy of any notice of violation relating to the
Premises or the Project of any Environmental Requirement.

 

33.2 The term “Environmental Requirements” means all applicable present and
future statutes, regulations, ordinances, rules, codes, judgments, permits,
authorizations, orders, policies or other similar requirements of any
governmental authority, agency or court regulating or relating to health,
safety, or environmental conditions on, under, or about the Premises or the
environment, including without limitation, the following: the Comprehensive
Environmental Response, Compensation and Liability Act; the Resource
Conservation and Recovery Act; the Clean Air Act; the Clean Water Act; the Toxic
Substances Control Act and all state and local counterparts thereto; all
applicable California requirements, including, but not limited to, Sections
25115, 25117, 25122.7, 25140, 25249.8, 25281, 25316 and 25501 of the California
Health and Safety Code and Title 22 of the California Code of Regulations,
Division 4.5, Chapter 11, and any policies or rules promulgated thereunder as
well as any County or City ordinances that may operate independent of, or in
conjunction with, the State programs, and any common or civil law obligations
including, without limitation, nuisance or trespass, and any other requirements
of Article 3 of this Lease. The term “Hazardous Materials” means and includes
any substance, material, waste, pollutant, or contaminant that is or could be
regulated under any Environmental Requirement or that may adversely affect human
health or the environment, including, without limitation, any solid or hazardous
waste, hazardous substance, asbestos, petroleum (including crude oil or any
fraction thereof, natural gas, synthetic gas, polychlorinated biphenyls (PCBs),
and radioactive material). For purposes of Environmental Requirements, to the
extent authorized by law, Tenant is and shall be deemed to be the responsible
party, including without limitation, the “owner” and “operator” of Tenant’s
“facility” and the “owner” of all Hazardous Materials brought on the Premises by
Tenant, its agents, employees, contractors or invitees, and the wastes,
by-products, or residues generated, resulting, or produced therefrom.

 

33.3 Tenant, at its sole cost and expense, shall remove all Hazardous Materials
stored, disposed of or otherwise released by Tenant, its assignees, subtenants,
agents, employees, contractors or invitees onto or from the Premises, in a
manner and to a level satisfactory to Landlord in its sole discretion, but in no
event to a level and in a manner less than that which complies with all
Environmental Requirements and does not limit any future uses of the Premises or
require the recording of any deed restriction or notice regarding the Premises.
Tenant shall perform such work at any time during the period of the Lease upon
written request by Landlord or, in the absence of a specific request by
Landlord, before Tenant’s right to possession of the Premises terminates or
expires. If Tenant fails to perform such work within the time period specified
by Landlord or before Tenant’s right to possession terminates or expires
(whichever is earlier), Landlord may at its discretion, and without waiving any
other remedy available under this Lease or at law or equity (including without
limitation an action to compel Tenant to perform such work), perform such work
at Tenant’s cost. Tenant shall pay all costs incurred by Landlord in performing
such work within ten (10) business days after Landlord’s request therefor. Such
work performed by Landlord is on behalf of Tenant and Tenant remains the owner,
generator, operator, transporter, and/or arranger of the Hazardous Materials for
purposes of Environmental Requirements.

 

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Tenant agrees not to enter into any agreement with any person, including without
limitation any governmental authority, regarding the removal of Hazardous
Materials that have been disposed of or otherwise released onto or from the
Premises without the written approval of the Landlord.

 

33.4 Tenant shall indemnify, defend, and hold Landlord harmless from and against
any and all losses (including, without limitation, diminution in value of the
Premises or the Project and loss of rental income from the Project), claims,
demands, actions, suits, damages (including, without limitation, punitive
damages), expenses (including, without limitation, remediation, removal, repair,
corrective action, or cleanup expenses), and costs (including, without
limitation, actual attorneys’ fees, consultant fees or expert fees and
including, without limitation, removal or management of any asbestos brought
into the Premises or disturbed in breach of the requirements of this Article 33,
regardless of whether such removal or management is required by law) which are
brought or recoverable against, or suffered or incurred by Landlord as a result
of any release of Hazardous Materials or any breach of the requirements under
this Article 33 by Tenant, its agents, employees, contractors, subtenants,
assignees or invitees, regardless of whether Tenant had knowledge of such
noncompliance. The obligations of Tenant under this Article 33 shall survive any
termination of this Lease.

 

33.5 Landlord shall have access to, and a right to perform inspections and tests
of, the Premises to determine Tenant’s compliance with Environmental
Requirements, its obligations under this Article 33, or the environmental
condition of the Premises. Access shall be granted to Landlord upon Landlord’s
prior notice to Tenant and at such times so as to minimize, so far as may be
reasonable under the circumstances, any disturbance to Tenant’s operations. Such
inspections and tests shall be conducted at Landlord’s expense, unless such
inspections or tests reveal that Tenant has not complied with any Environmental
Requirement, in which case Tenant shall reimburse Landlord for the reasonable
cost of such inspection and tests. Landlord’s receipt of or satisfaction with
any environmental assessment in no way waives any rights that Landlord holds
against Tenant. Tenant shall promptly notify Landlord of any communication or
report that Tenant makes to any governmental authority regarding any possible
violation of Environmental Requirements or release or threat of release of any
Hazardous Materials onto or from the Premises. Tenant shall, within five (5)
business days of receipt thereof, provide Landlord with a copy of any documents
or correspondence received from any governmental agency or other party relating
to a possible violation of Environmental Requirements or claim or liability
associated with the release or threat of release of any Hazardous Materials onto
or from the Premises.

 

33.6 In addition to all other rights and remedies available to Landlord under
this Lease or otherwise, Landlord may, in the event of a breach of the
requirements of this Article 33 that is not cured within thirty (30) days
following notice of such breach by Landlord, require Tenant to provide financial
assurance (such as insurance, escrow of funds or third party guarantee) in an
amount and form reasonably satisfactory to Landlord. The requirements of this
Article 33 are in addition to and not in lieu of any other provision in the
Lease.

 

33.7 Studies. Tenant acknowledges receipt of a copy of that certain
Environmental Site Assessment 11.5 Acre Parcel Southeast Corner of Via Verde and
San Dimas Ave., San Dimas, California 91773 dated May 20, 1998 prepared by
Harding Lawson Associates (collectively, “Hazardous Substance Reports”).
Landlord, except as provided in the following sentence of this paragraph, makes
no representations or warranties whatsoever to Tenant regarding: (i) the
Hazardous Substance Reports (including, without limitation, the contents and/or
accuracy thereof); or (ii) the presence or absence of toxic or Hazardous
Materials in, at, or under the Premises, the Building or the Project. Landlord
does acknowledge to Tenant that: (i) Landlord has not authorized any other
studies for hazardous or toxic materials at the Premises or Building other than
the Hazardous Substance Reports; and (ii) Landlord does not know of any surveys
for toxic or Hazardous Materials at the Premises or the Building other than the
Hazardous Substance Reports. Notwithstanding the preceding sentence, Tenant: (a)
shall not rely on and Tenant hereby represents to Landlord that it has not
relied on the Hazardous Substance Reports; and (b) shall make such studies and
investigations, conduct such tests and surveys, and engage such specialists as
Tenant deems appropriate to fairly evaluate the Premises and any risks from
hazardous or toxic materials. In connection with any inspections or tests to be
conducted by Tenant at the Premises or Building, Tenant shall first notify
Landlord of each proposed inspection or test and the scope, impact, and

 

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intent thereof and obtain Landlord’s written consent to perform the same. Tenant
shall restore the Premises and the property on which the leased premises are
located to the condition existing immediately prior to any such test and/or
inspection.

 

ARTICLE 34.

COMPLIANCE WITH LAWS AND OTHER REGULATIONS

 

34.1 Tenant, as its sole cost and expense, shall promptly comply with all laws,
statutes, ordinances, and governmental rules, regulations, or requirements now
in force or which may hereafter become in force, of federal, state, county, and
municipal authorities, including, but not limited to, the Americans with
Disabilities Act, with the requirements of any board of fire underwriters or
other similar body now or hereafter constituted, and with any occupancy
certificate issued pursuant to any law by any public officer or officers, which
impose, any duty upon Landlord or Tenant, insofar as any thereof relate to or
affect the condition, use, alteration, or occupancy of the Premises. Landlord’s
approval of Tenant’s plans for any improvements shall create no responsibility
or liability on the part of Landlord for their completeness, design sufficiency,
or compliance with all laws, rules, and regulations of governmental agencies or
authorities, including, but not limited to, the Americans with Disabilities Act.

 

34.2 Landlord shall, as part of Operating Expenses, subject to the terms and
exclusions set forth in Article 5, comply with all laws, statutes, ordinances,
and governmental rules, regulations, or requirements (collectively, the
“Requirements”) that impose any obligation with respect to the Common Area, the
structural elements of the Building or to the Building systems other than
systems installed by Tenant (which shall be the sole responsibility of Tenant),
but only to the extent the same are applicable to Landlord and the Building,
Landlord is required by the applicable governmental authority to take such
action, and such action is not the result of a “Trigger Event” (as defined
below). As used herein, the term “Trigger Event” means one or more of the
following events or circumstances:

 

(a) With respect to Requirements that first become applicable after the
Commencement Date, Tenant’s particular use of the Premises (other than normal
office uses);

 

(b) With respect to Requirements that first become applicable after the
Commencement Date, the manner of conduct of Tenant’s business or operation of
its installations, equipment or other property outside those of normal office
use;

 

(c) With respect to Requirements applicable as of the Commencement Date,
Tenant’s particular use of the Premises (other than the Stated Uses);

 

(d) With respect to Requirements applicable as of the Commencement Date, the
manner of conduct of Tenant’s business or operation of its installations,
equipment or other property outside those of the Stated Use;

 

(e) The performance of any alterations or the installation of any Tenant
systems; or

 

(f) The breach of any of Tenant’s obligations under this Lease.

 

ARTICLE 35.

SEVERABILITY

 

35.1 This Lease shall be construed in accordance with the laws of the State of
California. If any clause or provision of this Lease is illegal, invalid, or
unenforceable under present or future laws effective during the Term, then it is
the intention of the parties hereto that the remainder of this Lease shall not
be affected thereby. It is also the intention of both parties that in lieu of
each clause or provision that is illegal, or unenforceable, there is added as a
part of this Lease a clause or provision as

 

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similar in terms to such illegal, invalid, or unenforceable clause or provision
as may be possible and still be legal, valid, and enforceable.

 

ARTICLE 36.

NOTICES

 

36.1 Whenever in this Lease it shall be required or permitted that notice or
demand be given or served by either party to this Lease to or on the other, such
notice or demand shall be given or served in writing and delivered personally,
or forwarded by certified or registered mail, postage prepaid, or recognized
overnight courier, addressed as follows:

 

If to Landlord:    c/o The Prudential Insurance Company of America      6701
Center Drive West, Suite 710      Los Angeles, California 90045      Attention:
Mr. Marc Selznick

With a copy by the same method to:

     c/o The Prudential Insurance Company of America      8 Campus Drive, 4th
Floor      Parsippany, New Jersey 07054      Attention: Joan Hayden, Esquire

With a copy by the same method to:

     Unire Real Estate Group, Inc.,      10 Pointe Drive, Suite 150      Brea,
California 92821      Attention: Mark Harryman

With a copy by the same method to:

     Wohl Property Group      2828 East Foothill Road, Suite 201      Pasadena,
California 91107      Attention: Emil Wohl

If to Tenant:

   (If prior to the Commencement Date)      Sypris Data Systems      605 E.
Huntington Drive      Monrovia, California 91016      Attention: Cynthia Belak

With a copy by the same method to:

     Sypris Solutions, Inc.      101 Bullitt Lane, Suite 450      Louisville,
Kentucky 40222      Attention: John McGeeney      (If on or after the
Commencement Date)      To the Premises      Attention: Same as above

 

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36.2 Notice hereunder shall become effective upon (a) delivery in case of
personal delivery and (b) receipt or refusal in case of certified or registered
mail or delivery by overnight courier.

 

36.3 Prior to the Commencement Date, the address for notices to Tenant shall be
the address set forth below its signature hereto; after the Commencement Date,
the address for notices to Tenant shall be as herein above set forth. Such
address may be changed from time to time by either party serving notice as
provided above.

 

ARTICLE 37.

OBLIGATIONS OF, SUCCESSORS, PLURALITY, GENDER

 

37.1 Landlord and Tenant agree that all the provisions hereof are to be
construed as covenants and agreements as though the words imparting such
covenants were used in each paragraph hereof, and that, except as restricted by
the provisions hereof, shall bind and inure to the benefit of the parties
hereto, their respective heirs, legal representatives, successors, and assigns.
If the rights of Tenant hereunder are owned by two or more parties, or two or
more parties are designated herein as Tenant, then all such parties shall be
jointly and severally liable for the obligations of Tenant hereunder. Whenever
the singular or plural number, masculine or feminine or neuter gender is used
herein, it shall equally include the other.

 

ARTICLE 38.

ENTIRE AGREEMENT

 

38.1 This Lease and any attached addenda or exhibits constitute the entire
agreement between Landlord and Tenant. No prior or contemporaneous written or
oral leases or representations shall be binding. This Lease shall not be
amended, changed, or extended except by written instrument signed by Landlord
and Tenant.

 

38.2 THE SUBMISSION OF THIS LEASE BY LANDLORD, ITS AGENT OR REPRESENTATIVE FOR
EXAMINATION OR EXECUTION BY TENANT DOES NOT CONSTITUTE AN OPTION OR OFFER TO
LEASE THE PREMISES UPON THE TERMS AND CONDITIONS CONTAINED HEREIN OR A
RESERVATION OF THE PREMISES IN FAVOR OF TENANT, IT BEING INTENDED HEREBY THAT
THIS LEASE SHALL ONLY BECOME EFFECTIVE UPON THE EXECUTION HEREOF BY LANDLORD AND
DELIVERY OF A FULLY EXECUTED LEASE TO TENANT.

 

ARTICLE 39.

CAPTIONS

 

39.1 Paragraph captions are for Landlord’s and Tenant’s convenience only, and
neither limit nor amplify the provisions of this Lease.

 

ARTICLE 40.

CHANGES

 

40.1 Should any mortgagee require a modification of this Lease, which
modification will not bring about any increased risk, cost or expense to Tenant
or in any other way substantially and adversely change the rights and
obligations of Tenant hereunder, then and in such event Tenant agrees that this
Lease may be so modified.

 

ARTICLE 41.

AUTHORITY

 

41.1 All rights and remedies of Landlord under this Lease, or those which may be
provided by law, may be exercised by Landlord in its own name individually, or
in its name by its agent,

 

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and all legal proceedings for the enforcement of any such rights or remedies,
including distress for Rent, unlawful detainer, and any other legal or equitable
proceedings may be commenced and prosecuted to final judgment and be executed by
Landlord in its own name individually or in its name by its agent. Landlord and
Tenant each represent to the other that each has full power and authority to
execute this Lease and to make and perform the agreements herein contained, and
Tenant expressly stipulates that any rights or remedies available to Landlord,
either by the provisions of this Lease or otherwise, may be enforced by Landlord
in its own name individually or in its name by its agent or principal.

 

ARTICLE 42.

BROKERAGE

 

42.1 Tenant represents and warrants to Landlord that it has dealt only with CB
Richard Ellis Real Estate Services, Inc. (“Tenant’s Broker”) and Cushman &
Wakefield of California, Inc. (“Landlord’s Broker”), in negotiation of this
Lease. Landlord shall make payment of the brokerage fee due the Landlord’s
Broker pursuant to and in accordance with a separate agreement between Landlord
and Landlord’s Broker. Landlord’s Broker shall pay a portion of its commission
to Tenant’s Broker pursuant to a separate agreement between Landlord’s Broker
and Tenant’s Broker. Except for amounts owing to Landlord’s Broker and Tenant’s
Broker, each party hereby agrees to indemnify and hold the other party harmless
of and from any and all damages, losses, costs, or expenses (including, without
limitation, all attorneys’ fees and disbursements) by reason of any claim of or
liability to any other broker or other person claiming through the indemnifying
party and arising out of or in connection with the negotiation, execution, and
delivery of this Lease. Additionally, except as may be otherwise expressly
agreed upon by Landlord in writing, Tenant acknowledges and agrees that Landlord
and/or Landlord’s agent shall have no obligation for payment of any brokerage
fee or similar compensation to any person with whom Tenant has dealt or may in
the future deal with respect to leasing of any additional or expansion space in
the Building or renewals or extensions of this Lease.

 

ARTICLE 43.

EXHIBITS

 

43.1 Exhibits A through F are attached hereto and incorporated herein for all
purposes and are hereby acknowledged by both parties to this Lease.

 

ARTICLE 44.

APPURTENANCES

 

44.1 The Premises include the right of ingress and egress thereto and therefrom;
however, Landlord reserves the right to make changes and alterations to the
Building, fixtures and equipment thereof, in the street entrances, doors, halls,
corridors, lobbies, passages, elevators, escalators, stairways, toilets and
other parts thereof which Landlord may deem necessary or desirable; provided
that Tenant at all times has a means of access to the Premises (including
without limitation access off of the main lobby of the Building) and Tenant’s
loading dock area (subject to a temporary interruption due to Force Majeure
Events or necessary maintenance that cannot reasonably be performed without such
interruption of access). Neither this Lease nor any use by Tenant of the
Building or any passage, door, tunnel, concourse, plaza or any other area
connecting the garages or other buildings with the Building, shall give Tenant
any right or easement of such use and the use thereof may, without notice to
Tenant, be regulated or discontinued at any time and from time to time by
Landlord without liability of any kind to Tenant and without affecting the
obligations of Tenant under this Lease.

 

ARTICLE 45.

PREJUDGMENT REMEDY, REDEMPTION, COUNTERCLAIM, AND JURY

 

45.1 Tenant, for itself and for all persons claiming through or under it, hereby
expressly waives any and all rights which are, or in the future may be,
conferred upon Tenant by any present or future law to redeem the Premises, or to
any new trial in any action for ejection under any provisions of law, after
reentry thereupon, or upon any part thereof, by Landlord, or after any warrant
to

 

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dispossess or judgment in ejection. If Landlord shall acquire possession of the
Premises by summary proceedings, or in any other lawful manner without judicial
proceedings, it shall be deemed a reentry within the meaning of that word as
used in this Lease. In the event that Landlord commences any summary proceedings
or action for nonpayment of rent or other charges provided for in this Lease,
Tenant shall not interpose any counterclaim of any nature or description in any
such proceeding or action. Tenant and Landlord both waive a trial by jury of any
or all issues arising in any action or proceeding between the parties hereto or
their successors, under or connected with this Lease, or any of its provisions.

 

ARTICLE 46.

RECORDING

 

46.1 Tenant shall not record this Lease but will, at the request of Landlord,
execute a memorandum or notice thereof in recordable form satisfactory to both
Landlord and Tenant specifying the date of commencement and expiration of the
Term of this Lease and other information required by statute. Either Landlord or
Tenant may then record said memorandum or notice of lease at the cost of the
recording party.

 

ARTICLE 47.

MORTGAGEE PROTECTION

 

47.1 Tenant agrees to give any mortgagees and/or trust deed holders, by
registered mail, a copy of any notice of default served upon Landlord, provided
that prior to such notice Tenant has been notified, in writing of the address of
such mortgagees and/or trust deed holders. Without limiting Tenant’s rights to
rent abatement under Section 6.6 or Tenant’s termination rights under Article
19, Tenant further agrees that if Landlord shall have failed to cure such
default within the time provided for in this Lease, then the mortgagees and/or
trust deed holders shall have an additional thirty (30) days within which to
cure such default or if such default cannot be cured within that time, then such
additional time as may be necessary to cure such default (including but not
limited to commencement of foreclosure proceedings, if necessary to effect such
cure) in which event this Lease shall not be terminated while such remedies are
being so diligently pursued.

 

ARTICLE 48.

SHORING

 

48.1 If any excavation or construction is made adjacent to, upon or within the
Building, or any part thereof, Tenant shall afford to any and all persons
causing or authorized to cause such excavation or construction license to enter
upon the Premises for the purpose of doing such work as such persons shall deem
necessary to preserve the Building or any portion thereof from injury or damage
and to support the same by proper foundations, braces and supports, without any
claim for damages or indemnity or abatement of rent (subject to the express
provisions of this Lease), or of a constructive or actual eviction of Tenant;
provided that the provisions of this Article 48 shall not limit Tenant’s right
to rent abatement as provided in Section 6.6, above.

 

ARTICLE 49.

PARKING

 

49.1 Tenant shall also have the non-exclusive right to use in common with
Landlord and other tenants of the Building and their employees and invitees, on
a first come first served basis, a number of spaces equal to Tenant’s Parking
Allocation (as defined below) in the parking area provided by Landlord for the
parking of passenger automobiles for the Building, other than parking spaces
designated as “Handicapped Parking”, “Loading Area” or as may be otherwise
reserved or allocated (the “Excluded Parking Areas”). Landlord may issue parking
permits, install a gate system, and impose any other system as Landlord
reasonably deems necessary for the use of the parking area; provided that there
shall be no direct charge to Tenant for Tenant’s Parking Allocation except for
government imposed charges. The cost of any parking attendants or other
personnel involved in the control and monitoring of use of the parking areas (if
any) shall be an Operating Expense. In addition, if an entry control system is
required, the cost

 

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thereof (not to exceed $50,000 and amortized over such period as Landlord shall
reasonably determine together with interest on the unamortized balance) shall be
an Operating Expense. Tenant agrees that it and its employees and invitees shall
not park their automobiles in any Excluded Parking Areas, and shall comply with
such rules and regulations for use of the parking area as Landlord may from time
to time prescribe. Landlord shall not be responsible for any damage to or theft
of any vehicle in the parking area, and shall not be required to keep parking
spaces clear of unauthorized vehicles or to otherwise supervise the use of the
parking area. Landlord reserves the right to change any existing or future
parking area, roads, or driveways, or increase or decrease the size thereof and
make any repairs or alterations it deems necessary to the parking area, roads
and driveways and Landlord agrees to use commercially reasonable efforts to
minimize any interference with Tenant’s parking in the course of such repairs or
alterations.

 

49.2 As used herein, “Tenant’s Parking Allocation” means a number determined by
(a) multiplying (i) 4 by (ii) the rentable square feet in the Premises divided
by 1,000, and (b) rounding that product down to the nearest whole number.

 

49.3 Ten (10) spaces to be selected by Tenant out of Tenant’s Parking Allocation
shall be reserved and painted with Tenant’s name, subject to approval of the
City of San Dimas. In addition, Tenant may use up to two (2) spaces out of
Tenant’s Parking Allocation for storage containers for Tenant’s materials,
subject to Landlord’s prior written approval as to the location, appearance and
screening of those storage containers and subject to the prior approval of the
City of San Dimas.

 

49.4 In the event that any time during the term of this Lease, Landlord grants
to any other tenant of the Project the right to have more than five reserved
parking spaces for use by that tenant, then Landlord shall offer the Tenant the
right to have reserved parking spaces on the same terms and conditions as
offered to that other tenant for those same reserved spaces, including the rate,
proximity to the tenant’s premises and the proportion that the total number of
reserved spaces bears to the total rentable area of the tenant.

 

ARTICLE 50.

ELECTRICAL CAPACITY

 

50.1 The Tenant covenants and agrees that at all times, its use of electric
energy shall never exceed the capacity of the existing feeders to the Building
or the distribution of wiring installation. To the extent not constructed as
part of the initial Tenant Improvements pursuant to the Work Letter, any
alterations to supply the Tenant’s electrical requirements upon written request
of the Tenant shall be installed by the Landlord at the sole cost and expense of
the Tenant, if, in the Landlord’s sole judgment, the same are necessary and will
not cause or create a dangerous or hazardous condition or entail excess or
unreasonable alterations, repairs or expense or interfere with or disrupt other
tenants or occupants. In addition to the installation of such alterations, the
Landlord will also, at the sole cost and expense of Tenant, install all other
equipment proper and necessary in connection therewith subject to the aforesaid
terms and conditions.

 

ARTICLE 51.

OPTIONS TO EXTEND LEASE

 

51.1 Extension Option. Tenant shall have the option to extend this Lease (the
“First Extension Option”) for one additional term of five (5) years (the “First
Extension Period”), upon the terms and conditions hereinafter set forth:

 

(a) If the First Extension Option is exercised, then the Rent per annum for such
First Extension Period (the “First Option Rent”) shall be the Fair Market Rental
Value (as defined hereinafter) for the Premises as of the commencement of the
First Extension Option for such First Extension Period.

 

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(b) The First Extension Option must be exercised by Tenant, if at all, only at
the time and in the manner provided in this subsection 51.1(b).

 

(i) If Tenant wishes to exercise the First Extension Option, Tenant shall
deliver written notice (the “First Interest Notice”) to Landlord no less than
twelve (12) months before the expiration of the initial Lease Term.

 

(ii) After receipt of Tenant’s First Interest Notice, Landlord shall deliver
notice (the “First Option Rent Notice”) to Tenant no less than ten (10) months
before the expiration of the initial Lease Term, stating the First Option Rent,
based on Landlord’s determination of the Fair Market Rental Value of the
Premises as of the commencement of the First Extension Period.

 

(iii) If Tenant wishes to exercise the First Extension Option, Tenant must, on
or before the date occurring nine (9) months before the expiration of the
initial Lease Term, exercise the First Extension Option by delivering written
notice (the “First Exercise Notice”) to Landlord. If Tenant timely and properly
exercises its First Extension Option, the Lease Term shall be extended for the
First Extension Period upon all of the terms and conditions set forth in the
Lease, as amended, except that the rent for the First Extension Period shall be
as provided in subsection 51.1(a), Tenant shall be entitled to a refurbishment
allowance in the amount of $15.00 for each rentable square foot of area in the
Premises, which shall be disbursed in the same manner as the Tenant Improvement
Allowance, and Tenant shall have no further options to extend the Lease Term
except for the Second Extension Option.

 

(iv) If Tenant wishes to contest the First Option Rent stated in the First
Option Rent Notice, Tenant must provide, with the First Exercise Notice, written
notice to Landlord that Tenant objects to the stated First Option Rent. If
Tenant provides such written objection, the parties shall follow the procedure
described in Section 51.4, and the First Option Rent shall be determined as set
forth in that section.

 

(v) If Tenant fails to deliver a timely First Interest Notice or First Exercise
Notice, Tenant shall be considered to have elected not to exercise the First
Extension Option.

 

(c) It is understood and agreed that the First Extension Option hereby granted
is personal to Tenant and is not transferable, except to an assignee of Tenant’s
entire interest in the Lease consented to by Landlord pursuant to Article 18 or
as to which Landlord’s consent is not required pursuant to Article 18.

 

(d) Tenant’s exercise of the First Extension Option shall, if Landlord so elects
in its absolute discretion, be ineffective in the event that an Event of Default
by Tenant remains uncured at the time of delivery of the First Interest Notice
or the First Exercise Notice or at the commencement of the First Extension
Period. If Tenant so requests in connection with its exercise of this option,
Landlord will confirm whether or not there exists an uncured Event of Default at
the times provided in this subparagraph.

 

51.2 Second Extension Option. Tenant shall have the option to extend this Lease
(the “Second Extension Option”) for one additional term of five (5) years (the
“Second Extension Period”), upon the terms and conditions hereinafter set forth:

 

(a) If the Second Extension Option is exercised, then the Rent per annum for
such Second Extension Period (the “Second Option Rent”) shall be the Fair Market
Rental Value for the Premises as of the commencement of the Second Extension
Option for such Second Extension Period.

 

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(b) The Second Extension Option must be exercised by Tenant, if at all, only at
the time and in the manner provided in this subsection 51.2(b).

 

(i) If Tenant wishes to exercise the Second Extension Option, Tenant shall
deliver written notice (the “Second Interest Notice”) to Landlord no less than
twelve (12) months before the expiration of the First Extension Period.

 

(ii) After receipt of Tenant’s Second Interest Notice, Landlord shall deliver
notice (the “Second Option Rent Notice”) to Tenant no less than ten (10) months
before the expiration of the First Extension Period, stating the Second Option
Rent, based on Landlord’s determination of the Fair Market Rental Value of the
Premises as of the commencement of the Second Extension Period.

 

(iii) If Tenant wishes to exercise the Second Extension Option, Tenant must, on
or before the date occurring nine (9) months before the expiration of the First
Extension Period, exercise the Extension Option by delivering written notice
(the “Second Exercise Notice”) to Landlord. If Tenant timely and properly
exercises its Second Extension Option, the Lease Term shall be extended for the
Second Extension Period upon all of the terms and conditions set forth in the
Lease, as amended, except that the rent for the Second Extension Period shall be
as provided in subsection 51.2(a), Tenant shall be entitled to a refurbishment
allowance in the amount of $15.00 for each rentable square foot of area in the
Premises, which shall be disbursed in the same manner as the Tenant Improvement
Allowance, and Tenant shall have no further options to extend the Lease Term.

 

(iv) If Tenant wishes to contest the Second Option Rent stated in the Second
Option Rent Notice, Tenant must provide, with the Second Exercise Notice,
written notice to Landlord that Tenant objects to the stated Second Option Rent.
If Tenant provides such written objection, the parties shall follow the
procedure described in Section 51.4, and the Second Option Rent shall be
determined as set forth in that section.

 

(v) If Tenant fails to deliver a timely Second Interest Notice or Second
Exercise Notice, Tenant shall be considered to have elected not to exercise the
Second Extension Option.

 

(c) It is understood and agreed that the Second Extension Option hereby granted
is personal to Tenant and is not transferable, except to an assignee of Tenant’s
entire interest in the Lease consented to by Landlord pursuant to Article 18 or
as to which Landlord’s consent is not required pursuant to Article 18.

 

(d) Tenant’s exercise of the Second Extension Option shall, if Landlord so
elects in its absolute discretion, be ineffective in the event that an Event of
Default by Tenant remains uncured at the time of delivery of the Second Interest
Notice or the Second Exercise Notice or at the commencement of the Second
Extension Period. If Tenant so requests in connection with its exercise of this
option, Landlord will confirm whether or not there exists an uncured Event of
Default at the times provided in this subparagraph.

 

(e) The Second Extension Option shall terminate and shall thereafter be null and
void in the event Tenant does not exercise the First Extension Option or for any
reason Tenant’s exercise of the First Extension Option is ineffective.

 

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51.3 Fair Market Rent. The provisions of this Section shall apply in any
instance in which this Lease provides that the Fair Market Rent is to apply.

 

(a) “Fair Market Rental Value” means the annual amount per square foot that a
willing tenant would pay and a willing landlord would accept in arm’s length
negotiations, without any additional inducements, for an extension of a lease of
the applicable space on the applicable terms and conditions for the applicable
period of time. Fair Market Rent shall be determined by Landlord considering the
most recent new direct leases (and market renewals and extensions, if
applicable) in other Comparable Buildings in the Market Area. In any
determination of Fair Market Rental Value, the Base Year for each Extension
Period shall be the calendar year in which the first day of the applicable
Extension Period falls.

 

(b) In determining the rental rate of comparable space, the parties shall
include all escalations and take into consideration the following concessions:

 

(i) Rental abatement concessions, if any, being granted to tenants in connection
with the comparable space;

 

(ii) The $15.00 per square foot of rentable area refurbishment allowance to be
provided under this Lease;

 

(iii) Tenant improvements or allowances provided or to be provided for the
comparable space, taking into account the value of the existing improvements in
the Premises, based on the age, quality, and layout of the improvements.

 

(c) If in determining the Fair Market Rental Value the parties determine that
the economic terms of leases of comparable space include a tenant improvement
allowance in excess of $15.00 per square foot of rentable area, Landlord may, at
Landlord’s sole option, elect to do the following:

 

(i) Grant some or all of the value of that Tenant improvement allowance as an
allowance for the refurbishment of the Premises; and

 

(ii) Reduce the Base Rent component of the Fair Market Rental Value to be an
effective rental rate that takes into consideration the total dollar value of
that portion of that tenant improvement allowance that Landlord has elected not
to grant to Tenant (in which case that portion of that tenant improvement
allowance evidenced in the effective rental rate shall not be granted to
Tenant).

 

51.4 Resolving Disagreement Over Fair Market Rental Value. If Tenant timely and
effectively objects to Landlord’s determination of Fair Market Rental Value
under subsections 51.1(b)(iv) or 51.2(b)(iv), the disagreement shall be resolved
under this section 51.4.

 

(a) Negotiated Agreement. Landlord and Tenant shall diligently attempt in good
faith to agree on the Fair Market Rental Value on or before the tenth (10th) day
after Tenant’s objection to the Fair Market Rental Value (the “Outside Agreement
Date”).

 

(b) Parties’ Separate Determinations. If Landlord and Tenant fail to reach
agreement on or before the Outside Agreement Date, Landlord and Tenant shall
each make a separate determination of the Fair Market Rental Value and notify
the other party of this determination within five (5) days after the Outside
Agreement Date.

 

(i) Two Determinations. If each party makes a timely determination of the Fair
Market Rental Value, those determinations shall be submitted to arbitration in
accordance with subsection (c).

 

(ii) One Determination. If Landlord or Tenant fails to make a determination of
the Fair Market Rental Value within the five-day (5-day) period, that

 

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failure shall be conclusively considered to be that party’s approval of the Fair
Market Rental Value submitted within the five-day (5-day) period by the other
party.

 

(c) Arbitration. If both parties make timely individual determinations of the
Fair Market Rental Value under subsection (b), the Fair Market Rental Value
shall be determined by arbitration under this subsection (c).

 

(i) Scope of Arbitration. The determination of the arbitrators shall be limited
to the sole issue of whether Landlord’s or Tenant’s submitted Fair Market Rental
Value is the closest to the actual Fair Market Rental Value as determined by the
arbitrators, taking into account the requirements of Section 51.3.

 

(ii) Qualifications of Arbitrator(s). The arbitrators must be lawyers licensed
to practice law in the State of California who have been active in the leasing
of commercial properties in the Market Area over the five-year period ending on
the date of their appointment as arbitrator(s), but who have not represented
either Tenant or Landlord during that five (5) year period.

 

(iii) Parties’ Appointment of Arbitrators. Within fifteen (15) days after the
Outside Agreement Date, Landlord and Tenant shall each appoint one arbitrator
and notify the other party of the arbitrator’s name and business address.

 

(iv) Appointment of Third Arbitrator. If each party timely appoints an
arbitrator, the two (2) arbitrators shall, within ten (10) days after the
appointment of the second arbitrator, agree on and appoint a third arbitrator
(who shall be qualified under the same criteria set forth above for
qualification of the initial two (2) arbitrators) and provide notice to Landlord
and Tenant of the arbitrator’s name and business address.

 

(v) Arbitrators’ Decision. Within thirty (30) days after the appointment of the
third arbitrator, the three (3) arbitrators shall decide whether the parties
will use Landlord’s or Tenant’s submitted Fair Market Rental Value and shall
notify Landlord and Tenant of their decision. The decision of the majority the
three (3) arbitrators shall be binding on Landlord and Tenant.

 

(vi) If Only One Arbitrator is Appointed. If either Landlord or Tenant fails to
appoint an arbitrator within fifteen (15) days after the Outside Agreement Date,
the arbitrator timely appointed by one of them shall reach a decision and notify
Landlord and Tenant of that decision within thirty (30) days after the
arbitrator’s appointment. The arbitrator’s decision shall be binding on Landlord
and Tenant.

 

(vii) If Only Two Arbitrators Are Appointed. If each party appoints an
arbitrator in a timely manner, but the two (2) arbitrators fail to agree on and
appoint a third arbitrator within the required period, the arbitrators shall be
dismissed without delay and the issue of Fair Market Rental Value shall be
submitted to binding arbitration under the real estate arbitration rules of
JAMS, subject to the provisions of this section.

 

(viii) If No Arbitrator Is Appointed. If Landlord and Tenant each fail to
appoint an arbitrator in a timely manner, the matter to be decided shall be
submitted without delay to binding arbitration under the real estate arbitration
rules of JAMS subject the provisions of this Section 51.4(c).

 

(ix) Cost of Arbitration. The cost of the arbitration shall be paid by the
losing party.

 

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ARTICLE 52.

TELECOMMUNICATIONS LINES AND EQUIPMENT

 

52.1 Location of Tenant’s Equipment and Landlord Consent:

 

52.1.1 Tenant may install, maintain, replace, remove and use communications or
computer wires, cables and related devices (collectively, the “Lines”) in the
Premises.

 

52.1.2 Landlord’s approval of, or requirements concerning, the Lines or any
equipment related thereto, the plans, specifications or designs related thereto,
the contractor or subcontractor, or the work performed hereunder, shall not be
deemed a warranty as to the adequacy or appropriateness thereof, and Landlord
hereby disclaims any responsibility or liability for the same.

 

52.1.3 If Landlord consents to Tenant’s proposal, Tenant shall pay all of
Tenant’s and Landlord’s third party costs in connection therewith (including
without limitation all costs related to new Lines) and shall use, maintain and
operate the Lines and related equipment in accordance with and subject to all
laws governing the Lines and equipment and at Tenant’s sole risk and expense.
Tenant shall comply with all of the requirements of this Lease concerning
alterations in connection with installing the Lines. As soon as the work is
completed, Tenant shall submit as-built drawings to Landlord.

 

52.1.4 Landlord reserves the right to require that Tenant repair so as to
correct any violation or remove, if not reasonably repairable, any Lines located
in or serving the Premises which are installed in violation of these provisions,
or which are at any time in violation of any laws or present a dangerous or
potentially dangerous condition (whether such Lines were installed by Tenant or
any other party), within five (5) business days after written notice.

 

52.2 Reallocation of Line Space. Landlord may (but shall not have the obligation
to) at Landlord’s sole cost and expense, which shall not be included in
Operating Expenses, (a) install and relocate Lines at the Building; and (b)
monitor and control the installation, maintenance, replacement and removal of,
the allocation and periodic re-allocation of available space (if any) for, and
the allocation of excess capacity (if any) on, any Lines now or hereafter
installed at the Building by Landlord, Tenant or any other party; provided that
such reallocation shall not result in Tenant having less than Tenant’s Building
Percentage of the available riser space. In any such installation, relocation,
monitoring, control or reallocation, Landlord shall make reasonable efforts to
minimize any disruption to Tenant’s business operation in the Premises.

 

52.3 Line Problems: Except to the extent arising from the gross negligence or
willful misconduct of Landlord or Landlord’s contractors, agents or employees,
Landlord shall have no liability for damages arising from, and Landlord does not
warrant that the Tenant’s use of any Lines will be free from the following
(collectively called “Line Problems”): (a) any shortages, failures, variations,
interruptions, disconnections, loss or damage caused by the installation,
maintenance, or replacement, use or removal of Lines by or for other tenants or
occupants in the Building, by any failure of the environmental conditions or the
power supply for the Building to conform to any requirement of the Lines or any
associated equipment, or any other problems associated with any Lines by any
other cause; (b) any failure of any Lines to satisfy Tenant’s requirements; or
(c) any eavesdropping or wiretapping by unauthorized parties. Landlord in no
event shall be liable for damages by reason of loss of profits, business
interruption or other consequential damage arising from any Line Problems.

 

52.4 Electromagnetic Fields: If Tenant at any time uses any equipment that may
create an electromagnetic field and/or radio frequency exceeding the normal
insulation ratings of ordinary twisted pair riser cable or cause radiation
higher than normal background radiation, Landlord reserves the right to require
Tenant to appropriately insulate that equipment and the Lines therefor
(including without limitation riser cables), and take such other remedial action
at Tenant’s sole cost and expense as Landlord may require in its reasonable
discretion to prevent such excessive electromagnetic fields, radio frequency or
radiation.

 

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52.5 Removal of Electrical and Telecommunications Wires.

 

52.5.1 Within 30 days after the expiration or sooner termination of the Lease,
Landlord may elect by written notice to Tenant to:

 

(a) Retain any or all Lines abandoned by Tenant in the risers of the Building;

 

(b) Remove any or all such Lines at Landlord’s sole expense.

 

ARTICLE 53.

TENANT’S RIGHT OF FIRST OFFER

 

53.1 As used herein, “Offer Space” means space on the second floor of the
Building. Landlord may from time to time give Tenant a written notice (the
“Availability Notice”) identifying the particular Offer Space (the “Specific
Offer Space”) that is Available (as defined below). As used herein, “Available”
means that the space (i) is not part of the Premises, (ii) is not then subject
to a lease, and (iii) is not then subject to any rights of tenant to renew their
lease or expand their premises as set forth in their lease. For purposes of this
Article 53, space that is unleased as of the Commencement Date shall be
considered to become Available only after the first anniversary of the
Commencement Date. Until that date, Landlord shall have the right to lease such
space without triggering Tenant’s right of first offer.

 

53.2 Tenant may inform Landlord (the “Request Notice”) not more than once in any
twelve (12) month period. Landlord shall, within ten (10) business days of
receiving the properly given Request Notice, deliver to Tenant an Availability
Notice identifying Specific Offer Space that is Available.

 

53.3 The location and configuration of the Specific Offer Space shall be
determined by Landlord in its reasonable discretion; provided that Landlord
shall have no obligations to designate Specific Offer Space that would result in
any space not included in the Specific Offer Space being not Configured For
Leasing (as defined below). For purposes of this Lease, “Configured For Leasing”
means the applicable space must contain at least 3,300 rentable square feet,
must have convenient access to the central corridor on the applicable floor,
must have a configuration that complies with all applicable building codes and
other laws and is such that Landlord judges, in its reasonable discretion, that
Landlord will be able to lease such space to a third party. The Availability
Notice shall:

 

(a) Describe the particular Specific Offer Space (including rentable area,
usable area and location);

 

(b) Include an attached floor plan identifying such space;

 

(c) State the date (the “Specific Offer Space Delivery Date”) the space will be
available for delivery to Tenant; and

 

(d) Specify the Base Rent and Base Year for the Specific Offer Space.

 

(e) Specify the increase in the termination fees under Section 2.4 that will
apply to reflect the addition of the Specific Offer Space to the Premises.

 

(f) Specify the increase in the Security Deposit that will be required.

 

53.4 If Tenant wishes to exercise Tenant’s rights set forth in this Article 53
with respect to the Specific Offer Space, then within ten (10) business days of
delivery of the Availability Notice to Tenant, Tenant shall deliver irrevocable
notice to Landlord (the “First Offer Exercise Notice”) offering to lease the
Specific Offer Space on the terms and conditions as may be specified by Landlord
in the Availability Notice.

 

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53.5 In the event Tenant fails to give a First Offer Exercise Notice in response
to any Availability Notice, Tenant shall have no further rights to receive an
Availability Notice and Tenant’s rights under this Article 53 shall terminate
and Landlord shall be free to lease the Offer Space to anyone on any terms at
any time during the Term, without any obligation to provide Tenant with any
further right to lease that space.

 

53.6 If Tenant timely and validly gives the First Offer Exercise Notice, then
beginning on the Specific Offer Space Delivery Date and continuing for the
balance of the Term (including any extensions):

 

(a) The Specific Offer Space shall be part of the Premises under this Lease (so
that the term “Premises” in this Lease shall refer to the space in the Premises
immediately before the Specific Offer Space Delivery Date plus the Specific
Offer Space);

 

(b) Tenant’s Building Percentage shall be adjusted to reflect the increased
rentable area of the Premises.

 

(c) Base Rent for the Specific Offer Space shall be as specified in the
Availability Notice.

 

(d) If the Base Year specified in the Availability Notice is other than the Base
Year applicable to the balance of the Premises, then Tenant’s Share with respect
to the Specific Offer Space shall be appropriately adjusted to reflect that
different Base Year.

 

(e) The termination fee in Section 2.4 and the Security Deposit shall be
increased by the amounts specified in the Availability Notice.

 

(f) Tenant’s lease of the Specific Offer Space shall be on the same terms and
conditions as affect the original Premises from time to time, except as
otherwise provided in this section. Tenant’s obligation to pay Rent with respect
to the Specific Offer Space shall begin on the Offer Space Delivery Date. The
Offer Space shall be leased to Tenant in its “as-is” condition and Landlord
shall not be required to construct improvements in, or contribute any tenant
improvement allowance for, the Offer Space. Tenant’s construction of any
improvements in the Specific Offer Space shall comply with the terms of this
Lease concerning alterations.

 

(g) If requested by Landlord, Landlord and Tenant shall confirm in writing the
addition of the Specific Offer Space to the Premises on the terms and conditions
set forth in this section, but Tenant’s failure to execute or deliver such
written confirmation shall not affect the enforceability of the First Offer
Exercise Notice.

 

53.7 Tenant’s rights and Landlord’s obligations under this Article 53 are
expressly subject to and conditioned upon there not existing an Event of Default
by Tenant under this Lease, either at the time of delivery of the First Offer
Exercise Notice or at the time the Specific Offer Space is to be added to the
Premises.

 

53.8 It is understood and agreed that Tenant’s rights under this Article 53 are
personal to Tenant and not transferable, except to an Affiliate in connection
with an assignment of Tenant’s entire interest in this Lease. In the event of
any other assignment or subletting of the Premises or any part thereof, this
expansion right shall automatically terminate and shall thereafter be null and
void.

 

ARTICLE 54.

GUARANTY

 

54.1 The obligations of Tenant under this Lease shall be guarantied by Sypris
Solutions, Inc., a Delaware corporation, pursuant to a Guaranty in the form of
the Guaranty attached hereto as Exhibit “E,” which shall be executed and
delivered to Landlord concurrently with Tenant’s execution and delivery of this
Lease.

 

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IN WITNESS WHEREOF, Landlord and Tenant, acting herein through duly authorized
individuals, have caused these presents to be executed as of the date first
above written.

 

TENANT:

SYPRIS DATA SYSTEMS, INC., a

Delaware corporation

By:  

/s/    G. Darrell Robertson

   

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

   

G. Darrell Robertson

   

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

    [Printed Name and Title]

 

LANDLORD:

VIA VERDE VENTURE, LLC,

a Delaware limited liability company

By:   Marc D. Selznick    

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

    Vice President    

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

    [Printed Name and Title]

 

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Schedules (or similar attachments) to this exhibit have not been filed because
such schedules do not contain information which is material to an investment
decision and which is not otherwise disclosed in the agreement or the Company’s
disclosure documents. The Company agrees to furnish supplementally a copy of any
omitted schedule to the Commission upon request.

 

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