Exhibit 10.10

 

LEASE

 

BY AND BETWEEN

 

CTC ASSOCIATES II, L.P.,

a Delaware limited partnership

 

as Landlord

 

and

 

REDBACK NETWORKS INC.,

a Delaware corporation

 

as Tenant

 

January 2, 2004

 

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LEASE

 

THIS LEASE, dated January 2, 2004 for reference purposes only, is made by and
between CTC ASSOCIATES II, L.P., a Delaware limited partnership (“Landlord”) and
REDBACK NETWORKS INC., a Delaware corporation (“Tenant”), to be effective and
binding upon the parties as of the date the last of the designated signatories
to this Lease shall have executed this Lease (the “Effective Date of this
Lease”).

 

RECITAL

 

Landlord, as successor-in-interest to CORPORATE TECHNOLOGY CENTRE ASSOCIATES
LLC, a California limited liability company, and Tenant entered into that
certain Lease Agreement dated October 27, 1999, as amended by that certain First
Amendment to Lease Agreement dated as of October 13, 2000 (collectively, the
“Original Lease”), for premises located in the City of San Jose, California,
commonly known as 300 Holger Way, comprised of approximately 99,870 rentable
square feet of floor area (“Leased Premises”). Landlord and its affiliates and
Tenant have entered into a Memorandum of Settlement (“Memorandum”) with respect
to the Original Lease, inter alia, a copy of which is attached to this Lease as
Exhibit D. The effectiveness of this Lease is subject to the conditions set
forth in the Memorandum. In the event of a conflict between the terms and
conditions of the Memorandum and this Lease, the terms and conditions of the
Memorandum will control.

 

ARTICLE 1

 

REFERENCE

 

References. All references in this Lease (subject to any further clarifications
contained in this Lease) to the following terms shall have the following meaning
or refer to the respective address, person, date, time period, amount,
percentage, calendar year or fiscal year as below set forth:

 

Tenant’s Address for Notice:

  

Redback Networks Inc.

300 Holger Way

San Jose, California

Tenant’s Representative:

   Tom Cronan, CFO

Landlord’s Address for Notices:

  

c/o Menlo Equities LLC

490 California Avenue

Palo Alto, California 94306

Landlord’s Representative:

   Henry Bullock/Richard Holmstrom

Phone Number:

   (650) 326-9300

Lease Commencement Date:

   January 2, 2004

Lease Expiration Date:

   October 31, 2006, subject to the provisions of Section 2 below.

Landlord’s Option to Renew:

   One option to renew for a term of two (2) years.

Tenant’s Option to Renew:

   One option to renew for a term of five (5) years.

Tenant’s Security Deposit:

   $124,837.50

Late Charge Amount:

   Five Percent (5%) of the Delinquent Amount Tenant’s Required Liability
Coverage:    $10,000,000 Combined Single Limit

Brokers:

   None

Project:

   That certain real property situated in the City of San Jose, County of Santa
Clara, State of California, to be improved with a total of eight (8)
building(s), which real property is shown on the Site Plan attached hereto as
Exhibit “A” and is commonly known as or otherwise described as follows:
Corporate Technology Centre, San Jose, California.

Property:

   That certain real property situated in the City of San Jose, County of Santa
Clara, State of California, as presently improved with one (1) building, which
real property is shown as Parcel 3 on the Site Plan attached hereto as Exhibit
“B”.

 

1.

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Building:

   That certain building on the Property in which the Leased Premises are
located commonly known as or otherwise described as follows: 300 Holger Way, San
Jose, California (the “Building”) which Building is shown outlined on Exhibit
“B” hereto.

Outside Areas:

   The “Outside Areas” shall mean all areas within the Property which are
located outside the Building, such as pedestrian walkways, parking areas,
landscaped areas, open areas and enclosed trash disposal areas.

Leased Premises:

   All the interior space within the Building, including stairwells, connecting
walkways, and atriums, consisting of approximately 99,870 square feet and, for
purposes of this Lease, agreed to contain said number of square feet.

Tenant’s Expense Share:

   The term “Tenant’s Expense Share” shall mean the percentage obtained by
dividing the rentable square footage of the Leased Premises at the time of
calculation by the rentable square footage of the Building. Such percentage is
currently 100%. In the event that any portion of the Building is sold by
Landlord, or the rentable square footage of the Leased Premises or the Building
is otherwise changed, Tenant’s Expense Share shall be recalculated to equal the
percentage described in the first sentence of this paragraph, so that the
aggregate Tenant’s Expense Share of all tenants of the Building shall equal
100%.

 

Base Monthly Rent:

   January 2, 2004 to October 31, 2004    $104,863.50      November 1, 2004 to
October 31, 2005    $114,850.50      November 1, 2005 to October 31, 2006   
$124,837.50

 

Permitted Use:

   General office, research and development, marketing, sales, manufacturing,
distribution, warehouse and other related lawful uses.

Exhibits:

   The term “Exhibits” shall mean the Exhibits of this Lease which are described
as follows:

 

      

Exhibit “A”  –

  Site Plan showing the Project       

Exhibit “B”  –

  Site Plan showing the Property and delineating the Building in which the
Leased Premises are located.       

Exhibit “C”  –

  Form of Tenant Estoppel Certificate       

Exhibit “D”  –

  Memorandum of Settlement (without exhibits)

 

2.

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ARTICLE 2

 

LEASED PREMISES, TERM AND POSSESSION

 

2.1 Demise Of Leased Premises. Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord for Tenant’s own use in the conduct of Tenant’s
business and not for purposes of speculating in real estate, for the Lease Term
and upon the terms and subject to the conditions of this Lease, that certain
interior space described in Article 1 as the Leased Premises, reserving and
excepting to Landlord the right to fifty percent (50%) of all assignment
consideration and excess rentals as provided in Article 7 below. Tenant’s lease
of the Leased Premises, together with the appurtenant right to use the Outside
Areas as described in Paragraph 2.2 below, shall be conditioned upon and be
subject to the continuing compliance by Tenant with (i) all the terms and
conditions of this Lease, (ii) all Laws governing the use of the Leased Premises
and the Property, (iii) all Private Restrictions, easements and other matters
now of public record respecting the use of the Leased Premises and Property, and
(iv) all reasonable rules and regulations from time to time established by
Landlord. Notwithstanding any provision of this Lease to the contrary, Landlord
hereby reserves to itself and its designees all rights of access, use and
occupancy of the Building roof, and Tenant shall have no right of access, use or
occupancy of the Building roof except (if at all) to the extent required in
order to enable Tenant to perform Tenant’s maintenance and repair obligations
pursuant to this Lease and except at provided in Paragraph 4.14.

 

2.2 Right To Use Outside Areas. As an appurtenant right to Tenant’s right to the
use and occupancy of the Leased Premises, Tenant shall have the right to use the
Outside Areas in conjunction with its use of the Leased Premises solely for the
purposes for which they were designated and intended and for no other purposes
whatsoever. Tenant’s right to so use the Outside Areas shall be subject to the
limitations on such use as set forth in Article 1 and shall terminate
concurrently with any termination of this Lease.

 

2.3 Lease Commencement Date And Lease Term. The term of this Lease shall
commence on the Lease Commencement Date, as set forth in Article 1 (the “Lease
Commencement Date”). The term of this Lease shall in all events end on the Lease
Expiration Date (as set forth in Article 1) subject to the provisions of
Sections 13, 15 and 16. The Lease Term shall be that period of time commencing
on the Lease Commencement Date and ending on the Lease Expiration Date (the
“Lease Term”).

 

2.4 Delivery Of Possession. Tenant acknowledges that it occupies the Leased
Premises pursuant to the Original Lease and is fully familiar with the
conditions of the Leased Premises and the Building. Tenant is accepting the
Leased Premises AS-IS and WITH ALL FAULTS.

 

2.5 Surrender Of Possession. Immediately prior to the expiration or upon the
sooner termination of this Lease, Tenant shall remove all of Tenant’s signs from
the exterior of the Building and shall remove all of Tenant’s equipment, trade
fixtures, furniture, supplies, wall decorations and other personal property from
within the Leased Premises, the Building and the Outside Areas, and shall vacate
and surrender the Leased Premises, the Building, the Outside Areas and the
Property to Landlord in the same condition, broom clean, as existed at the Lease
Commencement Date set forth herein, reasonable wear and tear excepted. Tenant
shall repair all damage to the Leased Premises, the exterior of the Building and
the Outside Areas caused by Tenant’s removal of Tenant’s property. Tenant shall
patch and refinish, to Landlord’s reasonable satisfaction, all penetrations made
by Tenant or its employees to the floor, walls or ceiling of the Leased
Premises, whether such penetrations were made with Landlord’s approval or not.
Tenant shall repair all damage caused by Tenant to the exterior surface of the
Building and the paved surfaces of the Outside Areas and, where necessary,
replace or resurface same. Additionally, to the extent that Landlord shall have
notified or is deemed to have notified Tenant in writing at the time the
improvements were completed that it desired to have certain improvements made by
Tenant or at the request of Tenant removed at the expiration or sooner
termination of the Lease, Tenant shall, upon the expiration or sooner
termination of the Lease, remove any such improvements constructed or installed
by Landlord or Tenant and repair all damage caused by such removal. If the
Leased Premises, the Building, the Outside Areas and the Property are not
surrendered to Landlord in the condition required by this paragraph at the
expiration or sooner termination of this Lease, Landlord may, at Tenant’s
expense, so remove Tenant’s signs, property and/or improvements not so removed
and make such repairs and replacements not so made or hire, at Tenant’s expense,
independent contractors to perform such work. Tenant shall be liable to Landlord
for all costs incurred by Landlord in returning the Leased Premises, the
Building and the Outside Areas to the required condition, together with interest
on all costs so incurred from the date paid by Landlord at the then maximum rate
of interest not prohibited or made usurious by law until paid. Tenant shall pay
to Landlord the amount of all costs so incurred plus such interest thereon,
within ten (10) days of Landlord’s billing Tenant for same. Tenant shall
indemnify Landlord against loss or liability resulting from delay by Tenant in
surrendering the Leased Premises, including, without limitation, any claims made
by any succeeding Tenant or any losses to Landlord with respect to lost
opportunities to lease to succeeding tenants.

 

3.

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ARTICLE 3

 

RENT, LATE CHARGES AND SECURITY DEPOSITS

 

3.1 Base Monthly Rent. Commencing as of the Lease Commencement Date and
continuing throughout the Lease Term, Tenant shall pay to Landlord, without
prior demand therefor, in advance on the first day of each calendar month, the
amount set forth as “Base Monthly Rent” in Article 1 (the “Base Monthly Rent”).
As of the Lease Commencement Date, Base Monthly Rent for the month of January
2004 shall be $104,863.50 but shall not prorated for any partial month.

 

3.2 Additional Rent. Commencing as of the Lease Commencement Date and continuing
throughout the Lease Term, in addition to the Base Monthly Rent and to the
extent not required by Landlord to be contracted for and paid directly by
Tenant, Tenant shall pay to Landlord as additional rent (the “Additional Rent”)
the following amounts:

 

(a) An amount equal to all Property Operating Expenses (as defined in Article
13) incurred by Landlord. Payment shall be made by whichever of the following
methods (or combination of methods) is (are) from time to time designated by
Landlord:

 

(i) Landlord may forward invoices or bills for such expenses to Tenant, and
Tenant shall, no later than ten (10) days prior to the due date, pay such
invoices or bills and deliver satisfactory evidence of such payment to Landlord,
and/or

 

(ii) Landlord may bill to Tenant, on a periodic basis not more frequently than
monthly, the amount of such expenses (or group of expenses) as paid or incurred
by Landlord, and Tenant shall pay to Landlord the amount of such expenses within
ten days after receipt of a written bill therefor from Landlord, and/or

 

(iii) Landlord may deliver to Tenant Landlord’s reasonable estimate of any given
expense (such as Landlord’s Insurance Costs or Real Property Taxes), or group of
expenses, which it anticipates will be paid or incurred for the ensuing calendar
or fiscal year, as Landlord may determine, and Tenant shall pay to Landlord an
amount equal to the estimated amount of such expenses for such year in equal
monthly installments during such year with the installments of Base Monthly
Rent.

 

Landlord reserves the right to change from time to time the methods of billing
Tenant for any given expense or group of expenses or the periodic basis on which
such expenses are billed.

 

(b) Landlord’s share of the consideration received by Tenant upon certain
assignments and sublettings as required by Article 7.

 

(c) Any legal fees and costs that Tenant is obligated to pay or reimburse to
Landlord pursuant to Article 13; and

 

(d) Any other charges or reimbursements due Landlord from Tenant pursuant to the
terms of this Lease.

 

Notwithstanding the foregoing, Landlord may elect by written notice to Tenant to
have Tenant pay Real Property Taxes or any portion thereof directly to the
applicable taxing authority, in which case Tenant shall make such payments and
deliver satisfactory evidence of payment to Landlord no later than ten (10) days
before such Real Property Taxes become delinquent.

 

3.3 Year-End Adjustments. If Landlord shall have elected to bill Tenant for the
Property Operating Expenses (or any group of such expenses) on an estimated
basis in accordance with the provisions of Paragraph 3.2(a)(iii) above, Landlord
shall furnish to Tenant within three months following the end of the applicable
calendar or fiscal year, as the case may be, a statement setting forth (i) the
amount of such expenses paid or incurred during the just ended calendar or
fiscal year, as appropriate, and (ii) the amount that Tenant has paid to
Landlord for credit against such expenses for such period. If Tenant shall have
paid more than its obligation for such expenses for the stated period, Landlord
shall, at its election, either (i) credit the amount of such overpayment toward
the next ensuing payment or payments of Additional Rent that would otherwise be
due or (ii) refund in cash to Tenant the amount of such overpayment. If such
year-end statement shall show that Tenant did not pay its obligation for such
expenses in full, then Tenant shall pay to Landlord the amount of such
underpayment within ten days from Landlord’s billing of same to Tenant. The
provisions of this Paragraph shall survive the expiration or sooner termination
of this Lease.

 

3.4 Late Charge And Interest On Rent In Default. Tenant acknowledges that the
late payment by Tenant of any monthly installment of Base Monthly Rent or any
Additional Rent will cause Landlord to incur certain costs and expenses not
contemplated under this Lease, the exact amounts of which are extremely
difficult or impractical to fix. Such costs and expenses will include without
limitation, administration and collection costs and processing and accounting
expenses. Therefor, if any installment of Base Monthly Rent is not received by
Landlord from Tenant within five (5) calendar days after the same becomes due,
Tenant shall immediately pay to Landlord a late charge in an amount equal to the
amount set forth in Article 1 as the “Late Charge Amount,” and if any Additional
Rent is not received by Landlord when the same becomes due, Tenant shall
immediately pay to Landlord a late charge in an amount equal to 5% of the
Additional Rent not so paid. Landlord and Tenant agree that this late charge
represents a reasonable estimate of such costs and expenses and is fair
compensation to Landlord for the anticipated loss Landlord would suffer by
reason of Tenant’s failure to make timely payment. In no event shall this
provision for a late charge be deemed to grant to Tenant a grace period or
extension of time within which to pay any rental installment or prevent Landlord
from exercising any right or remedy available to Landlord upon Tenant’s failure
to

 

4.

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pay each rental installment due under this Lease when due, including the right
to terminate this Lease. If any rent remains delinquent for a period in excess
of five (5) calendar days, then, in addition to such late charge, Tenant shall
pay to Landlord interest on any rent that is not so paid from said tenth day at
the then maximum rate of interest not prohibited or made usurious by Law until
paid.

 

3.5 Payment Of Rent. Except as specifically provided otherwise in this Lease,
all rent shall be paid in lawful money of the United States, without any
abatement, reduction or offset for any reason whatsoever, to Landlord at such
address as Landlord may designate from time to time. Tenant’s obligation to pay
Base Monthly Rent and all Additional Rent shall be appropriately prorated at the
commencement and expiration of the Lease Term. The failure by Tenant to pay any
Additional Rent as required pursuant to this Lease when due shall be treated the
same as a failure by Tenant to pay Base Monthly Rent when due, and Landlord
shall have the same rights and remedies against Tenant as Landlord would have
had Tenant failed to pay the Base Monthly Rent when due.

 

3.6 Prepaid Rent. Intentionally deleted.

 

3.7 Security Deposit.

 

(a) Within one (1) business day following the effective date of Tenant’s plan of
reorganization entered in the the United States Bankruptcy Court for the
District of Delaware, Chapter 11 Case No. Case No. 03-13359 (CGC), Tenant shall
deposit with Landlord, the amount set forth in Article 1 as the “Security
Deposit” as security for the performance by Tenant of the terms of this Lease to
be performed by Tenant, and not as prepayment of rent. Landlord may apply such
portion or portions of the Security Deposit as are reasonably necessary for the
following purposes: (i) to remedy any default by Tenant in the payment of Base
Monthly Rent or Additional Rent or a late charge or interest on defaulted rent,
or any other monetary payment obligation of Tenant under this Lease; (ii) to
repair damage to the Leased Premises, the Building or the Outside Areas caused
or permitted to occur by Tenant; (iii) to clean and restore and repair the
Leased Premises, the Building or the Outside Areas following their surrender to
Landlord if not surrendered in the condition required pursuant to the provisions
of Article 2, and (iv) to remedy any other default of Tenant to the extent
permitted by Law including, without limitation, failure of Tenant to comply with
the terms of Paragraph 6.4 hereof. In this regard, Tenant hereby waives any
restriction on the uses to which the Security Deposit may be applied as
contained in Section 1950.7(c) of the California Civil Code and/or any successor
statute. In the event the Security Deposit or any portion thereof is so used,
Tenant shall pay to Landlord, promptly upon demand, an amount in cash sufficient
to restore the Security Deposit to the full original sum. Landlord shall not be
deemed a trustee of the Security Deposit. Landlord may use the Security Deposit
in Landlord’s ordinary business and shall not be required to segregate it from
Landlord’s general accounts. Tenant shall not be entitled to any interest on the
Security Deposit. If Landlord transfers the Building or the Property during the
Lease Term, Landlord shall pay the Security Deposit to any subsequent owner in
conformity with the provisions of Section 1950.7 of the California Civil Code
and/or any successor statute, in which event the transferring landlord shall be
released from all liability for the return of the Security Deposit. Tenant
specifically grants to Landlord (and Tenant hereby waives the provisions of
California Civil Code Section 1950.7 to the contrary) a period of sixty (60)
days following a surrender of the Leased Premises by Tenant to Landlord within
which to inspect the Leased Premises, make required restorations and repairs,
receive and verify workmen’s billings therefor, and prepare a final accounting
with respect to the Security Deposit. In no event shall the Security Deposit or
any portion thereof, be considered prepaid rent.

 

ARTICLE 4

 

USE OF LEASED PREMISES AND OUTSIDE AREA

 

4.1 Permitted Use. Tenant shall be entitled to use the Leased Premises solely
for the “Permitted Use” as set forth in Article 1 and for no other purpose
whatsoever. Tenant shall have the right to use the Outside Areas in conjunction
with its Permitted Use of the Leased Premises solely for the purposes for which
they were designed and intended and for no other purposes whatsoever. Tenant
shall have no right of access, use or occupancy of the Building roof except as
expressly permitted herein.

 

4.2 General Limitations On Use. Tenant shall not do or permit anything to be
done in or about the Leased Premises, the Building, the Outside Areas or the
Property which does or could (i) jeopardize the structural integrity of the
Building or (ii) cause damage to any part of the Leased Premises, the Building,
the Outside Areas or the Property. Tenant shall not operate any equipment within
the Leased Premises which does or could (i) injure, vibrate or shake the Leased
Premises or the Building, (ii) damage, overload or impair the efficient
operation of any electrical, plumbing, heating, ventilating or air conditioning
systems within or servicing the Leased Premises or the Building, or (iii) damage
or impair the efficient operation of the sprinkler system (if any) within or
servicing the Leased Premises or the Building. Tenant shall not install any
equipment or antennas on or make any penetrations of the exterior walls or roof
of the Building except as expressly permitted herein. Tenant shall not affix any
equipment to or make any penetrations or cuts in the floor, ceiling, walls or
roof of the Leased Premises. Tenant shall not place any loads upon the floors,
walls, ceiling or roof systems which could endanger the structural integrity of
the Building or damage its floors, foundations or supporting structural
components. Tenant shall not place any explosive, flammable or harmful fluids or
other waste materials in the drainage systems of the Leased Premises, the
Building, the Outside Areas or the Property. Tenant shall not drain or discharge
any fluids in the landscaped areas or across the paved areas of the Property.
Tenant shall not use any of the Outside Areas for the storage of its materials,
supplies, inventory or equipment and all such materials, supplies, inventory or
equipment shall at all times be stored within the Leased Premises except as may
be approved by Landlord in writing. No later than January 31, 2004, Tenant must
remove all storage containers, portable generators and its other personal
property currently

 

5.

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placed in the Outside Areas. Tenant shall not commit nor permit to be committed
any waste in or about the Leased Premises, the Building, the Outside Areas or
the Property.

 

4.3 Noise And Emissions. All noise generated by Tenant in its use of the Leased
Premises shall be confined or muffled so that it does not interfere with the
businesses of or annoy the occupants and/or users of adjacent properties. All
dust, fumes, odors and other emissions generated by Tenant’s use of the Leased
Premises shall be sufficiently dissipated in accordance with sound environmental
practice and exhausted from the Leased Premises in such a manner so as not to
interfere with the businesses of or annoy the occupants and/or users of adjacent
properties, or cause any damage to the Leased Premises, the Building, the
Outside Areas or the Property or any component part thereof or the property of
adjacent property owners.

 

4.4 Trash Disposal. Tenant shall provide trash bins or other adequate garbage
disposal facilities within the trash enclosure areas provided or permitted by
Landlord outside the Leased Premises sufficient for the interim disposal of all
of its trash, garbage and waste. All such trash, garbage and waste temporarily
stored in such areas shall be stored in such a manner so that it is not visible
from outside of such areas, and Tenant shall cause such trash, garbage and waste
to be regularly removed from the Property. Tenant shall keep the Leased Premises
and the Outside Areas in a clean, safe and neat condition free and clear of all
of Tenant’s trash, garbage, waste and/or boxes, pallets and containers
containing same at all times.

 

4.5 Parking. Tenant shall have the use of all parking within the boundaries of
the Property. Tenant shall not, at any time, park or permit to be parked any
recreational vehicles, inoperative vehicles or equipment in the Outside Areas or
on any portion of the Property. Tenant agrees to assume responsibility for
compliance by its employees and invitees with the parking provisions contained
herein. If Tenant or its employees park any vehicle within the Property in
violation of these provisions, then Landlord may, upon prior written notice to
Tenant giving Tenant one (1) day (or any applicable statutory notice period, if
longer than one (1) day) to remove such vehicle(s) at Tenant’s expense. Landlord
reserves the right to grant easements and access rights to others for use of the
parking areas on the Property, provided that such grants do not materially
interfere with Tenant’s use of the parking areas.

 

4.6 Signs. Except for business identification signs permitted by this Section
4.6, Tenant shall not place or install on or within any portion of the Leased
Premises, the exterior of the Building, the Outside Areas or the Property any
sign, advertisement, banner, placard, or picture which is visible from the
exterior of the Leased Premises. Tenant shall have the right to install a
building mounted business identification sign, subject to Landlord’s prior
written approval (which shall not be unreasonably withheld). Landlord agrees to
use its best efforts to assist Tenant in obtaining approval for such signage
from the City of San Jose. Except for the foregoing, Tenant shall not place or
install on or within any portion of the Leased Premises, the exterior of the
Building, the Outside Areas or the Property any business identification sign
which is visible from the exterior of the Leased Premises until Landlord shall
have approved in writing and in its reasonable discretion the location, size,
content, design, method of attachment and material to be used in the making of
such sign; provided, however, that so long as such signs are normal and
customary business directional or identification signs within the Building,
Tenant shall not be required to obtain Landlord’s approval. Any sign, once
approved by Landlord, shall be installed at Tenant’s sole cost and expense and
only in strict compliance with Landlord’s approval and all Laws and requirements
of the City of San Jose, using a person approved by Landlord to install same.
Landlord may remove any signs (which have not been approved in writing by
Landlord), advertisements, banners, placards or pictures so placed by Tenant on
or within the Leased Premises, the exterior of the Building, the Outside Areas
or the Property and charge to Tenant the cost of such removal, together with any
costs incurred by Landlord to repair any damage caused thereby, including any
cost incurred to restore the surface (upon which such sign was so affixed) to
its original condition. Tenant shall remove all of Tenant’s signs, repair any
damage caused thereby, and restore the surface upon which the sign was affixed
to its original condition, all to Landlord’s reasonable satisfaction, upon the
termination of this Lease.

 

4.7 Compliance With Laws And Private Restrictions. Tenant shall abide by and
shall promptly observe and comply with, at its sole cost and expense, all Laws
and Private Restrictions respecting the use and occupancy of the Leased
Premises, the Building, the Outside Areas or the Property including, without
limitation, all Laws governing the use and/or disposal of hazardous materials,
and shall defend with competent counsel, indemnify and hold Landlord harmless
from any claims, damages or liability resulting from Tenant’s failure to so
abide, observe, or comply. Tenant’s obligations hereunder shall survive the
expiration or sooner termination of this Lease.

 

4.8 Compliance With Insurance Requirements. With respect to any insurance
policies required or permitted to be carried by Landlord in accordance with the
provisions of this Lease, Tenant shall not conduct nor permit any other person
to conduct any activities nor keep, store or use (or allow any other person to
keep, store or use) any item or thing within the Leased Premises, the Building,
the Outside Areas or the Property which (i) is prohibited under the terms of any
such policies, (ii) could result in the termination of the coverage afforded
under any of such policies, (iii) could give to the insurance carrier the right
to cancel any of such policies, or (iv) could cause an increase in the rates
(over standard rates) charged for the coverage afforded under any of such
policies. Tenant shall comply with all requirements of any insurance company,
insurance underwriter, or Board of Fire Underwriters which are necessary to
maintain, at standard rates, the insurance coverages carried by either Landlord
or Tenant pursuant to this Lease, provided that Landlord has notified Tenant of
such requirements.

 

4.9 Landlord’s Right To Enter. Landlord and its agents shall have the right to
enter the Leased Premises during normal business hours after giving Tenant
reasonable notice and subject to Tenant’s reasonable security measures for the
purpose of (i) inspecting the same; (ii) showing the Leased Premises to
prospective purchasers, mortgagees or tenants; (iii) making necessary
alterations, additions or repairs; and (iv) performing any of Tenant’s
obligations when Tenant has failed to do so. Landlord shall have the right to
enter the Leased premises during normal business hours (or as otherwise agreed),
subject to Tenant’s reasonable security measures, for purposes of supplying any

 

6.

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maintenance or services agreed to be supplied by Landlord. Landlord shall have
the right to enter the Outside Areas during normal business hours for purposes
of (i) inspecting the exterior of the Building and the Outside Areas; (ii)
posting notices of nonresponsibility (and for such purposes Tenant shall provide
Landlord at least thirty days’ prior written notice of any work to be performed
on the Leased Premises); and (iii) supplying any services to be provided by
Landlord. Any entry into the Leased Premises or the Outside Areas obtained by
Landlord in accordance with this paragraph shall not under any circumstances be
construed or deemed to be a forcible or unlawful entry into, or a detainer of,
the Leased Premises, or an eviction, actual or constructive of Tenant from the
Leased Premises or any portion thereof.

 

4.10 Use Of Outside Areas. Tenant, in its use of the Outside Areas, shall at all
times keep the Outside Areas in a safe condition free and clear of all
materials, equipment, debris, trash (except within existing enclosed trash
areas), inoperable vehicles, and other items which are not specifically
permitted by Landlord to be stored or located thereon by Tenant. If, in the
opinion of Landlord, unauthorized persons are using any of the Outside Areas by
reason of, or under claim of, the express or implied authority or consent of
Tenant, then Tenant, upon demand of Landlord, shall restrain, to the fullest
extent then allowed by Law, such unauthorized use, and shall initiate such
appropriate proceedings as may be required to so restrain such use. Landlord
reserves the right to grant easements and access rights to others for use of the
Outside Areas and shall not be liable to Tenant for any diminution in Tenant’s
right to use the Outside Areas as a result.

 

4.11 Environmental Protection. Tenant’s obligations under this Section 4.11
shall survive the expiration or termination of this Lease.

 

(a) As used herein, the term “Hazardous Materials” shall mean any toxic or
hazardous substance, material or waste or any pollutant or infectious or
radioactive material, including but not limited to those substances, materials
or wastes regulated now or in the future under any of the following statutes or
regulations and any and all of those substances included within the definitions
of “hazardous substances,” “hazardous materials,” “hazardous waste,” “hazardous
chemical substance or mixture,” “imminently hazardous chemical substance or
mixture,” “toxic substances,” “hazardous air pollutant,” “toxic pollutant,” or
“solid waste” in the (a) Comprehensive Environmental Response, Compensation and
Liability Act of 1990 (“CERCLA” or “Superfund”), as amended by the Superfund
Amendments and Reauthorization Act of 1986 (“SARA”), 42 U.S.C. § 9601 et seq.,
(b) Resource Conservation and Recovery Act of 1976 (“RCRA”), 42 U.S.C. § 6901 et
seq., (c) Federal Water Pollution Control Act (“FSPCA”), 33 U.S.C. § 1251 et
seq., (d) Clean Air Act (“CAA”), 42 U.S.C. § 7401 et seq., (e) Toxic Substances
Control Act (“TSCA”), 14 U.S.C. § 2601 et seq., (f) Hazardous Materials
Transportation Act, 49 U.S.C. § 1801, et seq., (g) Carpenter-Presley-Tanner
Hazardous Substance Account Act (“California Superfund”), Cal. Health & Safety
Code § 25300 et seq., (h) California Hazardous Waste Control Act, Cal. Health &
Safety code § 25100 et seq., (i) Porter-Cologne Water Quality Control Act
(“Porter-Cologne Act”), Cal. Water Code § 13000 et seq., (j) Hazardous Waste
Disposal Land Use Law, Cal. Health & Safety codes § 25220 et seq., (k) Safe
Drinking Water and Toxic Enforcement Act of 1986 (“Proposition 65”), Cal. Health
& Safety code § 25249.5 et seq., (l) Hazardous Substances Underground Storage
Tank Law, Cal. Health & Safety code § 25280 et seq., (m) Air Resources Law, Cal.
Health & Safety Code § 39000 et seq., and (n) regulations promulgated pursuant
to said laws or any replacement thereof, or as similar terms are defined in the
federal, state and local laws, statutes, regulations, orders or rules. Hazardous
Materials shall also mean any and all other biohazardous wastes and substances,
materials and wastes which are, or in the future become, regulated under
applicable Laws for the protection of health or the environment, or which are
classified as hazardous or toxic substances, materials or wastes, pollutants or
contaminants, as defined, listed or regulated by any federal, state or local
law, regulation or order or by common law decision, including, without
limitation, (i) trichloroethylene, tetrachloroethylene, perchloroethylene and
other chlorinated solvents, (ii) any petroleum products or fractions thereof,
(iii) asbestos, (iv) polychlorinted biphenyls, (v) flammable explosives, (vi)
urea formaldehyde, (vii) radioactive materials and waste, and (viii) materials
and wastes that are harmful to or may threaten human health, ecology or the
environment.

 

(b) Notwithstanding anything to the contrary in this Lease, Tenant, at its sole
cost, shall comply with all Laws relating to Tenant’s storage, use and disposal
of Hazardous Materials; provided, however, that Tenant shall not be responsible
for contamination of the Leased Premises by Hazardous Materials existing as of
the date the Leased Premises are delivered to Tenant (whether before or after
the Scheduled Delivery Date) unless caused by Tenant. Tenant shall not store,
use or dispose of any Hazardous Materials except for those Hazardous Materials
listed in a Hazardous Materials management plan (“HMMP”) which Tenant shall
deliver to Landlord upon execution of this Lease and update at least annually
with Landlord (“Permitted Materials”) which may be used, stored and disposed of
provided (i) such Permitted Materials are used, stored, transported, and
disposed of in strict compliance with applicable laws, (ii) such Permitted
Materials shall be limited to the materials listed on and may be used only in
the quantities specified in the HMMP, and (iii) Tenant shall provide Landlord
with copies of all material safety data sheets and other documentation required
under applicable Laws in connection with Tenant’s use of Permitted Materials as
and when such documentation is provided to any regulatory authority having
jurisdiction, in no event shall Tenant cause or permit to be discharged into the
plumbing or sewage system of the Building or onto the land underlying or
adjacent to the Building any Hazardous Materials. Tenant shall be solely
responsible for and shall defend, indemnify, and hold Landlord and its agents
harmless from and against all claims, costs and liabilities, including
attorneys’ fees and costs, arising out of or in connection with Tenant’s
storage, use and/or disposal of Hazardous Materials. If the presence of
Hazardous Materials on the Leased Premises caused or permitted by Tenant results
in contamination or deterioration of water or soil, then Tenant shall promptly
take any and all action necessary to clean up such contamination, but the
foregoing shall in no event be deemed to constitute permission by Landlord to
allow the presence of such Hazardous Materials. At any time prior to the
expiration of the Lease Term if Tenant has a reasonable basis to suspect that
there has been any release or the presence of Hazardous Materials in the ground
or ground water on the Leased Premises which did not exist upon commencement of
the Lease Term, Tenant shall have the right to conduct appropriate tests of
water and soil and to deliver to Landlord the results of

 

7.

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such tests to demonstrate that no contamination in excess of permitted levels
has occurred as a result of Tenant’s use of the Leased Premises. Tenant shall
further be solely responsible for, and shall defend, indemnify, and hold
Landlord and its agents harmless from and against all claims, costs and
liabilities, including attorneys’ fees and costs, arising out of or in
connection with any removal, cleanup and restoration work and materials required
hereunder to return the Leased Premises and any other property of whatever
nature to their condition at the time the Leased Premises were delivered to
Tenant.

 

(c) Upon termination or expiration of the Lease, Tenant at its sole expense
shall cause all Hazardous Materials placed in or about the Leased Premises, the
Building and/or the Property by Tenant, its agents, contractors, or invitees,
and all installations (whether interior or exterior) made by or on behalf of
Tenant relating to the storage, use, disposal or transportation of Hazardous
Materials to be removed from the property and transported for use, storage or
disposal in accordance and compliance with all Laws and other requirements
respecting Hazardous Materials used or permitted to be used by Tenant. Tenant
shall apply for and shall obtain from all appropriate regulatory authorities
(including any applicable fire department or regional water quality control
board) all permits, approvals and clearances necessary for the closure of the
Property and shall take all other actions as may be required to complete the
closure of the Building and the Property. In addition, prior to vacating the
Leased Premises, Tenant shall undertake and submit to Landlord an environmental
site assessment from an environmental consulting company reasonably acceptable
to Landlord which site assessment shall evidence Tenant’s compliance with this
Paragraph 4.11.

 

(d) At any time prior to expiration of the Lease term, subject to reasonable
prior notice (not less than forty-eight (48) hours) and Tenant’s reasonable
security requirements and provided such activities do not unreasonably interfere
with the conduct of Tenant’s business at the Leased Premises, Landlord shall
have the right to enter in and upon the Property, Building and Leased Premises
in order to conduct appropriate tests of water and soil to determine whether
levels of any Hazardous Materials in excess of legally permissible levels has
occurred as a result of Tenant’s use thereof. Landlord shall furnish copies of
all such test results and reports to Tenant and, at Tenant’s option and cost,
shall permit split sampling for testing and analysis by Tenant. Such testing
shall be at Tenant’s expense if Landlord has a reasonable basis for suspecting
and confirms the presence of Hazardous Materials in the soil or surface or
ground water in, on, under, or about the Property, the Building or the Leased
Premises, which has been caused by or resulted from the activities of Tenant,
its agents, contractors, or invitees.

 

(e) Landlord may voluntarily cooperate in a reasonable manner with the efforts
of all governmental agencies in reducing actual or potential environmental
damage. Tenant shall not be entitled to terminate this Lease or to any reduction
in or abatement of rent by reason of such compliance or cooperation. Tenant
agrees at all times to cooperate fully with the requirements and recommendations
of governmental agencies regulating, or otherwise involved in, the protection of
the environment.

 

4.12 Rules And Regulations. In the event Redback Networks Inc. is no longer the
sole tenant of the Leased Premises, Landlord shall have the right from time to
time to establish reasonable rules and regulations and/or amendments or
additions thereto respecting the use of the Leased Premises and the Outside
Areas for the care and orderly management of the Property. Upon delivery to
Tenant of a copy of such rules and regulations or any amendments or additions
thereto, Tenant shall comply with such rules and regulations. A violation by
Tenant of any of such rules and regulations shall constitute a default by Tenant
under this Lease. If there is a conflict between the rules and regulations and
any of the provisions of this Lease, the provisions of this Lease shall prevail.
Landlord shall not be responsible or liable to Tenant for the violation of such
rules and regulations by any other tenant of the Property.

 

4.13 Reservations. Landlord reserves the right from time to time to grant,
without the consent or joinder of Tenant, such easements, rights of way and
dedications that Landlord deems necessary, and to cause the recordation of
parcel maps and restrictions, so long as such easements, rights of way and
dedications not unreasonably interfere with the use of the Leased Premises by
Tenant. Tenant agrees to execute any documents reasonably requested by Landlord
to effectuate any such easement rights, dedications, maps or restrictions.

 

4.14 Roof. Notwithstanding any provision of this Lease to the contrary, Landlord
hereby reserves to itself and its designees rights of access, use and occupancy
of the Building roof, and Tenant shall have no right of access, use or occupancy
of the Building roof except as permitted herein and except to the extent
required in order to enable Tenant to perform Tenant’s maintenance and repair
obligations pursuant to this Lease. Subject to Tenant’s restoration and repair
obligations under Paragraph 2.7, Tenant shall have the right to install antennae
and equipment on the Building roof in an area designated by Landlord no larger
than 20 feet by 20 feet.

 

ARTICLE 5

 

REPAIRS, MAINTENANCE, SERVICES AND UTILITIES

 

5.1 Repair And Maintenance. Except in the case of damage to or destruction of
the Leased Premises, the Building, the Outside Areas or the Property caused by
an act of God or other peril, in which case the provisions of Article 10 shall
control, the parties shall have the following obligations and responsibilities
with respect to the repair and maintenance of the Leased Premises, the Building,
the Outside Areas, and the Property.

 

(a) Tenant’s Obligations. Tenant shall, at all times during the Lease Term and
at its sole cost and expense, regularly clean and continuously keep and maintain
in good order, condition and repair the Leased Premises and every part thereof
including, without limiting the generality of the foregoing, (i) all interior
walls, floors and ceilings, (ii) all windows, doors and skylights, (iii) all
electrical wiring, conduits, connectors and fixtures,

 

8.

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(iv) all plumbing, pipes, sinks, toilets, faucets and drains, (v) all lighting
fixtures, bulbs and lamps and all heating, ventilating and air conditioning
equipment, and (vi) all entranceways to the Leased Premises. Tenant, if
requested to do so by Landlord, shall hire, at Tenant’s sole cost and expense, a
licensed heating, ventilating and air conditioning contractor to regularly and
periodically (not less frequently than every three months) inspect and perform
required maintenance on the heating, ventilating and air conditioning equipment
and systems serving the Leased Premises, or alternatively, Landlord may, at its
election, contract in its own name for such regular and periodic inspections of
and maintenance on such heating, ventilating and air conditioning equipment and
systems and charge to Tenant, as Additional Rent, the cost thereof. Tenant, if
requested to do so by Landlord, shall hire, at Tenant’s sole cost and expense, a
licensed roofing contractor to regularly and periodically (not less frequently
than every three months) inspect and perform required maintenance on the roof of
the Leased Premises, or alternatively, Landlord may, at its election, contract
in its own name for such regular and periodic inspections of and maintenance on
the roof and charge to Tenant, as Additional Rent, the cost thereof. Tenant
shall, at all times during the Lease Term, keep in a clean and safe condition
the Outside Areas. Tenant shall regularly and periodically sweep and clean the
driveways and parking areas. Tenant shall, at its sole cost and expense, repair
all damage to the Leased Premises, the Building, the Outside Areas or the
Property caused by the activities of Tenant, its employees, invitees or
contractors promptly following written notice from Landlord to so repair such
damages. If Tenant shall fail to perform the required maintenance or fail to
make repairs required of it pursuant to this paragraph within a reasonable
period of time following notice from Landlord to do so, then Landlord may, at
its election and without waiving any other remedy it may otherwise have under
this Lease or at law, perform such maintenance or make such repairs and charge
to Tenant, as Additional Rent, the costs so incurred by Landlord for same. All
glass within or a part of the Leased Premises, both interior and exterior, is at
the sole risk of Tenant and any broken glass shall promptly be replaced by
Tenant at Tenant’s expense with glass of the same kind, size and quality.

 

(b) Landlord’s Obligation. Landlord shall, at its sole cost and expense, at all
times during the Lease Term, maintain and repair the foundation, the roof
structure and the load-bearing and exterior walls of the Building. Landlord
shall repair and maintain the roof membrane of the Building as needed and charge
to Tenant, as part of Property Maintenance Costs, the costs incurred by Landlord
in performing such maintenance and/or making such repairs.

 

5.2 Utilities. Tenant shall arrange at its sole cost and expense and in its own
name, for the supply of gas and electricity to the Leased Premises. In the event
that such services are not separately metered, Tenant shall, at its sole
expense, cause such meters to be installed. Landlord shall maintain the water
meter(s) in its own name; provided, however, that if at any time during the
Lease Term Landlord shall require Tenant to put the water service in Tenant’s
name, Tenant shall do so at Tenant’s sole cost. Tenant shall be responsible for
determining if the local supplier of water, gas and electricity can supply the
needs of Tenant and whether or not the existing water, gas and electrical
distribution systems within the Building and the Leased Premises are adequate
for Tenant’s needs. Tenant shall be responsible for determining if the existing
sanitary and storm sewer systems now servicing the Leased Premises and the
Property are adequate for Tenant’s needs. Tenant shall pay all charges for
water, gas, electricity and storm and sanitary sewer services as so supplied to
the Leased Premises, irrespective of whether or not the services are maintained
in Landlord’s or Tenant’s name.

 

5.3 Security. Tenant acknowledges that Landlord has not undertaken any duty
whatsoever to provide security for the Leased Premises, the Building, the
Outside Areas or the Property and, accordingly, Landlord is not responsible for
the security of same or the protection of Tenant’s property or Tenant’s
employees, invitees or contractors. To the extent Tenant determines that such
security or protection services are advisable or necessary, Tenant shall arrange
for and pay the costs of providing same.

 

5.4 Energy And Resource Consumption. Landlord may voluntarily cooperate in a
reasonable manner with the efforts of governmental agencies and/or utility
suppliers in reducing energy or other resource consumption within the Property,
provided that such cooperation does not materially and adversely impact Tenant’s
use of the Leased Premises. Tenant shall not be entitled to terminate this Lease
or to any reduction in or abatement of rent by reason of such compliance or
cooperation. Tenant agrees at all times to cooperate fully with Landlord and to
abide by all reasonable rules established by Landlord in order to comply with
the requirements of utility suppliers and governmental agencies regulating the
consumption of energy and/or other resources.

 

5.5 Limitation Of Landlord’s Liability. Landlord shall not be liable to Tenant
for injury to Tenant, its employees, agents, invitees or contractors, damage to
Tenant’s property or loss of Tenant’s business or profits, nor shall Tenant be
entitled to terminate this Lease or to any reduction in or abatement of rent by
reason of (i) Landlord’s failure to provide security services or systems within
the Property for the protection of the Leased Premises, the Building or the
Outside Areas, or the protection of Tenant’s property or Tenant’s employees,
invitees, agents or contractors, or (ii) Landlord’s failure to perform any
maintenance or repairs to the Leased Premises, the Building, the Outside Areas
or the Property until Tenant shall have first notified Landlord, in writing, of
the need for such maintenance or repairs, and then only after Landlord shall
have had a reasonable period of time following its receipt of such notice within
which to perform such maintenance or repairs, or (iii) any failure,
interruption, rationing or other curtailment in the supply of water, electric
current, gas or other utility service to the Leased Premises, the Building, the
Outside Areas or the Property from whatever cause (other than Landlord’s gross
negligence or willful misconduct), or (iv) the unauthorized intrusion or entry
into the Leased Premises by third parties (other than Landlord).

 

9.

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ARTICLE 6

 

ALTERATIONS AND IMPROVEMENTS

 

6.1 By Tenant. Tenant shall not make any alterations to or modifications of the
Leased Premises or construct any improvements within the Leased Premises until
Landlord shall have first approved, in writing, the plans and specifications
therefor, which approval may be withheld in Landlord’s reasonable discretion.
Landlord’s approval shall be deemed given if not denied by Landlord in a written
notice to Tenant delivered within fifteen (15) days following receipt of
Tenant’s written request. Tenant’s written request shall also contain a request
for Landlord to elect whether or not it will require Tenant to remove the
subject alterations, modifications or improvements at the expiration or earlier
termination of this Lease. If such additional request is not included, Landlord
may make such election upon any subsequent request by Tenant or at the
expiration or earlier termination of this Lease (and for purposes of Tenant’s
removal obligations set forth in Section 2.7 above, Landlord shall be deemed to
have made the election at the time the alterations, modifications or
improvements were completed). All such modifications, alterations or
improvements, once so approved, shall be made, constructed or installed by
Tenant at Tenant’s expense (including all permit fees and governmental charges
related thereto), using a licensed contractor first approved by Landlord, in
substantial compliance with the Landlord-approved plans and specifications
therefor. All work undertaken by Tenant shall be done in accordance with all
Laws and in a good and workmanlike manner using new materials of good quality.
Tenant shall not commence the making of any such modifications or alterations or
the construction of any such improvements until (i) all required governmental
approvals and permits shall have been obtained, (ii) all requirements regarding
insurance imposed by this Lease have been satisfied, (iii) Tenant shall have
given Landlord at least five (5) business days prior written notice of its
intention to commence such work so that Landlord may post and file notices of
non-responsibility, and (iv) if requested by Landlord, Tenant shall have
obtained contingent liability and broad form builder’s risk insurance in an
amount satisfactory to Landlord in its reasonable discretion to cover any perils
relating to the proposed work not covered by insurance carried by Tenant
pursuant to Article 9. In no event shall Tenant make any modification,
alterations or improvements whatsoever to the Outside Areas or the exterior or
structural components of the Building including, without limitation, any cuts or
penetrations in the floor, roof or exterior walls of the Leased Premises. As
used in this Article, the term “modifications, alterations and/or improvements”
shall include, without limitation, the installation of additional electrical
outlets, overhead lighting fixtures, drains, sinks, partitions, doorways, or the
like. Notwithstanding the foregoing, Tenant, without Landlord’s prior written
consent, shall be permitted to make non-structural alterations to the Building,
provided that: (a) such alterations do not exceed $50,000 individually or
$200,000 in the aggregate, (b) Tenant shall timely provide Landlord the notice
no less than ten (10) days prior to commencing such alterations, (c) Tenant
shall notify Landlord in writing within thirty (30) days of completion of the
alteration and deliver to Landlord a set of the plans and specifications
therefor, either “as built” or marked to show construction changes made, and (d)
Tenant shall, upon Landlord’s request, remove the alteration at the termination
of the Lease and restore the Leased Premises to their condition prior to such
alteration.

 

6.2 Ownership Of Improvements. All modifications, alterations and improvements
made or added to the Leased Premises by Tenant (other than Tenant’s inventory,
equipment, movable furniture, wall decorations and trade fixtures) shall be
deemed real property and a part of the Leased Premises, but shall remain the
property of Tenant during the Lease, and Tenant hereby covenants and agrees not
to grant a security interest in any such items to any party other than Landlord.
Any such modifications, alterations or improvements, once completed, shall not
be altered or removed from the Leased Premises during the Lease Term without
Landlord’s written approval first obtained in accordance with the provisions of
Paragraph 6.1 above. At the expiration or sooner termination of this Lease, all
such modifications, alterations and improvements other than Tenant’s inventory,
equipment, movable furniture, wall decorations and trade fixtures, shall
automatically become the property of Landlord and shall be surrendered to
Landlord as part of the Leased Premises as required pursuant to Article 2,
unless Landlord shall require Tenant to remove any of such modifications,
alterations or improvements in accordance with the provisions of Article 2, in
which case Tenant shall so remove same. Landlord shall have no obligations to
reimburse Tenant for all or any portion of the cost or value of any such
modifications, alterations or improvements so surrendered to Landlord. All
modifications, alterations or improvements which are installed or constructed on
or attached to the Leased Premises by Landlord and/or at Landlord’s expense
shall be deemed real property and a part of the Leased Premises and shall be
property of Landlord. All lighting, plumbing, electrical, heating, ventilating
and air conditioning fixtures, partitioning, window coverings, wall coverings
and floor coverings installed by Tenant shall be deemed improvements to the
Leased Premises and not trade fixtures of Tenant.

 

6.3 Alterations Required By Law. Tenant shall make all modifications,
alterations and improvements to the Leased Premises, at its sole cost, that are
required by any Law because of (i) Tenant’s use or occupancy of the Leased
Premises, the Building, the Outside Areas or the Property, (ii) Tenant’s
application for any permit or governmental approval, or (iii) Tenant’s making of
any modifications, alterations or improvements to or within the Leased Premises.
If Landlord shall, at any time during the Lease Term, be required by any
governmental authority to make any modifications, alterations or improvements to
the Building or the Property, or if due to any change in those Laws applicable
to commercial buildings generally, capital improvements are required to the
Leased Premises (except for modifications, alterations or improvements covered
by (i), (ii) or (iii) above) Landlord shall perform such modifications,
alterations or improvements and the cost incurred by Landlord in making such
modifications, alterations or improvements, including interest at a rate equal
to the greater of (a) 12%, or (b) the sum of that rate quoted by Wells Fargo
Bank, N.T. & S.A. from time to time as its prime rate, plus two percent (2%)
(“Wells Prime Plus Two”) (but in no event more than the maximum rate of interest
not prohibited or made usurious), shall be amortized by Landlord over the useful
life of such modifications, alterations or improvements, as determined in
accordance with generally accepted accounting principles, and the monthly
amortized cost of such modifications, alterations and improvements as so
amortized shall be considered a Property Maintenance Cost.

 

10.

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6.4 Liens. Tenant shall keep the Property and every part thereof free from any
lien, and shall pay when due all bills arising out of any work performed,
materials furnished, or obligations incurred by Tenant, its agents, employees or
contractors relating to the Property. If any such claim of lien is recorded
against Tenant’s interest in this Lease, the Property or any part thereof,
Tenant shall bond against, discharge or otherwise cause such lien to be entirely
released within ten days after the same has been recorded. Tenant’s failure to
do so shall be conclusively deemed a material default under the terms of this
Lease.

 

ARTICLE 7

 

ASSIGNMENT AND SUBLETTING BY TENANT

 

7.1 By Tenant. Tenant shall not sublet the Leased Premises or any portion
thereof or assign its interest in this Lease, whether voluntarily or by
operation of Law, without Landlord’s prior written consent which shall not be
unreasonably withheld. Any attempted subletting or assignment without Landlord’s
prior written consent, at Landlord’s election, shall constitute a default by
Tenant under the terms of this Lease. The acceptance of rent by Landlord from
any person or entity other than Tenant, or the acceptance of rent by Landlord
from Tenant with knowledge of a violation of the provisions of this paragraph,
shall not be deemed to be a waiver by Landlord of any provision of this Article
or this Lease or to be a consent to any subletting by Tenant or any assignment
of Tenant’s interest in this Lease. Without limiting the circumstances in which
it may be reasonable for Landlord to withhold its consent to an assignment or
subletting, Landlord and Tenant acknowledge that it shall be reasonable for
Landlord to withhold its consent in the following instances:

 

(a) the proposed assignee or sublessee is a governmental agency;

 

(b) in Landlord’s reasonable judgment, the use of the Leased Premises by the
proposed assignee or sublessee would involve occupancy by other than for a
Permitted Use, would entail any alterations which would lessen the value of the
leasehold improvements in the Leased Premises, or would require increased
services by Landlord;

 

(c) in Landlord’s reasonable judgment, the financial worth of the proposed
assignee is less than that of Tenant or does not meet the credit standards
applied by Landlord;

 

(d) the proposed assignee or sublessee (or any of its affiliates) has been in
material default under a lease, has been in litigation with a previous landlord,
or in the ten years prior to the assignment or sublease has filed for bankruptcy
protection, has been the subject of an involuntary bankruptcy, or has been
adjudged insolvent;

 

(e) Landlord has experienced a previous default by or is in litigation with the
proposed assignee or sublessee;

 

(f) in Landlord’s reasonable judgment, the Leased Premises, or the relevant part
thereof, will be used in a manner that will violate any negative covenant as to
use contained in this Lease;

 

(g) the use of the Leased Premises by the proposed assignee or sublessee will
violate any applicable law, ordinance or regulation;

 

(h) the proposed assignee or sublessee is, as of the date of this Lease, a
tenant in the Building;

 

(i) the proposed assignment or sublease fails to include all of the terms and
provisions required to be included therein pursuant to this Article 7;

 

(j) Tenant is in default of any obligation of Tenant under this Lease, or Tenant
has defaulted under this Lease on three or more occasions during the 12 months
preceding the date that Tenant shall request consent; or

 

(k) in the case of a subletting of less than the entire Leased Premises, if the
subletting would result in the division of the Leased Premises into more than
two subparcels or would require improvements to be made outside of the Leased
Premises.

 

7.2 Merger, Reorganization, or Sale of Assets. Any dissolution, merger,
consolidation or other reorganization of Tenant, or the sale or other transfer
in the aggregate over the Lease Term of a controlling percentage of the capital
stock of Tenant, or the sale or transfer of all or a substantial portion of the
assets of Tenant, shall be deemed a voluntary assignment of Tenant’s interest in
this Lease. The phrase “controlling percentage” means the ownership of and the
right to vote stock possessing more than fifty percent of the total combined
voting power of all classes of Tenant’s capital stock issued, outstanding and
entitled to vote for the election of directors. If Tenant is a partnership, a
withdrawal or change, voluntary, involuntary or by operation of Law, of any
general partner, or the dissolution of the partnership, shall be deemed a
voluntary assignment of Tenant’s interest in this Lease. Upon Landlord’s request
from time to time, Tenant shall promptly provide Landlord with a statement
certified by the Tenant’s chief operating officer, which shall provide the
following information: (a) the names of all of Tenant’s shareholders and their
ownership interests at the time thereof, provided Tenant’s shares are not
publicly traded; (b) the state in which Tenant is incorporated; (c) the location
of Tenant’s principal place of business; (d) information regarding a material
change in the corporate structure of Tenant, including, without limitation, a
merger or consolidation; and (e) any other information regarding Tenant’s
ownership that Landlord reasonably requests. Notwithstanding the foregoing,
Tenant may, without Landlord’s prior written consent and without being subject
to any of the provisions of this Article 7, including without limitation,
Landlord’s right to recapture any portion of the Leased Premises, sublet the

 

11.

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Leased Premises or assign this Lease to (individually, a “Permitted Assignee,”
collectively, “Permitted Assignees”): (i) a subsidiary, affiliate, division,
corporation or joint venture controlling, controlled by or under common control
with Tenant; (ii) a successor corporation related to Tenant by merger,
consolidation, nonbankruptcy reorganization, or government action; or (iii)
Tenant, after the sale or transfer of a controlling percentage of the capital
stock of Tenant; provided that any Permitted Assignee under (i), (ii) or (iii)
above has a market capitalization on the effective date of the assignment or
sublease which is equal to or greater than Tenant.

 

7.3 Landlord’s Election. If Tenant shall desire to assign its interest under the
Lease or to sublet the Leased Premises, Tenant must first notify Landlord, in
writing, of its intent to so assign or sublet, at least thirty (30) days in
advance of the date it intends to so assign its interest in this Lease or sublet
the Leased Premises but not sooner than one hundred eighty days in advance of
such date, specifying in detail the terms of such proposed assignment or
subletting, including the name of the proposed assignee or sublessee, the
property assignee’s or sublessee’s intended use of the Leased Premises, current
financial statements (including a balance sheet, income statement and statement
of cash flow, all prepared in accordance with generally accepted accounting
principles) of such proposed assignee or sublessee, the form of documents to be
used in effectuating such assignment or subletting and such other information as
Landlord may reasonably request. Landlord shall have a period of ten (10)
business days following receipt of such notice and the required information
within which to do one of the following: (i) consent to such requested
assignment or subletting subject to Tenant’s compliance with the conditions set
forth in Paragraph 7.4 below, or (ii) refuse to so consent to such requested
assignment or subletting, provided that such consent shall not be unreasonably
refused, or (iii) terminate this Lease as to the portion (including all) of the
Leased Premises that is the subject of the proposed assignment or subletting if
Tenant proposes to assign or sublet fifty percent (50%) or more of the total
space leased by Tenant from Landlord in the Project (pursuant to this Lease and
all other leases between Landlord and Tenant). During such ten (10) business day
period, Tenant covenants and agrees to supply to Landlord, upon request, all
necessary or relevant information which Landlord may reasonably request
respecting such proposed assignment or subletting and/or the proposed assignee
or sublessee.

 

7.4 Conditions To Landlord’s Consent. If Landlord elects to consent, or shall
have been ordered to so consent by a court of competent jurisdiction, to such
requested assignment or subletting, such consent shall be expressly conditioned
upon the occurrence of each of the conditions below set forth, and any purported
assignment or subletting made or ordered prior to the full and complete
satisfaction of each of the following conditions shall be void and, at the
election of Landlord, which election may be exercised at any time following such
a purported assignment or subletting but prior to the satisfaction of each of
the stated conditions, shall constitute a material default by Tenant under this
Lease until cured by satisfying in full each such condition by the assignee or
sublessee. The conditions are as follows:

 

(a) Landlord having approved in form and substance the assignment or sublease
agreement and any ancillary documents, which approval shall not be unreasonably
withheld by Landlord if the requirements of this Article 7 are otherwise
complied with.

 

(b) Each such sublessee or assignee having agreed, in writing satisfactory to
Landlord and its counsel and for the benefit of Landlord, to assume, to be bound
by, and to perform the obligations of this Lease to be performed by Tenant which
relate to space being subleased.

 

(c) Tenant having fully and completely performed all of its obligations under
the terms of this Lease through and including the date of such assignment or
subletting.

 

(d) Tenant having reimbursed to Landlord all reasonable costs and reasonable
attorneys’ fees incurred by Landlord in conjunction with the processing and
documentation of any such requested subletting or assignment.

 

(e) Tenant having delivered to Landlord a complete and fully-executed duplicate
original of such sublease agreement or assignment agreement (as applicable) and
all related agreements.

 

(f) Tenant having paid, or having agreed in writing to pay as to future
payments, to Landlord the assignment consideration or excess rentals to be paid
to Tenant or to any other on Tenant’s behalf or for Tenant’s benefit for such
assignment or subletting as follows:

 

(i) If Tenant assigns its interest under this Lease and if all or a portion of
the consideration for such assignment is to be paid by the assignee at the time
of the assignment, that Tenant shall have paid to Landlord and Landlord shall
have received an amount equal to fifty percent (50%) of the assignment
consideration so paid or to be paid (whichever is the greater) at the time of
the assignment by the assignee; or

 

(ii) If Tenant assigns its interest under this Lease and if Tenant is to receive
all or a portion of the consideration for such assignment in future
installments, that Tenant and Tenant’s assignee shall have entered into a
written agreement with and for the benefit of Landlord satisfactory to Landlord
and its counsel whereby Tenant and Tenant’s assignee jointly agree to pay to
Landlord an amount equal to fifty percent (50%) of all such future assignment
consideration installments to be paid by such assignee as and when such
assignment consideration is so paid.

 

(iii) If Tenant subleases the Leased Premises, that Tenant and Tenant’s
sublessee shall have entered into a written agreement with and for the benefit
of Landlord satisfactory to Landlord and its counsel whereby Tenant and Tenant’s
sublessee jointly agree to pay to Landlord fifty percent (50%) of all excess
rentals to be paid by such sublessee as and when such excess rentals are so
paid.

 

12.

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Notwithstanding the foregoing, in the event either (1) Tenant has assigned or
proposes to assign its interest in this Lease and any other lease between
Landlord and Tenant for space in the Project equal to or exceeding 99,870 square
feet; or (2) Tenant has sublet or proposes to sublet 99,870 or more square feet
of the total space in the Project leased by Tenant (pursuant to this Lease and
all other leases between Landlord and Tenant), then Landlord shall be entitled
to one hundred percent (100%) of the assignment consideration or excess rentals,
as applicable, in connection with any assignment or sublease, payable as set
forth in (i) through (iii) above.

 

7.5 Assignment Consideration And Excess Rentals Defined. For purposes of this
Article, including any amendment to this Article by way of addendum or other
writing, the term “assignment consideration” shall mean all consideration to be
paid by the assignee to Tenant or to any other party on Tenant’s behalf or for
Tenant’s benefit as consideration for such assignment, after deduction for
reasonable leasing commissions and reasonable legal fees paid by Tenant in
connection with such assignment but without deductions for any other costs or
expenses (including, without limitation, tenant improvements, capital
improvements, building upgrades, permit fees, and other consultants’ fees)
incurred by Tenant in connection with such assignment, and the term “excess
rentals” shall mean all consideration to be paid by the sublessee to Tenant or
to any other party on Tenant’s behalf or for Tenant’s benefit for the sublease
of all or any portion of the Leased Premises in excess of the rent due to
Landlord under the terms of this Lease for the portion so subleased for the same
period, after deduction for reasonable leasing commissions and reasonable legal
fees paid by Tenant in connection with such assignment but without deductions
for any other costs or expenses (including, without limitation, tenant
improvements, capital improvements, building upgrades, permit fees, and other
consultants’ fees) incurred by Tenant in connection with such sublease. Tenant
agrees that the portion of any assignment consideration and/or excess rentals
arising from any assignment or subletting by Tenant which is to be paid to
Landlord pursuant to this Article now is and shall then be the property of
Landlord and not the property of Tenant.

 

7.6 Payments. All payments required by this Article to be made to Landlord shall
be made in cash in full as and when they become due. At the time Tenant,
Tenant’s assignee or sublessee makes each such payment to Landlord, Tenant or
Tenant’s assignee or sublessee, as the case may be, shall deliver to Landlord an
itemized statement in reasonable detail showing the method by which the amount
due Landlord was calculated and certified by the party making such payment as
true and correct.

 

7.7 Good Faith. The rights granted to Tenant by this Article are granted in
consideration of Tenant’s express covenant that all pertinent allocations which
are made by Tenant between the rental value of the Leased Premises and the value
of any of Tenant’s personal property which may be conveyed or leased generally
concurrently with and which may reasonably be considered a part of the same
transaction as the permitted assignment or subletting shall be made fairly,
honestly and in good faith. If Tenant shall breach this covenant, Landlord may
immediately declare Tenant to be in default under the terms of this Lease and
terminate this Lease and/or exercise any other rights and remedies Landlord
would have under the terms of this Lease in the case of a material default by
Tenant under this Lease.

 

7.8 Effect Of Landlord’s Consent. No subletting or assignment, even with the
consent of Landlord, shall relieve Tenant of its personal and primary obligation
to pay rent and to perform all of the other obligations to be performed by
Tenant hereunder. Consent by Landlord to one or more assignments of Tenant’s
interest in this Lease or to one or more sublettings of the Leased Premises
shall not be deemed to be a consent to any subsequent assignment or subletting.
If Landlord shall have been ordered by a court of competent jurisdiction to
consent to a requested assignment or subletting, or such an assignment or
subletting shall have been ordered by a court of competent jurisdiction over the
objection of Landlord, such assignment or subletting shall not be binding
between the assignee (or sublessee) and Landlord until such time as all
conditions set forth in Paragraph 7.4 above have been fully satisfied (to the
extent not then satisfied) by the assignee or sublessee, including, without
limitation, the payment to Landlord of all agreed assignment considerations
and/or excess rentals then due Landlord.

 

ARTICLE 8

 

LIMITATION ON LANDLORD’S LIABILITY AND INDEMNITY

 

8.1 Limitation On Landlord’s Liability And Release. Landlord shall not be liable
to Tenant for, and Tenant hereby releases Landlord and its partners, principals,
members, officers, agents, employees, lenders, attorneys, and consultants from,
any and all liability, whether in contract, tort or on any other basis, for any
injury to or any damage sustained by Tenant, Tenant’s agents, employees,
contractors or invitees, any damage to Tenant’s property, or any loss to
Tenant’s business, loss of Tenant’s profits or other financial loss of Tenant
resulting from or attributable to the condition of, the management of, the
repair or maintenance of, the protection of, the supply of services or utilities
to, the damage in or destruction of the Leased Premises, the Building, the
Property or the Outside Areas, including without limitation (i) the failure,
interruption, rationing or other curtailment or cessation in the supply of
electricity, water, gas or other utility service to the Property, the Building
or the Leased Premises; (ii) the vandalism or forcible entry into the Building
or the Leased Premises; (iii) the penetration of water into or onto any portion
of the Leased Premises; (iv) the failure to provide security and/or adequate
lighting in or about the Property, the Building or the Leased Premises, (v) the
existence of any design or construction defects within the Property, the
Building or the Leased Premises; (vi) the failure of any mechanical systems to
function properly (such as the HVAC systems); (vii) the blockage of access to
any portion of the Property, the Building or the Leased Premises, except that
Tenant does not so release Landlord from such liability to the extent such
damage was proximately caused by Landlord’s active negligence, willful
misconduct, or Landlord’s failure to perform an obligation expressly undertaken
pursuant to this Lease after a reasonable period of time shall have lapsed
following receipt of written notice from Tenant to so perform such obligation.
In this regard, Tenant acknowledges that it is fully apprised of the

 

13.

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provisions of Law relating to releases, and particularly to those provisions
contained in Section 1542 of the California Civil Code which reads as follows:

 

“A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor.”

 

Notwithstanding such statutory provision, and for the purpose of implementing a
full and complete release and discharge, Tenant hereby (i) waives the benefit of
such statutory provision and (ii) acknowledges that, subject to the exceptions
specifically set forth herein, the release and discharge set forth in this
paragraph is a full and complete settlement and release and discharge of all
claims and is intended to include in its effect, without limitation, all claims
which Tenant, as of the date hereof, does not know of or suspect to exist in its
favor.

 

8.2 Tenant’s Indemnification Of Landlord. Tenant shall defend with competent
counsel satisfactory to Landlord any claims made or legal actions filed or
threatened against Landlord with respect to the violation of any Law, or the
death, bodily injury, personal injury, property damage, or interference with
contractual or property rights suffered by any third party occurring within the
Leased Premises or resulting from Tenant’s use or occupancy of the Leased
Premises, the Building or the Outside Areas, or resulting from Tenant’s
activities in or about the Leased Premises, the Building, the Outside Areas or
the Property, and Tenant shall indemnify and hold Landlord, Landlord’s partners,
principals, members, employees, agents and contractors harmless from any loss
liability, penalties, or expense whatsoever (including any loss attributable to
vacant space which otherwise would have been leased, but for such activities)
resulting therefrom, except to the extent proximately caused by the active
negligence or willful misconduct of Landlord or Landlord’s default under this
Lease (after notice and opportunity to cure as specified in Paragraph 12.3).
This indemnity agreement shall survive the expiration or sooner termination of
this Lease.

 

ARTICLE 9

 

INSURANCE

 

9.1 Tenant’s Insurance. Tenant shall maintain insurance complying with all of
the following:

 

(a) Tenant shall procure, pay for and keep in full force and effect, at all
times during the Lease Term, the following:

 

(i) Commercial general liability insurance insuring Tenant against liability for
personal injury, bodily injury, death and damage to property occurring within
the Leased Premises, or resulting from Tenant’s use or occupancy of the Leased
Premises, the Building, the Outside Areas or the Property, or resulting from
Tenant’s activities in or about the Leased Premises or the Property, with
coverage in an amount equal to Tenant’s Required Liability Coverage (as set
forth in Article 1), which insurance shall contain “blanket contractual
liability” and “broad form property damage” endorsements insuring Tenant’s
performance of Tenant’s obligations to indemnify Landlord as contained in this
Lease.

 

(ii) Fire and property damage insurance in special form coverage insuring Tenant
against loss from physical damage to Tenant’s personal property, inventory,
trade fixtures and improvements within the Leased Premises with coverage for the
full actual replacement cost thereof;

 

(iii) Business income/extra expense insurance sufficient to pay Base Monthly
Rent and Additional Rent for a period of not less than twelve (12) months;

 

(iv) Plate glass insurance, at actual replacement cost;

 

(v) Boiler and machinery insurance, to limits sufficient to restore the
Building;

 

(vi) Product liability insurance (including, without limitation, if food and/or
beverages are distributed, sold and/or consumed within the Leased Premises, to
the extent obtainable, coverage for liability arising out of the distribution,
sale, use or consumption of food and/or beverages (including alcoholic
beverages, if applicable) at the Leased Premises for not less than Tenant’s
Required Liability Coverage (as set forth in Article 1);

 

(vii) Workers’ compensation insurance (statutory coverage) with employer’s
liability in amounts not less than $1,000,000 insurance sufficient to comply
with all laws; and

 

(viii) With respect to making of any alterations or modifications or the
construction of improvements or the like undertaken by Tenant, course of
construction, commercial general liability, automobile liability and workers’
compensation (to be carried by Tenant’s contractor), in an amount and with
coverage reasonably satisfactory to Landlord.

 

(b) Each policy of liability insurance required to be carried by Tenant pursuant
to this paragraph or actually carried by Tenant with respect to the Leased
Premises or the Property: (i) shall, except with respect to insurance required
by subparagraph (a)(vii) above, name Landlord, and such others as are designated
by Landlord, as additional insureds; (ii) shall be primary insurance providing
that the insurer shall be liable for the full amount of the loss, up to and
including the total amount of liability set forth in the declaration of
coverage, without the right of contribution from or prior payment by any other
insurance coverage of Landlord; (iii) shall be in a form satisfactory to
Landlord; (iv) shall be carried with companies reasonably acceptable to Landlord
with Best’s ratings of at least A

 

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and XI; (v) shall provide that such policy shall not be subject to cancellation,
lapse or change except after at least thirty (30) days prior written notice to
Landlord, and (vi) shall contain a so-called “severability” or “cross liability”
endorsement. Each policy of property insurance maintained by Tenant with respect
to the Leased Premises or the Property or any property therein (i) shall provide
that such policy shall not be subject to cancellation, lapse or change except
after at least thirty (30) days prior written notice to Landlord and (ii) shall
contain a waiver and/or a permission to waive by the insurer of any right of
subrogation against Landlord, its partners, principals, members, officers,
employees, agents and contractors, which might arise by reason of any payment
under such policy or by reason of any act or omission of Landlord, its partners,
principals, members, officers, employees, agents and contractors.

 

(c) Prior to the time Tenant or any of its contractors enters the Leased
Premises, Tenant shall deliver to Landlord, with respect to each policy of
insurance required to be carried by Tenant pursuant to this Article, a copy of
such policy (appropriately authenticated by the insurer as having been issued,
premium paid) or a certificate of the insurer certifying in form satisfactory to
Landlord that a policy has been issued, premium paid, providing the coverage
required by this Paragraph and containing the provisions specified herein. With
respect to each renewal or replacement of any such insurance, the requirements
of this Paragraph must be complied with not less than thirty days prior to the
expiration or cancellation of the policies being renewed or replaced. Landlord
may, at any time and from time to time, inspect and/or copy any and all
insurance policies required to be carried by Tenant pursuant to this Article. If
Landlord’s Lender, insurance broker, advisor or counsel reasonably determines at
any time that the amount of coverage set forth in Paragraph 9.1(a) for any
policy of insurance Tenant is required to carry pursuant to this Article is not
adequate, then Tenant shall increase the amount of coverage for such insurance
to such greater amount as Landlord’s Lender, insurance broker, advisor or
counsel reasonably deems adequate.

 

9.2 Landlord’s Insurance. With respect to insurance maintained by Landlord:

 

(a) Landlord shall maintain, as the minimum coverage required of it by this
Lease, fire and property damage insurance in special form coverage insuring
Landlord (and such others as Landlord may designate) against loss from physical
damage to the Building with coverage of not less than one hundred percent (100%)
of the full actual replacement cost thereof and against loss of rents for a
period of not less than six months. Such fire and property damage insurance, at
Landlord’s election but without any requirements on Landlord’s behalf to do so,
(i) may be written in so-called “all risk” form, excluding only those perils
commonly excluded from such coverage by Landlord’s then property damage insurer;
(ii) may provide coverage for physical damage to the improvements so insured for
up to the entire full actual replacement cost thereof; (iii) may be endorsed to
cover loss or damage caused by any additional perils against which Landlord may
elect to insure, including earthquake and/or flood; and/or (iv) may provide
coverage for loss of rents for a period of up to twelve months. Landlord shall
not be required to cause such insurance to cover any of Tenant’s personal
property, inventory, and trade fixtures, or any modifications, alterations or
improvements made or constructed by Tenant to or within the Leased Premises.
Landlord shall use commercially reasonable efforts to obtain such insurance at
competitive rates.

 

(b) Landlord shall maintain commercial general liability insurance insuring
Landlord (and such others as are designated by Landlord) against liability for
personal injury, bodily injury, death, and damage to property occurring in, on
or about, or resulting from the use or occupancy of the Property, or any portion
thereof, with combined single limit coverage of at least Ten Million Dollars
($10,000,000). Landlord may carry such greater coverage as Landlord or
Landlord’s Lender, insurance broker, advisor or counsel may from time to time
determine is reasonably necessary for the adequate protection of Landlord and
the Property.

 

(c) Landlord may maintain any other insurance which in the opinion of its
insurance broker, advisor or legal counsel is prudent in carry under the given
circumstances, provided such insurance is commonly carried by owners of property
similarly situated and operating under similar circumstances.

 

9.3 Mutual Waiver Of Subrogation. Landlord hereby releases Tenant, its
respective partners, principals, members, officers, agents, employees and
servants, and Tenant hereby releases Landlord and its respective partners,
principals, members, officers, agents, employees and servants, from any and all
liability for loss, damage or injury to the property of the other in or about
the Leased Premises or the Property which is caused by or results from a peril
or event or happening which is covered by insurance required to be carried by
this Lease and in force at the time of the loss by the party sustaining such
loss; provided, however, that such waiver shall be effective only to the extent
permitted by the insurance covering such loss and to the extent such insurance
is not prejudiced thereby.

 

ARTICLE 10

 

DAMAGE TO LEASED PREMISES

 

10.1 Landlord’s Duty To Restore. If the Leased Premises, the Building or the
Outside Area are damaged by any peril after the Effective Date of this Lease,
Landlord shall restore the same, as and when required by this paragraph, unless
this Lease is terminated by Landlord pursuant to Paragraph 10.3 or by Tenant
pursuant to Paragraph 10.4. If this Lease is not so terminated, then upon the
issuance of all necessary governmental permits, Landlord shall commence and
diligently prosecute to completion the restoration of the Leased Premises, the
Building or the Outside Area, as the case may be, to the extent then allowed by
law, to substantially the same condition in which it existed as of the Lease
Commencement Date. Landlord’s obligation to restore shall be limited to the
improvements constructed by Landlord. Landlord shall have no obligation to
restore any alterations, modifications or improvements made by Tenant to the
Leased Premises or any of Tenant’s personal property, inventory or trade
fixtures. Upon completion of the restoration by Landlord, Tenant shall forthwith
replace or fully repair all of

 

15.

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Tenant’s personal property, inventory, trade fixtures and other improvements
constructed by Tenant to like or similar conditions as existed at the time
immediately prior to such damage or destruction.

 

10.2 Insurance Proceeds. All insurance proceeds available from the fire and
property damage insurance carried by Landlord shall be paid to and become the
property of Landlord. If this Lease is terminated pursuant to either Paragraph
10.3 or 10.4, all insurance proceeds available from insurance carried by Tenant
which cover loss of property that is Landlord’s property or was paid for with
the Tenant Improvement Allowance (as set forth in the Work Letter) or was
installed or constructed by Landlord shall be paid to and become the property of
Landlord, and the remainder of such proceeds shall be paid to and become the
property of Tenant. If this Lease is not terminated pursuant to either Paragraph
10.3 or 10.4, all insurance proceeds available from insurance carried by Tenant
which cover loss to property that is Landlord’s property shall be paid to and
become the property of Landlord, and all proceeds available from such insurance
which cover loss to property which would only become the property of Landlord
upon the termination of this Lease shall be paid to and remain the property of
Tenant. The determination of Landlord’s property and Tenant’s property shall be
made pursuant to Paragraph 6.2.

 

10.3 Landlord’s Right To Terminate. Landlord shall have the option to terminate
this Lease in the event any of the following occurs, which option may be
exercised only by delivery to Tenant of a written notice of election to
terminate within thirty days after the date of such damage or destruction:

 

(a) The Building is damaged by any peril covered by valid and collectible
insurance actually carried by Landlord and in force at the time of such damage
or destruction (an “insured peril”) to such an extent that the estimated cost to
restore the Building exceeds the lesser of (i) the insurance proceeds (less any
deductible amount) available from insurance actually carried by Landlord, or
(ii) fifty percent of the then actual replacement cost thereof;

 

(b) The Building is damaged by an uninsured peril whose repair cost exceeds ten
percent (10%) of the replacement cost of the Building, which peril Landlord was
not required to insure against pursuant to the provisions of Article 9 of this
Lease.

 

(c) The Building is damaged by any peril and, because of the laws then in force,
the Building (i) cannot be restored at reasonable cost or (ii) if restored,
cannot be used for the same use being made thereof before such damage.

 

10.4 Tenant’s Right To Terminate. If the Leased Premises, the Building or the
Outside Area are damaged by any peril and Landlord does not elect to terminate
this Lease or is not entitled to terminate this Lease pursuant to this Article,
then as soon as reasonably practicable, Landlord shall furnish Tenant with the
written opinion of Landlord’s architect or construction consultant as to when
the restoration work required of Landlord may be complete. Tenant shall have the
option to terminate this Lease in the event any of the following occurs, which
option may be exercised only by delivery to Landlord of a written notice of
election to terminate within thirty (30) days after Tenant receives from
Landlord the estimate of the time needed to complete such restoration:

 

(a) If the time estimated to substantially complete the restoration exceeds
twelve months from and after the date of damage or destruction; or

 

(b) If the damage occurred within twelve months of the last day of the Lease
Term and the time estimated to substantially complete the restoration exceeds
one hundred eighty days from and after the date of damage or destruction.

 

10.5 Tenant’s Waiver. Landlord and Tenant agree that the provisions of Paragraph
10.4 above, captioned “Tenant’s Right To Terminate”, are intended to supersede
and replace the provisions contained in California Civil Code, Section 1932,
Subdivision 2, and California Civil Code, Section 1934, and accordingly, Tenant
hereby waives the provisions of such Civil Code Sections and the provisions of
any successor Civil Code Sections or similar laws hereinafter enacted.

 

10.6 Abatement Of Rent. In the event of damage to the Leased Premises which does
not result in the termination of this Lease, the Base Monthly Rent (and any
Additional Rent) shall be temporarily abated during the period of restoration in
proportion in the degree to which Tenant’s use of the Leased Premises is
impaired by such damage.

 

ARTICLE 11

 

CONDEMNATION

 

11.1 Tenant’s Right To Terminate. Except as otherwise provided in Paragraph 11.4
below regarding temporary takings, Tenant shall have the option to terminate
this Lease if, as a result of any taking, (i) all of the Leased Premises is
taken, or (ii) twenty-five percent (25%) or more of the Leased Premises is taken
and the part of the Leased Premises that remains cannot, within a reasonable
period of time, be made reasonably suitable for the continued operation of
Tenant’s business. Tenant must exercise such option within a reasonable period
of time, to be effective on the later to occur of (i) the date that possession
of that portion of the Leased Premises that is condemned is taken by the
condemnor or (ii) the date Tenant vacated the Leased Premises.

 

11.2 Landlord’s Right To Terminate. Except as otherwise provided in Paragraph
11.4 below regarding temporary takings, Landlord shall have the option to
terminate this Lease if, as a result of any taking, (i) all of the Leased
Premises is taken, (ii) twenty-five percent (25%) or more of the Leased Premises
is taken and the part of the Leased

 

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Premises that remains cannot, within a reasonable period of time, be made
reasonably suitable for the continued operation of Tenant’s business, or (iii)
because of the laws then in force, the Leased Premises may not be used for the
same use being made before such taking, whether or not restored as required by
Paragraph 11.3 below. Any such option to terminate by Landlord must be exercised
within a reasonable period of time, to be effective as of the date possession is
taken by the condemnor.

 

11.3 Restoration. If any part of the Leased Premises or the Building is taken
and this Lease is not terminated, then Landlord shall, to the extent not
prohibited by laws then in force, repair any damage occasioned thereby to the
remainder thereof to a condition reasonably suitable for Tenant’s continued
operations and otherwise, to the extent practicable, in the manner and to the
extent provided in Paragraph 10.1.

 

11.4 Temporary Taking. If a portion of the Leased Premises is temporarily taken
for a period of one year or less and such period does not extend beyond the
Lease Expiration Date, this Lease shall remain in effect. If any portion of the
Leased Premises is temporarily taken for a period which exceeds one year or
which extends beyond the Lease Expiration Date, then the rights of Landlord and
Tenant shall be determined in accordance with Paragraphs 11.1 and 11.2 above. If
there is material interference with Tenant’s enjoyment of the Leased Premises,
there shall be an abatement of rent pursuant to paragraph 11.6.

 

11.5 Division Of Condemnation Award. Any award made for any taking of the
Property, the Building, or the Leased Premises, or any portion thereof, shall
belong to and be paid to Landlord, and Tenant hereby assigns to Landlord all of
its right, title and interest in any such award; provided, however, that Tenant
shall be entitled to receive any portion of the award that is made specifically
(i) for the taking of personal property, inventory or trade fixtures belonging
to Tenant, (ii) for the interruption of Tenant’s business or its moving costs,
or (iii) for the value of any leasehold improvements installed and paid for by
Tenant. The rights of Landlord and Tenant regarding any condemnation shall be
determined as provided in this Article, and each party hereby waives the
provisions of Section 1265.130 of the California Code of Civil Procedure, and
the provisions of any similar law hereinafter enacted, allowing either party to
petition the Supreme Court to terminate this Lease and/or otherwise allocate
condemnation awards between Landlord and Tenant in the event of a taking of the
Leased Premises.

 

11.6 Abatement Of Rent. In the event of a taking of the Leased Premises which
does not result in a termination of this Lease, then, as of the date possession
is taken by the condemning authority, the Base Monthly Rent shall be reduced in
the same proportion that the area of that part of the Leased Premises so taken
(less any addition to the area of the Leased Premises by reason of any
reconstruction after such addition is available for Tenant’s use) bears to the
area of the Leased Premises immediately prior to such taking.

 

11.7 Taking Defined. The term “taking” or “taken” as used in this Article 11
shall mean any transfer or conveyance of all or any portion of the Property to a
public or quasi-public agency or other entity having the power of eminent domain
pursuant to or as a result of the exercise of such power by such an agency,
including any inverse condemnation and/or any sale or transfer by Landlord of
all or any portion of the Property to such an agency under threat of
condemnation or the exercise of such power. Landlord and Tenant shall each give
the other prompt notice after receiving notice of a proposed taking.

 

ARTICLE 12

 

DEFAULT AND REMEDIES

 

12.1 Events Of Tenant’s Default. Tenant shall be in default of its obligations
under this Lease if any of the following events occur:

 

(a) Tenant shall have failed to pay Base Monthly Rent or any Additional Rent
when due; or

 

(b) Tenant shall have done or permitted to be done any act, use or thing in its
use, occupancy or possession of the Leased Premises or the Building or the
Outside Areas which is prohibited by the terms of this Lease; or

 

(c) Tenant shall have failed to perform any term, covenant or condition of this
Lease (except those requiring the payment of Base Monthly Rent or Additional
Rent, which failures shall be governed by subparagraph (a) above) within thirty
(30) days after written notice from Landlord to Tenant specifying the nature of
such failure and requesting Tenant to perform same; or

 

(d) Tenant shall have sublet the Leased Premises or assigned or encumbered its
interest in this Lease in violation of the provisions contained in Article 7,
whether voluntarily or by operation of law; or

 

(e) Tenant shall have abandoned the Leased Premises; or

 

(f) Tenant or any Guarantor of this Lease shall have permitted or suffered the
sequestration or attachment of, or execution on, or the appointment of a
custodian or receiver with respect to, all or any substantial part of the
property or assets of Tenant (or such Guarantor) or any property or asset
essential to the conduct of Tenant’s (or such Guarantor’s) business, and Tenant
(or such Guarantor) shall have failed to obtain a return or release of the same
within thirty days thereafter, or prior to sale pursuant to such sequestration,
attachment or levy, whichever is earlier; or

 

(g) Tenant or any Guarantor of this Lease shall have made a general assignment
of all or a substantial part of its assets for the benefit of its creditors; or

 

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(h) Tenant or any Guarantor of this Lease shall have allowed (or sought) to have
entered against it a decree or order which: (i) grants or constitutes an order
for relief, appointment of a trustee, or condemnation or a reorganization plan
under the bankruptcy laws of the United States; (ii) approves as properly filed
a petition seeking liquidation or reorganization under said bankruptcy laws or
any other debtor’s relief law or similar statute of the United States or any
state thereof; or (iii) otherwise directs the winding up or liquidation of
Tenant; provided, however, if any decree or order was entered without Tenant’s
consent or over Tenant’s objection, Landlord may not terminate this Lease
pursuant to this Subparagraph if such decree or order is rescinded or reversed
within thirty days after its original entry. This Section 12.1(h) shall not
apply to any bankruptcy filing in effect as of the date of this Lease; or

 

(i) Tenant or any Guarantor of this Lease shall have availed itself of the
protection of any debtor’s relief law, moratorium law or other similar law which
does not require the prior entry of a decree or order.

 

12.2 Landlord’s Remedies. In the event of any default by Tenant, and without
limiting Landlord’s right to indemnification as provided in Article 8.2,
Landlord shall have the following remedies, in addition to all other rights and
remedies provided by law or otherwise provided in this Lease, to which Landlord
may resort cumulatively, or in the alternative:

 

(a) Landlord may, at Landlord’s election, keep this Lease in effect and enforce,
by an action at law or in equity, all of its rights and remedies under this
Lease including, without limitation, (i) the right to recover the rent and other
sums as they become due by appropriate legal action, (ii) the right to make
payments required by Tenant, or perform Tenant’s obligations and be reimbursed
by Tenant for the cost thereof with interest at the then maximum rate of
interest not prohibited by law from the date the sum is paid by Landlord until
Landlord is reimbursed by Tenant, and (iii) the remedies of injunctive relief
and specific performance to prevent Tenant from violating the terms of this
Lease and/or to compel Tenant to perform its obligations under this Lease, as
the case may be.

 

(b) Landlord may, at Landlord’s election, terminate this Lease by giving Tenant
written notice of termination, in which event this Lease shall terminate on the
date set forth for termination in such notice, in which event Tenant shall
immediately surrender the Leased Premises to Landlord, and if Tenant fails to do
so, Landlord may, without prejudice to any other remedy which it may have for
possession or arrearages in rent, enter upon and take possession of the Leased
Premises and expel or remove Tenant and any other person who may be occupying
the Leased Premises or any part thereof, without being liable for prosecution or
any claim or damages therefor. Any termination under this subparagraph shall not
relieve Tenant from its obligation to pay to Landlord all Base Monthly Rent and
Additional Rent then or thereafter due, or any other sums due or thereafter
accruing to Landlord, or from any claim against Tenant for damages previously
accrued or then or thereafter accruing. In no event shall any one or more of the
following actions by Landlord, in the absence of a written election by Landlord
to terminate this Lease constitute a termination of this Lease:

 

(i) Appointment of a receiver or keeper in order to protect Landlord’s interest
hereunder;

 

(ii) Consent to any subletting of the Leased Premises or assignment of this
Lease by Tenant, whether pursuant to the provisions hereof or otherwise; or

 

(iii) Any action taken by Landlord or its partners, principals, members,
officers, agents, employees, or servants, which is intended to mitigate the
adverse effects of any breach of this Lease by Tenant, including, without
limitation, any action taken to maintain and preserve the Leased Premises on any
action taken to relet the Leased Premises or any portion thereof for the account
at Tenant and in the name of Tenant.

 

(c) In the event Tenant breaches this Lease and abandons the Leased Premises,
Landlord may terminate this Lease, but this Lease shall not terminate unless
Landlord gives Tenant written notice of termination. If Landlord does not
terminate this Lease by giving written notice of termination, Landlord may
enforce all its rights and remedies under this Lease, including the right and
remedies provided by California Civil Code Section 1951.4 (“lessor may continue
lease in effect after lessee’s breach and abandonment and recover rent as it
becomes due, if lessee has right to sublet or assign, subject only to reasonable
limitations”), as in effect on the Effective Date of this Lease.

 

(d) In the event Landlord terminates this Lease, Landlord shall be entitled, at
Landlord’s election, to the rights and remedies provided in California Civil
Code Section 1951.2, as in effect on the Effective Date of this Lease. For
purposes of computing damages pursuant to Section 1951.2, an interest rate equal
to the maximum rate of interest then not prohibited by law shall be used where
permitted. Such damages shall include, without limitation:

 

(i) The worth at the time of the award of the unpaid rent which had been earned
at the time of termination;

 

(ii) The worth at the time of award of the amount by which the unpaid rent for
the balance of the term after the time of award exceeds the amount of such
rental loss that Tenant proves could be reasonably avoided, computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco, at the time of award plus one percent; and

 

(iii) Any other amount necessary to compensate Landlord for all 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, the following: (i) expenses for
cleaning,

 

18.

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repairing or restoring the Leased Premises, (ii) expenses for altering,
remodeling or otherwise improving the Leased Premises for the purpose of
reletting, including removal of existing leasehold improvements and/or
installation of additional leasehold improvements (regardless of how the same is
funded, including reduction of rent, a direct payment or allowance to a new
tenant, or otherwise), (iii) broker’s fees allocable to the remainder of the
term of this Lease, advertising costs and other expenses of reletting the Leased
Premises; (iv) costs of carrying and maintaining the Leased Premises, such as
taxes, insurance premiums, utility charges and security precautions, (v)
expenses incurred in removing, disposing of and/or storing any of Tenant’s
personal property, inventory or trade fixtures remaining therein; (vi)
reasonable attorney’s fees, expert witness fees, court costs and other
reasonable expenses incurred by Landlord (but not limited to taxable costs) in
retaking possession of the Leased Premises, establishing damages hereunder, and
releasing the Leased Premises; and (vii) any other expenses, costs or damages
otherwise incurred or suffered as a result of Tenant’s default.

 

12.3 Landlord’s Default And Tenant’s Remedies. In the event Landlord fails to
perform its obligations under this Lease, Landlord shall nevertheless not be in
default under the terms of this Lease until such time as Tenant shall have first
given Landlord written notice specifying the nature of such failure to perform
its obligations, and then only after Landlord shall have had thirty (30) days
following its receipt of such notice within which to perform such obligations;
provided that, if longer than thirty (30) days is reasonably required in order
to perform such obligations, Landlord shall have such longer period. In the
event of Landlord’s default as above set forth, then, and only then, Tenant may
then proceed in equity or at law to compel Landlord to perform its obligations
and/or to recover damages proximately caused by such failure to perform (except
as and to the extent Tenant has waived its right to damages as provided in this
Lease).

 

12.4 Limitation Of Tenant’s Recourse. If Landlord is a corporation, trust,
partnership, joint venture, limited liability company, unincorporated
association, or other form of business entity, Tenant agrees that (i) the
obligations of Landlord under this Lease shall not constitute personal
obligations of the officers, directors, trustees, partners, joint venturers,
members, owners, stockholders, or other principals of such business entity, and
(ii) Tenant shall have recourse only to the property of such corporation, trust,
partnership, joint venture, limited liability company, unincorporated
association, or other form of business entity for the satisfaction of such
obligations and not against the assets of such officers, directors, trustees,
partners, joint venturers, members, owners, stockholders or principals.
Additionally, if Landlord is a partnership or limited liability company, then
Tenant covenants and agrees:

 

(a) No partner or member of Landlord shall be sued or named as a party in any
suit or action brought by Tenant with respect to any alleged breach of this
Lease (except to the extent necessary to secure jurisdiction over the
partnership and then only for that sole purpose);

 

(b) No service of process shall be made against any partner or member of
Landlord except for the sole purpose of securing jurisdiction over the
partnership; and

 

(c) No writ of execution will ever be levied against the assets of any partner
or member of Landlord other than to the extent of his or her interest in the
assets of the partnership or limited liability company constituting Landlord.

 

Tenant further agrees that each of the foregoing covenants and agreements shall
be enforceable by Landlord and by any partner or member of Landlord and shall be
applicable to any actual or alleged misrepresentation or nondisclosure made
regarding this Lease or the Leased Premises or any actual or alleged failure,
default or breach of any covenant or agreement either expressly or implicitly
contained in this Lease or imposed by statute or at common law.

 

12.5 Tenant’s Waiver. Landlord and Tenant agree that the provisions of Paragraph
12.3 above are intended to supersede and replace the provisions of California
Civil Code Sections 1932(1), 1941 and 1942, and accordingly, Tenant hereby
waives the provisions of California Civil Code Sections 1932(1), 1941 and 1942
and/or any similar or successor law regarding Tenant’s right to terminate this
Lease or to make repairs and deduct the expenses of such repairs from the rent
due under this Lease.

 

ARTICLE 13

 

GENERAL PROVISIONS

 

13.1 Taxes On Tenant’s Property. Tenant shall pay before delinquency any and all
taxes, assessments, license fees, use fees, permit fees and public charges of
whatever nature or description levied, assessed or imposed against Tenant or
Landlord by a governmental agency arising out of, caused by reason of or based
upon Tenant’s estate in this Lease, Tenant’s ownership of property, improvements
made by Tenant to the Leased Premises or the Outside Areas, improvements made by
Landlord for Tenant’s use within the Leased Premises or the Outside Areas,
Tenant’s use (or estimated use) of public facilities or services or Tenant’s
consumption (or estimated consumption) of public utilities, energy, water or
other resources (collectively, “Tenant’s Interest”). Upon demand by Landlord,
Tenant shall furnish Landlord with satisfactory evidence of these payments.
Tenant may elect to protest such taxes provided that Tenant first notifies
Landlord in writing and posts a bond equal to 100% of the maximum amount of such
taxes plus penalties and interest or pays the taxes. If any such taxes,
assessments, fees or public charges are levied against Landlord, Landlord’s
property, the Building or the Property, or if the assessed value of the Building
or the Property is increased by the inclusion therein of a value placed upon
Tenant’s Interest, regardless of the validity thereof, Landlord shall have the
right to require Tenant to pay such taxes, and if not paid and satisfactory
evidence of payment delivered to Landlord at least ten days prior to
delinquency, then Landlord shall have the right to pay such taxes on Tenant’s
behalf and to invoice Tenant for the same. Tenant shall, within the earlier to
occur of (a)

 

19.

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thirty (30) days of the date it receives an invoice from Landlord setting forth
the amount of such taxes, assessments, fees, or public charge so levied, or (b)
the due date of such invoice, pay to Landlord, as Additional Rent, the amount
set forth in such invoice. Failure by Tenant to pay the amount so invoiced
within such time period shall be conclusively deemed a default by Tenant under
this Lease. Tenant shall have the right to bring suit in any court of competent
jurisdiction to recover from the taxing authority the amount of any such taxes,
assessments, fees or public charges so paid.

 

13.2 Holding Over. This Lease shall terminate without further notice on the
Lease Expiration Date (as set forth in Article 1). Any holding over by Tenant
after expiration of the Lease Term shall neither constitute a renewal nor
extension of this Lease nor give Tenant any rights in or to the Leased Premises
except as expressly provided in this Paragraph. Any such holding over to which
Landlord has consented shall be construed to be a tenancy from month to month,
on the same terms and conditions herein specified insofar as applicable, except
that the Base Monthly Rent shall be increased to an amount equal to one hundred
fifty percent (150%) of the Base Monthly Rent payable during the last full month
immediately preceding such holding over. Tenant acknowledges that if Tenant
holds over without Landlord’s consent, such holding over may compromise or
otherwise affect Landlord’s ability to enter into new leases with prospective
tenants regarding the Leased Premises. Therefore, if Tenant fails to surrender
the Leased Premises upon the expiration or termination of this Lease, in
addition to any other liabilities to Landlord accruing therefrom, Tenant shall
protect, defend, indemnify and hold Landlord harmless from and against all
claims resulting from such failure, including, without limiting the foregoing,
any claims made by any succeeding tenant founded upon such failure to surrender,
and any losses suffered by Landlord, including lost profits, resulting from such
failure to surrender.

 

13.3 Subordination To Mortgages. This Lease is subject to and subordinate to all
ground leases, mortgages and deeds of trust which affect the Building or the
Property and which are of public record as of the Effective Date of this Lease,
and to all renewals, modifications, consolidations, replacements and extensions
thereof. However, if the lessor under any such ground lease or any lender
holding any such mortgage or deed of trust shall advise Landlord that it desires
or requires this Lease to be made prior and superior thereto, then, upon written
request of Landlord to Tenant, Tenant shall promptly execute, acknowledge and
deliver any and all customary or reasonable documents or instruments which
Landlord and such lessor or lender deems necessary or desirable to make this
Lease prior thereto. Tenant hereby consents to Landlord’s ground leasing the
land underlying the Building or the Property and/or encumbering the Building or
the Property as security for future loans on such terms as Landlord shall
desire, all of which future ground leases, mortgages or deeds of trust shall be
subject to and subordinate to this Lease. However, if any lessor under any such
future ground lease or any lender holding such future mortgage or deed of trust
shall desire or require that this Lease be made subject to and subordinate to
such future ground lease, mortgage or deed of trust, then Tenant agrees, within
ten days after Landlord’s written request therefor, to execute, acknowledge and
deliver to Landlord any and all documents or instruments requested by Landlord
or by such lessor or lender as may be necessary or proper to assure the
subordination of this Lease to such future ground lease, mortgage or deed of
trust, but only if such lessor or lender agrees to recognize Tenant’s rights
under this Lease and agrees not to disturb Tenant’s quiet possession of the
Leased Premises so long as Tenant is not in default under this Lease. If
Landlord assigns the Lease as security for a loan, Tenant agrees to execute such
documents as are reasonably requested by the lender and to provide reasonable
provisions in the Lease protecting such lender’s security interest which are
customarily required by institutional lenders making loans secured by a deed of
trust. Landlord agrees to obtain for Tenant a subordination, non-disturbance
agreement and attornment agreement from the existing lender holding a deed of
trust on the Property in substantially the form which Tenant executed in
connection with the financing of the Property on February 22, 2001.

 

13.4 Tenant’s Attornment Upon Foreclosure. Tenant shall, upon request, attorn
(i) to any purchaser of the Building or the Property at any foreclosure sale or
private sale conducted pursuant to any security instruments encumbering the
Building or the Property, (ii) to any grantee or transferee designated in any
deed given in lieu of foreclosure of any security interest encumbering the
Building or the Property, or (iii) to the lessor under an underlying ground
lease of the land underlying the Building or the Property, should such ground
lease be terminated; provided that such purchaser, grantee or lessor recognizes
Tenant’s rights under this Lease.

 

13.5 Mortgagee Protection. In the event of any default on the part of Landlord,
Tenant will give notice by registered mail to any Lender or lessor under any
underlying ground lease who shall have requested, in writing, to Tenant that it
be provided with such notice, and Tenant shall offer such Lender or lessor a
reasonable opportunity to cure the default, including time to obtain possession
of the Leased Premises by power of sale or judicial foreclosure or other
appropriate legal proceedings if reasonably necessary to effect a cure.

 

13.6 Estoppel Certificate. Tenant will, following any request by Landlord,
promptly execute and deliver to Landlord an estoppel certificate substantially
in form attached as Exhibit C, and certifying such other information about this
Lease, if true, as may be reasonably requested by Landlord, its Lender or
prospective lenders, investors or purchasers of the Building or the Property.
Tenant’s failure to execute and deliver such estoppel certificate within ten
(10) days after Landlord’s request therefor shall be a material default by
Tenant under this Lease, and Landlord shall have all of the rights and remedies
available to Landlord as Landlord would otherwise have in the case of any other
material default by Tenant, including the right to terminate this Lease and sue
for damages proximately caused thereby, it being agreed and understood by Tenant
that Tenant’s failure to so deliver such estoppel certificate in a timely manner
could result in Landlord being unable to perform committed obligations to other
third parties which were made by Landlord in reliance upon this covenant of
Tenant. Landlord and Tenant intend that any statement delivered pursuant to this
paragraph may be relied upon by any Lender or purchaser or prospective Lender or
purchaser of the Building, the Property, or any interest in them.

 

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13.7 Tenant’s Financial Information. Tenant shall, within ten business days
after Landlord’s request therefor, deliver to Landlord a copy of Tenant’s (and
any guarantor’s) current financial statements (including a balance sheet, income
statement and statement of cash flow, all prepared in accordance with generally
accepted accounting principles) and any such other information reasonably
requested by Landlord regarding Tenant’s financial condition. Landlord shall be
entitled to disclose such financial statements or other information to its
Lender, to any present or prospective principal of or investor in Landlord, or
to any prospective Lender or purchaser of the Building, the Property, or any
portion thereof or interest therein. Any such financial statement or other
information which is marked “confidential” or “company secrets” (or is otherwise
similarly marked by Tenant) shall be confidential and shall not be disclosed by
Landlord to any third party except as specifically provided in this paragraph,
unless the same becomes a part of the public domain without the fault of
Landlord.

 

13.8 Transfer By Landlord. Landlord and its successors in interest shall have
the right to transfer their interest in the Building, the Property, or any
portion thereof at any time and to any person or entity. In the event of any
such transfer, the Landlord originally named herein (and in the case of any
subsequent transfer, the transferor), from the date of such transfer, (i) shall
be automatically relieved, without any further act by any person or entity, of
all liability for the performance of the obligations of the Landlord hereunder
which may accrue after the date of such transfer and (ii) shall be relieved of
all liability for the performance of the obligations of the Landlord hereunder
which have accrued before the date of transfer if its transferee agrees to
assume and perform all such prior obligations of the Landlord hereunder. Tenant
shall attorn to any such transferee. After the date of any such transfer, the
term “Landlord” as used herein shall mean the transferee of such interest in the
Building or the Property.

 

13.9 Force Majeure. The obligations of each of the parties under this Lease
(other than the obligations to pay money) shall be temporarily excused if such
party is prevented or delayed in performing such obligations by reason of any
strikes, lockouts or labor disputes; government restrictions, regulations,
controls, action or inaction; civil commotion; or extraordinary weather, fire or
other acts of God.

 

13.10 Notices. Any notice required or permitted to be given under this Lease
shall be in writing and (i) personally delivered, (ii) sent by United States
mail, registered or certified mail, postage prepaid, return receipt requested,
(iii) sent by Federal Express or similar nationally recognized overnight courier
service, or (iv) transmitted by facsimile with a hard copy sent within one (1)
business day by any of the foregoing means, and in all cases addressed as
follows, and such notice shall be deemed to have been given upon the date of
actual receipt or delivery (or refusal to accept delivery) at the address
specified below (or such other addresses as may be specified by notice in the
foregoing manner) as indicated on the return receipt or air bill:

 

If to Landlord:    CTC Associates II, L.P.      c/o Menlo Equities LLC      490
California Avenue      Palo Alto, California 94306      Attention: Henry
Bullock/Richard Holmstrom      Facsimile: (650) 326-9300 with a copy to:   
Cooley Godward LLP      One Maritime Plaza      20th Floor      San Francisco,
California 94111      Attention: Paul Churchill      Facsimile: (415) 951-3699
If to Tenant:    Redback Networks Inc.      300 Holger Way      San Jose,
California      Attention: Tom Cronan, CFO with a copy to:    Berliner Cohen  
   10 Almaden Blvd., #1100      San Jose, CA 95113      Attention: Eric Wong

 

Any notice given in accordance with the foregoing shall be deemed received upon
actual receipt or refusal to accept delivery.

 

13.11 Attorneys’ Fees. In the event any party shall bring any action,
arbitration proceeding or legal proceeding alleging a breach of any provision of
this Lease, to recover rent, to terminate this Lease, or to enforce, protect,
determine or establish any term or covenant of this Lease or rights or duties
hereunder of either party, the prevailing party shall be entitled to recover
from the non-prevailing party as a part of such action or proceeding, or in a
separate action for that purpose brought within one year from the determination
of such proceeding, reasonable attorneys’ fees, expert witness fees, court costs
and other reasonable expenses incurred by the prevailing party.

 

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13.12 Definitions. Any term that is given a special meaning by any provision in
this Lease shall, unless otherwise specifically stated, have such meaning
wherever used in this Lease or in any Addenda or amendment hereto. In addition
to the terms defined in Article 1, the following terms shall have the following
meanings:

 

(a) Real Property Taxes. The term “Real Property Tax” or “Real Property Taxes”
shall each mean Tenant’s Expense Share of (i) all taxes, assessments, levies and
other charges of any kind or nature whatsoever, general and special, foreseen
and unforeseen (including all instruments of principal and interest required to
pay any general or special assessments for public improvements and any increases
resulting from reassessments caused by any change in ownership or new
construction), now or hereafter imposed by any governmental or
quasi-governmental authority or special district having the direct or indirect
power to tax or levy assessments, which are levied or assessed for whatever
reason against the Property or any portion thereof, or Landlord’s interest
herein, or the fixtures, equipment and other property of Landlord that is an
integral part of the Property and located thereon, or Landlord’s business of
owning, leasing or managing the Property or the gross receipts, income or
rentals from the Property, (ii) all charges, levies or fees imposed by any
governmental authority against Landlord by reason of or based upon the use of or
number of parking spaces within the Property, the amount of public services or
public utilities used or consumed (e.g. water, gas, electricity, sewage or waste
water disposal) at the Property, the number of person employed by tenants of the
Property, the size (whether measured in area, volume, number of tenants or
whatever) or the value of the Property, or the type of use or uses conducted
within the Property, and all costs and fees (including attorneys’ fees)
reasonably incurred by Landlord in contesting any Real Property Tax and in
negotiating with public authorities as to any Real Property Tax. If, at any time
during the Lease Term, the taxation or assessment of the Property prevailing as
of the Effective Date of this Lease shall be altered so that in lieu of or in
addition to any the Real Property Tax described above there shall be levied,
awarded or imposed (whether by reason of a change in the method of taxation or
assessment, creation of a new tax or charge, or any other cause) an alternate,
substitute, or additional use or charge (i) on the value, size, use or occupancy
of the Property or Landlord’s interest therein or (ii) on or measured by the
gross receipts, income or rentals from the Property, or on Landlord’s business
of owning, leasing or managing the Property or (iii) computed in any manner with
respect to the operation of the Property, then any such tax or charge, however
designated, shall be included within the meaning of the terms “Real Property
Tax” or “Real Property Taxes” for purposes of this Lease. If any Real Property
Tax is partly based upon property or rents unrelated to the Property, then only
that part of such Real Property Tax that is fairly allocable to the Property
shall be included within the meaning of the terms “Real Property Tax” or “Real
Property Taxes.” Notwithstanding the foregoing, the terms “Real Property Tax” or
“Real Property Taxes” shall not include estate, inheritance, transfer, gift or
franchise taxes of Landlord or the federal or state income tax imposed on
Landlord’s income from all sources.

 

(b) Landlord’s Insurance Costs. The term “Landlord’s Insurance Costs” shall mean
Tenant’s Expense Share of the costs to Landlord to carry and maintain the
policies of fire and property damage insurance for the Building and the Property
and general liability and any other insurance required or permitted to be
carried by Landlord pursuant to Article 9, together with any deductible amounts
paid by Landlord upon the occurrence of any insured casualty or loss. If any of
Landlord’s Insurance Costs are partly based upon property unrelated to the
Property (e.g., another portion of the Project), then only that part of
Landlord’s Insurance Costs that is fairly allocable to the Property shall be
included in Landlord’s Insurance Costs hereunder.

 

(c) Property Maintenance Costs. The term “Property Maintenance Costs” shall mean
Tenant’s Expense Share of all costs and expenses (except Landlord’s Insurance
Costs and Real Property Taxes) paid or incurred by Landlord in protecting,
operating, maintaining, repairing and preserving the Property and all parts
thereof, including without limitation, (i) market rate professional management
fees of two percent (2%) of all base rent collected from tenants of the
Property, (ii) the amortizing portion of any costs incurred by Landlord in the
making of any modifications, alterations or improvements required by any
governmental authority as set forth in Article 6, which are so amortized during
the Lease Term, and (iii) such other costs as may be paid or incurred with
respect to operating, maintaining, and preserving the Property, including, but
limited to, repairing or replacing, when necessary, electrical, plumbing,
heating, ventilating and air conditioning systems serving the Building, and
repairing and resurfacing paved areas. “Property Maintenance Costs” shall not
include the costs of repairing and/or replacing the foundation, the roof
structure and the load-bearing and exterior walls of the Building. If any of the
Property Maintenance Costs are partly based upon property unrelated to the
Property (e.g., another portion of the Project), then only that part of Property
Maintenance Costs that is fairly allocable to the Property shall be included in
the definition of Property Maintenance Costs hereunder.

 

(d) Property Operating Expenses. The term “Property Operating Expenses” shall
mean and include all Real Property Taxes, plus all Landlord’s Insurance Costs,
plus all Property Maintenance Costs.

 

(e) Law. The term “Law” shall mean any judicial decisions and any statute,
constitution, ordinance, resolution, regulation, rule, administrative order, or
other requirements of any municipal, county, state, federal, or other
governmental agency or authority having jurisdiction over the parties to this
Lease, the Leased Premises, the Building or the Property, or any of them, in
effect either at the Effective Date of this Lease or at any time during the
Lease Term, including, without limitation, any regulation, order, or policy of
any quasi-official entity or body (e.g. a board of fire examiners or a public
utility or special district).

 

(f) Lender. The term “Lender” shall mean the holder of any promissory note or
other evidence of indebtedness secured by the Property or any portion thereof.

 

(g) Private Restrictions. The term “Private Restrictions” shall mean (as they
may exist from time to time) any and all covenants, conditions and restrictions,
private agreements, easements, and any other recorded documents or instruments
affecting the use of the Property, the Building, the Leased Premises, or the
Outside Areas.

 

(h) Rent. The term “Rent” shall mean collectively Base Monthly Rent and all
Additional Rent.

 

22.

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13.13 General Waivers. One party’s consent to or approval of any act by the
other party requiring the first party’s consent or approval shall not be deemed
to waive or render unnecessary the first party’s consent to or approval of any
subsequent similar act by the other party. No waiver of any provision hereof, or
any waiver of any breach of any provision hereof, shall be effective unless in
writing and signed by the waiving party. The receipt by Landlord of any rent or
payment with or without knowledge of the breach of any other provision hereof
shall not be deemed a waiver of any such breach. No waiver of any provision of
this Lease shall be deemed a continuing waiver unless such waiver specifically
states so in writing and is signed by both Landlord and Tenant. No delay or
omission in the exercise of any right or remedy accruing to either party upon
any breach by the other party under this Lease shall impair such right or remedy
or be construed as a waiver of any such breach theretofore or thereafter
occurring. The waiver by either party of any breach of any provision of this
Lease shall not be deemed to be a waiver of any subsequent breach of the same or
any other provisions herein contained.

 

13.14 Miscellaneous. Should any provisions of this Lease prove to be invalid or
illegal, such invalidity or illegality shall in no way affect, impair or
invalidate any other provisions hereof, and such remaining provisions shall
remain in full force and effect. Time is of the essence with respect to the
performance of every provision of this Lease in which time of performance is a
factor. Any copy of this Lease which is executed by the parties shall be deemed
an original for all purposes. This Lease shall, subject to the provisions
regarding assignment, apply to and bind the respective heirs, successors,
executors, administrators and assigns of Landlord and Tenant. The term “party”
shall mean Landlord or Tenant as the context implies. If Tenant consists of more
than one person or entity, then all members of Tenant shall be jointly and
severally liable hereunder. This Lease shall be construed and enforced in
accordance with the Laws of the State in which the Leased Premises are located.
The captions in this Lease are for convenience only and shall not be construed
in the construction or interpretation of any provision hereof. When the context
of this Lease requires, the neuter gender includes the masculine, the feminine,
a partnership, corporation, limited liability company, joint venture, or other
form of business entity, and the singular includes the plural. The terms “must,”
“shall,” “will,” and “agree” are mandatory. The term “may” is permissive. When a
party is required to do something by this Lease, it shall do so at its sole cost
and expense without right of reimbursement from the other party unless specific
provision is made therefor. Where Landlord’s consent is required hereunder, the
consent of any Lender shall also be required. Landlord and Tenant shall both be
deemed to have drafted this Lease, and the rule of construction that a document
is to be construed against the drafting party shall not be employed in the
construction or interpretation of this Lease. Where Tenant is obligated not to
perform any act or is not permitted to perform any act, Tenant is also obligated
to restrain any others reasonably within its control, including agents,
invitees, contractors, subcontractors and employees, from performing such act.
Landlord shall not become or be deemed a partner or a joint venturer with Tenant
by reason of any of the provisions of this Lease

 

ARTICLE 14

 

CORPORATE AUTHORITY

BROKERS AND ENTIRE AGREEMENT

 

14.1 Corporate Authority. If Tenant is a corporation, each individual executing
this Lease on behalf of such corporation represents and warrants that Tenant is
validly formed and duly authorized and existing, that Tenant is qualified to do
business in the State in which the Leased Premises are located, that Tenant has
the full right and legal authority to enter into this Lease, and that he or she
is duly authorized to execute and deliver this Lease on behalf of Tenant in
accordance with its terms. Tenant shall, within thirty days after execution of
this Lease, deliver to Landlord a certified copy of the resolution of its board
of directors authorizing or ratifying the execution of this Lease or other
evidence of due authorization and if Tenant fails to do so, Landlord at its sole
election may elect to terminate this Lease.

 

14.2 Brokerage Commissions. Tenant and Landlord each represent, warrant and
agree that they have not had any dealings with any real estate broker(s),
leasing agent(s), finder(s) or salesmen, other than the Brokers (as named in
Article 1) with respect to the lease by it of the Leased Premises pursuant to
this Lease, and that Landlord will assume all obligations with respect to
Landlord’s Broker and Tenant’s Broker and any other broker retained by Landlord.
Tenant will assume all obligations and responsibility with respect to the
payment of any broker other than Tenant’s Broker that Tenant retained. Each of
Landlord and Tenant will indemnify, defend with competent counsel, and hold the
other harmless from any liability for the payment of any real estate brokerage
commissions, leasing commissions or finder’s fees claimed by any other real
estate broker(s), leasing agent(s), finder(s), or salesmen due to the other
party’s breach of the representations, warranties and covenants made by such
party in this Section 14.2.

 

14.3 Entire Agreement. This Lease and the Exhibits (as described in Article 1),
which Exhibits are by this reference incorporated herein, constitute the entire
agreement between the parties, and there are no other agreements, understandings
or representations between the parties relating to the lease by Landlord of the
Leased Premises to Tenant, except as expressed herein. No subsequent changes,
modifications or additions to this Lease shall be binding upon the parties
unless in writing and signed by both Landlord and Tenant.

 

14.4 Landlord’s Representations. Tenant acknowledges that neither Landlord nor
any of its agents made any representations or warranties respecting the
Property, the Building or the Leased Premises, upon which Tenant relied in
entering into the Lease, which are not expressly set forth in this Lease. Tenant
further acknowledges that neither Landlord nor any of its agents made any
representations as to (i) whether the Leased Premises may be used for Tenant’s
intended use under existing Law, or (ii) the suitability of the Leased Premises
for the conduct of Tenant’s business, or (iii) the exact square footage of the
Leased Premises, and that Tenant relies solely upon its own investigations with
respect to such matters. Tenant expressly waives any and all claims for damage
by reason of any

 

23.

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statement, representation, warranty, promise or other agreement of Landlord or
Landlord’s agent(s), if any, not contained in this Lease or in any Exhibit
attached hereto.

 

ARTICLE 15

 

OPTIONS TO EXTEND

 

15.1 Landlord’s Option to Extend Lease Term. Landlord has the option, in its
sole discretion, to extend the initial Lease Term to expire on October 31, 2008;
provided Landlord provides to Tenant written notice of its election to extend
the Lease Term no later than April 30, 2006 and no sooner than February 1, 2006.
Base Monthly Rent for the portion Lease Term as extended by Landlord shall be
the “Fair Market Rent” for the Premises for said period, which shall be
determined by the processes set forth in Paragraphs 15.4 and 15.5 below.

 

15.2 Tenant’s Option to Extend Lease Term. Provided Landlord has exercised its
option to extend set forth in Section 15.1 above, Redback Networks Inc. is the
Tenant hereunder and occupies the entirety of the Leased Premises, and subject
to the condition set forth in clause (b) below, Tenant shall have one option to
extend the term of this Lease with respect to the entirety of the Leased
Premises, a period of five (5) years from the expiration of the initial Lease
Term as extended by Landlord above (the “Extension Period”), subject to the
satisfaction or waiver of the following conditions in Landlord’s sole
discretion:

 

(a) The option to extend shall be exercised, if at all, by notice of exercise
given to Landlord by Tenant not more than twelve (12) months nor less than nine
(9) months prior to the expiration of the initial Lease Term;

 

(b) Anything herein to the contrary notwithstanding, if Tenant is in default
under any of the terms, covenants or conditions of this Lease, either at the
time Tenant exercises the extension option or on the commencement date of the
Extension Period, Landlord shall have, in addition to all of Landlord’s other
rights and remedies provided in this Lease, the right to terminate such
option(s) to extend upon notice to Tenant; and

 

(c) Both at the same time Tenant exercises the extension option and on the
commencement date of the Extension Term, Tenant’s publicly traded equities must
have a Market Capitalization on said day, as reported by the Wall Street Journal
or equivalent source, of not less than $250,000,000. Market Capitalization means
the closing price for Tenant’s publicly traded Common Stock multiplied by the
number of then outstanding shares.

 

15.3 In the event the applicable option is exercised in a timely fashion, the
Lease shall be extended for the term of the applicable extension period upon all
of the terms and conditions of this Lease, provided that the Base Monthly Rent
for each extension period shall be the “Fair Market Rent” for the Leased
Premises, increased as set forth below. For purposes hereof, “Fair Market Rent”
shall mean the Base Monthly Rent determined pursuant to the process described
below. In no event, however, shall any adjustment of Base Monthly Rent pursuant
to this paragraph result in a decrease of the Base Monthly Rent for the Leased
Premises below the amount due from Tenant for the preceding portion of the
initial Lease Term for which Base Monthly Rent had been fixed.

 

15.4 Within thirty (30) days after receipt of Tenant’s notice of exercise,
Landlord shall notify Tenant in writing of Landlord’s estimate of the Base
Monthly Rent for the first year of the extension period, and Landlord’s estimate
of annual increases. For purposes hereof, “Fair Market Rent” shall mean
collectively, (1) Base Monthly Rent for the first year of the applicable
extension period and (2) annual increases, if any, determined at the time and in
the same manner Base Monthly Rent for the first year is determined. Within 30
days after receipt of such notice from Landlord, Tenant shall have the right
either to (i) accept Landlord’s estimate of Fair Market Rent or (ii) elect to
arbitrate Landlord’s estimate of Fair Market Rent, such arbitration to be
conducted pursuant to the provisions hereof. Failure on the part of Tenant to
require arbitration of Fair Market Rent within such 30-day period shall
constitute acceptance of the Fair Market Rent for the applicable extension
period as calculated by Landlord. If Tenant elects arbitration, the arbitration
shall be concluded within 90 days after the date of Tenant’s election, subject
to extension for an additional 30-day period if a third arbitrator is required
and does not act in a timely manner. To the extent that arbitration has not been
completed prior to the expiration of any preceding period for which Base Monthly
Rent has been determined, Tenant shall pay Base Monthly Rent at the rate
calculated by Landlord, with the potential for an adjustment to be made once
Fair Market Rent is ultimately determined by arbitration.

 

15.5 In the event of arbitration, the judgment or the award rendered in any such
arbitration may be entered in any court having jurisdiction and shall be final
and binding between the parties. The arbitration shall be conducted and
determined in the County of Santa Clara in accordance with the then prevailing
rules of the American Arbitration Association or its successor for arbitration
of commercial disputes except to the extent that the procedures mandated by such
rules shall be modified as follows:

 

(a) Tenant shall make demand for arbitration in writing within thirty (30) days
after service of Landlord’s determination of Fair Market Rent given under
Paragraph 15.4 above, specifying therein the name and address of the person to
act as the arbitrator on its behalf. The arbitrator shall be qualified as a real
estate appraiser familiar with the Fair Market Rent of similar industrial,
research and development, or office space in the Silicon Valley area who would
qualify as an expert witness over objection to give opinion testimony addressed
to the issue in a court of competent jurisdiction. Failure on the part of Tenant
to make a proper demand in a timely manner for such arbitration shall constitute
a waiver of the right thereto. Within fifteen (15) days after the service of the
demand for arbitration, Landlord shall give notice to Tenant, specifying the
name and address of the person designated by Landlord to act as arbitrator on
its behalf who shall be similarly qualified. If Landlord fails to notify Tenant
of the appointment of its arbitrator, within or by the time above specified,
then the arbitrator appointed by Tenant shall be the arbitrator to determine the
issue.

 

24.

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(b) In the event that two arbitrators are chosen pursuant to Paragraph 15.5(a)
above, the arbitrators so chosen shall, within fifteen (15) days after the
second arbitrator is appointed determine the Fair Market Rent. If the two
arbitrators shall be unable to agree upon a determination of Fair Market Rent
within such 15-day period, they, themselves, shall appoint a third arbitrator,
who shall be a competent and impartial person with qualifications similar to
those required of the first two arbitrators pursuant to Paragraph 15.5(a). In
the event they are unable to agree upon such appointment within seven days after
expiration of such 15-day period, the third arbitrator shall be selected by the
parties themselves, if they can agree thereon, within a further period of
fifteen (15) days. If the parties do not so agree, then either party, on behalf
of both, may request appointment of such a qualified person by the then Chief
Judge of the United States District Court having jurisdiction over the County of
Santa Clara, acting in his private and not in his official capacity, and the
other party shall not raise any question as to such Judge’s full power and
jurisdiction to entertain the application for and make the appointment. The
three arbitrators shall decide the dispute if it has not previously been
resolved by following the procedure set forth below.

 

(c) Where an issue cannot be resolved by agreement between the two arbitrators
selected by Landlord and Tenant or settlement between the parties during the
course of arbitration, the issue shall be resolved by the three arbitrators
within 15 days of the appointment of the third arbitrator in accordance with the
following procedure. The arbitrator selected by each of the parties shall state
in writing his determination of the Fair Market Rent supported by the reasons
therefor with counterpart copies to each party. The arbitrators shall arrange
for a simultaneous exchange of such proposed resolutions. The role of the third
arbitrator shall be to select which of the two proposed resolutions most closely
approximates his determination of Fair Market Rent. The third arbitrator shall
have no right to propose a middle ground or any modification of either of the
two proposed resolutions. The resolution he chooses as most closely
approximating his determination shall constitute the decision of the arbitrators
and be final and binding upon the parties.

 

(d) In the event of a failure, refusal or inability of any arbitrator to act,
his successor shall be appointed by him, but in the case of the third
arbitrator, his successor shall be appointed in the same manner as provided for
appointment of the third arbitrator. The arbitrators shall decide the issue
within fifteen (15) days after the appointment of the third arbitrator. Any
decision in which the arbitrator appointed by Landlord and the arbitrator
appointed by Tenant concur shall be binding and conclusive upon the parties.
Each party shall pay the fee and expenses of its respective arbitrator and both
shall share the fee and expenses of the third arbitrator, if any, and the
attorneys’ fees and expenses of counsel for the respective parties and of
witnesses shall be paid by the respective party engaging such counsel or calling
such witnesses.

 

(e) The arbitrators shall have the right to consult experts and competent
authorities to obtain factual information or evidence pertaining to a
determination of Fair Market Rent, but any such consultation shall be made in
the presence of both parties with full right on their part to cross-examine. The
arbitrators shall render their decision and award in writing with counterpart
copies to each party. The arbitrators shall have no power to modify the
provisions of this Lease.

 

ARTICLE 16

 

REQUIREMENTS LEASE

 

16.1 Requirements Lease. Tenant hereby agrees that until the earlier of (i)
November 1, 2006 (or November 1, 2008 in the event Landlord exercises its option
to extend as provided in Paragraph 15.1 above), or (ii) such time as Tenant has
been “Acquired”, as defined below, neither Tenant nor any of its subsidiaries
shall enter into any lease, sublease, or other agreement to occupy any premises
within ten (10) miles in any direction from the Leased Premises, the mileage to
be measured on a straight-line basis on a map, not following contours of the
land and streets, without providing Landlord prior written notice setting forth
its leasing requirements (“Leasing Notice”). Provided Landlord or an affiliate,
within thirty (30) days following receipt of such Leasing Notice, delivers to
Tenant a written Lease reasonably satisfying the leasing requirements set forth
in the Leasing Notice within the Project (“Requirements Lease”), Tenant shall be
required to enter into such Requirements Lease. The Requirements Lease shall be
on the same general terms as the Lease, except that Base Monthly Rent under the
Requirements Lease shall be “Fair Market Rent” which shall be determined by the
processes set forth in Paragraphs 15.4 and 15.5 above. For purposes of this
Amendment, Tenant shall be deemed Acquired on such date that Tenant is a party
to a merger or consolidation in which the holders of stock of Tenant entitled to
vote in the election of directors of Tenant immediately prior to the merger or
consolidation own less than 50% of the voting stock entitled to vote in the
election of directors of the surviving entity in such merger or consolidation.

 

ARTICLE 17

 

WARRANTS

 

17.1 Warrants. As additional consideration for Landlord entering into this Lease
with Tenant, Tenant hereby agrees to grant and issue to Landlord (i) a warrant
to purchase up to 677,452 shares of Common Stock of Tenant at a purchase price
of $5.00 per share, and (ii) another warrant to purchase up to an additional
677,452 shares of Common Stock of Tenant at a purchase price of $9.50 per share
(the “Warrants”) in the form attached to the Plan, but modified to allow the
Landlord to transfer the Warrants in whole or in part to any one or more
affiliates of Landlord. In the Tenant breaches its obligation to issue one or
both Warrants or to perform thereunder, Landlord shall have all rights to pursue
any and all remedies at law, in equity or as set forth in this Lease, separately
or in conjunction with exercising its rights and remedies under this Lease.

 

25.

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ARTICLE 18

 

TELEPHONE SERVICE

 

18.1 Notwithstanding any other provision of this Lease to the contrary:

 

(a) So long as the entirety of the Leased Premises is leased to Tenant:

 

(i) Landlord shall have no responsibility for providing to Tenant any telephone
equipment, including wiring, within the Leased Premises or for providing
telephone service or connections from the utility to the Leased Premises; and

 

(ii) Landlord makes no warranty as to the quality, continuity or availability of
the telecommunications services in the Building, and Tenant hereby waives any
claim against Landlord for any actual or consequential damages (including
damages for loss of business) in the event Tenant’s telecommunications services
in any way are interrupted, damaged or rendered less effective, except to the
extent caused by the grossly negligent or willful act or omission by Landlord,
its agents or employees. Landlord shall not be liable to Tenant and Tenant
waives all claims against Landlord whatsoever, whether for personal injury,
property damage, loss of use of the Leased Premises, or otherwise, due to the
interruption or failure of telephone services to the Leased Premises. Tenant
hereby holds Landlord harmless and agrees to indemnify, protect and defend
Landlord from and against any liability for any damage, loss or expense due to
any failure or interruption of telephone service to the Leased Premises for any
reason.

 

(b) At such time as the entirety of the Building is no longer leased to Tenant,
Landlord shall in its sole discretion have the right, by written notice to
Tenant, to elect to assume limited responsibility for INC, as provided below,
and upon such assumption of responsibility by Landlord, this subparagraph (b)
shall apply prospectively.

 

(i) Landlord shall provide Tenant access to such quantity of pairs in the
Building intra-building network cable (“INC”) as is determined to be available
by Landlord in its reasonable discretion. Tenant’s access to the INC shall be
solely by arrangements made by Tenant, as Tenant may elect, directly with
Pacific Bell or Landlord (or such vendor as Landlord may designate), and Tenant
shall pay all reasonable charges as may be imposed in connection therewith.
Pacific Bell’s charges shall be deemed to be reasonable. Subject to the
foregoing, Landlord shall have no responsibility for providing to Tenant any
telephone equipment, including wiring, within the Leased Premises or for
providing telephone service or connections from the utility to the Leased
Premises, except as required by law.

 

(ii) Tenant shall not alter, modify, add to or disturb any telephone wiring in
the Leased Premises or elsewhere in the Building without the Landlord’s prior
written consent. Tenant shall be liable to Landlord for any damage to the
telephone wiring in the Building due to the act, negligent or otherwise, of
Tenant or any employee, contractor or other agent of Tenant. Tenant shall have
no access to the telephone closets within the Building, except in the manner and
under procedures established by Landlord. Tenant shall promptly notify Landlord
of any actual or suspected failure of telephone service to the Leased Premises.

 

(iii) All costs incurred by Landlord for the installation, maintenance, repair
and replacement of telephone wiring in the Building shall be a Property
Maintenance Cost.

 

(iv) Landlord makes no warranty as to the quality, continuity or availability of
the telecommunications services in the Building, and Tenant hereby waives any
claim against Landlord for any actual or consequential damages (including
damages for loss of business) in the event Tenant’s telecommunications services
in any way are interrupted, damaged or rendered less effective, except to the
extent caused by the grossly negligent or willful act or omission by Landlord,
its agents or employees. Tenant acknowledges that Landlord meets its duty of
care to Tenant with respect to the Building INC by contracting with a reliable
third party vendor to assume responsibility for the maintenance and repair
thereof (which contract shall contain provisions requiring such vendor to
inspect the INC periodically (the frequency of such inspections to be determined
by such vendor based on its experience and professional judgment), and requiring
such vendor to meet local and federal requirements for telecommunications
material and workmanship). Subject to the foregoing, Landlord shall not be
liable to Tenant and Tenant waives all claims against Landlord whatsoever,
whether for personal injury, property damage, loss of use of the Leased
Premises, or otherwise, due to the interruption or failure of telephone services
to the Leased Premises. Tenant hereby holds Landlord harmless and agrees to
indemnify, protect and defend Landlord from and against any liability for any
damage, loss or expense due to any failure or interruption of telephone service
to the Leased Premises for any reason.

 

26.

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IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the
respective dates below set forth with the intent to be legally bound thereby as
of the Effective Date of this Lease first above set forth.

 

LANDLORD: CTC ASSOCIATES II, L.P., a Delaware limited partnership By: CTC
Associates II GenPar, LLC, a Delaware limited liability company, its general
partner

By: Corporate Technology Centre Associates LLC

a California limited liability company, its sole member

By: Corporate Technology Centre Partners LLC

a California limited liability company, its Manager

By: Menlo Equities LLC a California limited liability company, its Managing
Member By: Diamant Investments LLC, its member

 

Dated:

              By:        

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Richard J. Holmstrom, Manager

    TENANT:            

REDBACK NETWORKS INC.,

a Delaware corporation

Dated:

              By:        

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

               

Title:

                       

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Dated:

              By:        

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

             

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

               

Title:

                       

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27.

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EXHIBIT A

 

SITE PLAN (PROJECT)

 

1.

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

EXHIBIT B

 

SITE PLAN (PROPERTY)

 

1.

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

EXHIBIT C

 

FORM OF ESTOPPEL CERTIFICATE

 

                    , 20        

 

 

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

 

Re 300 Holger Way

San Jose, California

 

Ladies and Gentlemen:

 

Reference is made to that certain Lease, dated as of November     , 2003,
between CTC ASSOCIATES II, L.P., a Delaware limited partnership (“Landlord”),
and the undersigned (herein referred to as the “Lease”). A copy of the Lease
[and all amendment thereto] is[are] attached hereto as Exhibit A. At the request
of Landlord in connection with [State reasons for request for estoppel
certificate], the undersigned hereby certifies to Landlord and to [State names
of other parties requiring certification] and each of your respective successors
and assigns as follows:

 

1. The undersigned is the tenant under the Lease.

 

2. The Lease is in full force and effect and has not been amended, modified,
supplemented or superseded except as indicated in Exhibit A.

 

3. There is no defense, offset, claim or counterclaim by or in favor of the
undersigned against Landlord under the Lease or against the obligations of the
undersigned under the Lease, except                     . The undersigned has no
renewal, extension or expansion option, no right of first offer or right of
first refusal and no other similar right to renew or extend the term of the
Lease or expand the property demised thereunder except as may be expressly set
forth in the Lease.

 

4. The undersigned is not aware of any default now existing of the undersigned
or of Landlord under the Lease, nor of any event which with notice or the
passage of time or both would constitute a default of the undersigned or of
Landlord under the Lease, except                     .

 

5. The undersigned has not received notice of a prior transfer, assignment,
hypothecation or pledge by Landlord of any of Landlord’s interest in the Lease,
except                     .

 

6. The monthly rent due under the Lease is $           and has been paid through
                    , and all additional rent due and payable under the Lease
has been paid through                     .

 

7. The term of the Lease commenced on                     , and expires on
                    , unless sooner terminated pursuant to the provisions of the
Lease. Landlord has performed all work required by the Lease for the
undersigned’s initial occupancy of the demised property.

 

8. The undersigned has deposited the sum of $           with Landlord as
security for the performance of its obligations as tenant under the Lease, and
no portion of such deposit has been applied by Landlord to any obligation under
the Lease.

 

9. There is no free rent period pending, nor is Tenant entitled to any
Landlord’s contribution.

 

The above certifications are made to Landlord and Lender knowing that Landlord
and Lender will rely thereon in accepting an assignment of the Lease.

 

Very truly yours,

 

REDBACK NETWORKS INC.

 

By:        

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Name:        

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Title:        

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1.

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EXHIBIT D

 

FORM OF WARRANT

 

TO PURCHASE COMMON STOCK

 

1.

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TABLE OF CONTENTS

 

     PAGE

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

ARTICLE 1 REFERENCE

   1

1.1 References

   1

ARTICLE 2 LEASED PREMISES, TERM AND POSSESSION

   3

2.1 Demise Of Leased Premises

   3

2.2 Right To Use Outside Areas

   3

2.3 Lease Commencement Date And Lease Term

   3

2.4 Delivery Of Possession

   3

2.5 Surrender Of Possession

   3

ARTICLE 3 RENT, LATE CHARGES AND SECURITY DEPOSITS

   4

3.1 Base Monthly Rent

   4

3.2 Additional Rent

   4

3.3 Year-End Adjustments

   4

3.4 Late Charge, And Interest On Rent In Default.

   4

3.5 Payment Of Rent

   5

3.6 Prepaid Rent

   5

3.7 Security Deposit

   5

ARTICLE 4 USE OF LEASED PREMISES AND OUTSIDE AREA

   5

4.1 Permitted Use

   5

4.2 General Limitations On Use

   5

4.3 Noise And Emissions

   6

4.4 Trash Disposal

   6

4.5 Parking

   6

4.6 Signs

   6

4.7 Compliance With Laws And Private Restrictions

   6

4.8 Compliance With Insurance Requirements

   6

4.9 Landlord’s Right To Enter

   6

4.10 Use Of Outside Areas

   7

4.11 Environmental Protection

   7

4.12 Rules And Regulations

   8

4.13 Reservations

   8

4.14 Roof

   8

ARTICLE 5 REPAIRS, MAINTENANCE, SERVICES AND UTILITIES

   8

5.1 Repair And Maintenance

   8

5.2 Utilities

   9

5.3 Security

   9

5.4 Energy And Resource Consumption

   9

5.5 Limitation Of Landlord’s Liability

   9

ARTICLE 6 ALTERATIONS AND IMPROVEMENTS

   10

6.1 By Tenant

   10

6.2 Ownership Of Improvements

   10

6.3 Alterations Required By Law

   10

 

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6.4 Liens

   11

ARTICLE 7 ASSIGNMENT AND SUBLETTING BY TENANT

   11

7.1 By Tenant

   11

7.2 Merger, Reorganization, or Sale of Assets

   11

7.3 Landlord’s Election

   12

7.4 Conditions To Landlord’s Consent

   12

7.5 Assignment Consideration And Excess Rentals Defined

   13

7.6 Payments

   13

7.7 Good Faith

   13

7.8 Effect Of Landlord’s Consent

   13

ARTICLE 8 LIMITATION ON LANDLORD’S LIABILITY AND INDEMNITY

   13

8.1 Limitation On Landlord’s Liability And Release

   13

8.2 Tenant’s Indemnification Of Landlord

   14

ARTICLE 9 INSURANCE

   14

9.1 Tenant’s Insurance

   14

9.2 Landlord’s Insurance

   15

9.3 Mutual Waiver Of Subrogation

   15

ARTICLE 10 DAMAGE TO LEASED PREMISES

   15

10.1 Landlord’s Duty To Restore

   15

10.2 Insurance Proceeds

   16

10.3 Landlord’s Right To Terminate

   16

10.4 Tenant’s Right To Terminate

   16

10.5 Tenant’s Waiver

   16

10.6 Abatement Of Rent

   16

ARTICLE 11 CONDEMNATION

   16

11.1 Tenant’s Right To Terminate

   16

11.2 Landlord’s Right To Terminate

   16

11.3 Restoration

   17

11.4 Temporary Taking

   17

11.5 Division Of Condemnation Award

   17

11.6 Abatement Of Rent

   17

11.7 Taking Defined

   17

ARTICLE 12 DEFAULT AND REMEDIES

   17

12.1 Events Of Tenant’s Default

   17

12.2 Landlord’s Remedies

   18

12.3 Landlord’s Default And Tenant’s Remedies

   19

12.4 Limitation Of Tenant’s Recourse

   19

12.5 Tenant’s Waiver

   19

ARTICLE 13 GENERAL PROVISIONS

   19

13.1 Taxes On Tenant’s Property

   19

13.2 Holding Over

   20

 

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13.3 Subordination To Mortgages

   20

13.4 Tenant’s Attornment Upon Foreclosure

   20

13.5 Mortgagee Protection

   20

13.6 Estoppel Certificate

   20

13.7 Tenant’s Financial Information

   21

13.8 Transfer By Landlord

   21

13.9 Force Majeure

   21

13.10 Notices

   21

13.11 Attorneys’ Fees

   21

13.12 Definitions

   22

13.13 General Waivers

   23

13.14 Miscellaneous

   23

ARTICLE 14 CORPORATE AUTHORITY BROKERS AND ENTIRE AGREEMENT

   23

14.1 Corporate Authority

   23

14.2 Brokerage Commissions

   23

14.3 Entire Agreement

   23

14.4 Landlord’s Representations

   23

ARTICLE 15 OPTIONS TO EXTEND

   24

ARTICLE 16

   25

16.1 Requirements Lease

   25

ARTICLE 18 TELEPHONE SERVICE

   25

 

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