Exhibit 10.1

THIRD AMENDMENT TO LEASE

This Third Amendment to Lease (the “Amendment”) is entered into as of August 31,
2010 (the “Effective Date”), by and between WESTPORT OFFICE PARK, LLC, a
California limited liability company (“Landlord”), and SABA SOFTWARE, INC., a
Delaware corporation (“Tenant”), with respect to the following facts and
circumstances:

A. Landlord (as successor in interest to Westport Joint Venture, a California
general partnership) and Tenant have previously entered into that certain Lease
Agreement dated as of March 16, 1999, as amended by a First Amendment to Lease
dated as of December 28, 1999, and a Second Amendment to Lease (the “Second
Amendment”) dated as of May 24, 2001 (collectively, the “Original Lease”), of
certain premises in the building commonly known as 2400 Bridge Parkway, Redwood
City, California 94065, as more particularly described in the Original Lease.
Capitalized terms used and not otherwise defined herein shall have the meanings
given those terms in the Original Lease.

B. Landlord and Tenant desire to amend the Original Lease to extend its term and
to make other modifications on the terms and conditions provided herein.

IT IS, THEREFORE, agreed as follows:

1. The Termination Date of the Original Lease is hereby changed to May 31, 2019
(the “New Expiration Date”). The period from June 1, 2014 (the “Extension
Commencement Date”) to the New Expiration Date is referred to herein as the
“Extension Term.”

2. Section 4(A) of the Original Lease is hereby amended as of the Effective Date
of this Agreement in accordance with the following schedule to restate the Base
Rent payable thereunder by Tenant:

 

Period

        Monthly Base Rent

06/01/2013 – 05/31/2014

     $162,086.40

06/01/2014 – 05/31/2015

     $  96,768.00

06/01/2015 – 05/31/2016

     $  99,671.04

06/01/2016 – 05/31/2017

     $102,574.08

06/01/2017 – 05/31/2018

     $105,960.96

06/01/2018 – 05/31/2019

     $108,864.00

3. Tenant is in occupancy of the Premises and hereby accepts the Premises
“AS IS”, without any obligation on Landlord’s part to alter or improve such
space or provide Tenant with any improvement allowance, except as provided in
Exhibit D attached hereto.

4. Notwithstanding the provisions of Article 8 of the Original Lease or anything
in the Original Lease to the contrary, Landlord acknowledges and agrees that
Tenant shall not be required to remove from the Premises at the expiration of
the lease term or earlier termination of the Lease, any alterations or
improvements made by Tenant prior to the Effective Date. Additionally, Tenant
shall not be obligated to remove any alterations or improvements that are made
by Tenant subsequent to the Effective Date with respect to which the following
is true: (i)

 

1

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

at the time Tenant requests Landlord’s approval, Tenant requests of Landlord in
writing that Landlord inform Tenant of whether or not Landlord will require
Tenant to remove such alterations or improvements at the expiration of the Lease
term; and (ii) at the time Landlord grants such approval, it informs Tenant that
such removal will not be required.

5. Except as otherwise provided herein, all of the terms and conditions of the
Original Lease shall continue to apply during the Extension Term; provided,
however, that there shall be no rent credit, and that there shall be no
improvement allowance, Landlord construction obligations or other initial
concessions with respect to the Extension Term, except as provided in
Paragraph 3 of this Amendment, and Tenant shall have no further option to extend
the term.

6. Landlord hereby represents and warrants to Tenant that it has dealt with no
broker, finder or similar person in connection with this Amendment, and Tenant
hereby represents and warrants to Landlord that it has dealt with no broker,
finder or similar person in connection with this Amendment, other than Harvest
Properties (“Landlord’s Broker”) and CB Richard Ellis, Inc. (“Tenant’s Broker”).
Landlord and Tenant shall each defend, indemnify and hold the other harmless
with respect to all claims, causes of action, liabilities, losses, costs and
expenses (including without limitation attorneys’ fees) arising from a breach of
the foregoing representation and warranty. The commission with respect to this
Amendment shall be paid to Landlord’s Broker by Landlord pursuant to a separate
agreement. Landlord’s Broker will pay Tenant’s Broker a commission pursuant to a
separate agreement. Nothing in this Amendment shall impose any obligation on
Landlord to pay a commission or fee to any party other than Landlord’s Broker.

7. As additional consideration for this Amendment, Landlord and Tenant each
hereby certify to the other that:

(a) The Original Lease (as amended hereby) is in full force and effect.

(b) Tenant is in possession of the Premises.

(c) Rent has been paid through August 31, 2010

(d) To each party’s knowledge, there are no uncured defaults on the part of
Landlord or Tenant under the Original Lease.

(e) All of Landlord’s obligations with respect to construction of tenant
improvements in the Premises and payment of Tenant improvement allowances have
been satisfied, except those provided for in Paragraph 3 of this Amendment.

(f) To each party’s knowledge, there are no existing offsets or defenses which
either party has against the enforcement of the Original Lease (as amended
hereby).

8. Except as specifically provided herein, the terms and conditions of the
Original Lease as amended hereby are confirmed and continue in full force and
effect. This Amendment shall be binding on the heirs, administrators, successors
and assigns (as the case may be) of the parties hereto. This Amendment and the
attached exhibits, which are hereby incorporated into

 

2

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

and made a part of this Amendment, set forth the entire agreement between the
parties with respect to the matters set forth herein. There have been no
additional oral or written representations or agreements. Under no circumstances
shall Tenant be entitled to any Rent abatement, improvement allowance, leasehold
improvements, or other work to the Premises, or any similar economic incentives
that may have been provided to Tenant in connection with entering into the
Original Lease, unless specifically set forth in this Amendment. In the case of
any inconsistency between the provisions of the Original Lease and this
Amendment, the provisions of this Amendment shall govern and control. Submission
of this Amendment by Landlord is not an offer to enter into this Amendment but
rather is a solicitation for such an offer by Tenant. Landlord shall not be
bound by this Amendment until Landlord has executed and delivered the same to
Tenant. Time is of the essence of this Amendment and the provisions contained
herein.

9. Effective as of the Effective Date, all references to the “Lease” shall refer
to the Original Lease, as amended by this Amendment.

10. As an inducement to Landlord to enter into this Amendment, Tenant hereby
represents and warrants that: (i) Tenant is not, nor is it owned or controlled
directly or indirectly by, any person, group, entity or nation named on any list
issued by the Office of Foreign Assets Control of the United States Department
of the Treasury (“OFAC”) pursuant to Executive Order 13224 or any similar list
or any law, order, rule or regulation or any Executive Order of the President of
the United States as a terrorist, “Specially Designated National and Blocked
Person” or other banned or blocked person (any such person, group, entity or
nation being hereinafter referred to as a “Prohibited Person”); (ii) Tenant is
not (nor is it owned or controlled, directly or indirectly, by any person,
group, entity or nation which is) acting directly or indirectly for or on behalf
of any Prohibited Person; and (iii) neither Tenant (nor any person, group,
entity or nation which owns or controls Tenant, directly or indirectly) has
knowingly conducted or will knowingly conduct business or has knowingly engaged
or will knowingly engage in any transaction or dealing with any Prohibited
Person, including without limitation any assignment of this Lease or any
subletting of all or any portion of the Premises or the making or receiving of
any contribution of funds, goods or services to or for the benefit of a
Prohibited Person. Tenant covenants and agrees (a) to comply with all
requirements of law relating to money laundering, anti-terrorism, trade embargos
and economic sanctions, now or hereafter in effect, (b) to immediately notify
Landlord in writing if any of the representations, warranties or covenants set
forth in this Section 10 are no longer true or have been breached or if Tenant
has a reasonable basis to believe that they may no longer be true or have been
breached, (c) not to use funds from any Prohibited Person to make any payment
due to Landlord under the Lease and (d) at the request of Landlord, to provide
such information as may be reasonably requested by Landlord to determine
Tenant’s compliance with the terms hereof. Tenant shall indemnify, defend and
hold harmless Landlord, its employees, assigns, successors,
successor-in-interest, agents and representatives from and against any and all
claims, liabilities, obligations, losses, causes of action, demands,
governmental directives, fines, penalties, expenses, costs (including without
limitation, reasonable attorneys’, consultants’ and other experts’ fees and
costs), and damages, which arise from or relate to a breach by Tenant of the
foregoing representations and warranties. The representations and warranties
contained in this subsection shall be continuing in nature and shall survive the
expiration or earlier termination of this Lease.

 

3

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

11. To satisfy compliance with the Employee Retirement Income Security Act of
1974, as amended (“ERISA”), and Section 4975(c) of the Internal Revenue Code,
Tenant represents and warrants to Landlord that (i) Tenant is not an “employee
benefit plan” (as that term is defined in Section 3(3) of ERISA); (ii) no
portion of the rights of Tenant in the Original Lease and this Amendment or in
the leasehold estate demised thereby constitutes a plan asset subject to ERISA;
and (iii) the undersigned is not an “affiliate” of The Prudential Insurance
Company of America as defined in Section IV(b) of PTE90-1.

 

4

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

IN WITNESS WHEREOF, this Amendment has been executed as of the date first above
written.

 

LANDLORD:

 

WESTPORT OFFICE PARK, LLC,

a California limited liability company

By:   The Prudential Insurance Company of America, a New Jersey corporation, its
member   By:   /s/    JEFFREY D. MILLS            

Jeffrey D. Mills

Vice President

    [Printed Name and Title]

TENANT:

 

SABA SOFTWARE, INC.,

a Delaware corporation

By:   /s/    WILLIAM SLATER          

William Slater

Chief Financial Officer

  [Printed Name and Title]

 

5

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

EXHIBIT D

TENANT WORK LETTER

This Tenant Work Letter (“Tenant Work Letter”) shall set forth the terms and
conditions relating to certain construction in the Premises. All references in
this Tenant Work Letter to “the Lease” shall mean the relevant portions of the
Lease as defined in the Third Amendment to Lease (the “Amendment”) to which this
Tenant Work Letter is attached as Exhibit D.

SECTION 1

BASE, SHELL AND CORE

Landlord has previously constructed the base, shell, and core (i) of the
Premises and (ii) of the floor(s) of the Building on which the Premises are
located (collectively, the “Base, Shell, and Core”), and Tenant shall accept the
Base, Shell and Core and the Premises in their current “As-Is” condition
existing as of the date of the Amendment. Tenant shall install in the Premises
certain “Renovation Improvements” (as defined below) pursuant to the provisions
of this Tenant Work Letter. Except for Landlord’s obligation to disburse the
Renovation Improvement Allowance as described below, Landlord shall not be
obligated to make or pay for any alterations or improvements to the Premises,
the Building or the Complex, subject to any of Landlord’s obligations of
maintenance and repair pursuant to the Original Lease as modified by this
Amendment, which shall continue in full force and effect.

SECTION 2

RENOVATION IMPROVEMENTS

2.1 Renovation Improvement Allowance. Tenant shall be entitled to a one-time
tenant improvement allowance (the “Renovation Improvement Allowance”) in the
amount of up to, but not exceeding $241,920.00, for the costs relating to the
initial design and construction of Tenant’s improvements in the Premises,
including any changes in the Base, Shell and Core that are completed prior to
December 31, 2011 (collectively, the “Renovation Improvements”); provided,
however, that Landlord shall have no obligation to pay all or any portion of the
Renovation Improvement Allowance to Tenant unless Tenant makes a request for
disbursement pursuant to the terms and conditions of Section 2.2 below prior to
December 31, 2018. In no event shall Landlord be obligated to make disbursements
pursuant to this Tenant Work Letter in a total amount which exceeds the
Renovation Improvement Allowance. Tenant shall not be entitled to receive any
cash payment or credit against Rent or otherwise for any unused portion of the
Renovation Improvement Allowance which is not used to pay for the Renovation
Improvement Allowance Items (as such term is defined below).

2.2 Disbursement of the Renovation Improvement Allowance.

2.2.1 Renovation Improvement Allowance Items. Except as otherwise set forth in
this Tenant Work Letter, the Renovation Improvement Allowance shall be payable
by

 

6

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

Landlord to Tenant only for the following items and costs (collectively, the
“Renovation Improvement Allowance Items”), and Landlord shall not deduct any
other expenses from the Tenant Improvement Allowance. The Renovation Improvement
Allowance Items shall consist of:

2.2.1.1 Payment of the fees of the “Architect” and the “Engineers,” as those
terms are defined in Section 3.1 of this Tenant Work Letter, costs paid to
Tenant’s consultants in connection with the design, construction of the
Renovation Improvements, and all related design and construction costs incurred
by Tenant, including the fees and costs of Tenant’s project management
consultants;

2.2.1.2 The payment of plan check, permit and license fees relating to
construction of the Renovation Improvements;

2.2.1.3 The cost of construction of the Renovation Improvements, including,
without limitation, contractors’ fees and general conditions, testing and
inspection costs, costs of utilities, and trash removal, including .

2.2.1.4 The cost of any changes to the Construction Drawings or Renovation
Improvements required by Laws and building codes (collectively, “Code”);

2.2.1.5 Sales and use taxes and Title 24 fees; and

2.2.1.6 payment of the actual out-of-pocket fees incurred by, and the actual
out-of-pocket cost of documents and materials supplied by, Landlord and
Landlord’s consultants in connection with the preparation and review of the
“Construction Drawings,” as that term is defined in Section 3.1 of this Tenant
Work Letter, up to a maximum of $5,000.

2.2.2 Disbursement of Tenant Improvement Allowance. During the construction of
the Renovation Improvements, Landlord shall make disbursements of the Renovation
Improvement Allowance in up to two tranches if necessary for Renovation
Improvement Allowance Items for the benefit of Tenant and shall authorize the
release of monies for the benefit of Tenant as follows.

2.2.2.1 Disbursements. On or before each of (i) April 15, 2011 and
(ii) November 15, 2011, if necessary (each, a “Submittal Date”), Tenant shall
deliver to Landlord: (i) a request for payment of the “Contractor,” as that term
is defined in Section 4.1 of this Tenant Work Letter, and/or to the “Architect”
and/or to the “Engineers”, as such terms are defined in Section 3.1, below,
and/or to Tenant’s various consultants or other persons or entities entitled to
payment (or reimbursement to Tenant if Tenant has already paid the Contractor or
other person or entity entitled to payment), approved by Tenant, in a form to be
provided by Landlord, showing the schedule, by trade, of percentage of
completion of the Renovation Improvements in the Premises, detailing the portion
of the work completed; (ii) invoices from all of “Tenant’s Agents,” as that term
is defined in Section 4.1.2 of this Tenant Work Letter, for labor rendered and
materials delivered to the Premises for the applicable payment period;
(iii) executed conditional mechanic’s lien releases from all of Tenant’s Agents
which shall substantially comply with the appropriate provisions of California
Civil Code Section 3262(d) or unconditional releases if appropriate
(iv) Landlord has determined that no substandard work

 

7

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

exists or non material non-compliance with the “Approved Working Drawings”
exists which creates a Design Problem and Landlord has received proof that all
permits and certificates of occupancy required by applicable governmental
authorities in connection with the Renovation Improvements have been obtained;
provided, however, that with respect to fees and expenses of the Architect,
Engineers, or construction or project managers or other similar consultants,
and/or any other pre-construction items for which the payment scheme set forth
in items (i) through (iv), above of this Tenant Work Letter, is not applicable
(collectively, the “Non-Construction Allowance Items”), Tenant shall only be
required to deliver to Landlord on or before the applicable Submittal Date,
reasonable evidence of incurring the cost for the applicable Non-Construction
Allowance Items (unless Landlord has received a preliminary notice in connection
with such costs in which event conditional lien releases must be submitted in
connection with such costs); and (v) all other information reasonably requested
in good faith by Landlord. Tenant’s request for payment shall be deemed Tenant’s
acceptance and approval of the work furnished and/or the materials supplied as
set forth in Tenant’s payment request vis-à-vis Landlord. Within forty-five
(45) days following the Submittal Date, and assuming Landlord receives all of
the information described in items (i) through (v), above, Landlord shall
deliver a check to Tenant made jointly payable to Contractor and Tenant or if
Tenant elects, to the Contractor, subcontractor, architect, engineer or
consultant designated by Tenant and/or a separate check to Tenant where Tenant
has provided evidence reasonably satisfactory to Landlord that Tenant has paid
such Contractor (or other supplier of services or goods) accompanied when
appropriate by unconditional lien releases, or any other provider of goods and
services designated by Tenant to Landlord, and Tenant in payment of the lesser
of: (A) the amounts so requested by Tenant, as set forth in this
Section 2.2.2.1, above, less a ten percent (10%) retention (the aggregate amount
of such retentions to be known as the “Final Retention”), provided, however,
that no such retention shall be applicable to amounts due to Tenant’s
consultants, the Architect, or the Engineer or for Non-Construction Allowance
Items or other Renovation Improvement Allowance Items in connection with the
payment of suppliers for materials delivered to the Premises and subcontractors
for completing performance of their work substantially in advance of the
substantial completion of the Renovation Improvements, and (B) the balance of
any remaining available portion of the Renovation Improvement Allowance (not
including the Final Retention). Landlord’s payment of such amounts shall not be
deemed Landlord’s approval or acceptance of the work furnished or materials
supplied as set forth in Tenant’s payment request. If Tenant receives a check
payable to anyone other than solely to Tenant, Tenant may return such check to
Landlord and receive a replacement check made payable only to Tenant within ten
(10) business days, if Tenant provides the releases and evidence to the extent
required above to receive a check payable solely to Tenant.

Each time after Landlord makes a payment of a portion of the Renovation
Improvement Allowance Payment to Tenant, the Base Rent payable under the Lease
shall automatically increase by a sum sufficient to fully amortize such portion
of the Renovation Improvement Allowance Payment in equal monthly installments to
be paid over the period commencing on the first full month after the date
Landlord makes such portion of the Renovation Improvement Allowance Payment to
Tenant and ending on the Extension Term Expiration Date, which amortization
shall be on a straight line basis at an interest rate of eight percent (8%) per
annum, and, if requested by Landlord, Landlord and Tenant will promptly after
such request enter into an amendment to the Lease setting forth the revised Base
Rent schedule.

 

8

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

2.2.2.2 Final Retention. A check for the Final Retention payable jointly to
Tenant and Contractor (or payable solely to Tenant if Contractor is no longer
owed any money by Tenant for work performed in the Premises) shall be delivered
by Landlord to Tenant following the completion of construction of the Premises,
provided that (i) Tenant delivers to Landlord properly executed mechanics lien
releases in compliance with both California Civil Code Section 3262(d)(2) and
either Section 3262(d)(3) or Section 3262(d)(4), (ii) Architect delivers to
Landlord a certificate, in a form reasonably acceptable to Landlord, certifying
that the construction of the Renovation Improvements in the Premises has been
substantially completed, and (iii) Tenant fulfills its obligations pursuant to
Section 4.3(i) of this Tenant Work Letter.

2.2.2 Other Terms. Landlord shall only be obligated to make disbursements from
the Renovation Improvement Allowance to the extent costs are incurred by Tenant
for Renovation Improvement Allowance Items.

2.2.3 Specifications for Building Standard Components. Landlord has established
specifications (the “Specifications”) for the Building standard components to be
used in the construction of the Renovation Improvements in the Premises which
Specifications have been received by Tenant. Unless otherwise agreed to by
Landlord, the Renovation Improvements shall comply with the Specifications.
Landlord may make changes to the Specifications from time to time. Landlord
shall only be obligated to make disbursements from the Renovation Improvement
Allowance to the extent costs are incurred by Tenant for Renovation Improvement
Allowance Items.

SECTION 3

CONSTRUCTION DRAWINGS

3.1 Selection of Architect/Construction Drawings. Tenant shall retain the
architect/space planner (the “Architect”) approved by Landlord, which approval
shall not be unreasonably withheld or delayed beyond five (5) business days, to
prepare the Construction Drawings. Tenant shall retain the engineering
consultants approved by Landlord (the “Engineers”), which approval shall not be
unreasonably withheld or delayed beyond five (5) business days, to prepare all
plans and engineering working drawings relating to the structural, mechanical,
electrical, plumbing, HVAC, life safety, and sprinkler work in the Premises. The
plans and drawings to be prepared by Architect and the Engineers hereunder shall
be known collectively as the “Construction Drawings.” All Construction Drawings
shall comply at a minimum with the Specifications and shall be in a drawing
format reasonably acceptable to Landlord. Tenant and Architect shall verify, in
the field, the dimensions and conditions as shown on the relevant portions of
the base building plans, and Tenant and Architect shall be solely responsible
for the same, and Landlord shall have no responsibility in connection therewith.
Landlord’s review of the Construction Drawings as set forth in this Section 3,
shall be for its sole purpose and shall not imply Landlord’s review of the same,
or obligate Landlord to review the same, for quality, design, Code compliance or
other like matters. Accordingly, notwithstanding that any Construction Drawings
are reviewed by Landlord or its space planner, architect, engineers and
consultants, and notwithstanding any advice or assistance which may be rendered
to Tenant by Landlord or Landlord’s space planner, architect, engineers, and
consultants, Landlord shall have no liability whatsoever in connection therewith
and shall not be

 

9

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

responsible for any omissions or errors contained in the Construction Drawings.
Each time Landlord is granted the right to review, consent or approve the
Construction Drawings or any component thereof, such consent shall not be
unreasonably withheld, conditioned or delayed. Notwithstanding anything to the
contrary in this Tenant Work Letter, Landlord shall be deemed to have acted
reasonably in disapproving plans or designs if Landlord determines in good faith
that the matter disapproved constitutes or would create a Design Problem (as
defined below). As used herein, a “Design Problem” shall mean, and will be
deemed to exist if such alteration or improvements will (i) affect the exterior
appearance of the Building; (ii) adversely affect the Building structure;
(iii) possibly damage the Building’s systems; (iv) create the potential for
unusual expenses to be incurred upon the removal of the alteration or
improvement (if such removal has been, or will be required (or deemed to be
required) by Landlord upon termination of this Lease), unless Tenant agrees to
perform such work or pay for the incremental removal costs caused by the
non-typical alterations; or (v) fail to comply with the Code.

3.2 Final Space Plan. Tenant shall supply Landlord with four (4) copies signed
by Tenant of its final space plan for the Premises before any architectural
working drawings or engineering drawings have been commenced. The final space
plan (the “Final Space Plan”) shall include a layout and designation of all
offices, rooms and other partitioning, their intended use, and equipment to be
contained therein. Landlord may request clarification or more specific drawings
for special use items not included in the Final Space Plan. Landlord shall
advise Tenant within five (5) business days after Landlord’s receipt of the
Final Space Plan for the Premises if the same is unsatisfactory or incomplete in
any respect. If Tenant is so advised, Tenant shall promptly (i) cause the Final
Space Plan to be revised to correct any deficiencies or other matters Landlord
may reasonably require, and (ii) deliver such revised Final Space Plan to
Landlord.

3.3 Final Working Drawings. After the Final Space Plan has been approved by
Landlord and Tenant, Tenant shall promptly cause the Architect and the Engineers
to complete the architectural and engineering drawings for the Premises, and
cause the Architect to compile a fully coordinated set of architectural,
structural, mechanical, electrical and plumbing working drawings in a form which
is complete to allow subcontractors to bid on the work and to obtain all
applicable permits for the Renovation Improvements (collectively, the “Final
Working Drawings”), and shall submit the same to Landlord for Landlord’s
approval. Tenant shall supply Landlord with four (4) copies signed by Tenant of
such Final Working Drawings. Landlord shall advise Tenant within five (5)
business days after Landlord’s receipt of the Final Working Drawings for the
Premises if the same is unsatisfactory or incomplete in any respect. If Tenant
is so advised, Tenant shall promptly (i) revise the Final Working Drawings in
accordance with such review and any disapproval of Landlord in connection
therewith, and (ii) deliver such revised Final Working Drawings to Landlord.

3.4 Approved Working Drawings. The Final Working Drawings shall be approved by
Landlord (the “Approved Working Drawings”) prior to the commencement of
construction of the Renovation Improvements by Tenant. After approval by
Landlord of the Final Working Drawings, Tenant shall promptly submit the same to
the appropriate governmental authorities for all applicable building permits.
Tenant hereby agrees that neither Landlord nor Landlord’s consultants shall be
responsible for obtaining any building permit or certificate of occupancy for
the Premises and that obtaining the same shall be Tenant’s

 

10

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

responsibility; provided, however, that Landlord shall cooperate with Tenant in
executing permit applications and performing other ministerial acts reasonably
necessary to enable Tenant to obtain any such permit or certificate of
occupancy. No changes, modifications or alterations in the Approved Working
Drawings may be made without the prior written consent of Landlord, which
consent shall not be unreasonably withheld.

SECTION 4

CONSTRUCTION OF THE TENANT IMPROVEMENTS

4.1 Tenant’s Selection of Contractor and Tenant’s Agents.

4.1.1 The Contractor. A general contractor shall be retained by Tenant to
construct the Renovation Improvements. Such general contractor (“Contractor”)
must be approved in writing by Landlord, which approval shall not be
unreasonably withheld or delayed.

4.1.2 Tenant’s Agents. All major trade subcontractors and suppliers used by
Tenant (and the Contractor are known collectively as “Tenant’s Agents”) must be
approved in writing by Landlord, which approval shall not be unreasonably
withheld, conditioned or delayed; provided that, in any event, Tenant must
contract with Landlord’s base building subcontractors for any structural work in
the Premises. If requested by Landlord, Tenant’s Agents shall all be union labor
in compliance with the master labor agreements existing between trade unions and
the local chapter of the Associated General Contractors of America.

4.2 Construction of Renovation Improvements by Tenant’s Agents.

4.2.1 Construction Contract; Cost Budget. Prior to Tenant’s execution of the
construction contract and general conditions with Contractor (the “Contract”),
Tenant shall submit the Contract to Landlord for its approval, which approval
shall not be unreasonably withheld or delayed. Prior to the commencement of the
construction of the Renovation Improvements, and after Tenant has accepted all
bids for the Renovation Improvements, Tenant shall provide Landlord with a
written detailed cost breakdown (the “Final Costs Statement”), by trade, of the
final costs to be incurred, or which have been incurred, in connection with the
Renovation Improvements to be performed by or at the direction of Tenant or the
Contractor which costs form a basis for the amount of the Contract (the “Final
Costs”). Prior to the commencement of construction of the Renovation
Improvements, Tenant shall supply Landlord with evidence reasonably acceptable
to Landlord that Tenant has cash-on-hand in an amount equal to the difference
between the Renovation Improvement Allowance and the Final Costs. In the event
that the Final Costs exceed the Renovation Improvement Allowance, then such
costs shall be paid by Tenant when due out of Tenant’s own funds.

4.2.1.1 Landlord’s General Conditions for Tenant’s Agents and Renovation
Improvement Work. Tenant’s and Tenant’s Agents’ construction of the Renovation
Improvements shall comply with the following: (i) the Renovation Improvements
shall be constructed in material accordance with the Approved Working Drawings;
(ii) Tenant and Tenant’s Agents shall not, in any way, interfere with, obstruct,
or delay, the work of Landlord’s base building contractor and subcontractors
with respect to the Base, Shell and Core (if any) or

 

11

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

any other work in the Building; (iii) Tenant’s shall submit a schedule of work
relating to the Renovation Improvements to Landlord and shall use good faith
efforts to adhere to such schedule, as the same may be amended from time to
time; and (iv) Tenant shall abide by all rules made by Landlord’s Building
contractor or Landlord’s Building manager with respect to the use of freight,
loading dock and service elevators, storage of materials, coordination of work
with the contractors of other tenants, and any other matter in connection with
this Tenant Work Letter, including, without limitation, the construction of the
Renovation Improvements.

4.2.1.2 Indemnity. Tenant’s indemnity of Landlord as set forth in the Lease
shall also apply with respect to any and all costs, losses, damages, injuries
and liabilities related in any way to any act or omission of Tenant or Tenant’s
Agents, or anyone directly or indirectly employed by any of them, or in
connection with Tenant’s non-payment of any amount arising out of the Renovation
Improvements. Such indemnity by Tenant, as set forth in the Lease, shall also
apply with respect to any and all costs, losses, damages, injuries and
liabilities related in any way to Landlord’s performance of any ministerial acts
reasonably necessary (i) to permit Tenant to complete the Renovation
Improvements, and (ii) to enable Tenant to obtain any building permit or
certificate of occupancy for the Premises.

4.2.1.3 Insurance Requirements.

4.2.1.3.1 General Coverages. All of Tenant’s Agents shall carry worker’s
compensation insurance covering all of their respective employees, and shall
also carry public liability insurance, including property damage, all with
limits, in form and with companies as are required to be carried by Tenant as
set forth in the Lease (provided that the limits of liability to be carried by
Tenant’s Agents and Contractor, shall be in an amount which is customary for
such respective Tenant’s Agents employed by tenants constructing improvements in
the comparable buildings).

4.2.1.3.2 Special Coverages. Tenant or Contractor shall carry “Builder’s All
Risk” insurance in an amount approved by Landlord covering the construction of
the Renovation Improvements, and such other insurance as Landlord may reasonably
require, it being understood and agreed that the Renovation Improvements shall
be insured by Tenant pursuant to the Lease immediately upon completion thereof.
Such insurance shall be in amounts and shall include such extended coverage
endorsements as may be reasonably required by Landlord, and in form and with
companies as are required to be carried by Tenant as set forth in the Lease.

4.2.1.3.3 General Terms. Certificates for all insurance carried pursuant to this
Section 4.2.2.4 shall be delivered to Landlord before the commencement of
construction of the Renovation Improvements and before the Contractor’s
equipment is moved onto the site. All such policies of insurance must contain a
provision that the company writing said policy will give Landlord thirty (30)
days prior written notice of any cancellation or lapse of the effective date or
any reduction in the amounts of such insurance. In the event that the Renovation
Improvements are damaged by any cause during the course of the construction
thereof and the Lease is not terminated, Tenant shall immediately repair the
same at Tenant’s sole cost and expense. All policies carried under this
Section 4.2.2.4 shall insure Landlord and Tenant, as their interests may appear,
as well as Contractor and Tenant’s Agents,

 

12

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

and shall name as additional insureds Landlord’s Property Manager, Landlord’s
Asset Manager, and all mortgagees and ground lessors of the Building. All
insurance, except Workers’ Compensation, maintained by Tenant’s Agents shall
preclude subrogation claims by the insurer against anyone insured thereunder.
Such insurance shall provide that it is primary insurance as respects the owner
and that any other insurance maintained by owner is excess and noncontributing
with the insurance required hereunder. The requirements for the foregoing
insurance shall not derogate from the provisions for indemnification of Landlord
by Tenant under Section 4.2.2.3 of this Tenant Work Letter.

4.2.2 Governmental Compliance. The Renovation Improvements shall comply in all
respects with the following: (i) the Code and other state, federal, city or
quasi-governmental laws, codes, ordinances and regulations, as each may apply
according to the rulings of the controlling public official, agent or other
person; (ii) applicable standards of the American Insurance Association
(formerly, the National Board of Fire Underwriters) and the National Electrical
Code; and (iii) building material manufacturer’s specifications.

4.2.3 Inspection by Landlord. Landlord shall have the right to inspect the
Renovation Improvements at all reasonable times; provided, however, that
Landlord’s failure to inspect the Renovation Improvements shall in no event
constitute a waiver of any of Landlord’s rights hereunder nor shall Landlord’s
inspection of the Renovation Improvements constitute Landlord’s approval of the
same. Should Landlord reasonably disapprove any portion of the Renovation
Improvements, Landlord shall notify Tenant in writing of such disapproval and
shall specify the items disapproved. Any defects or deviations in, and/or
disapproval by Landlord of, the Renovation Improvements shall be rectified by
Tenant at no expense to Landlord; provided, however, that in the event Landlord
determines that a defect or deviation exists or disapproves of any matter in
connection with any portion of the Renovation Improvements and such defect,
deviation or matter might adversely affect the mechanical, electrical, plumbing,
heating, ventilating and air conditioning or life-safety systems of the
Building, the structure or exterior appearance of the Building or any other
tenant’s use of such other tenant’s leased premises, Landlord may, take such
action as Landlord deems necessary, at Tenant’s expense and without incurring
any liability on Landlord’s part, to correct any such defect, deviation and/or
matter, including, without limitation, causing the cessation of performance of
the construction of the Renovation Improvements until such time as the defect,
deviation and/or matter is corrected to Landlord’s satisfaction.

4.2.4 Meetings. Commencing upon the execution of the Lease, Tenant shall hold
periodic meetings at a reasonable time, with the Architect and the Contractor
regarding the progress of the preparation of Construction Drawings and the
construction of the Renovation Improvements, which meetings shall be held at a
location designated by Landlord, and Landlord and/or its agents shall receive
prior notice of, and shall have the right to attend, all such meetings, and,
upon Landlord’s request, certain of Tenant’s Agents shall attend such meetings.
In addition, minutes shall be taken at all such meetings, a copy of which
minutes shall be promptly delivered to Landlord. One such meeting each month
shall include the review of Contractor’s current request for payment.

4.3 Notice of Completion; Copy of “As Built” Plans. Within ten (10) days after
completion of construction of the Renovation Improvements, Tenant shall cause a
Notice of

 

13

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

Completion to be recorded in the office of the Recorder of the County in which
the Building is located in accordance with Section 3093 of the Civil Code of the
State of California or any successor statute, and shall furnish a copy thereof
to Landlord upon such recordation. If Tenant fails to do so, Landlord may
execute and file the same on behalf of Tenant as Tenant’s agent for such
purpose, at Tenant’s sole cost and expense. At the conclusion of construction,
(i) Tenant shall cause the Architect and Contractor (A) to update the Approved
Working Drawings as necessary to reflect all changes made to the Approved
Working Drawings during the course of construction, (B) to certify to the best
of their knowledge that the “record-set” of as-built drawings are true and
correct, which certification shall survive the expiration or termination of the
Lease, (C) to deliver to Landlord two (2) sets of sepias of such as-built
drawings within ninety (90) days following issuance of a certificate of
occupancy for the Premises, and (D) to deliver to Landlord a computer disk
containing the Approved Working Drawings in AutoCAD format, and (ii) Tenant
shall deliver to Landlord a copy of all warranties, guaranties, and operating
manuals and information relating to the improvements, equipment, and systems in
the Premises.

4.4 Coordination by Tenant’s Agents with Landlord. Upon Tenant’s delivery of the
Contract to Landlord under Section 4.2.1 of this Tenant Work Letter, Tenant
shall furnish Landlord with a schedule setting forth the projected date of the
completion of the Renovation Improvements and showing the critical time
deadlines for each phase, item or trade relating to the construction of the
Renovation Improvements.

SECTION 5

MISCELLANEOUS

5.1 Tenant’s Representative. Prior to the commencement of construction of the
Renovation Improvements under the terms of this Tenant Work Letter, Tenant shall
provide Landlord with written notice identifying its sole representative with
respect to the matters set forth in this Tenant Work Letter, who shall have full
authority and responsibility to act on behalf of the Tenant as required in this
Tenant Work Letter.

5.2 Landlord’s Representative. Landlord has designated Christine Scheerer as its
sole representative with respect to the matters set forth in this Tenant Work
Letter, who, until further notice to Tenant, shall have full authority and
responsibility to act on behalf of the Landlord as required in this Tenant Work
Letter.

5.3 Time of the Essence in This Tenant Work Letter. Unless otherwise indicated,
all references herein to a “number of days” shall mean and refer to calendar
days. If any item requiring approval is timely disapproved by Landlord, the
procedure for preparation of the document and approval thereof shall be repeated
until the document is approved by Landlord.

5.4 Tenant’s Lease Default. Notwithstanding any provision to the contrary
contained in the Lease, if an event of default by Tenant of this Tenant Work
Letter or the Lease (beyond applicable notice and cure periods) has occurred at
any time on or before the substantial completion of the Premises, then (i) in
addition to all other rights and remedies granted to Landlord pursuant to the
Lease, at law and/or in equity, Landlord shall have the right to withhold

 

14

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

payment of all or any portion of the Renovation Improvement Allowance and/or
Landlord may cause Contractor to cease the construction of the Premises (in
which case, Tenant shall be responsible for any delay in the substantial
completion of the Premises caused by such work stoppage), and (ii) all other
obligations of Landlord under the terms of this Tenant Work Letter shall be
forgiven until such time as such default is cured pursuant to the terms of the
Lease (in which case, Tenant shall be responsible for any delay in the
substantial completion of the Premises caused by such inaction by Landlord).

 

15