Exhibit 10.20

 

STANDARD FORM

MODIFIED GROSS OFFICE LEASE

 

This Standard Form Modified Gross Office Lease (“Lease”) is entered into
effective as of August 14, 2000, between AMERICAN ASSETS, INC., as agent for
PACIFIC SORRENTO MESA HOLDINGS, L.P., a California limited partnership, and
PACIFIC STONECREST HOLDINGS, L.P., a California limited partnership, as tenants
in common (“Landlord”), and BAKBONE SOFTWARE, INC., a California corporation,
(“Tenant”), who agree as follows:

 

1. Agreement to Let. Landlord hereby leases to Tenant, and Tenant hereby leases
from Landlord, upon all of the terms, provisions, and conditions contained in
this Lease, (i) those certain premises described in the Principal Lease
Provisions, below (the “Premises”), consisting of a portion of that certain
building described in the Principal Lease Provisions, below (the “Building”),
which is in turn a part of the Project (as described in the Principal Lease
Provisions, below), along with (ii) the non-exclusive right to use, in common
with Landlord, Landlord’s invitees and licensees, and the other tenants and
users of space within the Project, those portions of the Project intended for
use by, or benefiting, tenants of the Project in common including, without
limitation, the landscaped areas, passageways, walkways, hallways, elevators,
parking areas, and driveways of the Building and the Project, but excluding all
interior areas of the other buildings which may now or in the future be located
in the Project other than the Building (collectively, the “Common Areas”). This
Lease confers no rights, however, to the roof, exterior walls, or utility
raceways of the Building nor rights to any other building in the Project, nor
with regard to either the subsurface of the land below the ground level of the
Project or with regard to the air space above the ceiling of the Premises;
provided, however, that Tenant shall have the limited right to access systems
and equipment exclusively serving the Premises (for which Tenant has maintenance
and repair responsibilities pursuant to Paragraph 10.1 below) that may be
located on the roof, in exterior or demising walls, in utility raceways, in the
airspaces above the ceiling of the Premises, or in any other portion of the
Building or the Common Areas for the sole purpose of maintaining, repairing, and
replacing such systems and equipment.

 

2. Principal Lease Provisions. The following are the “Principal Lease
Provisions” of this Lease. Other portions of this Lease explain and describe
these Principal Lease Provisions in more detail and should be read in
conjunction with this Paragraph 2. In the event of any conflict between the
Principal Lease Provisions and the other portions of this Lease, the Principal
Lease Provisions will control. (Terms shown in quotations are defined terms used
elsewhere in this Lease).

 

2.1. “Project”: That certain office project sometimes referred to as Pacific
Corporate Center, located near the intersection of Pacific Heights Boulevard and
Pacific Mesa Boulevard, in San Diego, California (see Exhibit “A”). As of the
date of this Lease, (i) the Project includes only the Pacific Tower building and
certain Common Areas, and (ii) Landlord has only committed to the construction
of the Building; however, it is anticipated that in the future Landlord may
develop additional buildings and improvements within the boundaries of the
Project pursuant to Paragraph 34, below, in which event, all references herein
to the Project will include such additional buildings and improvements as well.

 

2.2. “Building”: That certain building to be constructed by Landlord pursuant to
attached Exhibit “C”, which is identified on the attached Exhibit “A” as
building B-2.

 

2.3. “Premises”: Approximately 12,500 Rentable Square Feet of space on the west
side of the third floor of the Building (excluding those areas designated on
attached Exhibit “B” as Common Areas) (see Exhibit “B”).

 

2.4. Rentable Area of the Premises: Approximately 12,500 Rentable Square Feet of
space. The terms “Rentable Square Footage,” “Usable Square Footage,” and similar
terms dealing with Rentable or Usable means of describing measurements of square
footages, will have the meanings of such terms adopted by the Building Owners
and Managers Association International relative to single tenant, full-floor
tenants.

 

2.5. “Initial Lease Term”: Five years and zero months (plus any period of time
between the Lease Commencement Date and the Rent Commencement Date (as defined
below) provided that if the Rent Commencement Date is other than the first day
of a calendar month, then such additional period will be extended until the
first day of the calendar month immediately following the Rent Commencement
Date—beginning as of the Lease Commencement Date and ending as of the Initial
Expiration Date (as such terms are defined below); subject to any early access
rights provided to Tenant pursuant to the Addendum attached hereto.

 

2.6. “Lease Commencement Date”: That date upon which Landlord turns possession
of the Premises over to the Tenant in the condition required pursuant to
Paragraph 4.1, below (estimated date: July 1, 2001; see Exhibit “C”).

 

2.7. “Initial Expiration Date”: That date which is five years after the Rent
Commencement Date (estimated date: June 30, 2006; see Exhibit “C”); provided,
however, if the Rent Commencement date is other than the first day of a calendar
month, then such Initial Expiration Date will instead be that date which is five
years after the first day of the first calendar month following the Rent
Commencement Date.

 

2.8. “Rent Commencement Date”: That date upon which Landlord turns possession of
the Premises over to the Tenant in the condition required pursuant to Paragraph
4.1, below (estimated date: July 1, 2001; see Exhibit “C”).

 

2.9. Extension Rights: Yes x    No ¨; one (1) five (5) year extension (subject
to the terms and conditions of the attached Addendum No. 1).

 

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2.10. “Basic Monthly Rent”: The initial Basic Monthly Rent (as of the Rent
Commencement Date) will be $2.25 per month, per Rentable Square Foot of space in
the Premises. The Basic Monthly Rent will increase annually pursuant to
Paragraph 7.2, below. Basic Monthly Rent will always be due and payable in
advance, on or before the first day of the applicable month, except that the
first month’s Basic Monthly Rent will be due and payable concurrently with
Tenant’s execution of this Lease.

 

2.11. “Security Deposit”: $28,125.00. Tenant’s Security Deposit—which is due and
payable on the date Tenant executes this Lease—does not constitute last month’s
rent. Last month’s rent must be separately paid by Tenant on or before the first
day of the last month of the Lease Term.

 

2.12. “Base Year”: Calendar year 2002.

 

2.13. Guarantor: None.

 

2.14. Address for Landlord:

  

c/o American Assets, Inc.

    

11455 El Camino Real, Suite 200

    

San Diego, CA 92130

    

Attn: John Chamberlain

    

Facsimile No. (858) 350-2620

With a copy to:

         

Miguel A. Smith, Esq.

    

Solomon Ward Seidenwurm & Smith, LLP

    

401 B Street, Suite 1200

    

San Diego, CA 92101

    

Facsimile No. (619) 231-4755

2.15. Addresses for Tenant:

  

Legal Notice Address:

    

BakBone Software, Inc.

    

10145 Pacific Heights Boulevard, Suite 900

    

San Diego, CA 92121

    

Facsimile No. (858) 450-9929

With a copy to:

         

Jeff Lawson, Esq.

    

350 7th Avenue SW, Suite 1400

    

Calgary, Alberta, Canada

    

T2P3N9

    

Facsimile No. (403) 260-0337

 

2.16. Permitted Uses By Tenant: General office use and incidental related uses,
all of which uses must be consistent with the operation of a first class office
building, and otherwise in compliance with the terms, provisions, and conditions
of this Lease (the “Permitted Use”).

 

2.17. Building Standard Operating Hours :

 

    

Monday through Friday: 7:00 AM-6:00 PM

    

Saturday: 7:00 AM-12:00 PM

    

(excluding local, state, and federal holidays)

 

2.18. Participating Brokers:

  

Landlord: John Burnham and Company

(Warren J. Arnett and Lynn LaChapelle)

Tenant: CB Richard Ellis, Inc.

(Michael D. Jordan, Steve Holland, Bill Bacon)

 

2.19. Initial Payment Amounts: $28,125.00, representing the Security Deposit;
and $28,125.00, representing the first month’s Basic Monthly Rent (to be
adjusted on the Rent Commencement Date to reflect the actual first month’s Basic
Monthly Rent, based upon the actual Rentable Square Footage thereof), all of
which is payable concurrently with Tenant’s execution of this Lease.

 

2.20. Parking Rights: Approximately four spaces per 1,000 Usable Square Feet of
space in the Premises (see Paragraph 11, below).

 

2.21. Permitted Trade Name: BakBone Software, Inc.

 

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3. Term.

 

3.1. Description of Term. The term of this Lease (“Term”) shall commence on the
“Lease Commencement Date”, as defined in the Principal Lease Provisions, and
shall expire on the “Expiration Date”, as defined below.

 

3.2. Expiration Date. The term “Expiration Date”, as used in this Lease, shall
mean the Initial Expiration Date or any earlier date upon which this Lease is
terminated by Landlord, as provided below.

 

4. Delivery of Possession.

 

4.1. Delivery Requirements. On or before the Lease Commencement Date, Landlord,
at its cost, shall have Substantially Completed the work, if any, required to be
completed by Landlord prior to the delivery of the Premises to Tenant, as
described in Exhibit “C” to this Lease (the “Landlord’s Work”) and shall deliver
possession of the Premises to Tenant (subject to Landlord’s reserved rights
hereunder and Landlord’s right to continue the completion of Landlord’s Work
without material interference by Tenant). If possession of the Premises
(including, without limitation, Substantial Completion of the Landlord’s Work,
if any) is not delivered to Tenant on or before the estimated Lease Commencement
Date stated in the Principal Lease Provisions, then Landlord shall not be liable
for any damage caused by such delay, and such delay shall neither affect the
validity of this Lease, affect Tenant’s obligations under this Lease, nor extend
the Term.

 

4.2. Definition of Substantial Completion. For purposes of this Lease, the term
“Substantially Complete” (and its grammatical variations, such as Substantial
Completion) when used with reference to Landlord’s Work, will mean that
Landlord’s Work has been completed to such an extent that Tenant can commence
its work, if any, to be undertaken by Tenant, as described in Exhibit “C” to
this Lease (the “Tenant’s Work”), without material delay or interference due to
the completion of Landlord’s Work.

 

4.3. Final Completion. Except for (i) any items set forth on a written, detailed
“punch-list” of excepted items delivered to Landlord upon the date Landlord
notifies Tenant that the Landlord’s Work is finally completed (the “Completion
Date”), or (ii) any latent defects in Landlord’s Work which Tenant, despite
reasonable inspection of the Premises fails to discover as of the Completion
Date, Tenant shall, as of the Completion Date, be deemed to have (a) thoroughly
inspected the Premises, and determined that, to the best of Tenant’s knowledge,
the Premises comply with all applicable laws and ordinances, and that the
Premises are in first-class condition and repair, (b) acknowledged that
Landlord’s Work has been finally completed, (c) accepted the Premises in its
then as-is condition with no right to require Landlord to perform any additional
work therein, except as set forth on the punch list or to correct latent
defects, and (d) waived any express or implied warranties regarding the
condition of the Premises, including any implied warranties of fitness for a
particular purpose or merchantability.

 

5. Use of Premises and Common Areas.

 

5.1. Permitted Use of Premises. Tenant may use the Premises for the Permitted
Use specified in the Principal Lease Provisions and for no other use without
Landlord’s consent. Any change in the Permitted Use (or any change in Tenant’s
trade name from the Permitted Trade Name identified in the Principal Lease
Provisions) will require Landlord’s prior written consent, which consent may be
granted or withheld in Landlord’s reasonable discretion.

 

5.2. Compliance with Laws. Landlord covenants that the Premises will comply with
all applicable laws as of the Lease Commencement Date. Thereafter, Tenant shall
comply with all laws concerning the Premises and/or Tenant’s use of the
Premises, including without limitation the obligation at Tenant’s sole cost to
alter, maintain, or restore the Premises in compliance with all applicable laws,
even if such laws are enacted after the date of this Lease, and even if
compliance entails costs to Tenant of a substantial nature. Such obligation to
comply with laws shall include, without limitation, compliance with Title III of
the Americans With Disabilities Act of 1990 (42 U.S.C. 12181 et seq.) (the
“ADA”). If Tenant’s specific use of the Premises results in the need for
modifications or alterations to any portion of the Project in order to comply
with the ADA or other applicable laws, then Tenant shall additionally be
responsible, upon demand, for the cost of such modifications and alterations
plus a supervisory fee of ten percent (10%) of such cost payable to Landlord.

 

5.3. Condition During Periods of Non-Use. During any period of time in which
Tenant is not continuously using and occupying the Premises, Tenant shall take
such measures as may be necessary or desirable, in Landlord’s reasonable
opinion, to secure the Premises from break-ins and use by unauthorized persons,
to minimize the appearance of non-use, and to otherwise maintain the interior
and exterior portions of Tenant’s Premises, including all windows and doors, in
first class condition.

 

5.4. Use of Common Areas. Tenant’s use of the Common Areas shall at all times
comply with the provisions of all reasonable Rules (as defined below) regarding
such use as Landlord may from time to time adopt. In no event shall the rights
granted to Tenant to use the Common Areas include the right to store any
property in the Common Areas, whether temporarily or permanently. Any property
stored in the Common Areas may be removed by Landlord and disposed of, and the
cost of such removal and disposal shall be payable by Tenant to Landlord upon
demand. Additionally, in no event may Tenant use any portion of the Common Areas
for loading, unloading, or parking, except in those areas specifically
designated by Landlord for such purposes, nor for any group social event,
sidewalk sale, employment fair, or similar unauthorized purpose.

 

5.5. General Covenants and Limitations on Use. In addition to the Rules, Tenant
and Tenant’s Invitees (as defined below) use of the Premises and the Project,
will be subject to the following additional general covenants and limitations on
use.

 

5.5.1. Tenant shall not do, bring, or keep anything in or about the Premises
that will cause a cancellation of any insurance covering the Premises. If the
rate of any insurance carried by Landlord is increased

 

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as a result of Tenant’s use or Tenant’s failure to continuously use and occupy
the Premises, Tenant shall pay the amount of such increase to Landlord, within
ten days after Landlord delivers to Tenant a notice of such increase.

 

5.5.2. No noxious or unreasonably offensive activity shall be carried on, in or
upon the Premises by Tenant or Tenant’s Invitees, nor shall anything be done or
kept in the Premises which may be or become a public nuisance or which may cause
unreasonable disturbance, or annoyance to others in the Project, or on adjacent
or nearby property. To that end, Tenant additionally covenants and agrees that
no light shall be emitted from the Premises which is unreasonably bright or
causes unreasonable glare; no sounds shall be emitted from the Premises which
are unreasonably loud or annoying; and no odor shall be emitted from the
Premises which is or might be noxious or offensive to others in the Building, on
the Project, or on adjacent or near-by property.

 

5.5.3. No unsightliness shall be permitted in the Premises which is visible from
the Common Areas. Without limiting the generality of the foregoing, all
equipment, objects, and materials shall be kept enclosed within the Premises and
in Common Areas trash enclosures and screened from view; no refuse, scraps,
debris, garbage, trash, bulk materials, or waste shall be kept, stored, or
allowed to accumulate except as may be properly enclosed within appropriate
containers in the Premises and promptly and properly disposed of.

 

5.5.4. The Premises shall not be used for sleeping or washing clothes, nor shall
the Premises be used for cooking or the preparation, manufacture, or mixing of
anything that might emit any offensive odor or objectionable noises or lights
onto the Project or nearby properties.

 

5.5.5. All pipes, wires, conduit, cabling, poles, antennas, and other
equipment/facilities for or relating to utilities, telecommunications, computer
equipment, or the transmission or reception of audio or visual signals must be
kept and maintained enclosed within the Premises (except to the extent included
as part of Landlord’s Work, Tenant’s Work, or otherwise approved by Landlord)

 

5.5.6. Tenant shall not keep or permit to be kept any motorcycle, or other
vehicle, nor any animal (excluding seeing-eye dogs), bird, reptile, or other
exotic creature in the Premises.

 

5.5.7. Neither Tenant nor Tenant’s Invitees shall do anything that will cause
damage or waste to the Project. Neither the floor nor any other portion of the
Premises shall be overloaded. No machinery, equipment, apparatus, or other
appliance shall be used or operated in or on the Premises that will in any
manner injure, vibrate, or shake all or any part of the Project or be allowed to
interfere with the equipment of any other tenant within the Project (or other
property owned by Landlord or its affiliates), including, without limitation,
interference with transmission and reception of telephone, telecommunications,
television, radio, or similar signals.

 

5.6. Access Rights. Tenant will have 24 hour-a-day, seven day-a-week access to
the Building and the Premises. Notwithstanding the foregoing, no failure of such
access rights will constitute an eviction or a disturbance of Tenants use and
possession of the Premises or relieve Tenant from paying Rent or performing any
of its obligations under this Lease; except that Tenant shall be entitled to
equitable abatement of its Rent (as defined below) obligations hereunder to the
extent such lack of access is due to Landlord’s gross negligence or intentional
misconduct and continues for a period in excess of three business days. Landlord
will not be liable, under any circumstances, for a loss of or injury to property
or for injury to or interference with Tenants business, including loss of
profits through, in connection with, or incidental to a failure to furnish
access under this Paragraph. Notwithstanding the foregoing, Landlord agrees to
use reasonable efforts to promptly correct any such interruption of access.

 

5.7. Remedies for Breach. In the event of any breach of this Paragraph 5 by
Tenant or Tenant’s Invitees, Landlord, at its election and in addition to its
other rights and remedies under this Lease, may pay the cost of correcting such
breach and Tenant shall immediately, upon demand, pay Landlord the cost thereof,
plus a supervisory fee in the amount of ten percent (10%) of such cost.

 

6. Security Deposit. Upon Tenant’s execution of this Lease, Tenant shall deposit
with Landlord, cash in the amount of the Security Deposit set forth in the
Principal Lease Provisions, to secure the performance by Tenant of its
obligations under this Lease, including without limitation Tenant’s obligations
(i) to pay Basic Monthly Rent and Additional Rent (as defined below), (ii) to
repair damages to the Premises and/or the Project caused by Tenant or Tenant’s
agents, employees, contractors, licensees, and invitees (collectively, “Tenant’s
Invitees”), (iii) to surrender the Premises in the condition required by
Paragraph 24, below, and (iv) to remedy any other Event of Default by Tenant in
the performance of any of its obligations under this Lease. If Tenant commits an
Event of Default under this Lease, Landlord may, at its election, use the
Security Deposit to cure such Event of Default, and to compensate Landlord for
all damage suffered by Landlord which are directly attributable to such Event of
Default, including, without limitation, reasonable attorneys’ fees and costs
incurred by Landlord. Upon demand by Landlord, Tenant shall promptly pay to
Landlord a sum equal to any portion of the Security Deposit so used by Landlord,
in order to maintain the Security Deposit in the amount set forth in the
Principal Lease Provisions. Following the Expiration Date, and within the
earlier of 30 days or the time frame otherwise required by applicable law,
Landlord shall deliver to Tenant, at Tenant’s last known address, any portion of
the Security Deposit not used by Landlord, as provided in this Paragraph.
Landlord may commingle the Security Deposit with Landlord’s other funds and
Landlord will not pay interest on such Security Deposit to Tenant.

 

7. Rent and Rent Adjustments.

 

7.1. Initial Monthly Rent. Tenant shall pay to Landlord as minimum monthly rent,
without deduction, setoff, prior notice, or demand (except as otherwise
specifically provided in this Lease), the Basic Monthly Rent described in the
Principal Lease Provisions (subject to adjustment as provided in Paragraph 7.2,
below), in advance, on or before the first day of each calendar month, beginning
on the Rent Commencement Date and thereafter throughout the Term. If the Rent
Commencement Date is other than the first day of a calendar month, then the
Basic

 

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Monthly Rent payable by Tenant for the second month of the Term following the
Rent Commencement Date (acknowledging that the first month’s rent is payable
upon Lease execution) shall be prorated on the basis of the actual number of
days during the Term occurring during the first partial calendar month thereof.
Notwithstanding the foregoing, if Landlord is delayed in completion of
Landlord’s Work due to any Tenant Delays, then in addition to the Basic Monthly
Rent payable for the first month of the Term following the Rent Commencement
Date, Tenant shall additionally pay to Landlord, upon the Rent Commencement
Date, additional rent, at the rate of one-thirtieth of the Basic Monthly Rent
per day, for the number of days of such delay.

 

7.2. Rental Adjustments. On each anniversary of the Rent Commencement Date
throughout the Initial Lease Term, the Basic Monthly Rent shall be increased by
multiplying the then-existing Basic Monthly Rent amount by 1.035 (i.e. a three
and one-half percent (3.5%) increase per year).

 

7.3. Additional Rent. In addition to paying the Basic Monthly Rent pursuant to
this Paragraph 7, Tenant shall pay to Landlord (in accordance with Paragraph 8,
below), commencing on January 1, 2002, Tenant’s Share (as defined below) of the
annual Direct Expenses that are in excess of the amount of Direct Expenses
applicable to the Base Year. The amounts payable pursuant to this Paragraph,
together with other amounts of any kind (other than Basic Monthly Rent) payable
by Tenant to Landlord under the terms of this Lease, constitute additional rent
for the Premises and are collectively and individually referred to in this Lease
as “Additional Rent.”

 

7.4. General Rental Provisions. All “Rent” (which includes Basic Monthly Rent,
and any “Additional Rent” hereunder) shall be paid to Landlord at the same
address as notices are to be delivered to Landlord pursuant to the Principal
Lease Provisions, as Landlord may change such address from time to time pursuant
to the terms of this Lease. The Rentable Area of the Premises and the Building
are, at Landlord’s election, subject to verification by Landlord’s space planner
or architect. That verification shall be made in accordance with this Paragraph.
Tenant’s space planner or architect may consult with Landlord’s space planner or
architect regarding that verification. Verification of the Rentable Area of the
Premises and the Building shall be done, if at all, within sixty (60) days of
the Lease Commencement Date. Verification of the Rentable Area of the Building
may be accomplished within such 60-day period If Landlord’s space planner or
architect determines that the Rentable Area of the Premises or the Building is
different from that stated in this Lease, all Rent and other calculations under
this Lease that are based on that incorrect amount shall be modified in
accordance with that determination. If that determination is made, it shall be
confirmed in writing by Landlord to Tenant. In the event Tenant disputes
Landlord’s redetermination, and the parties are unable to agree upon the actual
size of the Premises (as so re-measured) within 30 days of Landlord’s notice to
Tenant, such issue will be arbitrated in the same manner as matters are to be
arbitrated pursuant to Paragraph 10.2.

 

8. Additional Rent.

 

8.1. Definitions. The following definitions apply in this Paragraph 8 (and
elsewhere in this Lease):

 

8.1.1. Building Operating Costs. Subject to the Excluded Costs (as defined
below) relating to the Building, the term “Building Operating Costs” means all
expenses, costs, and amounts of every kind or nature that Landlord pays or
incurs because of or in connection with the ownership, operation, management,
maintenance, or repair of the Building (which includes the land and any parking
areas located under the Building). Building Operating Costs include, without
limitation, the following amounts paid or incurred relative to the Building (a)
the cost of supplying utilities to all portions of the Building, including
without limitation water, electricity, heating, ventilation, and air
conditioning, (b) Tax Expenses relating to the Building, to the extent the
Building is separately assessed by the taxing authority, (c) the cost of
providing janitorial services for the Building and of operating, managing,
maintaining, and repairing all building systems, including without limitation
utility, mechanical, sanitary, storm drainage, and elevator systems, and the
cost of supplies, tools, and equipment, as well as maintenance and service
contracts in connection with those systems, (d) the cost of licenses,
certificates, permits, and inspections relating to the operation of the
Building, (e) the cost of contesting the validity or applicability of any
government enactments that may affect the Building Operating Costs, (f) the cost
of maintenance, repair, and restoration of any parking areas located under the
Building (if any), including, without limitation, resurfacing, repainting,
restriping, and cleaning costs, (g) fees, charges, and other costs, including
administrative, management fees, and accounting costs (or amounts in lieu of
such fees), whether paid to Landlord, an affiliate of Landlord’s, or a third
party, consulting fees, legal fees, and accounting fees of all persons engaged
by Landlord or otherwise reasonably incurred by Landlord in connection with the
operation, management, maintenance, and repair of the Building, (h) wages,
salaries, and other compensation and benefits of all persons engaged in the
operation, maintenance, repair, or security of the Building plus employer’s
Social Security taxes, unemployment taxes, insurance, and any other taxes
imposed on Landlord that may be levied on those wages, salaries, and other
compensation and benefits. If any of Landlord’s employees provide services for
more than one project of Landlord, only the prorated portion of those employees’
wages, salaries, other compensation and benefits, and taxes reflecting the
percentage of their working time devoted to the Building will be included in the
Building Operating Costs, (i) payments under any easement, CC&R’s, license,
operating agreement, declaration, restrictive covenant, or other instrument
relating to the sharing of costs, (j) amortization (including interest on the
unamortized cost at a rate equal to the floating commercial loan rate announced
from time to time by Bank of America as its “reference rate” (or a comparable
rate selected by Landlord if such reference rate ceases to be published) plus
three percentage points per annum) of the cost of acquiring or renting personal
property used in the maintenance, repair, and operation of the Building, (k)
reasonable reserves (it being acknowledged, that, among other amounts, any
amount of reserves required by a Lender, as defined below, will be deemed
reasonable) (l) the cost of capital improvements including those which (1) are
intended as a labor saving or cost saving device or to effect other economies in
the maintenance or operation of the Building, or (2) are required under any
government law or regulation. All capital expenditures shall be amortized
(including interest on the unamortized cost at the rate stated in subparagraph
(j) of this Paragraph) over their useful life, as determined by GAAP.

 

8.1.2. Building’s Pro Rata Share. “Building’s Pro Rata Share” means a fraction,
the numerator of which is the total aggregate Rentable Square Feet in the
Building, and the denominator of which is the total aggregate Rentable Square
Feet in all of the buildings in the Project. The Building’s Pro Rata Share will
be

 

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calculated as of the first day of each calendar month; which calculation will
remain in effect (regardless of changes to the Project) until the following
month.

 

8.1.3. Direct Expenses. “Direct Expenses” means the sum of Operating Expenses
plus Insurance Expenses (as such terms are defined below).

 

8.1.4. Excluded Costs. “ Excluded Costs” means the following expenses, as they
relate to the Building Operating Costs and the Project Operating Costs (as
defined below): (i) depreciation, interest, and amortization on mortgages or
ground lease payments, (ii) legal fees incurred in negotiating and enforcing
tenant leases, (iii) real estate brokers’ leasing commissions, (iv) initial
improvements or alterations to tenant spaces, (v) the cost of providing any
service directly to and paid directly by any individual tenant, if the cost of
providing such service would have otherwise been included in Building’s
Operating Costs, (vi) any costs expressly excluded from Operating Expenses
elsewhere in this Lease, (vii) costs of any items for which Landlord receives
reimbursement from insurance proceeds or a third party (such costs shall be
excluded from Operating Expenses in the year in which the reimbursement is
received), but any deductible amount under any insurance policy shall be
included within Operating Expenses, (viii) costs of capital improvements, except
as specifically provided herein, (ix) costs incurred for the benefit of a single
tenant (for example, tenant improvement costs to build-out a particular suite),
(x) costs incurred due to Landlord’s breach of a lease, law, or ordinance, (xi)
repairs necessitated by the gross negligence or willful misconduct of Landlord,
(xii) the cost of earthquake or flood insurance, unless required by Landlord’s
Lender and in such event an amount reasonably estimated by Landlord to
approximate the cost of such coverage as if such coverage been carried during
the Base Year shall be added to Direct Expenses for the Base Year, (xiii)
overhead profit increments paid to Landlord’s subsidiaries or affiliates for
management or other services on or to the building or for supplies or other
materials to the extent that the cost of the services, supplies, or materials
exceeds the cost that would have been paid had the services, supplies, or
materials been provided by unaffiliated parties on a competitive basis, (xiv)
any compensation paid to clerks, attendants, or other persons in commercial
concessions operated by Landlord, (xv) advertising and promotional expenditures,
(xvi) costs of repairs and other work occasioned by fire, windstorm, or other
casualty covered by insurance, (xvii) management costs to the extent they exceed
5% of all gross rent collected, (xviii) costs for sculpture, paintings, or other
objects of art (nor insurance thereon or extraordinary security in connection
therewith), (xix) wages, salaries, or other compensation paid to any executive
employees above the grade of building manager, (xx) the cost of correcting any
building code or other violations which were violations prior to the Lease
Commencement Date, and (xxi) the cost of containing, removing, or otherwise
remediating any contamination of the Property (including the underlying land and
ground water) by any toxic or hazardous materials (including, without
limitation, asbestos and “PCB’s”) where such contamination was not caused by
Tenant.

 

8.1.5. Expense Year. “Expense Year” means the Base Year, and each calendar year
after the Base Year, in which any portion of the Lease Term falls, through and
including the calendar year in which the Lease Term expires.

 

8.1.6. Operating Expenses. “Operating Expenses” means the sum of (i) all
Building Operating Costs, and (ii) the Building’s Pro Rata Share of the Project
Operating Costs. Notwithstanding any other limitations contained in this
Paragraph 8, Landlord shall not be entitled to recover more than 100% of any
Operating Expense.

 

8.1.7. Project Operating Costs. Subject to the Excluded Costs relating to the
Project, the term “Project Operating Costs” means all expenses, costs, and
amounts of every kind or nature that Landlord pays or incurs because of or in
connection with the ownership, operation, management, maintenance, or repair of
the Project, including the “Project Common Areas,” which for purposes hereof
will include all portions of the Project other than the Building and any other
similar office building(s) within the Project from time to time. Project
Operating Costs include, without limitation, the following amounts paid or
incurred relative to the Project Common Area: (a) the cost of supplying
utilities to all portions of the Project Common Area, including without
limitation water, electricity, heating, ventilation, and air conditioning, (b)
janitorial/cleaning costs and the cost of operating, managing, maintaining, and
repairing the Project Common Area and all related systems, including without
limitation utility, mechanical, sanitary, storm drainage, and elevator systems,
(c) the cost of supplies and tools and of equipment, maintenance, and service
contracts in connection with the systems referenced in clause (b), above, (d)
the cost of licenses, certificates, permits, and inspections relating to the
Project, (e) the cost of contesting the validity or applicability of any
government enactments that may affect the Project Operating Costs, (f) costs
incurred in connection with the implementation and operation of a parking or
transportation management program or similar program, (g) all Tax Expenses,
except to the extent such Tax Expenses relate to a separately assessed building
in the Project and are separately paid by the tenants of such building (such as
pursuant to Paragraph 8.1.1, clause (b), above), (h) fees, charges, and other
costs, including administrative, management fees, and accounting costs (or
amounts in lieu of such fees), whether paid to Landlord, an affiliate of
Landlord’s, or a third party, consulting fees, legal fees, and accounting fees
of all persons engaged by Landlord or otherwise reasonably incurred by Landlord
in connection with the operation, management, maintenance, and repair of the
Project, (i) the cost of parking area and parking structure maintenance, repair,
and restoration, including, without limitation, resurfacing, repainting,
restriping, and cleaning (excluding costs which are already included as part of
the Building Operating Costs relative to any parking areas located under a
building, if any), (j) wages, salaries, and other compensation and benefits of
all persons engaged in the operation, maintenance, or security of the Project
plus employer’s Social Security taxes, unemployment taxes, insurance, and any
other taxes imposed on Landlord that may be levied on those wages, salaries, and
other compensation and benefits. If any of Landlord’s employees provide services
for more than one project of Landlord, only the prorated portion of those
employees’ wages, salaries, other compensation and benefits, and taxes
reflecting the percentage of their working time devoted to the Project shall be
included in Project Operating Costs, (k) any costs or expenses payable pursuant
to the provisions of any reciprocal easement and maintenance agreement (or
similar instrument or agreement) recorded against the Project either now or in
the future including any owner’s association or similar fees, assessments or
dues presently or hereafter established for the Project, including payments
under any easement, CC&R’s, license, operating agreement, declaration,
restrictive covenant, or other instrument relating to the sharing of costs, (l)
amortization (including interest on the unamortized cost at a rate

 

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equal to the floating commercial loan rate announced from time to time by Bank
of America as its reference rate plus three percentage points per annum) of the
cost of acquiring or renting personal property used in the maintenance, repair,
and operation of the Project, (m) reasonable reserves (it being acknowledged,
that, among other amounts, and (n) any amount of reserves required by a Lender
will be deemed reasonable) the cost of capital improvements or other costs
including, without limitation, those which (1) are intended as a labor saving
device or to effect other economies in the maintenance or operation of all or
part of the Project, or (2) are required under any government law or regulation.
All capital expenditures shall be amortized (including interest on the
unamortized cost at the rate stated in subparagraph (l), above) over their
useful life, as reasonably determined by Landlord’s certified public accountant.
Notwithstanding the foregoing, the Project Operating Costs will exclude any
Excluded Costs relating to the Project.

 

8.1.8. Tenant’s Share. “Tenant’s Share” means a means a fraction, the numerator
of which is the total aggregate Rentable Square Feet in the Premises, and the
denominator of which is the total aggregate Rentable Square Feet in the
Building. If either the Premises or the Building are expanded or reduced,
Tenant’s Share shall be appropriately adjusted. Tenant’s Share for the Expense
Year in which that change occurs shall be determined on the basis of the number
of days during the Expense Year in which each such Tenant’s Share was in effect.

 

8.2. Adjustment of Operating Expenses. Operating Expenses shall be adjusted as
follows:

 

8.2.1. Gross Up Adjustment When a Project Is Less Than Fully Occupied. If the
occupancy of the total Rentable Square Footage of completed buildings within the
Project (which are included in the calculation of the Building’s Pro Rata Share)
which are only partially occupied during any part of any Expense Year (including
the Base Year) is less than 95%, Landlord shall make an appropriate adjustment
of the variable components of the Operating Expenses for that Expense Year, as
reasonably determined by Landlord using sound accounting and management
principles, to determine the amount of Operating Expenses that would have been
incurred had the Project been 100% occupied. This amount shall be considered to
have been the amount of Operating Expenses for that Expense Year. For purposes
of this Paragraph 8.2, “variable components” include only those component
expenses that are affected by variations in occupancy levels, such as water
usage.

 

8.2.2. Adjustment When Landlord Adds Additional Buildings to the Project. If
Landlord constructs additional buildings within the Project following the Base
Year, Landlord shall make an appropriate adjustment to the Operating Expenses
for the Base Year, as reasonably determined by Landlord using sound accounting
and management principles, to determine the amount of Operating Expenses that
would have been incurred for the Base Year if such building had been complete
and 100% occupied during the Base Year.

 

8.2.3. Adjustment When Landlord Does Not Furnish a Service to All Tenants. If,
during any part of any Expense Year (including the Base Year), Landlord is not
furnishing a particular service or work (the cost of which, if furnished by
Landlord, would be included in Operating Expenses) to a tenant (other than
Tenant) that has undertaken to perform such service or work in lieu of receiving
it from Landlord, Operating Expenses for that Expense Year shall be considered
to be increased by an amount equal to the additional Operating Expenses that
Landlord would reasonably have incurred during such period if Landlord had
furnished such service or work to that tenant.

 

8.2.4. Additional Costs. If due to a change in the types of costs being incurred
by Landlord as Direct Expenses (such as, for example, the commencement or
cessation of security services—but not a mere change in how a particular cost is
handled—such as going from an in-house to an outside landscaping service), the
Base Year Direct Expenses need to be adjusted to eliminate the effect of such
change, Landlord shall reasonably adjust the Base Year Direct Expenses and
notify Tenant of such change in writing.

 

8.2.5. Common Areas. Landlord may elect to reasonably partition/separate
portions of the Common Areas of the Project such that the Operating Costs
associated with such partitioned Common Areas are allocated to particular
buildings or parcels within the Project.

 

8.3. Tax Expenses.

 

8.3.1. Definition of Taxes and Tax Expenses. “Taxes” means and refers to all
federal, state, county, or local government or municipal taxes, fees, charges,
or other impositions of every kind or nature, whether general, special,
ordinary, or extraordinary. Taxes include taxes, fees, and charges such as real
property taxes, general and special assessments, transit taxes, leasehold taxes,
and taxes based on the receipt of rent (including gross receipts or sales taxes
applicable to the receipt of rent, unless required to be paid by Tenant), and
personal property taxes imposed on Landlord’s fixtures, machinery, equipment,
apparatus, systems, appurtenances, and other personal property used in
connection with the Project or the Building, as the case may be. Notwithstanding
the foregoing, the following shall be excluded from Taxes: (a) all excess
profits taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and
succession taxes, estate taxes, federal, state, and local income taxes, and
other taxes applied or measured by Landlord’s general or net income (as opposed
to rents, receipts, or income attributable to operations at the Building), and
(b) personal property taxes attributable to property owned or installed by or
for other tenants of the Project. “Tax Expenses” means the sum of all Taxes that
are paid or incurred by Landlord because of or in connection with the ownership,
leasing, and/or operation of the Project from time to time.

 

8.3.2. Adjustment of Taxes. For purposes of this Lease, Tax Expenses for the
Base Year shall be adjusted upon a reassessment of the Project resulting from
the construction of a new building within the Project to increase the Base Year
Tax Expenses amount by the amount of Tax Expenses attributable to such new
building’s assessed value. Accordingly, during the portion of any Expense Year
occurring after the Base Year, Tax Expenses shall be considered to be increased
appropriately.

 

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8.4. Calculation and Payment of Direct Expenses. Tenant’s Share of the increased
Direct Expenses for any Expense Year shall be calculated and paid as follows:

 

8.4.1. Calculation of Excess. If Direct Expenses for any Expense Year (other
than the Base Year) ending or beginning within the Lease Term exceeds the amount
of Direct Expenses applicable to the Base Year, Tenant shall pay as Additional
Rent to Landlord an amount equal to Tenant’s Share of that excess, in the manner
stated below.

 

8.4.2. Statement/Payment of Direct Expenses. Tenant shall pay to Landlord, on
the first day of each calendar month during the Lease Term, commencing January
1, 2003 as Additional Rent, without notice, demand, offset, or deduction (except
as provided below), an amount (“Tenant’s Monthly Payment”) equal to one-twelfth
of Tenant’s Share of the amount by which the Direct Expenses for each Expense
Year following the Base Year exceed the Base Year Direct Expenses (such excess
being referred to herein as the “Increased Direct Expenses”), as estimated (and
subsequently reconciled) by Landlord in the most recently delivered Estimated
Statement (as defined below). Landlord intends to deliver to Tenant, prior to
the commencement of each Expense Year following the Base Year during the Lease
Term, a written statement (“Estimated Statement”) setting forth Landlord’s
estimate of the Direct Expenses and Increased Direct Expenses allocable to the
ensuing Expense Year, and Tenant’s Share of such Increased Direct Expenses.
Landlord may, at its option, during any Expense Year, deliver to Tenant a
revised Estimated Statement, revising Landlord’s estimate of the Direct Expenses
and Increased Direct Expenses, in accordance with Landlord’s most current
estimate. Within approximately 90 days after the end of each Expense Year during
the Lease Term, Landlord intends to deliver to Tenant a written statement
(“Actual Statement”) setting forth the actual Direct Expenses allocable to the
preceding Expense Year. Tenant’s failure to object to Landlord regarding the
contents of an Actual Statement, in writing, within 90 days after delivery to
Tenant of such Actual Statement, shall constitute Tenant’s absolute and final
acceptance and approval of the Actual Statement. If the sum of Tenant’s Monthly
Payments actually paid by Tenant during any Expense Year exceeds Tenant’s Share
of the actual Increased Direct Expenses allocable to such Expense Year, then
such excess will be credited against future Tenant’s Monthly Payments, unless
such Expense Year was the Expense Year during which the Lease Expiration Date
occurs (the “Last Calendar Year”), in which event either (i) such excess shall
be credited against any monetary default of Tenant under this Lease, or (ii) if
Tenant is not in default under this Lease, then Landlord shall (within the time
frame for returning Tenant’s Security Deposit) pay to Tenant such excess. If the
sum of Tenant’s Monthly Payments actually paid by Tenant during any Expense Year
is less than Tenant’s Share of the actual Increased Direct Expenses allocable to
such Expense Year, then Tenant shall, within ten days of delivery of the Actual
Statement, pay to Landlord the amount of such deficiency. Landlord’s delay in
delivering any Estimated Statement or Actual Statement will not release Tenant
from its obligation to pay any Tenant’s Monthly Payment or any such excess upon
receipt of the Estimated Statement or the Actual Statement, as the case may be.
The references in this Paragraph to the actual Increased Direct Expenses
allocable to an Expense Year, shall include, if such Expense Year is the Last
Calendar Year, the actual Increased Direct Expenses allocable to the portion of
such year prior to the Lease Expiration Date, calculated on a pro rata basis,
without regard to the date of a particular expenditure.

 

8.5. Landlord’s Books and Records. If Tenant disputes the amount of Additional
Rent stated in an Actual Statement within 90 days of Tenant’s receipt thereof,
Tenant may, upon at least five business days notice to Landlord, request an
opportunity to inspect and audit Landlord’s records and supporting documentation
regarding such Actual Statement. Such inspection and audit must be conducted by
an independent certified public accountant within 180 days of the date Tenant
received the Actual Statement, shall be at Tenant’s sole cost and expense
(except as provided below), and Landlord shall, at its election, either provide
copies of such records and supporting documentation to Tenant or make such
records and supporting documentation available to Tenant for its inspection at
Landlord’s business office during normal business hours. If Tenant fails to
dispute the amount of Additional Rent stated in an Actual Statement within 90
days of Tenant’s receipt thereof, or Tenant’s audit fails to disclose a
discrepancy in such Actual Statement within 180 days after Tenant’s receipt of
the Actual Statement in question, then the Actual Statement will be deemed
binding on Tenant. If it is determined as a result of Tenant’s timely audit of
Landlord’s records (and Landlord’s certified public accountant’s concurrence
therein) that Tenant was overcharged relative to the Direct Expenses, such
overcharge shall entitle Tenant to a credit against its next payment of Direct
Expenses in the amount of the overcharge plus, in the case of an overcharge
exceeding three percent (3%) of the Direct Expenses, the reasonable third party
costs of such audit (and if such credit occurs following the expiration of the
Term, Landlord shall promptly pay the amount of such credit to Tenant). If it is
determined as a result of Tenant’s timely audit of Landlord’s records (and
Landlord’s certified public accountant’s concurrence therein), or otherwise,
that Tenant was undercharged relative to the Direct Expenses, Tenant shall,
within ten days of written demand, pay such undercharge to Landlord.

 

9. Utilities and Services.

 

9.1. Utility Costs. Tenant shall pay when due all bills for gas, water,
electricity and other utilities used on the Premises on and after the
Commencement Date and through and including the date of expiration of this
Lease. If separate utility meters are not already present serving the Premises,
Tenant, as part of the Tenant’s Work, shall install separate meters for the
utilities used in the Premises, in compliance with the requirements of the
utility suppliers.

 

9.2. Electricity. Landlord shall construct the Building with wiring, outlets,
and systems sufficient to provide electrical current to the Premises for
Project-standard ordinary and customary office uses. In addition to the
foregoing, Landlord shall replace lamps, starters, and ballasts for
Project-standard lighting fixtures within the Premises upon Tenant’s request;
the expense of which will be an Operating Expense. Tenant shall replace lamps,
starters, and ballasts for non-Project-standard lighting fixtures within the
Premises at Tenant’s sole expense. Landlord shall provide electrical service in
connection with Common Area needs, such as lighting. Tenant shall be
responsible, pursuant to Paragraph 9.1, above, for the payment of all charges
relating to the electrical service provided to the Premises.

 

9.3. Janitorial Service. Landlord shall provide five day per week ordinary and
customary, basic janitorial services in and about the Premises consistent with
other first class office buildings in the vicinity of the Building. Landlord
shall not be required to provide janitorial services to above-Project-standard
improvements installed in the Premises including but not limited to metallic
trim, wood floor covering, glass panels, interior windows,

 

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kitchen/dining areas, executive washrooms, or shower facilities. Any janitorial
services required by Tenant and provided by Landlord in excess of such ordinary
and customary, basic janitorial services shall be separately paid for by Tenant,
as Additional Rent, within ten days of written demand.

 

9.4. Over-Standard Tenant Use.Tenant shall not exceed the rated capacity of the
Building’s electrical and other utility systems, which systems will be
consistent in capacity with other first class office buildings built at or about
the same time as the Building. In the event of any damage to any of the
Project’s systems caused by Tenant’s use thereof in excess of ordinary and
customary usage for a professional office, Tenant shall be responsible for all
costs and expenses incurred by Landlord as a result of such over-use. In
addition, if Tenant requires any utilities or services described in this
Paragraph 9, which are to be provided by Landlord, in excess of the standard
levels being provided by Landlord, or during hours other than Building Standard
Operating Hours, Landlord shall have the right to impose reasonable restrictions
on such usage and/or commercially reasonable charges therefor. The cost for
heating and air conditioning during hours other than Building Standard Operating
Hours will be Twenty-Five Dollars ($25.00) per hour (or portion thereof, subject
to reasonable increase over the Lease Term and during any extensions thereof.

 

9.5. Conduit and Wiring. Installation of all types of conduit and wiring
exclusively serving the Premises (other than as part of Landlord’s Work),
including but not limited to Tenant’s Work, is subject to the requirements of
Paragraph 23, below, Exhibit “C”, and the Landlord’s reasonable approval of the
location, manner of installation, and qualifications of the installing
contractor. All such conduit and wiring will, at Landlord’s option, become
Landlord’s property upon the expiration of the Term. Upon expiration of the
Term, Landlord may elect to require Tenant to remove such conduit and wiring at
Tenant’s expense and return the Premises and the Common Areas to their
pre-existing condition. Tenant will not be required to remove any conduit or
wiring for which Tenant has obtained Landlord’s consent, unless Landlord has
indicated at the time of granting such consent, that such removal will be
required at the end of the Lease Term. If Landlord constructs new or additional
utility facilities, including without limitation wiring, plumbing, conduits,
and/or mains, resulting from Tenant’s changed or increased utility requirements,
Tenant shall on demand promptly pay (or advance) to Landlord the cost of such
items as Additional Rent.

 

9. 6. Utilities Generally. Tenant agrees that, except as provided below,
Landlord will not be liable for damages, by abatement of Rent or otherwise, for
failure to furnish or delay in furnishing any service (including telephone and
telecommunication services) or for diminution in the quality or quantity of any
service. Such failure, delay, or diminution will not constitute an eviction or a
disturbance of Tenant’s use and possession of the Premises or relieve Tenant
from paying Rent or performing any of its obligations under this Lease, except
that Tenant will be entitled to an equitable abatement of Rent for the period of
such failure, delay, or diminution to the extent such failure, delay, or
diminution (i) is directly attributable to Landlord’s gross negligence or
intentional misconduct, (ii) prevents Tenant from using, and Tenant does not
use, the Premises or the affected portion thereof for the conduct of Tenant’s
business operations therein, (iii) Tenant was using the Premises or such
affected portion for the conduct of Tenant’s business operations immediately
prior to the failure, and (iv) such failure, delay, or diminution continues for
more than two consecutive business days (or ten business days in any twelve
month period) after delivery of written notice of such failure, delay, or
diminution from Tenant to Landlord. Landlord will not be liable, under any
circumstances, for a loss of or injury to property or for injury to or
interference with Tenant’s business, including loss of profits through, in
connection with, or incidental to a failure to furnish any of the utilities or
services under this Paragraph. Notwithstanding the foregoing, Landlord agrees to
use reasonable efforts to promptly correct any such interruption of utilities or
services. If any governmental authority having jurisdiction over the Project
imposes mandatory controls, or suggests voluntary guidelines applicable to the
Project, relating to the use or conservation of water, gas, electricity, power,
or the reduction of automobile emissions, Landlord, at its sole discretion, may
comply with such mandatory controls or voluntary guidelines and, accordingly,
require Tenant to so comply. Landlord shall not be liable for damages to persons
or property for any such reduction, nor shall such reduction in any way be
construed as a partial eviction of Tenant, cause an abatement of Rent, or
operate to release Tenant from any of Tenant’s obligations under this Lease,
except as specifically provided in this Paragraph 9.6.

 

10. Maintenance.

 

10.1. Tenant’s Duties. Tenant shall, at its sole cost, maintain, repair,
replace, and repaint, all in first class condition, the interior of the
Premises, all building systems exclusively serving the Premises and located
within the Premises or the walls of the Premises, and any damage to the Premises
or the Project resulting from the acts or omissions of Tenant or Tenant’s
Invitees. Tenant shall maintain all communications conduit, equipment, and
wiring serving the Premises, whether in the Premises or not (and specifically
including all of Tenant’s Work and all wiring, equipment, and conduit located on
the roof of the Building), regardless of the ownership of said conduit or
wiring, subject to Landlord’s reasonable approval of Tenant’s maintenance/repair
contractor and manner of maintenance/repair. If Tenant fails to maintain,
repair, replace, or repaint any portion of the Premises or the Project as
provided above then following ten days’ written notice thereof to Tenant,
Landlord may, at its election, maintain, repair, replace, or repaint any such
portion of the Premises or the Project and Tenant shall promptly reimburse
Landlord, as Additional Rent, for Landlord’s actual cost thereof plus a
supervisory fee in the amount of ten percent (10%) of Landlord’s actual cost.
Notwithstanding the foregoing, if following Tenant’s payment (or performance) of
its obligations under this Paragraph, Landlord receives payment from an insurer
for such work, Tenant will be entitled to receive such proceeds (after Landlord
has first been fully reimbursed for its costs and expenses relative thereto
including Landlord’s costs and expenses in obtaining such proceeds) to the
extent Tenant previously paid or incurred third party costs relative thereto.

 

10.2. Landlord’s Duties. Landlord shall, as a part of the Operating Expenses,
maintain, repair, replace, and repaint, all in good order and condition,
consistent with other first-class office buildings in the vicinity of the
Building, the Common Areas and all portions of the interior and exterior of the
Building and any other buildings in the Project (including, without limitation,
all electrical, mechanical, plumbing, fire/life safety, and other building
systems), except to the extent of Tenant’s obligations as set forth in Paragraph
10.1, above. Landlord’s failure to perform its obligations set forth above will
not release Tenant of its obligations under this Lease, including without
limitation

 

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Tenant’s obligation to pay Rent. Tenant waives the provisions of California
Civil Code Section 1942 (or any successor statute), and any similar principles
of law with respect to Landlord’s obligations for tenantability of the Premises
and Tenant’s right to make repairs and deduct the expense of such repairs from
rent. If Landlord fails to perform any of its repair and maintenance obligations
under this Paragraph 10.2 and such failure materially and adversely impairs
Tenant’s ability to use and occupy the Premises for the Permitted Use, Tenant
will have the right, to perform such repairs and/or maintenance to the extent
necessary to enable Tenant to resume its use and occupancy of the Premises.
Notwithstanding the foregoing, prior to exercising such right, Tenant must,
except as provided below in connection with an emergency, have given Landlord at
least 30 days’ prior written notice of the nature of the problem and Tenant’s
intention to exercise its rights under this Paragraph if such matter is not
resolved within such 30-day period; provided, however, if the nature of the
matter giving rise to such repair or maintenance obligation will reasonably
require more than 30 days to remedy and Landlord is proceeding with due
diligence to remedy such matter, then such 30 day period will be extended for
such additional time as may be necessary for Landlord to complete such repairs
or maintenance. Notwithstanding the preceding sentence, in the case of an
emergency which poses an imminent threat of death, injury, or severe damage to
persons or property, the required notice from Tenant may be provided orally
rather than in writing and for such shorter period of time (i.e. less than 30
days) as Tenant, in the exercise of its reasonable judgment deems appropriate
under the exigent circumstances (however, at a minimum, Tenant shall at least
contact Landlord telephonically prior to commencing such work so that Landlord
may, at its election, make arrangements to handle such emergency itself). If
Landlord fails to fulfill its repair and maintenance obligations under this
Paragraph, and as a result thereof Tenant exercises the foregoing right to
correct such matter, then Landlord shall reimburse Tenant for the reasonable
third-party costs incurred by Tenant to complete such repairs and/or maintenance
within 30 days after receipt of Tenant’s written demand therefor, together with
copies of the paid invoices evidencing the costs so incurred. Any such repairs
or maintenance performed by Tenant, as permitted herein, must be performed in a
good and workmanlike manner by licensed contractors. If Landlord objects to the
repairs and/or maintenance performed by Tenant or the expenses incurred by
Tenant in performing such work, or Landlord disputes its obligation therefor,
Landlord shall deliver written notice of its objection to Tenant. Landlord’s
notice shall set forth in reasonable detail Landlord’s reasons for its
objection. If Tenant and Landlord are unable to resolve such dispute within 30
days thereafter, the matter may be submitted to arbitration before the AAA (or
its successor) by either party and the decision of the arbitrator will be
binding on both parties with the cost of such arbitration being split evenly by
the parties and each party bearing its own attorneys’ fees and costs. In no
event may Tenant offset any amount owed to it by Landlord from Tenant’s Rent
obligations unless Tenant’s claim has been submitted to arbitration and Landlord
fails to pay the amount which the above-referenced arbitrator determines is
owing to Tenant within ten business days of Landlord’s receipt of the
arbitrator’s written ruling.

 

11. Parking.

 

11.1. General Parking Rights. Subject to the remaining provisions of this
Paragraph 11, Landlord grants to Tenant (for the benefit of Tenant and Tenant’s
Invitees) the right to the non-exclusive use of the parking area within the
boundaries of and serving the Project (the “Parking Area”). Tenant’s use of the
Parking Area shall be subject to such reasonable, non-discriminatory rules as
Landlord may, in its sole discretion, adopt from time to time with respect to
the Parking Area, including without limitation (i) rules providing for the
payment of charges or fees by users of the Parking Area (including, without
limitation, Tenant) in order to reimburse Landlord for the expense of a parking
attendant and/or an automated parking system or to comply with local taxes or
fees and in such event the charges or fees shall be deemed Additional Rent, (ii)
rules limiting tenants of the Project (including, without limitation, Tenant) to
the use of, or excluding the use of, certain parking spaces or certain portions
of the Parking Area, in order to maintain the availability of accessible parking
spaces for clients, guests, and invitees of tenants of the Project, and (iii)
rules limiting tenants of the Project (including without limitation Tenant) to
the use of a restricted number of parking spaces or a restricted area.
Notwithstanding anything to the contrary in this Paragraph, Landlord may, at its
election, construct improvements upon or otherwise alter in any manner the
Parking Area, provided that Landlord makes reasonable amounts of parking
available (or reasonable amounts of parking will remain available) to Tenant
elsewhere within the Project (or within a reasonable distance from the Project).
Landlord reserves the right to grant certain tenants in the Project the
exclusive right to park in specified areas of the Parking Area, to the exclusion
of all other tenants. Tenant acknowledges that the exercise of the rights
reserved to Landlord under this Paragraph may result in a decrease in the number
of parking spaces available to Tenant and Tenant’s Invitees, and no such
decrease shall affect Tenant’s obligations under this Paragraph or entitle
Tenant to any abatement of Rent.

 

11.2. Parking Ratios. As of the Commencement Date (and subject to temporary
interruptions in connection with Landlord’s continued development of the
Project, as provided below), the parking ratio within the Project will be
approximately four spaces per 1,000 Usable Square Feet (“USF”) of space within
the Project. The foregoing (4:1,000 USF) parking ratio includes all spaces
within the Project, including covered, uncovered, reserved, unreserved,
handicap, and visitor parking spaces.

 

11.3. Specific Parking Rights. Tenant shall be entitled to the same 4:1,000 USF
ratio of parking relative to the USF of the Premises; provided, however, as part
of the foregoing parking rights, Landlord agrees that Tenant will be entitled to
have such parking proportionately distributed among the surface, subterranean,
and structure parking which makes up the total parking pool for the Project.
That portion of such parking which is located below the Building (and any
reserved parking provided by Landlord in the parking structure) will be marked
as reserved for Tenant and will be subject to a monthly charge of $50.00 per
space, subject to increase over the Lease Term. Such charge will constitute
Additional Rent hereunder and will be due and payable in advance, on or before
the first day of each month.

 

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12. Signs.

 

12.1. General Signage Conditions. Landlord may at any time change the name of
either or both of the Building and/or the Project and install, affix, and
maintain all signs on the exterior and interior of the Building and other
buildings within the Project as Landlord may, in Landlord’s sole discretion,
desire. Tenant shall not have or acquire any property right or interest in the
name of the Building or the Project. Subject to Tenant’s signage rights under
Paragraph 12.2, below, Tenant may not place, construct, or maintain any sign,
advertisement, awning, banner, or other exterior decoration (collectively,
“sign”) in the Premises which is visible from the exterior of the Premises, or
on the Building or any other portion of the Project, without Landlord’s prior
written consent. Any sign that Tenant is permitted by Landlord to place,
construct, or maintain in the Premises or on the Building or the Project
(including pursuant to Paragraph 12.2, below) must comply with Landlord’s sign
criteria applicable to the Project, including, without limitation, criteria
relating to size, color, shape, graphics, and location (collectively, the “Sign
Criteria”), and shall comply with all applicable laws, ordinances, CC&R’s (or
similar recorded instruments), rules, or regulations, and Tenant shall obtain
any approvals required by such laws, ordinances, CC&R’s (or similar recorded
instruments), rules, and regulations. Landlord makes no representation or
warranty with respect to Tenant’s ability to obtain any such approval. Tenant
shall, at Tenant’s sole cost, make any changes to any sign, whether in the
Premises or on the Building, as required by any new or revised applicable laws,
ordinances, rules, or regulations. Tenant shall, additionally, maintain, repair,
and replace all of Tenant’s signs (including, specifically, those installed
pursuant to Paragraph 12.2, below) in first class condition. Nothing contained
in this Paragraph 12 will limit the Landlord’s right to grant signage rights to
other tenants of the Building, or to affect the signage rights of any tenant of
the Building.

 

12.2. Tenant’s Individual Signage Rights. Subject to compliance with the
requirements of Paragraph 12.1, above, Tenant is hereby granted the following
signage rights in/on the Building and at the Project.

 

12.2.1. Directory/Suite Signage. The Building will be provided, at Landlord’s
expense, with a Project-standard lobby directory sign.

 

12.2.2. Single Tenant Floor. Throughout any period of time during the Term that
the Premises comprise or include an entire floor(s) of the Building, Tenant may,
at Tenant’s sole expense, install identification signs (including its logo) in
the elevator lobby(ies) of such entire floor(s) comprising the Premises, subject
to the following requirements: (i) Tenant must obtain Landlord’s and any
applicable governmental entity’s prior written approval for such signs
(including all required permits); (ii) all signs must be in keeping with the
quality, design, and style of the Building; and (iii) no such sign may be
visible from the exterior of the Building.

 

13. Rules, Regulations, and Covenants. Tenant shall observe (and shall cause
Tenant’s Invitees to observe) faithfully and comply strictly with any rules and
regulations which Landlord may from time to time adopt for the Project (and
provide Tenant with a copy of), as well as any recorded easement agreements,
maintenance agreements, CC&R’s, or like instruments affecting the Building
and/or the Project, whether now existing or hereafter adopted or amended from
time to time (all of the foregoing, collectively, “Rules”). Landlord has no duty
or obligation to enforce any Rule against any other tenant, and Landlord will
not be liable to Tenant for violation of any Rule by any other tenant, or any
other tenant’s agents, employees, officers, independent contractors, customers,
invitees, visitors, or licensees. Tenant acknowledges that Landlord reserves the
right, from time to time, to enter into leases or other agreements by which
Landlord agrees to restrict the use of all or any portion of the Project
(including the Premises) from certain uses. All such leases and other
agreements, whether now existing or entered into in the future, shall be binding
upon Tenant and in no event shall Tenant utilize the Premises for any use so
prohibited; provided, however, no such restriction may prevent Tenant from using
the Premises for the Permitted Use.

 

14. Early Access/Insurance. If prior to the Rent Commencement Date Tenant is
planning to (and permitted by Landlord to—see attached Addendum and Exhibit “C”)
make any Alterations (as defined below) to the Premises, perform any of the
Tenant’s Work, or install any of Tenant’s personalty, then in addition to
complying with the provisions of attached Exhibit “C”, (i) Tenant shall, at
Tenant’s sole cost, prior to first entering onto the Project, obtain and
thereafter at all times maintain (a) ”Builder’s Risk” or “Course of
Construction” insurance with respect to such work reasonably satisfactory to
Landlord, and (b) all of the insurance to be maintained by Tenant during the
Term, and (ii) all obligations of Tenant under the provisions of this Lease,
shall be operative. Any work pursuant to this Paragraph shall be subject to all
of the provisions of Paragraph 23, below. Nothing in this Paragraph shall be
construed as granting permission to Tenant to enter the Premises, or to make any
Alterations, prior to the Lease Commencement Date and no such right shall exist
unless specified in Exhibit “C” or agreed to by Landlord in its sole discretion.

 

15. Plate-Glass Insurance. Tenant shall at its sole cost maintain full coverage
plate-glass insurance on the Premises, under which Landlord and any lender
holding a security interest in the Project (“Lender”) shall be named as
additional insureds.

 

16. Public Liability and Property Damage Insurance. Throughout the Lease Term,
Tenant shall, at Tenant’s sole cost, maintain commercial general liability and
property damage insurance (i) with a combined single limit of liability of not
less than $2,000,000.00, (ii) insuring (a) against all liability of Tenant and
Tenant’s Invitees arising out of or in connection with Tenant’s use or occupancy
of the Premises, including, without limitation, Tenant’s use, maintenance,
repair, and replacement of systems and equipment either contained within the
Premises or in air spaces, walls, roof areas, or other portions of the Building
or the Project and which exclusively serve the Premises, and (b) performance by
Tenant of the indemnity provisions set forth in this Lease, (iii) naming
Landlord, its agent, and any Lender as additional insureds, (iv) containing
cross-liability endorsements, and (vi) which includes products liability
insurance (if Tenant is to sell merchandise or other products derived,
assembled, or produced from the Premises). Not more frequently than once every
one year, if in the commercially reasonable opinion of Landlord, the amount of
such insurance at that time is not adequate, Tenant shall increase such
insurance as reasonably required by Landlord.

 

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17. Fire and Extended Coverage Insurance. Tenant shall, at Tenant’s sole cost,
maintain on Tenant’s Alterations and Tenant’s Personal Property (as defined
below) a policy of standard fire and extended coverage and special form
insurance, with vandalism and malicious mischief endorsements, coverage with
respect to increased costs due to building ordinances, demolition coverage,
boiler and machinery insurance, and sprinkler leakage coverage, in each case to
the extent of at least 100 percent of full replacement value, and issued in the
name of Tenant—with building ordinance protection, demolition coverage, boiler
and machinery insurance, and sprinkler leakage coverage, in each case to the
extent of at least 100 percent of full replacement value, and issued in the name
of Tenant with Landlord, Landlord’s Lender, and Landlord’s designated agent as
additional insureds. Such “full replacement value” shall be determined by the
company issuing such policy at the time the policy is initially obtained. Not
more frequently than once every two years, either Landlord or Tenant may, at its
election, notify the other that it elects to have the replacement value
redetermined by an insurance company. Such redetermination shall be made
promptly and in accordance with the rules and practices of the Board of Fire
Underwriters, or a like board recognized and generally accepted by the insurance
company, and Landlord and Tenant shall be promptly notified of the results by
the insurance company. Such policy shall be promptly adjusted according to such
redetermination. The foregoing casualty insurance may be maintained under
blanket policies so long as there is no diminution in the quality or
availability of the required coverage.

 

18. Business Interruption Insurance. Tenant shall obtain and maintain,
throughout the Term, business interruption insurance in amounts sufficient to
reimburse Tenant for direct or indirect costs and loss of income attributable to
all events/perils commonly insured against by prudent tenants or attributable to
prevention of access to the Premises or to the Project as a result of such
events/perils or otherwise.

 

19. Insurance Generally. If Tenant fails during the Term to maintain any
insurance required to be maintained by Tenant under this Lease (or is within 48
hours of such a failure), then Landlord may, at its election, arrange for any
such insurance, and Tenant shall reimburse Landlord, as Additional Rent, for any
premiums for any such insurance within ten business days after Tenant receives a
copy of the premium notice. Insurance required to be maintained by Tenant under
this Lease shall be in form and content reasonably satisfactory to Landlord and
its Lender and (i) shall be issued as a primary policy, by insurance companies
authorized to do business in the state in which the Project is located with a
Best’s Rating of at least “A-” and a Best’s Financial Size Category rating of at
least “X,” as set forth in the most current edition of “Best’s Insurance
Reports” (unless otherwise approved by Landlord), or such higher rating as may
be required by any Lender, (ii) shall name Landlord, Landlord’s agent(s), and
any Lender as additional insureds, (iii) shall consist of “occurrence” based
coverage, without provision for subsequent conversion to “claims” based
coverage, (iv) shall not be cancelable or subject to reduction of coverage or
other modification except after 30-days’ prior written notice to Landlord and
any Lender, and (v) shall not provide for a deductible or co-insurance provision
in excess of $5,000.00. Tenant shall, at least 30 days prior to the expiration
of each such policy, furnish Landlord with a renewal of or “binder” extending
such policy. Tenant shall promptly, upon request, deliver to Landlord copies of
such policy or policies or (if acceptable to Landlord’s Lender) certificates
evidencing the existence and amounts of such insurance together with evidence of
payment of premiums.

 

20. Waiver of Subrogation. Tenant releases Landlord and Landlord’s guests,
invitees, customers and licensees (collectively, “Landlord’s Invitees”) from all
claims for damage, loss, or injury to Tenant’s Personal Property and to the
systems, equipment, fixtures, personalty, and Alterations of Tenant in or on the
Premises and the Project to the extent such damage, loss, or injury is covered
by any insurance policies carried by Tenant and in force at the time of such
damage. Tenant shall cause all insurance policies obtained by it pursuant to
this Lease to provide (if such provision is generally commercially available)
that the insurance company waives all right of recovery by way of subrogation
against Landlord in connection with any damage, loss, or injury covered by such
policy. Landlord releases Tenant and Tenant’s Invitees from all claims for
damage, loss, or injury to Tenant’s Personal Property and to the systems,
equipment, fixtures, and Alterations of Tenant in or on the Premises and the
Project to the extent such damage, loss, or injury is covered by any insurance
policies carried by Landlord and in force at the time of such damage. Landlord
shall cause all insurance policies obtained by it pursuant to this Lease to
provide (if such provision is generally commercially available) that the
insurance company waives all rights of recovery by way of subrogation against
Tenant in connection with any damage, loss, or injury covered by such policy.

 

21. Landlord’s Insurance. Landlord shall maintain (in addition to such other
coverages which Landlord elects to maintain or which its Lender might require)
the following insurance, in such amounts and with such limits as Landlord shall
determine in its reasonable discretion: (i) public liability insurance; (ii)
fire and extended coverage (all risk or special form) insurance; and (iii)
boiler and machinery insurance, if applicable. The premiums, costs, expenses,
co-insurance payments, and deductibles (or similar costs or charges) of and/or
with respect to any insurance maintained from time to time by Landlord (all of
the preceding, collectively, “Insurance Expenses”) shall constitute Operating
Expenses. Any such coverage may be part of an umbrella or blanket policy,
whereupon the premiums, costs, and expenses hereof will be reasonably
apportioned between the Project and the other properties so included under such
policy(ies).

 

22. Personal Property Taxes. Tenant shall pay before delinquency all taxes,
assessments, license fees, and other charges that are levied or assessed
against, or based upon the value of, Tenant’s personal property installed or
located in or on the Premises including without limitation trade fixtures,
furnishings, equipment, Alterations, and inventory (collectively, “Tenant’s
Personal Property”). On written demand by Landlord, Tenant shall furnish
Landlord with satisfactory evidence of such payments. If any such taxes,
assessments, license fees, and/or other charges are levied against Landlord or
Landlord’s property, or if the assessed value of the Premises is increased by
the inclusion of a value placed on Tenant’s Personal Property, and if Landlord
pays such taxes, assessments, license fees, and/or other charges or any taxes
based on the increased assessments caused by Tenant’s Personal Property, then
Tenant, on demand, shall immediately reimburse Landlord, as Additional Rent, for
the sum of such taxes, assessments, license fees, and/or other charges so levied
against Landlord, or the proportion of taxes resulting from such increase in
Landlord’s assessment. Landlord may, at its election, pay such taxes,
assessments, license fees, and/or other charges or such proportion, and receive
such reimbursement, regardless of the validity of the levy.

 

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23. Alterations. Tenant shall not make any alterations, improvements, additions,
installations, or changes of any nature in or to the Premises (any of the
preceding, “Alterations”) unless (i) Tenant first obtains Landlord’s written
consent, provided, however, that minor, interior cosmetic alterations such as
painting, wall papering, carpeting or hanging pictures or moving furniture and
temporary partitions or cubicldes (the aggregate cost of which will not exceed
$50,000.00, and which alteration will not be visible from outside the Premises
or affect any structural components of the Project) does not require Landlord’s
approval so long as Tenant notifies Landlord in writing of the nature and extent
of such alteration at least 15 business days before commencing such alteration);
(ii) Tenant complies with all conditions which may be imposed by Landlord,
including but not limited to Landlord’s selection of specific contractors or
construction techniques and the requirements of the attached Exhibit “C”; and
(iii) Tenant pays to Landlord the reasonable costs and expenses of Landlord for
architectural, engineering, or other consultants which reasonably may be
incurred by Landlord in determining whether to approve any such Alterations. At
least 30 days prior to making any Alterations, Tenant shall submit to Landlord,
in written form, proposed detailed plans of such Alterations. Tenant shall,
prior to the commencement of any Alterations, at Tenant’s sole cost, (i) acquire
(and deliver to Landlord a copy of) any required permit from the appropriate
governmental agencies to make such Alterations (any conditions of which permit
Tenant shall comply with, at Tenant’s sole cost, in a prompt and expeditious
manner), (ii) provide Landlord with ten days’ prior written notice of the date
the installation of the Alterations is to commence, so that Landlord can post
and record an appropriate notice of non-responsibility, and (iii) obtain (and
deliver to Landlord proof of) reasonably adequate workers compensation insurance
with respect to any of Tenant’s employees installing or involved with such
Alterations (which insurance Tenant shall maintain on an occurrence basis in
force until completion of the Alterations). All Alterations shall upon
installation become the property of Landlord and shall remain on and be
surrendered with the Premises on the Expiration Date, except that Landlord may,
at its election, require Tenant to remove any or all of the Alterations, by so
notifying Tenant in writing on or about the Expiration Date, in which event,
Tenant shall, at its sole cost, on or before the Expiration Date or within five
days of Landlord’s request, if after the Expiration Date, repair and restore the
Premises to the condition of the Premises prior to the installation of the
Alterations which are to be removed. Tenant shall pay all costs for Alterations
and other construction done or caused to be done by Tenant and Tenant shall keep
the Premises free and clear of all mechanics’ and materialmen’s liens resulting
from or relating to any Alterations or other construction. Tenant may, at its
election, contest the correctness or validity of any such lien provided that (a)
immediately on demand by Landlord, Tenant procures and records a lien release
bond, issued by a corporation satisfactory to Landlord and authorized to issue
surety bonds in California, in an amount equal to 150 percent of the amount of
the claim of lien, which bond meets the requirements of California Civil Code
Section 3143 or any successor statute, and (b) Landlord may, at its election,
require Tenant to pay Landlord’s attorneys’ fees and costs incurred in
participating in such an action.

 

24. Surrender of Premises and Holding Over. On the Expiration Date, Tenant shall
surrender to Landlord the Premises and all Alterations (except for Alterations
that Tenant is obligated to remove as expressly set forth above) in a first
class and clean condition, less any normal wear and tear, free of trash and
debris including cleaning of all flooring; all walls shall be patched and
painted; all signage installed by Tenant on any portion of the Buildings or
Project shall be removed and the surfaces repaired, including restoration of the
signage mounting surfaces to their pre-existing condition; all sign circuits,
electrical circuits, and lighting fixtures shall be in good operating condition;
all roof penetrations arising from Tenant’s occupancy of the Premises shall be
in a watertight condition; and all doors, windows, locks, and hardware shall be
in operable condition upon the termination of this Lease. Tenant shall
additionally, as of the Expiration Date, remove all of Tenant’s Personal
Property and perform all repairs and restoration required by the removal of any
Alterations or Tenant’s Personal Property, and Tenant shall surrender to
Landlord all keys to the Premises (including without limitation any keys to any
exterior or interior doors). Landlord may elect to retain or dispose of in any
manner any Alterations or Tenant’s Personal Property that Tenant does not remove
from the Premises on the Expiration Date as required by this Lease by giving
written notice to Tenant. Any such Alterations or Tenant’s Personal Property
that Landlord elects to retain or dispose of shall immediately upon notice to
Tenant vest in Landlord. Tenant waives all claims against Landlord for any
damage to Tenant resulting from Landlord’s retention or disposition of any such
Alterations or Tenant’s Personal Property. Tenant will be liable to Landlord for
Landlord’s costs for storing, removing (including related restoration work), or
disposing of any such Alterations or Tenant’s Personal Property. If Tenant fails
to surrender the Premises to Landlord on the Expiration Date in the condition
required by this Paragraph, Tenant shall indemnify, defend, and hold Landlord
harmless from and against all liabilities, damages, losses, costs, expenses,
attorneys’ fees, and claims resulting from such failure, including without
limitation any claim for damages made by a succeeding tenant. If Tenant, with
Landlord’s consent, remains in possession of the Premises after the Expiration
Date, such possession by Tenant shall be deemed to be a month-to-month tenancy
terminable on 30-days’ written notice given at any time by Landlord or Tenant.
During any such month-to-month tenancy, or any other holdover tenancy which is
without Landlord’s consent, Tenant shall pay, as Basic Monthly Rent, 150 percent
of the Basic Monthly Rent in effect immediately prior to the Expiration Date;
which rental amount Tenant acknowledges is fair and reasonable under all of the
facts and circumstances existing as of the date of this Lease. All provisions of
this Lease except for those pertaining to Term shall apply to any such tenancy.

 

25. Default. The occurrence of any of the following shall constitute a material
default and breach of this Lease by Tenant (each an “Event of Default”):

 

25.1. The abandonment (as defined in the California Civil Code 1951.3) of the
Premises by Tenant.

 

25.2. Tenant’s failure to make any payment of Rent (including late charges)
within two business days after written notice of delinquency. No grace period
prior to the imposition of a late charge pursuant to Paragraph 27, below, shall
extend the date when such Rent is due and payable.

 

25.3. Tenant’s failure to observe or perform any of the provisions of this Lease
to be observed or performed by Tenant, other than described in the preceding two
paragraphs, where such failure shall continue for a period of ten days after
written notice of such failure from Landlord to Tenant; provided, however, that
any such notice shall be in lieu of, and not in addition to, any notice required
under applicable unlawful detainer statutes; and provided further, that if the
nature of Tenant’s default is such that more than ten days are reasonably
required for its cure, then

 

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Tenant shall not be deemed to be in default if Tenant commenced such cure within
such ten-day period and thereafter diligently prosecutes such cure to completion
within 30 days after Landlord’s written notice.

 

25.4. The making by Tenant of any general arrangement or assignment for the
benefit of creditors; Tenant’s becoming bankrupt, insolvent or a “debtor” as
defined in 11 U.S.C. Section 101, or any successor statute (unless, in the case
of a petition filed against Tenant, such petition is dismissed within 60 days
after its original filing); the institution of proceedings under the bankruptcy
or similar laws in which Tenant is the debtor or bankrupt; the appointing of a
trustee or receiver to take possession of substantially all of Tenant’s assets
located at the Premises or of Tenant’s interest in this Lease (unless possession
is restored to Tenant within 60 days after such taking); the attachment,
execution, or judicial seizure of substantially all of Tenant’s assets located
at the Premises or Tenant’s interest in this Lease (unless such attachment,
execution, or judicial seizure is discharged within 60 days after such
attachment, execution, or judicial seizure); or, if Tenant is a partnership or
consists of more than one person or entity, any partners of the partnership or
any such other person or entity becoming bankrupt or insolvent or making a
general arrangement or assignment for the benefit of creditors.

 

25.5. The occurrence of an Event of Default under the terms of that certain
lease between Landlord and Tenant dated as of February 22, 2000, for space on
the ninth floor of the building located at 10145 Pacific Heights Boulevard, San
Diego, California.

 

26. Landlord’s Remedies. Landlord shall have the following remedies if Tenant
commits an Event of Default under this Lease. These remedies are not exclusive,
but are cumulative and in addition to any remedies provided elsewhere in this
Lease or now or later allowed by law.

 

26.1. Continuation of Lease. No act by Landlord shall terminate Tenant’s right
to possession unless Landlord notifies Tenant in writing that Landlord elects to
terminate Tenant’s right to possession. As long as Landlord does not terminate
Tenant’s right to possession, Landlord may (i) continue this Lease in effect,
(ii) continue to collect Rent when due and enforce all the other provisions of
this Lease, and (iii) enter the Premises and relet them, or any part of them, to
third parties for Tenant’s account, for a period shorter or longer than the
remaining Term of this Lease. Tenant shall immediately pay to Landlord all costs
Landlord incurs in such reletting, including, without limitation, brokers’
commissions, attorneys’ fees, advertising costs, and expenses of remodeling the
Premises for such reletting. The parties agree that Landlord is to have the
remedy described in California Civil Code Section 1951.4 (which effectively
provides that a lessor may continue a lease in effect after the lessee’s breach
and recover rent as it becomes due), and the Tenant hereby acknowledges that
this Lease meets the requirements of such statutory provision and that Tenant’s
rights to sublet or assign hereunder are subject only to reasonable limitations.

 

26.2. Rent from Reletting. If Landlord elects to relet all or any portion of the
Premises as permitted above, rent that Landlord receives from such reletting
shall be applied to the payment of, in the following order and priority, (i) any
indebtedness from Tenant to Landlord other than Rent due from Tenant, (ii) all
costs incurred by Landlord in such reletting, and (iii) Rent due and unpaid
under this Lease. After applying such payments as referred to above, any sum
remaining from the rent Landlord receives from such reletting shall be held by
Landlord and applied in payment of future Rent as it becomes due under this
Lease. In no event shall Tenant be entitled to any excess rent received by
Landlord unless and until all obligations of Tenant under this Lease, including
all future obligations, are satisfied in full.

 

26.3. Termination of Tenant’s Right to Possession. Landlord may terminate
Tenant’s right to possession of the Premises at any time, by notifying Tenant in
writing that Landlord elects to terminate Tenant’s right to possession. Such
written notice will result in the immediate termination of this Lease upon the
date such right of possession is terminated. Upon termination of this Lease,
Landlord has the right to recover from Tenant (i) the worth at the time of the
award of the unpaid Rent which had been earned at the time of such termination,
(ii) the worth at the time of the award of the amount by which the unpaid Rent
which would have been earned after such termination until the time of award
exceeds the amount of such loss of Rent that Tenant proves could have been
reasonably avoided, (iii) the worth at the time of the award of the amount by
which the unpaid Rent for the balance of the Term after the time of award (had
there been no such termination) exceeds the amount of such loss of Rent that
Tenant proves could be reasonably avoided, and (iv) 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 in the ordinary course of
things would be likely to result therefrom. The “worth at the time of the award”
of the amounts referred to in clauses (i) and (ii) above is to be computed by
allowing interest at the Default Rate. The “worth at the time of the award” of
the amount referred to in clause (iii) above is to be computed by discounting
such amount at the discount rate of the Federal Reserve Bank of San Francisco at
the time of award plus one percent.

 

26.4. Landlord’s Right to Cure Default. Landlord, at any time after Tenant
commits an Event of Default, may cure such Event of Default at Tenant’s sole
cost. If Landlord at any time, by reason of Tenant’s default or breach, pays any
sum or does any act that requires the payment of any sum, such sum shall be due
immediately from Tenant to Landlord at the time such sum is paid, along with a
supervisory fee in the amount of ten percent (10%) of such amount so expended by
Landlord, and shall be deemed Additional Rent under this Lease. If Tenant fails
to timely pay any amount due under this Paragraph within ten business days of
receipt of Landlord’s invoice for such costs, then (without curing such default)
interest at the Default Rate shall accrue (and be immediately payable) on such
overdue amount until it is paid.

 

26.5. Enforcement Costs. All costs and expenses incurred by Landlord in
connection with collecting any amounts and damages owing by Tenant pursuant to
the provisions of this Lease, or to enforce any provision of this Lease,
including reasonable attorneys’ fees, whether or not any action is commenced by
Landlord, shall be paid by Tenant to Landlord upon demand. If Tenant fails to
timely pay any amount due under this Paragraph, then (without curing such
default) interest at the Default Rate shall accrue (and be immediately payable)
on such overdue amounts until it is paid.

 

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27. Late Charges. Late payment by Tenant to Landlord of Rent will cause Landlord
to incur costs not contemplated by this Lease, the exact amount of which would
be impracticable or extremely difficult to fix. Such costs include, without
limitation, processing, collection and accounting charges, and late charges that
may be imposed on Landlord by the terms of any deed of trust covering the
Premises. Therefore, if any Rent (in the form of good funds) is not received by
Landlord within ten days of its due date, then, without any requirement for
notice to Tenant, Tenant shall pay to Landlord an additional sum of ten percent
(10%) of such overdue amount as a late charge. Such late charge represents a
fair and reasonable estimate of the costs that Landlord will incur by reason of
any late payment by Tenant, and therefore this Paragraph is reasonable under the
circumstances existing at the time this Lease is made. Acceptance of such late
charge by Landlord shall not constitute a waiver or cure of Tenant’s default
with respect to such overdue amount, nor prevent Landlord from exercising any of
the other rights and remedies available to Landlord under this Lease.

 

28. Default Interest. In addition to the late charge payable by Tenant, as
provided above, if any Rent is not paid within 30 days of the date such Rent is
due, then Tenant shall pay to Landlord interest on such overdue Rent (until all
amounts, including interest, are paid in full) at the rate of seven percent (7%)
above the “reference rate” announced from time to time by Bank of America, NT&SA
(the “Default Rate”). If such reference rate ceases to be announced, then a
comparable “prime rate” shall be utilized, as selected by Landlord.

 

29. Payment of Rent by Cashier’s Check. If a late charge is payable under this
Lease, whether or not collected, for two or more installments of Basic Monthly
Rent or other Rent due under this Lease, or if any two payments made by Tenant
in the form of a personal or business check is returned by the bank it was drawn
upon for whatever reason, including but not limited to insufficient funds, then
Landlord, at Landlord’s option, may require Tenant to submit future payments to
Landlord in the form of a certified cashier’s check, money order, or by wire
transfer. Tenant’s obligation to provide payment in the aforementioned manner
shall continue in full force and effect until Landlord, in its sole discretion,
determines otherwise. Tenant further agrees to reimburse Landlord, as Additional
Rent, Landlord’s actual costs imposed by Landlord’s bank or financial
institution arising from Tenant’s returned check(s). These costs shall be in
addition to any late charges payable by Tenant pursuant to this Lease.

 

30. Destruction. If the Building is totally or partially destroyed during the
Term, rendering the Premises totally or partially inaccessible or unusable,
then, subject to the remainder of this Paragraph, (i) Landlord shall promptly
commence work necessary to restore the Building to substantially the same
condition as it was in immediately before such destruction and shall diligently
prosecute such restoration work until completed, (ii) Landlord shall not be
required to restore Tenant’s Alterations or Tenant’s Personal Property, unless
they are specifically covered by insurance proceeds received by Landlord, such
excluded items being the sole responsibility of Tenant to restore, (iii) such
destruction shall not terminate this Lease (except as provided below), and (iv)
all obligations of Tenant under this Lease shall remain in effect, except that
the Basic Monthly Rent and Additional Rent shall be abated or reduced, between
the date of such destruction and the date of Substantial Completion of
restoration, by the ratio of (a) the Rentable Square Footage of the Premises
rendered unusable or inaccessible by the destruction, to (b) the Rentable Square
Footage of the Premises prior to such destruction. Notwithstanding anything to
the contrary in this Paragraph, either party shall have ten business days from
the date of Landlord’s determination that this sentence applies to the subject
destruction/reconstruction, in which to terminate this Lease if Landlord
determines that (1) it will likely take more than either (A) 330 days following
the date of such casualty, or (B) 270 days from obtaining all required permits
for such reconstruction, in which to complete such work, (2) such destruction
(which is not de minimus in nature) occurs during the last year of the Term, or
(3) then-existing laws do not permit such restoration. Additionally, Landlord
may, at its election, terminate this Lease by so notifying Tenant in writing on
or before the later of 60 days after such destruction or 30 days after
Landlord’s receipt of the proceeds (or written notice of the amount of proceeds)
from insurance maintained by Landlord, if (I) such destruction exceeds twenty
percent (20%) of the then-replacement value of the Premises, the Building, or
the Project, or (II) Landlord reasonably determines that the cost of such
restoration will exceed the amount of insurance proceeds relating to such
destruction actually received by Landlord from insurance maintained by Landlord,
excluding deductibles, by more than five percent (5%) of such cost of
restoration. If Landlord or Tenant so terminates this Lease, then (x) Landlord
shall have no obligation to restore the Project, (y) Landlord shall retain all
insurance proceeds relating to such destruction, and (z) this Lease shall
terminate as of 30 days after such notice of termination from Landlord to
Tenant. Tenant hereby waives the provisions of California Civil Code Sections
1932(2) and 1933(4) or any successor statute with respect to any destruction of
the Premises. If Landlord restores the Premises following any such destruction,
Tenant shall immediately refixturize, re-equip, and (if applicable) restock the
Premises and shall re-open the Premises for business as soon thereafter as is
reasonably practicable. If Tenant does not intend to so reopen the Premises for
business, it must notify Landlord in writing within 20 business days of such
damage or destruction, whereupon Landlord may cease its repair work and
terminate this Lease. Additionally, if Landlord fails to Substantially Complete
such restoration work within one year, Tenant may, by 30 days’ written notice to
Landlord delivered after such year (during which period of time such restoration
is not Substantially Completed), terminate this Lease.

 

31. Condemnation. If during the Term, or during the period of time between the
execution of this Lease and the Lease Commencement Date, there is any taking of
all or any part of the Premises or any interest in this Lease by the exercise of
any governmental power, whether by legal proceedings or otherwise, by any public
or quasi-public authority, or private corporation or individual, having the
power of condemnation (any of the preceding a “Condemnor”), or a voluntary sale
or transfer by Landlord to any Condemnor, either under threat of condemnation or
while legal proceedings for condemnation are pending (any of the preceding, a
“Condemnation”), the rights and obligations of Landlord and Tenant shall be
determined pursuant to this Paragraph. If such Condemnation is of the entire
Premises, then this Lease shall terminate on the date the Condemnor takes
possession of the Premises (the “Date of Condemnation”). If such Condemnation is
of any portion, but not all, of the Premises, then this Lease shall remain in
effect, except that, if the remaining portion of the Premises is rendered
unsuitable for Tenant’s continued use of the Premises, then Tenant may elect to
terminate this Lease, by so notifying Landlord in writing (the “Termination
Notice”) within 30 days after the date that the nature and extent of the
Condemnation have been determined. Such termination shall be effective on the
earlier of (i) the date that is 30 days after the giving of the Termination
Notice, or (ii) the Date

 

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of Condemnation. If Tenant does not give to Landlord the Termination Notice
within such 30-day period, then all obligations of Tenant under this Lease shall
remain in effect, except that (unless the Premises are restored as set forth
below) Basic Monthly Rent shall be reduced by the ratio of (a) the Rentable
Square Footage of the Premises taken to (b) the Rentable Square Footage of the
Premises immediately prior to the Date of Condemnation. Notwithstanding anything
to the contrary in this Paragraph, if, within 30 days after Landlord’s receipt
of the Termination Notice, Landlord notifies Tenant that Landlord at its cost
will add to the remaining Premises (or substitute for the Premises other
comparable space in the Project) so that the Rentable Square Footage of the
Premises will be substantially the same after the Condemnation as they were
before the Condemnation, and Landlord commences the restoration promptly and
completes it within 150 days after Landlord so notifies Tenant, then all
obligations of Tenant under this Lease shall remain in effect, except that Basic
Monthly Rent and Additional Rent shall be abated or reduced during the period
from the Date of Condemnation until the completion of such restoration by the
ratio of (A) the Rentable Square Footage of the Premises taken to (B) the
Rentable Square Footage of the Premises immediately prior to the Date of
Condemnation. Unless Landlord restores the Premises pursuant to the preceding
sentence, or unless Tenant gives to Landlord the Termination Notice within the
relevant 30-day period, Tenant at its sole cost shall accomplish any restoration
required by Tenant to use the Premises. A temporary Condemnation of the
Premises, or any part of the Premises, for less than 180 days, shall not
constitute a Condemnation under this Paragraph; but the Basic Monthly Rent shall
abate as to the portion of the Premises affected during such temporary
Condemnation. All compensation, sums, or anything of value awarded, paid, or
received on a total or partial Condemnation (the “Award”) shall belong to and be
paid to Landlord. Tenant shall have no right to any part of the Award, and
Tenant hereby assigns to Landlord all of Tenant’s right, title, and interest in
and to any part of the Award, except that Tenant shall receive from the Award
any sum paid expressly to Tenant from the Condemnor for Tenant’s Personal
Property or for severance damages. Landlord and Tenant waive the provisions of
any statute (including without limitation California Code of Civil Procedure
Section 1265.130 or any successor statute) that allows Landlord or Tenant to
petition the superior court (or any other court) to terminate this Lease in the
event of a partial Condemnation of the Premises.

 

32. Assignment and Other Transfers.

 

32.1. Restriction on Transfer. Without Landlord’s prior written consent, which
shall not be unreasonably withheld, and except as permitted by Paragraph 32.3,
below, none of the following shall occur (nor be permitted by Tenant to occur),
voluntarily, involuntarily, by operation of law, or otherwise (any of the
following, a “Transfer”): (i) any assignment, sublease, disposition, sale,
concession, license, license agreement for the use of any portion of the
Premises, mortgage, encumbrance, hypothecation, pledge, collateral assignment,
or other transfer, by Tenant of this Lease, any interest in this Lease, or all
or any portion of the Premises; or (ii) any assignment, disposition, sale,
transfer, acquisition, or issuance of equitable interests (whether stock,
partnership or otherwise) in Tenant, to or by any person, entity, or group of
related persons or affiliated entities, whether in a single transaction or in a
series of related or unrelated transactions, which results in such person,
entity, or group holding (or assigning, transferring, disposing of, or selling)
fifty percent (50%) or more of the aggregate issued and outstanding equitable
interests in Tenant.

 

32.2. Transfer Provisions Generally. Landlord shall not be liable in damages to
Tenant or to any proposed subtenant, assignee or other transferee (any of the
preceding a “Proposed Transferee”) if such consent is adjudicated to have been
unreasonably withheld, and, in such event, Tenant’s sole remedy shall be to have
the proposed Transfer declared as valid as if Landlord’s consent had been given,
although Tenant shall be entitled to reasonable attorney’s fees if Tenant is the
prevailing party in such litigation. At least 30 days prior to entering into any
proposed Transfer, Tenant shall submit to Landlord the sum of $400.00 (as
payment toward Landlord’s and Landlord’s attorneys’ cost of reviewing,
consenting to, rejecting and/or consummating any proposed Transfer), and a
written notice (“Tenant’s Notice”) which includes or sets forth in reasonable
detail (i) the form of the proposed Transfer, including without limitation all
related agreements, documents, instruments, exhibits, and escrow instructions,
(ii) the name and address of the Proposed Transferee, (iii) the terms and
conditions of the proposed Transfer, including without limitation the economics
of such Proposed Transfer and the commencement or effective date of the proposed
Transfer, which shall be at least 30 days after Tenant’s Notice is given, and
(iv) the nature, character, and current financial information and references
with respect to the Proposed Transferee and the business of the Proposed
Transferee, in reasonably sufficient detail to enable Landlord to determine the
Proposed Transferee’s financial responsibility. Within 20 days after Landlord’s
receipt from Tenant of such sum and Tenant’s Notice, and all documentation
requested of Tenant by Landlord, Landlord shall notify Tenant whether Landlord
has consented to the proposed Transfer. Any consent by Landlord to any proposed
Transfer shall not constitute a consent with respect to any other Transfer. If
Landlord consents to any proposed Transfer, and Tenant fails to consummate such
Transfer within 90 days of the commencement or effective date of the proposed
Transfer (as set forth in Tenant’s Notice) or, if Tenant’s Notice fails to
identify such a date, then within 150 days of the Tenant’s Notice, then such
consent shall be deemed withdrawn and Tenant shall be required again to comply
with this Paragraph before making a Transfer. Landlord shall not have
unreasonably withheld its consent with respect to any Transfer if (among other
things) Landlord shall not have received such sum or Tenant’s Notice, if the
nature or character of the Proposed Transferee is not in keeping with the
dignity and character of the Building and the surrounding area, if the Proposed
Transferee’s proposed use is materially and adversely different than the
Permitted Use or Tenant’s prior use, if the proposed Transfer will result in the
diminution of the value or marketability of the Building or the Project, if
Landlord is not reasonably satisfied that the Proposed Transferee is
creditworthy, or if the proposed Transfer will conflict with or result in a
breach of any of the provisions of, or constitute a default under, any
agreement, instrument, or document to which Landlord is a party or by which the
Project may be bound. No Transfer shall release or discharge Tenant from any
liability, whether past, present, or future, under this Lease and Tenant shall
continue to remain directly liable under this Lease (and not as a mere surety).
Tenant irrevocably assigns to Landlord, as security for Tenant’s obligations
under this Lease, all rent and other amounts generated from any Transfer, and
Landlord, as assignee, may collect such rent and other amounts and apply them
toward Tenant’s obligations under this Lease; except that, unless a default
occurs under this Lease, Tenant shall have the right to collect such rent and
other amounts. Unless otherwise agreed to by all parties, the Tenant’s Security
Deposit (if any) shall be retained by Landlord and returned to the lawful tenant
in possession of the Premises at the time of the Lease termination, subject to
the terms and conditions of Paragraph 6 of this Lease. Any Transfer
documentation shall

 

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contain the following provisions, which provisions whether contained in such
Transfer documentation or not, shall apply to such Transfer: (a) Such Transfer
shall be subject and subordinate to, and bound by, all provisions of this Lease;
(b) No Proposed Transferee shall be permitted to enter into any Transfer without
Landlord’s prior written consent; and (c) At Landlord’s option, in the event of
cancellation or termination of this Lease for any reason or the surrender of
this Lease, whether voluntarily, involuntarily, by operation of law or
otherwise, prior to the expiration of such Transfer, the Proposed Transferee
shall make full and complete attornment to Landlord for the balance of the term
of such Transfer. Such attornment shall be evidenced by an agreement in form and
substance reasonably satisfactory to Landlord that the Proposed Transferee shall
execute and deliver to Landlord within five days after request by Landlord.
Tenant shall promptly reimburse Landlord for Landlord’s reasonable cost (less
the $400.00 previously paid) of reviewing, consenting to, rejecting, and/or
consummating any proposed Transfer, including without limitation reasonable
attorneys’ fees and costs/fees of Landlord’s Lender in connection therewith. If
Tenant fails to pay such amount within ten business days of written demand,
Tenant shall be in default hereunder and Landlord shall have the right, in
addition to its other rights and remedies under this Lease, to revoke its prior
approval of the proposed Transfer if such Proposed Transferee has not yet taken
over possession of the Premises.

 

32.3. Excess Rent and Recapture. Tenant shall promptly pay to Landlord, as and
when received, fifty percent (50%) of all rents and other consideration after
all of Tenant’s reasonable third-party expenses incurred in connection with such
Transfer are deducted, of whatever nature, payable by the Proposed Transferee
(or receivable by Tenant) pursuant to or as a result of any Transfer, which
exceed (i) in the case of a sublease of a portion of the Premises, the portion
of the Basic Monthly Rent that is allocable to the portion of the Premises
subleased (such allocation based on the Rentable Square Footage of the portion
subleased), or (ii) in the case of any other Transfer, the Basic Monthly Rent.
Landlord additionally has the right, in the event Tenant indicates in the
Tenant’s Notice that it desires to assign this Lease or sublet greater than 50%
of the Premises, at its election, by giving written notice (the “Recapture
Notice”) to Tenant within 15 days after receipt of Tenant’s Notice, to recapture
the Premises and terminate this Lease. If Landlord elects to exercise such right
and delivers a Recapture Notice to Tenant, this Lease shall automatically be
deemed terminated as of the commencement or effective date stated in Tenant’s
Notice for the proposed Transfer, and Tenant shall surrender possession of the
Premises as of such date (and any failure to do so shall constitute a default
hereunder). Landlord’s giving of a Recapture Notice shall not constitute
Landlord’s consent to Tenant’s proposed Transfer.

 

32.4. Permitted Transferee. Notwithstanding anything to the contrary contained
in Paragraphs 32.1 or 32.3, above, no consent of Landlord will be required for,
and no amounts will be payable to Landlord in connection with, any assignment or
subletting to any of the following (any of which will constitute a “Permitted
Transferee”):

 

32.4.1. Any parent company which owns all or substantially all of the voting and
beneficial interests in Tenant and which has a net worth (determined in
accordance with GAAP) equal to or greater than Tenant’s net worth as of the day
before such transaction or as of the Commencement Date, whichever is less;

 

32.4.2. Any surviving or successor entity resulting from a merger,
consolidation, or sale of substantially all of the assets of Tenant, where the
net worth of the resulting or acquiring company exceeds (as determined in
accordance with GAAP) the net worth of the Tenant as of the day prior to such
transaction or as of the Commencement Date, whichever is less; or

 

32.4.3. Any sale of stock as part of a “public offering” on one of the
nationally recognized securities exchanges (such as, without limitation, NYSE or
NASDAQ).

 

Notwithstanding the foregoing, and as a condition to the effectiveness of any
such Transfer to a Permitted Transferee, at least 20 days prior to any proposed
Transfer to a Permitted Transferee, Tenant shall notify Landlord in writing of
its intention to undertake such a Transfer and provide Landlord with sufficient
information to confirm that such entity will in fact be a Permitted Transferee.
Landlord shall keep all such information confidential. Other than the right to
engage in such a Transfer to a Permitted Transferee without Landlord’s consent,
all other provisions of this Paragraph 32 shall apply to such a Transfer.
Furthermore, if the Permitted Transferee is not in as strong a financial
position as Tenant (as reasonably determined by Landlord), based on Tenant’s
financial position both as of the date of this Lease and as of the date of such
Transfer, then as a condition to the effectiveness of such Transfer, Tenant
shall, at Landlord’s request, provide Landlord with an acceptable guarantor of
this Lease on Landlord’s standard form.

 

33. Landlord’s Reserved Rights. Landlord, as owner of the Project, in addition
to Landlord’s other rights, reserves the right from time to time: (i) to
temporarily utilize portions of the Common Areas for, among other things,
entertainment, outdoor shows, displays, automobile and other product shows, the
leasing of kiosks, or such other uses which, in Landlord’s reasonable judgment,
are appropriate; (ii) to utilize the lighting standards and other areas or
improvements in the Common Areas for advertising, notice purposes, or other
reasonable purposes; (iii) to close any of the Common Areas to the extent
required in the opinion of Landlord’s legal counsel to prevent a dedication of
any of the Common Areas or the accrual of any rights to any person or to the
public in and to any portion of the Common Areas; (iv) to close, temporarily,
any of the Common Areas for maintenance purposes; (v) to designate other
property outside the boundaries of the Project to become part of the Common
Areas; (vi) to close off or otherwise utilize portions of the Common Areas while
constructing improvements or making repairs or alterations to any portion of the
Project; (vii) to utilize portions of the Common Areas, on a temporary basis, as
a staging area for any construction work by Landlord or its affiliates, agents,
tenants, or contractors; and (viii) to make any changes to the Common Areas, or
any part of the Project, including without limitation changes to buildings or
other improvements, the addition of new buildings or other improvements, and/or
changes in (among other things) the location of driveways, entrances, exits,
vehicular parking spaces, or the direction of the flow of traffic. In exercising
such rights, Landlord agrees to use commercially reasonable efforts to minimize
any interference with Tenant’s use of the Premises.

 

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34. Continued Development of Project.

 

34.1. Further Construction. Tenant acknowledges that Landlord may, from time to
time, at its sole election, construct (including, without limitation, additional
buildings), reconstruct, improve (including tenant improvements), modify,
expand, or otherwise alter the Project (collectively, “Construction Work”), or
portions thereof (in no event however will Landlord have any obligation to do
so). Tenant acknowledges that any such Construction Work will necessarily
involve, among other things, the generation of noise, dust, and vibrations,
barricading portions of the Project and the placement of scaffolding within the
Project, demolition, structural alterations, storage of materials and equipment
within the Project, and the presence of workmen within the Project, all of which
may require the rearrangement of the Common Areas, including, without
limitation, landscaping, parking areas, roadways, lighting facilities, and the
re-direction of vehicular and pedestrian traffic. Except as provided below,
Tenant waives any and all claims, defenses, rights of offset, or deductions
based upon any inconvenience suffered by Tenant or any interruption of or
interference with Tenant’s business including, without limitation, any loss of
business, decreased sales, or inconvenience to Tenant or Tenant’s Invitees as a
result of or relating to such Construction Work. Landlord hereby reserves for
itself and its agents, employees, licensees and contractors, the right to enter
the Premises to the extent reasonably necessary to pursue such Construction Work
upon 24 hours’ prior notice to Tenant. The exercise of any of Landlord’s rights
pursuant to this Paragraph will not entitle Tenant to any abatement of Rent or
other claim, right of offset, or defense against Landlord, except that (i)
Tenant shall have the right to bring an action against Landlord (as Tenant’s
sole remedy) in the event Tenant suffers any damages as a result of Landlord’s
gross negligence or intentional misconduct in pursuing such Construction Work,
and (ii) if such Construction Work results in Tenant being unable to access the
Premises, or portions thereof, for the Permitted Use for a period of greater
than ten business days, Tenant shall be entitled to equitable abatement of the
Rent for such period of time during which it is unable to access the Premises.
Tenant further acknowledges that expansion of the Project may affect the amount
of the Lease Expenses and the portion thereof payable by Tenant.

 

34.2. Reserved Rights. Landlord hereby reserves such licenses and easements in,
on, above or below the Premises as may be reasonably required (i) for the
installation, inspection, surveying, maintenance, or construction of mains,
conduits, shafts, columns, footings, piers, pipes or other facilities to serve
any building within the Project, or (ii) for any Construction Work; provided,
however, Landlord will use its best efforts to minimize any unreasonable
interference with Tenant’s use, occupancy, or enjoyment of the Premises as
contemplated by this Lease.

 

35. Access by Landlord. Landlord and any of Landlord’s Invitees shall have the
right to enter the Premises at all reasonable times, during normal business
hours if feasible under the circumstances, and upon 24 hours’ notice, if
feasible under the circumstances, (i) to determine whether the Premises are in
good condition and whether Tenant is complying with its obligations under this
Lease, (ii) to do any necessary maintenance or make any restoration to the
Premises that Landlord has the right or obligation to perform, (iii) to serve,
post, or keep posted any notices required or allowed under this Lease, (v) to
post “for sale” or “for rent” or “for lease” signs during the final nine months
of the Term, (vi) to show the Premises to brokers, lenders, agents, prospective
buyers, prospective tenants, or other persons interested in a listing of,
financing, purchasing, or occupying the Project, the Premises or any portion of
the Project or the Premises, and (vii) to shore the foundations, footings, and
walls of the Project, and to erect scaffolding and protective barricades around
and about the Premises, but not so as to prevent entry to the Premises, and to
do any other act or thing necessary for the safety or preservation of the
Premises if any excavation or other construction is undertaken or is about to be
undertaken on any adjacent property or nearby street. In the event of an
emergency Landlord shall have the right to enter the Premises at any time,
without prior notice to Tenant. Landlord’s rights under this Paragraph extend,
with Landlord’s consent, to the owner of adjacent property on which excavation
or construction is to take place and the adjacent property owner’s agents,
employees, officers, and contractors. Landlord shall not be liable for any
inconvenience, disturbance, loss of business, nuisance, or other damage arising
out of any entry on the Premises as provided in this Paragraph except damage
resulting directly from the grossly negligent acts or willful misconduct of
Landlord or Landlord’s Invitees. Tenant shall not be entitled to any abatement
or reduction of Basic Monthly Rent or other Rent because of the exercise by
Landlord of any rights under this Paragraph.

 

36. Indemnity. Tenant hereby agrees to indemnify, defend, protect, and hold
harmless Landlord and its shareholders, officers, directors, agents, property
managers, employees, contractors, and the partners comprising Landlord (if any)
from and against all Claims (as defined below) and all costs, expenses, and
attorneys’ fees incurred in the defense or handling of any such Claims or any
action or proceeding brought on any of such Claims. For purposes of this Lease,
the term “Claims” shall mean all liabilities, damages, losses, costs, expenses,
attorneys’ fees, and claims (except to the extent they result from Landlord’s
grossly negligent acts or willful misconduct) arising from or which seek to
impose liability under or because of (i) Tenant’s or Tenant’s Invitees’ use of
the Premises, (ii) the conduct of Tenant’s business, (iii) any activity, work,
or things done, permitted, or suffered by Tenant or any of Tenant’s Invitees in
or about the Premises or elsewhere, (iv) any breach or default in the
performance of any obligation to be performed by Tenant under this Lease, and/or
(v) any negligence of Tenant or any of Tenant’s Invitees. If any action or
proceeding is brought against Landlord or its shareholders, officers, directors,
agents, property managers, employees, contractors, or the partners comprising
Landlord (if any) by reason of any such Claims, Tenant upon notice from Landlord
shall defend such action or proceeding at Tenant’s sole cost by legal counsel
satisfactory to Landlord. Notwithstanding anything to the contrary in this
Paragraph 36:

 

36.1. Tenant shall not waive any claims against Landlord or be required to
indemnify, defend, or hold Landlord harmless from or against claims, liability,
loss, cost or expense arising out of the breach by Landlord, or Landlord’s
agents, employees, or independent contractors (collectively “Landlord’s
Agents”), of any covenant, representation or warranty under this Lease.

 

36.2. Except to the extent caused by the negligent acts or willful misconduct of
Tenant or Tenant’s employees, officers, or agents, Landlord shall protect,
defend and hold harmless Tenant and Tenant’s employees, officers, and agents
against and from any and all claims, demands, losses, liabilities, damages,
costs and expenses (including, without limitation, attorneys’ and consultants’
fees and the costs and expenses of defense) arising or resulting from (i)
Landlord’s or Landlord’s Agents’ breach of any covenant, representation or
warranty under this Lease and (ii) Landlord’s or Landlord’s Agents’ negligence
or willful misconduct. The mutual indemnity obligations of Landlord and

 

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Tenant under this Lease shall not, however, release the respective insurers of
Landlord and Tenant from such insurers’ obligations under any policies covering
their respective insureds.

 

37. Exemption of Landlord from Liability. Except to the extent caused by
Landlord’s grossly negligent acts or willful misconduct, Tenant assumes all risk
of, Tenant waives all claims against Landlord in respect of, and Landlord shall
not be liable for, any of the matters set forth in the preceding Paragraph or
any of the following: injury to Tenant’s business, loss of income from such
business, or damage or injury to the goods, wares, merchandise, or other
property or the person of Tenant, Tenant’s Invitees, or any other persons in,
upon, or about the Premises, whether such damage, loss, or injury is caused by
or results from criminal acts, fire, steam, electricity, gas, water, rain, the
breakage, leakage, obstruction or other defects of pipes, sewer lines,
sprinklers, wires, appliances, plumbing, air-conditioning or lighting fixtures,
or any other cause, conditions arising upon the Premises, or other sources or
places, and regardless of whether the cause of such damage, loss, or injury or
the means of repairing such damage, loss, or injury is inaccessible to Tenant.
This Lease shall not be affected or impaired by any change to any part of the
Project or any sidewalks, streets, or improvements nearby the Project.

 

38. Hazardous Substances.

 

38.1. Landlord’s Covenants. Landlord hereby notifies Tenant, and Tenant hereby
acknowledges that, prior to the leasing of the Premises pursuant to this Lease,
Tenant has been notified, pursuant to California Health and Safety Code Section
25359.7 (or any successor statue), that Landlord knows, or has reasonable cause
to believe, that certain hazardous substances (as such term is used in such
Section 25359.7), such as common cleaning supplies, office supplies, spillage of
petroleum products from motor vehicles, and other consumer products, may have
come (and may in the future come) to be located on or beneath the Premises
and/or the Project. Notwithstanding the foregoing, Landlord shall not cause any
unlawful accumulations of Hazardous Material (as defined below) to be generated,
brought onto, used, stored, or disposed of in or about the Premises, the
Building, or the Project by Landlord or its agents, employees, or contractors,
except for limited quantities of standard office and janitorial supplies and
petroleum and petroleum-related products commonly used on or at similar office
projects. Furthermore, Landlord shall: (a) use, store, and dispose of all such
permitted Hazardous Material in strict compliance with all applicable statutes,
ordinances, and regulations in effect during the Lease Term that govern and/or
relate to Hazardous Material, public health and safety and protection of the
environment, and (b) comply at all times during the Lease Term with all
environmental laws (as defined in Paragraph 38.2, below. Except as to those
matters which are Tenant’s responsibility pursuant to Paragraph 38.2, below,
Landlord shall be responsible, at its expense (or the expense of others; but not
as an Operating Expense) to cause any unlawful accumulations of Hazardous
Materials to be remediated in accordance with the requirements of all applicable
environmental laws.

 

38.2. Tenant’s Covenants. Tenant represents and warrants to the Landlord that
its use of the Premises, the Building, and the Project will be in full
compliance with all environmental laws. Tenant hereby agrees to indemnify
Landlord against all actions, liabilities, damages, losses, costs, expenses,
attorneys’ fees, and claims (except to the extent they arise as a result of
Landlord’s grossly negligent acts or willful misconduct), arising from or
relating to: (i) any discharges, releases, or threatened releases of any
Hazardous Material into ambient air, water, or land by Tenant or Tenant’s
Invitee’s from, on, under, or above the Premises, (ii) the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, or hazardous or toxic wastes, substances,
or materials by Tenant or Tenant’s Invitees, or otherwise from, on, or under,
the Premises, or (iii) a violation of any environmental law on, under, or above
the Premises (for purposes of this Lease, “environmental laws” shall mean any
Federal, State, or local law, statute, regulation, ordinance, guideline, or
common law principle relating to public health or safety or the use or control
of the environment, including without limitation the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the
Carpenter-Presley-Tanner Hazardous Substance Account Act, the California
Hazardous Waste Control Law, the Federal Clean Air Act, the California Air
Resources Act, the Federal Clean Water Act, the California Porter-Cologne Water
Quality Control Act, the Federal Resource Conservation and Recovery Act, the
California Nejedly-Z’berg-Dills Solid Waste Management and Recovery Act, and
California Health and Safety Code Section 25359.7). Tenant agrees to promptly
reimburse Landlord for all of Landlord’s costs arising from periodic monitoring
of Tenant’s use, handling, or storage of Hazardous Substances at or surrounding
the Premises. Tenant shall not cause or permit any Hazardous Material to be
generated, brought onto, used, stored, or disposed of in or about the Premises,
the Building, or the Project by Tenant or its agents, employees, contractors,
subtenants, or invitees, except for limited quantities of standard office and
janitorial supplies. Tenant shall: (a) use, store, and dispose of all such
permitted Hazardous Material in strict compliance with all applicable statutes,
ordinances, and regulations in effect during the Lease Term that govern and/or
relate to Hazardous Material, public health and safety and protection of the
environment, and (b) comply at all times during the Lease Term with all
environmental laws. If the Premises are contaminated (or, due to the acts or
omissions of Tenant or Tenant’s Invitees, the Project is contaminated) by any
Hazardous Material during the Term, then (1) Tenant shall promptly notify
Landlord in writing of such contamination, and (2) Landlord may elect to either
(A) demand that Tenant perform all remediation required by Landlord (to
Landlord’s satisfaction and at Tenant’s sole cost, necessary to return the
Premises (and/or the Project) to at least as good a condition as the Premises
(or the Project) are in as of the date of this Lease, which Tenant shall
immediately do upon receipt of notice from Landlord, or (B) proceed to cause
such investigation, clean-up, and remediation work which Landlord deems
necessary or desirable to be undertaken, whereupon the entire cost thereof (plus
a supervisory fee equal to ten percent (10%) of such cost) will be payable by
Tenant to Landlord upon demand as Additional Rent. If, after demand by Landlord,
as provided in this Paragraph, Tenant does not promptly commence and diligently
pursue such remediation, then Landlord may, at Landlord’s election, perform or
cause to be performed such remediation and Tenant shall immediately, upon
demand, pay the cost thereof to Landlord, plus a supervisory fee in the amount
of ten percent (10%) of such cost. Tenant’s obligations and liability under this
Paragraph shall survive the termination of Tenant’s tenancy and the Term of this
Lease, except that nothing contained in this Paragraph shall be deemed to impose
liability on Tenant for any problem arising after the Term of this Lease
provided neither Tenant nor Tenant’s Invitees contributed to such problem during
the Term of the Lease.

 

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38.3. Definition of Hazardous Materials. As used in this Lease, the term
“Hazardous Material” shall mean any hazardous or toxic substance, material, or
waste that is or becomes regulated by the United States, the State of
California, or any local government authority having jurisdiction over the
Building. Hazardous Material includes, without limitation: (a) any “hazardous
substance”, as that term is defined in the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (CERCLA) (42 United States Code Sections
9601-9675); (b) “hazardous waste”, as that term is defined in the Resource
Conservation and Recovery Act of 1976 (RCRA) (42 United States Code Sections
6901-6992k); (c) any pollutant, contaminant, or hazardous, dangerous, or toxic
chemical, material, or substance, within the meaning of any other applicable
federal, state, or local law, regulation, ordinance, or requirement (including
consent decrees and administrative orders imposing liability or standards of
conduct concerning any hazardous, dangerous, or toxic waste, substance, or
material, now or hereafter in effect); (d) petroleum products; (e) radioactive
material, including any source, special nuclear, or byproduct material as
defined in 42 United States Code Sections 2011-2297; (f) asbestos in any form or
condition; and (g) polychlorinated biphenyls (PCBs) and substances or compounds
containing PCBs.

 

39. Prohibition Against Asbestos-Containing Materials. Tenant shall not allow or
permit any materials which contain asbestos in any form or concentration
(“Asbestos-Containing Materials”) to be used or stored in the Premises or used
in the construction of any improvements or alterations to the Premises,
including, without limitation, building or construction materials and supplies.
Such prohibition against Asbestos-Containing Materials shall apply regardless of
whether the Asbestos-Containing Materials may be considered safe or approved for
use by a manufacturer, supplier, or governmental authority, or by common use or
practice. Landlord shall have the right, upon 24-hours’ notice, to enter upon
and conduct inspections of the Premises to determine Tenant’s compliance with
this Paragraph. If Tenant allows or permits Asbestos-Containing Materials to be
used or stored in the Premises or used in the construction of any improvements
or alterations to the Premises, (a) Tenant shall, upon notice from Landlord,
immediately remove such Asbestos-Containing Materials at Tenant’s sole cost, (b)
such removal shall comply with all applicable laws, regulations, and
requirements concerning asbestos and the removal and disposal of
Asbestos-Containing Materials, (c) Tenant shall reimburse Landlord for all
expenses incurred in connection with any inspection of the Premises conducted by
Landlord, and (d) unless Tenant completes such removal within 30 days after
notice from Landlord, Landlord may, at its election, do either or both of the
following: (i) declare an Event of Default (without the requirement of any
notice under Paragraph 25.3) and exercise Landlord’s remedies hereunder,
including, without limitation, terminate this Lease upon ten days prior written
notice to Tenant, and/or (ii) remove and dispose of the Asbestos-Containing
Materials and obtain reimbursement from Tenant for the cost of such removal and
disposal, including a supervisory fee payable to Landlord in the amount of ten
percent (10%) of the removal and disposal cost. Tenant shall indemnify Landlord
and Landlord’s directors, officers, employees, and agents against all costs,
liabilities, expenses, penalties, and claims for damages, including, without
limitation, litigation costs and attorneys’ fees, arising from (A) the presence
of Asbestos-Containing Materials upon the Premises, to the extent that such
Asbestos-Containing Materials are used or stored in the Premises or used in the
construction of any Alterations by Tenant or Tenant’s agents, employees,
representatives, or independent contractors, (b) any lawsuit, settlement,
governmental order, or decree relating to the presence, handling, removal, or
disposal of Asbestos-Containing Materials upon or from the Premises, to the
extent that such Asbestos-Containing Materials are used or stored in the
Premises or used in the construction of any improvements or Alterations to the
Premises by Tenant or Tenant’s agents, employees, representatives, or
independent contractors, or (C) Tenant’s failure to perform its obligations to
remove such Asbestos-Containing Materials under this Paragraph. The provisions
of this Paragraph shall not apply to any Asbestos-Containing Materials brought
onto the Premises by Landlord or Landlord’s Invitees.

 

40. Security Measures. Tenant acknowledges that, although the Building will
contain a restricted access entry system (if provided for as part of Landlord’s
Work), (i) the Basic Monthly Rent does not include the cost of any security
measures for any portion of the Project (ii) Landlord shall have no obligation
to provide any such security measures, (iii) Landlord has made no representation
to Tenant regarding the safety or security of the Project, and (iv) Tenant will
be solely responsible for providing any security it deems necessary to protect
itself, its property, and Tenant’s Invitees in, on, or about the Project. If
Landlord provides any security measures at any time, then the cost thereof shall
be included as part of the Operating Expenses, but Landlord will not be
obligated to continue providing such security measures for any period of time,
Landlord may discontinue such security measures without notice and without
liability to Tenant, and Landlord will not be obligated to provide such security
measures with any particular standard of care. Tenant assumes all responsibility
for the security and safety of Tenant, Tenant’s property, and Tenant’s Invitees.
Tenant releases Landlord from all claims (other than due to Landlord’s gross
negligence or intentional misconduct) for damage, loss, or injury to Tenant,
Tenant’s Invitees, and/or to the personal property of Tenant and/or of Tenant’s
Invitees, even if such damage, loss, or injury is caused by or results from the
criminal, reckless, or negligent acts of third parties. Landlord shall have no
duty to warn Tenant of any criminal acts or dangerous conduct that has occurred
in or near the Project, regardless of Landlord’s knowledge of such crimes or
conduct, and Tenant hereby undertakes to remain informed regarding such issues.

 

41. Subordination and Attornment.

 

41.1. Priority of Title. This Lease and Tenant’s rights under this Lease are
subject and subordinate to any mortgage, deed of trust, ground lease, or
underlying lease (and to all renewals, modifications, consolidations,
replacements, or extensions thereof), now or hereafter affecting the Premises.
The provisions of this Paragraph shall be self-operative, and no further
instrument of subordination shall be required. In confirmation of such
subordination, however, Tenant shall promptly execute and deliver any
commercially reasonable instruments that Landlord, any Lender, or the lessor
under any ground or underlying lease, may request to evidence such
subordination, provided such instrument contains customary non-disturbance
language in favor of Tenant and is consistent with the provisions of the next
sentence. If any Lender, or the lessor of any ground or underlying lease
affecting the Premises, shall hereafter succeed to the rights of Landlord under
this Lease, whether by foreclosure, deed in lieu of foreclosure, or otherwise,
then (i) such successor landlord shall not be subject to any offsets or defenses
which Tenant might have against Landlord, (ii) such successor landlord shall not
be bound by any prepayment by Tenant of more than one month’s installment of
Basic Monthly Rent or any other Rent, (iii) such successor landlord shall not be
subject to any

 

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liability or obligation of Landlord except those arising after such succession,
(iv) Tenant shall attorn to and recognize such successor landlord as Tenant’s
landlord under this Lease, (v) Tenant shall promptly execute and deliver any
commercially reasonable instruments that may be necessary to evidence such
attornment, (vi) upon such attornment, this Lease shall continue in effect as a
direct lease (whether separately documented or not) between such successor
landlord and Tenant upon and subject to all of the provisions of this Lease, and
(v) Tenant shall be entitled to quiet enjoyment of the Premises for so long as
Tenant is not in default under the terms of this Lease or any substitute lease
referenced above. Notwithstanding the preceding provisions of this Paragraph, if
any ground lessor or Lender elects to have this Lease prior to the lien of its
ground lease, deed of trust, or mortgage, and gives written notice thereof to
Tenant that this Lease shall be deemed prior to such ground lease, deed of
trust, or mortgage, whether this Lease is dated prior or subsequent to the date
of such ground lease, deed of trust, or mortgage, then this Lease shall be
deemed to be prior to the lien of such ground lease or mortgage and such ground
lease, deed of trust, or mortgage shall be deemed to be subordinate to this
Lease.

 

42. Estoppel Certificate. Within ten days after written request from Landlord,
Tenant shall execute and deliver to Landlord, in recordable form, a certificate
stating (i) that this Lease is unmodified and in full force and effect, or in
full force and effect as modified, and stating all modifications, (ii) the
then-current Basic Monthly Rent, (iii) the dates to which Basic Monthly Rent has
been paid in advance, (iv) the amount of any security deposit, prepaid rent, or
other payment constituting Rent which has been paid, (v) whether or not Tenant
or Landlord is in default under this Lease and whether there currently exist any
defenses or rights of offset under the Lease in favor of Tenant, (vi) that any
Landlord’s Work required by this Lease is complete (or stating any exceptions)
and (vii) such other matters as Landlord may reasonably request. Tenant’s
failure to deliver such certificate within such ten day period shall be
conclusive upon Tenant for the benefit of Landlord, and any successor in
interest to Landlord, any lender or proposed lender, and any purchaser or
proposed purchaser of the Project that, except as may be represented by
Landlord, this Lease is unmodified and in full force and effect, no Rent has
been paid more than 30 days in advance, neither Tenant nor Landlord is in
default under this Lease, no defenses or rights of offset under the Lease exist
in favor of Tenant, and that all Landlord’s Work required by this Lease is
complete. Landlord will similarly, in connection with any lending or Transfer
transaction, upon ten days written request from Tenant, execute an estoppel
certificate in favor of Tenant’s proposed lender or Transferee confirming (i)
that this Lease is unmodified and in full force and effect, or in full force and
effect as modified, and stating all modifications, (ii) the then-current Basic
Monthly Rent, (iii) the dates to which Basic Monthly Rent has been paid in
advance, (iv) the amount of any security deposit, prepaid rent, or other payment
constituting Rent which has been paid, and (v) whether or not to the best of
Landlord’s knowledge Tenant is in default under this Lease.

 

43. Waiver. No delay or omission in the exercise of any right or remedy of
Landlord in the event of any default or Event of Default by Tenant shall impair
such right or remedy or be construed as a waiver. The receipt and acceptance by
Landlord of delinquent Rent shall not constitute a waiver of any default other
than the particular Rent payment accepted. Landlord’s receipt and acceptance
from Tenant, on any date (the “Receipt Date”), of an amount less than the Rent
actually due on such Receipt Date, or to become due at a later date but
applicable to a period prior to such Receipt Date, shall not release Tenant of
its obligation (i) to pay the full amount of such Rent due on such Receipt Date
or (ii) to pay when due the full amount of such Rent to become due at a later
date but applicable to a period prior to such Receipt Date. No act or conduct of
Landlord, including without limitation, the acceptance of the keys to the
Premises, shall constitute an acceptance by Landlord of the surrender of the
Premises by Tenant before the Expiration Date. Only a written notice from
Landlord to Tenant stating Landlord’s election to terminate Tenant’s right to
possession of the Premises shall constitute acceptance of the surrender of the
Premises and accomplish a termination of this Lease. Landlord’s consent to or
approval of any act by Tenant requiring Landlord’s consent or approval shall not
be deemed to waive or render unnecessary Landlord’s consent to or approval of
any other or subsequent act by Tenant. Any waiver by Landlord of any default
must be in writing and shall not be a waiver of any other default concerning the
same or any other provision of this Lease. Tenant hereby waives any rights
granted to Tenant under California Code of Civil Procedure Section 1179,
California Civil Code Section 3275, and/or any successor statute(s). Tenant
represents and warrants that if Tenant breaches this Lease and, as a result,
this Lease is terminated, Tenant will not suffer any undue hardship as a result
of such termination and, during the Term, will make such alternative or other
contingency plans to provide for its vacation of the Premises and relocation in
the event of such termination. Tenant acknowledges that Tenant’s waivers set
forth in this Paragraph are a material part of the consideration for Landlord’s
entering into this Lease and that Landlord would not have entered into this
Lease in the absence of such waivers.

 

44. Brokers. Tenant represents that no real estate broker, agent, finder, or
other person is responsible for bringing about or negotiating this Lease other
than the Tenant’s broker listed in the Principal Lease Provisions, and Tenant
has not dealt with any other real estate broker, agent, finder, or other person,
relative to this Lease in any manner. Tenant hereby indemnifies Landlord against
all liabilities, damages, losses, costs, expenses, attorneys’ fees and claims
arising from any claims that may be made against Landlord by any real estate
broker, agent, finder, or other person (other than as set forth above), alleging
to have acted on behalf of or to have dealt with Tenant. Landlord shall be
responsible, upon satisfaction of the requirements of a separate written listing
agreement between Landlord and Landlord’s broker, for the payment of the
commission due and owing to Landlord’s brokers identified in the Principal Lease
Provisions (or any other brokers engaged by Landlord), pursuant to such separate
written agreement between Landlord and Landlord’s broker. Landlord’s broker will
in turn split such commission with Tenant’s broker as such parties may agree.

 

45. Easements. Landlord may, at its election, from time to time, grant such
easements, rights and dedications, and cause the recordation of parcel maps,
easement and operating agreements, and restrictions affecting the Premises and
the Project, provided that no such acts materially and adversely affect Tenant’s
rights of ingress or egress to the Building and the Premises or Tenants right to
use the Premises. Tenant shall promptly sign any documents or instruments to
accomplish the foregoing upon request by Landlord. Tenant irrevocably appoints
Landlord as Tenant’s special attorney-in-fact to execute and deliver such
documents or instruments on behalf of Tenant if Tenant refuses or fails to do so
within ten days of written request.

 

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46. Limitations on Landlord’s Liability. If Landlord is in default of this
Lease, and as a consequence Tenant recovers a money judgment against Landlord,
such judgment shall be satisfied only out of the proceeds of sale received upon
execution of such judgment and levy against the right, title, and interest of
Landlord in the Project, and out of rent or other income from the Project
receivable by Landlord or out of the consideration received by Landlord from the
sale or other disposition of all or any part of Landlord’s right, title, and
interest in the Project. Neither Landlord nor Landlord’s shareholders, members,
officers, directors, agents, property managers, employees, contractors, or the
partners comprising Landlord (if any) shall be personally liable for any
deficiency.

 

47. Sale or Transfer of Premises. If Landlord sells or transfers the Project
(whether voluntarily or involuntarily), Landlord, on consummation of the sale or
transfer, shall be released from any liability thereafter accruing under this
Lease. If any security deposit or prepaid rent has been paid by Tenant, Landlord
may transfer the security deposit and/or prepaid rent to Landlord’s
successor-in-interest and on such transfer Landlord shall be discharged from any
further liability arising from the security deposit or prepaid rent.

 

48. Quitclaim Deed. Tenant shall execute and deliver to Landlord on the
Expiration Date, promptly on Landlord’s request, a quitclaim deed to the
Premises, in recordable form, designating Landlord as transferee.

 

49. No Merger. The voluntary or other surrender of this Lease by Tenant, or a
mutual cancellation of this Lease, or a termination by Landlord, shall not work
a merger, and shall, at the option of Landlord, terminate any existing subleases
or may, at the option of Landlord, operate as an assignment to Landlord of any
such subleases.

 

50. Confidentiality. Except as essential to the consummation of the transaction
contemplated by this Lease (together with all amendments and addenda hereto), or
in connection with a legitimate business purpose (such as in connection with a
sale or loan transaction), Tenant shall keep and maintain the terms of this
Lease and the transactions contemplated by this Lease in strict confidence.
Nothing provided herein, however, shall prevent Tenant from disclosing to its
legal counsel and/or certified public accountants, prospective purchasers, or
lenders the existence and terms of this Lease or any transaction under this
Lease, or any aspect of this lease, or from complying with any governmental or
court order or similar legal requirement which requires Tenant to disclose this
Lease, the terms of this Lease, the transaction contemplated by this Lease
and/or any aspect of this Lease; provided that Tenant and its agents,
representatives, and professional advisors use reasonable and diligent good
faith efforts to disclose no more than is absolutely required to be disclosed by
such legal requirement.

 

51. Miscellaneous.

 

51.1. This Lease may be executed in counterparts, each of which shall be deemed
an original and all of which together shall constitute one document.

 

51.2. Upon Landlord’s written request, Tenant shall promptly furnish to
Landlord, from time to time, financial statements certified by Tenant to be true
and correct, reflecting Tenant’s then current financial condition. Such
financial statements shall include a current balance sheet and a profit and loss
statement covering the most recent 12-month period available. In addition,
Tenant shall provide Landlord with its annual audited financial statements
prepared by its outside firm of certified public accountants. Landlord shall not
request financial statements from Tenant more than once every six months and
Landlord or Landlord’s Lender shall keep the information contained therein in
confidence. Furthermore, Tenant’s obligations with respect to financial
statements shall be limited to Tenant’s financial statements existing as of the
time of the request. In the event that Tenant becomes a publicly traded company
and a reporting company under the Federal Securities Laws, then, until such time
as Tenant ceases to be publicly traded, Tenant’s obligations with respect to
delivery of financial statements shall cease and Landlord’s obligation as to
confidentiality of Tenant’s financial statements shall cease.

 

51.3. Notwithstanding any other provision in this Lease to the contrary, Tenant
shall refrain from selling or otherwise distributing any alcoholic beverages and
such sales are expressly forbidden under this Lease notwithstanding the fact
that Tenant may hold the appropriate license as issued and/or approved by the
California Alcoholic Beverage Control Agency.

 

51.4. This Lease shall be governed by and construed in accordance with the laws
of the state in which the Premises are located. If the Premises are located
outside of California, then the references in this Lease to California statutes
shall be deemed to include any relevant statute of the jurisdiction in which the
Premises are located that is comparable to such California statutes.

 

51.5. For purposes of venue and jurisdiction, this Lease shall be deemed made
and to be performed in the City of San Diego, California (whether or not the
Premises are located in San Diego, California) and Landlord and Tenant hereby
consent to the jurisdiction of the Courts of the County of San Diego.

 

51.6. Tenant covenants and agrees not to protest or in any way oppose any
application for a license to serve or sell liquor filed by tenants or other
users of space within the Project.

 

51.7. Whenever the context so requires, all words used in the singular shall be
construed to have been used in the plural (and vice versa), each gender shall be
construed to include any other genders, and the word “person” shall be construed
to include a natural person, a corporation, a firm, a partnership, a joint
venture, a limited liability company, a trust, an estate, or any other entity.

 

51.8. Each provision of this Lease shall be valid and enforceable to the fullest
extent permitted by law. If any provision of this Lease or the application of
such provision to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such provision
to persons or

 

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circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected by such invalidity or unenforceability, unless such
provision or such application of such provision is essential to this Lease.

 

51.9. In the event any litigation, arbitration, mediation, or other proceeding
(“Proceeding”) is initiated by any party against any other party to enforce,
interpret or otherwise obtain judicial or quasi-judicial relief in connection
with this Lease the prevailing party in such Proceeding shall be entitled to
recover from the unsuccessful party all costs, expenses, and reasonable
attorney’s fees and expert witness fees relating to or arising out of such
Proceeding (whether or not such Proceeding proceeds to judgment), and any
post-judgment or post-award proceeding including without limitation one to
enforce any judgment or award resulting from any such Proceeding. Any such
judgment or award shall contain a specific provision for the recovery of all
such subsequently incurred costs, expenses, and actual attorney’s fees and
expert witness fees.

 

51.10. This Lease shall become effective and binding upon the parties when it
has been executed by each of Landlord and Tenant; notwithstanding the fact that
the Term of this Lease (i.e. Tenant’s rights of full occupancy hereunder) will
not commence until the Lease Commencement Date.

 

51.11. Subject to any restriction on transferability contained in this Lease,
this Lease shall be binding upon and shall inure to the benefit of the
successors-in-interest and assigns of each party to this Lease. Nothing in this
Paragraph shall create any rights enforceable by any person not a party to this
Lease, except for the rights of the successors-in-interest and assigns of each
party to this Lease, unless such rights are expressly granted in this Lease to
other specifically identified persons.

 

51.12. The headings of the Paragraphs of this Lease have been included only for
convenience, and shall not be deemed in any manner to modify or limit any of the
provisions of this Lease, or be used in any manner in the interpretation of this
Lease.

 

51.13. Time and strict and punctual performance are of the essence with respect
to each provision of this Lease. All references to “days” in this Lease will
refer to calendar days, unless such reference specifically indicates that
“business days” are intended. Business days will mean and refer to all calendar
days other than Saturdays, Sundays, and national or California state holidays.

 

51.14. Each party to this Lease and its legal counsel have had an opportunity to
review and revise this Lease. The rule of construction that any ambiguities are
to be resolved against the drafting party shall not be employed in the
interpretation of this Lease or any Addendum or Exhibit to this Lease, and such
rule of construction is hereby waived by Tenant.

 

51.15. All notices required or permitted to be given by Tenant to Landlord shall
be in writing and shall be personally delivered, sent by certified mail, postage
prepaid, return receipt requested, or sent by a nationally recognized overnight
express courier service that provides written confirmation of delivery to
Landlord at the address set forth in the Principal Lease Provisions of this
Lease. Each such notice or other communication shall be deemed given, delivered
and received upon its actual receipt, except that if it is sent by mail in
accordance with this Paragraph, then it shall be deemed given, delivered and
received three days after the date such notice or other communication is
deposited with the United States Postal Service in accordance with this
Paragraph. Landlord or Tenant must give a notice of a change of its address to
the other, if such address changes. All notices required or permitted to be
given to Tenant by Landlord shall Landlord shall, except as otherwise provided
in this Lease, be in writing, and such notice shall be personally delivered,
sent by certified mail, postage prepaid, return receipt requested, or sent by a
nationally recognized overnight express courier service that provides written
confirmation of delivery, to Tenant at the address set forth in the Principal
Lease Provisions of this Lease. Each such notice or other communication shall be
deemed given, delivered and received upon its actual receipt, except that if it
is sent by mail in accordance with this Paragraph, then it shall be deemed
given, delivered and received three days after the date such notice or other
communication is deposited with the United States Postal Service in accordance
with this Paragraph. Notwithstanding the foregoing, routine correspondence
between Landlord and Tenant shall be deliverable by regular U.S. mail, by fax,
or by other such means of delivery as may become customary.

 

51.16. If more than one person is Tenant, then the obligations of Tenant under
this Lease shall be the joint and several obligations of each of such persons;
provided, however, that any act or signature of one or more of any of such
persons and any notice or refund given to or served on any one of such persons
shall be fully binding on each of such persons.

 

51.17. All provisions, whether covenants or conditions, to be performed or
observed by Tenant shall be deemed to be both covenants and conditions.

 

51.18. All payments to be made by Tenant to Landlord under this Lease shall be
in United States currency.

 

51.19. This Lease, the Exhibits and Addenda, if any, attached hereto (which are
incorporated herein by this reference), constitute all of the covenants,
promises, assurances, representations, warranties, statements, agreements,
conditions and understandings between Landlord and Tenant concerning the
Premises and the Project, and there are no other covenants, promises,
assurances, representations, warranties, statements, conditions, or
understandings, either oral or written, between them. Except as herein otherwise
provided, no subsequent alteration, change, modification, or addition to this
Lease shall be binding upon Landlord or Tenant unless reduced to writing and
signed by each of them. Notwithstanding the foregoing, the Landlord may, from
time to time, establish and amend such Rules, regulations, and signage criteria,
in a written form, for the benefit of the Project and Building, as it deems
appropriate. Violations of such Rules, regulations, and signage criteria by
Tenant or Tenant’s Invitees shall constitute a material default of this Lease.

 

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51.20. This Lease, upon full execution, supersedes and revokes any and all
previous leases governing the Premises, lease negotiations, arrangements,
letters of intents, offers to lease, lease proposals or drafts, brochures,
representations, and information conveyed, whether oral or written, between
parties hereto or their respective representations or any other person purported
to represent Landlord or Tenant. The Tenant acknowledges it has not been induced
to enter into this Lease by any representations not set forth in the Leases, nor
has it relied on any such representations. No such representations should be
used in the interpretation or construction of this Lease and the Landlord shall
have no liability for any consequences arising as a result of any such
representations.

 

LANDLORD:

PACIFIC SORRENTO MESA HOLDINGS, L.P.,

a California limited partnership, and

PACIFIC STONECREST HOLDINGS, L.P.,

a California limited partnership, as tenants in common

By:  

American Assets, Inc., as Agent

    By:   /s/    JOHN. W. CHAMBERLAIN                

John W. Chamberlain

Chief Executive Officer

Date: August 14, 2000

 

 

TENANT:

BAKBONE SOFTWARE, INC.,

a California Corporation

By:   /s/    Illegible         Date:  

July 21, 2000

 

By:   /s/    Illegible         Date:  

July 21, 2000

 

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