EXHIBIT 10.10

BASIC LEASE INFORMATION
INDUSTRIAL NET

LEASE DATE:(same as date in first paragraph of Lease) June 5, 2002 TENANT: SIGMA
DESIGNS, INC., a California corporation TENANT'S NOTICE AND BILLING ADDRESS:

Prior to Term Commencement Date:

355 Fairview Way
Milpitas, CA 95035

From and after Term Commencement Date:

122l California Circle
Milpitas, CA 95035

TENANT CONTACT:   Mr. Thinh Tran, President

PHONE NUMBER: (408) 262-9003

FAX NUMBER: (408) 957-9740

LANDLORD: EOP-INDUSTRIAL PORTFOLIO, L.L.C., a Delaware limited liability company
LANDLORD'S NOTICE ADDRESS:

EOP-INDUSTRIAL PORTFOLIO, L.L.C., a Delaware limited liability company
1740 Technology Drive
Suite 150
San Jose, California 95110
Attn: Property Manager

with a copy to:

Equity Office Properties Trust
Two North Riverside Plazza, Suite 2100
Chicago, Illinois 60606
Attn: Regional Counsel - San Jose Region

LANDLARD'S REMITTANCE ADDRESS:

Payable to the order of Equity Office Properties to the address below:

EOP-Industrial Portfolio, L.L.C.
P.O. Box 45587
Dept. 15030
San Francisco, California 94145-0587

Project Description: That certain industrial project commonly known as
"California Circle II" containing approximately 95,545 square feet which
currently includes: the single-story buildings located at 1221 California
Circle, 355 Fairview Way, and 471-491 Fairview Way; the parcel(s) of land on
which such buildings are located and, at Landlord's discretion, all other
improvements thereon; and, at Landlord's option, the parking areas serving the
Project. all of which are located in Milpitas, California 95035. If the number
of buildings included in the Project increases or decreases, then the definition
of the Project shall be revised accordingly to reflect such change. Building
Description: That single story building located at 1221 California Circle,
Milpitas, California 95035 Premises:

The entire Building consisting of approximately 40.061 rentable square feet
located at 1221 California Circle, Milpitas, California, 95035

Permitted Use:

Chip design, office use, research and development and light industrial use,
warehousing and other related uses consistent with the character and quality of
the building, but in each instance only to the extent permitted pursuant to
applicable Regulations.

Parking Density:

3.3 spaces per 1,000 rentable square feet of the Premises

Scheduled Term Commencement Date:

October 1, 2002

Scheduled Length of Term:

60 months

Scheduled Term Expiration Date:

September 30, 2007

Rent:

Base Rent:

Estimated First Year Operating Expenses:

 

See Paragraph 39.A. of the Lease

$12,819.52 per month

Security Deposit:

$ 243,570.88, subject to the provisions of Paragraph 19 of the Lease.

Tenant's Proportionate Share:

Of Building:

Of Project:

 

100%

41.9289%

Broker:

Linda Costello

Allowance:

$400,000.00, subject to the provisions of the Lease Improvement Agreement
attached hereto as Exhibit C

Options to Renew:

One (I) option to renew the Term for five (5) years in accordance with the
provisions of Paragraph 39.C of the Lease.

The foregoing Basic Lease Information is incorporated into and made a part of
this Lease. Each reference in this Lease to any of the Basic Lease Information
shall mean the respective information above and shall be construed to
incorporate all of the terms provided under the particular Lease paragraph
pertaining to such information. In the event of any conflict between the Basic
Lease Information and the Lease, the latter shall control.

 

TABLE OF CONTENTS

     Page            Basic Lease Information 1      Table of Contents 2
1.  Premises 1 2.  Possession and Lease Commencement 1 3.  Term 1 4.  Use 1
5.  Rule and Regulations 1 6.  Rent 2 7.  Operating Expenses 2 8.  Insurance and
Indemnification 3 9.  Waiver of Subrogation 4 10. Landlord's Repairs and
Maintenance 4 11. Tenant's Repairs and Maintenance 5 12. Alterations 5 13. Signs
5 14. Inspection/Posting Notices 6 15. Services and Utilities 6
16. Subordination 6 17. Financial Statements 7 18. Estoppel Certificate 7
19. Security Deposit 7 20. Limitation of Tenant's Remedies 7 21. Assignment and
Subletting 7 22. Authority of Tenant 8 23. Condemnation 8 24. Casualty Damage 8
25. Holding Over 9 26. Default 9 27. Liens 10 28. Intentionally Deleted 11
21. Transfers by Landlord 11 30. Right of Landlord to Perform Tenant's Covenants
11 31. Waiver 11 32. Notices 11 33. Attorney's Fees 11 34. Successors and
Assigns 11 35. Force Majeure 11 36. Surrender of Premises 12 37. Hazardous
Materials 12 38. Miscellaneous 12 39. Additional Provisions 13 40. Jury Trial
Waiver 14       Signatures 14

            Exhibits:         Exhibit A Rules and Regulations       Exhibit B
      Outline and Location of Premises       Exhibit C Lease Improvement
Agreement       Exhibit D Hazardous Materials Questionnaire       Exhibit E
Depiction of Kitchen

LEASE

 

THIS LEASE is made as of the _______day of May 2002, by and between
EOP-INDUSTRIAL PORTFOLIO, L.L.C., a Delaware limited liability company
(hereinafter called "Landlord"), and SIGMA DESIGNS, INC., a California
corporation (hereinafter called "Tenant").

 

1. PREMISES

Landlord leases to Tenant and Tenant leases from Landlord, upon the terms and
conditions hereinafter set forth, those premises (the "Premises") outlined on
Exhibit B and described in the Basic Lease Information. The Premises shall he
all or part of a building (the "Building") and of a project (the "Project"),
which may consist of more than one building and additional facilities, as
described in the Basic Lease Information. Landlord and Tenant acknowledge that
physical changes may occur from time to time in the Premises, Building or
Project, and that the number of buildings and additional facilities which
constitute the Project may change from time to time, which may result in an
adjustment in Tenant's Proportionate Share, as defined in the Basic Lease
Information, as provided in Paragraph 7.A.

 

2. POSSESSION AND LEASE COMMENCEMENT

 The term commencement date ("Term Commencement Date") shall he the earlier of
the date on which: (1) Tenant commences business operations in some or all of
the Premises: or (2) the date which is 75 days following Landlord's delivery of
possession of the Premises to Tenant. If for any reason Landlord cannot deliver
possession of the Premises to Tenant on the scheduled Term Commencement Date, or
if Landlord delivers possession of the Premises prior to the scheduled Term
Commencement Date, Landlord shall not be subject to any liability therefor, nor
shall Landlord be in default hereunder nor shall such failure affect the
validity of this Lease, and Tenant agrees to accept possession of the Premises
at such time as Landlord delivers physical possession of the Premises to Tenant,
and the Term Commencement Date shall be determined in accordance with the first
sentence of this Paragraph 2 above. Tenant shall not be liable for any Rent for
any period prior to the Term Commencement Date (but without affecting any
obligations of Tenant under any improvement agreement appended to this lease).
Upon Landlord's request, Tenant shall promptly execute and return to Landlord a
"Start-Up letter" in which Tenant shall agree, among other things, to acceptance
of the Premises and to the determination of the term Commencement Date, in
accordance with the terms of this lease, but Tenant's failure or refusal to do
so shall not negate Tenant's acceptance of the Premises or affect determination
of the Term Commencement Date.

 

3. TERM

 The term of this Lease (the "Term") shall commence on the Term Commencement
Date and continue in full force and effect for the number of months specified as
the Length of Term in the Basic Lease Information or until this Lease is
terminated as otherwise provided herein, If the Term Commencement Date is a date
other than the first day of the calendar month, the Term shall be the number of
months of the Length of Term in addition to the remainder of the calendar month
following the Term Commencement Date.

 

4. USE

A. General.

Tenant shall use the Premises for the permitted use specified in the Basic Lease
Information "Permitted Use") and for no other use or purpose. Tenant shall
control Tenant's employees, agents, customers, visitors, invitees, licensees,
contractors, assignees arid subtenants (collectively, "Tenant's Parties") in
such a manner that Tenant and Tenant's Parties cumulatively do not exceed the
parking density specified in the Basic Lease Information (the "Parking Density")
at any time. So long as Tenant is, occupying the Premises, Tenant and Tenant's
Parties shall have the nonexclusive right to use, in common with other parties
occupying the Building or Project, the parking areas, driveways and other common
areas of the Building and Project, subject to the terms of this Lease and such
rules and regulations as Landlord may from time to time prescribe. Landlord
reserves the right, without notice or liability to Tenant, and without the same
constituting an actual or constructive eviction, to alter or modify the common
areas from time to time, including the location and configuration thereof, and
the amenities and facilities which Landlord may determine to provide from time
to time, so long as such alterations or modifications do not unreasonably
interfere with Tenant's access to the Premises or the Permitted Use granted to
Tenant hereunder and do not materially negatively change the quality of
appearance of the common areas.

B. Limitations.

Tenant shall not permit an" odors, smoke, dust, gas, substances, noise or
vibrations to emanate from the Premises or from any portion of the common areas
as a result of Tenant's or any Tenant's Party's use thereof, nor take any action
which would constitute a nuisance or would disturb, obstruct or endanger any
other tenants or occupants of the Building or Project or elsewhere, or interfere
with their use of their respective premises or common areas. Storage outside the
Premises of materials, vehicles or any other items is prohibited. Tenant shall
not use or allow the Premises to he used for any immoral, improper or unlawful
purpose, nor shall Tenant cause or maintain or permit any nuisance in, on or
about the Premises. Tenant shall not commit or suffer the commission of any
waste in, on or about the Premises. Tenant shall not allow any sale by auction
upon the Premises, or place any loads upon the floors, walls or ceilings which
could endanger the structure, or place any harmful substances in the drainage of
the Building or Project. No waste, materials or refuse shall be dumped upon or
permitted to remain outside the Premises except in trash containers placed
inside exterior enclosures designated for that purpose by Landlord, Landlord
shall not he responsible to Tenant for the non-compliance by any other tenant's
or occupant's of the Building or Project with any of the above-referenced rules
or any other terms or provisions of such tenant's or occupant's lease or other
contract.

C. Compliance with Regulations.

By entering the Premises, Tenant accepts the Premises in the condition existing
as of the date of such entry. Tenant shall at its sole cost and expense strictly
comply with all existing or future applicable municipal, state and federal and
other governmental statutes, rules, requirements, regulations, laws and
ordinances, including zoning ordinances and regulations, and covenants,
easements and restrictions of record governing and relating to the use,
occupancy or possession of the Premises, to Tenant's use of the common areas, or
to the use, storage, generation or disposal of Hazardous Materials (hereinafter
defined) (subject to the provisions of Paragraph 37 hereof) (collectively
"Regulations"). Tenant shall at its sole cost and expense obtain any and all
licenses and permits necessary for Tenant's use of the Premises. Tenant shall at
its sole cost and expense promptly comply with the requirements of any board of
fire underwriters or other similar body now or hereafter constituted. Tenant
shall not do or permit anything to be done in, on, under or about the Project or
bring or keep anything which will in any way increase the rate of any insurance
upon the Premises, Building or Project or upon any contents therein or cause a
cancellation of said insurance or otherwise affect said insurance in any manner.
Subject to the provisions of Paragraph 37 hereof with respect to Hazardous
Materials, Tenant shall indemnify, defend (by counsel reasonably acceptable to
Landlord), protect and hold Landlord harmless from and against any loss, cost,
expense, damage, attorneys' fees or liability arising out of the failure of
Tenant to comply with any Regulation. Tenant's obligations pursuant to the
foregoing indemnity shall survive the expiration or earlier termination of this
Lease.

 

5. RULES AND REGULATIONS

Tenant shall faithfully observe and comply with the building rules and
regulations attached hereto as Exhibit A and any other rules and regulations and
any modifications or additions thereto which Landlord may from time to time
prescribe in writing for the purpose of maintaining the proper care,
cleanliness, safety, traffic flow and general order of the Premises or the
Building or Project. Tenant shall cause Tenant's Parties to comply with such
rules and regulations. Landlord shall not be responsible to Tenant for the
non-compliance by any other tenant or occupant of the Building or Project with
any of such rules and regulations, any other tenant's or occupant's lease or any
Regulations. Landlord shall use commercially reasonable efforts to enforce the
building rules and regulations attached hereto as Exhibit A to the extent
necessary to prevent material interference with Tenant's use of the Premises.

 

6. RENT

A.

Base Rent. Tenant shall pay to Landlord and Landlord shall receive, without
notice or demand throughout the Term, Base Rent as specified in the Basic Lease
Information, payable in monthly installments in advance on or before the first
day of each calendar month, in lawful money of the United States, without
deduction or offset whatsoever, at the Remittance Address specified in the Basic
Lease Information or to such other place as Landlord may from time to time
designate in writing. Base Rent for the first full month of the Term shall be
paid by Tenant upon Tenant's execution of this Lease. If the obligation for
payment of Base Rent commences on a day other than the first day of a month,
then Base Rent shall be prorated and the prorated installment shall be paid on
the first day of the calendar month next succeeding the Term Commencement Date.
The Base Rent payable by Tenant hereunder is subject to adjustment as provided
elsewhere in this Lease, as applicable. As used herein, the term "Base Rent"
shall mean the Base Rent specified in the Basic Lease Information as it may be
so adjusted from time to time.

B. Additional Rent.

All monies other than Base Rent required to be paid by Tenant hereunder,
including, but not limited to, Tenant's Proportionate Share of Operating
Expenses, as specified in Paragraph 7 of this Lease, charges to be paid by
Tenant under Paragraph 15, the interest and late charge described in Paragraphs
26.D. and E., and any monies spent by Landlord pursuant to Paragraph 30, shall
be considered additional rent ("Additional Rent"). "Rent" shall mean Base Rent
and Additional Rent.

 

7. OPERATING EXPENSES

A.

Operating Expenses. In addition to the Base Rent required to be paid hereunder,
Tenant shall pay as Additional Rent, Tenant's Proportionate Share of the
Building and/or Project (as applicable), as defined in the Basic Lease
Information, of Operating Expenses (defined below) in the manner set forth
below. Tenant shall pay the applicable Tenant's Proportionate Share of each such
Operating Expenses. Landlord and Tenant acknowledge that if the number of
buildings which constitute the Project increases or decreases, or if physical
changes are made to the Premises, Building or Project or the configuration of
any thereof, Landlord may at its discretion reasonably adjust Tenant's
Proportionate Share of the Building or Project to reflect the change. Landlord's
determination of Tenant's Proportionate Share of the Building and of the Project
shall be conclusive so long as it is reasonably and consistently applied.
"Operating Expenses" shall mean all expenses and costs of every kind and nature
which Landlord shall pay or become obligated to pay, because of or in connection
with the ownership, management, maintenance, repair, preservation, replacement
and operation of the Building or Project and its supporting facilities and such
additional facilities now and in subsequent years as may be determined by
Landlord to be necessary or desirable to the Building and/or Project (as
determined in a reasonable manner) other than those expenses and costs which are
specifically attributable to Tenant or which are expressly made the financial
responsibility of Landlord or specific tenants of the Building or Project
pursuant to this Lease. Operating Expenses shall include, but are not limited
to, the following:

(1) Taxes.

All real property taxes and assessments, possessory interest taxes, sales taxes,
personal property taxes, business or license taxes or fees, gross receipts
taxes, service payments in lieu of such taxes or fees, annual or periodic
license or use fees, excises, transit charges, and other impositions, general
and special, ordinary and extraordinary, unforeseen as well as foreseen, of any
kind (including fees "in-lieu" of any such tax or assessment) which are now or
hereafter assessed, levied, charged, confirmed, or imposed by any public
authority upon the Building or Project, its operations or the Rent (or any
portion or component thereof), or any tax, assessment or fee imposed in
substitution, partially or totally, of any of the above. Operating Expenses
shall also include any taxes, assessments, reassessments, or other fees or
impositions with respect to the development, leasing, management, maintenance,
alteration, repair, use or occupancy by Tenant of the Premises, Building or
Project or any portion thereof, including, without limitation, by or for Tenant,
and all increases therein or reassessments thereof whether the increases or
reassessments result from increased rate and/or valuation (whether upon a
transfer of the Building or Project or any portion thereof or any interest
therein or for any other reason). Operating Expenses shall not include
inheritance or estate taxes imposed upon or assessed against the interest of any
person in the Project, or taxes computed upon the basis of the net income of any
owners of any interest in the Project. If it shall not be lawful for Tenant to
reimburse Landlord for all or any part of such taxes, the monthly rental payable
to Landlord under this Lease shall be revised to net Landlord the same net
rental after imposition of any such taxes by Landlord as would have been payable
to Landlord prior to the payment of any such taxes.

(2) Insurance.

All insurance premiums and costs, including, but not limited to, any deductible
amounts, premiums and other costs of insurance incurred by Landlord, including
for the insurance coverage set forth in Paragraph 8.A. herein.

(3) Common Area Maintenance.

(a) Repairs, replacements, and general maintenance of and for the Building and
Project and public and common areas and facilities of and comprising the
Building and Project, including, but not limited to, elevators, mechanical
rooms, alarm systems, pest extermination, landscaped areas, parking and service
areas, driveways, sidewalks, truck staging areas, rail spur areas, fire
sprinkler systems, sanitary and storm sewer lines, utility services, electrical,
mechanical or other systems, telephone equipment and wiring servicing, plumbing,
lighting, and any other items or areas which affect the operation or appearance
of the Building or Project, including replacement of any heating and air
conditioning unit within or serving the Premises (if made Landlord's
responsibility pursuant to, and subject to, the provisions of Paragraph 11 of
this Lease), and repairs and general maintenance of the roof and roof membrane,
which determination shall be at Landlord's discretion, except for: those items
to the extent paid for by the proceeds of insurance; and those items
attributable solely or jointly to specific tenants of the Building or Project.
The cost of replacement of the roof of any building in the Project shall be
attributed to the tenant(s) of the particular building. Any of the foregoing
which constitute capital improvements shall be amortized pursuant to
subparagraph (b) below.

(b)

Repairs, replacements, and general maintenance shall include the cost of any
improvements made to or assets acquired for the Project or Building that in
Landlord's discretion may reduce any other Operating Expenses, including present
or future repair work, provided that Landlord, based on expert third party
advice, reasonably believes that such improvements will reduce operating expense
costs or improve the operating efficiency of the Building, or are required to
comply with any Regulations that are enacted, or first interpreted to apply to
the Property, after the date of this Lease, such costs or allocable portions
thereof to be amortized in accordance with generally accepted accounting
principles, consistently applied.

(c)

Payment under or for any easement, license, permit, operating agreement,
declaration, restrictive covenant or instrument relating to the Building or
Project.

(d)

All expenses and rental related to services and costs of supplies, materials and
equipment used in operating, managing and maintaining the Premises, Building and
Project, the equipment therein and the adjacent sidewalks, driveways, parking
and service areas, including, without limitation, expenses related to service
agreements regarding security, fire and other alarm systems, janitorial services
to the extent not addressed in Paragraph 11 hereof, window cleaning, elevator
maintenance, Building exterior maintenance, landscaping and expenses related to
the administration, management and operation of the Project, including without
limitation salaries, wages and benefits for personnel at or below the level of
general manager and management office rent, if any; provided that if any
employee performs services in connection with the Project and other projects,
costs associated with such employee may be proportionately included in Operating
Expenses based on the percentage of time such employee spends in connection with
the operation, maintenance and management of the Project.

(e)

The cost of supplying any services and utilities which benefit all or a portion
of the Premises, Building or Project to the extent not addressed in Paragraph 15
hereof.

(f)

Legal expenses and the cost of audits by certified public accountants; provided,
however, that legal expenses chargeable as Operating Expenses shall not include
the cost of negotiating leases, collecting rents, evicting tenants nor shall it
include costs incurred in legal proceedings with or against any tenant or to
enforce the provisions of any lease.

(g)

A management and accounting cost recovery fee equal to two percent (2%) of the
applicable annual Base Rent payable by Tenant hereunder.

If the rentable area of the Building and/or Project is not fully occupied during
any fiscal year of the Term as determined by Landlord, an adjustment shall be
made in Landlord's reasonable discretion in computing the Operating Expenses for
such year so that Tenant pays an equitable portion of all variable items (e.g.,
utilities, janitorial services and other component expenses that are affected by
variations in occupancy levels) of Operating Expenses, as reasonably determined
by Landlord; provided, however, that in no event shall Landlord be entitled to
collect in excess of one hundred percent (100%) of the total Operating Expenses
from all of the tenants in the Building or Project, as the case may be.

Operating Expenses shall not include: the cost of providing tenant improvements
or other specific costs incurred for the account of, separately billed to and
paid by specific tenants of the Building or Project; the initial construction
cost of the Building; debt service on any mortgage or deed of trust recorded
with respect to the Project other than pursuant to Paragraph 7.A.(3)(b) above;
the cost of capital improvements (except as set forth above); depreciation;
interest (except as provided above for the amortization of capital
improvements); amortization (except as set forth above); the cost of repairs or
other work to the extent Landlord is reimbursed by insurance or condemnation
proceeds; costs in connection with leasing space in the Building or Project,
including brokerage commissions, brochures and marketing supplies, legal fees in
negotiating and preparing lease documents, and construction, improvement and
decorating costs in preparing space for initial occupancy by a specific tenant;
lease concessions, including rental abatements and construction allowances,
granted to specific tenants; costs incurred in connection with the sale,
financing or refinancing of the Building or Project, including brokerage
commissions, attorneys' and accountants' fees, closing costs, title insurance
premiums, transfer taxes and interest charges; fines, interest and penalties
incurred due to the late payment of Operating Expenses or any other sums
required to be paid by Landlord; organizational expenses associated with the
creation and operation of the entity which constitutes Landlord; any penalties
or damages that Landlord pays to Tenant under this Lease or to other tenants in
the Building or Project under their respective leases; or any costs in
connection with the Roof Work to be performed by Landlord pursuant to Paragraph
10 hereof or the HVAC Work to be performed by Landlord pursuant to Paragraph 11
hereof.

The following items are also excluded from Expenses:

(a) Ground lease rental.

(b) Attorney's fees and other expenses incurred in connection with negotiations
or disputes with prospective tenants or tenants or other occupants of the
Building or Project.

(c) The cost or expense of any services or benefits provided generally to other
tenants in the Building or Project and not provided or available to Tenant.

(d) Any expenses for which Landlord has received actual reimbursement (other
than through Operating Expenses).

(e) Expenses for the replacement of any item covered under warranty, unless
Landlord has not received payment under such warranty and it would not be
fiscally prudent to pursue legal action to collect on such warranty.

(f) Fines or penalties incurred as a result of violation by Landlord of any
applicable Laws.

(g) Any cost or expense related to removal, cleaning, abatement or remediation
of "hazardous materials" in or about the Building or Project, including, without
limitation, hazardous substances in the ground water or soil, except to the
extent such removal, cleaning, abatement or remediation is related to the
general repair and maintenance of the Building or Project.

(h) Landlord's costs of electricity and other services sold or provided to
tenants in the Building or Project and for which Landlord is entitled to be
reimbursed by such tenants as a separate additional charge or rental over and
above the base rental or additional base rental payable under the lease with
such tenant.

(i) Costs of litigation, negotiation or arbitration (including attorneys' fees
and costs of settlement, judgments and payments in lieu thereof) arising from
claims, disputes or potential disputes pertaining to Landlord or the Building or
Project, other than as otherwise permitted pursuant to this Paragraph 7.

Notwithstanding anything herein to the contrary, in any instance wherein
Landlord, in Landlord's reasonable discretion, deems Tenant to be responsible
for any amounts greater than Tenant's Proportionate Share, Landlord shall have
the right to allocate costs in any manner Landlord deems reasonably appropriate.
In no event shall Landlord be entitled to a reimbursement from tenants for
Operating Expenses in excess of 100% of the costs actually paid or incurred by
Landlord in any applicable fiscal year.

The above enumeration of services and facilities shall not be deemed to impose
an obligation on Landlord to make available or provide such services or
facilities except to the extent if any that Landlord has specifically agreed
elsewhere in this Lease to make the same available or provide the same. Without
limiting the generality of the foregoing, Tenant acknowledges and agrees that it
shall be responsible for providing adequate security for its use of the
Premises, the Building and the Project and that Landlord shall have no
obligation or liability with respect thereto, except to the extent if any that
Landlord has specifically agreed elsewhere in this Lease to provide the same.

B.

Payment of Estimated Operating Expenses. "Estimated Operating Expenses" for any
particular year shall mean Landlord's estimate of the Operating Expenses for
such fiscal year made with respect to such fiscal year as hereinafter provided.
Landlord shall have the right from time to time to revise its fiscal year and
interim accounting periods so long as the periods as so revised are reconciled
with prior periods in a reasonable manner. During the last month of each fiscal
year during the Term, or as soon thereafter as practicable, Landlord shall give
Tenant written notice of the Estimated Operating Expenses for the ensuing fiscal
year. Tenant shall pay Tenant's Proportionate Share of the Estimated Operating
Expenses with installments of Base Rent for the fiscal year to which the
Estimated Operating Expenses applies in monthly installments on the first day of
each calendar month during such year, in advance. Such payment shall be
construed to be Additional Rent for all purposes hereunder. If at any time
during the course of the fiscal year, Landlord determines that Operating
Expenses are projected to vary from the then Estimated Operating Expenses by
more than five percent (5%), Landlord may, by written notice to Tenant, revise
the Estimated Operating Expenses for the balance of such fiscal year, and
Tenant's monthly installments for the remainder of such year shall be adjusted
so that by the end of such fiscal year Tenant has paid to Landlord Tenant's
Proportionate Share of the revised Estimated Operating Expenses for such year,
such revised installment amounts to be Additional Rent for all purposes
hereunder.

C.

Computation of Operating Expense Adjustment. "Operating Expense Adjustment"
shall mean the difference between Estimated Operating Expenses and actual
Operating Expenses for any fiscal year determined as hereinafter provided.
Within one hundred twenty (120) days after the end of each fiscal year, or as
soon thereafter as practicable, Landlord shall deliver to Tenant a statement of
actual Operating Expenses for the fiscal year just ended, accompanied by a
computation of Operating Expense Adjustment. Landlord shall use reasonable
efforts to furnish the statement of actual Operating Expenses on or before June
1 of the fiscal year immediately following the fiscal year to which the
statement applies. If such statement shows that Tenant's payment based upon
Estimated Operating Expenses is less than Tenant's Proportionate Share of
Operating Expenses, then Tenant shall pay to Landlord the difference within
twenty (20) days after receipt of such statement, such payment to constitute
Additional Rent for all purposes hereunder. If such statement shows that
Tenant's payments of Estimated Operating Expenses exceed Tenant's Proportionate
Share of Operating Expenses, then (provided that Tenant is not in default under
this Lease) Landlord shall pay to Tenant the difference within twenty (20) days
after delivery of such statement to Tenant. If this Lease has been terminated or
the Term hereof has expired prior to the date of such statement, then the
Operating Expense Adjustment shall be paid by the appropriate party within
twenty (20) days after the date of delivery of the statement. Should this Lease
commence or terminate at any time other than the first day of the fiscal year,
Tenant's Proportionate Share of the Operating Expense Adjustment shall be
prorated based on a month of 30 days and the number of calendar months during
such fiscal year that this Lease is in effect. Notwithstanding anything to the
contrary contained in Paragraph 7.A or 7.B, Landlord's failure to provide any
notices or statements within the time periods specified in those paragraphs
shall in no way excuse Tenant from its obligation to pay Tenant's Proportionate
Share of Operating Expenses.

D.

Net Lease. This shall be a triple net Lease and Base Rent shall be paid to
Landlord absolutely net of all costs and expenses, except as specifically
provided to the contrary in this Lease. The provisions for payment of Operating
Expenses and the Operating Expense Adjustment are intended to pass on to Tenant
and reimburse Landlord for all costs and expenses of the nature described in
Paragraph 7.A. incurred in connection with the ownership, management,
maintenance, repair, preservation, replacement and operation of the Building
and/or Project and its supporting facilities and such additional facilities now
and in subsequent years as may be determined by Landlord to be necessary or
desirable to the Building and/or Project.

E.

Tenant Audit. If Tenant shall dispute the amount set forth in any statement
provided by Landlord under Paragraph 7.B. or 7.C. above, Tenant shall have the
right, not later than thirty (30) days following receipt of such statement and
upon the condition that Tenant shall first deposit with Landlord the full amount
in dispute, to cause Landlord's books and records with respect to Operating
Expenses for such fiscal year to be audited by certified public accountants
selected by Tenant and subject to Landlord's reasonable right of approval. The
Operating Expense Adjustment shall be appropriately adjusted on the basis of
such audit. If such audit discloses a liability for a refund in excess of five
percent (5%) of Tenant's Proportionate Share of the Operating Expenses
previously reported, the cost of such audit shall be borne by Landlord;
otherwise the cost of such audit shall be paid by Tenant. If Tenant shall not
request an audit in accordance with the provisions of this Paragraph 7.E. within
thirty (30) days after receipt of Landlord's statement provided pursuant to
Paragraph 7.B. or 7.C., such statement shall be final and binding for all
purposes hereof. Tenant acknowledges and agrees that any information revealed in
the above described audit may contain proprietary and sensitive information and
that significant damage could result to Landlord if such information were
disclosed to any party other than Tenant's auditors. Tenant shall not in any
manner disclose, provide or make available any information revealed by the audit
to any person or entity without Landlord's prior written consent, which consent
may be withheld by Landlord in its sole and absolute discretion. The information
disclosed by the audit will be used by Tenant solely for the purpose of
evaluating Landlord's books and records in connection with this Paragraph 7.E.

 

8. INSURANCE AND INDEMNIFICATION

A.

Landlord's Insurance. All insurance maintained by Landlord shall be for the sole
benefit of Landlord and under Landlord's sole control.

(1) Property Insurance.

Landlord agrees to maintain property insurance insuring the Building against
damage or destruction due to risk including fire, vandalism, and malicious
mischief in an amount not less than the replacement cost thereof, in the form
and with deductibles and endorsements as selected by Landlord. At its election,
Landlord may instead (but shall have no obligation to) obtain "All Risk"
coverage, and may also obtain earthquake (if available at commercially
reasonable premiums as evidenced by the premiums being obtained on new policies
by landlords of comparable buildings in the vicinity of the Building),
pollution, and/or flood insurance in amounts selected by Landlord.

(2) Optional Insurance.

Landlord, at Landlord's option, may also (but shall have no obligation to) carry
(i) insurance against loss of rent, in an amount equal to the amount of Base
Rent and Additional Rent that Landlord could be required to abate to all
Building tenants in the event of condemnation or casualty damage for a period of
twelve (12) months; and (ii) liability insurance and such other insurance as
Landlord may deem prudent or advisable, including, without limitation, liability
insurance in such amounts and on such terms as Landlord shall determine.
Landlord shall not be obligated to insure, and shall have no responsibility
whatsoever for any damage to, any furniture, machinery, goods, inventory or
supplies, or other personal property or fixtures which Tenant may keep or
maintain in the Premises, or any leasehold improvements, additions or
alterations within the Premises.

B.

Tenant's Insurance. Tenant shall procure at Tenant's sole cost and expense and
keep in effect from the date of this Lease and at all times until the end of the
Term the following:

(1) Property Insurance.

Insurance on all personal property and fixtures of Tenant and all improvements,
additions or alterations made by or for Tenant to the Premises on an "All Risk"
basis, insuring such property for the full replacement value of such property.

(2) Liability Insurance.

Commercial General Liability insurance covering bodily injury and property
damage liability occurring in or about the Premises or arising out of the use
and occupancy of the Premises and the Project, and any part of either, and any
areas adjacent thereto, and the business operated by Tenant or by any other
occupant of the Premises. Such insurance shall include contractual liability
coverage insuring all of Tenant's indemnity obligations under this Lease. Such
coverage shall have a minimum combined single limit of liability of at least Two
Million Dollars ($2,000,000.00), and a minimum general aggregate limit of Three
Million Dollars ($3,000,000.00), with an "Additional Insured - Managers or
Lessors of Premises Endorsement" and the "Amendment of the Pollution Exclusion
Endorsement." All such policies shall be written to apply to all bodily injury
(including death), property damage or loss, personal and advertising injury and
other covered loss, however occasioned, occurring during the policy term, shall
be endorsed to add Landlord and any party holding an interest to which this
Lease may be subordinated as an additional insured, and shall provide that such
coverage shall be "primary" and non-contributing with any insurance maintained
by Landlord, which shall be excess insurance only. Such coverage shall also
contain endorsements including employees as additional insureds if not covered
by Tenant's Commercial General Liability Insurance. All such insurance shall
provide for the severability of interests of insureds; and shall be written on
an "occurrence" basis, which shall afford coverage for all claims based on acts,
omissions, injury and damage, which occurred or arose (or the onset of which
occurred or arose) in whole or in part during the policy period.

(3) Workers' Compensation and Employers' Liability Insurance.

Workers' Compensation Insurance as required by any Regulation, and Employers'
Liability Insurance in amounts not less than One Million Dollars ($1,000,000)
each accident for bodily injury by accident; One Million Dollars ($1,000,000)
policy limit for bodily injury by disease; and One Million Dollars ($1,000,000)
each employee for bodily injury by disease.

(4) Commercial Auto Liability Insurance.

Commercial auto liability insurance with a combined limit of not less than One
Million Dollars ($1,000,000) for bodily injury and property damage for each
accident. Such insurance shall cover liability relating to any auto (including
owned, hired and non-owned autos).

(5) Alterations Requirements.

In the event Tenant shall desire to perform any Alterations, Tenant shall
deliver to Landlord, prior to commencing such Alterations (i) evidence
satisfactory to Landlord that Tenant carries "Builder's Risk" insurance covering
construction of such Alterations in an amount and form approved by Landlord,
(ii) such other insurance as Landlord shall nondiscriminatorily require, and
(iii) a lien and completion bond or other security in form and amount
satisfactory to Landlord.

(6) General Insurance Requirements.

All coverages described in this Paragraph 8.B shall be endorsed to (i) provide
Landlord with thirty (30) days' notice of cancellation or change in terms; and
(ii) waive all rights of subrogation by the insurance carrier against Landlord.
If at any time during the Term the amount or coverage of insurance which Tenant
is required to carry under this Paragraph 8.Bis, in Landlord's reasonable
judgment, materially less than the amount or type of insurance coverage
typically carried by owners or tenants of properties located in the general area
in which the Premises are located which are similar to and operated for similar
purposes as the Premises or if Tenant's use of the Premises should change with
or without Landlord's consent, Landlord shall have the right to require Tenant
to increase the amount or change the types of insurance coverage required under
this Paragraph 8.B. All insurance policies required to be carried by Tenant
under this Lease shall be written by companies rated A X or better in "Best's
Insurance Guide" and authorized to do business in the State of California. In
any event deductible amounts under all insurance policies required to be carried
by Tenant under this Lease shall not exceed Five Thousand Dollars ($5,000.00)
per occurrence. Tenant shall deliver to Landlord on or before the Term
Commencement Date, and thereafter at least thirty (30) days before the
expiration dates of the expired policies, certified copies of Tenant's insurance
policies, or a certificate evidencing the same issued by the insurer thereunder;
and, if Tenant shall fail to procure such insurance, or to deliver such policies
or certificates, Landlord may, at Landlord's option and in addition to
Landlord's other remedies in the event of a default by Tenant hereunder, procure
the same for the account of Tenant, and the cost thereof shall be paid to
Landlord as Additional Rent.

C.

Indemnification. Tenant shall indemnify, defend by counsel reasonably acceptable
to Landlord, protect and hold Landlord (or any successor), Equity Office
Properties Trust, a Maryland real estate investment trust, EOP Operating Limited
Partnership, a Delaware limited partnership, and each of their respective
directors, shareholders, partners, lenders, members, managers, contractors,
affiliates, and employees (collectively, "Landlord Indemnities") harmless from
and against any and all claims, liabilities, losses, costs, loss of rents,
liens, damages, injuries or expenses, including reasonable attorneys' and
consultants' fees and court costs, demands, causes of action, or judgments,
directly or indirectly arising out of or related to: (I) claims of injury to or
death of persons or damage to property or business loss occurring or resulting
directly or indirectly from the use or occupancy of the Premises, Building or
Project by Tenant or Tenant's Parties, or from activities or failures to act of
Tenant or Tenant's Parties; (2) claims arising from work or labor performed, or
for materials or supplies furnished to or at the request of Tenant in connection
with performance of any work done for the account of Tenant within the Premises
or Project; (3) claims arising from any breach or default on the part of Tenant
in the performance of any covenant contained in this Lease; and (4) claims
arising from the negligence or intentional acts or omissions of Tenant or
Tenant's Parties. The foregoing indemnity by Tenant shall not be applicable to
claims to the extent arising from the negligence or willful misconduct of
Landlord. Landlord shall not be liable to Tenant and Tenant hereby waives all
claims against Landlord for any injury to or death of or damage to any person or
property or business loss in or about the Premises, Building or Project by or
from any cause whatsoever (other than Landlord's negligence or willful
misconduct) and, without limiting the generality of the foregoing, whether
caused by water leakage of any character from the roof, walls, basement or other
portion of the Premises, Building or Project, or caused by gas, fire, oil or
electricity in, on or about the Premises, Building or Project, acts of God or of
third parties, or any matter outside of the reasonable control of Landlord.
Except to the extent caused by the negligence or willful misconduct of Tenant or
any Tenant's Parties (defined in Paragraph 4.A) or Tenant Indemnities (defined
below), Landlord shall indemnify, defend and hold Tenant, its trustees, members,
principals, beneficiaries, partners, officers, directors, employees and agents
(collectively, "Tenant Indemnities") harmless against and from all liabilities,
obligations, damages, penalties, claims, actions, costs, charges and expenses,
including, without limitation, reasonable attorneys' fees and other professional
fees (if and to the extent permitted by Regulations), which may be imposed upon,
incurred by or asserted against Tenant or any of the Tenant Indemnities and
arising out of or in connection with the acts or omissions (including violations
of Regulations) of Landlord, the Landlord Indemnities or any of Landlord's
contractors. The provisions of this Paragraph shall survive the expiration or
earlier termination of this Lease.

 

9. WAIVER OF SUBROGATION

Landlord and Tenant each waives any claim, loss or cost it might have against
the other for any injury to or damage to or theft, destruction, loss, or loss of
use of any property (a "Loss"), to the extent the same is insured against (or is
required to be insured against under the terms hereof) under any property damage
insurance policy covering the Building, the Premises, Landlord's or Tenant's
fixtures, personal property, leasehold improvements, or business, regardless of
whether the negligence of the other party caused such Loss.

 

10. LANDLORD'S REPAIRS AND MAINTENANCE

Landlord shall maintain in good repair, reasonable wear and tear excepted, the
roof, foundations, and exterior walls of the Building, subject to the provisions
of Paragraph 7 hereof. The term "exterior walls" as used herein shall not
include windows, glass or plate glass, doors, dock bumpers or dock plates,
special store fronts or office entries. Any damage caused by or repairs
necessitated by any negligence or act of Tenant or Tenant's Parties may be
repaired by Landlord at Landlord's option and Tenant's expense. Tenant shall
immediately give Landlord written notice of any defect or need of repairs in
such components of the Building for which Landlord is responsible, after which
Landlord shall have a reasonable opportunity and the right to enter the Premises
at all reasonable times to repair same. Landlord's liability with respect to any
defects, repairs, or maintenance for which Landlord is responsible under any of
the provisions of this Lease shall be limited to the cost of such repairs or
maintenance, and there shall be no abatement of rent and no liability of
Landlord by reason of any injury to or interference with Tenant's business
arising from the making of repairs, alterations or improvements in or to any
portion of the Premises, the Building or the Project or to fixtures,
appurtenances or equipment in the Building, except as provided in Paragraph 24.
By taking possession of the Premises, Tenant accepts them "as is," as being in
good order, condition and repair and the condition in which Landlord is
obligated to deliver them and suitable for the Permitted Use and Tenant's
intended operations in the Premises, whether or not any notice of acceptance is
given. Notwithstanding the foregoing, Landlord shall, at Landlord's cost,
perform certain deferred maintenance and repair work on the roof of the Building
in accordance with that certain survey performed by DAVCO Waterproofing on
behalf of Landlord dated April 16, 2002 and Landlord's Building standards for
roof maintenance and repair (the "Roof Work").

 

11. TENANT'S REPAIRS AND MAINTENANCE

Tenant shall at all times during the Term at Tenant's expense maintain all parts
of the Premises and such portions of the Building as are within the exclusive
control of Tenant in a first-class, good, clean and secure condition and
promptly make all necessary repairs and replacements, as determined by Landlord,
including but not limited to, all windows, glass, doors, walls, including
demising walls, and wall finishes, floors and floor covering, heating,
ventilating and air conditioning systems, ceiling insulation, truck doors,
hardware, dock bumpers, dock plates and levelers, plumbing work and fixtures,
downspouts, entries, skylights, smoke hatches, roof vents, electrical and
lighting systems, and fire sprinklers, with materials and workmanship of the
same character, kind and quality as the original, subject to the Initial
Alterations performed by Tenant in accordance with the Lease Improvement
Agreement attached hereto as Exhibit C, and excepting reasonable wear and tear.
Tenant shall at Tenant's expense also perform regular removal of trash and
debris. Tenant shall, at Tenant's own expense, enter into a regularly scheduled
preventative maintenance/service contract with a maintenance contractor for
servicing all hot water, heating and air conditioning systems and equipment
within or serving the Premises. The maintenance contractor and the contract must
be approved by Landlord, which approval shall not be unreasonably withheld. The
following maintenance contractors are hereby approved by Landlord for servicing
the heating and air conditioning systems and equipment within or serving the
Premises: Zack Farmer at Fluid Industrial (phone #:(408) 947-7700, fax #: (408)
947-7761, 1545 Berger Drive, San Jose, California 95112); Ben DeAsis at Cal Air,
Inc. (phone #:(408) 283-2330, fax #: (408) 271-1170, E-Mail: Bdeasis@calair.com,
1555 South 7th Street, San Jose, California 95112); and Dean Jenkins at Air
Conditioning Systems (phone #:(408) 248-7892, fax #:(408) 248-7895, 1073 Elm
Street, San Jose, California 95126). The service contract must include all
services suggested by the equipment manufacturer within the
operation/maintenance manual and must become effective and a copy thereof
delivered to Landlord within thirty (30) days after the Term Commencement Date.
Landlord may, upon notice to Tenant, enter into such a service contract on
behalf of Tenant or perform the work and in either case charge Tenant the cost
thereof along with a reasonable amount for Landlord's overhead. Notwithstanding
anything to the contrary contained herein, Tenant shall, at its expense,
promptly repair any damage to the Premises or the Building or Project resulting
from or caused by any negligence or act of Tenant or Tenant's Parties. Tenant
may make a claim under its insurance policy in connection with such damage,
provided that no such claim shall entitle Tenant to delay its obligation to
repair any such damage in accordance with the immediately preceding sentence.
Nothing herein shall expressly or by implication render Tenant Landlord's agent
or contractor to effect any repairs or maintenance required of Tenant under this
Paragraph 11, as to all of which Tenant shall be solely responsible.
Notwithstanding the foregoing, Landlord shall, at Landlord's cost, prior to the
Term Commencement Date, perform certain deferred maintenance and repair work for
the heating and air conditioning system of the Building as set forth in the
survey of the heating and air conditioning system prepared by Air Conditioning
Systems dated April 29, 2002 and in accordance with Landlord's Building
standards (the "HVAC Work"). Further, notwithstanding the foregoing, if, at any
time during the Term, as may be extended, any heating and air conditioning unit
within or serving the Premises fails to function properly and Tenant's
maintenance contractor reasonably determines in good faith that such unit needs
to be replaced, Tenant may provide written notice to Landlord of such
maintenance contractor's determination which notice shall include a copy of such
maintenance contractor's report concerning the unit. If, following Landlord's
receipt of such notice and a copy of such maintenance contractor's report from
Tenant, Landlord determines that the replacement of such unit is necessary,
Landlord shall cause such unit to be replaced, the cost of which replacement
shall be paid by Tenant as part of Operating Expenses; provided, however, it
shall be amortized pursuant to the provisions of Paragraph 7.A.(3)(b) above.

 

12. ALTERATIONS

A.

Tenant shall not make, or allow to be made, any alterations, physical additions,
improvements or partitions, including without limitation the attachment of any
fixtures or equipment, in, about or to the Premises ("Alterations") without
obtaining the prior written consent of Landlord, which consent shall not be
unreasonably withheld or delayed with respect to proposed Alterations which: (a)
comply with all applicable Regulations; (b) are, in Landlord's opinion,
compatible with the Building or the Project and its mechanical, plumbing,
electrical, heating/ventilation/air conditioning systems, and will not cause the
Building or Project or such systems to be required to be modified to comply with
any Regulations (including, without limitation, the Americans With Disabilities
Act); and (c) will not interfere with the use and occupancy of any other portion
of the Building or Project by any other tenant or its invitees. However,
Landlord's consent shall not be required for any Alteration that satisfies all
of the following criteria (a "Cosmetic Alteration"): (1) is of a cosmetic nature
such as painting, wallpapering, hanging pictures and installing carpeting; (2)
is not visible from the exterior of the Premises or Building; (3) will not
affect the systems or structure of the Building or Project; and (4) does not
require work to be performed inside the walls or above the ceiling of the
Premises. However, even though consent is not required, the performance of
Cosmetic Alterations shall be subject to all the other provisions of this
Paragraph 12. Specifically, but without limiting the generality of the
foregoing, prior to starting work, Tenant shall furnish to Landlord all plans
and specifications for the proposed Alterations, construction means and methods,
all appropriate permits and licenses, any contractor or subcontractor to be
employed on the work of Alterations, and the time for performance of such work,
and Landlord may impose rules and regulations for contractors and subcontractors
performing such work. Tenant shall also supply to Landlord any documents and
information reasonably requested by Landlord in connection with Landlord's
consideration of a request for approval hereunder and in connection with any
Cosmetic Alteration. Tenant shall cause all Alterations to be accomplished in a
first-class, good and workmanlike manner, and to comply with all applicable
Regulations and Paragraph 27 hereof. Tenant shall at Tenant's sole expense,
perform any additional work required under applicable Regulations due to the
Alterations hereunder. No review or consent by Landlord of or to any proposed
Alteration or additional work shall constitute a waiver of Tenant's obligations
under this Paragraph 12. Tenant shall reimburse Landlord for all reasonable
costs which Landlord may incur in connection with granting approval to Tenant
for any such Alterations, including any costs or expenses which Landlord may
incur in electing to have outside architects and engineers review said plans and
specifications. All such Alterations shall remain the property of Tenant until
the expiration or earlier termination of this Lease, at which time they shall be
and become the property of Landlord; provided, however, that Landlord may, at
Landlord's option, require that Tenant, at Tenant's expense, remove any or all
Alterations made by Tenant and restore the Premises by the expiration or earlier
termination of this Lease, to their condition existing prior to the construction
of any such Alterations. All such removals and restoration shall be accomplished
in a first-class and good and workmanlike manner so as not to cause any damage
to the Premises or Project whatsoever. If Tenant fails to remove such
Alterations or Tenant's trade fixtures or furniture or other personal property,
Landlord may keep and use them or remove any of them and cause them to be stored
or sold in accordance with applicable law, at Tenant's sole expense.
Notwithstanding the foregoing, Tenant, at the time it requests approval for a
proposed Alteration, may request in writing that Landlord advise Tenant whether
the Alteration or any portion of the Alteration will be required to be removed
by the expiration or earlier termination of this Lease. Within 10 days after
receipt of Tenant's request, Landlord shall advise Tenant in writing as to which
portions of the Alteration, if any, will be required to be so removed. In
addition to and wholly apart from Tenant's obligation to pay Tenant's
Proportionate Share of Operating Expenses, Tenant shall be responsible for and
shall pay prior to delinquency any taxes or governmental service fees,
possessory interest taxes, fees or charges in lieu of any such taxes, capital
levies, or other charges imposed upon, levied with respect to or assessed
against its fixtures or personal property, on the value of Alterations within
the Premises, and on Tenant's interest pursuant to this Lease, or any increase
in any of the foregoing based on such Alterations. To the extent that any such
taxes are not separately assessed or billed to Tenant, Tenant shall pay the
amount thereof as invoiced to Tenant by Landlord.

Notwithstanding the foregoing, at Landlord's option (but without obligation),
all or any portion of the Alterations (excluding the Initial Alterations to be
performed by Tenant pursuant to Exhibit C attached hereto and any Cosmetic
Alterations) shall be performed by Landlord for Tenant's account and Tenant
shall pay Landlord's estimate of the cost thereof (including a reasonable charge
for Landlord's overhead and profit) prior to commencement of the work. In
addition, at Landlord's election and notwithstanding the foregoing, however,
Tenant shall pay to Landlord the cost of removing any such Alterations and
restoring the Premises to their original condition, subject to the provisions of
this Paragraph l2.A. above, such cost to include a reasonable charge for
Landlord's overhead and profit as provided above, and such amount may be
deducted from the Security Deposit or any other sums or amounts held by Landlord
under this Lease.

B.

In compliance with Paragraph 27 hereof, at least ten (10) business days before
beginning construction of any Alteration, Tenant shall give Landlord written
notice of the expected commencement date of that construction to permit Landlord
to post and record a notice of non-responsibility. Upon substantial completion
of construction, if the law so provides, Tenant shall cause a timely notice of
completion to be recorded in the office of the recorder of the county in which
the Building is located.

 

13. SIGNS

Tenant shall not place, install, affix, paint or maintain any signs, notices,
graphics or banners whatsoever or any window decor which is visible in or from
public view or corridors, the common areas or the exterior of the Premises or
the Building, in or on any exterior window or window fronting upon any common
areas or service area or upon any truck doors or man doors without Landlord's
prior written approval which Landlord shall have the right to withhold in its
absolute and sole discretion (provided that Landlord shall not unreasonably
withhold approval with respect to any such sign proposed by Tenant so long as
the same complies with all Regulations and Landlord's signage criteria for the
Project, as the same may be established or modified by Landlord from time to
time); provided that Tenant's name shall be included in any Building-standard
door and directory signage, if any, in accordance with Landlord's Building
signage program, including without limitation, payment by Tenant of any fee
charged by Landlord for maintaining such signage, which fee shall constitute
Additional Rent hereunder. Any installation of signs, notices, graphics or
banners on or about the Premises or Project approved by Landlord shall be
subject to any Regulations and to any other requirements imposed by Landlord.
Tenant shall remove all such signs or graphics by the expiration or any earlier
termination of this Lease. Such installations and removals shall be made in such
manner as to avoid injury to or defacement of the Premises, Building or Project
and any other improvements contained therein, and Tenant shall repair any injury
or defacement including without limitation discoloration caused by such
installation or removal.

 

14. INSPECTION/POSTING NOTICES

After reasonable notice, except in emergencies where no such notice shall be
required, Landlord and Landlord's agents and representatives, shall have the
right to enter the Premises to inspect the same, to clean, to perform such work
as may be permitted or required hereunder, to make repairs, improvements or
alterations to the Premises, Building or Project or to other tenant spaces
therein, to deal with emergencies, to post such notices as may be permitted or
required by law to prevent the perfection of liens against Landlord's interest
in the Project or to exhibit the Premises to prospective tenants, purchasers,
encumbrancers or to others, or for any other purpose as Landlord may deem
necessary or desirable; provided, however, that Landlord shall use reasonable
efforts not to unreasonably interfere with Tenant's business operations. Tenant
shall not be entitled to any abatement of Rent by reason of the exercise of any
such right of entry. Tenant waives any claim for damages for any injury or
inconvenience to or interference with Tenant's business, any loss of occupancy
or quiet enjoyment of the Premises, and any other loss occasioned thereby.
Notwithstanding the foregoing, except in emergency situations as determined by
Landlord, Landlord shall exercise reasonable efforts to perform any entry into
the Premises in a manner that is reasonably designed to minimize interference
with the operation of Tenant's business in the Premises. Landlord shall at all
times have and retain a key with which to unlock all of the doors in, upon and
about the Premises, excluding Tenant's vaults and safes or special security
areas (designated in advance), and Landlord shall have the right to use any and
all means which Landlord may deem necessary or proper to open said doors in an
emergency, in order to obtain entry to any portion of the Premises, and any
entry to the Premises or portions thereof obtained by Landlord by any of said
means, or otherwise, shall not be construed to be a forcible or unlawful entry
into, or a detainer of, the Premises, or an eviction, actual or constructive, of
Tenant from the Premises or any portions thereof. At any time within six (6)
months prior to the expiration of the Term or following any earlier termination
of this Lease or agreement to terminate this Lease, Landlord shall have the
right to erect on the Premises, Building and/or Project a suitable sign
indicating that the Premises are available for lease.

 

15. SERVICES AND UTILITIES

A.

Tenant shall (where practicable) contract for and pay directly when due, for all
water, gas, heat, air conditioning, light, power, telephone, sewer, sprinkler
charges, cleaning, waste disposal and other utilities and services used on or
from the Premises, together with any taxes, penalties, surcharges or the like
pertaining thereto, and maintenance charges for utilities and shall furnish all
electric light bulbs, ballasts and tubes. If any such services are not
separately billed or metered to Tenant, Tenant shall pay an equitable
proportion, as determined in good faith by Landlord, of all charges billed or
metered with other premises. All sums payable under this Paragraph 15 shall
constitute Additional Rent hereunder.

B.

Tenant acknowledges that Tenant accepts the water, electricity, heat and air
conditioning and other utilities and services being supplied or furnished to the
Premises as of the date Tenant takes possession of the Premises, if any, as
being sufficient in their present condition, "as is," for the Permitted Use, and
for Tenant's intended operations in the Premises. Landlord shall have no
obligation to provide additional or after-hours electricity, heating or air
conditioning, but if Landlord elects to provide such services at Tenant's
request, Tenant shall pay upon demand to Landlord a reasonable charge for such
services as determined by Landlord. Tenant agrees to keep and cause to be kept
closed all window covering when necessary because of the sun's position, and
Tenant also agrees at all times to cooperate fully with Landlord and to abide by
all of the regulations and requirements which Landlord may prescribe for the
proper functioning and protection of electrical, heating, ventilating and air
conditioning systems. Wherever heat-generating machines, excess lighting or
equipment are used in the Premises which materially affect the temperature
otherwise maintained by the air conditioning system, Landlord reserves the right
to install supplementary air conditioning units in the Premises and the cost
thereof, including the reasonable cost of installation and the cost of operation
and maintenance thereof, shall be paid by Tenant to Landlord upon demand by
Landlord.

C.

Tenant shall not without written consent of Landlord use any apparatus,
equipment or device in the Premises which will in any way increase the amount of
electricity, water, or any other resource being furnished or supplied for the
use of the Premises for reasonable and normal use, in each case as of the date
Tenant takes possession of the Premises and as reasonably determined by
Landlord, or which will require additions or alterations to or interfere with
the Building power distribution systems; nor connect with electric current,
except through existing electrical outlets in the Premises or water pipes, any
apparatus, equipment or device for the purpose of using electrical current,
water, or any other resource. Tenant's usage of such resources shall be
separately metered. If Tenant shall require water or electric current or any
other resource in excess of that being furnished or supplied for the use of the
Premises as of the date Tenant takes possession of the Premises, if any, as
determined by Landlord, Tenant shall first procure the written consent of
Landlord which Landlord may refuse, to the use thereof. Tenant shall pay for
such utilities by separate charge billed by the applicable utility company. As a
condition of Landlord's consent, Tenant may also be required to pay for
additional meters and for installation, maintenance and repair of meters and of
any additional circuits or other equipment necessary to furnish such additional
resources, energy, utility or service. Landlord shall in no case be liable for
any damages directly or indirectly resulting from nor shall the Rent or any
monies owed Landlord under this Lease herein reserved be abated by reason of:
(a) the installation, use or interruption of use of any equipment used in
connection with the furnishing of any such utilities or services, or any change
in the character or means of supplying or providing any such utilities or
services or any supplier thereof; (b) the failure to furnish or delay in
furnishing any such utilities or services when such failure or delay is caused
by acts of God or the elements, labor disturbances of any character, or
otherwise, or because of any interruption of service due to Tenant's use of
water, electric current or other resource in excess of that being supplied or
furnished for the use of the Premises as of the date Tenant takes possession of
the Premises; or (c) the inadequacy, limitation, curtailment, rationing or
restriction on use of water, electricity, gas or any other form of energy or any
other service or utility whatsoever serving the Premises or Project otherwise;
or (d) the partial or total unavailability of any such utilities or services to
the Premises or the Building or the diminution in the quality or quantity
thereof, whether by Regulation or otherwise; or (e) any interruption in Tenant's
business operations as a result of any such occurrence; nor shall any such
occurrence constitute an actual or constructive eviction of Tenant. Landlord
shall further have no obligation to protect or preserve any apparatus, equipment
or device installed by Tenant in the Premises, including without limitation by
providing additional or after-hours heating or air conditioning. Landlord shall
be entitled to cooperate voluntarily and in a reasonable manner with the efforts
of national, state or local governmental agencies or utility suppliers in
reducing energy or other resource consumption. The obligation to make services
available hereunder shall be subject to the limitations of any such voluntary,
reasonable program. In addition, Landlord reserves the right to change the
supplier or provider of any such utility or service from time to time. Landlord
may, but shall not be obligated to, upon notice to Tenant, contract with or
otherwise obtain any electrical or other such service for or with respect to the
Premises or Tenant's operations therein from any supplier or provider of any
such service. Tenant shall cooperate with Landlord and any supplier or provider
of such services designated by Landlord from time to time to facilitate the
delivery of such services to Tenant at the Premises and to the Building and
Project, including without limitation allowing Landlord and Landlord's suppliers
or providers, and their respective agents and contractors, reasonable access to
the Premises for the purpose of installing, maintaining, repairing, replacing or
upgrading such service or any equipment or machinery associated therewith.

 

16. SUBORDINATION

Without the necessity of any additional document being executed by Tenant for
the purpose of effecting a subordination, this Lease shall be and is hereby
declared to be subject and subordinate at all times to: (a) all ground leases or
underlying leases which may now exist or hereafter be executed affecting the
Premises and/or the land upon which the Premises and Project are situated, or
both; and (b) any mortgage or deed of trust which may now exist or be placed
upon the Building, the Project and/or the land upon which the Premises or the
Project are situated, or said ground leases or underlying leases, or Landlord's
interest or estate in any of said items which is specified as security.
Notwithstanding the foregoing, Landlord shall have the right to subordinate or
cause to be subordinated any such ground leases or underlying leases or any such
liens to this Lease. If any ground lease or underlying lease terminates for any
reason or any mortgage or deed of trust is foreclosed or a conveyance in lieu of
foreclosure is made for any reason, Tenant shall, notwithstanding any
subordination, attorn to and become the Tenant of the successor in interest to
Landlord provided that Tenant shall not be disturbed in its possession under
this Lease by such successor in interest so long as Tenant is not in default
under this Lease. Within ten (10) days after request by Landlord, Tenant shall
execute and deliver any additional documents evidencing Tenant's attornment or
the subordination of this Lease with respect to any such ground leases or
underlying leases or any such mortgage or deed of trust, in the form requested
by Landlord or by any ground landlord, mortgagee, or beneficiary under a deed of
trust, subject to such nondisturbance requirement. If requested in writing by
Tenant, Landlord shall use commercially reasonable efforts to obtain a
subordination, nondisturbance and attornment agreement for the benefit of Tenant
reflecting the foregoing from any ground landlord, mortgagee or beneficiary, at
Tenant's expense, subject to such other terms and conditions as the ground
landlord, mortgagee or beneficiary may require.

 

17. FINANCIAL STATEMENTS

At the request of Landlord from time to time, Tenant shall provide to Landlord
Tenant's current financial statements or other information discussing financial
worth of Tenant, which Landlord shall use solely for purposes of this Lease and
in connection with the ownership, management, financing and disposition of the
Project. Notwithstanding the foregoing, Landlord shall not request financial
statements more than once in any 12 consecutive month period during the Term
unless Tenant is in default or Landlord reasonably believes that there has been
an adverse change in Tenant's financial position since the last financial
statement provided to Landlord.

 

18. ESTOPPEL CERTIFICATE

Tenant agrees from time to time, within ten (10) days after request of Landlord,
to deliver to Landlord, or Landlord's designee, an estoppel certificate stating
that this Lease is in full force and effect, that this Lease has not been
modified (or stating all modifications, written or oral, to this Lease), the
date to which Rent has been paid, the unexpired portion of this Lease, that
there are no current defaults by Landlord or Tenant under this Lease (or
specifying any such defaults), that the leasehold estate granted by this Lease
is the sole interest of Tenant in the Premises and/or the land at which the
Premises are situated, and such other matters pertaining to this Lease as may be
reasonably requested by Landlord or any mortgagee, beneficiary, purchaser or
prospective purchaser of the Building or Project or any interest therein.
Failure by Tenant to execute and deliver such certificate shall constitute an
acceptance of the Premises and acknowledgment by Tenant that the statements
included are true and correct without exception. Tenant agrees that if Tenant
fails to execute and deliver such certificate within such ten (10) day period,
Landlord may execute and deliver such certificate on Tenant's behalf and that
such certificate shall be binding on Tenant. Landlord and Tenant intend that any
statement delivered pursuant to this Paragraph may be relied upon by any
mortgagee, beneficiary, purchaser or prospective purchaser of the Building or
Project or any interest therein. The parties agree that Tenant's obligation to
furnish such estoppel certificates in a timely fashion is a material inducement
for Landlord's execution of this Lease, and shall be an event of default
(without any cure period that might be provided under Paragraph 26.A(3) of this
Lease) if Tenant fails to fully comply or makes any material misstatement in any
such certificate.

 

19. SECURITY DEPOSIT

Tenant agrees to deposit with Landlord upon execution of this Lease, a security
deposit as stated in the Basic Lease Information (the "Security Deposit") ,
which sum shall be held and owned by Landlord, without obligation to pay
interest, as security for the performance of Tenant's covenants and obligations
under this Lease. The Security Deposit is not an advance rental deposit or a
measure of damages incurred by Landlord in case of Tenant's default. Upon the
occurrence of any event of default by Tenant, Landlord may from time to time,
without prejudice to any other remedy provided herein or by law, use such fund
as a credit to the extent necessary to credit against any arrears of Rent or
other payments due to Landlord hereunder, and any other damage, injury, expense
or liability caused by such event of default, and Tenant shall pay to Landlord,
on demand, the amount so applied in order to restore the Security Deposit to its
original amount. Although the Security Deposit shall be deemed the property of
Landlord, any remaining balance of such deposit shall be returned by Landlord to
Tenant at such time after termination of this Lease that all of Tenant's
obligations under this Lease have been fulfilled, reduced by such amounts as may
be required by Landlord to remedy defaults on the part of Tenant in the payment
of Rent or other obligations of Tenant under this Lease, to repair damage to the
Premises, Building or Project caused by Tenant or any Tenant's Parties and to
clean the Premises. Landlord is hereby granted a security interest in the
Security Deposit in accordance with applicable provisions of the California
Commercial Code. Landlord may use and commingle the Security Deposit with other
funds of Landlord. Tenant hereby waives the provisions of Section 1950.7 of the
California Civil Code, and all other provisions of any Regulations, now or
hereinafter in force, which restricts the amount or types of claim that a
landlord may make upon a security deposit or imposes upon a landlord (or its
successors) any obligation with respect to the handling or return of security
deposits.

Subject to the remaining terms of this Paragraph 19, and provided Tenant has
timely paid all Rent due under this Lease during the 12 month period immediately
preceding the effective date of any reduction of the Security Deposit and both
of the Reduction Conditions, as defined below, have occurred, Tenant shall have
the right to reduce the amount of the Security Deposit so that the new Security
Deposit amount will be as follows: $60,892.72. The "Reduction Conditions" shall
mean the following two events: (i) Tenant shall have fully obtained new equity
funding in an effective aggregate amount equal to or in excess of
$10,000,000.00, as evidenced by revised financial statements, and/or such other
evidence as Landlord may reasonably require, delivered by Tenant to Landlord;
and (ii) Tenant shall have obtained a line, or lines, of credit reasonably
acceptable to Landlord and available during the entire Term, as may be extended,
from Silicon Valley Bank in the aggregate amount of $18,000,000.00, as evidenced
by all documentation delivered by Silicon Valley Bank to Tenant for such line,
or lines, of credit, and/or such other evidence as Landlord may reasonably
require, delivered by Tenant to Landlord. Notwithstanding anything to the
contrary contained herein, if Tenant has been in default under this Lease at any
time prior to the effective date of any reduction of the Security Deposit and
Tenant has failed to cure such default within any applicable cure period, then
Tenant shall have no right to reduce the amount of the Security Deposit as
described herein.

If Tenant is entitled to a reduction in the Security Deposit, Tenant shall
provide Landlord with written notice requesting that the Security Deposit be
reduced as provided above (the "Reduction Notice"). If Tenant provides Landlord
with a Reduction Notice, and Tenant is entitled to reduce the Security Deposit
as provided herein, Landlord shall refund the applicable portion of the Security
Deposit to Tenant within 45 days after the later to occur of(a) Landlord's
receipt of the Reduction Notice, or (b) the date upon which Tenant is entitled
to a reduction in the Security Deposit as provided above.

 

20. LIMITATION OF TENANT'S REMEDIES

The obligations and liability of Landlord to Tenant for any default by Landlord
under the terms of this Lease are not personal obligations of Landlord or of the
individual or other partners of Landlord or its or their partners, directors,
officers, or shareholders, and Tenant agrees to look solely to Landlord's
interest in the Project for the recovery of any amount from Landlord, and shall
not look to other assets of Landlord nor seek recourse against the assets of the
individual or other partners of Landlord or its or their partners, directors,
officers or shareholders. Any lien obtained to enforce any such judgment and any
levy of execution thereon shall be subject and subordinate to any lien, mortgage
or deed of trust on the Project. Under no circumstances shall Tenant have the
right to offset against or recoup Rent or other payments due and to become due
to Landlord hereunder except as expressly provided in this Lease, which Rent and
other payments shall be absolutely due and payable hereunder in accordance with
the terms hereof. In no case shall Landlord be liable to Tenant for any lost
profits, damage to business, or any form of special, indirect or consequential
damage on account of any breach of this Lease or otherwise, notwithstanding
anything to the contrary contained in this Lease. For purposes hereof, "interest
of Landlord in the Project" shall include rents due from tenants, insurance
proceeds, and proceeds from condemnation or eminent domain proceedings (prior to
the distribution of same to any partner or shareholder of Landlord or any other
third party) .

 

21. ASSIGNMENT OF SUBLETTING

A. (1) General. This Lease has been negotiated to be and is granted as an
accommodation to Tenant. Accordingly, this Lease is personal to Tenant, and
Tenant's rights granted hereunder do not include the right to assign this Lease
or sublease the Premises, or to receive any excess, either in installments or
lump sum, over the Rent which is expressly reserved by Landlord as hereinafter
provided, except as otherwise expressly hereinafter provided. Tenant shall not
assign or pledge this Lease or sublet the Premises or any part thereof, whether
voluntarily or by operation of law, or permit the use or occupancy of the
Premises or any part thereof by anyone other than Tenant, or suffer or permit
any such assignment, pledge, subleasing or occupancy, without Landlord's prior
written consent except as provided herein. If Tenant desires to assign this
Lease or sublet any or all of the Premises, Tenant shall give Landlord written
notice (the "Transfer Notice") at least thirty (30) days prior to the
anticipated effective date of the proposed assignment or sublease, which shall
contain all of the information reasonably requested by Landlord to address
Landlord's decision criteria specified hereinafter. Landlord shall then have a
period of thirty (30) days following receipt of the Transfer Notice to notify
Tenant in writing that Landlord elects either: (i) to terminate this Lease as to
the space so affected as of the date so requested by Tenant; or (ii) to consent
to the proposed assignment or sublease, subject, however, to Landlord's prior
written consent of the proposed assignee or subtenant and of any related
documents or agreements associated with the assignment or sublease. If Landlord
should fail to notify Tenant in writing of such election within said period,
Landlord shall be deemed to have waived option (i) above, but written consent by
Landlord of the proposed assignee or subtenant shall still be required. If
Tenant notifies Landlord at the time of Tenant's delivery of the Transfer Notice
to Landlord that Tenant requests Landlord to notify Tenant of its election of
either option (i) or (ii) above in less than thirty (30) days, Landlord shall
use reasonable efforts to expedite such notice; provided, however, Tenant shall
not be entitled to receive monetary damages or any other monies from Landlord
based upon a claim that Landlord unreasonably withheld its consent to a proposed
transfer and in no event shall any failure by Landlord to so expedite such
notice constitute a default by Landlord hereunder. Notwithstanding the
foregoing, if Landlord fails to respond to any request for consent within the 30
day period set forth above, Tenant shall have the right to provide Landlord with
a second request for consent. Tenant's second request for consent must
specifically state that Landlord's failure to respond within a period of 10 days
shall be deemed to be an approval by Landlord. If Landlord's failure to respond
continues for 10 days after its receipt of the second request for consent, the
Transfer for which Tenant has requested consent shall be deemed to have been
approved by Landlord. If Landlord does not exercise option (i) above, Landlord's
consent to a proposed assignment or sublease shall not be unreasonably withheld
or conditioned. Consent to any assignment or subletting shall not constitute
consent to any subsequent transaction to which this Paragraph 21 applies.

(2) Conditions of Landlord's Consent.

Without limiting the other instances in which it may be reasonable for Landlord
to withhold Landlord's consent to an assignment or subletting, Landlord and
Tenant acknowledge that it shall be reasonable for Landlord to withhold
Landlord's consent in the following instances: if the proposed assignee does not
agree to be bound by and assume the obligations of Tenant under this Lease in
form and substance satisfactory to Landlord; the use of the Premises by such
proposed assignee or subtenant would not be a Permitted Use or would violate any
exclusivity or other arrangement which Landlord has with any other tenant or
occupant or any Regulation or would increase the Occupancy Density or Parking
Density of the Building or Project, or would otherwise result in an undesirable
tenant mix for the Project as determined by Landlord; the proposed assignee or
subtenant is not of sound financial condition as determined by Landlord in
Landlord's sole discretion; the proposed assignee or subtenant is a governmental
agency; the proposed assignee or subtenant does not have a good reputation as a
tenant of property or a good business reputation; the proposed assignee or
subtenant is a person with whom Landlord is negotiating to lease space in the
Project or is a present tenant of the Project; the assignment or subletting
would entail any Alterations which would lessen the value of the leasehold
improvements in the Premises or use of any Hazardous Materials or other noxious
use or use which may disturb other tenants of the Project; or Tenant is in
default of any obligation of Tenant under this Lease, or Tenant has defaulted
under this Lease on three (3) or more occasions during any twelve (12) months
preceding the date that Tenant shall request consent. Failure by or refusal of
Landlord to consent to a proposed assignee or subtenant shall not cause a
termination of this Lease. Upon a termination under Paragraph 21 .A.(1)(i),
Landlord may lease the Premises to any party, including parties with whom Tenant
has negotiated an assignment or sublease, without incurring any liability to
Tenant. At the option of Landlord, a surrender and termination of this Lease
shall operate as an assignment to Landlord of some or all subleases or
subtenancies. Landlord shall exercise this option by giving notice of that
assignment to such subtenants on or before the effective date of the surrender
and termination. In connection with each request for assignment or subletting,
Tenant shall pay to Landlord Landlord's standard fee for approving such
requests, as well as all costs incurred by Landlord or any mortgagee or ground
lessor in approving each such request and effecting any such transfer,
including, without limitation, reasonable attorneys' fees. Notwithstanding the
foregoing, provided that neither the Tenant nor the proposed transferee requests
any changes to this Lease or Landlord's standard form of consent in connection
with the proposed transfer, such costs and expenses incurred by Landlord shall
not exceed $1,000.

B.

Bonus Rent. Any Rent or other consideration realized by Tenant under any such
sublease or assignment in excess of the Rent payable hereunder, shall be divided
and paid, fifty percent (50%) to Tenant, fifty percent (50%) to Landlord. Tenant
may deduct from the excess the following reasonable expenses directly incurred
by Tenant attributable to the transfer (other than Landlord's review fee):
brokerage fees, legal fees and construction costs. In any subletting or
assignment undertaken by Tenant, Tenant shall diligently seek to obtain the
maximum rental amount available in the marketplace for comparable space
available for primary leasing.

C.

Corporation. If Tenant is a corporation, a transfer of corporate shares by sale,
assignment, bequest, inheritance, operation of law or other disposition
(including such a transfer to or by a receiver or trustee in federal or state
bankruptcy, insolvency or other proceedings) resulting in a change in the
present control of such corporation or any of its parent corporations by the
person or persons owning a majority of said corporate shares, shall constitute
an assignment for purposes of this Lease.

D.

Unincorporated Entity. If Tenant is a partnership, joint venture, unincorporated
limited liability company or other unincorporated business form, a transfer of
the interest of persons, firms or entities responsible for managerial control of
Tenant by sale, assignment, bequest, inheritance, operation of law or other
disposition, so as to result in a change in the present control of said entity
and/or of the underlying beneficial interests of said entity and/or a change in
the identity of the persons responsible for the general credit obligations of
said entity shall constitute an assignment for all purposes of this Lease.

E.

Liability. No assignment or subletting by Tenant, permitted or otherwise, shall
relieve Tenant of any obligation under this Lease or alter the primary liability
of the Tenant named herein for the payment of Rent or for the performance of any
other obligations to be performed by Tenant, including obligations contained in
Paragraph 25 with respect to any assignee or subtenant. Landlord may collect
rent or other amounts or any portion thereof from any assignee, subtenant, or
other occupant of the Premises, permitted or otherwise, and apply the net rent
collected to the Rent payable hereunder, but no such collection shall be deemed
to be a waiver of this Paragraph 21, or the acceptance of the assignee,
subtenant or occupant as tenant, or a release of Tenant from the further
performance by Tenant of the obligations of Tenant under this Lease. Any
assignment or subletting which conflicts with the provisions hereof shall be
void.

F.

Permitted Transfers. So long as Tenant is not entering into the Permitted
Transfer for the purpose of avoiding or otherwise circumventing the remaining
terms of this Paragraph 21, Tenant may assign its entire interest under this
Lease, without the consent of Landlord, to (i) an affiliate, subsidiary, or
parent of Tenant, or a corporation, partnership or other legal entity wholly
owned by Tenant (collectively, an "Affiliated Party"), or (ii) a successor to
Tenant by purchase, merger, consolidation or reorganization (including
reorganization as a Delaware corporation), provided that all of the following
conditions are satisfied (each such transfer a "Permitted Transfer"): (1) Tenant
is not in default under this Lease; (2) the Permitted Use does not allow the
Premises to be used for retail purposes; (3) Tenant shall give Landlord written
notice at least 30 days prior to the effective date of the proposed Permitted
Transfer; (4) with respect to a proposed Permitted Transfer to an Affiliated
Party, Tenant continues to have a net worth equal to or greater than Tenant's
net worth at the date of this Lease; and (5) with respect to a purchase, merger,
consolidation or reorganization (including reorganization as a Delaware
corporation) or any Permitted Transfer which results in Tenant ceasing to exist
as a separate legal entity, (a) Tenant's successor shall own all or
substantially all of the assets of Tenant, and (b) Tenant's successor shall have
a net worth which is at least equal to the greater of Tenant's net worth at the
date of this Lease or Tenant's net worth as of the day prior to the proposed
purchase, merger, consolidation or reorganization. Tenant's notice to Landlord
shall include information and documentation showing that each of the above
conditions has been satisfied. If requested by Landlord, Tenant's successor
shall sign a commercially reasonable form of assumption agreement. As used
herein, (A) "parent" shall mean a company which owns a majority of Tenant's
voting equity; (B) "subsidiary" shall mean an entity wholly owned by Tenant or
at least 51% of whose voting equity is owned by Tenant; and (C) "affiliate"
shall mean an entity controlled, controlling or under common control with
Tenant. Notwithstanding the foregoing, if any parent, affiliate or subsidiary to
which this Lease has been assigned or transferred subsequently sells or
transfers its voting equity or its interest under this Lease other than to
another parent, subsidiary or affiliate of the original Tenant named hereunder,
such sale or transfer shall be deemed to be a transfer requiring the consent of
Landlord hereunder.

 

22. AUTHORITY

Landlord represents and warrants that it has full right and authority to enter
into this Lease and to perform all of Landlord's obligations hereunder and that
all persons signing this Lease on its behalf are authorized to do. Tenant and
the person or persons, if any, signing on behalf of Tenant, jointly and
severally represent and warrant that Tenant has full right and authority to
enter into this Lease, and to perform all of Tenant's obligations hereunder, and
that all persons signing this Lease on its behalf are authorized to do so.

 

23. CONDEMNATION

A

. Condemnation Resulting in Termination. If the whole or any substantial part of
the Premises should be taken or condemned for any public use under any
Regulation, or by right of eminent domain, or by private purchase in lieu
thereof, and the taking would prevent or materially interfere with the Permitted
Use of the Premises, either party shall have the right to terminate this Lease
at its option. If any material portion of the Building or Project is taken or
condemned for any public use under any Regulation, or by right of eminent
domain, or by private purchase in lieu thereof, Landlord may terminate this
Lease at its option. In either of such events, the Rent shall be abated during
the unexpired portion of this Lease, effective when the physical taking of said
Premises shall have occurred.

B

. Condemnation Not Resulting in Termination. If a portion of the Project of
which the Premises are a part should be taken or condemned for any public use
under any Regulation, or by right of eminent domain, or by private purchase in
lieu thereof, and the taking prevents or materially interferes with the
Permitted Use of the Premises, and this Lease is not terminated as provided in
Paragraph 23.A. above, the Rent payable hereunder during the unexpired portion
of this Lease shall be reduced, beginning on the date when the physical taking
shall have occurred, to such amount as may be fair and reasonable under all of
the circumstances, but only after giving Landlord credit for all sums received
or to be received by Tenant by the condemning authority. Notwithstanding
anything to the contrary contained in this Paragraph, if the temporary use or
occupancy of any part of the Premises shall be taken or appropriated under power
of eminent domain during the Term, this Lease shall be and remain unaffected by
such taking or appropriation and Tenant shall continue to pay in full all Rent
payable hereunder by Tenant during the Term; in the event of any such temporary
appropriation or taking, Tenant shall be entitled to receive that portion of any
award which represents compensation for the use of or occupancy of the Premises
during the Term.

C

. Award. Landlord shall be entitled to (and Tenant shall assign to Landlord) any
and all payment, income, rent, award or any interest therein whatsoever which
may be paid or made in connection with such taking or conveyance and Tenant
shall have no claim against Landlord or otherwise for any sums paid by virtue of
such proceedings, whether or not attributable to the value of any unexpired
portion of this Lease, except as expressly provided in this Lease.
Notwithstanding the foregoing, any compensation specifically and separately
awarded Tenant for Tenant's personal property and moving costs as a result of
any taking, condemnation or temporary appropriation, shall be and remain the
property of Tenant.

D

. Waiver of CCP§1265.130. Each party waives the provisions of California Civil
Code Procedure Section 1265.130 allowing either party to petition the superior
court to terminate this Lease as a result of a partial taking.

 

24. CASUALTY DAMAGE

A

. General. If the Premises or Building should be damaged or destroyed by fire,
tornado, or other casualty (collectively, "Casualty"), Tenant shall give
immediate written notice thereof to Landlord. Within thirty (30) days after
Landlord's receipt of such notice, Landlord shall notify Tenant whether in
Landlord's estimation material restoration of the Premises can reasonably be
made within one hundred eighty (180) days from the date of such notice and
receipt of required permits for such restoration. Landlord's determination shall
be binding on Tenant.

B

. Within 180 Days. If the Premises or Building should be damaged by Casualty to
such extent that material restoration can in Landlord's estimation be reasonably
completed within one hundred eighty (180) days after the date of such notice and
receipt of required permits for such restoration, this Lease shall not
terminate. Provided that insurance proceeds are received by Landlord to fully
repair the damage, Landlord shall proceed to rebuild and repair the Premises
diligently and in the manner determined by Landlord, except that Landlord shall
not be required to rebuild, repair or replace any part of any Alterations which
may have been placed on or about the Premises or paid for by Tenant. If the
Premises are untenantable in whole or in part following such damage, the Rent
payable hereunder during the period in which they are untenantable shall be
abated proportionately, but only to the extent of rental abatement insurance
proceeds received by Landlord during the time and to the extent the Premises are
unfit for occupancy.

C

. Greater than 180 Days. If the Premises or Building should be damaged by
Casualty to such extent that rebuilding or repairs cannot in Landlord's
estimation be reasonably completed within one hundred eighty (180) days after
the date of such notice and receipt of required permits for such rebuilding or
repair, then Landlord shall have the option of either: (I) terminating this
Lease effective upon the date of the occurrence of such damage, in which event
the Rent shall be abated during the unexpired portion of this Lease; or (2)
electing to rebuild or repair the Premises diligently and in the manner
determined by Landlord. Landlord shall notify Tenant of its election within
thirty (30) days after Landlord's receipt of notice of the damage or
destruction. Notwithstanding the above, Landlord shall not be required to
rebuild, repair or replace any part of any Alterations which may have been
placed, on or about the Premises or paid for by Tenant. If the Premises are
untenantable in whole or in part following such damage, the Rent payable
hereunder during the period in which they are untenantable shall be abated
proportionately, but only to the extent of rental abatement insurance proceeds
received by Landlord during the time and to the extent the Premises are unfit
for occupancy.

D

. Tenant's Fault. Notwithstanding anything herein to the contrary, if the
Premises or any other portion of the Building are damaged by Casualty resulting
from the fault, negligence, or breach of this Lease by Tenant or any of Tenant's
Parties, Base Rent and Additional Rent shall not be diminished during the repair
of such damage and Tenant shall be liable to Landlord for the cost and expense
of the repair and restoration of the Building caused thereby to the extent such
cost and expense is not covered by insurance proceeds.

E

. Insurance Proceeds. Notwithstanding anything herein to the contrary, if the
Premises or Building are damaged or destroyed and are not fully covered by the
insurance proceeds received by Landlord or if the holder of any indebtedness
secured by a mortgage or deed of trust covering the Premises requires that the
insurance proceeds be applied to such indebtedness, then in either case Landlord
shall have the right to terminate this Lease by delivering written notice of
termination to Tenant within thirty (30) days after the date of notice to
Landlord that said damage or destruction is not fully covered by insurance or
such requirement is made by any such holder, as the case may be, whereupon this
Lease shall terminate.

F

. Waiver. This Paragraph 24 shall be Tenant's sole and exclusive remedy in the
event of damage or destruction to the Premises or the Building. As a material
inducement to Landlord entering into this Lease, Tenant hereby waives any rights
it may have under Sections 1932, 1933(4), 1941 or 1942 of the Civil Code of
California with respect to any destruction of the Premises, Landlord's
obligation for tenantability of the Premises and Tenant's right to make repairs
and deduct the expenses of such repairs, or under any similar law, statute or
ordinance now or hereafter in effect.

G

. . Tenant's Personal Property. In the event of any damage or destruction of the
Premises or the Building, under no circumstances shall Landlord be required to
repair any injury or damage to, or make any repairs to or replacements of,
Tenant's personal property.

 

25. HOLDING OVER

Unless Landlord expressly consents in writing to Tenant's holding over, Tenant
shall be unlawfully and illegally in possession of the Premises, whether or not
Landlord accepts any rent from Tenant or any other person while Tenant remains
in possession of the Premises without Landlord's written consent. If Tenant
shall retain possession of the Premises or any portion thereof without
Landlord's consent following the expiration of this Lease or sooner termination
for any reason, then Tenant shall pay to Landlord for each day of such retention
150% of the amount of daily rental as of the last month prior to the date of
expiration or earlier termination. Tenant shall also indemnify, defend, protect
and hold Landlord harmless from any loss, liability or cost, including
consequential and incidental damages and reasonable attorneys' fees, incurred by
Landlord resulting from delay by Tenant in surrendering the Premises, including,
without limitation, any claims made by the succeeding tenant founded on such
delay. Acceptance of Rent by Landlord following expiration or earlier
termination of this Lease, or following demand by Landlord for possession of the
Premises, shall not constitute a renewal of this Lease, and nothing contained in
this Paragraph 25 shall waive Landlord's right of reentry or any other right.
Additionally, if upon expiration or earlier termination of this Lease, or
following demand by Landlord for possession of the Premises, Tenant has not
fulfilled its obligation with respect to repairs and cleanup of the Premises or
any other Tenant obligations as set forth in this Lease, then Landlord shall
have the right to perform any such obligations as it deems necessary at Tenant's
sole cost and expense, and any time required by Landlord to complete such
obligations shall be considered a period of holding over and the terms of this
Paragraph 25 shall apply. The provisions of this Paragraph 25 shall survive any
expiration or earlier termination of this Lease.

 

26. DEFAULT

A.

Events of Default. The occurrence of any of the following shall constitute an
event of default on the part of Tenant:

(1)

Abandonment. Abandonment of the Premises. Tenant waives any right to notice
Tenant may have under Section 1951.3 of the Civil Code of the State of
California, the terms of this Paragraph 26.A. being deemed such notice to Tenant
as required by said Section 1951.3.

(2)

Nonpayment of Rent. Failure to pay any installment of Rent or any other amount
due and payable hereunder upon the date when said payment is due, if the failure
continues for 3 days after written notice to Tenant. The notice required of
Landlord herein above shall replace rather than supplement any statutory notice
required under Code of Civil Procedure Section 1161 or any similar or successor
statute.

(3)

Other Obligations. Failure to perform any obligation, agreement or covenant
under this Lease other than those matters specified in subparagraphs (1) and (2)
of this Paragraph 26.A., and in Paragraphs 8, 16, 18 and 25, such failure
continuing for twenty (20) days after written notice of such failure, as to
which time is of the essence. However, if Tenant's failure to perform cannot
reasonably be cured within 20 days, Tenant shall be allowed additional time (not
to exceed 60 days) as is reasonably necessary to cure the failure so long as:
(I) Tenant commences to cure the failure within 20 days, and (2) Tenant
diligently pursues a course of action that will cure the failure and bring
Tenant back into compliance with the Lease. However, if Tenant's failure to
perform creates a hazardous condition, the failure must be cured immediately
upon notice to Tenant. In addition, if Landlord provides Tenant with notice of
Tenant's failure to perform any particular term, provision or covenant of the
Lease on 3 occasions during any 12 month period, Tenant's subsequent violation
of such term, provision or covenant shall, at Landlord's option, be an incurable
event of default by Tenant.

(4)

General Assignment. A general assignment by Tenant for the benefit of creditors.
.

(5)

Bankruptcy. The filing of any voluntary petition in bankruptcy by Tenant, or the
filing of an involuntary petition by Tenant's creditors, which involuntary
petition remains undischarged for a period of thirty (30) days. If under
applicable law, the trustee in bankruptcy or Tenant has the right to affirm this
Lease and continue to perform the obligations of Tenant hereunder, such trustee
or Tenant shall, in such time period as may be permitted by the bankruptcy court
having jurisdiction, cure all defaults of Tenant hereunder outstanding as of the
date of the affirmance of this Lease and provide to Landlord such adequate
assurances as may be necessary to ensure Landlord of the continued performance
of Tenant's obligations under this Lease.

(6)

Receivership. The employment of a receiver to take possession of substantially
all of Tenant's assets or the Premises, if such appointment remains undismissed
or undischarged for a period of fifteen (15) days after the order therefor.

(7) Attachment

. The attachment, execution or other judicial seizure of all or substantially
all of Tenant's assets or Tenant's leasehold of the Premises, if such attachment
or other seizure remains undismissed or undischarged for a period of fifteen
(15) days after the levy thereof.

(8)

Insolvency. The admission by Tenant in writing of its inability to pay its debts
as they become due.

B.

Remedies Upon Default.

(1)

Termination. In the event of the occurrence of any event of default, Landlord
shall have the right to give a written termination notice to Tenant, and on the
date specified in such notice, Tenant's right to possession shall terminate, and
this Lease shall terminate unless on or before such date all Rent in arrears and
all costs and expenses incurred by or on behalf of Landlord hereunder shall have
been paid by Tenant and all other events of default of this Lease by Tenant at
the time existing shall have been fully remedied to the satisfaction of
Landlord. At any time after such termination, Landlord may recover possession of
the Premises or any part thereof and expel and remove therefrom Tenant and any
other person occupying the same, including any subtenant or subtenants
notwithstanding Landlord's consent to any sublease, by any lawful means, and
again repossess and enjoy the Premises without prejudice to any of the remedies
that Landlord may have under this Lease, or at law or equity by any reason of
Tenant's default or of such termination. Landlord hereby reserves the right, but
shall not have the obligation, to recognize the continued possession of any
subtenant. The delivery or surrender to Landlord by or on behalf of Tenant of
keys, entry codes, or other means to bypass security at the Premises shall not
terminate this Lease.

(2) Continuation After Default.

Even though an event of default may have occurred, this Lease shall continue in
effect for so long as Landlord does not terminate Tenant's right to possession
under Paragraph 26.B.(1) hereof. Landlord shall have the remedy described in
California Civil Code Section 1951.4 ("Landlord may continue this Lease in
effect after Tenant's breach and abandonment and recover Rent as it becomes due,
if Tenant has the right to sublet or assign, subject only to reasonable
limitations"), or any successor code section. Accordingly, if Landlord does not
elect to terminate this Lease on account of any event of default by Tenant,
Landlord may enforce all of Landlord's rights and remedies under this Lease,
including the right to recover Rent as it becomes due. Acts of maintenance,
preservation or efforts to lease the Premises or the appointment of a receiver
under application of Landlord to protect Landlord's interest under this Lease or
other entry by Landlord upon the Premises shall not constitute an election to
terminate Tenant's right to possession.

(3) Increased Security Deposit.

If Tenant is in default under Paragraph 26.A.(2) hereof and such default remains
uncured for ten (10) days after such occurrence or such default occurs more than
three times in any twelve (12) month period, Landlord may require that Tenant
increase the Security Deposit to the amount of three times the current month's
Rent at the time of the most recent default.

C.

Damages After Default. Should Landlord terminate this Lease pursuant to the
provisions of Paragraph 26.B.(1) hereof, Landlord shall have the rights and
remedies of a Landlord provided by Section 1951.2 of the Civil Code of the State
of California, or any successor code sections. Upon such termination, in
addition to any other rights and remedies to which Landlord may be entitled
under applicable law or at equity, Landlord shall be entitled to recover from
Tenant: (1) the worth at the time of award of the unpaid Rent and other amounts
which had been earned at the time of termination, (2) the worth at the time of
award of the amount by which the unpaid Rent and other amounts that would have
been earned after the date of termination until the time of award exceeds the
amount of such Rent loss that Tenant proves could have been reasonably avoided;
(3) the worth at the time of award of the amount by which the unpaid Rent and
other amounts for the balance of the Term after the time of award exceeds the
amount of such Rent loss that the Tenant proves could be reasonably avoided; and
(4) any other amount and court costs necessary to compensate Landlord for all
detriment proximately caused by Tenant's failure to perform Tenant's obligations
under this Lease or which, in the ordinary course of things, would be likely to
result therefrom. The "worth at the time of award" as used in (1) and (2) above
shall be computed at the Applicable Interest Rate (defined below). The "worth at
the time of award" as used in (3) above shall be computed by discounting such
amount at the Federal Discount Rate of the Federal Reserve Bank of San Francisco
at the time of award plus one percent (1%). If this Lease provides for any
periods during the Term during which Tenant is not required to pay Base Rent or
if Tenant otherwise receives a Rent concession, then upon the occurrence of an
event of default, Tenant shall owe to Landlord the full amount of such Base Rent
or value of such Rent concession, plus interest at the Applicable Interest Rate,
calculated from the date that such Base Rent or Rent concession would have been
payable.

D. Late Charge.

In addition to its other remedies, Landlord shall have the right without notice
or demand to add to the amount of any payment required to be made by Tenant
hereunder, and which is not paid and received by Landlord on or before the first
day of each calendar month, an amount equal to five percent (5%) of the
delinquent amount, or $150.00, whichever amount is greater, for each month or
portion thereof that the delinquency remains outstanding to compensate Landlord
for the loss of the use of the amount not paid and the administrative costs
caused by the delinquency, the parties agreeing that Landlord's damage by virtue
of such delinquencies would be extremely difficult and impracticable to compute
and the amount stated herein represents a reasonable estimate thereof. Any
waiver by Landlord of any late charges or failure to claim the same shall not
constitute a waiver of other late charges or any other remedies available to
Landlord.

E. Interest.

Interest shall accrue on all sums not paid when due hereunder at the lesser of a
per annum rate equal to: (i) the greatest per annum rate of interest permitted
from time to time under applicable law, or (ii) the Prime Rate plus 5%
("Applicable Interest Rate") from the due date until paid. For purposes hereof,
the "Prime Rate" shall be the per annum interest rate publicly announced as its
prime or base rate by a federally insured bank selected by Landlord in the State
of California.

F.

Remedies Cumulative. All of Landlord's rights, privileges and elections or
remedies are cumulative and not alternative, to the extent permitted by law and
except as otherwise provided herein.

G. Replacement of Statutory Notice Requirements.

When this Lease requires service of a notice, that notice shall replace rather
than supplement any equivalent or similar statutory notice, including any notice
required by California Code of Civil Procedure Section 1161 or any similar or
successor statute. When a statute requires service of a notice in a particular
manner, service of that notice (or a similar notice required by this Lease) in
the manner required by this Paragraph 26 shall replace and satisfy the statutory
service-of-notice procedures, including those required by California Code of
Civil Procedure Section 1162 or any similar or successor statute.

 

27. LIENS

Tenant shall at all times keep the Premises and the Project free from liens
arising out of or related to work or services performed, materials or supplies
furnished or obligations incurred by or on behalf of Tenant or in connection
with work made, suffered or done by or on behalf of Tenant in or on the Premises
or Project. if Tenant shall not, within ten (10) days following the imposition
of any such lien, cause the same to be released of record by payment or posting
of a proper bond, Landlord shall have, in addition to all other remedies
provided herein and by law, the right, but not the obligation, to cause the same
to be released by such means as Landlord shall deem proper, including payment of
the claim giving rise to such lien. All sums paid by Landlord on behalf of
Tenant and all expenses incurred by Landlord in connection therefor shall be
payable to Landlord by Tenant on demand with interest at the Applicable Interest
Rate as Additional Rent. Landlord shall have the right at all times to post and
keep posted on the Premises any notices permitted or required by law, or which
Landlord shall deem proper, for the protection of Landlord, the Premises, the
Project and any other party having an interest therein, from mechanics' and
materialmen's liens, and Tenant shall give Landlord not less than ten (10)
business days prior written notice of the commencement of any work in the
Premises or Project which could lawfully give rise to a claim for mechanics' or
materialmen's liens to permit Landlord to post and record a timely notice of
non-responsibility, as Landlord may elect to proceed or as the law may from time
to time provide, for which purpose, if Landlord shall so determine, Landlord may
enter the Premises. Tenant shall not remove any such notice posted by Landlord
without Landlord's consent, and in any event not before completion of the work
which could lawfully give rise to a claim for mechanics' or materialmen's liens.

 

28. INTENTIONALLY DELETED

 

29 TRANSFERS BY LANDLORD

In the event of a sale or conveyance by Landlord of the Building or a
foreclosure by any creditor of Landlord, the same shall operate to release
Landlord from any liability upon any of the covenants or conditions, express or
implied, herein contained in favor of Tenant, to the extent required to be
performed after the passing of title to Landlord's successor-in-interest. In
such event, Tenant agrees to look solely to the responsibility of the
successor-in-interest of Landlord under this Lease with respect to the
performance of the covenants and duties of "Landlord" to be performed after the
passing of title to Landlord's successor-in-interest. This Lease shall not be
affected by any such sale and Tenant agrees to attorn to the purchaser or
assignee. Landlord's successor(s)-in-interest shall not have liability to Tenant
with respect to the failure to perform any of the obligations of "Landlord," to
the extent required to be performed prior to the date such
successor(s)-in-interest became the owner of the Building.

 

30. RIGHT OF LANDLORD TO PERFORM TENANT'S CONENANTS

All covenants and agreements to be performed by Tenant under any of the terms of
this Lease shall be performed by Tenant at Tenant's sole cost and expense and
without any abatement of Rent. if Tenant shall fail to pay any sum of money,
other than Base Rent, required to be paid by Tenant hereunder or shall fail to
perform any other act on Tenant's part to be performed hereunder, including
Tenant's obligations under Paragraph 11 hereof, and such failure shall continue
for twenty (20) days after notice thereof by Landlord, in addition to the other
rights and remedies of Landlord, Landlord may make any such payment and perform
any such act on Tenant's part. In the case of an emergency, no prior
notification by Landlord shall be required. Landlord may take such actions
without any obligation and without releasing Tenant from any of Tenant's
obligations. All sums so paid by Landlord and all incidental costs incurred by
Landlord and interest thereon at the Applicable Interest Rate, from the date of
payment by Landlord, shall be paid to Landlord on demand as Additional Rent. .

 

31. WAIVER

If either Landlord or Tenant waives the performance of any term, covenant or
condition contained in this Lease, such waiver shall not be deemed to be a
waiver of any subsequent breach of the same or any other term, covenant or
condition contained herein, or constitute a course of dealing contrary to the
expressed terms of this Lease. The acceptance of Rent by Landlord shall not
constitute a waiver of any preceding breach by Tenant of any term, covenant or
condition of this Lease, regardless of Landlord's knowledge of such preceding
breach at the time Landlord accepted such Rent. Failure by Landlord to enforce
any of the terms, covenants or conditions of this Lease for any length of time
shall not be deemed to waive or decrease the right of Landlord to insist
thereafter upon strict performance by Tenant. Waiver by Landlord of any term,
covenant or condition contained in this Lease may only be made by a written
document signed by Landlord, based upon full knowledge of the circumstances.

 

32. NOTICES

Each provision of this Lease or of any applicable governmental laws, ordinances,
regulations and other requirements with reference to sending, mailing, or
delivery of any notice or the making of any payment by Landlord or Tenant to the
other shall be deemed to be complied with when and if the following steps are
taken:

A. Rent.

All Rent and other payments required to be made by Tenant to Landlord hereunder
shall be payable to Landlord at Landlord's Remittance Address set forth in the
Basic Lease Information, or at such other address as Landlord may specify from
time to time by written notice delivered in accordance herewith. Tenant's
obligation to pay Rent and any other amounts to Landlord under the terms of this
Lease shall not be deemed satisfied until such Rent and other amounts have been
actually received by Landlord.

B.

Other. All notices, demands, consents and approvals which may or are required to
be given by either party to the other hereunder shall be in writing and either
personally delivered, sent by commercial overnight courier, mailed, certified or
registered, postage prepaid or sent by facsimile with confirmed receipt (and
with an original sent by commercial overnight courier), and in each case
addressed to the party to be notified at the Notice Address for such party as
specified in the Basic Lease Information or to such other place as the party to
be notified may from time to time designate by at least fifteen (15) days notice
to the notifying party. Notices shall be deemed served upon receipt or refusal
to accept delivery. Tenant appoints as its agent to receive the service of all
default notices and notice of commencement of unlawful detainer proceedings the
person in charge of or apparently in charge of occupying the Premises at the
time, and, if there is no such person, then such service may be made by
attaching the same on the main entrance of the Premises.

C. Required Notices.

Tenant shall immediately notify Landlord in writing of any notice of a violation
or a potential or alleged violation of any Regulation that relates to the
Premises or the Project, or of any inquiry, investigation, enforcement or other
action that is instituted or threatened by any governmental or regulatory agency
against Tenant or any other occupant of the Premises, or any claim that is
instituted or threatened by any third party that relates to the Premises or the
Project.

 

33. ATTORNEYS' FEES

If Landlord places the enforcement of this Lease, or any part thereof, or the
collection of any Rent due, or to become due hereunder, or recovery of
possession of the Premises in the hands of an attorney, Tenant shall pay to
Landlord, upon demand, Landlord's reasonable attorneys' fees and court costs,
whether incurred at trial, appeal or review. In any action which Landlord or
Tenant brings to enforce its respective rights hereunder, the unsuccessful party
shall pay all costs incurred by the prevailing party including reasonable
attorneys' fees, to be fixed by the court, and said costs and attorneys' fees
shall be a part of the judgment in said action. .

 

34. SUCCESSORS AND ASSIGNS

This Lease shall be binding upon and inure to the benefit of Landlord, its
successors and assigns, and shall be binding upon and inure to the benefit of
Tenant, its successors, and to the extent assignment is approved by Landlord as
provided hereunder, Tenant's assigns.

 

35. FORCE MAJEURE

If performance by a party of any portion of this Lease is made impossible by any
prevention, delay, or stoppage caused by strikes, lockouts, labor disputes, acts
of God, inability to obtain services, labor, or materials or reasonable
substitutes for those items, government actions, civil commotions, fire or other
casualty, or other causes beyond the reasonable control of the party obligated
to perform, performance by that party for a period equal to the period of that
prevention, delay, or stoppage is excused. Tenant's obligation to pay Rent,
however, is not excused by this Paragraph 35.

 

36. SURRENDER OF PREMISES

Tenant shall, upon expiration or sooner termination of this Lease, surrender the
Premises to Landlord in the same condition as existed on the date Tenant
originally took possession thereof, including, but not limited to, all interior
walls cleaned, all holes in walls repaired, all carpets shampooed and cleaned,
all HVAC equipment in operating order and in good repair, and all floors
cleaned, waxed, and free of any Tenant-introduced marking or painting, all to
the reasonable satisfaction of Landlord, ordinary wear and tear and damage by
fire or other casualty for which Landlord is required to make repairs hereunder
excepted. Notwithstanding the foregoing, Tenant shall not be required to remove
the Initial Alterations (as defined in Exhibit C) shown on the plans and
specifications therefor prepared by LRS Associates dated May 15, 2002. Tenant
shall remove all of its debris from the Project. Notwithstanding anything to the
contrary contained herein, Landlord and Tenant hereby acknowledge and agree that
Landlord shall request the existing tenant in the Premises to leave the existing
kitchen constructed in the Premises for such existing tenant (as depicted on
Exhibit E attached hereto), and the components thereof, (collectively, the
"Kitchen") upon such tenant's surrender and vacation of the Premises. Tenant
shall, however, at Tenant's sole cost and expense, remove the Kitchen and
restore the portion of the Premises in which the Kitchen is located to office
space of a quality and finish comparable to the remainder of the Premises,
subject to the surrender obligations of Tenant set forth in the first sentence
of this Paragraph 36, with all damage caused by the removal of the Kitchen
repaired before the Term Expiration Date or earlier termination of this Lease.
If Tenant fails to remove the Kitchen or perform related repairs in a timely
manner, Landlord, at Tenant's expense, may remove the Kitchen and perform the
required repairs. Tenant, within 30 days after receipt of an invoice, shall
reimburse Landlord for the reasonable costs incurred by Landlord. Tenant agrees
that the Kitchen is in its "as is" condition and in good order and satisfactory
condition, and that there are no representations or warranties by Landlord
whatsoever regarding the suitability for Tenant's use, the condition of the
Kitchen, title to the personal property located in the Kitchen or any liens or
other encumbrances to which the same may be subject, or any other matter
relating to the Kitchen. At all times during the Term, Tenant shall cause the
Kitchen to be insured as part of the Premises pursuant to the provisions of
Paragraph 8 above. At or before the time of surrender, Tenant shall comply with
the terms of Paragraph I2.A. hereof with respect to Alterations to the Premises
and all other matters addressed in such Paragraph and shall remove all
Alterations required to be removed pursuant to the provisions of Paragraph 12.
If the Premises are not so surrendered at the expiration or sooner termination
of this Lease, the provisions of Paragraph 25 hereof shall apply. All keys to
the Premises or any part thereof shall be surrendered to Landlord upon
expiration or sooner termination of the Term. Tenant shall give written notice
to Landlord at least thirty (30) days prior to vacating the Premises and shall
meet with Landlord for a joint inspection of the Premises at the time of
vacating, but nothing contained herein shall be construed as an extension of the
Term or as a consent by Landlord to any holding over by Tenant. In the event of
Tenant's failure to give such notice or participate in such joint inspection,
Landlord's inspection at or after Tenant's vacating the Premises shall
conclusively be deemed correct for purposes of determining Tenant's
responsibility for repairs and restoration. Any delay caused by Tenant's failure
to carry out its obligations under this Paragraph 36 beyond the term hereof,
shall constitute unlawful and illegal possession of Premises under Paragraph 25
hereof .

 

37. HAZARDOUS MATERIALS

A. General Restrictions.

Tenant shall conduct its business and shall cause each of its directors,
shareholders, partners, lenders, members, managers, contractors, affiliates, and
employees (individually, a "Tenant Party" and collectively, "Tenant Parties") to
act in such a manner as to (a) not release or permit the release of any
Hazardous Material in, under, on or about the Premises or Project, or (b) not
use, store, generate, treat, discharge, disperse, handle, manufacture, transport
or dispose of (collectively, "Handle") any Hazardous Materials (other than
incidental amounts of customary cleaning and office supplies) in or about the
Premises or Project without the prior written consent of Landlord, which consent
Landlord may withhold in its sole and absolute discretion ("Hazardous Materials
Consent Requirements"). "Hazardous Material" means any hazardous, explosive,
radioactive or toxic substance, material or waste which is or becomes regulated
by any local, state or federal governmental authority or agency, including,
without limitation, any material or substance which is (i) defined or listed as
a "hazardous waste," "extremely hazardous waste," "restricted hazardous waste,"
"hazardous substance," "hazardous material," "pollutant" or "contaminant" under
any Regulation, (ii) petroleum or petroleum derivative, (iii) a flammable
explosive, (iv) a radioactive material or waste, (v) a polychlorinated biphenyl,
(vi) asbestos or asbestos containing material, (vii) infectious waste, or (viii)
a carcinogen.

B.

Required Disclosures. Prior to Tenant (and at least five (5) days prior to any
assignee or any subtenant of Tenant) taking possession of any part of the
Premises, and on each anniversary of the Term Commencement Date (each such date
is hereinafter referred to as a "Disclosure Date"), until and including the
first Disclosure Date occurring after the expiration or sooner termination of
this Lease, Tenant shall disclose to Landlord in writing the names and amounts
of all Hazardous Materials, or any combination thereof, which were Handled on,
in, under or about the Premises or Project for the twelve (12) month period
prior to such Disclosure Date, or which Tenant intends to Handle on, under or
about the Premises during the twelve (12) month period following the Disclosure
Date by executing and delivering to Landlord a "Hazardous Materials
Questionnaire", in the form attached hereto as Exhibit D (as updated and
modified by Landlord, from time to time). Tenant's disclosure obligations under
this Paragraph 37.B shall include a requirement that, to the extent any
information contained in a Hazardous Materials Questionnaire previously
delivered by Tenant shall become inaccurate in any material respect, Tenant
shall immediately deliver to Landlord a new updated Hazardous Materials
Questionnaire.

C.

Additional Obligations. If any Hazardous Materials shall be released into the
environment comprising or surrounding the Project in connection with the acts,
omissions or operations of Tenant or any Tenant Party, Tenant shall at its sole
expense promptly prepare a remediation plan therefor consistent with applicable
Regulations and recommended industry practices (and approved by Landlord and all
governmental agencies having jurisdiction) to fully remediate such release, and
thereafter shall prosecute the remediation plan so approved to completion with
all reasonable diligence and to the satisfaction of Landlord and applicable
governmental agencies. If any Hazardous Materials are Handled in, under, on or
about the Premises during the Term, or if Landlord determines in good faith that
any release of any Hazardous Material or violation of Hazardous Materials
Regulations may have occurred in, on, under or about the Premises during the
Term, Landlord may require Tenant to at Tenant's sole expense, (i) retain a
qualified environmental consultant reasonably satisfactory to Landlord to
conduct a reasonable investigation (an "Environmental Assessment") of a nature
and scope reasonably approved in writing in advance by Landlord with respect to
the existence of any Hazardous Materials in, on, under or about the Premises and
providing a review of all Hazardous Materials activities of Tenant and the
Tenant Parties, and (ii) provide to Landlord a reasonably detailed, written
report, prepared in accordance with the institutional real estate standards, of
the Environmental Assessment.

D.

Indemnity. Tenant shall indemnify, defend (by counsel reasonably acceptable to
Landlord), protect and hold Landlord harmless from and against any and all
claims, liabilities, losses, costs, loss of rents, liens, damages, injuries or
expenses (including attorneys' and consultants' fees and court costs), demands,
causes of action, or judgments directly or indirectly arising out of or related
to the use, generation, storage, release, or disposal of Hazardous Materials by
Tenant or any of Tenant's Parties in, on, under or about the Premises, the
Building or the Project or surrounding land or environment, which indemnity
shall include, without limitation, damages for personal or bodily injury,
property damage, damage to the environment or natural resources occurring on or
off the Premises, losses attributable to diminution in value or adverse effects
on marketability, the cost of any investigation, monitoring, government
oversight, repair, removal, remediation, restoration, abatement, and disposal,
and the preparation of any closure or other required plans, whether such action
is required or necessary prior to or following the expiration or earlier
termination of this Lease. Neither the consent by Landlord to the use,
generation, storage, release or disposal of Hazardous Materials nor the strict
compliance by Tenant with all laws pertaining to Hazardous Materials shall
excuse Tenant from Tenant's obligation of indemnification pursuant to this
Paragraph 37.D. Tenant's obligations pursuant to the foregoing indemnity shall
survive the expiration or earlier termination of this Lease.

 

38. MISCELLANEOUS

A.

General. The term "Tenant" or any pronoun used in place thereof shall indicate
and include the masculine or feminine, the singular or plural number,
individuals, firms or corporations, and their respective successors, executors,
administrators and permitted assigns, according to the context hereof.

B.

Time. Time is of the essence regarding this Lease and all of its provisions.

C.

Choice of Law. This Lease shall in all respects be governed by the laws of the
State of California. .

D.

Entire Agreement. This Lease and the following exhibits and attachments
constitute the entire agreement between the parties and supersede all prior
agreements and understandings related to the Premises, including all lease
proposals, letters of intent and other documents: Exhibit A (Rules and
Regulations), Exhibit B (Outline and Location of Premises), Exhibit C (Lease
Improvement Agreement), Exhibit D (Hazardous Materials Questionnaire) and
Exhibit E (Depiction of Kitchen).

E.

Modification. This Lease may not be modified except by a written instrument
signed by the parties hereto. Tenant accepts the area of the Premises as
specified in the Basic Lease Information as the approximate area of the Premises
for all purposes under this Lease, and acknowledges and agrees that no other
definition of the area (rentable, usable or otherwise) of the Premises shall
apply. Tenant shall in no event be entitled to a recalculation of the square
footage of the Premises, rentable, usable or otherwise, and no recalculation, if
made, irrespective of its purpose, shall reduce Tenant's obligations under this
Lease in any manner, including without limitation the amount of Base Rent
payable by Tenant or Tenant's Proportionate Share of the Building and of the
Project.

F.

Severability. If, for any reason whatsoever, any of the provisions hereof shall
be unenforceable or ineffective, all of the other provisions shall be and remain
in full force and effect.

G.

Recordation. Tenant shall not record this Lease or a short form memorandum
hereof. .

H.

Examination of Lease. Submission of this Lease to Tenant does not constitute an
option or offer to lease and this Lease is not effective otherwise until
execution and delivery by both Landlord and Tenant.

I.

Accord and Satisfaction. No payment by Tenant of a lesser amount than the total
Rent due nor any endorsement on any check or letter accompanying any check or
payment of Rent shall be deemed an accord and satisfaction of full payment of
Rent, and Landlord may accept such payment without prejudice to Landlord's right
to recover the balance of such Rent or to pursue other remedies. All offers by
or on behalf of Tenant of accord and satisfaction are hereby rejected in
advance.

J. Easements.

Landlord may grant easements on the Project and dedicate for public use portions
of the Project without Tenant's consent; provided that no such grant or
dedication shall materially interfere with Tenant's Permitted Use of the
Premises. Upon Landlord's request, Tenant shall execute, acknowledge and deliver
to Landlord documents, instruments, maps and plats necessary to effectuate
Tenant's covenants hereunder.

K. Drafting and Determination Presumption.

The parties acknowledge that this Lease has been agreed to by both the parties,
that both Landlord and Tenant have consulted with attorneys with respect to the
terms of this Lease and that no presumption shall be created against Landlord
because Landlord drafted this Lease. Except as otherwise specifically set forth
in this Lease, with respect to any consent, determination or estimation of
Landlord required or allowed in this Lease or requested of Landlord, Landlord's
consent, determination or estimation shall be given or made solely by Landlord
in Landlord's good faith opinion, whether or not objectively reasonable. If
Landlord fails to respond to any request for its consent within the time period,
if any, specified in this Lease, Landlord shall be deemed to have disapproved
such request.

L. Exhibits.

The Basic Lease Information, and the Exhibits, addenda and attachments attached
hereto are hereby incorporated herein by this reference and made a part of this
Lease as though fully set forth herein.

M.

No Light, Air or View Easement. Any diminution or shutting off of light, air or
view by any structure which may be erected on lands adjacent to or in the
vicinity of the Building shall in no way affect this Lease or impose any
liability on Landlord.

N. No Third Party Benefit.

This Lease is a contract between Landlord and Tenant and nothing herein is
intended to create any third party benefit.

0. Quiet Enjoyment.

Upon payment by Tenant of the Rent, and upon the observance and performance of
all of the other covenants, terms and conditions on Tenant's part to be observed
and performed, Tenant shall peaceably and quietly hold and enjoy the Premises
for the term hereby demised without hindrance or interruption by Landlord or any
other person or persons lawfully or equitably claiming by, through or under
Landlord, subject, nevertheless, to all of the other terms and conditions of
this Lease. Landlord shall not be liable for any hindrance, interruption,
interference or disturbance by other tenants or third persons, nor shall Tenant
be released from any obligations under this Lease because of such hindrance,
interruption, interference or disturbance.

P. Counterparts.

This Lease may be executed in any number of counterparts, each of which shall be
deemed an original.

Q. Multiple Parties.

If more than one person or entity is named herein as Tenant, such multiple
parties shall have joint and several responsibility to comply with the terms of
this Lease.

R. Prorations.

Any Rent or other amounts payable to Landlord by Tenant hereunder for any
fractional month shall be prorated based on a month of 30 days. As used herein,
the term "fiscal year" shall mean the calendar year or such other fiscal year as
Landlord may deem appropriate.

S. Broker.

Tenant represents that it has dealt directly with and only with Linda Costello
as a broker in connection with this Lease. Tenant shall indemnify and hold
Landlord and the Landlord Indemnities harmless from all claims of any other
brokers claiming to have represented Tenant in connection with this Lease.
Landlord agrees to indemnify and hold Tenant and the Tenant Parties harmless
from all claims of any brokers claiming to have represented Landlord in
connection with this Lease.

 

39. ADDITIONAL PROVISIONS

A. Base Rent.

Tenant shall pay Base Rent pursuant to the following schedule:

Months of Term

Annual Base Rent

Monthly Base Rent

1-12

$576,878.40

$48,073.20

13-24

$594,184.75

$49,515.40

25-36

$612,010.29

$51,000.86

37-48

$630,370.60

$52,530.88

49-60

$649,281.72

$54,106.81

B. Temporary Space.

1. If Tenant has not completed the Initial Alterations in the Premises pursuant
to the Lease Improvement Agreement attached hereto as Exhibit C as of the
scheduled Term Commencement Date, then Tenant shall have the right to lease the
Temporary Space (as defined hereinbelow) directly from Landlord pursuant to the
provisions of this Paragraph 39.B. During the period beginning on the later of
the full and final execution of this Lease by Landlord and Tenant, delivery of
the Security Deposit and all prepaid rental required under this Lease, delivery
of all initial certificates of insurance required by this Lease (which
certificates of insurance shall specifically cover both the Temporary Space
during the Temporary Space Term, as hereinafter defined, and the Premises) and
the scheduled Term Commencement Date, and ending on the actual Term Commencement
Date (such period being referred to herein as the "Temporary Space Term"),
Landlord shall allow Tenant to use approximately 24,933 rentable square feet of
space (the "Temporary Space") known as the entire Building located at 355
Fairview Way for the Permitted Use. During the Temporary Space Term, the
Temporary Space shall be deemed the "Premises" for purposes of Paragraph 8.C
(Indemnification) of the Lease. Such Temporary Space shall be accepted by Tenant
in its "as-is" condition and configuration, it being agreed that Landlord shall
be under no obligation to perform any work in the Temporary Space or to incur
any costs in connection with Tenant's move in, move out or occupancy of the
Temporary Space. Tenant acknowledges that it shall be entitled to use and occupy
the Temporary Space at its sole cost, expense and risk. Tenant shall not
construct any improvements or make any alterations of any type to the Temporary
Space without the prior written consent of Landlord. All costs in connection
with making the Temporary Space ready for occupancy by Tenant shall be the sole
responsibility of Tenant. Notwithstanding anything to the contrary contained
herein, Tenant currently is in possession of the Temporary Space, as a
subtenant, pursuant to the terms of a certain sublease agreement (the
"Sublease") between Tenant, as subtenant, and Sun Microsystems, Inc., a Delaware
corporation (the "Sublandlord"), as sublandlord, which sublease agreement, and
the underlying primary lease between Landlord and Sublandlord, are scheduled to
expire, by their respective terms, as of the day immediately preceding the
scheduled Term Commencement Date described in this Lease. Tenant agrees that the
Temporary Space is in good order and satisfactory condition, and that there are
no representations or warranties by Landlord regarding the condition of the
Temporary Space.

2. The Temporary Space shall be subject to all the terms and conditions of the
Lease except as expressly modified herein, provided that Base Rent for the
Temporary Space during the Temporary Space Term shall be $29,919.60 each month
during the Temporary Space Term, payable in accordance with the Lease, with the
first installment due on the date Landlord delivers possession of the Temporary
Space to Tenant. If the Temporary Space Term commences on other than the first
day of a calendar month or ends on other than the last day of a calendar month,
then the monthly Base Rent payable for the Temporary Space for any such partial
month shall be prorated to reflect the actual number of days of such partial
month falling within the Temporary Space Term. In addition, Tenant shall be
required to pay Tenant's Proportionate Share of Operating Expenses for the
Temporary Space during the Temporary Space Term in accordance with the terms of
Paragraph 7 of this Lease. Tenant's Proportionate Share of the Building for the
Temporary Space is deemed to mean 100% and Tenant's Proportionate Share of the
Project for the Temporary Space is deemed to mean 26.0956%. Notwithstanding the
foregoing to the contrary, (i) Tenant shall not be entitled to receive any
allowances, abatement or other financial concession in connection with the
Temporary Space which was granted with respect to the Premises unless such
concessions are expressly provided for herein with respect to the Temporary
Space, and (ii) the Temporary Space shall not be subject to any renewal or
expansion rights of Tenant under the Lease.

3. Upon termination of the Temporary Space Term, Tenant shall vacate the
Temporary Space and deliver the same to Landlord in good condition and repair,
ordinary wear and tear excepted. At the expiration or earlier termination of the
Temporary Space Term, Tenant shall remove all debris, all items of Tenant's
personalty, and any trade fixtures of Tenant from the Temporary Space. Tenant
shall be fully liable for all damage Tenant or Tenant's agents, employees,
contractors, or subcontractors cause to the Temporary Space. Tenant shall have
no right to hold over or otherwise occupy the Temporary Space at any time
following the expiration or earlier termination of the Temporary Space Term, and
in the event of such holdover, Landlord shall immediately be entitled to
institute dispossessory proceedings to recover possession of the Temporary
Space, without first providing notice thereof to Tenant. In the event of holding
over by Tenant after expiration or termination of the Temporary Space Term
without the written authorization of Landlord, Tenant shall pay, for such
holding over, 150% of the monthly Base Rent due for the Temporary Space at the
rate in effect immediately preceding the expiration of the Temporary Space Term
for each month or partial month of holdover, plus all consequential damages that
Landlord incurs as a result of the Tenant's hold over. During any such holdover,
Tenant's occupancy of the Temporary Space shall be deemed that of a tenant at
sufferance, and in no event, either during the Temporary Space Term or during
any holdover by Tenant, shall Tenant be determined to be a tenant-at-will under
applicable law. While Tenant is occupying the Temporary Space, Landlord or
Landlord's authorized agents shall be entitled to enter the Temporary Space,
upon reasonable notice, to display the Temporary Space to prospective tenants.

C. Renewal Option.

1. Grant of Option; Conditions. Tenant shall have the right to extend the Term
(the "Renewal Option") for one additional period of 5 years commencing on the
day following the Term Expiration Date of the initial Term and ending on the
anniversary of the Term Expiration Date (the "Renewal Term"), if:

(i). Landlord receives notice of exercise ("Initial Renewal Notice") not less
than 9 full calendar months prior to the expiration of the initial Term and not
more than 12 full calendar months prior to the expiration of the initial Term;
and

(ii). Tenant is not in default under the Lease beyond any applicable cure
periods at the time that Tenant delivers its Initial Renewal Notice or at the
time Tenant delivers its Binding Notice (as defined below); and

(iii). No part of the Premises is sublet (other than pursuant to a Permitted
Transfer, as defined in Paragraph 2l.F. of the Lease) at the time that Tenant
delivers its Initial Renewal Notice or at the time Tenant delivers its Binding
Notice; and

(iv). The Lease has not been assigned (other than pursuant to a Permitted
Transfer, as defined in Paragraph 2l.F. of the Lease) prior to the date that
Tenant delivers its Initial Renewal Notice or prior to the date Tenant delivers
its Binding Notice.

2. Terms Applicable to Premises During Renewal Term.

(i). The initial Base Rent rate per rentable square foot for the Premises during
the Renewal Term shall equal the greater of (x) the Prevailing Market rate
(hereinafter defined) per rentable square foot for the Premises or (y) 100% of
the Base Rent rate, per rentable square foot per annum, applicable during the
last year of the initial Term. Base Rent during the Renewal Term shall increase,
if at all, in accordance with the increases assumed in the determination of
Prevailing Market rate. Base Rent attributable to the Premises shall be payable
in monthly installments in accordance with the terms and conditions of Paragraph
6 of the Lease.

(ii). Tenant shall pay Additional Rent (i.e. Operating Expenses) for the
Premises during the Renewal Term in accordance with the terms of Paragraph 7 of
the Lease, and the manner and method in which Tenant reimburses Landlord for
Tenant's share of Operating Expenses shall be some of the factors considered in
determining the Prevailing Market rate for the Renewal Term.

3. Initial Procedure for Determining Prevailing Market. Within 30 days after
receipt of Tenant's Initial Renewal Notice, Landlord shall advise Tenant in
writing of the applicable Base Rent rate for the Premises for the Renewal Term.
Tenant, within 15 days after the date on which Landlord delivers written notice
to Tenant of the applicable Base Rent rate for the Renewal Term, shall either
(i) give Landlord final binding written notice ("Binding Notice") of Tenant's
exercise of its Renewal Option, or (ii) if Tenant disagrees with Landlord's
determination, provide Landlord with written notice of rejection (the "Rejection
Notice"). If Tenant fails to provide Landlord with either a Binding Notice or
Rejection Notice within such 15 day period, Tenant's Renewal Option shall be
null and void and of no further force and effect. If Tenant provides Landlord
with a Binding Notice, Landlord and Tenant shall enter into the Renewal
Amendment (as defined below) upon the terms and conditions set forth herein. If
Tenant provides Landlord with a Rejection Notice, Landlord and Tenant shall work
together in good faith to agree upon the Prevailing Market rate for the Premises
during the Renewal Term. Upon agreement, Landlord and Tenant shall enter into
the Renewal Amendment in accordance with the terms and conditions hereof.
Notwithstanding the foregoing, if Landlord and Tenant fail to agree upon the
Prevailing Market rate within 30 days after the date Tenant provides Landlord
with the Rejection Notice, Tenant, by written notice to Landlord (the
"Arbitration Notice") within 10 days after the expiration of such 30 day period,
shall have the right to have the Prevailing Market rate determined in accordance
with the arbitration procedures described in Section D below. If Landlord and
Tenant fail to agree upon the Prevailing Market rate within the 30 day period
described and Tenant fails to timely exercise its right to arbitrate, Tenant's
Renewal Option shall be deemed to be null and void and of no further force and
effect.

4. Arbitration Procedure.

(i). If Tenant provides Landlord with an Arbitration Notice, Landlord and
Tenant, within 10 days after receipt of the Arbitration Notice, shall each
simultaneously submit to the other, in a sealed envelope, its good faith
estimate of the Prevailing Market rate for the Premises during the Renewal Term
(collectively referred to as the "Estimates"). If the higher of such Estimates
is not more than 105% of the lower of such Estimates, then Prevailing Market
rate shall be the average of the two Estimates. If the Prevailing Market rate is
not resolved by the exchange of Estimates, then, within 7 days after the
exchange of Estimates, Landlord and Tenant shall each select an appraiser to
determine which of the two Estimates most closely reflects the Prevailing Market
rate for the Premises during the Renewal Term. Each appraiser so selected shall
be certified as an MAI appraiser or as an ASA appraiser and shall have had at
least 5 years experience within the previous 10 years as a real estate appraiser
working in Milpitas, California, with working knowledge of current rental rates
and practices. For purposes hereof, an "MAI" appraiser means an individual who
holds an MAI designation conferred by, and is an independent member of, the
American Institute of Real Estate Appraisers (or its successor organization, or
in the event there is no successor organization, the organization and
designation most similar), and an "ASA" appraiser means an individual who holds
the Senior Member designation conferred by, and is an independent member of, the
American Society of Appraisers (or its successor organization, or, in the event
there is no successor organization, the organization and designation most
similar).

(ii). Upon selection, Landlord's and Tenant's appraisers shall work together in
good faith to agree upon which of the two Estimates most closely reflects the
Prevailing Market rate for the Premises. The Estimate chosen by such appraisers
shall be binding on both Landlord and Tenant as the Base Rent rate for the
Premises during the Renewal Term, subject to the terms of subparagraph 4(iv)
below regarding the Minimum Renewal Base Rent, as defined therein. If either
Landlord or Tenant fails to appoint an appraiser within the 7 day period
referred to above, the appraiser appointed by the other party shall be the sole
appraiser for the purposes hereof. If the two appraisers cannot agree upon which
of the two Estimates most closely reflects the Prevailing Market within 20 days
after their appointment, then, within 10 days after the expiration of such 20
day period, the two appraisers shall select a third appraiser meeting the
aforementioned criteria. Once the third appraiser (i.e. arbitrator) has been
selected as provided for above, then, as soon thereafter as practicable but in
any case within 14 days, the arbitrator shall make his determination of which of
the two Estimates most closely reflects the Prevailing Market rate and such
Estimate shall be binding on both Landlord and Tenant as the Base Rent rate for
the Premises, subject to the terms of Parhgraph 4(iv) below regarding the
Minimum Renewal Base Rent, as defined therein. If the arbitrator believes that
expert advice would materially assist him, he may retain one or more qualified
persons to provide such expert advice. The parties shall share equally in the
costs of the arbitrator and of any experts retained by the arbitrator. Any fees
of any appraiser, counsel or experts engaged directly by Landlord or Tenant,
however, shall be borne by the party retaining such appraiser, counsel or
expert.

(iii). If the Prevailing Market rate has not been determined by the commencement
date of the Renewal Term, Tenant shall pay Base Rent upon the terms and
conditions in effect during the last month of the initial Term for the Premises
until such time as the Prevailing Market rate has been determined. Upon such
determination, the Base Rent for the Premises shall be retroactively adjusted to
the commencement of the Renewal Term for the Premises. If such adjustment
results in an underpayment of Base Rent by Tenant, Tenant shall pay Landlord the
amount of such underpayment within 30 days after the determination thereof. If
such adjustment results in an overpayment of Base Rent by Tenant, Landlord shall
credit such overpayment against the next installment of Base Rent due under the
Lease and, to the extent necessary, any subsequent installments, until the
entire amount of such overpayment has been credited against Base Rent.

5. Renewal Amendment. If Tenant is entitled to and properly exercises its
Renewal Option, Landlord shall prepare an amendment (the "Renewal Amendment") to
reflect changes in the Base Rent, Term, Term Expiration Date and other
appropriate terms. The Renewal Amendment shall be sent to Tenant within a
reasonable time after receipt of the Binding Notice and Tenant shall execute and
return the Renewal Amendment to Landlord within 15 days after Tenant's receipt
of same, but, upon final determination of the Prevailing Market rate applicable
during the Renewal Term as described herein, an otherwise valid exercise of the
Renewal Option shall be fully effective whether or not the Renewal Amendment is
executed.

6. Prevailing Market. For purposes hereof, "Prevailing Market" shall mean the
arms length fair market annual rental rate per rentable square foot under
renewal leases and amendments entered into on or about the date on which the
Prevailing Market is being determined hereunder for space comparable to the
Premises in the Building and buildings comparable to the Building in north San
Jose and Milpitas, California. The determination of Prevailing Market shall take
into account any material economic differences between the terms of this Lease
and any comparison lease or amendment, such as rent abatements, construction
costs and other concessions and the manner, if any, in which the landlord under
any such lease is reimbursed for operating expenses and taxes.

 

40. JURY TRIAL WAIVER

EACH PARTY HERETO (WHICH INCLUDES ANY ASSIGNEE, SUCCESSOR HEIR OR PERSONAL
REPRESENTATIVE OF A PARTY) SHALL NOT SEEK A JURY TRIAL, HEREBY WAIVES TRIAL BY
JURY, AND HEREBY FURTHER WAIVES ANY OBJECTION TO VENUE IN THE COUNTY IN WHICH
THE BUILDING IS LOCATED, AND AGREES AND CONSENTS TO PERSONAL JURISDICTION OF THE
COURTS OF THE STATE IN WHICH THE PROPERTY IS LOCATED, IN ANY ACTION OR
PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY HERETO AGAINST THE OTHER ON ANY
MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE
RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY OF THE PREMISES,
OR ANY CLAIM OF INJURY OR DAMAGE, OR THE ENFORCEMENT OF ANY REMEDY UNDER ANY
STATUTE, EMERGENCY OR OTHERWISE, WHETHER ANY OF THE FOREGOING IS BASED ON THIS
LEASE OR ON TORT LAW. EACH PARTY REPRESENTS THAT IT HAS HAD THE OPPORTUNITY TO
CONSULT WITH LEGAL COUNSEL CONCERNING THE EFFECT OF THIS PARAGRAPH 40. THE
PROVISIONS OF THIS PARAGRAPH 40 SHALL SURVIVE THE EXPIRATION OR EARLIER
TERMINATION OF THIS LEASE.

IN WITNESS WHEREOF

, the parties hereto have executed this Lease as of the day and the year first
above written.

                                                                  LANDLORD

                                                                  
EOP-INDUSTRIAL PORTFOLIO, L.L.C., a Delaware limited liability company

                                                                   By: EOP
Operating Limited Partnership, a Delaware limited partnership, its sole member

                                                                   By: Equity
Office Properties Trust, a Maryland real estate trust, its general partner

                                                                  
By:                 _____________________________________

                                                                  
Name:            __________John W. Petersen____________

                                                                  
Title:              _______Regional Senior Vice President______

                                                                   Date: June 5,
2002

                                                                   TENANT

                                                                   SIGMA
DESIGNS, INC, a California corporation

                                                                  
By:                 __________Thinh Tran____________

                                                                  
Its:                 ____________CEO_______________

                                                                  
By:                 ___________Kit Tsui_____________

                                                                  
Its:                 ____________CFO_______________

                                                                   Date: 5 / 31,
02