Exhibit 10.1

OFFICE LEASE AGREEMENT

BY AND BETWEEN

SOUTH LAKE AVENUE INVESTORS LLC,

a Delaware limited liability company

AS LANDLORD

and

ARROWHEAD RESEARCH CORPORATION,

a Delaware corporation

AS TENANT

DATED April 12, 2012

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TABLE OF CONTENTS

 

     Page   Index of Defined Terms      iv    Basic Lease Information      v   
1.   Demise      1    2.   Premises      1    3.   Term      2    4.   Rent     
3    5.   Utilities and Services      10    6.   Late Charge      13    7.  
Security Deposit      13    8.   Possession      14    9.   Use of Premises     
14    10.   Acceptance of Premises      16    11.   Surrender      16    12.  
Alterations and Additions      17    13.   Maintenance and Repairs of Premises
     19    14.   Landlord’s Insurance      20    15.   Tenant’s Insurance     
20    16.   Indemnification      22    17.   Subrogation      22    18.   Signs
     22    19.   Free from Liens      23    20.   Entry by Landlord      23   
21.   Destruction and Damage      24    22.   Condemnation      26    23.  
Assignment and Subletting      27    24.   Default      31    25.   Landlord’s
Remedies      33    26.   Landlord’s Right to Perform Tenant’s Obligations     
37    27.   Attorney’s Fees      37    28.   Taxes      38   

 

-i-

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TABLE OF CONTENTS

(continued)

 

     Page   29.   Effect of Conveyance      38    30.   Tenant’s Estoppel
Certificate      38    31.   Subordination      38    32.   Environmental
Covenants      39    33.   Notices      42    34.   Waiver      42    35.  
Holding Over      42    36.   Successors and Assigns      43    37.   Time     
43    38.   Brokers      43    39.   Limitation of Liability      43    40.  
Financial Statements      44    41.   Rules and Regulations      44    42.  
Mortgagee Protection      44    43.   Relocation      45    44.   Parking     
46    45.   Entire Agreement      48    46.   Interest      48    47.  
Governing Law; Construction      48    48.   Representations and Warranties of
Tenant      48    49.   Name of Building      50    50.   Security      50   
51.   Jury Trial Waiver      50    52.   Recordation      50    53.   Right to
Lease      51    54.   Force Majeure      51    55.   Acceptance      51    56.
  Renewal Option (with FMV Rent)      51   

 

-ii-

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INDEX OF EXHIBITS

 

A    Diagram of the Premises B    Tenant Improvements C    Commencement and
Expiration Date Memorandum D    Rules and Regulations E    Form of Estoppel
Certificate F    California Asbestos Disclosure

 

iii

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INDEX OF DEFINED TERMS

 

ADA

     15   

Additional Rent

     3   

Allowance

     1   

Alterations

     17   

Base Insurance Expenses

     6   

Base Operating Expenses

     6   

Base Rent

     3   

Base Taxes

     6   

Base Utility Expenses

     6   

Base Year

     6   

Basic Lease Information

     1   

Budget

     3   

Building

     1   

Casualty Discovery Date

     24   

Change Orders

     4   

Commencement Date

     2   

Common Areas

     1   

Computation Year

     7   

Condemnation

     26   

Default

     31   

Drawings

     3   

Electric Service Provider

     11   

Environmental Laws

     39, 40   

Excess Tenant Improvements Cost

     4   

Expiration Date

     2   

Final Plans

     3   

Fit-up Work

     4   

Force Majeure

     51   

Guarantor

     31   

Hazardous Materials

     39   

Holder

     44   

Insurance Expenses

     5   

Landlord Parties

     43   

Landlord’s Agents

     14   

Landlord’s Insureds

     21   

Laws

     15   

Lease

     1   

Normal Business Hours

     10   

Operating Expenses

     3, 5   

Parking Areas

     1   

Premises

     1   

Private Restrictions

     15   

Project

     1   

Proportionate Share

     8   

Rent

     9   

Rules and Regulations

     44   

Successor Landlord

     39   

Superior Lease(s)

     38   

Superior Lessor

     39   

Superior Mortgage(s)

     38   

Superior Mortgagee

     39   

Systems

     4   

Taxes

     6   

Tenant Improvements Cost

     1   

Tenant’s Agents

     14   

Tenant’s Property

     21   

Term

     2   

Utilities

     5   

Utility Expenses

     5   

Visitor Parking Fees

     47   

worth at the time of award

     34   

 

 

iv

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L E A S E    A G R E E M E N T

BASIC LEASE INFORMATION

 

Lease Date:   April 12, 2012 Landlord:  

SOUTH LAKE AVENUE INVESTORS LLC,

a Delaware limited liability company

Landlord’s Address:  

Attention: Asset Manager - Corporate Center Pasadena

c/o UBS Realty Investors, LLC

455 Market Street, Suite 1540

San Francisco, California 94105

  All notices sent to Landlord under this Lease shall be sent to the above
address, with copies to:  

General Manager

PM Realty Group, L.P.

251 South Lake Avenue, Suite 100

Pasadena, California 91101-3057

 

All rent amounts shall be made payable to:

SOUTH LAKE AVENUE INVESTORS LLC

  and shall be mailed to:  

P.O. Box 748163

Los Angeles, CA 90074-8163

Tenant:  

ARROWHEAD RESEARCH CORPORATION,

a Delaware corporation

Tenant’s Contact Person:   Ken Myszkowski Tenant’s Address:  

225 South Lake Avenue, Suite 1050

Pasadena, California 91101

Premises Square Footage:   Approximately 5,303 rentable square feet.
Premises Address:   225 South Lake Avenue, Suite 1050, Pasadena, California
91101. Project:   Corporate Center Pasadena, comprising 637,651 rentable square
feet, together with the accompanying land and all Common Areas.

 

v

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Building:   225 South Lake Avenue Building, comprising 238,607 rentable square
feet Tenant’s Proportionate Share of Project:   0.83% Tenant’s Proportionate
Share of Building:   2.22% Length of Term:   Sixty-Five (65) months, with one
(1) sixty (60) month option to extend the Term. Estimated Commencement Date:  
August 1, 2012 Estimated Expiration Date:   December 31, 2017 Base Rent:  

 

Months   Rentable
Sq. Ft.    

Approx.
Annual

Base Rate

   

Annual Base

Rent

   

Approx.
Monthly

Base Rate

   

Monthly

Base Rent

  1 - 12     5,303      $ 30.00      $ 159,090.00      $ 2.50      $ 13,257.50
   13 - 24     5,303      $ 30.90      $ 163,862.76      $ 2.57      $ 13,655.23
   25 - 36     5,303      $ 31.83      $ 168,778.56      $ 2.65      $ 14,064.88
   37 - 48     5,303      $ 32.78      $ 173,841.96      $ 2.73      $ 14,486.83
   49 - 60     5,303      $ 33.77      $ 179,057.16      $ 2.81      $ 14,921.43
   61 - 65     5,303      $ 34.78      $ 184,428.96      $ 2.90      $ 15,369.08
  

 

Prepaid Base Rent:   $13,257.50 Month to which Prepaid Base Rent will be
Applied:   First (1st) month of the Term. Base Year:   2012 Security Deposit:  
$15,369.08 Permitted Use:   General office use consistent with the standards of
a “Class A” office building. Reserved Parking Spaces:   Up to three (3)
exclusive and designated parking spaces at the Building’s then-prevailing
standard reserved parking rate, which is subject to change from time to time, to
be located as close to the Building’s P1 parking level entrance as available. As
of the Lease Date, reserved parking spaces are $125.00/month.

 

vi

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Unreserved Parking Spaces:   Fifteen (15) nonexclusive and undesignated parking
spaces at the Building’s then-prevailing standard unreserved parking rate, which
is subject to change from time to time, less the number of Reserved Parking
Spaces Tenant elects to use from time to time (not to exceed the maximum allowed
number of Reserved Parking Spaces set forth above). As of the Lease Date,
unreserved parking Spaces are $85.00/month. Broker(s):  

CBRE, Inc. (Landlord’s Broker)

CresaPartners (Tenant’s Broker)

 

vii

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OFFICE LEASE AGREEMENT

THIS OFFICE LEASE AGREEMENT is made and entered into by and between Landlord and
Tenant on the Lease Date. The defined terms used in this Lease which are defined
in the Basic Lease Information attached to this Lease Agreement (“Basic Lease
Information”) shall have the meaning and definition given them in the Basic
Lease Information. The Basic Lease Information, the exhibits, the addendum or
addenda described in the Basic Lease Information, and this Lease Agreement are
and shall be construed as a single instrument and are referred to herein as the
“Lease.”

 

1. DEMISE

In consideration for the rents and all other charges and payments payable by
Tenant, and for the agreements, terms and conditions to be performed by Tenant
in this Lease, LANDLORD DOES HEREBY LEASE TO TENANT, AND TENANT DOES HEREBY HIRE
AND TAKE FROM LANDLORD, the Premises described below (the “Premises”), upon the
agreements, terms and conditions of this Lease for the Term hereinafter stated.

 

2. PREMISES

The Premises demised by this Lease are located in that certain building (the
“Building”) specified in the Basic Lease Information, which Building is located
in that certain real estate development (the “Project”) specified in the Basic
Lease Information. The Premises has the address and contains the square footage
specified in the Basic Lease Information; provided, however, that any statement
of square footage set forth in this Lease, or that may have been used in
calculating any of the economic terms hereof, is an approximation which Landlord
and Tenant agree is reasonable and, except as expressly set forth in Sections
4(c)(iii) and 4(c)(v) below, no economic terms based thereon shall be subject to
revision whether or not the actual square footage is more or less. The location
and dimensions of the Premises are depicted on Exhibit A, which is attached
hereto and incorporated herein by this reference. Tenant shall have the
non-exclusive right (in common with the other tenants, Landlord and any other
person granted use by Landlord) to use the Common Areas (as hereinafter
defined), except that with respect to the Project’s parking areas (the “Parking
Areas”), Tenant shall have only the rights, if any, set forth in Section 44
below. For purposes of this Lease, the term “Common Areas” means all areas and
facilities outside the Premises and within the exterior boundary line of the
Project that are, from time to time, provided and designated by Landlord for the
non-exclusive use of Landlord, Tenant and other tenants of the Project and their
respective employees, guests and invitees.

The Premises shall be leased by Tenant in “As-Is,” “Where Is” and “With all
Faults” condition and without any representation, warranty or implied warranty
of any kind or nature as to the condition, use or occupancy which may be made
thereof and without any improvements or alterations by Landlord unless Landlord
has expressly agreed to make such improvements or alterations in a tenant work
letter attached hereto, if at all, as Exhibit B. If Landlord has agreed to make
any such improvements or alterations, then the Premises demised by this Lease
shall include any Tenant Improvements (as that term is defined in the tenant
improvement work letter) to be constructed by Landlord within the interior of
the Premises. Landlord shall construct any Tenant Improvements on the terms and
conditions set forth in Exhibit B, if attached hereto. Landlord and Tenant agree
to and shall be bound by the terms and conditions of Exhibit B, if any.

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Landlord has the right, in its sole discretion, from time to time, to: (a) make
changes to the Common Areas, the Building and/or the Project, including, without
limitation, changes in the location, size, shape and number of driveways,
entrances, parking spaces, parking areas, ingress, egress, direction of
driveways, entrances, hallways, corridors, lobby areas and walkways; (b) close
temporarily any of the Common Areas for maintenance purposes so long as
reasonable access to the Premises remains available; (c) add additional
buildings and improvements to the Common Areas or remove existing buildings or
improvements therefrom; (d) use the Common Areas while engaged in making
additional improvements, repairs or alterations to the Project or any portion
thereof, and (e) do and perform any other acts, alter or expand, or make any
other changes in, to or with respect to the Common Areas, the Building and/or
the Project as Landlord may, in its sole discretion, deem to be appropriate.
Without limiting the foregoing, Landlord reserves the right from time to time to
install, use, maintain, repair, relocate and replace pipes, ducts, conduits,
wires, and appurtenant meters and equipment for service to the Premises or to
other parts of the Building which are above the ceiling surfaces, below the
floor surfaces, within the walls and in the central core areas of the Building
which are located within the Premises or located elsewhere in the Building. In
connection with any of the foregoing activities of Landlord, Landlord shall use
reasonable efforts while conducting such activities to minimize any interference
with Tenant’s use of, or access to, the Premises.

No rights to any view or to light or air over any property, whether belonging to
Landlord or any other person, are granted to Tenant by this Lease. If at any
time any windows of the Premises are temporarily darkened or the light or view
therefrom is obstructed, the same shall be without liability to Landlord and
without any reduction or diminution of Tenant’s obligations under this Lease.

 

3. TERM

The term of this Lease (the “Term”) shall be for the period of months and days
specified in the Basic Lease Information, commencing on the date which is the
earlier to occur of (i) twenty (20) business days following the date the Tenant
Improvements are approved by the appropriate governmental agency as being in
accordance with its building code and the building permit issued for such
improvements, as evidenced by the issuance of a final building inspection
approval, and Landlord has notified Tenant that the Tenant Improvements have
been substantially completed in accordance with the plans and specifications
therefor, or (ii) the date Tenant occupies the Premises for the purpose of
conducting business therein (the “Commencement Date”). In the event the
Commencement Date, as determined pursuant to the foregoing, is a date other than
the Estimated Commencement Date, then Landlord and Tenant shall promptly execute
a Commencement and Expiration Date Memorandum in the form attached hereto as
Exhibit C, wherein the parties shall specify the Commencement Date, the date on
which the Term expires (the “Expiration Date”) and the date on which Tenant is
to commence paying Rent (as defined below). If the actual Commencement Date is a
day other than the first day of a calendar month, the Term shall be extended
through the end of the month in which the Lease expires, so that the Expiration
Date occurs on the last day of the month.

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4. RENT

(a) Base Rent. Tenant shall pay to Landlord, in advance on the first day of each
month, without further notice or demand and without abatement, offset, rebate,
credit or deduction for any reason whatsoever, the monthly installments of rent
specified in the Basic Lease Information (the “Base Rent”). Notwithstanding
anything herein to the contrary, provided that Tenant is not in default beyond
any applicable notice and cure period pursuant to the terms of this Lease at any
time during the Term, then Tenant shall be excused from the obligation of paying
the monthly Base Rent (but not any other amounts) due hereunder for the second
(2nd) through the sixth (6th) months of the Term (the “Excused Base Rent”).
However, should Tenant default hereunder beyond any applicable cure period such
that Landlord properly exercises Landlord’s remedies pursuant to Section 25
below, then the Excused Base Rent shall no longer be excused and shall become an
obligation of Tenant hereunder, and Landlord shall be entitled to seek recovery
of the Excused Base Rent as part of the damages to which Landlord is entitled
pursuant to the terms of the Lease. Additionally, Tenant has the right to
utilize a portion of the Allowance as a credit against Base Rent subject to, and
in accordance with, the provisions of Section 1.2(c) of Exhibit B hereto. Upon
execution of this Lease, Tenant shall pay to Landlord the Security Deposit and
the Prepaid Rent specified in the Basic Lease Information to be applied toward
Base Rent and Additional Rent for the month of the Term specified in the Basic
Lease Information.

As used in this Lease, the term “Additional Rent” means all sums of money, other
than Base Rent, that shall become due from and payable by Tenant pursuant to
this Lease, and “Expenses” means the total of Operating Expenses, Insurance
Expenses, Utility Expenses, and Taxes.

(b) Additional Rent.

(i) Commencing as of the first anniversary of the Commencement Date, in addition
to the Base Rent, Tenant shall pay to Landlord as Additional Rent, in accordance
with this Section 4(b), (i) Tenant’s Proportionate Share(s) of the total dollar
increase, if any, in Operating Expenses (as defined below) attributable to each
Computation Year (as defined below) over Base Operating Expenses (as defined
below), (ii) Tenant’s Proportionate Share(s) of the total dollar increase, if
any, in Insurance Expenses (as defined below) attributable to each Computation
Year over Base Insurance Expenses (as defined below), (iii) Tenant’s
Proportionate Share(s) of the total dollar increase, if any, in Utility Expenses
(as defined below) attributable to each Computation Year over Base Utility
Expenses (as defined below), and (iv) Tenant’s Proportionate Share(s) of the
total dollar increase, if any, in Taxes (as defined below) attributable to each
Computation Year over Base Taxes (as defined below).

(ii) As used in this Lease, the following terms shall have the meanings
specified:

(A) “Operating Expenses” means the total costs and expenses paid or incurred by
Landlord in connection with the ownership, operation, maintenance, management
and repair of the Premises, the Building and/or the Project or any part thereof,
including, without limitation, all the following items:

(1) Common Area Operating Expenses. All costs to operate, maintain, repair,
replace, supervise, insure and administer the Common Areas, including, without
limitation, any Parking Areas owned by Landlord for the use of tenants, and
further including, without limitation, supplies, materials, labor and equipment
used in or related to the operation and maintenance of the Common Areas,
including, without limitation, Parking Areas (including, without limitation, all
costs of resurfacing and restriping Parking Areas), signs and directories on the
Building and/or the Project, landscaping (including, without limitation,
maintenance contracts and fees payable to landscaping consultants), amenities,
sprinkler systems, sidewalks, walkways, driveways, curbs, lighting systems and
security services, if any, provided by Landlord for the Common Areas, and any
charges, assessments, costs or fees levied by any association or entity of which
the Project or any part thereof is a member or to which the Project or any part
thereof is subject.

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(2) Parking Charges; Public Transportation Expenses. Any parking charges or
other costs levied, assessed or imposed by, or at the direction of, or resulting
from statutes or regulations, or interpretations thereof, promulgated by any
governmental authority or insurer in connection with the use or occupancy of the
Building or the Project, and the cost of maintaining any public transit system,
vanpool, or other public or semi-public transportation imposed upon Landlord’s
ownership and operation of the Building and/or the Project.

(3) Maintenance and Repair Costs. All costs to maintain, repair, and replace the
Premises, the Building and/or the Project or any part thereof and the personal
property used in conjunction therewith, including, without limitation, insurance
deductibles and, without limitation, (a) all costs paid under maintenance,
management and service agreements such as contracts for janitorial, security and
refuse removal, (b) all costs to maintain, repair and replace the roof coverings
of the Building or the Project or any part thereof, (c) all costs to maintain,
repair and replace the heating, ventilating, air conditioning, plumbing, sewer,
drainage, electrical, fire protection, escalator, elevator, life safety and
security systems and other mechanical, electrical and communications systems and
equipment serving the Premises, the Building and/or the Project or any part
thereof (collectively, the “Systems”), (d) the cost of all cleaning and
janitorial services and supplies, the cost of window glass replacement and
repair, and (e) the cost of maintenance, depreciation and replacement of
machinery, tools and equipment (if owned by Landlord) and for rental paid for
such machinery, tools and equipment (if rented) used in connection with the
operation or maintenance of the Building, and (f) costs for improvements made to
the Project which, although capital in nature, Landlord determines, in its sole
discretion, are necessary to enhance the security systems and improve the
security measures at the Project.

(4) Life Safety and Security Costs. All costs to install, maintain, repair and
replace all life safety systems, including, without limitation, (a) all fire
alarm systems serving the Premises, the Building and/or the Project or any part
thereof (including, without limitation, all maintenance contracts and fees
payable to life safety consultants), whether such systems are or shall be
required by Landlord’s insurance carriers, Laws (as hereinafter defined) or
otherwise, and (b) all costs of security and security systems at the Project,
including, without limitation; (i) wages and salaries (including, without
limitation, management fees) of all employees engaged in the security of the
Project; (ii) all supplies,

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materials, equipment, and devices used in the security of the Project, and any
upgrades thereto; and (iii) all service or maintenance contracts with
independent contractors for Project security, including, without limitation,
alarm service personnel, security guards, watchmen, and any other security
personnel.

(5) Management and Administration. All costs for management and administration
of the Premises, the Building and/or the Project or any part thereof, including,
without limitation, a property management fee, accounting, auditing, billing,
postage, salaries and benefits for all employees and contractors engaged in the
management, operation, maintenance, repair and protection of the Building and
the Project, whether located on the Project or off-site, payroll taxes and legal
and accounting costs, fees for licenses and permits related to the ownership and
operation of the Project, and office rent for the Building and/or Project
management office or the rental value of such office if it is located within the
Building and/or Project.

(6) Capital Improvements. Notwithstanding anything herein to the contrary,
amounts paid for capital improvements and other capital costs incurred in
connection with the Project (a) which are intended to effect economies in the
operation or maintenance of the Project, or any portion thereof to the extent of
their anticipated savings, (b) that are required to comply with conservation
programs, (c) which are replacements or modifications of nonstructural items
located in the Common Areas required to keep the Common Areas in good order or
condition, (d) that are non-structural in nature and required under any
governmental law or regulation enacted, or first enforced (provided Landlord was
not aware of a violation as of the Lease Date), after the Commencement Date, or
(e) which Landlord determines, in its reasonable discretion are necessary to
enhance Building security and improve security measures at the Project, all of
which shall be amortized uniformly over the useful life of the improvement
consistent with generally accepted real estate accounting principles.

Notwithstanding anything in this Section (b) to the contrary, Insurance
Expenses, Utility Expenses and Taxes shall not be deemed to constitute
“Operating Expenses” for purposes of this Section (A).

(B) “Insurance Expenses” means the total costs and expenses paid or incurred by
Landlord in connection with the obtaining of insurance on the Premises, the
Building and/or the Project or any part thereof or interest therein, including,
without limitation, premiums for “all risk” fire and extended coverage
insurance, commercial general liability insurance, rent loss or abatement
insurance, earthquake insurance, flood or surface water coverage, and other
insurance as Landlord deems necessary in its sole discretion, and any
deductibles paid under policies of any such insurance. The foregoing shall not
be deemed an agreement by Landlord to carry any particular insurance relating to
the Premises, Building, or Project.

(C) “Utility Expenses” means the cost of all electricity, water, gas, sewers,
oil and other utilities (collectively, “Utilities”), including, without
limitation, any surcharges imposed, serving the Premises, the Building and the
Project or any part thereof that are not separately metered to Tenant or any
other tenant, and any amounts, taxes, charges, surcharges, assessments or
impositions levied, assessed or imposed upon the Premises, the Building or the
Project or any part thereof, or upon Tenant’s use and occupancy thereof, as a
result of any rationing of Utility services or restriction on Utility use
affecting the Premises, the Building and/or the Project, as contemplated in
Section 5 below.

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(D) “Taxes” means all real estate taxes and assessments, which shall include any
form of tax, assessment (including, without limitation, any special or general
assessments and any assessments or charges for Utilities or similar purposes
included within any tax bill for the Building or the Project or any part
thereof, including, without limitation, entitlement fees, allocation unit fees
and/or any similar fees or charges), fee, license fee, business license fee,
levy, penalty (if a result of Tenant’s delinquency), sales tax, rent tax,
occupancy tax or other tax (other than net income, estate, succession,
inheritance, transfer or franchise taxes), imposed by any authority having the
direct or indirect power to tax, or by any city, county, state or federal
government or any improvement or other district or division thereof, whether
such tax is determined by the area of the Premises, the Building and/or the
Project or any part thereof, or the Rent and other sums payable hereunder by
Tenant or by other tenants, including, without limitation, (i) any gross income
or excise tax levied by any of the foregoing authorities, with respect to
receipt of Rent and/or other sums due under this Lease; (ii) upon any legal or
equitable interest of Landlord in the Premises, the Building and/or the Project
or any part thereof, (iii) upon this transaction or any document to which Tenant
is a party creating or transferring any interest in the Premises, the Building
and/or the Project; (iv) levied or assessed in lieu of, in substitution for, or
in addition to, existing or additional taxes against the Premises, the Building
and/or the Project, whether or not now customary or within the contemplation of
the parties; or surcharged against the Parking Areas. “Taxes” shall also include
legal and consultants’ fees, costs and disbursements incurred in connection with
proceedings to contest, determine or reduce taxes, Landlord specifically
reserving the right, but not the obligation, to contest by appropriate legal
proceedings the amount or validity of any taxes. Tenant and Landlord acknowledge
that Proposition 13 was adopted by the voters of the State of California in the
June, 1978 election and that assessments, taxes, fees, levies and charges may be
imposed by governmental agencies for such purposes as fire protection, street,
sidewalk, road, utility construction and maintenance, refuse removal and for
other governmental services which may formerly have been provided without charge
to property owners or occupants. It is the intention of the parties that all new
and increased assessments, taxes, fees, levies and charges due to any cause
whatsoever are to be included within the definition of real property taxes for
purposes of this Lease.

(E) “Base Year” means the calendar year specified in the Basic Lease
Information.

(F) “Base Operating Expenses” means the amount of Operating Expenses for the
Base Year.

(G) “Base Insurance Expenses” means the amount of Insurance Expenses for the
Base Year.

(H) “Base Taxes” means the amount of Taxes for the Base Year.

(I) “Base Utility Expenses” means the amount of Utility Expenses for the Base
Year. Notwithstanding anything to the contrary contained in this Lease, Base
Utility Expenses shall not include increases in utility costs due to
extraordinary circumstances,

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including, without limitation, conservation, bond and/or debt repayment
surcharges, charges of a one-time nature, boycotts, strikes, embargoes or other
events resulting in shortages. In addition, in the event that, in any
Computation Year after the Base Year, Landlord obtains a decrease in the unit
cost of electricity being provided to the Building through its negotiations with
utility providers or otherwise (“Reduced Electrical Rate”), Landlord shall have
the right to revise the electrical cost component of the Utility Expenses for
the Base Year to be equal to the amount such electrical cost component would
have been had the unit cost of electricity during the Base Year been equal to
the Reduced Electrical Rate.

(J) “Computation Year” means each twelve (12) consecutive month period
commencing January 1 of each year during the Term following the Base Year,
provided that Landlord, upon notice to Tenant, may change the Computation Year
from time to time to any other twelve (12) consecutive month period, and, in the
event of any such change, Tenant’s Proportionate Share(s) of Operating Expenses
over Base Operating Expenses, of Insurance Expenses over Base Insurance
Expenses, of Utility Expenses over Base Utility Expenses, and of Taxes over Base
Taxes shall be equitably adjusted for the Computation Years involved in any such
change.

(K) “Expense Adjustment Deadline” means the date which is eighteen (18) months
after the Expiration Date or earlier termination date of this Lease.
Notwithstanding anything to the contrary contained in this Lease, Tenant shall
have no obligation to pay any Expenses to Landlord which are first billed by the
Landlord after the Expense Adjustment Deadline (subject to adjustment for Force
Majeure); provided, however, nothing contained herein shall be deemed to relieve
Tenant from its liability to pay Tenant’s Proportionate Share of Expenses under
this Lease which were billed by Landlord prior to the Expense Adjustment
Deadline. Similarly, Landlord shall have no obligation to return, rebate or
credit to Tenant any refund, rebate, or return of Expenses received by Landlord
after the Expense Adjustment Deadline.

(L) “Exclusions”. The following items shall not be included within the
definitions of Operating Expenses, Insurance Expenses, Utility Expenses or
Taxes: (1) costs associated with the operation of the business of the ownership
or entity which constitutes “Landlord,” as distinguished from the cost of
building operations, including without limitation, accounting and legal matters,
cost of defending any law suits with any mortgagee (except as to the actions of
Tenant which may be at issue) or tenant, costs of selling, syndicating,
financing, mortgaging, or hypothecating any of Landlord’s interest in the
Building, costs of any disputes between Landlord and its employees not engaged
in Building operation, and disputes of Landlord with Building management;
(2) costs of capital improvements which are not contemplated under Section
(A)(6); (3) ground lease rent and/or any interest and principal payments
pursuant to any deed of trust secured by the property of which the Building is a
part; (4) legal fees, space planners’ fees, real estate brokers’ leasing
commissions, and advertising expenses incurred in connection with the leasing
space in the Building; (5) costs for which Landlord is reimbursed or entitled to
be reimbursed by its insurance carrier or any tenant’s insurance carrier(s);
(6) any bad debt loss, rent loss, or reserves for bad debts or rent loss, except
for the premiums, if any, associated with rental loss insurance; (7) fines,
penalties and interest incurred as a result of Landlord’s failure to make timely
payments; (8) electric power costs for which any tenant directly contracts with
the local public service company; (9) expenses directly

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resulting from the negligence or willful misconduct of Landlord, its agents,
servants or employees; (10) costs, including, permit, license and inspection
costs, incurred with respect to the installation of tenant improvements made for
new tenants in the Building or incurred in renovating or otherwise improving,
decorating, painting or redecorating vacant space for tenants or other occupants
of the Building; and (11) except for equipment rentals necessary for emergency
services, rentals and other related expenses incurred in leasing air
conditioning systems, elevators or other equipment ordinarily considered to be
of a capital nature.

(c) Payment of Additional Rent.

(i) Within ninety (90) days of the end of the Base Year and each Computation
Year or as soon thereafter as practicable, Landlord shall give to Tenant notice
of Landlord’s estimate of the total amounts that will be payable by Tenant under
Section (b) for the following Computation Year, and Tenant shall pay such
estimated Additional Rent on a monthly basis, in advance, on the first day of
each month. Tenant shall continue to make said monthly payments until notified
by Landlord of a change therein. If at any time or times Landlord determines
that the amounts payable under Section (b) for the current Computation Year will
vary from Landlord’s estimate given to Tenant, Landlord, by notice to Tenant,
may revise the estimate for such Computation Year, and subsequent payments by
Tenant for such Computation Year shall be based upon such revised estimate. By
April 1 of each calendar year following the initial Computation Year, Landlord
shall endeavor to provide to Tenant a reasonably detailed statement showing the
actual Additional Rent due to Landlord for the prior Computation Year. If the
total of the monthly payments of Additional Rent that Tenant has made for the
prior Computation Year is less than the actual Additional Rent chargeable to
Tenant for such prior Computation Year, then Tenant shall pay the difference in
a lump sum within ten (10) days after receipt of such statement from Landlord.
Any overpayment by Tenant of Additional Rent for the prior Computation Year
shall, at Landlord’s option, be either credited towards the Additional Rent next
due or returned to Tenant in a lump sum payment within ten (10) days after
delivery of such statement.

(ii) Landlord’s then-current annual operating and capital budgets for the
Building and the Project or the pertinent part thereof shall be used for
purposes of calculating Tenant’s monthly payment of estimated Additional Rent
for the current year, subject to adjustment as provided above. Landlord shall
make the final determination of Additional Rent for the year in which this Lease
terminates as soon as commercially practicable after termination of such year.
Even though the Term has expired and Tenant has vacated the Premises, with
respect to the year in which this Lease expires or terminates, Tenant shall
remain liable for payment of any amount due to Landlord in excess of the
estimated Additional Rent previously paid by Tenant, and, conversely, Landlord
shall promptly return to Tenant any overpayment. Failure of Landlord to submit
statements as called for herein shall not be deemed a waiver of Tenant’s
obligation to pay Additional Rent as herein provided.

(iii) With respect to Expenses, which Landlord allocates to the Building,
Tenant’s “Proportionate Share” shall be the percentage set forth in the Basic
Lease Information as Tenant’s Proportionate Share of the Building, as adjusted
by Landlord from time to time for a remeasurement of or changes in the physical
size of the Premises or the Building, whether such changes in size are due to an
addition to or a sale or conveyance of a portion of the Building or

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otherwise. With respect to Expenses, which Landlord allocates to the Project as
a whole or to only a portion of the Project, Tenant’s “Proportionate Share”
shall be, with respect to Operating Expenses, Insurance Expenses, Utility
Expenses or Taxes which Landlord allocates to the Project as a whole, the
percentage set forth in the Basic Lease Information as Tenant’s Proportionate
Share of the Project and, with respect to Expenses, which Landlord allocates to
only a portion of the Project, a percentage calculated by Landlord from time to
time in its sole discretion and furnished to Tenant in writing, in either case
as adjusted by Landlord from time to time for a remeasurement of or changes in
the physical size of the Premises or the Project, whether such changes in size
are due to an addition to or a sale or conveyance of a portion of the Project or
otherwise. Notwithstanding the foregoing, Landlord may equitably adjust Tenant’s
Proportionate Share(s) for all or part of any item of expense or cost
reimbursable by Tenant that relates to a repair, replacement, or service that
benefits only the Premises or only a portion of the Building and/or the Project
or that varies with the occupancy of the Building and/or the Project. Without
limiting the generality of the foregoing, Tenant understands and agrees that
Landlord shall have the right to adjust Tenant’s Proportionate Share(s) of any
Utility Expenses based upon Tenant’s use of the Utilities or similar services as
reasonably estimated and determined by Landlord based upon factors such as size
of the Premises and intensity of use of such Utilities by Tenant such that
Tenant shall pay the portion of such charges reasonably consistent with Tenant’s
use of such Utilities and similar services. If Tenant disputes any such estimate
or determination of Utility Expenses, then Tenant shall either pay the estimated
amount or, with the prior written approval of Landlord, which approval may be
given or withheld in Landlord’s sole and absolute discretion, cause the Premises
to be separately metered at Tenant’s sole expense.

(iv) In the event the average occupancy level of the Building or the Project for
the Base Year and/or any subsequent Computation Year is not ninety-five percent
(95%) or more of full occupancy, then the Operating Expenses for such year shall
be apportioned among the tenants by the Landlord to reflect those costs which
would have occurred had the Building or the Project, as applicable, been
ninety-five percent (95%) occupied during such year.

(v) Without limiting the terms of Section (c) above, Landlord reserves the right
from time to time to remeasure the Premises, the Building and/or the Project in
accordance with the current or revised standards promulgated from time to time
by the Building Owners and Managers Association (BOMA) or the American National
Standards Institute or other generally accepted measurement standards utilized
by Landlord and to thereafter adjust the Proportionate Share(s) of Tenant and
any other affected tenants of the Building and/or Project.

(d) General Payment Terms. The Base Rent, Additional Rent and all other sums
payable by Tenant to Landlord hereunder, any late charges assessed pursuant to
Section 6 below and any interest assessed pursuant to Section 46 below, are
referred to as the “Rent.” All Rent shall be paid in lawful money of the United
States of America and through a domestic branch of a United States financial
institution. Checks are to be made payable and mailed as set forth in the Basic
Lease Information, or to such other person or place as Landlord may, from time
to time, designate to Tenant in writing. The Rent for any fractional part of a
calendar month at the commencement or termination of the Term shall be a
prorated amount of the Rent for a full calendar month based upon a thirty
(30) day month.

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(e) Statements Binding. Every statement given by Landlord pursuant to Section
(c) shall be conclusive and binding upon Tenant unless (i) within ninety
(90) days after the receipt of such statement Tenant shall notify Landlord that
it disputes the correctness thereof, specifying the particular respects in which
the statement is claimed to be incorrect, and (ii) if such dispute shall not
have been settled by agreement, Tenant shall submit the dispute to arbitration
within one hundred eighty (180) days after receipt of the statement. Pending the
determination of such dispute by agreement or arbitration as aforesaid, Tenant
shall, within thirty (30) days after receipt of such statement, pay Additional
Rent in accordance with Landlord’s statement and such payment shall be without
prejudice to Tenant’s position. If the dispute shall be determined in Tenant’s
favor, Landlord shall within thirty (30) days thereafter pay Tenant the amount
of Tenant’s overpayment of Additional Rent resulting from compliance with
Landlord’s statement.

(f) Audit Rights. Provided Tenant notifies Landlord in accordance with the terms
of Section (e) above that Tenant disputes a statement received from Landlord,
Tenant or its CPA (as defined below) shall have the right, at Tenant’s sole cost
and expense, provided Tenant utilizes a Certified Public Accountant (the “CPA”)
compensated solely on an hourly basis, upon at least thirty (30) days prior
notice to Landlord at any time during regular business hours to audit, review
and photocopy Landlord’s records pertaining to the Expenses for the immediately
previous calendar year only. Tenant shall complete the audit and present any
disputed charges to Landlord, in writing, within six (6) months of receipt of
Landlord’s statement pursuant to Section (c). If Tenant fails to complete the
audit and present any disputed charges to Landlord within the foregoing six
(6) month period. Tenant shall forfeit any rights to claim a refund, rebate, or
return of the Expenses set forth in the statement. If, following Landlord’s
receipt of the audit and any disputed charges (the “Report Date”), Landlord
disputes the findings contained therein, and Landlord and Tenant are not able to
resolve their differences within thirty (30) days following the Report Date, the
dispute shall be resolved by binding arbitration as follows: Landlord and Tenant
shall each designate an independent certified public accountant, which shall in
turn jointly select a third independent Certified Public Accountant (the “Third
CPA”). The Third CPA, within thirty (30) days of selection, shall, at Tenant’s
sole expense, audit the relevant records and certify the proper amount within.
That certification shall be final and conclusive. If the Third CPA determines
that the amount of Operating Expenses billed to Tenant was incorrect, the
appropriate party shall pay to the other party the deficiency or overpayment, as
applicable, within thirty (30) days following delivery of the Third Party CPA’s
decision, without interest. Tenant agrees to keep all information thereby
obtained by Tenant confidential and to obtain the agreement of its CPA and Third
CPA to keep all such information confidential. Tenant shall provide a copy of
such CPA agreements to Landlord promptly upon request. Notwithstanding anything
herein to the contrary, if the Third CPA determines that Landlord overstated the
amount of Expenses by more than seven percent (7%), then Landlord shall
reimburse Tenant for its reasonable out-of-pocket audit expenses, including the
cost of the Third CPA.

 

5. UTILITIES AND SERVICES

(a) Building Services; Hours. From 8:00 a.m. to 6:00 p.m. on weekdays and
Saturday from 9:00 a.m. to 1:00 p.m. (“Normal Business Hours” (excluding legal
holidays)), Landlord shall furnish to the Premises electricity for lighting and
operation of low-power usage office machines, water, heat and air conditioning,
and elevator service. During all other hours, Landlord shall furnish such
service except for heat and air conditioning. Landlord shall provide

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janitorial services for the Premises five (5) days a week (excluding legal
holidays) as determined reasonably necessary by Landlord. Tenant shall
separately arrange with, and pay directly to, the applicable local public
authorities or utilities, as the case may be, for the furnishing, installation
and maintenance of all telephone services and equipment as may be required by
Tenant in the use of the Premises. Landlord shall not be liable for any damages
resulting from interruption of, or Tenant’s inability to receive such service,
and any such inability shall not relieve Tenant of any of its obligations under
this Lease. If at any time during the Term Landlord shall determine that
installation of a separate electrical meter for the Premises is necessary or
desirable as a result of Tenant’s electrical usage, Tenant shall pay the cost of
installing and maintaining such meter and the cost of Tenant’s electrical usage
as measured by such meter.

(b) After Hours HVAC. If requested in writing by Tenant with reasonable advance
notice, Landlord shall furnish heat and air conditioning at times other than
Normal Business Hours and the cost of such services as established by Landlord
shall be paid by Tenant as Additional Rent, payable concurrently with the next
installment of Base Rent. As of the Lease Date, HVAC service after Normal
Business Hours is $65.00 per hour.

(c) Electric Service Provider. Without limiting the terms of Section 5(a) above,
Tenant acknowledges that Landlord has contracted with the City of Pasadena to
provide electricity for the Building, and that Landlord reserves the right to
change the provider of such service at any time and from time to time in
Landlord’s sole discretion (any such provider being referred to herein as the
“Electric Service Provider”). Tenant shall obtain and accept electrical service
for the Premises only from and through Landlord, in the manner and to the extent
expressly provided in this Lease, at all times during the term of this Lease,
and Tenant shall have no right (and hereby waives any right Tenant may otherwise
have) (i) to contract with or otherwise obtain any electrical service for or
with respect to the Premises or Tenant’s operations therein from any provider of
electrical service other than the Electric Service Provider, or (ii) to enter
into any separate or direct contract or other similar arrangement with the
Electric Service Provider for the provision of electrical service to Tenant at
the Premises. Tenant shall cooperate with Landlord and the Electric Service
Provider at all times to facilitate the delivery of electrical service to Tenant
at the Premises and to the Building, including, without limitation, allowing
Landlord and the Electric Service Provider, and their respective agents and
contractors, (a) to install, repair, replace, improve and remove any and all
electric lines, feeders, risers, junction boxes, wiring, and other electrical
equipment, machinery and facilities now or hereafter located within the Building
or the Premises for the purpose of providing electrical service to or within the
Premises or the Building, and (b) reasonable access for the purpose of
maintaining, repairing, replacing or upgrading such electrical service from time
to time. Tenant shall provide such information and specifications regarding
Tenant’s use or projected use of electricity at the Premises as shall be
required from time to time by Landlord or the Electric Service Provider to
efficiently provide electrical service to the Premises or the Building. In no
event shall Landlord be liable or responsible for any loss, damage, expense or
liability, including, without limitation, loss of business or any consequential
damages, arising from any failure or inadequacy of the electrical service being
provided to the Premises or the Building, whether resulting from any change,
failure, interference, disruption, or defect in the supply or character of the
electrical service furnished to the Premises or the Building, or arising from
the partial or total unavailability of electrical service to the Premises or the
Building, from any cause whatsoever, or otherwise, nor shall any such failure,
inadequacy, change, interference, disruption, defect or

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unavailability constitute an actual or constructive eviction of Tenant, or
entitle Tenant to any abatement or diminution of Rent or otherwise relieve
Tenant from any of its obligations under this Lease.

(d) Usage Restriction. Tenant acknowledges that the Premises, the Building
and/or the Project may become subject to the rationing of Utility services or
restrictions on Utility use as required by a public utility company,
governmental agency or other similar entity having jurisdiction thereof. Tenant
acknowledges and agrees that its tenancy and occupancy hereunder shall be
subject to such rationing or restrictions as may be imposed upon Landlord,
Tenant, the Premises, the Building and/or the Project, and Tenant shall in no
event be excused or relieved from any covenant or obligation to be kept or
performed by Tenant by reason of any such rationing or restrictions. Tenant
agrees to comply with energy conservation programs implemented by Landlord by
reason of rationing, restrictions or Laws.

(e) Landlord Not Liable. Landlord shall not be liable for any loss, injury or
damage to property caused by or resulting from any variation, interruption, or
failure of Utilities due to any cause whatsoever, or from failure to make any
repairs or perform any maintenance. No temporary interruption or failure of such
services incident to the making of repairs, alterations, improvements, or due to
accident, strike, or conditions or other events shall be deemed an eviction of
Tenant or, subject to the terms of Section 5(g) below, relieve Tenant from any
of its obligations hereunder. In no event shall Landlord be liable to Tenant for
any damage to the Premises or for any loss, damage or injury to any property
therein or thereon occasioned by bursting, rupture, leakage or overflow of any
plumbing or other pipes (including, without limitation, water, steam, and/or
refrigerant lines), sprinklers, tanks, drains, drinking fountains or washstands,
or other similar cause in, above, upon or about the Premises, the Building, or
the Project.

(f) Tenant’s Utilities Consumption. Landlord makes no representation with
respect to the adequacy or fitness of the air-conditioning or ventilation
equipment in the Building to maintain temperatures which may be required for, or
because of, any equipment of Tenant, other than normal fractional horsepower
office equipment, or occupancy of the Premises by more than one person per 200
rentable square feet. Landlord shall have no liability for loss or damage in
connection therewith. Tenant shall not, without Landlord’s prior written
consent, use heat-generating machines, machines other than normal fractional
horsepower office machines, equipment or lighting other than building standard
lights in the Premises, which may affect the temperature otherwise maintained by
the air conditioning system or increase the water normally furnished for the
Premises by Landlord pursuant to the terms of this Section 5. If such consent is
given, Landlord shall have the right to install supplementary air conditioning
units or other facilities in the Premises, including, without limitation,
supplementary or additional metering devices, and the cost thereof, including,
without limitation, the cost of installation, operation and maintenance,
increased wear and tear on existing equipment and other similar charges, shall
be paid by Tenant to Landlord upon billing by Landlord. Tenant shall not use
water or heat or air conditioning in excess of that normally supplied by
Landlord. Tenant’s consumption of electricity shall not exceed the Building’s
capacity considering all other tenants of the Building.

(g) Service Interruption. Notwithstanding anything herein to the contrary, if
the Premises is made untenantable, inaccessible or unsuitable for the ordinary
conduct of Tenant’s

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business, as a result of an interruption in any of the basic services provided
by Landlord pursuant to this Section 5, then (i) Landlord shall use commercially
reasonable good faith efforts to restore the same as soon as is reasonably
possible, (ii) if, despite such commercially reasonable good faith efforts by
Landlord, such interruption persists for a period in excess of five (5)
consecutive business days, then Tenant, as its sole remedy, shall be entitled to
receive an abatement of Base Rent and Additional Rent payable hereunder during
the period beginning on the sixth (6th) consecutive business day of such
interruption and ending on the day the utility or service has been restored;
provided, however, that in the event such interruption is not due to Landlord’s
negligence or willful misconduct, then such abatement shall only apply to the
extent Landlord collects proceeds under the policy of rental-loss insurance the
cost of which has been included in Operating Expenses and the proceeds from
which are allocable to the Premises.

 

6. LATE CHARGE

Notwithstanding any other provision of this Lease to the contrary, Tenant hereby
acknowledges that late payment to Landlord of Rent, or other amounts due
hereunder will cause Landlord to incur costs not contemplated by this Lease, the
exact amount of which will be extremely difficult to ascertain. If any Rent or
other sums due from Tenant are not received by Landlord or by Landlord’s
designated agent within five (5) days after their due date, then Tenant shall
pay to Landlord a late charge equal to five percent (5%) of such overdue amount,
plus any costs and attorneys’ fees incurred by Landlord by reason of Tenant’s
failure to pay Rent and/or other charges when due hereunder. Landlord and Tenant
hereby agree that such late charges represent a fair and reasonable estimate of
the cost that Landlord will incur by reason of Tenant’s late payment and shall
not be construed as a penalty. Landlord’s acceptance of such late charges shall
not constitute a waiver of Tenant’s default with respect to such overdue amount
or stop Landlord from exercising any of the other rights and remedies granted
under this Lease.

 

7. SECURITY DEPOSIT

Concurrently with Tenant’s execution of the Lease, Tenant shall deposit with
Landlord the Security Deposit specified in the Basic Lease Information as
security for the full and faithful performance of each and every term, covenant
and condition of this Lease. Landlord may use, apply or retain the whole or any
part of the Security Deposit as may be reasonably necessary (a) to remedy any
Default by Tenant under this Lease, (b) to repair damage to the Premises caused
by Tenant, (c) to perform Tenant’s obligations under Section 11, in the event
Tenant fails to do so, (d) to reimburse Landlord for the payment of any amount
which Landlord may reasonably spend or be required to spend by reason of
Tenant’s Default, and (e) to compensate Landlord for any other loss or damage
which Landlord may suffer by reason of Tenant’s Default. Should Tenant
faithfully and fully comply with all of the terms, covenants and conditions of
this Lease, within thirty (30) days following the expiration of the Term, the
Security Deposit or any balance thereof shall be returned to Tenant or, at the
option of Landlord, to the last assignee of Tenant’s interest in this Lease.
Landlord shall not be required to keep the Security Deposit separate from its
general funds and Tenant shall not be entitled to any interest on such deposit.
If Landlord so uses or applies all or any portion of said deposit, within five
(5) days after written demand therefor Tenant shall deposit cash with Landlord
in an amount sufficient to restore the Security Deposit to the full extent of
the above amount, and Tenant’s failure to do so shall be a default under this
Lease. In the event Landlord transfers its interest in this Lease, Landlord
shall transfer

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the then remaining amount of the Security Deposit to Landlord’s successor in
interest, and thereafter Landlord shall have no further liability to Tenant with
respect to such Security Deposit. Tenant hereby waives any and all rights under
and the benefits of Section 1950.7 of the California Civil Code, and all other
provisions of law now in force or that become in force after the date of
execution of this Lease, that provide that Landlord may claim from a security
deposit only those sums reasonably necessary to remedy defaults in the payment
of Rent, to repair damage caused by Tenant, or to clean the Premises. Landlord
and Tenant agree that Landlord may, in addition, claim those sums reasonably
necessary to compensate Landlord for any other foreseeable or unforeseeable loss
or damage caused by the act or omission of Tenant or Tenant’s officers, agents,
employees, independent contractors, or invitees.

 

8. POSSESSION

(a) Tenant’s Right of Possession. Subject to Section 8(c), Tenant shall be
entitled to possession of the Premises upon commencement of the Term.

(b) Early Access. Tenant shall have the right to access the Premises prior to
the Commencement Date subject to and in accordance with the terms of Section 7
of Exhibit B hereto.

(c) Delay in Delivering Possession. If for any reason whatsoever, Landlord
cannot deliver possession of the Premises to Tenant on or before the Estimated
Commencement Date with the Tenant Improvements substantially completed, this
Lease shall not be void or voidable, nor shall Landlord, or Landlord’s agents,
advisors, employees, partners, shareholders, directors, invitees, independent
contractors or Landlord’s manager or investment advisors (collectively,
“Landlord’s Agents”), be liable to Tenant for any loss or damage resulting
therefrom. Notwithstanding the foregoing, if the Tenant Improvements are not
substantially completed and the Premises delivered by the date which is six
(6) months following the Estimated Commencement Date (as such date may be
extended by Force Majeure), then Tenant shall have the option to terminate this
Lease by written notice to Landlord within ten (10) days thereafter, unless
Landlord delivers possession of the Premises to Tenant with the Tenant
Improvements substantially completed prior to the expiration of such ten
(10) day period, and, upon any such termination, all deposits and prepayments
shall be refunded. The foregoing right of termination shall be the sole remedy
available to Tenant as a result of Landlord’s failure to deliver the Premises to
Tenant on a timely basis.

 

9. USE OF PREMISES

(a) Permitted Use. The use of the Premises by Tenant and Tenant’s agents,
advisors, employees, partners, shareholders, directors, customers, invitees and
independent contractors (collectively, “Tenant’s Agents”) shall be solely for
the Permitted Use specified in the Basic Lease Information and for no other use.
Tenant shall not permit any objectionable or unpleasant odor, smoke, dust, gas,
noise or vibration to emanate from or near the Premises. The Premises shall not
be used to create any nuisance or trespass, for any illegal purpose, for any
purpose not permitted by Laws (as hereinafter defined), for any purpose that
would invalidate the insurance or increase the premiums for insurance on the
Premises, the Building or the Project or for any purpose or in any manner that
would interfere with other tenants’ use or occupancy of the

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Project. If any of Tenant’s office machines or equipment disturb any other
tenant in the Building, then Tenant shall provide adequate insulation or take
such other action as may be necessary to eliminate the noise or disturbance.
Tenant agrees to pay to Landlord, as Additional Rent, any increases in premiums
on policies resulting from Tenant’s Permitted Use (other than general office
use) or any other use or action by Tenant or Tenant’s Agents which increases
Landlord’s premiums or requires additional coverage by Landlord to insure the
Premises. Tenant agrees not to overload the floor(s) of the Building.

(b) Compliance with Governmental Regulations and Private Restrictions. Tenant
and Tenant’s Agents shall, at Tenant’s expense, faithfully observe and comply
with (1) all municipal, state and federal laws, statutes, codes, rules,
regulations, ordinances, requirements, and orders (collectively, “Laws”), now in
force or which may hereafter be in force pertaining to the Premises or Tenant’s
use of the Premises, the Building or the Project; (2) all recorded covenants,
conditions and restrictions affecting the Project (“Private Restrictions”) now
in force or which may hereafter be in force; and (3) the Rules and Regulations
(as defined in Section 41 of this Lease). Without limiting the generality of the
foregoing, to the extent Landlord is required by the city or county in which the
Building is located to maintain carpooling and public transit programs, Tenant
shall cooperate in the implementation and use of these programs by and among
Tenant’s employees. The judgment of any court of competent jurisdiction, or the
admission of Tenant in any action or proceeding against Tenant, whether Landlord
be a party thereto or not, that Tenant has violated any Laws or Private
Restrictions, shall be conclusive of that fact as between Landlord and Tenant.

(c) Compliance with Americans with Disabilities Act. The Premises, the Building
and/or the Project may be subject to, among other Laws, the Americans with
Disabilities Act, 42 U.S.C. 12101 et seq., including, without limitation, to
Title III thereof, and all regulations and guidelines related thereto, together
with any and all laws, rules, regulations, ordinances, codes and statutes now or
hereafter enacted by local or state agencies having jurisdiction thereof
(including, without limitation, all of the requirements of Title 24 of the
California Code of Regulations), as the same may be in effect on the date of
this Lease and may be hereafter modified, amended or supplemented (collectively,
the “ADA”). Any Tenant Improvements to be constructed hereunder shall comply
with the ADA, and all costs incurred to comply therewith shall be a part of and
included in the cost of the Tenant Improvements. Tenant shall be solely
responsible for conducting its own independent investigation of this matter and
for ensuring that the design of all Tenant Improvements strictly complies with
all requirements of the ADA. Subject to reimbursement pursuant to Section 4(b)
above, if any barrier removal work or other work is required to the Building,
the Common Areas or the Project under the ADA, then such work shall be the
responsibility of Landlord; provided that, if such work is required under the
ADA as a result of Tenant’s use of the Premises (other than general office use)
or any work or Alteration (as hereinafter defined) made to the Premises by or on
behalf of Tenant (other than the Tenant Improvements), then such work shall be
performed by Landlord at the sole cost and expense of Tenant.

Except as otherwise expressly provided in this provision, Tenant shall be
responsible at its sole cost and expense for fully and faithfully complying with
all applicable requirements of the ADA. Within ten (10) days after receipt,
Tenant shall advise Landlord in writing, and provide Landlord with copies of (as
applicable), any notices alleging violation of the ADA

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relating to any portion of the Premises, the Building or the Project; any Claims
made or threatened orally or in writing regarding noncompliance with the ADA and
relating to any portion of the Premises, the Building, or the Project; or any
governmental or regulatory actions or investigations instituted or threatened
regarding noncompliance with the ADA and relating to any portion of the
Premises, the Building or the Project. Tenant shall and hereby agrees to
protect, defend (with counsel reasonably acceptable to Landlord) and hold
Landlord and Landlord’s Agents harmless and indemnify Landlord and Landlord’s
Agents from and against all actions, causes of action, charges, claims, costs,
damages, demands, expenses (including reasonable attorneys’ fees, costs of court
and expenses incurred), fines, judgments, liabilities, liens, losses, or
penalties of every kind and nature whatsoever (collectively, “Claims”) necessary
in the prosecution or defense of any litigation including the enforcement of
this provision arising from or in any way related to, directly or indirectly,
Tenant’s or Tenant’s Agents violation or alleged violation of the ADA. Tenant
agrees that the obligations of Tenant herein shall survive the expiration or
earlier termination of this Lease.

(d) No Roof Access. At no time during the Term shall Tenant have access to the
roof of the Building or have the right to install, operate or maintain a
satellite-earth communications station (antenna and associated equipment),
microwave equipment and/or an FM antenna on the Building or the Project.

 

10. ACCEPTANCE OF PREMISES

By its execution hereof, Tenant acknowledges that it had the opportunity to
fully inspect the Premises, including, without limitation, conducting any
desired testing. Tenant hereby certifies to Landlord that neither Tenant nor any
of its employees, agents, or contractors observed or has any actual knowledge of
any mold, mildew, Mold Conditions (as hereinafter defined) or moisture within
the Premises. Subject to Landlord’s obligations under Exhibit B, Landlord shall
deliver the Premises, Tenant shall accept the Premises as suitable for Tenant’s
intended use and as being in good and sanitary operating order, condition and
repair, “As-Is,” “Where Is” and “With all Faults” condition and without any
representation, warranty or implied warranty of any kind or nature as to the
condition, use or occupancy which may be made thereof and without any
improvements or alterations by Landlord. Any exceptions to the foregoing must be
by written agreement executed by Landlord and Tenant.

 

11. SURRENDER

Tenant agrees that on the last day of the Term, or on the sooner termination of
this Lease, Tenant shall surrender the Premises to Landlord (a) in broom clean,
good condition and repair (damage by acts of God, fire, normal wear and tear,
casualty and condemnation excepted), and (b) otherwise in accordance with
Section 32(f). Normal wear and tear shall not include any damage or
deterioration that would have been prevented by Tenant performing all of its
maintenance obligations under this Lease. On or before the expiration or sooner
termination of this Lease, (i) Tenant shall remove all of Tenant’s Property (as
hereinafter defined), all communications, computer or other electronic service
wiring, cabling and related devices installed in the Premises or elsewhere in
the Building by or at the request of Tenant (provided such removal shall be
performed by an engineer or telecom provider designated by Landlord), and
Tenant’s signage from the Premises, the Building and the Project, and Tenant
shall repair

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any damage caused by such removal, and (ii) Landlord may, subject to the
provisions of Section 12(i) below, by notice to Tenant given not later than
ninety (90) days prior to the Expiration Date (except in the event of a
termination of this Lease prior to the scheduled Expiration Date, in which event
no advance notice shall be required), require Tenant at Tenant’s expense to
remove any or all Alterations that Landlord has not consented to or that
Landlord has not informed Tenant may remain in the Premises pursuant to 12(i)
below, and to repair any damage caused by such removal; provided, however that
Tenant shall not be required to remove any of the initial Tenant Improvements
installed by Landlord under Exhibit B. Any of Tenant’s Property not so removed
by Tenant as required herein shall be deemed abandoned and may be stored,
removed, and disposed of by Landlord at Tenant’s expense, and Tenant waives all
Claims against Landlord for any damages resulting from Landlord’s retention and
disposition of such property; provided, however, that Tenant shall remain liable
to Landlord for all costs incurred in storing and disposing of such abandoned
property of Tenant. All Tenant Improvements and Alterations except those which
Landlord requires Tenant to remove shall remain in the Premises as the property
of Landlord.

 

12. ALTERATIONS AND ADDITIONS

(a) No Alterations Without Consent. Tenant shall not make, or permit to be made,
any alteration, addition or improvement (hereinafter referred to individually as
an “Alteration” and collectively as the “Alterations”) to the Premises or any
part thereof without the prior written consent of Landlord, which consent shall
not be unreasonably withheld, conditioned or delayed; provided, however, that
Landlord shall have the right in its sole and absolute discretion to consent or
to withhold its consent to any Alteration which conflicts with the Construction
Rules and Regulations (as hereinafter defined) or affects the structural
portions of the Premises, the Building or the Project or the Systems serving the
Premises, the Building and/or the Project or any portion thereof. As used
herein, “Construction Rules and Regulations” means Landlord’s standard rules and
regulations to construction and alterations, as updated and revised from time to
time. Notwithstanding the foregoing, provided Tenant is not in Default under
this Lease, Tenant may, upon no less than ten (10) days prior written notice to
Landlord and submission to Landlord of plans and specifications therefor (if
applicable), but without the necessity of obtaining Landlord’s prior written
consent, (1) paint and/or carpet the Premises, without regard to the cost
thereof, and (2) make other interior, cosmetic Alterations to the Premises
having a cost not to exceed $5,000.00, so long as the same do not (A) require a
building permit, (B) affect, interfere with or disrupt any of the Systems of the
Building, (C) affect the outside appearance of the Building, (D) affect the roof
of the Building, or (E) affect any structural element of the Building.
Notwithstanding anything herein to the contrary, Landlord will not require
approval of the contractor or the posting of a performance bond in connection
with any Alterations which do not require consent in accordance with the
foregoing.

(b) All Alterations at Tenant’s Expense; Pre-Construction Requirements. Any
Alteration to the Premises shall be at Tenant’s sole cost and expense, in
compliance with all applicable Laws and all requirements reasonably requested by
Landlord, including, without limitation, the requirements of any insurer
providing coverage for the Premises or the Project or any part thereof, and in
accordance with plans and specifications approved in writing by Landlord, and
shall be constructed and installed by a contractor approved in writing by
Landlord, in each case, Landlord’s approval not to be unreasonably withheld,
conditioned or delayed. In

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connection with any Alteration, Tenant shall deliver plans and specifications
therefor to Landlord. As a further condition to giving consent, Landlord may
require Tenant to provide Landlord, at Tenant’s sole cost and expense, a payment
and performance bond in form reasonably acceptable to Landlord, in a principal
amount not less than one and one-half times the estimated costs of such
Alterations, to ensure Landlord against any liability for mechanic’s and
materialmen’s liens and to ensure completion of work. Before Alterations may
begin, valid building permits or other required permits or licenses must be
furnished to Landlord, and, once the Alterations begin, Tenant will diligently
and continuously pursue their completion. Landlord may monitor construction of
the Alterations and Tenant shall reimburse Landlord for its actual, reasonable,
third-party costs (including, without limitation, the costs of any construction
manager retained by Landlord) in reviewing plans and documents and in monitoring
construction, which amount shall be deemed to be Additional Rent hereunder and
payable within thirty (30) days following Landlord’s invoice therefor. Tenant
shall maintain during the course of construction, at its sole cost and expense,
builders’ risk insurance for the amount of the completed value of the
Alterations on an all-risk non-reporting form covering all improvements under
construction, including, without limitation, building materials, and other
insurance in amounts and against such risks as Landlord shall reasonably require
in connection with the Alterations. In addition to and without limitation on the
generality of the foregoing, Tenant shall ensure that its contractors procure
and maintain in full force and effect during the course of construction a “broad
form” commercial general liability and property damage policy of insurance
naming Landlord, Tenant, Landlord’s investment adviser, any property manager
designated by Landlord and Landlord’s lenders as additional insureds. The
minimum limit of coverage of the aforesaid policy shall be in the amount of not
less than Three Million Dollars ($3,000,000.00) for injury or death of one
person in any one accident or occurrence and in the amount of not less than
Three Million Dollars ($3,000,000.00) for injury or death of more than one
person in any one accident or occurrence, and shall contain a severability of
interest clause or a cross liability endorsement. Such insurance shall further
insure Landlord and Tenant against liability for property damage of at least One
Million Dollars ($1,000,000.00).

(c) Property of Landlord. All Alterations, including, without limitation,
heating, lighting, electrical, air conditioning, fixed partitioning, drapery,
wall covering and paneling, built-in cabinet work and carpeting installations
made by Tenant, together with all property that has become an integral part of
the Premises or the Building, shall at once be and become the property of
Landlord, and shall not be deemed trade fixtures or Tenant’s Property.

(d) Equipment Installations. No private telephone systems and/or other related
computer or telecommunications equipment or lines may be installed without
Landlord’s prior written consent not to be unreasonably withheld, conditioned or
delayed. If Landlord gives such consent, all equipment, wiring and cabling must
be installed within the Premises and, at the request of Landlord made at any
time prior to the expiration of the Term, removed upon the expiration or sooner
termination of this Lease and the Premises restored to the same condition as
before such installation. Notwithstanding the foregoing, Landlord consents to
the initial cabling and other installations of computer and telecommunications
equipment of Tenant which shall be made prior to the Commencement Date.

(e) Heat Generating Equipment. Notwithstanding anything herein to the contrary,
before installing any equipment or lights which generate an undue amount of heat
in the

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Premises, or if Tenant plans to use any high-power usage equipment in the
Premises, Tenant shall obtain the written permission of Landlord. Landlord may
refuse to grant such permission unless Tenant agrees to pay the reasonable costs
to Landlord for installation of supplementary air conditioning capacity or
electrical systems necessitated by such equipment.

(f) Notices. Tenant agrees not to proceed to make any Alterations,
notwithstanding consent from Landlord to do so, until Tenant notifies Landlord
in writing of the date Tenant desires to commence construction or installation
of such Alterations and Landlord has approved such date in writing, in order
that Landlord may post appropriate notices to avoid any liability to contractors
or material suppliers for payment for Tenant’s improvements. Tenant will at all
times permit such notices to be posted and to remain posted until the completion
of work.

(g) Contractors. Tenant shall not, at any time prior to or during the Term,
directly or indirectly employ, or permit the employment of, any contractor,
mechanic or laborer in the Premises, whether in connection with any Alteration
or otherwise, if it is reasonably foreseeable that such employment will
materially interfere or cause any material conflict with other contractors,
mechanics, or laborers engaged in the construction, maintenance or operation of
the Project by Landlord, Tenant or others. In the event of any such interference
or conflict, Tenant, upon demand of Landlord, shall cause all contractors,
mechanics or laborers causing such interference or conflict to leave the Project
immediately.

(h) Mold. Tenant shall not use or employ materials that are susceptible to the
growth of mold, particularly in areas where moisture accumulation is common.

(i) Removal. At the time of requesting Landlord’s consent to any Alterations (or
prior to the installation of any Alterations that do not require the consent of
Landlord) Tenant shall have the right to request that Landlord inform Tenant
whether such Alterations may remain in the Premises following, or must be
removed from the Premises prior to, the expiration or sooner termination of this
Lease.

 

13. MAINTENANCE AND REPAIRS OF PREMISES

(a) Maintenance by Tenant. Throughout the Term, Tenant shall, at its sole
expense, subject to Sections 5(a), 13(b), 21 and 22 hereof, (1) keep and
maintain in good order and condition the Premises and Tenant’s Property,
(2) keep and maintain in good order and condition, repair and replace all of
Tenant’s security systems in or about or serving the Premises, (3) maintain and
replace all specialty lamps, bulbs, starters and ballasts; provided Landlord
shall replace all building standard lamps, bulbs, starters and ballasts in the
Premises as required by normal usage, and (4) comply with its obligations under
Section 32. Tenant shall not do nor shall Tenant allow Tenant’s Agents to do
anything to cause any damage, deterioration or unsightliness to the Premises,
the Building or the Project. If Landlord performs any work at the request of
Tenant (or because of Tenant’s failure to perform any work required by this
Lease to be undertaken by Tenant), Tenant shall reimburse Landlord all
Landlord’s costs in connection therewith, plus Landlord’s overhead and
administrative fee of 15% of such costs, all of which amounts shall be deemed to
be Additional Rent hereunder and payable within thirty (30) days following
Landlord’s invoice therefor.

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(b) Maintenance by Landlord. Subject to the provisions of Sections 13(a), 21 and
22, and further subject to Tenant’s obligation under Section 4 to reimburse
Landlord, in the form of Additional Rent, for Tenant’s Proportionate Share(s) of
the cost and expense of the following items, Landlord shall repair and maintain
the following items: the roof coverings (provided that Tenant installs no
additional air conditioning or other equipment on the roof that damages the roof
coverings, in which event Tenant shall pay all costs resulting from the presence
of such additional equipment); the Systems serving the Premises (excluding any
specialty systems installed by or for Tenant) and the Building; the Parking
Areas and pavement, landscaping, sprinkler systems, sidewalks, driveways, curbs,
and lighting systems in the Common Areas. Subject to the provisions of Sections
13(a), 21 and 22, Landlord, at its own cost and expense, agrees to repair and
maintain the following items: the structural portions of the roof (specifically
excluding the roof coverings), the foundation, the footings, the floor slab, and
the load bearing walls and exterior walls of the Building (excluding any glass
and any routine maintenance, including, without limitation, any painting,
sealing, patching and waterproofing of such walls). Notwithstanding anything in
this Section 13 to the contrary but subject to Section 17, Landlord shall have
the right to either repair or to require Tenant to repair any damage to any
portion of the Premises, the Building and/or the Project caused by or created
due to any negligence or willful misconduct of Tenant or Tenant’s Agents and to
restore the Premises, the Building and/or the Project, as applicable, to the
condition existing prior to the occurrence of such damage; provided, however,
that in the event Landlord elects to perform such repair and restoration work,
Tenant shall reimburse Landlord upon demand for all reasonable costs and
expenses incurred by Landlord in connection therewith. Landlord’s obligation
hereunder to repair and maintain is subject to the condition precedent that
Landlord shall have received written notice of the need for such repairs and
maintenance and a reasonable time to perform such repair and maintenance. Tenant
shall promptly report in writing to Landlord any defective condition known to
it, which Landlord is required to repair.

(c) Tenant’s Waiver of Rights. Tenant hereby expressly waives all rights to make
repairs at the expense of Landlord or to terminate this Lease, as provided for
in California Civil Code Sections 1941 and 1942, and 1932(l), respectively, and
any similar or successor statute or law in effect or any amendment thereof
during the Term.

 

14. LANDLORD’S INSURANCE

Landlord shall purchase and keep in force fire, extended coverage and “all risk”
insurance covering the Building and the Project. Tenant shall, at its sole cost
and expense, comply with any and all reasonable requirements pertaining to the
Premises, the Building and the Project of any insurer necessary for the
maintenance of reasonable fire and commercial general liability insurance,
covering the Building and the Project. Landlord may maintain “Loss of Rents”
insurance, insuring that the Rent will be paid in a timely manner to Landlord
for a period of at least twelve (12) months if the Premises, the Building or the
Project or any portion thereof are destroyed or rendered unusable or
inaccessible by any cause insured against under this Lease.

 

15. TENANT’S INSURANCE

(a) Commercial General Liability Insurance. Tenant shall, at Tenant’s expense,
secure and keep in force a “broad form” commercial general liability insurance
and property

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damage policy covering the Premises, insuring Tenant, and naming Landlord, any
property manager designated by Landlord, UBS Realty Investors LLC, and
Landlord’s lenders as additional insureds (collectively, “Landlord’s Insureds”)
against any liability arising out of the ownership, use, occupancy or
maintenance of the Premises. The minimum limit of coverage of such policy shall
be in the amount of not less than Three Million Dollars ($3,000,000.00) for
injury or death of one person in any one accident or occurrence and in the
amount of not less than Three Million Dollars ($3,000,000.00) for injury or
death of more than one person in any one accident or occurrence, shall include
an extended liability endorsement providing contractual liability coverage
(which shall include coverage for Tenant’s indemnification obligations in this
Lease), and shall contain a severability of interest clause or a cross liability
endorsement. Such insurance shall further insure Landlord and Tenant against
liability for property damage of at least Three Million Dollars ($3,000,000.00).
Landlord may from time to time require reasonable increases in any such limits
if Landlord believes that additional coverage is necessary or desirable. The
limit of any insurance shall not limit the liability of Tenant hereunder. No
policy maintained by Tenant under this Section 15(a) shall contain a deductible
greater than two thousand five hundred dollars ($2,500.00). No policy shall be
cancelable or subject to reduction of coverage without thirty (30) days prior
written notice to Landlord. Such policies of insurance shall be issued as
primary policies and not contributing with or in excess of coverage that
Landlord may carry, by an insurance company authorized to do business in the
state/commonwealth in which the Premises are located for the issuance of such
type of insurance coverage and rated B+:XIII or better in Best’s Key Rating
Guide.

(b) Personal Property Insurance. Tenant shall maintain in full force and effect
on all of its personal property, furniture, furnishings, trade or business
fixtures and equipment (collectively, “Tenant’s Property”) on the Premises, a
policy or policies of fire and extended coverage insurance with standard
coverage endorsement to the extent of the full replacement cost thereof. No such
policy shall contain a deductible greater than two thousand five hundred dollars
($2,500.00). During the term of this Lease the proceeds from any such policy or
policies of insurance shall be used for the repair or replacement of the
fixtures and equipment so insured. Landlord shall have no interest in the
insurance upon Tenant’s equipment and fixtures and will sign all documents
reasonably necessary in connection with the settlement of any claim or loss by
Tenant. Landlord will not carry insurance on Tenant’s possessions.

(c) Worker’s Compensation Insurance; Employer’s Liability Insurance. Tenant
shall, at Tenant’s expense, maintain in full force and effect worker’s
compensation insurance with not less than the minimum limits required by law,
and employer’s liability insurance with a minimum limit of coverage of One
Million Dollars ($1,000,000).

(d) Evidence of Coverage. Tenant shall deliver to Landlord certificates of
insurance and true and complete copies of any and all endorsements required
herein for all insurance required to be maintained by Tenant hereunder at the
time of execution of this Lease by Tenant. Tenant shall, at least thirty
(30) days prior to expiration of each policy, furnish Landlord with certificates
of renewal thereof. Each certificate shall expressly provide that such policies
shall not be cancelable or otherwise subject to modification except after thirty
(30) days prior written notice to Landlord and the other parties named as
additional insureds as required in this Lease (except for cancellation for
nonpayment of premium, in which event cancellation shall not take effect until
at least ten (10) days notice has been given to Landlord).

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16. INDEMNIFICATION

Tenant shall defend, protect, indemnify and hold harmless Landlord and
Landlord’s Agents against and from any and all Claims to the extent arising from
(1) the use of the Premises, the Building or the Project by Tenant or Tenant’s
Agents, or from any activity done, permitted or suffered by Tenant or Tenant’s
Agents in or about the Premises, the Building or the Project, including, without
limitation, any mold or Mold Conditions (as hereinafter defined) caused by
Tenant or Tenant’s Agents, and (2) any act, neglect, fault, willful misconduct
or omission of Tenant or Tenant’s Agents, or from any breach or default in the
terms of this Lease by Tenant or Tenant’s Agents, and (3) any action or
proceeding brought on account of any matter in items (1) or (2); however, the
foregoing indemnity shall not be applicable to the extent any claims arising by
reason of the negligence or willful misconduct of Landlord or Landlord’s Agents.
If any action or proceeding is brought against Landlord by reason of any such
claim, upon notice from Landlord, Tenant shall defend the same at Tenant’s
expense by counsel reasonably satisfactory to Landlord. As a material part of
the consideration to Landlord, Tenant hereby releases Landlord and Landlord’s
Agents from responsibility for, waives its entire claim of recovery for and
assumes all risk of (i) damage to property or injury to persons in or about the
Premises, the Building or the Project from any cause whatsoever (except to the
extent caused by the gross negligence or willful misconduct of Landlord or
Landlord’s Agents or by any default by Landlord hereunder), or (ii) loss
resulting from business interruption or loss of income at the Premises. The
foregoing indemnity shall not relieve any insurance carrier of its obligations
under any policies required to be carried by either party pursuant to this
Lease, to the extent that such policies cover the peril or occurrence that
results in the claim that is subject to the foregoing indemnity. The obligations
of Tenant under this Section 16 shall survive any termination of this Lease.

 

17. SUBROGATION

Landlord and Tenant hereby mutually waive any claim against the other and its
Agent(s) for any loss or damage to any of their property located on or about the
Premises, the Building or the Project that is caused by or results from perils
covered by property insurance carried by the respective parties, to the extent
of the proceeds of such insurance actually received with respect to such loss or
damage, whether or not due to the negligence of the other party or its Agents.
Because the foregoing waivers will preclude the assignment of any claim by way
of subrogation to an insurance company or any other person, each party shall
immediately notify its insurer, in writing, of the terms of these mutual waivers
and have their insurance policies endorsed to prevent the invalidation of the
insurance coverage because of these waivers. Nothing in this Section 17 shall
relieve a party of liability to the other for failure to carry insurance
required by this Lease.

 

18. SIGNS

Landlord shall provide, at Landlord’s cost, sufficient space in the electronic
directory in the lobby of the Building to list Tenant’s name and the names of
its professional staff. Additionally, Landlord shall provide one
(1) Building-standard suite identification sign (“Entrance Sign”) from the
management office of the Building, which shall be installed by Landlord at the
entry to the Premises at Landlord’s sole cost and expense. The Entrance Sign

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shall not contain any logos or artwork, shall utilize Building-standard fonts,
sizes and colors and shall be subject to Landlord’s approval. No other signs may
be posted at the entrance to Tenant’s suite. Tenant shall not place or permit to
be placed in, upon, or about the Premises, the Building or the Project any
exterior lights, decorations, balloons, flags, pennants, banners, advertisements
or notices, or erect or install any signs, window or door lettering, placards,
decorations, or advertising media of any type which can be viewed from the
exterior of the Premises without obtaining Landlord’s prior written consent.
Tenant shall remove any sign, advertisement or notice placed on the Premises,
the Building or the Project by Tenant upon the expiration of the Term or sooner
termination of this Lease, and Tenant shall repair any damage or injury to the
Premises, the Building or the Project caused thereby, all at Tenant’s expense.
If any signs are not removed, or necessary repairs not made, Landlord shall have
the right to remove the signs and repair any damage or injury to the Premises,
the Building or the Project at Tenant’s sole cost and expense. In addition to
any other rights or remedies available to Landlord, in the event that Tenant
erects or installs any sign in violation of this Section 18, and Tenant fails to
remove same within three (3) business days after notice from Landlord or erects
or installs a similar sign in the future, Landlord shall have the right to
charge Tenant a signage fee equal to $100.00 per day for each day thereafter
that such sign is not removed or a similar sign is installed or erected in the
future. Landlord’s election to charge such fee shall not be deemed to be a
consent by Landlord to such sign and Tenant shall remain obligated to remove
such sign in accordance with Landlord’s notice.

 

19. FREE FROM LIENS

Tenant shall keep the Premises, the Building and the Project free from any liens
arising out of any work performed, material furnished or obligations incurred by
or for Tenant. In the event that Tenant shall not, within ten (10) days
following the imposition of any such lien, cause the lien 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 same to be released by such means as it shall deem proper,
including, without limitation, payment of the claim giving rise to such lien.
All such sums paid by Landlord and all expenses incurred by it in connection
therewith (including, without limitation, reasonable attorneys’ fees) shall be
payable to Landlord by Tenant upon demand. Landlord shall have the right at all
times to post and keep posted on the Premises any notices permitted or required
by law or that Landlord shall deem proper for the protection of Landlord, the
Premises, the Building and the Project, from mechanics’ and materialmen’s liens.
Tenant shall give to Landlord at least five (5) business days’ prior written
notice of commencement of any repair or construction on the Premises except in
the case of an emergency, for which no notice shall be required.

 

20. ENTRY BY LANDLORD

Tenant shall permit Landlord and Landlord’s Agents to enter into and upon the
Premises at all reasonable times, upon reasonable notice (except in the case of
an emergency, for which no notice shall be required), and subject to Tenant’s
reasonable security arrangements, for the purpose of inspecting the same or
showing the Premises to prospective purchasers, lenders or tenants or to provide
services, alter, improve, maintain and repair the Premises or the Building as
required or permitted of Landlord under the terms hereof, or for any other
business purpose, without any rebate of Rent and without any liability to Tenant
for any loss of occupation or quiet

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enjoyment of the Premises thereby occasioned (except for actual damages
resulting from the sole active gross negligence or willful misconduct of
Landlord); Tenant shall permit Landlord to post notices of non-responsibility
and ordinary “for sale” or during the final nine (9) months of the Term, “for
lease” signs. No such entry shall be construed to be a forcible or unlawful
entry into, or a detainer of, the Premises, or an eviction or constructive
eviction of Tenant from the Premises. Landlord may temporarily close entrances,
doors, corridors, elevators or other facilities without liability to Tenant by
reason of such closure in the case of an emergency and when Landlord otherwise
deems such closure necessary.

 

21. DESTRUCTION AND DAMAGE

(a) Insured Damage. If the Premises are damaged by fire or other perils covered
by extended coverage insurance, Tenant shall give Landlord immediate notice
thereof and Landlord shall, at Landlord’s option:

(i) Total Destruction. In the event of total destruction (which shall mean
destruction or damage in excess of twenty-five percent (25%) of the full
insurable value thereof) of the Premises, elect either to commence promptly to
repair and restore the Premises and prosecute the same diligently to completion,
in which event this Lease shall remain in full force and effect; or not to
repair or restore the Premises, in which event this Lease shall terminate.
Landlord shall give Tenant written notice of its intention within sixty
(60) days after the date Landlord obtains actual knowledge of such destruction
(the “Casualty Discovery Date”). If Landlord elects not to restore the Premises,
this Lease shall be deemed to have terminated as of the Casualty Discovery Date.

(ii) Partial Destruction. In the event of a partial destruction (which shall
mean destruction or damage to an extent not exceeding twenty-five percent
(25%) of the full insurable value thereof) of the Premises for which Landlord
will receive insurance proceeds sufficient to cover the cost to repair and
restore such partial destruction and, if the damage thereto is such that the
Premises may be substantially repaired or restored to its condition existing
immediately prior to such damage or destruction within two hundred seventy
(270) days from the Casualty Discovery Date, Landlord shall commence and proceed
diligently with the work of repair and restoration, in which event the Lease
shall continue in full force and effect. If such repair and restoration requires
longer than two hundred seventy (270) days or if the insurance proceeds therefor
(plus any amounts Tenant may elect or is obligated to contribute) are not
sufficient to cover the cost of such repair and restoration, Landlord may elect
either to so repair and restore, in which event the Lease shall continue in full
force and effect, or not to repair or restore, in which event the Lease shall
terminate. In either case, Landlord shall give written notice to Tenant of its
intention within sixty (60) days after the Casualty Discovery Date. If Landlord
elects not to restore the Premises, this Lease shall be deemed to have
terminated as of the Casualty Discovery Date.

(iii) Damage Near End of Lease Term. Notwithstanding anything to the contrary
contained in this Section, in the event of damage to the Premises occurring
during the last twelve (12) months of the Term that cannot be repaired within
sixty (60) days after the Casualty Discovery Date, either Landlord or, if such
damage to the Premises materially impairs Tenant’s ability to continue its
business operations therein, then Tenant may elect to terminate this Lease by
written notice of such election given to the other party within thirty (30) days
after the Casualty Discovery Date.

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(b) Uninsured Damage. If the Premises are damaged by any peril not fully covered
by insurance proceeds to be received by Landlord, and the cost to repair such
damage exceeds any amount Tenant may agree to contribute, Landlord may elect
either to commence promptly to repair and restore the Premises and prosecute the
same diligently to completion, in which event this Lease shall remain in full
force and effect; or not to repair or restore the Premises, in which event this
Lease shall terminate. Landlord shall give Tenant written notice of its
intention within sixty (60) days after the Casualty Discovery Date. If Landlord
elects not to restore the Premises, this Lease shall be deemed to have
terminated as of the date on which Tenant surrenders possession of the Premises
to Landlord, except that if the damage to the Premises materially impairs
Tenant’s ability to continue its business operations in the Premises, then this
Lease shall be deemed to have terminated as of the date such damage occurred.

(c) Termination Rights. Notwithstanding anything to the contrary in this
Section 21, Landlord shall have the option to terminate this Lease, exercisable
by notice to Tenant within sixty (60) days after the Casualty Discovery Date, in
each of the following instances:

(i) If more than twenty-five percent (25%) of the full insurable value of the
Building or the Project is damaged or destroyed, regardless of whether or not
the Premises is destroyed.

(ii) If the Building or the Project or any portion thereof is damaged or
destroyed and the repair and restoration of such damage requires longer than one
hundred eighty (180) days from the Casualty Discovery Date, regardless of
whether or not the Premises is destroyed.

(iii) If the Building or the Project or any portion thereof is damaged or
destroyed and the insurance proceeds therefor are not sufficient to cover the
costs of repair and restoration, regardless of whether or not the Premises is
destroyed.

(iv) If the Building or the Project or any portion thereof is damaged or
destroyed during the last twelve (12) months of the Term, regardless of whether
or not the Premises is destroyed.

(d) Rent Abatement. In the event of repair and restoration as herein provided,
the monthly installments of Rent shall be abated proportionately in the ratio
which Tenant’s use of the Premises is impaired during the period of such repair
or restoration; provided, however, that Tenant shall not be entitled to such
abatement to the extent that such damage or destruction resulted from the gross
negligence or willful misconduct of Tenant or Tenant’s Agents. Except as
expressly provided in the immediately preceding sentence with respect to
abatement of Rent, Tenant shall have no claim against Landlord for, and hereby
releases Landlord and Landlord’s Agents from responsibility for and waives its
entire claim of recovery for any cost, loss or expense suffered or incurred by
Tenant as a result of any damage to or destruction of the Premises, the Building
or the Project or the repair or restoration thereof, including, without
limitation, any cost, loss or expense resulting from any loss of use of the
whole or any part of the

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Premises, the Building or the Project and/or any inconvenience or annoyance
occasioned by such damage, repair or restoration except to the extent caused by
the gross negligence of willful misconduct of Landlord.

(e) Repair and Restoration Obligations. If Landlord is obligated to or elects to
repair or restore as herein provided, Landlord shall repair or restore only the
initial tenant improvements, if any, constructed by Landlord in the Premises
pursuant to the terms of this Lease, substantially to their condition existing
immediately prior to the occurrence of the damage or destruction; and Tenant
shall promptly repair and restore, at Tenant’s expense, Tenant’s Alterations
which were not constructed by Landlord.

(f) Civil Code Waivers. Tenant hereby waives the provisions of California Civil
Code Section 1932(2) and Section 1933(4), which permit termination of a lease
upon destruction of the leased premises, and the provisions of any similar law
now or hereinafter in effect, and the provisions of this Section 21 shall govern
exclusively in case of such destruction.

 

22. CONDEMNATION

(a) Effect of Termination. If twenty-five percent (25%) or more of either the
Premises, the Building, the Project or the parking areas for the Building or the
Project is permanently taken for any public or quasi-public purpose by any
lawful governmental power or authority, by exercise of the right of
appropriation, inverse condemnation, condemnation or eminent domain, or sold to
prevent such taking (each such event being referred to as a “Condemnation”),
Landlord may, at its option, terminate this Lease as of the date title vests in
the condemning party. If twenty-five percent (25%) or more of the Premises is
taken and if the Premises remaining after such Condemnation and any repairs by
Landlord would be untenantable (in Landlord’s reasonable opinion) for the
conduct of Tenant’s business operations, Tenant shall have the right to
terminate this Lease as of the date title vests in the condemning party. If
either party elects to terminate this Lease as provided herein, such election
shall be made by written notice to the other party given within thirty (30) days
after the nature and extent of such Condemnation have been finally determined.
If neither Landlord nor Tenant elects to terminate this Lease to the extent
permitted above, Landlord shall promptly proceed to restore the Premises, to the
extent of any Condemnation award received by Landlord, to substantially the same
condition as existed prior to such Condemnation, allowing for the reasonable
effects of such Condemnation, and a proportionate abatement shall be made to the
Rent corresponding to the time during which, and to the portion of the floor
area of the Premises (adjusted for any increase thereto resulting from any
reconstruction) of which, Tenant is deprived on account of such Condemnation and
restoration, as reasonably determined by Landlord. Except as expressly provided
in the immediately preceding sentence with respect to abatement of Rent, Tenant
shall have no claim against Landlord for, and hereby releases Landlord and
Landlord’s Agents from responsibility for and waives its entire claim of
recovery for any cost, loss or expense suffered or incurred by Tenant as a
result of any Condemnation, whether permanent or temporary, or the repair or
restoration of the Premises, the Building or the Project or the parking areas
for the Building or the Project following such Condemnation, including, without
limitation, any cost, loss or expense resulting from any loss of use of the
whole or any part of the Premises, the Building, the Project or the parking
areas and/or any inconvenience or annoyance occasioned by such Condemnation,
repair or restoration except to the extent caused by the gross negligence or

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willful misconduct of Landlord. The provisions of California Code of Civil
Procedure Section 1265.130, which allows either party to petition the Superior
Court to terminate the Lease in the event of a partial taking of the Premises,
the Building or the Project or the parking areas for the Building or the
Project, and any other applicable law now or hereafter enacted, are hereby
waived by Tenant.

(b) Allocation of Compensation. Landlord shall be entitled to any and all
compensation, damages, income, rent, awards, or any interest therein whatsoever
which may be paid or made in connection with any Condemnation, and Tenant shall
have no claim against Landlord for the value of any unexpired term of this Lease
or otherwise; provided, however, that Tenant shall be entitled to receive any
award separately allocated by the condemning authority to Tenant for Tenant’s
relocation expenses or the value of Tenant’s Property (specifically excluding
fixtures, Alterations and other components of the Premises which under this
Lease or by law are or at the expiration of the Term will become the property of
Landlord), provided that such award does not reduce any award otherwise
allocable or payable to Landlord.

 

23. ASSIGNMENT AND SUBLETTING

(a) No Transfer Without Consent. Tenant shall not voluntarily or by operation of
law, (1) mortgage, pledge, hypothecate or encumber this Lease or any interest
herein, (2) assign or transfer this Lease or any interest herein, sublease the
Premises or any part thereof, or any right or privilege appurtenant thereto, or
allow any other person (the employees and invitees of Tenant excepted) to occupy
or use the Premises, or any portion thereof, without first obtaining the written
consent of Landlord, which consent shall not be withheld unreasonably as set
forth below in this Section 23, provided that Tenant is not then in Default
under this Lease nor is any event then occurring which with the giving of notice
or the passage of time, or both, would constitute a Default hereunder.

(b) Limited Recapture Option. If Tenant shall desire to assign this Lease or to
sublet all of the Premises for substantially the remainder of the Term (other
than to a Related Entity), then Tenant shall first notify Landlord in writing,
which notice shall include: (a) whether Tenant proposes to assign this Lease or
to sublet all of the Premises for substantially all of the remainder of the
Term; and (b) the effective date of the proposed assignment or sublease.
Landlord shall thereupon have the option, to be exercised within fifteen
(15) days of receipt of Tenant’s notice, to (1) terminate this Lease as of the
proposed effective date of such assignment or sublease, or (2) waive such right
to terminate this Lease. Landlord agrees that if it has not elected to terminate
this Lease within fifteen (15) days following the date that Tenant has duly
submitted such notice of intent to assign or sublease, then Landlord shall be
deemed to have waived its right to terminate this Lease as provided in this
Section 23(b). In the event Landlord elects to terminate this Lease as provided
in the foregoing clause (1), then Landlord shall have the additional right to
negotiate directly with Tenant’s proposed assignee or subtenant and to enter
into a direct lease or occupancy agreement with such party on such terms as
shall be acceptable to Landlord in its sole and absolute discretion, and Tenant
hereby waives any Claims against Landlord related thereto, including, without
limitation, any Claims for any compensation or profit related to such lease or
occupancy agreement.

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(c) Consent Request. If Tenant shall have complied with the provisions of
Section 23(b) above in connection with any transaction that is subject to the
provisions of Section 23(b) above and Landlord shall have elected (or be deemed
to have elected) not to terminate the Lease, or in any circumstance in which
Tenant is not required to comply with the provisions of Section 23(b) above,
Landlord will not unreasonably withhold or delay its consent to any request for
its consent to an assignment of the Lease or a sublease of the Premises subject
to the following provisions. Tenant shall first notify Landlord in writing of
the name and address of the proposed assignee or subtenant and the nature and
character of the business of the proposed assignee or subtenant, and shall
provide, if available, current and three (3) years’ prior financial statements
for the proposed assignee or subtenant, which financial statements shall be
audited to the extent available and shall in any event be prepared in accordance
with generally accepted accounting principles. Tenant shall also provide
Landlord with a copy of the proposed sublease or assignment agreement,
including, without limitation, all material terms and conditions thereof.
Landlord shall have the option, to be exercised within thirty (30) days of
receipt of the foregoing, to (1) consent to the proposed assignment or sublease,
or (2) refuse its consent to the proposed assignment or sublease, provided that
(A) such consent shall not be unreasonably withheld, conditioned or delayed so
long as Tenant is not then in Default under this Lease nor is any event then
occurring which, with the giving of notice or the passage of time, or both,
would constitute a Default hereunder, and (B) as a condition to providing such
consent, Landlord may require attornment from the proposed subtenant on terms
and conditions reasonably acceptable to Landlord. Without otherwise limiting the
criteria upon which Landlord may withhold its consent, Landlord shall be
entitled to consider all reasonable criteria including, without limitation, the
following: (1) whether or not the proposed subtenant or assignee is engaged in a
business which, and the use of the Premises will be in an manner which, is in
keeping with the then character and nature of all other tenancies in the
Project, (2) whether the use to be made of the Premises by the proposed
subtenant or assignee will conflict with any so-called “exclusive” use then in
favor of any other tenant of the Building or the Project, and whether such use
would be prohibited by any other portion of this Lease, including, without
limitation, any rules and regulations then in effect, or under applicable Laws,
and whether such use imposes a greater load upon the Premises and the Building
and Project services than imposed by Tenant, (3) the business reputation of the
proposed individuals who will be managing and operating the business operations
of the proposed assignee or subtenant, and the long-term financial and
competitive business prospects of the proposed assignee or subtenant, and
(4) the creditworthiness and financial stability of the proposed assignee or
subtenant in light of the responsibilities involved. In any event, Landlord may
withhold its consent to any assignment or sublease, if (i) the actual use
proposed to be conducted in the Premises or portion thereof conflicts with the
provisions of Section 9(a) or 9(b) above or with any other lease which restricts
the use to which any space in the Building or the Project may be put, (ii) the
portion of the Premises proposed to be sublet is irregular in shape and/or does
not permit safe or otherwise appropriate means of ingress and egress, or does
not comply with governmental safety and other codes, (iii) the proposed
sublessee or assignee is either a governmental or quasi-governmental agency or
instrumentality thereof, (iv) the proposed sublessee or assignee, or any person
or entity which directly or indirectly, controls, is controlled by, or is under
common control with, the proposed sublessee or assignee, either (x) occupies
space in the Project at the time of the request for Landlord’s consent, or
(y) is negotiating with Landlord or has negotiated with Landlord to lease space
in the Project during the six (6) month period immediately preceding the date
Landlord receives Tenant’s request for consent, and (v) if the proposed
subtenant or assignee is a Prohibited Person (as hereinafter defined).

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(d) Sublease Rental Rate. As a further condition to any rights Tenant may have
under this Lease to sublet all or any portion of the Premises, Tenant shall not
publicly advertise space for sublease at a starting base rental rate lower than
Landlord’s then current highest asking base rental rate for other space in the
Project which is then on the market for direct lease. If there is no space in
the Project then currently on the market for direct lease, Tenant shall not
publicly advertise the space for sublease at a starting base rental rate lower
than a rate which is the average of the starting rate for Landlord’s last two
new leases and/or renewals in the Project, or if Landlord has not entered into
two new leases and/or renewals within the immediately preceding six (6) month
period, then Tenant shall offer the space for sublease at a starting base rental
rate no lower than Landlord’s advertised rental rate for comparable spaces
within the Building. Nothing contained in this Section 23(d) shall prevent
Tenant from subleasing all or any portion of the Premises at rates below those
then being quoted by Landlord.

(e) Transfer Premium. If Landlord approves an assignment or subletting as herein
provided, Tenant shall pay to Landlord, as Additional Rent, fifty percent
(50%) of the excess, if any, of (1) the rent and any additional rent payable by
the assignee or sublessee to Tenant, less all costs and expenses incurred by
Tenant in connection with marketing the space and the execution and performance
of such assignment or sublease including, without limitation, reasonable and
customary market-based leasing commissions, costs of renovation or construction
of tenant improvements required under such assignment or sublease, attorneys’
and consultant fees, and any other concessions offered to such assignee or
sublessee; minus (2) Base Rent plus Additional Rent allocable to that part of
the Premises affected by such assignment or sublease pursuant to the provisions
of this Lease, which commissions shall, for purposes of the aforesaid
calculation, be amortized on a straight-line basis over the term of such
assignment or sublease. The assignment or sublease agreement, as the case may
be, after approval by Landlord, shall not be amended without Landlord’s prior
written consent, and shall contain a provision directing the assignee or
subtenant to pay the rent and other sums due thereunder directly to Landlord
upon receiving written notice from Landlord that Tenant is in default under this
Lease with respect to the payment of Rent. In the event that, notwithstanding
the giving of such notice, Tenant collects any rent or other sums from the
assignee or subtenant, then Tenant shall hold such sums in trust for the benefit
of Landlord and shall immediately forward the same to Landlord. Landlord’s
collection of such rent and other sums shall not constitute an acceptance by
Landlord of attornment by such assignee or subtenant.

(f) No Release. Notwithstanding any assignment or subletting, Tenant and any
guarantor or surety of Tenant’s obligations under this Lease shall at all times
remain fully and primarily responsible and liable for the payment of the Rent
and for compliance with all of Tenant’s other obligations under this Lease
(regardless of whether Landlord’s approval has been obtained for any such
assignment or subletting).

(g) Payment of Landlord’s Costs. Tenant shall reimburse Landlord for its actual,
reasonable, out of pocket third-party expenses (including, without limitation,
the fees of Landlord’s counsel), incurred in connection with Landlord’s review
and processing of documents regarding any proposed assignment or sublease, not
to exceed $1,500.00.

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(h) No Further Consent Implied. A consent to one assignment, subletting,
occupation or use shall not be deemed to be a consent to any other or subsequent
assignment, subletting, occupation or use, and consent to any assignment or
subletting shall in no way relieve Tenant of any liability under this Lease. Any
assignment or subletting without Landlord’s consent if required shall be void,
and shall, at the option of Landlord, constitute a Default under this Lease.

(i) Right to Collect Rent Directly. If this Lease is assigned, whether or not in
violation of the provisions of this Lease, Landlord may collect Rent from the
assignee. If the Premises or any part thereof is sublet or used or occupied by
anyone other than Tenant, whether or not in violation of this Lease, Landlord
may, after a Default by Tenant, collect Rent from the subtenant or occupant. In
either event, Landlord may apply the net amount collected to Rent, but no such
assignment, subletting, occupancy or collection shall be deemed a waiver of any
of the provisions of this Section 23, or the acceptance of the assignee,
subtenant or occupant as tenant, or a release of Tenant from the further
performance by Tenant of Tenant’s obligations under this Lease. The consent by
Landlord to an assignment, mortgaging, pledging, encumbering, transfer, use,
occupancy or subletting pursuant to any provision of this Lease shall not,
except as otherwise provided herein, in any way be considered to relieve Tenant
from obtaining the express consent of Landlord to any other or further
assignment, mortgaging, pledging, encumbering, transfer, use, occupancy or
subletting. References in this Lease to use or occupancy by anyone other than
Tenant shall not be construed as limited to subtenants and those claiming under
or through subtenants but as including also licensees or others claiming under
or through Tenant, immediately or remotely. The listing of any name other than
that of Tenant on any door of the Premises or on any directory or in any
elevator in the Building, or otherwise, shall not, except as otherwise provided
herein, operate to vest in the person so named any right or interest in this
Lease or in the Premises, or be deemed to constitute, or serve as a substitute
for, or any waiver of, any prior consent of Landlord required under this
Section 23.

(j) Incorporation of Terms. Each subletting and/or assignment pursuant to this
Section shall be subject to all of the covenants, agreements, terms, provisions
and conditions contained in this Lease and each of the covenants, agreements,
terms, provisions and conditions of this Lease shall be automatically
incorporated therein. If Landlord shall consent to, or reasonably withhold its
consent to, any proposed assignment or sublease, Tenant shall indemnify, defend
and hold harmless Landlord against and from any and all loss, liability,
damages, costs and expenses (including, without limitation, reasonable counsel
fees) resulting from any Claims that may be made against Landlord by the
proposed assignee or sublessee or by any brokers or other persons claiming a
commission or similar fee in connection with the proposed assignment or
sublease.

(k) Reasonableness of Restrictions. Tenant acknowledges and agrees that the
restrictions, conditions and limitations imposed by this Section 23 on Tenant’s
ability to assign or transfer this Lease or any interest herein, to sublet the
Premises or any part thereof, to transfer or assign any right or privilege
appurtenant to the Premises, or to allow any other person to occupy or use the
Premises or any portion thereof, are, for the purposes of California Civil Code
Section 1951.4, as amended from time to time, and for all other purposes,
reasonable at the time that the Lease was entered into, and shall be deemed to
be reasonable at the time that Tenant seeks to assign or transfer this Lease or
any interest herein, to sublet the Premises or any part

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thereof, to transfer or assign any right or privilege appurtenant to the
Premises, or to allow any other person to occupy or use the Premises or any
portion thereof. Tenant’s sole remedy if Landlord unreasonably withholds its
consent to an assignment, sublet or transfer in violation of Tenant’s rights
under this Lease shall be injunctive relief, and Tenant hereby expressly waives
California Civil Code Section 1995.310, which permits all remedies provided by
law for breach of contract, including, without limitation, the right to contract
damages and the right to terminate this Lease if Landlord unreasonably withholds
consent to a transfer in violation of Tenant’s rights under this Lease, and any
similar or successor statute or law in effect or any amendment thereof during
the Term.

(l) Transfers to Affiliates. Notwithstanding anything to the contrary contained
in this Section 23, Tenant, upon written notice to Landlord within a reasonable
time frame thereafter, but without Landlord’s consent, may assign Tenant’s
interest in the Lease or sublet all or any part of the Premises to any entity
(each herein called a “Related Entity”) which controls, is controlled by, or is
under common control with Tenant; which results from a merger of, reorganization
of, or consolidation with Tenant; or which acquires substantially all of the
stock or assets of Tenant, as a going concern, with respect to the business that
is being conducted in the Premises. Concurrently with providing notice to
Landlord of the making of an assignment or sublease to a Related Entity, Tenant
shall be required to submit reasonably satisfactory evidence that the assignment
or sublessee is to a Related Entity, together with an executed counterpart of
the assignment or sublease. As used herein in defining Related Entity, “control”
must include over fifty percent (50%) of the stock or other voting interest of
the controlled corporation or other business entity. Similar evidence that such
assignee or sublessee continues to be a Related Entity shall be furnished by
Tenant to Landlord within fifteen (15) days after request therefor, provided
such request is not made more often than annually. Any assignment or sublease to
a Related Entity shall not relieve Tenant from liability under this Lease. The
transfer premium and any costs otherwise payable to Landlord pursuant to
Section 23(e) shall not be applicable or payable in connection with a confirmed
assignment or sublease to a Related Entity under this Section 23(l).

 

24. DEFAULT

(a) The occurrence of any one of the following events shall constitute a default
on the part of Tenant (“Default”):

(i) Failure to Pay Rent. Failure to pay any installment of Rent or any other
monies due and payable hereunder, said failure continuing for a period of three
(3) days after notice of delinquency;

(ii) Assignment for Creditors. A general assignment by Tenant or any guarantor
or surety of Tenant’s obligations hereunder, including, without limitation,
Lease Guarantor, if any, (collectively, “Guarantor”) for the benefit of
creditors;

(iii) Filing of Bankruptcy Petition. The filing of a voluntary petition in
bankruptcy by Tenant or any Guarantor, the filing by Tenant or any Guarantor of
a voluntary petition for an arrangement, the filing by or against Tenant or any
Guarantor of a petition, voluntary or involuntary, for reorganization, or the
filing of an involuntary petition by the creditors of Tenant or any Guarantor,
said involuntary petition remaining undischarged for a period of sixty
(60) days;

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(iv) Attachment. Receivership, attachment, or other judicial seizure of
substantially all of Tenant’s assets on the Premises, such attachment or other
seizure remaining undismissed or undischarged for a period of sixty (60) days
after the levy thereof;

(v) Death; Dissolution. Death or disability of Tenant or any Guarantor, if
Tenant or such Guarantor is a natural person, or the failure by Tenant or any
Guarantor to maintain its legal existence, if Tenant or such Guarantor is a
corporation, partnership, limited liability company, trust or other legal
entity;

(vi) Failure to Deliver Ancillary Documents. Failure of Tenant to execute and
deliver to Landlord any estoppel certificate, subordination agreement, or lease
amendment within the time periods and in the manner required by Sections 30 or
31 or 42, and/or failure by Tenant to deliver to Landlord any financial
statement within the time period and in the manner required by Section 40;

(vii) Transfers. An assignment or sublease, or attempted assignment or sublease,
of this Lease or the Premises by Tenant contrary to the provision of Section 23,
unless such assignment or sublease is expressly conditioned upon Tenant having
received Landlord’s consent thereto;

(viii) Security Deposit. Failure of Tenant to restore the Security Deposit to
the amount and within the time period provided in Section 7 above;

(ix) Other Defaults. A default under any other agreement with Landlord beyond
any applicable notice and cure period under such agreement.

(x) General Non-Monetary Breaches. Failure in the performance of any of Tenant’s
covenants, agreements or obligations hereunder (except those failures specified
as events of Default in other subsections of this Section 24, which shall be
governed by the notice and cure periods set forth in such other subsections),
which failure continues for thirty (30) days after written notice thereof from
Landlord to Tenant, provided that, if Tenant has exercised reasonable diligence
to cure such failure and such failure cannot be cured within such thirty
(30) day period despite reasonable diligence, Tenant shall not be in default
under this subsection so long as Tenant thereafter diligently and continuously
prosecutes the cure to completion and actually completes such cure within sixty
(60) days after the giving of the aforesaid written notice;

(xi) Chronic Delinquency. Chronic delinquency by Tenant in the payment of Rent,
or any other periodic payments required to be paid by Tenant under this Lease.
“Chronic delinquency” means failure by Tenant to pay Rent, or any other payments
required to be paid by Tenant under this Lease within ten (10) days after
written notice thereof for any three (3) months (consecutive or nonconsecutive)
during any period of twelve (12) months;

(xii) Chronic Overuse. Chronic overuse by Tenant or Tenant’s Agents of the
number of undesignated parking spaces set forth in the Basic Lease Information.
“Chronic

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overuse” means use by Tenant or Tenant’s Agents of a number of parking spaces
greater than the number of parking spaces set forth in the Basic Lease
Information more than three (3) times during any period of twelve (12) months
after written notice by Landlord;

(xiii) Termination of Insurance. Any insurance required to be maintained by
Tenant pursuant to this Lease shall be canceled or terminated or shall expire or
be reduced or materially changed, except as permitted in this Lease;

(xiv) Liens. Any failure by Tenant to discharge any lien or encumbrance placed
on the Project or any part thereof in violation of this Lease within ten
(10) days after the date such lien or encumbrance is filed or recorded against
the Project or any part thereof;

(xv) Hazardous Materials. Any failure by Tenant to immediately remove, abate or
remedy any Hazardous Materials located in, on or about the Premises or the
Building in connection with any failure by Tenant to comply with Tenant’s
obligations under Section 32;

(xvi) Failure to Commence Business Operations. Tenant’s failure to commence
business operations in the Premises within ninety (90) days following the
Commencement Date, subject to delays beyond Tenant’s reasonable control (other
than financial difficulty); and

(xvii) False Representations. Any representation of Tenant herein or in any
financial statement or other materials provided by Tenant or any guarantor of
Tenant’s obligations under this Lease shall prove to be untrue or inaccurate in
any material respect, or any such financial statements or other materials shall
have omitted any material fact.

Tenant agrees that any notice given by Landlord pursuant to this Section 24
shall satisfy the requirements for notice under California Code of Civil
Procedure Section 1161, and Landlord shall not be required to give any
additional notice in order to be entitled to commence an unlawful detainer
proceeding.

 

25. LANDLORD’S REMEDIES

(a) Termination. In the event of any Default by Tenant, then in addition to any
other remedies available to Landlord at law or in equity and under this Lease,
Landlord may terminate this Lease immediately and all rights of Tenant hereunder
by giving written notice to Tenant of such intention to terminate. If Landlord
shall elect to so terminate this Lease then Landlord may recover from Tenant:

(i) the worth at the time of award of any unpaid Rent and any other sums due and
payable which have been earned at the time of such termination; plus

(ii) the worth at the time of award of the amount by which the unpaid Rent and
any other sums due and payable which would have been earned after termination
until the time of award exceeds the amount of such rental loss Tenant proves
could have been reasonably avoided; plus

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(iii) the worth at the time of award of the amount by which the unpaid Rent and
any other sums due and payable for the balance of the term of this Lease after
the time of award exceeds the amount of such rental loss that Tenant proves
could be reasonably avoided; plus

(iv) any other amount necessary to compensate Landlord for all the detriment
proximately caused by Tenant’s failure to perform its obligations under this
Lease or which in the ordinary course would be likely to result therefrom,
including, without limitation, (A) any costs or expenses incurred by Landlord
(i) in retaking possession of the Premises; (ii) in maintaining, repairing,
preserving, restoring, replacing, cleaning, altering, remodeling or
rehabilitating the Premises or any affected portions of the Building or the
Project, including, without limitation, such actions undertaken in connection
with the reletting or attempted reletting of the Premises to a new tenant or
tenants; (iii) for leasing commissions, advertising costs and other expenses of
reletting the Premises; or (iv) in carrying the Premises, including, without
limitation, taxes, insurance premiums, utilities and security precautions;
(B) any unearned brokerage commissions paid in connection with this Lease;
(C) reimbursement of any previously waived or abated Base Rent or Additional
Rent or any free rent or reduced rental rate granted hereunder; and (D) any
concession made or paid by Landlord for the benefit of Tenant including, without
limitation, any moving allowances, contributions, payments or loans by Landlord
for tenant improvements or build-out allowances (including, without limitation,
any unamortized portion of the Tenant Improvement Allowance, such Tenant
Improvement Allowance to be amortized over the Term in the manner reasonably
determined by Landlord, if any, and any outstanding balance (principal and
accrued interest) of the Tenant Improvement Loan, if any), or assumptions by
Landlord of any of Tenant’s previous lease obligations; plus

(v) such reasonable attorneys’ fees incurred by Landlord as a result of a
Default, and costs in the event suit is filed by Landlord to enforce such
remedy; and plus

(vi) at Landlord’s election, such other amounts in addition to or in lieu of the
foregoing as may be permitted from time to time by applicable law.

(vii) As used in subsections (i) and (ii) above, the “worth at the time of
award” is computed by allowing interest at an annual rate equal to twelve
percent (12%) per annum or the maximum rate permitted by law, whichever is less.
As used in subsection (iii) above, the “worth at the time of award” is computed
by discounting such amount at the discount rate of Federal Reserve Bank of San
Francisco at the time of award, plus one percent (1%).

Tenant hereby waives for Tenant and for all those claiming under Tenant all
right now or hereafter existing to redeem by order or judgment of any court or
by any legal process or writ, Tenant’s right of occupancy of the Premises after
any termination of this Lease, specifically, Tenant waives redemption or relief
from forfeiture under California Code of Civil Procedure Sections 1174 and 1179,
or under any other pertinent present or future Law, in the event Tenant is
evicted or Landlord takes possession of the Premises by reason of any Default of
Tenant hereunder.

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(b) Continuation of Lease. In the event of any Default by Tenant, then in
addition to any other remedies available to Landlord at law or in equity and
under this Lease, Landlord shall have the remedy described in California Civil
Code Section 1951.4, and the following provision from such Civil Code Section is
hereby repeated: “The Lessor has the remedy described in California Civil Code
Section 1951.4 (lessor may continue lease in effect after lessee’s breach and
abandonment and recover rent as it becomes due, if Lessee has right to sublet or
assign, subject only to reasonable limitations).” In addition, Landlord shall
not be liable in any way whatsoever for its failure or refusal to relet the
Premises. For purposes of this Section 25(b), the following acts by Landlord
will not constitute the termination of Tenant’s right to possession of the
Premises:

(i) Acts of maintenance or preservation or efforts to relet the Premises,
including, without limitation, alterations, remodeling, redecorating, repairs,
replacements and/or painting as Landlord shall consider advisable for the
purpose of reletting the Premises or any part thereof, or

(ii) The appointment of a receiver upon the initiative of Landlord to protect
Landlord’s interest under this Lease or in the Premises.

Even if Tenant has abandoned the Premises, this Lease shall continue in effect
for so long as Landlord does not terminate Tenant’s right to possession, and
Landlord may enforce all its rights and remedies under this Lease, including,
without limitation, the right to recover rent as it becomes due. Any such
payments due Landlord shall be made upon demand therefor from time to time and
Tenant agrees that Landlord may file suit to recover any sums falling due from
time to time. Notwithstanding the exercise by Landlord of its right under this
Section to continue the Lease without termination, Landlord may do so without
prejudice to its right at any time thereafter to terminate this Lease in
accordance with the other provisions contained in this Section.

(c) Re-entry. In the event of any Default by Tenant, Landlord shall also have
the right, with or without terminating this Lease, in compliance with applicable
law, to re-enter the Premises, by force if necessary, and remove all persons and
property from the Premises; such property may be removed and stored in a public
warehouse or elsewhere at the cost of and for the account of Tenant.

(d) Reletting. In the event of the abandonment of the Premises by Tenant or in
the event that Landlord shall elect to re-enter as provided in Section 25(b) or
shall take possession of the Premises pursuant to legal proceeding or pursuant
to any notice provided by law, then if Landlord does not elect to terminate this
Lease as provided in Section 25(a), Landlord may from time to time, without
terminating this Lease, relet the Premises or any part thereof for such term or
terms and at such rental or rentals and upon such other terms and conditions as
Landlord in its sole discretion may deem advisable with the right to make
alterations and repairs to the Premises in Landlord’s sole discretion. In the
event that Landlord shall elect to so relet, then rentals received by Landlord
from such reletting shall be applied in the following order: (1) to reasonable
attorneys’ fees incurred by Landlord as a result of a Default and costs in the
event suit is filed by Landlord to enforce such remedies; (2) to the payment of
any indebtedness other than Rent due hereunder from Tenant to Landlord; (3) to
the payment of any costs of such reletting;

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(4) to the payment of the costs of any alterations and repairs to the Premises;
(5) to the payment of Rent due and unpaid hereunder; and (6) the residue, if
any, shall be held by Landlord and applied in payment of future Rent and other
sums payable by Tenant hereunder as the same may become due and payable
hereunder. Should that portion of such rentals received from such reletting
during any month, which is applied to the payment of Rent hereunder, be less
than the Rent payable during the month by Tenant hereunder, then Tenant shall
pay such deficiency to Landlord. Such deficiency shall be calculated and paid
monthly. Tenant shall also pay to Landlord, as soon as ascertained, any costs
and expenses incurred by Landlord in such reletting or in making such
alterations and repairs not covered by the rentals received from such reletting.

(e) Termination. No re-entry or taking of possession of the Premises by Landlord
pursuant to this Section 25 shall be construed as an election to terminate this
Lease unless a written notice of such intention is given to Tenant or unless the
termination thereof is decreed by a court of competent jurisdiction.
Notwithstanding any reletting without termination by Landlord because of any
Default by Tenant, Landlord may at any time after such reletting elect to
terminate this Lease for any such Default.

(f) Cumulative Remedies. The remedies herein provided are not exclusive and
Landlord shall have any and all other remedies provided herein or by law or in
equity including, without limitation, any and all rights and remedies of
Landlord under California Civil Code Section 1951.8, California Code of Civil
Procedure Section 1161 et seq., or any similar, successor or related provision
of applicable Laws.

(g) No Surrender. No act or conduct of Landlord, whether consisting of the
acceptance of the keys to the Premises, or otherwise, shall be deemed to be or
constitute an acceptance of the surrender of the Premises by Tenant prior to the
expiration of the Term, and such acceptance by Landlord of surrender by Tenant
shall only flow from and must be evidenced by a written acknowledgment of
acceptance of surrender signed by Landlord. The surrender of this Lease by
Tenant, voluntarily or otherwise, shall not work a merger unless Landlord elects
in writing that such merger take place, but shall operate as an assignment to
Landlord of any and all existing subleases, or Landlord may, at its option,
elect in writing to treat such surrender as a merger terminating Tenant’s estate
under this Lease, and thereupon Landlord may terminate any or all such subleases
by notifying the sublessee of its election so to do within five (5) days after
such surrender.

(h) Landlord’s Lien. In addition to any statutory lien Landlord has, Tenant
hereby grants to Landlord a continuing security interest for all sums of money
becoming due hereunder upon personal property of Tenant situated on or about the
Premises and such property will not be removed therefrom without the consent of
Landlord until all sums of money then due Landlord have been first paid and
discharged. If a default occurs under this Lease, Landlord will have, in
addition to all other remedies provided herein or by law, all rights and
remedies under the Uniform Commercial Code, including, without limitation, the
right to sell the property described in this subjection (g) at public or private
sale upon five (5) days’ notice to Tenant. This contractual lien will be in
addition to any statutory lien for rent.

(i) Tenant’s Waiver of Redemption. Tenant waives redemption or relief from
forfeiture under California Code of Civil Procedure Sections 1174 and 1179, or
under any other pertinent present or future Law, in the event Tenant is evicted
or Landlord takes possession of the Premises by reason of any Default of Tenant
hereunder.

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26. LANDLORD’S RIGHT TO PERFORM TENANT’S OBLIGATIONS

(a) Right to Perform if Tenant in Default. Without limiting the rights and
remedies of Landlord contained in Section 25 above, if Tenant shall be in
Default in the performance of any of the terms, provisions, covenants or
conditions to be performed or complied with by Tenant pursuant to this Lease,
then Landlord may at Landlord’s option, without any obligation to do so, and
upon five (5) days prior notice to Tenant perform any such term, provision,
covenant, or condition, or make any such payment and Landlord by reason of so
doing shall not be liable or responsible for any loss or damage thereby
sustained by Tenant or anyone holding under or through Tenant or any of Tenant’s
Agents.

(b) Right to Perform in Emergency. Without limiting the rights of Landlord under
Section 26(a) above, Landlord shall have the right at Landlord’s option, without
any obligation to do so, to perform any of Tenant’s covenants or obligations
under this Lease without notice to Tenant in the case of an emergency, as
determined by Landlord in its sole and absolute judgment, or if Landlord
otherwise determines in its sole discretion that such performance is necessary
or desirable for the proper management and operation of the Building or the
Project or for the preservation of the rights and interests or safety of other
tenants of the Building or the Project.

(c) Reimbursement of Costs. If Landlord performs any of Tenant’s obligations
hereunder in accordance with this Section 26, the full amount of the cost and
expense incurred or the payment so made or the amount of the loss so sustained
shall immediately be owing by Tenant to Landlord, and Tenant shall promptly pay
to Landlord upon demand, as Additional Rent, the full amount thereof with
interest thereon from the date of payment by Landlord at the lower of (i) ten
percent (10%) per annum, or (ii) the highest rate permitted by applicable law.

 

27. ATTORNEY’S FEES

(a) Prevailing Party Awarded Fees. If either party hereto fails to perform any
of its obligations under this Lease or if any dispute arises between the parties
hereto concerning the meaning or interpretation of any provision of this Lease,
then the defaulting party or the party not prevailing in such dispute, as the
case may be, shall pay any and all costs and expenses incurred by the other
party on account of such default and/or in enforcing or establishing its rights
hereunder, including, without limitation, court costs and reasonable attorneys’
fees and disbursements. Any such attorneys’ fees and other expenses incurred by
either party in enforcing a judgment in its favor under this Lease shall be
recoverable separately from and in addition to any other amount included in such
judgment, and such attorneys’ fees obligation is intended to be severable from
the other provisions of this Lease and to survive and not be merged into any
such judgment.

(b) Collection Costs. Without limiting the generality of Section 27(a) above, if
Landlord utilizes the services of an attorney for the purpose of collecting any
Rent due and unpaid by Tenant or in connection with any other breach of this
Lease by Tenant, Tenant agrees to pay Landlord reasonable attorneys’ fees
incurred by Landlord for such services, regardless of the fact that no legal
action may be commenced or filed by Landlord.

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28. TAXES

Tenant shall be liable for and shall pay directly to the taxing authority, prior
to delinquency, all taxes levied against Tenant’s Property. If any Alteration
installed by Tenant pursuant to Section 12 or any of Tenant’s Property is
assessed and taxed with the Project or Building, Tenant shall pay such taxes to
Landlord within ten (10) days after delivery to Tenant of a statement therefor.

 

29. EFFECT OF CONVEYANCE

The term “Landlord” as used in this Lease means, from time to time, the then
current owner of the Building or the Project containing the Premises, so that,
in the event of any sale of the Building or the Project, Landlord shall be and
hereby is entirely freed and relieved of all covenants and obligations of
Landlord hereunder, and it shall be deemed and construed, without further
agreement between the parties and the purchaser at any such sale, that the
purchaser of the Building or the Project has assumed and agreed to carry out any
and all covenants and obligations of Landlord hereunder.

 

30. TENANT’S ESTOPPEL CERTIFICATE

From time to time, upon written request of Landlord, Tenant shall execute,
acknowledge and deliver to Landlord or its designee, an Estoppel Certificate in
substantially the form attached hereto as Exhibit E and with any other
statements reasonably requested by Landlord or its designee. Any such Estoppel
Certificate may be relied upon by a prospective purchaser of Landlord’s interest
or a mortgagee of (or holder of a deed of trust encumbering) Landlord’s interest
or assignment of any mortgage or deed of trust upon Landlord’s interest in the
Premises. If Tenant fails to provide such certificate within ten (10) days of
receipt by Tenant of a written request by Landlord as herein provided, such
failure shall, at Landlord’s election, constitute a Default under this Lease,
and Tenant shall be deemed to have given such certificate as above provided
without modification and shall be deemed to have admitted the accuracy of any
information supplied by Landlord to a prospective purchaser or mortgagee or deed
of trust holder.

 

31. SUBORDINATION

(a) Subordination. At the option of Landlord, this Lease, and all rights of
Tenant hereunder, are and shall be subject and subordinate to all ground leases,
overriding leases and underlying leases affecting the Building or the Project
now or hereafter existing and each of the terms, covenants and conditions
thereto (the “Superior Lease(s)”), and to all mortgages or deeds of trust which
may now or hereafter affect the Building, the Property or any of such leases and
each of the terms, covenants and conditions thereto (the “Superior
Mortgage(s)”), whether or not such mortgages or deeds of trust shall also cover
other land, buildings or leases, to each and every advance made or hereafter to
be made under such mortgages or deeds of trust, and to all renewals,
modifications, replacements and extensions of such leases and such mortgages or
deeds of trust and spreaders and consolidations of such mortgages or deeds of
trust. This Section shall be self-operative and no further instrument of
subordination shall be required.

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Tenant shall promptly execute, acknowledge and deliver any reasonable instrument
that Landlord, the lessor under any such lease or the holder of any such
mortgage or deed of trust or any of their respective successors in interest may
reasonably request to evidence such subordination; if Tenant fails to execute,
acknowledge or deliver any such instrument within ten (10) business days after
request therefor, Tenant hereby irrevocably constitutes and appoints Landlord as
Tenant’s attorney-in-fact, coupled with an interest, to execute and deliver any
such instrument for and on behalf of Tenant. As used herein the lessor of a
Superior Lease or its successor in interest is herein called “Superior Lessor”;
and the holder of a Superior Mortgage is herein called “Superior Mortgagee”.

(b) Attornment. If any Superior Lessor or Superior Mortgagee shall succeed to
the rights of Landlord under this Lease, whether through possession or
foreclosure action or delivery of a new lease or deed (such party so succeeding
to Landlord’s rights herein called “Successor Landlord”), then Tenant shall
attorn to and recognize such Successor Landlord as Tenant’s landlord under this
Lease (without the need for further agreement) and shall promptly execute and
deliver any reasonable instrument that such Successor Landlord may reasonably
request to evidence such attornment. This Lease shall continue in full force and
effect as a direct lease between the Successor Landlord and Tenant upon all of
the terms, conditions and covenants as are set forth in this Lease, except that
the Successor Landlord shall not (a) be liable for any previous act or omission
of Landlord under this Lease, except to the extent such act or omission shall
constitute a continuing Landlord default hereunder; (b) be subject to any
offset, not expressly provided for in this Lease; or (c) be bound by any
previous modification of this Lease or by any previous prepayment of more than
one month’s Base Rent, unless such modification or prepayment shall have been
expressly approved in writing by the Successor Landlord (or predecessor in
interest).

 

32. ENVIRONMENTAL COVENANTS

(a) Hazardous Materials. As used in this Lease, the term “Hazardous Materials”
means (i) any substance or material that is included within the definitions of
“hazardous substances,” “hazardous materials,” “toxic substances,” “pollutant,”
“contaminant,” “hazardous waste,” or “solid waste” in any Environmental Law;
(ii) petroleum or petroleum derivatives, including, without limitation, crude
oil or any fraction thereof, all forms of natural gas, and petroleum products or
by-products or waste; (iii) polychlorinated biphenyls (PCB’s); (iv) asbestos and
asbestos containing materials (whether friable or non-friable); (v) lead and
lead based paint or other lead containing materials (whether friable or
non-friable); (vi) urea formaldehyde; (vii) microbiological pollutants;
(viii) batteries or liquid solvents or similar chemicals; (ix) radon gas; and
(x) mildew, fungus, mold, bacteria and/or other organic spore material, whether
or not airborne, colonizing, amplifying or otherwise.

(b) Environmental Laws. As used in this Lease, the term “Environmental Laws”
means all statutes, terms, conditions, limitations, restrictions, standards,
prohibitions, obligations, schedules, plans and timetables that are contained in
or promulgated pursuant to any federal, state or local laws (including, without
limitation, rules, regulations, ordinances, codes,

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judgments, orders, decrees, contracts, permits, stipulations, injunctions, the
common law, court opinions, and demand or notice letters issued, entered,
promulgated or approved thereunder), relating to pollution or the protection of
the environment, including, without limitation, laws relating to emissions,
discharges, releases or threatened releases of Hazardous Materials into ambient
air, surface water, ground water or lands or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials including, without limitation, but
not limited to the: Comprehensive Environmental Response Compensation and
Liability Act of 1980 (CERCLA), as amended by the Superfund Amendments and
Reauthorization Act of 1986 (SARA), 42 U.S.C. § 9601 et seq.; Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976
(RCRA), 42 U.S.C. § 6901 et seq.; Federal Water Pollution Control Act, 33 U.S.C.
§ 1251 et seq.; Toxic Substances Control Act, 15 U.S.C. § 2601 et seq.; Clean
Air Act, 42 U.S.C. § 7401 et seq.; and the Safe Drinking Water Act, 42 U.S.C. §
300f et seq.; and any analogous state statutes, including, without limitation,
the Porter-Cologne Water Quality Control Act (Cal. Water Code § 13020 et seq.),
the Safe Drinking Water and Toxic Enforcement Act of 1986 (Cal. Health & Safety
Code § 25249.5 et seq.), the Hazardous Substance Account Act (Cal. Health &
Safety Code § 25300 et seq.), the Hazardous Waste Control Act (Cal. Health &
Safety Code § 25100 et seq.), and any other applicable provisions of the
California Health & Safety Code, Water Code, or Government Code, and local
counterparts or equivalents thereto. “Environmental Laws” shall include any
statutory or common law that has developed or develops in the future regarding
mold, fungus, microbiological pollutants, mildew, bacteria and/or other organic
spore material. “Environmental Law” shall not include laws relating to
industrial hygiene or worker safety, except to the extent that such laws address
asbestos and asbestos containing materials (whether friable or non-friable) or
lead and lead based paint or other lead containing materials.

(c) Cleaning and Business Supplies. During its use and occupancy of the Premises
Tenant will not permit Hazardous Materials to be present on or about the
Premises except for normal quantities of cleaning and other business supplies
customarily used and stored in an office and that it will comply with all
Environmental Laws relating to the use, storage or disposal of any such
Hazardous Materials.

(d) Obligation to Remediate. If Tenant’s use of Hazardous Materials on or about
the Premises results in a release, discharge or disposal of Hazardous Materials
on, in, at, under, or emanating from, the Premises or the property in which the
Premises are located, Tenant agrees to investigate, clean up, remove or
remediate such Hazardous Materials in full compliance with (a) the requirements
of (i) all Environmental Laws and (ii) any governmental agency or authority
responsible for the enforcement of any Environmental Laws; and (b) any
additional requirements of Landlord that are necessary, in Landlord’s reasonable
discretion, to protect the value of the Premises or the property in which the
Premises are located. Landlord shall also have the right, but not the
obligation, to take whatever action with respect to any such Hazardous Materials
that it deems necessary, in Landlord’s reasonable discretion, to protect the
value of the Premises or the property in which the Premises are located. All
costs and expenses paid or incurred by Landlord in the exercise of such right
shall be payable by Tenant promptly upon demand.

(e) Inspection Rights. Upon reasonable notice to Tenant, Landlord may inspect
the Premises for the purpose of determining whether there exists on the Premises
any Hazardous Materials or other condition or activity that is in violation of
the requirements of this Lease or of

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any Environmental Laws. The right granted to Landlord herein to perform
inspections shall not create a duty on Landlord’s part to inspect the Premises,
or liability on the part of Landlord for Tenant’s use, storage or disposal of
Hazardous Materials, it being understood that Tenant shall be solely responsible
for all liability in connection therewith.

(f) Condition on Surrender. Tenant shall surrender the Premises to Landlord upon
the expiration or earlier termination of this Lease free of (i) mold, Mold
Conditions (as hereinafter defined), debris, waste arising from Tenant’s use of
the Premises and (ii) Hazardous Materials placed on or about the Premises by
Tenant or Tenant’s Agents. Tenant’s obligations and liabilities pursuant to this
Section 32 shall be in addition to any other surrender requirements in this
Lease and shall survive the expiration or earlier termination of this Lease. If
it is determined by Landlord that, at the expiration or earlier termination of
this Lease, the condition of all or any portion of the Premises, the Building,
and/or the Project is not in compliance with the provisions of this Lease with
respect to Hazardous Materials, mold, debris, or waste, including, without
limitation, all Environmental Laws to the extent Tenant is responsible
hereunder, then at Landlord’s sole option, Landlord may require Tenant to hold
over possession of the Premises until Tenant can surrender the Premises to
Landlord in the condition required hereunder. Any such holdover by Tenant will
be with Landlord’s consent, will not be terminable by Tenant in any event or
circumstance and will otherwise be subject to the provisions of Section 35 of
this Lease.

(g) Indemnification. Tenant shall indemnify and hold harmless Landlord from and
against any and all Claims (including, without limitation, loss in value of the
Premises or the property in which the Premises is located, damages due to loss
or restriction of rentable or usable space, and damages due to any adverse
impact on marketing of the space and any and all sums paid for settlement of
Claims) incurred by Landlord during or after the term of this Lease and
attributable to (i) any Hazardous Materials placed on or about the Premises, the
Building or the Project by Tenant or Tenant’s Agents, or resulting from the
action or inaction of Tenant or Tenant’s Agents, or (ii) Tenant’s breach of any
provision of this Section 32. This indemnification includes, without limitation,
any and all costs incurred by Landlord due to any investigation of the site or
any cleanup, removal or restoration mandated by a federal, state or local agency
or political subdivision.

(h) Mold Prevention Practices. Tenant, at its sole cost and expense, shall:
(i) adopt and enforce good housekeeping practices, ventilation and vigilant
moisture control within the Premises (particularly in kitchen areas, janitorial
closets, bathrooms, in and around water fountains and other plumbing facilities
and fixtures, break rooms, in and around outside walls, and in and around HVAC
systems and associated drains) for the prevention of mold (such measures, “Mold
Prevention Practices”), (ii) regularly monitor the Premises for the visual
presence of mold and conditions that reasonably can be expected to give rise to
or be attributed to mold or fungus including, but not limited to, observed or
suspected instances of water damage, condensation, seepage, leaks or any other
water collection or penetration (from any source, internal or external), mold
growth, mildew, repeated complaints of respiratory ailments or eye irritation by
Tenant’s employees or any other occupants of the Premises, or any notice from a
governmental agency of complaints regarding the indoor air quality at the
Premises (the “Mold Conditions”), and (iii) immediately notify Landlord in
writing if it observes, suspects, or has reason to believe mold or Mold
Conditions in, at, or about the Premises and surrounding areas.

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(i) Inspection. In the event of suspected mold or Mold Conditions in, at, or
about the Premises and surrounding areas, Landlord may cause an inspection of
the Premises to be conducted, during such time as Landlord may designate, to
determine if mold or Mold Conditions are present in, at, or about the Premises.

(j) Survival. The provisions of this Section 32 shall survive the expiration or
earlier termination of this Lease.

 

33. NOTICES

All notices and demands which are required or may be permitted to be given to
either party by the other hereunder shall be in writing and shall be sent by
United States mail, postage prepaid, certified, or by personal delivery or
nationally recognized overnight courier, addressed to the addressee at Tenant’s
Address or Landlord’s Address as specified in the Basic Lease Information, or to
such other place as either party may from time to time designate in a notice to
the other party given as provided herein. Copies of all notices and demands
given to Landlord shall additionally be sent to Landlord’s property manager at
the address specified in the Basic Lease Information or at such other address as
Landlord may specify in writing from time to time. Notice shall be deemed given
upon actual receipt (or attempted delivery if delivery is refused), if
personally delivered, or one (1) business day following deposit with a reputable
overnight courier that provides a receipt, or on the third (3rd) day following
deposit in the United States mail in the manner described above. In no event
shall either party use a post office box or other address which does not accept
overnight delivery.

 

34. WAIVER

The waiver of any breach of any term, covenant or condition of this Lease shall
not be deemed to be a waiver of such term, covenant or condition or of any
subsequent breach of the same or any other term, covenant or condition herein
contained. The subsequent acceptance of Rent by Landlord shall not be deemed to
be a waiver of any preceding breach by Tenant, other than the failure of Tenant
to pay the particular rental so accepted, regardless of Landlord’s knowledge of
such preceding breach at the time of acceptance of such Rent. No delay or
omission in the exercise of any right or remedy of Landlord in regard to any
Default by Tenant shall impair such a right or remedy or be construed as a
waiver. Any waiver by Landlord of any Default must be in writing and shall not
be a waiver of any other Default concerning the same or any other provisions of
this Lease.

 

35. HOLDING OVER

Any holding over after the expiration of the Term, without the express written
consent of Landlord, shall constitute a Default and, without limiting Landlord’s
remedies provided in this Lease, such holding over shall be construed to be a
tenancy at sufferance, at a rental rate equal to one hundred fifty percent
(150%) of Base Rent last due in this Lease, plus Additional Rent, and shall
otherwise be on the terms and conditions herein specified, so far as applicable;
provided, however, in no event shall any renewal or expansion option, option to
purchase, or other similar right or option contained in this Lease be deemed
applicable to any such tenancy at sufferance. If the Premises are not
surrendered at the end of the Term or sooner termination of this Lease

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absent the consent of Landlord to such holdover, and in accordance with the
provisions of Sections 11 and 32(e), Tenant shall indemnify, defend and hold
Landlord harmless from and against any and all loss or liability resulting from
delay by Tenant in so surrendering the Premises including, without limitation,
any loss or liability resulting from any claim against Landlord made by any
succeeding tenant or prospective tenant founded on or resulting from such delay
and losses to Landlord due to lost opportunities to lease any portion of the
Premises to any such succeeding tenant or prospective tenant, together with, in
each case, actual attorneys’ fees and costs.

 

36. SUCCESSORS AND ASSIGNS

The terms, covenants and conditions of this Lease shall, subject to the
provisions as to assignment, apply to and bind the heirs, successors, executors,
administrators and assigns of all of the parties hereto. If Tenant shall consist
of more than one entity or person, the obligations of Tenant under this Lease
shall be joint and several.

 

37. TIME

Time is of the essence of this Lease and each and every term, condition and
provision herein.

 

38. BROKERS

Landlord and Tenant each represents and warrants to the other that neither it
nor its officers or agents nor anyone acting on its behalf has dealt with any
real estate broker except the Broker(s) specified in the Basic Lease Information
in the negotiating or making of this Lease, and each party agrees to indemnify
and hold harmless the other from any Claims incurred by the indemnified party in
conjunction with any such Claims of any other broker or brokers to a commission
in connection with this Lease as a result of the actions of the indemnifying
party. Landlord agrees to pay a commission to Tenant’s Broker pursuant to
separate agreement.

 

39. LIMITATION OF LIABILITY

In the event of any default or breach by Landlord under this Lease or arising in
connection herewith or with Landlord’s operation, management, leasing, repair,
renovation, alteration or any other matter relating to the Project or the
Premises Tenant’s remedies shall be limited solely and exclusively to an amount
which is equal to the lesser of (a) the interest in the Building of the
then-current Landlord or (b) the equity interest Landlord would have in the
Building if the Building were encumbered by third party debt in an amount equal
to eighty percent (80%) of the value of the Building (as such value is
determined by Landlord), provided that in no event shall such liability extend
to any sales or insurance proceeds received by Landlord or the “Landlord
Parties” in connection with the Project, Building or Premises. For purposes of
this Lease, “Landlord Parties” means collectively, Landlord, its partners,
shareholders, officers, directors, employees, investment advisors, or any
successor in interest of any of them. Neither Landlord, nor any of the Landlord
Parties shall have any personal liability therefor, and Tenant hereby expressly
waives and releases such personal liability on behalf of itself and all persons
claiming by, through or under Tenant. The limitations of liability contained in
this Section 39 shall inure to the benefit of Landlord’s and the Landlord
Parties’ present and

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future partners, beneficiaries, officers, directors, trustees, shareholders,
agents and employees, and their respective partners, heirs, successors and
assigns. Under no circumstances shall any present or future partner of Landlord
(if Landlord is a partnership), future member in Landlord (if Landlord is a
limited liability company) or trustee or beneficiary (if Landlord or any partner
or member of Landlord is a trust), have any liability for the performance of
Landlord’s obligations under this Lease. Notwithstanding any contrary provision
herein, neither Landlord nor the Landlord Parties shall be liable under any
circumstances for injury or damage to, or interference with Tenant’s business,
including, without limitation, loss of profits, loss of rents or other revenues,
loss of business opportunity, loss of goodwill or loss of use, in each case,
however occurring. The provisions of this section shall apply only to the
Landlord and the parties herein described, and shall not be for the benefit of
any insurer nor any other third party.

 

40. FINANCIAL STATEMENTS

Within ten (10) days after Landlord’s request, Tenant shall deliver to Landlord
the then current audited financial statements of Tenant (including interim
periods following the end of the last fiscal year for which annual statements
are available), prepared or compiled by a certified public accountant, including
a balance sheet and profit and loss statement for the most recent prior year,
all prepared in accordance with generally accepted accounting principles
consistently applied. Notwithstanding the foregoing, Tenant shall have no
obligation to deliver any financial statements if Tenant is a publicly traded
entity or an entity that is otherwise required to file financial statements with
any governmental entity that are publicly available and Tenant is in compliance
with such public reporting requirement.

 

41. RULES AND REGULATIONS

Tenant shall comply with the rules and regulations attached hereto as Exhibit D,
along with any reasonable modifications, amendments and supplements thereto, and
such reasonable rules and regulations as Landlord may adopt in the future, from
time to time, for the orderly and proper operation of the Building and the
Project (collectively, the “Rules and Regulations”). The Rules and Regulations
may include, but shall not be limited to, the following: (a) restriction of
employee parking to a limited, designated area or areas; and (b) regulation of
the removal, storage and disposal of Tenant’s refuse and other rubbish. The
then-current Rules and Regulations shall be binding upon Tenant upon delivery of
a copy of them to Tenant. Landlord shall not be responsible to Tenant for the
failure of any other person to observe and abide by any of said Rules and
Regulations.

 

42. MORTGAGEE PROTECTION

(a) Modifications for Lender. If, in connection with obtaining financing for the
Project or any portion thereof, Landlord’s lender shall request reasonable
modifications to this Lease as a condition to such financing, Tenant shall not
unreasonably withhold, delay or defer its consent to such modifications,
provided such modifications do not materially adversely affect Tenant’s rights
or increase Tenant’s obligations under this Lease.

(b) Rights to Cure. Tenant shall give to any trust deed or mortgage holder
(“Holder”), by a method provided for in Section 33 above, at the same time as it
is given to

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Landlord, a copy of any notice of default given to Landlord, provided that prior
to such notice Tenant has been notified, in writing, (by way of notice of
assignment of rents and leases, or otherwise) of the address of such Holder.
Tenant further agrees that if Landlord shall have failed to cure such default
within the time provided for in this Lease, then the Holder shall have an
additional reasonable period within which to cure such default, or if such
default cannot be cured without Holder pursuing its remedies against Landlord,
then such additional time as may be necessary to commence and complete a
foreclosure proceeding, provided Holder commences and thereafter diligently
pursues the remedies necessary to cure such default (including, without
limitation, commencement of foreclosure proceedings, if necessary to effect such
cure), in which event this Lease shall not be terminated.

 

43. RELOCATION

In order to accommodate a tenant of 10,000 rentable square feet or more,
Landlord shall have the right at any time during the Term to relocate the entire
Premises to another part of the Building or to another building in the Project
in accordance with the following:

(a) The new premises shall (i) have the same or not more than fifty percent
(50%) more than the usable and rentable area as the Premises described in this
Lease, (ii) be contiguous space located on the 8th floor or higher and have
comparable or better views, (iii) have a comparable layout and décor, and
(iv) have tenant improvements of equal or greater quality, appearance, condition
and function (for Tenant’s purposes) as the original Premises;

(b) The physical relocation of the Premises, including, without limitation, the
relocation of cabling, wiring, telephone lines and computer equipment, and
moving of Tenant’s furniture, equipment, supplies, and personal property to the
relocated premises shall be accomplished by Landlord at its cost;

(c) Landlord shall deliver to Tenant at least ninety (90) days prior written
notice of Landlord’s intention to relocate the Premises (a “Relocation Notice”),
which Relocation Notice shall identify the proposed Relocated Premises and set
for the date by which the relocation shall have occurred (the “Relocation
Date”). Tenant shall have the right, exercisable by delivery of written notice
to Landlord (a “Relocation Termination Notice”) within ten (10) business days of
delivery to Tenant of a Relocation Notice, to terminate this Lease, in which
event Tenant shall vacate and surrender the Premises to Landlord in accordance
with this Lease on or before the Relocation Date and this Lease shall terminate
upon the later of the date of such surrender or the Relocation Date; provided,
further, upon receipt of a Relocation Termination Notice from Tenant, Landlord
shall have the right, exercisable upon delivery of written notice to Tenant to
rescind its Relocation Notice and Tenant’s right to terminate this Lease;

(d) The physical relocation of the Premises shall take place on a weekend and
shall be substantially completed before the Monday following the weekend in
which the relocation takes place. If the physical relocation has not been
completed in that time, Rent shall abate from the time the physical relocation
commences to the time it is substantially completed;

(e) Reasonable, out-of-pocket costs incurred by Tenant as a result of the
relocation, including, without limitation, costs incurred in changing addresses
on stationery, business cards, directories, advertising, and other such items,
shall be paid by Landlord, in a sum not to exceed seven thousand five hundred
dollars ($7,500.00);

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(f) Landlord shall not have the right to relocate the Premises prior to the end
of the eighteenth (18th) month or more than once during the Term of this Lease;

(g) If the relocated Premises is a different square footage than the Premises
described in this Lease, the Base Rent shall be adjusted to a sum computed by
multiplying the Base Rent specified in the Basic Lease Information by a
fraction, the numerator of which shall be the total number of rentable square
feet in the relocated Premises, and the denominator of which shall be the total
number of rentable square feet in the Premises before relocation, provided,
however, in no event shall the Base Rent or Tenant’s Proportionate Share(s) be
increased as a result of such relocation; and

(h) The parties shall immediately execute an amendment to this Lease stating the
relocation of the Premises and the adjustment of Base Rent and Tenant’s
Proportionate Share(s), if any.

 

44. PARKING

(a) Parking Rights. Tenant shall have the right but not the obligation to lease
the number of parking spaces in the Parking Areas as specified in the Basic
Lease Information throughout the Term, and any extension thereof, subject to the
provisions of this Section 44; provided, however, that the number of parking
spaces allocated to Tenant hereunder shall be reduced on a proportionate basis
in the event any of the parking spaces in the Parking Areas are taken or
otherwise eliminated as a result of any Condemnation or casualty event affecting
such Parking Areas or any modifications made by Landlord to such Parking Areas.
Tenant shall pay the parking rental being charged for such spaces, as the same
may be increased from time to time, in advance, as Additional Rent, on the first
day of each month. The parking rental payable by Tenant hereunder may include
taxes imposed on the use of the parking spaces by any governmental or
quasi-governmental authority. The use of such spaces shall be for the parking of
standard size passenger automobiles, pick-up trucks, vans and sport utility
vehicles used by Tenant, its officers, directors, employees, consultants and
independent contractors only, and shall be subject to applicable Laws. Parking
spaces may not be assigned or transferred separate and apart from this Lease.
Upon the expiration or earlier termination of this Lease, Tenant’s rights with
respect to all leased parking spaces shall immediately terminate. Further, if
Tenant fails to pay parking rental when the same shall be due, then, upon
written notice from Landlord, in addition to all other remedies available to
Landlord, Tenant’s rights with respect to all leased parking spaces shall
immediately terminate.

(b) Management of Project Parking Areas. The Parking Areas shall be subject to
the reasonable control and management of Landlord, who may, from time to time,
establish, modify and enforce reasonable rules and regulations with respect
thereto. If parking spaces are not assigned pursuant to the terms of this Lease,
Landlord reserves the right at any time to assign parking spaces, and Tenant
shall thereafter be responsible to insure that its officers, directors,
consultants, independent contractors and employees park in the designated areas.
Tenant shall, if requested by Landlord, furnish to Landlord a complete list of
the license plate numbers of all

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vehicles operated by Tenant, any transferee, or their respective officers,
directors, consultants, independent contractors and employees. Landlord reserves
the right to change, reconfigure, or rearrange the Parking Areas, to reconstruct
or repair any portion thereof, and to restrict or eliminate the use of any
Parking Areas and do such other acts in and to such areas as Landlord deems
necessary or desirable, without such actions being deemed an eviction of Tenant
or a disturbance of Tenant’s use of the Premises, and without Landlord being
deemed in default hereunder, provided that Landlord shall use commercially
reasonable efforts (without any obligation to engage overtime labor or commence
any litigation) to minimize the extent and duration of any resulting
interference with Tenant’s parking rights. Landlord may, in its sole discretion,
convert the Parking Areas to a reserved and/or controlled parking facility, or
operate the Parking Areas (or a portion thereof) as a tandem, attendant assisted
and/or valet parking facility. Landlord may delegate its responsibilities with
respect to the Parking Areas to a parking operator, in which case such parking
operator shall have all the rights of control and management granted to
Landlord. In such event, Landlord may direct Tenant, in writing, to enter into a
parking agreement directly with the operator of the Parking Areas, and to pay
all parking charges directly to such operator.

(c) Indemnification; Waiver. Each vehicle shall, at Landlord’s option to be
exercised from time to time, bear a permanently affixed and visible
identification sticker to be provided by Landlord. Tenant shall not and shall
not permit its Agents to park any vehicles in locations other than those
specifically designated by Landlord as being for Tenant’s use. The license
granted hereunder is for self-service parking only and does not include
additional rights or services. Neither Landlord nor its Agents shall be liable
for: (i) loss or damage to any vehicle or other personal property parked or
located upon or within such parking spaces or any Parking Areas whether pursuant
to this license or otherwise and whether caused by fire, theft, explosion,
strikes, riots or any other cause whatsoever; or (ii) injury to or death of any
person in, about or around such parking spaces or any Parking Areas or any
vehicles parking therein or in proximity thereto whether caused by fire, theft,
assault, explosion, riot or any other cause whatsoever and Tenant hereby waives
any claim for or in respect to the above and against all Claims arising out of
loss or damage to property or injury to or death of persons, or both, relating
to any of the foregoing. Tenant shall not assign any of its rights hereunder and
in the event an attempted assignment is made, it shall be void.

(d) Visitor Parking. Tenant recognizes and agrees that visitors, clients and/or
customers (collectively the “Visitors”) to the Project and the Premises must
park automobiles or other vehicles only in areas designated by Landlord from
time to time as being for the use of such Visitors and Tenant hereby agrees to
ask its Visitors to park only in the areas designated by Landlord from time to
time for the use of Tenant’s Visitors. Further, parking for Visitors is subject
to the payment of fees (“Visitor Parking Fees”) at rates set and to be set by
Landlord from time to time in its sole discretion. Tenant hereby covenants and
agrees to pay or ask its Visitors to pay the Visitor Parking Fees, plus tax
thereon, as shall be set by Landlord from time to time and to comply with and
abide by Landlord’s or Landlord’s parking operator’s rules and regulations
governing the use of such Visitor’s parking as may be in existence from time to
time.

(e) Governmental Fees. In the event any tax, surcharge or regulatory fee is at
any time imposed by any governmental authority upon or with respect to parking
or vehicles parking in the parking spaces referred to herein, Tenant shall pay
such tax, surcharge or regulatory fee as

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Additional Rent under this Lease, such payments to be made in advance and from
time to time as required by Landlord (except that they shall be paid monthly
with Base Rent payments if permitted by the governmental authority).

 

45. ENTIRE AGREEMENT

This Lease, including the Exhibits and any Addenda attached hereto, which are
hereby incorporated herein by this reference, contains the entire agreement of
the parties hereto, and no representations, inducements, promises or agreements,
oral or otherwise, between the parties, not embodied herein or therein, shall be
of any force and effect. If there is more than one Tenant, the obligations
hereunder imposed shall be joint and several.

 

46. INTEREST

Any installment of Rent and any other sum due from Tenant under this Lease which
is not received by Landlord within five (5) days from when the same is due shall
bear interest from the date such payment was originally due under this Lease
until paid at the lesser of (a) an annual rate equal to the maximum rate of
interest permitted by law, or (b) ten percent (10%) per annum. Payment of such
interest shall not excuse or cure any Default by Tenant. In addition, Tenant
shall pay all costs and reasonable attorneys’ fees incurred by Landlord in
collection of such amounts.

 

47. GOVERNING LAW; CONSTRUCTION

This Lease shall be construed and interpreted in accordance with the laws of
state in which the Premises is located. The parties acknowledge and agree that
no rule of construction to the effect that any ambiguities are to be resolved
against the drafting party shall be employed in the interpretation of this
Lease, including the Exhibits and any Addenda attached hereto. All captions in
this Lease are for reference only and shall not be used in the interpretation of
this Lease. Whenever required by the context of this Lease, the singular shall
include the plural, the masculine shall include the feminine, and vice versa. If
any provision of this Lease shall be determined to be illegal or unenforceable,
such determination shall not affect any other provision of this Lease and all
such other provisions shall remain in full force and effect. The words
“include,” “includes,” and “including” shall be deemed to be followed by the
phrase “without limitation.” The phrase “business days” means Monday through
Friday, excluding holidays. If there shall be more than one person or entity
comprising Tenant, the act of or notice from, or notice or refund to, or the
signature of, any one or more of them, in connection with any matter arising
under this Lease, including but not limited to, any renewal, extension,
expiration, termination or modification of this Lease, shall be binding upon
each and all of the persons and entities comprising Tenant with the same force
and effect as if each and all of them had so acted or so given or received such
notice or refund or so signed.

 

48. REPRESENTATIONS AND WARRANTIES OF TENANT

Tenant (and, if Tenant is a corporation, partnership, limited liability company
or other legal entity, such corporation, partnership, limited liability company
or entity) hereby makes the following representations and warranties, each of
which is material and being relied upon by Landlord, is true in all respects as
of the date of this Lease, and shall survive the expiration or termination of
the Lease. Tenant shall re-certify such representations to Landlord
periodically, upon Landlord’s reasonable request.

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(a) If Tenant is an entity, Tenant is duly organized, validly existing and in
good standing under the laws of the state of its organization, and is qualified
to do business in the state in which the Premises is located, and the persons
executing this Lease on behalf of Tenant have the full right and authority to
execute this Lease on behalf of Tenant and to bind Tenant without the consent or
approval of any other person or entity. Tenant has full power, capacity,
authority and legal right to execute and deliver this Lease and to perform all
of its obligations hereunder. This Lease is a legal, valid and binding
obligation of Tenant, enforceable in accordance with its terms.

(b) Tenant has not (i) made a general assignment for the benefit of creditors,
(ii) filed any voluntary petition in bankruptcy or suffered the filing of an
involuntary petition by any creditors, (iii) suffered the appointment of a
receiver to take possession of all or substantially all of its assets,
(iv) suffered the attachment or other judicial seizure of all or substantially
all of its assets, (v) admitted in writing its inability to pay its debts as
they come due, or (vi) made an offer of settlement, extension or composition to
its creditors generally.

(c) Tenant hereby represents and warrants to Landlord that Tenant is not:

(i) in violation of any Anti-Terrorism Law (as hereinafter defined); or

(ii) a Prohibited Person, nor are any of Tenant’s affiliates, officers,
directors, members or lease guarantor, as applicable, a Prohibited Person.

If at any time any of these representations becomes false, then it shall be
considered a material default under this Lease.

As used herein, “Anti-Terrorism Law” is defined as any law relating to
terrorism, anti-terrorism, money-laundering or anti-money laundering activities,
including without limitation the United States Bank Secrecy Act, the United
States Money Laundering Control Act of 1986, Executive Order No. 13224, Title 3
of the USA Patriot Act, Cal. Gov. Code §7513.6, and any regulations promulgated
under any of them. As used herein “Executive Order No. 13224” is defined as
Executive Order No. 13224 on Terrorist Financing effective September 24, 2001,
and relating to “Blocking Property and Prohibiting Transactions With Persons Who
Commit, Threaten to Commit, or Support Terrorism”, as may be amended from time
to time. “Prohibited Person” is defined as (i) a person or entity that is listed
in the Annex to Executive Order No. 13224, or a person or entity owned or
controlled by an entity that is listed in the Annex to Executive Order
No. 13224; (ii) a person or entity with whom Landlord is prohibited from dealing
or otherwise engaging in any transaction by any Anti-Terrorism Law; or (iii) a
person or entity that is named as a “specially designated national and blocked
person” on the most current list published by the U.S. Treasury Department
Office of Foreign Assets Control at its official website,
http://www.treas.gov/ofac/t11sdn.pdf or at any replacement website or other
official publication of such list. “USA Patriot Act” is defined as the “Uniting
and Strengthening America by Providing Appropriate Tools Required to Intercept
and Obstruct Terrorism Act of 2001” (Public Law 107-56), as may be amended from
time to time.

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49. NAME OF BUILDING

In the event Landlord chooses to change the name or address of the Building
and/or the Project, Tenant agrees that such change shall not affect in any way
its obligations under this Lease, and that, except for the name or address
change, all terms and conditions of this Lease shall remain in full force and
effect. Tenant agrees further that such name or address change shall not require
a formal amendment to this Lease, but shall be effective upon Tenant’s receipt
of written notification from Landlord of said change.

 

50. SECURITY

(a) No Security Obligations. Tenant acknowledges and agrees that, while Landlord
may in its sole and absolute discretion engage security personnel to patrol the
Building or the Project, Landlord is not providing any security services with
respect to the Premises and that Landlord shall not be liable to Tenant for, and
Tenant waives any claim against Landlord with respect to, any bodily injury,
loss by theft or any other damage suffered or incurred by Tenant or Tenant’s
employees, invitees, and visitors in connection with any unauthorized entry into
the Premises or any other breach of security with respect to the Premises, the
Building or the Project.

(b) Cooperation With Security Measures. Tenant hereby agrees to the exercise by
Landlord and Landlord’s Agents, within their sole discretion, of such security
measures as, but not limited to, the evacuation of the Premises, the Building or
the Project for cause, suspected cause or for drill purposes, the denial of any
access to the Premises, the Building or the Project and other similarly related
actions that it deems necessary to prevent any threat of property damage or
bodily injury. The exercise of such security measures by Landlord and Landlord’s
Agents, and the resulting interruption of service and cessation of Tenant’s
business, if any, shall not be deemed an eviction or disturbance of Tenant’s use
and possession of the Premises, or any part thereof, or render Landlord or
Landlord’s Agents liable to Tenant for any resulting damages or relieve Tenant
from Tenant’s obligations under this Lease.

 

51. JURY TRIAL WAIVER

Landlord and Tenant each hereby waives any right to trial by jury with respect
to any action or proceeding (i) brought by Landlord, Tenant or any other party,
relating to (A) this Lease and/or any understandings or prior dealings between
the parties hereto, or (B) the Premises, the Building or the Project or any part
thereof, or (ii) to which Landlord or Tenant is a party. Landlord and Tenant
each hereby agrees that this Lease constitutes a written consent to waiver of
trial by jury pursuant to the provisions of California Code of Civil Procedure
Section 631.

 

52. RECORDATION

Neither this Lease, nor any memorandum, affidavit or other writing with respect
thereto, shall be recorded by Tenant or by any one acting through, under or on
behalf of Tenant, and the recording thereof in violation of this provision shall
make this Lease null and void at Landlord’s election.

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53. RIGHT TO LEASE

Landlord reserves the absolute right to effect such other tenancies in the
Project as Landlord in the exercise of its sole business judgment shall
determine to best promote the interest of the Project. Tenant does not rely on
the fact, nor does Landlord represent, that any specific tenant or type or
number of tenants shall, during the Lease Term, occupy any space in the Project.

 

54. FORCE MAJEURE

Any prevention, delay or stoppage due to strikes, lockouts, labor disputes, acts
of God, inability to obtain services, labor, or materials or reasonable
substitutes therefor, governmental actions, civil commotions, fire or other
casualty, and other causes beyond the reasonable control of the party obligated
to perform, except with respect to the obligations imposed with regard to Rent
and other charges to be paid by Tenant pursuant to this Lease (collectively, the
“Force Majeure”), notwithstanding anything to the contrary contained in this
Lease, shall excuse the performance of such party for a period equal to any such
prevention, delay or stoppage and therefore, if this Lease specifies a time
period for performance of an obligation of either party, that time period shall
be extended by the period of any delay in such party’s performance cause by a
Force Majeure.

 

55. ACCEPTANCE

This Lease shall only become effective and binding upon full execution hereof by
Landlord and delivery of a signed copy to Tenant and Landlord’s receipt of any
Security Deposit and Prepaid Base Rent set forth in the Basic Lease Information
Section of this Lease.

 

56. RENEWAL OPTION (WITH FMV RENT)

(a) Exercise of Options. Provided Tenant is not in default (beyond applicable
notice and grace periods) pursuant to any of the terms and conditions of this
Lease, at the date of both the Expiration Date and the effective date of the
Option (as defined below), Tenant shall have the option (the “Option”) to renew
this Lease for an additional sixty (60) month period (the “Extension Term”)
commencing on the date following the Expiration Date upon the terms and
conditions contained in this Section 56. To exercise the Option, Tenant shall
give Landlord notice (the “Extension Notice”) of intent to exercise said Option
not less than nine (9) months and not more than twelve (12) months prior to the
date on which the Extension Term which is the subject of the notice will
commence. The notice shall be given as provided in Section 33 hereof. In the
event Tenant exercises the Option, this Lease will terminate in its entirety at
the end of the Extension Term and Tenant will have no further option to renew or
extend the Term of this Lease.

(b) Procedures for Determining Prevailing Market Rate.

(i) If Tenant timely exercises the Option, Landlord shall deliver to Tenant a
good faith written proposal of the “Prevailing Market Rate” (as hereinafter
defined) for the Premises for the Extension Term. Within thirty (30) days after
receipt of Landlord’s proposal, Tenant shall notify Landlord in writing that
(A) Tenant accepts Landlord’s proposal or (B)

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Tenant rejects Landlord’s proposal. If Tenant does not give Landlord a timely
notice in response to Landlord’s proposal, Landlord’s proposal of the Prevailing
Market Rate for the Extension Term shall be deemed accepted by Tenant.

(ii) If Tenant timely rejects Landlord’s proposal, Landlord and Tenant shall
first negotiate in good faith in an attempt to agree upon the Prevailing Market
Rate for the Extension Term. If Landlord and Tenant are able to agree within
thirty (30) days following Landlord’s receipt of Tenant’s notice rejecting
Landlord’s proposal (the “Negotiation Period”), such agreement shall constitute
a determination of Prevailing Market Rate for purposes of this Article. If
Landlord and Tenant are unable to agree upon the Prevailing Market Rate during
the Negotiation Period, then within thirty (30) days after expiration of the
Negotiation Period, the parties shall meet and concurrently deliver to each
other their respective written estimates of the Prevailing Market Rate for the
Extension Term, supported by the reasons therefore (respectively, “Landlord’s
Determination” and “Tenant’s Determination”). Landlord’s Determination may be
more or less than its initial proposal of Prevailing Market Rate. If either
party fails to deliver its Determination in a timely manner, then the Prevailing
Market Rate shall be the amount specified by the other party. If the higher of
such Determinations is not more than one hundred five percent (105%) of the
lower of such Determinations, then the Prevailing Market Rate shall be the
average of the two Determinations. If the Prevailing Market Rate is not resolved
by exchange of the Determinations, the Prevailing Market Rate shall be
determined as follows, each party being bound to its Determination and such
Determinations constituting the only two choices available to the Appraisal
Panel (as hereinafter defined).

(iii) Within thirty (30) days after the parties exchange Landlord’s and Tenant’s
Determinations, the parties shall each appoint a neutral and impartial appraiser
who shall be certified as an MAI or ASA appraiser and shall have at least ten
(10) years’ experience, immediately prior to his or her appointment, as a real
estate appraiser of office properties in the City of Pasadena, including
significant experience appraising high rise office space in the South Lake
Avenue business and shopping district. 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, if 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, if there is no successor organization, the organization and
designation most similar). If either Landlord or Tenant fails to appoint an
appraiser within said thirty (30) day period, the Prevailing Market Rate for the
Extension Term shall be the Determination of the other party who timely
appointed an appraiser.

Landlord’s and Tenant’s appraisers shall work together in good faith to appoint
a neutral or impartial third party appraiser within 10 business days, and notify
both Landlord and Tenant of such selection. The three appraisers shall then work
together in good faith to decide which of the two Determinations more closely
reflects the Prevailing Market Rate of the Premises for the Extension Term. The
Determination selected by such appraisers shall be binding upon Landlord and
Tenant. If all three appraisers cannot agree upon which of the two
Determinations more closely reflects the Prevailing Market Rate within thirty
(30) days, the decision of a majority of the appraisers shall prevail.

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(iv) Within five (5) days following notification of the identity of the third
appraiser, Landlord and Tenant shall submit copies of Landlord’s Determination
and Tenant’s Determination to the third appraiser. The three appraisers are
referred to herein as the “Appraisal Panel.” The Appraisal Panel, if it so
elects, may conduct a hearing, at which Landlord and Tenant may each make
supplemental oral and/or written presentations, with an opportunity for rebuttal
by the other party and for questioning by the members of the Appraisal Panel.
Within thirty (30) days following the appointment of the third appraiser, the
Appraisal Panel, by majority vote, shall select either Landlord’s Determination
or Tenant’s Determination as the Prevailing Market Rate of the Premises for the
Extension Term, and shall have no right to propose a middle ground or to modify
either of the two proposals or the provisions of this Lease. The decision of the
Appraisal Panel shall be final and binding upon the parties, and may be enforced
in accordance with the provisions of California law. In the event of the
failure, refusal or inability of any member of the Appraisal Panel to act, a
successor shall be appointed in the manner that applied to the selection of the
member being replaced.

(v) Each party shall pay the fees and expenses of the appraiser appointed by
such party, and one-half of the fees and expenses of the third appraiser and the
expenses incident to the proceedings of the Appraisal Panel (excluding
attorneys’ fees and similar expenses of the parties which shall be borne
separately by each of the parties).

(c) Prevailing Market Rate. As used in this Lease, the phrase “Prevailing Market
Rate” means the amount that a landlord under no compulsion to lease the
Premises, and a tenant under no compulsion to lease the Premises, would agree
upon at arm’s length as Base Rent for the Premises for the Extension Term, as of
the commencement of the Extension Term. The Prevailing Market Rate shall be
based upon non-sublease, non-encumbered, non-equity lease transactions recently
entered into for space in the Building and in Comparable Buildings (“Comparison
Leases”) and may include periodic increases. Rental rates payable under
Comparison Leases shall be adjusted to account for variations between this Lease
and the Comparison Leases with respect to: (i) the length of the Extension Term
compared to the lease term of the Comparison Leases; (ii) rental structure,
including additional rent, and taking into consideration any “base year”;
(iii) the size of the Premises compared to the size of the premises under the
Comparison Leases; (iv) utility, location, floor levels, views and efficiencies
of the floor(s) of the Premises compared to the premises under the Comparison
Leases; (v) the age and quality of construction of the Building; (vi) the value
of existing leasehold improvements; and (vii) the financial condition and credit
history of Tenant compared to the tenants under the Comparison Leases. In
determining the Prevailing Market Rate, no consideration shall be given to
(i) any rental abatement period granted to tenants in Comparison Leases in
connection with the design and construction of tenant improvements, (ii) whether
Landlord or the landlords under Comparison Leases are paying real estate
brokerage commissions in connection with Tenant’s exercise of the Extension
Option or in connection with the Comparison Leases, and (iii) moving allowances
paid. As used herein, “Comparable Buildings” mean those buildings located in
Pasadena, California of the same or similar age, quality, tenant mix, parking,
views, and the like.

(d) Option is Personal. The rights contained in this Section 56 shall be
personal to the Named Tenant (and any assignee pursuant to Section 23(l)) and
shall not be transferable to any other assignee, sub-lessee or other transferee
and may only be exercised by the Named Tenant (or any assignee pursuant to
Section 23(l)) if such party occupies the entire Premises at the Expiration Date
and at the commencement of the Extension Term.

[Signatures on next page]

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IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered this Lease
as of the Lease Date specified in the Basic Lease Information.

 

  LANDLORD:   

SOUTH LAKE AVENUE INVESTORS LLC,

a Delaware limited liability company

        By:   

TPF Equity REIT Operating Partnership LP,

a Delaware limited partnership,

Its sole member

           By:   

TPF Equity REIT Operating Partnership GP LLC,

a Delaware limited liability company,

Its General Partner

              By:   

/s/ Scott D. Mullen

                 Scott D. Mullen, Director      TENANT:    ARROWHEAD RESEARCH
CORPORATION,         a Delaware corporation         By:   

/s/ Kenneth A. Myszkowski

           Kenneth A. Myszkowski, Chief Financial Officer