Exhibit 10.26

OFFICE LEASE

KILROY REALTY

KILROY CENTRE DEL MAR

KILROY REALTY, L.P.,

a Delaware limited partnership,

as Landlord,

and

VOLCANO CORPORATION,

a Delaware corporation,

as Tenant.

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TABLE OF CONTENTS

 

          Page ARTICLE 1    PREMISES, BUILDING, PROJECT, AND COMMON AREAS    5
ARTICLE 2    LEASE TERM; OPTION TERM    10 ARTICLE 3    BASE RENT    13 ARTICLE
4    ADDITIONAL RENT    14 ARTICLE 5    USE OF PREMISES    24 ARTICLE 6   
SERVICES AND UTILITIES    25 ARTICLE 7    REPAIRS    28 ARTICLE 8    ADDITIONS
AND ALTERATIONS    29 ARTICLE 9    COVENANT AGAINST LIENS    32 ARTICLE 10   
INSURANCE    33 ARTICLE 11    DAMAGE AND DESTRUCTION    38 ARTICLE 12   
NONWAIVER    40 ARTICLE 13    CONDEMNATION    41 ARTICLE 14    ASSIGNMENT AND
SUBLETTING    41 ARTICLE 15    SURRENDER OF PREMISES; OWNERSHIP AND REMOVAL OF
TRADE FIXTURES    46 ARTICLE 16    HOLDING OVER    47 ARTICLE 17    ESTOPPEL
CERTIFICATES    48 ARTICLE 18    SUBORDINATION    48 ARTICLE 19    DEFAULTS;
REMEDIES    49 ARTICLE 20    COVENANT OF QUIET ENJOYMENT    52 ARTICLE 21   
SECURITY DEPOSIT    52 ARTICLE 22    [INTENTIONALLY OMITTED]    53 ARTICLE 23   
SIGNS    53

 

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ARTICLE 24    COMPLIANCE WITH LAW    56 ARTICLE 25    LATE CHARGES    56 ARTICLE
26    LANDLORD’S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT    57 ARTICLE 27   
ENTRY BY LANDLORD    57 ARTICLE 28    TENANT PARKING    58 ARTICLE 29   
MISCELLANEOUS PROVISIONS    59

 

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INDEX

 

     Page(s)

Abatement Event

   27

Accountant

   23

Additional Notice

   27

Additional Rent

   14

Alterations

   29

Applicable Laws

   55

Bank Prime Loan

   56

Base Building

   30

Base Rent

   12

Base Year

   14

BOMA

   6

bona-fide third-party offer

   7

Brokers

   63

BS/BS Exception

   28

Building

   6 Building 3    1

Building Common Areas,

   6

Building Common Areas.

   6

Building Hours

   25

Building Structure

   28

Building Systems

   28

CC&Rs

   24

Comparable Buildings

   2

Contemplated Effective Date

   44

Contemplated Transfer

   43

Control,

   46

Cosmetic Alterations

   29

Damage Termination Date

   39

Damage Termination Notice

   39

Direct Expenses

   14

Eligibility Period

   27

Environmental Laws

   65

Estimate

   22

Estimate Statement

   22

Estimated Excess

   22

Excess

   21

Exercise Notice

   11

Expense Year

   14

Eyebrow Signage

   53

Fair Isaac

   53

First Refusal Notice

   7

First Refusal Space

   7

First Refusal Space Amendment

   8

 

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     Page(s)

First Refusal Space Commencement Date

   9

First Refusal Space Lease

   9

First Refusal Space Rent

   8

Force Majeure

   61

Hazardous Material(s)

   65

Holidays

   25

HVAC

   25

Identification Requirements

   65

Initial Notice

   27

Intent Notice

   11

Intention to Transfer Notice

   44

Interest Rate

   56

Landlord

   1

Landlord Parties

   32

Landlord Repair Notice

   37

Landlord Response Date

   11

Landlord Response Notice

   11

Landlord’s Option Rent Calculation

   11

Lease

   1

Lease Commencement Date

   9

Lease Expiration Date

   10

Lease Term

   9

Lines

   64

Mail

   61

Major Alterations

   29

Market Rate Schedule

   10

Monument Signage

   54

NDA

   48

New Lease Notice

   47

New Name

   53

Nine Month Period

   44

Notices

   61

Objectionable Name

   53

Operating Expenses

   14

Option Rent

   10

Option Term

   10

Original Improvements

   34

Original Tenant

   7

Outside Agreement Date

   11

Permitted Chemicals

   66

Permitted Transferee

   46

Permitted Use

   3

Premises

   5

Project

   6

Project Common Areas

   6

 

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     Page(s)

Project Common Areas,

   6

Proposition 13

   20

Recapture Notice

   44

Refusal Space Lease Term

   9

Renovations

   64

Rent

   14

Re-Submittal Date

   11

Review Period

   23

Security Deposit

   52

Statement

   21

Subject Space

   41

Suite 100/200 Premises

   1

Suite 100/200 Sublease

   1

Summary

   1

Superior Right Holders

   8

Tax Expenses

   19

TCCs

   5

Tenant

   1

Tenant Parties

   33

Tenant’s Option Rent Calculation

   11

Tenant’s Share

   21

Tenant’s Signage

   54

Termination Date

   12

Termination Fee

   12

Termination Notice

   12

Third Party Contractor

   36

Third Party Lease

   8

Third Party Tenant

   8

Transfer

   45

Transfer Costs

   43

Transfer Notice

   41

Transfer Premium

   43

Transferee

   41

Transfers

   41

Work Letter

   5

 

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KILROY CENTRE DEL MAR

OFFICE LEASE

This Office Lease (the “Lease”), dated as of the date set forth in Section 1 of
the Summary of Basic Lease Information (the “Summary”), below, is made by and
between KILROY REALTY, L.P., a Delaware limited partnership (“Landlord”), and
VOLCANO CORPORATION, a Delaware corporation (“Tenant”).

SUMMARY OF BASIC LEASE INFORMATION

 

         TERMS OF LEASE                DESCRIPTION

1.      Date:

   December 28, 2009.

2.      Premises:

  

2.1    Building:

   That certain five (5)-story building (the “Building” or “Building 3”) located
at 3661 Valley Centre Drive, San Diego, California 92130, which Building
contains 129,752 rentable (123,445 usable) square feet of space, and which
Building is commonly referred to as “Building 3” within the “Project.”

2.2    Premises:

   Approximately 31,686 rentable square feet of space located on the first (1st)
and second (2nd) floors of the Building and commonly known as Suites 100, 150
and 200 as further set forth in Exhibit A to the Office Lease. A portion of the
Premises consisting of approximately 22,000 rentable square feet of space (the
“Suite 100/200 Premises”) is currently occupied by Tenant pursuant to that
certain Sublease dated February 12, 2009, by and between Tenant and Fair Isaac
Corporation, a Delaware corporation (the “Suite 100/200 Sublease”). The
additional portion of the Premises containing approximately 10,000 rentable
square feet of space (i.e., all portions of the Premises that are not included
within the Suite 100/200 Premises) shall be referred to herein as the
“Additional Premises.”

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2.3    Project:

   The Building is part of an office project known as “Kilroy Del Mar,” as
further set forth in Section 1.1.2 of this Lease.

3.      Lease Term

         (Article 2):

  

3.1    Length of Term:

   Five (5) years.

3.2    Lease Commencement Date:

   August 1, 2010.

3.3    Intentionally Omitted:

   Intentionally Omitted.

3.4    Lease Expiration Date:

   July 31, 2015.

3.5    Option Term(s):

   One (1) three (3)-year option to renew, as more particularly set forth in
Section 2.2 of this Lease.

4.      Base Rent

         (Article 3):

  

 

Period During Lease Term

   Annualized
Base Rent*     Monthly
Installment
of Base Rent*     Monthly
Rental Rate
per Rentable
Square Foot* August 1,2010 -
July 31, 2011**    $ 980,998.56 **    $ 81,749.88 **    $ 2.580 August 1,2011 -
July 31, 2012**    $ 1,010,428.56 **    $ 84,202.38 **    $ 2.657 August 1,2012
-
July 31, 2013    $ 1,040,741.40      $ 86,728.45      $ 2.737 August 1,2013 -
July 31, 2014    $ 1,071,963.60      $ 89,330.30      $ 2.819 August 1,2014 -
July 31, 2015    $ 1,104,122.52      $ 92,010.21      $ 2.904

 

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* The initial Annual Base Rent (and Monthly Installment of Base Rent) for the
entire Premises was calculated by multiplying the initial Monthly Rental Rate
per Rentable Square Foot by the number of rentable square feet of space in the
Premises. In all subsequent twelve (12) month period occurring during the Lease
Term and commencing on August 1, the calculation of Annual Base Rent (and
Monthly Installment of Base Rent) reflects an annual increase of three
percent (3%).

** Subject to phase-in and/or abatement, pursuant to Sections 3.2 and 3.3,
below.

 

5.      Base Year

         (Article 4):

   Calendar year 2010.

6.      Tenant’s Share

         (Article 4):

   Approximately 24.42% (subject to phase-in pursuant to Section 3.2 below).

7.      Permitted Use

         (Article 5):

   Tenant shall use the Premises solely for general office use, the operation of
medical device labs (which lab use shall not include benched wet lab space),
research and development uses (which research and development uses may include
the installation of a small portable “cleanroom”), uses incidental thereto, and
any other use permitted under applicable zoning and laws (the “Permitted Use”);
provided, however, that notwithstanding anything to the contrary set forth
hereinabove, and as more particularly set forth in the Lease, Tenant shall be
responsible for operating and maintaining the Premises pursuant to, and in no
event may Tenant’s Permitted Use violate, (A) Landlord’s “Rules and
Regulations,” as that term is set forth in Section 5.2 of this Lease, (B) all
“Applicable Laws,” as that term is set forth in Article 24 of this Lease,
(C) all applicable zoning, building codes and the “CC&Rs,” as that term is set
forth in Section 5.3 of this Lease, and (D) the character of the Project as a
first-class office building Project.

 

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8.      Security Deposit

         (Article 21):

   $92,010.21.

9.      Parking Pass Ratio

         (Article 28):

   Four (4) unreserved parking passes for every 1,000 rentable square feet of
the Premises (i.e. one hundred twenty-seven (127) unreserved parking passes).

10.    Address of Tenant

         (Section 29.18):

  

Volcano Corporation

3661 Valley Centre Drive Suite 200

San Diego, California 92130

Attention: Mr. John Dahldorf

(Prior to and after Lease Commencement Date)

11.    Address of Landlord

         (Section 29.18):

   See Section 29.18 of the Lease.

12.    Broker(s)

         (Section 29.24):

  

         Representing Tenant:

   Representing Landlord:

         Irving Hughes.

   None.

13.    Improvement Allowance

         (Section 2 of Exhibit B):

   (A) Fifteen and 00/100 Dollars ($15.00) per rentable square foot of the
Premises located on the first (1st) floor of that portion of the Building, and
(B) Three and 00/100 Dollars ($3.00) per rentable square foot of that portion of
the Premises located on the second (2nd) floor of the Building.

 

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ARTICLE 1

PREMISES, BUILDING, PROJECT, AND COMMON AREAS

1.1 Premises, Building, Project and Common Areas.

1.1.1 The Premises. Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord the premises set forth in Section 2.2 of the Summary (the
“Premises”). The outline of the Premises is set forth in Exhibit A attached
hereto and each floor or floors of the Premises shall have approximately the
number of rentable square feet as set forth in Section 2.2 of the Summary. The
parties hereto agree that the lease of the Premises is upon and subject to the
terms, covenants and conditions (the “TCCs”) herein set forth, and Landlord and
Tenant each covenant as a material part of the consideration for this Lease to
keep and perform each and all of such TCCs by it to be kept and performed and
that this Lease is made upon the condition of such performance. The parties
hereto hereby acknowledge that the purpose of Exhibit A is to show the
approximate location of the Premises in the “Building,” as that term is defined
in Section 1.1.2, below, only, and such Exhibit is not meant to constitute an
agreement, representation or warranty as to the construction of the Premises,
the precise area thereof or the specific location of the “Common Areas,” as that
term is defined in Section 1.1.3, below, or the elements thereof or of the
accessways to the Premises or the “Project,” as that term is defined in
Section 1.1.2, below. Landlord and Tenant acknowledge that Tenant has been
occupying the Suite 100/200 Premises pursuant to the Suite 100/200 Sublease
(obviating any need for Landlord to “deliver” the Suite 100/200 Premises), and
Tenant shall continue to accept the Suite 100/200 Premises in its
currently-existing, “as is” condition. Except as specifically set forth in this
Lease and in the Work Letter attached hereto as Exhibit B (the “Work Letter”),
Landlord shall not be obligated to provide or pay for any improvement work or
services related to the improvement of the Premises. Tenant also acknowledges
that neither Landlord nor any agent of Landlord has made any representation or
warranty regarding the condition of the Premises, the Building or the Project or
with respect to the suitability of any of the foregoing for the conduct of
Tenant’s business, except as specifically set forth in this Lease and the Tenant
Work Letter. The taking of possession of the Additional Premises by Tenant shall
conclusively establish that such portions of the Premises and the Building were
at such time in good and sanitary order, condition and repair, subject only to
(i) the last two (2) sentences of this Section 1.1.1, (ii) latent defects to the
extent identified and, thereafter, promptly communicated to Landlord, within
twelve (12) months of the Lease Commencement Date, and (iii) Landlord’s ongoing
obligations set forth in Sections 1.1.3 and 29.33, and Articles 7 and 24 of this
Lease. Notwithstanding anything to the contrary set forth in this Lease,
Landlord shall, at Landlord’s sole cost and expense, deliver the Additional
Premises to Tenant with the roof, and all “Building Systems” (as that term is
defined in Section 7, below) serving and within the Additional Premises, in good
working condition, and Landlord covenants that (A) such Building Systems have
recently been operated, (B) such Building Systems have been regularly serviced,
and (C) such Building Systems and the Building’s roof have a remaining useful
life extending beyond the initial Lease Term (and if any of the same need to be
replaced during the initial Lease Term for any reason other than Tenant’s
over-standard use of the same or Tenant’s failure to properly maintain the same
in accordance with Article 7 of this Lease, the cost shall be paid by Landlord
and not included in Operating Expenses). If, within the first six (6) months of
the initial Lease Term, it is discovered that

 

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Landlord failed to deliver the Additional Premises in compliance with the
obligations listed in the immediately preceding sentence, then Landlord shall,
at its sole cost and expense, make any repairs and/or replacements necessary to
put the Building Systems serving the Additional Premises in the condition
required by the immediately preceding sentence.

1.1.2 The Building and The Project. The Premises are a part of the building set
forth in Section 2.1 of the Summary (the “Building”). The Building is part of an
office project known as “Kilroy Centre Del Mar.” The term “Project,” as used in
this Lease, shall mean (i) the Building and the Common Areas, (ii) the land
(which is improved with landscaping, parking facilities and other improvements)
upon which the Building and the Common Areas are located, and (iii) the other
office buildings located adjacent to the Building and the land upon which such
adjacent office buildings are located.

1.1.3 Common Areas. Tenant shall have the non-exclusive right to use in common
with other tenants in the Project, and subject to the rules and regulations
referred to in Article 5 of this Lease, those portions of the Project which are
provided, from time to time, for use in common by Landlord, Tenant and any other
tenants of the Project (such areas, together with such other portions of the
Project designated by Landlord, in its discretion, including certain areas
designated for the exclusive use of certain tenants, or to be shared by Landlord
and certain tenants, are collectively referred to herein as the “Common Areas”).
The Common Areas shall consist of the “Project Common Areas” and the “Building
Common Areas.” The term “Project Common Areas,” as used in this Lease, shall
mean the portion of the Project designated as such by Landlord. The term
“Building Common Areas,” as used in this Lease, shall mean the portions of the
Common Areas located within the Building designated as such by Landlord. The
manner in which the Common Areas are maintained and operated shall be at the
reasonable discretion of Landlord (but at all times in a manner consistent with
a first class office project) and the use thereof shall be subject to such
rules, regulations and restrictions as Landlord may make from time to time,
provided that such rules, regulations and restrictions do not unreasonably
interfere with the rights granted to Tenant under this Lease and the permitted
use granted under Section 5.1, below. Landlord reserves the right to close
temporarily, make alterations or additions to, or change the location of
elements of the Project and the Common Areas; provided that no such changes
shall be permitted which materially reduce Tenant’s rights or access hereunder.
Except when and where Tenant’s right of access is specifically excluded in this
Lease, Tenant shall have the right of access to the Premises, the Building, and
the Project parking facility twenty-four (24) hours per day, seven (7) days per
week during the “Lease Term,” as that term is defined in Section 2.1, below.

1.2 Verification of Rentable Square Feet of Premises and Building. For purposes
of this Lease, “rentable square feet” and “usable square feet” shall be
calculated pursuant to Standard Method of Measuring Floor Area in Office
Building, ANSI Z65.1 - 1996, and its accompanying guidelines (collectively,
“BOMA”). Within thirty (30) days after the Lease Commencement Date, Landlord may
elect to cause Landlord’s space planner/architect to measure the rentable and
usable square feet of the Premises, and thereafter the rentable and usable
square feet of the Premises and the results thereof shall be presented to Tenant
in writing. Tenant’s space planner/architect may review Landlord’s space
planner/architect’s determination of the number of rentable square feet and
usable square feet of the Premises and Tenant may, within fifteen (15) business
days after Tenant’s receipt of Landlord’s space planner/architect’s

 

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written determination, object to such determination by written notice to
Landlord. Tenant’s failure to deliver written notice of such objection within
said fifteen (15) business day period shall be deemed to constitute Tenant’s
acceptance of Landlord’s space planner/architect’s determination. If Tenant
objects to such determination, Landlord’s space planner/architect and Tenant’s
space planner/architect shall promptly meet and attempt to agree upon the
rentable and usable square footage of the Premises. If Landlord’s space
planner/architect and Tenant’s space planner/architect cannot agree on the
rentable and useable square footage of the Premises within thirty (30) days
after Tenant’s objection thereto, Landlord and Tenant shall mutually select an
independent third party space measurement professional to field measure the
Premises pursuant to BOMA. Such third party independent measurement
professional’s determination shall be conclusive and binding on Landlord and
Tenant. Landlord and Tenant shall each pay one-half ( 1/2) of the fees and
expenses of the independent third party space measurement professional. If the
Lease Term commences prior to such final determination, Landlord’s determination
shall be utilized until a final determination is made, whereupon an appropriate
adjustment, if necessary, shall be made retroactively, and Landlord shall make
appropriate payment (if applicable) to Tenant. In the event that pursuant to the
procedure described in this Section 1.2 above, it is determined that the square
footage amounts shall be different from those set forth in this Lease, all
amounts, percentages and figures appearing or referred to in this Lease based
upon such incorrect amount (including, without limitation, the amount of the
“Rent” and any “Security Deposit,” as those terms are defined in Section 4.1 and
Article 21 of this Lease, respectively) shall be modified in accordance with
such determination. If such determination is made, it will be confirmed in
writing by Landlord to Tenant.

1.3 Right of First Refusal. Landlord hereby grants to the Tenant originally
named herein (the “Original Tenant”) and its “Permitted Transferees” (as that
term is defined in Section 14.8 of this Lease), subject to the terms of this
Section 1.3 an ongoing right of refusal, during the initial Lease Term only,
with respect to all remaining space on the first (1st ), third (3rd),
fourth (4th) and fifth (5th) floors of the Building (the “First Refusal Space”).
Notwithstanding anything contained in this Section 1.3 to the contrary, Tenant’s
right of first refusal under this Section 1.3 shall be subject and subordinate
to (i) Landlord’s right to renew any then existing tenant of the First Refusal
Space from time to time, regardless of whether the subject tenant retains a
renewal or extension right and regardless of whether such renewal or extension
is documented pursuant to an amendment or a new lease, and (ii) any superior
rights of expansion, offer or refusal (or similar right) held by other tenants
at the time of execution of this Lease.

1.3.1 Procedure for Lease.

1.3.1.1 Procedure for Offer. Landlord shall notify Tenant (the “First Refusal
Notice”) from time-to-time when and if Landlord receives a “bona-fide
third-party offer” for the First Refusal Space. Pursuant to such First Refusal
Notice, Landlord shall offer to lease to Tenant the applicable First Refusal
Space. The First Refusal Notice shall describe the First Refusal Space, and the
lease term, rent and other fundamental economic terms and conditions upon which
Landlord proposes to lease such First Refusal Space pursuant to the bona-fide
third-party offer. For purposes of this Section 1.3, a “bona-fide third-party
offer” shall mean a counter-offer received by Landlord to lease First Refusal
Space from an unaffiliated and qualified third party which Landlord would
otherwise be willing to accept. For purposes of example only, the following
would each constitute a bona-fide third-party offer:

 

  (a) Landlord receives a request for proposal from an unaffiliated and
qualified third party. Landlord responds to the request for proposal with a
lease proposal and subsequently receives a written bona-fide counter proposal
from the unaffiliated and qualified third party (or the third party accepts
Landlord’s proposal).

 

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  (b) Landlord receives a written offer to lease from an unaffiliated and
qualified third party. Landlord responds to the offer with a written counter
offer and subsequently receives a bona-fide counter to Landlord’s counter offer
from the unaffiliated and qualified third party (or the third party accepts
Landlord’s proposal).

1.3.1.2 Procedure for Acceptance. If Tenant wishes to exercise Tenant’s right of
first refusal with respect to the First Refusal Space described in the First
Refusal Notice, then within five (5) business days of delivery of the First
Refusal Notice to Tenant, Tenant shall deliver notice to Landlord of Tenant’s
exercise of its right of first refusal with respect to all of the First Refusal
Space described in the First Refusal Notice at the rent, for the term and upon
the other fundamental economic terms and conditions contained in such First
Refusal Notice, including, but not limited to rental concessions and improvement
allowances. If Tenant does not so notify Landlord within such five (5) business
day period of Tenant’s exercise of its first refusal right, then Landlord shall
be free to negotiate and enter into a lease for the First Refusal Space to
anyone whom it desires on the net-effective economic terms and the fundamental
non-economic terms which are no more than five percent (5.0%) more beneficial to
such party than those set forth in the First Refusal Notice. In the event
Landlord does not lease such First Refusal Space pursuant to the foregoing
sentence within a period of one hundred eighty (180) days commencing upon the
expiration of the five (5) business day period, after which time, Tenant’s
rights to such space under this Section 1.3 shall renew. Notwithstanding the
foregoing, Tenant’s ongoing right of first refusal shall be subordinate to all
currently-existing rights which are set forth in leases of space with other
tenants of the Project (“Superior Right Holders”), including any renewal,
extension or expansion rights set forth in such leases, regardless of whether
such renewal, extension or expansion rights are executed strictly in accordance
with their terms, or pursuant to a lease amendment or a new lease. After
Landlord enters into any lease of First Refusal Space (“Third Party Lease”) to
any such third party (“Third Party Tenant”) in accordance with the foregoing,
Tenant’s rights under this Section 1.3 shall be subordinate to the rights of the
tenant under the Third Party Lease with respect to the space leased and
encumbered pursuant to the provisions of the Third Party Lease, all extensions
and renewals thereof, all expansion options and all right of first offer
expansions contained therein.

1.3.2 Amendment to Lease. If Tenant timely exercises Tenant’s right of first
refusal to lease First Refusal Space as set forth herein, Landlord and Tenant
shall within thirty (30) days thereafter execute an amendment to this Lease (the
“First Refusal Space

 

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Amendment”) for such First Refusal Space upon the terms set forth in the First
Refusal Notice, including, but not limited to rent (the “First Refusal Space
Rent”), but otherwise upon the TCCs set forth in this Lease and this
Section 1.3. Notwithstanding the foregoing, Landlord may, at its sole option,
require that a separate lease be executed by Landlord and Tenant in connection
with Tenant’s lease of the First Refusal Space, in which event such lease (the
“First Refusal Space Lease”) shall be on the same TCCs as this Lease, except as
provided in this Section 1.3 and specifically in this Lease to the contrary. The
First Refusal Lease, if applicable, shall be executed by Landlord and Tenant
within thirty (30) days following Tenant’s exercise of its right to lease the
First Refusal Space. Notwithstanding the foregoing an otherwise valid exercise
of Tenant’s right of first refusal shall be of full force and effect
irrespective of whether the First Refusal Space Amendment/First Refusal Space
Lease is timely signed by Landlord and Tenant.

1.3.3 No Defaults; Required Financial Condition of Tenant. The rights contained
in this Section 1.3 shall be personal to the Original Tenant and its Permitted
Transferees and may only be exercised by the Original Tenant or a Permitted
Transferee (and not any other assignee, sublessee or other transferee of the
Original Tenant’s interest in this Lease) if the Original Tenant and/or a
Permitted Transferee occupies not less than the entire then existing Premises.
The right to lease the First Refusal Space as provided in this Section 1.3 may
not be exercised if, as of the date Tenant attempts to exercise its right of
first refusal with respect to the First Refusal Space described in the First
Refusal Notice, or as of the scheduled date of delivery of such First Refusal
Space to Tenant, (A) Tenant is in economic or material default pursuant to the
terms of this Lease (beyond any applicable notice and cure periods), and
(B) Tenant has previously been in economic or material default under this Lease
(beyond any applicable notice and cure periods) during the previous twenty-four
(24) month period.

1.3.4 First Refusal Space Commencement Date; Construction in First Refusal
Space. The commencement date for the First Refusal Space shall be the date set
forth in the bona-fide third-party offer (the “First Refusal Space Commencement
Date”), unless otherwise agreed to by Landlord and Tenant; provided, however,
Landlord and Tenant hereby acknowledge and agree that the term of Tenant’s lease
of such First Refusal Space shall expire on the applicable date set forth in the
First Offer Notice (the “First Refusal Space Expiration Date”). The period of
time commencing on the First Refusal Space Commencement Date and ending on the
First Refusal Space Expiration Date shall be referred to herein as the “Refusal
Space Lease Term.” Except as set forth in this Section 1.3.1.1, Tenant shall
take the First Refusal Space in its “as is” condition, and the construction of
improvements in the First Refusal Space shall comply with the terms of Article 8
of this Lease.

1.3.5 Termination of First Refusal Right. Tenant’s right of first refusal set
forth in this Section 1.3 shall automatically terminate and be of no further
force or effect as of the last day of the initial Lease Term (regardless of
whether such Lease Term is extended pursuant to the terms of Section 2.2 of this
Lease or otherwise).

 

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ARTICLE 2

LEASE TERM; OPTION TERM

2.1 Initial Lease Term. The TCCs and provisions of this Lease shall be effective
as of the date of this Lease. The term of this Lease (the “Lease Term”) shall be
as set forth in Section 3.1 of the Summary, shall commence on the date set forth
in Section 3.2 of the Summary (the “Lease Commencement Date”), and shall
terminate on the date set forth in Section 3.4 of the Summary (the “Lease
Expiration Date”) unless this Lease is sooner terminated as hereinafter
provided. At any time during the Lease Term, Landlord may deliver to Tenant a
notice in the form as set forth in Exhibit C, attached hereto, as a confirmation
only of the information set forth therein, which Tenant shall execute and return
to Landlord within ten (10) business days of receipt thereof.

2.2 Option Term(s).

2.2.1 Option Right. Landlord hereby grants to the tenant originally named in
this Lease (the “Original Tenant”) and its “Permitted Transferees” (as that term
is defined in Section 14.8 below) one (1) option to extend the Lease Term for
the entire Premises by a period of three (3) years (“Option Term”). Such option
shall be exercisable only by Notice delivered by Tenant to Landlord as provided
below, provided that, as of the date of delivery of such Notice, (i) Tenant is
not then in economic or material, non-economic default under this Lease (beyond
the applicable notice and cure periods), (ii) Tenant has not been in economic or
material, non-economic default under this Lease (beyond the applicable notice
and cure periods) more than once during the prior twelve (12) month period, and
(iii) Tenant has not been in economic or material, non-economic default under
this Lease (beyond the applicable notice and cure periods) more than three
(3) times during the Lease Term. Upon the proper exercise of such option to
extend, and provided that, as of the end of the Lease Term, (A) Tenant is not in
economic or material, non-economic default under this Lease (beyond the
applicable notice and cure periods), (B) Tenant has not been in economic or
material, non-economic default under this Lease (beyond the applicable notice
and cure periods) more than once during the prior twelve (12) month period, and
(C) Tenant has not been in economic or material, non-economic default under this
Lease (beyond the applicable notice and cure periods) more than three (3) times
during the Lease Term, then the Lease Term, as it applies to the entire
Premises, shall be extended for a period of three (3) years. The rights
contained in this Section 2.2 shall only be exercised by the Original Tenant or
its Permitted Transferee (and not any other assignee, sublessee or other
transferee of the Original Tenant’s interest in this Lease) if Original Tenant
and/or its Permitted Transferee is in occupancy of no less than seventy-five
percent (75%) of the Premises.

2.2.2 Option Rent. The Rent payable by Tenant during the Option Term (the
“Option Rent”) shall be equal to the “Market Rent,” as that term is defined in,
and determined pursuant to, Exhibit G attached hereto; provided, however, that
the Market Rent for each year during the Option Term, shall be equal to the
amount set forth on a “Market Rate Schedule,” as that term is defined below. The
“Market Rate Schedule” shall be derived from the Market Rent for the Option Term
as determined pursuant to Exhibit G, attached hereto, as follows: (i) the Market
Rent for the first year of the Option Term shall be equal to the Market Rent, as

 

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determined pursuant to Exhibit G (inclusive of an adjustment for any Renewal
Allowance to be provided to Tenant, as more particularly detailed in Section 3
of Exhibit G to this Lease), and (ii) the Market Rent for each subsequent year
shall increase annually as determined to be consistent with annual increases for
Comparable Transactions. The calculation of the Market Rent shall be derived
from a review of, and comparison to, the “Net Equivalent Lease Rates” of the
“Comparable Transactions,” as provided for in Exhibit G.

2.2.3 Exercise of Option. The option contained in this Section 2.2 shall be
exercised by Tenant, if at all, only in the manner set forth in this
Section 2.2.3. Tenant shall deliver notice (the “Intent Notice”) to Landlord not
more than twelve (12) months nor less than eight (8) months prior to the
expiration of the initial Lease Term, stating that Tenant intends to exercise
its option. Concurrently with such Intent Notice, Tenant shall deliver to
Landlord Tenant’s calculation of the Market Rent (the “Tenant’s Option Rent
Calculation”). Landlord shall deliver notice (the “Landlord Response Notice”) to
Tenant on or before the date which is thirty (30) days after Landlord’s receipt
of the Intent Notice and Tenant’s Option Rent Calculation (the “Landlord
Response Date”), stating that (A) Landlord is accepting Tenant’s Option Rent
Calculation as the Market Rent, or (B) rejecting Tenant’s Option Rent
Calculation and setting forth Landlord’s calculation of the Market Rent (the
“Landlord’s Option Rent Calculation”). Within ten (10) business days of its
receipt of the Landlord Response Notice, Tenant shall deliver written notice to
Landlord (the “Exercise Notice”), which shall set forth Tenant’s election to
either (i) rescind its Intent Notice, in which event the Lease Term shall expire
as then-currently scheduled, and the Option shall terminate, (ii) affirm the
Intent Notice and accept the Market Rent contained in the Landlord’s Option Rent
Calculation, or (iii) affirm the Intent Notice but rejects the Market Rent
contained in the Landlord’s Option Rent Calculation, in which event the parties
shall follow the procedure set forth in Section 2.2.4 below, and the Market Rent
shall be determined as set forth in Section 2.2.4. Tenant’s failure to timely
deliver the Exercise Notice shall be conclusively deemed to constitute Tenant’s
rescission of its Intent Notice pursuant to alternative (i), from the
immediately preceding sentence.

2.2.4 Determination of Market Rent. In the event Tenant objects or is deemed to
have objected to the Market Rent, Landlord and Tenant shall attempt to agree
upon the Market Rent using reasonable good-faith efforts. If Landlord and Tenant
fail to reach agreement within forty-five (45) days following Tenant’s objection
or deemed objection to the Landlord’s Option Rent Calculation (the “Re-Submittal
Agreement Date”), then, Landlord and Tenant (i) shall each, within five
(5) business days following such Re-Submittal Date, re-submit an updated
Tenant’s Option Rent Calculation, Landlord’s Option Rent Calculation
respectively (provided that to the extent either Landlord or Tenant fail to
re-submit, they shall be deemed to have re-submitted, without change, the
previously delivered Tenant’s Option Rent Calculation or Landlord’s Option Rent
Calculation, as the case may be), and (ii) shall thereafter attempt to agree
upon the market Rent using reasonable good-faith efforts. If Landlord and Tenant
thereafter fail to reach agreement within seven (7) business days following the
Re-Submittal Date (the “Outside Agreement Date”), then either (A) to the extent
the then-applicable Landlord’s Option Rent Calculation is no more than one
hundred two percent (102%) of the then-applicable Tenant’s Option Rent
Calculation, then the average of the two shall be the Option Rent, or
(B) Tenant’s Exercise Notice shall be deemed rescinded, and the Lease Term shall
expire upon the originally scheduled Expiration Date.

 

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2.3 Tenant Termination Right. Tenant shall have the one (1) time right to
terminate this Lease in accordance with the terms and conditions of this
Section 2.3. If Tenant desires to exercise such termination right, then on or
before the first anniversary of the Lease Commencement Date, Tenant shall
deliver written notice to Landlord of Tenant’s desire to lease additional space
in the Project, and provide the approximate square footage of such additional
space (the “Expansion Request Notice”). If, during the ensuing one (1) year
period, Landlord is unable to reasonably accommodate Tenant’s needs as set forth
in the Expansion Request Notice, either via Tenant’s right of first refusal (as
set forth in Section 1.3, above, or otherwise, then Tenant shall have the
one-time right to terminate and cancel this Lease effective as of the third
anniversary of the Lease Commencement Date (the “Termination Date”), in
accordance with the terms and conditions of this Section 2.3. Accordingly,
Tenant shall deliver written notice to Landlord (the “Termination Notice”),
which notice shall be delivered to Landlord on or before the second anniversary
of the Lease Commencement Date, and, concurrently with its delivery of such
Termination Notice, Tenant shall deliver to Landlord the “Termination Fee,” as
that term is defined herein below, as consideration for and as a condition
precedent to such early termination. The “Termination Fee” shall be equal to the
sum of (A) the then remaining (as of the Termination Date) unamortized amount
(calculated by amortizing the same on a straight-line basis commencing on
August 1, 2010 and continuing thereafter for a period of time equal to
sixty (60) months, employing an interest factor of eight percent (8%) per annum)
of the sum of the following: (i) the “Improvement Allowance” as that term is
defined in Section 2.1 of the Work Letter, and (ii) the commission payable in
connection with this Lease; and (B) Three Hundred Nine Thousand Six Hundred and
00/100 Dollars ($309,600.00) (i.e., representing six (6) full calendar months of
the Base Rent Abatement). Subject to Landlord’s timely receipt of the
Termination Notice and the Termination Fee, this Lease shall automatically
terminate and be of no further force or effect, and Landlord and Tenant shall be
relieved of their respective obligations under this Lease, as of the Termination
Date, except with respect to those obligations set forth in this Lease, which
specifically survive the expiration or earlier termination of this Lease,
including, without limitation, the payment by Tenant of all amounts owed by
Tenant under this Lease, up to and including the Termination Date. The
termination right granted to Tenant under this Section 2.3 shall automatically
terminate and be of no further force or effect in the event (w) Tenant fails to
properly and timely exercise such termination right as set forth in this
Section 2.3, (x) Tenant assigns, subleases or otherwise permits the occupancy of
the Premises or any portion thereof by other entities or persons, other than in
connection with a Permitted Transfer, (y) Tenant’s right to possession of the
Premises has previously been terminated, or (z) Tenant is in default under this
Lease, as of the date of Tenant’s delivery of the Termination Notice to Landlord
or, at Landlord’s election, as of the Termination Date. The termination right
granted to Tenant under this Section 2.3 is personal to the Original Tenant and
any Permitted Transferee, and may not be exercised by any assignee, sublessee,
or transferee of the Original Tenant’s or Permitted Transferee’s interest in
this Lease.

 

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ARTICLE 3

BASE RENT

3.1 Base Rent. Tenant shall pay, without prior notice or demand, to Landlord or
Landlord’s agent at the management office of the Project, or, at Landlord’s
option, at such other place as Landlord may from time to time designate in
writing, by a check for currency which, at the time of payment, is legal tender
for private or public debts in the United States of America, base rent (“Base
Rent”) as set forth in Section 4 of the Summary, payable in equal monthly
installments as set forth in Section 4 of the Summary in advance on or before
the first day of each and every calendar month during the Lease Term, without
any setoff or deduction except as expressly provided for in this Lease. The Base
Rent for the first full month of the Lease Term which occurs after the
expiration of any free rent period shall be paid at the time of Tenant’s
execution of this Lease. If any Rent payment date (including the Lease
Commencement Date) falls on a day of the month other than the first day of such
month or if any payment of Rent is for a period which is shorter than one month,
the Rent for any such fractional month shall accrue on a daily basis during such
fractional month and shall total an amount equal to the product of (i) a
fraction, the numerator of which is the number of days in such fractional month
and the denominator of which is the actual number of days occurring in such
calendar month, and (ii) the then-applicable Monthly Installment of Base Rent.
All other payments or adjustments required to be made under the TCCs of this
Lease that require proration on a time basis shall be prorated on the same
basis.

3.2 Rent Phase-In. Notwithstanding anything to the contrary contained herein,
and provided that Tenant faithfully performs all of the terms and conditions of
this Lease, Landlord hereby agrees that, (i) for the six (6) month period
commencing August 1, 2010, and ending January 31, 2011, Tenant shall be
obligated to pay Base Rent pursuant to Section 3.3, below, and Tenant shall only
be obligated to pay Tenant’s Share of Direct Expenses for a 20,000 rentable
square foot portion of the Premises (and Tenant shall be obligated to pay any
other amount of Additional Rent) (i.e., Tenant shall pay Fifty-One Thousand Six
Hundred and 00/100 Dollars ($51,600.00) per month, and Tenant’s Share shall be
15.41%), (ii) for the six (6) month period commencing February 1, 2011, and
ending July 31, 2011, Tenant shall only be obligated to pay Base Rent and
Tenant’s Share of Direct Expenses for a 25,000 rentable square foot portion of
the Premises (i.e., Tenant shall pay Sixty-Four Thousand Five Hundred Fifty-One
Thousand One Hundred Fifty and 00/100 Dollars ($64,500.00) per month, and
Tenant’s Share shall be 19.27%), and (iii) for the six (6) month period
commencing August 1, 2011, and ending January 31, 2012, Tenant shall only be
obligated to pay Base Rent and Tenant’s Share of Direct Expenses for a 30,000
rentable square foot portion of the Premises (i.e. Seventy-Nine Thousand Seven
Hundred Twenty-Two and 00/100 Dollars ($79,722.00) per month and Tenant’s Share
shall be 23.12%). For the remainder of the Lease Term, Tenant shall be obligated
to pay Base Rent and Tenant’s Share of Direct Expenses for the entirety of the
Premises in the amounts set forth in Section 4 of the Summary. Notwithstanding
any provision to the contrary contained in this Section 3.2, as the electricity
to be consumed in the Premises will be metered and paid for by Tenant pursuant
to the terms of Section 6.1.2 of this Lease, Tenant shall, at all times during
the Lease Term, pay the cost thereof as more particularly contemplated by the
terms of Section 6.1.2 of this Lease (i.e., the cost of electricity consumed in
the Premises shall not be prorated or otherwise phased in based on the schedule
set forth in items (i), (ii) and (iii) of this Section 3.2, but shall instead be
paid in its entirety).

 

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3.3 Abated Base Rent. Notwithstanding anything to the contrary contained herein
(specifically including Section 3.2(i), above) and provided that Tenant
faithfully performs all of the terms and conditions of this Lease, Landlord
hereby agrees to abate Tenant’s obligation to pay monthly Base Rent for the six
(6) month period commencing August 1, 2010, and ending January 31, 2011. In
connection with the foregoing, the Base Rent Abatement provided to Tenant
pursuant to this Section 3.3 during the Base Rent Abatement Period shall not
exceed an aggregate Three Hundred Nine Thousand Six Hundred and 00/100 Dollars
($309,600.00). Tenant acknowledges and agrees that during such Base Rent
Abatement Period, such abatement of Base Rent shall have no effect on the
calculation of any Direct Expenses payable by Tenant pursuant to the terms of
this Lease, which Direct Expenses shall be payable during the Base Rent
Abatement Period without regard to the Base Rent Abatement. Additionally,
notwithstanding the foregoing, Tenant shall be obligated to pay all “Additional
Rent,” as that term is defined in Section 4.1, below, during the Base Rent
Abatement Period. In the event of a default by Tenant under the terms of this
Lease that results in early termination pursuant to the provisions of
Article 19, below, then as a part of the recovery set forth in Section 19.2,
below, Landlord shall be entitled to recover the monthly Base Rent that was
abated under the provisions of this Section 3.3.

ARTICLE 4

ADDITIONAL RENT

4.1 General Terms. In addition to paying the Base Rent specified in Article 3 of
this Lease, Tenant shall pay “Tenant’s Share” of the annual “Direct Expenses,”
as those terms are defined in Sections 4.2.6 and 4.2.2, respectively, of this
Lease, which are in excess of the amount of Direct Expenses applicable to the
“Base Year,” as that term is defined in Section 4.2.1, below; provided, however,
that in no event shall any decrease in Direct Expenses for any Expense Year
below Direct Expenses for the Base Year entitle Tenant to any decrease in Base
Rent or any credit against sums due under this Lease. Such payments by Tenant,
together with any and all other amounts payable by Tenant to Landlord pursuant
to the TCCs of this Lease, are hereinafter collectively referred to as the
“Additional Rent,” and the Base Rent and the Additional Rent are herein
collectively referred to as “Rent.” All amounts due under this Article 4 as
Additional Rent shall be payable for the same periods and in the same manner as
the Base Rent; provided, however, the parties hereby acknowledge that the first
monthly installment of Tenant’s Share of any “Estimated Excess,” as that term is
set forth in, and pursuant to the terms and conditions of, Section 4.4.2 of this
Lease, shall first be due and payable for the calendar month occurring
immediately following the expiration of the Base Year. Without limitation on
other obligations of Tenant which survive the expiration of the Lease Term, the
obligations of Tenant to pay the Additional Rent provided for in this Article 4
shall survive the expiration of the Lease Term.

4.2 Definitions of Key Terms Relating to Additional Rent. As used in this
Article 4, the following terms shall have the meanings hereinafter set forth:

4.2.1 “Base Year” shall mean the period set forth in Section 5 of the Summary.

 

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4.2.2 “Direct Expenses” shall mean “Operating Expenses” and “Tax Expenses.”

4.2.3 “Expense Year” shall mean each calendar year in which any portion of the
Lease Term falls, through and including the calendar year in which the Lease
Term expires, provided that Landlord, upon notice to Tenant, may change the
Expense Year from time to time to any other twelve (12) consecutive month
period, and, in the event of any such change, Tenant’s Share of Direct Expenses
shall be equitably adjusted for any Expense Year involved in any such change.

4.2.4 “Operating Expenses” shall mean all expenses, costs and amounts of every
kind and nature which Landlord pays or accrues during any Expense Year because
of or in connection with the ownership, management, maintenance, security,
repair, replacement, restoration or operation of the Project, or any portion
thereof, in accordance with sound real estate management and accounting
principles, consistently applied. Without limiting the generality of the
foregoing, Operating Expenses shall specifically include any and all of the
following: (i) the cost of supplying all utilities, the cost of operating,
repairing, maintaining, and renovating the utility, telephone, mechanical,
sanitary, storm drainage, and elevator systems, and the cost of maintenance and
service contracts in connection therewith; (ii) the cost of licenses,
certificates, permits and inspections and the cost of contesting any
governmental enactments which may affect Operating Expenses (to the extent of
the reasonably anticipated savings), and the costs incurred in connection with a
governmentally mandated transportation system management program or similar
program; (iii) the cost of all insurance carried by Landlord in connection with
the Project (provided that Landlord will not carry earthquake or flood insurance
unless required by its lender); (iv) the cost of landscaping, relamping, and all
supplies, tools, equipment and materials used in the operation, repair and
maintenance of the Project, or any portion thereof; (v) costs incurred in
connection with the parking areas servicing the Project; (vi) fees and other
costs, including management fees (which management fees shall not exceed three
percent (3%) of gross rentals from the Project), consulting fees, legal fees and
accounting fees, of all contractors and consultants in connection with the
management, operation, maintenance and repair of the Project; (vii) payments
under any equipment rental agreements and the fair rental value of any
management office space which exclusively serves the Building (or a
proportionate amount of such costs based upon the ratio of time actually spent
on the management of the Building); (viii) wages, salaries and other
compensation and benefits, including taxes levied thereon, of all persons (other
than persons generally considered to be higher in rank than the position of
“Property Manager”) engaged in the operation, maintenance and security of the
Project; (ix) costs under any instrument pertaining to the sharing of costs by
the Project; (x) operation, repair, maintenance and replacement (to the extent
the repair cost exceeds replacement cost) of all systems and equipment and
components thereof of the Building; (xi) the cost of janitorial, landscaping,
alarm, security and other services to the Project Common Areas, replacement of
Common Area wall and floor coverings, ceiling tiles and fixtures in common
areas, maintenance and replacement of curbs and walkways, repair of the Project,
and repair to roofs and re-roofing (membrane only) of the Building;
(xii) amortization of the cost of acquiring or the rental expense of personal
property used in the maintenance, operation and repair of the Project, or any
portion thereof (which amortization calculation shall include interest at the
“Interest Rate,” as that term is set forth in Article 25 of this Lease);
(xiii) the cost of capital improvements or other costs incurred in connection
with the Project (A) which are intended to

 

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effect economies in the operation or maintenance of the Project, or any portion
thereof, (B) that are required to comply with mandatory conservation programs,
or (C) that are required under any governmental law or regulation by a federal,
state or local governmental agency, except for capital repairs, replacements or
other improvements to remedy a condition existing prior to the Lease
Commencement Date which an applicable governmental authority, if it had
knowledge of such condition prior to the Lease Commencement Date, would have
then required to be remedied pursuant to the then-current governmental laws or
regulations in their form existing as of the Lease Commencement Date and
pursuant to the then-current interpretation of such governmental laws or
regulations by the applicable governmental authority as of the Lease
Commencement Date; provided, however, that any capital expenditure (whether
identified under this item (xiii) or another express provision of this
Section 4.2.4 above) shall be shall be amortized with interest at the Interest
Rate over its useful life as Landlord shall reasonably determine in accordance
with sound real estate management and accounting principles; and (xiv) costs,
fees, charges or assessments imposed by, or resulting from any mandate imposed
on Landlord by, any federal, state or local government for fire and police
protection, trash removal, community services, or other services which do not
constitute “Tax Expenses” as that term is defined in Section 4.2.5, below.
Notwithstanding the foregoing, for purposes of this Lease, Operating Expenses
shall not, however, include:

(a) costs, including, without limitation, marketing costs, legal fees, space
planners’ fees, advertising and promotional expenses, and brokerage fees
incurred in connection with the original construction or development, or
original or future leasing of the Project, and costs, including permit, license
and inspection costs, incurred with respect to the installation of improvements
made for new tenants initially occupying space in the Project after the Lease
Commencement Date or incurred in renovating or otherwise improving, decorating,
painting or redecorating vacant space for tenants or other occupants of the
Project;

(b) except as set forth in items (xii), (xiii), and (xiv) above, depreciation,
interest and principal payments on mortgages and other debt costs, if any,
penalties and interest;

(c) costs for which the Landlord is reimbursed or entitled to reimbursement by
any tenant or occupant of the Project or by insurance by its carrier or any
tenant’s carrier or by anyone else, and electric power and other utility costs
attributable to any Project Tenant’s premises (recognizing that Tenant is
directly paying for all such electric power and other utilities attributable to
the Premises pursuant to Article 6 of this Lease);

(d) any bad debt loss, rent loss, or reserves for bad debts or rent loss;

(e) costs associated with the operation of the business of the partnership or
entity which constitutes the Landlord, as the same are distinguished from the
costs of operation of the Project (which shall specifically include, but not be
limited to, accounting costs associated with the operation of the Project).
Costs associated with the operation of the business of the partnership or entity
which constitutes the Landlord include costs of partnership accounting and legal
matters, costs of defending any lawsuits with any mortgagee (except as the
actions of the Tenant may be in issue), costs of selling, syndicating,
financing, mortgaging or hypothecating any of the Landlord’s interest in the
Project, and costs incurred in connection with

 

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any disputes between Landlord and its employees, between Landlord and Project
management, or between Landlord and other tenants or occupants, and Landlord’s
general corporate overhead and general and administrative expenses;

(f) the wages and benefits of any employee who does not devote substantially all
of his or her employed time to the Project unless such wages and benefits are
prorated to reflect time spent on operating and managing the Project vis-a-vis
time spent on matters unrelated to operating and managing the Project; provided,
that in no event shall Operating Expenses for purposes of this Lease include
wages and/or benefits attributable to personnel above the level of Project
manager;

(g) amount paid as ground rental for the Project by the Landlord;

(h) overhead and profit increment paid to the Landlord or to subsidiaries or
affiliates of the Landlord for services in the Project to the extent the same
exceeds the costs of such services rendered by qualified, first-class
unaffiliated third parties on a competitive basis;

(i) any compensation paid to clerks, attendants or other persons in commercial
concessions operated by the Landlord;

(j) rentals and other related expenses incurred in leasing air conditioning
systems, elevators or other equipment which if purchased the cost of which would
be excluded from Operating Expenses as a capital cost, except equipment not
affixed to the Project which is used in providing janitorial or similar services
and, further excepting from this exclusion such equipment rented or leased to
remedy or ameliorate an emergency condition in the Project ;

(k) all items and services for which Tenant or any other tenant in the Project
reimburses Landlord or which Landlord provides selectively to one or more
tenants (other than Tenant) without reimbursement;

(l) costs, other than those incurred in ordinary maintenance and repair, for
sculpture, paintings, fountains or other objects of art;

(m) any costs expressly excluded from Operating Expenses elsewhere in this
Lease;

(n) rent for any office space occupied by Project management personnel to the
extent the size or rental rate of such office space exceeds the size or fair
market rental value of office space occupied by management personnel of the
Comparable Buildings in the vicinity of the Building, with adjustment where
appropriate for the size of the applicable project;

(o) costs to the extent arising from the gross negligence or willful misconduct
of Landlord or its agents, employees, vendors, contractors, or providers of
materials or services;

 

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(p) costs incurred to comply with laws relating to the removal of hazardous
material (as defined under applicable law) which was in existence in the
Building or on the Project prior to the Lease Commencement Date, ; and costs
incurred to remove, remedy, contain, or treat hazardous material, which
hazardous material is brought into the Building or onto the Project after the
date hereof by Landlord, any of Landlord’s agents, employees, contractors, or
licensees, or any other tenant of the Project;

(q) tax penalties incurred as a result of Landlord’s negligence, inability or
unwillingness to make payments when due or to file any income tax or
informational returns when due;

(r) costs incurred to comply with applicable laws with respect to the cleanup,
removal, investigation, and/or remediation of any Hazardous Materials (as such
term is defined in Article 5, below) in, on or under the Project and/or the
Building to the extent such Hazardous Materials are: (1) in existence as of the
Lease Commencement Date; or (2) introduced onto the Project and/or the Building
after the Lease Commencement Date by Landlord or any of Landlord’s agents,
employees, contractors, or other tenants in violation of applicable laws in
effect at the date of introduction;

(s) any Tax Expenses;

(t) rentals for items (except when needed in connection with normal repairs and
maintenance of permanent systems) which, if purchased, rather than rented, would
constitute a capital improvement specifically excluded above;

(u) costs (including, without limitation, fines, penalties, interest, and costs
of repairs, replacements, alterations and/or improvements) incurred in bringing
the Project into compliance with laws in effect as of the Lease Commencement
Date and as interpreted by applicable governmental authorities as of such date,
including, without limitation, any costs to correct building code violations
pertaining to the initial design or construction of the Building or any other
improvements to the Project, to the extent such violations exist as of the Lease
Commencement Date under any applicable building codes in effect and as
interpreted by applicable governmental authorities as of such date;

(v) costs for which Landlord has been compensated by a management fee, to the
extent that the inclusion of such costs in Operating Expenses would result in a
double charge to Tenant;

(w) costs for the initial development or future expansion of the Project;

(x) costs arising from Landlord’s charitable or political contributions;

(y) costs of any “tap fees” or any sewer or water connection fees for the
benefit of any particular tenant of the Project;

(z) “in-house” legal and/or accounting fees;

 

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(aa) any expenses incurred by Landlord for use of any portions of the Project to
accommodate shows, promotions, kiosks, displays, filming, photography, private
events or parties, ceremonies, and advertising beyond the normal expenses
otherwise attributable to providing services, such as lighting and HVAC to such
public portions of the Project in normal operations of the Project during
standard hours of operation; and

(bb) any balloons, flowers, or other gifts provided to any entity whatsoever, to
include, but not limited to, Tenant, other tenants, employees, vendors,
contractors, prospective tenants, and agents.

If Landlord is not furnishing any particular work or service (the cost of which,
if performed by Landlord, would be included in Operating Expenses) to a tenant
who has undertaken to perform such work or service in lieu of the performance
thereof by Landlord, Operating Expenses shall be deemed to be increased by an
amount equal to the additional Operating Expenses which would reasonably have
been incurred during such period by Landlord if it had at its own expense
furnished such work or service to such tenant. If the Project is not at least
ninety-five percent (95%) occupied during all or a portion of the Base Year or
any Expense Year, Landlord may elect to make an appropriate adjustment to the
components of Operating Expenses for such year to determine the amount of
Operating Expenses that would have been incurred had the Project been
ninety-five percent (95%) occupied; and the amount so determined shall be deemed
to have been the amount of Operating Expenses for such year. Operating Expenses
for the Base Year shall include market-wide cost increases (including utility
rate increases) due to extraordinary circumstances, including, but not limited
to, Force Majeure, boycotts, strikes, conservation surcharges, embargoes or
shortages, or amortized costs relating to capital improvements; provided,
however that at such time as any such particular increases or costs are no
longer included in Operating Expenses, such particular increases or costs shall
be excluded from the Base Year calculation of Operating Expenses. In no event
shall the components of Direct Expenses for any Expense Year related to Project
utility, services, or insurance costs be less than the components of Direct
Expenses related to Project utility, services, or insurance costs in the Base
Year. Landlord shall not (i) make a profit by charging items to Operating
Expenses that are otherwise also charged separately to others and (ii) subject
to Landlord’s right to adjust the components of Operating Expenses described
above in this paragraph, collect Operating Expenses from Tenant and all other
tenants in the Building in an amount in excess of what Landlord incurs for the
items included in Operating Expenses.

It is understood that Landlord will reduce Operating Expenses by all cash
discounts, trade discounts, or quantity discounts actually received by Landlord
in connection with the purchase of any goods, services, or utilities in
connection with the operation of the Project. Landlord will generally employ
commercially reasonable efforts to minimize Operating Expenses, taking into
consideration that the Project must be maintained and operated in a first class
manner.

4.2.5 Taxes.

4.2.5.1 “Tax Expenses” shall mean all federal, state, county, or local
governmental or municipal taxes, fees, charges or other impositions of every
kind and nature, whether general, special, ordinary or extraordinary,
(including, without limitation, real estate taxes, general and special
assessments, transit taxes, leasehold taxes or taxes based upon the

 

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receipt of rent, including gross receipts or sales taxes applicable to the
receipt of rent, unless required to be paid by Tenant, personal property taxes
imposed upon the fixtures, machinery, equipment, apparatus, systems and
equipment, appurtenances, furniture and other personal property used in
connection with the Project, or any portion thereof), which shall be paid or
accrued during any Expense Year (without regard to any different fiscal year
used by such governmental or municipal authority) because of or in connection
with the ownership, leasing and operation of the Project, or any portion
thereof.

4.2.5.2 Tax Expenses shall include, without limitation: (i) Any tax on the rent,
right to rent or other income from the Project, or any portion thereof, or as
against the business of leasing the Project, or any portion thereof; (ii) Any
assessment, tax, fee, levy or charge in addition to, or in substitution,
partially or totally, of any assessment, tax, fee, levy or charge previously
included within the definition of real property tax, it being acknowledged by
Tenant and Landlord that Proposition 13 was adopted by the voters of the State
of California in the June 1978 election (“Proposition 13”) and that assessments,
taxes, fees, levies and charges may be imposed by governmental agencies for such
services as fire protection, street, sidewalk and road maintenance, refuse
removal and for other governmental services formerly provided without charge to
property owners or occupants, and, in further recognition of the decrease in the
level and quality of governmental services and amenities as a result of
Proposition 13, Tax Expenses shall also include any governmental or private
assessments or the Project’s contribution towards a governmental or private
cost-sharing agreement for the purpose of augmenting or improving the quality of
services and amenities normally provided by governmental agencies; (iii) Any
assessment, tax, fee, levy, or charge allocable to or measured by the area of
the Premises or the Rent payable hereunder, including, without limitation, any
business or gross income tax or excise tax with respect to the receipt of such
rent, or upon or with respect to the possession, leasing, operating, management,
maintenance, alteration, repair, use or occupancy by Tenant of the Premises, or
any portion thereof; and (iv) Any assessment, tax, fee, levy or charge, upon
this transaction or any document to which Tenant is a party, creating or
transferring an interest or an estate in the Premises.

4.2.5.3 Any costs and expenses (including, without limitation, reasonable
attorneys’ fees) incurred in attempting to protest, reduce or minimize Tax
Expenses shall be included in Tax Expenses in the Expense Year such expenses are
paid, but only to the extent savings to Tax Expenses are reasonably anticipated
to result from such attempts. Except as set forth in Section 4.2.5.4, below,
refunds of Tax Expenses shall be credited against Tax Expenses and refunded to
Tenant regardless of when received, based on the Expense Year to which the
refund is applicable, provided that in no event shall the amount to be refunded
to Tenant for any such Expense Year exceed the total amount paid by Tenant as
Additional Rent under this Article 4 for such Expense Year. If Tax Expenses for
any period during the Lease Term or any extension thereof are increased after
payment thereof for any reason, including, without limitation, error or
reassessment by applicable governmental or municipal authorities, Tenant shall
pay Landlord upon demand Tenant’s Share of any such increased Tax Expenses
included by Landlord as Building Tax Expenses pursuant to the TCCs of this
Lease. Notwithstanding anything to the contrary contained in this Section 4.2.5
(except as set forth in Section 4.2.5.1, above), there shall be excluded from
Tax Expenses (i) all excess profits taxes, franchise taxes, gift taxes, capital
stock taxes, inheritance and succession taxes, estate taxes, federal and state

 

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income taxes, and other taxes to the extent applicable to Landlord’s general or
net income (as opposed to rents, receipts or income attributable to operations
at the Project), (ii) any items included as Operating Expenses, (iii) any items
paid by Tenant under Section 4.5 of this Lease, (iv) any Taxes for any time
prior to the Lease Commencement Date or after the later to occur of (A) the
expiration date of this Lease, or (B) the date Tenant vacates the Premises
pursuant to Articles 15 and/or 16 hereof, and (v) any special assessments or
special taxes as a means of financing improvements to the Building or Project.

4.2.5.4 Notwithstanding anything to the contrary set forth in this Lease, the
amount of Tax Expenses for the Base Year and any Expense Year shall be
calculated without taking into account any decreases in real estate taxes
obtained in connection with Proposition 8, and, therefore, the Tax Expenses in
the Base Year and/or an Expense Year may be greater than those actually incurred
by Landlord, but shall, nonetheless, be the Tax Expenses due under this Lease;
provided that (i) any costs and expenses incurred by Landlord in securing any
Proposition 8 reduction shall not be included in Direct Expenses for purposes of
this Lease, and (ii) tax refunds under Proposition 8 shall not be deducted from
Tax Expenses, but rather shall be the sole property of Landlord. Landlord and
Tenant acknowledge that this Section 4.2.5.4 is not intended to in any way
affect (A) the inclusion in Tax Expenses of the statutory two percent
(2.0%) annual increase in Tax Expenses (as such statutory increase may be
modified by subsequent legislation), or (B) the inclusion or exclusion of Tax
Expenses pursuant to the terms of Proposition 13, which shall be governed
pursuant to the terms of Sections 4.2.5.1 through 4.2.5.3, above.

4.2.6 “Tenant’s Share” shall mean the percentage set forth in Section 6 of the
Summary.

4.3 Allocation of Direct Expenses.

4.3.1 Method of Allocation. The parties acknowledge that the Building is a part
of a multi-building project and that the costs and expenses incurred in
connection with the Project (i.e. the Direct Expenses) should be shared between
the tenants of the Building and the tenants of the other buildings in the
Project. Accordingly, as set forth in Section 4.2 above, Direct Expenses (which
consists of Operating Expenses and Tax Expenses) are determined annually for the
Project as a whole, and a portion of the Direct Expenses, which portion shall be
reasonably determined by Landlord on an equitable basis, shall be allocated to
the tenants of the Building (as opposed to the tenants of any other buildings in
the Project) and such portion shall be the Direct Expenses for purposes of this
Lease. Such portion of Direct Expenses allocated to the tenants of the Building
shall include all Direct Expenses attributable solely to the Building and an
equitable portion of the Direct Expenses attributable to the Project as a whole.

4.4 Calculation and Payment of Additional Rent. If for any Expense Year ending
or commencing within the Lease Term, Tenant’s Share of Direct Expenses for such
Expense Year exceeds Tenant’s Share of Direct Expenses applicable to the Base
Year, then Tenant shall pay to Landlord, in the manner set forth in
Section 4.4.1, below, and as Additional Rent, an amount equal to the excess (the
“Excess”).

 

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4.4.1 Statement of Actual Building Direct Expenses and Payment by Tenant.
Landlord shall give to Tenant following the end of each Expense Year, a
statement (the “Statement”) which shall state in general major categories the
Building Direct Expenses incurred or accrued for the Base Year or such preceding
Expense Year, as applicable, and which shall indicate the amount of the Excess.
Landlord shall use commercially reasonable efforts to deliver such Statement to
Tenant on or before May 1 following the end of the Expense Year to which such
Statement relates. Upon receipt of the Statement for each Expense Year
commencing or ending during the Lease Term, if an Excess is present, Tenant
shall pay, within thirty (30) days after receipt of the Statement, the full
amount of the Excess for such Expense Year, less the amounts, if any, paid
during such Expense Year as “Estimated Excess,” as that term is defined in
Section 4.4.2, below, and if Tenant paid more as Estimated Excess than the
actual Excess, Tenant shall receive a credit in the amount of Tenant’s
overpayment against Rent next due under this Lease. The failure of Landlord to
timely furnish the Statement for any Expense Year shall not prejudice Landlord
or Tenant from enforcing its rights under this Article 4. Even though the Lease
Term has expired and Tenant has vacated the Premises, when the final
determination is made of Tenant’s Share of Building Direct Expenses for the
Expense Year in which this Lease terminates, if an Excess is present, Tenant
shall, within thirty (30) days after receipt of the Statement, pay to Landlord
such amount, and if Tenant paid more as Estimated Excess than the actual Excess,
Landlord shall, within thirty (30) days, deliver a check payable to Tenant in
the amount of the overpayment. The provisions of this Section 4.4.1 shall
survive the expiration or earlier termination of the Lease Term. Notwithstanding
the immediately preceding sentence, Tenant shall not be responsible for Tenant’s
Share of any Building Direct Expenses attributable to any Expense Year which are
first billed to Tenant more than eighteen (18) months after the Lease Expiration
Date, provided that in any event Tenant shall be responsible for Tenant’s Share
of Direct Expenses levied by any governmental authority or by any public utility
companies at any time following the Lease Expiration Date which are attributable
to any Expense Year.

4.4.2 Statement of Estimated Building Direct Expenses. In addition, Landlord
shall give Tenant a yearly expense estimate statement (the “Estimate Statement”)
which shall set forth in general major categories Landlord’s reasonable estimate
(the “Estimate”) of what the total amount of Building Direct Expenses for the
then-current Expense Year shall be and the estimated excess (the “Estimated
Excess”) as calculated by comparing the Building Direct Expenses for such
Expense Year, which shall be based upon the Estimate, to the amount of Building
Direct Expenses for the Base Year. Landlord shall use commercially reasonable
efforts to deliver such Estimate Statement to Tenant on or before May 1
following the end of the Expense Year to which such Estimate Statement relates.
The failure of Landlord to timely furnish the Estimate Statement for any Expense
Year shall not preclude Landlord from enforcing its rights to collect any
Additional Rent under this Article 4, nor shall Landlord be prohibited from
revising any Estimate Statement or Estimated Excess theretofore delivered to the
extent necessary. Thereafter, Tenant shall pay, within thirty (30) days after
receipt of the Estimate Statement, a fraction of the Estimated Excess for the
then-current Expense Year (reduced by any amounts paid pursuant to the second to
last sentence of this Section 4.4.2). Such fraction shall have as its numerator
the number of months which have elapsed in such current Expense Year, including
the month of such payment, and twelve (12) as its denominator. Until a new
Estimate Statement is furnished (which Landlord shall have the right to deliver
to Tenant at any time),

 

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Tenant shall pay monthly, with the monthly Base Rent installments, an amount
equal to one-twelfth (1/12) of the total Estimated Excess set forth in the
previous Estimate Statement delivered by Landlord to Tenant. Throughout the
Lease Term Landlord shall maintain books and records with respect to Building
Direct Expenses in accordance with generally accepted real estate accounting and
management practices, consistently applied.

4.5 Taxes and Other Charges for Which Tenant Is Directly Responsible.

4.5.1 Tenant shall be liable for and shall pay ten (10) days before delinquency,
taxes levied against Tenant’s equipment, furniture, fixtures and any other
personal property located in or about the Premises. If any such taxes on
Tenant’s equipment, furniture, fixtures and any other personal property are
levied against Landlord or Landlord’s property or if the assessed value of
Landlord’s property is increased by the inclusion therein of a value placed upon
such equipment, furniture, fixtures or any other personal property and if
Landlord pays the taxes based upon such increased assessment, which Landlord
shall have the right to do regardless of the validity thereof but only under
proper protest if requested by Tenant, Tenant shall upon demand repay to
Landlord the taxes so levied against Landlord or the proportion of such taxes
resulting from such increase in the assessment, as the case may be.

4.5.2 If the improvements in the Premises, whether installed and/or paid for by
Landlord or Tenant and whether or not affixed to the real property so as to
become a part thereof, are assessed for real property tax purposes at a
valuation higher than the valuation at which improvements conforming to
Landlord’s “building standard” in other space in the Building are assessed, then
the Tax Expenses levied against Landlord or the property by reason of such
excess assessed valuation shall be deemed to be taxes levied against personal
property of Tenant and shall be governed by the provisions of Section 4.5.1,
above.

4.5.3 Notwithstanding any contrary provision herein, Tenant shall pay prior to
delinquency any (i) rent tax or sales tax, service tax, transfer tax or value
added tax, or any other applicable tax on the rent or services herein or
otherwise respecting this Lease, (ii) taxes assessed upon or with respect to the
possession, leasing, operation, management, maintenance, alteration, repair, use
or occupancy by Tenant of the Premises or any portion of the Project, including
the Project parking facility; or (iii) taxes assessed upon this transaction or
any document to which Tenant is a party creating or transferring an interest or
an estate in the Premises.

4.6 Landlord’s Books and Records. Upon Tenant’s written request given not more
than one hundred eighty (180) days after Tenant’s receipt of a Statement for a
particular Expense Year, and provided that Tenant is not then in default under
this Lease beyond the applicable cure period provided in this Lease, Landlord
shall furnish Tenant with such reasonable supporting documentation in connection
with said Building Direct Expenses as Tenant may reasonably request. Landlord
shall provide said information to Tenant within sixty (60) days after Tenant’s
written request therefor. Within one hundred eighty (180) days after receipt of
a Statement by Tenant (the “Review Period”), if Tenant disputes the amount of
Additional Rent set forth in the Statement, an independent certified public
accountant (which accountant (A) is a member of a nationally or regionally
recognized accounting firm, and (B) is not working on a contingency fee basis),
designated and paid for by Tenant, may, after reasonable notice to Landlord and
at reasonable times, inspect Landlord’s records with respect to the Statement at
Landlord’s offices,

 

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provided that Tenant is not then in default under this Lease (beyond any
applicable notice and cure periods) and Tenant has paid all amounts required to
be paid under the applicable Estimate Statement and Statement, as the case may
be. In connection with such inspection, Tenant and Tenant’s agents must agree in
advance to follow Landlord’s reasonable rules and procedures regarding
inspections of Landlord’s records, and shall execute a commercially reasonable
confidentiality agreement regarding such inspection. Tenant’s failure to dispute
the amount of Additional Rent set forth in any Statement within the Review
Period shall be deemed to be Tenant’s approval of such Statement and Tenant,
thereafter, waives the right or ability to dispute the amounts set forth in such
Statement. If after such inspection, Tenant still disputes such Additional Rent,
a determination as to the proper amount shall be made, at Tenant’s expense, by
an independent certified public accountant (the “Accountant”) selected by
Landlord and subject to Tenant’s reasonable approval; provided that if such
determination by the Accountant proves that Direct Expenses were overstated by
more than five percent (5%), then the cost of the Accountant and the cost of
such determination shall be paid for by Landlord. Tenant hereby acknowledges
that Tenant’s sole right to inspect Landlord’s books and records and to contest
the amount of Direct Expenses payable by Tenant shall be as set forth in this
Section 4.6, and Tenant hereby waives any and all other rights pursuant to
applicable law to inspect such books and records and/or to contest the amount of
Direct Expenses payable by Tenant.

ARTICLE 5

USE OF PREMISES

5.1 Permitted Use. Tenant shall use the Premises solely for the Permitted Use
set forth in Section 7 of the Summary and Tenant shall not use or permit the
Premises or the Project to be used for any other purpose or purposes whatsoever
without the prior written consent of Landlord, which may be withheld in
Landlord’s sole discretion.

5.2 Prohibited Uses. The uses prohibited under this Lease shall include, without
limitation, use of the Premises or a portion thereof for (i) offices of any
agency or bureau of the United States or any state or political subdivision
thereof; (ii) offices or agencies of any foreign governmental or political
subdivision thereof; (iii) offices of any health care professionals or service
organization; (iv) schools or other training facilities which are not ancillary
to corporate, executive or professional office use; (v) retail or restaurant
uses; or (vi) communications firms such as radio and/or television stations.
Tenant shall not allow the average occupancy density of use of the total
Premises which is greater than four (4) persons per thousand (4:1000) rentable
square feet of space located in the Premises. Tenant further covenants and
agrees that Tenant shall not use, or suffer or permit any person or persons to
use, the Premises or any part thereof for any use or purpose contrary to the
provisions of the Rules and Regulations set forth in Exhibit D, attached hereto,
or in violation of the laws of the United States of America, the State of
California, or the ordinances, regulations or requirements of the local
municipal or county governing body or other lawful authorities having
jurisdiction over the Project) including, without limitation, any such laws,
ordinances, regulations or requirements relating to hazardous materials or
substances, as those terms are defined by applicable laws now or hereafter in
effect; provided, however, Landlord shall not enforce, change or modify the
Rules and Regulations in a discriminatory manner and Landlord agrees that the
Rules and Regulations shall not be unreasonably modified or enforced in a manner
which will unreasonably interfere with the

 

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normal and customary conduct of Tenant’s business. Tenant shall not do or permit
anything to be done in or about the Premises which will in any way damage the
reputation of the Project or unreasonably obstruct or interfere with the rights
of other tenants or occupants of the Building, or injure or annoy them or use or
allow the Premises to be used for any improper, unlawful or objectionable
purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about
the Premises. Tenant shall comply with all recorded covenants, conditions, and
restrictions now or hereafter affecting the Project.

5.3 CC&Rs. Tenant shall comply with all recorded covenants, conditions, and
restrictions currently affecting the Project. Additionally, Tenant acknowledges
that the Project may be subject to any future covenants, conditions, and
restrictions (the “CC&Rs”) which Landlord, in Landlord’s discretion, deems
reasonably necessary or desirable, and Tenant agrees that this Lease shall be
subject and subordinate to such CC&Rs. Landlord shall have the right to require
Tenant to execute and acknowledge, within fifteen (15) business days of a
request by Landlord, a “Recognition of Covenants, Conditions, and Restriction,”
in a form substantially similar to that attached hereto as Exhibit F, agreeing
to and acknowledging the CC&Rs.

ARTICLE 6

SERVICES AND UTILITIES

6.1 Standard Tenant Services. Landlord shall provide the following services on
all days (unless otherwise stated below) during the Lease Term.

6.1.1 Subject to limitations imposed by all governmental rules, regulations and
guidelines applicable thereto, Landlord shall provide heating and air
conditioning (“HVAC”) when necessary for normal comfort for normal office use in
the Premises from 7:00 A.M. to 6:00 P.M. Monday through Friday, and on Saturdays
from 9:00 A.M. to 1:00 P.M. (collectively, the “Building Hours”), except for the
date of observation of New Year’s Day, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day, Christmas Day and, at Landlord’s discretion, other
locally or nationally recognized holidays (collectively, the “Holidays”).

6.1.2 The Premises will be separately metered or submetered for electricity.
Landlord shall provide adequate electrical wiring and facilities for connection
to Tenant’s lighting fixtures and incidental use equipment, provided that Tenant
will not use electricity in excess of the capacity of the Building, which
electrical usage shall be subject to applicable laws and regulations, including
Title 24. Tenant shall pay directly to the utility company pursuant to the
utility company’s separate meters (or to Landlord in the event Landlord provides
submeters instead of the utility company’s meters), the cost of all electricity
provided to

 

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and/or consumed in the Premises (including normal and excess consumption and
including the cost of electricity to operate the HVAC air handlers, which
electricity shall be separately metered (as described above or otherwise
equitably allocated and directly charged by Landlord to Tenant and other tenants
of the Building). Tenant shall pay such cost (including the cost of such meters
or submeters) within twenty (20) days after demand and as Additional Rent under
this Lease (and not as part of the Operating Expenses). Landlord shall designate
the electricity utility provider from time to time. Tenant will design Tenant’s
electrical system serving any equipment producing nonlinear electrical loads to
accommodate such nonlinear electrical loads, including, but not limited to,
oversizing neutral conductors, derating transformers and/or providing power-line
filters. In the event that Tenant desires to upgrade or add onto the existing
electrical wiring and facilities in the Premises, then subject to Landlord’s
consent, not to be unreasonably withheld, Tenant shall have the right, at it’s
sole cost and expense, and as an Alteration in accordance with Article 8 of this
Lease, to perform such upgrades or additions (including, without limitation, the
cost of all permits, approvals, and any other electrical transformers, circuit
breakers, or other electrical facilities, which shall be required to be
installed or upgraded in any other portion of the Project in connection with
such upgrades or additions). Engineering plans shall include a calculation of
Tenant’s fully connected electrical design load with and without demand factors
and shall indicate the number of watts of unmetered and submetered loads. Tenant
shall bear the cost of replacement of lamps, starters and ballasts for
non-Building standard lighting fixtures within the Premises.

6.1.3 Landlord shall provide city water from the regular Building outlets for
drinking, lavatory and toilet purposes in the Building Common Areas.

6.1.4 Landlord shall provide janitorial services to the Premises, except the
date of observation of the Holidays, in and about the Premises and window
washing services in a manner consistent with other comparable buildings in the
vicinity of the Building.

6.1.5 Landlord shall provide nonexclusive, non-attended automatic passenger
elevator service during the Building Hours, shall have one elevator available at
all other times, except on the Holidays.

6.1.6 Landlord shall cause one (1) passenger elevator to be “padded” and
otherwise prepared and ready for freight service and shall make the same
reasonably available to Tenant on a nonexclusive basis, subject to scheduling by
Landlord.

6.1.7 Landlord shall cause roving security patrols to serve the Project.

Tenant shall cooperate fully with Landlord at all times and abide by all
regulations and requirements that Landlord may reasonably prescribe for the
proper functioning and protection of the HVAC, electrical, mechanical and
plumbing systems.

6.2 Overstandard Tenant Use. Tenant shall not, without Landlord’s prior written
consent, use heat-generating machines, machines other than normal fractional
horsepower office machines, or equipment or lighting other than Building
standard lights in the Premises, which

 

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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 Section 6.1 of this Lease. If such consent is given, Landlord
shall have the right to install supplementary air conditioning units or other
facilities in the Premises, including supplementary or additional metering
devices, and the cost thereof, including 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. If Tenant
uses water, electricity, heat or air conditioning in excess of that supplied by
Landlord pursuant to Section 6.1 of this Lease, Tenant shall pay to Landlord,
upon billing, the cost of such excess consumption, the cost of the installation,
operation, and maintenance of equipment which is installed in order to supply
such excess consumption, and the cost of the increased wear and tear on existing
equipment caused by such excess consumption; and Landlord may install devices to
separately meter any increased use and in such event Tenant shall pay the
increased cost directly to Landlord, on demand, at the rates charged by the
public utility company furnishing the same, including the cost of such
additional metering devices. Tenant’s use of electricity shall never exceed the
capacity of the feeders to the Project or the risers or wiring installation, and
subject to the terms of Section 29.32, below, Tenant shall not install or use or
permit the installation or use of any computer or electronic data processing
equipment in the Premises, without the prior written consent of Landlord, which
consent shall not be unreasonably withheld, conditioned or delayed. If Tenant
desires to use heat, ventilation or air conditioning during hours other than
those for which Landlord is obligated to supply such utilities pursuant to the
terms of Section 6.1 of this Lease, Tenant shall give Landlord such prior
notice, if any, as Landlord shall from time to time reasonably establish as
appropriate, of Tenant’s desired use in order to supply such utilities, and
Landlord shall supply such utilities to Tenant at an initial hourly cost to
Tenant of Thirty-Five and 00/100 Dollars ($35.00) per hour, which hourly rate
shall be subject to annual increases throughout the Lease Term of no more than
three percent (3%) per annum (which amount shall be treated as Additional Rent)
as Landlord shall from time to time ; provided, however, Landlord shall not
mark-up such hourly cost to include administration or similar fees and Landlord
shall not make a profit from such hourly cost.

6.3 Interruption of Use. Except as otherwise provided in Section 6.4 or
elsewhere in this Lease, Tenant agrees that Landlord shall not be liable for
damages, by abatement of Rent or otherwise, for failure to furnish or delay in
furnishing any service (including telephone and telecommunication services), or
for any diminution in the quality or quantity thereof, when such failure or
delay or diminution is occasioned, in whole or in part, by breakage, repairs,
replacements, or improvements, by any strike, lockout or other labor trouble, by
inability to secure electricity, gas, water, or other fuel at the Building or
Project after reasonable effort to do so, by any riot or other dangerous
condition, emergency, accident or casualty whatsoever, by act or default of
Tenant or other parties, or by any other cause beyond Landlord’s reasonable
control; and such failures or delays or diminution shall never be deemed to
constitute an eviction or disturbance of Tenant’s use and possession of the
Premises or relieve Tenant from paying Rent or performing any of its obligations
under this Lease, except as otherwise provided in Section 6.4 or elsewhere in
the Lease. Furthermore, Landlord shall not be liable under any circumstances for
a loss of, or injury to, property or for injury to, or interference with,
Tenant’s business, including, without limitation, loss of profits, however
occurring, through or in connection with or incidental to a failure to furnish
any of the services or utilities as set forth in this Article 6.

 

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6.4 Abatement Event. If (i) Landlord fails to perform the obligations required
of Landlord under the TCCs of this Lease or to otherwise perform an act required
by Landlord to avoid such interference, and (ii) such failure causes all or a
portion of the Premises to be untenantable and unusable by Tenant, and
(iii) such failure related to (A) the nonfunctioning of any Building System or
utility service to the Premises, or (B) a failure to provide access to the
Premises, Tenant shall give Landlord notice (the “Initial Notice”), specifying
such failure to perform by Landlord (the “Abatement Event”). If Landlord has not
cured such Abatement Event within five (5) business days after the receipt of
the Initial Notice (the “Eligibility Period”), Tenant may deliver an additional
notice to Landlord (the “Additional Notice”), specifying such Abatement Event
and Tenant’s intention to abate the payment of Rent under this Lease. If
Landlord does not cure such Abatement Event within five (5) business days of
receipt of the Additional Notice, Tenant may, upon written notice to Landlord,
immediately abate Rent payable under this Lease for that portion of the Premises
rendered untenantable and not used by Tenant, for the period beginning on the
date five (5) business days after the Initial Notice to the earlier of the date
Landlord cures such Abatement Event or the date Tenant recommences the use of
such portion of the Premises (or as to all of the Premises, if the portion which
is untenantable materially impairs Tenant’s ability to conduct business from the
Premises). Such right to abate Rent shall be Tenant’s sole and exclusive remedy
at law or in equity for an Abatement Event. Except as provided in this
Section 6.4, nothing contained herein shall be interpreted to mean that Tenant
is excused from paying Rent due hereunder.

ARTICLE 7

REPAIRS

Landlord shall maintain in first-class condition and operating order and keep in
good repair and condition the structural portions of the Building, including the
foundation, floor/ceiling slabs, exterior walls, roof structure (as opposed to
the roof membrane), curtain wall, exterior glass and mullions, columns, beams,
shafts (including elevator shafts), stairs, stairwells, elevator cab, men’s and
women’s washrooms, underground utilities, Building mechanical, electrical and
telephone closets, and all common and public areas servicing the Building,
including the parking areas, landscaping and exterior Project signage
(collectively, the “Building Structure”) and the Base Building mechanical,
electrical, life safety, plumbing, sprinkler systems and HVAC systems which were
not constructed by Tenant Parties (collectively, the “Building Systems”) and the
Project Common Areas. Notwithstanding anything in this Lease to the contrary,
Tenant shall be required to repair the Building Structure and/or the Building
Systems to the extent any damage thereto is caused due to Tenant’s use of the
Premises for other than a normal and customary implementation of its Permitted
Use, unless and to the extent such damage is covered by insurance carried or
required to be carried by Landlord pursuant to Article 10 and to which the
waiver of subrogation is applicable (such obligation to the extent applicable to
Tenant as qualified and conditioned will hereinafter be defined as the “BS/BS
Exception”). Tenant shall, at Tenant’s own expense, keep the Premises, including
all improvements, fixtures and furnishings therein, and the floor or floors of
the Building on which the Premises are located, in good order, repair and
condition at all times during the Lease Term. , but such obligation shall not
extend to the Building Structure and the Building Systems except pursuant to the
BS/BS Exception. In addition, Tenant shall, at Tenant’s own expense, but under

 

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the supervision and subject to the prior approval of Landlord, and within any
reasonable period of time specified by Landlord, promptly and adequately repair
all damage to the Premises and replace or repair all damaged, broken, or worn
fixtures and appurtenances, but such obligation shall not extend to the Building
Structure and the Building Systems except pursuant to the BS/BS Exception;
provided however, that, at Landlord’s option, or if Tenant fails to make such
repairs, Landlord may, after written notice to Tenant and Tenant’s failure to
repair within five (5) days thereafter (unless more than five (5) days is
required to effectuate such repair, in which case Tenant shall have the time
reasonably required to complete the repair, so long as Tenant commences the
repair during the five (5) day period and diligently completes such repair), but
need not, make such repairs and replacements, and Tenant shall pay Landlord the
cost thereof, including a percentage of the cost thereof (to be uniformly
established for the Building and/or the Project, but not to exceed five percent
(5%) of the cost of such work) sufficient to reimburse Landlord for all
overhead, general conditions, fees and other costs or expenses arising from
Landlord’s involvement with such repairs and replacements forthwith upon being
billed for same. Notwithstanding that, pursuant to the BS/BS Exception, Tenant
may be responsible for certain repairs to the Base Building and/or Building
Systems, Landlord shall nevertheless make such repairs at Tenant’s expense;
provided, however, to the extent the same are covered by Landlord’s insurance,
Tenant shall only be obligated to pay any deductible in connection therewith.
Landlord may, but shall not be required to, enter the Premises at all reasonable
times to make such repairs, alterations, improvements or additions to the
Premises or to the Project or to any equipment located in the Project as
Landlord shall desire or deem necessary or as Landlord may be required to do by
governmental or quasi-governmental authority or court order or decree; provided,
however, except for (i) emergencies, (ii) repairs, alterations, improvements or
additions required by governmental or quasi-governmental authorities or court
order or decree, or (iii) repairs which are the obligation of Tenant hereunder,
any such entry into the Premises by Landlord shall be performed in a manner so
as not to materially interfere with Tenant’s use of, or access to, the Premises;
provided that, with respect to items (ii) and (iii) above, Landlord shall use
commercially reasonable efforts to not materially interfere with Tenant’s use
of, or access to, the Premises. Tenant hereby waives any and all rights under
and benefits of subsection 1 of Section 1932 and Sections 1941 and 1942 of the
California Civil Code or under any similar law, statute, or ordinance now or
hereafter in effect.

ARTICLE 8

ADDITIONS AND ALTERATIONS

8.1 Landlord’s Consent to Alterations. Tenant may not make any improvements,
alterations, additions or changes to the Premises or any mechanical, plumbing or
HVAC facilities or systems pertaining to the Premises (collectively, the
“Alterations”) without first procuring the prior written consent of Landlord to
such Alterations, which consent shall be requested by Tenant not less than
fifteen (15) business days prior to the commencement thereof, and which consent
shall not be unreasonably withheld by Landlord, provided it shall be deemed
reasonable for Landlord to withhold its consent to any Alteration which
adversely affects the structural portions or the systems or equipment of the
Building or is visible from the exterior of the Building (collectively, the
“Major Alterations”). Notwithstanding the foregoing, shall not be required with
respect to any interior Alterations to the Premises which (i) are not Major

 

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Alterations, (ii) cost less than Thirty Thousand Dollars ($30,000) for any
(1) job, (iii) do not adversely affect the value of the Premises or Building,
and (iv) do not require a permit of any kind, as long a (A) Tenant delivers to
Landlord notice and a copy of any final plans, specifications and working
drawings for any such Alterations at least ten (10) days prior to commencement
of the work thereof, and (B) the other conditions of this Article 8 are
satisfied including, without limitation, conforming to Landlord’s rules,
regulations, and insurance requirements which govern contractors; provided,
however, that with respect to Alterations consisting solely of painting and
carpeting, such Thirty Thousand Dollar ($30,000) amount shall be deemed
increased to One Hundred Thousand Dollars ($100,000) (the “Cosmetic
Alterations”). The construction of the initial improvements to the Premises
shall be governed by the terms of the Tenant Work Letter and not the terms of
this Article 8.

8.2 Manner of Construction. Landlord may impose, as a condition of its consent
to any and all Alterations or repairs of the Premises or about the Premises,
such requirements as Landlord in its reasonable discretion may deem desirable,
including, but not limited to, the requirement that Tenant utilize for such
purposes only contractors reasonably approved by Landlord, and the requirement
that upon Landlord’s timely request (as more particularly set forth in
Section 8.5, below), Tenant shall, at Tenant’s expense, remove such Alterations
upon the expiration or any early termination of the Lease Term and return the
affected portion of the Premises to a building standard improved condition as
determined by Landlord. Tenant shall construct such Alterations and perform such
repairs in a good and workmanlike manner, in conformance with any and all
applicable federal, state, county or municipal laws, rules and regulations and
pursuant to a valid building permit, issued by the City of San Diego,
California, all in conformance with Landlord’s construction rules and
regulations; provided, however, that prior to commencing to construct any
Alteration, Tenant shall meet with Landlord to discuss Landlord’s design
parameters and code compliance issues. In the event Tenant performs any
Alterations in the Premises which require or give rise to governmentally
required changes to the “Base Building,” as that term is defined below, then
Landlord shall, at Tenant’s expense, make such changes to the Base Building. The
“Base Building” shall include the structural portions of the Building, and the
public restrooms, elevators, exit stairwells and the systems and equipment
located in the internal core of the Building on the floor or floors on which the
Premises are located. In performing the work of any such Alterations, Tenant
shall have the work performed in such manner so as not to obstruct access to the
Project or any portion thereof, by any other tenant of the Project, and so as
not to obstruct the business of Landlord or other tenants in the Project. Tenant
shall not use (and upon notice from Landlord shall cease using) contractors,
services, workmen, labor, materials or equipment that, in Landlord’s reasonable
judgment, would disturb labor harmony with the workforce or trades engaged in
performing other work, labor or services in or about the Building or the Common
Areas. In addition to Tenant’s obligations under Article 9 of this Lease, upon
completion of any Alterations, Tenant agrees to cause a Notice of Completion to
be recorded in the office of the Recorder of the County of San Diego, California
in accordance with Section 3093 of the Civil Code of the State of California or
any

 

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successor statute, and Tenant shall deliver to the Project construction manager
a reproducible copy of the “as built” drawings of the Alterations, to the extent
applicable, as well as all permits, approvals and other documents issued by any
governmental agency in connection with the Alterations.

8.3 Payment for Improvements. If payment is made directly to contractors, Tenant
shall (i) comply with Landlord’s requirements for final lien releases and
waivers in connection with Tenant’s payment for work to contractors, and
(ii) sign Landlord’s standard contractor’s rules and regulations. If Tenant
orders any work directly from Landlord, Tenant shall pay to Landlord an amount
equal to five percent of the cost of such work to compensate Landlord for all
overhead, general conditions, fees and other costs and expenses arising from
Landlord’s involvement with such work. If Tenant does not order any work
directly from Landlord, Tenant shall reimburse Landlord for Landlord’s
reasonable, actual, out-of-pocket costs and expenses actually incurred in
connection with Landlord’s review of such work.

8.4 Construction Insurance. In addition to the requirements of Article 10 of
this Lease, in the event that Tenant makes any Alterations, prior to the
commencement of such Alterations, Tenant shall provide Landlord with evidence
that Tenant or its contractor carries “Builder’s All Risk” insurance in an
amount reasonably approved by Landlord covering the construction of such
Alterations, and such other insurance as Landlord may reasonably require, it
being understood and agreed that all of such Alterations shall be insured by
Tenant pursuant to Article 10 of this Lease immediately upon completion thereof.
In addition, Landlord may, in its reasonable discretion, require Tenant to
obtain a lien and completion bond or some alternate form of security
satisfactory to Landlord in an amount sufficient to ensure the lien-free
completion of any such Alterations costing in excess of One Hundred Thousand and
00/100 Dollars ($100,000.00) and naming Landlord as a co-obligee.

8.5 Landlord’s Property. Landlord and Tenant hereby acknowledge and agree that
(i) all Alterations, improvements, fixtures, equipment and/or appurtenances
which may be installed or placed in or about the Premises, from time to time,
shall be at the sole cost of Tenant and shall be and become part of the Premises
and the property of Landlord (except that any portable “cleanroom” which is
installed by Tenant will be and remain Tenant’s property and may be removed by
Tenant at any time), and (ii) the Improvements to be constructed in the Premises
pursuant to the TCCs of the Work Letter shall, upon completion of the same, be
and become a part of the Premises and the property of Landlord. Furthermore,
Landlord may require Tenant, with regard to the Alterations (as opposed to the
Improvements being constructed pursuant to the Work Letter, which Improvements
Tenant shall not be required to remove), by written notice to Tenant, given at
the time of Landlord’s consent to such items (or, with respect to Alterations
not requiring Landlord’s consent, within three (3) business days after Tenant’s
written notice to Landlord of such Alternations as provided in Section 8.1,
above) at Tenant’s expense, to remove any such timely identified Alterations in
the Premises, and to repair any damage to the Premises and Building caused by
such removal and return the affected portion of the Premises to a building
standard improved condition as determined by Landlord. If Tenant fails to
complete such removal and/or the repair any damage caused by the removal of any
Alteration or improvements in the Premises, either (A) Tenant shall be deemed to
be holding over in the Premises and Rent shall continue to accrue in accordance
with the terms of Article 16, below, until such work shall be completed, or
(B) Landlord may do so and may charge the cost thereof

 

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to Tenant. Tenant hereby protects, defends, indemnifies and holds Landlord
harmless from any liability, cost, obligation, expense or claim of lien in any
manner relating to the installation, placement, removal or financing of any such
Alterations, improvements, fixtures and/or equipment in, on or about the
Premises by or on behalf of Tenant, which obligations of Tenant shall survive
the expiration or earlier termination of this Lease.

8.6 Security System. Notwithstanding anything to the contrary in this Lease,
Tenant shall be entitled to install, at Tenant’s sole cost and expense, a
separate security system for the Premises as an Alteration or as a part of the
initial Improvements being constructed by Tenant (the “Tenant Security System”);
provided, however, that the plans and specifications for any such Tenant
Security System shall be subject to Landlord’s reasonable approval, and the
installation of such Tenant Security System shall otherwise be subject to the
terms and conditions of Article 8 of this Lease. Tenant shall at all times
provide Landlord with a contact person who can disarm the Tenant Security System
and who is familiar with the functions of the alarm system in the event of a
malfunction. Notwithstanding any provision to the contrary contained in this
Article 8, Tenant hereby expressly agrees that, Tenant shall, on or before the
expiration or earlier termination of this Lease but in any event at Tenant’s
sole cost and expense, remove the Tenant Security System, and repair any damage
to the Premises and Building caused by such removal and return the affected
portions of the Premises to a building standard improved condition as determined
by Landlord.

ARTICLE 9

COVENANT AGAINST LIENS

Tenant shall keep the Project and Premises free from any liens or encumbrances
arising out of the work performed, materials furnished or obligations incurred
by or on behalf of Tenant, and shall protect, defend, indemnify and hold
Landlord harmless from and against any claims, liabilities, judgments or costs
(including, without limitation, reasonable attorneys’ fees and costs) arising
out of same or in connection therewith. Tenant shall give Landlord notice at
least twenty (20) days prior to the commencement of any such work on the
Premises (or such additional time as may be necessary under applicable laws) to
afford Landlord the opportunity of posting and recording appropriate notices of
non-responsibility. Tenant shall remove any such lien or encumbrance by bond or
otherwise within twenty (20) days after notice by Landlord, and if Tenant shall
fail to do so, Landlord may pay the amount necessary to remove such lien or
encumbrance, without being responsible for investigating the validity thereof.
The amount so paid shall be deemed Additional Rent under this Lease payable upon
demand, without limitation as to other remedies available to Landlord under this
Lease. Nothing contained in this Lease shall authorize Tenant to do any act
which shall subject Landlord’s title to the Building or Premises to any liens or
encumbrances whether claimed by operation of law or express or implied contract.
Any claim to a lien or encumbrance upon the Building or Premises arising in
connection with any such work or respecting the Premises not performed by or at
the request of Landlord shall be null and void, or at Landlord’s option shall
attach only against Tenant’s interest in the Premises and shall in all respects
be subordinate to Landlord’s title to the Project, Building and Premises.

 

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ARTICLE 10

INSURANCE

10.1 Indemnification and Waiver. Except to the extent caused by the negligence
or willful misconduct of the “Landlord Parties” (as that term is defined
hereinbelow), Tenant hereby assumes all risk of damage to property or injury to
persons in, upon or about the Premises and agrees that Landlord, its partners,
subpartners and their respective officers, agents, servants, employees, and
independent contractors (collectively, “Landlord Parties”) shall not be liable
for, and are hereby released from any responsibility for, any damage either to
person or property or resulting from the loss of use thereof, which damage is
sustained by Tenant or by other persons claiming through Tenant. Tenant shall
indemnify, defend, protect, and hold harmless the Landlord Parties from any and
all loss, cost, damage, expense and liability (including without limitation
court costs and reasonable attorneys’ fees) incurred in connection with or
arising from: (a) any causes in, on or about the Premises; (b) the use or
occupancy of the Premises by Tenant or any person claiming under Tenant; (c) any
activity, work, or thing done, or permitted or suffered by Tenant in or about
the Premises; (d) any acts, omission, or negligence of Tenant or any person
claiming under Tenant, or the contractors, agents, employees, invitees, or
visitors of Tenant or any such person; (e) any breach, violation, or
non-performance by Tenant or any person claiming under Tenant or the employees,
agents, contractors, invitees, or visitors of Tenant or any such person of any
term, covenant, or provision of this Lease or any law, ordinance, or
governmental requirement of any kind; (f) any injury or damage to the person,
property, or business of Tenant, its employees, agents, contractors, invitees,
visitors, or any other person entering upon the Premises under the express or
implied invitation of Tenant; or (g) the placement of any personal property or
other items within the Premises, provided that the foregoing indemnity shall not
apply to the extent of the negligence or willful misconduct of Landlord or the
Landlord Parties. Should Landlord be named as a defendant in any suit brought
against Tenant in connection with or arising out of Tenant’s occupancy of the
Premises, Tenant shall pay to Landlord its costs and expenses incurred in such
suit, including without limitation, its actual professional fees such as
appraisers’, accountants’ and attorneys’ fees. Subject to Tenant’s indemnity and
the waiver of subrogation provided below, Landlord shall indemnify, defend,
protect, and hold harmless Tenant, its partners, and their respective officers,
agents, servants, employees, and independent contractors (collectively, “Tenant
Parties”) from any and all loss, cost, damage, expense, and liability
(including, without limitation, court costs and reasonable attorneys’ fees)
arising from the negligence or willful misconduct of Landlord or the Landlord
Parties in, on or about the Project either prior to or during the Lease Term,
and/or as a result of Landlord’s breach of this Lease, except to the extent
caused by the negligence or willful misconduct of Tenant or the Tenant Parties.
Further, Tenant’s agreement to indemnify Landlord, and Landlord’s agreement to
indemnify Tenant, each pursuant to this Section 10.1 is not intended and shall
not relieve any insurance carrier of its obligations under policies required to
be carried pursuant to the provisions of this Lease, to the extent such policies
cover the matters subject to the parties’ respective indemnification
obligations; nor shall they supersede any inconsistent agreement of the parties
set forth in any other provision of this Lease. The provisions of this
Section 10.1 shall survive the expiration or sooner termination of this Lease
with respect to any claims or liability arising in connection with any event
occurring prior to such expiration or termination. Notwithstanding anything to
the contrary contained in this Lease, nothing in this

 

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Lease shall impose any obligations on Tenant or Landlord to be responsible or
liable for, and each hereby releases the other from all liability for,
consequential damages other than those consequential damages incurred by
Landlord in connection with a holdover of the Premises by Tenant after the
expiration or earlier termination of this Lease.

10.2 Tenant’s Compliance With Landlord’s Fire and Casualty Insurance. Tenant
shall, at Tenant’s expense, comply with Landlord’s insurance company
requirements pertaining to the use of the Premises. If Tenant’s conduct or use
of the Premises causes any increase in the premium for such insurance policies
then Tenant shall reimburse Landlord for any such increase. Tenant, at Tenant’s
expense, shall comply with all rules, orders, regulations or requirements of the
American Insurance Association (formerly the National Board of Fire
Underwriters) and with any similar body.

10.3 Tenant’s Insurance. Tenant shall maintain the following coverages in the
following amounts. The required evidence of coverage must be delivered to
Landlord on or before the date required under Section 10.4(I) sub-sections
(x) and (y), or Section 10.4(II) below (as applicable). Such policies shall be
for a term of at least one (1) year, or the length of the remaining term of this
Lease, whichever is less.

10.3.1 Commercial General Liability Insurance, including Broad Form contractual
liability covering the insured against claims of bodily injury, personal injury
and property damage (including loss of use thereof) based upon or arising out of
Tenant’s operations, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be written on an “occurrence” basis.
Landlord and any other party the Landlord so specifies that has a material
financial interest in the Project, including Landlord’s managing agent, ground
lessor and/or lender, if any, shall be named as additional insureds as their
interests may appear using Insurance Service Organization’s form CG2011 or a
comparable form approved by Landlord. Tenant shall provide an endorsement or
policy excerpt showing that Tenant’s coverage is primary and any insurance
carried by Landlord shall be excess and non-contributing. The coverage shall
also be extended to include damage caused by heat, smoke or fumes from a hostile
fire. The policy shall include severability of interest and cross-liability
(separation of insureds) endorsements. This policy shall include coverage for
all liabilities assumed under this Lease as an insured contract for the
performance of all of Tenant’s indemnity obligations under this Lease. The
limits of said insurance shall not, however, limit the liability of Tenant nor
relieve Tenant of any obligation hereunder. Limits of liability insurance shall
not be less than the following; provided, however, such limits may be achieved
through the use of an Umbrella/Excess Policy:

 

Bodily Injury and Property Damage Liability    $5,000,000 each occurrence
Personal Injury and Advertising Liability    $1,000,000 each occurrence Tenant
Legal Liability/Damage to Rented Premises Liability    $1,000,000.00

 

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10.3.2 Property Insurance covering (i) all office furniture, personal property,
business and trade fixtures, office equipment, free-standing cabinet work,
movable partitions, merchandise and all other items of Tenant’s business
personal property on the Premises installed by, for, or at the expense of
Tenant, (ii) the “Improvements,” as that term is defined in Section 2.1 of the
Work Letter, and any other improvements which exist in the Premises as of the
Lease Commencement Date (excluding the Base Building) (the “Original
Improvements”), and (iii) all Alterations performed in the Premises. Such
insurance shall be written on a Special Form basis, for the full replacement
cost value (subject to reasonable deductible amounts), without deduction for
depreciation of the covered items and in amounts that meet any co-insurance
clauses of the policies of insurance and shall include coverage for (a) all
perils included in the CP 10 30 04 02 Coverage Special Form, (b) water damage
from any cause whatsoever (excluding naturally occurring floods (i.e. from heavy
rainfall, rather than from a leaking pipe)), including, but not limited to,
backup or overflow from sprinkler leakage, bursting, leaking or stoppage of any
pipes, explosion, and backup of sewers and drainage, and (c) terrorism (to the
extent such terrorism insurance is available as a result of the Terrorism Risk
Insurance Act of 2002 (Pub. L. 107-297, 116 Stat. 2322), the Terrorism Risk
Insurance Program Reauthorization Act of 2005 (Pub. l. 109-144), and the
Terrorism Risk Insurance Program Reauthorization Act of 2007 (Pub. L. 110-160,
121 Stat. 183), any successor statute or regulation, or is otherwise available
at commercially reasonable rates).

10.3.2.1 Adjacent Premises. Tenant shall pay for any increase in the premiums
for the property insurance of the Project if said increase is caused by Tenant’s
acts, omissions, use or occupancy of the Premises.

10.3.2.2 Property Damage. Tenant shall use the proceeds from any such insurance
for the replacement of personal property, trade fixtures and Alterations.

10.3.2.3 No representation of Adequate Coverage. Landlord makes no
representation that the limits or forms of coverage of insurance specified
herein are adequate to cover Tenant’s property, business operations or
obligations under this Lease.

10.3.3 Property Insurance Subrogation. Landlord and Tenant intend that their
respective property loss risks shall be borne by insurance carriers to the
extent above provided (and, in the case of Tenant, by an insurance carrier
satisfying the requirements of Section 10.4(i) below), and Landlord and Tenant
hereby agree to look solely to, and seek recovery only from, their respective
insurance carriers in the event of a property loss to the extent that such
coverage is agreed to be provided hereunder. The parties each hereby waive all
rights and claims against each other for such losses, and waive all rights of
subrogation of their respective insurers. Landlord and Tenant hereby represent
and warrant that their respective “all risk” property insurance policies include
a waiver of (i) subrogation by the insurers, and (ii) all rights based upon an
assignment from its insured, against Landlord and/or any of the Landlord Parties
or Tenant and/or any of the Tenant Parties (as the case may be) in connection
with any property loss risk thereby insured against. Tenant will cause all other
occupants of the Premises claiming

 

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by, under, or through Tenant to execute and deliver to Landlord a waiver of
claims similar to the waiver in this Section 10.3.3 and to obtain such waiver of
subrogation rights endorsements. If either party hereto fails to maintain the
waivers set forth in items (i) and (ii) above, the party not maintaining the
requisite waivers shall indemnify, defend, protect, and hold harmless the other
party for, from and against any and all claims, losses, costs, damages, expenses
and liabilities (including, without limitation, court costs and reasonable
attorneys’ fees) arising out of, resulting from, or relating to, such failure.

10.3.4 Business Income Interruption for one year (1) plus Extra Expense
insurance in such amounts as will reimburse Tenant for actual direct or indirect
loss of earnings attributable to the risks outlined in Section 10.3.2 above.

10.3.5 Worker’s Compensation or other similar insurance pursuant to all
applicable state and local statutes and regulations, and Employer’s Liability
with minimum limits of not less than $1,000,000 each accident/employee/disease.

10.3.6 Commercial Automobile Liability Insurance covering all Owned (if any),
Hired, or Non-owned vehicles with limits not less than $1,000,000 combined
single limit for bodily injury and property damage.

10.4 Form of Policies. The minimum limits of policies of insurance required of
Tenant under this Lease shall in no event limit the liability of Tenant under
this Lease. Such insurance shall (i) be issued by an insurance company having an
AM Best rating of not less than A-X, or which is otherwise acceptable to
Landlord and licensed to do business in the State of California, (ii) be in form
and content reasonably acceptable to Landlord and complying with the
requirements of Section 10.3 (including, Sections 10.3.1 through 10.3.6),
(iii) Tenant shall not do or permit to be done anything which invalidates the
required insurance policies, and (iv) provide that said insurance shall not be
canceled or coverage changed unless Tenant provides thirty (30) days’ prior
written notice to Landlord and any mortgagee of Landlord, the identity of whom
has been provided to Tenant in writing. Tenant shall deliver said policy or
policies or certificates thereof and applicable endorsements which meet the
requirements of this Article 10 to Landlord on or before (I) the earlier to
occur of: (x) the Lease Commencement Date, and (y) the date Tenant and/or its
employees, contractors and/or agents first enter the Premises for occupancy,
construction of improvements, alterations, or any other move-in activities, and
(II) five (5) business days after the renewal of such policies. In the event
Tenant shall fail to procure such insurance, or to deliver such policies or
certificates and applicable endorsements, Landlord may, at its option, after
written notice to Tenant and Tenant’s failure to obtain such insurance within
five (5) days thereafter, procure such policies for the account of Tenant and
the sole benefit of Landlord, and the cost thereof shall be paid to Landlord
after delivery to Tenant of bills therefor.

10.5 Additional Insurance Obligations. Tenant shall carry and maintain during
the entire Lease Term, at Tenant’s sole cost and expense, increased amounts of
the insurance required to be carried by Tenant pursuant to this Article 10 and
such other reasonable types of insurance coverage and in such reasonable amounts
covering the Premises and Tenant’s operations therein, as may be reasonably
requested by Landlord. Notwithstanding the foregoing, Landlord’s request shall
only be considered reasonable if such increased coverage amounts and/or such new
types of insurance are consistent with the requirements of a majority of

 

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Comparable Buildings, and Landlord shall not so increase the coverage amounts or
require additional types of insurance during the initial Lease Term and
thereafter not more often than one (1) time in any five (5) years.

10.6 Third-Party Contractors. Tenant shall obtain and deliver to Landlord, Third
Party Contractor’s certificates of insurance and applicable endorsements at
least seven (7) business days prior to the commencement of work in or about the
Premises by any vendor or any other third-party contractor (collectively, a
“Third Party Contractor”). All such insurance shall (a) name Landlord as an
additional insured under such party’s liability policies as required by
Section 10.3.1 above and this Section 10.6, (b) provide a waiver of subrogation
in favor of Landlord under such Third Party Contractor’s commercial general
liability insurance, (c) be primary and any insurance carried by Landlord shall
be excess and non-contributing, and (d) comply with Landlord’s minimum insurance
requirements.

10.7 Landlord’s Fire, Casualty, and Liability Insurance.

10.7.1 Landlord shall maintain Commercial General Liability Insurance with at
least Five Million Dollars ($5,000,000) in coverage, with respect to the
Building during the Lease Term covering claims for bodily injury, personal
injury, and property damage in the Project Common Areas and with respect to
Landlord’s activities in the Premises; provided, however, such foregoing Five
Million Dollar ($5,000,000.00) requirement may be met by a combination of
primary and excess/umbrella policies.

10.7.2 Landlord shall insure the Building and Landlord’s remaining interest in
the Improvements and Alterations with a policy of Physical Damage Insurance
including building ordinance coverage, written on a standard Causes of Loss –
Special Form basis (against loss or damage due to fire and other casualties
covered within the classification of fire and extended coverage, vandalism, and
malicious mischief, sprinkler leakage, water damage and special extended
coverage), covering the full replacement cost of the Base Building, Premises and
other improvements (including coverages for enforcement of Applicable Laws
requiring the upgrading, demolition, reconstruction and/or replacement of any
portion of the Building as a result of a covered loss) without a deduction for
depreciation.

10.7.3 Landlord shall maintain Boiler and Machinery/Equipment Breakdown
Insurance covering the Building against risks commonly insured against by a
Boiler and Machinery/Equipment Breakdown policy and such policy shall cover the
full replacement costs, without deduction for depreciation.

10.7.4 The foregoing coverages shall contain commercially reasonable deductible
amounts from such companies, and on such other terms and conditions, as Landlord
may from time to time reasonably determine.

10.7.5 Additionally, at the option of Landlord, such insurance coverage may
include the risk of (i) earthquake, (ii) flood damage and additional hazards, or
(iii) a rental loss endorsement for a period of up to two (2) years.

 

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10.7.6 Notwithstanding the foregoing provisions of this Section 10.7, the
coverage and amounts of insurance carried by Landlord in connection with the
Building shall, at a minimum, be comparable to the coverage and amounts of
insurance which are carried by reasonably prudent landlords of Comparable
Buildings. In addition, Landlord shall carry Worker’s Compensation and
Employer’s Liability coverage as required by applicable law.

ARTICLE 11

DAMAGE AND DESTRUCTION

11.1 Repair of Damage to Premises by Landlord. Tenant shall promptly notify
Landlord of any damage to the Premises (unless de minimus) resulting from fire
or any other casualty. If the Premises or any Common Areas serving or providing
access to the Premises shall be damaged by fire or other casualty, Landlord
shall use commercially reasonable efforts to promptly and diligently, subject to
reasonable delays for insurance adjustment or other matters beyond Landlord’s
reasonable control, and subject to all other terms of this Article 11, restore
the Base Building and such Common Areas. Such restoration shall be to
substantially the same condition of the Base Building and the Common Areas prior
to the casualty, except for modifications required by zoning and building codes
and other laws or by the holder of a mortgage on the Building or Project or any
other modifications to the Common Areas deemed desirable by Landlord, which are
consistent with the character of the Project, provided that access to the
Premises and any common restrooms serving the Premises shall not be materially
impaired. Upon the occurrence of any damage to the Premises, upon notice (the
“Landlord Repair Notice”) to Tenant from Landlord, Tenant shall assign to
Landlord (or to any party designated by Landlord) all insurance proceeds payable
to Tenant under Tenant’s insurance required under Section 10.3 of this Lease,
and Landlord shall repair any injury or damage to the Improvements and the
Original Improvements installed in the Premises and shall return such
Improvements and Original Improvements to their original condition; provided
that if the cost of such repair by Landlord exceeds the amount of insurance
proceeds received by Landlord from Tenant’s insurance carrier, as assigned by
Tenant, the cost of such repairs shall be paid by Tenant to Landlord prior to
Landlord’s commencement of repair of the damage. In the event that Landlord does
not deliver the Landlord Repair Notice within sixty (60) days following the date
the casualty becomes known to Landlord, Tenant shall, at its sole cost and
expense, repair any injury or damage to the Improvements and the Original
Improvements installed in the Premises and shall return such Improvements and
Original Improvements to their original condition. Whether or not Landlord
delivers a Landlord Repair Notice, prior to the commencement of construction,
Tenant shall submit to Landlord, for Landlord’s review and approval, all plans,
specifications and working drawings relating thereto, and Landlord shall select
the contractors to perform such improvement work (subject to Tenant’s reasonable
approval). Landlord shall not be liable for any inconvenience or annoyance to
Tenant or its visitors, or injury to Tenant’s business resulting in any way from
such damage or the repair thereof; provided however, that if such fire or other
casualty shall have damaged the Premises or Common Areas necessary to Tenant’s
occupancy, and the Premises are not occupied by Tenant as a result thereof, then
during the time and to the extent the Premises are unfit for occupancy, the Rent
shall be abated in proportion to the ratio that the amount of rentable square
feet of the Premises which is unfit for occupancy for the purposes permitted
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the Premises (or if so much of the Premises are damaged that the remainder of
the Premises is not usable by Tenant, then all of the rent shall abate during
the repairs). In the event that Landlord shall not deliver the Landlord Repair
Notice, Tenant’s right to rent abatement pursuant to the preceding sentence
shall terminate as of the date which is reasonably determined by Landlord to be
the date Tenant should have completed repairs to the Premises assuming Tenant
used reasonable due diligence in connection therewith.

11.2 Landlord’s Option to Repair. Notwithstanding the terms of Section 11.1 of
this Lease, Landlord may elect not to rebuild and/or restore the Premises,
Building and/or Project, and instead terminate this Lease, by notifying Tenant
in writing of such termination within sixty (60) days after the date of
discovery of the damage, such notice to include a termination date giving Tenant
sixty (60) days to vacate the Premises, but Landlord may so elect only if the
Building or Project shall be damaged by fire or other casualty or cause, whether
or not the Premises are affected, and one or more of the following conditions is
present: (i) in Landlord’s reasonable judgment, repairs cannot reasonably be
completed within one hundred eighty (180) days after the date of discovery of
the damage (when such repairs are made without the payment of overtime or other
premiums); (ii) the holder of any mortgage on the Building or Project or ground
lessor with respect to the Building or Project shall require that the insurance
proceeds or any portion thereof be used to retire the mortgage debt, or shall
terminate the ground lease, as the case may be; (iii) the damage is not at least
ninety-percent (90%) covered by Landlord’s insurance policies; (iv) Landlord
decides to rebuild the Building or Common Areas so that they will be
substantially different structurally or architecturally; (v) the damage occurs
during the last twelve (12) months of the Lease Term; or (vi) any owner of any
other portion of the Project, other than Landlord, does not intend to repair the
damage to such portion of the Project; provided, however, that if Landlord does
not elect to terminate this Lease pursuant to Landlord’s termination right as
provided above, and the repairs cannot, in the reasonable opinion of Landlord,
be completed within one hundred eighty (180) days after being commenced, Tenant
may elect, no earlier than sixty (60) days after the date of the damage and not
later than ninety (90) days after the date of such damage, to terminate this
Lease by written notice to Landlord effective as of the date specified in the
notice, which date shall not be less than thirty (30) days nor more than sixty
(60) days after the date such notice is given by Tenant. Furthermore, if neither
Landlord nor Tenant has terminated this Lease, and the repairs are not actually
completed within such 180-day period, Tenant shall have the right to terminate
this Lease during the first five (5) business days of each calendar month
following the end of such period until such time as the repairs are complete, by
notice to Landlord (the “Damage Termination Notice”), effective as of a date set
forth in the Damage Termination Notice (the “Damage Termination Date”), which
Damage Termination Date shall not be less than ten (10) business days following
the end of each such month. Notwithstanding the foregoing, if Tenant delivers a
Damage Termination Notice to Landlord, then Landlord shall have the right to
suspend the occurrence of the Damage Termination Date for a period ending thirty
(30) days after the Damage Termination Date set forth in the Damage Termination
Notice by delivering to Tenant, within five (5) business days of Landlord’s
receipt of the Damage Termination Notice, a certificate of Landlord’s contractor
responsible for the repair of the damage certifying that it is such contractor’s
good faith judgment that the repairs shall be substantially completed within
thirty (30) days after the Damage Termination Date. If repairs shall be
substantially completed prior to the expiration of such thirty-day period, then
the Damage Termination Notice shall be of no force or effect, but if the

 

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repairs shall not be substantially completed within such thirty-day period, then
this Lease shall terminate upon the expiration of such thirty-day period. At any
time, from time to time, after the date occurring sixty (60) days after the date
of the damage, Tenant may request that Landlord inform Tenant of Landlord’s
reasonable opinion of the date of completion of the repairs and Landlord shall
respond to such request within five (5) business days. Notwithstanding the
provisions of this Section 11.2, Tenant shall have the right to terminate this
Lease under this Section 11.2 only if each of the following conditions is
satisfied: (a) the damage to the Project by fire or other casualty was not
caused by the gross negligence or intentional act of Tenant or its partners or
subpartners and their respective officers, agents, servants, employees, and
independent contractors; (b) Tenant is not then in default under this Lease; and
(c) as a result of the damage, Tenant cannot reasonably conduct business from
the Premises. In the event this Lease is terminated in accordance with the terms
of this Section 11.2, Tenant shall assign to Landlord (or to any party
designated by Landlord) all insurance proceeds payable to Tenant under Tenant’s
insurance required under items (ii) and (iii) of Section 10.3.2 of this Lease.

11.3 Waiver of Statutory Provisions. The provisions of this Lease, including
this Article 11, constitute an express agreement between Landlord and Tenant
with respect to any and all damage to, or destruction of, all or any part of the
Premises, the Building or the Project, and any statute or regulation of the
State of California, including, without limitation, Sections 1932(2) and 1933(4)
of the California Civil Code, with respect to any rights or obligations
concerning damage or destruction in the absence of an express agreement between
the parties, and any other statute or regulation, now or hereafter in effect,
shall have no application to this Lease or any damage or destruction to all or
any part of the Premises, the Building or the Project.

ARTICLE 12

NONWAIVER

No provision of this Lease shall be deemed waived by either party hereto unless
expressly waived in a writing signed thereby. The waiver by either party hereto
of any breach of any term, covenant or condition herein contained shall not be
deemed to be a waiver of any subsequent breach of same or any other term,
covenant or condition herein contained. The subsequent acceptance of Rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding breach
by Tenant of any term, covenant or condition of this Lease, other than the
failure of Tenant to pay the particular Rent so accepted, regardless of
Landlord’s knowledge of such preceding breach at the time of acceptance of such
Rent. No acceptance of a lesser amount than the Rent herein stipulated shall be
deemed a waiver of Landlord’s right to receive the full amount due, nor shall
any endorsement or statement on any check or payment or any letter accompanying
such check or payment be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord’s right to recover
the full amount due. No receipt of monies by Landlord from Tenant after the
termination of this Lease shall in any way alter the length of the Lease Term or
of Tenant’s right of possession hereunder, or after the giving of any notice
shall reinstate, continue or extend the Lease Term or affect any notice given
Tenant prior to the receipt of such monies, it being agreed that after the
service of notice or the commencement of a suit, or after final judgment for
possession of the Premises, Landlord may receive and collect any Rent due, and
the payment of said Rent shall not waive or affect said notice, suit or
judgment.

 

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ARTICLE 13

CONDEMNATION

If the whole or any part of the Premises, Building or Project shall be taken by
power of eminent domain or condemned by any competent authority for any public
or quasi-public use or purpose, or if any adjacent property or street shall be
so taken or condemned, or reconfigured or vacated by such authority in such
manner as to require the use, reconstruction or remodeling of any part of the
Premises, Building or Project, or if Landlord shall grant a deed or other
instrument in lieu of such taking by eminent domain or condemnation, Landlord
shall have the option to terminate this Lease effective as of the date
possession is required to be surrendered to the authority. If more than ten
percent (10%) of the rentable square feet of the Premises is taken, or if access
to the Premises is substantially impaired, in each case for a period in excess
of one hundred eighty (180) days, Tenant shall have the option to terminate this
Lease effective as of the date possession is required to be surrendered to the
authority. Tenant shall not because of such taking assert any claim against
Landlord or the authority for any compensation because of such taking and
Landlord shall be entitled to the entire award or payment in connection
therewith, except that Tenant shall have the right to file any separate claim
available to Tenant for any taking of Tenant’s personal property and fixtures
belonging to Tenant and removable by Tenant upon expiration of the Lease Term
pursuant to the terms of this Lease, and for moving expenses, so long as such
claims do not diminish the award available to Landlord, its ground lessor with
respect to the Building or Project or its mortgagee, and such claim is payable
separately to Tenant. All Rent shall be apportioned as of the date of such
termination. If any part of the Premises shall be taken, and this Lease shall
not be so terminated, the Rent shall be proportionately abated. Tenant hereby
waives any and all rights it might otherwise have pursuant to Section 1265.130
of The California Code of Civil Procedure. Notwithstanding anything to the
contrary contained in this Article 13, in the event of a temporary taking of all
or any portion of the Premises for a period of one hundred and eighty (180) days
or less, then this Lease shall not terminate but the Base Rent and the
Additional Rent shall be abated for the period of such taking in proportion to
the ratio that the amount of rentable square feet of the Premises taken bears to
the total rentable square feet of the Premises (or if so much of the Premises
are taken that the remainder of the Premises is not usable by Tenant, then all
of the rent shall abate during the taking). Landlord shall be entitled to
receive the entire award made in connection with any such temporary taking.

ARTICLE 14

ASSIGNMENT AND SUBLETTING

14.1 Transfers. Tenant shall not, without the prior written consent of Landlord
(which, as more particularly set forth in Section 14.2, below, shall not be
unreasonably withheld, conditioned, or delayed), assign, mortgage, pledge,
hypothecate, encumber, or permit any lien to attach to, or otherwise transfer,
this Lease or any interest hereunder, permit any assignment, or other transfer
of this Lease or any interest hereunder by operation of law, sublet the Premises
or any part thereof, or enter into any license or concession agreements or
otherwise permit the occupancy or use of the Premises or any part thereof by any
persons other than Tenant and its employees and contractors (all of the
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as “Transfers” and any person to whom any Transfer is made or sought to be made
is hereinafter sometimes referred to as a “Transferee”). If Tenant desires
Landlord’s consent to any Transfer, Tenant shall notify Landlord in writing,
which notice (the “Transfer Notice”) shall include (i) the proposed effective
date of the Transfer, which shall not be less than thirty (30) days nor more
than one hundred eighty (180) days after the date of delivery of the Transfer
Notice, (ii) a description of the portion of the Premises to be transferred (the
“Subject Space”), (iii) all of the terms of the proposed Transfer and the
consideration therefor, including calculation of the “Transfer Premium”, as that
term is defined in Section 14.3 below, in connection with such Transfer, the
name and address of the proposed Transferee, and a copy of all existing executed
and/or proposed documentation pertaining to the proposed Transfer, including all
existing operative documents to be executed to evidence such Transfer or the
agreements incidental or related to such Transfer, provided that Landlord shall
have the right to require Tenant to utilize Landlord’s standard Transfer
documents in connection with the documentation of such Transfer, (iv) current
financial statements of the proposed Transferee certified by an officer, partner
or owner thereof, business credit and personal references and history of the
proposed Transferee and any other information reasonably required by Landlord
which will enable Landlord to determine the financial responsibility, character,
and reputation of the proposed Transferee, nature of such Transferee’s business
and proposed use of the Subject Space and (v) an executed estoppel certificate
from Tenant in the form attached hereto as Exhibit E. Any Transfer made without
Landlord’s prior written consent shall, at Landlord’s option, be null, void and
of no effect, and shall, at Landlord’s option, constitute a default by Tenant
under this Lease. Whether or not Landlord consents to any proposed Transfer,
Tenant shall pay Landlord’s review and processing fees, as well as any
reasonable professional fees (including, without limitation, attorneys’,
accountants’, architects’, engineers’ and consultants’ fees) incurred by
Landlord, within thirty (30) days after written request by Landlord, in an
amount not to exceed Two Thousand Five Hundred and No/100 Dollars ($2,500.00) in
the aggregate, but such limitation of fees shall only apply to the extent such
Transfer is in the ordinary course of business. Landlord and Tenant hereby agree
that a proposed Transfer shall not be considered “in the ordinary course of
business” if such Transfer involves the review of documentation by Landlord on
more than two (2) occasions.

14.2 Landlord’s Consent. Landlord shall not unreasonably withhold its consent to
any proposed Transfer of the Subject Space to the Transferee on the terms
specified in the Transfer Notice. Without limitation as to other reasonable
grounds for withholding consent, the parties hereby agree that it shall be
reasonable under this Lease and under any applicable law for Landlord to
withhold consent to any proposed Transfer where one or more of the following
apply:

14.2.1 The Transferee is of a character or reputation or engaged in a business
which is not consistent with the quality of the Building or the Project, or
would be a significantly less prestigious occupant of the Building than Tenant;

14.2.2 The Transferee intends to use the Subject Space for purposes which are
not permitted under this Lease;

14.2.3 The Transferee is either a governmental agency or instrumentality
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14.2.4 The Transferee is not a party of reasonable financial worth and/or
financial stability in light of the responsibilities to be undertaken in
connection with the Transfer on the date consent is requested;

14.2.5 The proposed Transfer would cause a violation of another lease for space
in the Project, or would give an occupant of the Project a right to cancel its
lease;

14.2.6 The terms of the proposed Transfer will allow the Transferee to exercise
a right of renewal, right of expansion, right of first offer, or other similar
right held by Tenant (or will allow the Transferee to occupy space leased by
Tenant pursuant to any such right); or

14.2.7 Either the proposed Transferee, or any person or entity which directly or
indirectly, controls, is controlled by, or is under common control with, the
proposed Transferee, (i) occupies space in the Project at the time of the
request for consent, or (ii) is negotiating with Landlord to lease space in the
Project at such time, or (iii) has negotiated with Landlord during the six
(6)-month period immediately preceding the Transfer Notice (and Landlord has
available space in the Project meeting such proposed Transferee’s needs at the
time of the request for consent); or

14.2.8 The Transferee does not intend to occupy the entire Premises and conduct
its business therefrom for a substantial portion of the term of the Transfer.

If Landlord consents to any Transfer pursuant to the terms of this Section 14.2
(and does not exercise any recapture rights Landlord may have under Section 14.4
of this Lease), Tenant may within six (6) months after Landlord’s consent, but
not later than the expiration of said six-month period, enter into such Transfer
of the Premises or portion thereof, upon substantially the same terms and
conditions as are set forth in the Transfer Notice furnished by Tenant to
Landlord pursuant to Section 14.1 of this Lease, provided that if there are any
changes in the terms and conditions from those specified in the Transfer Notice
(i) such that Landlord would initially have been entitled to refuse its consent
to such Transfer under this Section 14.2, or (ii) which would cause the proposed
Transfer to be at least five percent (5%) more favorable to the Transferee than
the terms set forth in Tenant’s original Transfer Notice, Tenant shall again
submit the Transfer to Landlord for its approval and other action under this
Article 14 (including Landlord’s right of recapture, if any, under Section 14.4
of this Lease). Notwithstanding anything to the contrary in this Lease, if
Tenant or any proposed Transferee claims that Landlord has unreasonably withheld
or delayed its consent under Section 14.2 or otherwise has breached or acted
unreasonably under this Article 14, their sole remedies shall be a declaratory
judgment and an injunction for the relief sought without any monetary damages,
and Tenant hereby waives all other remedies, including, without limitation, any
right at law or equity to terminate this Lease, on its own behalf and, to the
extent permitted under all applicable laws, on behalf of the proposed
Transferee.

14.3 Transfer Premium. If Landlord consents to a Transfer, as a condition
thereto which the parties hereby agree is reasonable, Tenant shall pay to
Landlord fifty percent (50%) of any “Transfer Premium,” as that term is defined
in this Section 14.3, received by Tenant from such Transferee. “Transfer
Premium” shall mean all rent, additional rent or other consideration payable by
such Transferee in connection with the Transfer in excess of the Rent and
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Rent payable by Tenant under this Lease during the term of the Transfer on a per
rentable square foot basis if less than all of the Premises is transferred,
after deducting the reasonable expenses incurred by Tenant for (i) any changes,
alterations and improvements to the Premises in connection with the Transfer,
(ii) any free base rent or other economic concessions reasonably provided to the
Transferee, (iii) any brokerage commissions in connection with the Transfer,
(iv) any attorneys’ fees incurred by Tenant in connection with the Transfer,
(v) any lease takeover costs incurred by Tenant in connection with the Transfer,
(vi) any costs of advertising the space which is the subject of the Transfer,
and (vii) any review and processing fees paid to Landlord in connection with
such Transfer (collectively, the “Transfer Costs”). “Transfer Premium” shall
also include, but not be limited to, key money, bonus money or other cash
consideration paid by Transferee to Tenant in connection with such Transfer, and
any payment in excess of fair market value for services rendered by Tenant to
Transferee or for tangible assets (as opposed to intellectual property),
fixtures, inventory, equipment, or furniture transferred by Tenant to Transferee
in connection with such Transfer. In the calculations of the Rent (as it relates
to the Transfer Premium calculated under this Section 14.3), the Rent paid
during each annual period for the Subject Space, shall be computed after
adjusting such rent to the actual effective rent to be paid, taking into
consideration any and all leasehold concessions granted in connection therewith,
including, but not limited to, any rent credit and improvement allowance. For
purposes of calculating any such effective rent all such concessions shall be
amortized on a straight-line basis over the relevant term.

14.4 Landlord’s Option as to Subject Space. Notwithstanding any provision to the
contrary contained in this Article 14, in the event that Tenant contemplates a
Transfer (“Contemplated Transfer”), Tenant shall give Landlord notice (the
“Intention to Transfer Notice”) of such contemplated Transfer (whether or not
the contemplated Transferee or the terms of such contemplated Transfer have been
determined); provided, however, that Landlord hereby acknowledges and agrees
that Tenant shall have no obligation to deliver an Intention to Transfer Notice
hereunder, and Landlord shall have no right to recapture space with respect to
an assignment or sublease pursuant to the terms of Section 14.8, below. The
Intention to Transfer Notice shall specify the contemplated date of commencement
of the Contemplated Transfer (the “Contemplated Effective Date”), and the
contemplated length of the term of such contemplated Transfer, and shall specify
that such Intention to Transfer Notice is delivered to Landlord pursuant to this
Section 14.4 in order to allow Landlord to elect to recapture the Premises for
the remainder of the Lease Term. Thereafter, Landlord shall have the option, by
giving written notice to Tenant (the “Recapture Notice”) within twenty (20) days
after its receipt of any Intention to Transfer Notice, to recapture all of the
Contemplated Transfer Space. However, if Landlord delivers a Recapture Notice to
Tenant, Tenant may, within ten (10) days after Tenant’s receipt of the Recapture
Notice, deliver written notice to Landlord indicating that Tenant is rescinding
its request for consent to the proposed Transfer, in which case such Transfer
shall not be consummated and this Lease shall remain in full force and effect as
to the portion of the Premises that was the subject of the Transfer. Tenant’s
failure to so notify Landlord in writing within said ten (10) day period shall
be deemed to constitute Tenant’s election to allow the Recapture Notice to be
effective. Any recapture under this Section 14.4 shall cancel and terminate this
Lease as of the Contemplated Effective Date. If Landlord declines, or fails to
elect in a timely manner, to recapture the Premises under this Section 14.4,
then, subject to the other terms of this Article 14, for a period of nine
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on the last day of such thirty (30) day period, Landlord shall not have any
right to recapture the Premises during the Nine Month Period; provided however,
that any such Transfer shall be subject to the remaining terms of this
Article 14. If such a Transfer is not so consummated within the Nine Month
Period, Tenant shall again be required to submit a new Intention to Transfer
Notice to Landlord with respect any contemplated Transfer, as provided above in
this Section 14.4.

14.5 Effect of Transfer. If Landlord consents to a Transfer, (i) the TCCs of
this Lease shall in no way be deemed to have been waived or modified, (ii) such
consent shall not be deemed consent to any further Transfer by either Tenant or
a Transferee, (iii) Tenant shall deliver to Landlord, promptly after execution,
an original executed copy of all documentation pertaining to the Transfer in
form reasonably acceptable to Landlord, (iv) Tenant shall furnish upon
Landlord’s request a complete statement, certified by an independent certified
public accountant, or Tenant’s chief financial officer, setting forth in detail
the computation of any Transfer Premium Tenant has derived and shall derive from
such Transfer, and (v) no Transfer relating to this Lease or agreement entered
into with respect thereto, whether with or without Landlord’s consent, shall
relieve Tenant or any guarantor of the Lease from any liability under this
Lease, including, without limitation, in connection with the Subject Space.
Landlord or its authorized representatives shall have the right at all
reasonable times to audit the books, records and papers of Tenant relating to
any Transfer, and shall have the right to make copies thereof. If the Transfer
Premium respecting any Transfer shall be found understated, Tenant shall, within
thirty (30) days after demand, pay the deficiency, and if understated by more
than three percent (3%), Tenant shall pay Landlord’s costs of such audit.

14.6 Additional Transfers. For purposes of this Lease, the term “Transfer” shall
also include (i) if Tenant is a partnership, the withdrawal or change,
voluntary, involuntary or by operation of law, of more than fifty percent
(50%) or more of the partners, or transfer of more than fifty percent (50%) or
more of partnership interests, within a twelve (12)-month period, or the
dissolution of the partnership without immediate reconstitution thereof, and
(ii) if Tenant is a closely held corporation (i.e., whose stock is not publicly
held and not traded through an exchange or over the counter), (A) the
dissolution, merger, consolidation or other reorganization of Tenant or (B) the
sale or other transfer of an aggregate of more than fifty percent (50%) or more
of the voting shares of Tenant (other than to immediate family members by reason
of gift or death), within a twelve (12)-month period, or (C) the sale, mortgage,
hypothecation or pledge of an aggregate of more than fifty percent (50%) or more
of the value of the unencumbered assets of Tenant within a twelve (12)-month
period.

14.7 Occurrence of Default. Any Transfer hereunder shall be subordinate and
subject to the provisions of this Lease, and if this Lease shall be terminated
during the term of any Transfer, Landlord shall have the right to: (i) treat
such Transfer as cancelled and repossess the Subject Space by any lawful means,
or (ii) require that such Transferee attorn to and recognize Landlord as its
landlord under any such Transfer. If Tenant shall be in default under this
Lease, Landlord is hereby irrevocably authorized, as Tenant’s agent and
attorney-in-fact, to direct any Transferee to make all payments under or in
connection with the Transfer directly to Landlord (which Landlord shall apply
towards Tenant’s obligations under this Lease) until such default is cured. Such
Transferee shall rely on any representation by Landlord that Tenant is in
default hereunder, without any need for confirmation thereof by Tenant. Upon any
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assignee shall assume in writing all obligations and covenants of Tenant
thereafter to be performed or observed under this Lease. No collection or
acceptance of rent by Landlord from any Transferee shall be deemed a waiver of
any provision of this Article 14 or the approval of any Transferee or a release
of Tenant from any obligation under this Lease, whether theretofore or
thereafter accruing. In no event shall Landlord’s enforcement of any provision
of this Lease against any Transferee be deemed a waiver of Landlord’s right to
enforce any term of this Lease against Tenant or any other person. If Tenant’s
obligations hereunder have been guaranteed, Landlord’s consent to any Transfer
shall not be effective unless the guarantor also consents to such Transfer.

14.8 Non-Transfers. Notwithstanding anything to the contrary contained in this
Article 14, provided Tenant is not in economic or material non-economic default
under this Lease (beyond any applicable notice and cure periods) (i) an
assignment or subletting of all or a portion of the Premises to an affiliate of
Tenant (an entity which is controlled by, controls, or is under common control
with, Tenant), (ii) an assignment of the Premises to an entity which acquires
all or substantially all of the assets or interests (partnership, stock or
other) of Tenant, or (iii) an assignment of the Premises to an entity which is
the resulting entity of a merger or consolidation, public offering,
reorganization, or dissolution of Tenant, shall not be deemed a Transfer under
this Article 14, provided that Tenant notifies Landlord of any such assignment
or sublease and promptly supplies Landlord with any documents or information
requested by Landlord regarding such assignment or sublease or such affiliate,
and further provided that such assignment or sublease is not a subterfuge by
Tenant to avoid its obligations under this Lease or otherwise effectuate any
“release” by Tenant of such obligations and such Permitted Transferee shall
thereafter become liable under this Lease, on a joint and several basis, with
Tenant. The transferee under a transfer specified in items (i), (ii) or
(iii) above shall be referred to as a “Permitted Transferee.” “Control,” as used
in this Section 14.8, shall mean the ownership, directly or indirectly, of at
least fifty-one percent (51%) of the voting securities of, or possession of the
right to vote, in the ordinary direction of its affairs, of at least fifty-one
percent (51%) of the voting interest in, any person or entity Furthermore,
raising capital through a sale (or other offering) of stock or ownership
interests in Tenant will not be deemed a Transfer for purposes of this Lease
(i.e., Landlord’s consent, as opposed to notice, shall not be required).

ARTICLE 15

SURRENDER OF PREMISES; OWNERSHIP AND

REMOVAL OF TRADE FIXTURES

15.1 Surrender of Premises. No act or thing done by Landlord or any agent or
employee of Landlord during the Lease Term shall be deemed to constitute an
acceptance by Landlord of a surrender of the Premises unless such intent is
specifically acknowledged in writing by Landlord. The delivery of keys to the
Premises to Landlord or any agent or employee of Landlord shall not constitute a
surrender of the Premises or effect a termination of this Lease, whether or not
the keys are thereafter retained by Landlord, and notwithstanding such delivery
Tenant shall be entitled to the return of such keys at any reasonable time upon
request until this Lease shall have been properly terminated. The voluntary or
other surrender of this Lease by Tenant, whether accepted by Landlord or not, or
a mutual termination hereof, shall not work a merger, and at the option of
Landlord shall operate as an assignment to Landlord of all subleases or
subtenancies affecting the Premises or terminate any or all such sublessees or
subtenancies.

 

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15.2 Removal of Tenant Property by Tenant. Upon the expiration of the Lease
Term, or upon any earlier termination of this Lease, Tenant shall, subject to
the provisions of this Article 15, quit and surrender possession of the Premises
to Landlord in as good order and condition, reasonable wear and tear and repairs
which are specifically made the responsibility of Landlord hereunder excepted.
Upon such expiration or termination, Tenant shall, without expense to Landlord,
remove or cause to be removed from the Premises all debris and rubbish, and such
items of furniture, equipment, business and trade fixtures, free-standing
cabinet work, movable partitions and other articles of personal property owned
by Tenant or installed or placed by Tenant at its expense in the Premises, and
such similar articles of any other persons claiming under Tenant, as Landlord
may, in its sole discretion, require to be removed, and Tenant shall repair at
its own expense all damage to the Premises and Building resulting from such
removal. Notwithstanding anything to the contrary in the Suite 100/200 Sublease,
Tenant’s surrender obligations with respect to the Premises shall be limited to
those obligations specifically set forth in this Lease, and Tenant shall not
have any additional surrender obligations under the Suite 100/200 Sublease
vis-à-vis Landlord.

ARTICLE 16

HOLDING OVER

If Tenant holds over after the expiration of the Lease Term or earlier
termination thereof, with or without the express or implied consent of Landlord,
such tenancy shall be from month-to-month only, and shall not constitute a
renewal hereof or an extension for any further term, and in such case Rent shall
be payable at a monthly rate equal to the product of (i) the Rent applicable
during the last rental period of the Lease Term under this Lease, and (ii) a
percentage equal to one hundred fifty percent (150%). Such month-to-month
tenancy shall be subject to every other applicable term, covenant and agreement
contained herein. Nothing contained in this Article 16 shall be construed as
consent by Landlord to any holding over by Tenant, and Landlord expressly
reserves the right to require Tenant to surrender possession of the Premises to
Landlord as provided in this Lease upon the expiration or other termination of
this Lease. The provisions of this Article 16 shall not be deemed to limit or
constitute a waiver of any other rights or remedies of Landlord provided herein
or at law. If Tenant fails to surrender the Premises upon the termination or
expiration of this Lease, in addition to any other liabilities to Landlord
accruing therefrom, Tenant shall protect, defend, indemnify and hold Landlord
harmless from all loss, costs (including reasonable attorneys’ fees) and
liability resulting from such failure, including, without limiting the
generality of the foregoing, any claims made by any succeeding tenant founded
upon such failure to surrender and any lost profits to Landlord resulting
therefrom; provided, however, upon entering into a third party lease which
affects all or any portion of the Premises, Landlord shall deliver written
notice (the “New Lease Notice”) of such lease to Tenant and the terms of the
foregoing indemnity shall not be effective until the later of (i) the date that
occurs thirty (30) days following the date Landlord delivers such New Lease
Notice to Tenant, and (ii) the date which occurs thirty (30) days after the
termination or expiration of this Lease.

 

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ARTICLE 17

ESTOPPEL CERTIFICATES

Within ten (10) business days following a request in writing by Landlord, Tenant
shall execute, acknowledge and deliver to Landlord an estoppel certificate,
which, as submitted by Landlord, shall be substantially in the form of
Exhibit E, attached hereto (or such other form as may be required by any
prospective mortgagee or purchaser of the Project, or any portion thereof),
indicating therein any exceptions thereto that may exist at that time, and shall
also contain any other information reasonably requested by Landlord or
Landlord’s mortgagee or prospective mortgagee. Any such certificate may be
relied upon by any prospective mortgagee or purchaser of all or any portion of
the Project. Tenant shall execute and deliver whatever other instruments may be
reasonably required for such purposes. At any time during the Lease Term,
Landlord may require Tenant to provide Landlord with a current financial
statement and financial statements of the two (2) years prior to the current
financial statement year. Such statements shall be prepared in accordance with
generally accepted accounting principles and, if such is the normal practice of
Tenant, shall be audited by an independent certified public accountant. Failure
of Tenant to timely execute, acknowledge and deliver such estoppel certificate
or other instruments shall constitute an acceptance of the Premises and an
acknowledgment by Tenant that statements included in the estoppel certificate
are true and correct, without exception. Notwithstanding the foregoing, in the
event that (i) stock in the entity which constitutes Tenant under this Lease (as
opposed to an entity that “controls” Tenant, as that term is defined in
Section 14.8 of this Lease, or is under common control with Tenant) is publicly
traded on a national stock exchange, and (ii) Tenant has its own, separate and
distinct 10K and 10Q filing requirements (as opposed to joint filings with an
entity that controls Tenant or is under common control with Tenant), then
Tenant’s obligation to provide Landlord with a copy of its most recent current
financial statement shall be deemed satisfied.

ARTICLE 18

SUBORDINATION

This Lease shall be subject and subordinate to all present and future ground or
underlying leases of the Building or Project and to the lien of any mortgage,
trust deed or other encumbrances now or hereafter in force against the Building
or Project or any part thereof, if any, and to all renewals, extensions,
modifications, consolidations and replacements thereof, and to all advances made
or hereafter to be made upon the security of such mortgages or trust deeds,
unless the holders of such mortgages, trust deeds or other encumbrances, or the
lessors under such ground lease or underlying leases, require in writing that
this Lease be superior thereto. For the three (3) month period following the
date of this Lease, Landlord shall use commercially reasonable efforts to
provide Tenant, at a cost to be split evenly between Landlord and Tenant’s sole
cost, with a nondisturbance agreement in a commercially reasonable form (an
“NDA”) from Landlord’s presently existing lender holding a first deed of trust
on the Project. In the event that, notwithstanding Landlord’s use of
commercially reasonable efforts to obtain an NDA, Landlord is unable to attain
such an NDA in the foregoing three (3) month period, the Tenant shall have the
right to contact Landlord’s existing lender directly to try to obtain such an
NDA. In the event Landlord’s lender provides such an NDA, then the cost of such
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Landlord and Tenant. Moreover, Landlord’s delivery to Tenant of commercially
reasonable NDA in favor of Tenant from any ground lessor, mortgage holders or
lien holders of Landlord who later come into existence at any time prior to the
expiration of the Lease Term shall be in consideration of, and a condition
precedent to, Tenant’s agreement to be bound by the terms and conditions of this
Article 18. Tenant covenants and agrees in the event any proceedings are brought
for the foreclosure of any such mortgage or deed in lieu thereof (or if any
ground lease is terminated), to attorn, without any deductions or set-offs
whatsoever, to the lienholder or purchaser or any successors thereto upon any
such foreclosure sale or deed in lieu thereof (or to the ground lessor), if so
requested to do so by such purchaser or lienholder or ground lessor, and to
recognize such purchaser or lienholder or ground lessor as the lessor under this
Lease, provided such lienholder or purchaser or ground lessor shall agree to
accept this Lease and not disturb Tenant’s occupancy, so long as Tenant timely
pays the rent and observes and performs the TCCs of this Lease to be observed
and performed by Tenant. Landlord’s interest herein may be assigned as security
at any time to any lienholder. Tenant shall, within ten (10) business days of
request by Landlord, execute such further instruments or assurances as Landlord
may reasonably deem necessary to evidence or confirm the subordination or
superiority of this Lease to any such mortgages, trust deeds, ground leases or
underlying leases. Tenant waives the provisions of any current or future
statute, rule or law which may give or purport to give Tenant any right or
election to terminate or otherwise adversely affect this Lease and the
obligations of the Tenant hereunder in the event of any foreclosure proceeding
or sale.

ARTICLE 19

DEFAULTS; REMEDIES

19.1 Events of Default. The occurrence of any of the following shall constitute
a default of this Lease by Tenant:

19.1.1 Any failure by Tenant to pay any Rent or any other charge required to be
paid under this Lease, or any part thereof, when due unless such failure is
cured within three (3) days after notice; or

19.1.2 Except where a specific time period is otherwise set forth for Tenant’s
performance in this Lease, in which event the failure to perform by Tenant
within such time period shall be a default by Tenant under this Section 19.1.2,
any failure by Tenant to observe or perform any other provision, covenant or
condition of this Lease to be observed or performed by Tenant where such failure
continues for thirty (30) days after written notice thereof from Landlord to
Tenant; provided that if the nature of such default is such that the same cannot
reasonably be cured within a thirty (30) day period, Tenant shall not be deemed
to be in default if it diligently commences such cure within such period and
thereafter diligently proceeds to rectify and cure such default, but in no event
exceeding a period of time in excess of ninety (90) days after written notice
thereof from Landlord to Tenant; or

19.1.3 To the extent permitted by law, (i) Tenant or any guarantor of this Lease
being placed into receivership or conservatorship, or becoming subject to
similar proceedings under Federal or State law, or (ii) a general assignment by
Tenant or any guarantor of this Lease for the benefit of creditors, or (iii) the
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or dissolution whether or not there exists any proceeding under an insolvency or
bankruptcy law, or (iv) the filing by or against Tenant or any guarantor of any
proceeding under an insolvency or bankruptcy law, unless in the case of such a
proceeding filed against Tenant or any guarantor the same is dismissed within
sixty (60) days, or (v) the appointment of a trustee or receiver to take
possession of all or substantially all of the assets of Tenant or any guarantor,
unless possession is restored to Tenant or such guarantor within thirty
(30) days, or (vi) any execution or other judicially authorized seizure of all
or substantially all of Tenant’s assets located upon the Premises or of Tenant’s
interest in this Lease, unless such seizure is discharged within thirty
(30) days; or

19.1.4 Abandonment of the Premises pursuant to California Civil Code
Section 1915.3; or

19.1.5 The failure by Tenant to observe or perform according to the provisions
of Articles 5, 14, 17 or 18 of this Lease where such failure continues for more
than five (5) business days after notice from Landlord; or

19.1.6 Tenant’s failure to occupy the Premises within ninety (90) business days
after the Lease Commencement Date.

The notice periods provided herein are in lieu of, and not in addition to, any
notice periods provided by law.

19.2 Remedies Upon Default. Upon the occurrence of any event of default by
Tenant, Landlord shall have, in addition to any other remedies available to
Landlord at law or in equity (all of which remedies shall be distinct, separate
and cumulative), the option to pursue any one or more of the following remedies,
each and all of which shall be cumulative and nonexclusive, without any notice
or demand whatsoever.

19.2.1 Terminate this Lease, in which event Tenant shall immediately surrender
the Premises to Landlord, and if Tenant fails to do so, Landlord may, without
prejudice to any other remedy which it may have for possession or arrearages in
rent, enter upon and take possession of the Premises and expel or remove Tenant
and any other person who may be occupying the Premises or any part thereof,
without being liable for prosecution or any claim or damages therefor; and
Landlord may recover from Tenant the following:

(a) The worth at the time of award of any unpaid rent which has been earned at
the time of such termination; plus

(b) The worth at the time of award of the amount by which the unpaid rent which
would have been earned after termination until the time of award exceeds the
amount of such rental loss that Tenant proves could have been reasonably
avoided; plus

(c) The worth at the time of award of the amount by which the unpaid rent for
the balance of the Lease Term after the time of award exceeds the amount of such
rental loss that Tenant proves could have been reasonably avoided; plus

 

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(d) 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 of things would be likely to result
therefrom; and

(e) 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.

The term “rent” as used in this Section 19.2 shall be deemed to be and to mean
all sums of every nature required to be paid by Tenant pursuant to the terms of
this Lease, whether to Landlord or to others. As used in
Sections 19.2.1(a) and (b), above, the “worth at the time of award” shall be
computed by allowing interest at the Interest Rate. As used in
Section 19.2.1(c), above, the “worth at the time of award” shall be computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of award plus one percent (1%).

19.2.2 Landlord shall have 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 the right to
sublet or assign, subject only to reasonable limitations). Accordingly, if
Landlord does not elect to terminate this Lease on account of any default by
Tenant, Landlord may, from time to time, without terminating this Lease, enforce
all of its rights and remedies under this Lease, including the right to recover
all rent as it becomes due.

19.2.3 Landlord shall at all times have the rights and remedies (which shall be
cumulative with each other and cumulative and in addition to those rights and
remedies available under Sections 19.2.1 and 19.2.2, above, or any law or other
provision of this Lease), without prior demand or notice except as required by
applicable law, to seek any declaratory, injunctive or other equitable relief,
and specifically enforce this Lease, or restrain or enjoin a violation or breach
of any provision hereof.

19.3 Subleases of Tenant. Whether or not Landlord elects to terminate this Lease
on account of any default by Tenant, as set forth in this Article 19, Landlord
shall have the right to terminate any and all subleases, licenses, concessions
or other consensual arrangements for possession entered into by Tenant and
affecting the Premises or may, in Landlord’s sole discretion, succeed to
Tenant’s interest in such subleases, licenses, concessions or arrangements. In
the event of Landlord’s election to succeed to Tenant’s interest in any such
subleases, licenses, concessions or arrangements, Tenant shall, as of the date
of notice by Landlord of such election, have no further right to or interest in
the rent or other consideration receivable thereunder.

19.4 Form of Payment After Default. Following the second (2nd) occurrence of an
economic event of default by Tenant (beyond any applicable notice and cure
periods) occurring within any twelve (12) month period, Landlord shall have the
right to require that any or all subsequent amounts paid by Tenant to Landlord
hereunder, whether to cure the default in question or otherwise, be paid in the
form of cash, money order, cashier’s or certified check drawn on an institution
acceptable to Landlord, or by other means approved by Landlord, notwithstanding
any prior practice of accepting payments in any different form.

 

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19.5 Efforts to Relet. No re-entry or repossession, repairs, maintenance,
changes, alterations and additions, reletting, appointment of a receiver to
protect Landlord’s interests hereunder, or any other action or omission by
Landlord shall be construed as an election by Landlord to terminate this Lease
or Tenant’s right to possession, or to accept a surrender of the Premises, nor
shall same operate to release Tenant in whole or in part from any of Tenant’s
obligations hereunder, unless express written notice of such intention is sent
by Landlord to Tenant. Tenant hereby irrevocably waives any right otherwise
available under any law to redeem or reinstate this Lease.

19.6 Landlord Default. Notwithstanding anything to the contrary set forth in
this Lease, Landlord shall be in default in the performance of any obligation
required to be performed by Landlord pursuant to this Lease if Landlord fails to
perform such obligation within thirty (30) days after the receipt of notice from
Tenant specifying in detail Landlord’s failure to perform; provided, however, if
the nature of Landlord’s obligation is such that more than thirty (30) days are
required for its performance, then Landlord shall not be in default under this
Lease if it shall commence such performance within such thirty (30) day period
and thereafter diligently pursues the same to completion. Upon any such default
by Landlord under this Lease, Tenant may, except as otherwise specifically
provided in this Lease to the contrary, exercise any of its rights provided at
law or in equity, including, to the extent so provided, the initiation of an
action for damages or termination. Any award from a court or arbitrator in favor
of Tenant requiring payment by Landlord which is not paid by Landlord within the
time period directed by such award, may be offset by Tenant from Rent next due
and payable under this Lease; provided, however, Tenant may not deduct the
amount of the award against more than fifty percent (50%) of Base Rent next due
and owing (until such time as the entire amount of such judgment is deducted) to
the extent following a foreclosure or a deed-in-lieu of foreclosure.

ARTICLE 20

COVENANT OF QUIET ENJOYMENT

Landlord covenants that Tenant, on paying the Rent, charges for services and
other payments herein reserved and on keeping, observing and performing all the
other TCCs, provisions and agreements herein contained on the part of Tenant to
be kept, observed and performed, shall, during the Lease Term, peaceably and
quietly have, hold and enjoy the Premises subject to the TCCs, provisions and
agreements hereof without interference by any persons lawfully claiming by or
through Landlord. The foregoing covenant is in lieu of any other covenant
express or implied.

ARTICLE 21

SECURITY DEPOSIT

Concurrent with Tenant’s execution of this Lease, Tenant shall deposit with
Landlord a security deposit (the “Security Deposit”) in the amount set forth in
Section 8 of the Summary, as security for the faithful performance by Tenant of
all of its obligations under this Lease. If Tenant defaults with respect to any
provisions of this Lease, including, but not limited to, the provisions relating
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damage, Landlord may, without notice to Tenant, but shall not be required to
apply all or any part of the Security Deposit for the payment of any Rent or any
other sum in default and Tenant shall, upon demand therefor, restore the
Security Deposit to its original amount. Any unapplied portion of the Security
Deposit shall be returned to Tenant, or, at Landlord’s option, to the last
assignee of Tenant’s interest hereunder, within sixty (60) days following the
expiration of the Lease Term. Tenant shall not be entitled to any interest on
the Security Deposit. Tenant hereby irrevocably waives and relinquishes any and
all rights, benefits, or protections, if any, Tenant now has, or in the future
may have, under Section 1950.7 of the California Civil Code, any successor
statute, and all other provisions of law, now or hereafter in effect, including,
but not limited to, any provision of law which (i) establishes the time frame by
which a landlord must refund a security deposit under a lease, or (ii) provides
that a 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
a tenant, or to clean the subject premises. Tenant acknowledges and agrees that
(A) any statutory time frames for the return of a security deposit are
superseded by the express period identified in this Article 21, above, and
(B) rather than be so limited, Landlord may claim from the Security Deposit
(i) any and all sums expressly identified in this Article 21, above, and
(ii) any additional sums reasonably necessary to compensate Landlord for any and
all losses or damages caused by Tenant’s default of this Lease, including, but
not limited to, all damages or rent due upon termination of this Lease pursuant
to Section 1951.2 of the California Civil Code.

ARTICLE 22

[INTENTIONALLY OMITTED]

ARTICLE 23

SIGNS

23.1 Full Floors. Subject to Landlord’s prior written approval, in its
reasonable discretion, and provided all signs are in keeping with the quality,
design and style of the Building and Project, Tenant, if the Premises comprise
an entire floor of the Building, at its sole cost and expense, may install
identification signage anywhere in the Premises including in the elevator lobby
of the Premises, provided that such signs must not be visible from the exterior
of the Building.

23.2 Multi-Tenant Floors. If other tenants occupy space on the floor on which
the Premises is located, Tenant’s identifying signage shall be provided by
Landlord, at Tenant’s cost, and such signage shall be comparable to that used by
Landlord for other similar floors in the Building and shall comply with
Landlord’s Building standard signage program; provided, however, Landlord hereby
acknowledges and agrees that during the Lease Term (as the same may be extended
pursuant to the terms of this Lease) Tenant shall be permitted to maintain
identifying signage which is consistent in size, quality, quantity and location
with the signage previously installed in the Premises by Fair Isaac, Inc., a
Delaware corporation (“Fair Isaac”), and Tenant (which Landlord has approved in
connection with its consent to the Suite 100 and 200 Sublease).

 

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23.3 Prohibited Signage and Other Items. Any signs, notices, logos, pictures,
names or advertisements which are installed and that have not been separately
approved by Landlord may be removed without notice by Landlord at the sole
expense of Tenant. Except as provided in Section 23.4 below, Tenant may not
install any signs on the exterior or roof of the Project or the Common Areas.
Any signs, window coverings, or blinds (even if the same are located behind the
Landlord-approved window coverings for the Building), or other items visible
from the exterior of the Premises or Building, shall be subject to the prior
approval of Landlord, in its sole discretion.

23.4 Eyebrow Signage. Tenant shall be entitled, at its sole cost and expense, to
non-exclusive eyebrow signage in the location on the exterior of the Building
(the “Eyebrow Signage”), pursuant to this Section 23.4. All aspects of Tenant’s
Eyebrow Signage, including, but not limited to, quality, design, style, lighting
and size, as applicable, shall be (a) consistent with Landlord’s Building
standard eyebrow signage program, (b) subject to Landlord’s prior written
approval, in Landlord’s reasonable discretion, and (c) in compliance with all
applicable governmental laws and regulations. Further, Tenant shall be
responsible, at its sole cost and expense, for the operation, maintenance,
repair and replacement of Tenant’s Eyebrow Signage. Should the name of Tenant be
legally changed to another name (the “New Name”), Tenant shall be entitled to
modify, at Tenant’s sole cost and expense, Tenant’s name on the Eyebrow Signage
to reflect Tenant’s New Name, so long as Tenant’s New Name is not an
“Objectionable Name.” The term “Objectionable Name” shall mean any name which
relates to an entity which is of a character or reputation, or is associated
with a political orientation or faction, which is inconsistent with the quality
of the Project, or which would otherwise reasonably offend a landlord of the
Comparable Buildings. The parties hereby agree that the name “Volcano
Corporation” or any reasonable derivation thereof, shall not be deemed an
Objectionable Name. Upon the expiration or earlier termination of this Lease,
Tenant shall, at Tenant’s sole cost and expense, remove Tenant’s Eyebrow Signage
from the Building and repair any resulting damage.

23.5 Monument Signage. The Original Tenant as well as its Permitted Transferees
shall have the non-exclusive right, but not the obligation, to have its name as
determined by Tenant placed on the monument sign currently serving the Building
(the “Monument Signage”), and such signage shall be compatible with the quality,
design and style of the Project’s sign criteria; provided, however, in no event
shall Tenant’s Monument Signage include an Objectionable Name. Landlord shall
have the right to (i) position or prioritize Tenant’s name in any position on
such monument sign as it shall determine in its sole discretion, from time to
time, (ii) design and organize such monument signage (and the materials, design,
script size, type face, colors and all other characteristics thereof) in such
manner as it shall determine in its sole discretion, (iii) place such other
names, business names, trade names or affiliate names representing such other
tenants as it shall determine in its sole discretion, (iv) make such
modifications to such monument signage as it shall desire from time to time, and
(v) place thereon the name of (and/or other identifying information for) the
Building and/or Project as Landlord shall determine in its sole discretion.

23.6 Rights Personal. The rights granted under Sections 23.4 and 23.5 are
personal to the Original Tenant, and its Permitted Transferees, and any other
assignee of this Lease approved pursuant to Article 14 of this Lease, and shall
not be transferable in any other respect whatsoever. In the event that (i) the
Lease shall be assigned to any other party other than the

 

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Original Tenant’s Permitted Transferees and any other assignee of this Lease
approved pursuant to Article 14 of this Lease, (ii) an event of default (after
all notice and applicable cure periods have expired) exists under this Lease,
(iii) Tenant shall be delinquent for any period in excess of forty-five
(45) days in the payment of any amount of Rent, or (iv) the Original Tenant, and
its Permitted Transferees and any other assignee of this Lease approved pursuant
to Article 14 of this Lease, shall fail to actually occupy at least seventy-five
percent (75%) of the Premises for any period in excess of thirty (30) days
(except for time periods during repairs, remodeling or similar circumstances,
and except for the time period beginning as of the execution of this Lease and
continuing until the Lease Commencement Date), Landlord shall have the right to
(i) cancel Tenant’s rights under Sections 23.4 and 23.5 above, and (ii) require
Tenant to remove, at Tenant’s sole cost and expense, Tenant’s name from Tenant’s
Monument Signage and/or Tenant’s Eyebrow Signage within fifteen (15) days after
delivery of Landlord’s written notice to do so. For purposes of this Lease,
Tenant’s Monument Signage and Tenant’s Eyebrow Signage shall collectively be
referred to as “Tenant’s Signage”. Notwithstanding any provision to the contrary
in this Lease, Tenant’s rights to Tenant’s Signage shall commence as of the
execution of this Lease.

23.7 Cost and Maintenance. The costs of the actual signs comprising Tenant’s
name on Tenant’s Signage and the installation, design, construction, and any and
all other costs associated with Tenant’s Signage, including, without limitation,
any utility charges and hook-up fees (if applicable), permits, and maintenance
and repairs, shall be the sole responsibility of Tenant; provided that Landlord
shall reasonably cooperate with Tenant’s use of Common Areas to allow Tenant to
install, operate, maintain and repair Tenant’s Signage. Should Tenant’s Signage
require repairs and/or maintenance, Landlord shall have the right to provide
notice thereof to Tenant and Tenant (except as set forth above) shall cause such
repairs and/or maintenance to commence to be performed within thirty (30) days
after receipt of such notice from Landlord, at Tenant’s sole cost and expense;
provided, however, if such repairs and/or maintenance are reasonably expected to
require longer than thirty (30) days to perform, Tenant shall commence such
repairs and/or maintenance within such thirty (30) day period and shall
thereafter diligently prosecute such repairs and maintenance to completion at
Tenant’s sole cost and expense. Should Tenant fail to perform such repairs
and/or maintenance within the periods described in the immediately preceding
sentence, Landlord shall have the right to cause such work to be performed and
to charge Tenant as Additional Rent for the actual cost of such work plus
interest at the Interest Rate from the date of Landlord’s payment of such actual
costs to the date of Tenant’s reimbursement to Landlord. Tenant shall bear a pro
rata share (based upon the number of tenants identified on such Monument
Signage) of all costs of maintenance and operation of such Monument Signage and
all such costs shall be paid by Tenant to Landlord as Additional Rent within ten
(10) days of receipt of Landlord’s written demand therefor. Within a reasonable
time following the expiration or earlier termination of this Lease (which shall
in no event be later than thirty (30) days after such expiration or termination
of this Lease), Tenant shall, at Tenant’s sole cost and expense, commence, and
thereafter shall diligently pursue, the removal of Tenant’s Signage, and shall
cause the areas in which such Tenant’s Signage was located to be restored to the
condition existing immediately prior to the placement of such Tenant’s Signage.
If Tenant fails to timely remove Tenant’s Signage or to restore the areas in
which Tenant’s Signage was located, as provided in the immediately preceding
sentence, then Landlord may perform such work, and all actual costs reasonably
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performing, plus interest at the Interest Rate from the date of Landlord’s
payment of such costs to the date of Tenant’s reimbursement to Landlord, shall
be reimbursed by Tenant to Landlord within thirty (30) days after Tenant’s
receipt of an invoice therefore. The terms of this Section 23.7 shall survive
the expiration or earlier termination of this Lease.

ARTICLE 24

COMPLIANCE WITH LAW

Landlord covenants that as of the Lease Commencement Date, the Building, the
Additional Premises, and the parking areas serving the Building, shall be in
material compliance with all “Applicable Laws” (as that term is defined
hereinbelow) in effect as of the Lease Commencement Date, and Landlord shall, at
its sole cost and expense, correct any material deficiency in such condition
promptly following receipt of written notice thereof from Tenant. Tenant shall
not do anything or suffer anything to be done in or about the Premises or the
Project which will in any way conflict with any law, statute, ordinance or other
governmental rule, regulation or requirement now in force or which may hereafter
be enacted or promulgated which are applicable to the Premises (collectively,
“Applicable Laws”). At its sole cost and expense, Tenant shall promptly comply
with all such Applicable Laws which relate to (i) Tenant’s use of the Premises
for non-general office use, (ii) the Alterations, or (iii) the Base Building,
but, as to the Base Building, only to the extent such obligations are triggered
by Tenant’s Alterations, the Improvements, or use of the Premises for
non-general office use. Should any standard or regulation now or hereafter be
imposed on Landlord or Tenant by a state, federal or local governmental body
charged with the establishment, regulation and enforcement of occupational,
health or safety standards for employers, employees, landlords or tenants, then
Tenant agrees, at its sole cost and expense, to comply promptly with such
standards or regulations. The judgment of any court of competent jurisdiction or
the admission of Tenant in any judicial action, regardless of whether Landlord
is a party thereto, that Tenant has violated any of said governmental measures,
shall be conclusive of that fact as between Landlord and Tenant. Landlord shall
comply with all Applicable Laws relating to the Base Building or relating to
compliance with laws in effect as of the Lease Commencement Date, provided that
compliance with such Applicable Laws is not the responsibility of Tenant under
this Lease, and provided further that Landlord’s failure to comply therewith
would (x) prohibit Tenant from obtaining or maintaining a certificate of
occupancy for the Premises, (y) would unreasonably and materially affect the
safety of Tenant’s employees or create a significant health hazard for Tenant’s
employees, or (z) violate an affirmative mandate (directed specifically to the
Project) of an applicable governmental authority. Landlord shall be permitted to
include in Operating Expenses any costs or expenses incurred by Landlord under
this Article 24 to the extent consistent with the terms of Section 4.2.4, above.

ARTICLE 25

LATE CHARGES

If any installment of Rent or any other sum due from Tenant shall not be
received by Landlord or Landlord’s designee when due, then Tenant shall pay to
Landlord a late charge equal to five percent (5%) of the overdue amount plus any
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reason of Tenant’s failure to pay Rent and/or other charges when due hereunder;
provided, however, with regard to the first such failure in any twelve
(12) month period, Landlord will waive such late charge to the extent Tenant
cures such failure within three (3) days following Tenant’s receipt of written
notice from Landlord that the same was not received when due. The late charge
shall be deemed Additional Rent and the right to require it shall be in addition
to all of Landlord’s other rights and remedies hereunder or at law and shall not
be construed as liquidated damages or as limiting Landlord’s remedies in any
manner. In addition to the late charge described above, any Rent or other
amounts owing hereunder which are not paid within ten (10) days after the date
they are due shall bear interest from the date when due until paid at the
Interest Rate. For purposes of this Lease, the “Interest Rate” shall be an
annual rate equal to the lesser of (i) the annual “Bank Prime Loan” rate cited
in the Federal Reserve Statistical Release Publication H.15(519), published
weekly (or such other comparable index as Landlord and Tenant shall reasonably
agree upon if such rate ceases to be published), plus four (4) percentage
points, and (ii) the highest rate permitted by applicable law.

ARTICLE 26

LANDLORD’S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT

26.1 Landlord’s Cure. All covenants and agreements to be kept or performed by
Tenant under this Lease shall be performed by Tenant at Tenant’s sole cost and
expense and without any reduction of Rent, except to the extent, if any,
otherwise expressly provided herein. If Tenant shall fail to perform any
obligation under this Lease, and such failure shall continue in excess of the
time allowed under Section 19.1.2, above, unless a specific time period is
otherwise stated in this Lease, Landlord may, but shall not be obligated to,
make any such payment or perform any such act on Tenant’s part without waiving
its rights based upon any default of Tenant and without releasing Tenant from
any obligations hereunder.

26.2 Tenant’s Reimbursement. Except as may be specifically provided to the
contrary in this Lease, Tenant shall pay to Landlord, upon delivery by Landlord
to Tenant of statements therefor: (i) sums equal to expenditures reasonably made
and obligations reasonably incurred by Landlord in connection with the remedying
by Landlord of Tenant’s defaults pursuant to the provisions of Section 26.1;
(ii) sums equal to all losses, costs, liabilities, damages and expenses referred
to in Article 10 of this Lease; and (iii) sums equal to all expenditures
reasonably made and obligations reasonably incurred by Landlord in collecting or
attempting to collect the Rent or in enforcing or attempting to enforce any
rights of Landlord under this Lease or pursuant to law, including, without
limitation, all legal fees and other amounts so expended. Tenant’s obligations
under this Section 26.2 shall survive the expiration or sooner termination of
the Lease Term.

ARTICLE 27

ENTRY BY LANDLORD

Landlord reserves the right at all reasonable times (during Building Hours with
respect to items (i) and (ii) below) and upon at least twenty-four (24) hours
prior notice to Tenant (except in the case of an emergency) to enter the
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prospective purchasers, or to current or prospective mortgagees, ground or
underlying lessors or insurers, or during the last six (6) months of the Lease
Term, to prospective tenants; (iii) post notices of nonresponsibility; or
(iv) alter, improve or repair the Premises or the Building, or for structural
alterations, repairs or improvements to the Building or the Building’s systems
and equipment. Notwithstanding anything to the contrary contained in this
Article 27, Landlord may enter the Premises at any time to (A) perform services
required of Landlord, including janitorial service; (B) take possession due to
any breach of this Lease in the manner provided herein; and (C) perform any
covenants of Tenant which Tenant fails to perform. Landlord may make any such
entries without the abatement of Rent, except as otherwise provided in this
Lease, and may take such reasonable steps as required to accomplish the stated
purposes; provided, however, except for (x) emergencies, (y) repairs,
alterations, improvements or additions required by governmental or
quasi-governmental authorities or court order or decree, or (z) repairs which
are the obligation of Tenant hereunder, any such entry shall be performed in a
manner so as not to unreasonably interfere with Tenant’s use of the Premises and
shall be performed after normal business hours if reasonably practical. With
respect to items (y) and (z) above, Landlord shall use commercially reasonable
efforts to not materially interfere with Tenant’s use of, or access to, the
Premises. For each of the above purposes, Landlord shall at all times have a key
with which to unlock all the doors in the Premises, excluding Tenant’s vaults,
safes and special security areas designated in advance by Tenant. In an
emergency, Landlord shall have the right to use any means that Landlord may deem
proper to open the doors in and to the Premises. Any entry into the Premises by
Landlord in the manner hereinbefore described shall not be deemed to be a
forcible or unlawful entry into, or a detainer of, the Premises, or an actual or
constructive eviction of Tenant from any portion of the Premises. No provision
of this Lease shall be construed as obligating Landlord to perform any repairs,
alterations or decorations except as otherwise expressly agreed to be performed
by Landlord herein. Landlord will exercise its rights pursuant to this
Article 27 in a manner so as to minimize any unreasonable interference with
Tenant’s use of the Premises.

ARTICLE 28

TENANT PARKING

Tenant shall be entitled to utilize without charge, and Landlord hereby
covenants to provide, commencing on the Lease Commencement Date and continuing
throughout the initial Lease Term and any renewal or extension thereof, the
amount of parking passes set forth in Section 9 of the Summary, which parking
passes shall pertain to the Project parking facility. Notwithstanding the
foregoing, Tenant shall be responsible for the full amount of any taxes imposed
by any governmental authority in connection with the renting of such parking
passes by Tenant or the use of the parking facility by Tenant. Tenant’s
continued right to use the parking passes is conditioned upon Tenant abiding by
all rules and regulations which are prescribed from time to time for the orderly
operation and use of the parking facility where the parking passes are located,
including any sticker or other identification system established by Landlord,
Tenant’s use of commercially reasonable efforts to cause Tenant’s employees and
visitors also comply with such rules and regulations and Tenant not being in
default under this Lease. Landlord specifically reserves the right to change the
size, configuration, design, layout and all other aspects of the Project parking
facility at any time and Tenant acknowledges and agrees that

 

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Landlord may, without incurring any liability to Tenant and without any
abatement of Rent under this Lease, from time to time, temporarily close-off or
restrict access to the Project parking facility for purposes of permitting or
facilitating any such construction, alteration or improvements; provided that
Landlord shall provide Tenant with reasonable substitute parking in such event,
to the extent reasonably necessary. Landlord may delegate its responsibilities
hereunder to a parking operator in which case such parking operator shall have
all the rights of control attributed hereby to the Landlord. The parking passes
provided to Tenant pursuant to this Article 28 are provided to Tenant solely for
use by Tenant’s own personnel, employees, agents, contractors, and invitees, and
such passes may not be transferred, assigned, subleased or otherwise alienated
by Tenant without Landlord’s prior approval. Tenant may validate visitor parking
by such method or methods as the Landlord may establish, at the validation rate
from time to time generally applicable to visitor parking.

ARTICLE 29

MISCELLANEOUS PROVISIONS

29.1 Terms; Captions. The words “Landlord” and “Tenant” as used herein shall
include the plural as well as the singular. The necessary grammatical changes
required to make the provisions hereof apply either to corporations or
partnerships or individuals, men or women, as the case may require, shall in all
cases be assumed as though in each case fully expressed. The captions of
Articles and Sections are for convenience only and shall not be deemed to limit,
construe, affect or alter the meaning of such Articles and Sections.

29.2 Binding Effect. Subject to all other provisions of this Lease, each of the
covenants, conditions and provisions of this Lease shall extend to and shall, as
the case may require, bind or inure to the benefit not only of Landlord and of
Tenant, but also of their respective heirs, personal representatives, successors
or assigns, provided this clause shall not permit any assignment by Tenant
contrary to the provisions of Article 14 of this Lease.

29.3 No Air Rights. 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 by reason of any repairs,
improvements, maintenance or cleaning in or about the Project, the same shall be
without liability to Landlord and without any reduction or diminution of
Tenant’s obligations under this Lease.

29.4 Modification of Lease. Should any current or prospective mortgagee or
ground lessor for the Building or Project require a modification of this Lease,
which modification will not cause an increased cost or expense to Tenant or in
any other way materially and adversely change the rights and obligations of
Tenant hereunder, then and in such event, Tenant agrees that this Lease may be
so modified and agrees to execute whatever documents are reasonably required
therefor and to deliver the same to Landlord within ten (10) business days
following a request therefor. At the request of Landlord or any mortgagee or
ground lessor, Tenant agrees to execute a short form of Lease and deliver the
same to Landlord within ten (10) business days following the request therefor.

 

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29.5 Transfer of Landlord’s Interest. Tenant acknowledges that Landlord has the
right to transfer all or any portion of its interest in the Project or Building
and in this Lease, and Tenant agrees that in the event of any such transfer,
Landlord shall automatically be released from all liability under this Lease not
accrued as of the date of the transfer and Tenant agrees to look solely to such
transferee for the performance of Landlord’s obligations hereunder after the
date of transfer and such transferee shall be deemed to have fully assumed and
be liable for all obligations of this Lease to be performed by Landlord,
including the return of any Security Deposit, and Tenant shall attorn to such
transferee. Tenant further acknowledges that Landlord may assign its interest in
this Lease to a mortgage lender as additional security and agrees that such an
assignment shall not release Landlord from its obligations hereunder and that
Tenant shall continue to look to Landlord for the performance of its obligations
hereunder.

29.6 Prohibition Against Recording. Except as provided in Section 29.4 of this
Lease, neither this Lease, nor any memorandum, affidavit or other writing with
respect thereto, shall be recorded by Tenant or by anyone acting through, under
or on behalf of Tenant.

29.7 Landlord’s Title. Landlord’s title is and always shall be paramount to the
title of Tenant. Nothing herein contained shall empower Tenant to do any act
which can, shall or may encumber the title of Landlord.

29.8 Relationship of Parties. Nothing contained in this Lease shall be deemed or
construed by the parties hereto or by any third party to create the relationship
of principal and agent, partnership, joint venturer or any association between
Landlord and Tenant.

29.9 Application of Payments. Landlord shall have the right to apply payments
received from Tenant pursuant to this Lease, regardless of Tenant’s designation
of such payments, to satisfy any obligations of Tenant hereunder, in such order
and amounts as Landlord, in its sole discretion, may elect, it nevertheless
being acknowledged that Tenant may be free to make any such payments “under
protest.”

29.10 Time of Essence. Time is of the essence with respect to the performance of
every provision of this Lease in which time of performance is a factor.

29.11 Partial Invalidity. If any term, provision or condition contained in this
Lease shall, to any extent, be invalid or unenforceable, the remainder of this
Lease, or the application of such term, provision or condition to persons or
circumstances other than those with respect to which it is invalid or
unenforceable, shall not be affected thereby, and each and every other term,
provision and condition of this Lease shall be valid and enforceable to the
fullest extent possible permitted by law.

29.12 No Warranty. In executing and delivering this Lease, Tenant has not relied
on any representations, including, but not limited to, any representation as to
the amount of any item comprising Additional Rent or the amount of the
Additional Rent in the aggregate or that Landlord is furnishing the same
services to other tenants, at all, on the same level or on the same basis, or
any warranty or any statement of Landlord which is not set forth herein or in
one or more of the exhibits attached hereto.

 

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29.13 Landlord Exculpation. The liability of Landlord or the Landlord Parties to
Tenant for any default 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 shall be
limited solely and exclusively to an amount which is equal to the net interest
of Landlord (following payment of any outstanding liens and/or mortgages,
whether attributable to sales or insurance proceeds or otherwise) in the Project
(including any insurance or rental proceeds which Landlord receives). 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 29.13 shall inure
to the benefit of Landlord’s and the Landlord Parties’ present and 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), or trustee or beneficiary (if Landlord or any partner 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 consequential damages (except in relation to any holdover by
Tenant) injury or damage to, or interference with, Tenant’s business, including
but not limited to, 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.

29.14 Entire Agreement. It is understood and acknowledged that there are no oral
agreements between the parties hereto affecting this Lease and this Lease
constitutes the parties’ entire agreement with respect to the leasing of the
Premises and supersedes and cancels any and all previous negotiations,
arrangements, brochures, agreements and understandings, if any, between the
parties hereto or displayed by Landlord to Tenant with respect to the subject
matter thereof, and none thereof shall be used to interpret or construe this
Lease. None of the terms, covenants, conditions or provisions of this Lease can
be modified, deleted or added to except in writing signed by the parties hereto.

29.15 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 interests of the Building or
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 Building or Project.

29.16 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, a “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 caused by a Force Majeure.

 

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29.17 Waiver of Redemption by Tenant. Tenant hereby waives, for Tenant and for
all those claiming under Tenant, any and all rights 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.

29.18 Notices. All notices, demands, statements, designations, approvals or
other communications (collectively, “Notices”) given or required to be given by
either party to the other hereunder or by law shall be in writing, shall be
(A) sent by United States certified or registered mail, postage prepaid, return
receipt requested (“Mail”), (B) transmitted by telecopy, if such telecopy is
promptly followed by a Notice sent by Mail, (C) delivered by a nationally
recognized overnight courier, or (D) delivered personally. Any Notice shall be
sent, transmitted, or delivered, as the case may be, to Tenant at the
appropriate address set forth in Section 10 of the Summary, or to such other
place as Tenant may from time to time designate in a Notice to Landlord, or to
Landlord at the addresses set forth below, or to such other places as Landlord
may from time to time designate in a Notice to Tenant. Any Notice will be deemed
given (i) three (3) days after the date it is posted if sent by Mail, (ii) the
date the telecopy is transmitted, (iii) the date the overnight courier delivery
is made, or (iv) the date personal delivery is made or attempted to be made. If
Tenant is notified of the identity and address of Landlord’s mortgagee or ground
or underlying lessor, Tenant shall give to such mortgagee or ground or
underlying lessor written notice of any default by Landlord under the terms of
this Lease by registered or certified mail, and such mortgagee or ground or
underlying lessor shall be given a reasonable opportunity to cure such default
prior to Tenant’s exercising any remedy available to Tenant. As of the date of
this Lease, any Notices to Landlord must be sent, transmitted, or delivered, as
the case may be, to the following addresses:

Kilroy Realty Corporation

12200 West Olympic Boulevard

Suite 200

Los Angeles, California 90064

Attention: Legal Department

with copies to:

Kilroy Realty Corporation

3611 Valley Centre Drive, Suite 550

San Diego, California 92130

Attention: Mr. Brian Galligan

and

Allen Matkins Leck Gamble Mallory & Natsis LLP

1901 Avenue of the Stars, Suite 1800

Los Angeles, California 90067

Attention: Anton N. Natsis, Esq.

29.19 Joint and Several. If there is more than one Tenant, the obligations
imposed upon Tenant under this Lease shall be joint and several.

 

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29.20 Authority. Tenant hereby represents and warrants that Tenant is a duly
formed and existing entity qualified to do business in California and that
Tenant has full right and authority to execute and deliver this Lease and that
each person signing on behalf of Tenant is authorized to do so. In such event,
Tenant shall, within ten (10) days after execution of this Lease, deliver to
Landlord satisfactory evidence of such authority and, if a corporation, upon
demand by Landlord, also deliver to Landlord satisfactory evidence of (i) good
standing in Tenant’s state of incorporation and (ii) qualification to do
business in California.

29.21 Attorneys’ Fees. In the event that either Landlord or Tenant should bring
suit for the possession of the Premises, for the recovery of any sum due under
this Lease, or because of the breach of any provision of this Lease or for any
other relief against the other, then all costs and expenses, including
reasonable attorneys’ fees, incurred by the prevailing party therein shall be
paid by the other party, which obligation on the part of the other party shall
be deemed to have accrued on the date of the commencement of such action and
shall be enforceable whether or not the action is prosecuted to judgment.

29.22 Governing Law; WAIVER OF TRIAL BY JURY. This Lease shall be construed and
enforced in accordance with the laws of the State of California. IN ANY ACTION
OR PROCEEDING ARISING HEREFROM, LANDLORD AND TENANT HEREBY CONSENT TO (I) THE
JURISDICTION OF ANY COMPETENT COURT WITHIN THE STATE OF CALIFORNIA, (II) SERVICE
OF PROCESS BY ANY MEANS AUTHORIZED BY CALIFORNIA LAW, AND (III) IN THE INTEREST
OF SAVING TIME AND EXPENSE, TRIAL WITHOUT A JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER OR THEIR
SUCCESSORS IN RESPECT OF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS
LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT’S USE OR OCCUPANCY OF THE
PREMISES, AND/OR ANY CLAIM FOR INJURY OR DAMAGE, OR ANY EMERGENCY OR STATUTORY
REMEDY.

29.23 Submission of Lease. Submission of this instrument for examination or
signature by Tenant does not constitute a reservation of, option for or option
to lease, and it is not effective as a lease or otherwise until execution and
delivery by both Landlord and Tenant.

29.24 Brokers. Landlord and Tenant hereby warrant to each other that they have
had no dealings with any real estate broker or agent in connection with the
negotiation of this Lease, excepting only the real estate brokers or agents
specified in Section 12 of the Summary (the “Brokers”), and that they know of no
other real estate broker or agent who is entitled to a commission in connection
with this Lease. Landlord shall pay the Brokers pursuant to the terms of
separate commission agreements. Each party agrees to indemnify and defend the
other party against and hold the other party harmless from any and all claims,
demands, losses, liabilities, lawsuits, judgments, costs and expenses (including
without limitation reasonable attorneys’ fees) with respect to any leasing
commission or equivalent compensation alleged to be owing on account of any
dealings with any real estate broker or agent, other than the Brokers, occurring
by, through, or under the indemnifying party.

29.25 Independent Covenants. This Lease shall be construed as though the
covenants herein between Landlord and Tenant are independent and not dependent
and Tenant hereby

 

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expressly waives the benefit of any statute to the contrary and agrees that if
Landlord fails to perform its obligations set forth herein, except as otherwise
set forth in this Lease, Tenant shall not be entitled to make any repairs or
perform any acts hereunder at Landlord’s expense or to any setoff of the Rent or
other amounts owing hereunder against Landlord.

29.26 Project or Building Name and Signage. Landlord shall have the right at any
time to change the name of the Project or Building and to install, affix and
maintain any and all signs on the exterior and on the interior of the Project or
Building as Landlord may, in Landlord’s sole discretion, desire. Tenant shall
not use the name of the Project or Building or use pictures or illustrations of
the Project or Building in advertising or other publicity or for any purpose
other than as the address of the business to be conducted by Tenant in the
Premises, without the prior written consent of Landlord.

29.27 Counterparts. This Lease may be executed in counterparts with the same
effect as if both parties hereto had executed the same document. Both
counterparts shall be construed together and shall constitute a single lease.

29.28 Confidentiality. Landlord and Tenant acknowledges that the content of this
Lease and any related documents are confidential information. Except as required
by law, court order, or pursuant to good corporate practice, Landlord and Tenant
shall keep such confidential information strictly confidential and shall not
disclose such confidential information to any person or entity other than
Tenant’s or Landlord’s employees, their financial, legal, and space planning
consultants and/or prospective purchasers of their respective businesses.

29.29 Transportation Management. Tenant shall fully comply with all present or
future programs intended to manage parking, transportation or traffic in and
around the Building, so long as Tenant’s parking rights are not materially,
adversely, affected, and in connection therewith, Tenant shall take responsible
action for the transportation planning and management of all employees located
at the Premises by working directly with Landlord, any governmental
transportation management organization or any other transportation-related
committees or entities.

29.30 Building Renovations. It is specifically understood and agreed that
Landlord has made no representation or warranty to Tenant and has no obligation
and has made no promises to alter, remodel, improve, renovate, repair or
decorate the Premises, Building, or any part thereof and that no representations
respecting the condition of the Premises or the Building have been made by
Landlord to Tenant except as specifically set forth herein or in the Tenant Work
Letter. However, Tenant hereby acknowledges that Landlord is currently
renovating or may during the Lease Term renovate, improve, alter, or modify
(collectively, the “Renovations”) the Project, the Building and/or the Premises
including without limitation the parking structure, common areas, systems and
equipment, roof, and structural portions of the same, and in connection with any
Renovations, Landlord may, among other things, temporarily erect scaffolding or
other necessary structures in the Building, limit or eliminate access to
portions of the Project, including portions of the common areas, or perform work
in the Building, which work may create noise, dust or leave debris in the
Building. Tenant hereby agrees that such Renovations and Landlord’s actions in
connection with such Renovations shall in no way constitute a constructive
eviction of Tenant nor entitle Tenant to any abatement of Rent. Landlord shall
have no responsibility or for any

 

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reason be liable to Tenant for any direct or indirect injury to or interference
with Tenant’s business arising from the Renovations, nor shall Tenant be
entitled to any compensation or damages from Landlord for loss of the use of the
whole or any part of the Premises or of Tenant’s personal property or
improvements resulting from the Renovations or Landlord’s actions in connection
with such Renovations, or for any inconvenience or annoyance occasioned by such
Renovations or Landlord’s actions. Landlord shall perform such Renovations in
compliance with the terms of this Lease, including, without limitation, the
terms of Section 1.1.3, and shall use commercially reasonable efforts to have
all such work performed on a continuous basis, and once started, to be completed
reasonably expeditiously, with such work being organized and conducted in a
manner which will minimize any interference to Tenant’s business operations in
the Premises.

29.31 No Violation. Tenant hereby warrants and represents that neither its
execution of nor performance under this Lease shall cause Tenant to be in
violation of any agreement, instrument, contract, law, rule or regulation by
which Tenant is bound, and Tenant shall protect, defend, indemnify and hold
Landlord harmless against any claims, demands, losses, damages, liabilities,
costs and expenses, including, without limitation, reasonable attorneys’ fees
and costs, arising from Tenant’s breach of this warranty and representation.

29.32 Communications and Computer Lines. Tenant may install, maintain, replace,
remove or use any communications or computer wires and cables (collectively, the
“Lines”) at the Project in or serving the Premises, provided that (i) Tenant
shall obtain Landlord’s prior written consent (not to be unreasonably withheld,
conditioned, or delayed), use an experienced and qualified contractor approved
in writing by Landlord, and comply with all of the other provisions of
Articles 7 and 8 of this Lease, (ii) an acceptable number of spare Lines and
space for additional Lines shall be maintained for existing and future occupants
of the Project, as determined in Landlord’s reasonable opinion, (iii) the Lines
therefor (including riser cables) shall be (x) appropriately insulated to
prevent excessive electromagnetic fields or radiation, (y) surrounded by a
protective conduit reasonably acceptable to Landlord, and (z) identified in
accordance with the “Identification Requirements,” as that term is set forth
hereinbelow, (iv) any new or existing Lines servicing the Premises shall comply
with all applicable governmental laws and regulations, (v) as a condition to
permitting the installation of new Lines, Tenant shall remove existing Lines
located in or serving the Premises and repair any damage in connection with such
removal, and (vi) Tenant shall pay all costs in connection therewith. All Lines
shall be clearly marked with adhesive plastic labels (or plastic tags attached
to such Lines with wire) to show Tenant’s name, suite number, telephone number
and the name of the person to contact in the case of an emergency (A) every four
feet (4’) outside the Premises (specifically including, but not limited to, the
electrical room risers and other Common Areas), and (B) at the Lines’
termination point(s) (collectively, the “Identification Requirements”). Landlord
reserves the right to require that Tenant remove any Lines located in or serving
the Premises which are installed in violation of these provisions, or which are
at any time (1) are in violation of any Applicable Laws, (2) are inconsistent
with then-existing industry standards (such as the standards promulgated by the
National Fire Protection Association (e.g., such organization’s “2002 National
Electrical Code”)), or (3) otherwise represent a dangerous or potentially
dangerous condition.

 

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29.33 Hazardous Substances.

29.33.1 Definitions. For purposes of this Lease, the following definitions shall
apply: “Hazardous Material(s)” shall mean any solid, liquid or gaseous substance
or material that is described or characterized as a toxic or hazardous
substance, waste, material, pollutant, contaminant or infectious waste, or any
matter that in certain specified quantities would be injurious to the public
health or welfare, or words of similar import, in any of the “Environmental
Laws,” as that term is defined below, or any other words which are intended to
define, list or classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, toxicity or reproductive
toxicity and includes, without limitation, asbestos, petroleum (including crude
oil or any fraction thereof, natural gas, natural gas liquids, liquefied natural
gas, or synthetic gas usable for fuel, or any mixture thereof), petroleum
products, polychlorinated biphenyls, urea formaldehyde, radon gas, nuclear or
radioactive matter, medical waste, soot, vapors, fumes, acids, alkalis,
chemicals, microbial matters (such as molds, fungi or other bacterial matters),
biological agents and chemicals which may cause adverse health effects,
including but not limited to, cancers and /or toxicity. “Environmental Laws”
shall mean any and all federal, state, local or quasi-governmental laws (whether
under common law, statute or otherwise), ordinances, decrees, codes, rulings,
awards, rules, regulations or guidance or policy documents now or hereafter
enacted or promulgated and as amended from time to time, in any way relating to
(i) the protection of the environment, the health and safety of persons
(including employees), property or the public welfare from actual or potential
release, discharge, escape or emission (whether past or present) of any
Hazardous Materials or (ii) the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of any Hazardous Materials.

29.33.2 Compliance with Environmental Laws. Landlord covenants that during the
Lease Term, Landlord shall comply with all Environmental Laws in accordance
with, and as required by, the TCCs of Article 24 of this Lease. Tenant
represents and warrants that, except as herein set forth, it will not use, store
or dispose of any Hazardous Materials in or on the Premises. However,
notwithstanding the preceding sentence, Landlord agrees that Tenant may use,
store and properly dispose of (i) commonly available household cleaners and
chemicals to maintain the Premises and Tenant’s routine office operations (such
as printer toner and copier toner), and the items permitted by Section 29.33.3
below (hereinafter the “Permitted Chemicals”). Landlord and Tenant acknowledge
that any or all of the Permitted Chemicals described in this paragraph may
constitute Hazardous Materials. However, Tenant may use, store and dispose of
same, provided that in doing so, Tenant fully complies with all Environmental
Laws.

29.33.3 Tenant Hazardous Materials. Tenant will (i) obtain and maintain in full
force and effect all Environmental Permits (as defined below) that may be
required from time to time under any Environmental Laws applicable to Tenant or
the Premises, and (ii) be and remain in compliance with all terms and conditions
of all such Environmental Permits and with all other Environmental Laws.
“Environmental Permits” means, collectively, any and all permits, consents,
licenses, approvals and registrations of any nature at any time required
pursuant to, or in order to comply with any Environmental Law. On or before the
Lease Commencement Date and on each anniversary of the Commencement Date
thereafter, as well as at any other time following Tenant’s receipt of a
reasonable request from Landlord, Tenant agrees to deliver to Landlord a list of
all Hazardous Materials anticipated to be used by Tenant in

 

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the Premises and the quantities thereof. Upon the expiration or earlier
termination of this Lease, Tenant agrees to promptly remove from the Premises,
the Building and the Project, at its sole cost and expense, any and all
Hazardous Materials, including any equipment or systems containing Hazardous
Materials, which are installed, brought upon, stored, used, generated or
released upon, in, under or about the Premises, the Building, and/or the Project
or any portion thereof by Tenant and/or any Tenant Parties (such obligation to
survive the expiration or sooner termination of this Lease). Nothing in this
Lease shall impose any liability on Tenant for any Hazardous Materials in
existence on the Premises, Building or Project prior to the Lease Commencement
Date or brought onto the Premises, Building or Project after the Lease
Commencement Date by any third parties not under Tenant’s control.

29.33.4 Landlord’s Right of Environmental Audit. Landlord may, upon reasonable
notice to Tenant, be granted access to and enter the Premises no more than once
annually to perform or cause to have performed an environmental inspection, site
assessment or audit. Such environmental inspector or auditor may be chosen by
Landlord, in its sole discretion, and be performed at Landlord’s sole expense.
To the extent that the report prepared upon such inspection, assessment or
audit, indicates the presence of Hazardous Materials brought onto the Premises
by or on behalf of Tenant in violation of Environmental Laws, or provides
recommendations or suggestions to prohibit the release, discharge, escape or
emission of any Hazardous Materials brought onto the Premises by or on behalf of
Tenant at, upon, under or within the Premises, or to comply with any
Environmental Laws, Tenant shall promptly, at Tenant’s sole expense, comply with
such recommendations or suggestions, including, but not limited to performing
such additional investigative or subsurface investigations or remediation(s) as
recommended by such inspector or auditor. Notwithstanding the above, if at any
time, Landlord has actual notice or reasonable cause to believe that Tenant has
violated, or permitted any violations of any Environmental Law, then Landlord
will be entitled to perform its environmental inspection, assessment or audit at
any time, notwithstanding the above mentioned annual limitation, and Tenant must
reimburse Landlord for the cost or fees incurred for such as Additional Rent if
a violation is discovered.

29.33.5 Indemnifications. Landlord agrees to indemnify, defend, protect and hold
harmless the Tenant Parties from and against any liability, obligation, damage
or costs, including without limitation, attorneys’ fees and costs, resulting
directly or indirectly from any use, presence, removal or disposal of any
Hazardous Materials to the extent such liability, obligation, damage or costs
was a result of actions caused or knowingly permitted by Landlord or a Landlord
Party. Tenant agrees to indemnify, defend, protect and hold harmless the
Landlord Parties from and against any liability, obligation, damage or costs,
including without limitation, attorneys’ fees and costs, resulting directly or
indirectly from any use, presence, removal or disposal of any Hazardous
Materials or breach of any provision of this section, to the extent such
liability, obligation, damage or costs was a result of actions caused or
permitted by Tenant or a Tenant Party. Nothing in this Lease shall impose any
liability on Tenant for any Hazardous Materials in existence on the Premises,
Building, or Project, prior to the Lease Commencement Date or brought onto the
Premises, Building, or Project after the Lease Commencement Date by any third
parties not under Tenant’s control.

 

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29.34 Effectiveness of this Office Lease. Notwithstanding any provision to the
contrary contained in this Lease, this Lease shall not be effective until
Landlord and FICO, Inc., a California corporation, successor-in-interest to Fair
Isaac Corporation, a Delaware corporation, enter into an amended and restated
lease pursuant to which Fair Isaac agrees to no longer lease the Premises.

29.35 Fitness Center. Landlord may, from time to time in its sole discretion,
maintain an exercise facility at the Project (the “Fitness Center”) for use, on
a non-exclusive basis, by the occupants of the Project and any other individuals
approved by Landlord. So long as Tenant is not in default under this Lease
(beyond the applicable notice and cure periods), Tenant and its employees (in
such capacity, the “Fitness Center Users”) are hereby permitted to use the
Fitness Center, provided that such Fitness Center Users execute Landlord’s
standard waiver of liability and release form, and otherwise satisfy the
conditions identified hereinbelow. Landlord shall have the right at any time to
require that a new standard waiver of liability and release form be signed by
any of the Fitness Center Users as a condition of any further use of the Fitness
Center by any of the Fitness Center Users. The use of the Fitness Center shall
be subject to the reasonable rules and regulations (including rules regarding
hours of use) established from time to time by Landlord for the Fitness Center.
Landlord and Tenant acknowledge that the use of the Fitness Center by the
Fitness Center Users shall be at their own risk and that the terms and
provisions of Article 10 of this Lease shall apply to the use of the Fitness
Center by the Fitness Center Users or the use of any equipment located therein
by the Fitness Center Users (whether or not authorized), whether or not such
persons have properly executed Landlord’s standard form waiver of liability and
release form. Tenant shall be solely responsible for the proper use of the
Fitness Center and the equipment located therein by the Fitness Center Users.
Tenant agrees and acknowledges that Landlord shall provide no supervision of use
of the Fitness Center made by the Fitness Center Users. In the event that Tenant
becomes aware of any defect, damage to or other problem with the equipment in
the Fitness Center, or any other unsafe condition in the Fitness Center, Tenant
shall immediately notify Landlord in writing of such condition. Tenant
acknowledges that the provisions of this Section 29.35 shall not be deemed to be
a representation by Landlord that Landlord shall continuously maintain the
Fitness Center (or any other fitness facility) throughout the Lease Term, and
Landlord shall have the right, in Landlord’s sole and absolute discretion, to
expand, contract, eliminate or otherwise modify the Fitness Center. No
expansion, contraction, elimination or modification of the Fitness Center, and
no termination of Tenant’s or the Fitness Center Users’ rights to the Fitness
Center shall entitle Tenant to an abatement or reduction in Rent, constitute a
constructive eviction, or result in an event of default by Landlord under this
Lease. Any and all fees, costs and expenses relating to operating, managing,
owning and maintaining the Fitness Center shall be included as part of Operating
Expenses.

[Signatures follow on next page]

 

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IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be executed
the day and date first above written.

 

“LANDLORD”:

KILROY REALTY, L.P.,

a Delaware limited partnership

BY:  

Kilroy Realty Corporation,

a Maryland corporation, general partner

  By:  

/s/ Jeffrey C. Hawken

  Name:  

Jeffrey C. Hawken

  Its:  

Executive Vice President
Chief Operating Officer

  By:  

/s/ John T. Fucci

  Name:  

John T. Fucci

  Its:  

Sr. Vice President
Asset Management

“TENANT”:

VOLCANO CORPORATION,

a Delaware corporation

By:  

/s/ Scott Huennekens

Name:  

Scott Huennekens

Its:  

CEO

By:  

/s/ John Dahldorf

Name:  

John Dahldorf

Its:  

CFO

 

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EXHIBIT A

KILROY CENTRE DEL MAR

OUTLINE OF PREMISES

[ATTACHED]

 

EXHIBIT A

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EXHIBIT B

KILROY CENTRE DEL MAR

WORK LETTER

This Work Letter shall set forth the terms and conditions relating to the
construction of the Premises. This Work Letter is essentially organized
chronologically and addresses the issues of the construction of the Premises, in
sequence, as such issues will arise during the actual construction of the
Premises. All references in this Work Letter to Articles or Sections of “this
Lease” shall mean the relevant portions of Articles 1 through 29 of the Office
Lease to which this Work Letter is attached as Exhibit B, and all references in
this Work Letter to Sections of “this Work Letter” shall mean the relevant
portions of Sections 1 through 5 of this Work Letter.

SECTION 1

DELIVERY OF THE PREMISES AND BASE BUILDING

1.1 Base Building as Constructed by Landlord. Upon the full execution and
delivery of this Lease by Landlord and Tenant, Landlord shall deliver the
Premises and “Base Building,” as that term is defined in Section 8.2 of the
Lease, to Tenant, and Tenant shall accept the Premises and Base Building from
Landlord in their presently existing, “as-is” condition.

1.2 Landlord Work. Notwithstanding the foregoing, Landlord hereby agrees, at
Landlord’s sole cost and expense, to deliver the Additional Premises to Tenant
with (i) all of the IT racks and personal property belonging to Fair Isaac to be
removed from that portion of the Premises located on the first (1st) floor of
the Building which used to be part of the Fair Isaac IT room, and (ii) any
damage occasioned thereby repaired to a Building standard condition as
reasonably determined by Landlord.

SECTION 2

IMPROVEMENTS

2.1 Improvement Allowance. Tenant shall be entitled to a one-time improvement
allowance (the “Improvement Allowance”) in the amount of Fifteen and 00/100
Dollars ($15.00) per rentable square foot of the Premises located on the first
(1st) floor of the Building, and Three and 00/100 Dollars ($3.00) per rentable
square foot of the Premises located on the second (2nd) floor of the Building,
for the costs relating to the initial design and construction of the
improvements, which are permanently affixed to the Premises (the
“Improvements”). In no event shall Landlord be obligated to make disbursements
pursuant to this Work Letter in the event that Tenant fails to timely pay any
portion of the “Over-Allowance Amount,” as that term is defined, and within the
time frames more particularly set forth, in Section 4.2.1, nor shall Landlord be
obligated to pay a total amount which exceeds the Improvement Allowance.
Notwithstanding the foregoing or any contrary provision of this Lease, all
Improvements shall be deemed Landlord’s property under the terms of this Lease.
Any unused portion of the Improvement Allowance remaining as of December 31,
2010, shall remain with Landlord and Tenant shall have no further right thereto.

 

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2.2 Disbursement of the Improvement Allowance.

2.2.1 Improvement Allowance Items. Except as otherwise set forth in this Work
Letter, the Improvement Allowance shall be disbursed by Landlord (each of which
disbursements shall be made pursuant to Landlord’s disbursement process,
including, without limitation, Landlord’s receipt of invoices for all costs and
fees described herein) only for the following items and costs (collectively the
“Improvement Allowance Items”):

2.2.1.1 Payment of (i) the fees of the “Architect” and the “Engineers,” as those
terms are defined in Section 3.1 of this Work Letter, (ii) third-party fees
actually and reasonably incurred (the reasonableness of which shall be
determined in light of the nature of particular Construction Drawings being
submitted by Landlord to its consultants for review) by Landlord in connection
with the preparation and review of the “Construction Drawings,” as that term is
defined in Section 3.1 of this Work Letter, and (iii) the actual cost of
installing telephone and data cabling, and any signage permitted by the Lease,
which amounts identified in the foregoing items (i), (ii) and (iii) shall,
notwithstanding any provision to the contrary contained in this Work Letter, not
exceed an aggregate amount equal to $3.50 per rentable square foot of the
Premises;

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

2.2.1.3 The cost of construction of the Improvements, including, without
limitation, testing and inspection costs and costs of utilities. In no event
shall Tenant or its contractor be charged for parking, access, freight elevator
use or similar items in connection with the Improvements;

2.2.1.4 The cost of any changes in the Base Building when such changes are
required by the Construction Drawings, such cost to include all direct
architectural and/or engineering fees and expenses incurred in connection
therewith;

2.2.1.5 The cost of any changes to the Construction Drawings or Improvements
required by all applicable building codes (the “Code”);

2.2.1.6 The cost of the “Coordination Fee,” as that term is defined in
Section 4.2.2.1 of this Work Letter; and

2.2.1.7 Sales and use taxes

2.2.2 Disbursement of Improvement Allowance. During the construction of the
Improvements, Landlord shall make monthly disbursements of the Improvement
Allowance for Improvement Allowance Items and shall authorize the release of
monies as follows.

2.2.2.1 Monthly Disbursements. On or before the day of each calendar month, as
reasonably determined by Landlord, during the construction of the Improvements,

 

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Tenant shall deliver to Landlord: (i) a request for payment of the “Contractor,”
as that term is defined in Section 4.1.1 of this Work Letter, approved by
Tenant, in a form to be provided by Landlord, showing the schedule, by trade, of
percentage of completion of the Improvements in the Premises, detailing the
portion of the work completed and the portion not completed; (ii) invoices from
all of “Tenant’s Agents,” as that term is defined in Section 4.1.2 of this Work
Letter, for labor rendered and materials delivered to the Premises;
(iii) executed mechanic’s lien releases from all of Tenant’s Agents which shall
comply with the appropriate provisions, as reasonably determined by Landlord, of
California Civil Code Section 3262(d); and (iv) all other information reasonably
requested by Landlord. Tenant’s request for payment shall constitute, to
Tenant’s then-existing actual knowledge, Tenant’s acceptance and approval of the
work furnished and/or the materials supplied as set forth in Tenant’s payment
request; provided, however, the parties acknowledge that in no event shall the
Contractor be a third-party beneficiary with regard to any such acceptance and
approval under this sentence. Thereafter, Landlord shall deliver a check to
Tenant made jointly payable to Contractor and Tenant (or solely to Tenant to the
extent Tenant has previously paid in full to Contractor the amounts
corresponding to such request for payment) in payment of the lesser of:
(A) “Landlord’s Ratio,” as that term is set forth below, of the amounts so
requested by Tenant, as set forth in this Section 2.2.2.1, above, less a ten
percent (10%) retention (the aggregate amount of such retentions to be known as
the “Final Retention”), and (B) the balance of any remaining available portion
of the Improvement Allowance (not including the Final Retention), provided that
Landlord does not dispute any request for payment based on non-compliance of any
work with the “Approved Working Drawings,” as that term is defined in
Section 3.4 below, or due to any substandard work, or for any other reasonably
substantiated reason, it being hereby acknowledged that Tenant shall pay
“Tenant’s Ratio,” as that term is set forth below, of the corresponding amounts
so requested by Tenant, less a similar ten (10%) retention. Landlord’s payment
of such amounts shall not be deemed Landlord’s approval or acceptance of the
work furnished or materials supplied as set forth in Tenant’s payment request.

2.2.2.2 Final Retention. Subject to the provisions of this Work Letter, a check
for the Final Retention payable jointly to Tenant and Contractor shall be
delivered by Landlord to Tenant following the substantial completion of
construction of the Improvements, provided that (i) Tenant delivers to Landlord
properly executed mechanic’s lien releases in compliance with both California
Civil Code Section 3262(d)(2) and either Section 3262(d)(3) or
Section 3262(d)(4) from all of Tenant’s Agents, (ii) Landlord has determined
that no substandard work exists which adversely affects the mechanical,
electrical, plumbing, heating, ventilating and air conditioning, life-safety or
other systems of the Building, the curtain wall of the Building, the structure
or exterior appearance of the Building, (iii) Architect delivers to Landlord a
certificate, in a form reasonably acceptable to Landlord, certifying that the
construction of the Improvements in the Premises has been substantially
completed, (iv) Tenant records a valid Notice of Completion in accordance with
the requirements of Section 4.3 of this Work Letter, and (v) a certificate of
occupancy (or its equivalent) has been issued for the Premises. Upon substantial
completion of the Improvements, and in conjunction with the Final Retention and
disbursement thereof, as set forth in this Section 2.2.2.2, above, Tenant shall
perform a final costs analysis to determine the actual “Final Costs” of the
Improvements so constructed. Thereafter, Tenant shall submit such analysis to
Landlord for Landlord’s review. In the event it is determined that there remains
any unpaid portion of the Improvement Allowance (in addition

 

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to the Final Retention), Tenant shall submit to Landlord an invoice for such
amount (which excess shall in no event exceed the amount paid by Tenant as an
Over-Allowance Amount or supplement thereto) and Landlord shall promptly pay
such unpaid portion of the Improvement Allowance to Tenant (but only to the
extent otherwise reimbursable hereunder for Improvement Allowance Items).

2.2.2.3 Other Terms. Landlord shall only be obligated to make disbursements from
the Improvement Allowance to the extent costs are incurred by Tenant for
Improvement Allowance Items. All Improvement Allowance Items for which the
Improvement Allowance has been made available shall be deemed Landlord’s
property under the terms of this Lease.

2.3 Building Standards. Landlord has established or may establish specifications
for certain Building standard components to be used in the construction of the
Improvements in the Premises. The quality of Improvements shall be equal to or
of greater quality than the quality of such Building standards, provided that
Landlord may, at Landlord’s option, require the Improvements to comply with
certain Building standards. Landlord may make changes to said specifications for
Building standards from time to time. Removal requirements regarding the
Improvements are addressed in Article 8 of this Lease.

SECTION 3

CONSTRUCTION DRAWINGS

3.1 Selection of Architect/Construction Drawings. Subject to Landlord’s
approval, which approval shall not be unreasonably withheld, delayed, or
conditioned, Tenant shall select and retain an architect/space planner (the
“Architect”) to prepare the “Construction Drawings,” as that term is defined in
this Section 3.1; provided, however, Landlord hereby pre-approves Carrier
Johnson as Architect. Tenant shall retain the engineering consultants reasonably
approved by Landlord (the “Engineers”) to prepare all plans and engineering
working drawings relating to the structural, mechanical, electrical, plumbing
and HVAC work in the Premises. The plans and drawings to be prepared by
Architect and the Engineers hereunder shall be known collectively as the
“Construction Drawings.” All Construction Drawings shall comply with the drawing
format and specifications determined by Landlord, and shall be subject to
Landlord’s approval; provided, however, Landlord shall only disapprove any such
Construction Drawing to the extent of a “Design Problem,” as that term is
defined below. Tenant and Architect shall verify, in the field, the dimensions
and conditions as shown on the relevant portions of the Base Building plans, and
Tenant and Architect shall be solely responsible for the same, and Landlord
shall have no responsibility in connection therewith. Landlord’s review of the
Construction Drawings as set forth in this Section 3, shall be for its sole
purpose and shall not imply Landlord’s review of the same, or obligate Landlord
to review the same, for quality, design, Code compliance or other like matters.
Accordingly, notwithstanding that any Construction Drawings are reviewed by
Landlord or its space planner, architect, engineers and consultants, and
notwithstanding any advice or assistance which may be rendered to Tenant by
Landlord or Landlord’s space planner, architect, engineers, and consultants,
Landlord shall have no liability whatsoever in connection therewith and shall
not be responsible for any omissions or errors contained in the Construction
Drawings, and Tenant’s waiver and indemnity set forth in this

 

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Lease shall specifically apply to the Construction Drawings. A “Design Problem”
is defined as, and shall be deemed to exist if there could be (i) an affect on
the exterior appearance of the Building, (ii) a material, adverse affect on the
Base Building portions of the Premises Buildings (including without limitation
the Building Structure), (iii) a material adverse affect on the Building Systems
or the operation and maintenance thereof, or (iv) any failure to comply with
Applicable Laws.

3.2 Final Space Plan. Tenant shall supply Landlord with four (4) hard copies
signed by Tenant of its final space plan for the Premises before any
architectural working drawings or engineering drawings have been commenced, and
concurrently with Tenant’s delivery of such hard copies, Tenant shall send to
Landlord via electronic mail one (1) .pdf electronic copy of such final space
plan. The final space plan (the “Final Space Plan”) shall include a layout and
designation of all offices, rooms and other partitioning, their intended use,
and equipment to be contained therein. Landlord may request clarification or
more specific drawings for special use items not included in the Final Space
Plan. Landlord shall advise Tenant within five (5) business days after
Landlord’s receipt of the Final Space Plan for the Premises if the same is
unsatisfactory or incomplete in any respect; provided, however, Landlord shall
only disapprove such Final Space Plans to the extent of a Design Problem.
Landlord shall set forth with reasonable specificity in what respect the Final
Space Plan is unsatisfactory or incomplete (based upon a commercially reasonable
standard). If Tenant is so advised, Tenant shall promptly cause the Final Space
Plan to be revised to correct any deficiencies or other matters Landlord may
reasonably require, and immediately thereafter Architect shall promptly
re-submit the Final Space Plan to Landlord for its approval. Such procedure
shall continue (except that the time frame to consent to any revisions shall be
shortened to three (3) business days) until the Final Space Plan is approved by
Landlord.

3.3 Final Working Drawings. After the Final Space Plan has been approved by
Landlord, Tenant shall supply the Engineers with a complete listing of standard
and non-standard equipment and specifications, including, without limitation,
B.T.U. calculations, electrical requirements and special electrical receptacle
requirements for the Premises, to enable the Engineers and the Architect to
complete the “Final Working Drawings” (as that term is defined below) in the
manner as set forth below. Upon the approval of the Final Space Plan by Landlord
and Tenant, Tenant shall promptly cause the Architect and the Engineers to
complete the architectural and engineering drawings for the Premises, and
Architect shall compile a fully coordinated set of architectural, structural,
mechanical, electrical and plumbing working drawings in a form which is complete
to allow subcontractors to bid on the work and to obtain all applicable permits
(collectively, the “Final Working Drawings”) and shall submit the same to
Landlord for Landlord’s approval. Tenant shall supply Landlord with four
(4) hard copies signed by Tenant of the Final Working Drawings, and concurrently
with Tenant’s delivery of such hard copies, Tenant shall send to Landlord via
electronic mail one (1) .pdf electronic copy of such Final Working Drawings.
Landlord shall, within five (5) business days after Landlord’s receipt of all of
the Final Working Drawings, either (i) approve the Final Working Drawings,
(ii) approve the Final Working Drawings subject to specified conditions, which
conditions must be stated in a reasonably clear and complete manner, and shall
only be conditions reasonably intended to address a potential Design Problem, or
(iii) disapprove and return the Construction Drawings to Tenant with requested
revisions; provided, however, Landlord shall only disapprove

 

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such Final Working Drawings to the extent of a Design Problem. If Landlord
disapproves the Final Working Drawings, Tenant may resubmit the Final Working
Drawings to Landlord at any time, and Landlord shall approve or disapprove the
resubmitted Final Working Drawings, based upon the criteria set forth in this
Section 3.3, within three (3) business days after Landlord receives such
resubmitted Final Working Drawings. Such procedure shall be repeated until the
Final Working Drawings are approved.

3.4 Approved Working Drawings. The Final Working Drawings shall be approved by
Landlord (the “Approved Working Drawings”) prior to the commencement of
construction of the Premises by Tenant. After approval by Landlord of the Final
Working Drawings, Tenant may submit the same to the appropriate municipal
authorities for all applicable building permits. Tenant hereby agrees that
neither Landlord nor Landlord’s consultants shall be responsible for obtaining
any building permit or certificate of occupancy for the Premises and that
obtaining the same shall be Tenant’s responsibility; provided, however, that
Landlord shall cooperate with Tenant in executing permit applications and
performing other ministerial acts reasonably necessary to enable Tenant to
obtain any such permit or certificate of occupancy. No changes, modifications or
alterations in the Approved Working Drawings may be made without the prior
written consent of Landlord, which consent may not be unreasonably withheld.

3.5 Electronic Approvals. Notwithstanding any provision to the contrary
contained in the Lease or this Work Letter, Landlord may, in Landlord’s sole and
absolute discretion, transmit or otherwise deliver any of the approvals required
under this Work Letter via electronic mail to Tenant’s representative identified
in Section 5.1 of this Work Letter, or by any of the other means identified in
Section 29.18 of this Lease.

SECTION 4

CONSTRUCTION OF THE IMPROVEMENTS

4.1 Tenant’s Selection of Contractors.

4.1.1 The Contractor. A general contractor shall be retained by Tenant to
construct the Improvements. Such general contractor (“Contractor”) shall be
selected by Tenant from a list of general contractors mutually and reasonably
agreed upon by Landlord, and Tenant shall deliver to Landlord notice of its
selection of the Contractor upon such selection.

4.1.2 Tenant’s Agents. All subcontractors, laborers, materialmen, and suppliers
used by Tenant (such subcontractors, laborers, materialmen, and suppliers, and
the Contractor to be known collectively as “Tenant’s Agents”) must be approved
in writing by Landlord, which approval shall not be unreasonably withheld or
delayed and which approval shall, if withheld or conditioned with regard to any
such Tenant’s Agents, be made within two (2) business days following Landlord’s
receipt of the corresponding request for such approval from Tenant. If Landlord
does not approve any of Tenant’s proposed subcontractors, laborers, materialmen
or suppliers, Tenant shall submit other proposed subcontractors, laborers,
materialmen or suppliers for Landlord’s written approval.

 

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4.2 Construction of Improvements by Tenant’s Agents.

4.2.1 Construction Contract; Cost Budget. Tenant shall engage the Contractor
pursuant to a contract form (collectively, the “Contract”) approved by Landlord,
which approval shall not be unreasonably withheld. Prior to the commencement of
the construction of the Improvements, and after Tenant has accepted all bids for
the Improvements, Tenant shall provide Landlord with a detailed breakdown, by
trade, of the final costs to be incurred or which have been incurred, as set
forth more particularly in Sections 2.2.1.1 through 2.2.1.8, above, in
connection with the design and construction of the Improvements to be performed
by or at the direction of Tenant or the Contractor, which costs form a basis for
the amount of the Contract (the “Final Costs”). Prior to the commencement of
construction of the Improvements, Tenant shall determine the amount (the
“Over-Allowance Amount”) by which the Final Costs exceed the Improvement
Allowance. Tenant will also determine the ratio of the Over-Allowance Amount to
the Improvement Allowance to the total cost of the Improvements (e.g., if the
Over-Allowance Amount were to be Sixty Thousand and 00/100 Dollars ($60,000.00)
and the Improvement Allowance were to be Two Hundred Forty Thousand and 00/100
Dollars ($240,000.00), such that the total cost of the Improvements was Three
Hundred Thousand Dollars ($300,000), the ratio would be twenty percent
(20%) Over-Allowance Amount and eighty percent (80%) Improvement Allowance). The
ratio applicable to the Over-Allowance Amount may be referred to herein as
“Tenant’s Ratio”, and the ratio applicable to the Improvement Allowance may be
referred to herein as “Landlord’s Ratio.” Tenant’s determination of the
Over-Allowance Amount, Tenant’s Ratio and Landlord’s Ratio are subject to
Landlord’s reasonable approval. The Over-Allowance Amount shall be disbursed by
Landlord in accordance with Section 2.2 above. In the event that, after the
Final Costs have been delivered by Tenant to Landlord, the costs relating to the
design and construction of the Improvements shall change, any additional costs
necessary to such design and construction in excess of the Final Costs, shall be
paid by Tenant to Landlord immediately as an addition to the Over-Allowance
Amount or at Landlord’s option, Tenant shall make payments for such additional
costs out of its own funds, but Tenant shall continue to provide Landlord with
the documents described in Sections 2.2.2.1(i), (ii), (iii) and (iv) of this
Work Letter, above, for Landlord’s approval, prior to Tenant paying such costs.

4.2.2 Tenant’s Agents.

4.2.2.1 Landlord’s General Conditions for Tenant’s Agents and Improvement Work.
Tenant’s and Tenant’s Agent’s construction of the Improvements shall comply with
the following: (i) the Improvements shall be constructed in strict accordance
with the Approved Working Drawings; (ii) Tenant’s Agents shall submit schedules
of all work relating to the Improvements to Contractor and Contractor shall,
within five (5) business days of receipt thereof, inform Tenant’s Agents of any
changes which are necessary thereto, and Tenant’s Agents shall adhere to such
corrected schedule; and (iii) Tenant shall abide by all reasonable rules made by
Landlord’s Building manager with respect to the use of freight, loading dock and
service elevators, storage of materials, and any other matter in connection with
this Work Letter, including, without limitation, the construction of the
Improvements. Tenant shall pay a logistical coordination fee (the “Coordination
Fee”) to Landlord in an amount equal to the product of (i) four percent (4%),
and (ii) the sum of the Improvement Allowance, the Over Allowance Amount, as
such amount may be increased hereunder, and any other amounts expended by Tenant
in connection with the design and construction of the Improvements, which
Coordination Fee shall be for services relating to the coordination of the
construction of the Improvements.

 

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4.2.2.2 Indemnity. Tenant’s indemnity of Landlord as set forth in this Lease
shall also apply with respect to any and all costs, losses, damages, injuries
and liabilities related in any way to any negligence or willful misconduct of
Tenant or Tenant’s Agents, or anyone directly or indirectly employed by any of
them, or in connection with Tenant’s non-payment of any amount arising out of
the Improvements and/or Tenant’s disapproval of all or any portion of any
request for payment.

4.2.2.3 Requirements of Tenant’s Agents. Each of Tenant’s Agents shall guarantee
to Tenant and for the benefit of Landlord that the portion of the Improvements
for which it is responsible shall be free from any defects in workmanship and
materials for a period of not less than one (1) year from the date of completion
thereof. Each of Tenant’s Agents shall be responsible for the replacement or
repair, without additional charge, of all work done or furnished in accordance
with its contract that shall become defective within one (1) year after the
completion of the work performed by such contractor or subcontractors. The
correction of such work shall include, without additional charge, all additional
expenses and damages incurred in connection with such removal or replacement of
all or any part of the Improvements, and/or the Building and/or common areas
that may be damaged or disturbed thereby. All such warranties or guarantees as
to materials or workmanship of or with respect to the Improvements shall be
contained in the Contract or subcontract and shall be written such that such
guarantees or warranties shall inure to the benefit of both Landlord and Tenant,
as their respective interests may appear, and can be directly enforced by
either. Tenant covenants to give to Landlord any assignment or other assurances
which may be necessary to effect such right of direct enforcement.

4.2.2.4 Insurance Requirements.

4.2.2.4.1 General Coverages. All of Tenant’s Agents shall carry worker’s
compensation insurance covering all of their respective employees, and shall
also carry public liability insurance, including property damage, all with
limits, in form and with companies as are reasonably required by Landlord.

4.2.2.4.2 Special Coverages. Tenant shall cause its Contractor to carry
“Builder’s All Risk” insurance in an amount approved by Landlord covering the
construction of the Improvements, and such other insurance as Landlord may
reasonably require, it being understood and agreed that the Improvements shall
be insured by Tenant pursuant to this Lease immediately upon completion thereof.
Such insurance shall be in amounts and shall include such extended coverage
endorsements as may be reasonably required by Landlord, and in form and with
companies as are required to be carried by Tenant as set forth in this Lease;
provided, however, Tenant’s Contractor shall carry excess liability and
Completed Operation Coverage insurance, each in amounts not less than $5,000,000
per incident, $5,000,000 in aggregate.

4.2.2.4.3 General Terms. Certificates for all insurance carried pursuant to this
Section 4.2.2.4 shall be delivered to Landlord before the commencement of

 

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construction of the Improvements and before the Contractor’s equipment is moved
onto the site. All such policies of insurance must contain a provision that the
company writing said policy will give Landlord thirty (30) days prior written
notice (ten (10) days for nonpayment of premiums) of any cancellation or lapse
of the effective date or any reduction in the amounts of such insurance. In the
event that the Improvements are damaged by any cause during the course of the
construction thereof, Tenant shall cause the same to be repaired at no cost to
Landlord or by application of the Improvement Allowance. Tenant’s Agents shall
maintain all of the foregoing insurance coverage in force until the Improvements
are fully completed and accepted by Landlord, except for any Products and
Completed Operation Coverage insurance required by Landlord, which is to be
maintained for ten (10) years following completion of the work and acceptance by
Landlord and Tenant. All policies carried under this Section 4.2.2.4 shall name
Landlord and Tenant, as additional insureds, as their interests may appear, as
well as Contractor and Tenant’s Agents. All insurance, except Workers’
Compensation, maintained by Tenant’s Agents shall preclude subrogation claims by
the insurer against anyone insured thereunder. Such insurance shall provide that
it is primary insurance as respects the owner and that any other insurance
maintained by owner is excess and noncontributing with the insurance required
hereunder. The requirements for the foregoing insurance shall not derogate from
the provisions for indemnification of Landlord by Tenant under Section 4.2.2.2
of this Work Letter.

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

4.2.4 Inspection by Landlord. Landlord shall have the right to inspect the
Improvements at all times, provided however, that Landlord’s failure to inspect
the Improvements shall in no event constitute a waiver of any of Landlord’s
rights hereunder nor shall Landlord’s inspection of the Improvements constitute
Landlord’s approval of the same. Should Landlord disapprove any portion of the
Improvements, Landlord shall notify Tenant in writing of such disapproval and
shall specify the items disapproved. Any defects or deviations in, and/or
disapproval by Landlord of, the Improvements shall be rectified by Tenant at no
expense to Landlord.

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

4.3 Notice of Completion; Copy of Record Set of Plans. Within twenty (20) days
after completion of construction of the Improvements, Tenant shall cause a
Notice of Completion

 

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to be recorded in the office of the Recorder of the county in which the Building
is located in accordance with Section 3093 of the Civil Code of the State of
California or any successor statute, and shall furnish a copy thereof to
Landlord upon such recordation. If Tenant fails to do so, Landlord may execute
and file the same as Tenant’s agent for such purpose, at Tenant’s sole cost and
expense. At the conclusion of construction, (i) Tenant shall cause the Architect
and Contractor (A) to update the Approved Working Drawings as necessary to
reflect all changes made to the Approved Working Drawings during the course of
construction, (B) to certify to the best of their knowledge that the
“record-set” of as-built drawings are true and correct, which certification
shall survive the expiration or termination of this Lease, and (C) to deliver to
Landlord two (2) sets of copies of such record set of drawings within one
hundred twenty (120) days following issuance of a certificate of occupancy for
the Premises, and (ii) Tenant shall deliver to Landlord a copy of all
warranties, guaranties, and operating manuals and information relating to the
improvements, equipment, and systems in the Premises.

SECTION 5

MISCELLANEOUS

5.1 Tenant’s Representative. Tenant has designated Mr. John Dahldorf as its sole
representative with respect to the matters set forth in this Work Letter (whose
e-mail address for the purposes of this Work Letter is
jdahldorf@volcanocorp.commailto:), who, shall have full authority and
responsibility to act on behalf of the Tenant as required in this Work Letter.

5.2 Landlord’s Representative. Landlord has designated Mr. Richard Mount as its
sole representative with respect to the matters set forth in this Work Letter
(whose e-mail address for the purposes of this Work Letter is
rmount@kilroyrealty.com), who, until further notice to Tenant, shall have full
authority and responsibility to act on behalf of the Landlord as required in
this Work Letter.

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

5.4 Tenant’s Lease Default. Notwithstanding any provision to the contrary
contained in the Lease or this Work Letter, if any economic or material,
non-economic default (beyond any applicable notice and cure periods) by Tenant
under the Lease or this Work Letter (including, without limitation, any failure
by Tenant to fund any portion of the Over-Allowance Amount) occurs at any time
on or before the substantial completion of the Improvements, then (i) in
addition to all other rights and remedies granted to Landlord pursuant to the
Lease, Landlord shall have the right to withhold payment of all or any portion
of the Improvement Allowance, and (ii) all other obligations of Landlord under
the terms of the Lease and this Work Letter shall be forgiven until such time as
such default is cured pursuant to the terms of the Lease.

5.5 Landlord Delays. In the event that there are any actual delays in the
completion of the Improvements caused by Landlord or the Landlord Parties, then
after (A) written notice to Landlord setting forth with reasonable detail the
existence and nature of such delay, and (B) the

 

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expiration of a two (2) business day cure period following Landlord’s receipt of
such notice without the remedy thereof, any such delay shall thereafter be
deemed a “Landlord Delay.” In addition, if Landlord fails to approve any matter
during the time periods expressly specified in this Work Letter Agreement
therefore, such failure shall immediately (following the outside date for
Landlord’s response) constitute a Landlord Delay (to the extent actual delays in
the completion of the Improvements ultimately result therefrom). In addition, to
the extent that Landlord does not deliver possession of the Additional Premises
to Tenant in accordance with all of the terms and conditions of the Lease and
this Work Letter on or before May 1, 2010, then for each day occurring
thereafter until the actual date of delivery of possession, the same shall
constitute a Landlord Delay (to the extent actual delays in the completion of
the Improvements ultimately result therefrom). Any actual Landlord Delays under
this Section 5.5 may result in an extension of the Lease Commencement Date as to
the Additional Premises, as defined in Section 3.2 of the Summary (and a
corresponding extension of all rental phase-in and abatement set forth in
Sections 3.2 and 3.3 of the Lease), by extending the Lease Commencement Date as
to the Additional Premises of August 1, 2010, by an equivalent number of days as
such Landlord Delays (and a corresponding extension of all rental phase-in and
abatement set forth in Sections 3.2 and 3.3 of the Lease). Notwithstanding
anything contained in this Section 5.5, in no event shall Tenant be obligated to
employ extraordinary efforts or incur extraordinary expenses (e.g., overtime),
to overcome any Landlord Delays.

 

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EXHIBIT C

KILROY CENTRE DEL MAR

NOTICE OF LEASE TERM DATES

 

To:  

 

 

 

 

 

 

 

 

  Re: Office Lease dated                     , 200     between
                                        , a
                                         (“Landlord”), and
                                        , a
                                         (“Tenant”) concerning Suite         on
floor(s)         of the office building located at
                                        ,
                                        , California.

Gentlemen:

In accordance with the Office Lease (the “Lease”), we wish to advise you and/or
confirm as follows:

 

  1. The Lease Term shall commence on or has commenced on
                            for a term of                             ending on
                            .

 

  2. Rent commenced to accrue on                             , in the amount of
                            .

 

  3. If the Lease Commencement Date is other than the first day of the month,
the first billing will contain a pro rata adjustment. Each billing thereafter,
with the exception of the final billing, shall be for the full amount of the
monthly installment as provided for in the Lease.

 

  4. Your rent checks should be made payable to                             at
                            .

 

  5. The exact number of rentable/usable square feet within the Premises is
                    square feet.

 

EXHIBIT C

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  6. Tenant’s Share as adjusted based upon the exact number of usable square
feet within the Premises is             %.

 

“Landlord”:  

 

  ,

a

 

 

   

By:

 

 

      Its:  

 

 

Agreed to and Accepted

as of                     , 200    .

 

“Tenant”:

 

a

 

 

 

By:

 

 

    Its:  

 

 

EXHIBIT C

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EXHIBIT D

KILROY CENTRE DEL MAR

RULES AND REGULATIONS

Tenant shall faithfully observe and comply with the following Rules and
Regulations. Landlord shall not be responsible to Tenant for the nonperformance
of any of said Rules and Regulations by or otherwise with respect to the acts or
omissions of any other tenants or occupants of the Project. In the event of any
conflict between the Rules and Regulations and the other provisions of this
Lease, the latter shall control.

1. Tenant shall not alter any lock or install any new or additional locks or
bolts on any doors or windows of the Premises without obtaining Landlord’s prior
written consent. Tenant shall bear the cost of any lock changes or repairs
required by Tenant. Two keys will be furnished by Landlord for the Premises, and
any additional keys required by Tenant must be obtained from Landlord at a
reasonable cost to be established by Landlord. Upon the termination of this
Lease, Tenant shall restore to Landlord all keys of stores, offices, and toilet
rooms, either furnished to, or otherwise procured by, Tenant and in the event of
the loss of keys so furnished, Tenant shall pay to Landlord the cost of
replacing same or of changing the lock or locks opened by such lost key if
Landlord shall deem it necessary to make such changes.

2. All doors opening to public corridors shall be kept closed at all times
except for normal ingress and egress to the Premises.

3. Landlord reserves the right to close and keep locked all entrance and exit
doors of the Building during such hours as are customary for comparable
buildings in the San Diego, California area. Tenant, its employees and agents
must be sure that the doors to the Building are securely closed and locked when
leaving the Premises if it is after the normal hours of business for the
Building. Any tenant, its employees, agents or any other persons entering or
leaving the Building at any time when it is so locked, or any time when it is
considered to be after normal business hours for the Building, may be required
to sign the Building register. Access to the Building may be refused unless the
person seeking access has proper identification or has a previously arranged
pass for access to the Building. Landlord will furnish passes to persons for
whom Tenant requests same in writing. Tenant shall be responsible for all
persons for whom Tenant requests passes and shall be liable to Landlord for all
acts of such persons. The Landlord and his agents shall in no case be liable for
damages for any error with regard to the admission to or exclusion from the
Building of any person. In case of invasion, mob, riot, public excitement, or
other commotion, Landlord reserves the right to prevent access to the Building
or the Project during the continuance thereof by any means it deems appropriate
for the safety and protection of life and property.

4. No furniture, freight or equipment of any kind shall be brought into the
Building without prior notice to Landlord. All moving activity into or out of
the Building shall be scheduled with Landlord and done only at such time and in
such manner as Landlord reasonably designates. Landlord shall have the right to
prescribe the weight, size and position of all safes

 

EXHIBIT D

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and other heavy property brought into the Building and also the times and manner
of moving the same in and out of the Building. Safes and other heavy objects
shall, if considered necessary by Landlord, stand on supports of such thickness
as is necessary to properly distribute the weight. Landlord will not be
responsible for loss of or damage to any such safe or property in any case. Any
damage to any part of the Building, its contents, occupants or visitors by
moving or maintaining any such safe or other property shall be the sole
responsibility and expense of Tenant.

5. No furniture, packages, supplies, equipment or merchandise will be received
in the Building or carried up or down in the elevators, except between normal
office hours, in such specific elevator and by such personnel as shall be
reasonably designated by Landlord.

6. The requirements of Tenant will be attended to only upon application at the
management office for the Project or at such office location designated by
Landlord. Employees of Landlord shall not perform any work or do anything
outside their regular duties unless under special instructions from Landlord.

7. No sign, advertisement, notice or handbill shall be exhibited, distributed,
painted or affixed by Tenant on any part of the Premises or the Building without
the prior written consent of the Landlord. Tenant shall not disturb, solicit,
peddle, or canvass any occupant of the Project and shall cooperate with Landlord
and its agents of Landlord to prevent same.

8. The toilet rooms, urinals, wash bowls and other apparatus shall not be used
for any purpose other than that for which they were constructed, and no foreign
substance of any kind whatsoever shall be thrown therein. The expense of any
breakage, stoppage or damage resulting from the violation of this rule shall be
borne by the tenant who, or whose servants, employees, agents, visitors or
licensees shall have caused same.

9. Tenant shall not overload the floor of the Premises, nor (except to the
extent of hanging pictures and the like) mark, drive nails or screws, or drill
into the partitions, woodwork or drywall or in any way deface the Premises or
any part thereof without Landlord’s prior written consent. Tenant shall not
purchase spring water, ice, towel, linen, maintenance or other like services
from any person or persons not approved by Landlord.

10. Except for vending machines intended for the sole use of Tenant’s employees
and invitees, no vending machine or machines other than fractional horsepower
office machines shall be installed, maintained or operated upon the Premises
without the written consent of Landlord.

11. Tenant shall not use or keep in or on the Premises, the Building, or the
Project any kerosene, gasoline, explosive material, corrosive material, material
capable of emitting toxic fumes, or other inflammable or combustible fluid
chemical, substitute or material. Tenant shall provide material safety data
sheets for any Hazardous Material used or kept on the Premises.

12. Tenant shall not without the prior written consent of Landlord use any
method of heating or air conditioning other than that supplied by Landlord.

 

EXHIBIT D

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13. Tenant shall not use, keep or permit to be used or kept, any foul or noxious
gas or substance in or on the Premises, or permit or allow the Premises to be
occupied or used in a manner offensive or objectionable to Landlord or other
occupants of the Project by reason of noise, odors, or vibrations, or interfere
with other tenants or those having business therein, whether by the use of any
musical instrument, radio, phonograph, or in any other way. Tenant shall not
throw anything out of doors, windows or skylights or down passageways.

14. Tenant shall not bring into or keep within the Project, the Building or the
Premises any firearms, animals, birds, aquariums, or, except in areas designated
by Landlord, bicycles or other vehicles.

15. No cooking shall be done or permitted on the Premises, nor shall the
Premises be used for the storage of merchandise, for lodging or for any
improper, objectionable or immoral purposes. Notwithstanding the foregoing,
Underwriters’ laboratory-approved equipment and microwave ovens may be used in
the Premises for heating food and brewing coffee, tea, hot chocolate and similar
beverages for employees and visitors, provided that such use is in accordance
with all applicable federal, state, county and city laws, codes, ordinances,
rules and regulations.

16. The Premises shall not be used for manufacturing or for the storage of
merchandise except as such storage may be incidental to the use of the Premises
provided for in the Summary. Tenant shall not occupy or permit any portion of
the Premises to be occupied as an office for a messenger-type operation or
dispatch office, public stenographer or typist, or for the manufacture or sale
of liquor, narcotics, or tobacco in any form, or as a medical office, or as a
barber or manicure shop, or as an employment bureau without the express prior
written consent of Landlord. Tenant shall not engage or pay any employees on the
Premises except those actually working for such tenant on the Premises nor
advertise for laborers giving an address at the Premises.

17. Landlord reserves the right to exclude or expel from the Project any person
who, in the judgment of Landlord, is intoxicated or under the influence of
liquor or drugs, or who shall in any manner do any act in violation of any of
these Rules and Regulations.

18. Tenant, its employees and agents shall not loiter in or on the entrances,
corridors, sidewalks, lobbies, courts, halls, stairways, elevators, vestibules
or any Common Areas for the purpose of smoking tobacco products or for any other
purpose, nor in any way obstruct such areas, and shall use them only as a means
of ingress and egress for the Premises. Furthermore, in no event shall Tenant,
its employees or agents smoke tobacco products within the Building or within
seventy-five feet (75') of any entrance into the Building or into any other
Project building.

19. Tenant shall not waste electricity, water or air conditioning and agrees to
cooperate fully with Landlord to ensure the most effective operation of the
Building’s heating and air conditioning system, and shall refrain from
attempting to adjust any controls. Tenant shall participate in recycling
programs undertaken by Landlord.

20. Tenant shall store all its trash and garbage within the interior of the
Premises. No material shall be placed in the trash boxes or receptacles if such
material is of such nature that it

 

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may not be disposed of in the ordinary and customary manner of removing and
disposing of trash and garbage in San Diego, California without violation of any
law or ordinance governing such disposal. All trash, garbage and refuse disposal
shall be made only through entry-ways and elevators provided for such purposes
at such times as Landlord shall designate. If the Premises is or becomes
infested with vermin as a result of the use or any misuse or neglect of the
Premises by Tenant, its agents, servants, employees, contractors, visitors or
licensees, Tenant shall forthwith, at Tenant’s expense, cause the Premises to be
exterminated from time to time to the satisfaction of Landlord and shall employ
such licensed exterminators as shall be approved in writing in advance by
Landlord.

21. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental agency.

22. Any persons employed by Tenant to do janitorial work shall be subject to the
prior written approval of Landlord, and while in the Building and outside of the
Premises, shall be subject to and under the control and direction of the
Building manager (but not as an agent or servant of such manager or of
Landlord), and Tenant shall be responsible for all acts of such persons.

23. No awnings or other projection shall be attached to the outside walls of the
Building without the prior written consent of Landlord, and no curtains, blinds,
shades or screens shall be attached to or hung in, or used in connection with,
any window or door of the Premises other than Landlord standard drapes. All
electrical ceiling fixtures hung in the Premises or spaces along the perimeter
of the Building must be fluorescent and/or of a quality, type, design and a warm
white bulb color approved in advance in writing by Landlord. Neither the
interior nor exterior of any windows shall be coated or otherwise sunscreened
without the prior written consent of Landlord. Tenant shall be responsible for
any damage to the window film on the exterior windows of the Premises and shall
promptly repair any such damage at Tenant’s sole cost and expense. Tenant shall
keep its window coverings closed during any period of the day when the sun is
shining directly on the windows of the Premises. Prior to leaving the Premises
for the day, Tenant shall draw or lower window coverings and extinguish all
lights. Tenant shall abide by Landlord’s regulations concerning the opening and
closing of window coverings which are attached to the windows in the Premises,
if any, which have a view of any interior portion of the Building or Building
Common Areas.

24. The sashes, sash doors, skylights, windows, and doors that reflect or admit
light and air into the halls, passageways or other public places in the Building
shall not be covered or obstructed by Tenant, nor shall any bottles, parcels or
other articles be placed on the windowsills.

25. Tenant must comply with requests by the Landlord concerning the informing of
their employees of items of importance to the Landlord.

26. Tenant must comply with applicable “NO-SMOKING” ordinances and all related,
similar or successor ordinances, rules, regulations or codes. If Tenant is
required under the ordinance to adopt a written smoking policy, a copy of said
policy shall be on file in the office of the Building. In addition, no smoking
of any substance shall be permitted within the Project except in specifically
designated outdoor areas. Within such designated outdoor areas,

 

EXHIBIT D

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all remnants of consumed cigarettes and related paraphernalia shall be deposited
in ash trays and/or waste receptacles. No cigarettes shall be extinguished
and/or left on the ground or any other surface of the Project. Cigarettes shall
be extinguished only in ashtrays. Furthermore, in no event shall Tenant, its
employees or agents smoke tobacco products or other substances within any
interior areas of the Project or within seventy-five feet (75') of any entrance
into the Building or into any other Project building.

27. Tenant hereby acknowledges that Landlord shall have no obligation to provide
guard service or other security measures for the benefit of the Premises, the
Building or the Project. Tenant hereby assumes all responsibility for the
protection of Tenant and its agents, employees, contractors, invitees and
guests, and the property thereof, from acts of third parties, including keeping
doors locked and other means of entry to the Premises closed, whether or not
Landlord, at its option, elects to provide security protection for the Project
or any portion thereof. Tenant further assumes the risk that any safety and
security devices, services and programs which Landlord elects, in its sole
discretion, to provide may not be effective, or may malfunction or be
circumvented by an unauthorized third party, and Tenant shall, in addition to
its other insurance obligations under this Lease, obtain its own insurance
coverage to the extent Tenant desires protection against losses related to such
occurrences. Tenant shall cooperate in any reasonable safety or security program
developed by Landlord or required by law.

28. All non-standard office equipment of any electrical or mechanical nature
shall be placed by Tenant in the Premises in settings that minimize, absorb or
prevent any vibration, noise and annoyance.

29. Tenant shall not use in any space or in the public halls of the Building,
any hand trucks except those equipped with rubber tires and rubber side guards.

30. No auction, liquidation, fire sale, going-out-of-business or bankruptcy sale
shall be conducted in the Premises without the prior written consent of
Landlord.

31. No tenant shall use or permit the use of any portion of the Premises for
living quarters, sleeping apartments or lodging rooms.

32. Tenant shall install and maintain, at Tenant’s sole cost and expense, an
adequate, visibly marked and properly operational fire extinguisher next to any
duplicating or photocopying machines or similar heat producing equipment, which
may or may not contain combustible material, in the Premises.

33. Fitness Center Rules. Tenant shall cause its employees (whether users or
prospective users of the Fitness Center) to comply with the following Fitness
Center rules and regulations (subject to change from time to time as Landlord
may solely determine):

 

  A. Use of the Fitness Center is open to the employees of Tenant employed at
the Project. No guests will be permitted to use the Fitness Center without the
prior written consent of Landlord or Landlord’s representative.

 

EXHIBIT D

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  B. The Fitness Center shall be open during the hours of 6:00 A.M. to 8:00 P.M.
Monday through Friday and from 8:00 A.M. to 1:00 P.M. on Saturday. The Fitness
Center shall be closed on Sunday and on Holidays. Fitness Center Users are not
allowed to be in the Fitness Center other than the hours set forth herein.

 

  C. All Fitness Center Users must execute Landlord’s standard waiver of
liability and Release form prior to use of the Fitness Center and agree to all
terms and conditions outlined therein.

 

  D. All Fitness Center Users shall use the Fitness Center and exercise at their
own risk.

 

  E. Those Fitness Center Users with medical conditions such as high blood
pressure, heart disease, respiratory problems or any other conditions or
situations which may make any form of exercise dangerous to one’s health, such
as pregnancy or medication(s), must consult with and receive consent from their
physician prior to joining the Fitness Center and/or prior to using the Fitness
Center.

 

  F. If any Fitness Center User feels faint, dizzy, sick, experiences pain
and/or has difficulty breathing while using the Fitness Center, such Fitness
Center User shall immediately stop what he/she is doing and cool down. In the
event such Fitness Center User does not feel better, he/she shall call 911 for
assistance.

 

  G. Fitness Center Users are required to read the equipment instructions
provided before operating the exercise/weight equipment. In the event a Fitness
Center User notices any faulty or malfunctioning equipment, hazardous
conditions, situations, safety concerns, or feels uncomfortable while using the
Fitness Center for any reason, such Fitness Center User shall report the
situation to Landlord’s property manager or building staff personnel
immediately.

 

  H. Keycards to the Fitness Center shall not be shared and shall only be used
by the individual to whom such keycard was issued. Failure to abide by this rule
shall result in immediate termination of such Fitness Center User’s right to use
the Fitness Center.

 

  J. Fitness Center Users agree to keep the Fitness Center in a neat and orderly
fashion, including, but not limited to, wiping off all equipment after having
completed use.

 

  K. Fitness Center Users shall not store anything in the Fitness Center, except
to the extent temporarily stored in the locker rooms during the Fitness Center
Users’ use of the Fitness Center.

 

  L. Dress Code. Appropriate exercise attire is required to be worn in the
Fitness Center at all times. Gym clothes are not to be worn outside of the
Fitness Center area.

 

EXHIBIT D

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  M. All personal articles are to be removed upon completion of the Fitness
Center User’s workout.

 

  N. Landlord expressly prohibits any children inside of the Fitness Center at
any time.

 

  O. No alcoholic beverages or glassware are allowed in or around the Fitness
Center.

 

  P. Fitness Center Users agree that any infringement of any of the above rules
or subsequent rules or regulations which Landlord may from time to time
establish shall serve as grounds for cancellation of such Fitness Center User’s
membership at Landlord’s sole option.

Landlord reserves the right at any time to change or rescind any one or more of
these Rules and Regulations, or to make such other and further reasonable Rules
and Regulations as in Landlord’s judgment may from time to time be necessary for
the management, safety, care and cleanliness of the Premises, Building, the
Common Areas and the Project, and for the preservation of good order therein, as
well as for the convenience of other occupants and tenants therein. Landlord may
waive any one or more of these Rules and Regulations for the benefit of any
particular tenants, but no such waiver by Landlord shall be construed as a
waiver of such Rules and Regulations in favor of any other tenant, nor prevent
Landlord from thereafter enforcing any such Rules or Regulations against any or
all tenants of the Project. Tenant shall be deemed to have read these Rules and
Regulations and to have agreed to abide by them as a condition of its occupancy
of the Premises.

 

EXHIBIT D

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EXHIBIT E

KILROY CENTRE DEL MAR

FORM OF TENANT’S ESTOPPEL CERTIFICATE

The undersigned as Tenant under that certain Office Lease (the “Lease”) made and
entered into as of                     , 200     by and between
                                        as Landlord, and the undersigned as
Tenant, for Premises on the             floor(s) of the office building located
at                                         ,
                                        , California
                                        , certifies as follows:

1. Attached hereto as Exhibit A is a true and correct copy of the Lease and all
amendments and modifications thereto. The documents contained in Exhibit A
represent the entire agreement between the parties as to the Premises.

2. The undersigned currently occupies the Premises described in the Lease, the
Lease Term commenced on                             , and the Lease Term expires
on                             , and the undersigned has no option to terminate
or cancel the Lease or to purchase all or any part of the Premises, the Building
and/or the Project.

3. Base Rent became payable on                                         .

4. The Lease is in full force and effect and has not been modified, supplemented
or amended in any way except as provided in Exhibit A.

5. Tenant has not transferred, assigned, or sublet any portion of the Premises
nor entered into any license or concession agreements with respect thereto
except as follows:

6. Tenant shall not modify the documents contained in Exhibit A without the
prior written consent of Landlord’s mortgagee.

7. All monthly installments of Base Rent, all Additional Rent and all monthly
installments of estimated Additional Rent have been paid when due through
                    . The current monthly installment of Base Rent is
$            .

8. To the undersigned’s knowledge, all conditions of the Lease to be performed
by Landlord necessary to the enforceability of the Lease have been satisfied and
Landlord is not in default thereunder. In addition, the undersigned has not
delivered any notice to Landlord regarding a default by Landlord thereunder.

 

EXHIBIT E

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9. No rental has been paid more than thirty (30) days in advance and no security
has been deposited with Landlord except as provided in the Lease.

10. To the undersigned’s knowledge, as of the date hereof, there are no existing
defenses or offsets, or, to the undersigned’s knowledge, claims or any basis for
a claim, that the undersigned has against Landlord.

11. If Tenant is a corporation or partnership, each individual executing this
Estoppel Certificate on behalf of Tenant hereby represents and warrants that
Tenant is a duly formed and existing entity qualified to do business in
California and that Tenant has full right and authority to execute and deliver
this Estoppel Certificate and that each person signing on behalf of Tenant is
authorized to do so.

12. There are no actions pending against the undersigned under the bankruptcy or
similar laws of the United States or any state.

13. To the undersigned’s knowledge, other than in compliance with all applicable
laws and incidental to the ordinary course of the use of the Premises, the
undersigned has not used or stored any hazardous substances in the Premises.

14. To the undersigned’s knowledge, all tenant improvement work to be performed
by Landlord under the Lease has been completed in accordance with the Lease and
has been accepted by the undersigned and all reimbursements and allowances due
to the undersigned under the Lease in connection with any tenant improvement
work have been paid in full.

The undersigned acknowledges that this Estoppel Certificate may be delivered to
Landlord or to a prospective mortgagee or prospective purchaser, and
acknowledges that said prospective mortgagee or prospective purchaser will be
relying upon the statements contained herein in making the loan or acquiring the
property of which the Premises are a part and that receipt by it of this
certificate is a condition of making such loan or acquiring such property.

Executed at                              on the      day of             ,
200    .

 

“Tenant”:  

 

  , a  

 

  By:  

 

    Its:  

 

  By:  

 

    Its:  

 

 

 

EXHIBIT E

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EXHIBIT F

KILROY CENTRE DEL MAR

RECORDING REQUESTED BY

AND WHEN RECORDED RETURN TO:

ALLEN MATKINS LECK GAMBLE

& MALLORY LLP

1901 Avenue of the Stars, 18th Floor

Los Angeles, California 90067

Attention: Anton N. Natsis, Esq.

 

 

RECOGNITION OF COVENANTS,

CONDITIONS, AND RESTRICTIONS

This Recognition of Covenants, Conditions, and Restrictions (this “Agreement”)
is entered into as of the      day of                     , 200    , by and
between                              (“Landlord”), and
                            (“Tenant”), with reference to the following facts:

A. Landlord and Tenant entered into that certain Office Lease Agreement dated
    , 200     (the “Lease”). Pursuant to the Lease, Landlord leased to Tenant
and Tenant leased from Landlord space (the “Premises”) located in an office
building on certain real property described in Exhibit A attached hereto and
incorporated herein by this reference (the “Property”).

B. The Premises are located in an office building located on real property which
is part of an area owned by Landlord containing approximately             (    )
acres of real property located in the City of                     , California
(the “Project”), as more particularly described in Exhibit B attached hereto and
incorporated herein by this reference.

C. Landlord, as declarant, has previously recorded, or proposes to record
concurrently with the recordation of this Agreement, a Declaration of Covenants,
Conditions, and Restrictions (the “Declaration”), dated                     ,
200    , in connection with the Project.

D. Tenant is agreeing to recognize and be bound by the terms of the Declaration,
and the parties hereto desire to set forth their agreements concerning the same.

NOW, THEREFORE, in consideration of (a) the foregoing recitals and the mutual
agreements hereinafter set forth, and (b) for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows,

1. Tenant’s Recognition of Declaration. Notwithstanding that the Lease has been
executed prior to the recordation of the Declaration, Tenant agrees to recognize
and by bound by all of the terms and conditions of the Declaration.

 

EXHIBIT F

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2. Miscellaneous.

2.1 This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, estates, personal representatives,
successors, and assigns.

2.2 This Agreement is made in, and shall be governed, enforced and construed
under the laws of, the State of California.

2.3 This Agreement constitutes the entire understanding and agreements of the
parties with respect to the subject matter hereof, and shall supersede and
replace all prior understandings and agreements, whether verbal or in writing.
The parties confirm and acknowledge that there are no other promises, covenants,
understandings, agreements, representations, or warranties with respect to the
subject matter of this Agreement except as expressly set forth herein.

2.4 This Agreement is not to be modified, terminated, or amended in any respect,
except pursuant to any instrument in writing duly executed by both of the
parties hereto.

2.5 In the event that either party hereto shall bring any legal action or other
proceeding with respect to the breach, interpretation, or enforcement of this
Agreement, or with respect to any dispute relating to any transaction covered by
this Agreement, the losing party in such action or proceeding shall reimburse
the prevailing party therein for all reasonable costs of litigation, including
reasonable attorneys’ fees, in such amount as may be determined by the court or
other tribunal having jurisdiction, including matters on appeal.

2.6 All captions and heading herein are for convenience and ease of reference
only, and shall not be used or referred to in any way in connection with the
interpretation or enforcement of this Agreement.

2.7 If any provision of this Agreement, as applied to any party or to any
circumstance, shall be adjudged by a court of competent jurisdictions to be void
or unenforceable for any reason, the same shall not affect any other provision
of this Agreement, the application of such provision under circumstances
different form those adjudged by the court, or the validity or enforceability of
this Agreement as a whole.

2.8 Time is of the essence of this Agreement.

2.9 The Parties agree to execute any further documents, and take any further
actions, as may be reasonable and appropriate in order to carry out the purpose
and intent of this Agreement.

2.10 As used herein, the masculine, feminine or neuter gender, and the singular
and plural numbers, shall each be deemed to include the others whenever and
whatever the context so indicates.

 

EXHIBIT F

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SIGNATURE PAGE OF RECOGNITION OF

COVENANTS, CONDITIONS AND RESTRICTIONS

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.

 

“Landlord”:  

 

  , a  

 

  By:  

 

    Its:  

 

  “Tenant”:  

 

  , a  

 

  By:  

 

    Its:  

 

  By:  

 

    Its:  

 

 

 

EXHIBIT F

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EXHIBIT G

KILROY CENTRE DEL MAR

MARKET RENT DETERMINATION FACTORS

When determining Market Rent, the following rules and instructions shall be
followed.

1. RELEVANT FACTORS. The “Comparable Transactions” shall be the “Net Equivalent
Lease Rates” per rentable square foot, at which tenants, are, pursuant to
transactions consummated within twelve (12) months prior to the commencement of
the Option Term, leasing non-sublease, non-encumbered space comparable in
location and quality to the Premises containing a square footage comparable to
that of the Premises for a term of three (3) years, in an arm’s-length
transaction, which comparable space is located in “Comparable Buildings.” The
terms of the Comparable Transactions shall be calculated as a “Net Equivalent
Lease Rate” pursuant to the terms of this Exhibit G, and shall take into
consideration only the following terms and concessions: (i) the rental rate and
escalations for the Comparable Transactions, (ii) the amount of parking rent per
parking permit paid in the Comparable Transactions, if any, (iii) operating
expense and tax protection granted in such Comparable Transactions such as a
base year or expense stop (although for each such Comparable Transaction the
base rent shall be adjusted to a triple net base rent using reasonable estimates
of operating expenses and taxes as determined by Landlord for each such
Comparable Transaction); (iv) rental abatement concessions, if any, being
granted such tenants in connection with such comparable space, (v) any “Renewal
Allowance,” as defined herein below, to be provided by Tenant in connection with
the Option Term as compared to the improvements or allowances provided or to be
provided in the Comparable Transactions, taking into account the contributory
value of the existing improvements in the Premises, such value to be based upon
the age, design, quality of finishes, and layout of the existing improvements,
and (vi) all other monetary concessions (including the value of any signage), if
any, being granted such tenants in connection with such Comparable Transactions.
Notwithstanding any contrary provision hereof, in determining the Market Rent,
no consideration shall be given to any period of rental abatement, if any,
granted to tenants in Comparable Transactions in connection with the design,
permitting and construction of improvements, or any commission paid or not paid
in connection with such Comparable Transaction. The Market Rent shall include
adjustment of the stated size of the Premises based upon the standards of
measurement utilized in the Comparable Transactions. The Market Rent shall
additionally be subject to appropriate adjustments (if any) to account for
differences in the then-existing financial condition of the Tenant vis-à-vis the
subject tenants under the Comparable Transactions and taking into account any
applicable credit enhancements (e.g., security deposits, letters of credit,
guaranties, etc.). Landlord and Tenant hereby acknowledge and agree that if
there are not a sufficient number of transactions comparable to those set forth
in this Exhibit G with a comparable lease term to the Option Term to determine
the Market Rent for a lease of such duration, then the Market Rent for purposes
of this Lease shall be equal to that of Comparable Transactions with a term of
five (5) years, provided that the concessions shall be appropriately prorated on
a fractional basis to account for the shorter term of the Lease.

 

EXHIBITG

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2. TENANT SECURITY. The Market Rent shall additionally include a determination
as to whether, and if so to what extent, Tenant must provide Landlord with
financial security, such as an enhanced security deposit, a letter of credit or
guaranty, for Tenant’s Rent obligations during the Option Term; provided,
however, Tenant shall only be obligated to provide additional financial security
to the extent Tenant’s then-existing financial condition is materially worse
than those existing as of the date of this Lease. Such determination shall be
made by reviewing the extent of financial security then generally being imposed
in Comparable Transactions from tenants of comparable financial condition and
credit history to the then existing financial condition and credit history of
Tenant (with appropriate adjustments to account for differences in the
then-existing financial condition of Tenant and such other tenants, and giving
reasonable consideration to Tenant’s prior performance history during the Lease
Term).

3. RENEWAL IMPROVEMENT ALLOWANCE. Notwithstanding anything to the contrary set
forth in this Exhibit G, once the Market Rent for the Option Term is determined
as a Net Equivalent Lease Rate, if, in connection with such determination, it is
deemed that Tenant is entitled to an improvement or comparable allowance for the
improvement of the Premises, (the total dollar value of such allowance shall be
referred to herein as the “Renewal Allowance”), Landlord shall pay the Renewal
Allowance to Tenant pursuant to a commercially reasonable disbursement procedure
determined by Landlord and the terms of Article 8 of this Lease, the rental rate
component of the Market Rent shall be increased to be a rental rate which takes
into consideration that Tenant will receive payment of such Renewal Allowance
and, accordingly, such payment (with interest at a then-applicable, commercially
reasonable amortization rate) shall be factored into the base rent component of
the Market Rent. Notwithstanding any provision to the contrary, in no event
shall Tenant be obligated to accept a Renewal Allowance once the Market Rent has
been determined, and in the event Tenant elects not to accept such a Renewal
Allowance, the Market Rent shall be adjusted accordingly to take account of such
non-election.

4. COMPARABLE BUILDINGS. For purposes of this Lease, the term “Comparable
Buildings” shall mean first-class multi-tenant occupancy office buildings which
are comparable to the Building in terms of age (based upon the date of
completion of construction or major renovation), designed characteristics,
quality of construction, level of services and amenities (including, but not
limited to, the type (e.g., surface, covered, subterranean) and amount of
parking), size and appearance, and are located in the “Comparable Area,” which
is the “Del Mar Heights Area.” The “Del Mar Heights Area” shall be the area
containing Comparable Buildings which have reasonably comparable freeway access
to the Project and which are within an area bounded by Del Mar Heights Road on
the North side, Highway 56 on the South side, I-5 on the West side and Carmel
Valley Road on the East side.

 

EXHIBIT G

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