EXHIBIT 10.44

 

STANDARD LEASE AGREEMENT (OFFICE)

BETWEEN

LANDHOLD, INC., A CALIFORNIA CORPORATION,

AS “LANDLORD”

 

AND

 

HEALTH NET, INC., A DELAWARE CORPORATION,

AS “TENANT”

 

MARCH 5, 2001

 

(11971 FOUNDATION PLACE, RANCHO CORDOVA)

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OFFICE GROSS LEASE AGREEMENT

Basic Lease Information

 

Terms and Definitions. For the purpose of this Lease, the following capitalized
terms shall have the following definitions:

 

Lease Date:    March 5, 2001 Landlord:   

Landhold, Inc., a California corporation

8413 Jackson Road, Suite B

Sacramento, California 95826

Tenant:    Health Net, Inc., a Delaware Corporation Tenant’s Notice Address:   

Health Net, Inc.

P. O. Box 2470, Rancho Cordova, CA 95741-2470

Attn: Director of Real Estate

Tenant’s Billing Address:   

Health Net, Inc.

P. O. Box 2470, Rancho Cordova, CA 95741-2470

Attn: Director of Real Estate

Tenant Contact:   

Director of Real Estate

Phone Number: (916) 463-7742

Fax Number: (916) 463-7747

Project:    That office development commonly known as Gold Pointe Corporate
Center, which currently consists of two office buildings, but shall eventually
be comprised of five office buildings. Building:    The three story building
commonly known as 11971 Foundation Place, Rancho Cordova, California. The
location of the Building is shown on the site plan attached as Exhibit A.
Tenant’s Proportionate Share:    98.10%, based on a Building rentable area of
approximately 147,801 square feet. Premises:    The Premises referred to in this
Lease consists of approximately 145,000 rentable square feet on the first,
second and third floors of the Building, as shown on the floor plans attached
hereto as Exhibit G. Term:    The term shall be ten (10) years and six (6)
months from the Commencement Date as defined in Section 4 below. Scheduled Lease
Commencement Date:    July 15, 2002 Business Hours:    The hours of 7:00 a.m. to
6:00 p. m, Monday through Friday, and 8:00 a.m. to 1:00 p.m. Saturday (excepting
Federally recognized holidays). Base Rent:    Months 01-06:    Free of Rent and
Operating Expenses.      Months 07-30:    $1.83 per rentable square foot per
month.      Months 31-54:    $1.88 per rentable square foot per month.     
Months 55-78:    $1.93 per rentable square foot per month.      Months 79-102:
   $1.98 per rentable square foot per month.      Months 103-126:    $2.03 per
rentable square foot per month. Base Year:    2002 calendar year Lease Year:   
The calendar year in which the Term commences and each succeeding calendar year
thereafter. Use:    General office and any other lawful use approved in writing
by Landlord, which shall not be unreasonably withheld, delayed or conditioned.
Security Deposit:    Waived Broker for Landlord:    None

 

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Broker for Tenant:   

Aguer Pipgras Associates

655 University Avenue, Suite 215

Sacramento, California 95825-6747

 

LIST OF EXHIBITS:

 

A

   Site Plan

A-l

   Project Plans and Specs

B

   Lease Improvement Agreement

C

   First Amendment to Lease and Acknowledgment

D

   Rules and Regulations

E

   Janitorial Specifications

F

   Exclusions From Operating Expenses and Real Estate Taxes

G

   Floor Plans of Premises

 

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STANDARD LEASE AGREEMENT

(OFFICE)

 

This Standard Lease Agreement (“Lease”) is made and entered into by the Landlord
and Tenant referred to in the Basic Lease Information. The Basic Lease
Information attached to this Lease as page 1 and page 2 is hereby incorporated
into this Lease by this reference.

 

1. PREMISES

 

(a) This Lease shall be effective as between Landlord and Tenant as of the full
execution and delivery hereof by both Landlord and Tenant. Landlord hereby
leases to Tenant and Tenant hereby leases from Landlord upon the terms and
conditions contained herein the Premises, which are more particularly described
in Exhibit A attached hereto and made a part hereof (the “Premises”), including
the tenant improvements (the “Tenant Improvements”) thereon presently existing
or to be constructed in accordance with the “Lease Improvement Agreement”
attached as Exhibit B, which is made a part hereof by this reference. As
hereinafter used in this Lease, the term “Building” shall refer to the entire
structure in which the Premises are located, the term “Lot” shall refer to the
Assessor’s tax parcel on which the Building is situated, and the term “Project”
shall collectively refer to the Lot, the Building, and the Project Common Areas.
This Lease confers no rights either with regard to the subsurface of the land
below the ground level of the Building or with regard to airspace above the roof
of the Building.

 

(b) Tenant acknowledges that, as of the Lease Date, Landlord has begun
development on the Building, which construction is intended to be completed by
the Scheduled Lease Commencement Date. Prior to the Lease Date, Landlord and
Tenant have agreed upon certain project plans (“Project Plans”), attached hereto
as Exhibit A-1. Landlord agrees to construct the Building in compliance with the
Project Plans and all applicable laws, statutes and ordinances, and such
construction shall be consistent with the Project Specifications, subject to
events preventing such compliance beyond the reasonable control of Landlord
(provided that Landlord has advised Tenant in writing of such noncompliance, and
the specific reasons (c) Tenant may, not later than the Commencement Date, at
Tenant’s expense, have a licensed architect measure the Premises (using the
Standard Method for Measuring Floor Area in Office Buildings, ANSI Z65.1-1996,
published by BOMA International (the “BOMA Standard”)) to determine the rentable
area and usable area of the Premises. Based on such measurement, the Base Rent,
and Tenant Improvement Allowance shall be proportionately adjusted; provided,
however, that in no event (i) will such measurement result in a Rent increase to
Tenant of more than two percent (2%), or (ii) will the rentable area of the
Premises be more than ten percent (10%) greater than the “Office Area” (as that
term is defined in the BOMA Standard) of the Premises (the difference, expressed
as a percentage of the Office Area of the Premises, between the Premises’
rentable area and the Office Area of the Premises is hereinafter referred to as
the “Load Factor”).

 

2. ACCEPTANCE OF PREMISES

 

Except as otherwise provided in this Lease, Tenant’s taking possession of the
Premises shall constitute Tenant’s acknowledgment that, to Tenant’s actual
knowledge, the Premises are in good condition and that the Tenant Improvements
are constructed in accordance with the Lease Improvement Agreement, and that
Tenant agrees to accept the same in its condition existing as of the date of
such entry and subject to all applicable municipal, county, state and federal
statutes, laws, ordinances, including zoning ordinances, and regulations
governing and relating to the use, occupancy or possession of the Premises.
Notwithstanding the foregoing, within fifteen (15) days following the
Commencement Date, Tenant shall deliver to Landlord a list of items (“Punch List
Items”) that Tenant reasonably deems that Landlord complete or correct in order
for the Premises to be reasonably acceptable (which shall not include any items
damaged by Tenant, its agents, employees, contractors and/or subcontractors).
Within thirty (30) days following Landlord’s receipt of the Punch List Items, to
the extent commercially possible, Landlord shall complete and/or correct such
items set forth on the Punch List Items using its good faith efforts and due
diligence. No promise of Landlord to alter, remodel, repair or improve the
Premises or the Building and no representation, express or implied, respecting
any matter or thing related to the Premises or Building or this Lease
(including, without limitation, the condition of the Building or Premises) have
been made to Tenant by Landlord, its agents or employees, other than as set
forth in the Lease Improvement Agreement and as otherwise provided in this
Lease. Nothing in this Section 2 shall, however, relieve Landlord of its
obligation to correct any latent defects in the Premises, Building or Project,
or to construct the Premises in compliance with all applicable laws.

 

3. PROJECT COMMON AREAS

 

The term “Project Common Areas” shall refer to all areas and facilities outside
the Premises and within the Project (including all appurtenant parking
facilities) that are provided and designated by Landlord from time to time for
the general nonexclusive use of Landlord, Tenant, and of other lessees in the
Project and their respective employees, suppliers, shippers, customers, and
invitees. Landlord hereby grants to Tenant, during the term of this Lease, the
nonexclusive right to use, in common with others entitled to such use, the
Project Common Areas as they exist from time to time, subject to any reasonable
and nondiscriminatory rules, regulations, and restrictions governing the use of
the Project as from time to time made or amended by Landlord. Under no
circumstances shall the right granted herein to use the Project Common Areas be
deemed to include the right to store any property in the Project Common Areas.
Provided that Landlord, using its commercially reasonable efforts, does not
unreasonably interfere with Tenant’s use of the Premises or the parking
facilities, Landlord reserves the right at any time and from time to time, to:
(i) make alterations in or additions to the Project and to the Project Common
Areas; (ii) close the Project Common Areas to whatever extent required in the
opinion of Landlord’s counsel to prevent a dedication of any of the Project
Common Areas or the accrual of any rights of any person or of the public to the
Project Common Areas; (iii) temporarily close any of the Project Common Areas
for maintenance purposes; and (iv) promulgate reasonable and nondiscriminatory
rules and regulations governing the use of the Project Common Areas.

 

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4. TERM AND POSSESSION

 

(a) Subject to and upon the terms and conditions set forth herein, the Term of
this Lease shall be for the period specified in the Basic Lease Information,
commencing upon the earlier of the following dates (the “Commencement Date”):
(i) the date on which the Premises are Substantially Complete (as defined
below); (ii) the date on which the Premises would have been Substantially
Complete had there been no tenant Delays (as defined in Section 6.1 of the Lease
Improvement Agreement); or (iii) the date upon which the Tenant takes possession
of the Premises in order to conduct its business operations therein, with the
Landlord’s written consent, provided, however, that in no event shall Tenant be
obligated to accept a Commencement Date prior to July 15, 2002. Within thirty
(30) days after the Commencement Date, Landlord and Tenant shall execute an
amendment to this Lease (“First Amendment to Lease and Acknowledgment”) setting
forth the Commencement Date and the expiration date of the term of the Lease,
which shall be in the form attached hereto as Exhibit C. For purposes of the
foregoing, the Premises shall be deemed to be “Substantially Complete” when (i)
Tenant is tendered direct access to the Premises with building services
(sanitary sewer, public water, electrical, elevator, HVAC service and fire
suppression services operational) ready to be furnished to the Premises, and
(ii) a certificate of occupancy (temporary or final) for the Premises has been
issued by the appropriate governmental entity, and (iii) the identified
construction to be provided by Landlord, as set forth in the Lease Improvement
Agreement has been completed, with the exception of the Punch List Items.
Landlord shall provide Tenant with not less than sixty (60) days prior written
notice of the anticipated date that the Premises shall be Substantially
Complete. Tenant shall be permitted sixty (60) days early occupancy prior to the
Commencement Date to set up telecommunication equipment and panelized
furnishings, to move in Tenant’s furniture, fixtures and equipment, and to
otherwise prepare the Premises for Tenant’s use and occupancy, provided Tenant
does not interfere or impede Landlord in construction of tenant improvements,
and provided further that evidence of insurance as hereinafter required is
delivered to Landlord prior to occupancy. Landlord shall Substantially Complete
the Premises by the Scheduled Lease Commencement Date as set forth in the Basic
Lease Information, plus extensions thereto equal to the durations of (i) any
delays beyond the reasonable control of Landlord, such as acts of God, fire,
earthquake, acts of a public enemy, riot, insurrection, unavailability of
materials, governmental restrictions on the sale of materials or supplies or on
the transportation of such materials or supplies, governmental delay in issuing
permits, approvals, and inspections, strike or shortages directly affecting
construction or transportation of materials or supplies, shortages of materials
or labor resulting from government controls, weather conditions, or any other
cause or events beyond the reasonable control of Landlord, provided that
Landlord has advised Tenant in writing of such causes or events, within a
reasonable period of time after learning of the same, and Landlord has used
reasonable efforts to minimize the delay occasioned thereby (collectively,
“Force Majeure Event”), or (ii) Tenant Delays caused by or attributable to the
Tenant (“Tenant Delays”) (as defined in Section 6.1 of the Lease Improvement
Agreement). The parties agree that if Landlord is unable to Substantially
Complete the Premises by the Scheduled Lease Commencement Date, plus any
extension thereto pursuant to this Section, this Lease shall not be void or
voidable (except as expressly provided in this Section 4 below), nor shall
Landlord be liable to Tenant for any loss or damage resulting therefrom, and the
expiration date of the Term of this Lease shall be extended for such delay; but
in such event, Tenant shall not be liable for any Rent until the day that is the
first day of the seventh (7th) month following the Commencement Date; provided,
however if such delays were caused or attributable to Tenant, Rent shall
commence as of the day that is the first day of the seventh (7th) month
following the date that the Commencement Date would have occurred but for Tenant
Delays.

 

(b) If the Commencement Date has not occurred within thirty (30) days after the
Scheduled Lease Commencement Date (the “Grace Period”) (unless such delays are
caused by Force Majeure Events), for any reason other than Tenant Delays,
Landlord shall grant Tenant a period of free Rent (including Base Rent and all
Operating Expenses), commencing upon the expiration of the Rent abatement period
provided in Section 5(b). This period of free Rent shall consist of one day for
each day elapsing between the expiration of the Grace Period and the
Commencement Date.

 

(c) If for any reason whatsoever, including but not limited to Force Majeure
Events, but excluding Tenant Delays, the Commencement Date does not occur within
one hundred eighty (180) days after the Scheduled Lease Commencement Date,
Tenant may, upon ten (10) days’ written notice to Landlord, terminate this Lease
without incurring any liability to Landlord, if the Commencement Date does not
occur during such ten (l0)-day period.

 

5. BASE RENT

 

(a) Tenant agrees to pay Landlord the Base Rent for the Premises, without prior
notice, demand, deduction or offset (except as expressly set forth in this Lease
or under applicable law) in the manner and amounts set forth in this Section 5.
Landlord agrees to accept payment of Base Rent pursuant to wire transfer from
Tenant. The term “Rent” as used in this Lease shall mean Base Rent, Tenant’s
Proportionate Share of Operating Expenses, Excess Utilities Payments, and any
other amounts owing from Tenant to Landlord pursuant to the provisions of this
Lease. The Base Rent shall be payable in advance on or before the first day of
each month throughout the term of this Lease. Base Rent for any period during
the term hereof which is for less than one month shall be a prorated portion of
the monthly installment based upon a thirty (30)-day month.

 

(b) The Base Rent shall be increased during the Term of this Lease as follows:

 

Months 01-06:

   Free of rent and operating expenses and utility charges.

Months 07-30:

   $1.83 per rentable square foot per month.

Months 31-54:

   $1.88 per rentable square foot per month.

Months 55-78:

   $1.93 per rentable square foot per month.

Months 79-102:

   $1.98 per rentable square foot per month.

Months 103-126:

   $2.03 per rentable square foot per month.

 

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(c) If the amount of Rent or any other payments due under this Lease violates
the terms of any governmental restrictions on such Rent or payment, then the
Rent or payment due during the period of such restrictions shall be the maximum
amount allowable under those restrictions.

 

6. SECURITY DEPOSIT

 

Waived.

 

7. OPERATING EXPENSES

 

(a) For the purpose of this Section 7(a) and this Lease, the following terms are
defined as follows:

 

  (1) “Base Year” shall mean the calendar year set forth in the Basic Lease
Information; provided, however, that if the Commencement Date occurs later than
December 31, 2002, for any reason other than Tenant Delays, the “Base Year”
shall be the calendar year 2003.

 

  (2) “Tenant’s Proportionate Share” of the total rentable area of the Building
as set forth as a percentage in the Basic Lease Information, however, Landlord
and Tenant acknowledge that if physical changes are made to the Premises or the
Building or the configuration of any thereof, Landlord may at its discretion
reasonably adjust Tenant’s Proportionate Share of the Building to reflect the
change. Landlord’s determination of Tenant’s Proportionate Share of the Building
shall be conclusive so long as it is reasonably and consistently applied and
does not otherwise violate the provisions of this Lease.

 

  (3)

“Operating Expenses” shall mean all reasonable and necessary costs and expenses
paid or incurred by or on behalf of Landlord (whether directly or through
independent contractors) in connection with the operation, repair, replacement
and maintenance of the Building and the Project, including the following costs
by way of illustration, but not limitation: (i) salaries, wages, compensation,
benefits, pension or contributions and all medical, insurance and other fringe
benefits paid to, for, or with respect to all persons, excluding management
personnel (whether they be employees of Landlord, its managing agent or any
independent contractor) for their services in the operation (including security
services for the Project, allocated in an equitable manner to the Building),
maintenance, repair or cleaning of the Project or Building, and payroll taxes,
worker’s compensation, uniforms and dry cleaning costs for such persons; (ii)
payments under service contracts with independent contractors for operating
(including providing security services, if any), maintaining, repairing or
cleaning the Project or Building or any portion thereof or any fixtures or
equipment therein; (iii) all costs for water, steam, sewer and other utility
services to the Project or Building, including any taxes on any such utilities
(but excluding electricity and natural gas, as those expenses are addressed as
Excess Utilities Payments pursuant to Section 7(a)(5) below); (iv) repairs and
replacements which are appropriate to the continued operation of the Building as
a first-class office building; (v) cost of lobby decoration, painting and
decoration of non-tenant areas; (vi) cost of landscaping in, on or about the
Project or Building; (vii) cost of building and cleaning supplies and equipment,
cost of replacements for tools and equipment used in the operation, maintenance
and repair of the Project or Building and charges for lobby and elevator
telephone service for the Building; (viii) financial expenses incurred in
connection with the operation of the Project or Building, such as insurance
costs, including, but not limited to, any premiums, deductibles and other costs
of insurance, as Landlord may, in its reasonable discretion, from time to time
carry (including, without limitation, liability insurance, fire and casualty
insurance, rental interruption insurance, flood and earthquake insurance, and
any other insurance), attorneys’ fees and disbursements, auditing and other
professional fees and expenses, association dues and any other ordinary and
customary financial expenses incurred in the ordinary course in connection with
the operation of the Project and Building; (ix) fees payable to a property
management company (which may be owned or controlled by Landlord or Landlord’s
principals) for the property and asset management of a first-class office
building; (x) the cost of capital improvements made by Landlord in order (i) to
conform to any changes enacted after the Commencement Date in laws, rules,
regulations or requirements of any governmental authority having jurisdiction,
or of the board of fire underwriters or similar insurance body, provided that
such expense, if a capital expenditure as determined by generally accepted
accounting procedures, shall be amortized on a straight line basis over such
expenditure’s useful life, and only such amortized portion shall be included in
Operating Expenses, not to exceed One Hundred Thousand and No/100ths Dollars
($100,000.00) in any given Lease Year (which limitation shall apply only during
the initial Term of this Lease), or (ii) to effect a labor saving, energy saving
or other economy, which cost shall be included in Operating Expenses for the
Lease Year in which such improvement was made not in excess of the savings
resulting from such expenditure; (xi) costs for accounting, legal and other
professional services incurred in the operation of the Project and Building;
(xii) rental payments made for equipment used in the operation and maintenance
of the Project; (xiii) the cost of governmental licenses and permits, or
renewals thereof, necessary for the operation of the Project and/or

 

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Building; (xiv) sales, use and excise taxes on goods and services; (xv) real
property taxes, assessments and bonds (collectively, “Real Estate Taxes”), which
shall include, but not be limited to, any and all taxes, assessments, water and
sewer charges and other similar governmental charges levied on or attributable
to the Project, including the Building and the Lot, or their operation, ordinary
and extraordinary, substitute and additional, unforeseen as well as foreseen,
present and future, of any kind and nature whatsoever, including without
limitation, (i) real property taxes or assessments levied or assessed against
the Project, including the Building and the Lot, (ii) assessments or charges
levied or assessed against the Project, including the Building and the Lot by
any redevelopment agency, (iii) any tax measured by gross rentals received from
the leasing of the Premises, Building or Project, excluding any documentary
transfer taxes, net income, franchise, capital stock, estate or inheritance
taxes imposed by the state or federal government or their agencies, branches or
departments; provided that if at any time during the term any governmental
entity levies, assesses or imposes on Landlord any (1) general or special, ad
valorem or specific, excise, capital levy or other tax, assessment, levy or
charge directly on the rent received under this Lease or on the rent received
under any other leases of space in the Building or the Project, or (2) any
license fee, excise or franchise tax, assessment, levy or charge measured by or
based, in whole or in part upon such rent, or (3) any transfer, transaction,
succession, gift, transit, or similar tax, assessment, levy or charge based
directly or indirectly upon the transaction represented by this Lease or such
other leases, or (4) any occupancy, use, per capita or other tax, assessment,
levy or charge based directly or indirectly upon the use or occupancy of the
Premises or other premises within the Building or the Project, then any such
taxes, assessments, levies and charges shall be deemed to be included in real
property taxes and assessments (real estate taxes and assessments shall also
include the reasonable cost to Landlord of contesting the amount, validity, or
applicability of any real estate taxes and assessments); (xvi) costs associated
with the maintenance of the Building management offices or related facilities in
the Building, including the fair rental value of any space occupied for such
purposes in the event the Landlord performs such management services itself, or
the rental paid to Landlord for such space by any management company in the
event that Landlord employs a management company to provide such services (in no
event, however, will such management office or related facility exceed 2,000
square feet); and (xvii) all other reasonable or necessary expenses paid in
connection with the operation, maintenance, repair, replacement and cleaning of
the Project and Building, that pursuant to sound property management practices
consistently applied would be considered an operating expense. Please see
Exhibit F for Operating Expense exclusions (in the event of any inconsistency
between this Section 7(a)(3) and Exhibit F, the terms of Exhibit F shall
control).

 

Any costs or expenses of the nature described above shall be included in
Operating Expenses for any Lease Year no more than once, notwithstanding that
such cost or expenses may fall under more than one of the categories listed
above. Operating Expenses shall not be reduced as a result of Tenant performing
for itself any of the services that Landlord provides for the Project or the
tenants thereof. Landlord may use related or affiliated entities to provide
service or furnish materials for the Project; provided the fees and charges of
such related and affiliated entities do not exceed the reasonable fees charged
in the applicable industry for a project similar to the Project.

 

The Operating Expenses that vary with occupancy (“Varying Operating Expenses”)
and that are attributable to any Lease Year (including the Base Year) in which
less than ninety-five percent (95.00%) of the rentable area of the Building is
occupied by tenants will be adjusted by Landlord to the amount that Landlord
reasonably believes they would have been if ninety-five percent (95.00%) of the
rentable area of the Building had been occupied. Additionally, Real Estate Taxes
for the Base Year shall be adjusted to be based upon a fully completed and
assessed Building, with full completion of all tenant improvements constructed
therein consistent with finishes generally utilized by similar first-class
projects in the vicinity of the Building.

 

  (4) Tenant’s Proportionate Share of Operating Expenses shall be payable by
Tenant to Landlord as follows:

 

  (i) Beginning with the Lease Year following the Base Year and for each Lease
Year thereafter, Tenant shall pay Landlord an amount equal to Tenant’s
Proportionate Share of the Operating Expenses incurred by Landlord in the Lease
Year which exceeds the total amount of Operating Expenses payable by Landlord
for the Base Year. This excess is referred to as the “Excess Expenses.”

 

  (ii)

To provide for current payments of Excess Expenses, Tenant shall, at Landlord’s
request, pay as additional rent during each Lease Year, an amount equal to
Tenant’s Proportionate Share of the Excess Expenses payable during such Lease
Year, as estimated and modified by Landlord from time to time, but not in excess
of once per Lease Year. Such payments shall be made in monthly installments,
commencing on the first day of the month following the month in

 

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which Landlord notifies Tenant of the amount it is to pay hereunder and
continuing until the first day of the month following the month in which
Landlord gives Tenant a new notice of estimated Excess Expenses. It is the
intention hereunder to estimate from time to time the amount of the Excess
Expenses for each Lease Year, including the Lease Year immediately following the
Base Year, and Tenant’s Proportionate Share thereof, and then to make an
adjustment in the following year based on the actual Excess Expenses incurred
for that Lease Year.

 

  (iii) On or before April 1 of each Lease Year after the first Lease Year (or
as soon thereafter as is practical), Landlord shall deliver to Tenant a
statement (“Expense Statement”) setting forth Tenant’s Proportionate Share of
the Excess Expenses and Excess Utilities Payments (as defined in Section 7(a)(5)
below) for the preceding Lease Year; provided, however, that the failure of
Landlord to supply such statement shall not constitute a waiver of Landlord’s
rights to collect for such Excess Expenses or Excess Utilities Payments, except,
however, in the event that Landlord’s failure to provide such statement exceeds
two hundred seventy (270) days after the Lease Year in question, Landlord’s
right to collect such Excess Expenses and Excess Utilities Payments shall
terminate at such time. If Tenant’s Proportionate Share of the actual Excess
Expenses or Excess Utilities Payments for the previous Lease Year exceeds the
total of the estimated monthly payments made by Tenant for such year, Tenant
shall pay Landlord the amount of the deficiency within thirty (30) days of the
receipt of the statement. If such total exceeds Tenant’s Proportionate Share of
the actual Excess Expenses or Excess Utilities Payments for such Lease Year,
then Landlord shall credit against Tenant’s next ensuing monthly installment(s)
of Base Rent and Excess Expense and Excess Utilities Payments an amount equal to
the difference until the credit is exhausted. If a credit is due from Landlord
on the Expiration Date, Landlord shall pay Tenant the amount of the credit
within thirty (30) days following the determination of such amount. The
obligations of Tenant and Landlord to make payments required under this Section
7 shall survive the Expiration Date. Tenant’s Proportionate Share of Excess
Expenses and Excess Utilities Payments in any Lease Year having less than three
hundred sixty-five (365) days shall be appropriately prorated.

 

  (iv) For a period of nine (9) months after receipt of the Expense Statement,
Tenant, or its representatives, shall be entitled, upon ten (10) days prior
written notice and during normal business hours, at the office of the Building’s
property manager or such other place as Landlord shall reasonably designate, to
inspect, copy and examine those books and records of Landlord relating to the
determination of Excess Expenses and Excess Utilities Payments for the
immediately preceding Lease Year. Failure of Tenant to request such inspection
within such nine (9) month period shall render such Expense Statement conclusive
and binding on Tenant. Notwithstanding any contrary provision of this Lease, the
Base Year Operating Expenses shall be subject to audit at any time, without the
aforementioned nine-month limitation or any other time limitation. If, after
inspection and examination of such books and records, Tenant disputes the
amounts of the Excess Expenses or Excess Utilities Payments charged by Landlord,
Tenant may, by written notice to Landlord, request an independent audit of such
books and records. The independent audit of the books and records shall be
conducted by a certified public accountant, an independent property management
company, or other reputable professional with the requisite experience regarding
operating expenses (each, a “Qualified Auditor”) reasonably acceptable to both
Landlord and Tenant. If, within thirty (30) days after Landlord’s receipt of
Tenant’s notice requesting an audit, Landlord and Tenant are unable to agree on
the Qualified Auditor to conduct such audit, then the presiding judge of the
superior court may designate a Qualified Auditor not then employed by Landlord
or Tenant to conduct such audit, The audit shall be limited to the determination
of the amount of Excess Expenses and Excess Utilities Payments for the subject
Lease Year. If the audit discloses that the amount of Excess Expenses or Excess
Utilities Payments billed to Tenant was incorrect, the appropriate party shall
pay to the other party the deficiency or overpayment, as applicable. Tenant
shall pay all costs and expenses of the audit unless the audit shows that
Landlord overstated Excess Expenses or Excess Utilities Payments for the subject
Lease Year by more than five percent (5.00%), in which case Landlord shall pay
all costs and expenses of the audit. Tenant and the Qualified Auditor shall keep
any information gained from such audit confidential and shall not disclose it to
any other party (other than Tenant’s attorneys, accountants and other
consultants and advisors), except as necessary to enforce the terms of this
Lease. The exercise by Tenant of the audit rights hereunder shall not relieve
Tenant of its obligation to timely pay all sums due hereunder, including,
without limitation, the disputed Excess Expenses or Excess Utilities Payments.

 

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  (v) Multiple Buildings in Project. If Operating Expenses attributable to the
Project as a whole (and not solely the Lot and Building), such as for example,
security costs and Project Common Area landscaping costs, will be allocated to
the Building in the proportion that the rentable area of the Building bears in
relation to the total rentable area of the Project (as such rentable area may
vary from time to time) that benefits from such cost. In no event will any
expense (such as repair or replacement of a building) attributable solely to
another building or parcel of land in the Project be included in Operating
Expenses.

 

  (vi) Payment in Installments. All assessments and premiums which are not
specifically charged to Tenant because of what Tenant has done, which can be
paid by Landlord in installments, shall be paid by Landlord in the maximum
number of installments permitted by law and not included as Operating Expenses
except in the year in which the assessment or premium installment is actually
paid; provided, however, that if the prevailing practice in comparable buildings
is to pay such assessments or premiums on an earlier basis, and Landlord pays on
such basis, such assessments or premiums shall be included in Operating Expenses
as paid by Landlord.

 

  (vii) Line Item Detail. Each time Landlord provides Tenant with an actual
and/or estimated statement of Operating Expenses or Excess Utilities Payments,
such statement shall be itemized on a line item by line item basis, showing the
applicable expense for the applicable year and the year prior to the applicable
year; such format and detail shall be reasonably consistent from year to year in
order to facilitate Tenant’s review.

 

  (viii) Reduction Due to Vacancy. In the event Tenant ceases to occupy a
contiguous portion of the Premises constituting a full floor on any floor of the
Premises for a period of more than thirty (30) consecutive days, then upon
Tenant giving Landlord written notice thereof, Tenant shall receive a credit
against Tenant’s Proportionate Share of Operating Expenses equal to the charges,
on a per square foot of rentable area basis, not used by Tenant as a result of
such vacancy during the period of such vacancy, but only to the extent of the
actual reduction in Operating Expenses experienced by Landlord.

 

  (ix) Payment of Taxes and Insurance Premiums, Tenant shall not be required to
pay its Proportionate Share of Real Estate Taxes or insurance premiums on the
basis of estimates or in monthly installments, Tenant shall only be required to
pay such Proportionate Share of Real Estate Taxes or insurance premiums ten (10)
days prior to the due date Landlord is required to pay such taxes or insurance
premiums. Landlord shall bill Tenant for Tenant’s Proportionate Share of Real
Estate Taxes thirty (30) days before Landlord is required to make payments of
such taxes to the appropriate taxing authorities. Landlord shall bill Tenant for
Tenant’s Proportionate Share of insurance premiums; thirty (30) days before
Landlord is required to make payment of such insurance premiums to the
appropriate insurer(s).

 

  (x) Proposition 8. If Landlord receives a reduction in Real Estate Taxes
attributable to the Base Year as a result of commonly called Proposition 8
application, then Real Estate Taxes for the Base Year and each Lease Year shall
be calculated as if no Proposition 8 reduction in Real Estate Taxes were
received.

 

  (xi) Service Agreements: If any portion of the Project Is covered by a service
agreement at any time during the Base Year and to the extent the Project is not
covered by such service agreement during a subsequent Lease Year, Operating
Expenses for the Base Year shall be deemed increased by such amount as Landlord
would have incurred during the Base Year with respect to the items or matters
covered by the subject or service agreement, had such service agreement not been
in effect at the time during the Base Year.

 

  (xii) Management Agreement. In the event that the property management
agreement in effect during the Base Year changes in any subsequent year, and a
service that was previously performed pursuant to, and as part of, such property
management agreement is thereafter excluded from the scope of such management
agreement, then such cost shall either be excluded from Operating Expenses or
the Base Year shall be grossed up to reflect such cost of such performance.

 

  (5)

In addition to the Excess Expenses, Tenant shall pay Tenant’s Proportionate
Share of any actual natural gas and electricity charges for the Building and Lot
(but excluding any other portions of the Project) which in any Lease Year exceed
the sum of Two Dollars ($2.00) per rentable square foot of the Building (the
“Energy Expense Stop”) (such excess over the Energy Expense Stop is hereinafter
referred to as the “Excess Utilities Payments”), Landlord may estimate such
Excess Utilities Payments in the same manner

 

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as Excess Expenses are estimated and billed under Section 7(a)(4)(ii) above
(provided, however, that Tenant shall have no obligation to pay such Excess
Utilities Payments until Landlord has already paid an amount equal to the Energy
Expense Stop for the Lease Year in question). In order to assure that Tenant
gets the benefit of a full six (6) months without electrical or gas charges (as
contemplated by Section 5(b) above), the natural gas and electricity charges for
the first six (6) months of the Term shall be treated as being “zero”. In
calculating Tenant’s responsibility for Excess Utilities Payments, there shall
be excluded any charge for natural gas or electricity attributable to the use of
the Building or Lot by other occupants beyond the Building Hours or at level of
occupancy in excess of that of general office use.

 

8. USE

 

Tenant shall use the Premises for the uses set forth in the Basic Lease
Information, and shall not use the Premises for any other purposes. Tenant shall
be solely responsible for obtaining any necessary governmental approvals of such
use that is of a non-office nature. Tenant shall not do, bring, or keep anything
in or about the Premises that will cause a cancellation of any insurance
covering the Premises. If the rate of any insurance carried by Landlord is
increased as a result of Tenant’s use for non-office purposes, Tenant shall pay
to Landlord within thirty (30) days before the date Landlord is obligated to pay
a premium on the insurance, or within thirty (30) days after Landlord delivers
to Tenant a certified statement from Landlord’s insurance carrier stating that
the rate increase was caused solely by an activity of Tenant on the Premises as
permitted in this Lease, whichever date is later, a sum equal to the difference
between the original premium and the increased premium. Landlord reserves the
right to prescribe the weight and position of all safes, fixtures and heavy
installations that Tenant desires to place in the Premises so as to distribute
properly the weight, or to require plans prepared by a qualified structural
engineer for such heavy objects, which shall be prepared at Tenant’s sole cost
and expense.

 

9. COMPLIANCE WITH THE LAW

 

(a) Tenant shall not use the Premises or permit anything to be done in or about
the Premises which will in any way conflict with any law, statute, zoning
restriction, ordinance or governmental law or rule, regulation, or requirement
of any duly constituted public authorities now in force or which may hereafter
be enacted or promulgated, or subject Landlord to any liability for injury to
any person or property by reason of any business operation being conducted in or
about the Premises. Subject to Section 9(b) below, to the extent required due to
Tenant’s specific use of the Premises, alterations of the Premises, or as a
result of Tenant’s application for permits or authorizations, as opposed to
compliance required by office tenants in general, Tenant shall, at its sole cost
and expense, promptly comply with all laws, statutes, ordinances, and
governmental rules, regulations, including, but not limited to, the Americans
with Disabilities Act (“ADA”) of 1990 (42 U.S.C. § 12101 et seq.), any amendment
thereto or regulations promulgated thereunder, or state or local ordinances or
codes enacted pursuant thereto; or requirements of any board or fire insurance
underwriters or other similar bodies, now or hereafter constituted, relating to
or affecting the condition, use, or occupancy of the Premises by Tenant,
excluding structural changes not related to or affected by Tenant’s improvements
or acts. The final judgment of any court of competent jurisdiction or the
admission of Tenant in any action against Tenant, whether Landlord be a party
thereto or not, that Tenant has violated any law, statute, ordinance, or
governmental rule, regulation, or requirement, shall be conclusive of that fact
as between Landlord and Tenant.

 

(b) Landlord represents and warrants that the Building, Premises and Project
Common Area, as of the Commencement Date to the extent such were constructed by
or caused to be constructed by Landlord, are in compliance with all laws,
statutes, ordinances and governmental rules, regulations including, but not
limited to ADA, and all laws governing hazardous materials or hazardous
substances, air quality and other environmental regulations. The foregoing
representation and warranty of Landlord does not (i) include any improvements
constructed or caused to be constructed by any other tenant of the Project
and/or Tenant, and/or (ii) affect the Tenant’s obligations pursuant to Section
9(a) above and/or (iii) apply to any non-office use to which Tenant will put the
Premises. In the event Landlord’s representation or warranty in this section is
finally determined to be incorrect, as Tenant’s sole remedy, Landlord shall be
responsible for promptly taking actions to cause such compliance, at Landlord’s
sole cost and expense.

 

10. ALTERATIONS AND ADDITIONS

 

(a) Tenant shall not make or suffer to be made any non-structural alterations,
additions, or improvements (collectively, “Alterations”) to or of the Premises,
or any part thereof, without first obtaining the written consent of Landlord,
which shall not be unreasonably withheld or delayed; provided, however, if the
Alterations would adversely affect the structure or safety of the Building or
its electrical, plumbing, HVAC, mechanical or safety systems, or if such
Alterations would create an obligation on Landlord’s part to make modifications
to the Building, and Tenant is not willing to pay the cost necessary to
remediate such problems, Landlord may withhold its consent in its sole and
absolute discretion. Notwithstanding the foregoing, without the prior consent of
Landlord, but with the prior notice to Landlord, Tenant shall be entitled to
make Alterations within the Premises, provided that (i) the cost of construction
such Alterations does not exceed One Hundred Thousand and No/l00ths Dollars
($100,000.00) per project, and (ii) does not affect the plumbing, electrical,
structural or mechanical systems of the Building, and (iii) Tenant otherwise
complies with the provisions of this Section. In no event shall carpeting,
painting or other work of a similar decorative nature (and which does not
require a building permit) require the consent of, or notice to, the Landlord.
All Alterations shall comply with all applicable laws, statutes and ordinances,
which include, but are not limited to ADA. Any Alterations to or of said
Premises, including, but not limited to, wall covering, paneling, and built-in
cabinet work, but excepting movable furniture and trade fixtures, shall on the
expiration of the Term become a part of the realty and belong to Landlord, and
shall be

 

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surrendered with the Premises. However, Landlord shall provide written notice to
Tenant (concurrently with Landlord’s approval of such Alteration) whether Tenant
will be required to remove such Alteration. If Landlord so states in such
written notice, Tenant, at its own cost shall remove such Alteration upon the
expiration of the Term. Upon Landlord’s approval of the requested Alterations,
Tenant shall secure all necessary permits, if applicable. Before Landlord’s
consent to such Alterations, Tenant shall submit detailed specifications, floor
plans and necessary permits (if applicable) to Landlord for review. In no event
shall any Alterations affect the structure of the Building or its facade. As a
condition to its consent, Landlord may request adequate assurance that all
contractors who will perform such work have in force workman’s compensation and
such other employee and public liability insurance as Landlord deems reasonably
necessary. In the event Landlord consents to the making of any Alterations to
the Premises by Tenant, the same shall be made by Tenant at Tenant’s sole cost
and expense, completed to the reasonable satisfaction of Landlord, and the
contractor or person selected by Tenant to make the same must first be approved
in writing by Landlord which approval shall not be unreasonably withheld or
delayed. If Tenant makes any Alterations to the Premises as provided in this
Section, the Alterations shall not be commenced until ten (10) business days
after Landlord has received notice from Tenant stating the date the installation
of the Alterations is to commence so that Landlord can post and record an
appropriate notice of non-responsibility. Tenant shall reimburse Landlord for
any reasonable out-of-pocket expenses incurred by Landlord in connection with
the Alterations made by Tenant, including any reasonable fees charged by
Landlord’s contractors or consultants to review plans and specifications
prepared by Tenant, and the cost of updating the existing as-built plans of the
Building to reflect the Alterations, not to exceed One Thousand and No/l00ths
Dollars ($1,000.00) in total per Alteration; Landlord must, at the time that
Landlord consents to the Alteration, have provided Tenant with a binding
estimate of such costs. Tenant shall indemnify, defend and hold the Landlord,
the Building and the Premises free and harmless from any liability, loss,
damage, cost, attorneys’ fees and other expenses incurred on account of such
construction, or claims by any person performing work or furnishing materials or
supplies for Tenant or any persons claiming under Tenant.

 

(b) Landlord agrees that, subject to Tenant’s compliance with Section 10(a)
above, Tenant shall be entitled to install a satellite/microwave dish upon the
roof of the Building in a location reasonably acceptable to Landlord and Tenant;
no rent or license fee shall be charged. Tenant acknowledges that view
aesthetics of the Building shall be considered in the placement of such dish.
Tenant shall be responsible for the maintenance and repair of such dish and
shall remove, at Tenant’s cost, such dish from the roof of the Building upon the
expiration or earlier termination of this Lease and shall repair any damage
caused thereby and reseal any roof penetrations.

 

11. REPAIRS AND MAINTENANCE:

 

(a) By taking possession of the Premises, Tenant shall be deemed to have
accepted the Premises as being in good and sanitary order, condition and repair,
excepting the Punch List Items and latent defects in the construction done by
Landlord, its agents, employees, contractors, and subcontractors. Except as
provided in Section 11(c) (pursuant to which Landlord is to undertake various
repair and maintenance), Tenant shall, at Tenant’s sole cost and expense,
maintain the Premises, in clean and good condition and repair, ordinary wear and
tear and casualty excepted. Without limiting the generality of the foregoing,
Tenant shall be solely responsible for maintaining and repairing all fixtures,
non-building standard electrical lighting (if identified as being non-building
standard at the time that Landlord approves the Plans under the Lease
Improvement Agreement), ceilings and floor coverings, doors, and interior walls
within the Premises to the extent the foregoing are nonstructural elements of
the Building, using the same quality of materials as used in the original
construction. In addition, Tenant shall be responsible for all repairs made
necessary by Tenant or Tenant’s invitees, Landlord acknowledges that Tenant
shall have no obligation to repair or maintain any areas of the Project outside
of the Premises, unless such repair or maintenance is required due to acts of
Tenant, its agents, employees, contractors and subcontractors and the cost
thereof is not covered by insurance carried by Landlord or required to be
carried by Landlord under this Lease. Excepting maintenance, repairs or
replacements required due to the negligence or willful misconduct of Landlord,
its agents, employees, contractors and subcontractors, Tenant acknowledges that
Landlord shall have no obligation to maintain, repair or replace any
telecommunications or computer cabling or wiring which is located in the
Premises or which exclusively serves the Premises (collectively, “Cabling”),
except in the event that such would be required due to Landlord’s negligent acts
or omissions. Tenant shall, at Tenant’s expense, contract with Pacific Bell or
another reputable contractor to maintain the Cabling. Landlord shall have no
obligation to alter, remodel, improve, repair, decorate or paint the Premises
except as specifically set forth in this Lease. Under no circumstances shall
Tenant make any repairs to the Building or to the mechanical, electrical or
heating, ventilating or air conditioning systems of the Premises or the
Building, unless such repairs are previously approved in writing by Landlord.
Tenant waives the provisions of Sections 1931(1), 1941 and 1942 of the
California Civil Code, and any similar or successor law regarding Tenant’s right
to make repairs and deduct expenses of such repairs from the Rent due under this
Lease, subject, however, to the terms of Section 11(d) below. In no event shall
Tenant be responsible for repairs or replacements necessitated by ordinary wear
and tear, damage by third party casualty or damage caused by Landlord or others
for which Tenant is not responsible, nor shall Tenant be responsible for the
correction or repair of any latent defect in the Premises, or any condition,
dilapidation or defect of which Landlord has actual knowledge prior to the
Commencement Date.

 

(b) Landlord shall operate the Building (and provide maintenance, repairs and
replacements pursuant to Section 11(c) below) to a standard or quality
consistent with that of other first-class projects in the immediate geographical
area and shall (i) provide janitorial service to the Premises on a five
(5)-day-a-week basis (excepting holidays described in the Basic Lease
Information), consistent with the janitorial specification attached hereto as
Exhibit E, (ii) provide nonexclusive, non-attended automatic passenger elevator
service at all times, (iii) replace Building standard lamps, starters and
ballasts (all nonstandard lighting within the Premises shall be the
responsibility of Tenant).

 

(c) Landlord shall be responsible for maintaining and repairing all structural
portions and latent defects of the Building, at Landlord’s sole expense (and not
as part of Operating Expenses), and shall maintain the

 

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roof, side walls, and foundations of the Building in good, clean and safe
condition and repair. Landlord shall be entitled to approve, in its sole
discretion, the sealing of any roof penetrations caused by Tenant Improvements.
Landlord shall also maintain all landscaping, driveways, parking lots, fences,
signs, sidewalks and the Project Common Areas. Landlord shall be responsible for
maintenance and repair of all washrooms, mechanical, electrical and common area
telephone closets, windows, plate glass, exterior doors, plumbing, heating,
electrical, air conditioning and ventilation and life safety systems, and
elevators. Except as otherwise provided in this Lease, Landlord shall have no
liability to Tenant, nor shall Tenant’s obligations under this Lease be reduced
or abated in any manner whatsoever by reason of any inconvenience, annoyance,
interruption or injury to business arising from Landlord making any repairs or
changes which Landlord is required or permitted by this Lease or required by law
to make in or to any portion of the Building or the Premises. Landlord shall use
reasonable efforts to minimize any interference with Tenant’s business at the
Premises. If Tenant fails to maintain the Premises as required in Section 11(a),
Landlord may give Tenant thirty (30) days’ written notice to do such acts as are
reasonably required to so maintain the Premises. If Tenant fails to promptly
commence such work within such time period and diligently prosecute it to
completion, then Landlord shall have the right to do such acts and expend such
funds at the expense of Tenant as are reasonably required to perform such work.
Any amount so expended by Landlord shall be paid by Tenant promptly after demand
with interest at the Prime Rate plus two percent (2%) per annum, from the date
of such work, but not to exceed the maximum amount then allowed by law. Landlord
shall have no liability to Tenant for any damage, inconvenience, or interference
with the use of the Premises by Tenant as the result of performing any such
work. For the purpose of this Lease, the “Prime Rate” shall mean the rate, or
base rate, reported in the Money Rates column or section of The Wall Street
Journal as being the base rate on corporate loans at large U.S. money center
commercial banks (whether or not such rate has actually been charged by any such
bank) on the first date on which The Wall Street Journal is published in the
month preceding the month in which the subject costs are incurred.

 

(d) If Landlord fails to provide repairs or maintenance as required under this
Lease, and such failure interferes with Tenant’s use of the Premises, and Tenant
has notified Landlord of the necessity of such repairs or maintenance in
writing, then Tenant may perform such repairs or maintenance at Landlord’s cost
by taking whatever action is reasonably necessary to do so, provided:

 

(1) Tenant gives Landlord (and any mortgagee whose address has been provided to
Tenant) notice of Tenant’s intent to take such action at least ten (10) business
days prior to taking any such action, Landlord further fails or refuses to
commence repairs within three (3) business days after a second written notice to
Landlord and such mortgagee (which notice cannot be effective until the lapse of
the aforementioned ten (10) business day period) (if the nature of the required
repair is such that Landlord’s failure to act is reasonably likely to result in
injury to Tenant’s employees or visitors, or damage to Tenant’s personal
property, the aforementioned notice period shall be one (1) business day, and
there shall be no requirement that Tenant notify Landlord’s mortgagee);

 

(2) If such repairs or maintenance will affect the Building’s electrical or
mechanical systems, or the structural integrity of the Building, Tenant shall
use only those contractors used by Landlord in the Building that work on the
Building’s systems, equipment or structure (unless such contractors are
unwilling or unable to perform such work, or the urgent nature of the required
repair makes using those contractors impractical, in which events Tenant may
utilize the services of any other qualified contractor approved by Landlord,
which approval shall not be unreasonably withheld, conditioned or delayed).

 

If Landlord does not deliver a detailed written reasonable objection to Tenant
within thirty (30) days after receipt of any invoice from Tenant of the
reasonable costs and expenses incurred by Tenant in so repairing or maintaining
(such invoice to contain a reasonably particularized breakdown of the costs and
expenses incurred by Tenant in connection therewith) then Tenant shall be
entitled to deduct from Rent next due the amount set forth in such invoice (to
the extent not previously paid by Landlord).

 

12. WASTE

 

Tenant shall not use the Premises in any manner that will constitute waste,
nuisance, or unreasonable annoyance (which includes excessive noise and/or
vibration) to owners or occupants of adjacent properties or to other tenants of
the Building.

 

13. LIENS

 

Tenant shall keep the Premises and the Project free from any liens arising out
of any work performed, materials furnished, or obligations incurred by Tenant.
Landlord may, at its election, and upon ten (10) days’ notice to Tenant, remove
any liens, in which case Tenant shall pay to Landlord the cost of removing the
lien, including reasonable attorneys’ fees. Landlord shall have the right at all
times to post on the Premises any notices permitted or required by law for the
protection of Landlord, the Premises, the Building or the Project from
mechanics’ and materialmen’s liens. To the extent a lien arises out of any work
performed, materials furnished, or obligations incurred by Tenant, Tenant shall
have thirty (30) days to remove such lien, or provide a bond to Landlord in an
amount sufficient to satisfy the lien.

 

14. UTILITIES AND SERVICES

 

(a) Landlord agrees to furnish to the Premises during the Business Hours (and
during non-Business Hours, subject to the terms of this Section 14), subject to
the conditions and in accordance with the standards set forth in this Lease,
adequate quantities of electric current for normal lighting and fractional
horsepower office machines, water for lavatory and drinking purposes (hot and
cold), heat and air conditioning required in the comfortable use and occupation
of the Premises, and elevator service by non-attended automatic elevators.
Tenant

 

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acknowledges and agrees that Landlord may impose a reasonable charge for the use
of any additional or unusual janitorial services required by Tenant’s
carelessness or the nature of Tenant’s business that is inconsistent with the
Use permitted under this Lease. Landlord shall not be obligated to service,
maintain, repair or replace any system or improvement in the Premises that has
not been installed by Landlord at Landlord’s expense, or which is a specialized
improvement requiring additional or extraordinary maintenance or repair (by way
of example only, if the standard premises in the Building contain fluorescent
light fixtures, Landlord’s obligation shall be limited to the replacement of
fluorescent light tubes, irrespective of any incandescent fixtures that may have
been installed in the Premises at Tenant’s expense). Landlord shall not be
liable for, and (except as provided in Section 14(b) below) Tenant shall not be
entitled to any abatement or reduction of rent by reason of Landlord’s failure
to furnish any of the foregoing when such failure is caused by accident,
breakage, repairs, strikes, lockouts or other labor disturbances or labor
disputes of any character or for any other causes; provided, however, Landlord
shall use its reasonable efforts to cause such services to be restored as soon
as possible. Tenant hereby waives the provisions of California Civil Code
Section 1932(1) or any other applicable existing or future law, ordinance or
governmental regulation permitting the termination of this Lease due to the
interruption or failure of any services to be provided under this Lease.

 

(b) If there shall be an interruption, curtailment or suspension of the
Building’s elevator, electricity or HVAC service or water supply (and no
reasonably equivalent alternative service or supply is provided by Landlord)
(each, a “Service Interruption”), and if (i) such Service Interruption shall not
have been caused, in whole or in part, by an act or omission or negligence of
Tenant, or of Tenant’s agents, employees or contractors, (ii) such Service
Interruption does not arise as a result of a matter, event or condition
affecting the general area in which the Building is located, such as rolling
electrical blackouts, (iii) such Service Interruption shall have been caused, in
whole or in part, by an act or omission or negligence of Landlord, or of
Landlord’s agents, employees or contractors, and (iv) Landlord shall have failed
to cure such Service Interruption within five (5) business days after the
occurrence thereof, Rent hereunder shall thereafter be abated in the same
proportion as the portion of the Premises affected by the Service Interruption
bears to the entire Premises from the end of such five (5) business day period
until such time as such services or utilities are restored or Tenant begins
using the Premises (or affected portion thereof) again, whichever shall first
occur.

 

(c) Tenant acknowledges and agrees that Tenant’s use of the Premises during
non-Business Hours imposes additional burden on the Project’s janitorial
services, fluorescent light tubes, HVAC, and the Project Common Areas.
Accordingly, non-Business Hours use of services will be made available to Tenant
through an access or override switch accessible to Tenant from the Premises and
will be billed as an after hours rent assessment (the “After Hours Charge”).
After hours use will be metered and the After Hours Charge will be payable by
Tenant to Landlord upon demand. The After Hours Charge is estimated to be $3.50
per hour and subject to change due to increases in maintenance costs. The After
Hours Charge shall be limited to amount of the reasonable out-of-pocket costs
that Landlord can substantiate that Landlord has incurred as a direct result of
Tenant’s use of the Premises in excess of the Business Hours, and shall not
include any costs of electricity or natural gas (except that, during the six
month “free rent” period under Section 5(b) above, the After-Hours Charge shall
include electrical costs, and during such six month period the After Hours
Charge shall, the Landlord currently estimates, be $20.00 per hour, for each
HVAC unit used). Tenant shall be entitled to access to the Premises, Building
and Project Common Areas, twenty-four (24) hours a day, three hundred sixty-five
(365) days a calendar year.

 

(d) Except as otherwise provided in the Lease Improvement Agreement, Tenant
shall not, without the prior consent of Landlord, connect to the utility systems
of the Building any apparatus, machinery or other equipment except typical
office machines and devices such as electric typewriters, word processors, mini
and micro-computers and office-size photocopiers. Nor shall Tenant, without the
prior written consent of Landlord, connect to any electrical circuit in the
Premises any apparatus or equipment with power requirements that exceed the
designed electrical capacity of the Premises as described in the Lease
Improvement Agreement; Landlord agrees, that in all events Tenant shall have the
use of not fewer than six (6) watts of electricity per rentable square foot in
the Premises for Tenant’s equipment, at no additional charge. Tenant shall pay
the cost of all utilities and services supplied to Tenant in connection with
Tenant’s use of additional office equipment approved by Landlord hereunder.
Notwithstanding Landlord’s consent to such excess loading of circuits, Tenant
shall pay the cost of any additional or above-standard capacity electrical
circuits necessitated by such excess loading circuits and the installation
thereof.

 

(e) All sums payable hereunder by Tenant for additional services or for excess
utility usage shall be payable within thirty (30) days after written request
from Landlord, including reasonable supporting documentation, except that
Landlord may require Tenant to pay monthly for the estimated cost of Tenant’s
excess utility usage if such usage occurs on a regular basis, and such estimated
amounts shall be payable in advance on the first day of each month.

 

(f) [Intentionally omitted]

 

(g) Tenant may elect to hire its own cleaning and janitorial service, upon not
less than thirty (30) days notice to Landlord. If Tenant makes such an election,
Tenant shall receive a reduction in Base Rent equal to the cost that Landlord
actually incurred in the Base Year in providing such janitorial service.

 

(h) Landlord shall provide commercially reasonable levels of security service
for the Project, the cost of which shall be included in Operating Expenses.

 

(i) Landlord shall cause the Building’s windows to be washed, inside and out, as
often as commercially reasonable, but in all events no less frequently than
twice per calendar year; the cost of such window washing shall be included in
Operating Expenses.

 

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15. ASSIGNMENT AND SUBLETTING

 

(a) Tenant shall not, without the prior written consent of Landlord, which shall
not be unreasonably withheld or delayed as provided in this Section 15: (a)
assign, mortgage, pledge, encumber or otherwise transfer this Lease, the term or
estate hereby granted, or any interest hereunder; (b) permit the Premises or any
part thereof to be utilized by anyone other than Tenant (whether as
concessionaire, franchisee, licensee, permittee or otherwise); or (c) except as
hereinafter provided, sublet or offer or advertise for subletting the Premises
or any part thereof. Any assignment, mortgage, pledge, encumbrance, transfer or
sublease without Landlord’s consent shall be voidable and, at Landlord’s
election, shall constitute a default.

 

Notwithstanding the foregoing and Subsections (b) and (c) below, Tenant may
assign this Lease or sublet the Premises or a portion thereof, without
Landlord’s consent, but with prior written notice, to any corporation,
partnership, individual or other entity which controls, is controlled by or is
under common control with Tenant; or to any corporation, partnership, individual
or other entity, resulting from the merger or consolidation with Tenant; or to
any person or entity which acquires all of the assets of Tenant’s business going
concern, provided that (i) the assignee or subtenant assumes, in full, the
obligations of Tenant under this Lease (or, in the case of a sublease, the
non-monetary obligations relevant to the portion of the Premises being
subleased), (ii) Tenant remains fully liable under this Lease, (iii) the use of
the Lease by such transferee conforms with the requirements of this Lease, and
(iv) if Tenant is no longer a viable operating business, the proposed transferee
shall have a net worth which is comparable to that of Tenant as of the Lease
Date. Provided that Tenant is a corporation, and (i) the stock of Tenant is
traded on a national exchange, the transfer of stock in Tenant shall not be
considered an assignment, sublease or transfer under the Lease, or (ii) the
stock of Tenant is not traded on a national exchange, the collective transfer of
fifty percent (50.00%) or less of such stock shall not be considered an
assignment, sublease or transfer under this Lease.

 

(b) If at any time or from time to time during the Term of this Lease, Tenant
desires to assign this Lease with respect to, or to sublet, all or any part of
the Premises, then at least twenty (20) days prior to the date when Tenant
desires the assignment or subletting to be effective (the “Transfer Date”),
Tenant shall give Landlord a notice (the “Transfer Notice”) which shall set
forth the name, address and business of the proposed assignee or subtenant,
information (including financial statements and references) concerning the
character of the proposed assignee or subtenant, in the case of a proposed
sublease, a detailed description of the space proposed to be sublet, which must
be a single, self-contained unit (the “Space”), any rights of the proposed
assignee or subtenant to use Tenant’s improvements and the like, the Transfer
Date, and the fixed rent and/or other consideration and all other material terms
and conditions of the proposed assignment or subletting, all in such detail as
Landlord may reasonably require, if Landlord promptly (not later than ten (10)
business days after receipt of the Transfer Notice) requests additional detail,
the Transfer Notice shall not be deemed to have been received until Landlord
receives such additional detail. If this Lease or any interest in this Lease is
sold, assigned or transferred by Tenant, or Tenant subleases any part of the
Premises, without Landlord’s consent, Landlord may, cumulative of any other
right or remedy available to Landlord, elect to terminate this Lease (as it
affects the portion of the Premises sought to be sublet or assigned) as of the
effective date of the proposed transfer. Landlord’s acceptance of any name for
listing on the Building directory will not be deemed, not will it substitute
for, Landlord’s consent, as required by this Lease, to any sublease, assignment
or other occupancy of the Premises.

 

(c) Landlord shall be permitted to consider any reasonable factor in determining
whether or not to withhold its consent to a proposed assignment or sublease and
Landlord shall make such determination within twenty (20) days following
Landlord’s receipt of the Transfer Notice. The failure of Landlord to deliver
written notice of such determination within such time period shall be deemed
Landlord’s disapproval thereof. Without limiting the other instances in which it
may be reasonable for Landlord to withhold its consent to an assignment or
sublease, it shall be reasonable for Landlord to withhold its consent if
Landlord establishes that any of the following conditions are not satisfied:

 

(1) The proposed use by the transferee shall (i) comply with Tenant’s permitted
use, (ii) not materially increase the likelihood of damage or destruction, (iii)
not materially increase the density of occupancy of the Premises or increase the
amount of pedestrian and other traffic through the Building beyond the limits
for which the Building was designed, (iv) not be likely to cause an increase in
insurance premiums for insurance policies applicable to the Building, unless
paid for by Tenant or the transferee, (v) not require new tenant improvements
incompatible with then-existing Building systems and components, unless paid for
by Tenant or the transferee, (vi) unless paid by Tenant or the transferee, not
require Landlord to make material modifications to the Building outside of the
Premises (in order, for example, to comply with laws such as the ADA), and
(viii) not otherwise have or cause a material adverse impact on the Premises,
the Building, the Project, or Landlord’s interest therein

 

(2) The proposed transferee shall not be a foreign government entity.

 

(3) Any ground lessor or mortgagee whose consent to such transfer is required
fails to consent thereto, notwithstanding Landlord’s good faith and diligent
efforts to obtain such consent.

 

(d) Provided Landlord has consented to such assignment or subletting, Tenant
shall be entitled to enter into such assignment or sublease with the third party
identified in the Transfer Notice subject to the following conditions:

 

(1) At the time of the transfer, no event of monetary default or monetary
material default under this Lease (following the giving of notice and passage of
the applicable cure period under Section 24) shall have occurred and be
continuing;

 

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(2) The assignment or sublease shall be on the same terms substantially set
forth in the Transfer Notice given to Landlord;

 

(3) No assignment or sublease shall be valid and no assignee or sublessee shall
take possession until an executed counterpart of the assignment or sublease has
been delivered to Landlord;

 

(4) No assignee or sublessee shall have a right further to assign or sublet
without Landlord’s consent thereto in each instance, which consent in the case
of a future assignment should not be unreasonably withheld or delayed;

 

(5) Any assignee shall have assumed in writing the obligations of Tenant under
this Lease;

 

(6) Any subtenant shall have agreed in writing to comply with all applicable
terms and conditions of this Lease with respect to the Space;

 

(7) In the event Tenant sublets the entire Premises or any part thereof, and
where the Landlord’s consent is otherwise required, Tenant shall deliver to
Landlord fifty percent (50.00%) of any excess rent within thirty (30) days of
Tenant’s receipt thereof pursuant to such subletting. As used herein, “excess
rent” shall mean any sums or economic consideration per square foot of the
Premises received by Tenant pursuant to such subletting in excess of the amount
of the rent per square foot of the Premises payable by Tenant under this Lease
applicable to the part or parts of the Premises so sublet; provided, however,
that no excess payment shall be payable until Tenant shall have recovered
therefrom all of the costs incurred by Tenant for brokerage commissions, tenant
improvement work approved by Landlord, reasonable rent concessions, reasonable
attorneys fees, and reasonable marketing fees, in conjunction with such
sublease; and

 

(8) In the event Tenant assigns this Lease, and where the Landlord’s consent is
otherwise required, Tenant shall deliver to Landlord fifty percent (50.00%) of
any excess payment within thirty (30) days of Tenant’s receipt thereof pursuant
to such assignment. As used herein, “excess payment” shall mean the amount of
payment received for such assignment of this Lease in excess of the rent payable
by Tenant under this Lease; provided, however, that no excess payment shall be
payable until Tenant shall have recovered therefrom all of the costs incurred by
Tenant for brokerage commissions, tenant improvement work approved by Landlord,
rent concessions, reasonable attorneys fees, and reasonable marketing fees, in
conjunction with such assignment.

 

(e) No subletting or assignment shall release Tenant of Tenant’s obligations
under this Lease or alter the liability of Tenant to pay the rent and to perform
all other obligations to be performed by Tenant hereunder. The acceptance of
rent by Landlord from any other person shall not be deemed to be a waiver by
Landlord of any provision hereof. Consent to one assignment or subletting shall
not be deemed consent to any subsequent assignment or subletting. In the event
of default by an assignee or subtenant of Tenant or any successor of Tenant in
the performance of any of the terms hereof, Landlord may proceed directly
against Tenant without the necessity of exhausting remedies against such
assignee, subtenant or successor. Landlord may consent to subsequent assignments
of the Lease or sublettings or amendments or modifications to the Lease with
assignees of Tenant, after notifying Tenant, or any successor of Tenant, and
after obtaining its or their consent thereto and any such actions shall not
relieve Tenant of liability under this Lease.

 

(f) If Tenant assigns the Lease or sublets the Premises or requests the consent
of Landlord to any assignment or subletting, then Tenant shall, upon demand, pay
Landlord an administrative fee not to exceed Five Hundred and No/100ths Dollars
($500.00).

 

(g) Tenant may require, as part of its Transfer Notice, that a transferee
receive a recognition agreement (the “Recognition Agreement”) from Landlord
which provides that in the event this Lease is terminated, Landlord shall
recognize the transferee (and such transferee shall be bound to and recognize
Landlord), provided that Landlord shall only execute a Recognition Agreement
with such transferee, under the following conditions (which conditions must be
reflected in the Recognition Agreement): (i) such transfer is made upon the same
terms and conditions set forth in this Lease, subject to equitable modifications
based on the number of rentable square feet contained in the Space; provided,
however, the economic terms of such transfer may be more favorable to Landlord
than those set forth in this Lease, (ii) the Space contains only full floors in
the Building, (iii) all Space is contiguous, (iv) the transferee is, as of the
date this Lease is terminated, a party of reasonable financial worth and/or
financial stability in light of the responsibilities involved under the subject
transfer (it being agreed that it would be reasonable for Landlord to deny a
Recognition Agreement to any transferee whose net worth is less than the product
of $20,000,000 times the number of floors the transferee is leasing, but such
specific minimum net worth requirement shall not, however, be imposed on
transferees not requesting a Recognition Agreement), (v) Landlord shall not be
liable for any act or omission of Tenant, (vi) Landlord shall not be subject to
any offsets or defenses which the transferee might have as to Tenant or to any
claims for damages against Tenant, (vii) Landlord shall not be required or
obligated to credit the transferee with any rent or additional rent paid by the
transferee to Tenant, (viii) Landlord shall not be bound by any terms or
conditions of the transfer which are inconsistent with the terms and conditions
of this Lease, (ix) Landlord shall be responsible for performance of only those
covenants and obligations of Tenant pursuant to the transfer accruing after the
termination of this Lease, (x) the transferee shall make full and complete
attornment to Landlord, as lessor, pursuant to a written agreement executed by
Landlord and the transferee, so as to establish direct privity of contract
between Landlord and the transferee with the same force and effect as though the
transfer was originally made directly between Landlord and the transferee, (xi)
the transferee benefiting from the Recognition Agreement must agree to sign a
commercially reasonable subordination, non-disturbance and attornment agreement
(“SNDA”) in favor of any Superior Lienor (as defined in Section 31(d) below),
which SNDA shall require the transferee to be bound to recognize the Superior
Lienor and any successor thereto, and (xii) Tenant shall remain fully liable
under this Lease, as provided in Sections 15(a)(ii) and 15(e) above.

 

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Upon Landlord’s written request given any time after the termination of this
Lease, the transferee shall execute a lease for the space subject to the
applicable transfer upon the same terms and conditions as set forth in the
Recognition Agreement. Tenant agrees that Landlord may consider, in exercising
its reasonable discretion under Section 15(a) above whether or not to consent to
a given transfer, the Tenant’s request for a Recognition Agreement under this
Section 15(g). If it is reasonable do so, Landlord may reject the transfer on
the grounds that the proposed transferee does not have sufficient
creditworthiness to be entitled to a Recognition Agreement, in which event
Tenant shall have the right to amend its Transfer Notice to delete the request
for a Recognition Agreement.

 

(h) Notwithstanding anything to the contrary in this Lease, Tenant shall not be
deemed to have waived any of its rights under California Civil Code Section
1995.310.

 

(i) Tenant may allow any person or company which is a client or customer of
Tenant or which is providing service to Tenant or one of Tenant’s clients to
occupy certain portions of the Premises (not to exceed, at any one time, a total
of 20,000 rentable square feet), without such occupancy being deemed an
assignment or subleasing as long as no new demising walls are constructed to
accomplish such occupancy and as long as such relationship was not created as a
subterfuge to avoid the obligations set forth in this Section 15.

 

16. INDEMNITY

 

(a) Subject to the provisions of Section 18(e) below and to the extent not
funded and paid to Landlord by any insurance maintained by Tenant, Tenant shall
indemnify, defend and hold harmless Landlord against and from any and all
claims, damages, liabilities, and expenses (including reasonable attorneys’
fees) to the extent arising from Tenant’s use of the Premises for the conduct of
its business or from any activity, work or other thing done, permitted or
suffered by the Tenant in or about the Building, and shall further indemnify,
defend and hold harmless Landlord against and from any and all claims to the
extent arising from any breach or default in the performance of any obligation
on Tenant’s part to be performed under the terms of this Lease, or from any act
or negligence of the Tenant, or any officer, agent, employee, guest or invitee
of Tenant, and from all and against all reasonable cost, attorney’s fees,
expenses and liabilities incurred in or about any such claim or any action or
proceeding brought thereon, and, if any case, action or proceeding be brought
against Landlord by reason of any such claim, Tenant upon notice from Landlord
shall defend the same at Tenant’s expense by counsel selected by Tenant and
approved in writing by Landlord such approval not to be unreasonably withheld or
delayed. Notwithstanding the preceding sentence, such indemnification by Tenant
and such assumption and waiver of claims shall not include damage or injury to
the extent caused by the negligence or willful misconduct of Landlord, its
agents, employees or contractors or which is covered by insurance carried by
Landlord or required to be carried by Landlord under this Lease. Subject to
Section 18(e) below and to the extent not funded and paid to Tenant by any
insurance maintained by Landlord or Tenant, Landlord shall indemnify, defend and
hold harmless Tenant against and from any and all claims, damages, liabilities,
and expenses (including reasonable attorneys’ fees) to the extent arising from
any breach or default in the performance of any obligation on Landlord’s part to
be performed under the terms of this Lease, or from any act or negligence of
Landlord, or any officer, agent, employee, guest or invitee of Landlord, and
from and against all reasonable costs, attorneys’ fees, expenses and liabilities
incurred in or about any such claim or any action or proceeding brought thereon,
and, if any case, action or proceeding be brought against Tenant by reason of
any such claim, Landlord upon notice from Tenant, shall defend same at
Landlord’s expense by counsel selected by Landlord and approved in writing by
Tenant, such approval not to be unreasonably withheld or delayed.
Notwithstanding any other provision of this Lease to the contrary, Landlord
shall not be responsible for any damages relating to Tenant’s loss of business
resulting from an event requiring indemnification pursuant to this Section.

 

(b) Neither Landlord nor any of its Affiliates shall be liable for and there
shall be no abatement of rent for (i) any damage to Tenant’s property stored
with Affiliates of Landlord, (ii) loss of or damage to any property by theft or
any other wrongful or illegal act, or (iii) any injury or damage to persons or
property resulting from fire, explosion, wind, earthquake, falling plaster,
steam, gas, electricity, flood, water or rain which may leak from any part of
the Building or the Project or from the pipes, appliances, appurtenances or
plumbing works therein or from the roof, street or sub-surface or from any other
place or resulting from dampness or any other cause whatsoever or from the acts
or omissions of other tenants, occupants or other visitors to the Building or
the Project or from any other cause whatsoever, or (iv) any diminution or
shutting off of light, air or view by any structure which may be erected on
lands adjacent to the Building, whether within or outside of the Property.
Tenant and Landlord agree that in no case shall the other ever be responsible or
liable on any theory for any injury to such other party’s business, loss of
profits, loss of income or any other form of consequential damage. Tenant shall
give prompt notice to Landlord in the event of (a) the occurrence of a fire or
accident in the Premises or in the Building, or (b) the discovery of any defect
therein or in the fixtures or equipment thereof.

 

17. DAMAGE TO PREMISES OR BUILDING

 

All injury to the Premises or the Building caused by moving the property of
Tenant or its employees, agents, guests or invitees into, in or out of the
Building and all breakage done by Tenant or the agents, servants, employees, and
visitors of Tenant shall be repaired as determined by the Landlord at the
expense of the Tenant (except to the extent paid by insurance carried by, or
required to be carried by Landlord).

 

18. TENANT’S INSURANCE

 

(a) All insurance required to be carried by Tenant hereunder shall be issued by
responsible insurance companies which are rated by Best Insurance Reports as
A-VII or better and reasonably acceptable to Landlord and Landlord’s lender and
licensed or authorized to do business in the State of California. Each policy
shall include Landlord, and at Landlord’s request any mortgagee of Landlord, as
an additional insured (but only as to the liability

 

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policy carried by Tenant), as their respective interests may appear. Each policy
shall contain (i) a separation of insureds condition, (ii) a provision that such
policy and the coverage evidenced thereby shall, as to any loss resulting from
Tenant’s negligent acts, be primary and non-contributing with respect to any
policies carried by Landlord and that any coverage carried by Landlord shall be
excess insurance for Landlord’s interest only, and (iii) a waiver by the insurer
of any right of subrogation against Landlord, its agents, employees and
representatives, which arises or might arise by reason of any payment under such
policy or by reason of any act or omission of Landlord, its agents, employees or
representatives (but only as to the property policy). A copy of each certificate
of the insurer evidencing the existence and amount of each insurance policy
required hereunder shall be delivered to Landlord before the date Tenant is
given possession of the Premises, and annually thereafter, within thirty (30)
days after any demand by Landlord therefor. No such policy shall be cancelable,
materially changed or reduced in coverage except after endeavoring to provide
thirty (30) days’ written notice to Landlord (and not less than ten (10) days,
in the case of nonpayment of premiums). Tenant agrees that if Tenant does not
take out and maintain such insurance following a written notice from Landlord
and passage of the applicable cure period under Section 24, Landlord may (but
shall not be required to) procure said insurance on Tenant’s behalf and charge
the Tenant the premiums, which shall be payable upon demand. Tenant shall have
the right to provide such insurance coverage pursuant to blanket policies
obtained by the Tenant, provided such blanket policies expressly afford coverage
to the Premises, Landlord, Landlord’s mortgagee and Tenant as required by this
Lease.

 

(b) Beginning on the date Tenant is given access to the Premises for any purpose
and continuing until expiration of the term of this Lease, Tenant shall procure,
pay for and maintain in effect policies of property insurance covering (i) any
alterations, additions or improvements as may be made and funded by Tenant
pursuant to the provisions of Section 10 hereof, and (ii) trade fixtures,
merchandise and other personal property from time to time, in, on or about the
Premises, in an amount not less than one hundred percent (100%) of their actual
replacement cost from time to time, providing protection against all risks of
physical loss or damage. Upon termination of this Lease following a casualty as
set forth herein, the proceeds shall be paid to Tenant.

 

(c) Beginning on the date Tenant is given access to the Premises for any purpose
and continuing until expiration of the Term of the Lease, Tenant shall procure,
pay for and maintain in effect workers’ compensation and employer’s liability
insurance. In addition, Tenant shall carry commercial general liability
insurance including coverage for personal injury and contractual liability with
not less than Two Million and No/100ths Dollars ($2,000,000.00) per occurrence
combined single limit, and a Five Million and No/l00ths Dollars ($5,000,000.00)
aggregate limit, for bodily injury, personal injury or property damage
liability.

 

(d) [Intentionally omitted]

 

(e) Landlord and Tenant each hereby waive all rights of recovery against the
other and against the officers, employees, agents and representatives of the
other, on account of loss by or damage to the waiving party of its property or
the property of others under its control, to the extent that such loss or damage
is insured against and payment is made under any “all risk” or “special form”
insurance policy which either may have in force at the time of the loss or
damage. Tenant and Landlord shall, upon obtaining the policies of insurance
required under this Lease, give notice to its insurance carrier or carriers that
the foregoing mutual waiver of subrogation as contained in this Lease.

 

(f) During the term of this Lease, Landlord shall maintain the following
policies of insurance with insurers of recognized responsibility, licensed to do
business in the State of California, rated by Best Insurance Reports as A-: VII
or better: (i) commercial general liability of Two Million and No/100ths Dollars
($2,000,000.00) per occurrence combined single limit, and Five Million and
No/100ths Dollars ($5,000,000.00) aggregate limit, for bodily injury, personal
injury and property damage liability, (ii) workers’ compensation insurance, in
accordance with applicable law, and employee’s liability insurance and bodily
injury by accident of One Million and No/100ths Dollars ($1,000,000.00) per
accident, and bodily injury by disease One Million and No/100ths Dollars
($1,000,000.00) policy limit, and (iii) property liability insurance, on “all
risk” or “special form” basis, insuring the Building for the full replacement
costs thereof. Landlord shall be responsible for insuring the Tenant
Improvements funded and installed by Landlord pursuant to the provisions of the
Lease Improvement Agreement.

 

(g) Provided that Tenant complies with the provisions of Section 18(a), Tenant
shall have the right to self-insure the requirements of this Section 18,
provided Tenant, along with any corporate parent, subsidiary or affiliate
thereof, maintains a minimum net worth of $400 million as shown in the latest
annual financial report for Tenant. Tenant shall provide Landlord with thirty
(30) days prior written notice of such election to self-insure.

 

19. AD VALOREM TAXES

 

Tenant shall pay, or cause to be paid, before delinquency, any and all taxes
levied or assessed and which become payable during the term hereof upon all
Tenant’s leasehold improvements (if not part of the improvements constructed
pursuant to the Leasehold Improvement Agreement), equipment, furniture,
fixtures, and personal property located in the Premises, except that which has
been paid for by Landlord and is the standard of the Building. In the event any
or all of the Tenant’s leasehold improvements (if not part of the improvements
constructed pursuant to the Leasehold Improvement Agreement), equipment,
furniture, fixtures, and personal property shall be assessed and taxed with the
Building, Tenant shall pay to Landlord its share of such taxes within thirty
(30) days after delivery to Tenant by Landlord of a statement in writing setting
forth the amount of such taxes applicable to Tenant’s property with supporting
documentation.

 

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20. WAIVER

 

No delay or omission in the exercise of any right or remedy of Landlord or
Tenant on any default by Tenant or Landlord shall impair such a right or remedy
or be construed as a waiver. The subsequent acceptance of Rent by Landlord after
breach by Tenant of any covenant or term of this Lease shall not be deemed a
waiver of such breach, other than a waiver of timely payment for the particular
Rent involved, and shall not prevent Landlord from maintaining an unlawful
detainer or other action based on such breach. No act or conduct of Landlord,
including without limitation the acceptance of the keys to the Premises, shall
constitute an acceptance of the surrender of the Premises by Tenant before the
expiration of the term. Prior to the scheduled expiration of the term of the
Lease, only a notice from Landlord to Tenant shall constitute acceptance of the
surrender of the Premises and accomplish an early termination of this Lease
Landlord’s consent to or approval of any act by Tenant requiring Landlord’s
consent or approval shall not be deemed to waive or render unnecessary
Landlord’s consent to or approval of any subsequent act by Tenant. Any waiver by
Landlord or Tenant of any default must be in writing and shall not be a waiver
of any other default concerning the same or any other provision of this Lease.
The review, approval, or inspection by Landlord of any item to be reviewed,
approved, or inspected by Landlord under the terms of this Lease shall not
constitute the assumption of any responsibility by Landlord for the accuracy or
sufficiency of any such item or the quality or suitability of such item for its
intended use.

 

21. ENTRY BY LANDLORD

 

Landlord reserves, and shall at any and all reasonable times with reasonable
notice have the right to enter the Premises to inspect the same, to supply any
service to be provided by Landlord to Tenant hereunder, to show the Premises to
prospective purchasers or tenants (with regard to prospective tenants, such
entrance shall not occur earlier than one hundred eighty (180) days prior to the
expiration of the Term), to post notices of non-responsibility, and to maintain
and repair the Premises and any portion of the Building that Landlord may deem
necessary or desirable, without abatement of Rent, and may for that purpose
erect scaffolding and other necessary structures, where reasonably required by
the character of the work to be performed, always providing that the entrance to
the Premises shall not be blocked thereby and further providing that the
business of the Tenant shall not be interfered with unreasonably. For each of
the aforesaid purposes, Landlord shall at all times have and retain a key with
which to unlock all of the doors in, upon and about the Premises, excluding
Tenant’s vaults, safes, files, and other areas designated as secure by Tenant,
and Landlord shall have the right to use any and all means which Landlord may
deem proper to open said doors in the event of an emergency (as determined by
Landlord or its employees or representatives acting in good faith), in order to
obtain entry to the Premises without liability to Landlord. Any entry to the
Premises obtained by Landlord by any of said means or otherwise shall not under
any circumstances be construed or be deemed to be a forcible or unlawful entry
into, or a detainer of the Premises, or an eviction of Tenant from the Premises
or any portion thereof.

 

22. CASUALTY DAMAGE

 

(a) During the Term hereof, if the Premises or any part thereof shall be damaged
by fire or other casualty, Tenant shall give prompt written notice thereof to
Landlord. In case the Building shall be so damaged by fire or other casualty
that substantial alteration or reconstruction of the Building shall be required
(whether or not the Premises shall have been damaged by such fire or other
casualty), (i) if such damage cannot be repaired within two hundred seventy
(270) days thereafter, as reasonably determined by Landlord, (ii) if any
mortgagee under a mortgage or deed of trust covering the Building requires that
the insurance proceeds payable as a result of said fire or other casualty be
used to retire or reduce such mortgage debt, or (iii) if such damage is not
covered by insurance carried by Landlord or required to be carried by Landlord
under this Lease, Landlord may, at its option, terminate this Lease and the term
and estate hereby granted by notifying Tenant in writing of such termination
within fifty (50) days after the date of such damage, in which event the Rent
shall be abated as of the date of such damage. If Landlord elects to repair the
Premises and/or the Building, Landlord shall within sixty (60) days after the
date of such damage commence to repair and restore the Building and shall
proceed with reasonable diligence to restore the Building (except that Landlord
shall not be responsible for delays outside its control) to substantially the
same condition in which it was immediately prior to the happening of the
casualty, except that Landlord shall not be required to rebuild, repair or
replace any part of Tenant’s furniture and furnishings or fixtures and equipment
removable by Tenant under the provisions of this Lease, but such work shall not
exceed the scope of the work done by Landlord in originally constructing the
Building. Tenant shall not be entitled to any compensation or damages from
Landlord, and Landlord shall not be liable, for any loss of the use of the whole
or any part of the Premises, the Building, Tenant’s personal property, or any
inconvenience or annoyance occasioned by such loss of use, damage, repair,
reconstruction or restoration, except that, Landlord shall allow Tenant a
diminution of Rent during the time and to the extent the Premises are unfit or
unavailable for occupancy. Any insurance which may be carried by Landlord or
Tenant against loss or damage to the Building or to the Premises shall be for
the sole benefit of the party carrying such insurance and under its sole
control. Tenant hereby specifically waives any and all rights it may have under
any law, statute, ordinance or regulation to terminate the Lease by reason of
casualty or damage to the Premises or Building, and the parties hereto
specifically agree that the Lease shall not automatically terminate by law upon
destruction of the Premises. Except as otherwise provided in this Section 22,
Tenant hereby waives the provisions of Sections 1932(2), 1933(4), 1941 and 1942
of the California Civil Code.

 

(b) In the event that Landlord elects to repair any damage to the Premises
and/or Building (if such damage prevents Tenant from using the Premises pursuant
to this Lease), Landlord shall deliver written notice to Tenant indicating
Landlord’s good faith estimate of the number of days required to repair such
damage within fifty (50) days following the date of such damage. If Landlord’s
estimate is in excess of two hundred seventy (270) days, for a period of thirty
(30) days following receipt of such notice, Tenant shall have the right, by
delivery of written notice to Landlord, to terminate this Lease, which
termination shall be effective upon delivery of such notice to

 

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Tenant by Landlord. The failure of Tenant to provide such written notice within
such time period, shall be deemed a waiver of Tenant’s right to terminate this
Lease pursuant to the preceding sentence.

 

23. CONDEMNATION

 

(a) If the whole of the Building or Premises should be condemned, this Lease
shall terminate as of the date when physical possession of the Building or the
Premises is taken by the condemning authority. If less than substantially the
whole of the Building or the Premises is thus taken or sold, this Lease shall be
unaffected by such taking, provided that (i) Tenant shall have the right to
terminate this Lease by written notice to Landlord given within ninety (90) days
after the date of such taking if twenty percent (20%) or more of the Premises is
taken and the remaining area of the Premises is not reasonably sufficient for
Tenant to continue operation of its business, and (ii) Landlord (whether or not
the Premises are affected thereby) may terminate this Lease by giving written
notice thereof to Tenant within sixty (60) days after the date of such taking,
in which event this Lease shall terminate as of the date when physical
possession of such portion of the Building or Premises is taken by the
condemning authority. If, upon any such condemnation of less than substantially
the whole of the Building or the Premises, this Lease shall not be thus
terminated, the Rent payable hereunder shall be diminished by an amount
representing that part of the Rent as shall properly be allocable to the portion
of the Premises which was so condemned, and Landlord shall, at Landlord’s sole
expense, restore and reconstruct the remainder of the Building and the Premises
to substantially their former condition to the extent that the same, in
Landlord’s reasonable judgment, may be feasible, but such work shall not exceed
the scope of the work done in originally constructing the Building, nor shall
Landlord in any event be required to spend for such work an amount in excess of
the amount received by Landlord as compensation awarded upon a taking of any
part or all of the Building or the Premises. Subject to the rights of any
mortgagee under a mortgage or deed of trust covering the Building, Landlord
shall be entitled to and shall receive the total amount of any award made with
respect to condemnation of the Premises or Building, regardless of whether the
award is based on a single award or a separate award as between the respective
parties, and to the extent that any such award or awards shall be made to Tenant
or to any person claiming through or under Tenant, Tenant hereby irrevocably
assigns to Landlord all of its rights, title and interest in and to any such
awards. No portion of any such award or awards shall be allocated to or paid to
Tenant for any so-called bonus or excess value of this Lease by reason of the
relationship between the rental payable under this Lease and what may at the
time be a fair market rental for the Premises, nor for Tenant’s unamortized
costs of leasehold improvements. The foregoing notwithstanding, and if Tenant be
not in default for any reason, Landlord shall turn over to Tenant, promptly
after receipt thereof by Landlord, that portion of any such award received by
Landlord hereunder which is attributable to Tenant’s fixtures and equipment
which are condemned as part of the property taken but which Tenant would
otherwise be entitled to remove, and the appraisal of the condemning authority
with respect to the amount of any such award allocable to such items shall be
conclusive. The foregoing shall not, however, be deemed to restrict Tenant’s
right to pursue a separate award specifically for its relocation expenses or the
taking of Tenant’s personal property or trade fixtures so long as such separate
award does not diminish any award otherwise due Landlord as a result of such
condemnation or taking. Tenant hereby specifically waives any and all rights it
may have under any law, statute, ordinance or regulation (including, without
limitation, Sections 1265.120 and 1265.130 of the California Code of Civil
Procedure), to terminate or petition to terminate this Lease upon partial
condemnation of the Premises or Building, and the parties hereto specifically
agree that this Lease shall not automatically terminate upon condemnation.

 

(b) Landlord may, without any obligation or liability to Tenant and without
affecting the validity and existence of this Lease other than as hereafter
expressly provided, agree to sell and/or convey to the condemnor the Premises or
portion thereof sought by the condemnor, without first requiring that any action
or proceeding be instituted, or if such action or proceeding shall have been
instituted, without first requiring any trial or hearing thereof (and Landlord
is expressly empowered to stipulate to judgment therein), free from this Lease
and the rights of Tenant hereunder.

 

(c) If all or any portion of the Premises is condemned or otherwise taken for a
period (i) of less than one hundred twenty (120) days, this Lease shall remain
in full force and effect and Tenant shall continue to perform all terms and
covenants of this Lease; provided, however, Rent shall abate during such limited
period in proportion to the portion of the Premises that is rendered unusable as
a result of such condemnation or other taking, or (ii) of one hundred twenty
(120) days or more, Tenant shall have the right to terminate this Lease by
providing written notice of such election within thirty (30) days of such
condemnation, in which case Rent shall be abated as of the date of such
condemnation.

 

(d) The words “condemnation” or “condemned” as used herein shall mean the taking
for any public or quasi-public use under any governmental law, ordinance, or
regulation, or the exercise of, or the intent to exercise, the power of eminent
domain, expressed in writing, as well as the filing of any action or proceeding
for such purpose, by any person, entity, body, agency, or authority having the
right or power of eminent domain, and shall include a voluntary sale by Landlord
to any such person, entity, body agency or authority, either under threat of
condemnation expressed in writing or while condemnation proceedings are pending,
and shall occur in point of time upon the actual physical taking of possession
pursuant to the exercise of said power of eminent domain.

 

24. TENANT’S DEFAULT

 

The occurrence of any one or more of the following events shall constitute a
default and breach of this Lease by Tenant:

 

(a) The abandonment of the Premises by Tenant (failure to occupy and operate the
Premises for ten (10) days or more shall be deemed an abandonment), unless
Tenant continues to pay all Rent and other expenses as and when due.

 

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(b) The failure by Tenant to make any payment of Rent or any other payment
required to be made by Tenant hereunder as and when due, which such failure
shall continue for a period of five business days following Tenant’s receipt of
written demand from Landlord.

 

(c) Tenant’s failure to observe or perform any of the covenants, conditions, or
provisions of this Lease to be observed or performed by Tenant, other than as
described in subparagraph (b) above, where such failure shall continue for a
period of fifteen (15) days after written notice thereof by Landlord to Tenant;
provided, however, that if the nature of Tenant’s default is such that more than
fifteen (15) days are reasonably required for its cure, then Tenant shall not be
deemed to be in default if Tenant commences such cure within said fifteen (15)
day period and thereafter diligently prosecutes such cure to completion;
provided that such cure shall not be in excess of ninety (90) days.

 

(d) The making by Tenant of any general assignment or general arrangement for
the benefit of creditors, or the appointment of a trustee or a receiver to take
possession of substantially all of Tenant’s assets located at the Premises or of
Tenant’s interest in this Lease, where possession is not restored to Tenant
within sixty (60) days, or the attachment, execution, or other judicial seizure
of substantially all of Tenant’s assets located at the Premises or of Tenant’s
interest in this Lease, where such seizure is not discharged in sixty (60) days.

 

(e) The filing of any voluntary petition in bankruptcy by Tenant, or the filing
of any involuntary petition by Tenant’s creditors, which involuntary petition
remains undischarged for a period of sixty (60) days. In the event that under
applicable law the trustee in bankruptcy or Tenant has the right to affirm this
Lease and perform the obligations of Tenant hereunder, such trustee or Tenant
shall, in such time period as may be permitted by the bankruptcy court having
jurisdiction, cure all defaults of Tenant hereunder outstanding as of the date
of the affirmance of this Lease, and provide to Landlord such adequate
assurances as may be necessary to ensure Landlord of the continued performance
of Tenant’s obligation under this Lease.

 

(f) Without the prior written consent of Landlord, which shall not be
unreasonably withheld or delayed, selling, leasing, assigning, encumbering,
hypothecating, transferring, or otherwise disposing of all or substantially all
of the Tenant’s assets.

 

(g) If Tenant is a partnership or consists of more than one (1) person or
entity, if any partner of the partnership or other person or entity is involved
in any of the acts or events described in Sections (d) or (e) above.

 

25. REMEDIES FOR TENANT’S DEFAULT

 

In the event of Tenant’s default, Landlord may:

 

(a) Terminate Tenant’s right to possession of the Premises by any lawful means,
in which case this Lease shall terminate and Tenant shall immediately surrender
possession of the Premises to Landlord. In such event, Landlord shall be
entitled to recover from Tenant:

 

(1) the worth at the time of the award of any unpaid rent which had been earned
at the time of such termination; plus

 

(2) the worth at the time of the 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 which Tenant proves could have been reasonably
avoided; plus

 

(3) the worth at the time of the award of the amount by which the unpaid rent
for the balance of the term after the time of award exceeds the amount of such
rental loss which Tenant proves could be reasonably avoided; plus

 

(4) 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 (including, without limitation, the cost of recovering possession of
the Premises, expenses of reletting including necessary renovation and
alteration of the Premises, reasonable attorneys’ fees, and real estate
commissions actually paid and that portion of the leasing commission paid by
Landlord and applicable to the unexpired portion of this Lease); plus

 

(5) such other amounts in addition to or in lieu of the foregoing as may be
permitted from time to time by applicable California law.

 

As used in Subsections (1) and (2) above, the “worth at the time of the award”
shall be computed by allowing interest at the lesser of ten percent (10%) per
annum, or the maximum rate permitted by law per annum. As used in Subsection (3)
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%).

 

(b) Continue this Lease in full force and effect, and the Lease will continue in
effect, as long as Landlord does not terminate Tenant’s right to possession, and
Landlord shall have the right to collect Rent when due consistent with
California Civil Code Section 1951.4. During the period Tenant is in default,
Landlord may enter the Premises and relet them, or any part of them, to third
parties for Tenant’s account. Tenant shall be liable immediately to Landlord for
all costs Landlord reasonably incurs in reletting the Premises, including,
without limitation, brokers’ commissions, expenses of remodeling the Premises
required by the reletting, and like costs. Reletting can be for a period shorter
or longer than the remaining term of this Lease. Tenant shall pay to Landlord

 

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the Rent due under this Lease on the dates the Rent is due, less the rent
Landlord receives from any reletting. In no event shall Tenant be entitled to
any excess rent received by Landlord. No act by Landlord allowed by this
paragraph shall terminate this Lease unless Landlord notifies Tenant in writing
that Landlord elects to terminate this Lease. After Tenant’s default and for as
long as Landlord does not terminate Tenant’s right to possession of the
Premises, if Tenant obtains Landlord’s consent, Tenant shall have the right to
assign or sublet its interest in this Lease, but Tenant shall not be released
from liability.

 

(c) Cause a receiver to be appointed to collect Rent. Neither the filing of a
petition for the appointment of a receiver nor the appointment itself shall
constitute an election by Landlord to terminate the Lease.

 

(d) Cure the default at Tenant’s cost. If Landlord at any time, by reason of
Tenant’s default, reasonably pays any sum or does any act that requires the
payment of any sum, the sum paid by Landlord shall be due immediately from
Tenant to Landlord at the time the sum is paid, and if paid at a later date
shall bear interest at the lesser of ten percent (10%) per annum, or the maximum
rate an individual is permitted by law to charge from the date the sum is paid
by Landlord until Landlord is reimbursed by Tenant. The sum, together with
interest on it, shall be additional Rent.

 

The foregoing remedies are not exclusive; they are cumulative, in addition to
any remedies now or later allowed by law, to any equitable remedies Landlord may
have, and to any remedies Landlord may have under bankruptcy laws or laws
affecting creditors’ rights generally. The waiver by Landlord of any breach of
any term, covenant or condition of this Lease shall not be deemed a waiver of
such term, covenant or condition or of any subsequent breach of the same or any
other term, covenant or condition. Acceptance of Rent by Landlord subsequent to
any breach hereof shall not be deemed a waiver of any proceeding breach other
than a failure to pay the particular Rent so accepted, regardless of Landlord’s
knowledge of any breach at the time of such acceptance of Rent. Landlord shall
not be deemed to have waived any term, covenant or condition unless Landlord
gives Tenant written notice of such waiver.

 

26. SURRENDER OF PREMISES

 

On expiration of this Lease or within five (5) days after the earlier
termination of the Term, Tenant shall surrender to Landlord the Premises in good
condition (except for ordinary wear and tear, repair and maintenance which is
the obligation of Landlord, and destruction to the Premises covered by Section
22). Tenant shall remove all its personal property within the above-stated time.
Tenant shall perform all restoration made necessary by the removal of any
alterations or Tenant’s personal property within the time periods stated in this
paragraph.

 

Landlord may elect to retain or dispose of in any manner any alterations or any
of Tenant’s personal property that Tenant does not remove from the Premises on
expiration or termination of the term as allowed or required by this Lease by
giving at least ten (10) days’ notice to Tenant. Title to any such alterations
or any of Tenant’s personal property that Landlord elects to retain or dispose
of on expiration of the ten (10)-day period shall vest in Landlord. Tenant
waives all claims against Landlord for any damage to Tenant resulting from
Landlord’s retention or disposition of any such alterations or any of Tenant’s
personal property. Tenant shall be liable to Landlord for Landlord’s costs for
storing, removing, and disposing of any alterations or any of Tenant’s personal
property. If Tenant fails to surrender the Premises to Landlord on expiration or
five (5) days after termination of the term as required by this paragraph,
Tenant shall indemnify and hold Landlord harmless from all claims, liability and
damages resulting from Tenant’s failure to surrender the Premises, including,
without limitation, claims made by a succeeding tenant resulting from Tenant’s
failure to surrender the Premises.

 

27. SUBSTITUTION

 

Intentionally Deleted.

 

28. PARKING

 

Tenant shall have the right to park in the Project’s parking facilities in
common with other tenants of the Building and or Project upon terms and
conditions as may from time to time be established by Landlord. In this regard,
during the Term of the Lease, Tenant shall be entitled to the nonexclusive use
of not less than four (4) parking spaces for every one thousand (1,000) rentable
square feet within the Premises at no cost to Tenant or Tenant’s employees or
visitors. If Tenant and Tenant’s employees and visitors consistently use more
parking stalls than allotted to Tenant under this Lease, and as a result other
occupants of the Building consistently do not have a sufficient parking spaces
available to them, Landlord shall have the right to thereafter take commercially
reasonable measures, (such as issuing parking permits, and towing vehicles) in
order to ensure that Tenant and the other Building occupants do not use more
spaces than allotted to them under their respective leases. Not more than
thirty-five percent (35%) of the parking spaces shall be compact-sized, with the
balance being full-sized. The parking layout shall include an adequate area
reserved for car-pool parking. If Landlord grants reserved parking rights to any
occupant of the Building, such occupant’s percentage of such reserved parking
stalls shall not exceed such occupant’s proportionate share of the rentable area
of the Building, and Tenant shall be entitled to that percentage of the total
reserved parking stalls equal to Tenant’s Proportionate Share of the rentable
area of the Building. Landlord shall use best efforts to ensure that the
Tenant’s rights to the parking area are not infringed upon by others. Landlord
shall ensure, at Landlord’s sole expense, that the exterior light levels satisfy
all laws and prudent safety standards; Landlord shall, prior to completion of
construction, provide the results of an exterior lighting survey to Tenant.
Landlord shall not be liable for any claims, losses, damages, expenses or
demands with respect to injury or damage to the vehicles of Tenant or Tenant’s
customers or employees that park in the parking areas of the Project, except for
such loss or damage as may be caused by Landlord’s gross negligence or willful
misconduct. If Tenant leases

 

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additional space in the Building or Project, Tenant’s reserved and non-exclusive
parking rights shall be increased on a proportionate basis.

 

29. ESTOPPEL CERTIFICATE

 

(a) Tenant shall at any time and from time to time upon not less than fifteen
(15) days’ prior written notice from Landlord execute, acknowledge, and deliver
to Landlord a statement in writing, (a) certifying that this Lease is unmodified
and in full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease as modified is in full force and
effect) and the date to which the Rental and other charges are paid in advance,
if any; (b) certifying that the Premises have been accepted by Tenant; (c)
confirming the Commencement Date and the expiration date of this Lease; (d)
acknowledging that there are not, to Tenant’s knowledge, any uncured defaults on
the part of the Landlord hereunder, or specifying such defaults, if any are
claimed, and (e) such other matters reasonably requested by Landlord. Any such
statement may be relied upon by a prospective purchaser or encumbrancer of all
or any portion of the real property of which the Premises are a part.

 

(b) Landlord shall at any time and from time to time upon not less than fifteen
(15) days’ prior written notice from Tenant execute, acknowledge, and deliver to
Tenant a statement in writing, (a) certifying that this Lease is unmodified and
in full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease as modified is in full force and
effect) and the date to which the Rental and other charges are paid in advance,
if any; (b) confirming the Commencement Date and the expiration date of this
Lease; (c) acknowledging that there are not, to Landlord’s knowledge, any
uncured defaults on the part of the Tenant hereunder, or specifying such
defaults, if any are claimed, and (d) such other matters reasonably requested by
Tenant. Any such statement may be relied upon by a prospective transferee of
Tenant’s interest in this Lease.

 

30. SALE OF PREMISES

 

In the event of any sale of the Project, Landlord shall be and hereby is
entirely freed and relieved of all further liability under any and all of its
covenants and obligations contained in or derived from this Lease and accruing
after such sale, and the purchaser, at such sale or any subsequent sale of the
Premises, shall be deemed, without any further agreement between the parties or
their successors in interest or between the parties and any such purchaser, to
have assumed and agreed to carry out any and all of the covenants and
obligations of Landlord under this Lease. If any Security Deposit or prepaid
Rent has been paid by Tenant, Landlord will transfer’ the Security Deposit and
prepaid Rent to Landlord’s successor and upon such transfer, Landlord shall be
relieved of any and all further liability with respect thereto.

 

31. SUBORDINATION, ATTORNMENT

 

(a) This Lease is and shall be subordinate to any encumbrance now of record or
recorded after the date of this Lease affecting the Building, other
improvements, and land of which the Premises are a part. Such subordination is
effective without any further act of Tenant. If any mortgagee, trustee, or
ground lessor shall elect to have this Lease and any options granted hereby
prior to the lien of its mortgage, deed of trust, or ground lease, and shall
give written notice thereof to Tenant, this Lease and such options shall be
deemed prior to such mortgage, deed of trust, or ground lease, whether this
Lease or such options are deeded prior or subsequent to the date of said
mortgage, deed of trust, or ground lease, or the date of recording thereof.

 

(b) In the event any proceedings are brought for foreclosure, or in the event of
a sale or exchange of the real property on which the Building is located, or in
the event of the exercise of the power of sale under any mortgage or deed of
trust made by Landlord covering the Premises, Tenant shall attorn to the
purchaser upon any such foreclosure and sale and recognize such purchaser as the
Landlord under this Lease.

 

(c) Tenant agrees to execute any documents reasonably required to effectuate an
attornment or to make this Lease or any options granted herein prior to the lien
of any mortgage, deed of trust, or ground lease, as the case may be, provided
the rights of Tenant are not diminished or adversely affected as a result
thereof.

 

(d) Landlord agrees that Tenant’s obligations to subordinate under this Section
31 to any existing and future ground lease, mortgage, or deed of trust (each, an
“Encumbrance”) shall be conditioned upon Tenant’s receipt of a non-disturbance
agreement from the party requiring such subordination (which party is referred
to for the purposes of this Section as the “Superior Lienor”). Such
non-disturbance agreement shall be in recordable form, and shall provide, at a
minimum, that (i) Tenant’s possession of the Premises shall not be interfered
with following a foreclosure, or other termination of the Encumbrance, provided
Tenant is not in default beyond any applicable cure periods, (ii) there shall be
no diminution in Tenant’s rights under this Lease as a result of a foreclosure
or other termination of the Encumbrance, and (iii) the Superior Lienor or any
other party acquiring Landlord’s interest in this Lease shall perform all of
Landlord’s future obligations hereunder, and (iv) Landlord’s obligation with
respect to such a non-disturbance agreement shall be limited to obtaining the
non-disturbance agreement in such form as the Superior Lienor generally provides
in connection with its standard commercial loans, however, Tenant shall have the
right to negotiate, and Landlord shall use its good faith efforts and due
diligence in assisting Tenant in the negotiation of, revisions to that
non-disturbance directly with the Superior Lienor, Tenant agrees to use its good
faith efforts to reach agreement with the Superior Lienor upon acceptable terms
and conditions of a non-disturbance agreement.

 

(e) Tenant’s obligation to pay Rent under this Lease to Superior Lienor is
conditioned upon Tenant’s receipt of a nondisturbance agreement, satisfying the
requirements of Section 31 (d), from any Superior Lienor whose Encumbrance is
superior to this Lease as of the Commencement Date.

 

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32. AUTHORITY OF TENANT

 

If Tenant is a corporation, each individual executing this Lease on behalf of
said corporation represents and warrants that he is duly authorized to execute
and deliver this Lease on behalf of said corporation, and that this Lease is
binding upon said corporation in accordance with its terms.

 

33. BROKER

 

(a) Landlord and Tenant each warrants that it has had no dealings with any real
estate broker or agents in connection with the negotiation of this Lease except
for the broker or brokers listed in the Basic Lease Information of this Lease
(“Broker”), and it knows of no other real estate broker or agent who is entitled
to a commission in connection with the Lease. Landlord agrees to pay any
commission to which its Broker is entitled in connection with this Lease. Tenant
agrees to indemnify and defend Landlord and hold Landlord harmless from any
claims for brokerage commissions arising out of any discussion allegedly had by
Tenant with any broker other than Broker.

 

(b) Landlord shall pay Tenant’s Broker a commission per a separate commission
agreement.

 

34. HOLDING OVER

 

Upon termination of the Lease or expiration of the Term hereof, if Tenant
retains possession of the Premises without Landlord’s written consent first had
and obtained, then Tenant’s possession shall be deemed a month-to-month tenancy
upon all of the terms and conditions contained in this Lease, except the Base
Rent portion of the Rent which shall be increased to one hundred twenty-five
percent (125%) of the amount of the Base Rent portion of the Rent at the
expiration or earlier termination of the Lease, as the case may be. Rent, as
adjusted pursuant to this Section, shall be payable in advance on or before the
first day of each month. If either party desires to terminate such
month-to-month tenancy, it shall give the other party not less than thirty (30)
days’ advance written notice of the date of termination.

 

35. RULES AND REGULATIONS

 

Tenant shall faithfully observe and comply with the reasonable,
nondiscriminatory rules and regulations that Landlord shall from time to time
promulgate. Landlord reserves the right from time to time to make all reasonable
nondiscriminatory modifications to said rules. The additions and modifications
to those rules shall be binding upon Tenant upon delivery of a copy to them to
Tenant (a copy of the present Rules and Regulations is attached hereto as
Exhibit D). Landlord shall use its reasonable efforts to enforce compliance with
such rules in a uniform manner, but shall not be responsible to Tenant for the
nonperformance of any of said rules by other tenants or occupants. In the event
of any inconsistency between such rules and regulations and this Lease, the
terms of this Lease shall govern. Any consent required to be obtained by Tenant
pursuant to the rules and regulations Shall not be unreasonably withheld or
delayed.

 

36. OTHER RIGHTS RESERVED BY LANDLORD

 

In addition to any other rights contained in this Lease, Landlord retains and
shall have the rights set forth below, exercisable without notice and without
liability to Tenant for damage or injury to property, person or business and
without effecting an eviction, constructive or actual, or disturbance of
Tenant’s use or possession of the Premises or giving rise to any claim for
setoff or abatement of Rent: to install, affix and maintain any and all signs on
the exterior and interior of the Building, except as limited by Section 37(p)
below; to reduce, increase, enclose or otherwise change at any time and from
time to time the size, number, location, layout and nature of the Project Common
Area and facilities and other tenancies and premises in the Project and to
create additional rentable areas through use or enclosure of Project Common
Area, provided that such changes do not materially affect Tenant’s business, and
parking layout, location and nature of parking spaces available, and the access
to the Premises and visibility of Tenant’s signage is not impaired.

 

37. GENERAL PROVISIONS

 

(a) Plats and Riders. Clauses, plats, and riders, if any, signed by the Landlord
and Tenant and endorsed on or affixed to this Lease are a part hereof.

 

(b) Consents. Except as provided in this Lease, whenever this Lease requires the
consent or approval of Landlord, Landlord agrees that such consent or approval
shall not be unreasonably withheld or delayed.

 

(c) Joint Obligation. If there be more than one Tenant, the obligations
hereunder imposed upon Tenant shall be joint and several.

 

(d) Marginal Headings. The marginal headings and titles to the paragraphs of
this Lease are not a part of this Lease and shall have no effect upon the
construction or interpretation of any part hereof.

 

(e) Time. Time is of the essence in this Lease and with respect to each and all
of its provisions in which performance is a factor.

 

(f) Quiet Possession. Upon Tenant paying the Rent reserved hereunder, and
observing and performing all of the covenants, conditions, and provisions on
Tenant’s part to be observed, and performed

 

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hereunder, Tenant shall have quiet possession of the Premises for the entire
term hereof, subject to all the provisions of this Lease.

 

(g) Prior Agreements. This Lease contains all of the agreements of the parties
hereto with respect to any matter covered or mentioned in this Lease, and no
prior agreements or understanding pertaining to any such matters shall be
effective for any purpose. No provision of this Lease may be amended or added to
except by an agreement in writing signed by the parties hereto or their
respective successors in interest. This Lease shall not be effective or binding
on any party until fully executed by both parties hereto.

 

(h) Force Majeure. Except as provided in this Lease, in the event Landlord or
Tenant, is delayed, interrupted or prevented from performing any of its
obligations under this Lease, and such delay, interruption or prevention is due
to fire, act of God, failure of utility service provider to provide such utility
service, government regulation or restriction, governmental delay in issuing
permits, approvals and inspections, weather which causes delay of construction,
strike, labor dispute, unavailability of materials or any other cause outside
the reasonable control of such party (excepting, however, such party’s financial
inability), then the time for performance of the affected obligations of such
party shall be extended for a period equivalent to the period of such delay,
interruption or prevention (but in no event shall the time for performance of
any obligation for payment of money be extended pursuant to this provision).

 

(i) Jury Trial. The parties hereto shall, and they hereby do, waive trial by
jury in any action, proceeding, or counterclaim brought by either of the parties
hereto against the other on any matters whatsoever arising out of or in any way
connected with this Lease, the relationship of Landlord and Tenant, Tenant’s use
or occupancy of the Premises and/or any claim of injury or damage.

 

(j) Limitation on Liability. In consideration of the benefits accruing
hereunder, Tenant and all successors and assigns covenant and agree that, in the
event of any actual or alleged failure, breach or default hereunder by Landlord
(except for a default under the Lease Improvement Agreement prior to the
Commencement Date (1) Tenant’s sole and exclusive recourse shall be against
Landlord’s interest in the Project. Tenant shall not have any right to satisfy
any judgment which it may have against Landlord from any other assets of
Landlord; (2) no partner, stockholder, director, officer, employee, beneficiary
or trustee (collectively, “Partner”) of Landlord shall be sued or named as a
party in any suit or action (except as may be necessary to secure jurisdiction
over Landlord); (3) no service of process shall be made against any Partner of
Landlord (except as may be necessary to secure jurisdiction over Landlord); (4)
no Partner of Landlord shall be required to answer or otherwise plead to any
service of process; (5) no judgment will be taken against any Partner of
Landlord; (6) any judgment taken against any Partner of Landlord may be vacated
and set aside at any time nunc pro tune; (7) no writ of execution will ever be
levied against the assets of any Partner of Landlord; and (8) these covenants
and agreements are enforceable both by Landlord and also by any Partner of
Landlord.

 

(k) Limitation on Liability. The obligations of Tenant under this Lease do not
constitute personal obligations of the individual officers and employees of
Tenant.

 

(l) [Intentionally omitted]

 

(m) No Construction Against Drafter. The provisions of this Lease shall be
construed in accordance with the fair meaning of the language used and shall not
be strictly construed against either party.

 

(n) Separability. Any provisions of this Lease which shall prove to be invalid,
void, and illegal shall in no way affect, impair, or invalidate any other
provision hereof, and such other provisions shall remain in full force and
effect.

 

(o) Choice of Law. This Lease shall be governed by the laws of the State in
which the Premises are located.

 

(p) Signage.

 

  (i) If Landlord should install a monument (the “Monument”) (it being agreed
that Landlord has no obligation to do so) on the Lot in accordance with the
covenants, conditions and restrictions encumbering the Project, such Monument
may be used for Tenant and Building identification, and Tenant shall (subject to
clause (iii) below) have the exclusive right to install its identification
signage. Tenant shall be responsible for all costs associated with the
installation and maintenance of such signage. Upon the termination of this
Lease, the Monument signage shall be removed by Landlord, at Tenant’s expense.

 

  (ii) Tenant shall be entitled, on an exclusive basis (subject to clause (iii)
below), to Building parapet signage (“Building Signage”) to be located at a
location acceptable to Landlord and Tenant. The size, style, material and
attachment of such exterior signage shall be subject to the reasonable approval
of Landlord and Tenant and such exterior signage shall comply with all
applicable laws, statutes and ordinances, and the conditions, covenants and
restrictions encumbering the Project (collectively, the “Sign Ordinances”). The
Building signage shall be as large as such Sign Ordinances allow. Tenant shall
be responsible for all costs associated with the installation and maintenance of
such signage. Upon the termination of this Lease, the Building Signage shall be
removed by Landlord, at Tenant’s expense.

 

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  (iii) If Tenant exercises its contraction right pursuant to Section 39(d)
below: (i) Tenant’s right to Monument signage and Building Signage shall, after
the effective date of the contraction, no longer be exclusive, and (ii) Landlord
shall have the right to install other signs on the Building, but Landlord will
not permit any Competitor (as defined below) to place a sign on the Building or
Monument. As used in this Section 39(p), a “Competitor” shall be any company
that is commonly known to directly compete with Tenant’s health maintenance
organization and health insurance businesses.

 

(q) Project Name. Tenant may use the name of the Project in which the Premises
are located in all Tenant’s advertising in connection with Tenant’s business at
the Premises and for no other purpose, except with Landlord’s consent.

 

(r) Late Charges. Tenant acknowledges that late payment by Tenant to Landlord of
Rent will cause Landlord to incur costs not contemplated by this Lease, the
exact amount of such costs being extremely difficult and impracticable to fix.
Such costs include, without limitation, processing charges, accounting charges,
and late charges that may be imposed on Landlord by the terms of any encumbrance
and note secured by any encumbrance covering the Premises. Therefore, if any
delinquent installment of Rent or other sums due from Tenant is not received by
Landlord on or before the fifth day of each calendar month Tenant shall pay to
Landlord an additional sum equal to six percent (6.00%) of such overdue amount
as a late charge. The parties agree that this late charge represents a fair and
reasonable estimate of the administrative and other costs that Landlord will
incur by reason of late payment by Tenant. Acceptance of any late charge shall
not constitute a waiver of Tenant’s default with respect to the overdue amount,
nor prevent Landlord from exercising any of the other rights and remedies
available to Landlord.

 

(s) Interest. Notwithstanding any other provisions of this Lease, any
installment of Rent or other amounts due under this Lease not paid to Landlord
when due shall bear interest from the date due or from the date of expenditure
by Landlord for the account of Tenant, until the same have been fully paid, at
the lessor often percent (10%) per annum or the maximum rate permitted under
applicable law (the “Interest Rate”). The payment of such interest shall not
constitute a waiver of any default by Tenant hereunder. Any sum owing from
Landlord to Tenant under this Lease shall bear interest from the date due at the
Interest Rate.

 

(t) Attorneys’ Fees. If Tenant or Landlord shall be in breach or default under
this Lease, such party (the “Defaulting Party”) shall reimburse the other party
(the “Non-Defaulting Party”) upon demand for any costs or expenses that the
Non-Defaulting Party incurs in connection with any breach or default of the
Defaulting Party under this Lease. Such costs shall include legal fees and costs
incurred for the negotiation of a settlement, enforcement of rights or
otherwise. Furthermore, if any action for breach of or to enforce the provisions
of this Lease is commenced, the court in such action shall award to the party in
whose favor a judgment is entered, a reasonable sum as attorneys’ fees and
costs. The losing party in such action shall pay such attorneys’ fees and costs.

 

(u) Modification. This Lease and all exhibits attached hereto contain the entire
agreement between the parties relating to the rights herein granted and the
obligations herein assumed. Any oral representations or modifications concerning
this Lease shall be of no force or effect, excepting a subsequent modification
in writing signed by the party to be charged.

 

(v) Successors and Assigns. Subject to the provisions of Section 15, this Lease
and each of its covenants and conditions shall be binding upon and shall inure
to the benefit of the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors and assigns.

 

(w) Waiver of California Code Sections. Notwithstanding any other provision of
this Lease and in addition to any waivers which may be contained in this Lease,
Tenant waives the provisions of Civil Code Section 1932(2) and 1933(4) with
respect to the destruction of the Premises; Civil Code Sections 1932(1), 1941
and 1942 with respect to Landlord’s repair duties and Tenant’s right of repair;
and Code of Civil Procedure Section 1265.130 allowing either party to petition
the Superior Court to terminate this Lease in the event of a partial taking of
the Premises for public or quasi-public use by statute, by right of imminent
domain, or by purchase in lieu of imminent domain; and any right of redemption
or reinstatement of Tenant under any present of future case law or statutory
provision (including Code of Civil Procedure Section 473, 1174(c) and 1179 and
Civil Code Section 3275) in the event Tenant is dispossessed from the premises
for any reason. This waiver applies to future statutes enacted in addition or in
substitution to the statue specified herein, and this waiver shall apply even
though Tenant may be the subject of a voluntary or involuntary petition in
bankruptcy.

 

(x) Government Energy or Utility Controls. In the event of imposition of
federal, state or local governmental controls, regulations or restrictions on
the use or consumption of energy or other utilities during the term, both
Landlord and Tenant shall be bound thereby.

 

(y) Accord and Satisfaction; Allocation of Payments. No payment by Tenant or
receipt by Landlord of a lesser amount than the Rent provided for in this Lease
shall be deemed to be other than account of the earliest due Rent, nor shall any
endorsement or statement on any check or letter accompanying any check or
payment as Rent be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord’s right to recover the
balance of the Rent or pursue any other remedy provided for in this Lease. In
connection with the foregoing, Landlord shall have the absolute right in its
sole discretion to apply any payment received from Tenant to any account or
other payment of Tenant which is then due or delinquent.

 

(z) Furnishing Financial Statements. In order to induce Landlord to enter into
this Lease, and at any time during the Term, Tenant agrees that it shall furnish
to Landlord within 15 days, upon Landlord’s written request, with annual
financial statements reflecting Tenant’s current financial condition, Tenant
represents and

 

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warrants that all financial statements, records and information furnished by
Tenant to Landlord in connection with the Lease are true, correct and complete
in all respects as of the date of delivery.

 

(aa) Recording. Tenant shall not record this Lease or a memorandum thereof, or
any other reference to this Lease, without the prior written consent of
Landlord. Either party, upon the request of the other, shall execute and
acknowledge a “short form” memorandum of this Lease for recording purposes.

 

(bb) Execution of Lease, No Options. The submission of this Lease to Tenant
shall be for examination purposes only, and does not and shall not constitute a
reservation of or option for Tenant to Lease, or otherwise created any interest
of Tenant in the Premises or any other Premises within the Building. Execution
of this Lease by Tenant and its return to Landlord shall not be binding on
Landlord notwithstanding any time interval, until Landlord has in fact signed
and delivered this Lease to Tenant.

 

38. NOTICES

 

All notices and demands required to be sent to the Landlord or Tenant under the
terms of this Lease shall be personally delivered or sent by certified or
registered mail, postage prepaid or by overnight courier (i.e., Federal
Express), to the addresses indicated in the Basic Lease Information, or to such
other addresses as the parties may from time to time designate by notice
pursuant to this paragraph. In addition, Notices to Tenant shall also be sent to
the building premises. Notices shall be deemed received upon the earlier of (i)
if personally delivered, the date of delivery to the address of the person to
receive such notice (ii) if mailed, two (2) days following the date of posting
by the U.S. Postal Service, and (iii) if by overnight courier, on the business
day following the deposit of such notice with such courier.

 

39. ADDENDA/ADDITIONAL PROVISIONS

 

(a) Telecommunications Carrier’s Access.

 

(1) Tenant’s right to select and utilize a telecommunications and data carrier
(the “Carrier”) shall be conditioned on the execution by such Carrier of a
mutually acceptable license agreement, such license agreement must be
commercially reasonable, pursuant to which Landlord shall grant to the Carrier a
license (which shall be coextensive with the rights and privileges granted to
Tenant under this Lease) to install, operate, maintain, repair, replace, and
remove cable and related equipment within the Premises and the Building’s main
telephone/electrical closet and vertical and horizontal pathways within the
Building but outside of the Premises that are necessary to provide
telecommunications and data services to Tenant at the Premises.

 

(2) The license contemplated herein to be granted to the Carrier shall permit
the Carrier to provide services only to Tenant and not to any other tenants or
occupants of the Building and shall require all of the Carrier’s equipment
(other than connecting wiring) to be located in the Tenant’s Premises. The
License shall not grant an exclusive right to Tenant or to the Carrier. Landlord
reserves the right, at its sole discretion, to grant, renew, or extend licenses
to other telecommunications and data carriers for the purposes of locating
telecommunications equipment in the Building which may serve Tenant or other
tenants in the Building.

 

(3) Except to the extent expressly set forth herein, nothing herein shall grant
to the Carrier any greater rights or privileges than Tenant is granted pursuant
to the terms of this Lease or diminish Tenant’s obligations or Landlord’s rights
hereunder.

 

(4) Tenant shall be responsible for ensuring that the Carrier complies with the
terms and conditions or the license agreement relating to the use of the
Premises or the making of any physical Alterations imposed upon Tenant under
this Lease to the extent the Carrier operates or maintains any equipment or
delivers any services in the Premises. Any failure by the Carrier to observe and
comply with such terms, conditions, agreement, and covenants on behalf of
Tenant, to the extent the Carrier operates or maintains any equipment or
delivers any services in the Premises or the Licensed Areas, shall be a default
under the Lease (following the giving of written notice and the passage of the
applicable cure period under Section 24).

 

(b) Option(s) to Renew.

 

Tenant shall, provided this Lease is in full force and effect and Tenant is not
then in monetary or nonmonetary material default under any of the terms and
conditions of this Lease (following the giving of written notice and passage of
the applicable cure period under Section 24), have three (3) successive
option(s) to renew this Lease for a term of five (5) year(s) each, for the
Premises in “as is” condition and on the same terms and conditions set forth in
this Lease, except as modified by the terms, covenants and conditions set forth
below:

 

(1) If Tenant elects to exercise such option, then Tenant shall provide Landlord
with written notice no earlier than the date which is three hundred sixty-five
(365) days prior to the expiration of the then current term of this Lease, but
no later than 5:00 p.m. (Pacific Standard Time) on the date which is two hundred
seventy (270) days prior to the expiration of the then current term of this
Lease. If Tenant fails to provide such notice, Tenant shall have no further or
additional right to extend or renew the term of this Lease.

 

(2) The Base Rent in effect at the expiration of the then current term of this
Lease shall be adjusted to reflect the current fair market rental for comparable
space in the Building or Project and in other similar buildings in the same
rental market as of the date the renewal term is to commence, taking into
account the specific provisions of this Lease which will remain constant, and
the Building amenities, location, identity, quality, age,

 

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conditions, term of lease, tenant improvements, services provided, and other
pertinent items. The “Base Year” shall be the calendar year in which the
commencement of the renewal term occurs.

 

(3) Landlord shall advise Tenant of the new Base Rent for the Premises for the
applicable renewal term which will be based on Landlord’s determination of fair
market rental value no later than fifteen (15) days after receipt of notice of
Tenant’s exercise of its option to renew. Tenant shall have forty-five (45) days
after receipt of such notification from Landlord to accept the new Base Rent,
terms and conditions.

 

If Landlord and Tenant are unable to agree upon the fair market rental value for
Base Rent for the Extension Term within such forty-five (45) day period, then
within fifteen (15) days after the expiration of the forty-five (45) day period,
each party, by giving notice to the other party, shall appoint a commercial real
estate broker who is active in the greater Sacramento office market, with at
least ten (10) years of experience. “Fair Market Rental Value” shall mean the
monthly amount per rentable square foot in the Premises that a willing,
non-equity new tenant would pay and a willing landlord would accept at arm’s
length for space in a comparable building or buildings, with comparable tenant
improvements, in a comparable location, giving appropriate consideration to
then-current monthly rental rates per rentable square foot, the presence or
absence of rent escalation clauses such as operating expense and tax
pass-throughs, length of lease term, size and location of premises being leased
and other generally applicable terms and conditions of tenancy for a similar
building or buildings. If the two (2) brokers are unable to agree on the Fair
Market Rental Value for the Extension Term within twenty (20) days, they shall
select a third broker meeting the qualifications stated in this Section within
five (5) days after the last day the two (2) brokers are given to set the Fair
Market Rental Value for the Extension Term, The third broker, however selected,
shall be a person who has not previously acted in any capacity for either party.
Within twenty (20) days after the selection of the third broker, a majority of
the brokers shall set the Fair Market Rental Value for the Extension Term. If a
majority of the brokers is unable to set the Fair Market Rental Value within the
twenty (20) day period, the two (2) closest Fair Market Rental Values shall be
added together and their total divided by two (2). The resulting quotient shall
be the Fair Market Rental Value and Tenant shall pay to Landlord said Fair
Market Rental Value for the Extension Term. Each party shall be responsible for
the costs, charges and fees of the broker appointed by that party plus one-half
of the cost of the third broker.

 

(4) Any exercise by Tenant of any option to renew under this Paragraph shall be
irrevocable. If requested by Landlord, Tenant agrees to execute a lease
amendment reflecting the foregoing terms and conditions, prior to the
commencement of the renewal term. The option(s) to renew granted under this
Paragraph is/are not transferable, except to an assignee of Tenant’s entire
interest in this Lease in accordance with the terms of Section 15 of this Lease.

 

(5) If more than one renewal option is provided above, the exercise of each
renewal option shall be contingent upon Tenant exercising the prior renewal
option. Only one renewal option may be exercised at a time. As each renewal
option provided for above is exercised, the number of renewal options remaining
to be exercised is reduced by one and upon exercise of the last remaining
renewal option Tenant shall have no further right to extend the term of this
Lease.

 

(c) Expansion Option.

 

Within the first twelve (12) months following the Commencement Date, provided
Tenant is not then in default if its monetary or nonmonetary, material
obligations under this Lease, Tenant shall have the prior right of refusal to
lease up to approximately 60,000 square feet or more, if available, within Gold
Pointe Corporate Center Buildings D or E. Upon notification by Landlord in
writing of the availability of space and the terms and conditions on which
Landlord is willing to lease such additional space to Tenant, Tenant shall have
ten (10) business days to notify Landlord in writing of Tenant’s desire to
exercise Tenant’s prior right of refusal on the terms and conditions offered
(the terms offered by Landlord must be at least as favorable to Tenant as (i)
those terms offered by Landlord to the market in general, and (ii) those terms
offered by bona fide third parties that Landlord wishes to accept). In the event
Tenant fails to give Landlord notice of Tenant’s election to lease such
additional space within such time period, Tenant shall have no further right,
title or interest in such additional space and this prior right of refusal shall
terminate. If, on the other hand, Tenant exercises its prior right of refusal in
the manner prescribed, Tenant and Landlord shall consummate a lease respecting
such space without delay in accordance with the terms and conditions set forth
in Landlord’s notice. Such additional space shall be leased to Tenant on an “as
is” basis and Landlord shall have no obligation to improve such additional space
or grant Tenant any improvement allowance thereon. Notwithstanding anything to
the contrary herein contained, Tenant’s right to the expansion premises shall be
conditioned upon the following: (i) at the time Tenant agrees to accept the
expansion premises and at the time of the commencement of the term for the
expansion premises. Tenant (or an affiliate of Tenant) shall be in possession of
and occupying the primary premises for the conduct of its business therein and
the same shall not be occupied by any assignee, subtenant or licensee and,
provided further, that the option for additional space shall be applicable
hereunder only if the expansion premises will actually be occupied by Tenant (or
an affiliate of Tenant) and (ii) the agreement of acceptance shall constitute a
representation by Tenant to Landlord, effective as of the date of the agreement
of acceptance and as of the date of commencement of the lease for the expansion
premises, that Tenant does not intend to assign the lease for the expansion
premises, in whole or in part or sublet all or any portion of the Premises, the
election to expand being for the purpose of utilizing the expansion premises for
Tenant’s purposes in the conduct of Tenant’s business (or the business of an
affiliate of Tenant) therein. Tenant’s options to renew and contract shall
continue in full force and effect notwithstanding Tenant’s failure to exercise
is prior right of refusal.

 

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(d) Contraction Option.

 

Provided that Tenant is not then in default of its monetary or nonmonetary,
material obligations under this Lease, Tenant shall have the option to contract
up to thirty-five thousand (35,000) square feet of rentable area of the Premises
at any point during their initial lease term provided the following conditions
are met: (i) Tenant shall give Landlord at least two hundred seventy (270) days
prior written notice of its intent to exercise such contraction option; (ii)
Such contraction space shall be in a mutually agreeable location in the
Building, but in any event shall be in a location having a prominent lobby
entrance; (iii) Tenant shall, no later than six (6) months prior to the
effective date of the contraction, pay a lump sum lease termination fee to equal
the sum of the unamortized tenant improvements, free rent, and brokerage
commissions equal to the proportionate share of such contraction space, as well
as reasonable costs to demise the subject space (amortized over months 7 through
126 of the initial term of this Lease). Such interest rate to be utilized for
the amortization calculations shall be nine percent (9%) per annum, except for
the Additional Allowance (as defined in Section 4.2 of the Lease Improvement
Agreement), which shall be amortized at ten percent (10%) per annum); (iv)
Tenant shall deliver the contraction space to Landlord in the same condition as
received at lease commencement, normal wear and tear excepted, and in clean and
sanitary condition; and (v) all Rent obligations of Tenant under this Lease for
such contraction space are paid through the date of contraction. Landlord shall
cause the contraction space to be separately metered for electricity following
the effective date of such contraction, and Tenant shall thereafter have no
responsibility for such electricity costs.

 

Notwithstanding the foregoing, Tenant shall still be obligated for
reconciliation of Operating Expenses and Excess Utilities Payments under this
Lease for the for the contraction space until such contraction was effective.

 

Tenant agrees that, should the contraction result in the addition of extra
corridors or other nonleasable areas, the Load Factor (as defined in Section
1(b) above) may be increased, it being the parties’ intention that the Tenant’s
exercise of the contraction option shall not result in a reduction in the area
of the Building on which Landlord may collect Rent. If the contraction space is
connected to Tenant’s security system, Tenant shall, at Tenant’s option, either
remove that system from the contraction space or make whatever changes to the
system are necessary to permit its use by the next occupant of the contraction
space (in no event, however, shall Tenant have any liability to Landlord or any
occupant of the contraction space by reason of failure of such security system).

 

(e) Conduit. Landlord shall install, at Landlord’s expense, four (4) conduits to
accommodate fiber optic cable and other wiring connecting Building C to Building
D, and Building C to Building A (12033 Foundation Place) not later than the
Substantial Completion of the Base Building Work under the Lease Improvement
Agreement. The specifications for such conduit shall be subject to Tenant’s
prior approval (which shall not be unreasonably withheld, delayed or
conditioned), and shall require, at minimum, that the conduit (x) be at least
four (4) inches in diameter, and (y) comply with the minimum requirement then in
effect for Pacific Bell to install fiber optic cable. Landlord shall prepare for
Tenant’s approval (which shall not be unreasonably withheld, delayed or
conditioned) an easement agreement respecting the conduit, and shall cause the
same to be recorded against the Lot and other parcels which such conduit
crosses, not later than the Commencement Date.

 

(f) Generator. Landlord shall permit Tenant to install and maintain, at Tenant’s
expense, a back-up generator (and an associated fuel tank) for the Building, at
a location (outside of the Building) mutually acceptable to Landlord and Tenant.
Any such generator shall be subject to the requirements imposed on Alterations
pursuant to Section 10 of this Lease (including, but not limited to, the
requirements that Landlord approve the plans and that Tenant obtain all
applicable governmental permits).

 

IN WITNESS WHEREOF, this Lease is executed on the date and year first above
written.

 

LANDLORD:       TENANT:

LANDHOLD, INC., a California corporation

     

HEALTH NET, INC., a Delaware corporation

By:   /s/    LINDA STANLEY               By:   /s/    MICHAEL RADFORD          
 

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    Linda Stanley      

Name:

  Michael Radford Title:   President       Title:   Vice President

 

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STANDARD LEASE AGREEMENT (OFFICE)

BETWEEN

LANDHOLD, INC., A CALIFORNIA CORPORATION,

AS “LANDLORD”

 

AND

 

HEALTH NET, INC., A DELAWARE CORPORATION,

AS “TENANT”

 

MARCH 5, 2001

 

(11931 FOUNDATION PLACE, RANCHO CORDOVA)

 

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OFFICE GROSS LEASE AGREEMENT

Basic Lease Information

 

Terms and Definitions. For the purpose of this Lease, the following capitalized
terms shall have the following definitions:

 

Lease Date:

   March 5, 2001

Landlord:

  

Landhold, Inc., a California corporation

8413 Jackson Road, Suite B

Sacramento, California 95826

Tenant:

   Health Net, Inc., a Delaware Corporation

Tenant’s Notice Address:

  

Health Net, Inc.

P. 0. Box 2470, Rancho Cordova, CA 95741-2470

Attn: Director of Real Estate

Tenant’s Billing Address:

  

Health Net, Inc.

P. O. Box 2470, Rancho Cordova, CA 95741-2470

Attn: Director of Real Estate

Tenant Contact:

  

Director of Real Estate

Phone Number: (916) 463-7742

Fax Number: (916) 463-7747

Project:

   That office development commonly known as Gold Pointe Corporate Center, which
currently consists of two office buildings, but shall eventually be comprised of
five office buildings.

Building:

   The two story building commonly known as 11931 Foundation Place, Rancho
Cordova, California. The location of the Building is shown on the site plan
attached as Exhibit A. Tenant’s Proportionate Share:    47.35%, based on a
Building rentable area of approximately 63,355 square feet.

Premises:

   The Premises referred to in this Lease consists of approximately 30,000
rentable square feet on the second floor of the Building, as shown on the floor
plans attached hereto as Exhibit G.

Term:

   The term shall be ten (10) years and six (6) months from the Commencement
Date as defined in Section 4 below.

Scheduled Lease

Commencement Date:

   July 15, 2002

Business Hours:

   The hours of 7:00 a.m. to 6:00 p. m, Monday through Friday, and 8:00 a.m. to
1:00 p.m. Saturday (excepting Federally recognized holidays).

Base Rent:

   Months 01-06:    Free of Rent and Operating Expenses.      Months 07-30:   
$1.83 per rentable square foot per month.      Months 31-54:    $1.88 per
rentable square foot per month.      Months 55-78:    $1.93 per rentable square
foot per month.      Months 79-102:    $1.98 per rentable square foot per month.
     Months 103-126:    $2.03 per rentable square foot per month.

Base Year:

   2002 calendar year

Lease Year:

   The calendar year in which the Term commences and each succeeding calendar
year thereafter.

Use:

   General office and any other lawful use approved in writing by Landlord,
which shall not be unreasonably withheld, delayed or conditioned.

Security Deposit:

   Waived

Broker for Landlord:

   None

 

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Broker for Tenant:

  

Aguer Pipgras Associates

655 University Avenue, Suite 215

Sacramento, California 95825-6747

 

LIST OF EXHIBITS:

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

    

A

   Site Plan

A-l

   Project Plans and Specs

B

   Lease Improvement Agreement

C

   First Amendment to Lease and Acknowledgment

D

   Rules and Regulations

E

   Janitorial Specifications

F

   Exclusions From Operating Expenses and Real Estate Taxes

G

   Floor Plans of Premises

 

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STANDARD LEASE AGREEMENT

(OFFICE)

 

This Standard Lease Agreement (“Lease”) is made and entered into by the Landlord
and Tenant referred to in the Basic Lease Information. The Basic Lease
Information attached to this Lease as page 1 and page 2 is hereby incorporated
into this Lease by this reference.

 

1. PREMISES

 

(a) This Lease shall be effective as between Landlord and Tenant as of the full
execution and delivery hereof by both Landlord and Tenant. Landlord hereby
leases to Tenant and Tenant hereby leases from Landlord upon the terms and
conditions contained herein the Premises, which are more particularly described
in Exhibit A attached hereto and made a part hereof (the “Premises”), including
the tenant improvements (the “Tenant Improvements”) thereon presently existing
or to be constructed in accordance with the “Lease Improvement Agreement”
attached as Exhibit B, which is made a part hereof by this reference. As
hereinafter used in this Lease, the term “Building” shall refer to the entire
structure in which the Premises are located, the term “Lot” shall refer to the
Assessor’s tax parcel on which the Building is situated, and the term “Project”
shall collectively refer to the Lot, the Building, and the Project Common Areas.
This Lease confers no rights either with regard to the subsurface of the land
below the ground level of the Building or with regard to airspace above the roof
of the Building.

 

(b) Tenant acknowledges that, as of the Lease Date, Landlord has begun
development on the Building, which construction is intended to be completed by
the Scheduled Lease Commencement Date. Prior to the Lease Date, Landlord and
Tenant have agreed upon certain project plans (“Project Plans”), attached hereto
as Exhibit A-l. Landlord agrees to construct the Building in compliance with the
Project Plans and all applicable laws, statutes and ordinances, and such
construction shall be consistent with the Project Specifications, subject to
events preventing such compliance beyond the reasonable control of Landlord
(provided that Landlord has advised Tenant in writing of such noncompliance, and
the specific reasons (c) Tenant may, not later than the Commencement Date, at
Tenant’s expense, have a licensed architect measure the Premises (using the
Standard Method for Measuring Floor Area in Office Buildings, ANSI Z65.1-1996,
published by BOMA International (the “BOMA Standard”)) to determine the rentable
area and usable area of the Premises. Based on such measurement, the Base Rent,
and Tenant Improvement Allowance shall be proportionately adjusted; provided,
however, that in no event (i) will such measurement result in a Rent increase to
Tenant of more than two percent (2%), or (ii) will the rentable area of the
Premises be more than twelve percent (12%) greater than the “Office Area” (as
that term is defined in the BOMA Standard) of the Premises (the difference,
expressed as a percentage of the Office Area of the Premises, between the
Premises’ rentable area and the Office Area of the Premises is hereinafter
referred to as the “Load Factor”).

 

2. ACCEPTANCE OF PREMISES

 

Except as otherwise provided in this Lease, Tenant’s taking possession of the
Premises shall constitute Tenant’s acknowledgment that, to Tenant’s actual
knowledge, the Premises are in good condition and that the Tenant Improvements
are constructed in accordance with the Lease Improvement Agreement, and that
Tenant agrees to accept the same in its condition existing as of the date of
such entry and subject to all applicable municipal, county, state and federal
statutes, laws, ordinances, including zoning ordinances, and regulations
governing and relating to the use, occupancy or possession of the Premises.
Notwithstanding the foregoing, within fifteen (15) days following the
Commencement Date, Tenant shall deliver to Landlord a list of items (“Punch List
Items”) that Tenant reasonably deems that Landlord complete or correct in order
for the Premises to be reasonably acceptable (which shall not include any items
damaged by Tenant, its agents, employees, contractors and/or subcontractors).
Within thirty (30) days following Landlord’s receipt of the Punch List Items, to
the extent commercially possible, Landlord shall complete and/or correct such
items set forth on the Punch List Items using its good faith efforts and due
diligence. No promise of Landlord to alter, remodel, repair or improve the
Premises or the Building and no representation, express or implied, respecting
any matter or thing related to the Premises or Building or this Lease
(including, without limitation, the condition of the Building or Premises) have
been made to Tenant by Landlord, its agents or employees, other than as set
forth in the Lease Improvement Agreement and as otherwise provided in this
Lease. Nothing in this Section 2 shall, however, relieve Landlord of its
obligation to correct any latent defects in the Premises, Building or Project,
or to construct the Premises in compliance with all applicable laws.

 

3. PROJECT COMMON AREAS

 

The term “Project Common Areas” shall refer to all areas and facilities outside
the Premises and within the Project (including all appurtenant parking
facilities) that are provided and designated by Landlord from time to time for
the general nonexclusive use of Landlord, Tenant, and of other lessees in the
Project and their respective employees, suppliers, shippers, customers, and
invitees. Landlord hereby grants to Tenant, during the term of this Lease, the
nonexclusive right to use, in common with others entitled to such use, the
Project Common Areas as they exist from time to time, subject to any reasonable
and nondiscriminatory rules, regulations, and restrictions governing the use of
the Project as from time to time made or amended by Landlord. Under no
circumstances shall the right granted herein to use the Project Common Areas be
deemed to include the right to store any property in the Project Common Areas.
Provided that Landlord, using its commercially reasonable efforts, does not
unreasonably interfere with Tenant’s use of the Premises or the parking
facilities, Landlord reserves the right at any time and from time to time, to:
(i) make alterations in or additions to the Project and to the Project Common
Areas; (ii) close the Project Common Areas to whatever extent required in the
opinion of Landlord’s counsel to prevent a dedication of any of the Project
Common Areas or the accrual of any rights of any person or of the public to the
Project Common Areas; (iii) temporarily close any of the Project Common Areas
for maintenance purposes; and (iv) promulgate reasonable and nondiscriminatory
rules and regulations governing the use of the Project Common Areas.

 

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4. TERM AND POSSESSION

 

(a) Subject to and upon the terms and conditions set forth herein, the Term of
this Lease shall be for the period specified in the Basic Lease Information,
commencing upon the earlier of the following dates (the “ Commencement Date”):
(i) the date on which the Premises are Substantially Complete (as defined
below); (ii) the date on which the Premises would have been Substantially
Complete had there been no Tenant Delays (as defined in Section 6.1 of the Lease
Improvement Agreement); or (iii) the date upon which the Tenant takes possession
of the Premises in order to conduct its business operations therein, with the
Landlord’s written consent, provided, however, that in no event shall Tenant be
obligated to accept a Commencement Date prior to July 15,2002. Within thirty
(30) days after the Commencement Date, Landlord and Tenant shall execute an
amendment to this Lease (“First Amendment to Lease and Acknowledgment”) setting
forth the Commencement Date and the expiration date of the term of the Lease,
which shall be in the form attached hereto as Exhibit C. For purposes of the
foregoing, the Premises shall be deemed to be “Substantially Complete” when (i)
Tenant is tendered direct access to the Premises with building services
(sanitary sewer, public water, electrical, elevator, HVAC service and fire
suppression services operational) ready to be furnished to the Premises, and
(ii) a certificate of occupancy (temporary or final) for the Premises has been
issued by the appropriate governmental entity, and (iii) the identified
construction to be provided by Landlord, as set forth in the Lease Improvement
Agreement has been completed, with the exception of the Punch List Items.
Landlord shall provide Tenant with not less than sixty (60) days prior written
notice of the anticipated date that the Premises shall be Substantially
Complete. Tenant shall be permitted sixty (60) days early occupancy prior to the
Commencement Date to set up telecommunication equipment and panelized
furnishings, to move in Tenant’s furniture, fixtures and equipment, and to
otherwise prepare the Premises for Tenant’s use and occupancy, provided Tenant
does not interfere or impede Landlord in construction of tenant improvements,
and provided further that evidence of insurance as hereinafter required is
delivered to Landlord prior to occupancy. Landlord shall Substantially Complete
the Premises by the Scheduled Lease Commencement Date as set forth in the Basic
Lease Information, plus extensions thereto equal to the durations of (i) any
delays beyond the reasonable control of Landlord, such as acts of God, fire,
earthquake, acts of a public enemy, riot, insurrection, unavailability of
materials, governmental restrictions on the sale of materials or supplies or on
the transportation of such materials or supplies, governmental delay in issuing
permits, approvals, and inspections, strike or shortages directly affecting
construction or transportation of materials or supplies, shortages of materials
or labor resulting from government controls, weather conditions, or any other
cause or events beyond the reasonable control of Landlord, provided that
Landlord has advised Tenant in writing of such causes or events, within a
reasonable period of time after learning of the same, and Landlord has used
reasonable efforts to minimize the delay occasioned thereby (collectively,
“Force Majeure Event”), or (ii) Tenant Delays caused by or attributable to the
Tenant (“Tenant Delays”) (as defined in Section 6.1 of the Lease Improvement
Agreement). The parties agree that if Landlord is unable to Substantially
Complete the Premises by the Scheduled Lease Commencement Date, plus any
extension thereto pursuant to this Section, this Lease shall not be void or
voidable (except as expressly provided in this Section 4 below), nor shall
Landlord be liable to Tenant for any loss or damage resulting therefrom, and the
expiration date of the Term of this Lease shall be extended for such delay; but
in such event, Tenant shall not be liable for any Rent until the day that is the
first day of the seventh (7th) month following the Commencement Date; provided,
however if such delays were caused or attributable to Tenant, Rent shall
commence as of the day that is the first day of the seventh (7th) month
following the date that the Commencement Date would have occurred but for Tenant
Delays.

 

(b) If the Commencement Date has not occurred within thirty (30) days after the
Scheduled Lease Commencement Date (the “Grace Period”) (unless such delays are
caused by Force Majeure Events), for any reason other than Tenant Delays,
Landlord shall grant Tenant a period of free Rent (including Base Rent and all
Operating Expenses), commencing upon the expiration of the Rent abatement period
provided in Section 5(b). This period of free Rent shall consist of one day for
each day elapsing between the expiration of the Grace Period and the
Commencement Date.

 

(c) If for any reason whatsoever, including but not limited to Force Majeure
Events, but excluding Tenant Delays, the Commencement Date does not occur within
one hundred eighty (180) days after the Scheduled Lease Commencement Date,
Tenant may, upon ten (10) days’ written notice to Landlord, terminate this Lease
without incurring any liability to Landlord, if the Commencement Date does not
occur during such ten (10)-day period.

 

5. BASE RENT

 

(a) Tenant agrees to pay Landlord the Base Rent for the Premises, without prior
notice, demand, deduction or offset (except as expressly set forth in this Lease
or under applicable law) in the manner and amounts set forth in this Section 5.
Landlord agrees to accept payment of Base Rent pursuant to wire transfer from
Tenant. The term “Rent” as used in this Lease shall mean Base Rent, Tenant’s
Proportionate Share of Operating Expenses, Excess Utilities Payments, and any
other amounts owing from Tenant to Landlord pursuant to the provisions of this
Lease. The Base Rent shall be payable in advance on or before the first day of
each month throughout the term of this Lease. Base Rent for any period during
the term hereof which is for less than one month shall be a prorated portion of
the monthly installment based upon a thirty (30)-day month.

 

(b) The Base Rent shall be increased during the Term of this Lease as follows:

 

Months 01-06:

   Free of rent and operating expenses and utility charges.

Months 07-30:

   $1.83 per rentable square foot per month.

Months 31-54:

   $1.88 per rentable square foot per month.

Months 55-78:

   $1.93 per rentable square foot per month.

Months 79-102:

   $1.98 per rentable square foot per month.

Months 103-126:

   $2.03 per rentable square foot per month.

 

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(c) If the amount of Rent or any other payments due under this Lease violates
the terms of any governmental restrictions on such Rent or payment, then the
Rent or payment due during the period of such restrictions shall be the maximum
amount allowable under those restrictions.

 

6. SECURITY DEPOSIT

 

      Waived.

 

7. OPERATING EXPENSES

 

(a) For the purpose of this Section 7(a) and this Lease, the following terms are
defined as follows:

 

  (1) “Base Year” shall mean the calendar year set forth in the Basic Lease
Information; provided, however, that if the Commencement Date occurs later than
December 31, 2002, for any reason other than Tenant Delays, the “Base Year”
shall be the calendar year 2003.

 

  (2) “Tenant’s Proportionate Share” of the total rentable area of the Building
as set forth as a percentage in the Basic Lease Information, however, Landlord
and Tenant acknowledge that if physical changes are made to the Premises or the
Building or the configuration of any thereof, Landlord may at its discretion
reasonably adjust Tenant’s Proportionate Share of the Building to reflect the
change. Landlord’s determination of Tenant’s Proportionate Share of the Building
shall be conclusive so long as it is reasonably and consistently applied and
does not otherwise violate the provisions of this Lease.

 

  (3)

“Operating Expenses” shall mean all reasonable and necessary costs and expenses
paid or incurred by or on behalf of Landlord (whether directly or through
independent contractors) in connection with the operation, repair, replacement
and maintenance of the Building and the Project, including the following costs
by way of illustration, but not limitation: (i) salaries, wages, compensation,
benefits, pension or contributions and all medical, insurance and other fringe
benefits paid to, for, or with respect to all persons, excluding management
personnel (whether they be employees of Landlord, its managing agent or any
independent contractor) for their services in the operation (including security
services for the Project, allocated in an equitable manner to the Building),
maintenance, repair or cleaning of the Project or Building, and payroll taxes,
worker’s compensation, uniforms and dry cleaning costs for such persons; (ii)
payments under service contracts with independent contractors for operating
(including providing security services, if any), maintaining, repairing or
cleaning the Project or Building or any portion thereof or any fixtures or
equipment therein; (iii) all costs for water, steam, sewer and other utility
services to the Project or Building, including any taxes on any such utilities
(but excluding electricity and natural gas, as those expenses are addressed as
Excess Utilities Payments pursuant to Section 7(a)(5) below); (iv) repairs and
replacements which are appropriate to the continued operation of the Building as
a first-class office building; (v) cost of lobby decoration, painting and
decoration of non-tenant areas; (vi) cost of landscaping in, on or about the
Project or Building; (vii) cost of building and cleaning supplies and equipment,
cost of replacements for tools and equipment used in the operation, maintenance
and repair of the Project or Building and charges for lobby and elevator
telephone service for the Building; (viii) financial expenses incurred in
connection with the operation of the Project or Building, such as insurance
costs, including, but not limited to, any premiums, deductibles and other costs
of insurance, as Landlord may, in its reasonable discretion, from time to time
carry (including, without limitation, liability insurance, fire and casualty
insurance, rental interruption insurance, flood and earthquake insurance, and
any other insurance), attorneys’ fees and disbursements, auditing and other
professional fees and expenses, association dues and any other ordinary and
customary financial expenses incurred in the ordinary course in connection with
the operation of the Project and Building; (ix) fees payable to a property
management company (which may be owned or controlled by Landlord or Landlord’s
principals) for the property and asset management of a first-class office
building; (x) the cost of capital improvements made by Landlord in order (i) to
conform to any changes enacted after the Commencement Date in laws, rules,
regulations or requirements of any governmental authority having jurisdiction,
or of the board of fire underwriters or similar insurance body, provided that
such expense, if a capital expenditure as determined by generally accepted
accounting procedures, shall be amortized on a straight line basis over such
expenditure’s useful life, and only such amortized portion shall be included in
Operating Expenses, not to exceed One Hundred Thousand and No/l00ths Dollars
($100,000.00) in any given Lease Year (which limitation shall apply only during
the initial Term of this Lease), or (ii) to effect a labor saving, energy saving
or other economy, which cost shall be included in Operating Expenses for the
Lease Year in which such improvement was made not in excess of the savings
resulting from such expenditure; (xi) costs for accounting, legal and other
professional services incurred in the operation of the Project and Building;
(xii) rental payments made for equipment used in the operation and maintenance
of the Project; (xiii) the cost of governmental licenses and permits, or
renewals thereof, necessary for the operation of the Project and/or

 

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Building; (xiv) sales, use and excise taxes on goods and services; (xv) real
property taxes, assessments and bonds (collectively, “Real Estate Taxes”), which
shall include, but not be limited to, any and all taxes, assessments, water and
sewer charges and other similar governmental charges levied on or attributable
to the Project, including the Building and the Lot, or their operation, ordinary
and extraordinary, substitute and additional, unforeseen as well as foreseen,
present and future, of any kind and nature whatsoever, including without
limitation, (i) real property taxes or assessments levied or assessed against
the Project, including the Building and the Lot, (ii) assessments or charges
levied or assessed against the Project, including the Building and the Lot by
any redevelopment agency, (iii) any tax measured by gross rentals received from
the leasing of the Premises, Building or Project, excluding any documentary
transfer taxes, net income, franchise, capital stock, estate or inheritance
taxes imposed by the state or federal government or their agencies, branches or
departments; provided that if at any time during the term any governmental
entity levies, assesses or imposes on Landlord any (1) general or special, ad
valorem or specific, excise, capital levy or other tax, assessment, levy or
charge directly on the rent received under this Lease or on the rent received
under any other leases of space in the Building or the Project, or (2) any
license fee, excise or franchise tax, assessment, levy or charge measured by or
based, in whole or in part upon such rent, or (3) any transfer, transaction,
succession, gift, transit, or similar tax, assessment, levy or charge based
directly or indirectly upon the transaction represented by this Lease or such
other leases, or (4) any occupancy, use, per capita or other tax, assessment,
levy or charge based directly or indirectly upon the use or occupancy of the
Premises or other premises within the Building or the Project, then any such
taxes, assessments, levies and charges shall be deemed to be included in real
property taxes and assessments (real estate taxes and assessments shall also
include the reasonable cost to Landlord of contesting the amount, validity, or
applicability of any real estate taxes and assessments); (xvi) costs associated
with the maintenance of the Building management offices or related facilities in
the Building, including the fair rental value of any space occupied for such
purposes in the event the Landlord performs such management services itself, or
the rental paid to Landlord for such space by any management company in the
event that Landlord employs a management company to provide such services (in no
event, however, will such management office or related facility exceed 2,000
square feet); and (xvii) all other reasonable or necessary expenses paid in
connection with the operation, maintenance, repair, replacement and cleaning of
the Project and Building, that pursuant to sound property management practices
consistently applied would be considered an operating expense. Please see
Exhibit F for Operating Expense exclusions (in the event of any inconsistency
between this Section 7(a)(3) and Exhibit F, the terms of Exhibit F shall
control).

 

Any costs or expenses of the nature described above shall be included in
Operating Expenses for any Lease Year no more than once, notwithstanding that
such cost or expenses may fall under more than one of the categories listed
above. Operating Expenses shall not be reduced as a result of Tenant performing
for itself any of the services that Landlord provides for the Project or the
tenants thereof. Landlord may use related or affiliated entities to provide
service or furnish materials for the Project; provided the fees and charges of
such related and affiliated entities do not exceed the reasonable fees charged
in the applicable industry for a project similar to the Project.

 

The Operating Expenses that vary with occupancy (“Varying Operating Expenses”)
and that are attributable to any Lease Year (including the Base Year) in which
less than ninety-five percent (95.00%) of the rentable area of the Building is
occupied by tenants will be adjusted by Landlord to the amount that Landlord
reasonably believes they would have been if ninety-five percent (95.00%) of the
rentable area of the Building had been occupied. Additionally, Real Estate Taxes
for the Base Year shall be adjusted to be based upon a fully completed and
assessed Building, with full completion of all tenant improvements constructed
therein consistent with finishes generally utilized by similar first-class
projects in the vicinity of the Building.

 

  (4) Tenant’s Proportionate Share of Operating Expenses shall be payable by
Tenant to Landlord as follows:

 

  (i) Beginning with the Lease Year following the Base Year and for each Lease
Year thereafter, Tenant shall pay Landlord an amount equal to Tenant’s
Proportionate Share of the Operating Expenses incurred by Landlord in the Lease
Year which exceeds the total amount of Operating Expenses payable by Landlord
for the Base Year. This excess is referred to as the “Excess Expenses.”

 

  (ii)

To provide for current payments of Excess Expenses, Tenant shall, at Landlord’s
request, pay as additional rent during each Lease Year, an amount equal to
Tenant’s Proportionate Share of the Excess Expenses payable during such Lease
Year, as estimated and modified by Landlord from time to time, but not in excess
of once per Lease Year. Such payments shall be made in monthly installments,
commencing on the first day of the month following the month in

 

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which Landlord notifies Tenant of the amount it is to pay hereunder and
continuing until the first day of the month following the month in which
Landlord gives Tenant a new notice of estimated Excess Expenses. It is the
intention hereunder to estimate from time to time the amount of the Excess
Expenses for each Lease Year, including the Lease Year immediately following the
Base Year, and Tenant’s Proportionate Share thereof, and then to make an
adjustment in the following year based on the actual Excess Expenses incurred
for that Lease Year.

 

  (iii) On or before April 1 of each Lease Year after the first Lease Year (or
as soon thereafter as is practical), Landlord shall deliver to Tenant a
statement (“Expense Statement”) setting forth Tenant’s Proportionate Share of
the Excess Expenses and Excess Utilities Payments (as defined in Section 7(a)(5)
below) for the preceding Lease Year; provided, however, that the failure of
Landlord to supply such statement shall not constitute a waiver of Landlord’s
rights to collect for such Excess Expenses or Excess Utilities Payments, except,
however, in the event that Landlord’s failure to provide such statement exceeds
two hundred seventy (270) days after the Lease Year in question, Landlord’s
right to collect such Excess Expenses and Excess Utilities Payments shall
terminate at such time. If Tenant’s Proportionate Share of the actual Excess
Expenses or Excess Utilities Payments for the previous Lease Year exceeds the
total of the estimated monthly payments made by Tenant for such year, Tenant
shall pay Landlord the amount of the deficiency within thirty (30) days of the
receipt of the statement. If such total exceeds Tenant’s Proportionate Share of
the actual Excess Expenses or Excess Utilities Payments for such Lease Year,
then Landlord shall credit against Tenant’s next ensuing monthly installment(s)
of Base Rent and Excess Expense and Excess Utilities Payments an amount equal to
the difference until the credit is exhausted. If a credit is due from Landlord
on the Expiration Date, Landlord shall pay Tenant the amount of the credit
within thirty (30) days following the determination of such amount. The
obligations of Tenant and Landlord to make payments required under this Section
7 shall survive the Expiration Date. Tenant’s Proportionate Share of Excess
Expenses and Excess Utilities Payments in any Lease Year having less than three
hundred sixty-five (365) days shall be appropriately prorated.

 

  (iv) For a period of nine (9) months after receipt of the Expense Statement,
Tenant, or its representatives, shall be entitled, upon ten (10) days prior
written notice and during normal business hours, at the office of the Building’s
property manager or such other place as Landlord shall reasonably designate, to
inspect, copy and examine those books and records of Landlord relating to the
determination of Excess Expenses and Excess Utilities Payments for the
immediately preceding Lease Year. Failure of Tenant to request such inspection
within such nine (9) month period shall render such Expense Statement conclusive
and binding on Tenant. Notwithstanding any contrary provision of this Lease, the
Base Year Operating Expenses shall be subject to audit at any time, without the
aforementioned nine-month limitation or any other time limitation. If, after
inspection and examination of such books and records, Tenant disputes the
amounts of the Excess Expenses or Excess Utilities Payments charged by Landlord,
Tenant may, by written notice to Landlord, request an independent audit of such
books and records. The independent audit of the books and records shall be
conducted by a certified public accountant, an independent property management
company, or other reputable professional with the requisite experience regarding
operating expenses (each, a “Qualified Auditor”) reasonably acceptable to both
Landlord and Tenant. If, within thirty (30) days after Landlord’s receipt of
Tenant’s notice requesting an audit, Landlord and Tenant are unable to agree on
the Qualified Auditor to conduct such audit, then the presiding judge of the
superior court may designate a Qualified Auditor not then employed by Landlord
or Tenant to conduct such audit. The audit shall be limited to the determination
of the amount of Excess Expenses and Excess Utilities Payments for the subject
Lease Year. If the audit discloses that the amount of Excess Expenses or Excess
Utilities Payments billed to Tenant was incorrect, the appropriate party shall
pay to the other party the deficiency or overpayment, as applicable. Tenant
shall pay all costs and expenses of the audit unless the audit shows that
Landlord overstated Excess Expenses or Excess Utilities Payments for the subject
Lease Year by more than five percent (5.00%), in which case Landlord shall pay
all costs and expenses of the audit. Tenant and the Qualified Auditor shall keep
any information gained from such audit confidential and shall not disclose it to
any other party (other than Tenant’s attorneys, accountants and other
consultants and advisors), except as necessary to enforce the terms of this
Lease. The exercise by Tenant of the audit rights hereunder shall not relieve
Tenant of its obligation to timely pay all sums due hereunder, including,
without limitation, the disputed Excess Expenses or Excess Utilities Payments.

 

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  (v) Multiple Buildings in Project. If Operating Expenses attributable to the
Project as a whole (and not solely the Lot and Building), such as for example,
security costs and Project Common Area landscaping costs, will be allocated to
the Building in the proportion that the rentable area of the Building bears in
relation to the total rentable area of the Project (as such rentable area may
vary from time to time) that benefits from such cost. In no event will any
expense (such as repair or replacement of a building) attributable solely to
another building or parcel of land in the Project be included in Operating
Expenses.

 

  (vi) Payment in Installments. All assessments and premiums which are not
specifically charged to Tenant because of what Tenant has done, which can be
paid by Landlord in installments, shall be paid by Landlord in the maximum
number of installments permitted by law and not included as Operating Expenses
except in the year in which the assessment or premium installment is actually
paid; provided, however, that if the prevailing practice in comparable buildings
is to pay such assessments or premiums on an earlier basis, and Landlord pays on
such basis, such assessments or premiums shall be included in Operating Expenses
as paid by Landlord.

 

  (vii) Line Item Detail. Each time Landlord provides Tenant with an actual
and/or estimated statement of Operating Expenses or Excess Utilities Payments,
such statement shall be itemized on a line item by line item basis, showing the
applicable expense for the applicable year and the year prior to the applicable
year; such format and detail shall be reasonably consistent from year to year in
order to facilitate Tenant’s review.

 

  (viii) Reduction Due to Vacancy. In the event Tenant ceases to occupy a
contiguous portion of the Premises constituting a full floor on any floor of the
Premises for a period of more than thirty (30) consecutive days, then upon
Tenant giving Landlord written notice thereof, Tenant shall receive a credit
against Tenant’s Proportionate Share of Operating Expenses equal to the charges,
on a per square foot of rentable area basis, not used by Tenant as a result of
such vacancy during the period of such vacancy, but only to the extent of the
actual reduction in Operating Expenses experienced by Landlord.

 

  (ix) Payment of Taxes and Insurance Premiums. Tenant shall not be required to
pay its Proportionate Share of Real Estate Taxes or insurance premiums on the
basis of estimates or in monthly installments. Tenant shall only be required to
pay such Proportionate Share of Real Estate Taxes or insurance premiums ten (10)
days prior to the due date Landlord is required to pay such taxes or insurance
premiums. Landlord shall bill Tenant for Tenant’s Proportionate Share of Real
Estate Taxes thirty (30) days before Landlord is required to make payments of
such taxes to the appropriate taxing authorities. Landlord shall bill Tenant for
Tenant’s Proportionate Share of insurance premiums thirty (30) days before
Landlord is required to make payment of such insurance premiums to the
appropriate insurer(s).

 

  (x) Proposition 8. If Landlord receives a reduction in Real Estate Taxes
attributable to the Base Year as a result of commonly called Proposition 8
application, then Real Estate Taxes for the Base Year and each Lease Year shall
be calculated as if no Proposition 8 reduction in Real Estate Taxes were
received.

 

  (xi) Service Agreements: If any portion of the Project is covered by a service
agreement at any time during the Base Year and to the extent the Project is not
covered by such service agreement during a subsequent Lease Year, Operating
Expenses for the Base Year shall be deemed increased by such amount as Landlord
would have incurred during the Base Year with respect to the items or matters
covered by the subject or service agreement, had such service agreement not been
in effect at the time during the Base Year.

 

  (xii) Management Agreement. In the event that the property management
agreement in effect during the Base Year changes in any subsequent year, and a
service that was previously performed pursuant to, and as part of, such property
management agreement is thereafter excluded from the scope of such management
agreement, then such cost shall either be excluded from Operating Expenses or
the Base Year shall be grossed up to reflect such cost of such performance.

 

  (5)

In addition to the Excess Expenses, Tenant shall pay Tenant’s Proportionate
Share of any actual natural gas and electricity charges for the Building and Lot
(but excluding any other portions of the Project) which in any Lease Year exceed
the sum of Two Dollars ($2.00) per rentable square foot of the Building (the
“Energy Expense Stop”) (such excess over the Energy Expense Stop is hereinafter
referred to as the “Excess Utilities Payments”). Landlord may estimate such
Excess Utilities Payments in the same manner

 

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as Excess Expenses are estimated and billed under Section 7(a)(4)(ii) above
(provided, however, that Tenant shall have no obligation to pay such Excess
Utilities Payments until Landlord has already paid an amount equal to the Energy
Expense Stop for the Lease Year in question). In order to assure that Tenant
gets the benefit of a full six (6) months without electrical or gas charges (as
contemplated by Section 5(b) above), the natural gas and electricity charges for
the first six (6) months of the Term shall be treated as being “zero”. In
calculating Tenant’s responsibility for Excess Utilities Payments, there shall
be excluded any charge for natural gas or electricity attributable to the use of
the Building or Lot by other occupants beyond the Building Hours or at level of
occupancy in excess of that of general office use.

 

8. USE

 

Tenant shall use the Premises for the uses set forth in the Basic Lease
Information, and shall not use the Premises for any other purposes. Tenant shall
be solely responsible for obtaining any necessary governmental approvals of such
use that is of a non-office nature. Tenant shall not do, bring, or keep anything
in or about the Premises that will cause a cancellation of any insurance
covering the Premises. If the rate of any insurance carried by Landlord is
increased as a result of Tenant’s use for non-office purposes, Tenant shall pay
to Landlord within thirty (30) days before the date Landlord is obligated to pay
a premium on the insurance, or within thirty (30) days after Landlord delivers
to Tenant a certified statement from Landlord’s insurance carrier stating that
the rate increase was caused solely by an activity of Tenant on the Premises as
permitted in this Lease, whichever date is later, a sum equal to the difference
between the original premium and the increased premium. Landlord reserves the
right to prescribe the weight and position of all safes, fixtures and heavy
installations that Tenant desires to place in the Premises so as to distribute
properly the weight, or to require plans prepared by a qualified structural
engineer for such heavy objects, which shall be prepared at Tenant’s sole cost
and expense.

 

9. COMPLIANCE WITH THE LAW

 

(a) Tenant shall not use the Premises or permit anything to be done in or about
the Premises which will in any way conflict with any law, statute, zoning
restriction, ordinance or governmental law or rule, regulation, or requirement
of any duly constituted public authorities now in force or which may hereafter
be enacted or promulgated, or subject Landlord to any liability for injury to
any person or property by reason of any business operation being conducted in or
about the Premises. Subject to Section 9(b) below, to the extent required due to
Tenant’s specific use of the Premises, alterations of the Premises, or as a
result of Tenant’s application for permits or authorizations, as opposed to
compliance required by office tenants in general. Tenant shall, at its sole cost
and expense, promptly comply with all laws, statutes, ordinances, and
governmental rules, regulations, including, but not limited to, the Americans
with Disabilities Act (“ADA”) of 1990 (42 U.S.C. § 12101 et seq.), any amendment
thereto or regulations promulgated thereunder, or state or local ordinances or
codes enacted pursuant thereto; or requirements of any board or fire insurance
underwriters or other similar bodies, now or hereafter constituted, relating to
or affecting the condition, use, or occupancy of the Premises by Tenant,
excluding structural changes not related to or affected by Tenant’s improvements
or acts. The final judgment of any court of competent jurisdiction or the
admission of Tenant in any action against Tenant, whether Landlord be a party
thereto or not, that Tenant has violated any law, statute, ordinance, or
governmental rule, regulation, or requirement, shall be conclusive of that fact
as between Landlord and Tenant.

 

(b) Landlord represents and warrants that the Building, Premises and Project
Common Area, as of the Commencement Date to the extent such were constructed by
or caused to be constructed by Landlord, are in compliance with all laws,
statutes, ordinances and governmental rules, regulations including, but not
limited to ADA, and all laws governing hazardous materials or hazardous
substances, air quality and other environmental regulations. The foregoing
representation and warranty of Landlord does not (i) include any improvements
constructed or caused to be constructed by any other tenant of the Project
and/or Tenant, and/or (ii) affect the Tenant’s obligations pursuant to Section
9(a) above and/or (iii) apply to any non-office use to which Tenant will put the
Premises. In the event Landlord’s representation or warranty in this section is
finally determined to be incorrect, as Tenant’s sole remedy, Landlord shall be
responsible for promptly taking actions to cause such compliance, at Landlord’s
sole cost and expense.

 

10. ALTERATIONS AND ADDITIONS

 

(a) Tenant shall not make or suffer to be made any non-structural alterations,
additions, or improvements (collectively, “Alterations”) to or of the Premises,
or any part thereof, without first obtaining the written consent of Landlord,
which shall not be unreasonably withheld or delayed; provided, however, if the
Alterations would adversely affect the structure or safety of the Building or
its electrical, plumbing, HVAC, mechanical or safety systems, or if such
Alterations would create an obligation on Landlord’s part to make modifications
to the Building, and Tenant is not willing to pay the cost necessary to
remediate such problems, Landlord may withhold its consent in its sole and
absolute discretion. Notwithstanding the foregoing, without the prior consent of
Landlord, but with the prior notice to Landlord, Tenant shall be entitled to
make Alterations within the Premises, provided that (i) the cost of construction
such Alterations does not exceed One Hundred Thousand and No/l00ths Dollars
($100,000.00) per project, and (ii) does not affect the plumbing, electrical,
structural or mechanical systems of the Building, and (iii) Tenant otherwise
complies with the provisions of this Section. In no event shall carpeting,
painting or other work of a similar decorative nature (and which does not
require a building permit) require the consent of, or notice to, the Landlord.
All Alterations shall comply with all applicable laws, statutes and ordinances,
which include, but are not limited to ADA. Any Alterations to or of said
Premises, including, but not limited to, wall covering, paneling, and built-in
cabinet work, but excepting movable furniture and trade fixtures, shall on the
expiration of the Term become a part of the realty and belong to Landlord, and
shall be

 

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surrendered with the Premises. However, Landlord shall provide written notice to
Tenant (concurrently with Landlord’s approval of such Alteration) whether Tenant
will be required to remove such Alteration. If Landlord so states in such
written notice, Tenant, at its own cost shall remove such Alteration upon the
expiration of the Term. Upon Landlord’s approval of the requested Alterations,
Tenant shall secure all necessary permits, if applicable. Before Landlord’s
consent to such Alterations, Tenant shall submit detailed specifications, floor
plans and necessary permits (if applicable) to Landlord for review. In no event
shall any Alterations affect the structure of the Building or its facade. As a
condition to its consent, Landlord may request adequate assurance that all
contractors who will perform such work have in force workman’s compensation and
such other employee and public liability insurance as Landlord deems reasonably
necessary. In the event Landlord consents to the making of any Alterations to
the Premises by Tenant, the same shall be made by Tenant at Tenant’s sole cost
and expense, completed to the reasonable satisfaction of Landlord, and the
contractor or person selected by Tenant to make the same must first be approved
in writing by Landlord which approval shall not be unreasonably withheld or
delayed. If Tenant makes any Alterations to the Premises as provided in this
Section, the Alterations shall not be commenced until ten (10) business days
after Landlord has received notice from Tenant stating the date the installation
of the Alterations is to commence so that Landlord can post and record an
appropriate notice of non-responsibility. Tenant shall reimburse Landlord for
any reasonable out-of-pocket expenses incurred by Landlord in connection with
the Alterations made by Tenant, including any reasonable fees charged by
Landlord’s contractors or consultants to review plans and specifications
prepared by Tenant, and the cost of updating the existing as-built plans of the
Building to reflect the Alterations, not to exceed One Thousand and No/100ths
Dollars ($1,000.00) in total per Alteration; Landlord must, at the time that
Landlord consents to the Alteration, have provided Tenant with a binding
estimate of such costs. Tenant shall indemnify, defend and hold the Landlord,
the Building and the Premises free and harmless from any liability, loss,
damage, cost, attorneys’ fees and other expenses incurred on account of such
construction, or claims by any person performing work or furnishing materials or
supplies for Tenant or any persons claiming under Tenant.

 

(b) Landlord agrees that, subject to Tenant’s compliance with Section 10(a)
above, Tenant shall be entitled to install a satellite/microwave dish upon the
roof of the Building in a location reasonably acceptable to Landlord and Tenant;
no rent or license fee shall be charged. Tenant acknowledges that view
aesthetics of the Building shall be considered in the placement of such dish.
Tenant shall be responsible for the maintenance and repair of such dish and
shall remove, at Tenant’s cost, such dish from the roof of the Building upon the
expiration or earlier termination of this Lease and shall repair any damage
caused thereby and reseal any roof penetrations.

 

11. REPAIRS AND MAINTENANCE:

 

(a) By taking possession of the Premises, Tenant shall be deemed to have
accepted the Premises as being in good and sanitary order, condition and repair,
excepting the Punch List Items and latent defects in the construction done by
Landlord, its agents, employees, contractors, and subcontractors. Except as
provided in Section 11(c) (pursuant to which Landlord is to undertake various
repair and maintenance), Tenant shall, at Tenant’s sole cost and expense,
maintain the Premises, in clean and good condition and repair, ordinary wear and
tear and casualty excepted. Without limiting the generality of the foregoing,
Tenant shall be solely responsible for maintaining and repairing all fixtures,
non-building standard electrical lighting (if identified as being non-building
standard at the time that Landlord approves the Plans under the Lease
Improvement Agreement), ceilings and floor coverings, doors, and interior walls
within the Premises to the extent the foregoing are nonstructural elements of
the Building, using the same quality of materials as used in the original
construction. In addition, Tenant shall be responsible for all repairs made
necessary by Tenant or Tenant’s invitees. Landlord acknowledges that Tenant
shall have no obligation to repair or maintain any areas of the Project outside
of the Premises, unless such repair or maintenance is required due to acts of
Tenant, its agents, employees, contractors and subcontractors and the cost
thereof is not covered by insurance carried by Landlord or required to be
carried by Landlord under this Lease. Excepting maintenance, repairs or
replacements required due to the negligence or willful misconduct of Landlord,
its agents, employees, contractors and subcontractors, Tenant acknowledges that
Landlord shall have no obligation to maintain, repair or replace any
telecommunications or computer cabling or wiring which is located in the
Premises or which exclusively serves the Premises (collectively, “Cabling”),
except in the event that such would be required due to Landlord’s negligent acts
or omissions. Tenant shall, at Tenant’s expense, contract with Pacific Bell or
another reputable contractor to maintain the Cabling. Landlord shall have no
obligation to alter, remodel, improve, repair, decorate or paint the Premises
except as specifically set forth in this Lease. Under no circumstances shall
Tenant make any repairs to the Building or to the mechanical, electrical or
heating, ventilating or air conditioning systems of the Premises or the
Building, unless such repairs are previously approved in writing by Landlord.
Tenant waives the provisions of Sections 1931(1), 1941 and 1942 of the
California Civil Code, and any similar or successor law regarding Tenant’s right
to make repairs and deduct expenses of such repairs from the Rent due under this
Lease, subject, however, to the terms of Section 11(d) below. In no event shall
Tenant be responsible for repairs or replacements necessitated by ordinary wear
and tear, damage by third party casualty or damage caused by Landlord or others
for which Tenant is not responsible, nor shall Tenant be responsible for the
correction or repair of any latent defect in the Premises, or any condition,
dilapidation or defect of which Landlord has actual knowledge prior to the
Commencement Date.

 

(b) Landlord shall operate the Building (and provide maintenance, repairs and
replacements pursuant to Section 11(c) below) to a standard or quality
consistent with that of other first-class projects in the immediate geographical
area and shall (i) provide janitorial service to the Premises on a five
(5)-day-a-week basis (excepting holidays described in the Basic Lease
Information), consistent with the janitorial specification attached hereto as
Exhibit E, (ii) provide nonexclusive, non-attended automatic passenger elevator
service at all times, (iii) replace Building standard lamps, starters and
ballasts (all nonstandard lighting within the Premises shall be the
responsibility of Tenant).

 

(c) Landlord shall be responsible for maintaining and repairing all structural
portions and latent defects of the Building, at Landlord’s sole expense (and not
as part of Operating Expenses), and shall maintain the

 

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roof, side walls, and foundations of the Building in good, clean and safe
condition and repair. Landlord shall be entitled to approve, in its sole
discretion, the sealing of any roof penetrations caused by Tenant Improvements.
Landlord shall also maintain all landscaping, driveways, parking lots, fences,
signs, sidewalks and the Project Common Areas. Landlord shall be responsible for
maintenance and repair of all washrooms, mechanical, electrical and common area
telephone closets, windows, plate glass, exterior doors, plumbing, heating,
electrical, air conditioning and ventilation and life safety systems, and
elevators. Except as otherwise provided in this Lease, Landlord shall have no
liability to Tenant, nor shall Tenant’s obligations under this Lease be reduced
or abated in any manner whatsoever by reason of any inconvenience, annoyance,
interruption or injury to business arising from Landlord making any repairs or
changes which Landlord is required or permitted by this Lease or required by law
to make in or to any portion of the Building or the Premises. Landlord shall use
reasonable efforts to minimize any interference with Tenant’s business at the
Premises. If Tenant fails to maintain the Premises as required in Section 11(a),
Landlord may give Tenant thirty (30) days’ written notice to do such acts as are
reasonably required to so maintain the Premises. If Tenant fails to promptly
commence such work within such time period and diligently prosecute it to
completion, then Landlord shall have the right to do such acts and expend such
funds at the expense of Tenant as are reasonably required to perform such work.
Any amount so expended by Landlord shall be paid by Tenant promptly after demand
with interest at the Prime Rate plus two percent (2%) per annum, from the date
of such work, but not to exceed the maximum amount then allowed by law. Landlord
shall have no liability to Tenant for any damage, inconvenience, or interference
with the use of the Premises by Tenant as the result of performing any such
work. For the purpose of this Lease, the “Prime Rate” shall mean the rate, or
base rate, reported in the Money Rates column or section of The Wall Street
Journal as being the base rate on corporate loans at large U.S. money center
commercial banks (whether or not such rate has actually been charged by any such
bank) on the first date on which The Wall Street Journal is published in the
month preceding the month in which the subject costs are incurred.

 

(d) If Landlord fails to provide repairs or maintenance as required under this
Lease, and such failure interferes with Tenant’s use of the Premises, and Tenant
has notified Landlord of the necessity of such repairs or maintenance in
writing, then Tenant may perform such repairs or maintenance at Landlord’s cost
by taking whatever action is reasonably necessary to do so, provided:

 

(1) Tenant gives Landlord (and any mortgagee whose address has been provided to
Tenant) notice of Tenant’s intent to take such action at least ten (10) business
days prior to taking any such action, Landlord further fails or refuses to
commence repairs within three (3) business days after a second written notice to
Landlord and such mortgagee (which notice cannot be effective until the lapse of
the aforementioned ten (10) business day period) (if the nature of the required
repair is such that Landlord’s failure to act is reasonably likely to result in
injury to Tenant’s employees or visitors, or damage to Tenant’s personal
property, the aforementioned notice period shall be one (1) business day, and
there shall be no requirement that Tenant notify Landlord’s mortgagee);

 

(2) If such repairs or maintenance will affect the Building’s electrical or
mechanical systems, or the structural integrity of the Building, Tenant shall
use only those contractors used by Landlord in the Building that work on the
Building’s systems, equipment or structure (unless such contractors are
unwilling or unable to perform such work, or the urgent nature of the required
repair makes using those contractors impractical, in which events Tenant may
utilize the services of any other qualified contractor approved by Landlord,
which approval shall not be unreasonably withheld, conditioned or delayed).

 

If Landlord does not deliver a detailed written reasonable objection to Tenant
within thirty (30) days after receipt of any invoice from Tenant of the
reasonable costs and expenses incurred by Tenant in so repairing or maintaining
(such invoice to contain a reasonably particularized breakdown of the costs and
expenses incurred by Tenant in connection therewith) then Tenant shall be
entitled to deduct from Rent next due the amount set forth in such invoice (to
the extent not previously paid by Landlord).

 

12. WASTE

 

Tenant shall not use the Premises in any manner that will constitute waste,
nuisance, or unreasonable annoyance (which includes excessive noise and/or
vibration) to owners or occupants of adjacent properties or to other tenants of
the Building.

 

13. LIENS

 

Tenant shall keep the Premises and the Project free from any liens arising out
of any work performed, materials furnished, or obligations incurred by Tenant.
Landlord may, at its election, and upon ten (10) days’ notice to Tenant, remove
any liens, in which case Tenant shall pay to Landlord the cost of removing the
lien, including reasonable attorneys’ fees. Landlord shall have the right at all
times to post on the Premises any notices permitted or required by law for the
protection of Landlord, the Premises, the Building or the Project from
mechanics’ and materialmen’s liens. To the extent a lien arises out of any work
performed, materials furnished, or obligations incurred by Tenant, Tenant shall
have thirty (30) days to remove such lien, or provide a bond to Landlord in an
amount sufficient to satisfy the lien.

 

14. UTILITIES AND SERVICES

 

(a) Landlord agrees to furnish to the Premises during the Business Hours (and
during non-Business Hours, subject to the terms of this Section 14), subject to
the conditions and in accordance with the standards set forth in this Lease,
adequate quantities of electric current for normal lighting and fractional
horsepower office machines, water for lavatory and drinking purposes (hot and
cold), heat and air conditioning required in the comfortable use and occupation
of the Premises, and elevator service by non-attended automatic elevators.
Tenant

 

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acknowledges and agrees that Landlord may impose a reasonable charge for the use
of any additional or unusual janitorial services required by Tenant’s
carelessness or the nature of Tenant’s business that is inconsistent with the
Use permitted under this Lease. Landlord shall not be obligated to service,
maintain, repair or replace any system or improvement in the Premises that has
not been installed by Landlord at Landlord’s expense, or which is a specialized
improvement requiring additional or extraordinary maintenance or repair (by way
of example only, if the standard premises in the Building contain fluorescent
light fixtures, Landlord’s obligation shall be limited to the replacement of
fluorescent light tubes, irrespective of any incandescent fixtures that may have
been installed in the Premises at Tenant’s expense). Landlord shall not be
liable for, and (except as provided in Section 14(b) below) Tenant shall not be
entitled to any abatement or reduction of rent by reason of Landlord’s failure
to furnish any of the foregoing when such failure is caused by accident,
breakage, repairs, strikes, lockouts or other labor disturbances or labor
disputes of any character or for any other causes; provided, however, Landlord
shall use its reasonable efforts to cause such services to be restored as soon
as possible. Tenant hereby waives the provisions of California Civil Code
Section 1932(1) or any other applicable existing or future law, ordinance or
governmental regulation permitting the termination of this Lease due to the
interruption or failure of any services to be provided under this Lease.

 

(b) If there shall be an interruption, curtailment or suspension of the
Building’s elevator, electricity or HVAC service or water supply (and no
reasonably equivalent alternative service or supply is provided by Landlord)
(each, a “Service Interruption”), and if (i) such Service Interruption shall not
have been caused, in whole or in part, by an act or omission or negligence of
Tenant, or of Tenant’s agents, employees or contractors, (ii) such Service
Interruption does not arise as a result of a matter, event or condition
affecting the general area in which the Building is located, such as rolling
electrical blackouts, (iii) such Service Interruption shall have been caused, in
whole or in part, by an act or omission or negligence of Landlord, or of
Landlord’s agents, employees or contractors, and (iv) Landlord shall have failed
to cure such Service Interruption within five (5) business days after the
occurrence thereof, Rent hereunder shall thereafter be abated in the same
proportion as the portion of the Premises affected by the Service Interruption
bears to the entire Premises from the end of such five (5) business day period
until such time as such services or utilities are restored or Tenant begins
using the Premises (or affected portion thereof) again, whichever shall first
occur.

 

(c) Tenant acknowledges and agrees that Tenant’s use of the Premises during
non-Business Hours imposes additional burden on the Project’s janitorial
services, fluorescent light tubes, HVAC, and the Project Common Areas.
Accordingly, non-Business Hours use of services will be made available to Tenant
through an access or override switch accessible to Tenant from the Premises and
will be billed as an after hours rent assessment (the “After Hours Charge”).
After hours use will be metered and the After Hours Charge will be payable by
Tenant to Landlord upon demand. The After Hours Charge is estimated to be $3.50
per hour and subject to change due to increases in maintenance costs. The After
Hours Charge shall be limited to amount of the reasonable out-of-pocket costs
that Landlord can substantiate that Landlord has incurred as a direct result of
Tenant’s use of the Premises in excess of the Business Hours, and shall not
include any costs of electricity or natural gas (except that, during the six
month “free rent” period under Section 5(b) above, the After-Hours Charge shall
include electrical costs, and during such six month period the After Hours
Charge shall, the Landlord currently estimates, be $20.00 per hour, for each
HVAC unit used). Tenant shall be entitled to access to the Premises, Building
and Project Common Areas, twenty-four (24) hours a day, three hundred sixty-five
(365) days a calendar year.

 

(d) Except as otherwise provided in the Lease Improvement Agreement, Tenant
shall not, without the prior consent of Landlord, connect to the utility systems
of the Building any apparatus, machinery or other equipment except typical
office machines and devices such as electric typewriters, word processors, mini
and micro computers and office-size photocopiers. Nor shall Tenant, without the
prior written consent of Landlord, connect to any electrical circuit in the
Premises any apparatus or equipment with power requirements that exceed the
designed electrical capacity of the Premises as described in the Lease
Improvement Agreement; Landlord agrees, that in all events Tenant shall have the
use of not fewer than six (6) watts of electricity per rentable square foot in
the Premises for Tenant’s equipment, at no additional charge. Tenant shall pay
the cost of all utilities and services supplied to Tenant in connection with
Tenant’s use of additional office equipment approved by Landlord hereunder.
Notwithstanding Landlord’s consent to such excess loading of circuits, Tenant
shall pay the cost of any additional or above-standard capacity electrical
circuits necessitated by such excess loading circuits and the installation
thereof.

 

(e) All sums payable hereunder by Tenant for additional services or for excess
utility usage shall be payable within thirty (30) days after written request
from Landlord, including reasonable supporting documentation, except that
Landlord may require Tenant to pay monthly for the estimated cost of Tenant’s
excess utility usage if such usage occurs on a regular basis, and such estimated
amounts shall be payable in advance on the first day of each month.

 

(f) [Intentionally omitted]

 

(g) Tenant may elect to hire its own cleaning and janitorial service, upon not
less than thirty (30) days notice to Landlord. If Tenant makes such an election,
Tenant shall receive a reduction in Base Rent equal to the cost that Landlord
actually incurred in the Base Year in providing such janitorial service.

 

(h) Landlord shall provide commercially reasonable levels of security service
for the Project, the cost of which shall be included in Operating Expenses.

 

(i) Landlord shall cause the Building’s windows to be washed, inside and out, as
often as commercially reasonable, but in all events no less frequently than
twice per calendar year; the cost of such window washing shall be included in
Operating Expenses.

 

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15. ASSIGNMENT AND SUBLETTING

 

(a) Tenant shall not, without the prior written consent of Landlord, which shall
not be unreasonably withheld or delayed as provided in this Section 15: (a)
assign, mortgage, pledge, encumber or otherwise transfer this Lease, the term or
estate hereby granted, or any interest hereunder; (b) permit the Premises or any
part thereof to be utilized by anyone other than Tenant (whether as
concessionaire, franchisee, licensee, permittee or otherwise); or (c) except as
hereinafter provided, sublet or offer or advertise for subletting the Premises
or any part thereof. Any assignment, mortgage, pledge, encumbrance, transfer or
sublease without Landlord’s consent shall be voidable and, at Landlord’s
election, shall constitute a default.

 

Notwithstanding the foregoing and Subsections (b) and (c) below, Tenant may
assign this Lease or sublet the Premises or a portion thereof, without
Landlord’s consent, but with prior written notice, to any corporation,
partnership, individual or other entity which controls, is controlled by or is
under common control with Tenant; or to any corporation, partnership, individual
or other entity, resulting from the merger or consolidation with Tenant; or to
any person or entity which acquires all of the assets of Tenant’s business going
concern, provided that (i) the assignee or subtenant assumes, in full, the
obligations of Tenant under this Lease (or, in the case of a sublease, the
non-monetary obligations relevant to the portion of the Premises being
subleased), (ii) Tenant remains fully liable under this Lease, (iii) the use of
the Lease by such transferee conforms with the requirements of this Lease, and
(iv) if Tenant is no longer a viable operating business, the proposed transferee
shall have a net worth which is comparable to that of Tenant as of the Lease
Date. Provided that Tenant is a corporation, and (i) the stock of Tenant is
traded on a national exchange, the transfer of stock in Tenant shall not be
considered an assignment, sublease or transfer under the Lease, or (ii) the
stock of Tenant is not traded on a national exchange, the collective transfer of
fifty percent (50.00%) or less of such stock shall not be considered an
assignment, sublease or transfer under this Lease.

 

(b) If at any time or from time to time during the Term of this Lease, Tenant
desires to assign this Lease with respect to, or to sublet, all or any part of
the Premises, then at least twenty (20) days prior to the date when Tenant
desires the assignment or subletting to be effective (the “Transfer Date”),
Tenant shall give Landlord a notice (the “Transfer Notice”) which shall set
forth the name, address and business of the proposed assignee or subtenant,
information (including financial statements and references) concerning the
character of the proposed assignee or subtenant, in the case of a proposed
sublease, a detailed description of the space proposed to be sublet, which must
be a single, self-contained unit (the “Space”), any rights of the proposed
assignee or subtenant to use Tenant’s improvements and the like, the Transfer
Date, and the fixed rent and/or other consideration and all other material terms
and conditions of the proposed assignment or subletting, all in such detail as
Landlord may reasonably require, if Landlord promptly (not later than ten (10)
business days after receipt of the Transfer Notice) requests additional detail,
the Transfer Notice shall not be deemed to have been received until Landlord
receives such additional detail. If this Lease or any interest in this Lease is
sold, assigned or transferred by Tenant, or Tenant subleases any part of the
Premises, without Landlord’s consent, Landlord may, cumulative of any other
right or remedy available to Landlord, elect to terminate this Lease (as it
affects the portion of the Premises sought to be sublet or assigned) as of the
effective date of the proposed transfer. Landlord’s acceptance of any name for
listing on the Building directory will not be deemed, not will it substitute
for, Landlord’s consent, as required by this Lease, to any sublease, assignment
or other occupancy of the Premises.

 

(c) Landlord shall be permitted to consider any reasonable factor in determining
whether or not to withhold its consent to a proposed assignment or sublease and
Landlord shall make such determination within twenty (20) days following
Landlord’s receipt of the Transfer Notice. The failure of Landlord to deliver
written notice of such determination within such time period shall be deemed
Landlord’s disapproval thereof. Without limiting the other instances in which it
may be reasonable for Landlord to withhold its consent to an assignment or
sublease, it shall be reasonable for Landlord to withhold its consent if
Landlord establishes that any of the following conditions are not satisfied:

 

(1) The proposed use by the transferee shall (i) comply with Tenant’s permitted
use, (ii) not materially increase the likelihood of damage or destruction, (iii)
not materially increase the density of occupancy of the Premises or increase the
amount of pedestrian and other traffic through the Building beyond the limits
for which the Building was designed, (iv) not be likely to cause an increase in
insurance premiums for insurance policies applicable to the Building, unless
paid for by Tenant or the transferee, (v) not require new tenant improvements
incompatible with then-existing Building systems and components, unless paid for
by Tenant or the transferee, (vi) unless paid by Tenant or the transferee, not
require Landlord to make material modifications to the Building outside of the
Premises (in order, for example, to comply with laws such as the ADA), and
(viii) not otherwise have or cause a material adverse impact on the Premises,
the Building, the Project, or Landlord’s interest therein

 

(2) The proposed transferee shall not be a foreign government entity,

 

(3) Any ground lessor or mortgagee whose consent to such transfer is required
fails to consent thereto, notwithstanding Landlord’s good faith and diligent
efforts to obtain such consent.

 

(d) Provided Landlord has consented to such assignment or subletting, Tenant
shall be entitled to enter into such assignment or sublease with the third party
identified in the Transfer Notice subject to the following conditions:

 

(1) At the time of the transfer, no event of monetary default or monetary
material default under this Lease (following the giving of notice and passage of
the applicable cure period under Section 24) shall have occurred and be
continuing;

 

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(2) The assignment or sublease shall be on the same terms substantially set
forth in the Transfer Notice given to Landlord;

 

(3) No assignment or sublease shall be valid and no assignee or sublessee shall
take possession until an executed counterpart of the assignment or sublease has
been delivered to Landlord;

 

(4) No assignee or sublessee shall have a right further to assign or sublet
without Landlord’s consent thereto in each instance, which consent in the case
of a future assignment should not be unreasonably withheld or delayed;

 

(5) Any assignee shall have assumed in writing the obligations of Tenant under
this Lease;

 

(6) Any subtenant shall have agreed in writing to comply with all applicable
terms and conditions of this Lease with respect to the Space;

 

(7) In the event Tenant sublets the entire Premises or any part thereof, and
where the Landlord’s consent is otherwise required, Tenant shall deliver to
Landlord fifty percent (50.00%) of any excess rent within thirty (30) days of
Tenant’s receipt thereof pursuant to such subletting. As used herein, “excess
rent” shall mean any sums or economic consideration per square foot of the
Premises received by Tenant pursuant to such subletting in excess of the amount
of the rent per square foot of the Premises payable by Tenant under this Lease
applicable to the part or parts of the Premises so sublet; provided, however,
that no excess payment shall be payable until Tenant shall have recovered
therefrom all of the costs incurred by Tenant for brokerage commissions, tenant
improvement work approved by Landlord, reasonable rent concessions, reasonable
attorneys fees, and reasonable marketing fees, in conjunction with such
sublease; and

 

(8) In the event Tenant assigns this Lease, and where the Landlord’s consent is
otherwise required, Tenant shall deliver to Landlord fifty percent (50.00%) of
any excess payment within thirty (30) days of Tenant’s receipt thereof pursuant
to such assignment. As used herein, “excess payment” shall mean the amount of
payment received for such assignment of this Lease in excess of the rent payable
by Tenant under this Lease; provided, however, that no excess payment shall be
payable until Tenant shall have recovered therefrom all of the costs incurred by
Tenant for brokerage commissions, tenant improvement work approved by Landlord,
rent concessions, reasonable attorneys fees, and reasonable marketing fees, in
conjunction with such assignment.

 

(e) No subletting or assignment shall release Tenant of Tenant’s obligations
under this Lease or alter the liability of Tenant to pay the rent and to perform
all other obligations to be performed by Tenant hereunder. The acceptance of
rent by Landlord from any other person shall not be deemed to be a waiver by
Landlord of any provision hereof. Consent to one assignment or subletting shall
not be deemed consent to any subsequent assignment or subletting. In the event
of default by an assignee or subtenant of Tenant or any successor of Tenant in
the performance of any of the terms hereof, Landlord may proceed directly
against Tenant without the necessity of exhausting remedies against such
assignee, subtenant or successor. Landlord may consent to subsequent assignments
of the Lease or sublettings or amendments or modifications to the Lease with
assignees of Tenant, after notifying Tenant, or any successor of Tenant, and
after obtaining its or their consent thereto and any such actions shall not
relieve Tenant of liability under this Lease.

 

(f) If Tenant assigns the Lease or sublets the Premises or requests the consent
of Landlord to any assignment or subletting, then Tenant shall, upon demand, pay
Landlord an administrative fee not to exceed Five Hundred and No/100ths Dollars
($500.00).

 

(g) Tenant may require, as part of its Transfer Notice, that a transferee
receive a recognition agreement (the “Recognition Agreement”) from Landlord
which provides that in the event this Lease is terminated, Landlord shall
recognize the transferee (and such transferee shall be bound to and recognize
Landlord), provided that Landlord shall only execute a Recognition Agreement
with such transferee, under the following conditions (which conditions must be
reflected in the Recognition Agreement): (i) such transfer is made upon the same
terms and conditions set forth in this Lease, subject to equitable modifications
based on the number of rentable square feet contained in the Space; provided,
however, the economic terms of such transfer may be more favorable to Landlord
than those set forth in this Lease, (ii) the Space contains only full floors in
the Building, (iii) all Space is contiguous, (iv) the transferee is, as of the
date this Lease is terminated, a party of reasonable financial worth and/or
financial stability in light of the responsibilities involved under the subject
transfer (it being agreed that it would be reasonable for Landlord to deny a
Recognition Agreement to any transferee whose net worth is less than the product
of $20,000,000 times the number of floors the transferee is leasing, but such
specific minimum net worth requirement shall not, however, be imposed on
transferees not requesting a Recognition Agreement), (v) Landlord shall not be
liable for any act or omission of Tenant, (vi) Landlord shall not be subject to
any offsets or defenses which the transferee might have as to Tenant or to any
claims for damages against Tenant, (vii) Landlord shall not be required or
obligated to credit the transferee with any rent or additional rent paid by the
transferee to Tenant, (viii) Landlord shall not be bound by any terms or
conditions of the transfer which are inconsistent with the terms and conditions
of this Lease, (ix) Landlord shall be responsible for performance of only those
covenants and obligations of Tenant pursuant to the transfer accruing after the
termination of this Lease, (x) the transferee shall make full and complete
attornment to Landlord, as lessor, pursuant to a written agreement executed by
Landlord and the transferee, so as to establish direct privity of contract
between Landlord and the transferee with the same force and effect as though the
transfer was originally made directly between Landlord and the transferee, (xi)
the transferee benefiting from the Recognition Agreement must agree to sign a
commercially reasonable subordination, non-disturbance and attornment agreement
(“SNDA”) in favor of any Superior Lienor (as defined in Section 31(d) below),
which SNDA shall require the transferee to be bound to recognize the Superior
Lienor and any successor thereto, and (xii) Tenant shall remain fully liable
under this Lease, as provided in Sections 15(a)(ii) and 15(e) above.

 

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Upon Landlord’s written request given any time after the termination of this
Lease, the transferee shall execute a lease for the space subject to the
applicable transfer upon the same terms and conditions as set forth in the
Recognition Agreement. Tenant agrees that Landlord may consider, in exercising
its reasonable discretion under Section 15(a) above whether or not to consent to
a given transfer, the Tenant’s request for a Recognition Agreement under this
Section 15(g). If it is reasonable do so, Landlord may reject the transfer on
the grounds that the proposed transferee does not have sufficient
creditworthiness to be entitled to a Recognition Agreement, in which event
Tenant shall have the right to amend its Transfer Notice to delete the request
for a Recognition Agreement.

 

(h) Notwithstanding anything to the contrary in this Lease, Tenant shall not be
deemed to have waived any of its rights under California Civil Code Section
1995.310.

 

(i) Tenant may allow any person or company which is a client or customer of
Tenant or which is providing service to Tenant or one of Tenant’s clients to
occupy certain portions of the Premises (not to exceed, at any one time, a total
of 20,000 rentable square feet), without such occupancy being deemed an
assignment or subleasing as long as no new demising walls are constructed to
accomplish such occupancy and as long as such relationship was not created as a
subterfuge to avoid the obligations set forth in this Section 15.

 

16. INDEMNITY

 

(a) Subject to the provisions of Section 18(e) below and to the extent not
funded and paid to Landlord by any insurance maintained by Tenant, Tenant shall
indemnify, defend and hold harmless Landlord against and from any and all
claims, damages, liabilities, and expenses (including reasonable attorneys’
fees) to the extent arising from Tenant’s use of the Premises for the conduct of
its business or from any activity, work or other thing done, permitted or
suffered by the Tenant in or about the Building, and shall further indemnify,
defend and hold harmless Landlord against and from any and all claims to the
extent arising from any breach or default in the performance of any obligation
on Tenant’s part to be performed under the terms of this Lease, or from any act
or negligence of the Tenant, or any officer, agent, employee, guest or invitee
of Tenant, and from all and against all reasonable cost, attorney’s fees,
expenses and liabilities incurred in or about any such claim or any action or
proceeding brought thereon, and, if any case, action or proceeding be brought
against Landlord by reason of any such claim, Tenant upon notice from Landlord
shall defend the same at Tenant’s expense by counsel selected by Tenant and
approved in writing by Landlord such approval not to be unreasonably withheld or
delayed. Notwithstanding the preceding sentence, such indemnification by Tenant
and such assumption and waiver of claims shall not include damage or injury to
the extent caused by the negligence or willful misconduct of Landlord, its
agents, employees or contractors or which is covered by insurance carried by
Landlord or required to be carried by Landlord under this Lease. Subject to
Section 18(e) below and to the extent not funded and paid to Tenant by any
insurance maintained by Landlord or Tenant, Landlord shall indemnify, defend and
hold harmless Tenant against and from any and all claims, damages, liabilities,
and expenses (including reasonable attorneys’ fees) to the extent arising from
any breach or default in the performance of any obligation on Landlord’s part to
be performed under the terms of this Lease, or from any act or negligence of
Landlord, or any officer, agent, employee, guest or invitee of Landlord, and
from and against all reasonable costs, attorneys’ fees, expenses and liabilities
incurred in or about any such claim or any action or proceeding brought thereon,
and, if any case, action or proceeding be brought against Tenant by reason of
any such claim, Landlord upon notice from Tenant, shall defend same at
Landlord’s expense by counsel selected by Landlord and approved in writing by
Tenant, such approval not to be unreasonably withheld or delayed.
Notwithstanding any other provision of this Lease to the contrary, Landlord
shall not be responsible for any damages relating to Tenant’s loss of business
resulting from an event requiring indemnification pursuant to this Section.

 

(b) Neither Landlord nor any of its Affiliates shall be liable for and there
shall be no abatement of rent for (i) any damage to Tenant’s property stored
with Affiliates of Landlord, (ii) loss of or damage to any property by theft or
any other wrongful or illegal act, or (iii) any injury or damage to persons or
property resulting from fire, explosion, wind, earthquake, falling plaster,
steam, gas, electricity, flood, water or rain which may leak from any part of
the Building or the Project or from the pipes, appliances, appurtenances or
plumbing works therein or from the roof, street or sub-surface or from any other
place or resulting from dampness or any other cause whatsoever or from the acts
or omissions of other tenants, occupants or other visitors to the Building or
the Project or from any other cause whatsoever, or (iv) any diminution or
shutting off of light, air or view by any structure which may be erected on
lands adjacent to the Building, whether within or outside of the Property.
Tenant and Landlord agree that in no case shall the other ever be responsible or
liable on any theory for any injury to such other party’s business, loss of
profits, loss of income or any other form of consequential damage. Tenant shall
give prompt notice to Landlord in the event of (a) the occurrence of a fire or
accident in the Premises or in the Building, or (b) the discovery of any defect
therein or in the fixtures or equipment thereof.

 

17. DAMAGE TO PREMISES OR BUILDING

 

All injury to the Premises or the Building caused by moving the property of
Tenant or its employees, agents, guests or invitees into, in or out of the
Building and all breakage done by Tenant or the agents, servants, employees, and
visitors of Tenant shall be repaired as determined by the Landlord at the
expense of the Tenant (except to the extent paid by insurance carried by, or
required to be carried by Landlord).

 

18. TENANT’S INSURANCE

 

(a) All insurance required to be carried by Tenant hereunder shall be issued by
responsible insurance companies which are rated by Best Insurance Reports as
A-VI1 or better and reasonably acceptable to Landlord and Landlord’s lender and
licensed or authorized to do business in the State of California. Each policy
shall include Landlord, and at Landlord’s request any mortgagee of Landlord, as
an additional insured (but only as to the liability

 

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policy carried by Tenant), as their respective interests may appear. Each policy
shall contain (i) a separation of insureds condition, (ii) a provision that such
policy and the coverage evidenced thereby shall, as to any loss resulting from
Tenant’s negligent acts, be primary and non-contributing with respect to any
policies carried by Landlord and that any coverage carried by Landlord shall be
excess insurance for Landlord’s interest only, and (iii) a waiver by the insurer
of any right of subrogation against Landlord, its agents, employees and
representatives, which arises or might arise by reason of any payment under such
policy or by reason of any act or omission of Landlord, its agents, employees or
representatives (but only as to the property policy). A copy of each certificate
of the insurer evidencing the existence and amount of each insurance policy
required hereunder shall be delivered to Landlord before the date Tenant is
given possession of the Premises, and annually thereafter, within thirty (30)
days after any demand by Landlord therefor. No such policy shall be cancelable,
materially changed or reduced in coverage except after endeavoring to provide
thirty (30) days’ written notice to Landlord (and not less than ten (10) days,
in the case of nonpayment of premiums). Tenant agrees that if Tenant does not
take out and maintain such insurance following a written notice from Landlord
and passage of the applicable cure period under Section 24, Landlord may (but
shall not be required to) procure said insurance on Tenant’s behalf and charge
the Tenant the premiums, which shall be payable upon demand. Tenant shall have
the right to provide such insurance coverage pursuant to blanket policies
obtained by the Tenant, provided such blanket policies expressly afford coverage
to the Premises, Landlord, Landlord’s mortgagee and Tenant as required by this
Lease.

 

(b) Beginning on the date Tenant is given access to the Premises for any purpose
and continuing until expiration of the term of this Lease, Tenant shall procure,
pay for and maintain in effect policies of property insurance covering (i) any
alterations, additions or improvements as may be made and funded by Tenant
pursuant to the provisions of Section 10 hereof, and (ii) trade fixtures,
merchandise and other personal property from time to time, in, on or about the
Premises, in an amount not less than one hundred percent (100%) of their actual
replacement cost from time to time, providing protection against all risks of
physical loss or damage. Upon termination of this Lease following a casualty as
set forth herein, the proceeds shall be paid to Tenant.

 

(c) Beginning on the date Tenant is given access to the Premises for any purpose
and continuing until expiration of the Term of the Lease, Tenant shall procure,
pay for and maintain in effect workers’ compensation and employer’s liability
insurance. In addition, Tenant shall carry commercial general liability
insurance including coverage for personal injury and contractual liability with
not less than Two Million and No/100ths Dollars ($2,000,000.00) per occurrence
combined single limit, and a Five Million and No/100ths Dollars ($5,000,000.00)
aggregate limit, for bodily injury, personal injury or property damage
liability.

 

(d) [Intentionally omitted]

 

(e) Landlord and Tenant each hereby waive all rights of recovery against the
other and against the officers, employees, agents and representatives of the
other, on account of loss by or damage to the waiving party of its property or
the property of others under its control, to the extent that such loss or damage
is insured against and payment is made under any “all risk” or “special form”
insurance policy which either may have in force at the time of the loss or
damage. Tenant and Landlord shall, upon obtaining the policies of insurance
required under this Lease, give notice to its insurance carrier or carriers that
the foregoing mutual waiver of subrogation as contained in this Lease.

 

(f) During the term of this Lease, Landlord shall maintain the following
policies of insurance with insurers of recognized responsibility, licensed to do
business in the State of California, rated by Best Insurance Reports as A-: VII
or better: (i) commercial general liability of Two Million and No/100ths Dollars
($2,000,000.00) per occurrence combined single limit, and Five Million and
No/100ths Dollars ($5,000,000.00) aggregate limit, for bodily injury, personal
injury and property damage liability, (ii) workers’ compensation insurance, in
accordance with applicable law, and employee’s liability insurance and bodily
injury by accident of One Million and No/100ths Dollars ($1,000,000.00) per
accident, and bodily injury by disease One Million and No/100ths Dollars
($1,000,000.00) policy limit, and (iii) property liability insurance, on “all
risk” or “special form” basis, insuring the Building for the full replacement
costs thereof. Landlord shall be responsible for insuring the Tenant
Improvements funded and installed by Landlord pursuant to the provisions of the
Lease Improvement Agreement.

 

(g) Provided that Tenant complies with the provisions of Section 18(a), Tenant
shall have the right to self-insure the requirements of this Section 18,
provided Tenant, along with any corporate parent, subsidiary or affiliate
thereof, maintains a minimum net worth of $400 million as shown in the latest
annual financial report for Tenant. Tenant shall provide Landlord with thirty
(30) days prior written notice of such election to self- insure.

 

19. AD VALOREM TAXES

 

Tenant shall pay, or cause to be paid, before delinquency, any and all taxes
levied or assessed and which become payable during the term hereof upon all
Tenant’s leasehold improvements (if not part of the improvements constructed
pursuant to the Leasehold Improvement Agreement), equipment, furniture,
fixtures, and personal property located in the Premises, except that which has
been paid for by Landlord and is the standard of the Building. In the event any
or all of the Tenant’s leasehold improvements (if not part of the improvements
constructed pursuant to the Leasehold Improvement Agreement), equipment,
furniture, fixtures, and personal property shall be assessed and taxed with the
Building, Tenant shall pay to Landlord its share of such taxes within thirty
(30) days after delivery to Tenant by Landlord of a statement in writing setting
forth the amount of such taxes applicable to Tenant’s property with supporting
documentation.

 

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20. WAIVER

 

No delay or omission in the exercise of any right or remedy of Landlord or
Tenant on any default by Tenant or Landlord shall impair such a right or remedy
or be construed as a waiver. The subsequent acceptance of Rent by Landlord after
breach by Tenant of any covenant or term of this Lease shall not be deemed a
waiver of such breach, other than a waiver of timely payment for the particular
Rent involved, and shall not prevent Landlord from maintaining an unlawful
detainer or other action based on such breach. No act or conduct of Landlord,
including without limitation the acceptance of the keys to the Premises, shall
constitute an acceptance of the surrender of the Premises by Tenant before the
expiration of the term. Prior to the scheduled expiration of the term of the
Lease, only a notice from Landlord to Tenant shall constitute acceptance of the
surrender of the Premises and accomplish an early termination of this Lease.
Landlord’s consent to or approval of any act by Tenant requiring Landlord’s
consent or approval shall not be deemed to waive or render unnecessary
Landlord’s consent to or approval of any subsequent act by Tenant. Any waiver by
Landlord or Tenant of any default must be in writing and shall not be a waiver
of any other default concerning the same or any other provision of this Lease.
The review, approval, or inspection by Landlord of any item to be reviewed,
approved, or inspected by Landlord under the terms of this Lease shall not
constitute the assumption of any responsibility by Landlord for the accuracy or
sufficiency of any such item or the quality or suitability of such item for its
intended use.

 

21. ENTRY BY LANDLORD

 

Landlord reserves, and shall at any and all reasonable times with reasonable
notice have the right to enter the Premises to inspect the same, to supply any
service to be provided by Landlord to Tenant hereunder, to show the Premises to
prospective purchasers or tenants (with regard to prospective tenants, such
entrance shall not occur earlier than one hundred eighty (180) days prior to the
expiration of the Term), to post notices of non-responsibility, and to maintain
and repair the Premises and any portion of the Building that Landlord may deem
necessary or desirable, without abatement of Rent, and may for that purpose
erect scaffolding and other necessary structures, where reasonably required by
the character of the work to be performed, always providing that the entrance to
the Premises shall not be blocked thereby and further providing that the
business of the Tenant shall not be interfered with unreasonably. For each of
the aforesaid purposes, Landlord shall at all times have and retain a key with
which to unlock all of the doors in, upon and about the Premises, excluding
Tenant’s vaults, safes, files, and other areas designated as secure by Tenant,
and Landlord shall have the right to use any and all means which Landlord may
deem proper to open said doors in the event of an emergency (as determined by
Landlord or its employees or representatives acting in good faith), in order to
obtain entry to the Premises without liability to Landlord. Any entry to the
Premises obtained by Landlord by any of said means or otherwise shall not under
any circumstances be construed or be deemed to be a forcible or unlawful entry
into, or a detainer of the Premises, or an eviction of Tenant from the Premises
or any portion thereof.

 

22. CASUALTY DAMAGE

 

(a) During the Term hereof, if the Premises or any part thereof shall be damaged
by fire or other casualty, Tenant shall give prompt written notice thereof to
Landlord. In case the Building shall be so damaged by fire or other casualty
that substantial alteration or reconstruction of the Building shall be required
(whether or not the Premises shall have been damaged by such fire or other
casualty), (i) if such damage cannot be repaired within two hundred seventy
(270) days thereafter, as reasonably determined by Landlord, (ii) if any
mortgagee under a mortgage or deed of trust covering the Building requires that
the insurance proceeds payable as a result of said fire or other casualty be
used to retire or reduce such mortgage debt, or (iii) if such damage is not
covered by insurance carried by Landlord or required to be carried by Landlord
under this Lease, Landlord may, at its option, terminate this Lease and the term
and estate hereby granted by notifying Tenant in writing of such termination
within fifty (50) days after the date of such damage, in which event the Rent
shall be abated as of the date of such damage. If Landlord elects to repair the
Premises and/or the Building, Landlord shall within sixty (60) days after the
date of such damage commence to repair and restore the Building and shall
proceed with reasonable diligence to restore the Building (except that Landlord
shall not be responsible for delays outside its control) to substantially the
same condition in which it was immediately prior to the happening of the
casualty, except that Landlord shall not be required to rebuild, repair or
replace any part of Tenant’s furniture and furnishings or fixtures and equipment
removable by Tenant under the provisions of this Lease, but such work shall not
exceed the scope of the work done by Landlord in originally constructing the
Building. Tenant shall not be entitled to any compensation or damages from
Landlord, and Landlord shall not be liable, for any loss of the use of the whole
or any part of the Premises, the Building, Tenant’s personal property, or any
inconvenience or annoyance occasioned by such loss of use, damage, repair,
reconstruction or restoration, except that, Landlord shall allow Tenant a
diminution of Rent during the time and to the extent the Premises are unfit or
unavailable for occupancy. Any insurance which may be carried by Landlord or
Tenant against loss or damage to the Building or to the Premises shall be for
the sole benefit of the party carrying such insurance and under its sole
control. Tenant hereby specifically waives any and all rights it may have under
any law, statute, ordinance or regulation to terminate the Lease by reason of
casualty or damage to the Premises or Building, and the parties hereto
specifically agree that the Lease shall not automatically terminate by law upon
destruction of the Premises. Except as otherwise provided in this Section 22,
Tenant hereby waives the provisions of Sections 1932(2), 1933(4), 1941 and 1942
of the California Civil Code.

 

(b) In the event that Landlord elects to repair any damage to the Premises
and/or Building (if such damage prevents Tenant from using the Premises pursuant
to this Lease), Landlord shall deliver written notice to Tenant indicating
Landlord’s good faith estimate of the number of days required to repair such
damage within fifty (50) days following the date of such damage. If Landlord’s
estimate is in excess of two hundred seventy (270) days, for a period of thirty
(30) days following receipt of such notice, Tenant shall have the right, by
delivery of written notice to Landlord, to terminate this Lease, which
termination shall be effective upon delivery of such notice to

 

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Tenant by Landlord. The failure of Tenant to provide such written notice within
such time period, shall be deemed a waiver of Tenant’s right to terminate this
Lease pursuant to the preceding sentence.

 

23. CONDEMNATION

 

(a) If the whole of the Building or Premises should be condemned, this Lease
shall terminate as of the date when physical possession of the Building or the
Premises is taken by the condemning authority. If less than substantially the
whole of the Building or the Premises is thus taken or sold, this Lease shall be
unaffected by such taking, provided that (i) Tenant shall have the right to
terminate this Lease by written notice to Landlord given within ninety (90) days
after the date of such taking if twenty percent (20%) or more of the Premises is
taken and the remaining area of the Premises is not reasonably sufficient for
Tenant to continue operation of its business, and (ii) Landlord (whether or not
the Premises are affected thereby) may terminate this Lease by giving written
notice thereof to Tenant within sixty (60) days after the date of such taking,
in which event this Lease shall terminate as of the date when physical
possession of such portion of the Building or Premises is taken by the
condemning authority. If, upon any such condemnation of less than substantially
the whole of the Building or the Premises, this Lease shall not be thus
terminated, the Rent payable hereunder shall be diminished by an amount
representing that part of the Rent as shall properly be allocable to the portion
of the Premises which was so condemned, and Landlord shall, at Landlord’s sole
expense, restore and reconstruct the remainder of the Building and the Premises
to substantially their former condition to the extent that the same, in
Landlord’s reasonable judgment, may be feasible, but such work shall not exceed
the scope of the work done in originally constructing the Building, nor shall
Landlord in any event be required to spend for such work an amount in excess of
the amount received by Landlord as compensation awarded upon a taking of any
part or all of the Building or the Premises. Subject to the rights of any
mortgagee under a mortgage or deed of trust covering the Building, Landlord
shall be entitled to and shall receive the total amount of any award made with
respect to condemnation of the Premises or Building, regardless of whether the
award is based on a single award or a separate award as between the respective
parties, and to the extent that any such award or awards shall be made to Tenant
or to any person claiming through or under Tenant, Tenant hereby irrevocably
assigns to Landlord all of its rights, title and interest in and to any such
awards. No portion of any such award or awards shall be allocated to or paid to
Tenant for any so-called bonus or excess value of this Lease by reason of the
relationship between the rental payable under this Lease and what may at the
time be a fair market rental for the Premises, nor for Tenant’s unamortized
costs of leasehold improvements. The foregoing notwithstanding, and if Tenant be
not in default for any reason, Landlord shall turn over to Tenant, promptly
after receipt thereof by Landlord, that portion of any such award received by
Landlord hereunder which is attributable to Tenant’s fixtures and equipment
which are condemned as part of the property taken but which Tenant would
otherwise be entitled to remove, and the appraisal of the condemning authority
with respect to the amount of any such award allocable to such items shall be
conclusive. The foregoing shall not, however, be deemed to restrict Tenant’s
right to pursue a separate award specifically for its relocation expenses or the
taking of Tenant’s personal property or trade fixtures so long as such separate
award does not diminish any award otherwise due Landlord as a result of such
condemnation or taking. Tenant hereby specifically waives any and all rights it
may have under any law, statute, ordinance or regulation (including, without
limitation, Sections 1265.120 and 1265.130 of the California Code of Civil
Procedure), to terminate or petition to terminate this Lease upon partial
condemnation of the Premises or Building, and the parties hereto specifically
agree that this Lease shall not automatically terminate upon condemnation.

 

(b) Landlord may, without any obligation or liability to Tenant and without
affecting the validity and existence of this Lease other than as hereafter
expressly provided, agree to sell and/or convey to the condemnor the Premises or
portion thereof sought by the condemnor, without first requiring that any action
or proceeding be instituted, or if such action or proceeding shall have been
instituted, without first requiring any trial or hearing thereof (and Landlord
is expressly empowered to stipulate to judgment therein), free from this Lease
and the rights of Tenant hereunder.

 

(c) If all or any portion of the Premises is condemned or otherwise taken for a
period (i) of less than one hundred twenty (120) days, this Lease shall remain
in full force and effect and Tenant shall continue to perform all terms and
covenants of this Lease; provided, however, Rent shall abate during such limited
period in proportion to the portion of the Premises that is rendered unusable as
a result of such condemnation or other taking, or (ii) of one hundred twenty
(120) days or more, Tenant shall have the right to terminate this Lease by
providing written notice of such election within thirty (30) days of such
condemnation, in which case Rent shall be abated as of the date of such
condemnation.

 

(d) The words “condemnation” or “condemned” as used herein shall mean the taking
for any public or quasi-public use under any governmental law, ordinance, or
regulation, or the exercise of, or the intent to exercise, the power of eminent
domain, expressed in writing, as well as the filing of any action or proceeding
for such purpose, by any person, entity, body, agency, or authority having the
right or power of eminent domain, and shall include a voluntary sale by Landlord
to any such person, entity, body agency or authority, either under threat of
condemnation expressed in writing or while condemnation proceedings are pending,
and shall occur in point of time upon the actual physical taking of possession
pursuant to the exercise of said power of eminent domain.

 

24. TENANT’S DEFAULT

 

The occurrence of any one or more of the following events shall constitute a
default and breach of this Lease by Tenant:

 

(a) The abandonment of the Premises by Tenant (failure to occupy and operate the
Premises for ten (10) days or more shall be deemed an abandonment), unless
Tenant continues to pay all Rent and other expenses as and when due.

 

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(b) The failure by Tenant to make any payment of Rent or any other payment
required to be made by Tenant hereunder as and when due, which such failure
shall continue for a period of five business days following Tenant’s receipt of
written demand from Landlord.

 

(c) Tenant’s failure to observe or perform any of the covenants, conditions, or
provisions of this Lease to be observed or performed by Tenant, other than as
described in subparagraph (b) above, where such failure shall continue for a
period of fifteen (15) days after written notice thereof by Landlord to Tenant;
provided, however, that if the nature of Tenant’s default is such that more than
fifteen (15) days are reasonably required for its cure, then Tenant shall not be
deemed to be in default if Tenant commences such cure within said fifteen (15)
day period and thereafter diligently prosecutes such cure to completion;
provided that such cure shall not be in excess of ninety (90) days.

 

(d) The making by Tenant of any general assignment or general arrangement for
the benefit of creditors, or the appointment of a trustee or a receiver to take
possession of substantially all of Tenant’s assets located at the Premises or of
Tenant’s interest in this Lease, where possession is not restored to Tenant
within sixty (60) days, or the attachment, execution, or other judicial seizure
of substantially all of Tenant’s assets located at the Premises or of Tenant’s
interest in this Lease, where such seizure is not discharged in sixty (60) days.

 

(e) The filing of any voluntary petition in bankruptcy by Tenant, or the filing
of any involuntary petition by Tenant’s creditors, which involuntary petition
remains undischarged for a period of sixty (60) days. In the event that under
applicable law the trustee in bankruptcy or Tenant has the right to affirm this
Lease and perform the obligations of Tenant hereunder, such trustee or Tenant
shall, in such time period as may be permitted by the bankruptcy court having
jurisdiction, cure all defaults of Tenant hereunder outstanding as of the date
of the affirmance of this Lease, and provide to Landlord such adequate
assurances as may be necessary to ensure Landlord of the continued performance
of Tenant’s obligation under this Lease.

 

(f) Without the prior written consent of Landlord, which shall not be
unreasonably withheld or delayed, selling, leasing, assigning, encumbering,
hypothecating, transferring, or otherwise disposing of all or substantially all
of the Tenant’s assets.

 

(g) If Tenant is a partnership or consists of more than one (1) person or
entity, if any partner of the partnership or other person or entity is involved
in any of the acts or events described in Sections (d) or (e) above.

 

25. REMEDIES FOR TENANT’S DEFAULT

 

In the event of Tenant’s default, Landlord may:

 

(a) Terminate Tenant’s right to possession of the Premises by any lawful means,
in which case this Lease shall terminate and Tenant shall immediately surrender
possession of the Premises to Landlord. In such event, Landlord shall be
entitled to recover from Tenant:

 

(1) the worth at the time of the award of any unpaid rent which had been earned
at the time of such termination; plus

 

(2) the worth at the time of the 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 which Tenant proves could have been reasonably
avoided; plus

 

(3) the worth at the time of the award of the amount by which the unpaid rent
for the balance of the term after the time of award exceeds the amount of such
rental loss which Tenant proves could be reasonably avoided; plus

 

(4) 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 (including, without limitation, the cost of recovering possession of
the Premises, expenses of reletting including necessary renovation and
alteration of the Premises, reasonable attorneys’ fees, and real estate
commissions actually paid and that portion of the leasing commission paid by
Landlord and applicable to the unexpired portion of this Lease); plus

 

(5) such other amounts in addition to or in lieu of the foregoing as may be
permitted from time to time by applicable California law.

 

As used in Subsections (1) and (2) above, the “worth at the time of the award”
shall be computed by allowing interest at the lesser often percent (10%) per
annum, or the maximum rate permitted by law per annum. As used in Subsection (3)
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%).

 

(b) Continue this Lease in full force and effect, and the Lease will continue in
effect, as long as Landlord does not terminate Tenant’s right to possession, and
Landlord shall have the right to collect Rent when due consistent with
California Civil Code Section 1951.4. During the period Tenant is in default,
Landlord may enter the Premises and relet them, or any part of them, to third
parties for Tenant’s account. Tenant shall be liable immediately to Landlord for
all costs Landlord reasonably incurs in reletting the Premises, including,
without limitation, brokers’ commissions, expenses of remodeling the Premises
required by the reletting, and like costs. Reletting can be for a period shorter
or longer than the remaining term of this Lease. Tenant shall pay to Landlord

 

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the Rent due under this Lease on the dates the Rent is due, less the rent
Landlord receives from any reletting. In no event shall Tenant be entitled to
any excess rent received by Landlord. No act by Landlord allowed by this
paragraph shall terminate this Lease unless Landlord notifies Tenant in writing
that Landlord elects to terminate this Lease. After Tenant’s default and for as
long as Landlord does not terminate Tenant’s right to possession of the
Premises, if Tenant obtains Landlord’s consent, Tenant shall have the right to
assign or sublet its interest in this Lease, but Tenant shall not be released
from liability.

 

(c) Cause a receiver to be appointed to collect Rent. Neither the filing of a
petition for the appointment of a receiver nor the appointment itself shall
constitute an election by Landlord to terminate the Lease.

 

(d) Cure the default at Tenant’s cost. If Landlord at any time, by reason of
Tenant’s default, reasonably pays any sum or does any act that requires the
payment of any sum, the sum paid by Landlord shall be due immediately from
Tenant to Landlord at the time the sum is paid, and if paid at a later date
shall bear interest at the lesser of ten percent (10%) per annum, or the maximum
rate an individual is permitted by law to charge from the date the sum is paid
by Landlord until Landlord is reimbursed by Tenant. The sum, together with
interest on it, shall be additional Rent.

 

The foregoing remedies are not exclusive; they are cumulative, in addition to
any remedies now or later allowed by law, to any equitable remedies Landlord may
have, and to any remedies Landlord may have under bankruptcy laws or laws
affecting creditors’ rights generally. The waiver by Landlord of any breach of
any term, covenant or condition of this Lease shall not be deemed a waiver of
such term, covenant or condition or of any subsequent breach of the same or any
other term, covenant or condition. Acceptance of Rent by Landlord subsequent to
any breach hereof shall not be deemed a waiver of any proceeding breach other
than a failure to pay the particular Rent so accepted, regardless of Landlord’s
knowledge of any breach at the time of such acceptance of Rent. Landlord shall
not be deemed to have waived any term, covenant or condition unless Landlord
gives Tenant written notice of such waiver.

 

26. SURRENDER OF PREMISES

 

On expiration of this Lease or within five (5) days after the earlier
termination of the Term, Tenant shall surrender to Landlord the Premises in good
condition (except for ordinary wear and tear, repair and maintenance which is
the obligation of Landlord, and destruction to the Premises covered by Section
22). Tenant shall remove all its personal property within the above-stated time.
Tenant shall perform all restoration made necessary by the removal of any
alterations or Tenant’s personal property within the time periods stated in this
paragraph.

 

Landlord may elect to retain or dispose of in any manner any alterations or any
of Tenant’s personal property that Tenant does not remove from the Premises on
expiration or termination of the term as allowed or required by this Lease by
giving at least ten (10) days’ notice to Tenant. Title to any such alterations
or any of Tenant’s personal property that Landlord elects to retain or dispose
of on expiration of the ten (10)-day period shall vest in Landlord. Tenant
waives all claims against Landlord for any damage to Tenant resulting from
Landlord’s retention or disposition of any such alterations or any of Tenant’s
personal property. Tenant shall be liable to Landlord for Landlord’s costs for
storing, removing, and disposing of any alterations or any of Tenant’s personal
property. If Tenant fails to surrender the Premises to Landlord on expiration or
five (5) days after termination of the term as required by this paragraph,
Tenant shall indemnify and hold Landlord harmless from all claims, liability and
damages resulting from Tenant’s failure to surrender the Premises, including,
without limitation, claims made by a succeeding tenant resulting from Tenant’s
failure to surrender the Premises.

 

27. SUBSTITUTION

 

Intentionally Deleted.

 

28. PARKING

 

Tenant shall have the right to park in the Project’s parking facilities in
common with other tenants of the Building and or Project upon terms and
conditions as may from time to time be established by Landlord. In this regard,
during the Term of the Lease, Tenant shall be entitled to the nonexclusive use
of not less than four (4) parking spaces for every one thousand (1,000) rentable
square feet within the Premises at no cost to Tenant or Tenant’s employees or
visitors. If Tenant and Tenant’s employees and visitors consistently use more
parking stalls than allotted to Tenant under this Lease, and as a result other
occupants of the Building consistently do not have a sufficient parking spaces
available to them, Landlord shall have the right to thereafter take commercially
reasonable measures, (such as issuing parking permits, and towing vehicles) in
order to ensure that Tenant and the other Building occupants do not use more
spaces than allotted to them under their respective leases. Not more than
thirty-five percent (35%) of the parking spaces shall be compact-sized, with the
balance being full-sized. The parking layout shall include an adequate area
reserved for car-pool parking. If Landlord grants reserved parking rights to any
occupant of the Building, such occupant’s percentage of such reserved parking
stalls shall not exceed such occupant’s proportionate share of the rentable area
of the Building, and Tenant shall be entitled to that percentage of the total
reserved parking stalls equal to Tenant’s Proportionate Share of the rentable
area of the Building. Landlord shall use best efforts to ensure that the
Tenant’s rights to the parking area are not infringed upon by others. Landlord
shall ensure, at Landlord’s sole expense, that the exterior light levels satisfy
all laws and prudent safety standards; Landlord shall, prior to completion of
construction, provide the results of an exterior lighting survey to Tenant.
Landlord shall not be liable for any claims, losses, damages, expenses or
demands with respect to injury or damage to the vehicles of Tenant or Tenant’s
customers or employees that park in the parking areas of the Project, except for
such loss or damage as may be caused by Landlord’s gross negligence or willful
misconduct. If Tenant leases

 

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additional space in the Building or Project, Tenant’s reserved and non-exclusive
parking rights shall be increased on a proportionate basis.

 

29. ESTOPPEL CERTIFICATE

 

(a) Tenant shall at any time and from time to time upon not less than fifteen
(15) days’ prior written notice from Landlord execute, acknowledge, and deliver
to Landlord a statement in writing, (a) certifying that this Lease is unmodified
and in full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease as modified is in full force and
effect) and the date to which the Rental and other charges are paid in advance,
if any; (b) certifying that the Premises have been accepted by Tenant; (c)
confirming the Commencement Date and the expiration date of this Lease; (d)
acknowledging that there are not, to Tenant’s knowledge, any uncured defaults on
the part of the Landlord hereunder, or specifying such defaults, if any are
claimed, and (e) such other matters reasonably requested by Landlord. Any such
statement may be relied upon by a prospective purchaser or encumbrancer of all
or any portion of the real property of which the Premises are a part.

 

(b) Landlord shall at any time and from time to time upon not less than fifteen
(15) days’ prior written notice from Tenant execute, acknowledge, and deliver to
Tenant a statement in writing, (a) certifying that this Lease is unmodified and
in full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease as modified is in full force and
effect) and the date to which the Rental and other charges are paid in advance,
if any; (b) confirming the Commencement Date and the expiration date of this
Lease; (c) acknowledging that there are not, to Landlord’s knowledge, any
uncured defaults on the part of the Tenant hereunder, or specifying such
defaults, if any are claimed, and (d) such other matters reasonably requested by
Tenant. Any such statement may be relied upon by a prospective transferee of
Tenant’s interest in this Lease.

 

30. SALE OF PREMISES

 

In the event of any sale of the Project, Landlord shall be and hereby is
entirely freed and relieved of all further liability under any and all of its
covenants and obligations contained in or derived from this Lease and accruing
after such sale, and the purchaser, at such sale or any subsequent sale of the
Premises, shall be deemed, without any further agreement between the parties or
their successors in interest or between the parties and any such purchaser, to
have assumed and agreed to carry out any and all of the covenants and
obligations of Landlord under this Lease. If any Security Deposit or prepaid
Rent has been paid by Tenant, Landlord will transfer the Security Deposit and
prepaid Rent to Landlord’s successor and upon such transfer, Landlord shall be
relieved of any and all further liability with respect thereto.

 

31. SUBORDINATION, ATTORNMENT

 

(a) This Lease is and shall be subordinate to any encumbrance now of record or
recorded after the date of this Lease affecting the Building, other
improvements, and land of which the Premises are a part. Such subordination is
effective without any further act of Tenant. If any mortgagee, trustee, or
ground lessor shall elect to have this Lease and any options granted hereby
prior to the lien of its mortgage, deed of trust, or ground lease, and shall
give written notice thereof to Tenant, this Lease and such options shall be
deemed prior to such mortgage, deed of trust, or ground lease, whether this
Lease or such options are deeded prior or subsequent to the date of said
mortgage, deed of trust, or ground lease, or the date of recording thereof.

 

(b) In the event any proceedings are brought for foreclosure, or in the event of
a sale or exchange of the real property on which the Building is located, or in
the event of the exercise of the power of sale under any mortgage or deed of
trust made by Landlord covering the Premises, Tenant shall attorn to the
purchaser upon any such foreclosure and sale and recognize such purchaser as the
Landlord under this Lease.

 

(c) Tenant agrees to execute any documents reasonably required to effectuate an
attornment or to make this Lease or any options granted herein prior to the lien
of any mortgage, deed of trust, or ground lease, as the case may be, provided
the rights of Tenant are not diminished or adversely affected as a result
thereof.

 

(d) Landlord agrees that Tenant’s obligations to subordinate under this Section
31 to any existing and future ground lease, mortgage, or deed of trust (each, an
“Encumbrance”) shall be conditioned upon Tenant’s receipt of a non-disturbance
agreement from the party requiring such subordination (which party is referred
to for the purposes of this Section as the “Superior Lienor”). Such
non-disturbance agreement shall be in recordable form, and shall provide, at a
minimum, that (i) Tenant’s possession of the Premises shall not be interfered
with following a foreclosure, or other termination of the Encumbrance, provided
Tenant is not in default beyond any applicable cure periods, (ii) there shall be
no diminution in Tenant’s rights under this Lease as a result of a foreclosure
or other termination of the Encumbrance, and (iii) the Superior Lienor or any
other party acquiring Landlord’s interest in this Lease shall perform all of
Landlord’s future obligations hereunder, and (iv) Landlord’s obligation with
respect to such a non-disturbance agreement shall be limited to obtaining the
non-disturbance agreement in such form as the Superior Lienor generally provides
in connection with its standard commercial loans, however, Tenant shall have the
right to negotiate, and Landlord shall use its good faith efforts and due
diligence in assisting Tenant in the negotiation of, revisions to that
non-disturbance directly with the Superior Lienor. Tenant agrees to use its good
faith efforts to reach agreement with the Superior Lienor upon acceptable terms
and conditions of a non-disturbance agreement.

 

(e) Tenant’s obligation to pay Rent under this Lease to Superior Lienor is
conditioned upon Tenant’s receipt of a nondisturbance agreement, satisfying the
requirements of Section 31(d), from any Superior Lienor whose Encumbrance is
superior to this Lease as of the Commencement Date.

 

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32. AUTHORITY OF TENANT

 

If Tenant is a corporation, each individual executing this Lease on behalf of
said corporation represents and warrants that he is duly authorized to execute
and deliver this Lease on behalf of said corporation, and that this Lease is
binding upon said corporation in accordance with its terms.

 

33. BROKER

 

(a) Landlord and Tenant each warrants that it has had no dealings with any real
estate broker or agents in connection with the negotiation of this Lease except
for the broker or brokers listed in the Basic Lease Information of this Lease
(“Broker”), and it knows of no other real estate broker or agent who is entitled
to a commission in connection with the Lease. Landlord agrees to pay any
commission to which its Broker is entitled in connection with this Lease. Tenant
agrees to indemnify and defend Landlord and hold Landlord harmless from any
claims for brokerage commissions arising out of any discussion allegedly had by
Tenant with any broker other than Broker.

 

(b) Landlord shall pay Tenant’s Broker a commission per a separate commission
agreement.

 

34. HOLDING OVER

 

Upon termination of the Lease or expiration of the Term hereof, if Tenant
retains possession of the Premises without Landlord’s written consent first had
and obtained, then Tenant’s possession shall be deemed a month-to-month tenancy
upon all of the terms and conditions contained in this Lease, except the Base
Rent portion of the Rent which shall be increased to one hundred twenty-five
percent (125%) of the amount of the Base Rent portion of the Rent at the
expiration or earlier termination of the Lease, as the case may be. Rent, as
adjusted pursuant to this Section, shall be payable in advance on or before the
first day of each month. If either party desires to terminate such
month-to-month tenancy, it shall give the other party not less than thirty (30)
days’ advance written notice of the date of termination.

 

35. RULES AND REGULATIONS

 

Tenant shall faithfully observe and comply with the reasonable,
nondiscriminatory rules and regulations that Landlord shall from time to time
promulgate. Landlord reserves the right from time to time to make all reasonable
nondiscriminatory modifications to said rules. The additions and modifications
to those rules shall be binding upon Tenant upon delivery of a copy to them to
Tenant (a copy of the present Rules and Regulations is attached hereto as
Exhibit D). Landlord shall use its reasonable efforts to enforce compliance with
such rules in a uniform manner, but shall not be responsible to Tenant for the
nonperformance of any of said rules by other tenants or occupants. In the event
of any inconsistency between such rules and regulations and this Lease, the
terms of this Lease shall govern. Any consent required to be obtained by Tenant
pursuant to the rules and regulations shall not be unreasonably withheld or
delayed.

 

36. OTHER RIGHTS RESERVED BY LANDLORD

 

In addition to any other rights contained in this Lease, Landlord retains and
shall have the rights set forth below, exercisable without notice and without
liability to Tenant for damage or injury to property, person or business and
without effecting an eviction, constructive or actual, or disturbance of
Tenant’s use or possession of the Premises or giving rise to any claim for
setoff or abatement of Rent: to install, affix and maintain any and all signs on
the exterior and interior of the Building, except as limited by Section 37(p)
below; to reduce, increase, enclose or otherwise change at any time and from
time to time the size, number, location, layout end nature of the Project Common
Area and facilities and other tenancies and premises in the Project and to
create additional rentable areas through use or enclosure of Project Common
Area, provided that such changes do not materially affect Tenant’s business, and
parking layout, location and nature of parking spaces available, and the access
to the Premises and visibility of Tenant’s signage is not impaired.

 

37. GENERAL PROVISIONS

 

(a) Plats and Riders. Clauses, plats, and riders, if any, signed by the Landlord
and Tenant and endorsed on or affixed to this Lease are a part hereof.

 

(b) Consents. Except as provided in this Lease, whenever this Lease requires the
consent or approval of Landlord, Landlord agrees that such consent or approval
shall not be unreasonably withheld or delayed.

 

(c) Joint Obligation. If there be more than one Tenant, the obligations
hereunder imposed upon Tenant shall be joint and several.

 

(d) Marginal Headings. The marginal headings and titles to the paragraphs of
this Lease are not a part of this Lease and shall have no effect upon the
construction or interpretation of any part hereof.

 

(e) Time. Time is of the essence in this Lease and with respect to each and all
of its provisions in which performance is a factor.

 

(f) Quiet Possession. Upon Tenant paying the Rent reserved hereunder, and
observing and performing all of the covenants, conditions, and provisions on
Tenant’s part to be observed and performed

 

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hereunder, Tenant shall have quiet possession of the Premises for the entire
term hereof, subject to all the provisions of this Lease.

 

(g) Prior Agreements. This Lease contains all of the agreements of the parties
hereto with respect to any matter covered or mentioned in this Lease, and no
prior agreements or understanding pertaining to any such matters shall be
effective for any purpose. No provision of this Lease may be amended or added to
except by an agreement in writing signed by the parties hereto or their
respective successors in interest. This Lease shall not be effective or binding
on any party until fully executed by both parties hereto.

 

(h) Force Majeure. Except as provided in this Lease, in the event Landlord or
Tenant, is delayed, interrupted or prevented from performing any of its
obligations under this Lease, and such delay, interruption or prevention is due
to fire, act of God, failure of utility service provider to provide such utility
service, government regulation or restriction, governmental delay in issuing
permits, approvals and inspections, weather which causes delay of construction,
strike, labor dispute, unavailability of materials or any other cause outside
the reasonable control of such party (excepting, however, such party’s financial
inability), then the time for performance of the affected obligations of such
party shall be extended for a period equivalent to the period of such delay,
interruption or prevention (but in no event shall the time for performance of
any obligation for payment of money be extended pursuant to this provision).

 

(i) Jury Trial. The parties hereto shall, and they hereby do, waive trial by
jury in any action, proceeding, or counterclaim brought by either of the parties
hereto against the other on any matters whatsoever arising out of or in any way
connected with this Lease, the relationship of Landlord and Tenant, Tenant’s use
or occupancy of the Premises and/or any claim of injury or damage.

 

(j) Limitation on Liability. In consideration of the benefits accruing
hereunder, Tenant and all successors and assigns covenant and agree that, in the
event of any actual or alleged failure, breach or default hereunder by Landlord
(except for a default under the Lease Improvement Agreement prior to the
Commencement Date (1) Tenant’s sole and exclusive recourse shall be against
Landlord’s interest in the Project. Tenant shall not have any right to satisfy
any judgment which it may have against Landlord from any other assets of
Landlord; (2) no partner, stockholder, director, officer, employee, beneficiary
or trustee (collectively, “Partner”) of Landlord shall be sued or named as a
party in any suit or action (except as may be necessary to secure jurisdiction
over Landlord); (3) no service of process shall be made against any Partner of
Landlord (except as may be necessary to secure jurisdiction over Landlord); (4)
no Partner of Landlord shall be required to answer or otherwise plead to any
service of process; (5) no judgment will be taken against any Partner of
Landlord; (6) any judgment taken against any Partner of Landlord may be vacated
and set aside at any time nunc pro tunc; (7) no writ of execution will ever be
levied against the assets of any Partner of Landlord; and (8) these covenants
and agreements are enforceable both by Landlord and also by any Partner of
Landlord.

 

(k) Limitation on Liability. The obligations of Tenant under this Lease do not
constitute personal obligations of the individual officers and employees of
Tenant.

 

(l) [Intentionally omitted]

 

(m) No Construction Against Drafter. The provisions of this Lease shall be
construed in accordance with the fair meaning of the language used and shall not
be strictly construed against either party.

 

(n) Separability. Any provisions of this Lease which shall prove to be invalid,
void, and illegal shall in no way affect, impair, or invalidate any other
provision hereof, and such other provisions shall remain in full force and
effect.

 

(o) Choice of Law. This Lease shall be governed by the laws of the State in
which the Premises are located.

 

(p) Signage.

 

  (i) If Landlord should install a monument (the “Monument”) (it being agreed
that Landlord has no obligation to do so) on the Lot in accordance with the
covenants, conditions and restrictions encumbering the Project, such Monument
may be used for Tenant and Building identification, and Tenant shall have the
non-exclusive right to install its identification signage. Tenant shall be
responsible for all costs associated with the installation and maintenance of
such signage. Upon the termination of this Lease, the Monument signage shall be
removed by Landlord, at Tenant’s expense.

 

  (ii)

Tenant shall be entitled, on a non-exclusive basis, to Building parapet signage
(“Building Signage”) to be located at a location acceptable to Landlord and
Tenant. The size, style, material and attachment of such exterior signage shall
be subject to the reasonable approval of Landlord and Tenant and such exterior
signage shall comply with all applicable laws, statutes and ordinances, and the
conditions, covenants and restrictions encumbering the Project (collectively,
the “Sign Ordinances”). The Building signage shall be as large as such Sign
Ordinances allow. Tenant shall be responsible for all costs associated with the
installation and maintenance of such signage. Upon the termination of this
Lease, the Building Signage shall be removed by Landlord, at Tenant’s expense.
Landlord shall have the right to install other signs on the Building, but
Landlord will not permit any Competitor (as defined below) to place a sign on
the Building or Monument. As used in this Section 39(p), a “Competitor”

 

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shall be any company that is commonly known to directly compete with Tenant’s
health maintenance organization and health insurance businesses. Notwithstanding
the above, should Tenant lease the entire rentable area of the Building, Tenant
shall have exclusive rights to such Building Signage.

 

(q) Project Name. Tenant may use the name of the Project in which the Premises
are located in all Tenant’s advertising in connection with Tenant’s business at
the Premises and for no other purpose, except with Landlord’s consent.

 

(r) Late Charges. Tenant acknowledges that late payment by Tenant to Landlord of
Rent will cause Landlord to incur costs not contemplated by this Lease, the
exact amount of such costs being extremely difficult and impracticable to fix.
Such costs include, without limitation, processing charges, accounting charges,
and late charges that may be imposed on Landlord by the terms of any encumbrance
and note secured by any encumbrance covering the Premises. Therefore, if any
delinquent installment of Rent or other sums due from Tenant is not received by
Landlord on or before the fifth day of each calendar month Tenant shall pay to
Landlord an additional sum equal to six percent (6.00%) of such overdue amount
as a late charge. The parties agree that this late charge represents a fair and
reasonable estimate of the administrative and other costs that Landlord will
incur by reason of late payment by Tenant. Acceptance of any late charge shall
not constitute a waiver of Tenant’s default with respect to the overdue amount,
nor prevent Landlord from exercising any of the other rights and remedies
available to Landlord.

 

(s) Interest. Notwithstanding any other provisions of this Lease, any
installment of Rent or other amounts due under this Lease not paid to Landlord
when due shall bear interest from the date due or from the date of expenditure
by Landlord for the account of Tenant, until the same have been fully paid, at
the lessor of ten percent (10%) per annum or the maximum rate permitted under
applicable law (the “Interest Rate”). The payment of such interest shall not
constitute a waiver of any default by Tenant hereunder. Any sum owing from
Landlord to Tenant under this Lease shall bear interest from the date due at the
Interest Rate.

 

(t) Attorneys’ Fees. If Tenant or Landlord shall be in breach or default under
this Lease, such party (the “Defaulting Party”) shall reimburse the other party
(the “Non-Defaulting Party”) upon demand for any costs or expenses that the
Non-Defaulting Party incurs in connection with any breach or default of the
Defaulting Party under this Lease. Such costs shall include legal fees and costs
incurred for the negotiation of a settlement, enforcement of rights or
otherwise. Furthermore, if any action for breach of or to enforce the provisions
of this Lease is commenced, the court in such action shall award to the party in
whose favor a judgment is entered, a reasonable sum as attorneys’ fees and
costs. The losing party in such action shall pay such attorneys’ fees and costs.

 

(u) Modification. This Lease and all exhibits attached hereto contain the entire
agreement between the parties relating to the rights herein granted and the
obligations herein assumed. Any oral representations or modifications concerning
this Lease shall be of no force or effect, excepting a subsequent modification
in writing signed by the party to be charged.

 

(v) Successors and Assigns. Subject to the provisions of Section 15, this Lease
and each of its covenants and conditions shall be binding upon and shall inure
to the benefit of the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors and assigns.

 

(w) Waiver of California Code Sections. Notwithstanding any other provision of
this Lease and in addition to any waivers which may be contained in this Lease,
Tenant waives the provisions of Civil Code Section 1932(2) and 1933(4) with
respect to the destruction of the Premises; Civil Code Sections 1932(1), 1941
and 1942 with respect to Landlord’s repair duties and Tenant’s right of repair;
and Code of Civil Procedure Section 1265.130 allowing either party to petition
the Superior Court to terminate this Lease in the event of a partial taking of
the Premises for public or quasi-public use by statute, by right of imminent
domain, or by purchase in lieu of imminent domain; and any right of redemption
or reinstatement of Tenant under any present of future case law or statutory
provision (including Code of Civil Procedure Section 473, 1174(c) and 1179 and
Civil Code Section 3275) in the event Tenant is dispossessed from the premises
for any reason. This waiver applies to future statutes enacted in addition or in
substitution to the statue specified herein, and this waiver shall apply even
though Tenant may be the subject of a voluntary or involuntary petition in
bankruptcy.

 

(x) Government Energy or Utility Controls. In the event of imposition of
federal, state or local governmental controls, regulations or restrictions on
the use or consumption of energy or other utilities during the term, both
Landlord and Tenant shall be bound thereby.

 

(y) Accord and Satisfaction; Allocation of Payments. No payment by Tenant or
receipt by Landlord of a lesser amount than the Rent provided for in this Lease
shall be deemed to be other than account of the earliest due Rent, nor shall any
endorsement or statement on any check or letter accompanying any check or
payment as Rent be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord’s right to recover the
balance of the Rent or pursue any other remedy provided for in this Lease. In
connection with the foregoing, Landlord shall have the absolute right in its
sole discretion to apply any payment received from Tenant to any account or
other payment of Tenant which is then due or delinquent.

 

(z) Furnishing Financial Statements. In order to induce Landlord to enter into
this Lease, and at any time during the Term, Tenant agrees that it shall furnish
to Landlord within 15 days, upon Landlord’s written request, with annual
financial statements reflecting Tenant’s current financial condition. Tenant
represents and warrants that all financial statements, records and information
furnished by Tenant to Landlord in connection with the Lease are true, correct
and complete in all respects as of the date of delivery.

 

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(aa) Recording. Tenant shall not record this Lease or a memorandum thereof, or
any other reference to this Lease, without the prior written consent of
Landlord, Either party, upon the request of the other, shall execute and
acknowledge a “short form” memorandum of this Lease for recording purposes.

 

(bb) Execution of Lease, No Options. The submission of this Lease to Tenant
shall be for examination purposes only, and does not and shall not constitute a
reservation of or option for Tenant to Lease, or otherwise created any interest
of Tenant in the Premises or any other Premises within the Building. Execution
of this Lease by Tenant and its return to Landlord shall not be binding on
Landlord notwithstanding any time interval, until Landlord has in fact signed
and delivered this Lease to Tenant.

 

38. NOTICES

 

All notices and demands required to be sent to the Landlord or Tenant under the
terms of this Lease shall be personally delivered or sent by certified or
registered mail, postage prepaid or by overnight courier (i.e., Federal
Express), to the addresses indicated in the Basic Lease Information, or to such
other addresses as the parties may from time to time designate by notice
pursuant to this paragraph. In addition, Notices to Tenant shall also be sent to
the building premises. Notices shall be deemed received upon the earlier of (i)
if personally delivered, the date of delivery to the address of the person to
receive such notice (ii) if mailed, two (2) days following the date of posting
by the U.S. Postal Service, and (iii) if by overnight courier, on the business
day following the deposit of such notice with such courier.

 

39. ADDENDA/ADDITIONAL PROVISIONS

 

(a) Telecommunications Carrier’s Access.

 

(1) Tenant’s right lo select and utilize a telecommunications and data carrier
(the “Carrier”) shall be conditioned on the execution by such Carrier of a
mutually acceptable license agreement, such license agreement must be
commercially reasonable, pursuant to which Landlord shall grant to the Carrier a
license (which shall be coextensive with the rights and privileges granted to
Tenant under this Lease) to install, operate, maintain, repair, replace, and
remove cable and related equipment within the Premises and the Building’s main
telephone/electrical closet and vertical and horizontal pathways within the
Building but outside of the Premises that are necessary to provide
telecommunications and data services to Tenant at the Premises.

 

(2) The license contemplated herein to be granted to the Carrier shall permit
the Carrier to provide services only to Tenant and not to any other tenants or
occupants of the Building and shall require all of the Carrier’s equipment
(other than connecting wiring) to be located in the Tenant’s Premises. The
License shall not grant an exclusive right to Tenant or to the Carrier. Landlord
reserves the right, at its sole discretion, to grant, renew, or extend licenses
to other telecommunications and data carriers for the purposes of locating
telecommunications equipment in the Building which may serve Tenant or other
tenants in the Building.

 

(3) Except to the extent expressly set forth herein, nothing herein shall grant
to the Carrier any greater rights or privileges than Tenant is granted pursuant
to the terms of this Lease or diminish Tenant’s obligations or Landlord’s rights
hereunder.

 

(4) Tenant shall be responsible for ensuring that the Carrier complies with the
terms and conditions or the license agreement relating to the use of the
Premises or the making of any physical Alterations imposed upon Tenant under
this Lease to the extent the Carrier operates or maintains any equipment or
delivers any services in the Premises. Any failure by the Carrier to observe and
comply with such terms, conditions, agreement, and covenants on behalf of
Tenant, to the extent the Carrier operates or maintains any equipment or
delivers any services in the Premises or the Licensed Areas, shall be a default
under the Lease (following the giving of written notice and the passage of the
applicable cure period under Section 24).

 

(b) Option(s) to Renew.

 

Tenant shall, provided this Lease is in full force and effect and Tenant is not
then in monetary or nonmonetary material default under any of the terms and
conditions of this Lease (following the giving of written notice and passage of
the applicable cure period under Section 24), have three (3) successive
option(s) to renew this Lease for a term of five (5) year(s) each, for the
Premises in “as is” condition and on the same terms and conditions set forth in
this Lease, except as modified by the terms, covenants and conditions set forth
below:

 

(1) If Tenant elects to exercise such option, then Tenant shall provide Landlord
with written notice no earlier than the date which is three hundred sixty-five
(365) days prior to the expiration of the then current term of this Lease, but
no later than 5:00 p.m. (Pacific Standard Time) on the date which is two hundred
seventy (270) days prior to the expiration of the then current term of this
Lease. If Tenant fails to provide such notice, Tenant shall have no further or
additional right to extend or renew the term of this Lease.

 

(2) The Base Rent in effect at the expiration of the then current term of this
Lease shall be adjusted to reflect the current fair market rental for comparable
space in the Building or Project and in other similar buildings in the same
rental market as of the date the renewal term is to commence, taking into
account the specific provisions of this Lease which will remain constant, and
the Building amenities, location, identity, quality, age, conditions, term of
lease, tenant improvements, services provided, and other pertinent items. The
“Base Year” shall be the calendar year in which the commencement of the renewal
term occurs.

 

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(3) Landlord shall advise Tenant of the new Base Rent for the Premises for the
applicable renewal term which will be based on Landlord’s determination of fair
market rental value no later than fifteen (15) days after receipt of notice of
Tenant’s exercise of its option to renew. Tenant shall have forty-five (45) days
after receipt of such notification from Landlord to accept the new Base Rent,
terms and conditions.

 

If Landlord and Tenant are unable to agree upon the fair market rental value for
Base Rent for the Extension Term within such forty-five (45) day period, then
within fifteen (15) days after the expiration of the forty-five (45) day period,
each party, by giving notice to the other party, shall appoint a commercial real
estate broker who is active in the greater Sacramento office market, with at
least ten (10) years of experience. “Fair Market Rental Value” shall mean the
monthly amount per rentable square foot in the Premises that a willing,
non-equity new tenant would pay and a willing landlord would accept at arm’s
length for space in a comparable building or buildings, with comparable tenant
improvements, in a comparable location, giving appropriate consideration to
then-current monthly rental rates per rentable square foot, the presence or
absence of rent escalation clauses such as operating expense and tax
pass-throughs, length of lease term, size and location of premises being leased
and other generally applicable terms and conditions of tenancy for a similar
building or buildings. If the two (2) brokers are unable to agree on the Fair
Market Rental Value for the Extension Term within twenty (20) days, they shall
select a third broker meeting the qualifications stated in this Section within
five (5) days after the last day the two (2) brokers are given to set the Fair
Market Rental Value for the Extension Term. The third broker, however selected,
shall be a person who has not previously acted in any capacity for either party.
Within twenty (20) days after the selection of the third broker, a majority of
the brokers shall set the Fair Market Rental Value for the Extension Term. If a
majority of the brokers is unable to set the Fair Market Rental Value within the
twenty (20) day period, the two (2) closest Fair Market Rental Values shall be
added together and their total divided by two (2). The resulting quotient shall
be the Fair Market Rental Value and Tenant shall pay to Landlord said Fair
Market Rental Value for the Extension Term. Each party shall be responsible for
the costs, charges and fees of the broker appointed by that party plus one-half
of the cost of the third broker.

 

(4) Any exercise by Tenant of any option to renew under this Paragraph shall be
irrevocable. If requested by Landlord, Tenant agrees to execute a lease
amendment reflecting the foregoing terms and conditions, prior to the
commencement of the renewal term. The option(s) to renew granted under this
Paragraph is/are not transferable, except to an assignee of Tenant’s entire
interest in this Lease in accordance with the terms of Section 15 of this Lease.

 

(5) If more than one renewal option is provided above, the exercise of each
renewal option shall be contingent upon Tenant exercising the prior renewal
option. Only one renewal option may be exercised at a time. As each renewal
option provided for above is exercised, the number of renewal options remaining
to be exercised is reduced by one and upon exercise of the last remaining
renewal option Tenant shall have no further right to extend the term of this
Lease.

 

(c) Generator. Landlord shall permit Tenant to install and maintain, at Tenant’s
expense, a back-up generator (and an associated fuel tank) for the Building, at
a location (outside of the Building) mutually acceptable to Landlord and Tenant.
Any such generator shall be subject to the requirements imposed on Alterations
pursuant to Section 10 of this Lease (including, but not limited to, the
requirements that Landlord approve the plans and that Tenant obtain all
applicable governmental permits).

 

IN WITNESS WHEREOF, this Lease is executed on the date and year first above
written.

 

LANDLORD:       TENANT:

LANDHOLD, INC., a California corporation

     

HEALTH NET, INC., a Delaware corporation

By:   /s/    LINDA STANLEY               By:   /s/    MICHAEL RADFORD          
 

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Title:

 

Linda Stanley

President

     

Name:

Title:

 

Michael Radford

Vice President

 

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