Exhibit 10.7

 

OFFICE SPACE LEASE

 

BETWEEN

 

THE IRVINE COMPANY

 

AND

 

GARDENBURGER, INC.

 

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

 

OFFICE SPACE LEASE

 

THIS LEASE is made as of the 21st day of August, 2003, by and between THE IRVINE
COMPANY, hereafter called “Landlord,” and GARDENBURGER, INC., an Oregon
corporation, hereafter called “Tenant.”

 

ARTICLE I.  BASIC LEASE PROVISIONS

 

Each reference in this Lease to the “Basic Lease Provisions” shall mean and
refer to the following collective terms, the application of which shall be
governed by the provisions in the remaining Articles of this Lease.

 

1.                    Tenant’s Trade Name:  N/A

 

2.                    Premises:  Suite No. 350 (the Premises are more
particularly described in Section 2.1).

 

Address of Building:  15615 Alton Parkway, Irvine, CA 92618

 

Project Description:  Palm Court

 

3.                    Use of Premises:  General office and for no other use.

 

4.                    Estimated Delivery Date :  October 1, 2003

 

5.                     Lease Term:  Thirty-six (36) months, plus such additional
days as may be required to cause this Lease to terminate on the final day of the
calendar month.

 

6.                    Basic Rent:  Ten Thousand Three Hundred Twenty-Two Dollars
($10,322.00) per month.

 

Rental Adjustments:

 

Commencing twelve (12) months following the Commencement Date, the Basic Rent
shall be Ten Thousand Eight Hundred Thirty-Eight Dollars ($10,838.00) per month.

 

Commencing twenty-four (24) months following the Commencement Date, the Basic
Rent shall be Eleven Thousand Three Hundred Fifty-Four Dollars ($11,354.00) per
month.

 

7.                     Property Tax Base :  The Property Taxes per rentable
square foot incurred by Landlord and attributable to the twelve month period
ending June 30, 2004 (the “Base Year”).

 

Building Cost Base :  The Building Costs per rentable square foot incurred by
Landlord and attributable to the Base Year.

 

Expense Recovery Period:  Every twelve month period during the Term (or portion
thereof during the first and last Lease years) ending June 30.

 

8.                    Floor Area of Premises:  approximately 5,161 rentable
square feet

 

9.                    Security Deposit:  $12,489.00

 

10.              Broker(s):  Lee & Associates

 

11.              Plan Approval Date :  N/A

 

12.              Parking:  Eighteen (18) unreserved vehicle parking spaces.

 

13.              Address for Payments and Notices:

 

LANDLORD

 

TENANT

 

 

 

The Irvine Company
8001 Irvine Center Drive, Suite 840
Irvine, CA  92618
Attn:  Property Manager

 

Gardenburger, Inc.
15615 Alton Parkway, Suite 350
Irvine, CA  92618

 

 

 

with a copy of notices to:

 

 

 

 

 

THE IRVINE COMPANY
P.O. Box 6370
Newport Beach, CA 92658-6370
Attn:  Vice President, Operations – Office Properties

 

 

 

1

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

 

ARTICLE II.  PREMISES

 

SECTION 2.1.                                     LEASED PREMISES.  Landlord
leases to Tenant and Tenant rents from Landlord the premises shown in Exhibit A
(the “Premises”), containing approximately the floor area set forth in Item 8 of
the Basic Lease Provisions and known by the suite number identified in Item 2 of
the Basic Lease Provisions.  The Premises are located in the building identified
in Item 2 of the Basic Lease Provisions (the “Building”), which is a portion of
the project described in Item 2 (the “Project”).  If, upon completion of the
space plans for the Premises, Landlord’s architect or space planner determines
that the rentable square footage of the Premises differs from that set forth in
the Basic Lease Provisions, then Landlord shall so notify Tenant and the Basic
Rent (as shown in Item 6 of the Basic Lease Provisions) shall be promptly
adjusted in proportion to the change in square footage.  Within five (5) days
following Landlord’s request, the parties shall memorialize the adjustments by
executing an amendment to this Lease prepared by Landlord.

 

SECTION 2.2.                                     ACCEPTANCE OF PREMISES.  Tenant
acknowledges that neither Landlord nor any representative of Landlord has made
any representation or warranty with respect to the Premises or the Building or
the suitability or fitness of either for any purpose, except as set forth in
this Lease.  The taking of possession or use of the Premises by Tenant for any
purpose other than construction shall conclusively establish that the Premises
and the Building were in satisfactory condition and in conformity with the
provisions of this Lease in all respects, except for those matters which Tenant
shall have brought to Landlord’s attention on a written punch list.  The list
shall be limited to any items required to be accomplished by Landlord under the
Work Letter (if any) attached as Exhibit X, and shall be delivered to Landlord
within thirty (30) days after the term (“Term”) of this Lease commences as
provided in Article III below.  If there is no Work Letter, or if no items are
required of Landlord under the Work Letter, by taking possession of the Premises
Tenant accepts the improvements in their existing condition, and waives any
right or claim against Landlord arising out of the condition of the Premises. 
Nothing contained in this Section shall affect the commencement of the Term or
the obligation of Tenant to pay rent.  Landlord shall diligently complete all
punch list items of which it is notified as provided above.

 

SECTION 2.3.                                     BUILDING NAME, ADDRESS AND
DEPICTION.  Tenant shall not utilize any name selected by Landlord from time to
time for the Building and/or the Project as any part of Tenant’s corporate or
trade name.  Landlord shall have the right to change the name, number or
designation of the Building or Project without liability to Tenant.  Tenant
shall not use any picture of the Building in its advertising, stationery or in
any other manner.

 

ARTICLE III.  TERM

 

SECTION 3.1.                                     GENERAL.  The Term shall be for
the period shown in Item 5 of the Basic Lease Provisions.  The Term shall
commence (“Commencement Date”) one (1) month following the date the Premises are
“ready for occupancy” as described in Section 3.2 (the “Delivery Date”). 
Promptly following request by Landlord, the parties shall memorialize on a form
provided by Landlord the actual Commencement Date and the expiration date
(“Expiration Date”) of this Lease.

 

SECTION 3.2.                                     EARLY OCCUPANCY.  It is
understood that Landlord is currently constructing the Premises as a “spec
suite” pursuant to a mutually agreeable space plan.  The Premises shall be
deemed “ready for occupancy” upon the tendered date, but only if and when
Landlord, to the extent applicable, (a) has put into operation all building
services essential for the use of the Premises by Tenant, (b) has provided
reasonable access to the Premises for Tenant so that it may be used without
unnecessary interference, (c) has substantially completed all the work required
to be done by Landlord in this Lease, and (d) has obtained requisite
governmental approvals to Tenant’s occupancy.  Notwithstanding the foregoing,
however, if the prosecution of Landlord’s improvement work in the Premises is
delayed due to any action or inaction by Tenant, then the Premises shall be
deemed ready for occupancy for purposes hereof as of the date Landlord would
have been able to deliver the Premises to Tenant but for Tenant’s delay(s). 
Following the full execution of this Lease, payment of all deposits due
hereunder and delivery of proper evidence of insurance pursuant to Exhibit D
hereof, Tenant shall be permitted to occupy the Premises during the one (1)
month period following the Delivery Date in order that it may install its
furniture, telephone systems and data cabling equipment and commence its normal
business operations therein.  Tenant’s access to the Premises prior to the
Commencement Date shall be subject to all of the terms and obligations of this
Lease, including the indemnity provisions herein, except that Tenant shall not
be required to pay Basic Rent during that period.

 

SECTION 3.3.                                     RIGHT TO EXTEND THIS LEASE. 
Provided that Tenant is not in default under any provision of this Lease at the
time of exercise of the extension right granted herein, and provided further
that Tenant is occupying the entire Premises and has not assigned or sublet any
of its interest in this Lease (except in connection with an assignment of this
Lease to a Tenant Affiliate as described in Section 9.1(f) hereof), Tenant may
extend the Term of this Lease for one (1) period of twenty-four (24) months. 
Tenant shall exercise its right to extend the Term by and only by delivering to
Landlord, not less than nine (9) months or more than twelve (12) months prior to
the expiration date of the Term,

 

2

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

 

Tenant’s written notice of its irrevocable commitment to extend (the “Commitment
Notice”).  Should Tenant fail timely to deliver the Commitment Notice, then this
extension right shall thereupon lapse and be of no further force or effect.  The
Basic Rent payable under the Lease during the extension of the Term shall be at
the prevailing market rental rate (including periodic adjustments) for
comparable and similarly improved space within the Building as of the
commencement of the extension period, as determined by Landlord based on a
reasonable extrapolation of its then-current leasing rates.  In no event shall
the monthly Basic Rent payable for the extension period be less than the Basic
Rent payable during the month immediately preceding the commencement of such
extension period.  Promptly following receipt of the Commitment Notice, Landlord
shall prepare an appropriate amendment to the Lease memorializing the extension
of the Term in accordance with the foregoing, and Tenant shall duly execute and
return same to Landlord within fifteen (15) days.  Should Tenant fail timely to
execute and deliver the amendment, then Landlord may, at its sole written
election, either specifically enforce the Commitment Notice or extinguish
Tenant’s right to extend the Term.  Should Landlord elect the latter, then this
Lease shall terminate upon the scheduled date of expiration and Tenant’s rights
under this paragraph shall be of no further force or effect.  Any attempt to
assign or transfer any right or interest created by this paragraph to other than
a Tenant Affiliate shall be void from its inception.  Tenant shall have no other
right to extend the Term beyond the single twenty-four (24) month extension
created by this paragraph.  Unless agreed to in a writing signed by Landlord and
Tenant, any extension of the Term, whether created by an amendment to this Lease
or by a holdover of the Premises by Tenant, or otherwise, shall be deemed a part
of, and not in addition to, any duly exercised extension period permitted by
this paragraph.  Time is specifically made of the essence of this paragraph.

 

ARTICLE IV.  RENT AND OPERATING EXPENSES

 

SECTION 4.1.                                     BASIC RENT.  From and after the
Commencement Date, Tenant shall pay to Landlord without deduction or offset a
Basic Rent for the Premises in the total amount shown (including subsequent
adjustments, if any) in Item 6 of the Basic Lease Provisions.  Any rental
adjustment shown in Item 6 shall be deemed to occur on the specified monthly
anniversary of the Commencement Date, whether or not that date occurs at the end
of a calendar month.  The rent shall be due and payable in advance commencing on
the Commencement Date and continuing thereafter on the first day of each
successive calendar month of the Term, as prorated for any partial month.  No
demand, notice or invoice shall be required.  An installment of rent in the
amount of one (1) full month’s Basic Rent at the initial rate specified in Item
6 of the Basic Lease Provisions shall be delivered to Landlord concurrently with
Tenant’s execution of this Lease and shall be applied against the Basic Rent
first due hereunder; the next installment of Basic Rent shall be due on the
first day of the second calendar month of the Term, which installment shall, if
applicable, be appropriately prorated to reflect the amount prepaid for that
calendar month.

 

SECTION 4.2.                                     OPERATING EXPENSE INCREASE.

 

(a)                                  Commencing twelve (12) months following the
Commencement Date, Tenant shall compensate Landlord, as additional rent, for
Tenant’s proportionate shares of “Building Costs” and “Property Taxes,” as those
terms are defined below, incurred by Landlord in the operation of the Building
and Project.  Property Taxes and Building Costs are mutually exclusive and may
be billed separately or in combination as determined by Landlord.  Tenant’s
proportionate share of Property Taxes shall equal the product of the rentable
floor area of the Premises multiplied by the difference of (i) Property Taxes
per rentable square foot less (ii) the Property Tax Base set forth in Item 7 of
the Basic Lease Provisions.  Tenant’s proportionate share of Building Costs
shall equal the product of the rentable floor area of the Premises multiplied by
the difference of (i) Building Costs per rentable square foot less (ii) the
Building Cost Base set forth in Item 7 of the Basic Lease Provisions.  Tenant
acknowledges Landlord’s rights to make changes or additions to the Building
and/or Project from time to time pursuant to Section 6.5 below, in which event
the total rentable square footage within the Building and/or Project may be
adjusted.  For convenience of reference, Property Taxes and Building Costs may
sometimes be collectively referred to as “Operating Expenses.”

 

(b)                                 Commencing prior to the start of the first
full “Expense Recovery Period” of the Lease (as defined in Item 7 of the Basic
Lease Provisions), and prior to the start of each full or partial Expense
Recovery Period thereafter, Landlord shall give Tenant a written estimate of the
amount of Tenant’s proportionate shares of Building Costs and Property Taxes for
the Expense Recovery Period or portion thereof.  Commencing twelve (12) months
following the Commencement Date, Tenant shall pay the estimated amounts to
Landlord in equal monthly installments, in advance, with Basic Rent.  If
Landlord has not furnished its written estimate for any Expense Recovery Period
by the time set forth above, Tenant shall continue to pay cost reimbursements at
the rates established for the prior Expense Recovery Period, if any; provided
that when the new estimate is delivered to Tenant, Tenant shall, at the next
monthly payment date, pay any accrued cost reimbursements based upon the new
estimate.  Landlord may from time to time change the Expense Recovery Period to
reflect a calendar year or a new fiscal year of Landlord, as applicable, in
which event Tenant’s share of Operating Expenses shall be equitably prorated for
any partial year.

 

3

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

 

(c)                                  Within one hundred twenty (120) days after
the end of each Expense Recovery Period, Landlord shall furnish to Tenant a
statement setting forth the actual or prorated Property Taxes and Building Costs
attributable to that period, and the parties shall within thirty (30) days
thereafter make any payment or allowance necessary to adjust Tenant’s estimated
payments, if any, to Tenant’s actual proportionate shares as shown by the annual
statement.  If Tenant has not made estimated payments during the Expense
Recovery Period, any amount owing by Tenant pursuant to subsection (a) above
shall be paid to Landlord in accordance with Article XVI.  If actual Property
Taxes or Building Costs allocable to Tenant during any Expense Recovery Period
are less than the Property Tax Base or the Building Cost Base, respectively,
Landlord shall not be required to pay that differential to Tenant, although
Landlord shall refund any applicable estimated payments collected from Tenant. 
Should Tenant fail to object in writing to Landlord’s determination of actual
Operating Expenses within sixty (60) days following delivery of Landlord’s
expense statement, Landlord’s determination of actual Operating Expenses for the
applicable Expense Recovery Period shall be conclusive and binding on Tenant.

 

(d)                                 Even though the Lease has terminated and the
Tenant has vacated the Premises, when the final determination is made of
Tenant’s share of Property Taxes and Building Costs for the Expense Recovery
Period in which the Lease terminates, Tenant shall upon notice pay the entire
increase due over the estimated expenses paid; conversely, any overpayment made
in the event expenses decrease shall be rebated by Landlord to Tenant.  However,
in lieu thereof, Landlord may deliver a reasonable estimate of the anticipated
reconciliation amount to Tenant prior to the expiration of the Term, in which
event the appropriate party shall fund that amount by the termination date.

 

(e)                                  If, at any time during any Expense Recovery
Period, any one or more of the Operating Expenses are increased to a rate(s) or
amount(s) in excess of the rate(s) or amount(s) used in calculating the
estimated expenses for the year, then Tenant’s estimated share of Property Taxes
or Building Costs, as applicable, shall be increased for the month in which the
increase becomes effective and for all succeeding months by an amount equal to
Tenant’s proportionate share of the increase.  Landlord shall give Tenant
written notice of the amount or estimated amount of the increase, the month in
which the increase will become effective, Tenant’s monthly share thereof and the
months for which the payments are due.  Tenant shall pay the increase to
Landlord as a part of Tenant’s monthly payments of estimated expenses as
provided in paragraph (b) above, commencing with the month in which effective.

 

(f)                                    The term “Building Costs” shall include
all expenses of operation and maintenance of the Building and the Project,
together with all appurtenant Common Areas (as defined in Section 6.2), and
shall include the following charges by way of illustration but not limitation: 
water and sewer charges; insurance premiums or reasonable premium equivalents
should Landlord elect to self-insure any risk or deductible that Landlord is
authorized to insure hereunder; license, permit, and inspection fees; heat;
light; power; janitorial services; access control/security costs, inclusive of
the reasonable cost of improvements made to enhance access control systems and
procedures; repairs; air conditioning; supplies; materials; equipment; tools;
tenant services; programs instituted to comply with transportation management
requirements; amortization of capital investments reasonably intended to produce
a reduction in operating charges or energy conservation; amortization of capital
investments necessary to bring the Building into compliance with applicable laws
and building codes; labor; reasonably allocated wages and salaries, fringe
benefits, and payroll taxes for administrative and other personnel directly
applicable to the Building and/or Project, including both Landlord’s personnel
and outside personnel; any expense incurred pursuant to Sections 6.1, 6.2, 6.4,
7.2, and 10.2 and Exhibits B and C below; and a reasonable overhead/management
fee.  It is understood that Building Costs shall include competitive charges for
direct services provided by any subsidiary or division of Landlord.  In no event
shall access control/security costs, insurance costs, or utility charges
allocable to Tenant on a per square foot basis during any Expense Recovery
Period be less than the corresponding amount for such component in the Building
Cost Base.  The term “Property Taxes” as used herein shall include the
following:  (i) all real estate taxes or personal property taxes, as such
property taxes may be reassessed from time to time; and (ii) other taxes,
charges and assessments which are levied with respect to this Lease or to the
Building and/or the Project, and any improvements, fixtures and equipment and
other property of Landlord located in the Building and/or the Project, except
that general net income and franchise taxes imposed against Landlord shall be
excluded; and (iii) any tax, surcharge or assessment which shall be levied in
addition to or in lieu of real estate or personal property taxes, other than
taxes covered by Article VIII; and (iv) costs and expenses incurred in
contesting the amount or validity of any Property Tax by appropriate
proceedings.  A copy of Landlord’s unaudited statement of expenses shall be made
available to Tenant upon request.  The Building Costs, inclusive of those for
the Base Year, shall be extrapolated by Landlord to reflect at least ninety-five
percent (95%) occupancy of the rentable area of the Building.

 

SECTION 4.3.                                     SECURITY DEPOSIT.  Concurrently
with Tenant’s delivery of this Lease, Tenant shall deposit with Landlord the
sum, if any, stated in Item 9 of the Basic Lease Provisions (the “Security
Deposit”), to be held by Landlord as security for the full and faithful
performance of Tenant’s obligations under this Lease to pay any rent as and when
due, including without limitation such additional rent as may be owing under any
provision hereof, and to maintain the Premises as required by Sections 7.1 and
15.3 or any other provision of this Lease.  Upon any breach of those obligations
by Tenant, Landlord may apply all or part of the Security Deposit as full or
partial compensation.  If any portion of the Security Deposit is so applied,
Tenant shall within five (5) days after written demand by

 

4

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

 

Landlord deposit cash with Landlord in an amount sufficient to restore the
Security Deposit to its original amount.  Landlord shall not be required to keep
this Security Deposit separate from its general funds, and Tenant shall not be
entitled to interest on the Security Deposit.  In no event may Tenant utilize
all or any portion of the Security Deposit as a payment toward any rental sum
due under this Lease.  If Tenant fully performs its obligations under this
Lease, the Security Deposit or any balance thereof shall be returned to Tenant
or, at Landlord’s option, to the last assignee of Tenant’s interest in this
Lease.

 

ARTICLE V.  USES

 

SECTION 5.1.                                     USE.  Tenant shall use the
Premises only for the purposes stated in Item 3 of the Basic Lease Provisions. 
The parties agree that any contrary use shall be deemed to cause material and
irreparable harm to Landlord and shall entitle Landlord to injunctive relief in
addition to any other available remedy.  The uses prohibited under this Lease
shall include, without limitation, use of the Premises or a portion thereof for
(i) offices of any agency or bureau of the United States or any state or
political subdivision thereof; (ii) offices or agencies of any foreign
governmental or political subdivision thereof; (iii) offices of any health care
professionals or service organization; (iv) schools, temporary employment
agencies or other training facilities which are not ancillary to corporate,
executive or professional office use; (v) retail or restaurant uses; or (vi)
communications firms such as radio and/or television stations.  Tenant shall not
do or permit anything to be done in or about the Premises which will in any way
interfere with the rights or quiet enjoyment of other occupants of the Building
or the Project, or use or allow the Premises to be used for any unlawful
purpose, nor shall Tenant permit any nuisance or commit any waste in the
Premises or the Project.  Tenant shall not do or permit to be done anything
which will invalidate or increase the cost of any insurance policy(ies) covering
the Building, the Project and/or their contents, and shall comply with all
applicable insurance underwriters rules.  Tenant shall comply at its expense
with all present and future laws, ordinances and requirements of all
governmental authorities that pertain to Tenant or its use of the Premises,
including without limitation all federal and state occupational health and
safety and handicap access requirements, whether or not Tenant’s compliance will
necessitate expenditures or interfere with its use and enjoyment of the
Premises.  Tenant shall not generate, handle, store or dispose of hazardous or
toxic materials (as such materials may be identified in any federal, state or
local law or regulation) in the Premises or Project without the prior written
consent of Landlord; provided that the foregoing shall not be deemed to
proscribe the use by Tenant of customary office supplies in normal quantities so
long as such use comports with all applicable laws.  Tenant agrees that it shall
promptly complete and deliver to Landlord any disclosure form regarding
hazardous or toxic materials that may be required by any governmental agency. 
Tenant shall also, from time to time upon request by Landlord, execute such
affidavits concerning Tenant’s best knowledge and belief regarding the presence
of hazardous or toxic materials in the Premises.  Landlord shall have the right
at any time to perform an assessment of the environmental condition of the
Premises and of Tenant’s compliance with this Section.  As part of any such
assessment, Landlord shall have the right, upon reasonable prior notice to
Tenant, to enter and inspect the Premises and to perform tests, provided those
tests are performed in a manner that minimizes disruption to Tenant.  Tenant
will cooperate with Landlord in connection with any assessment by, among other
things, promptly responding to inquiries and providing relevant documentation
and records.  The reasonable cost of the assessment/testing shall be reimbursed
by Tenant to Landlord if such assessment/testing determines that Tenant failed
to comply with the requirements of this Section.  In all events Tenant shall
indemnify Landlord in the manner elsewhere provided in this Lease from any
release of hazardous or toxic materials caused by Tenant, its agents, employees,
contractors, subtenants or licensees.  The foregoing covenants shall survive the
expiration or earlier termination of this Lease.

 

SECTION 5.2.                                     SIGNS.  Landlord shall affix
and maintain a sign (restricted solely to Tenant’s name as set forth herein or
such other name as Landlord may consent to in writing) adjacent to the entry
door of the Premises, together with a directory strip listing Tenant’s name as
set forth herein in the lobby directory of the Building.  Any subsequent changes
to that initial signage shall be at Tenant’s sole expense.  All signage shall
conform to the criteria for signs established by Landlord and shall be ordered
through Landlord.  Tenant shall not place or allow to be placed any other sign,
decoration or advertising matter of any kind that is visible from the exterior
of the Premises.  Any violating sign or decoration may be immediately removed by
Landlord at Tenant’s expense without notice and without the removal constituting
a breach of this Lease or entitling Tenant to claim damages.

 

ARTICLE VI. LANDLORD SERVICES

 

SECTION 6.1.                                     UTILITIES AND SERVICES. 
Landlord shall furnish to the Premises the utilities and services described in
Exhibit B, subject to the conditions and payment obligations and standards set
forth in this Lease.  Landlord shall not be liable for any failure to furnish
any services or utilities when the failure is the result of any accident or
other cause beyond Landlord’s reasonable control, nor shall Landlord be liable
for damages resulting from power surges or any breakdown in telecommunications
facilities or services.  Landlord’s temporary inability to furnish any services
or utilities shall not entitle Tenant to any damages, relieve Tenant of the
obligation to pay rent or

 

5

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

 

constitute a constructive or other eviction of Tenant, except that Landlord
shall diligently attempt to restore the service or utility promptly.  Tenant
shall comply with all rules and regulations which Landlord may reasonably
establish for the provision of services and utilities, and shall cooperate with
all reasonable conservation practices established by Landlord.  Landlord shall
at all reasonable times have free access to all electrical and mechanical
installations of Landlord.

 

SECTION 6.2.                                     OPERATION AND MAINTENANCE OF
COMMON AREAS.  During the Term, Landlord shall operate all Common Areas within
the Building and the Project.  The term “Common Areas”  shall mean all areas
within the Building and other buildings in the Project which are not held for
exclusive use by persons entitled to occupy space, and all other appurtenant
areas and improvements provided by Landlord for the common use of Landlord and
tenants and their respective employees and invitees, including without
limitation parking areas and structures, driveways, sidewalks, landscaped and
planted areas, hallways and interior stairwells not located within the premises
of any tenant, common entrances and lobbies, elevators, and restrooms not
located within the premises of any tenant.

 

SECTION 6.3.                                     USE OF COMMON AREAS.  The
occupancy by Tenant of the Premises shall include the use of the Common Areas in
common with Landlord and with all others for whose convenience and use the
Common Areas may be provided by Landlord, subject, however, to compliance with
all rules and regulations as are prescribed from time to time by Landlord. 
Landlord shall at all times during the Term have exclusive control of the Common
Areas, and may restrain or permit any use or occupancy, except as otherwise
provided in this Lease or in Landlord’s rules and regulations.  Tenant shall
keep the Common Areas clear of any obstruction or unauthorized use related to
Tenant’s operations.  Landlord may temporarily close any portion of the Common
Areas for repairs, remodeling and/or alterations, to prevent a public dedication
or the accrual of prescriptive rights, or for any other reasonable purpose.

 

SECTION 6.4.                                     PARKING.  Parking shall be
provided in accordance with the provisions set forth in Exhibit C to this Lease.

 

SECTION 6.5.                                     CHANGES AND ADDITIONS BY
LANDLORD.  Landlord reserves the right to make alterations or additions to the
Building or the Project, or to the attendant fixtures, equipment and Common
Areas.  No change shall entitle Tenant to any abatement of rent or other claim
against Landlord, provided that the change does not deprive Tenant of reasonable
access to or use of the Premises.

 

ARTICLE VII.  MAINTAINING THE PREMISES

 

SECTION 7.1.                                     TENANT’S MAINTENANCE AND
REPAIR.  Subject to Article XI, Tenant at its sole expense shall make all
repairs necessary to keep the Premises and all improvements and fixtures therein
in the condition as existed on the Commencement Date (or on any later date that
the applicable improvements may have been installed), excepting ordinary wear
and tear.  Notwithstanding Section 7.2 below, Tenant’s maintenance obligation
shall include without limitation all appliances, non-building standard
lighting/electrical systems, and plumbing fixtures and installations located
within or servicing only the Premises.  All repairs shall be at least equal in
quality to the original work, shall be made only by a licensed, bonded
contractor approved in writing in advance by Landlord and shall be made only at
the time or times approved by Landlord.  Any contractor utilized by Tenant shall
be subject to Landlord’s standard requirements for contractors, as modified from
time to time.  Landlord may impose reasonable restrictions and requirements with
respect to repairs, as provided in Section 7.3, and the provisions of Section
7.4 shall apply to all repairs.  Alternatively, should Landlord or its
management agent agree to make a repair on behalf of Tenant and at Tenant’s
request, Tenant shall promptly reimburse Landlord as additional rent for all
costs incurred (including the standard coordination fee of Landlord’s management
agent) upon submission of an invoice.

 

SECTION 7.2.                                     LANDLORD’S MAINTENANCE AND
REPAIR.  Subject to Article XI, Landlord shall provide service, maintenance and
repair with respect to the heating, ventilating and air conditioning (“HVAC”)
equipment of the Building (exclusive of any supplemental HVAC equipment
servicing only the Premises) and shall maintain in good repair the Common Areas,
roof, foundations, footings, the exterior surfaces of the exterior walls of the
Building, and the structural, electrical, mechanical and plumbing systems of the
Building except as provided in Section 7.1 above.  Landlord shall have the right
to employ or designate any reputable person or firm, including any employee or
agent of Landlord or any of Landlord’s affiliates or divisions, to perform any
service, repair or maintenance function.  Landlord need not make any other
improvements or repairs except as specifically required under this Lease, and
nothing contained in this Section shall limit Landlord’s right to reimbursement
from Tenant for maintenance, repair costs and replacement costs as provided
elsewhere in this Lease.  Tenant understands that it shall not make repairs at
Landlord’s expense or by rental offset.  Except as provided in Sections 11.1 and
12.1 below, there shall be no abatement of rent and no liability of Landlord by
reason of any injury to or interference with Tenant’s business arising from the
making of any repairs, alterations or improvements to any portion of the
Building, including repairs to the Premises, nor shall any related activity by
Landlord constitute an actual or constructive

 

6

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

 

eviction; provided, however, that in making repairs, alterations or
improvements, Landlord shall interfere as little as reasonably practicable with
the conduct of Tenant’s business in the Premises.

 

SECTION 7.3.                                     ALTERATIONS .  Tenant shall
make no alterations, additions or improvements to the Premises without the prior
written consent of Landlord.  Landlord’s consent shall not be unreasonably
withheld as long as the proposed changes do not affect the structural,
electrical or mechanical components or systems of the Building, are not visible
from the exterior of the Premises, and utilize only building standard
materials.  Landlord may impose, as a condition to its consent, any requirements
that Landlord in its discretion may deem reasonable or desirable,  including but
not limited to a requirement that all work be covered by a lien and completion
bond satisfactory to Landlord and requirements as to the manner, time, and
contractor for performance of the work.  Without limiting the generality of the
foregoing, Tenant shall use Landlord’s designated mechanical and electrical
contractors for all work affecting the mechanical or electrical systems of the
Building.  Should Tenant perform any work that would necessitate any ancillary
Building modification or other expenditure by Landlord, then Tenant shall
promptly fund the cost thereof to Landlord.  Tenant shall obtain all required
permits for the work and shall perform the work in compliance with all
applicable laws, regulations and ordinances, and Landlord shall be entitled to a
supervision fee in the amount of five percent (5%) of the cost of the work. 
Under no circumstances shall Tenant make any improvement which incorporates
asbestos-containing construction materials into the Premises.  Any request for
Landlord’s consent shall be made in writing and shall contain architectural
plans describing the work in detail reasonably satisfactory to Landlord. 
Landlord may elect to cause its architect to review Tenant’s architectural
plans, and the reasonable cost of that review shall be reimbursed by Tenant. 
Should the work proposed by Tenant modify the internal configuration of the
Premises, then Tenant shall, at its expense, furnish Landlord with as-built
drawings and CAD disks compatible with Landlord’s systems.  Unless Landlord
otherwise agrees in writing, all alterations, additions or improvements affixed
to the Premises (excluding moveable trade fixtures and furniture) shall become
the property of Landlord and shall be surrendered with the Premises at the end
of the Term, except that Landlord may, by notice to Tenant given at the time of
Landlord’s consent to the alteration or improvement, require Tenant to remove by
the Expiration Date, or sooner termination date of this Lease, all or any
alterations, decorations, fixtures, additions, improvements and the like
installed either by Tenant or by Landlord at Tenant’s request.  Tenant shall
repair any damage to the Premises arising from that removal and restore the
affected area to its pre-existing condition, reasonable wear and tear excepted. 
Landlord may require Tenant to remove an improvement provided as part of the
initial build-out pursuant to Exhibit X, if any, if and only if the improvement
is a non-building standard item and Tenant is notified of the requirement prior
to the build-out.  Except as otherwise provided in this Lease or in any Exhibit
to this Lease, should Landlord make any alteration or improvement to the
Premises at the request of Tenant, Landlord shall be entitled to prompt payment
from Tenant of the cost thereof, inclusive of the standard coordination fee of
Landlord’s management agent.

 

SECTION 7.4.                                     MECHANIC’S LIENS.  Tenant shall
keep the Premises free from any liens arising out of any work performed,
materials furnished, or obligations incurred by or for Tenant.  Upon request by
Landlord, Tenant shall promptly cause any such lien to be released by posting a
bond in accordance with California Civil Code Section 3143 or any successor
statute.  In the event that Tenant shall not, within thirty (30) days following
the imposition of any lien, cause the lien to be released of record by payment
or posting of a proper bond, Landlord shall have, in addition to all other
available remedies, the right to cause the lien to be released by any means it
deems proper, including payment of or defense against the claim giving rise to
the lien.  All expenses so incurred by Landlord, including Landlord’s attorneys’
fees, shall be reimbursed by Tenant promptly following Landlord’s demand,
together with interest from the date of payment by Landlord at the maximum rate
permitted by law until paid.  Tenant shall give Landlord no less than twenty
(20) days’ prior notice in writing before commencing construction of any kind on
the Premises so that Landlord may post and maintain notices of nonresponsibility
on the Premises.

 

SECTION 7.5.                                     ENTRY AND INSPECTION.  Landlord
shall at all reasonable times have the right to enter the Premises to inspect
them, to supply services in accordance with this Lease, to protect the interests
of Landlord in the Premises, to make repairs and renovations as reasonably
deemed necessary by Landlord, and to submit the Premises to prospective or
actual purchasers or encumbrance holders (or, during the final twelve months of
the Term or when an uncured Tenant default exists, to prospective tenants), all
without being deemed to have caused an eviction of Tenant and without abatement
of rent except as provided elsewhere in this Lease.  Landlord shall at all times
have and retain a key which unlocks all of the doors in the Premises, excluding
Tenant’s vaults and safes, and Landlord shall have the right to use any and all
means which Landlord may deem proper to open the doors in an emergency in order
to obtain entry to the Premises, and any entry to the Premises obtained by
Landlord shall not under any circumstances be deemed to be a forcible or
unlawful entry into, or a detainer of, the Premises, or any eviction of Tenant
from the Premises.

 

SECTION 7.6.                                     SPACE PLANNING AND
SUBSTITUTION.  Landlord shall have the right, upon providing not less than
forty-five (45) days written notice, to move Tenant to other space of comparable
size in the Building or in the Project.  The new space shall be provided with
improvements of comparable quality to those within the Premises.  Landlord shall
pay the reasonable out-of-pocket costs to relocate and reconnect Tenant’s
personal property and equipment within the new space; provided that Landlord may
elect to cause such work to be done by its contractors.  Landlord shall also
reimburse Tenant for such other reasonable out-of-pocket costs that Tenant may
incur in connection

 

7

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

 

with the relocation, including without limitation necessary stationery
revisions, provided that a reasonable estimate thereof is given to Landlord
within twenty (20) days following Landlord’s notice.  In no event, however,
shall Landlord be obligated to incur or fund total relocation costs, exclusive
of tenant improvement expenditures, in an amount in excess of two (2) months of
Basic Rent at the rate then payable hereunder.  Within ten (10) days following
request by Landlord, Tenant shall execute an amendment to this Lease prepared by
Landlord to memorialize the relocation.  Should Tenant fail timely to execute
and deliver the amendment to Landlord, or should Tenant thereafter fail to
comply with the terms thereof, then Landlord may at its option elect to
terminate this Lease upon not less than sixty (60) days prior written notice to
Tenant.  Upon the effective date of any termination of this Lease, Tenant shall
vacate the Premises in accordance with Section 15.3.

 

ARTICLE VIII.  TAXES AND ASSESSMENTS ON TENANT’S PROPERTY

 

Tenant shall be liable for and shall pay before delinquency, all taxes and
assessments levied against all personal property of Tenant located in the
Premises.  When possible Tenant shall cause its personal property to be assessed
and billed separately from the real property of which the Premises form a part. 
If any taxes on Tenant’s personal property are levied against Landlord or
Landlord’s property and if Landlord pay s the same, or if the assessed value of
Landlord’s property is increased by the inclusion of a value placed upon the
personal property of Tenant and if Landlord pays the taxes based upon the
increased assessment, Tenant shall pay to Landlord the taxes so levied against
Landlord or the proportion of the taxes resulting from the increase in the
assessment.

 

ARTICLE IX.  ASSIGNMENT AND SUBLETTING

 

SECTION 9.1.                                     RIGHTS OF PARTIES.

 

(a)                                  Tenant may not, either voluntarily or by
operation of law, assign, sublet , encumber, or otherwise transfer all or any
part of Tenant’s interest in this Lease, or permit the Premises to be occupied
by anyone other than Tenant, without Landlord’s prior written consent, which
consent shall not unreasonably be withheld in accordance with the provisions of
Section 9.1.(c).  For purposes of this Lease, references to any subletting,
sublease or variation thereof shall be deemed to apply not only to a sublease
effected directly by Tenant, but also to a sub-subletting or an assignment of
subtenancy by a subtenant at any level.  No assignment (whether voluntary,
involuntary or by operation of law) and no subletting shall be valid or
effective without Landlord’s prior written consent and, at Landlord’s election,
shall constitute a material default of this Lease.  Landlord shall not be deemed
to have given its consent to any assignment or subletting by any other course of
action, including its acceptance of any name for listing in the Building
directory.  To the extent not prohibited by provisions of the Bankruptcy Code,
11 U.S.C. Section 101 et seq. (the “Bankruptcy Code”), including Section
365(f)(1), Tenant on behalf of itself and its creditors, administrators and
assigns waives the applicability of Section 365(e) of the Bankruptcy Code unless
the proposed assignee of the Trustee for the estate of the bankrupt meets
Landlord’s standard for consent as set forth in Section 9.1(c) of this Lease. 
If this Lease is assigned to any person or entity pursuant to the provisions of
the Bankruptcy Code, any and all monies or other considerations to be delivered
in connection with the assignment shall be delivered to Landlord, shall be and
remain the exclusive property of Landlord and shall not constitute property of
Tenant or of the estate of Tenant within the meaning of the Bankruptcy Code. 
Any person or entity to which this Lease is assigned pursuant to the provisions
of the Bankruptcy Code shall be deemed to have assumed all of the obligations
arising under this Lease on and after the date of the assignment, and shall upon
demand execute and deliver to Landlord an instrument confirming that assumption.

 

(b)                                 If Tenant is a corporation, limited
liability company, unincorporated association or partnership, the transfer of
any stock or interest in the entity which results in a change in voting control
shall be deemed an assignment within the meaning and provisions of this
Article.  In addition, any change in the status of the entity, such as, but not
limited to, the withdrawal of a general partner, shall be deemed an assignment
within the meaning of this Article.

 

(c)                                  If Tenant or any subtenant hereunder
desires to transfer an interest in this Lease, Tenant shall first notify
Landlord and request in writing Landlord’s consent to the transfer.  Tenant
shall also submit in writing to Landlord:  (i) the name and address of the
proposed transferee; (ii) the nature of any proposed subtenant’s or assignee’s
business to be carried on in the Premises; (iii) the terms and provisions of any
proposed sublease or assignment (including without limitation the rent and other
economic provisions, term, improvement obligations and commencement date); (iv)
evidence that the proposed assignee or subtenant will comply with the
requirements of Exhibit D to this Lease; and (v) any other information requested
by Landlord and reasonably related to the transfer.  Except as provided in
Subsection (d) of this Section, Landlord shall not unreasonably withhold its
consent, provided:  (1) the use of the Premises will be consistent with the
provisions of this Lease and with Landlord’s commitment to other tenants of the
Building and Project; (2) any proposed subtenant or assignee demonstrates that
it is financially responsible by submission to Landlord of all reasonable
information as Landlord may request concerning the proposed subtenant or
assignee, including, but

 

8

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

 

not limited to, a balance sheet of the proposed subtenant or assignee as of a
date within ninety (90) days of the request for Landlord’s consent and
statements of income or profit and loss of the proposed subtenant or assignee
for the two-year period preceding the request for Landlord’s consent; (3) the
proposed subtenant or assignee is, in Landlord’s good faith determination,
appropriate for tenancy in a first class office project; (4) the proposed
assignee or subtenant is neither an existing tenant or occupant of the Building
or Project nor a prospective tenant with whom Landlord is then actively
negotiating; and (5) the proposed transfer will not impose additional burdens or
security risks on Landlord.  If Landlord consents to the proposed transfer, then
the transfer may be effected within ninety (90) days after the date of the
consent upon the terms described in the information furnished to Landlord;
provided that any material change in the terms shall be subject to Landlord’s
consent as set forth in this Section.  Landlord shall approve or disapprove any
requested transfer within thirty (30) days following receipt of Tenant’s written
notice and the information set forth above.  Tenant shall pay to Landlord a
transfer fee of Five Hundred Dollars ($500.00) if and when any transfer request
submitted by Tenant is approved.

 

(d)                                 Notwithstanding the provisions of Subsection
(c) above, in lieu of consenting to a proposed assignment or subletting,
Landlord may elect to (i) sublease the Premises (or the portion proposed to be
subleased), or take an assignment of Tenant’s interest in this Lease, upon the
same terms as offered to the proposed subtenant or assignee (excluding terms
relating to the purchase of personal property, the use of Tenant’s name or the
continuation of Tenant’s business), or (ii) terminate this Lease as to the
portion of the Premises proposed to be subleased or assigned with a
proportionate abatement in the rent payable under this Lease, effective on the
date that the proposed sublease or assignment would have commenced.  Landlord
may thereafter, at its option, assign or relet any space so recaptured to any
third party, including without limitation the proposed transferee identified by
Tenant.

 

(e)                                  Should any assignment or subletting occur,
Tenant shall promptly pay or cause to be paid to Landlord, as additional rent,
fifty percent (50%) of any amounts paid by the assignee or subtenant, however
described and whether funded during or after the Lease Term, to the extent such
amounts are in excess of the sum of (i) the scheduled rental sums payable by
Tenant hereunder (or, in the event of a subletting of only a portion of the
Premises, the rent allocable to such portion as reasonably determined by
Landlord) and (ii) the direct out-of-pocket costs, as evidenced by third party
invoices provided to Landlord, incurred by Tenant to effect the transfer, which
costs shall be amortized over the remaining Term of this Lease or, if shorter,
over the term of the sublease.  Upon request by Landlord, Tenant and all other
parties to the transfer shall memorialize in writing the amounts to be paid
pursuant to this paragraph.

 

(f)                                    Notwithstanding the foregoing, provided
Tenant is not then in default hereunder, Tenant may, without Landlord’s prior
consent but with prior written notice to Landlord and subject to the provisions
of Section 9.2, assign or transfer its right, title and interest in this Lease
or sublease the Premises to any of the following: (i) any entity resulting from
a merger or consolidation with Tenant; (ii) any entity succeeding to the
business and assets of Tenant; or (iii) any entity controlling, controlled by,
or under common control with, Tenant (collectively, “Tenant Affiliate”).

 

SECTION 9.2.                                     EFFECT OF TRANSFER.  No
subletting or assignment, even with the consent of Landlord, shall relieve
Tenant, or any successor-in-interest to Tenant hereunder, of its obligation to
pay rent and to perform all its other obligations under this Lease.  Moreover,
Tenant shall indemnify and hold Landlord harmless, as provided in Section 10.3,
for any act or omission by an assignee or subtenant.  Each assignee, other than
Landlord, shall be deemed to assume all obligations of Tenant under this Lease
and shall be liable jointly and severally with Tenant for the payment of all
rent, and for the due performance of all of Tenant’s obligations, under this
Lease.  Such joint and several liability shall not be discharged or impaired by
any subsequent modification or extension of this Lease.  No transfer shall be
binding on Landlord unless any document memorializing the transfer is delivered
to Landlord, both the assignee/subtenant and Tenant deliver to Landlord an
executed consent to transfer instrument prepared by Landlord and consistent with
the requirements of this Article, and the assignee/subtenant independently
complies with all of the insurance requirements of Tenant as set forth in
Exhibit D and evidence thereof is delivered to Landlord.  The acceptance by
Landlord of any payment due under this Lease from any other person shall not be
deemed to be a waiver by Landlord of any provision of this Lease or to be a
consent to any transfer.  Consent by Landlord to one or more transfers shall not
operate as a waiver or estoppel to the future enforcement by Landlord of its
rights under this Lease.  In addition to the foregoing, no change in the status
of Tenant or any party jointly and severally liable with Tenant as aforesaid
(e.g., by conversion to a limited liability company or partnership) shall serve
to abrogate the liability of any person or entity for the obligations of Tenant,
including any obligations that may be incurred by Tenant after the status change
by exercise of a preexisting right in this Lease.

 

SECTION 9.3.                                     SUBLEASE REQUIREMENTS.  The
following terms and conditions shall apply to any subletting by Tenant of all or
any part of the Premises and shall be included in each sublease:

 

(a)                                  Tenant hereby irrevocably assigns to
Landlord all of Tenant’s interest in all rentals and income arising from any
sublease of the Premises, and Landlord may collect such rent and income and
apply same toward Tenant’s obligations under this Lease; provided, however, that
until a default occurs in the performance of Tenant’s obligations under this
Lease, Tenant shall have the right to

 

9

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

 

receive and collect the sublease rentals.  Landlord shall not, by reason of this
assignment or the collection of sublease rentals, be deemed liable to the
subtenant for the performance of any of Tenant’s obligations under the
sublease.  Tenant hereby irrevocably authorizes and directs any subtenant, upon
receipt of a written notice from Landlord stating that an uncured default exists
in the performance of Tenant’s obligations under this Lease, to pay to Landlord
all sums then and thereafter due under the sublease.  Tenant agrees that the
subtenant may rely on that notice without any duty of further inquiry and
notwithstanding any notice or claim by Tenant to the contrary.  Tenant shall
have no right or claim against the subtenant or Landlord for any rentals so paid
to Landlord.  In the event Landlord collects amounts from subtenants that exceed
the total amount then due from Tenant hereunder, Landlord shall promptly remit
the excess to Tenant.

 

(b)                                 In the event of the termination of this
Lease, Landlord may, at its sole option, take over Tenant’s entire interest in
any sublease and, upon notice from Landlord, the subtenant shall attorn to
Landlord.  In no event, however, shall Landlord be liable for any previous act
or omission by Tenant under the sublease or for the return of any advance rental
payments or deposits under the sublease that have not been actually delivered to
Landlord, nor shall Landlord be bound by any sublease modification executed
without Landlord’s consent or for any advance rental payment by the subtenant in
excess of one month’s rent.  The general provisions of this Lease, including
without limitation those pertaining to insurance and indemnification, shall be
deemed incorporated by reference into the sublease despite the termination of
this Lease.

 

(c)                                  Tenant agrees that Landlord may, at its
sole option, authorize a subtenant of the Premises to cure a default by Tenant
under this Lease.  Should Landlord accept such cure, the subtenant shall have a
right of reimbursement and offset from and against Tenant under the applicable
sublease.

 

ARTICLE X.  INSURANCE AND INDEMNITY

 

SECTION 10.1.                              TENANT’S INSURANCE.  Tenant, at its
sole cost and expense, shall provide and maintain in effect the insurance
described in Exhibit D.  Evidence of that insurance must be delivered to
Landlord prior to the Commencement Date.

 

SECTION 10.2.                              LANDLORD’S INSURANCE.  Landlord may,
at its election, provide any or all of the following types of insurance, with or
without deductible and in amounts and coverages as may be determined by Landlord
in its discretion:  property insurance, subject to standard exclusions, covering
the Building or Project, and such other risks as Landlord or its mortgagees may
from time to time deem appropriate, and commercial general liability coverage. 
Landlord shall not be required to carry insurance of any kind on any tenant
improvements or alterations in the Premises installed by Tenant or its
contractors or otherwise removable by Tenant (collectively, “Tenant
Installations”), as well as any trade fixtures, furnishings, equipment, interior
plate glass, signs and all items of personal property in the Premises, and
Landlord shall not be obligated to repair or replace any of the foregoing items
should damage occur.  All proceeds of insurance maintained by Landlord upon the
Building and Project shall be the property of Landlord, whether or not Landlord
is obligated to or elects to make any repairs.

 

SECTION 10.3.                              TENANT’S INDEMNITY.  To the fullest
extent permitted by law, but subject to Section 10.5 below, Tenant shall defend,
indemnify and hold harmless Landlord, its agents, lenders, and any and all
affiliates of Landlord, from and against any and all claims, liabilities, costs
or expenses arising either before or after the Commencement Date from Tenant’s
use or occupancy of the Premises, the Building or the Common Areas, or from the
conduct of its business, or from any activity, work, or thing done, permitted or
suffered by Tenant or its agents, employees, subtenants, vendors, contractors,
invitees or licensees in or about the Premises, the Building or the Common
Areas, or from any default in the performance of any obligation on Tenant’s part
to be performed under this Lease, or from any act or negligence of Tenant or its
agents, employees, subtenants, vendors, contractors, invitees or licensees. 
Landlord may, at its option, require Tenant to assume Landlord’s defense in any
action covered by this Section through counsel reasonably satisfactory to
Landlord.

 

SECTION 10.4.                              LANDLORD’S NONLIABILITY.  Landlord
shall not be liable to Tenant, its employees, agents and invitees, and Tenant
hereby waives all claims against Landlord, its employees and agents for loss of
or damage to any property, or any injury to any person, or loss or interruption
of business or income, resulting from any condition including, but not limited
to, fire, explosion, falling plaster, steam, gas, electricity, water or rain
which may leak or flow from or into any part of the Premises or from the
breakage, leakage, obstruction or other defects of the pipes, sprinklers, wires,
appliances, plumbing, air conditioning, electrical works or other fixtures in
the Building, whether the damage or injury results from conditions arising in
the Premises or in other portions of the Building.  It is understood that any
such condition may require the temporary evacuation or closure of all or a
portion of the Building.  Should Tenant elect to receive any service from a
concessionaire, licensee or third party tenant of Landlord, Tenant shall not
seek recourse against Landlord for any breach or liability of that service
provider.  Neither Landlord nor its agents shall be liable for interference with
light or other similar intangible interests.  Tenant shall immediately notify
Landlord in case of fire or accident in the Premises, the Building or the
Project and of defects in any improvements or equipment.

 

10

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

 

SECTION 10.5.                              WAIVER OF
SUBROGATION.                      Landlord and Tenant each hereby waives all
rights of recovery against the other on account of loss and damage occasioned to
the property of such waiving party to the extent that the waiving party is
entitled to proceeds for such loss and damage under any property insurance
policies carried or otherwise required to be carried by this Lease.  By this
waiver it is the intent of the parties that neither Landlord nor Tenant shall be
liable to any insurance company (by way of subrogation or otherwise) insuring
the other party for any loss or damage insured against under any property
insurance policies, even though such loss or damage might be occasioned by the
negligence of such party, its agents, employees, contractors or invitees.  The
foregoing waiver by Tenant shall also inure to the benefit of Landlord’s
management agent for the Building.

 

ARTICLE XI. DAMAGE OR DESTRUCTION

 

SECTION 11.1.                              RESTORATION.

 

(a)                                  If the Building of which the Premises are a
part is damaged as the result of an event of casualty, then subject to the
provisions below, Landlord shall repair that damage as soon as reasonably
possible unless:  (i) Landlord reasonably determines that the cost of repair
would exceed ten percent (10%) of the full replacement cost of the Building
(“Replacement Cost”) and the damage is not covered by Landlord’s fire and
extended coverage insurance (or by a normal extended coverage policy should
Landlord fail to carry that insurance); or (ii) Landlord reasonably determines
that the cost of repair would exceed twenty-five percent (25%) of the
Replacement Cost; or (iii) Landlord reasonably determines that the cost of
repair would exceed ten percent (10%) of the Replacement Cost and the damage
occurs during the final twelve (12) months of the Term.  Should Landlord elect
not to repair the damage for one of the preceding reasons, Landlord shall so
notify Tenant in the “Casualty Notice” (as defined below), and this Lease shall
terminate as of the date of delivery of that notice.

 

(b)                                 As soon as reasonably practicable following
the casualty event but not later than sixty (60) days thereafter, Landlord shall
notify Tenant in writing (“Casualty Notice”) of Landlord’s election, if
applicable, to terminate this Lease.  If this Lease is not so terminated, the
Casualty Notice shall set forth the anticipated period for repairing the
casualty damage.  If the anticipated repair period exceeds two hundred seventy
(270) days and if the damage is so extensive as to reasonably prevent Tenant’s
substantial use and enjoyment of the Premises, then Tenant may elect to
terminate this Lease by written notice to Landlord within ten (10) days
following delivery of the Casualty Notice.

 

(c)                                  To the extent and for the period that
Landlord is entitled to reimbursement from the proceeds of rental interruption
insurance carried by Landlord as part of Operating Expenses, the rental to be
paid under this Lease shall be abated in the same proportion that the floor area
of the Premises that is rendered unusable by the damage from time to time bears
to the tot al floor area of the Premises.

 

(d)                                 Notwithstanding the provisions of
subsections (a), (b) and (c) of this Section, but subject to Section 10.5, the
cost of any repairs shall be borne by Tenant, and Tenant shall not be entitled
to rental abatement or termination rights, if the damage is due to the fault or
neglect of Tenant or its employees, subtenants, contractors, invitees or
representatives.  In addition, the provisions of this Section shall not be
deemed to require Landlord to repair any Tenant Installations, fixtures and
other items that Tenant is obligated to insure pursuant to Exhibit D or any
other provision of this Lease.

 

SECTION 11.2.                              LEASE GOVERNS.  Tenant agrees that
the provisions of this Lease, including without limitation Section 11.1, shall
govern any damage or destruction and shall accordingly supersede any contrary
statute or rule of law.

 

ARTICLE XII. EMINENT DOMAIN

 

SECTION 12.1.                              TOTAL OR PARTIAL TAKING.  If all or a
material portion of the Premises is taken by any lawful authority by exercise of
the right of eminent domain, or sold to prevent a taking, either Tenant or
Landlord may terminate this Lease effective as of the date possession is
required to be surrendered to the authority.  In the event title to a portion of
the Building or Project, other than the Premises, is taken or sold in lieu of
taking, and if Landlord elects to restore the Building in such a way as to alter
the Premises materially, either party may terminate this Lease, by written
notice to the other party, effective on the date of vesting of title.  In the
event neither party has elected to terminate this Lease as provided above, then
Landlord shall promptly, after receipt of a sufficient condemnation award,
proceed to restore the Premises to substantially their condition prior to the
taking, and a proportionate allowance shall be made to Tenant for the rent
corresponding to the time during which, and to the part of the Premises of
which, Tenant is deprived on account of the taking and restoration.  In the
event of a taking, Landlord shall be entitled to the entire amount of the
condemnation award without deduction for any estate or interest of Tenant;
provided that nothing in this Section shall be deemed to give Landlord any
interest in, or prevent Tenant from seeking any award against the taking

 

11

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

 

authority for, the taking of personal property and fixtures belonging to Tenant
or for relocation or business interruption expenses recoverable from the taking
authority.

 

SECTION 12.2.                              TEMPORARY TAKING.  No temporary
taking of the Premises shall terminate this Lease or give Tenant any right to
abatement of rent, and any award specifically attributable to a temporary taking
of the Premises shall belong entirely to Tenant.  A temporary taking shall be
deemed to be a taking of the use or occupancy of the Premises for a period of
not to exceed ninety (90) days.

 

SECTION 12.3.                              TAKING OF PARKING AREA.  In the event
there shall be a taking of the parking area such that Landlord can no longer
provide sufficient parking to comply with this Lease,  Landlord may substitute
reasonably equivalent parking in a location reasonably close to the Building;
provided that if Landlord fails to make that substitution within ninety (90)
days following the taking and if the taking materially impairs Tenant’s use and
enjoyment of the Premises, Tenant may, at its option, terminate this Lease by
written notice to Landlord.  If this Lease is not so terminated by Tenant, there
shall be no abatement of rent and this Lease shall continue in effect.

 

ARTICLE XIII. SUBORDINATION; ESTOPPEL CERTIFICATE

 

SECTION 13.1.                              SUBORDINATION.  At the option of
Landlord or any of its mortgagees/deed of trust beneficiaries, this Lease shall
be either superior or subordinate to all ground or underlying leases, mortgages
and deeds of trust, if any, which may hereafter affect the Building, and to all
renewals, modifications, consolidations, replacements and extensions thereof;
provided, that so long as Tenant is not in default under this Lease, this Lease
shall not be terminated or Tenant’s quiet enjoyment of the Premises disturbed in
the event of termination of any such ground or underlying lease, or the
foreclosure of any such mortgage or deed of trust, to which this Lease has been
subordinated pursuant to this Section.  In the event of a termination or
foreclosure, Tenant shall become a tenant of and attorn to the
successor-in-interest to Landlord upon the same terms and conditions as are
contained in this Lease, and shall promptly execute any instrument reasonably
required by Landlord’s successor for that purpose.  Tenant shall also, within
ten (10) days following written request of Landlord (or the beneficiary under
any deed of trust encumbering the Building), execute and deliver all instruments
as may be required from time to time by Landlord or such beneficiary (including
without limitation any subordination, nondisturbance and attornment agreement in
the form customarily required by such beneficiary) to subordinate this Lease and
the rights of Tenant under this Lease to any ground or underlying lease or to
the lien of any mortgage or deed of trust; provided, however, that any such
beneficiary may, by written notice to Tenant given at any time, subordinate the
lien of its deed of trust to this Lease.  Tenant shall agree that any purchaser
at a foreclosure sale or lender taking title under a deed in lieu of foreclosure
shall not be responsible for any act or omission of a prior landlord, shall not
be subject to any offsets or defenses Tenant may have against a prior landlord,
and shall not be liable for the return of any security deposit not actually
recovered by such purchaser or bound by any rent paid in advance of the calendar
month in which the transfer of title occurred; provided that the foregoing shall
not release the applicable prior landlord from any liability for those
obligations.  Tenant acknowledges that Landlord’s mortgagees and
successors-in-interest and all beneficiaries under deeds of trust encumbering
the Building are intended third party beneficiaries of this Section.

 

SECTION 13.2.                              ESTOPPEL CERTIFICATE.  Tenant shall,
within ten (10) days following written notice from Landlord, execute,
acknowledge and deliver to Landlord, in any form that Landlord may reasonably
require, a statement in writing in favor of Landlord and/or any prospective
purchaser or encumbrancer of the Building (i) certifying that this Lease is
unmodified and in full force and effect (or, if modified, stating the nature of
the modification and certifying that this Lease, as modified, is in full force
and effect) and the dates to which the rental, additional rent and other charges
have been paid in advance, if any, and (ii) acknowledging that, to Tenant’s
knowledge, there are no uncured defaults on the part of Landlord, or specifying
each default if any are claimed, and (iii) setting forth all further information
that Landlord may reasonably require.  Tenant’s statement may be relied upon by
any prospective purchaser or encumbrancer of all or any portion of the Building
or Project.  In addition to Landlord’s other rights and remedies, Tenant’s
failure to deliver any estoppel statement within the provided time shall be
conclusive upon Tenant that (i) this Lease is in full force and effect, without
modification except as may be represented by Landlord, (ii) there are no uncured
defaults in Landlord’s performance, and (iii) not more than one month’s rental
has been paid in advance.

 

ARTICLE XIV. DEFAULTS AND REMEDIES

 

SECTION 14.1.                              TENANT’S DEFAULTS.  In addition to
any other event of default set forth in this Lease, the occurrence of any one or
more of the following events shall constitute a default by Tenant:

 

(a)                                  The failure by Tenant to make any payment
of rent required to be made by Tenant, as and when due, where the failure
continues for a period of three (3) days after written notice from Landlord to
Tenant; provided, however, that any such notice shall be in lieu of, and not in
addition to, any notice required under California Code of Civil Procedure
Section 1161 and 1161(a) as amended.

 

12

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

 

For purposes of these default and remedies provisions, the term “additional
rent” shall be deemed to include all amounts of any type whatsoever other than
Basic Rent to be paid by Tenant pursuant to the terms of this Lease.

 

(b)                                 The assignment, sublease, encumbrance or
other transfer of the Lease by Tenant, either voluntarily or by operation of
law, whether by judgment, execution, transfer by intestacy or testacy, or other
means, without the prior written consent of Landlord unless otherwise authorized
herein.

 

(c)                                  The discovery by Landlord that any
financial statement provided by Tenant, or by any affiliate, successor or
guarantor of Tenant, was materially false.

 

(d)                                 The failure or inability by Tenant to
observe or perform any of the covenants or provisions of this Lease to be
observed or performed by Tenant, other than as specified in any other subsection
of this Section, where the failure continues for a period of thirty (30) days
after written notice from Landlord to Tenant; provided, however, that any such
notice shall be in lieu of, and not in addition to, any notice required under
California Code of Civil Procedure Section 1161 and 1161(a) as amended. 
However, if the nature of the failure is such that more than thirty (30) days
are reasonably required for its cure, then Tenant shall not be deemed to be in
default if Tenant commences the cure within thirty (30) days, and thereafter
diligently pursues the cure to completion.

 

(e)                                  (i)  The making by Tenant of any general
assignment for the benefit of creditors; (ii) the filing by or against Tenant of
a petition to have Tenant adjudged a Chapter 7 debtor under the Bankruptcy Code
or to have debts discharged or a petition for reorganization or arrangement
under any law relating to bankruptcy (unless, in the case of a petition filed
against Tenant, the same is dismissed within sixty (60) days); (iii) the
appointment of a trustee or receiver to take possession of substantially all of
Tenant’s assets located at the Premises or of Tenant’s interest in this Lease,
if possession is not restored to Tenant within thirty (30) days; (iv) 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 the
seizure is not discharged within thirty (30) days; or (v) Tenant’s convening of
a meeting of its creditors for the purpose of effecting a moratorium upon or
composition of its debts.  Landlord shall not be deemed to have knowledge of any
event described in this subsection unless notification in writing is received by
Landlord, nor shall there be any presumption attributable to Landlord of
Tenant’s insolvency.  In the event that any provision of this subsection is
contrary to applicable law, the provision shall be of no force or effect.

 

SECTION 14.2.                              LANDLORD’S REMEDIES.

 

(a)                                  In the event of any default by Tenant, then
in addition to any other remedies available to Landlord, Landlord may exercise
the following remedies:

 

(i)                                     Landlord may 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.  Such termination shall not affect any accrued obligations of Tenant
under this Lease.  Upon termination, Landlord shall have the right to reenter
the Premises and remove all persons and property.  Landlord shall also be
entitled to recover from Tenant:

 

(1)  The worth at the time of award of the unpaid rent and additional rent which
had been earned at the time of termination;

 

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

 

(3)  The worth at the time of award of the amount by which the unpaid rent and
additional rent for the balance of the Term after the time of award exceeds the
amount of such loss that Tenant proves could be reasonably avoided;

 

(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 from
Tenant’s default, including, but not limited to, the cost of recovering
possession of the Premises, commissions and other expenses of reletting,
including necessary repair, renovation, improvement and alteration of the
Premises for a new tenant, reasonable attorneys’ fees, and any other reasonable
costs; and

 

(5)  At Landlord’s election, all other amounts in addition to or in lieu of the
foregoing as may be permitted by law.  The term “rent” as used in this Lease
shall be deemed to mean the Basic Rent and all other sums required to be paid by
Tenant to Landlord pursuant to the terms of this Lease, including without
limitation any sums that may be owing from Tenant pursuant to Section 4.3 of
this Lease.  Any sum, other than Basic Rent, shall be computed on the basis of
the average monthly amount accruing during the twenty-four (24) month period
immediately prior to default, except that if it becomes necessary to compute
such rental before the twenty-four (24) month period has occurred, then the
computation shall be on the basis of the average monthly amount during the
shorter

 

13

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

 

period.  As used in subparagraphs (1) and (2) above, the “worth at the time of
award” shall be computed by allowing interest at the rate of ten percent (10%)
per annum.  As used in subparagraph (3) above, the “worth at the time of award”
shall be computed by discounting the amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award plus one percent (1%).

 

(ii)                                  Landlord may elect not to terminate
Tenant’s right to possession of the Premises, in which event Landlord may
continue to enforce all of its rights and remedies under this Lease, including
the right to collect all rent as it becomes due.  Efforts by the Landlord to
maintain, preserve or relet the Premises, or the appointment of a receiver to
protect the Landlord’s interests under this Lease, shall not constitute a
termination of the Tenant’s right to possession of the Premises.  In the event
that Landlord elects to avail itself of the remedy provided by this subsection
(ii), Landlord shall not unreasonably withhold its consent to an assignment or
subletting of the Premises subject to the reasonable standards for Landlord’s
consent as are contained in this Lease.

 

(b)                                 The various rights and remedies reserved to
Landlord in this Lease or otherwise shall be cumulative and, except as otherwise
provided by California law, Landlord may pursue any or all of its rights and
remedies at the same time.  No delay or omission of Landlord to exercise any
right or remedy shall be construed as a waiver of the right or remedy or of any
breach or default by Tenant.  The acceptance by Landlord of rent shall not be a
(i) waiver of any preceding breach or default by Tenant of any provision of this
Lease, other than the failure of Tenant to pay the particular rent accepted,
regardless of Landlord’s knowledge of the preceding breach or default at the
time of acceptance of rent, or (ii) a waiver of Landlord’s right to exercise any
remedy available to Landlord by virtue of the breach or default.  The acceptance
of any payment from a debtor in possession, a trustee, a receiver or any other
person acting on behalf of Tenant or Tenant’s estate shall not waive or cure a
default under Section 14.1.  No payment by Tenant or receipt by Landlord of a
lesser amount than the rent required by this Lease shall be deemed to be other
than a partial payment on account of the earliest due stipulated rent, nor shall
any endorsement or statement on any check or letter be deemed an accord and
satisfaction and Landlord shall accept the check or payment without prejudice to
Landlord’s right to recover the balance of the rent or pursue any other remedy
available to it.  Tenant hereby waives any right of redemption or relief from
forfeiture under California Code of Civil Procedure Section 1174 or 1179, or
under any other present or future law, in the event this Lease is terminated by
reason of any default by Tenant.  No act or thing done by Landlord or Landlord’s
agents during the Term shall be deemed an acceptance of a surrender of the
Premises, and no agreement to accept a surrender shall be valid unless in
writing and signed by Landlord.  No employee of Landlord or of Landlord’s agents
shall have any power to accept the keys to the Premises prior to the termination
of this Lease, and the delivery of the keys to any employee shall not operate as
a termination of the Lease or a surrender of the Premises.

 

SECTION 14.3.                              LATE PAYMENTS.

 

(a)                                  Any rent due under this Lease that is not
paid to Landlord within five (5) days of the date when due shall bear interest
at the maximum rate permitted by law from the date due until fully paid.  The
payment of interest shall not cure any default by Tenant under this Lease.  In
addition, Tenant acknowledges that the late payment by Tenant to Landlord of
rent will cause Landlord to incur costs not contemplated by this Lease, the
exact amount of which will be extremely difficult and impracticable to
ascertain.  Those costs may include, but are not limited to, administrative,
processing and accounting charges, and late charges which may be imposed on
Landlord by the terms of any ground lease, mortgage or trust deed covering the
Premises.  Accordingly, if any rent due from Tenant shall not be received by
Landlord or Landlord’s designee within five (5) days after the date due, then
Tenant shall pay to Landlord, in addition to the interest provided above, a late
charge for each delinquent payment equal to the greater of (i) four percent (4%)
of that delinquent payment or (ii) two hundred and fifty dollars ($250.00). 
Acceptance of a late charge by Landlord shall not constitute a waiver of
Tenant’s default with respect to the overdue amount, nor shall it prevent
Landlord from exercising any of its other rights and remedies.

 

(b)                                 Following each second consecutive
installment of rent that is not paid within five (5) days following notice of
nonpayment from Landlord, Landlord shall have the option (i) to require that
beginning with the first payment of rent next due, rent shall no longer be paid
in monthly installments but shall be payable quarterly three (3) months in
advance and/or (ii) to require that Tenant increase the amount, if any, of the
Security Deposit by one hundred percent (100%).  Should Tenant deliver to
Landlord, at any time during the Term, two (2) or more insufficient checks, the
Landlord may require that all monies then and thereafter due from Tenant be paid
to Landlord by cashier’s check.

 

SECTION 14.4.                              RIGHT OF LANDLORD TO PERFORM.  All
covenants and agreements to be performed by Tenant under this Lease shall be
performed at Tenant’s sole cost and expense and without any abatement of rent or
right of set -off.  If Tenant fails to pay any sum of money, or fails to perform
any other act on its part to be performed under this Lease, and the failure
continues beyond any applicable grace period set forth in Section 14.1, then in
addition to any other available remedies, Landlord may, at its election, make
the payment or perform the other act on Tenant’s part.  Landlord’s election to
make the payment or perform the act on Tenant’s part shall not give rise to any
responsibility of Landlord to continue making the same or similar payments or
performing the same or similar acts.  Tenant shall, promptly upon demand by
Landlord, reimburse Landlord for all sums paid

 

14

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

 

by Landlord and all necessary incidental costs, together with interest at the
maximum rate permitted by law from the date of the payment by Landlord.

 

SECTION 14.5.                              DEFAULT BY LANDLORD.  Landlord shall
not be deemed to be in default in the performance of any obligation under this
Lease unless and until it has failed to perform the obligation within thirty
(30) days after written notice by Tenant to Landlord specifying in reasonable
detail the nature and extent of the failure; provided, however, that if the
nature of Landlord’s obligation is such that more than thirty (30) days are
required for its performance, then Landlord shall not be deemed to be in default
if it commences performance within the thirty (30) day period and thereafter
diligently pursues the cure to completion.

 

SECTION 14.6.                              EXPENSES AND LEGAL FEES.  Should
either Landlord or Tenant bring any action in connection with this Lease, the
prevailing party shall be entitled to recover as a part of the action its
reasonable attorneys’ fees, and all other costs.  The prevailing party for the
purpose of this paragraph shall be determined by the trier of the facts.

 

SECTION 14.7.                              WAIVER OF JURY TRIAL/RIGHT TO
ARBITRATE.

 

(a)                                  LANDLORD AND TENANT EACH ACKNOWLEDGES THAT
IT IS AWARE OF AND HAS HAD THE ADVICE OF COUNSEL OF ITS CHOICE WITH RESPECT TO
ITS RIGHT TO TRIAL BY JURY, AND EACH PARTY DOES HEREBY EXPRESSLY AND KNOWINGLY
WAIVE AND RELEASE ALL SUCH RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BROUGHT BY EITHER PARTY HERETO AGAINST THE OTHER (AND/OR AGAINST
ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, OR SUBSIDIARY OR AFFILIATED
ENTITIES) ON ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH
THIS LEASE, TENANT’S USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM OF
INJURY OR DAMAGE.

 

(b)                                  SHOULD A DISPUTE ARISE BETWEEN THE PARTIES
REGARDING ANY MATTER DESCRIBED ABOVE, THEN EXCEPT WITH RESPECT TO ACTIONS FOR
UNLAWFUL OR FORCIBLE DETAINER EITHER PARTY MAY CAUSE THE DISPUTE TO BE SUBMITTED
TO EITHER JAMS/ENDISPUTE (“JAMS”) OR THE AMERICAN ARBITRATION ASSOCIATION
(“AAA”), OR THEIR SUCCESSORS, IN THE COUNTY IN WHICH THE BUILDING IS SITUATED
FOR BINDING ARBITRATION BEFORE A SINGLE ARBITRATOR.  HOWEVER, EACH PARTY
RESERVES THE RIGHT TO SEEK A PROVISIONAL REMEDY BY JUDICIAL ACTION.  NO
ARBITRATION ELECTION BY EITHER PARTY PURSUANT TO THIS SUBSECTION SHALL BE
EFFECTIVE IF MADE LATER THAN THIRTY (30) DAYS FOLLOWING SERVICE OF A JUDICIAL
SUMMONS AND COMPLAINT BY OR UPON SUCH PARTY CONCERNING THE DISPUTE.  THE
ARBITRATION ELECTION SHALL DESIGNATE WHETHER THE ARBITRATION WILL BE CONDUCTED
WITH JAMS OR AAA.  THE ARBITRATION SHALL BE CONDUCTED IN ACCORDANCE WITH THE
RULES OF PRACTICE AND PROCEDURE OF JAMS OR THE COMMERCIAL ARBITRATION RULES OF
THE AAA, AS APPLICABLE, AND OTHERWISE PURSUANT TO THE CALIFORNIA ARBITRATION ACT
(CODE OF CIVIL PROCEDURE SECTIONS 1280 ET SEQ.).  NOTWITHSTANDING THE FOREGOING,
THE ARBITRATOR IS SPECIFICALLY DIRECTED TO LIMIT DISCOVERY TO THAT WHICH IS
ESSENTIAL TO THE EFFECTIVE PROSECUTION OR DEFENSE OF THE ACTION, AND IN NO EVENT
SHALL SUCH DISCOVERY BY EITHER PARTY INCLUDE MORE THAN ONE NON-EXPERT WITNESS
DEPOSITION UNLESS BOTH PARTIES OTHERWISE AGREE.  THE ARBITRATOR SHALL, TO THE
EXTENT APPLICABLE, FOLLOW THE SUBSTANTIVE LAW OF CALIFORNIA AND SHALL RENDER A
REASONED WRITTEN DECISION WITHIN TWENTY DAYS FOLLOWING THE HEARING.  THE
ARBITRATOR SHALL APPORTION THE COSTS OF THE ARBITRATION, TOGETHER WITH THE
ATTORNEYS’ FEES OF THE PARTIES, IN THE MANNER DEEMED EQUITABLE BY THE
ARBITRATOR, IT BEING THE INTENTION OF THE PARTIES THAT THE PREVAILING PARTY
ORDINARILY BE ENTITLED TO RECOVER ITS REASONABLE COSTS AND FEES.  JUDGMENT UPON
ANY AWARD RENDERED BY THE ARBITRATOR MAY BE ENTERED BY ANY COURT HAVING
JURISDICTION.

 

ARTICLE XV. END OF TERM

 

SECTION 15.1.                              HOLDING OVER.  This Lease shall
terminate without further notice upon the expiration of the Term, and any
holding over by Tenant after the expiration shall not constitute a renewal or
extension of this Lease, or give Tenant any rights under this Lease, except when
in writing signed by both parties.  If Tenant holds over for any period after
the expiration (or earlier termination) of the Term, Landlord may, at its
option, treat Tenant as a tenant at sufferance only, commencing on the first
(1st) day following the termination of this Lease.  However, should Landlord
accept the payment of monthly hold-over rent by Tenant, then a month-to-month
tenancy shall be deemed effected and neither party shall terminate this Lease
without thirty (30) days prior written notice to the other party.  Any hold-over
by Tenant shall be subject to all of the terms of this Lease, except that the
monthly rental shall be two hundred percent (200%) of the total monthly rental
for the month immediately preceding the date of termination, subject to
Landlord’s right to modify same upon thirty (30) days notice to Tenant.  The
acceptance by Landlord of monthly hold-over rental in a lesser

 

15

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

 

amount shall not constitute a waiver of Landlord’s right to recover the full
amount due unless otherwise agreed in writing by Landlord.  If Tenant fails to
surrender the Premises upon the expiration of this Lease despite demand to do so
by Landlord, Tenant shall indemnify and hold Landlord harmless from all loss or
liability, including without limitation, any claims made by any succeeding
tenant relating to such failure to surrender.  The foregoing provisions of this
Section are in addition to and do not affect Landlord’s right of re-entry or any
other rights of Landlord under this Lease or at law.

 

SECTION 15.2.                              MERGER ON TERMINATION.  The voluntary
or other surrender of this Lease by Tenant, or a mutual termination of this
Lease, shall terminate any or all existing subleases unless Landlord, at its
option, elects in writing to treat the surrender or termination as an assignment
to it of any or all subleases affecting the Premises.

 

SECTION 15.3.                              SURRENDER OF PREMISES;  REMOVAL OF
PROPERTY.  Upon the Expiration Date or upon any earlier termination of this
Lease, Tenant shall quit and surrender possession of the Premises to Landlord in
as good order, condition and repair as when received or as hereafter may be
improved by Landlord or Tenant, reasonable wear and tear and repairs which are
Landlord’s obligation excepted, and shall remove or fund to Landlord the cost of
removing all wallpapering and voice and/or data transmission cabling installed
by or for Tenant, together with all personal property and debris, except for any
items that Landlord may by written authorization allow to remain.  Tenant shall
repair all damage to the Premises resulting from the removal and restore the
affected area to its pre-existing condition, reasonable wear and tear excepted,
provided that Landlord may instead elect to repair any structural damage at
Tenant’s expense.  If Tenant shall fail to comply with the provisions of this
Section, Landlord may effect the removal and/or make any repairs, and the cost
to Landlord shall be additional rent payable by Tenant upon demand.  If
requested by Landlord,  Tenant shall execute, acknowledge and deliver to
Landlord an instrument in writing releasing and quitclaiming to Landlord all
right, title and interest of Tenant in the Premises.

 

ARTICLE XVI.  PAYMENTS AND NOTICES

 

All sums payable by Tenant to Landlord shall be paid, without deduction or
offset, in lawful money of the United States to Landlord at its address set
forth in Item 13 of the Basic Lease Provisions, or at any other place as
Landlord may designate in writing.  Unless this Lease expressly provides
otherwise, as for example in the payment of rent pursuant to Section 4.1, all
payments shall be due and payable within five (5) days after demand.  All
payments requiring proration shall be prorated on the basis of the number of
days in the pertinent calendar month or year, as applicable.  Any notice,
election, demand, consent, approval or other communication to be given or other
document to be delivered by either party to the other may be delivered to the
other party, at the address set forth in Item 13 of the Basic Lease Provisions,
by personal service or electronic facsimile transmission, or by any courier or
“overnight” express mailing service, or may be deposited in the United States
mail, postage prepaid.  Either party may, by written notice to the other, served
in the manner provided in this Article, designate a different address.  If any
notice or other document is sent by mail, it shall be deemed served or delivered
three (3) business days after mailing or, if sooner, upon actual receipt.  The
refusal to accept delivery of a notice, or the inability to deliver the notice
(whether due to a change of address for which notice was not duly given or other
good reason), shall be deemed delivery and receipt of the notice as of the date
of attempted delivery.  If more than one person or entity is named as Tenant
under this Lease, service of any notice upon any one of them shall be deemed as
service upon all of them.

 

ARTICLE XVII.  RULES AND REGULATIONS

 

Tenant agrees to comply with the Rules and Regulations attached as Exhibit E,
and any reasonable and nondiscriminatory amendments, modifications and/or
additions as may be adopted and published by written notice to tenants by
Landlord for the safety, care, security, good order, or cleanliness of the
Premises, Building, Project and/or Common Areas.  Landlord shall not be liable
to Tenant for any violation of the Rules and Regulations or the breach of any
covenant or condition in any lease or any other act or conduct by any other
tenant, and the same shall not constitute a constructive eviction hereunder. 
One or more waivers by Landlord of any breach of the Rules and Regulations by
Tenant or by any other tenant(s) shall not be a waiver of any subsequent breach
of that rule or any other.  Tenant’s failure to keep and observe the Rules and
Regulations shall constitute a default under this Lease.  In the case of any
conflict between the Rules and Regulations and this Lease, this Lease shall be
controlling.

 

ARTICLE XVIII.  BROKER’S COMMISSION

 

The parties recognize as the broker(s) who negotiated this Lease the firm(s), if
any, whose name(s) is (are) stated in Item 10 of the Basic Lease Provisions, and
agree that Landlord shall be responsible for the payment of brokerage
commissions to those broker(s) unless otherwise provided in this Lease.  Each
party warrants that it has had no dealings with any other real estate broker or
agent

 

16

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

 

in connection with the negotiation of this Lease, and agrees to indemnify and
hold the other party harmless from any cost, expense or liability (including
reasonable attorneys’ fees) for any compensation, commissions or charges claimed
by any other real estate broker or agent employed or claiming to represent or to
have been employed by the indemnifying party in connection with the negotiation
of this Lease.  The foregoing agreement shall survive the termination of this
Lease.

 

ARTICLE XIX.  TRANSFER OF LANDLORD’S INTEREST

 

In the event of any transfer of Landlord’s interest in the Premises, the
transferor shall be automatically relieved of all obligations on the part of
Landlord accruing under this Lease from and after the date of the transfer,
provided that Tenant is duly notified of the transfer.  Any funds held by the
transferor in which Tenant has an interest shall be turned over, subject to that
interest, to the transferee.  No holder of a mortgage and/or deed of trust to
which this Lease is or may be subordinate shall be responsible in connection
with the Security Deposit unless the mortgagee or holder of the deed of trust
actually receives the Security Deposit.  It is intended that the covenants and
obligations contained in this Lease on the part of Landlord shall, subject to
the foregoing, be binding on Landlord, its successors and assigns, only during
and in respect to their respective successive periods of ownership.

 

ARTICLE XX.  INTERPRETATION

 

SECTION 20.1.                              GENDER AND NUMBER.  Whenever the
context of this Lease requires, the words “Landlord” and “Tenant” shall include
the plural as well as the singular, and words used in neuter, masculine or
feminine genders shall include the others.

 

SECTION 20.2.                              HEADINGS.  The captions and headings
of the articles and sections of this Lease are for convenience only, are not a
part of this Lease and shall have no effect upon its construction or
interpretation.

 

SECTION 20.3.                              JOINT AND SEVERAL LIABILITY.  If more
than one person or entity is named as Tenant, the obligations imposed upon each
shall be joint and several and the act of or notice from, or notice or refund
to, or the signature of, any one or more of them shall be binding on all of them
with respect to the tenancy of this Lease, including, but not limited to, any
renewal, extension, termination or modification of this Lease.

 

SECTION 20.4.                              SUCCESSORS.  Subject to Articles IX
and XIX, all rights and liabilities given to or imposed upon Landlord and Tenant
shall extend to and bind their respective heirs, executors, administrators,
successors and assigns.  Nothing contained in this Section is intended, or shall
be construed, to grant to any person other than Landlord and Tenant and their
successors and assigns any rights or remedies under this Lease.

 

SECTION 20.5.                              TIME OF ESSENCE.  Time is of the
essence with respect to the performance of every provision of this Lease in
which time of performance is a factor.

 

SECTION 20.6.                              CONTROLLING LAW/VENUE.  This Lease
shall be governed by and interpreted in accordance with the laws of the State of
California.  Should any litigation be commenced between the parties in
connection with this Lease, such action shall be prosecuted in the applicable
State Court of California in the county in which the Building is located.

 

SECTION 20.7.                              SEVERABILITY.  If any term or
provision of this Lease, the deletion of which would not adversely affect the
receipt of any material benefit by either party or the deletion of which is
consented to by the party adversely affected, shall be held invalid or
unenforceable to any extent, the remainder of this Lease shall not be affected
and each term and provision of this Lease shall be valid and enforceable to the
fullest extent permitted by law.

 

SECTION 20.8.                              WAIVER.  One or more waivers by
Landlord or Tenant of any breach of any term, covenant or condition contained in
this Lease shall not be a waiver of any subsequent breach of the same or any
other term, covenant or condition.  Consent to any act by one of the parties
shall not be deemed to render unnecessary the obtaining of that party’s consent
to any subsequent act.  No breach of this Lease shall be deemed to have been
waived unless the waiver is in a writing signed by the waiving party.

 

SECTION 20.9.                              INABILITY TO PERFORM.  In the event
that either party shall be delayed or hindered in or prevented from the
performance of any work or in performing any act required under this Lease by
reason of any cause beyond the reasonable control of that party, then the
performance of the work or the doing of the act shall be excused for the period
of the delay and the time for performance shall be extended for a period
equivalent to the period of the delay.  The provisions of this Section shall not
operate to excuse Tenant from the prompt payment of rent.

 

17

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

 

SECTION 20.10.                       ENTIRE AGREEMENT.  This Lease and its
exhibits and other attachments cover in full each and every agreement of every
kind between the parties concerning the Premises, the Building, and the Project,
and all preliminary negotiations, oral agreements, understandings and/or
practices, except those contained in this Lease, are superseded and of no
further effect.  Tenant waives its rights to rely on any representations or
promises made by Landlord or others which are not contained in this Lease.  No
verbal agreement or implied covenant shall be held to modify the provisions of
this Lease, any statute, law, or custom to the contrary notwithstanding.

 

SECTION 20.11.                       QUIET ENJOYMENT.  Upon the observance and
performance of all the covenants, terms and conditions on Tenant’s part to be
observed and performed, and subject to the other provisions of this Lease,
Tenant shall have the right of quiet enjoyment and use of the Premises for the
Term without hindrance or interruption by Landlord or any other person claiming
by or through Landlord.

 

SECTION 20.12.                       SURVIVAL.  All covenants of Landlord or
Tenant which reasonably would be intended to survive the expiration or sooner
termination of this Lease, including without limitation any warranty or
indemnity hereunder, shall so survive and continue to be binding upon and inure
to the benefit of the respective parties and their successors and assigns.

 

ARTICLE XXI.  EXECUTION AND RECORDING

 

SECTION 21.1.                              COUNTERPARTS.  This Lease may be
executed in one or more counterparts, each of which shall constitute an original
and all of which shall be one and the same agreement.

 

SECTION 21.2.                              CORPORATE AND PARTNERSHIP AUTHORITY. 
If Tenant is a corporation, limited liability company or partnership, each
individual executing this Lease on behalf of the entity represents and warrants
that he is duly authorized to execute and deliver this Lease and that this Lease
is binding upon the corporation, limited liability company or partnership in
accordance with its terms.  Tenant shall, at Landlord’s request, deliver a
certified copy of its organizational documents or an appropriate certificate
authorizing or evidencing the execution of this Lease.

 

SECTION 21.3.                              EXECUTION OF LEASE; NO OPTION OR
OFFER.  The submission of this Lease to Tenant shall be for examination purposes
only, and shall not constitute an offer to or option for Tenant to lease the
Premises.  Execution of this Lease by Tenant and its return to Landlord shall
not be binding upon Landlord, notwithstanding any time interval, until Landlord
has in fact executed and delivered this Lease to Tenant, it being intended that
this Lease shall only become effective upon execution by Landlord and delivery
of a fully executed counterpart to Tenant.

 

SECTION 21.4.                              RECORDING.  Tenant shall not record
this Lease without the prior written consent of Landlord.  Tenant, upon the
request of Landlord, shall execute and acknowledge a “short form” memorandum of
this Lease for recording purposes.

 

SECTION 21.5.                              AMENDMENTS.  No amendment or mutual
termination of this Lease shall be effective unless in writing signed by
authorized signatories of Tenant and Landlord, or by their respective successors
in interest.  No actions, policies, oral or informal arrangements, business
dealings or other course of conduct by or between the parties shall be deemed to
modify this Lease in any respect.

 

ARTICLE XXII.  MISCELLANEOUS

 

SECTION 22.1.                              NONDISCLOSURE OF LEASE TERMS.  Tenant
acknowledges and agrees that the terms of this Lease are confidential and
constitute proprietary information of Landlord.  Disclosure of the terms could
adversely affect the ability of Landlord to negotiate other leases and impair
Landlord’s relationship with other tenants.  Accordingly, Tenant agrees that it,
and its partners, officers, directors, employees and attorneys, shall not
intentionally and voluntarily disclose the terms and conditions of this Lease to
any other tenant or apparent prospective tenant of the Building or Project,
either directly or indirectly, without the prior written consent of Landlord,
provided, however, that Tenant may disclose the terms to prospective subtenants
or assignees under this Lease or pursuant to any legal requirement.

 

SECTION 22.2.                              REPRESENTATIONS BY TENANT.  The
application, financial statements and tax returns, if any, submitted and
certified to by Tenant as an accurate representation of its financial condition
have been prepared, certified and submitted to Landlord as an inducement and
consideration to Landlord to enter into this Lease.  The application and
statements are represented and warranted by Tenant to be correct and to
accurately and fully reflect Tenant’s true financial condition as of the date of
execution of this Lease by Tenant.  Tenant shall during the Term promptly
furnish Landlord with current annual financial statements accurately reflecting
Tenant’s financial condition upon written request from Landlord.

 

18

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

 

SECTION 22.3.                              CHANGES REQUESTED BY LENDER.  If, in
connection with obtaining financing for the Building, the lender shall request
reasonable modifications in this Lease as a condition to the financing, Tenant
will not unreasonably withhold or delay its consent, provided that the
modifications do not materially increase the obligations of Tenant or materially
and adversely affect the leasehold interest created by this Lease.

 

SECTION 22.4.                              MORTGAGEE PROTECTION.  No act or
failure to act on the part of Landlord which would otherwise entitle Tenant to
be relieved of its obligations hereunder or to terminate this Lease shall result
in such a release or termination unless (a) Tenant has given notice by
registered or certified mail to any beneficiary of a deed of trust or mortgage
covering the Building whose address has been furnished to Tenant and (b) such
beneficiary is afforded a reasonable opportunity to cure the default by
Landlord, including, if necessary to effect the cure, time to obtain possession
of the Building by power of sale or judicial foreclosure provided that such
foreclosure remedy is diligently pursued.

 

SECTION 22.5.                              DISCLOSURE STATEMENT.  Tenant
acknowledges that it has read, understands and, if applicable, shall comply with
the provisions of Exhibit F to this Lease, if that Exhibit is attached.

 

LANDLORD:

TENANT:

 

 

THE IRVINE COMPANY

GARDENBURGER, INC.

 

 

 

 

By

 

 

By

 

 

 

Donald S. McNutt

 

 

 

 

 

Senior Vice President, Leasing,

Printed Name

 

 

 

Office Properties

 

 

 

 

 

Title

 

 

 

 

 

 

 

 

 

 

By

 

 

By

 

 

 

Michael T. Bennett

 

 

 

 

 

Vice President, Operations,

 

Printed Name

 

 

 

Office Properties

 

 

 

 

 

Title

 

 

 

19

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

 

EXHIBIT B

 

UTILITIES AND SERVICES

 

The following standards for utilities and services shall be in effect at the
Building.  Landlord reserves the right to adopt nondiscriminatory modifications
and additions to these standards.  In the case of any conflict between these
standards and the Lease, the Lease shall be controlling.  Subject to all of the
provisions of the Lease, including but not limited to the restrictions contained
in Section 6.1, the following shall apply:

 

1.          Landlord shall make available to the Premises during the hours of
8:00 a.m. to 6:00 p.m., Monday through Friday, and if requested by Tenant on a
week -by-week basis, from 8:00 a.m. to 1:00 p.m. on Saturday (“Building Hours”),
generally recognized national holidays excepted, reasonable HVAC services. 
Subject to the provisions set forth below, Landlord shall also furnish the
Building with elevator service (if applicable), reasonable amounts of electric
current for normal lighting by Landlord’s standard overhead fluorescent and
incandescent fixtures and for the operation of office equipment consistent in
type and quantity with that utilized by typical office tenants of the Building
and Project, and water for lavatory purposes.  Tenant will not, without the
prior written consent of Landlord, connect any apparatus, machine or device with
water pipes or electric current (except through existing electrical outlets in
the Premises) for the purpose of using electric current or water.  Because the
Building systems have been designed for normal occupancy of approximately four
persons per one thousand usable square feet, Tenant understands that excess
occupancy of the Premises may result in excessive use of power and other
services and may inhibit the efficient cooling of the Premises.  This paragraph
shall at all times be subject to applicable governmental regulations.

 

2.          Upon written request from Tenant delivered to Landlord at least 24
hours prior to the period for which service is requested, but during normal
business hours, Landlord will provide any of the foregoing building services to
Tenant at such times when such services are not otherwise available.  Tenant
agrees to pay Landlord for those after-hour services at rates that Landlord may
establish from time to time.  If Tenant requires electric current in excess of
that which Landlord is obligated to furnish under this Exhibit B, Tenant shall
first obtain the consent of Landlord, and Landlord may cause an electric current
meter to be installed in the Premises to measure the amount of electric current
consumed.  The cost of installation, maintenance and repair of the meter shall
be paid for by Tenant, and Tenant shall reimburse Landlord promptly upon demand
for all electric current consumed for any special power use as shown by the
meter.  The reimbursement shall be at the rates charged for electrical power by
the local public utility furnishing the current, plus any additional expense
incurred in keeping account of the electric current consumed.

 

3.          Landlord shall furnish water for drinking, personal hygiene and
lavatory purposes only.  If Tenant requires or uses water for any purposes in
addition to ordinary drinking, cleaning and lavatory purposes, Landlord may,  in
its discretion, install a water meter to measure Tenant’s water consumption. 
Tenant shall pay Landlord for the cost of the meter and the cost of its
installation, and for consumption throughout the duration of Tenant’s
occupancy.  Tenant shall keep the meter and installed equipment in good working
order and repair at Tenant’s own cost and expense, in default of which Landlord
may cause the meter to be replaced or repaired at Tenant’s expense.  Tenant
agrees to pay for water consumed, as shown on the meter and when bills are
rendered, and on Tenant’s default in making that payment Landlord may pay the
charges on behalf of Tenant.  Any costs or expenses or payments made by Landlord
for any of the reasons or purposes stated above shall be deemed to be additional
rent payable by Tenant to Landlord upon demand.

 

4.          In the event that any utility service to the Premises is separately
metered or billed to Tenant, Tenant shall pay all charges for that utility
service to the Premises and the cost of furnishing the utility to tenant suites
shall be excluded from the Operating Expenses as to which reimbursement from
Tenant is required in the Lease.  If any utility charges are not paid when due
Landlord may pay them, and any amounts paid by Landlord shall immediately become
due to Landlord from Tenant as additional rent.  If Landlord elects to furnish
any utility service to the Premises, Tenant shall purchase its requirements of
that utility from Landlord as long as the rates charged by Landlord do not
exceed those which Tenant would be required to pay if the utility service were
furnished it directly by a public utility.

 

5.          Landlord shall provide janitorial services five days per week,
equivalent to that furnished in comparable buildings, and window washing as
reasonably required; provided, however, that Tenant shall pay for any additional
or unusual janitorial services required by reason of any nonstandard
improvements in the Premises, including without limitation wall coverings and
floor coverings installed by or for Tenant, or by reason of any use of Premises
other than exclusively as offices.  The cleaning services provided by Landlord
shall also exclude refrigerators, eating utensils (plates, drinking containers
and silverware), and interior glass partitions.  Tenant shall pay to Landlord
the cost of removal of any of Tenant’s refuse and rubbish, to the extent that
they exceed the refuse and rubbish usually attendant with general office usage.

 

1

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

 

6.          Tenant shall have access to the Building 24 hours per day, 7 days
per week, 52 weeks per year; provided that Landlord may install access control
systems as it deems advisable for the Building.  Such systems may, but need not,
include full or part-time lobby supervision, the use of a sign-in sign-out log,
a card identification access system, building parking and access pass system,
closing hours procedures, access control stations, fire stairwell exit door
alarm system, electronic guard system, mobile paging system, elevator control
system or any other access controls.  In the event that Landlord elects to
provide any or all of those services, Landlord may discontinue providing them at
any time with or without notice.  Landlord may impose a reasonable charge for
access control cards and/or keys issued to Tenant.  Landlord shall have no
liability to Tenant for the provision by Landlord of improper access control
services, for any breakdown in service, or for the failure by Landlord to
provide access control services.  Tenant further acknowledges that Landlord’s
access systems may be temporarily inoperative during building emergency and
system repair periods.  Tenant agrees to assume responsibility for compliance by
its employees with any regulations established by Landlord with respect to any
card key access or any other system of building access as Landlord may
establish.  Tenant shall be liable to Landlord for any loss or damage resulting
from its or its employees use of any access system.

 

2

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

 

EXHIBIT C

 

PARKING

 

The following parking regulations shall be in effect at the Building.  Landlord
reserves the right to adopt reasonable, nondiscriminatory modifications and
additions to the regulations by written notice to Tenant.  In the case of any
conflict between these regulations and the Lease, the Lease shall be
controlling.

 

1.          Landlord agrees to maintain, or cause to be maintained, an
automobile parking area (“Parking Area”) in reasonable proximity to the Building
for the benefit and use of the visitors and patrons and, except as otherwise
provided, employees of Tenant, and other tenants and occupants of the Building. 
The Parking Area shall include, whether in a surface parking area or a parking
structure, the automobile parking stalls, driveways, entrances, exits, sidewalks
and attendant pedestrian passageways and other areas designated for parking. 
Landlord shall have the right and privilege of determining the nature and extent
of the automobile Parking Area, whether it shall be surface, underground or
other structure, and of making such changes to the Parking Area from time to
time which in its opinion are desirable and for the best interests of all
persons using the Parking Area.  Landlord shall keep the Parking Area in a neat,
clean and orderly condition, and shall repair any damage to its facilities. 
Landlord shall not be liable for any damage to motor vehicles of visitors or
employees, for any loss of property from within those motor vehicles, or for any
injury to Tenant, its visitors or employees, unless ultimately determined to be
caused by the sole active negligence or willful misconduct of Landlord.  Unless
otherwise instructed by Landlord, every parker shall park and lock his or her
own motor vehicle.  Landlord shall also have the right to establish, and from
time to time amend, and to enforce against all users of the Parking Area all
reasonable rules and regulations (including the designation of areas for
employee parking) as Landlord may deem necessary and advisable for the proper
and efficient operation and maintenance of the Parking Area.  Garage managers or
attendants are not authorized to make or allow any exceptions to these
regulations.

 

2.          Landlord may, if it deems advisable in its sole discretion, charge
for parking and may establish for the Parking Area a system or systems of permit
parking for Tenant, its employees and its visitors, which may include, but not
be limited to, a system of charges against nonvalidated parking, verification of
users, a set of regulations governing different parking locations, and an
allotment of reserved or nonreserved parking spaces based upon the charges paid
and the identity of users.  In no event shall Tenant or its employees park in
reserved stalls leased to other tenants or in stalls within designated visitor
parking zones, nor shall Tenant or its employees utilize more than the number of
parking stalls allotted in this Lease to Tenant.  It is understood that Landlord
shall not have any obligation to cite improperly parked vehicles or otherwise
attempt to enforce reserved parking rules during hours when parking attendants
are not present at the Parking Area.  Tenant shall comply with such system in
its use (and in the use of its visitors, patrons and employees) of the Parking
Area, provided, however, that the system and rules and regulations shall apply
to all persons entitled to the use of the Parking Area, and all charges to
Tenant for use of the Parking Area shall be no greater than Landlord’s then
current scheduled charge for parking.

 

3.          Tenant shall, upon request of Landlord from time to time, furnish
Landlord with a list of its employees’ names and of Tenant’s and its employees’
vehicle license numbers.  Tenant agrees to acquaint its employees with these
regulations and assumes responsibility for compliance by its employees with
these parking provisions, and shall be liable to Landlord for all unpaid parking
charges incurred by its employees.  Any amount due from Tenant shall be deemed
additional rent.  Tenant authorizes Landlord to tow away from the Building any
vehicle belonging to Tenant or Tenant’s employees parked in violation of these
provisions, and/or to attach violation stickers or notices to those vehicles. 
In the event Landlord elects or is required to limit or control parking by
tenants, employees, visitors or invitees of the Building, whether by validation
of parking tickets, parking meters or any other method of assessment, Tenant
agrees to participate in the validation or assessment program under reasonable
rules and regulations as are established by Landlord and/or any applicable
governmental agency.

 

4.          Landlord may establish an identification system for vehicles of
Tenant and its employees which may consist of stickers, magnetic parking cards
or other identification devices supplied by Landlord.  All identification
devices shall remain the property of Landlord, shall be displayed as required by
Landlord or upon request and may not be mutilated or obliterated in any manner. 
Those devices shall not be transferable and any such device in the possession of
an unauthorized holder shall be void and may be confiscated.  Landlord may
impose a reasonable fee for identification devices and a replacement charge for
devices which are lost or stolen.  Each identification device shall be returned
to Landlord promptly following the Expiration Date or sooner termination of this
Lease.  Loss or theft of parking identification devices shall be reported to
Landlord or its Parking Area operator immediately and a written report of the
loss filed if requested by Landlord or its Parking Area operator.

 

5.          Persons using the Parking Area shall observe all directional signs
and arrows and any posted speed limits.  Unless otherwise posted, in no event
shall the speed limit of 5 miles per hour be exceeded.  All vehicles shall be
parked entirely within painted stalls, and no vehicles shall be

 

1

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

 

parked in areas which are posted or marked as “no parking” or on or in ramps,
driveways and aisles.  Only one vehicle may be parked in a parking space.  In no
event shall Tenant interfere with the use and enjoyment of the Parking Area by
other tenants of the Building or their employees or invitees.

 

6.          Parking Areas shall be used only for parking vehicles.  Washing,
waxing, cleaning or servicing of vehicles, or the parking of any vehicle on an
overnight basis, in the Parking Area (other than emergency services) by any
parker or his or her agents or employees is prohibited unless otherwise
authorized by Landlord.  Tenant shall have no right to install any fixtures,
equipment or personal property (other than vehicles) in the Parking Area, nor
shall Tenant make any alteration to the Parking Area.

 

7.          It is understood that the employees of Tenant and the other tenants
of Landlord within the Building and Project shall not be permitted to park their
automobiles in the portions of the Parking Area which may from time to time be
designated for patrons of the Building and/or Project and that Landlord shall at
all times have the right to establish rules and regulations for employee
parking.  Landlord shall lease to Tenant, and Tenant shall be obligated to lease
from Landlord for the Term of this Lease, the total number of vehicle parking
spaces set forth in Item 12 of the Basic Lease Provisions (the “Allotted
Stalls”).  Tenant shall pay to Landlord for the lease of the Allotted Stalls the
amounts as Landlord shall from time to time determine.  Should any monthly
parking charge installment not be paid within five (5) days following the date
due, then a late charge shall be payable by Tenant equal to the greater of (i)
four percent (4%) of the delinquent installment or (ii) two hundred and fifty
dollars ($250.00), which late charge shall be separate and in addition to any
late charge that may be assessed pursuant to Section 14.3 of the Lease for other
than delinquent monthly parking charges.  Landlord may authorize persons other
than those described above, including occupants of other buildings, to utilize
the Parking Area.  In the event of the use of the Parking Area by other persons,
those persons shall pay for that use in accordance with the terms established
above; provided, however, Landlord may allow those persons to use the Parking
Area on weekends, holidays, and at other non-office hours without payment. 
Notwithstanding the foregoing, provided Tenant is not in default under the
Lease, the monthly stall charge for the Allotted Stalls shall be waived through
the end of the initial Lease Term.

 

8.          Notwithstanding the foregoing paragraphs 1 through 7, Landlord shall
be entitled to pass on to Tenant its proportionate share of any charges or
parking surcharge or transportation management costs levied by any governmental
agency.  The foregoing parking provisions are further subject to any
governmental regulations which limit parking or otherwise seek to encourage the
use of carpools, public transit or other alternative transportation forms or
traffic reduction programs.  Tenant agrees that it will use its best efforts to
cooperate, including registration and attendance, in programs which may be
undertaken to reduce traffic.  Tenant acknowledges that as a part of those
programs, it may be required to distribute employee transportation information,
participate in employee transportation surveys, allow employees to participate
in commuter activities, designate a liaison for commuter transportation
activities, distribute commuter information to all employees, and otherwise
participate in other programs or services initiated under a transportation
management program.

 

9.          Should any parking spaces be allotted by Landlord to Tenant, either
on a reserved or nonreserved basis, Tenant shall not assign or sublet any of
those spaces, either voluntarily or by operation of law, without the prior
written consent of Landlord, except in connection with an authorized assignment
of this Lease or subletting of the Premises.

 

2

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

 

EXHIBIT D

 

TENANT’S INSURANCE

 

The following standards for Tenant’s insurance shall be in effect at the
Building, and Tenant shall also cause any of its subtenants to comply with the
requirements below.  Landlord reserves the right to adopt reasonable
nondiscriminatory modifications and additions to those standards.  Tenant agrees
to obtain and present evidence to Landlord that it has fully complied with the
insurance requirements.

 

1.          Tenant shall, at its sole cost and expense, commencing on the date
Tenant is given access to the Premises for any purpose and during the entire
Term, procure, pay for and keep in full force and effect:  (i) commercial
general liability insurance with respect to the Premises and the operations of
or on behalf of Tenant in, on or about the Premises, including but not limited
to coverage for personal injury, independent contractors, broad form property
damage, fire legal liability, products liability (if a product is sold from the
Premises), and liquor law liability (if alcoholic beverages are sold, served or
consumed within the Premises), which policy(ies) shall be written on an
“occurrence” basis and for not less than $2,000,000 combined single limit (with
a $50,000 minimum limit on fire legal liability) per occurrence for bodily
injury, death, and property damage liability, or the current limit of liability
carried by Tenant, whichever is greater, and subject to such increases in
amounts as Landlord may determine from time to time; (ii) workers’ compensation
insurance coverage as required by law, together with employers’ liability
insurance coverage of at least $1,000,000; (iii) with respect to improvements,
alterations, and the like required or permitted to be made by Tenant under this
Lease, builder’s risk insurance, in amounts satisfactory to Landlord; (iv)
insurance against fire, vandalism, malicious mischief and such other additional
perils as may be included in a standard “special form” policy, insuring all
Tenant Installations, trade fixtures, furnishings, equipment and items of
personal property in the Premises, in an amount equal to not less than ninety
percent (90%) of their actual replacement cost (with replacement cost
endorsement), which policy shall also include loss of income/business
interruption/extra expense coverage in an amount not less than nine months loss
of income from Tenant’s business in the Premises.  In no event shall the limits
of any policy be considered as limiting the liability of Tenant under this
Lease.

 

2.          All policies of insurance required to be carried by Tenant pursuant
to this Exhibit shall be written by responsible insurance companies authorized
to do business in the State of California and with a general policyholder rating
of not less than “A-” and financial rating of not less than “VIII” in the most
current Best’s Insurance Report.  Any insurance required of Tenant may be
furnished by Tenant under any blanket policy carried by it or under a separate
policy.  A certificate of insurance, certifying that the policy has been issued,
provides the coverage required by this Exhibit and contains the required
provisions, together with endorsements acceptable to Landlord evidencing the
waiver of subrogation and additional insured provisions required under Paragraph
3 below, shall be delivered to Landlord prior to the date Tenant is given the
right of possession of the Premises.  Proper evidence of the renewal of any
insurance coverage shall also be delivered to Landlord not less than thirty (30)
days prior to the expiration of the coverage.  Landlord may at any time, and
from time to time, inspect and/or copy any and all insurance policies required
by this Lease.

 

3.          Unless otherwise provided below, each policy evidencing insurance
required to be carried by Tenant pursuant to this Exhibit shall contain the
following provisions and/or clauses satisfactory to Landlord:  (i) with respect
to Tenant’s commercial general liability insurance, a provision that the policy
and the coverage provided shall be primary and that any coverage carried by
Landlord shall be excess and noncontributory, together with a provision
including Landlord and any other parties in interest designated by Landlord as
additional insureds;  (ii) except with respect to Tenant’s commercial general
liability insurance, a waiver by the insurer of any right to subrogation against
Landlord, its agents, employees, contractors and representatives which arises or
might arise by reason of any payment under the policy or by reason of any act or
omission of Landlord, its agents, employees, contractors or representatives; and
(iii) a provision that the insurer will not cancel or change the coverage
provided by the policy without first giving Landlord thirty (30) days prior
written notice.

 

4.          In the event that Tenant fails to procure, maintain and/or pay for,
at the times and for the durations specified in this Exhibit, any insurance
required by this Exhibit, or fails to carry insurance required by any
governmental authority, Landlord may at its election procure that insurance and
pay the premiums, in which event Tenant shall repay Landlord all sums paid by
Landlord, together with interest at the maximum rate permitted by law and any
related costs or expenses incurred by Landlord, within ten (10) days following
Landlord’s written demand to Tenant.

 

NOTICE TO TENANT:  IN ACCORDANCE WITH THE TERMS OF THIS LEASE, TENANT MUST
PROVIDE EVIDENCE OF THE REQUIRED INSURANCE TO LANDLORD’S MANAGEMENT AGENT PRIOR
TO BEING AFFORDED ACCESS TO THE PREMISES.

 

1

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

 

EXHIBIT E

 

RULES AND REGULATIONS

 

The following Rules and Regulations shall be in effect at the Building. 
Landlord reserves the right to adopt reasonable nondiscriminatory modifications
and additions at any time.  In the case of any conflict between these
regulations and the Lease, the Lease shall be controlling.

 

1.          Except with the prior written consent of Landlord, or unless
otherwise specifically authorized in this Lease, Tenant shall not sell or permit
the retail sale of goods or services in or from the Premises, nor shall Tenant
allow the Premises to be utilized for any manufacturing or medical practice.

 

2.          The sidewalks, halls, passages, elevators, stairways, and other
common areas shall not be obstructed by Tenant or used by it for storage, for
depositing items, or for any purpose other than for ingress to and egress from
the Premises.  The halls, passages, entrances, elevators, stairways, balconies
and roof are not for the use of the general public, and Landlord shall in all
cases retain the right to control and prevent access to those areas of all
persons whose presence, in the judgment of Landlord, shall be prejudicial to the
safety, character, reputation and interests of the Building and its tenants. 
Should Tenant have access to any balcony or patio area, Tenant shall not place
any furniture or other personal property in such area without the prior written
approval of Landlord.  Nothing contained in this Lease shall be construed to
prevent access to persons with whom Tenant normally deals only for the purpose
of conducting its business on the Premises (such as clients, customers, office
suppliers and equipment vendors and the like) unless those persons are engaged
in illegal activities.  Neither Tenant nor any employee or contractor of Tenant
shall go upon the roof of the Building without the prior written consent of
Landlord.

 

3.          The sashes, sash doors, windows, glass lights, solar film and/or
screen, and any lights or skylights that reflect or admit light into the halls
or other places of the Building shall not be covered or obstructed.  The toilet
rooms, water and wash closets and other water apparatus shall not be used for
any purpose other than that for which they were constructed, and no foreign
substance of any kind shall be thrown in those facilities, and the expense of
any breakage, stoppage or damage resulting from the violation of this rule shall
be borne by Tenant.

 

4.          No sign, advertisement or notice visible from the exterior of the
Premises shall be inscribed, painted or affixed by Tenant on any part of the
Building or the Premises without the prior written consent of Landlord.  If
Landlord shall have given its consent at any time, whether before or after the
execution of this Lease, that consent shall in no way operate as a waiver or
release of any of the provisions of this Lease, and shall be deemed to relate
only to the particular sign, advertisement or notice so consented to by Landlord
and shall not be construed as dispensing with the necessity of obtaining the
specific written consent of Landlord with respect to any subsequent sign,
advertisement or notice.  If Landlord, by a notice in writing to Tenant, shall
object to any curtain, blind, tinting, shade or screen attached to, or hung in,
or used in connection with, any window or door of the Premises, the use of that
curtain, blind, tinting, shade or screen shall be immediately discontinued and
removed by Tenant.  No awnings shall be permitted on any part of the Premises. 
No antenna or satellite dish shall be installed by Tenant that is either located
or visible from outside the Premises without the prior written agreement of
Landlord.

 

5.          Tenant shall not do or permit anything to be done in the Premises,
or bring or keep anything in the Premises, which shall in any way increase the
rate of fire insurance on the Building, or on the property kept in the Building,
or obstruct or interfere with the rights of other tenants, or in any way injure
or annoy them, or conflict with the regulations of the Fire Department or the
fire laws, or with any insurance policy upon the Building, or any portion of the
Building or its contents, or with any rules and ordinances established by the
Board of Health or other governmental authority.

 

6.          The installation and location of any unusually heavy equipment in
the Premises, including without limitation file storage units, safes and
electronic data processing equipment, shall require the prior written approval
of Landlord.  Landlord may restrict the weight and position of any equipment
that may exceed the weight load limits for the structure of the Building, and
may further require, at Tenant’s expense, the reinforcement of any flooring on
which such equipment may be placed and/or an engineering study to be performed
to determine whether the equipment may safely be installed in the Building and
the necessity of any reinforcement.  The moving of large or heavy objects shall
occur only between those hours as may be designated by, and only upon previous
written notice to, Landlord, and the persons employed to move those objects in
or out of the Building must be reasonably acceptable to Landlord.  Without
limiting the generality of the foregoing, no freight, furniture or bulky matter
of any description shall be received into or moved out of the lobby of the
Building or carried in any elevator other than the freight elevator designated
by Landlord unless approved in writing by Landlord.

 

7.          Landlord shall clean the Premises as provided in the Lease, and
except with the written consent of Landlord, no person or persons other than
those approved by Landlord will be permitted to enter the Building for that
purpose.  Tenant shall not cause unnecessary labor by reason of

 

1

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

 

Tenant’s carelessness and indifference in the preservation of good order and
cleanliness.  Landlord shall not be responsible to Tenant or its employees for
loss or damage to property in connection with the provision of janitorial
services by third party contractors.

 

8.          Tenant shall not sweep or throw, or permit to be swept or thrown,
from the Premises any dirt or other substance into any of the corridors or halls
or elevators, or out of the doors or windows or stairways of the Building, and
Tenant shall not use, keep or permit to be used or kept any foul or noxious gas
or substance in the Premises, or permit or suffer the Premises to be occupied or
used in a manner offensive or objectionable to Landlord or other occupants of
the Building by reason of noise, odors and/or vibrations, or interfere in any
way with other tenants or those having business with other tenants, nor shall
any animals or birds be kept by Tenant in or about the Building.  Smoking or
carrying of lighted cigars, cigarettes, pipes or similar products anywhere
within the Premises or Building is strictly prohibited, and Landlord may enforce
such prohibition pursuant to Landlord’s leasehold remedies.  Smoking is
permitted outside the Building and within the project only in areas designated
by Landlord.

 

9.          No cooking shall be done or permitted by Tenant on the Premises,
except pursuant to the normal use of a U.L. approved microwave oven and coffee
maker for the benefit of Tenant’s employees and invitees, nor shall the Premises
be used for the storage of merchandise or for lodging.

 

10.              Tenant shall not use or keep in the Building any kerosene,
gasoline, or inflammable fluid or any other illuminating material, or use any
method of heating other than that supplied by Landlord.

 

11.              If Tenant desires telephone, telegraph, burglar alarm or
similar connections, Landlord will direct electricians as to where and how the
wires are to be introduced.  No boring or cutting for wires or otherwise shall
be made without directions from Landlord.

 

12.              Upon the termination of its tenancy, Tenant shall deliver to
Landlord all the keys to offices, rooms and toilet rooms and all access cards
which shall have been furnished to Tenant or which Tenant shall have had made.

 

13.              Tenant shall not mark, drive nails, screw or drill into the
partitions, woodwork or plaster or in any way deface the Premises, except to
install normal wall hangings.  Tenant shall not affix any floor covering to the
floor of the Premises in any manner except by a paste, or other material which
may easily be removed with water, the use of cement or other similar adhesive
materials being expressly prohibited.  The method of affixing any floor covering
shall be subject to approval by Landlord.  The expense of repairing any damage
resulting from a violation of this rule shall be borne by Tenant.

 

14.              On Saturdays, Sundays and legal holidays, and on other days
between the hours of 6:00 p.m. and 8:00 a.m., access to the Building, or to the
halls, corridors, elevators or stairways in the Building, or to the Premises,
may be refused unless the person seeking access complies with any access control
system that Landlord may establish.  Landlord shall in no case be liable for
damages for the admission to or exclusion from the Building of any person whom
Landlord has the right to exclude under Rules 2 or 18 of this Exhibit.  In case
of invasion, mob, riot, public excitement, or other commotion, or in the event
of any other situation reasonably requiring the evacuation of the Building,
Landlord reserves the right at its election and without liability to Tenant to
prevent access to the Building by closing the doors or otherwise, for the safety
of the tenants and protection of property in the Building.

 

15.              Tenant shall be responsible for protecting the Premises from
theft, which includes keeping doors and other means of entry closed and securely
locked.  Tenant shall cause all water faucets or water apparatus to be shut off
before Tenant or Tenant’s employees leave the Building, and that all
electricity, gas or air shall likewise be shut off, so as to prevent waste or
damage, and for any default or carelessness Tenant shall make good all injuries
sustained by other tenants or occupants of the Building or Landlord.

 

16.              Tenant shall not alter any lock or install a new or additional
lock or any bolt on any door of the Premises without the prior written consent
of Landlord.  If Landlord gives its consent, Tenant shall in each case promptly
furnish Landlord with a key for any new or altered lock.

 

17.              Tenant shall not install equipment, such as but not limited to
electronic tabulating or computer equipment, requiring electrical or air
conditioning service in excess of that to be provided by Landlord under the
Lease except in accordance with Exhibit B.

 

18.              Landlord shall have full and absolute authority to regulate or
prohibit the entrance to the Premises of any vendor, supplier, purveyor,
petitioner, proselytizer or other similar person if, in the good faith judgment
of Landlord, such person will be involved in general solicitation activities, or
the proselytizing, petitioning, or disturbance of other tenants or their
customers or invitees, or engaged or likely to engage in conduct which may in
Landlord’s opinion distract from the use of the Premises for its intended
purpose.  Notwithstanding the foregoing, Landlord reserves the absolute right
and discretion to limit or prevent access to the Buildings by any food or
beverage vendor, whether or not

 

2

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

 

invited by Tenant, and Landlord may condition such access upon the vendor’s
execution of an entry permit agreement which may contain provisions for
insurance coverage and/or the payment of a fee to Landlord.

 

19.              Tenant shall, at its expense, be required to utilize the third
party contractor designated by Landlord for the Building to provide any
telephone wiring services from the minimum point of entry of the telephone cable
in the Building to the Premises.

 

20.              Tenant shall, upon request by Landlord, supply Landlord with
the names and telephone numbers of personnel designated by Tenant to be
contacted on an after-hours basis should circumstances warrant.

 

21.              Tenant shall cause its employees and agents, and shall endeavor
to instruct its invitees, to wear attire suitable for a first class office
project while such persons are in the Building or Project.

 

22.              Landlord may from time to time grant tenants individual and
temporary variances from these Rules, provided that any variance does not have a
material adverse effect on the use and enjoyment of the Premises by Tenant.

 

3

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