Exhibit 10.16

 

Lease between

Sobrato Interests II and Netflix, Inc.

 

Section

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Parties

   1

Premises

   1

Use

   1

Permitted Uses

   1

Uses Prohibited

   1

Advertisements and Signs

   1

Covenants, Conditions and Restrictions

   2

Term and Rental

   2

Base Monthly Rent

   2

Late Charges

   2

Security Deposit

   3

Acceptance of Possession and Covenants to Surrender

   3

Delivery and Acceptance

   3

Condition Upon Surrender

   3

Failure to Surrender

   4

Alterations and Additions

   4

Tenant’s Alterations

   4

Free From Liens

   4

Compliance With Governmental Regulations

   4

Maintenance of Premises

   5

Landlord’s Obligations

   5

Tenant’s Obligations

   5

Waiver of Liability

   6

Hazard Insurance

   6

Tenant’s Use

   6

Landlord’s Insurance

   6

Tenant’s Insurance

   7

Waiver

   7

Taxes

   7

Utilities

   8

Toxic Waste and Environmental Damage

   8

Use of Hazardous Material

   8

Tenant’s Indemnity Regarding Hazardous Material

   9

Notice of Release or Violation

   9

Remediation Obligations

   10

Environmental Monitoring

   10

 

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Tenant’s Default

   10

Remedies

   11

Right to Re-enter

   11

Continuation of Lease

   11

No Termination

   12

Non-Waiver

   12

Performance by Landlord

   12

Habitual Default

   12

Landlord’s Liability

   12

Limitation on Landlord’s Liability

   12

Limitation on Tenant’s Recourse

   13

Indemnification of Landlord

   13

Destruction of Premises

   14

Landlord’s Obligation to Restore

   14

Limitations on Landlord’s Restoration Obligation

   14

Condemnation

   14

Assignment or Sublease

   15

Consent by Landlord

   15

Assignment or Subletting Consideration

   16

No Release

   16

Reorganization of Tenant

   17

Permitted Transfers

   17

Effect of Default

   17

Effects of Conveyance

   18

Successors and Assigns

   18

Sublease Requirements

   18

Option to Extend the Lease Term

   18

Grant and Exercise of Option

   18

Determination of Fair Market Rental

   19

Resolution of a Disagreement over the Fair Market Rental

   19

Personal to Tenant

   20

General Provisions

   20

Attorney’s Fees

   20

Authority of Parties

   20

Brokers

   20

Choice of Law

   20

Dispute Resolution

   20

Entire Agreement

   22

Entry by Landlord

   22

Estoppel Certificates

   22

Exhibits

   22

Interest

   22

Modifications Required by Lender

   23

No Presumption Against Drafter

   23

Notices

   23

Property Management

   23

Rent

   23

Representations

   23

Rights and Remedies

   23

 

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Severability

   23

Submission of Lease

   23

Subordination

   23

Survival of Indemnities

   24

Time

   24

Transportation Demand Management Programs

   24

Waiver of Right to Jury Trial

   24

EXHIBIT A – Premises & Building

   26

 

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1. PARTIES: THIS LEASE, is entered into on this first day of April, 2004,
(“Effective Date”) between SOBRATO INTERESTS II, a California Limited
Partnership, whose address is 10600 North De Anza Boulevard, Suite 200,
Cupertino, CA 95014 and Netflix, Inc., a Delaware Corporation, whose address is
970 University Avenue, Los Gatos, CA 95032, hereinafter called respectively
Landlord and Tenant. Landlord and Tenant are collectively referred to in this
Lease as the “Parties”.

 

2. PREMISES: Landlord hereby leases to Tenant, and Tenant hires from Landlord
those certain Premises with the appurtenances, situated in the City of
Sunnyvale, County of Santa Clara, State of California, commonly known and
designated as 545 Oakmead Parkway. For purposes of this Lease the building
(“Building”) is deemed to be 115,000 rentable square feet as outlined in red on
Exhibit “A” and all improvements located therein including but not limited to
buildings, parking areas and structures, landscaping, loading docks, sidewalks,
service areas and other facilities.

 

3. USE:

 

A. Permitted Uses: Tenant shall use the Premises as permitted under applicable
zoning laws only for the following purposes and shall not change the use of the
Premises without the prior written consent of Landlord: Office, research,
warehousing, distribution, and development, marketing, light manufacturing,
ancillary storage and other incidental uses thereto. Tenant shall use only the
number of parking spaces allocated to Tenant under this Lease. Tenant shall have
the right to park up to four (4) delivery vehicles overnight in the parking lot.
All commercial trucks and delivery vehicles shall (i) be parked at the rear of
the Building, (ii) loaded and unloaded in a manner which does not interfere with
the businesses of other occupants of the Project, and (iii) permitted to remain
within the Project only so long as is reasonably necessary to complete the
loading and unloading. Landlord makes no representation or warranty that any
specific use of the Premises desired by Tenant is permitted pursuant to any
Laws.

 

B. Uses Prohibited: Tenant shall not commit or suffer to be committed on the
Premises any waste, nuisance, or other act or thing which may disturb the quiet
enjoyment of any other tenant in or around the Premises, nor allow any sale by
auction or any other use of the Premises for an unlawful purpose. Tenant shall
not (i) damage or overload the electrical, mechanical or plumbing systems of the
Premises, (ii) attach, hang or suspend anything from the ceiling, walls or
columns of the Building in excess of the load limits for which such ceiling,
walls or columns are designed, or set any load on the floor in excess of the
load limits for which such floors are designed, or (iii) generate dust, fumes or
waste products which create a fire or health hazard or damage the Premises. No
materials, supplies, equipment, finished products or semi-finished products, raw
materials or articles of any nature, or any waste materials, refuse, scrap or
debris, shall be stored upon or permitted to remain on any portion of the
Premises outside of the Building without Landlord’s prior approval, which
approval may be withheld in its sole discretion.

 

C. Advertisements and Signs: Tenant will not place or permit to be placed, in,
upon or about the Premises any signs not approved by the city and other
governing authority having jurisdiction. Tenant will not place or permit to be
placed upon the Premises any signs, advertisements or notices without the
written

 

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consent of Landlord as to type, size, design, lettering, coloring and location,
which consent will not be unreasonably withheld. Any sign placed on the Premises
shall be removed by Tenant, at its sole cost, prior to the Expiration Date or
promptly following the earlier termination of the Lease, and Tenant shall
repair, at its sole cost, any damage or injury to the Premises caused thereby,
and if not so removed, then Landlord may have same so removed at Tenant’s
expense.

 

D. Covenants, Conditions and Restrictions: This Lease is subject to the effect
of (i) any covenants, conditions, restrictions, easements, mortgages or deeds of
trust, ground leases, rights of way of record and any other matters or documents
of record; and (ii) any zoning laws of the city, county and state where the
Building is situated (collectively referred to herein as “Restrictions”) and
Tenant will conform to and will not violate the terms of any such Restrictions.
To Landlord’s knowledge there are no covenants, conditions or other restrictions
that would interfere with Tenant’s intended use of the Premises.

 

4. TERM AND RENTAL:

 

A. Base Monthly Rent: The term (“Lease Term”) shall be for sixty (60) months,
commencing on substantial completion of construction as determined pursuant to
Section 5.G (the “Commencement Date”) estimated to occur on April 1, 2004, and
ending on March 31, 2009, (“Expiration Date”). Notwithstanding the Parties
agreement that the Lease Term begins on the Commencement Date, this Lease and
all of the obligations of Landlord and Tenant shall be binding and in full force
and effect from and after the Effective Date. In addition to all other sums
payable by Tenant under this Lease, Tenant shall pay as base monthly rent (“Base
Monthly Rent”) for the Premises pursuant to the following schedule:

 

April 1, 2004 – June 30, 2004:

$7,500.00

 

July 1, 2004 – September 30, 2004:

 

$17,500.00

 

October 1, 2004 – September 30, 2005:

$28,750.00

 

October 1, 2005 – June 30, 2007:

$80,500.00

 

July 1, 2007 – March 31, 2009:

$86,250.00

 

Base Monthly Rent shall be due in advance on or before the first day of each
calendar month during the Lease Term. All sums payable by Tenant under this
Lease shall be paid to Landlord in lawful money of the United States of America,
without offset or deduction and without prior notice or demand, at the address
specified in Section 1 of this Lease or at such place or places as may be
designated in writing by Landlord during the Lease Term. Base Monthly Rent for
any period less than a calendar month shall be a pro rata portion of the monthly
installment.

 

B. Late Charges: Tenant hereby acknowledges that late payment by Tenant to
Landlord of Base Monthly Rent and other sums due hereunder will cause Landlord
to incur costs not contemplated by this Lease, the exact amount of which is
extremely difficult to ascertain. Such costs include but are not limited to:
administrative, processing, accounting, and late charges which may be imposed on
Landlord by the terms of any contract, revolving credit, mortgage, or trust deed
covering the Premises. Accordingly, if any installment of Base Monthly Rent or
other sum due from Tenant shall not be received by Landlord or its designee
within five (5) days after notice that such payment is past due (provided
however no such notice is required if Landlord has given such notice more than
twice in any given calendar year). Tenant shall pay to Landlord a late charge
equal to five (5%) percent of such overdue amount, which late charge shall be
due and payable on the same date that the overdue amount was due. The parties
agree that such late charge represents a fair and reasonable estimate of the
costs Landlord will incur by reason of late payment by Tenant, excluding
interest and attorneys fees and costs. If any rent or other sum due from Tenant
remains delinquent for a period in excess of thirty (30) days then, in addition
to such late

 

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charge, Tenant shall pay to Landlord interest on any rent that is not paid when
due at the Agreed Interest Rate specified in Section 19.J following the date
such amount became due until paid. Acceptance by Landlord of such late charge
shall not constitute a waiver of Tenant’s default with respect to such overdue
amount nor prevent Landlord from exercising any of the other rights and remedies
granted hereunder. In the event that a late charge is payable hereunder, whether
or not collected, for three (3) consecutive installments of Base Monthly Rent,
then the Base Monthly Rent shall automatically become due and payable quarterly
in advance, rather than monthly, notwithstanding any provision of this Lease to
the contrary.

 

C. Security Deposit: Within ten (10) of Tenant’s execution of this Lease, Tenant
shall provide Landlord a security deposit of Eight Thousand Five Hundred Dollars
($80,500.00). (“Security “Deposit”). If Tenant defaults with respect to any
provisions of the Lease, including but not limited to the provisions relating to
payment of (i) Base Monthly Rent or other charges in default; (ii) any other
amount which Landlord may spend or become obligated to spend by reason of
Tenant’s default, Landlord shall be entitled to draw upon the full amount of the
Security Deposit.

 

5. This paragraph intentionally left blank

 

6. ACCEPTANCE OF POSSESSION AND COVENANTS TO SURRENDER:

 

A. Delivery and Acceptance: On the Commencement Date, Landlord shall deliver and
Tenant shall accept possession of the Premises and enter into occupancy of the
Premises on the Commencement Date. By accepting possession, Tenant acknowledges
that it has had an opportunity to conduct, and has conducted, such inspections
of the Premises as it deems necessary to evaluate its condition. Tenant agrees
to accept possession of the Premises in its then existing condition, subject to
all Restrictions and without representation or warranty by Landlord. At the time
Landlord delivers possession of the Premises to Tenant, Landlord and Tenant
shall together execute an acceptance agreement. Landlord shall have no
obligation to deliver possession, nor shall Tenant be entitled to take
occupancy, of the Premises until such acceptance agreement has been executed,
and Tenant’s obligation to pay Base Monthly Rent and Additional Rent shall not
be excused or delayed because of Tenant’s failure to execute such acceptance
agreement.

 

B. Condition Upon Surrender: Tenant further agrees on the Expiration Date or on
the sooner termination of this Lease, to surrender the Premises to Landlord in
good condition and repair, normal wear and tear excepted. In this regard,
“normal wear and tear” shall be construed to mean wear and tear caused to the
Premises by the natural aging process which occurs in spite of prudent
application of the commercially reasonable standards for maintenance, repair
replacement, and janitorial practices, and does not include items of neglected
or deferred maintenance. In any event, Tenant shall cause the following to be
done prior to the Expiration Date or sooner termination of this Lease: (i) all
interior walls shall be painted or cleaned so that they appear freshly painted,
(ii) all tiled floors shall be cleaned and waxed, (iii) all carpets shall be
cleaned and shampooed, (iv) all broken, marred, stained or nonconforming
acoustical ceiling tiles shall be replaced, (v) all cabling placed above the
ceiling by Tenant or Tenant’s contractors shall be removed, (vi) all windows
shall be washed; (vii) the HVAC system shall be serviced by a reputable and
licensed service firm and left in “good operating condition and repair” as so
certified by such firm, (viii) the plumbing and electrical systems and lighting
shall be placed in good order and repair (including replacement of any burned
out, discolored or broken light bulbs, ballasts, or lenses. On or before the
Expiration Date or sooner termination of this Lease, Tenant shall remove all its
personal property and trade fixtures from the Premises. All property and
fixtures not so removed shall be deemed as abandoned by Tenant. If Landlord has
so indicated pursuant to Section 7 below Tenant shall, at Tenant’s sole cost and
expense, remove such Alternations as Landlord has required and shall repair and
restore such to condition at time of commencement, normal wear and tear
excluded. Such repair and restoration shall include causing the Premises to

 

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be brought into compliance with all applicable building codes and laws in effect
at the time of the removal but only to the extent such compliance is
necessitated by the repair and restoration work.

 

C. Failure to Surrender: If the Premises are not surrendered at the Expiration
Date or sooner termination of this Lease in the condition required by this
Section 6, Tenant shall be deemed in a holdover tenancy pursuant to this Section
6.C If Tenant remains in possession of the Premises after the Expiration Date or
sooner termination of this Lease without Landlord’s consent, Tenant’s continued
possession shall be on the basis of a tenancy at sufferance and Tenant shall pay
as rent during the holdover period an amount equal to one hundred fifty percent
(150%) of the Base Monthly Rent due in the month preceding the earlier
termination or Expiration Date, as applicable, plus all other amounts payable by
Tenant under this Lease. Any holding over shall otherwise be on the terms and
conditions herein specified, except those provisions relating to the Lease Term
and any options to extend or renew, which provisions shall be of no further
force and effect. This provision shall survive the termination or expiration of
the Lease.

 

7. ALTERATIONS AND ADDITIONS:

 

A. Tenant’s Alterations: Tenant shall not make, or suffer to be made, any
alteration or addition to the Premises (“Alterations”), or any part thereof,
without obtaining Landlord’s prior written consent and delivering to Landlord
the proposed architectural and structural plans for all such Alterations at
least fifteen (15) days prior to the start of construction. Notwithstanding the
foregoing, Tenant shall be entitled without obtaining Landlord’s consent, to
make any Alterations which (i) do not affect the structure of the Building, and
(ii) cost does not exceed Fifty Thousand Dollars ($50,000.00) per alteration nor
an aggregate of One Hundred Thousand Dollars ($100,000.00) in any twelve (12)
month period. If such Alterations affect the structure of the Building, Tenant
additionally agrees to reimburse Landlord its reasonable out-of-pocket costs
incurred in reviewing Tenant’s plans not to exceed $1,000 per alteration. Upon
the request of Tenant, Landlord shall, within the 15-day period, advise Tenant
in writing as to whether Landlord shall require removal of an Alteration in
question upon the expiration or earlier termination of the Lease Term. After
obtaining Landlord’s consent, Tenant shall not proceed to make such Alterations
until Tenant has obtained all required governmental approvals and permits, and
in the event the total estimated cost of the Alteration exceeds $100,000
provides Landlord reasonable security, in form reasonably approved by Landlord,
to protect Landlord against mechanics’ lien claims. Tenant agrees to provide
Landlord (i) written notice of the anticipated and actual start-date of the
work, (ii) a complete set of half-size (15” X 21”) vellum as-built drawings, and
(iii) a certificate of occupancy for the work upon completion of the
Alterations. All Alterations shall be constructed by a licensed general
contractor in compliance with all applicable building codes and laws including,
without limitation, the Americans with Disabilities Act of 1990 as amended from
time to time. Upon the Expiration Date, all Alterations, except movable
furniture and trade fixtures, shall become a part of the realty and belong to
Landlord but shall nevertheless be subject to removal by Tenant as provided in
Section 6 above. Alterations which are not deemed as trade fixtures include
heating, lighting, electrical systems, air conditioning, walls, carpeting, or
any other installation which has become an integral part of the Premises. All
Alterations shall be maintained, replaced or repaired by Tenant at its sole cost
and expense.

 

B. Free From Liens: Tenant shall keep the Premises free from all liens arising
out of work performed, materials furnished, or obligations incurred by Tenant or
claimed to have been performed for Tenant. In the event Tenant fails to
discharge any such lien within ten (10) days after receiving notice of the
filing, Landlord shall immediately be entitled to discharge the lien at Tenant’s
expense and all reasonable resulting costs incurred by Landlord, including
attorney’s fees shall be due immediately from Tenant as additional rent.

 

C. Compliance With Governmental Regulations: The term Laws or Governmental
Regulations shall include all federal, state,

 

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county, city or governmental agency laws, statutes, ordinances, standards,
rules, requirements, or orders now in force or hereafter enacted, promulgated,
or issued. The term also includes government measures regulating or enforcing
public access, traffic mitigation, occupational, health, or safety standards for
employers, employees, landlords, or tenants. Tenant, at Tenant’s sole expense
will comply with all such Governmental Regulations applicable to the premises or
the Tenant’s use of the Premises and shall make all repairs, replacements,
alterations, or improvements necessary to comply with said Governmental
Regulations. Such expense shall be borne solely by Tenant if the Governmental
Regulations relate to or are required by any Law because of (i) Tenant’s
particular use or change of use of the Premises, (ii) Tenant’s application for
any permit or governmental approval, or (iii) Tenant’s construction or
installation of any Alterations or Trade Fixtures. To the extent repairs,
replacements, alterations or improvements are required by Governmental
Regulations and are not related to or required by Tenant pursuant to the
preceding sentence, then the expense shall be split between Landlord and Tenant
based on the following: Landlord and Tenant shall establish the useful life of
the item in question based upon generally accepted accounting principles. Tenant
shall pay a portion of the cost equal to the actual complicance-related expense
times a fraction, the numerator of which is the number of months remaining in
the initial Lease Term, and the denominator of which is the useful life of the
required work in months. Landlord shall make such payment to Tenant within
fifteen (15) days after written demand and proof of payment by Tenant. The
judgment of any court of competent jurisdiction or the admission of Tenant in
any action or proceeding against Tenant (whether Landlord be a party thereto or
not) that Tenant has violated any such law, regulation or other requirement in
its use of the Premises shall be conclusive of that fact as between Landlord and
Tenant. In addition to the foregoing, if any Alteration by Tenant results in
seismic retrofit requirements to the buildings fire-suppression system, Landlord
and Tenant shall equally share such cost.

 

8. MAINTENANCE OF PREMISES:

 

A. Landlord’s Obligations: Landlord at its sole cost and expense, shall maintain
in good condition, order, and repair, and replace as and when necessary, the
foundation, all exterior walls, structural support systems, and roof structure
of the Building Shell.

 

B. Tenant’s Obligations: Tenant shall clean, maintain, repair and replace when
necessary the Premises and every part thereof through regular inspections and
servicing, including but not limited to: (i) all plumbing and sewage facilities,
(ii) all heating ventilating and air conditioning facilities and equipment,
(iii) all fixtures, interior walls floors, carpets and ceilings, (iv) all
windows, door entrances, plate glass and glazing systems including caulking, and
skylights, (v) all electrical facilities and equipment, (vi) all automatic fire
extinguisher equipment, (vii) the parking lot and all underground utility
facilities servicing the Premises, (viii) all elevator equipment, (ix) the roof
membrane system, and (x) all waterscape, landscaping and shrubbery. All wall
surfaces and floor tile are to be maintained in an as good a condition as when
Tenant took possession free of holes, gouges, or defacements. With respect to
items (ii), (viii) and (ix) above, Tenant shall provide Landlord a copy of a
service contract between Tenant and a licensed service contractor providing for
periodic maintenance of all such systems or equipment in conformance with the
manufacturer’s recommendations. Tenant shall provide Landlord a copy of such
preventive maintenance contracts and paid invoices for the recommended work if
requested by Landlord. The provisions of the Section 8 notwithstanding, if the
roof membrane or the HVAC system requires replacement or material repair during
the Lease Term, then Landlord shall make such replacement or repairs promptly
after notification by Tenant and the cost of such replacement or repairs shall
be allocated as follows: Landlord and Tenant shall establish the useful life of
the replacement or repair based upon generally accepted accounting principles.
Tenant shall pay a portion of the cost equal to the actual cost paid by Landlord
to the third

 

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party contractor performing the work times a fraction, the numerator of which is
the number of months remaining in the initial Lease Term, and the denominator of
which is the useful life of the replacement or repair in months. Tenant shall
make such payment as Additional Rent over the remainder of the Term.

 

C. Waiver of Liability: Failure by Landlord to perform any defined services, or
any cessation thereof, when such failure is caused by accident, breakage,
repairs, strikes, lockout or other labor disturbances or labor disputes of any
character or by any other cause, similar or dissimilar, shall not render
Landlord liable to Tenant in any respect, including damages to either person or
property, nor be construed as an eviction of Tenant, nor cause an abatement of
rent, nor relieve Tenant from fulfillment of any covenant or agreement hereof.
Should any equipment or machinery utilized in supplying the services listed
herein break down or for any cause cease to function properly, upon receipt of
written notice from Tenant of any deficiency or failure of any services,
Landlord shall use reasonable diligence to repair the same promptly, but Tenant
shall have no right to terminate this Lease and shall have no claim for rebate
of rent or damages on account of any interruptions in service occasioned thereby
or resulting therefrom. Tenant waives the provisions of California Civil Code
Sections 1941 and 1942 concerning the Landlord’s obligation of tenantability and
Tenant’s right to make repairs and deduct the cost of such repairs from the
rent. Landlord shall not be liable for a loss of or injury to person or
property, however occurring, through or in connection with or incidental to
furnishing, or its failure to furnish, any of the foregoing.

 

9. HAZARD INSURANCE:

 

A. Tenant’s Use: Tenant shall not use or permit the Premises, or any part
thereof, to be used for any purpose other than that for which the Premises are
hereby leased; and no use of the Premises shall be made or permitted, nor acts
done, which will cause an increase in premiums or a cancellation of any
insurance policy covering the Premises or any part thereof, nor shall Tenant
sell or permit to be sold, kept, or used in or about the Premises, any article
prohibited by the standard form of fire insurance policies. Tenant shall, at its
sole cost, comply with all reasonable requirements pertaining to the Premises of
any insurance company or organization necessary for the maintenance of
reasonable fire and public liability insurance covering the Premises and
appurtenances.

 

B. Landlord’s Insurance: Landlord agrees to purchase and keep in force All Risk
and fire insurance in an amount equal to the replacement cost of the Building
(not including any Tenant Improvements or Alterations paid for by Tenant) as
determined by Landlord’s insurance company’s appraisers. At Landlord’s election,
such fire and property damage insurance may be endorsed to cover loss caused by
such additional perils against which Landlord may elect to insure, including
earthquake, flood or terrorist acts, and shall contain reasonable deductibles.
If Landlord elects to obtain insurance against any such additional perils
Tenant’s obligation to reimburse Landlord for the cost of the additional
coverage shall be limited to an annual amount of Sixty Nine Thousand and No/100
Dollars ($69,000) increased each year during the Lease term by three percent
(3%) compounded. Additionally Landlord may maintain a policy of (i) commercial
general liability insurance insuring Landlord (and such others designated by
Landlord) against liability for personal injury, bodily injury, death and damage
to property occurring or resulting from an occurrence in, on or about the
Premises or Project in an amount as Landlord determines is reasonably necessary
for its protection, and (ii) rental loss insurance covering a twelve (12) month
period. Tenant agrees to pay Landlord as additional rent, on demand, the full
reasonable cost of said insurance as evidenced by insurance billings to
Landlord, and in the event of damage covered by said insurance, the amount of
any deductible under such policy not to exceed Twenty Five Thousand and no/100
Dollars ($25,00.00). Payment shall be due to Landlord within thirty (30) days
after written invoice to Tenant. It is understood and agreed that Tenant’s
obligation under this Section will be prorated to reflect the Lease Commencement
and Expiration Dates.

 

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C. Tenant’s Insurance: Tenant agrees, at its sole cost, to insure its personal
property, Tenant Improvements and Alterations against damage for their full
replacement value (without depreciation). Said insurance shall provide All Risk
and fire coverage equal to the replacement cost of said property. The property
casualty insurance provided by Tenant as required by this paragraph shall name
Landlord and Landlord’s lender, as an additional insured. Tenant shall deliver
certificates of insurance to Landlord evidencing such Insurance. Tenant agrees,
at its sole cost, and to obtain worker’s compensation and Commercial General
Liability insurance for occurrences within the Premises. Worker’s Compensation
limits shall be per state law. General liability Insurance shall contain a
combined single limit of not less than Five Million Dollars ($5,000,000.00).
Tenant’s liability insurance shall be primary insurance containing a
cross-liability clause, and shall provide coverage on an “occurrence” rather
than on a “claims made” basis. All such insurance shall provide for severability
of interests; shall provide that an act or omission of one of the named
(additional) insureds shall not reduce or avoid coverage to the other named
(additional insureds). Tenant shall name Landlord and Landlord’s lender as an
additional insured and shall deliver a certificates of insurance to Landlord.
All insurance policies required under this section shall provide for thirty (30)
days’ prior written notice to Landlord of any cancellation,. Notwithstanding the
above, Landlord retains the right to have Tenant provide other forms of
insurance which may be reasonably required to cover future risks, provided such
as available at commercially reasonable rates

 

D. Waiver: Landlord and Tenant hereby waive rights each may have against the
other on account of physical or damage sustained by Landlord or Tenant, as the
case may be to the Premises or its contents, which may arise from any risk
covered by their respective property insurance policies (or which would have
been covered had such insurance policies been maintained in accordance with this
Lease) as set forth above. The Parties shall each obtain from their respective
insurance companies a waiver of any right of subrogation which said insurance
company may have against Landlord or Tenant, as the case may be.

 

10. TAXES: Tenant shall be liable for and shall pay as additional rental, prior
to delinquency, the following: (i) all taxes and assessments levied against
Tenant’s personal property and trade or business fixtures; (ii) all real estate
taxes and assessment installments or other impositions or charges which may be
levied on the Premises or upon the occupancy of the Premises, including any
substitute or additional charges which may be imposed applicable to the Lease
Term; and (iii) real estate tax increases due to an increase in assessed value
resulting from a sale, transfer or other change of ownership of the Premises as
it appears on the City and County tax bills during the Lease Term. All real
estate taxes shall be prorated to reflect the Lease Commencement and Expiration
Dates. If, at any time during the Lease Term a tax, excise on rents, business
license tax or any other tax, however described, is levied or assessed against
Landlord as a substitute or addition, in whole or in part, for taxes assessed or
imposed on land or Buildings, Tenant shall pay and discharge its pro rata share
of such tax or excise on rents or other tax before it becomes delinquent; except
that this provision is not intended to cover net income taxes, inheritance, gift
or estate tax imposed upon Landlord. In the event that a tax is placed, levied,
or assessed against Landlord and the taxing authority takes the position that
Tenant cannot pay and discharge its pro rata share of such tax on behalf of
Landlord, then at Landlord’s sole election, Landlord may increase the Base
Monthly Rent by the exact amount of such tax and Tenant shall pay such increase.
If by virtue of any application or proceeding brought by Landlord, there results
a reduction in the assessed value of the Premises during the Lease Term, Tenant
agrees to pay Landlord a fee consistent with the fees charged by a third party
appeal firm for such services but in no event more than the amount of tax
savings. Notwithstanding the foregoing, if property taxes increase during the
Lease Term as a result of a reassessment due to a voluntary change of

 

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ownership, Tenant’s shall be responsible for payment of the resulting property
tax increase as follows: during the first twelve months, Tenant shall be
responsible for payment of thirty three percent (33%) of the tax increase;
during the second twelve months, Tenant shall be responsible for payment of
sixty seven percent (67%) of the tax increase, thereafter Tenant shall be
responsible for payment of the entire tax increase.

 

11. UTILITIES: Tenant shall pay directly to the providing utility all water,
gas, electric, telephone, and other utilities supplied to the Premises. Landlord
shall not be liable for loss of or injury to person or property, however
occurring, through or in connection with or incidental to furnishing or the
utility company’s failure to furnish utilities to the Premises, and in such
event Tenant shall not be entitled to abatement or reduction of any portion of
Base Monthly Rent or any other amount payable under this Lease.

 

12. TOXIC WASTE AND ENVIRONMENTAL DAMAGE:

 

A. Use of Hazardous Material: Without the prior written consent of Landlord,
Tenant or Tenant’s agents, employees, contractors, subtenants or invitees
(“Tenant’s Agents”) shall not cause or permit any Hazardous Material, as defined
below, to be generated, brought onto, used, stored, created, released or
disposed of in or about the Premises, except that Tenant may use and store small
quantities of common household cleaners and office supplies on the Premises
provided such use and storage is in strict compliance with all Environmental
Laws, as defined below. As used herein, the term “Hazardous Material” shall mean
any substance, material or waste (whether liquid, solid or gaseous), which is a
pollutant or contaminant, or which is hazardous, toxic, ignitable, reactive,
corrosive, dangerous, harmful or injurious, or which presents a risk to public
health or the environment, or which is or may become regulated by or under the
authority of any Environmental Laws, as defined below, including, without
limitation, asbestos or asbestos containing materials, petroleum products,
pesticides, polychlorinated biphenyls, flammable explosives, radioactive
materials and urea formaldehyde. As used herein, the term “Environmental Laws”
shall mean any present or future federal, state or local law, whether common
law, statute, rule, regulation or ordinance, judgment, order, or other
governmental restriction, guideline, listing or requirement, relating to the
environment or any Hazardous Material, including without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
42 U.S.C. §9601 et seq., the Resource Conservation and Recovery Act of 1976, 42
U.S.C. §6901 et seq., and applicable provisions of the California Health and
Safety Code and the California Water Code, all as heretofore or hereafter may be
amended from time to time. In order to obtain consent, Tenant shall deliver to
Landlord its written proposal describing the Hazardous Material to be brought
onto the Premises, measures to be taken for storage and disposal thereof, and
safety measures to be employed to prevent pollution or contamination of the air,
soil, surface and ground water. Landlord’s approval may be withheld in its
reasonable judgment. In the event Landlord consents to Tenant’s use of Hazardous
Materials on the Premises or such consent is not required,Tenant represents and
warrants that it shall comply with all Governmental Regulations applicable to
Hazardous Material including doing the following: (i) adhere to all reporting
and inspection requirements imposed by Federal, State, County or Municipal laws,
ordinances or regulations and provide Landlord a copy of any such reports or
agency inspections; (ii) obtain and provide Landlord copies of all necessary
permits required for the use and handling of Hazardous Material on the Premises;
(iii) enforce Hazardous Material handling and disposal practices consistent with
industry standards; (iv) surrender the Premises free from any Hazardous
Materials arising from Tenant’s generating, bringing, using, storing, creating,
releasing, or disposing of Hazardous Material; and (v) properly close the
facility with regard to Hazardous Material including the removal or
decontamination of any process piping, mechanical ducting, storage tanks,
containers, or trenches which have come into contact with Hazardous Material and
obtaining a closure certificate from the local administering agency prior to the
Expiration Date.

 

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B. Tenant’s Indemnity Regarding Hazardous Material: Landlord represents and
warrants, to the best of it’s knowledge, that as of the Effective Date there
does not exist any Hazardous Materials on the Premises or the property of which
the Premises are a part. Tenant shall, at its sole cost and expense and with
counsel reasonably acceptable to Landlord, indemnify, defend and hold harmless
Landlord and Landlord’s trustees, shareholders, directors, officers, employees,
partners, affiliates, agents, successors and assigns from, and against any and
all claims, liabilities, obligations, penalties, fines, actions, costs or
expenses incurred or suffered arising from generating, bringing, using, storing,
creating, releasing or disposing of Hazardous Material by Tenant or Tenant’s
Agents in or about the Premises, or the violation of any Governmental Regulation
or Environmental Laws by Tenant or Tenant’s Agents. This indemnification applies
whether or not the concentrations of any such Hazardous Material exceed
applicable maximum contaminant or action levels or any governmental agency has
issued a cleanup order. Tenant’s indemnification, defense, and hold harmless
obligations include, without limitation, the following: (i) claims, liabilities,
costs or expenses resulting from or based upon administrative, judicial (civil
or criminal) or other action, legal or equitable, brought by any private or
public person under present or future laws, including Environmental Laws; (ii)
claims, liabilities, costs or expenses pertaining to the assessment and
identification, monitoring, cleanup, containment, or removal of Hazardous
Material from soils, riverbeds or aquifers including the provision of an
alternative public drinking water source; (iii) losses attributable to
diminution in the value of the Premises or the Building (iv) loss or restriction
of use of rentable space in the Building; and (v) all other liabilities,
obligations, penalties, fines, claims, actions (including remedial or
enforcement actions of any kind and administrative or judicial proceedings,
orders or judgments), damages (including consequential and punitive damages),
and costs (including attorney, consultant, and expert fees and expenses)
directly resulting from the release or violation. This Section 12.B shall
survive the expiration or termination of this Lease.

 

C. Notice of Release or Violation: Tenant agrees to notify Landlord of any
lawsuits or orders of which Tenant has been notified in writing which relate to
the remedying of or actual release of Hazardous Materials on or into the soils
or ground water at or under the Premises. Tenant shall also provide Landlord all
notices required by Section 25359.7(B) of the Health and Safety Code and all
other notices required by law to be given to Landlord in connection with
Hazardous Materials. Without limiting the foregoing, Tenant shall also deliver
to Landlord, within twenty (20) days after receipt thereof, any written notices
from any governmental agency alleging a material violation of, or material
failure to comply with, any federal, state or local laws, regulations,
ordinances or orders, the violation of which of failure to comply with poses a
foreseeable and material risk of contamination of the ground water or injury to
humans (other than injury solely to Tenant, Tenant’s Agents and employees within
the Building.

 

In the event of any release on or into the Premises or into the soil or ground
water under the Premises, the Building or the Project of any Hazardous Materials
used, treated, stored or disposed of by Tenant or Tenant’s Agents, Tenant agrees
to comply, at its sole cost, with all laws, regulations, ordinances and orders
of any federal, state or local agency relating to the monitoring or remediation
of such Hazardous Materials. In the event of any such release of Hazardous
Materials Tenant shall immediately give verbal and follow-up written notice of
the release to Landlord, and Tenant agrees to meet and confer with Landlord and
its Lender to attempt to eliminate and mitigate any financial exposure to such
Lender and resultant exposure to Landlord under California Code of Civil
Procedure Section 736(b) as a result of such release, and promptly to take
reasonable monitoring, cleanup and remedial steps given, inter alia, the
historical uses to which the Property has and continues to be used, the risks to
public health posed by the release, the then available technology and the costs
of

 

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remediation, cleanup and monitoring, consistent with acceptable customary
practices for the type and severity of such contamination and all applicable
laws. Nothing in the preceding sentence shall eliminate, modify or reduce the
obligation of Tenant under 12.B of this Lease to indemnify, defend and hold
Landlord harmless from any claims liabilities, costs or expenses incurred or
suffered by Landlord. Tenant shall provide Landlord prompt written notice of
Tenant’s monitoring, cleanup and remedial steps.

 

In the absence of an order of any federal, state or local governmental or
quasi-governmental agency relating to the cleanup, remediation or other response
action required by applicable law, any dispute arising between Landlord and
Tenant concerning Tenant’s obligation to Landlord under this Section 12.C
concerning the level, method, and manner of cleanup, remediation or response
action required in connection with such a release of Hazardous Materials shall
be resolved by mediation and/or arbitration pursuant to this Lease.

 

D. Remediation Obligations: In the event of any release on, under or about the
Premises of any Hazardous Material generated, brought onto, used, stored,
created or disposed of by Tenant or Tenant’s Agents, Tenant shall, at its sole
cost, promptly take all necessary and appropriate actions, in compliance with
applicable Environmental Laws, to remove or remediate such Hazardous Material,
whether or not any governmental agency has issued a cleanup order, so as to
return the Premises to substantially the condition that existed before the
introduction of such Hazardous Material or as may otherwise be required by law.
Tenant shall obtain Landlord’s written consent prior to implementing any
proposed removal or remedial action, provided, however, that Tenant shall be
entitled to respond immediately to an emergency without first obtaining
Landlord’s written consent. Nothing in the preceding sentence shall in any way
eliminate, modify or reduce the obligation of Tenant under 12.B of this Lease to
indemnify, defend and hold Landlord harmless from any claims, liabilities, costs
or expenses incurred or suffered by Landlord.

 

E. Environmental Monitoring: Landlord and its agents shall have the right to
inspect, investigate, sample and monitor the Premises, including any air, soil,
water, ground water, or to conduct any other sampling or testing, digging,
drilling or analysis, to determine whether Tenant is complying with the terms of
this Section 12. If Landlord discovers that Tenant is not in compliance with the
terms of this Section 12, any costs incurred by Landlord in determining Tenant’s
non- compliance, including attorneys’, consultants’ and experts’ fees, shall be
due and payable by Tenant to Landlord within thirty (30) following Landlord’s
written demand therefore.

 

13. TENANT’S DEFAULT: The occurrence of any of the following shall constitute a
material default and breach of this Lease by Tenant: (i) Tenant’s failure to pay
the Base Monthly Rent including additional rent or any other payment due under
this Lease, where such failure to pay continues for five (5) days after written
notice thereof by Landlord to Tenant, (ii) the abandonment of the Premises by
Tenant; (iii) Tenant’s failure to observe and perform any other required
provision of this Lease, where such failure continues for thirty (30) days after
written notice from Landlord provided, however, that if the nature of the
default is such that it cannot reasonably be cured within the 30-day period,
Tenant shall not be deemed in default if it commences within such period to
cure, and thereafter diligently prosecutes the same to completion; (iv) Tenant’s
making of any general assignment for the benefit of creditors; (v) the filing by
or against Tenant of a petition to have Tenant adjudged a bankrupt or of 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
after the filing); (vi) 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, where possession is not restored to Tenant
within thirty (30) days or (vii) the attachment, execution or other judicial
seizure of substantially all of Tenant’s assets located at the Premises or of
Tenant’s interest in this Lease, where such seizure is not discharged within
thirty (30) days.

 

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A. Remedies: In the event of any such default by Tenant, then in addition to
other remedies available to Landlord at law or in equity, Landlord shall have
the immediate option to terminate this Lease and all rights of Tenant hereunder
by giving written notice of such intention to terminate. In the event Landlord
elects to so terminate this Lease, Landlord may recover from Tenant all the
following: (i) the worth at time of award of any unpaid rent which had been
earned at the time of such termination; (ii) the worth at time of award of the
amount by which the unpaid rent which would have been earned after termination
until the time of award exceeds the amount of such rental loss for the same
period that Tenant proves could have been reasonably avoided; (iii) the worth at
time of award of the amount by which the unpaid rent for the balance of the
Lease Term after the time of award exceeds the amount of such rental loss that
Tenant proves could be reasonably avoided; (iv) any other amount necessary to
compensate Landlord for all detriment proximately caused by Tenant’s failure to
perform its obligations under this Lease, or which in the ordinary course of
things would be likely to result therefrom; including the following: (x)
expenses for repairing, altering or remodeling the Premises for purposes of
reletting, (y) broker’s fees, advertising costs or other expenses of reletting
the Premises, and (z) costs of carrying the Premises such as taxes, insurance
premiums, utilities and security precautions; and (v) at Landlord’s election,
such other amounts in addition to or in lieu of the foregoing as may be
permitted by applicable California law. The term “rent”, as used herein, is
defined as the minimum monthly installments of Base Monthly Rent and all other
sums required to be paid by Tenant pursuant to this Lease, all such other sums
being deemed as additional rent due hereunder. As used in (i) and (ii) above,
“worth at the time of award” shall be computed by allowing interest at a rate
equal to the discount rate of the Federal Reserve Bank of San Francisco plus
five (5%) percent per annum. As used in (iii) above, “worth at the time of
award” shall be computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of award plus one (1%)
percent.

 

B. Right to Re-enter: In the event of any such default by Tenant, Landlord shall
have the right, after terminating this Lease, to re-enter the Premises and
remove all persons and property. Such property may be removed and stored in a
public warehouse or elsewhere at the cost of and for the account of Tenant, and
disposed of by Landlord in any manner permitted by law.

 

C. Continuation of Lease: If Landlord does not elect to terminate this Lease as
provided in Section 13.A or 13.B above, then the provisions of California Civil
Code Section 1951.4, (Landlord may continue the lease in effect after Tenant’s
breach and abandonment and recover rent as it becomes due if Tenant has a right
to sublet and assign, subject only to reasonable limitations) as amended from
time to time, shall apply and Landlord may from time to time, without
terminating this Lease, either recover all rental as it becomes due or relet the
Premises or any part thereof for such term or terms and at such rental or
rentals and upon such other terms and conditions as Landlord in its sole
discretion may deem advisable, with the right to make alterations and repairs to
the Premises. In the event that Landlord elects to so relet, rentals received by
Landlord from such reletting shall be applied in the following order to: (i) the
payment of any indebtedness other than Base Monthly Rent due hereunder from
Tenant to Landlord; (ii) the payment of any cost of such reletting; (iii) the
payment of the cost of any alterations and repairs to the Premises; and (iv) the
payment of Base Monthly Rent and other sums due and unpaid hereunder. The
residual rentals, if any, shall be held by Landlord and applied in payment of
future Base Monthly Rent as the same may become due and payable hereunder.
Landlord shall have the obligation to market the space but shall have no
obligation to relet the Premises following a default if Landlord has other
comparable available space within the Building or Project. In the event the
portion of rentals received from such reletting which is applied to the payment

 

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of rent hereunder during any month be less than the rent payable during that
month by Tenant hereunder, then Tenant shall pay such deficiency to Landlord
immediately upon demand. Such deficiency shall be calculated and paid monthly.
Tenant shall also pay to Landlord, as soon as ascertained, any reasonable costs
and expenses incurred by Landlord in such reletting or in making such
alterations and repairs not covered by the rentals received from such reletting.

 

D. No Termination: Landlord’s re-entry or taking possession of the Premises
pursuant to 13.B or 13.C shall not be construed as an election to terminate this
Lease unless written notice of such intention is given to Tenant or unless the
termination is decreed by a court of competent jurisdiction. Notwithstanding any
reletting without termination by Landlord because of any default by Tenant,
Landlord may at any time after such reletting elect to terminate this Lease for
any such default.

 

E. Non-Waiver: Landlord may accept Tenant’s payments without waiving any rights
under this Lease, including rights under a previously served notice of default.
No payment by Tenant or receipt by Landlord of a lesser amount than any
installment of rent due shall be deemed as other than payment on account of the
amount due. If Landlord accepts payments after serving a notice of default,
Landlord may nevertheless commence and pursue an action to enforce rights and
remedies under the previously served notice of default without giving Tenant any
further notice or demand. Furthermore, the Landlord’s acceptance of rent from
the Tenant when the Tenant is holding over without express written consent does
not convert Tenant’s Tenancy from a tenancy at sufferance to a month to month
tenancy. No waiver of any provision of this Lease shall be implied by any
failure of Landlord to enforce any remedy for the violation of that provision,
even if that violation continues or is repeated. Any waiver by Landlord of any
provision of this Lease must be in writing. Such waiver shall affect only the
provision specified and only for the time and in the manner stated in the
writing. No delay or omission in the exercise of any right or remedy by Landlord
shall impair such right or remedy or be construed as a waiver thereof by
Landlord. No act or conduct of Landlord, including, without limitation, the
acceptance of keys to the Premises, shall constitute acceptance of the surrender
of the Premises by Tenant before the Expiration Date. Only written notice from
Landlord to Tenant of acceptance shall constitute such acceptance of surrender
of the Premises. Landlord’s consent to or approval of any act by Tenant which
requires Landlord’s consent or approvals shall not be deemed to waive or render
unnecessary Landlord’s consent to or approval of any subsequent act by Tenant.

 

F. Performance by Landlord: If Tenant fails to perform any obligation required
under this Lease or by law or governmental regulation, and such failure
continues after any applicable notice and cure period, Landlord in its sole
discretion may, without further notice, without waiving any rights or remedies
and without releasing Tenant from its obligations hereunder, perform such
obligation, in which event Tenant shall pay Landlord as additional rent all sums
paid by Landlord in connection with such substitute performance, including
interest at the Agreed Interest Rate (as defined in Section 19.J) within thirty
(30) days of Landlord’s written notice for such payment.

 

G. Habitual Default: Intentionally Deleted

 

14. LANDLORD’S LIABILITY:

 

A. Limitation on Landlord’s Liability: In the event of Landlord’s failure to
perform any of its covenants or agreements under this Lease, Tenant shall give
Landlord written notice of such failure and shall give Landlord thirty (30) days
to cure or commence to cure such failure prior to any claim for breach or
resultant damages, provided, however, that if the nature of the default is such
that it cannot reasonably be cured within the 30-day period, Landlord shall not
be deemed in default if it commences within such period to cure, and thereafter
diligently prosecutes the same to completion. In addition, upon any such failure
by Landlord, Tenant shall give notice by registered or certified mail to any
person or entity with a security interest in the Premises (“Mortgagee”)

 

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that has provided Tenant with written notice of its interest in the Premises,
and shall provide Mortgagee a reasonable opportunity to cure such failure,
including such time to obtain possession of the Premises by power of sale or
judicial foreclosure, if such should prove necessary to effectuate a cure.
Tenant agrees that each of the Mortgagees to whom this Lease has been assigned
is an expressed third-party beneficiary hereof. Tenant waives any right under
California Civil Code Section 1950.7 or any other present or future law to the
collection of any payment or deposit from Mortgagee or any purchaser at a
foreclosure sale of Mortgagee’s interest unless Mortgagee or such purchaser
shall have actually received and not refunded the applicable payment or deposit.
Tenant Further waives any right to terminate this Lease and to vacate the
Premises on Landlord’s default under this Lease. Tenant’s sole remedy on
Landlord’s default is an action for damages or injunctive or declaratory relief;
provided, however, Landlord and its partners, trustees, beneficiaries and
employees shall not be liable to Tenant for any consequential damages suffered
or incurred by Tenant on account of Landlord’s default including, without
limitation, on account of lost profits or the interruption of Tenant’s business.
Tenant hereby agrees that Landlord shall not be liable for injury to Tenant’s
business or any loss of income therefrom or for damage to the goods, wares,
merchandise, or other property of Tenant, Tenant’s employees, invitees,
customers, or any other person in or about the Premises or the Project, nor
shall Landlord be liable for injury to the person of Tenant, Tenant’s employees,
agents, or contractors, whether such damage or injury is caused by or results
from fire, steam, electricity, gas, water, or rain, or from the breakage,
leakage, obstruction, or other defects of pipes, sprinklers, wires, appliances,
plumbing, air conditioning, or lighting fixtures, or from any other cause,
whether said damage or injury results from conditions arising upon the Premises
or upon other portions of the Project or from other sources or places and
regardless of whether the cause of such damage or injury or the means of
repairing the same is inaccessible to Tenant. Landlord shall not be liable for
any damages arising from any act or neglect or any other tenant, occupant, or
user of the Project, nor from the failure of Landlord to enforce the provisions
of any other lease of the Project.

 

B. Limitation on Tenant’s Recourse: If Landlord is a corporation, trust,
partnership, joint venture, unincorporated association or other form of business
entity, then (i) the obligations of Landlord shall not constitute personal
obligations of the officers, directors, trustees, partners, joint venturers,
members, owners, stockholders, or other principals or representatives except to
the extent of their property interest in the Premises. Tenant shall have
recourse only to the interest of Landlord in the Premises for the satisfaction
of the obligations of Landlord and shall not have recourse to any other assets
of Landlord for the satisfaction of such obligations.

 

C. Indemnification of Landlord: Except to the extent due to the negligence or
willful misconduct of Landlord, as a material part of the consideration rendered
to Landlord, Tenant hereby waives all claims against Landlord for damages to
goods, wares and merchandise, and all other personal property in, upon or about
said Premises and for injuries to persons in or about said Premises, from any
cause arising at any time to the fullest extent permitted by law, and Tenant
shall indemnify, defend with counsel reasonably acceptable to Landlord (it being
agreed that a counsel preferred by Tenant’s insurance company is acceptable) and
hold Landlord, and their shareholders, directors, officers, trustees, employees,
partners, affiliates and agents from any claims, liabilities, costs or expenses
incurred or suffered arising from the use or occupancy of the Premises or any
part of the Project by Tenant or Tenant’s Agents, the acts or omissions of
Tenant or Tenant’s Agents, Tenant’s breach of this Lease, or any damage or
injury to person or property from any cause, including but not limited to the
use or occupancy of the Premises or any part of the project by Tenant or
Tenant’s Agents, the acts or omissions of Tenant or Tenant’s Agents, Tenant’s
breach of this Lease or from the failure of Tenant to keep the Premises in good
condition and repair as herein provided. Further, in the event Landlord is made
party to any litigation due to the acts or omission of

 

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Tenant or Tenant’s Agents, Tenant will indemnify, defend (with counsel
reasonably acceptable to Landlord) and hold Landlord harmless from any such
claim or liability including Landlord’s costs and expenses and reasonable
attorney’s fees incurred in defending such claims.

 

15. DESTRUCTION OF PREMISES:

 

A. Landlord’s Obligation to Restore: In the event of a destruction of the
Premises during the Lease Term Landlord and Tenant, to the extent of its
alterations and Tenant Improvements, shall repair the same to a similar
condition to that which existed prior to such destruction. Such destruction
shall not annul or void this Lease; however, Tenant shall be entitled to a
proportionate reduction of Base Monthly Rent and Additional Rent while repairs
are being made, such proportionate reduction to be based upon the extent to
which the repairs interfere with Tenant’s business in the Premises, as
reasonably determined by Landlord. In no event shall Landlord be required to
replace or restore Alterations, Tenant Improvements paid for by Tenant from
sources other than the Work Allowance or Tenant’s fixtures or personal property.

 

B. Limitations on Landlord’s Restoration Obligation: Notwithstanding the
provisions of Section 15.A, Landlord shall have no obligation to repair, or
restore the Premises if any of the following occur: (i) if the repairs cannot be
made in two hundred and seventy (270) days from the date of destruction as
reasonably determined by Landlord (ii) if the holder of the first deed of trust
or mortgage encumbering the Building elects not to permit the insurance proceeds
payable upon damage or destruction to be used for such repair or restoration,
(iii) the damage or destruction is not fully covered by the insurance that
Landlord is required to have maintained under this Lease and exceeds ten percent
(10%) of the replacement cost of the Premises, (iv) the damage or destruction
occurs in the last twenty four (24) months of the Lease Term, (v) Tenant is in
default pursuant to the provisions of Section 13, or (vi) Tenant has vacated the
Premises for more than ninety (90) days. In any such event Landlord may elect
either to (i) complete the repair or restoration, or (ii) terminate this Lease
by providing Tenant written notice of its election within sixty (60) days
following the damage or destruction. If Landlord elects to repair or restore,
this Lease shall continue in full force and effect. Tenant hereby waives the
benefits and rights provided to Tenant by the provisions of Civil Code Sections
1932 and 1933. Notwithstanding anything in this Lease to the contrary, Tenant
shall have the right to terminate the Lease in the event of a destruction of the
Premises that either: (i) occurs during the last year of the Lease Term and
cannot be repaired within one hundred twenty (120) days of the date of such
destruction; or (ii) cannot be repaired within two hundred seventy (270) days
from the date of destruction, as reasonably determined by Landlord. If Tenant
elects to terminate the Lease pursuant to the above, it shall do so by providing
written notice to Landlord no later than fifteen (15) days following
notification by Landlord of the time period necessary to repair the destruction.

 

16. CONDEMNATION: If any part of the Premises shall be taken for any public or
quasi-public use, under any statute or by right of eminent domain or private
purchase in lieu thereof, and only a part thereof remains which is susceptible
of occupation hereunder, this Lease shall, as to the part so taken, terminate as
of the day before title vests in the condemnor or purchaser (“Vesting Date”) and
Base Monthly Rent payable hereunder shall be adjusted so that Tenant is required
to pay for the remainder of the Lease Term only such portion of Base Monthly
Rent as the value of the part remaining after such taking bears to the value of
the entire Premises prior to such taking. Further, in the event of such partial
taking, Landlord shall have the option to terminate this Lease as of the Vesting
Date. If all of the Premises or such part thereof be taken so that there does
not remain a portion reasonably susceptible for occupation by Tenant in for its
intended use, this Lease shall terminate on the Vesting Date. If part or all of
the Premises be taken, all compensation awarded upon such taking shall go to
Landlord, and Tenant shall have no claim thereto; except

 

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Landlord shall cooperate with Tenant, without cost to Landlord, to recover
compensation for damage to or taking of any Alterations, Tenant Improvements
paid for by Tenant from sources other than the Work Allowance, or for Tenant’s
moving costs. Tenant hereby waives the provisions of California Code of Civil
Procedures Section 1265.130 and any other similarly enacted statue, and the
provisions of this Section 16 shall govern in the case of a taking.

 

17. ASSIGNMENT OR SUBLEASE:

 

A. Consent by Landlord: Except as specifically provided in Section 17.E, Tenant
may not voluntarily, involuntarily or by operation of law, assign, sell or
otherwise transfer all or any part of Tenant’s interest in this Lease or in the
Premises, cause or permit any part of the Premises to be sublet, occupied or
used by anyone other than Tenant, or permit any person to succeed to any
interest in this Lease or the Premises (all of the foregoing being a “Transfer”)
without the express written consent of Landlord. In the event Tenant desires to
effectuate a Transfer, Tenant shall deliver to Landlord (i) executed
counterparts of any agreement and of all ancillary agreements with the proposed
transferee, (ii) current financial statements of the transferee covering the
preceding three years, (iii) the nature of the proposed transferee’s business to
be carried on in the Premises, (iv) a statement outlining all consideration to
be given on account of the Transfer, and (v) a current financial statement of
Tenant. Landlord may condition its approval of any Transfer on receipt of a
certification from both Tenant and the proposed transferee of all consideration
to be paid to Tenant in connection with such Transfer. At Landlord’s request,
Tenant shall also provide additional information reasonably required by Landlord
to determine whether it will consent to the proposed Transfer. Landlord shall
have a ten (10) day period following receipt of all the foregoing within which
to notify Tenant in writing that Landlord elects to: (i) terminate, to the
extent any assignment is for the remainder of the Term, this Lease as to the
portion of the Premises proposed to be transferred, (ii) permit Tenant to
Transfer such space to the named transferee on the terms and conditions set
forth in the notice; or (iii) refuse consent. If Landlord should fail to notify
Tenant in writing of such election within the 10-day period, Landlord shall be
deemed to have elected option (ii) above. In the event Landlord elects option
(i) above, this Lease shall expire with respect to such part of the Premises on
the date upon which the proposed Transfer was to commence, and from such date
forward, Base Monthly Rent and Tenant’s Allocable Share of all other costs and
charges shall be adjusted based upon the proportion that the rentable area of
the Premises remaining bears to the total rentable area of the Building. In the
event Landlord does not elect option (i) above, Landlord’s consent to the
proposed Transfer shall not be unreasonably withheld, provided and upon the
condition that: (i) the proposed transferee is engaged in a business that is
limited to the use expressly permitted under this Lease; (ii) the proposed
transferee is a company with sufficient financial worth and management ability
to undertake the financial obligation of this Lease and Landlord has been
furnished with reasonable proof thereof; (iii) the proposed transfer agreement,
if it is a sublease, conforms to the requirements of subsection 17.I (Sublease
Requirements) or if it is an assignment, is in a form reasonably satisfactory to
Landlord; (iv) (v) Tenant reimburses Landlord within 30 days following for any
reasonable costs that may be incurred by Landlord in connection with said
Transfer, including the costs of making investigations as to the acceptability
of the proposed transferee and legal costs incurred in connection with the
granting or denial of any requested consent; and (vi) Tenant shall not have
advertised or publicized in any way the availability of the Premises without
prior notice to Landlord. In the event all or any one of the foregoing
conditions are not satisfied (without limiting other factors that may be
considered or conditions that may be imposed by Landlord in connection with a
requested Transfer), Landlord shall be considered to have acted reasonably if it
withholds its consent. Tenant shall not hypothecate, mortgage, pledge or
otherwise encumber Tenant’s interest in this Lease or the Premises or otherwise
use the Lease as a security device in any manner without the consent of
Landlord, (all of the foregoing being an “Hypothecation”) which consent Landlord

 

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may withhold in its sole discretion. Tenant shall reimburse Landlord within 30
days following demand for any reasonable costs that may be incurred by Landlord
in connection with an Hypothecation, including legal costs incurred in
connection with the granting or denial of any requested consent. Landlord’s
consent to one or more Transfers or Hypothecations shall not operate to waive
Tenant’s obligation to obtain Landlord’s consent to other Transfers or
Hypothecations nor constitute consent to an assignment or other Transfer
following foreclosure of any permitted lien, mortgage or other encumbrance. If
Tenant is a corporation, limited liability company, unincorporated association,
partnership or other legal entity, the sale, assignment, transfer or
hypothecation of any stock, membership or other ownership interest in such
entity (whether occurring at one time or over a period of time) in the aggregate
of more than fifty percent (50%) (determined cumulatively) shall be deemed an
assignment of this Lease; in the case of a partnership, any withdrawal or
substitution (whether occurring at one time or over a period of time) of any
partners owning fifty percent (50%) or more (cumulatively) of the partnership,
or the dissolution of the partnership shall be deemed an assignment of this
Lease; provided that, subject to Section 17.D below, the foregoing provisions of
this sentence shall not apply to a transfer of stock in a corporation whose
stock is publicly traded on a public stock exchange. If Tenant is a corporation
whose stock is not publicly traded on a public stock exchange, any dissolution,
merger, consolidation or reorganization of Tenant shall be deemed a Transfer.

 

B. Assignment or Subletting Consideration: Landlord and Tenant hereby agree that
fifty percent (50%) of any rent or other economic consideration (including
without limitation, payments for trade fixtures and personal property in excess
of the fair market value thereof, stock, warrants, and options) in excess of the
Base Monthly Rent payable hereunder (i) realized by Tenant in connection with
any Transfer by Tenant, and/or (ii) realized by a subtenant or any other person
or entity (other than Tenant) (any such subtenant, person or entity being a
“Subsequent Transferor”) in connection with a sublease, assignment or other
Transfer by such Subsequent Transferor, shall be paid by Tenant to Landlord
promptly after such amounts are paid to Tenant or a Subsequent Transferor As
used in this Section 17.B, “Reasonable Transfer Costs” shall mean all costs to
the extent reasonably incurred in connection with the Transfer in question,
including without limitation: (i) advertising costs, legal fees and brokerage
commissions payable to unaffiliated third parties, and (ii) tenant improvement
costs incurred solely in connection with such Transfer. All Reasonable Transfer
Costs shall be recovered by Tenant prior to payment of any excess Base Rent to
Landlord. Tenant’s obligation to pay over Landlord’s portion of the
consideration constitutes an obligation for additional rent hereunder. The above
provisions relating to Landlord’s right to terminate the Lease and relating to
the allocation of excess rent are independently negotiated terms of the Lease
which constitute a material inducement for the Landlord to enter into the Lease,
and are agreed by the Parties to be commercially reasonable. No Transfer by
Tenant shall relieve it of any obligation under this Lease. Any Transfer which
conflicts with the provisions of this Lease shall be void.

 

C. No Release: Any Transfer shall be made only if and shall not be effective
until the transferee shall execute, acknowledge, and deliver to Landlord an
agreement, in form and substance satisfactory to Landlord, whereby the
transferee shall assume all the obligations of this Lease on the part of Tenant
to be performed or observed to the extent of the interest being transferred and
shall be subject to all the covenants, agreements, terms, provisions and
conditions in this Lease to the extent applicable to the interest being
transferred. Notwithstanding any Transfer and the acceptance of rent or other
sums by Landlord from any transferee, Tenant and any guarantor shall remain
fully liable for the payment of Base Monthly Rent and additional rent due, and
to become due hereunder, for the performance of all the covenants, agreements,
terms, provisions and conditions contained in this Lease on the part of Tenant
to be performed and for all acts and omissions of any transferee or any other

 

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person claiming under or through any transferee that shall be in violation of
any of the terms and conditions of this Lease, and any such violation shall be
deemed a violation by Tenant. Tenant shall indemnify, defend and hold Landlord
harmless from and against all losses, liabilities, damages, costs and expenses
(including reasonable attorney fees) resulting from any claims that may be made
against Landlord by the proposed transferee or by any real estate brokers or
other persons claiming compensation in connection with the proposed Transfer.

 

D. Reorganization of Tenant: The provisions of this Section 17.D shall apply if
Tenant is a publicly-held corporation and: (i) there is a dissolution, merger,
consolidation, or other reorganization of or affecting Tenant, where Tenant is
not the surviving corporation, or (ii) there is a sale or transfer of stock
possessing more than fifty percent (50%) of the total combined voting power of
all classes of Tenant’s capital stock issued, outstanding and entitled to vote
for the election of directors to one person or entity (or to any group of
related persons or entities) (the “Acquiring Entity”), and after such sale or
transfer of stock Tenant’s stock is no longer publicly traded. In a transaction
under clause (i), the surviving corporation shall promptly execute and deliver
to Landlord an agreement in form reasonably satisfactory to Landlord under which
such surviving corporation assumes the obligations of Tenant hereunder. In a
transaction under clause (ii), the Acquiring Entity shall promptly execute and
deliver to Landlord an agreement in form reasonably satisfactory to Landlord
under which such Acquiring Entity assumes the obligations of Tenant to the
extent accruing after such transferee’s acquisition of Tenant’s stock possessing
more than 50% of the total combined voting of all classes of Tenant’s capital
stock issued, outstanding and entitled to vote for the election of directors.
The foregoing notwithstanding, in the event the Acquiring Entity is itself not a
publicly-traded corporation, but is instead the subsidiary of a publicly-traded
corporation (or a subsidiary of a subsidiary of a publicly-traded corporation,
or a subsidiary in a chain of entities in which a parent corporation is publicly
traded), then the publicly-traded parent corporation shall be required to
execute and deliver to Landlord the Lease Guaranty. It is the intent of the
parties that after such an acquisition of the stock of Tenant, Landlord shall be
entitled to rely on the creditworthiness of a publicly-traded corporation and to
receive audited financial information from a publicly-traded corporation.

 

E. Permitted Transfers: Notwithstanding anything contained in this Section 17,
so long as Tenant otherwise complies with the provisions of this Section 17,
Tenant may enter into any of the following Transfers (a “Permitted Transfer”)
without Landlord’s prior consent, and Landlord shall not be entitled to
terminate the Lease or to receive any part of any subrent resulting therefrom
that would otherwise be due pursuant to Sections 17.A and 17.B. Tenant may
sublease all or part of the Premises or assign its interest in this Lease to (i)
any corporation which controls, is controlled by, or is under common control
with the original Tenant to this Lease by means of an ownership interest of more
than fifty percent (50%); (ii) a corporation which results from a merger,
consolidation or other reorganization in which Tenant is not the surviving
corporation, so long as the surviving corporation has a net worth at the time of
such assignment that is equal to or greater than the net worth of Tenant
immediately prior to such transaction; and (iii) a corporation which purchases
or otherwise acquires all or substantially all of the assets of Tenant so long
as such acquiring corporation has a net worth at the time of such assignment
that is equal to or greater than the net worth of Tenant immediately prior to
such transaction.

 

F. Effect of Default: In the event of Tenant’s default, Tenant hereby assigns
all amounts due to Tenant from any Transfer as security for performance of
Tenant’s obligations under this Lease, and Landlord may collect such amounts as
Tenant’s Attorney-in-Fact, except that Tenant may collect such amounts unless a
default occurs as described in Section 13 above. A termination of the Lease due
to Tenant’s default shall not automatically terminate a Transfer then in
existence; rather at Landlord’s election (1) such Transfer shall survive the
Lease termination, (2) the transferee shall attorn to Landlord, and (3) Landlord
shall undertake the

 

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obligations of Tenant under the transfer agreement; except that Landlord shall
not be liable for prepaid rent, security deposits or other defaults of Tenant to
the transferee, or for any acts or omissions of Tenant and Tenant’s Agents.

 

G. Conveyance by Landlord: In the event of any transfer of Landlord’s interest
in this Lease, the Landlord herein named (and in case of any subsequent
transfer, the then transferor) shall be automatically freed and relieved from
and after the date of such transfer of all liability for the performance of any
covenants or obligations on the part of Landlord contained in this Lease
thereafter to be performed; provided, however, that any funds in the hands of
Landlord or the then transferor at the time of such transfer, in which Tenant
has an interest shall be turned over to the transferee and any amount then due
and payable to Tenant by Landlord or the then transferor under any provision of
this Lease shall be paid to Tenant; and provided, further, that upon any such
transfer, the transferee shall be deemed to have assumed, subject to the
limitations of this Section 17, all of the agreements, covenants and conditions
in this Lease to be performed on the part of Landlord, it being intended hereby
that the covenants and obligations contained in this Lease to be performed on
the part of Landlord shall, subject as aforesaid, be binding on each Landlord,
its successors and assigns, only during its period of ownership.

 

H. Successors and Assigns: Subject to the provisions this Section 17, the
covenants and conditions of this Lease shall apply to and bind the heirs,
successors, executors, administrators and assigns of all Parties hereto; and all
parties hereto comprising Tenant shall be jointly and severally liable
hereunder.

 

I. Sublease Requirements: If Landlord consents to any sublet of the premises by
Tenant to an approved Subtenant (“Subtenant”), every sublet transaction shall be
evidenced by a written sublease between Tenant and Subtenant (the “Sublease”).
The Sublease shall comply with the following requirements: (i) The form of the
Sublease and the terms and conditions thereof shall be subject to Landlord’s
approval which shall not be withheld unreasonably; (ii) The Sublease shall
provide that it is subject to and shall incorporate by reference all of the
terms and conditions of this Lease, except those terms and conditions relating
to Rent, Additional Rent, and any other amount due under this Lease; (iii) The
Sublease shall provide that the Subtenant shall have no right to exercise any
option or other right granted to Tenant in this Lease; (iv) The Sublease shall
contain a waiver of subrogation against Landlord and shall require Subtenant’s
insurance policies to acknowledge such waiver of subrogation; (v) The Sublease
shall provide that all requirements of the Lease applicable to subleases shall
be applicable to sub-subleases; (vi) The Sublease shall require Subtenant,
acting through Tenant, to obtain Landlord’s prior written approval, to any
alteration to the Premises to the same extent Tenant is required by this Lease
to obtain such consent; (vii) The Sublease shall require Subtenant to send
Landlord copies of any and all notices concerning the Premises that Subtenant is
obligated to provide to Tenant and Tenant to send Landlord copies of any and all
notices concerning the Premises that Tenant is obligated to provide to
Subtenant; and (viii) The Sublease shall provide that, at Landlord’s option, the
Sublease shall not terminate in the event that this Lease terminates and shall
require Subtenant to execute an attornment agreement if Landlord, in its sole
and absolute discretion, shall elect to have the Sublease continue beyond the
date of termination of this Lease.

 

18. OPTION TO EXTEND THE LEASE TERM:

 

A. Grant and Exercise of Option: Landlord grants to Tenant, subject to the terms
and conditions set forth in this Section 18.A, two (2) options (the “Options”)
to extend the Lease Term for an additional term (the “Option Term”). Each Option
Term shall be for a period of thirty (30) months and shall be exercised, if at
all, by written notice to Landlord no earlier than nine (9) months prior to the
date the Lease Term would expire but for such exercise but no later than six (6)
months prior to the date the Lease Term would expire but for such exercise, time
being of the essence for the giving of such notice. If Tenant exercises the
Option, all of the

 

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terms, covenants and conditions of this Lease shall apply except for the grant
of additional Options pursuant to this Section, provided that Base Monthly Rent
for the Premises payable by Tenant during the Option Term shall be the greater
of (i) the Base Monthly Rent applicable to the period immediately prior to the
commencement of the Option Term, and (ii) ninety five percent (95%) of the Fair
Market Rental as hereinafter defined. Notwithstanding anything herein to the
contrary, if Tenant is in monetary or material non-monetary default (beyond any
applicable notice or cure period under any of the terms, covenants or conditions
of this Lease either at the time Tenant exercises the Option or at any time
thereafter prior to the commencement date of the Option Term, then Landlord
shall have, in addition to all of Landlord’s other rights and remedies provided
in this Lease, the right to terminate the Option upon notice to Tenant, in which
event the Lease Term shall not be extended pursuant to this Section 18.A. As
used herein, the term “Fair Market Rental” is defined as the rental and all
other monetary payments, including any escalations and adjustments thereto
(including without limitation Consumer Price Indexing) that Landlord could
obtain during the Option Term from a third party desiring to lease the Premises,
based upon the (i) current use and other potential uses of the Premises, as
determined by the rents then obtainable for new leases of space comparable in
age and quality to the Premises in the same real estate submarket as the
Building The appraisers shall be instructed that the foregoing five percent
(5.0%) discount is intended to offset comparable rents that include the
following costs which Landlord will not incur in the event Tenant exercises its
option (i) brokerage commissions, (ii) tenant improvement or relocation
allowances, and (iii) vacancy costs, or.

 

B. Determination of Fair Market Rental: If Tenant exercises the Option, Landlord
shall send Tenant a notice setting forth the Fair Market Rental for the Option
Term within thirty (30) days following the Exercise Date. If Tenant disputes
Landlord’s determination of Fair Market Rental for the Option Term, Tenant
shall, within thirty (30) days after the date of Landlord’s notice setting forth
Fair Market Rental for the Option Term, send to Landlord a notice stating that
Tenant either elects to terminate its exercise of the Option, in which event the
Option shall lapse and this Lease shall terminate on the Expiration Date, or
that Tenant disagrees with Landlord’s determination of Fair Market Rental for
the Option Term and elects to resolve the disagreement as provided in Section
18.C below. If Tenant does not send Landlord a notice as provided in the
previous sentence, Landlord’s determination of Fair Market Rental shall be the
Base Monthly Rent payable by Tenant during the Option Term. If Tenant elects to
resolve the disagreement as provided in Section 18.C and such procedures are not
concluded prior to the commencement date of the Option Term, Tenant shall pay to
Landlord as Base Monthly Rent the Fair Market Rental as determined by Landlord
in the manner provided above. If the Fair Market Rental as finally determined
pursuant to Section 18.C is greater than Landlord’s determination, Tenant shall
pay Landlord the difference between the amount paid by Tenant and the Fair
Market Rental as so determined in Section 18.C within thirty (30) days after
such determination. If the Fair Market Rental as finally determined in Section
18.C is less than Landlord’s determination, the difference between the amount
paid by Tenant and the Fair Market Rental as so determined in Section 18.C shall
be credited against the next installments of Base Monthly Rent due from Tenant
to Landlord hereunder.

 

C. Resolution of a Disagreement over the Fair Market Rental: Any disagreement
regarding Fair Market Rental shall be resolved as follows:

 

1. Within thirty (30) days after Tenant’s response to Landlord’s notice setting
forth the Fair Market Rental, Landlord and Tenant shall meet at a mutually
agreeable time and place, in an attempt to resolve the disagreement.

 

2. If within the 30-day period referred to above, Landlord and Tenant cannot
reach agreement as to Fair Market Rental, each party shall select one appraiser
to determine Fair Market Rental. Each such appraiser shall arrive

 

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at a determination of Fair Market Rental and submit their conclusions to
Landlord and Tenant within thirty (30) days after the expiration of the 30-day
consultation period described above.

 

3. If only one appraisal is submitted within the requisite time period, it shall
be deemed as Fair Market Rental. If both appraisals are submitted within such
time period and the two appraisals so submitted differ by less than ten percent
(10%), the average of the two shall be deemed as Fair Market Rental. If the two
appraisals differ by more than 10%, the appraisers shall immediately select a
third appraiser who shall, within thirty (30) days after his selection, make and
submit to Landlord and Tenant a determination of Fair Market Rental. This third
appraisal will then be averaged with the closer of the two previous appraisals
and the result shall be Fair Market Rental.

 

4. All appraisers specified pursuant to this Section shall be members of the
American Institute of Real Estate Appraisers with not less than ten (10) years
experience appraising office and industrial properties in the Santa Clara
Valley. Each party shall pay the cost of the appraiser selected by such party
and one-half of the cost of the third appraiser.

 

D. Personal to Tenant: All Options provided to Tenant in this Lease are personal
and granted to Netflix, Inc. or its Permitted Transferee and are not exercisable
by any third party should Tenant assign or sublet all or a portion of its rights
under this Lease, unless Landlord consents to permit exercise of any option by
any assignee or subtenant, in Landlord’s sole and absolute discretion. In the
event Tenant has multiple options to extend this Lease, a later option to extend
the Lease cannot be exercised unless the prior option has been properly
exercised.

 

19. GENERAL PROVISIONS:

 

A. Attorney’s Fees: In the event a suit or alternative form of dispute
resolution is brought for the possession of the Premises, for the recovery of
any sum due hereunder, to interpret the Lease, or because of the breach of any
other covenant herein; then the losing party shall pay to the prevailing party
reasonable attorney’s fees including the expense of expert witnesses,
depositions and court testimony as part of its costs which shall be deemed to
have accrued on the commencement of such action. The prevailing party shall also
be entitled to recover all costs and expenses including reasonable attorney’s
fees incurred in enforcing any judgment or award against the other party. The
foregoing provision relating to post-judgment costs is severable from all other
provisions of this Lease.

 

B. Authority of Parties: Tenant represents and warrants that it is duly formed
and in good standing, and is duly authorized to execute and deliver this Lease
on behalf of said corporation, in accordance with a duly adopted resolution of
the Board of Directors of said corporation or in accordance with the by-laws of
said corporation, and that this Lease is binding upon said corporation in
accordance with its terms. At Landlord’s request, Tenant shall provide Landlord
with corporate resolutions or other proof in a form acceptable to Landlord,
authorizing the execution of the Lease.

 

C. Brokers: Tenant represents it has not utilized or contacted a real estate
broker or finder with respect to this Lease other than Colliers International
and Tenant agrees to indemnify, defend and hold Landlord harmless against any
claim, cost, liability or cause of action asserted by any other broker or finder
claiming through Tenant.

 

D. Choice of Law: This Lease shall be governed by and construed in accordance
with California law. Except as provided in Section 19.E, venue shall be Santa
Clara County.

 

E. Dispute Resolution: Landlord and Tenant and any other party that may become a
party to this Lease or be deemed a party to this Lease including any subtenants
agree that, except for any claim by Landlord for unlawful detainer or any claim
within the jurisdiction of the small claims court (which small claims court
shall be the sole court of competent jurisdiction), any controversy, dispute, or
claim of whatever

 

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nature arising out of, in connection with or in relation to the interpretation,
performance or breach of this Lease, including any claim based on contract,
tort, or statute, shall be resolved at the request of any party to this
agreement through a two-step dispute resolution process administered by J.A.M.S.
or another judicial mediation service mutually acceptable to the parties located
in Santa Clara County, California. The dispute resolution process shall involve
first, mediation, followed, if necessary, by final and binding arbitration
administered by and in accordance with the then existing rules and practices of
J.A.M.S. or other judicial mediation service selected. In the event of any
dispute subject to this provision, either party may initiate a request for
mediation and the parties shall use reasonable efforts to promptly select a
J.A.M.S. mediator and commence the mediation. In the event the parties are not
able to agree on a mediator within thirty (30) days, J. A. M. S. or another
judicial mediation service mutually acceptable to the parties shall appoint a
mediator. The mediation shall be confidential and in accordance with California
Evidence Code § 1119 et. seq. The mediation shall be held in Santa Clara County,
California and in accordance with the existing rules and practice of J. A. M. S.
(or other judicial and mediation service selected). The parties shall use
reasonable efforts to conclude the mediation within sixty (60) days of the date
of either party’s request for mediation. The mediation shall be held prior to
any arbitration or court action (other than a claim by Landlord for unlawful
detainer or any claim within the jurisdiction of the small claims court which
are not subject to this mediation/arbitration provision and may be filed
directly with a court of competent jurisdiction). In order for the prevailing
party to be entitled to the payment of attorney’s fees, the prevailing party
must have followed the provisions of this section and have attempted to mediate
any dispute prior to invoking arbitration.

 

IF A MEDIATION IS CONDUCTED BUT IS UNSUCCESSFUL, IT SHALL BE FOLLOWED BY FINAL
AND BINDING ARBITRATION ADMINISTERED BY AND IN ACCORDANCE WITH THE THEN EXISTING
RULES AND PRACTICES OF J.A.M.S. OR THE OTHER JUDICIAL AND MEDIATION SERVICE
SELECTED, AND JUDGMENT UPON ANY AWARD RENDERED BY THE ARBITRATOR(S) MAY BE
ENTERED BY ANY STATE OR FEDERAL COURT HAVING JURISDICTION THEREOF AS PROVIDED BY
CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 1280 ET. SEQ, AS SAID STATUTES THEN
APPEAR, INCLUDING ANY AMENDMENTS TO SAID STATUTES OR SUCCESSORS TO SAID STATUTES
OR AMENDED STATUTES, EXCEPT THAT IN NO EVENT SHALL THE PARTIES BE ENTITLED TO
PROPOUND INTERROGATORIES OR REQUEST FOR ADMISSIONS DURING THE ARBITRATION
PROCESS. THE ARBITRATOR SHALL BE A RETIRED JUDGE OR A LICENSED CALIFORNIA
ATTORNEY. THE VENUE FOR ANY SUCH ARBITRATION OR MEDIATION SHALL BE IN SANTA
CLARA COUNTY, CALIFORNIA.

 

NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE
ARISING OUT OF THE MATTERS INCLUDED IN THE “MEDIATION AND ARBITRATION OF
DISPUTES” PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW
AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED
IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP
YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE
SPECIFICALLY INCLUDED IN THE “MEDIATION AND ARBITRATION OF DISPUTES” PROVISION.
IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY
BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL
PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY.

 

WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING
OUT OF THE MATTERS INCLUDED IN THE “MEDIATION AND ARBITRATION OF DISPUTES”
PROVISION TO NEUTRAL ARBITRATION.

 

LANDLORD:                  TENANT:             

 

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F. Entire Agreement: This Lease and the exhibits attached hereto contain all of
the agreements and conditions made between the Parties hereto and may not be
modified orally or in any other manner other than by written agreement signed by
all parties hereto or their respective successors in interest. This Lease
supersedes and revokes all previous negotiations, letters of intent, lease
proposals, brochures, agreements, representations, promises, warranties, and
understandings, whether oral or in writing, between the parties or their
respective representatives or any other person purporting to represent Landlord
or Tenant.

 

G. Entry by Landlord: Upon prior notice to Tenant and subject to Tenant’s
reasonable security regulations, Tenant shall permit Landlord and his agents to
enter into and upon the Premises at all reasonable times, and without any rent
abatement or reduction or any liability to Tenant for any loss of occupation or
quiet enjoyment of the Premises thereby occasioned, for the following purposes:
(i) inspecting and maintaining the Premises; (ii) making repairs, alterations or
additions to the Premises; (iii) erecting additional building(s) and
improvements on the land where the Premises are situated or on adjacent land
owned by Landlord; (iv) performing any obligations of Landlord under the Lease
including remediation of Hazardous Materials if determined to be the
responsibility of Landlord, (v) posting and keeping posted thereon notices of
non-responsibility for any construction, alteration or repair thereof, as
required or permitted by any law, and (vi) showing the Premises to Landlord’s or
the Master Landlord’s existing or potential successors, purchaser, tenants and
lenders. Tenant shall permit Landlord and his agents, at any time within
eighteen (18) months prior to the Expiration Date (or at any time during the
Lease if Tenant is in default hereunder), to place upon the Premises “For Lease”
signs and exhibit the Premises to real estate brokers and prospective tenants at
reasonable hours. Any entry by Landlord shall be designed to minimize
interruption to Tenant’s ongoing operations.

 

H. Estoppel Certificates: At any time during the Lease Term, Tenant shall,
within ten (10) days following written notice from Landlord, execute and deliver
to Landlord a written statement certifying, if true, the following: (i) that
this Lease is unmodified and in full force and effect (or, if modified, stating
the nature of such modification); (ii) the date to which rent and other charges
are paid in advance, if any; (iii) acknowledging that there are not, to Tenant’s
knowledge, any uncured defaults on Landlord’s part hereunder (or specifying such
defaults if they are claimed); and (iv) such other information as Landlord may
reasonably request. Any such statement may be conclusively relied upon by any
prospective purchaser or encumbrancer of Landlord’s interest in the Premises.
Tenant’s failure to deliver such statement within such time shall be conclusive
upon the Tenant that this Lease is in full force and effect without
modification, except as may be represented by Landlord, and that there are no
uncured defaults in Landlord’s performance. To extent Tenant is not a publicly
traded company. Tenant agrees to provide, within five (5) days of Landlord’s
request, Tenant’s most recent three (3) years of audited financial statements
for Landlord’s use in financing or sale of the Premises or Landlord’s interest
therein.

 

I. Exhibits: All exhibits referred to are attached to this Lease and
incorporated by reference.

 

J. Interest: All rent due hereunder, if not paid when due, shall bear interest
at the rate of the Reference Rate published by Bank of America, San Francisco
Branch, plus two percent (2%) per annum from that date until paid in full
(“Agreed Interest Rate”). This provision shall survive the expiration or sooner
termination of the Lease. Despite any other provision of this Lease, the total
liability for interest payments shall not exceed the limits, if any, imposed by
the usury laws of the State of California. Any interest paid in excess of those
limits shall be refunded to Tenant by application of the amount of excess
interest paid against any

 

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sums outstanding in any order that Landlord requires. If the amount of excess
interest paid exceeds the sums outstanding, the portion exceeding those sums
shall be refunded in cash to Tenant by Landlord. To ascertain whether any
interest payable exceeds the limits imposed, any non-principal payment
(including late charges) shall be considered to the extent permitted by law to
be an expense or a fee, premium, or penalty rather than interest.

 

K. Modifications Required by Lender: If any lender of Landlord or ground lessor
of the Premises requires a modification of this Lease that will not increase
Tenant’s cost or expense or materially or adversely change Tenant’s rights and
obligations, Tenant agrees to execute whatever reasonable documentation is
required to effectuate and modification and deliver them to Landlord within ten
(10) days after the request.

 

L. No Presumption Against Drafter: Landlord and Tenant understand, agree and
acknowledge that this Lease has been freely negotiated by both Parties; and that
in any controversy, dispute, or contest over the meaning, interpretation,
validity, or enforceability of this Lease or any of its terms or conditions,
there shall be no inference, presumption, or conclusion drawn whatsoever against
either party by virtue of that party having drafted this Lease or any portion
thereof.

 

M. Notices: All notices, demands, requests, or consents required to be given
under this Lease shall be sent in writing by U.S. certified mail, return receipt
requested, nationally recognized overnight courier service or by personal
delivery addressed to the party to be notified at the address for such party
specified in Section 1 of this Lease, or to such other place as the party to be
notified may from time to time designate by at least fifteen (15) days prior
notice to the notifying party. When this Lease requires service of a notice,
that notice shall replace rather than supplement any equivalent or similar
statutory notice, including any notices required by Code of Civil Procedure
Section 1161 or any similar or successor statute.

 

N. Property Management: Intentionally Deleted

 

O. Rent: All monetary sums due from Tenant to Landlord under this Lease,
including, without limitation those referred to as “additional rent”, shall be
deemed as rent.

 

P. Representations: Except for the provisions of this Lease, Tenant acknowledges
that neither Landlord nor any of its employees or agents have made any
agreements, representations, warranties or promises with respect to the Premises
or with respect to present or future rents, expenses, operations, tenancies or
any other matter. Except as herein expressly set forth herein, Tenant relied on
no statement of Landlord or its employees or agents for that purpose.

 

Q. Rights and Remedies: Subject to Section 14 above, All rights and remedies
hereunder are cumulative and not alternative to the extent permitted by law, and
are in addition to all other rights and remedies in law and in equity.

 

R. Severability: If any term or provision of this Lease is held unenforceable or
invalid by a court of competent jurisdiction, the remainder of the Lease shall
not be invalidated thereby but shall be enforceable in accordance with its
terms, omitting the invalid or unenforceable term.

 

S. Submission of Lease: Submission of this document for examination or signature
by the parties does not constitute an option or offer to lease the Premises on
the terms in this document or a reservation of the Premises in favor of Tenant.
This document is not effective as a lease or otherwise until executed and
delivered by both Landlord and Tenant.

 

T. Subordination: Landlord represents to Tenant that the Premises will be
unencumbered by a real estate loan as of the Effective Date. Landlord shall
cause any future lender to furnish to Tenant, within sixty (60) days of the date
of both parties’ execution of this Lease, or placement of a lien by lender on
the property, as applicable, with a written agreement providing for (i)
recognition by the lender of all of the terms and conditions of this

 

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Lease; and (ii) continuation of this Lease upon foreclosure of existing lender’s
security interest in the Premises. Subject to the above, this Lease is subject
and subordinate to ground and underlying leases, mortgages and deeds of trust
(collectively “Encumbrances”) which may now affect the Premises, to any
covenants, conditions or restrictions of record, and to all renewals,
modifications, consolidations, replacements and extensions thereof; provided,
however, if the holder or holders of any such Encumbrance (“Holder”) require
that this Lease be prior and superior thereto, within seven (7) days after
written request of Landlord to Tenant, Tenant shall execute, have acknowledged
and deliver all documents or instruments, in the form presented to Tenant, which
Landlord or Holder deems necessary or desirable for such purposes. Landlord
shall have the right to cause this Lease to be and become and remain subject and
subordinate to any and all Encumbrances which are now or may hereafter be
executed covering the Premises or any renewals, modifications, consolidations,
replacements or extensions thereof, for the full amount of all advances made or
to be made thereunder and without regard to the time or character of such
advances, together with interest thereon and subject to all the terms and
provisions thereof; provided only, that in the event of termination of any such
lease or upon the foreclosure of any such mortgage or deed of trust, Holder
agrees to recognize and not disturb Tenant’s rights under this Lease as long as
Tenant is not then in default (beyond applicable cure periods) and continues to
pay Base Monthly Rent and additional rent and observes and performs all required
provisions of this Lease. Within ten (10) days after Landlord’s written request,
Tenant shall execute any documents required by Landlord or the Holder to make
this Lease subordinate to any lien of the Encumbrance so long as such documents
provide for (i) recognition by the Holder of all of the terms and conditions of
this Lease; and (ii) continuation of this Lease upon foreclosure on the
Encumbrance.If Tenant fails to do so, then in addition to such failure
constituting a default by Tenant, it shall be deemed that this Lease is so
subordinated to such Encumbrance. Notwithstanding anything to the contrary in
this Section, Tenant hereby attorns and agrees to attorn to any entity
purchasing or otherwise acquiring the Premises at any sale or other proceeding
or pursuant to the exercise of any other rights, powers or remedies under such
encumbrance.

 

U. Survival of Indemnities: All indemnification, defense, and hold harmless
obligations of Landlord and Tenant under this Lease shall survive the expiration
or sooner termination of the Lease.

 

V. Time: Time is of the essence hereunder.

 

W. Transportation Demand Management Programs: Should a government agency or
municipality require Landlord to institute TDM (Transportation Demand
Management) facilities and/or programs, Tenant agrees            , provided it
has been reasonably consulted and allowed to meaningfully participate in all
associated processes that the cost of TDM imposed facilities and programs
required on the Premises, including but not limited to employee showers,
lockers, cafeteria, or lunchroom facilities, shall be paid by Tenant. Further,
any ongoing costs or expenses associated with a TDM program which are required
for the Premises and not provided by Tenant, such as an on-site TDM coordinator,
shall be provided by Landlord with such costs being included as additional rent
and reimbursed to Landlord by Tenant within thirty (30) days after demand. If
TDM facilities and programs are instituted on a Project wide basis, Tenant shall
pay its proportionate share of such costs in accordance with Section 8 above.

 

X. Waiver of Right to Jury Trial: Landlord and Tenant waive their respective
rights to trial by jury of any contract or tort claim, counterclaim,
cross-complaint, or cause of action in any action, proceeding, or hearing
brought by either party against the other on any matter arising out of or in any
way connected with this Lease, the relationship of Landlord and Tenant, or
Tenant’s use or occupancy of the Premises, including any claim of injury or
damage or the enforcement of any remedy under any current or future law,
statute, regulation, code, or ordinance.

 

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IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease on the day and
year first above written.

 

Landlord: SOBRATO INTERESTS II   Tenant: NETFLIX, INC. a California Limited
Partnership   a Delaware Corporation               By:  

/s/ J. M. Sobrato

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  By:  

/s/ David Hyman

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Its:   General Partner   Its:  

General Counsel

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EXHIBIT “A” – Premises & Building

 

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