Exhibit 10.6

 

LEASE

 

SFERS REAL ESTATE CORP. U,

a Delaware corporation,

 

Landlord,

 

and

 

PHARSIGHT CORPORATION,

a Delaware corporation,

 

Tenant

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TABLE OF CONTENTS

 

          Page

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1.

   USE AND RESTRICTIONS ON USE    1

2.

   TERM    2

3.

   RENT.    2

4.

   RENT ADJUSTMENTS.    3

5.

   SECURITY DEPOSIT    6

6.

   ALTERATIONS    6

7.

   REPAIR    7

8.

   LIENS    7

9.

   ASSIGNMENT AND SUBLETTING    8

10.

   INDEMNIFICATION    10

11.

   INSURANCE    10

12.

   WAIVER OF SUBROGATION    11

13.

   SERVICES AND UTILITIES    11

14.

   HOLDING OVER    11

15.

   SUBORDINATION    11

16.

   RULES AND REGULATIONS    12

17.

   REENTRY BY LANDLORD    12

18.

   DEFAULT    12

19.

   REMEDIES    13

20.

   TENANT’S BANKRUPTCY OR INSOLVENCY    14

21.

   QUIET ENJOYMENT    15

22.

   CASUALTY    15

23.

   EMINENT DOMAIN    16

24.

   SALE BY LANDLORD    16

25.

   ESTOPPEL CERTIFICATES    16

26.

   SURRENDER OF PREMISES    17

27.

   NOTICES    17

28.

   TAXES PAYABLE BY TENANT    18

29.

   INTENTIONALLY OMITTED    18

30.

   DEFINED TERMS AND HEADINGS    18

31.

   TENANT’S AUTHORITY    18

32.

   FINANCIAL STATEMENTS AND CREDIT REPORTS    18

33.

   COMMISSIONS    18

34.

   TIME AND APPLICABLE LAW    18

35.

   SUCCESSORS AND ASSIGNS    19

36.

   ENTIRE AGREEMENT    19

37.

   EXAMINATION NOT OPTION    19

 

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TABLE OF CONTENTS

(continuation)

 

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38.

   RECORDATION    19

39.

   LETTER OF CREDIT    19

40.

   OPTION TO RENEW    21

41.

   RIGHT OF FIRST NEGOTIATION    21

42.

   LIMITATION OF LANDLORD’S LIABILITY    21

 

EXHIBIT A – FLOOR PLAN DEPICTING THE PREMISES

 

EXHIBIT A-1 – SITE PLAN

 

EXHIBIT B – INITIAL ALTERATIONS

 

EXHIBIT C – COMMENCEMENT DATE MEMORANDUM

 

EXHIBIT D – RULES AND REGULATIONS

 

EXHIBIT E – FORM OF LETTER OF CREDIT

 

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MULTI-TENANT INDUSTRIAL NET LEASE

 

REFERENCE PAGES

 

BUILDING:

   Mountain View Corporate Center

LANDLORD:

  

SFERS REAL ESTATE CORP. U,

a Delaware corporation

LANDLORD’S ADDRESS:

  

c/o RREEF Management Company

1310 Tully Road, Suite 110

San Jose, California 95122

WIRE INSTRUCTIONS AND/OR ADDRESS FOR RENT PAYMENT:   

SFERS Real Estate Corp. U

Dept. #44631

P.O. Box 44000

San Francisco, California 94144

LEASE REFERENCE DATE:

   July 18, 2005

TENANT:

  

PHARSIGHT CORPORATION,

a Delaware corporation

TENANT’S NOTICE ADDRESS:

    

(a) As of beginning of Term:

   321 East Evelyn Ave., Mountain View, California 94039

(b) Prior to beginning of Term (if different):

  

800 W. El Camino Real, Suite 200

Mountain View, California 94040

PREMISES ADDRESS:

   321 East Evelyn Avenue, 3rd Floor, Mountain View, California 94039

PREMISES RENTABLE AREA:

   Approximately 14,223 sq. ft. (for outline of Premises see Exhibit A)

USE:

   General office use, administrative use, research, development, and
engineering of software products, together with such ancillary uses related
thereto in compliance with this Lease and which do not involve Hazardous
Materials (as defined in Section 1.2 below), cause excessive wear and tear or
increase liability of Landlord, and for no other use.

SCHEDULED COMMENCEMENT DATE:

   September 1, 2005

TERM OF LEASE:

   Approximately five (5) years, beginning on the Commencement Date and ending
on the Termination Date.

TERMINATION DATE:

   August 31, 2010

 

                                Initials    

 

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ANNUAL RENT and MONTHLY INSTALLMENT OF

RENT (Article 3):

 

Period

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

  

Rentable Square
Footage

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Annual Rent

Per Square Foot

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

   Annual Rent

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

  

Monthly Installment

of Rent

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from

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

  

through

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            Month 1    Month 12    14,223    $ 14.40    $ 204,811.20    $
17,067.60 * Month 13    Month 24    14,223    $ 15.00    $ 213,345.00    $
17,778.75   Month 25    Month 36    14,223    $ 15.60    $ 221,878.80    $
18,489.90   Month 37    Month 48    14,223    $ 17.40    $ 247,480.20    $
20,623.35   Month 49    Month 60    14,223    $ 18.00    $ 256,014.00    $
21,334.50  

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* Monthly Installment of Rent shall be subject to abatement in accordance with
Section 3.3 below.

 

INITIAL ESTIMATED MONTHLY INSTALLMENT OF RENT ADJUSTMENTS (Article 4)   
$5,262.51 TENANT’S PROPORTIONATE SHARE:   

5.35% of the project in which the Building is located (the “Project”)

 

28.88% of the Building

PARKING:    4 parking spaces per 1,000 rentable square feet of the Premises.
SECURITY DEPOSIT:    $26,597.01 cash security deposit LETTER OF CREDIT   
$56,892.00 in the form of a letter of credit in accordance with Section 39 below
ASSIGNMENT/SUBLETTING FEE    $1,500.00 REAL ESTATE BROKER:    Cornish & Carey
TENANT’S SIC CODE:    7372 AMORTIZATION RATE:    N/A

 

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                                Initials    

 

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The Reference Pages information is incorporated into and made a part of the
Lease. In the event of any conflict between any Reference Pages information and
the Lease, the Lease shall control. This Lease includes Exhibits A through E,
all of which are made a part of this Lease.

 

LANDLORD:   TENANT:

SFERS REAL ESTATE CORP. U,

a Delaware corporation

 

PHARSIGHT CORPORATION,

a Delaware corporation

By:  

RREEF Management Company, a

Delaware corporation

        By:  

/s/ James H. Ida

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  By:  

/s/ Cynthia Stephens

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Name:   James H. Ida   Name:  

Cynthia Stephens

Title:   Vice President, District Manager   Title:  

SVP & CFO

Dated:   July 20, 2005   Dated:   July 18, 2005

 

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LEASE

 

By this Lease Landlord leases to Tenant and Tenant leases from Landlord the
Premises in the Building as set forth and described on the Reference Pages. The
Premises are depicted on the floor plan attached hereto as Exhibit A, and the
Building is depicted on the site plan attached hereto as Exhibit A-1. The
Reference Pages, including all terms defined thereon, are incorporated as part
of this Lease.

 

1. USE AND RESTRICTIONS ON USE.

 

1.1 The Premises are to be used solely for the purposes set forth on the
Reference Pages. Tenant shall not do or permit anything to be done in or about
the Premises which will in any way obstruct or interfere with the rights of
other tenants or occupants of the Building or injure, annoy, or disturb them, or
allow the Premises to be used for any improper, immoral, unlawful, or
objectionable purpose, or commit any waste. Tenant shall not do, permit or
suffer in, on, or about the Premises the sale of any alcoholic liquor without
the written consent of Landlord first obtained. Tenant shall comply with all
governmental laws, ordinances, rules and regulations (collectively, “Laws”)
applicable to the use of the Premises and its occupancy and shall promptly
comply with all governmental orders and directions for the correction,
prevention and abatement of any violations in the Building or appurtenant land,
caused or permitted by, or resulting from the specific use by, Tenant, or in or
upon, or in connection with, the Premises, all at Tenant’s sole expense (subject
to subclause (i) of Section 4.1.2 below). Tenant shall not do or permit anything
to be done on or about the Premises or bring or keep anything into the Premises
which will in any way increase the rate of, invalidate or prevent the procuring
of any insurance protecting against loss or damage to the Building or any of its
contents by fire or other casualty or against liability for damage to property
or injury to persons in or about the Building or any part thereof. As of the
date hereof, Landlord has not received notice from any governmental agencies
that the Building is in violation of Title III of the Americans with
Disabilities Act. Except to the extent properly included in Expenses, Landlord
shall be responsible for the cost of correcting any violations of Title III of
the Americans with Disabilities Act (ADA) with respect to the common areas of
the Building. Notwithstanding the foregoing, Landlord shall have the right to
contest any alleged violation in good faith, including, without limitation, the
right to apply for and obtain a waiver or deferment of compliance, the right to
assert any and all defenses allowed by law and the right to appeal any
decisions, judgments or rulings to the fullest extent permitted by law.
Landlord, after the exhaustion of any and all rights to appeal or contest, will
make all repairs, additions, alterations or improvements necessary to comply
with the terms of any final order or judgment.

 

1.2 Tenant shall not, and shall not direct, suffer or permit any of its agents,
contractors, employees, licensees or invitees (collectively, the “Tenant
Entities”) to at any time handle, use, manufacture, store or dispose of in or
about the Premises or the Building any (collectively “Hazardous Materials”)
flammables, explosives, radioactive materials, hazardous wastes or materials,
toxic wastes or materials, or other similar substances, petroleum products or
derivatives or any substance subject to regulation by or under any federal,
state and local laws and ordinances relating to the protection of the
environment or the keeping, use or disposition of environmentally hazardous
materials, substances, or wastes, presently in effect or hereafter adopted, all
amendments to any of them, and all rules and regulations issued pursuant to any
of such laws or ordinances (collectively “Environmental Laws”), nor shall Tenant
suffer or permit any Hazardous Materials to be used in any manner not fully in
compliance with all Environmental Laws, (a) in the Premises (other than by
Landlord and/or any of Landlord’s employees, agents or contractors) or (b) by
Tenant or by any Tenant Entity, in the Building and appurtenant land or (c)
cause the environment in the Building or appurtenant land (i.e, outside the
Premises) to become contaminated with any Hazardous Materials or allow the
environment in the Premises to become contaminated with any Hazardous Materials.
Notwithstanding the foregoing, Tenant may handle, store, use or dispose of
products containing small quantities of Hazardous Materials (such as aerosol
cans containing insecticides, toner for copiers, paints, paint remover and the
like) to the extent customary and necessary for the use of the Premises for
general office purposes; provided that Tenant shall always handle, store, use,
and dispose of any such Hazardous Materials in a safe and lawful manner and
never allow such Hazardous Materials to contaminate the Premises, Building and
appurtenant land or the environment. Tenant shall protect, defend, indemnify and
hold each and all of the Landlord Entities (as defined in Article 30) harmless
from and against any and all loss, claims, liability or costs (including court
costs and attorney’s fees) incurred by reason of any actual or asserted failure
of Tenant to fully comply with all applicable Environmental Laws, or the
presence, handling, use or disposition in or from the Premises of any Hazardous
Materials by Tenant or any Tenant Entity (even though permissible under all
applicable Environmental Laws or the provisions of this Lease), or by reason of
any actual or asserted failure of Tenant to keep, observe, or perform any
provision of this Section 1.2.

 

1.3 Tenant and the Tenant Entities will be entitled to the non-exclusive use of
the common areas of the Building as they exist from time to time during the
Term, including the parking facilities, subject to Landlord’s rules and
regulations regarding such use. Such rules and regulations shall be
non-discriminatorily applied to all tenants of the

 

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Building. However, in no event will Tenant or the Tenant Entities park more
vehicles in the parking facilities than Tenant’s Proportionate Share of the
total parking spaces available for common use. The foregoing shall not be deemed
to provide Tenant with an exclusive right to any parking spaces or any guaranty
of the availability of any particular parking spaces or any specific number of
parking spaces. If, at any time during the Term of the Lease, Landlord
designates certain parking spaces in the parking facilities as “visitor” spaces,
Tenant’s visitors may use such visitor spaces on a non-exclusive basis in common
with other tenants of the Building, provided that in no event shall (a) Landlord
be obligated to monitor use of such visitor spaces, and (b) the foregoing be
deemed to permit Tenant to use more than Tenant’s Proportionate Share of the
total parking spaces, as set forth above.

 

2. TERM.

 

2.1 The Term of this Lease shall begin on the date (“Commencement Date”) which
shall be the earlier of the Scheduled Commencement Date as shown on the
Reference Pages and the date that Tenant occupies the Premises for business
purposes, and shall terminate on the date as shown on the Reference Pages
(“Termination Date”), unless sooner terminated by the provisions of this Lease.
Tenant shall, at Landlord’s request, execute and deliver a memorandum agreement
provided by Landlord in the form of Exhibit C attached hereto, setting forth the
actual Commencement Date, Termination Date and, if necessary, a revised rent
schedule. Should Tenant fail to do so within thirty (30) days after Landlord’s
request, the information set forth in such memorandum provided by Landlord shall
be conclusively presumed to be agreed and correct.

 

2.2 Tenant agrees that in the event of the inability of Landlord to deliver
possession of the Premises for any reason within five (5) days following the
mutual execution and delivery of this Lease by Landlord and Tenant and
Landlord’s receipt of any Security Deposit and evidence of insurance required
hereunder (the “Scheduled Delivery Date”), Landlord shall not be liable for any
damage resulting from such inability, but Tenant shall not be liable for any
rent until the time when Landlord can, after notice to Tenant, deliver
possession of the Premises to Tenant. No such failure to give possession on the
Scheduled Delivery Date shall affect the other obligations of Tenant under this
Lease, except that if Landlord is unable to deliver possession of the Premises
within one hundred twenty (120) days after the Scheduled Delivery Date, Tenant
shall have the option to terminate this Lease.

 

2.3 In the event Landlord permits Tenant, or any agent, employee or contractor
of Tenant, to enter, use or occupy the Premises prior to the Commencement Date,
such entry, use or occupancy shall be subject to all the provisions of this
Lease other than the payment of rent, including, without limitation, Tenant’s
compliance with the insurance requirements of Article 11. Said early possession
shall not advance the Termination Date. Notwithstanding the foregoing but
subject to the terms of this Section 2.3, (a) Landlord grants Tenant the right
to enter the Premises, at Tenant’s sole risk, following the mutual execution and
delivery of this Lease by Landlord and Tenant and Landlord’s receipt of the
Security Deposit, prepaid rent, and evidence of insurance required hereunder,
solely for the purpose of performing the Initial Alterations (defined in Exhibit
B attached hereto) and installing telecommunications and data cabling,
equipment, furnishings and other personalty, and (b) so long as Tenant complies
with the provisions of this Section 2.3, Landlord shall not unreasonably
interfere with Tenant’s early access to the Premises.

 

3. RENT.

 

3.1 Tenant agrees to pay to Landlord the Annual Rent in effect from time to time
by paying the Monthly Installment of Rent then in effect on or before the first
day of each full calendar month during the Term, except that the fourth (subject
to the Abated Monthly Installment of Rent (as defined in Section 3.3 below) full
month’s rent shall be paid upon the execution of this Lease. The Monthly
Installment of Rent in effect at any time shall be one-twelfth (1/12) of the
Annual Rent in effect at such time. Rent for any period during the Term which is
less than a full month shall be a prorated portion of the Monthly Installment of
Rent based upon the number of days in such month. Said rent shall be paid to
Landlord, without deduction or offset and without notice or demand, at the Rent
Payment Address, as set forth on the Reference Pages, or to such other person or
at such other place as Landlord may from time to time designate in writing. If
an Event of Default in the payment of Monthly Installment of Rent occurs,
Landlord may require by notice to Tenant that all subsequent rent payments be
made by an automatic payment from Tenant’s bank account to Landlord’s account,
without cost to Landlord. Tenant must implement such automatic payment system
prior to the next scheduled rent payment or within ten (10) days after
Landlord’s notice, whichever is later. Unless specified in this Lease to the
contrary, all amounts and sums payable by Tenant to Landlord pursuant to this
Lease shall be deemed additional rent.

 

3.2 Tenant recognizes that late payment of any rent or other sum due under this
Lease will result in administrative expense to Landlord, the extent of which
additional expense is extremely difficult and economically

 

2

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impractical to ascertain. Tenant therefore agrees that if rent or any other sum
is not paid when due and payable pursuant to this Lease, a late charge shall be
imposed in an amount equal to the greater of: (a) Fifty Dollars ($50.00), or (b)
six percent (6%) of the unpaid rent or other payment; provided, however, that
the foregoing late charge shall not apply to the first two (2) such late payment
in any twelve (12) month period of the Term of this Lease or any extension
thereto until following written notice to Tenant and the expiration of five (5)
days thereafter without cure. The amount of the late charge to be paid by Tenant
shall be reassessed and added to Tenant’s obligation for each successive month
until paid. The provisions of this Section 3.2 in no way relieve Tenant of the
obligation to pay rent or other payments on or before the date on which they are
due, nor do the terms of this Section 3.2 in any way affect Landlord’s remedies
pursuant to Article 19 of this Lease in the event said rent or other payment is
unpaid after date due.

 

3.3 Notwithstanding anything in this Lease to the contrary, so long as Tenant is
not in default under this Lease, Tenant shall be entitled to an abatement of
Monthly Installment of Rent with respect to the Premises, as originally
described in this Lease, in the amount of $17,067.60 per month for the first
three (3) full calendar months of the Term. The maximum total amount of Abated
Monthly Installment of Rent abated with respect to the Premises in accordance
with the foregoing shall equal $51,202.80 (the “Abated Monthly Installment of
Rent”). If Tenant defaults under this Lease at any time during the first three
(3) calendar months of the Term and fails to cure such default within any
applicable cure period under this Lease, then all Abated Monthly Installment of
Rent shall immediately become due and payable. Only Monthly Installment of Rent
shall be abated pursuant to this Section, as more particularly described herein,
and Tenant’s Proportionate Share of Expenses and Taxes all other rent and other
costs and charges specified in this Lease shall remain as due and payable
pursuant to the provisions of this Lease.

 

4. RENT ADJUSTMENTS.

 

4.1 For the purpose of this Article 4, the following terms are defined as
follows:

 

4.1.1 Lease Year: Each fiscal year (as determined by Landlord from time to time)
falling partly or wholly within the Term.

 

4.1.2 Expenses: All costs of operation, maintenance, repair, replacement and
management of the Building and the Project (including the amount of any credits
which Landlord may grant to particular tenants of the Building and the Project
in lieu of providing any standard services or paying any standard costs
described in this Section 4.1.2 for similar tenants), as determined in
accordance with generally accepted accounting principles, including the
following costs by way of illustration, but not limitation (but subject to the
exclusions set forth below): water and sewer charges; insurance charges of or
relating to all insurance policies and endorsements deemed by Landlord to be
reasonably necessary or desirable and relating in any manner to the protection,
preservation, or operation of the Building or any part thereof (provided,
however, in the event that the Building is damaged by an earthquake, Tenant’s
Proportionate Share of any earthquake insurance deductibles for such earthquake
event shall be amortized over a period of ten (10) years, with interest on the
unamortized amount at one percent (1%) in excess of the Wall Street Journal
prime lending rate announced from time to time; and Tenant shall only pay the
amortized portion of such earthquake insurance deductible during each Lease Year
of the Term (including any extension thereof)); utility costs, including, but
not limited to, the cost of heat, light, power, steam, gas; waste disposal; the
cost of janitorial services; the cost of security and alarm services (including
any central station signaling system); costs of cleaning, repairing, replacing
and maintaining the common areas, including parking and landscaping, window
cleaning costs; labor costs; costs and expenses of managing the Building
including management and/or administrative fees (provided however, in no event
shall the management fees for the Building (expressed as a percentage of gross
receipts for the Building and the project in which the Building is located)
exceed five percent (5%) of such gross receipts); air conditioning maintenance
costs; elevator maintenance fees and supplies; material costs; equipment costs
including the cost of maintenance, repair and service agreements and rental and
leasing costs; purchase costs of equipment; current rental and leasing costs of
items which would be capital items if purchased; tool costs; licenses, permits
and inspection fees; wages and salaries; employee benefits and payroll taxes;
accounting and legal fees; any sales, use or service taxes incurred in
connection therewith. In addition, Landlord shall be entitled to recover, as
additional rent (which, along with any other capital expenditures constituting
Expenses, Landlord may either include in Expenses or cause to be billed to
Tenant along with Expenses and Taxes but as a separate item), Tenant’s
Proportionate Share of: (i) an allocable portion of the cost of capital
improvement items which are reasonably calculated to reduce operating expenses;
(ii) the cost of fire sprinklers and suppression systems and other life safety
systems; and (iii) other capital expenses which are required under any
governmental laws, regulations or ordinances which were not applicable to the
Building at the time it was constructed; but the costs described in this
sentence shall be amortized over the reasonable life of such expenditures in
accordance with such reasonable life and amortization schedules as shall be
determined by Landlord in accordance with generally accepted accounting
principles, with interest on the unamortized amount at one percent (1%) in
excess of the Wall Street Journal prime lending

 

3

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rate announced from time to time. Expenses shall not include depreciation or
amortization of the Building or equipment in the Building except as provided
herein, loan principal payments, costs of alterations of tenants’ premises,
leasing commissions, interest expenses on long-term borrowings or advertising
costs.

 

The following items are also excluded from Expenses:

 

  (a) Any expenses for which Landlord has received actual reimbursement (other
than through Expenses).

 

  (b) Attorney’s fees and other expenses incurred in connection with
negotiations or disputes with prospective tenants or tenants or other occupants
of the Building.

 

  (c) Costs in connection with leasing space in the Building, including
brokerage commissions, brochures and marketing supplies, legal fees in
negotiating and preparing lease documents.

 

  (d) Any “tenant allowances”, “tenant concessions” and other costs or expenses
incurred in fixturing, furnishing, renovating or otherwise improving, decorating
or redecorating space for tenants or other occupants of the Building, or vacant
leaseable space in the Building, except in connection with general maintenance
and repairs provided to the tenants of the Building in general.

 

  (e) Marketing costs, including leasing commissions, attorneys’ fees in
connection with the negotiation and preparation or enforcement of letters, deal
memos, letters of intent, leases, subleases and/or assignments, space planning
costs, and other costs and expenses incurred in connection with lease, sublease
and/or assignment negotiations and transactions with present or prospective
tenants or other occupants of the Building.

 

  (f) The cost or expense of any services or benefits provided generally to
other tenants in the Building and not provided or available to Tenant.

 

  (g) Except as specifically provided in Section 4.1.2, any capital improvement
costs.

 

  (h) Advertising and promotional expenditures.

 

  (i) The cost of complying with any laws in effect (and as enforced) on the
Commencement Date, provided that if any portion of the Building that was in
compliance with all applicable laws on the Commencement Date becomes out of
compliance due to normal wear and tear, the cost of bringing such portion of the
Building into compliance shall be included in Expenses unless otherwise excluded
pursuant to the terms hereof.

 

  (j) Fines, costs or penalties incurred as a result and to the extent of a
violation by Landlord of any applicable laws.

 

  (k) Any fines, penalties or interest resulting from the negligence or willful
misconduct of the Landlord or its agents, contractors, employees or other
tenants.

 

  (l) Costs incurred by Landlord in connection with the correction of latent
defects in the construction of the Building.

 

  (m) The cost of operating any parking or commercial concession which is
operated by Landlord at the Building.

 

  (n) Any cost or expense related to removal, cleaning, abatement or remediation
of “hazardous materials” existing as of the date of this Lease in or about the
Building, common areas or project except to the extent such removal, cleaning,
abatement or remediation is related to the general repair and maintenance of the
Building, common areas or project.

 

4

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  (o) Costs incurred by Landlord for the repair of damage to the Building, to
the extent that Landlord is reimbursed for such costs by insurance proceeds,
contractor warranties, guarantees, judgments or other third party sources.

 

4.1.3 Taxes: Real estate taxes and any other taxes, charges and assessments
which are levied with respect to the Building or the land appurtenant to the
Building, or with respect to any improvements, fixtures and equipment or other
property of Landlord, real or personal, located in the Building and used in
connection with the operation of the Building and said land, any payments to any
ground lessor in reimbursement of tax payments made by such lessor; and all
fees, expenses and costs incurred by Landlord in investigating, protesting,
contesting or in any way seeking to reduce or avoid increase in any assessments,
levies or the tax rate pertaining to any Taxes to be paid by Landlord in any
Lease Year. Taxes shall not include any corporate franchise, or estate,
inheritance or net income tax, or tax imposed upon any transfer by Landlord of
its interest in this Lease or the Building or any taxes to be paid by Tenant
pursuant to Article 28.

 

4.2 Tenant shall pay as additional rent for each Lease Year Tenant’s
Proportionate Share of Expenses and Taxes incurred for such Lease Year.

 

4.3 The annual determination of Expenses shall be made by Landlord and shall be
binding upon Landlord and Tenant, subject to the provisions of this Section 4.3.
During the Term, Tenant may review, at Tenant’s sole cost and expense, the books
and records supporting such determination in an office of Landlord, or
Landlord’s agent, during normal business hours, upon giving Landlord five (5)
days advance written notice within ninety (90) days after receipt of such
determination, but in no event more often than once in any one (1) year period,
subject to execution of a reasonable confidentiality agreement acceptable to
Landlord, and provided that if Tenant utilizes an independent accountant to
perform such review it shall be one of national standing, is not compensated on
a contingency basis and is also subject to such confidentiality agreement. If
Tenant fails to object to Landlord’s determination of Expenses within ninety
(90) days after receipt, or if any such objection fails to state with reasonable
specificity the reason for the objection, Tenant shall be deemed to have
approved such determination and shall have no further right to object to or
contest such determination. If Landlord and Tenant determine that Expenses and
Taxes for the calendar year are less than reported, Landlord shall provide
Tenant with a credit against the next installment of rent in the amount of the
overpayment by Tenant. Likewise, if Landlord and Tenant determine that Expenses
and Taxes for the calendar year are greater than reported, Tenant shall pay
Landlord the amount of any underpayment within thirty (30) days. Any such audit
shall be at Tenant’s sole cost and expense. However, notwithstanding the
foregoing, if Landlord and Tenant determine that Expenses and Taxes for the
Building for the year in question were less than stated by more than five
percent (5%), Landlord, within thirty (30) days after its receipt of paid
invoices therefor from Tenant, shall reimburse Tenant for the reasonable amounts
paid by Tenant to third parties in connection with such review by Tenant. In the
event that during all or any portion of any Lease Year or Base Year, the
Building is not fully rented and occupied Landlord shall make an appropriate
adjustment in occupancy-related Expenses for such year for the purpose of
avoiding distortion of the amount of such Expenses to be attributed to Tenant by
reason of variation in total occupancy of the Building, by employing consistent
and sound accounting and management principles to determine Expenses that would
have been paid or incurred by Landlord had the Building been at least
ninety-five percent (95%) rented and occupied, and the amount so determined
shall be deemed to have been Expenses for such Lease Year.

 

4.4 Prior to the actual determination thereof for a Lease Year, Landlord may
from time to time estimate Tenant’s liability for Expenses and/or Taxes under
Section 4.2, Article 6 and Article 28 for the Lease Year or portion thereof.
Landlord will give Tenant written notification of the amount of such estimate
and Tenant agrees that it will pay, by increase of its Monthly Installments of
Rent due in such Lease Year, additional rent in the amount of such estimate. Any
such increased rate of Monthly Installments of Rent pursuant to this Section 4.4
shall remain in effect until further written notification to Tenant pursuant
hereto.

 

4.5 When the above mentioned actual determination of Tenant’s liability for
Expenses and/or Taxes is made for any Lease Year and when Tenant is so notified
in writing, then:

 

4.5.1 If the total additional rent Tenant actually paid pursuant to Section 4.3
on account of Expenses and/or Taxes for the Lease Year is less than Tenant’s
liability for Expenses and/or Taxes, then Tenant shall pay such deficiency to
Landlord as additional rent in one lump sum within thirty (30) days of receipt
of Landlord’s bill therefor; and

 

4.5.2 If the total additional rent Tenant actually paid pursuant to Section 4.3
on account of Expenses and/or Taxes for the Lease Year is more than Tenant’s
liability for Expenses and/or Taxes, then Landlord shall credit the difference
against the then next due payments to be made by Tenant under this Article 4,
or, if the Lease has terminated, refund the difference in cash.

 

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4.6 If the Commencement Date is other than January 1 or if the Termination Date
is other than December 31, Tenant’s liability for Expenses and Taxes for the
Lease Year in which said Date occurs shall be prorated based upon a three
hundred sixty-five (365) day year.

 

5. SECURITY DEPOSIT. Subject to Article 39, Tenant shall deposit the Security
Deposit with Landlord upon the execution of this Lease. Said sum shall be held
by Landlord as security for the faithful performance by Tenant of all the terms,
covenants and conditions of this Lease to be kept and performed by Tenant and
not as an advance rental deposit or as a measure of Landlord’s damage in case of
Tenant’s default. If Tenant defaults beyond any applicable cure period with
respect to any provision of this Lease, Landlord may use any part of the
Security Deposit for the payment of any rent or any other sum in default, or for
the payment of any amount which Landlord may spend or become obligated to spend
by reason of Tenant’s default, or to compensate Landlord for any other loss or
damage which Landlord may suffer by reason of Tenant’s default. If any portion
is so used, Tenant shall within five (5) days after written demand therefor,
deposit with Landlord an amount sufficient to restore the Security Deposit to
its original amount and Tenant’s failure to do so shall be a material breach of
this Lease. Except to such extent, if any, as shall be required by law, Landlord
shall not be required to keep the Security Deposit separate from its general
funds, and Tenant shall not be entitled to interest on such deposit. If there
exists no Event of Default, the Security Deposit or any balance thereof shall be
returned to Tenant at such time after termination of this Lease, subject to
Landlord’s right to retain any such amounts with respect to any default of
Tenant as provided in this Section 5. Notwithstanding anything to the contrary
contained herein or in Article 23 hereof, Tenant hereby waives the provisions of
Section 1950.7 of the California Civil Code, or any similar or successor
Regulations or other laws now or hereinafter in effect.

 

6. ALTERATIONS.

 

6.1 Tenant shall not make or suffer to be made any alterations, additions, or
improvements, including, but not limited to, the attachment of any fixtures or
equipment in, on, or to the Premises or any part thereof or the making of any
improvements as required by Article 7, without the prior written consent of
Landlord. When applying for such consent, Tenant shall, if requested by
Landlord, furnish complete plans and specifications for such alterations,
additions and improvements. Landlord’s consent shall not be unreasonably
withheld with respect to alterations which (i) are not structural in nature,
(ii) are not visible from the exterior of the Building, (iii) do not affect or
require modification of the Building’s electrical, mechanical, plumbing, HVAC or
other systems, and (iv) in aggregate do not cost more than $5.00 per rentable
square foot of that portion of the Premises affected by the alterations in
question. Notwithstanding anything to the contrary contained in this Lease,
Tenant shall have the right, without the consent of, but with notice to,
Landlord, to make non-structural cosmetic alterations within the interior of the
Premises costing, in the aggregate, less than Ten Thousand Dollars ($10,000.00)
in any twelve (12)-month period during the Term of this Lease, provided, that
(a) Tenant furnishes to Landlord, at least ten (10) days prior to commencing
such non-structural cosmetic alterations, documents substantiating the proposed
alterations and the name, license numbers and insurance of Tenant’s contractor
and any subcontractors who will perform work in the Premises, (b) Tenant has
obtained all necessary governmental permits for the proposed alterations, (c)
the proposed alterations do not affect the building systems in the Building or
affect the exterior of the Building, (d) the proposed alterations are not
visible from the outside of the Building (e) the proposed alterations do not
impair the value of the Premises, and (f) the construction or installation of
the proposed alterations will not directly or indirectly require or result in
any work with respect to compliance with any laws, rules, statutes, acts or
ordinances.

 

6.2 In the event Landlord consents to the making of any such alteration,
addition or improvement by Tenant, the same shall be made by using either
Landlord’s contractor or a contractor reasonably approved by Landlord, in either
event at Tenant’s sole cost and expense. If Tenant shall employ any contractor
other than Landlord’s contractor and such other contractor or any subcontractor
of such other contractor shall employ any non-union labor or supplier, Tenant
shall be responsible for and hold Landlord harmless from any and all delays,
damages and extra costs suffered by Landlord as a result of any dispute with any
labor unions concerning the wage, hours, terms or conditions of the employment
of any such labor. In any event Landlord may charge Tenant a construction
management fee not to exceed five percent (5%) of the cost of such work to cover
its overhead as it relates to such proposed work, with such amount being due
five (5) days after Landlord’s demand.

 

6.3 All alterations, additions or improvements proposed by Tenant shall be
constructed in accordance with all government laws, ordinances, rules and
regulations, using Building standard materials where applicable, and Tenant
shall, prior to construction, provide the additional insurance required under
Article 11 in such case, and also all such assurances to Landlord as Landlord
shall reasonably require to assure payment of the costs thereof, including but
not limited to, notices of non-responsibility, waivers of lien, surety company
performance bonds and funded construction escrows and to protect Landlord and
the Building and appurtenant land against any loss from any mechanic’s,
materialmen’s or other liens. Tenant

 

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shall pay in addition to any sums due pursuant to Article 4, any increase in
real estate taxes attributable to any such alteration, addition or improvement
for so long, during the Term, as such increase is ascertainable; at Landlord’s
election said sums shall be paid in the same way as sums due under Article 4.
Landlord may, as a condition to its consent to any particular alterations or
improvements, require Tenant to deposit with Landlord the amount reasonably
estimated by Landlord as sufficient to cover the cost of removing such
alterations or improvements and restoring the Premises, to the extent required
under Section 26.2; provided, however, that Landlord shall not require Tenant to
deposit any amount in connection with the Initial Alterations.

 

7. REPAIR.

 

7.1 Landlord shall have no obligation to alter, remodel, improve, repair,
decorate or paint the Premises, except that Landlord shall repair and maintain
(subject to reimbursement through Expenses) the structural portions of the roof,
foundation, slab and walls of the Building and the electrical, mechanical,
plumbing, heating and air conditioning systems serving the Building. By taking
possession of the Premises, Tenant accepts them as being in good order,
condition and repair and in the condition in which Landlord is obligated to
deliver them except as set forth in Section 1.1 of this Lease and Section 4 of
Exhibit B. It is hereby understood and agreed that no representations respecting
the condition of the Premises or the Building have been made by Landlord to
Tenant, except as specifically set forth in this Lease. Landlord shall not be
liable for any failure to make any repairs or to perform any maintenance unless
such failure shall persist for an unreasonable time after written notice of the
need of such repairs or maintenance is given to Landlord by Tenant.

 

7.2 Except as set forth in Section 7.1 above, Tenant shall at its own cost and
expense keep and maintain all parts of the Premises and such non-structural
portions of the Building and improvements as are within the exclusive control of
Tenant (if any) in good condition, promptly making all necessary repairs and
replacements, whether ordinary or extraordinary, with materials and workmanship
of the same character, kind and quality as the original (including, but not
limited to, repair and replacement of all of the following to the extent located
solely within or solely serving the Premises: fixtures installed by Tenant,
water heaters serving the Premises, windows, glass and plate glass, doors,
exterior stairs, skylights, any special office entries, interior walls and
finish work, floors and floor coverings, electrical systems and fixtures,
sprinkler systems, dock boards, truck doors, dock bumpers, plumbing work and
fixtures, and performance of regular removal of trash and debris). Tenant as
part of its obligations hereunder shall keep the Premises in a clean and
sanitary condition. Tenant will, as far as possible keep all such parts of the
Premises from deterioration due to ordinary wear and from falling temporarily
out of repair, and upon termination of this Lease in any way Tenant will yield
up the Premises to Landlord in good condition and repair, loss by fire or other
casualty excepted (but not excepting any damage to glass). Tenant shall, at its
own cost and expense, repair any damage to the Premises or the Building
resulting from and/or caused in whole or in part by the negligence or misconduct
of Tenant, its agents, employees, contractors, invitees, or any other person
entering upon the Premises as a result of Tenant’s business activities or caused
by Tenant’s default hereunder.

 

7.3 Except as provided in Article 22, there shall be no abatement of rent and no
liability of Landlord by reason of any injury to or interference with Tenant’s
business arising from the making of any repairs, alterations or improvements in
or to any portion of the Building or the Premises or to fixtures, appurtenances
and equipment in the Building. Tenant hereby waives any and all rights under and
benefits of subsection 1 of Section 1932 and Sections 1941 and 1942 of the
California Civil Code, or any similar or successor Regulations or other laws now
or hereinafter in effect.

 

7.4 As of the date of this Lease, Landlord has entered into and, subject to the
terms hereof, shall maintain, a regularly scheduled preventive
maintenance/service contract with respect to the HVAC unit servicing the
Premises and the Building. The cost of such contract and any service shall be
either reimbursed by Tenant as additional rent (if such contract and/or service
respects the Premises) and shall be included in Expenses (if such contract
and/or service respects the Building). Tenant shall, at Landlord’s request at
any time during the Term and at Tenant’s own cost and expense, enter into a
regularly scheduled preventive maintenance/service contract with a maintenance
contractor approved by Landlord for servicing all heating and air conditioning
systems and equipment serving the Premises (and a copy thereof shall be
furnished to Landlord). In the event that Landlord so requires Tenant to
maintain a regularly scheduled preventive maintenance/service contract, such
contract must include all services suggested by the equipment manufacturer in
the operation/maintenance manual and must become effective within thirty (30)
days of the date Landlord notifies Tenant of such requirement. Should Tenant
fail to do so following such requirement by Landlord, Landlord may, upon notice
to Tenant, maintain the current service contract or enter into such a
maintenance/ service contract on behalf of Tenant or perform the work and in
either case, charge Tenant the cost thereof along with a reasonable amount for
Landlord’s overhead.

 

8. LIENS. Tenant shall keep the Premises, the Building and appurtenant land and
Tenant’s leasehold interest in the Premises free from any liens arising out of
any services, work or materials performed, furnished, or contracted for by
Tenant,

 

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or obligations incurred by Tenant. In the event that Tenant fails, within ten
(10) days following the imposition of any such lien, to either cause the same to
be released of record or provide Landlord with insurance against the same issued
by a major title insurance company or such other protection against the same as
Landlord shall accept (such failure to constitute an Event of Default), Landlord
shall have the right to cause the same to be released by such means as it shall
deem proper, including payment of the claim giving rise to such lien. All such
sums paid by Landlord and all expenses incurred by it in connection therewith
shall be payable to it by Tenant within five (5) days of Landlord’s demand.

 

9. ASSIGNMENT AND SUBLETTING.

 

9.1 Except as expressly set forth in this Article 9, Tenant shall not have the
right to assign or pledge this Lease or to sublet the whole or any part of the
Premises whether voluntarily or by operation of law, or permit the use or
occupancy of the Premises by anyone other than Tenant, and shall not make,
suffer or permit such assignment, subleasing or occupancy without the prior
written consent of Landlord, such consent not to be unreasonably withheld, and
said restrictions shall be binding upon any and all assignees of the Lease and
subtenants of the Premises. In the event Tenant desires to sublet, or permit
such occupancy of, the Premises, or any portion thereof, or assign this Lease,
Tenant shall give written notice thereof to Landlord at least twenty (20) days
but no more than one hundred twenty (120) days prior to the proposed
commencement date of such subletting or assignment, which notice shall set forth
the name of the proposed subtenant or assignee, the relevant terms of any
sublease or assignment and copies of financial reports and other relevant
financial information of the proposed subtenant or assignee.

 

9.2 Notwithstanding any assignment or subletting, permitted or otherwise, Tenant
shall at all times remain directly, primarily and fully responsible and liable
for the payment of the rent specified in this Lease and for compliance with all
of its other obligations under the terms, provisions and covenants of this
Lease. Upon the occurrence of an Event of Default, if the Premises or any part
of them are then assigned or sublet, Landlord, in addition to any other remedies
provided in this Lease or provided by law, may, at its option, collect directly
from such assignee or subtenant all rents due and becoming due to Tenant under
such assignment or sublease and apply such rent against any sums due to Landlord
from Tenant under this Lease, and no such collection shall be construed to
constitute a novation or release of Tenant from the further performance of
Tenant’s obligations under this Lease.

 

9.3 In addition to Landlord’s right to approve of any subtenant or assignee,
Landlord shall have the option, in its sole discretion, in the event of any
proposed subletting or assignment, to terminate this Lease, or in the case of a
proposed subletting of all or more than sixty percent (60%) of the rentable area
of the Premises for more than seventy-five percent (75%) of the remaining Term
(excluding unexercised options), to recapture the portion of the Premises to be
sublet, as of the date the subletting or assignment is to be effective. The
option shall be exercised, if at all, by Landlord giving Tenant written notice
given by Landlord to Tenant within twenty (20) days following Landlord’s receipt
of Tenant’s written notice as required above. However, if Tenant notifies
Landlord, within five (5) days after receipt of Landlord’s termination notice,
that Tenant is rescinding its proposed assignment or sublease, the termination
notice shall be void and the Lease shall continue in full force and effect. If
this Lease shall be terminated with respect to the entire Premises pursuant to
this Section, the Term of this Lease shall end on the date stated in Tenant’s
notice as the effective date of the sublease or assignment as if that date had
been originally fixed in this Lease for the expiration of the Term. If Landlord
recaptures under this Section only a portion of the Premises, the rent to be
paid from time to time during the unexpired Term shall abate proportionately
based on the proportion by which the approximate square footage of the remaining
portion of the Premises shall be less than that of the Premises as of the date
immediately prior to such recapture. Tenant shall, at Tenant’s own cost and
expense, discharge in full any outstanding commission obligation which may be
due and owing as a result of any proposed assignment or subletting, whether or
not the Premises are recaptured pursuant to this Section 9.3 and rented by
Landlord to the proposed tenant or any other tenant.

 

9.4 In the event that Tenant sells, sublets, assigns or transfers this Lease
(except in the case of a Permitted Transfer (as defined below)), Tenant shall
pay to Landlord as additional rent an amount equal to fifty percent (50%) of any
Increased Rent (as defined below), less the Costs Component (as defined below),
when and as such Increased Rent is received by Tenant. As used in this Section,
“Increased Rent” shall mean the excess of (i) all rent and other consideration
which Tenant is entitled to receive by reason of any sale, sublease, assignment
or other transfer of this Lease, over (ii) the rent otherwise payable by Tenant
under this Lease at such time. For purposes of the foregoing, any consideration
received by Tenant in form other than cash shall be valued at its fair market
value as determined by Landlord in good faith. The “Costs Component” is that
amount which, if paid monthly, would fully amortize on a straight-line basis,
over the entire period for which Tenant is to receive Increased Rent, the
reasonable costs incurred by Tenant for leasing commissions and tenant
improvements in connection with such sublease, assignment or other transfer.

 

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9.5 Notwithstanding any other provision hereof, it shall be considered
reasonable for Landlord to withhold its consent to any assignment of this Lease
or sublease of any portion of the Premises if at the time of either Tenant’s
notice of the proposed assignment or sublease or the proposed commencement date
thereof, there shall exist any uncured default of Tenant or matter which will
become a default of Tenant with passage of time unless cured, or if the proposed
assignee or sublessee is an entity: (a) with which Landlord is already in
negotiation; (b) is already an occupant of the Building unless Landlord is
unable to provide the amount of space required by such occupant; (c) is a
governmental agency; (d) is incompatible with the character of occupancy of the
Building; (e) with which the payment for the sublease or assignment is
determined in whole or in part based upon its net income or profits; or (f)
would subject the Premises to a use which would: (i) involve materially
increased personnel or wear upon the Building; (ii) violate any exclusive right
granted to another tenant of the Building; (iii) require any material addition
to or modification of the Premises or the Building in order to comply with
building code or other governmental requirements; or, (iv) involve a violation
of Section 1.2. Tenant expressly agrees that for the purposes of any statutory
or other requirement of reasonableness on the part of Landlord, Landlord’s
refusal to consent to any assignment or sublease for any of the reasons
described in this Section 9.5, shall be conclusively deemed to be reasonable.

 

9.6 Upon any request to assign or sublet, Tenant will pay to Landlord the
Assignment/Subletting Fee plus, on demand, a sum equal to all of Landlord’s
costs, including reasonable attorney’s fees, incurred in investigating and
considering any proposed or purported assignment or pledge of this Lease or
sublease of any of the Premises (the “Review Reimbursement”), regardless of
whether Landlord shall consent to, refuse consent, or determine that Landlord’s
consent is not required for, such assignment, pledge or sublease. Except as
otherwise expressly provided herein, the Review Reimbursement shall not exceed
$1,500.00 (the “Cap”). Any purported sale, assignment, mortgage, transfer of
this Lease or subletting which does not comply with the provisions of this
Article 9 shall be void. If: (a) Tenant fails to execute Landlord’s standard
form of consent without any changes to this Lease, without material changes to
the consent and without material negotiation of the consent, and (b) Landlord
shall notify Tenant that the Review Reimbursement shall exceed the Cap as a
result of such changes and/or negotiation, and (c) Tenant elects to proceed with
such changes and/or negotiation, then the Cap shall not apply and Tenant shall
pay to Landlord the Assignment/Subletting Fee plus the Review Reimbursement in
full. The foregoing shall in no event be deemed to be a right of Tenant to
rescind its written notice to Landlord requesting consent to a transfer of this
Lease or a sublease of all or a portion of the Premises as provided in Section
9.1. In the event that Tenant fails to notify Landlord of its election as
provided in subsection (c) above within three (3) business days following
Landlord’s notice to Tenant of the excess described in subsection (b) above,
then Tenant shall be deemed to have elected proceed with any such changes and/or
negotiation and the Cap shall not apply.

 

9.7 If Tenant is a corporation, limited liability company, partnership or trust,
any transfer or transfers of or change or changes within any twelve (12) month
period in the number of the outstanding voting shares of the corporation or
limited liability company, the general partnership interests in the partnership
or the identity of the persons or entities controlling the activities of such
partnership or trust resulting in the persons or entities owning or controlling
a majority of such shares, partnership interests or activities of such
partnership or trust at the beginning of such period no longer having such
ownership or control shall be regarded as equivalent to an assignment of this
Lease to the persons or entities acquiring such ownership or control and shall
be subject to all the provisions of this Article 9 to the same extent and for
all intents and purposes as though such an assignment.

 

9.8 So long as Tenant is not entering into the Permitted Transfer for the
purpose of avoiding or otherwise circumventing the remaining terms of this
Article 9, Tenant may assign its entire interest under this Lease, without the
consent of Landlord, to (a) an affiliate, subsidiary, or parent of Tenant, or a
corporation, partnership or other legal entity wholly owned by Tenant
(collectively, an “Affiliated Party”), or (b) a successor to Tenant by purchase,
merger, consolidation or reorganization, provided that all of the following
conditions are satisfied (each such transfer a “Permitted Transfer” and any such
assignee or sublessee of a Permitted Transfer, a “Permitted Transferee”): (i)
Tenant is not in default under this Lease beyond any applicable notice and cure
period; (ii) the Permitted Use does not allow the Premises to be used for retail
purposes; (iii) Tenant shall give Landlord written notice at least thirty (30)
days prior to the effective date of the proposed Permitted Transfer; (iv) with
respect to a proposed Permitted Transfer to an Affiliated Party, Tenant
continues to have a net worth equal to or greater than Tenant’s net worth at the
date of this Lease; and (v) with respect to a purchase (whether stock or asset),
merger, consolidation or reorganization or any Permitted Transfer which results
in Tenant ceasing to exist as a separate legal entity, (A) Tenant’s successor
shall own all or substantially all of the assets of Tenant, and (B) Tenant’s
successor shall have a net worth which is at least equal to the greater of
Tenant’s net worth at the date of this Lease or Tenant’s net worth as of the day
prior to the proposed purchase, merger, consolidation or reorganization.
Tenant’s notice to Landlord shall include information and documentation showing
that each of the above conditions has been satisfied. If requested by Landlord,
Tenant’s successor shall sign a commercially reasonable form of assumption
agreement. As used herein, (1) “parent” shall mean a company which owns a
majority of Tenant’s voting equity; (2) “subsidiary” shall mean an entity wholly
owned by Tenant or at least fifty-one percent (51%) of whose voting equity is
owned by Tenant; and (3) “affiliate” shall mean an entity controlled,
controlling or under common control with Tenant.

 

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10. INDEMNIFICATION. None of the Landlord Entities shall be liable and Tenant
hereby waives all claims against them for any damage to any property or any
injury to any person in or about the Premises or the Building by or from any
cause whatsoever (including without limiting the foregoing, rain or water
leakage of any character from the roof, windows, walls, basement, pipes,
plumbing works or appliances, the Building not being in good condition or
repair, gas, fire, oil, electricity or theft), except to the extent caused by or
arising from (a) the gross negligence or willful misconduct of Landlord or its
agents, employees or contractors, or (b) Landlord’s breach of this Lease. Tenant
shall protect, indemnify and hold the Landlord Entities harmless from and
against any and all loss, claims, liability or costs (including court costs and
attorney’s fees) incurred by reason of (a) any damage to any property (including
but not limited to property of any Landlord Entity) or any injury (including but
not limited to death) to any person occurring in, on or about the Premises or
the Building to the extent that such injury or damage shall be caused by or
arise from any actual or alleged act, neglect, fault, or omission by or of
Tenant or any Tenant Entity to meet any standards imposed by any duty with
respect to the injury or damage; (b) the conduct or management of any work or
thing whatsoever done by the Tenant in or about the Premises or from
transactions of the Tenant concerning the Premises; (c) Tenant’s failure to
comply with any and all governmental laws, ordinances and regulations applicable
to the condition or use of the Premises or its occupancy; or (d) any breach or
default on the part of Tenant in the performance of any covenant or agreement on
the part of the Tenant to be performed pursuant to this Lease, except with
respect to subsections (a) through (d) above, to the extent caused by the gross
negligence or willful misconduct of Landlord or Landlord’s agents, employees or
contractors or by Landlord’s breach of this Lease. Landlord shall protect,
indemnify and hold Tenant harmless from and against any and all loss, claims,
liability or costs (including court costs and attorney’s fees) incurred by
reason of any damage to any property (including but not limited to property of
Tenant) or any injury (including but not limited to death) to any person
occurring in, on or about the common areas of the Building to the extent that
such injury or damage shall be caused by or arise from the gross negligence or
willful misconduct of Landlord or any of Landlord’s agents or employees. The
provisions of this Article shall survive the termination of this Lease with
respect to any claims or liability accruing prior to such termination.

 

11. INSURANCE.

 

11.1 Tenant shall keep in force throughout the Term: (a) a Commercial General
Liability insurance policy or policies to protect the Landlord Entities against
any liability to the public or to any invitee of Tenant or a Landlord Entity
incidental to the use of or resulting from any accident occurring in or upon the
Premises with a limit of not less than $1,000,000 per occurrence and not less
than $2,000,000 in the annual aggregate, or such larger amount as Landlord may
reasonably require from time to time taking into consideration insurance
requirements imposed upon similar tenants operating similar businesses in
buildings located in the same rental market, covering bodily injury and property
damage liability and $1,000,000 products/completed operations aggregate; (b)
Business Auto Liability covering owned, non-owned and hired vehicles with a
limit of not less than $1,000,000 per accident; (c) insurance protecting against
liability under Worker’s Compensation Laws with limits at least as required by
statute with Employers Liability with limits of $500,000 each accident, $500,000
disease policy limit, $500,000 disease—each employee; (d) All Risk or Special
Form coverage protecting Tenant against loss of or damage to Tenant’s
alterations, additions, improvements, carpeting, floor coverings, panelings,
decorations, fixtures, inventory and other business personal property situated
in or about the Premises to the full replacement value of the property so
insured; and, (e) Business Interruption Insurance with limit of liability
representing loss of at least approximately six (6) months of income.

 

11.2 The aforesaid policies shall (a) be provided at Tenant’s expense; (b) name
the Landlord Entities as additional insureds (General Liability) and loss payee
(Property—Special Form); (c) be issued by an insurance company with a minimum
Best’s rating of “A:VII” during the Term; and (d) provide that said insurance
shall not be canceled unless thirty (30) days prior written notice (ten days for
non-payment of premium) shall have been given to Landlord; a certificate of
Liability insurance on ACORD Form 25 and a certificate of Property insurance on
ACORD Form 27 shall be delivered to Landlord by Tenant upon the Commencement
Date and at least thirty (30) days prior to each renewal of said insurance.

 

11.3 Whenever Tenant shall undertake any alterations, additions or improvements
in, to or about the Premises (“Work”) the aforesaid insurance protection must
extend to and include injuries to persons and damage to property arising in
connection with such Work, without limitation including liability under any
applicable structural work act, and such other insurance as Landlord shall
require; and the policies of or certificates evidencing such insurance must be
delivered to Landlord prior to the commencement of any such Work.

 

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11.4 Landlord shall keep in force throughout the Term Commercial General
Liability Insurance and All Risk or Special Form coverage insuring the Landlord
and the Building, in such amounts and with such deductibles as Landlord
determines from time to time in accordance with sound and reasonable risk
management principles. The cost of all such insurance is included in Expenses.

 

12. WAIVER OF SUBROGATION. Notwithstanding anything to the contrary in this
Lease, so long as their respective insurers so permit, Tenant and Landlord
hereby mutually waive their respective rights of recovery against each other for
any loss insured by fire, extended coverage, All Risks or other insurance now or
hereafter existing for the benefit of the respective party (or which otherwise
would have been maintained under this Lease but for a breach of this Lease by
the party required to maintain the insurance), regardless of the negligence of
the party hereunder benefiting from such waiver, but only to the extent of the
net insurance proceeds payable (or that would have been payable) under such
policies. Each party shall obtain any special endorsements required by their
insurer to evidence compliance with the aforementioned waiver.

 

13. SERVICES AND UTILITIES. Tenant shall pay for all water, gas, heat, light,
power, telephone, sewer, sprinkler system charges and other utilities and
services used on or from the Premises, together with any taxes, penalties, and
third party surcharges or the like pertaining thereto and any third party
maintenance charges for utilities. Tenant shall furnish all electric light
bulbs, tubes and ballasts, battery packs for emergency lighting and fire
extinguishers. If any such services are not separately metered to Tenant, Tenant
shall pay such proportion of all charges jointly metered with other premises as
reasonably determined by Landlord. Landlord shall have the right to install
separate metering for utilities delivered to the Premises. The cost of
installing such separate metering to the Premises shall be paid by Tenant if
separate metering is required, in Landlord’s reasonable discretion, as a result
of Tenant’s disproportionate use of utilities. Any such charges paid by Landlord
and assessed against Tenant shall be immediately payable to Landlord on demand
and shall be additional rent hereunder. Tenant will not, without the written
consent of Landlord, contract with a utility provider to service the Premises
with any utility, including, but not limited to, telecommunications,
electricity, water, sewer or gas, which is not previously providing such service
to other tenants in the Building. Landlord shall in no event be liable for any
interruption or failure of utility services on or to the Premises. However,
notwithstanding the foregoing, if the Premises, or a material portion of the
Premises, are made untenantable for a period in excess of ten (10) consecutive
business days solely as a result of an interruption, diminishment or termination
of services due to Landlord’s gross negligence or willful misconduct and such
interruption, diminishment or termination of services is otherwise reasonably
within the control of Landlord to correct (a “Service Failure”), then Tenant, as
its sole remedy, shall be entitled to receive an abatement of the Monthly
Installment of Rent and Tenant’s Proportionate Share of Expenses and Taxes
payable hereunder during the period beginning on the eleventh (11th) consecutive
business day of the Service Failure and ending on the day the interrupted
service has been restored. If the entire Premises have not been rendered
untenantable by the Service Failure, the amount of abatement shall be equitably
prorated.

 

14. HOLDING OVER. Tenant shall pay Landlord for each day Tenant retains
possession of the Premises or part of them after termination of this Lease by
lapse of time or otherwise at the rate (“Holdover Rate”) which shall be One
Hundred Fifty Percent (150%) of the greater of (a) the amount of the Annual Rent
for the last period prior to the date of such termination plus all Rent
Adjustments under Article 4; and (b) the then market rental value of the
Premises as determined by Landlord assuming a new lease of the Premises of the
then usual duration and other terms, in either case, prorated on a daily basis,
and also pay all damages sustained by Landlord by reason of such retention. If
Landlord gives notice to Tenant of Landlord’s election to such effect, such
holding over shall constitute renewal of this Lease for a period from month to
month or one (1) year, whichever shall be specified in such notice, in either
case at the Holdover Rate, but if the Landlord does not so elect, no such
renewal shall result notwithstanding acceptance by Landlord of any sums due
hereunder after such termination; and instead, a tenancy at sufferance at the
Holdover Rate shall be deemed to have been created. In any event, no provision
of this Article 14 shall be deemed to waive Landlord’s right of reentry or any
other right under this Lease or at law.

 

15. SUBORDINATION. Without the necessity of any additional document being
executed by Tenant for the purpose of effecting a subordination, this Lease
shall be subject and subordinate at all times to ground or underlying leases and
to the lien of any mortgages or deeds of trust now or hereafter placed on,
against or affecting the Building, Landlord’s interest or estate in the
Building, or any ground or underlying lease; provided, however, that if the
lessor, mortgagee, trustee, or holder of any such mortgage or deed of trust
elects to have Tenant’s interest in this Lease be superior to any such
instrument, then, by notice to Tenant, this Lease shall be deemed superior,
whether this Lease was executed before or after said instrument. Notwithstanding
the foregoing, Tenant covenants and agrees to execute and deliver within ten
(10) days of Landlord’s request such further instruments evidencing such
subordination or superiority of this Lease as may be required by Landlord. As of
the date hereof, a lien encumbers Landlord’s interest in the Building in favor
of Sumitomo Mitsui Banking Corporation (“Lender”). At Tenant’s cost, Landlord
shall use commercially reasonable efforts to provide Tenant with a
non-disturbance, subordination, and attornment agreement made by Lender in favor
of Tenant. In addition, with respect to any future

 

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encumbrance affecting the Building, upon written request by Tenant, Landlord
will use commercially reasonable efforts to obtain a non-disturbance,
subordination and attornment agreement from Landlord’s then current mortgagee on
such mortgagee’s then current standard form of agreement. As used in this
Article 15, “commercially reasonable efforts” of Landlord shall not require
Landlord to incur any cost, expense or liability to obtain such agreement, it
being agreed that Tenant shall be responsible for any fee or review costs
charged by Lender. Landlord’s failure to obtain a non-disturbance, subordination
and attornment agreement for Tenant shall have no effect on the rights,
obligations and liabilities of Landlord and Tenant or be considered to be a
default by Landlord hereunder.

 

16. RULES AND REGULATIONS. Tenant shall faithfully observe and comply with all
the rules and regulations as set forth in Exhibit D to this Lease and all
reasonable and non-discriminatory modifications of and additions to them from
time to time put into effect by Landlord. Landlord shall not be responsible to
Tenant for the non-performance by any other tenant or occupant of the Building
of any such rules and regulations.

 

17. REENTRY BY LANDLORD.

 

17.1 Landlord reserves and shall at all times have the right to re-enter the
Premises to inspect the same, to show said Premises to prospective purchasers,
mortgagees or tenants, and to alter, improve or repair the Premises and any
portion of the Building, without abatement of rent, and may for that purpose
erect, use and maintain scaffolding, pipes, conduits and other necessary
structures and open any wall, ceiling or floor in and through the Building and
Premises where reasonably required by the character of the work to be performed,
provided entrance to the Premises shall not be blocked thereby, and further
provided that the business of Tenant and Tenant’s use and occupancy of the
Premises shall not be interfered with unreasonably. Landlord shall have the
right at any time to change the arrangement and/or locations of entrances, or
passageways, doors and doorways, and corridors, windows, elevators, stairs,
toilets or other public parts of the Building and to change the name, number or
designation by which the Building is commonly known, so long as the same does
not unreasonably interfere with Tenant’s use and occupancy of the Premises. In
the event that Landlord damages any portion of any wall or wall covering,
ceiling, or floor or floor covering within the Premises, Landlord shall repair
or replace the damaged portion to match the original as nearly as commercially
reasonable but shall not be required to repair or replace more than the portion
actually damaged. Subject to the terms of Section 10 above, Tenant hereby waives
any claim for damages for any injury or inconvenience to or interference with
Tenant’s business, any loss of occupancy or quiet enjoyment of the Premises, and
any other loss occasioned by any action of Landlord authorized by this Article
17.

 

17.2 For each of the aforesaid purposes, Landlord shall at all times have and
retain a key with which to unlock all of the doors in the Premises, excluding
Tenant’s vaults and safes or special security areas (designated in advance), and
Landlord shall have the right to use any and all means which Landlord may deem
proper to open said doors in an emergency to obtain entry to any portion of the
Premises. As to any portion to which access cannot be had by means of a key or
keys in Landlord’s possession, Landlord is authorized to gain access by such
means as Landlord shall elect and the cost of repairing any damage occurring in
doing so shall be borne by Tenant and paid to Landlord within five (5) days of
Landlord’s demand.

 

18. DEFAULT.

 

18.1 Except as otherwise provided in Article 20, the following events shall be
deemed to be Events of Default under this Lease:

 

18.1.1 Tenant shall fail to pay when due any sum of money becoming due to be
paid to Landlord under this Lease, whether such sum be any installment of the
rent reserved by this Lease, any other amount treated as additional rent under
this Lease, or any other payment or reimbursement to Landlord required by this
Lease, whether or not treated as additional rent under this Lease, and such
failure shall continue for a period of five (5) days after written notice that
such payment was not made when due, but if any such notice shall be given two
(2) times during the twelve (12) month period commencing with the date of the
first (1st) such notice, the third (3rd) failure to pay within five (5) days
after due any additional sum of money becoming due to be paid to Landlord under
this Lease during such twelve (12) month period shall be an Event of Default,
without notice. The notice required pursuant to this Section 18.1.1 shall
replace rather than supplement any statutory notice required under California
Code of Civil Procedure Section 1161 or any similar or successor statute.

 

18.1.2 Tenant shall fail to comply with any term, provision or covenant of this
Lease which is not provided for in another Section of this Article and shall not
cure such failure within twenty (20) days (forthwith, if the failure involves a
hazardous condition) after written notice of such failure to Tenant provided,
however, that such failure shall not be an event of default if such failure
could not reasonably be cured during such twenty (20) day period, Tenant has
commenced the cure within such twenty (20) day period and thereafter is
diligently pursuing such cure to completion, but the total aggregate cure period
shall not exceed ninety (90) days.

 

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18.1.3 Tenant shall fail to vacate the Premises immediately upon termination of
this Lease, by lapse of time or otherwise, or upon termination of Tenant’s right
to possession only.

 

18.1.4 Tenant shall become insolvent, admit in writing its inability to pay its
debts generally as they become due, file a petition in bankruptcy or a petition
to take advantage of any insolvency statute, make an assignment for the benefit
of creditors, make a transfer in fraud of creditors, apply for or consent to the
appointment of a receiver of itself or of the whole or any substantial part of
its property, or file a petition or answer seeking reorganization or arrangement
under the federal bankruptcy laws, as now in effect or hereafter amended, or any
other applicable law or statute of the United States or any state thereof.

 

18.1.5 A court of competent jurisdiction shall enter an order, judgment or
decree adjudicating Tenant bankrupt, or appointing a receiver of Tenant, or of
the whole or any substantial part of its property, without the consent of
Tenant, or approving a petition filed against Tenant seeking reorganization or
arrangement of Tenant under the bankruptcy laws of the United States, as now in
effect or hereafter amended, or any state thereof, and such order, judgment or
decree shall not be vacated or set aside or stayed within sixty (60) days from
the date of entry thereof.

 

19. REMEDIES.

 

19.1 Upon the occurrence of any Event or Events of Default under this Lease,
whether enumerated in Article 18 or not, Landlord shall have the option to
pursue any one or more of the following remedies without any notice (except as
expressly prescribed herein) or demand whatsoever (and without limiting the
generality of the foregoing, Tenant hereby specifically waives notice and demand
for payment of rent or other obligations and waives any and all other notices or
demand requirements imposed by applicable law):

 

19.1.1 Terminate this Lease and Tenant’s right to possession of the Premises and
recover from Tenant an award of damages equal to the sum of the following:

 

19.1.1.1 The Worth at the Time of Award of the unpaid rent which had been earned
at the time of termination;

 

19.1.1.2 The Worth at the Time of Award of the amount by which the unpaid rent
which would have been earned after termination until the time of award exceeds
the amount of such rent loss that Tenant affirmatively proves could have been
reasonably avoided;

 

19.1.1.3 The Worth at the Time of Award of the amount by which the unpaid rent
for the balance of the Term after the time of award exceeds the amount of such
rent loss that Tenant affirmatively proves could be reasonably avoided;

 

19.1.1.4 Any other amount necessary to compensate Landlord for all the detriment
either proximately caused by Tenant’s failure to perform Tenant’s obligations
under this Lease or which in the ordinary course of things would be likely to
result therefrom; and

 

19.1.1.5 All such other amounts in addition to or in lieu of the foregoing as
may be permitted from time to time under applicable law.

 

The “Worth at the Time of Award” of the amounts referred to in parts 19.1.1.1
and 19.1.1.2 above, shall be computed by allowing interest at the lesser of a
per annum rate equal to: (i) the greatest per annum rate of interest permitted
from time to time under applicable law, or (ii) the Prime Rate plus 5%. For
purposes hereof, the “Prime Rate” shall be the per annum interest rate publicly
announced as its prime or base rate by a federally insured bank selected by
Landlord in the State of California. The “Worth at the Time of Award” of the
amount referred to in part 19.1.1.3, above, 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 1%;

 

19.1.2 Employ the remedy described in California Civil Code § 1951.4 (Landlord
may continue this Lease in effect after Tenant’s breach and abandonment and
recover rent as it becomes due, if Tenant has the right to sublet or assign,
subject only to reasonable limitations); or

 

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19.1.3 Notwithstanding Landlord’s exercise of the remedy described in California
Civil Code § 1951.4 in respect of an Event or Events of Default, at such time
thereafter as Landlord may elect in writing, to terminate this Lease and
Tenant’s right to possession of the Premises and recover an award of damages as
provided above in Section 19.1.1.

 

19.2 The subsequent acceptance of rent hereunder by Landlord shall not be deemed
to be a waiver of any preceding breach by Tenant of any term, covenant or
condition of this Lease, other than the failure of Tenant to pay the particular
rent so accepted, regardless of Landlord’s knowledge of such preceding breach at
the time of acceptance of such rent. No waiver by Landlord of any breach hereof
shall be effective unless such waiver is in writing and signed by Landlord.

 

19.3 TENANT HEREBY WAIVES ANY AND ALL RIGHTS CONFERRED BY SECTION 3275 OF THE
CIVIL CODE OF CALIFORNIA AND BY SECTIONS 1174 (c) AND 1179 OF THE CODE OF CIVIL
PROCEDURE OF CALIFORNIA AND ANY AND ALL OTHER REGULATIONS AND RULES OF LAW FROM
TIME TO TIME IN EFFECT DURING THE TERM PROVIDING THAT TENANT SHALL HAVE ANY
RIGHT TO REDEEM, REINSTATE OR RESTORE THIS LEASE FOLLOWING ITS TERMINATION BY
REASON OF TENANT’S BREACH. TENANT ALSO HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY LITIGATION ARISING OUT OF OR
RELATING TO THIS LEASE.

 

19.4 No right or remedy herein conferred upon or reserved to Landlord is
intended to be exclusive of any other right or remedy, and each and every right
and remedy shall be cumulative and in addition to any other right or remedy
given hereunder or now or hereafter existing by agreement, applicable law or in
equity. In addition to other remedies provided in this Lease, Landlord shall be
entitled, to the extent permitted by applicable law, to injunctive relief, or to
a decree compelling performance of any of the covenants, agreements, conditions
or provisions of this Lease, or to any other remedy allowed to Landlord at law
or in equity. Forbearance by Landlord to enforce one or more of the remedies
herein provided upon an Event of Default shall not be deemed or construed to
constitute a waiver of such Default.

 

19.5 This Article 19 shall be enforceable to the maximum extent such enforcement
is not prohibited by applicable law, and the unenforceability of any portion
thereof shall not thereby render unenforceable any other portion..

 

19.6 If more than three (3) Events of Default occur during the Term or any
renewal thereof, Tenant’s renewal options, expansion options, purchase options,
rights of first offer and/or refusal and right of first negotiation, if any are
provided for in this Lease, shall be null and void.

 

19.7 If, on account of any breach or default by Tenant in Tenant’s obligations
under the terms and conditions of this Lease, it shall become necessary or
appropriate for Landlord to employ or consult with an attorney or collection
agency concerning or to enforce or defend any of Landlord’s rights or remedies
arising under this Lease or to collect any sums due from Tenant, Tenant agrees
to pay all costs and fees so incurred by Landlord, including, without
limitation, reasonable attorneys’ fees and costs.

 

19.8 Upon the occurrence of an Event of Default, Landlord may (but shall not be
obligated to) cure such default at Tenant’s sole expense. Without limiting the
generality of the foregoing, Landlord may, at Landlord’s option, enter into and
upon the Premises if Landlord determines in its reasonable discretion that
Tenant is not acting within a commercially reasonable time to maintain, repair
or replace anything for which Tenant is responsible under this Lease or to
otherwise effect compliance with its obligations under this Lease and correct
the same, without being deemed in any manner guilty of trespass, eviction or
forcible entry and detainer and without incurring any liability for any damage
or interruption of Tenant’s business resulting therefrom and Tenant agrees to
reimburse Landlord within five (5) days of Landlord’s demand as additional rent,
for any expenses which Landlord may incur in thus effecting compliance with
Tenant’s obligations under this Lease, plus interest from the date of
expenditure by Landlord at the Wall Street Journal prime rate. To the extent
required by applicable law, Landlord shall use commercially reasonable efforts
to mitigate Landlord’s damages in the event of a default on the part of Tenant.

 

 

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20. TENANT’S BANKRUPTCY OR INSOLVENCY.

 

20.1 If at any time and for so long as Tenant shall be subjected to the
provisions of the United States Bankruptcy Code or other law of the United
States or any state thereof for the protection of debtors as in effect at such
time (each a “Debtor’s Law”):

 

20.1.1 Tenant, Tenant as debtor-in-possession, and any trustee or receiver of
Tenant’s assets (each a “Tenant’s Representative”) shall have no greater right
to assume or assign this Lease or any interest in this Lease, or to sublease any
of the Premises than accorded to Tenant in Article 9, except to the extent
Landlord shall be required to permit such assumption, assignment or sublease by
the provisions of such Debtor’s Law. Without limitation of the generality of the
foregoing, any right of any Tenant’s Representative to assume or assign this
Lease or to sublease any of the Premises shall be subject to the conditions
that:

 

20.1.1.1 Such Debtor’s Law shall provide to Tenant’s Representative a right of
assumption of this Lease which Tenant’s Representative shall have timely
exercised and Tenant’s Representative shall have fully cured any default of
Tenant under this Lease.

 

20.1.1.2 Tenant’s Representative or the proposed assignee, as the case shall be,
shall have deposited with Landlord as security for the timely payment of rent an
amount equal to the larger of: (a) three (3) months’ rent and other monetary
charges accruing under this Lease; and (b) any sum specified in Article 5; and
shall have provided Landlord with adequate other assurance of the future
performance of the obligations of the Tenant under this Lease. Without
limitation, such assurances shall include, at least, in the case of assumption
of this Lease, demonstration to the satisfaction of the Landlord that Tenant’s
Representative has and will continue to have sufficient unencumbered assets
after the payment of all secured obligations and administrative expenses to
assure Landlord that Tenant’s Representative will have sufficient funds to
fulfill the obligations of Tenant under this Lease; and, in the case of
assignment, submission of current financial statements of the proposed assignee,
audited by an independent certified public accountant reasonably acceptable to
Landlord and showing a net worth and working capital in amounts determined by
Landlord to be sufficient to assure the future performance by such assignee of
all of the Tenant’s obligations under this Lease.

 

20.1.1.3 The assumption or any contemplated assignment of this Lease or
subleasing any part of the Premises, as shall be the case, will not breach any
provision in any other lease, mortgage, financing agreement or other agreement
by which Landlord is bound.

 

20.1.1.4 Landlord shall have, or would have had absent the Debtor’s Law, no
right under Article 9 to refuse consent to the proposed assignment or sublease
by reason of the identity or nature of the proposed assignee or sublessee or the
proposed use of the Premises concerned.

 

21. QUIET ENJOYMENT. Landlord represents and warrants that it has full right and
authority to enter into this Lease and that Tenant, while paying the rental and
performing its other covenants and agreements contained in this Lease, shall
peaceably and quietly have, hold and enjoy the Premises for the Term without
hindrance or molestation from Landlord subject to the terms and provisions of
this Lease. Landlord shall not be liable for any interference or disturbance by
other tenants or third persons, nor shall Tenant be released from any of the
obligations of this Lease because of such interference or disturbance.

 

22. CASUALTY

 

22.1 In the event the Premises or the Building are damaged by fire or other
cause and in Landlord’s reasonable estimation such damage can be materially
restored within one hundred eighty (180) days, Landlord shall forthwith repair
the same and this Lease shall remain in full force and effect, except that
Tenant shall be entitled to a proportionate abatement in rent from the date of
such damage. Such abatement of rent shall be made pro rata in accordance with
the extent to which the damage and the making of such repairs shall interfere
with the use and occupancy by Tenant of the Premises from time to time. Within
forty-five (45) days from the date of such damage, Landlord shall notify Tenant,
in writing, of Landlord’s reasonable estimation of the length of time within
which material restoration can be made, and Landlord’s reasonable determination
shall be binding on Tenant. For purposes of this Lease, the Building or Premises
shall be deemed “materially restored” if they are in such condition as would not
prevent or materially interfere with Tenant’s use of the Premises for the
purpose for which it was being used immediately before such damage.

 

22.2 If such repairs cannot, in Landlord’s reasonable estimation, be made within
one hundred eighty (180) days, Landlord and Tenant shall each have the option of
giving the other, at any time within ninety (90) days after such damage, notice
terminating this Lease as of the date of such damage. In the event of the giving
of such notice, this Lease shall expire and all interest of the Tenant in the
Premises shall terminate as of the date of such damage as if such date had been
originally fixed in this Lease for the expiration of the Term. In the event that
neither Landlord nor Tenant exercises its option to terminate this Lease, then
Landlord shall repair or restore such damage, this Lease continuing in full
force and effect, and the rent hereunder shall be proportionately abated as
provided in Section 22.1.

 

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22.3 Landlord shall not be required to repair or replace any damage or loss by
or from fire or other cause to any panelings, decorations, partitions,
additions, railings, ceilings, floor coverings, office fixtures or any other
property or improvements installed on the Premises by, or belonging to, Tenant.
Any insurance which may be carried by Landlord or Tenant against loss or damage
to the Building or Premises shall be for the sole benefit of the party carrying
such insurance and under its sole control.

 

22.4 In the event that Landlord should fail to complete such repairs and
material restoration within one hundred eighty (180) days after the date
estimated by Landlord therefor, Tenant may at its option and as its sole remedy
terminate this Lease by delivering written notice to Landlord, within fifteen
(15) days after the expiration of said period of time, whereupon the Lease shall
end on the date of such notice or such later date fixed in such notice as if the
date of such notice was the date originally fixed in this Lease for the
expiration of the Term.

 

22.5 Notwithstanding anything to the contrary contained in this Article: (a)
Landlord shall not have any obligation whatsoever to repair, reconstruct, or
restore the Premises when the damages resulting from any casualty covered by the
provisions of this Article 22 occur during the last twelve (12) months of the
Term or any extension thereof, but if Landlord determines not to repair such
damages Landlord shall notify Tenant and if such damages shall render any
material portion of the Premises untenantable Tenant shall have the right to
terminate this Lease by notice to Landlord within fifteen (15) days after
receipt of Landlord’s notice; and (b) in the event the holder of any
indebtedness secured by a mortgage or deed of trust covering the Premises or
Building requires that any insurance proceeds be applied to such indebtedness,
then Landlord shall have the right to terminate this Lease by delivering written
notice of termination to Tenant within fifteen (15) days after such requirement
is made by any such holder, whereupon this Lease shall end on the date of such
damage as if the date of such damage were the date originally fixed in this
Lease for the expiration of the Term.

 

22.6 In the event of any damage or destruction to the Building or Premises by
any peril covered by the provisions of this Article 22, it shall be Tenant’s
responsibility to properly secure the Premises and upon notice from Landlord to
remove forthwith, at its sole cost and expense, such portion of all of the
property belonging to Tenant or its licensees from such portion or all of the
Building or Premises as Landlord shall request.

 

22.7 Tenant hereby waives any and all rights under and benefits of Sections
1932(2) and 1933(4) of the California Civil Code, or any similar or successor
Regulations or other laws now or hereinafter in effect.

 

23. EMINENT DOMAIN. If all or any substantial part of the Premises shall be
taken or appropriated by any public or quasi-public authority under the power of
eminent domain, or conveyance in lieu of such appropriation, either party to
this Lease shall have the right, at its option, of giving the other, at any time
within thirty (30) days after such taking, notice terminating this Lease, except
that Tenant may only terminate this Lease by reason of taking or appropriation,
if such taking or appropriation shall be so substantial as to materially
interfere with Tenant’s use and occupancy of the Premises. If neither party to
this Lease shall so elect to terminate this Lease, the rental thereafter to be
paid shall be adjusted on a fair and equitable basis under the circumstances. In
addition to the rights of Landlord above, if any substantial part of the
Building shall be taken or appropriated by any public or quasi-public authority
under the power of eminent domain or conveyance in lieu thereof, and regardless
of whether the Premises or any part thereof are so taken or appropriated,
Landlord shall have the right, at its sole option, to terminate this Lease.
Landlord shall be entitled to any and all income, rent, award, or any interest
whatsoever in or upon any such sum, which may be paid or made in connection with
any such public or quasi-public use or purpose, and Tenant hereby assigns to
Landlord any interest it may have in or claim to all or any part of such sums,
other than any separate award which may be made with respect to Tenant’s good
will, trade fixtures and moving expenses; Tenant shall make no claim for the
value of any unexpired Term. Tenant hereby waives any and all rights under and
benefits of Section 1265.130 of the California Code of Civil Procedure, or any
similar or successor Regulations or other laws now or hereinafter in effect.

 

24. SALE BY LANDLORD. In event of a sale or conveyance by Landlord of the
Building, the same shall operate to release Landlord from any future liability
upon any of the covenants or conditions, expressed or implied, contained in this
Lease in favor of Tenant, and in such event Tenant agrees to look solely to the
responsibility of the successor in interest of Landlord in and to this Lease.
Except as set forth in this Article 24, this Lease shall not be affected by any
such sale and Tenant agrees to attorn to the purchaser or assignee. If any
security has been given by Tenant to secure the faithful performance of any of
the covenants of this Lease, Landlord may transfer or deliver said security, as
such, to Landlord’s successor in interest and thereupon Landlord shall be
discharged from any further liability with regard to said security.

 

25. ESTOPPEL CERTIFICATES. Within ten (10) days following any written request
which Landlord may make from time to time, Tenant shall execute and deliver to
Landlord or mortgagee or prospective mortgagee a sworn statement

 

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certifying: (a) the date of commencement of this Lease; (b) the fact that this
Lease is unmodified and in full force and effect (or, if there have been
modifications to this Lease, that this lease is in full force and effect, as
modified, and stating the date and nature of such modifications); (c) the date
to which the rent and other sums payable under this Lease have been paid; (d)
the fact that there are no current defaults under this Lease by either Landlord
or Tenant except as specified in Tenant’s statement; and (e) such other matters
as may be requested by Landlord. Landlord and Tenant intend that any statement
delivered pursuant to this Article 25 may be relied upon by any mortgagee,
beneficiary or purchaser, and Tenant shall be liable for all loss, cost or
expense resulting from the failure of any sale or funding of any loan caused by
any material misstatement contained in such estoppel certificate. Tenant
irrevocably agrees that if Tenant fails to execute and deliver such certificate
within such ten (10) day period, the same shall constitute a default under this
Lease; however Landlord may provide to Tenant a second written request with
respect to such estoppel certificate. If Tenant fails to execute and deliver
such certificate within a five (5) business day period following the date of
Landlord’s second written request therefor, Landlord or Landlord’s beneficiary
or agent may execute and deliver such certificate on Tenant’s behalf, and that
such certificate shall be fully binding on Tenant.

 

26. SURRENDER OF PREMISES.

 

26.1 Tenant shall arrange to meet Landlord for two (2) joint inspections of the
Premises, the first to occur at least thirty (30) days (but no more than sixty
(60) days) before the last day of the Term, and the second to occur not later
than forty-eight (48) hours after Tenant has vacated the Premises. In the event
of Tenant’s failure to arrange such joint inspections and/or participate in
either such inspection, Landlord’s inspection at or after Tenant’s vacating the
Premises shall be conclusively deemed correct for purposes of determining
Tenant’s responsibility for repairs and restoration.

 

26.2 All alterations, additions, and improvements in, on, or to the Premises
made or installed by or for Tenant, including carpeting (collectively,
“Alterations”), shall be and remain the property of Tenant during the Term. Upon
the expiration or sooner termination of the Term, all Alterations shall become a
part of the realty and shall belong to Landlord without compensation, and title
shall pass to Landlord under this Lease as by a bill of sale. At the end of the
Term or any renewal of the Term or other sooner termination of this Lease,
Tenant will peaceably deliver up to Landlord possession of the Premises,
together with all Alterations by whomsoever made, in the same conditions
received or first installed, broom clean and free of all debris, excepting only
ordinary wear and tear and damage by fire or other casualty. Notwithstanding the
foregoing, if Landlord elects by notice given to Tenant at least ten (10) days
prior to expiration of the Term, Tenant shall, at Tenant’s sole cost, remove any
Alterations, including carpeting, so designated by Landlord’s notice, and repair
any damage caused by such removal; provided, however, that with respect to the
Initial Alterations, Landlord shall notify Tenant at the time that Landlord
approves the Initial Alterations whether any portion of the Initial Alterations
shall be removed by Tenant at the expiration or earlier termination of the Term.
Tenant must, at Tenant’s sole cost, remove upon termination of this Lease, any
and all of Tenant’s furniture, furnishings, movable partitions of less than full
height from floor to ceiling and other trade fixtures and personal property
(collectively, “Personalty”). Personalty not so removed shall be deemed
abandoned by the Tenant and title to the same shall thereupon pass to Landlord
under this Lease as by a bill of sale, but Tenant shall remain responsible for
the cost of removal and disposal of such Personalty, as well as any damage
caused by such removal.

 

26.3 All obligations of Tenant under this Lease not fully performed as of the
expiration or earlier termination of the Term shall survive the expiration or
earlier termination of the Term. Upon the expiration or earlier termination of
the Term, Tenant shall pay to Landlord the amount, as estimated by Landlord,
necessary to repair and restore the Premises as provided in this Lease and/or to
discharge Tenant’s obligation for unpaid amounts due or to become due to
Landlord. All such amounts shall be used and held by Landlord for payment of
such obligations of Tenant, with Tenant being liable for any additional costs
upon demand by Landlord, or with any excess to be returned to Tenant after all
such obligations have been determined and satisfied. Any otherwise unused
Security Deposit shall be credited against the amount payable by Tenant under
this Lease.

 

27. NOTICES. Any notice or document required or permitted to be delivered under
this Lease shall be addressed to the intended recipient, by fully prepaid
registered or certified United States Mail return receipt requested, or by
reputable independent contract delivery service furnishing a written record of
attempted or actual delivery, and shall be deemed to be delivered when tendered
for delivery to the addressee at its address set forth on the Reference Pages,
or at such other address as it has then last specified by written notice
delivered in accordance with this Article 27, or if to Tenant at either its
aforesaid address or its last known registered office or home of a general
partner or individual owner, whether or not actually accepted or received by the
addressee. Any such notice or document may also be personally delivered if a
receipt is signed by and received from, the individual, if any, named in
Tenant’s Notice Address.

 

17

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28. TAXES PAYABLE BY TENANT. In addition to rent and other charges to be paid by
Tenant under this Lease, Tenant shall reimburse to Landlord, upon demand, any
and all taxes payable by Landlord (other than net income taxes) whether or not
now customary or within the contemplation of the parties to this Lease: (a)
upon, allocable to, or measured by or on the gross or net rent payable under
this Lease, including without limitation any gross income tax or excise tax
levied by the State, any political subdivision thereof, or the Federal
Government with respect to the receipt of such rent; (b) upon or with respect to
the possession, leasing, operation, management, maintenance, alteration, repair,
use or occupancy of the Premises or any portion thereof, including any sales,
use or service tax imposed as a result thereof; (c) upon or measured by the
Tenant’s gross receipts or payroll or the value of Tenant’s equipment,
furniture, fixtures and other personal property of Tenant or leasehold
improvements, alterations or additions located in the Premises; or (d) upon this
transaction or any document to which Tenant is a party creating or transferring
any interest of Tenant in this Lease or the Premises. In addition to the
foregoing, Tenant agrees to pay, before delinquency, any and all taxes levied or
assessed against Tenant and which become payable during the term hereof upon
Tenant’s equipment, furniture, fixtures and other personal property of Tenant
located in the Premises.

 

29. INTENTIONALLY OMITTED.

 

30. DEFINED TERMS AND HEADINGS. The Article headings shown in this Lease are for
convenience of reference and shall in no way define, increase, limit or describe
the scope or intent of any provision of this Lease. Any indemnification or
insurance of Landlord shall apply to and inure to the benefit of all the
following “Landlord Entities”, being Landlord, Landlord’s investment manager,
and the trustees, boards of directors, officers, general partners,
beneficiaries, stockholders, employees and agents of each of them. Any option
granted to Landlord shall also include or be exercisable by Landlord’s trustee,
beneficiary, agents and employees, as the case may be. In any case where this
Lease is signed by more than one person, the obligations under this Lease shall
be joint and several. The terms “Tenant” and “Landlord” or any pronoun used in
place thereof shall indicate and include the masculine or feminine, the singular
or plural number, individuals, firms or corporations, and their and each of
their respective successors, executors, administrators and permitted assigns,
according to the context hereof. The term “rentable area” shall mean the
rentable area of the Premises or the Building as calculated by the Landlord on
the basis of the plans and specifications of the Building. Tenant hereby accepts
and agrees to be bound by the figures for the rentable square footage of the
Premises and Tenant’s Proportionate Share shown on the Reference Pages; however,
Landlord may equitably adjust either or both figures if there is manifest error,
addition or subtraction to the Building or any business park or complex of which
the Building is a part, remeasurement or other circumstance reasonably
justifying adjustment. The term “Building” refers to the structure in which the
Premises are located and the common areas (parking lots, sidewalks, landscaping,
etc.) appurtenant thereto. If the Building is part of a larger complex of
structures, the term “Building” may include the entire complex, where
appropriate (such as shared Expenses or Taxes) and subject to Landlord’s
reasonable discretion.

 

31. TENANT’S AUTHORITY. If Tenant signs as a corporation, partnership, trust or
other legal entity each of the persons executing this Lease on behalf of Tenant
represents and warrants that Tenant has been and is qualified to do business in
the state in which the Building is located, that the entity has full right and
authority to enter into this Lease, and that all persons signing on behalf of
the entity were authorized to do so by appropriate actions. Tenant agrees to
deliver to Landlord, simultaneously with the delivery of this Lease, a corporate
resolution, proof of due authorization by partners, opinion of counsel or other
appropriate documentation reasonably acceptable to Landlord evidencing the due
authorization of Tenant to enter into this Lease.

 

32. FINANCIAL STATEMENTS AND CREDIT REPORTS. At Landlord’s request, Tenant shall
deliver to Landlord a copy, certified by an officer of Tenant as being a true
and correct copy, of Tenant’s most recent audited financial statement, or, if
unaudited, certified by Tenant’s chief financial officer as being true, complete
and correct in all material respects. Tenant hereby authorizes Landlord to
obtain one or more credit reports on Tenant at any time, and shall execute such
further authorizations as Landlord may reasonably require in order to obtain a
credit report. Notwithstanding the foregoing, so long as Tenant is a publicly
traded company that is subject to federal and state securities laws, the
foregoing shall not apply so long as Tenant’s current public annual report (in
compliance with applicable securities laws) for such applicable year is
available to Landlord in the public domain.

 

33. COMMISSIONS. Each of the parties represents and warrants to the other that
it has not dealt with any broker or finder in connection with this Lease, except
as described on the Reference Pages.

 

34. TIME AND APPLICABLE LAW. Time is of the essence of this Lease and all of its
provisions. This Lease shall in all respects be governed by the laws of the
state in which the Building is located.

 

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35. SUCCESSORS AND ASSIGNS. Subject to the provisions of Article 9, the terms,
covenants and conditions contained in this Lease shall be binding upon and inure
to the benefit of the heirs, successors, executors, administrators and assigns
of the parties to this Lease.

 

36. ENTIRE AGREEMENT. This Lease, together with its exhibits, contains all
agreements of the parties to this Lease and supersedes any previous
negotiations. There have been no representations made by the Landlord or any of
its representatives or understandings made between the parties other than those
set forth in this Lease and its exhibits. This Lease may not be modified except
by a written instrument duly executed by the parties to this Lease.

 

37. EXAMINATION NOT OPTION. Submission of this Lease shall not be deemed to be a
reservation of the Premises. Landlord shall not be bound by this Lease until it
has received a copy of this Lease duly executed by Tenant and has delivered to
Tenant a copy of this Lease duly executed by Landlord, and until such delivery
Landlord reserves the right to exhibit and lease the Premises to other
prospective tenants. Notwithstanding anything contained in this Lease to the
contrary, Landlord may withhold delivery of possession of the Premises from
Tenant until such time as Tenant has paid to Landlord any security deposit
required by Article 5, the first month’s rent as set forth in Article 3 and any
sum owed pursuant to this Lease.

 

38. RECORDATION. Tenant shall not record or register this Lease or a short form
memorandum hereof without the prior written consent of Landlord, and then shall
pay all charges and taxes incident such recording or registration.

 

39. LETTER OF CREDIT. Concurrently with Tenant’s execution of this Lease, Tenant
shall deliver to Landlord, as collateral for the full performance by Tenant of
all of its obligations under this Lease and for all losses and damages Landlord
may suffer as a result of Tenant’s failure to comply with one or more provisions
of this Lease, including, but not limited to, any post lease termination damages
under section 1951.2 of the California Civil Code, a standby, unconditional,
irrevocable, transferable letter of credit (the “Letter of Credit”) in the
amount of Fifty-Six Thousand Eight Hundred Ninety-Two Dollars ($56,892.00). The
following terms and conditions shall apply to the Letter of Credit:

 

39.1 The Letter of Credit shall be in favor of Landlord, shall be issued by
Silicon Valley Bank or another bank acceptable to Landlord with a Standard &
Poors rating of “A” or better, shall comply with all of the terms and conditions
of this Article 39 and shall otherwise be in the form attached hereto as Exhibit
E.

 

39.2 The Letter of Credit or any replacement Letter of Credit shall be
irrevocable for the term thereof and shall automatically renew on a year to year
basis until a period ending not earlier than two months subsequent to the
Termination Date (the “LOC Expiration Date”) without any action whatsoever on
the part of Landlord; provided that the issuing bank shall have the right not to
renew the Letter of Credit by giving written notice to Landlord not less than
thirty (30) days prior to the expiration of the then current term of the Letter
of Credit that it does not intend to renew the Letter of Credit.

 

39.3 Upon Tenant’s failure to comply with one or more provisions of this Lease
beyond any applicable cure period, or as otherwise specifically agreed by
Landlord and Tenant pursuant to this Lease or any amendment hereof, Landlord
may, without prejudice to any other remedy provided in this Lease or by Law,
draw on the Letter of Credit and use all or part of the proceeds to (b) satisfy
any amounts due to Landlord from Tenant, and (b) satisfy any other damage,
injury, expense or liability caused by Tenant’s failure to so comply. In
addition, if Tenant fails to furnish a renewal or replacement Letter of Credit
complying with all of the provisions of this Article 39 at least thirty (30)
days prior to the stated expiration date of the Letter of Credit then held by
Landlord, Landlord may draw upon such Letter of Credit and hold the proceeds
thereof (and such proceeds need not be segregated) in accordance with the terms
of this Article 39 (the “LC Proceeds Account”).

 

39.4 The proceeds of the Letter of Credit shall constitute Landlord’s sole and
separate property (and not Tenant’s property or the property of Tenant’s
bankruptcy estate) and Landlord may immediately upon any draw (and without
notice to Tenant) apply or offset the proceeds of the Letter of Credit: (a)
against any rent payable by Tenant under this Lease that is not paid when due;
(b) against all losses and damages that Landlord has suffered or that Landlord
reasonably estimates that it may suffer as a result of Tenant’s failure to
comply with one or more provisions of this Lease, including any damages arising
under section 1951.2 of the California Civil Code following termination of this
Lease; (c) against any costs incurred by Landlord in connection with the Lease
(including attorneys’ fees); and (d) against any other amount that Landlord may
spend or become obligated to spend by reason of an Event of Default. Provided
Tenant has performed all of its obligations under this Lease, Landlord agrees to
pay to Tenant within forty-five (45) days after the LOC Expiration Date the
amount of any proceeds of the Letter of Credit received by Landlord and not
applied as allowed above; provided, that if prior to the LOC Expiration Date a
voluntary petition is filed by Tenant or any guarantor, or an involuntary
petition is filed against Tenant or

 

19

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any guarantor by any of Tenant’s or guarantor’s creditors, under the Federal
Bankruptcy Code, then Landlord shall not be obligated to make such payment in
the amount of the unused Letter of Credit proceeds until either all preference
issues relating to payments under this Lease have been resolved in such
bankruptcy or reorganization case or such bankruptcy or reorganization case has
been dismissed, in each case pursuant to a final court order not subject to
appeal or any stay pending appeal.

 

39.5 Landlord and Tenant (a) acknowledge and agree that in no event or
circumstance shall the Letter of Credit or any renewal thereof or substitute
therefor or any proceeds thereof (including the LC Proceeds Account) be deemed
to be or treated as a “security deposit” under any Law applicable to security
deposits in the commercial context including Section 1950.7 of the California
Civil Code, as such section now exist or as may be hereafter amended or
succeeded (“Security Deposit Laws”), (b) acknowledge and agree that the Letter
of Credit (including any renewal thereof or substitute therefor or any proceeds
thereof) is not intended to serve as a security deposit, and the Security
Deposit Laws shall have no applicability or relevancy thereto, and (c) waive any
and all rights, duties and obligations either party may now or, in the future,
will have relating to or arising from the Security Deposit Laws. Tenant hereby
waives the provisions of Section 1950.7 of the California Civil Code and all
other provisions of Law, now or hereafter in effect, which (i) establish the
time frame by which Landlord must refund a security deposit under a lease,
and/or (ii) provide that Landlord may claim from the security deposit only those
sums reasonably necessary to remedy Events of Default in the payment of rent, to
repair damage caused by Tenant or to clean the Premises, it being agreed that
Landlord may, in addition, claim those sums specified above in this Article 39
and/or those sums reasonably necessary to compensate Landlord for any loss or
damage caused by Tenant’s breach of this Lease or the acts or omission of Tenant
or any other Tenant Entities, including any damages Landlord suffers following
termination of the Lease.

 

39.6 Tenant acknowledges and agrees (and the Letter of Credit shall so state)
that the Letter of Credit shall be honored by the issuing bank without inquiry
as to the truth of the statements set forth in such draw request and regardless
of whether the Tenant disputes the content of such statement.

 

39.7 Landlord may, at any time and without notice to Tenant and without first
obtaining Tenant’s consent thereto, transfer all or any portion of its interest
in and to the Letter of Credit to another party, person or entity, including
Landlord’s mortgagee and/or to have the Letter of Credit reissued in the name of
Landlord’s mortgagee. If Landlord transfers its interest in the Building and
transfers the Letter of Credit (or any proceeds thereof then held by Landlord)
in whole or in part to the transferee, Landlord shall, without any further
agreement between the parties hereto, thereupon be released by Tenant from all
liability therefor. The provisions hereof shall apply to every transfer or
assignment of all or any part of the Letter of Credit to a new landlord. In
connection with any such transfer of the Letter of Credit by Landlord, Tenant
shall, at Tenant’s sole cost and expense, execute and submit to the issuer of
the Letter of Credit such applications, documents and instruments as may be
necessary to effectuate such transfer. Tenant shall be responsible for paying
the issuer’s transfer and processing fees in connection with any transfer of the
Letter of Credit and, if Landlord advances any such fees (without having any
obligation to do so), Tenant shall reimburse Landlord for any such transfer or
processing fees within ten (10) days after Landlord’s written request therefor.

 

39.8 Without limiting the generality of the foregoing, if the Letter of Credit
expires earlier than the LOC Expiration Date, or the issuing bank notifies
Landlord that it shall not renew the Letter of Credit, Landlord shall accept a
renewal thereof or substitute Letter of Credit (such renewal or substitute
Letter of Credit to be in effect not later than sixty (60) days prior to the
expiration thereof), irrevocable and automatically renewable through the LOC
Expiration Date upon the same terms as the expiring Letter of Credit or upon
such other terms as may be acceptable to Landlord. However, if (a) the Letter of
Credit is not timely renewed, or (b) a substitute Letter of Credit, complying
with all of the terms and conditions of this paragraph is not timely received,
Landlord may present such Letter of Credit to the issuing bank, and the entire
sum so obtained shall be paid to Landlord, to be held by Landlord in accordance
with Section 39.4 of this Lease. Notwithstanding the foregoing, Landlord shall
be entitled to receive from Tenant all attorneys’ fees and costs incurred in
connection with the review of any proposed substitute Letter of Credit pursuant
to this Section.

 

39.9 If Tenant is not then in default under this Lease and has timely paid rent
during the twelve (12) month period prior to any reduction and Landlord has not
drawn on the Letter of Credit from and after the thirty-sixth (36th) month of
the Term, Tenant may request in writing that Landlord, in its sole discretion,
allow Tenant to reduce the amount of the Letter of Credit by such amount as
determined by Landlord in its sole discretion; provided, however, that in no
event shall the foregoing be deemed to obligate Landlord to permit such a
reduction, and in no event shall Landlord be liable for Landlord’s refusal to
permit such a reduction. Any reduction of the Letter of Credit amount shall be
accomplished by Tenant providing Landlord with a substitute Letter of Credit in
the reduced amount.

 

20

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40. OPTION TO RENEW.

 

40.1 Tenant shall, provided this Lease is in full force and effect and Tenant is
not in default beyond any applicable cure period under any of the other terms
and conditions of this Lease at the time of notification or commencement, have
one (1) option to renew (the “Renewal Option”) this Lease for a term of three
(3) years (the “Renewal Term”), for the portion of the Premises being leased by
Tenant as of the date the Renewal Term is to commence, on the same terms and
conditions set forth in this Lease, except as modified by the terms, covenants
and conditions as set forth below:

 

40.1.1 If Tenant elects to exercise the Renewal Option, then Tenant shall
provide Landlord with written notice no earlier than the date which is two
hundred seventy (270) days prior to the expiration of the Term of this Lease but
no later than the date which is one hundred eight (180) days prior to the
expiration of the Term of this Lease. If Tenant fails to provide such notice,
Tenant shall have no further or additional right to extend or renew the Term of
this Lease.

 

40.1.2 The Annual Rent and Monthly Installment of Rent in effect at the
expiration of the initial Term of this Lease shall be increased to reflect the
current fair market rental for comparable space in the Building and in other
similar buildings in the same rental market as of the date the Renewal Term is
to commence, taking into account the specific provisions of this Lease which
will remain constant. Landlord shall advise Tenant of the new Annual Rent and
Monthly Installment of Rent for the Premises no later than thirty (30) days
after receipt of Tenant’s written request therefor. Said request shall be made
no earlier than thirty (30) days prior to the first date on which Tenant may
exercise its Renewal Option under this Article 40. Said notification of the new
Annual Rent may include a provision for its escalation to provide for a change
in fair market rental between the time of notification and the commencement of
the Renewal Term. In no event shall the Annual Rent and Monthly Installment of
Rent for the Renewal Term be less than the Annual Rent and Monthly Installment
of Rent in the preceding period.

 

40.1.3 This Renewal Option is not transferable; the parties hereto acknowledge
and agree that they intend that the aforesaid option to renew this Lease shall
be “personal” to Tenant and any Permitted Transferee as set forth above and that
in no event will any assignee or sublessee (other than a Permitted Transferee)
have any rights to exercise the aforesaid option to renew.

 

40.1.4 If the Renewal Option is properly exercised or if Tenant fails to
properly exercise the Renewal Option pursuant to the terms of this Article 40,
Tenant shall have no further right to extend the term of this Lease.

 

41. RIGHT OF FIRST NEGOTIATION. If Tenant properly exercises the Renewal Option
in accordance with the provisions of Article 40 above and provided that Tenant
is not in default of this Lease, Tenant may provide written notice to Landlord
on or before the day that is three hundred sixty (360) days prior to the
expiration of the Renewal Term (the “Offer Deadline”) that Tenant would like to
renew this Lease for an additional term (the “Extension Offer”). The Extension
Offer shall contain all material terms of Tenant’s offer, including, without
limitation, the proposed Monthly Minimum Rent and any other material terms.
Landlord hereby agrees to use good faith in considering Tenant’s Extension
Offer; provided, however, that in no event shall Landlord have any obligation to
accept Tenant’s Extension Offer, and in no event shall Landlord be liable for
Landlord’s refusal to accept Tenant’s Extension Offer. In addition, Landlord may
accept offers from third parties to lease the Premises prior to receiving
Tenant’s Extension Offer. The terms of this Article shall in no event be deemed
an exclusive right of and/or opportunity for Tenant. In the event Tenant fails
to deliver the Extension Offer to Landlord prior to the Offer Deadline, Tenant
shall be deemed to have waived its rights as provided in this Article.

 

42. LIMITATION OF LANDLORD’S LIABILITY. Redress for any claim against Landlord
under this Lease shall be limited to and enforceable only against and to the
extent of Landlord’s interest in the Building. The obligations of

 

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

21

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Landlord under this Lease are not intended to be and shall not be personally
binding on, nor shall any resort be had to the private properties of, any of its
or its investment manager’s trustees, directors, officers, partners,
beneficiaries, members, stockholders, employees, or agents, and in no case shall
Landlord be liable to Tenant hereunder for any lost profits, damage to business,
or any form of special, indirect or consequential damages.

 

LANDLORD:   TENANT:

SFERS REAL ESTATE CORP. U,

a Delaware corporation

 

PHARSIGHT CORPORATION,

a Delaware corporation

By:  

RREEF Management Company, a Delaware

corporation

        By:  

/s/ James H. Ida

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

  By:  

/s/ Cynthia Stephens

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

Name:   James H. Ida   Name:  

Cynthia Stephens

Title:   Vice President, District Manager   Title:  

SVP & CFO

Dated:   July 20, 2005   Dated:   July 18, 2005

 

22

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EXHIBIT A – FLOOR PLAN DEPICTING THE PREMISES

 

attached to and made a part of Lease bearing the

Lease Reference Date of July 18, 2005 between

SFERS REAL ESTATE CORP. U, a Delaware corporation, as Landlord and

PHARSIGHT CORPORATION, a Delaware corporation, as Tenant

 

Exhibit A is intended only to show the general layout of the Premises as of the
beginning of the Term of this Lease. It does not in any way supersede any of
Landlord’s rights set forth in Article 17 with respect to arrangements and/or
locations of public parts of the Building and changes in such arrangements
and/or locations. It is not to be scaled; any measurements or distances shown
should be taken as approximate.

 

LOGO [g15892img001.jpg]

 

                                Initials    

 

A-1

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

EXHIBIT A-1 – SITE PLAN

 

attached to and made a part of Lease bearing the

Lease Reference Date of July 18, 2005 between

SFERS REAL ESTATE CORP. U, a Delaware corporation, as Landlord and PHARSIGHT
CORPORATION, a

Delaware corporation, as Tenant

 

Exhibit A-1 is intended only to show the general layout of the Premises as of
the beginning of the Term of this Lease. It does not in any way supersede any of
Landlord’s rights set forth in Article 17 with respect to arrangements and/or
locations of public parts of the Building and changes in such arrangements
and/or locations. It is not to be scaled; any measurements or distances shown
should be taken as approximate.

 

LOGO [g15892img002.jpg]

 

                                Initials    

 

A-2

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

EXHIBIT B — INITIAL ALTERATIONS

 

attached to and made a part of Lease bearing the

Lease Reference Date of July 18, 2005 between

SFERS REAL ESTATE CORP. U, a Delaware corporation, as Landlord and

PHARSIGHT CORPORATION, a Delaware corporation, as Tenant

 

1. Tenant, following the delivery of the Premises by Landlord and the full and
final execution and delivery of the Lease to which this Exhibit B is attached
and all prepaid rental, security deposits and evidence of insurance required
under such agreement, shall have the right to perform alterations and
improvements in the Premises (the “Initial Alterations”). Notwithstanding the
foregoing, Tenant and its contractors shall not have the right to perform
Initial Alterations in the Premises unless and until Tenant has complied with
all of the terms and conditions of Article 6 of the Lease, including, without
limitation, approval by Landlord of the final plans for the Initial Alterations
and the contractors to be retained by Tenant to perform such Initial
Alterations. Tenant shall be responsible for all elements of the design of
Tenant’s plans (including, without limitation, compliance with law,
functionality of design, the structural integrity of the design, the
configuration of the premises and the placement of Tenant’s furniture,
appliances and equipment), and Landlord’s approval of Tenant’s plans shall in no
event relieve Tenant of the responsibility for such design. At the time that
Landlord approves the final plans for the Initial Alterations, Landlord shall
notify Tenant which, if any, of the Initial Alterations must be removed by
Tenant at the expiration or earlier termination of the Term of the Lease.
Landlord’s approval of the contractors to perform the Initial Alterations shall
not be unreasonably withheld or delayed. The parties agree that Landlord’s
approval of the general contractor to perform the Initial Alterations shall not
be considered to be unreasonably withheld if any such general contractor (a)
does not have trade references reasonably acceptable to Landlord, (b) does not
maintain insurance as required pursuant to the terms of this Lease, (c) does not
have the ability to be bonded for the work in an amount of no less than 150% of
the total estimated cost of the Initial Alterations, (d) does not provide
current financial statements reasonably acceptable to Landlord, or (e) is not
licensed as a contractor in the state/municipality in which the Premises is
located. Tenant acknowledges the foregoing is not intended to be an exclusive
list of the reasons why Landlord may reasonably withhold its consent to a
general contractor.

 

2. Provided Tenant is not in default beyond any applicable notice and cure
periods, Landlord agrees to contribute the sum of $312,906.00 (the “Allowance”)
toward the cost of performing the Initial Alterations in preparation of Tenant’s
occupancy of the Premises. The Allowance may only be used for hard costs in
connection with the Initial Alterations. The Allowance, less a 10% retainage
(which retainage shall be payable as part of the final draw), shall be paid to
Tenant or, at Landlord’s option, to the order of the general contractor that
performs the Initial Alterations, in periodic disbursements within 30 days after
receipt of the following documentation: (i) an application for payment and sworn
statement of contractor substantially in the form of AIA Document G-702 covering
all work for which disbursement is to be made to a date specified therein; (ii)
a certification from an AIA architect substantially in the form of the
Architect’s Certificate for Payment which is located on AIA Document G702,
Application and Certificate of Payment; (iii) Contractor’s, subcontractor’s and
material supplier’s waivers of liens which shall cover all Initial Alterations
for which disbursement is being requested and all other statements and forms
required for compliance with the mechanics’ lien laws of the state in which the
Premises is located, together with all such invoices, contracts, or other
supporting data as Landlord or Landlord’s Mortgagee may reasonably require; (iv)
a cost breakdown for each trade or subcontractor performing the Initial
Alterations; (v) plans and specifications for the Initial Alterations, together
with a certificate from an AIA architect that such plans and specifications
comply in all material respects with all laws affecting the Building, Property
and Premises; (vi) copies of all construction contracts for the Initial
Alterations, together with copies of all change orders, if any; and (vii) a
request to disburse from Tenant containing an approval by Tenant of the work
done and a good faith estimate of the cost to complete the Initial Alterations.
Upon completion of the Initial Alterations, and prior to final disbursement of
the Allowance, Tenant shall furnish Landlord with: (1) general contractor and
architect’s completion affidavits, (2) full and final waivers of lien, (3)
receipted bills covering all labor and materials expended and used, (4) as-built
plans of the Initial Alterations, (5) the certification of Tenant and its
architect that the Initial Alterations have been installed in a good and
workmanlike manner in accordance with the approved plans, and in accordance with
applicable laws, codes and ordinances, (6) the original product and material
warranties and guaranties; and (7) the fully signed-off building permit(s). In
no event shall Landlord be required to disburse the Allowance more than one time
per month. If the Initial Alterations exceed the Allowance, Tenant shall be
entitled to the Allowance in accordance with the terms hereof, but each
individual

 

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disbursement of the Allowance shall be disbursed in the proportion that the
Allowance bears to the total cost for the Initial Alterations, less the 10%
retainage referenced above. Notwithstanding anything herein to the contrary,
Landlord shall not be obligated to disburse any portion of the Allowance during
the continuance of an uncured default under the Lease, and Landlord’s obligation
to disburse shall only resume when and if such default is cured.

 

3. In no event shall the Allowance be used for the purchase of equipment,
furniture or other items of personal property of Tenant. If Tenant does not
submit a request for payment of the entire Allowance to Landlord in accordance
with the provisions contained in this Exhibit B by February 28, 2006, any unused
amount shall accrue to the sole benefit of Landlord, it being understood that
Tenant shall not be entitled to any credit, abatement or other concession in
connection therewith. Tenant shall be responsible for all applicable state sales
or use taxes, if any, payable in connection with the Initial Alterations and/or
Allowance. Landlord shall be entitled to deduct from the Allowance a
construction management fee for Landlord’s oversight of the Initial Alterations
in an amount equal to five percent (5%) of the total cost of the Initial
Alterations.

 

4. Tenant agrees to accept the Premises in its “as-is” condition and
configuration, it being agreed that Landlord shall not be required to perform
any work or, except as provided above with respect to the Allowance, incur any
costs in connection with the construction or demolition of any improvements in
the Premises. Except to the extent caused or exacerbated by Tenant, or any of
Tenant’s Related Parties, agents, licensees, employees, invitees, customers or
contractors, as of the date Landlord delivers possession of the Premises to
Tenant, the base Building electrical, heating, ventilation and air conditioning,
mechanical, plumbing systems servicing the Premises shall be in good order and
satisfactory condition and repair. Tenant shall have sixty (60) days from the
date Landlord delivers possession of the Premises to Tenant in which to discover
and to notify Landlord, in writing, which, if any, of the above stated Building
systems are not in good working order and satisfactory condition and repair and
with respect to any such items of which Tenant so notifies Landlord, Landlord
shall be responsible for the cost and correction thereof.

 

5. This Exhibit B shall not be deemed applicable to any additional space added
to the Premises at any time or from time to time, whether by any options under
the Lease or otherwise, or to any portion of the original Premises or any
additions to the Premises in the event of a renewal or extension of the original
Term of the Lease, whether by any options under the Lease or otherwise, unless
expressly so provided in the Lease or any amendment or supplement to the Lease.

 

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EXHIBIT C – COMMENCEMENT DATE MEMORANDUM

 

attached to and made a part of Lease bearing the

Lease Reference Date of July 18, 2005 between

SFERS REAL ESTATE CORP. U, a Delaware corporation, as Landlord and

PHARSIGHT CORPORATION, a Delaware corporation, as Tenant

 

COMMENCEMENT DATE MEMORANDUM

 

THIS MEMORANDUM, made as of             , 20    , by and between SFERS REAL
ESTATE CORP. U, a Delaware corporation, as Landlord, and PHARSIGHT CORPORATION,
a Delaware corporation (“Tenant”).

 

Recitals:

 

  A. Landlord and Tenant are parties to that certain Lease, dated for reference
as of July 18, 2005 (the “Lease”) for certain premises (the “Premises”)
consisting of approximately 14,223 square feet at the building commonly known as
321 East Evelyn Ave., Mountain View, California 94039.

 

  B. Tenant is in possession of the Premises and the Term of the Lease has
commenced.

 

  C. Landlord and Tenant desire to enter into this Memorandum confirming the
Commencement Date, the Termination Date and other matters under the Lease.

 

NOW, THEREFORE, Landlord and Tenant agree as follows:

 

1. The actual Commencement Date is             .

 

2. The actual Termination Date is             .

 

3. The schedule of the Annual Rent and the Monthly Installment of Rent set forth
on the Reference Pages is deleted in its entirety, and the following is
substituted therefor:

 

[insert rent schedule]

 

4. Capitalized terms not defined herein shall have the same meaning as set forth
in the Lease.

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date and year first above written.

 

LANDLORD:   TENANT:

SFERS REAL ESTATE CORP. U,

a Delaware corporation

 

PHARSIGHT CORPORATION,

a Delaware corporation

By:  

RREEF Management Company, a Delaware

corporation

        By:                       DO_NOT_SIGN                        By:  
                    DO_NOT_SIGN                      Name:  

 

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  Name:  

 

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Title:  

 

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  Title:  

 

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Dated:  

 

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  Dated:  

 

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EXHIBIT D – RULES AND REGULATIONS

 

attached to and made a part of Lease bearing the

Lease Reference Date of July 18, 2005 between

SFERS REAL ESTATE CORP. U, a Delaware corporation, as Landlord and

PHARSIGHT CORPORATION, a Delaware corporation, as Tenant

 

1. No sign, placard, picture, advertisement, name or notice (collectively
referred to as “Signs”) shall be installed or displayed on any part of the
outside of the Building without the prior written consent of the Landlord which
consent shall be in Landlord’s sole discretion. All approved Signs shall be
printed, painted, affixed or inscribed at Tenant’s expense by a person or vendor
approved by Landlord and shall be removed by Tenant at Tenant’s expense upon
vacating the Premises. Landlord shall have the right to remove any Sign
installed or displayed in violation of this rule at Tenant’s expense and without
notice. Tenant shall install, at Tenant’s sole cost and expense, its name on the
directory provided by Landlord in the lobby of the Building.

 

2. If Landlord objects in writing to any curtains, blinds, shades or screens
attached to or hung in or used in connection with any window or door of the
Premises or Building, Tenant shall immediately discontinue such use. No awning
shall be permitted on any part of the Premises. Tenant shall not place anything
or allow anything to be placed against or near any glass partitions or doors or
windows which may appear unsightly, in the opinion of Landlord, from outside the
Premises.

 

3. Tenant shall not alter any lock or other access device or install a new or
additional lock or access device or bolt on any door of its Premises without the
prior written consent of Landlord. Tenant, upon the termination of its tenancy,
shall deliver to Landlord the keys or other means of access to all doors.

 

4. If Tenant requires telephone, data, burglar alarm or similar service, the
cost of purchasing, installing and maintaining such service shall be borne
solely by Tenant. No boring or cutting for wires will be allowed without the
prior written consent of Landlord. Landlord shall direct electricians as to
where and how telephone, data, and electrical wires are to be introduced or
installed. The location of burglar alarms, telephones, call boxes or other
office equipment affixed to the Premises shall be subject to the prior written
approval of Landlord.

 

5. Tenant shall not place a load upon any floor of its Premises, including
mezzanine area, if any, which exceeds the load per square foot that such floor
was designed to carry and that is allowed by law. Heavy objects shall stand on
such platforms as determined by Landlord to be necessary to properly distribute
the weight. Landlord will not be responsible for loss of or damage to any such
equipment or other property from any cause, and all damage done to the Building
by maintaining or moving such equipment or other property shall be repaired at
the expense of Tenant.

 

6. Tenant shall not install any radio or television antenna, satellite dish,
loudspeaker or other device on the roof or exterior walls of the Building
without Landlord’s prior written consent which shall be in Landlord’s sole
discretion.

 

7. Tenant shall not mark, drive nails, screw or drill into the partitions,
woodwork, plaster or drywall (except for pictures and general office uses) or in
any way deface the Premises or any part thereof. Tenant shall not affix any
floor covering to the floor of the Premises or paint or seal any floors in any
manner except as approved by Landlord. Tenant shall repair any damage resulting
from noncompliance with this rule.

 

8. No cooking shall be done or permitted on the Premises, except that
Underwriters’ Laboratory approved microwave ovens or equipment for brewing
coffee, tea, hot chocolate and similar beverages shall be permitted, provided
that such equipment and use is in accordance with all applicable federal, state
and city laws, codes, ordinances, rules and regulations.

 

9. Tenant shall not use any hand trucks except those equipped with the rubber
tires and side guards, and may use such other material-handling equipment as
Landlord may approve. Tenant shall not bring any other vehicles of any kind into
the Building. Forklifts which operate on asphalt areas shall only use tires that
do not damage the asphalt.

 

10. Tenant shall not use the name of the Building or any photograph or other
likeness of the Building in connection with or in promoting or advertising
Tenant’s business except that Tenant may include the Building name in Tenant’s
address. Landlord shall have the right, exercisable without notice and without
liability to any tenant, to change the name and address of the Building.

 

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11. All trash and refuse shall be contained in suitable receptacles at locations
approved by Landlord. Tenant shall not place in the trash receptacles any
personal trash or material that cannot be disposed of in the ordinary and
customary manner of removing such trash without violation of any law or
ordinance governing such disposal.

 

12. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governing authority.

 

13. Tenant assumes all responsibility for securing and protecting its Premises
and its contents including keeping doors locked and other means of entry to the
Premises closed.

 

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

 

15. No person shall go on the roof without Landlord’s permission.

 

16. Tenant shall not permit any animals, other than seeing-eye dogs, to be
brought or kept in or about the Premises or any common area of the property.

 

17. Tenant shall not permit any motor vehicles to be washed or mechanical work
or maintenance of motor vehicles to be performed on any portion of the Premises
or parking lot.

 

18. These Rules and Regulations are in addition to, and shall not be construed
to in any way modify or amend, in whole or in part, the terms, covenants,
agreements and conditions of any lease of any premises in the Building. Landlord
may waive any one or more of these Rules and Regulations for the benefit of any
tenant or tenants, and any such waiver by Landlord shall not be construed as a
waiver of such Rules and Regulations for any or all tenants.

 

19. Landlord reserves the right to make such other and reasonable rules and
regulations as in its judgment may from time to time be needed for safety and
security, for care and cleanliness of the Building and for the preservation of
good order in and about the Building. Tenant agrees to abide by all such rules
and regulations herein stated and any additional rules and regulations which are
adopted. Tenant shall be responsible for the observance of all of the foregoing
rules by Tenant’s employees, agents, clients, customers, invitees and guests.

 

20. Any toilet rooms, toilets, urinals, wash bowls and other apparatus shall not
be used for any purpose other than that for which they were constructed and no
foreign substance of any kind whatsoever shall be thrown into them. The expense
of any breakage, stoppage or damage resulting from the violation of this rule
shall be borne by the Tenant who, or whose employees or invitees, shall have
caused it.

 

21. Tenant shall not permit smoking or carrying of lighted cigarettes or cigars
in areas reasonably designated by Landlord or any applicable governmental
agencies as non-smoking areas.

 

22. Any directory of the Building or project of which the Building is a part
(“Project Area”), if provided, will be exclusively for the display of the name
and location of tenants only and Landlord reserves the right to charge for the
use thereof and to exclude any other names.

 

23. Canvassing, soliciting, distribution of handbills or any other written
material in the Building or Project Area is prohibited and each tenant shall
cooperate to prevent the same. No tenant shall solicit business from other
tenants or permit the sale of any goods or merchandise in the Building or
Project Area without the written consent of Landlord.

 

24. Any equipment belonging to Tenant which causes noise or vibration that may
be transmitted to the structure of the Building or to any space therein to such
a degree as to be objectionable to Landlord or to any tenants in the Building
shall be placed and maintained by Tenant, at Tenant’s expense, on vibration
eliminators or other devices sufficient to eliminate the noise or vibration.

 

25. Driveways, sidewalks, halls, passages, exits, entrances and stairways
(“Access Areas”) shall not be obstructed by tenants or used by tenants for any
purpose other than for ingress to and egress from their respective premises.
Access areas are not for the use of the general public and Landlord shall in all
cases retain the right to control and prevent access thereto by all persons
whose presence, in the judgment of Landlord, shall be prejudicial to the safety,
character, reputation and interests of the Building or its tenants.

 

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D-2

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26. Landlord reserves the right to designate the use of parking areas and
spaces. Tenant shall not park in visitor, reserved, or unauthorized parking
areas. Tenant and Tenant’s guests shall park between designated parking lines
only and shall not park motor vehicles in those areas designated by Landlord for
loading and unloading. Vehicles in violation of the above shall be subject to
being towed at the vehicle owner’s expense. Vehicles parked overnight without
prior written consent of the Landlord shall be deemed abandoned and shall be
subject to being towed at vehicle owner’s expense. Tenant will from time to
time, upon the request of Landlord, supply Landlord with a list of license plate
numbers of vehicles owned or operated by its employees or agents.

 

27. No trucks, tractors or similar vehicles can be parked anywhere other than in
Tenant’s own truck dock area. Tractor-trailers which must be unhooked or parked
with dolly wheels beyond the concrete loading areas must use steel plates or
wood blocks under the dolly wheels to prevent damage to the asphalt paving
surfaces. No parking or storing of such trailers will be permitted in the
parking areas or on streets adjacent thereto.

 

28. During periods of loading and unloading, Tenant shall not unreasonably
interfere with traffic flow and loading and unloading areas of other tenants.
All products, materials or goods must be stored within the Tenant’s Premises and
not in any exterior areas, including, but not limited to, exterior dock
platforms, against the exterior of the Building, parking areas and driveway
areas. Tenant agrees to keep the exterior of the Premises clean and free of
nails, wood, pallets, packing materials, barrels and any other debris produced
from their operation.

 

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                                Initials    

 

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EXHIBIT E – FORM OF LETTER OF CREDIT

 

attached to and made a part of Lease bearing the

Lease Reference Date of July 18, 2005 between

SFERS REAL ESTATE CORP. U, a Delaware corporation, as Landlord and

PHARSIGHT CORPORATION, a Delaware corporation, as Tenant

 

BENEFICIARY:

 

SFERS REAL ESTATE CORP. U

c/o RREEF Management Company

1310 Tully Road, Suite 110

San Jose, California 95122

 

AS “LANDLORD”

 

APPLICANT:

 

PHARSIGHT CORPORATION

800 W. EL CAMINO REAL, SUITE 200

MOUNTAIN VIEW, CA 94040

 

AS “TENANT”

 

AMOUNT: US$56,892.00 (FIFTY-SIX THOUSAND EIGHT HUNDRED NINETY-TWO DOLLARS)

 

EXPIRATION DATE:     July     , 2006

 

LOCATION: SANTA CLARA, CALIFORNIA

 

LADIES AND GENTLEMEN:

 

WE HEREBY ESTABLISH OUR IRREVOCABLE STANDBY LETTER OF CREDIT NO.
SVBSF             IN YOUR FAVOR. THIS LETTER OF CREDIT IS AVAILABLE BY SIGHT
PAYMENT WITH OURSELVES ONLY AGAINST PRESENTATION AT THIS OFFICE OF THE FOLLOWING
DOCUMENTS:

 

  1. THE ORIGINAL OF THIS LETTER OF CREDIT AND ALL AMENDMENT (S), IF ANY.

 

  2. YOUR SIGHT DRAFT DRAWN ON US IN THE FORM ATTACHED HERETO AS EXHIBIT “A”.

 

  3. A DATED CERTIFICATION PURPORTEDLY SIGNED BY AN AUTHORIZED SIGNATORY OR
AGENT OF THE BENEFICIARY, FOLLOWED BY HIS/HER PRINTED NAME AND DESIGNATED TITLE,
STATING THE FOLLOWING WITH INSTRUCTIONS IN BRACKETS THEREIN COMPLIED WITH:

 

“THIS DRAW IN THE AMOUNT OF US$ [INSERT AMOUNT IN NUMERALS] ([INSERT AMOUNT IN
WORDS] AND     /100 U.S. DOLLARS) UNDER SILICON VALLEY BANK IRREVOCABLE STANDBY
LETTER OF CREDIT NO. SVBSF         REPRESENTS FUNDS DUE AND OWING TO US PURSUANT
TO THE TERMS OF THAT CERTAIN LEASE BY AND BETWEEN SFERS REAL ESTATE CORP. U, AS
LANDLORD, AND PHARSIGHT CORPORATION, AS TENANT, AND/OR ANY AMENDMENT TO THE
LEASE OR ANY OTHER AGREEMENT BETWEEN SUCH PARTIES RELATED TO THE LEASE.”

 

THE LEASE AGREEMENT MENTIONED ABOVE IS FOR IDENTIFICATION PURPOSES ONLY AND IS
NOT INTENDED THAT SAID LEASE AGREEMENT BE INCORPORATED HEREIN OR FORM PART OF
THIS LETTER OF CREDIT.

 

PARTIAL DRAWINGS ARE ALLOWED.

 

THIS LETTER OF CREDIT MUST ACCOMPANY ANY DRAWINGS HEREUNDER FOR ENDORSEMENT OF
THE DRAWING AMOUNT AND WILL BE RETURNED TO THE BENEFICIARY UNLESS IT IS FULLY
UTILIZED.

 

                                Initials    

 

E-1

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THIS LETTER OF CREDIT SHALL BE AUTOMATICALLY EXTENDED FOR AN ADDITIONAL PERIOD
OF ONE YEAR, WITHOUT AMENDMENT, FROM THE PRESENT OR EACH FUTURE EXPIRATION DATE,
UNLESS, AT LEAST SIXTY (60) DAYS PRIOR TO THEN CURRENT EXPIRATION DATE WE NOTIFY
YOU BY REGISTERED MAIL/OVERNIGHT COURIER SERVICE AT THE ABOVE ADDRESS THAT THIS
LETTER OF CREDIT WILL NOT BE EXTENDED BEYOND THE CURRENT EXPIRATION DATE. IN NO
EVENT SHALL THIS LETTER OF CREDIT BE AUTOMATICALLY EXTENDED BEYOND, October 30,
2010.

 

UPON RECEIPT OF SUCH NOTICE YOU MAY DRAW YOUR SIGHT DRAFTS ON US, IN THE FORM
ATTACHED HERETO AS EXHIBIT “A”, FOR THE AVAILABLE AMOUNT UNDER THIS STANDBY
LETTER OF CREDIT ACCOMPANIED BY YOUR DATED STATEMENT PURPORTEDLY SIGNED BY ONE
OF YOUR AUTHORIZED SIGNATORIES OR AGENTS, FOLLOWED BY HIS/HER PRINTED NAME AND
DESIGNATED TITLE, CERTIFYING THE FOLLOWING:

 

“WE ARE IN RECEIPT OF YOUR NOTICE THAT YOU HAVE ELECTED NOT TO RENEW SILICON
VALLEY BANK IRREVOCABLE STANDBY LETTER OF CREDIT NO. SVBSF            , AND
PHARSIGHT CORPORATION HAS FAILED TO PROVIDE US WITH AN ACCEPTABLE SUBSTITUTE
IRREVOCABLE STANDBY LETTER OF CREDIT IN ACCORDANCE WITH THE TERMS OF THAT
CERTAIN LEASE DATED [INSERT DATE] BY AND BETWEEN SFERS REAL ESTATE CORP. U, AS
LANDLORD, AND PHARSIGHT CORPORATION, AS TENANT, (THE “LEASE”), AS AMENDED OR
MODIFIED FROM TIME TO TIME.”

 

THIS LETTER OF CREDIT IS TRANSFERABLE ONE OR MORE TIMES, BUT IN EACH INSTANCE
ONLY TO A SINGLE BENEFICIARY AS TRANSFEREE AND ONLY IN THE FULL AMOUNT AVAILABLE
TO BE DRAWN UNDER THE LETTER OF CREDIT AT THE TIME OF SAID TRANSFER. ANY SUCH
TRANSFER SHALL BE EFFECTED ONLY UPON PRESENTATION TO US AT THE BANK’S OFFICE
SPECIFIED BELOW OF A DULY EXECUTED INSTRUMENT SUBSTANTIALLY IN THE FORM OF
“EXHIBIT B” ATTACHED HERETO TOGETHER WITH THE ORIGINAL LETTER OF CREDIT
INCLUDING ANY AMENDMENTS, IF ANY. APPLICANT SHALL PAY OUR TRANSFER FEE OF ¼ OF
1% OF THE TRANSFER AMOUNT (MINIMUM US$250.00) UNDER THIS LETTER OF CREDIT. ANY
REQUEST FOR TRANSFER WILL BE EFFECTED BY US SUBJECT TO THE ABOVE CONDITIONS.
HOWEVER, ANY SUCH TRANSFER IS NOT CONTINGENT UPON APPLICANT’S ABILITY TO PAY OUR
TRANSFER FEE.

 

ANY TRANSFER OF THIS LETTER OF CREDIT MAY NOT CHANGE THE PLACE OR DATE OF
EXPIRATION OF THE LETTER OF CREDIT FROM OUR SPECIFIED OFFICE. EACH TRANSFER
SHALL BE EVIDENCED BY OUR ENDORSEMENT ON THE REVERSE OF THE LETTER OF CREDIT AND
WE SHALL FORWARD THE ORIGINAL OF THE LETTER OF CREDIT SO ENDORSED TO THE
TRANSFEREE.

 

DRAFT(S) AND DOCUMENTS MUST INDICATE THE NUMBER AND DATE OF THIS LETTER OF
CREDIT.

 

DOCUMENTS MUST BE DELIVERED TO US DURING REGULAR BUSINESS HOURS ON A BUSINESS
DAY OR FORWARDED TO US BY OVERNIGHT DELIVERY SERVICE TO: SILICON VALLEY BANK,
3003 TASMAN DRIVE, 2ND FLOOR, MAIL SORT HF210, SANTA CLARA, CALIFORNIA 95054,
ATTENTION: GLOBAL FINANCIAL SERVICES – STANDBY LETTER OF CREDIT DEPARTMENT (THE
“BANK’S OFFICE”).

 

AS USED HEREIN, THE TERM “BUSINESS DAY” MEANS A DAY ON WHICH WE ARE OPEN AT OUR
ABOVE ADDRESS IN SANTA CLARA, CALIFORNIA TO CONDUCT OUR LETTER OF CREDIT
BUSINESS. NOTWITHSTANDING ANY PROVISION TO THE CONTRARY IN THE UCP (AS
HEREINAFTER DEFINED), IF THE EXPIRATION DATE OR THE FINAL EXPIRATION DATE IS NOT
A BUSINESS DAY THEN SUCH DATE SHALL BE AUTOMATICALLY EXTENDED TO THE NEXT
SUCCEEDING DATE WHICH IS A BUSINESS DAY.

 

WE HEREBY AGREE WITH YOU THAT DRAFT(S) DRAWN AND/OR DOCUMENTS PRESENTED UNDER
AND IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT SHALL
BE DULY HONORED UPON PRESENTATION TO SILICON VALLEY BANK, IF PRESENTED ON OR
BEFORE THE EXPIRATION DATE OF THIS LETTER OF CREDIT.

 

                                Initials    

 

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WE FURTHER ACKNOWLEDGE AND AGREE THAT UPON RECEIPT OF THE DOCUMENTATION REQUIRED
HEREIN, WE WILL HONOR YOUR DRAWS AGAINST THIS IRREVOCABLE STANDBY LETTER OF
CREDIT WITHOUT INQUIRY INTO THE ACCURACY OF BENEFICIARY’S SIGNED STATEMENT AND
REGARDLESS OF WHETHER APPLICANT DISPUTES THE CONTENT OF SUCH STATEMENT.

 

THIS LETTER OF CREDIT IS SUBJECT TO THE UNIFORM CUSTOMS AND PRACTICE FOR
DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF COMMERCE,
PUBLICATION NO. 500, (THE “UCP”).

 

SILICON VALLEY BANK,

   

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AUTHORIZED SIGNATURE

 

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AUTHORIZED SIGNATURE

 

                                Initials    

 

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EXHIBIT “A”

 

SIGHT DRAFT/BILL OF EXCHANGE

 

DATE:                        REF. NO.                     

 

AT SIGHT OF THIS BILL OF EXCHANGE

 

PAY TO THE ORDER OF                                         
US$                    

 

U.S. DOLLARS                                         
                                                                     

 

“DRAWN UNDER SILICON VALLEY BANK, SANTA CLARA, CALIFORNIA, IRREVOCABLE STANDBY
LETTER OF CREDIT NUMBER NO. SVBSF              DATED                  , 20    ”

 

TO:    SILICON VALLEY BANK          3003 TASMAN DRIVE  

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     SANTA CLARA, CA 95054   [INSERT NAME OF BENEFICIARY]         

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Authorized Signature

 

GUIDELINES TO PREPARE THE SIGHT DRAFT OR BILL OF EXCHANGE:

 

1. DATE     INSERT ISSUANCE DATE OF DRAFT OR BILL OF EXCHANGE.

 

2. REF. NO.     INSERT YOUR REFERENCE NUMBER IF ANY.

 

3. PAY TO THE ORDER OF:     INSERT NAME OF BENEFICIARY

 

4. US$     INSERT AMOUNT OF DRAWING IN NUMERALS/FIGURES.

 

5. U.S. DOLLARS     INSERT AMOUNT OF DRAWING IN WORDS.

 

6. LETTER OF CREDIT NUMBER INSERT THE LAST DIGITS OF OUR STANDBY L/C NUMBER THAT
PERTAINS TO THE DRAWING.

 

7. DATED INSERT THE ISSUANCE DATE OF OUR STANDBY L/C.

 

NOTE: BENEFICIARY SHOULD ENDORSE THE BACK OF THE SIGHT DRAFT OR BILL OF EXCHANGE
AS YOU WOULD A CHECK.

 

IF YOU NEED FURTHER ASSISTANCE IN COMPLETING THIS SIGHT DRAFT OR BILL OF
EXCHANGE, PLEASE CALL OUR L/C PAYMENT SECTION AND ASK FOR: EVELIO BARAIRO AT
(408) 654-3035 OR ALICE DALUZ AT (408) 654-7120 OR EFRAIN TUVILLA AT (408)
654-6349.

 

                                Initials    

 

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EXHIBIT “B”

 

DATE:

 

TO:    SILICON VALLEY BANK      3003 TASMAN DRIVE      SANTA CLARA, CA 95054  
   ATTENTION: INTERNATIONAL DIVISION RE:    SILICON VALLEY BANK, SANTA CLARA,
CALIFORNIA      IRREVOCABLE STANDBY LETTER OF CREDIT NO. SVBSF                  
DATED                          , 20     AMOUNT: US$            .

 

GENTLEMEN:

 

FOR VALUE RECEIVED, THE UNDERSIGNED BEING A DULY AUTHORIZED REPRESENTATIVE OR
OFFICER OF THE BENEFICIARY (“BENEFICIARY”) HEREBY IRREVOCABLY TRANSFERS TO:

 

____________________________________________

(NAME OF TRANSFEREE)

 

____________________________________________

(ADDRESS)

 

(“TRANSFEREE”) ALL RIGHTS OF THE BENEFICIARY TO DRAW UNDER THE ABOVE LETTER OF
CREDIT UP TO ITS AVAILABLE AMOUNT AS SHOWN ABOVE AS OF THE DATE OF THIS
TRANSFER.

 

BY THIS TRANSFER, ALL RIGHTS OF THE UNDERSIGNED BENEFICIARY IN SUCH LETTER OF
CREDIT ARE TRANSFERRED TO THE TRANSFEREE. TRANSFEREE SHALL HAVE THE SOLE RIGHTS
AS BENEFICIARY THEREOF, INCLUDING SOLE RIGHTS RELATING TO ANY AMENDMENTS,
WHETHER INCREASES OR EXTENSIONS OR OTHER AMENDMENTS, AND WHETHER NOW EXISTING OR
HEREAFTER MADE. ALL AMENDMENTS ARE TO BE ADVISED DIRECTLY TO THE TRANSFEREE
WITHOUT NECESSITY OF ANY CONSENT OF OR NOTICE TO THE UNDERSIGNED BENEFICIARY.

 

                                Initials    

 

E-5

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THE ORIGINAL OF SUCH LETTER OF CREDIT IS RETURNED HEREWITH, AND WE ASK YOU TO
ENDORSE THE TRANSFER ON THE REVERSE THEREOF, AND FORWARD IT DIRECTLY TO THE
TRANSFEREE WITH YOUR CUSTOMARY NOTICE OF TRANSFER.

 

SINCERELY,

 

[INSERT NAME OF TRANSFEROR BENEFICIARY]

 

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(AUTHORIZED SIGNATURE)

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(PRINTED NAME AND TITLE)

SIGNATURE AUTHENTICATION:1

THE ABOVE SIGNATURE AND TITLE

CONFORMS WITH THAT ON FILE WITH US.

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(NAME OF BANK OF TRANSFEROR BENEFICIARY)

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(AUTHORIZED SIGNATURE)

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(PRINTED NAME AND TITLE)

 

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

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1 BY AFFIXING HIS/HER SIGNATURE, HE OR SHE IS CERTIFYING THAT THE BANK ON WHOSE
BEHALF HE OR SHE IS SIGNING IS REGULATED EITHER BY THE FED, THE OCC, OR THE
FDIC, AND THAT THE BANK HAS IMPLEMENTED AML (ANTI-MONEY LAUNDERING) PROCEDURES
IN ACCORDANCE WITH THE BANK SECRECY ACT, AND THAT THE TRANSFEROR NAMED ABOVE HAS
BEEN APPROVED UNDER HIS/HER BANK’S OWN CIP (CUSTOMER INFORMATION PROGRAM). NOTE:
VERIFICATION OF TRANSFEROR’S SIGNATURE(S) BY A NOTARY PUBLIC IS NOT ACCEPTABLE.

 

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E-6