Exhibit 10.44

 

RESULTS WAY CORPORATE PARK

CUPERTINO, CALIFORNIA

 

LEASE FOR 2 RESULTS WAY

 

RWC, LLC,

a California limited liability company,

 

Landlord

 

and

 

DURECT CORPORATION,

a Delaware corporation

 

Tenant

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TABLE OF CONTENTS

 

     Page
Reference

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Article 1 — Premises

   3

Article 2 — Term

   5

Article 3 — Rent

   9

Article 4 — Operating Expenses and Direct Expenses

   9

Article 5 — Letter of Credit

   13

Article 6 — Use

   14

Article 7 — Services and Utilities

   16

Article 8 — Alterations

   16

Article 9 — Repairs

   18

Article 10 — Assignment and Subletting

   19

Article 11 — Indemnification

   23

Article 12 — Destruction or Damage

   24

Article 13 — Waiver of Subrogation

   26

Article 14 — Rules and Regulations

   26

Article 15 — Entry by Landlord

   26

Article 16 — Default

   27

Article 17 — Landlord’s Right to Cure Defaults

   29

Article 18 — Attorneys’ Fees

   29

Article 19 — Holding Over

   30

Article 20 — Waiver

   30

Article 21 — Eminent Domain

   30

Article 22 — Sale by Landlord

   31

Article 23 — Subordination

   31

Article 24 — No Merger

   32

Article 25 — Surrender of Premises

   32

Article 26 — Estoppel Certificate

   33

Article 27 — No Light, Air or View Easement

   33

Article 28 — Notices

   33

Article 29 — Successors

   33

Article 30 — Insurance

   34

Article 31 — Waiver of Trial by Jury; Counterclaim

   35

Article 32 — Miscellaneous

   35

 

EXHIBIT A

 

PREMISES

EXHIBIT B

 

RESULTS WAY CORPORATE PARK SIGN PROGRAM

EXHIBIT C

 

WORK LETTER

EXHIBIT C-1

 

APPROVED SPACE PLAN

EXHIBIT D

 

ACKNOWLEDGMENT OF TERM COMMENCEMENT DATE

EXHIBIT E

 

BASE BUILDING IMPROVEMENTS

EXHIBIT F

 

RULES AND REGULATIONS

EXHIBIT G

 

BUILDING 3 EXTENSION AND EXPANSION RIGHTS

 

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OFFICE LEASE

 

This lease is entered into by and between the landlord and tenant specified in
the Basic Lease Information (hereinafter “Landlord” and “Tenant” respectively).

 

BASIC LEASE INFORMATION

 

Date:    __September 1___, 2005 Landlord:   

RWC, LLC,

a California limited liability company

Tenant:    Durect Corporation, a Delaware corporation Building    Building No. 2
located in the Project, as shown on the site plan attached hereto as Exhibit “A”
and incorporated herein. Project:    That certain real property depicted on the
site plan attached hereto as Exhibit ”A” and incorporated herein, which real
property is commonly known as Results Way Corporate Park, together with the
Premises, the other buildings located on such real property, and all other
improvements now or hereafter located on such real property, collectively.

 

Section

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   Page

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          Section 1.1    3    Premises:    The entire Building, including
below-grade garage Section 1.2    4    Rentable Area of space within the
Building:    Approximately 40,560 rentable square feet calculated by Landlord
pursuant to the Standard Method for Measuring Floor Area in Office Buildings,
ANSI/BOMA Z65.1-1996 for a full-building tenant, as published by the Building
Owners and Managers Association International, plus approximately 3,025 rentable
square feet of storage space and the square footage constituting the Building
garage, both (storage and garage) of which are used by Tenant rent free and as
part of the Premises. For purposes of this Lease, the first floor of the
Building is deemed to contain 22,786 rentable square feet and the second floor
of the Building is deemed to contain 17,774 square feet. Section 1.2    4   
Rentable Area of space within the Project:    372,982 square feet Section 1.2   
4    Rentable Area of Premises:    40,560 square feet Section 1.7    5   
Parking Spaces:    Ten (10) designated visitor-parking spaces near entrance to
Building in surface lot, and exclusive use of Building parking garage. Section
2.1    5    Scheduled Term Commencement Date:    December 1, 2005 Section 2.1   
5    Term Expiration Date:    The day preceding the seventh (7th) anniversary of
the Term Commencement Date.

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Section 3.1    9    Base Rent:                         

Period

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Annual Base Rent

Per Rentable Sq.Ft.

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               Months 1-12    $16.20                13-24    16.69            
   25-36    17.19                37-48    17.70                49-60    18.23  
             61-72    18.78                73-84    19.34

 

Section 3.4    9    Advance Rent    $30,761.10 Section 4.1    9   

Proportionate Share (Project)

Proportionate Share (Building)

  

10.8745%

100%

Section 5.1    13    Letter of Credit:    $328,536.00 Section 6.1    14    Use:
   General office, research and development labs and/or manufacturing uses
consistent with uses in other first class corporate business parks in Cupertino,
California Section 28.1    33    Tenant’s Address for Notices:   

Durect Corporation

10240 Bubb Road

Cupertino, CA 95014-4166

Attention: Vice President, General Counsel

Telephone: (408) 777-1827

Facsimile: (408) 864-7419

Section 28.1    33    Tenant’s Address Prior to Occupancy:   

Durect Corporation

10240 Bubb Road

Cupertino, CA 95014-4166

Attention: Vice President, General Counsel

Telephone: (408) 777-1827

Facsimile: (408) 864-7419

Section 28.1    33    Landlord’s Address for Notices:   

RWC, LLC

c/o Grosvenor California Limited

One Embarcadero, Suite 3900

San Francisco, CA 94111

Attn: Asset Manager

Telephone: 415/434-0175

Facsimile: 415/434-2742

          With a copy to:   

Greene Radovsky Maloney & Share LLP

Four Embarcadero Center, Suite 4000

San Francisco, CA 94111

Attn: Mark S. Hennigh

Telephone: 415/981-1400

Facsimile: 415/777-4961

Section 32.11    36    Landlord’s Broker:    Cornish & Carey Commercial Section
32.11    36    Tenant’s Broker:    Colliers International

 

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Special Provision(s):    Section 1.1(b) – Right of First Refusal      Section
2.3 – Extension Option      Section 8(b) – Landlord’s Contribution

 

In the event of any conflict between this Basic Lease Information and the other
terms of this Lease, the other terms of this Lease shall control.

 

Article 1 — Premises

 

Section 1.1 Premises.

 

(a) Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord,
for the term and subject to the agreements, conditions and provisions contained
in the Basic Lease Information and hereinafter set forth, to each and all of
which Landlord and Tenant hereby mutually agree, those certain premises shown on
Exhibit “A” attached hereto, together with a non-exclusive right to the use of
the “Common Facilities” (as defined in Section 1.3) (the “Premises”), which
Premises are specified in the Basic Lease Information and located in the
building specified in the Basic Lease Information (the “Building”). The vertical
boundaries of the Premises shall extend from the unfinished surface of the floor
to and including the unfinished surface of the roof above the finished ceiling.
Landlord hereby reserves for itself from the leasehold interest granted to
Tenant herein: (a) the “Main Utility Lines” (as defined in Section 1.3), any
easements for public utilities and the right of ingress and egress to the public
utilities and the distribution system for all utilities serving the Project for
the purpose of installing, maintaining and repairing such utility systems, and
(b) a nonexclusive right to use the Common Facilities, including a nonexclusive
right of ingress and egress over the parking lots, entrances, exits and drive
aisles.

 

(b) Right of First Refusal. Throughout the Term of this Lease, but subject to
the extension option rights and expansion option rights granted prior to July
2005 to other tenants of the building commonly known as 3 Results Way (“Building
3”) and shown on Exhibit “A” attached hereto, which extension option and
expansion option rights are listed on Exhibit “G” attached hereto, Tenant shall
have the continuing right of first refusal to lease space located in Building 3
as such space becomes available for lease (the “First Refusal Space”). The First
Refusal Space shall not be deemed available for lease if Landlord renews or
extends the lease with the existing tenant(s) of the First Refusal Space, their
successors or assigns, on a negotiated basis. The precise size and configuration
of the First Refusal Space shall be as reasonably determined by Landlord and
shall be subject to the exiting requirements then imposed by the applicable
governmental authorities with jurisdiction over the Premises. On each occasion
during the Term of this Lease (including any Option Terms) that Landlord
receives a Third Party Offer (as hereinafter defined) for the First Refusal
Space and prior to leasing the First Refusal Space to any third party, Landlord
shall first deliver to Tenant a redacted copy of such Third Party Offer
specifying the material business terms and conditions upon which such
third-party has proposed to lease the First Refusal Space and which Landlord is
willing to accept (the “Availability Notice”). Tenant shall then have five
(5) business days after its receipt of the Availability Notice in which Tenant
may either give Landlord written notice of Tenant’s acceptance of the First
Refusal Space on the terms and conditions specified in the Availability Notice
(the “Acceptance Notice”) or written notice of a counteroffer by Tenant for the
lease of such First Refusal Space (the “Counteroffer Notice”). Prior to giving
the Availability Notice to Tenant and for five (5) business days thereafter,
Landlord shall not enter into any lease of the First Refusal Space with any
other person. If during such five (5) business day period:

 

1. Tenant gives Landlord an Acceptance Notice, Landlord and Tenant shall then
promptly and at Landlord’s election enter into an amendment of this Lease
incorporating the terms of the Acceptance Notice, increasing the size of the
Premises to include the First Refusal Space and to increase Tenant’s Percentage
Share to reflect the Rentable Area so added; or

 

2. Tenant gives Landlord a Counteroffer Notice, Landlord shall then give Tenant
written notice either: (i) accepting such counteroffer (in which event, Landlord
and Tenant shall promptly enter into an amendment of this Lease incorporating
the terms of said counteroffer, increasing the size of the Premises to include
the First Refusal Space

 

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and to increase Tenant’s Percentage Share to reflect the Rentable Area so
added); or (ii) rejecting such counteroffer.

 

After expiration of such five (5) business day period, if Tenant has not given
Landlord a timely Acceptance Notice or a timely Counteroffer Notice, then
Landlord shall be free to lease the First Refusal Space to any other person or
entity on any terms and conditions which are not materially less favorable to
Landlord than those as set forth in the Third Party Offer. After expiration of
such five (5) business day period, if Tenant has given Landlord a timely
Counteroffer Notice which Landlord has rejected, Landlord shall be free to lease
such First Refusal Space to any other person or entity on any terms and
conditions; provided, however, Landlord shall not lease such First Refusal Space
to any other person or entity on basic economic terms materially less favorable
to Landlord (in the aggregate) than those set forth in such Counteroffer Notice
(or, if more than one was timely given, in the last such Counteroffer Notice)
without first giving Tenant at least five (5) business days prior written notice
of such proposed lease and the opportunity (during such five (5) business day
period by delivery of written notice to Landlord) to agree to lease such First
Refusal Space on the same terms and conditions as those of such proposed lease.

 

For purposes of this Section, the term “Third Party Offer” shall mean a bona
fide offer to lease all or any part of the First Refusal Space received by
Landlord (including any term sheets or letters of intent) from an unaffiliated
third party on terms which are acceptable to Landlord.

 

Section 1.2 Rentable Area. As used in this Lease, the term “Rentable Square
Feet” means the number of square feet of constructed floor area appropriated to
the exclusive use or occupancy of tenants or owner/occupants, whether or not
such areas are actually leased or occupied, measured in accordance with the
standard set forth under “Rentable Area of Space Within Building” in the Basic
Lease Information. As used in this Lease, the term “Rentable Area” means the
total number of Rentable Square Feet comprising the applicable portion of the
Project from time to time. The Rentable Area of the Premises and of the Project
are agreed to be the corresponding number of square feet specified in the Basic
Lease Information determined using the methodology set forth in the preceding
sentences of this Section 1.2.

 

Section 1.3 Main Utility Lines, Common Facilities. The term “Main Utility Lines”
means the pipes, conduits, lines, trails and/or systems for electricity,
telephone, water, storm drain, gas and sewer services serving the Project and
located under those portions of the Project. The term “Common Facilities” means
the Main Utility Lines, entrances, exits, drive aisles and access roads, parking
areas, walkways, landscaped areas and all other areas located on or adjacent to
the Project which are provided from time to time for the common use of tenants
or occupants of the Project and/or the Premises. The Common Facilities exclude
all areas located on or adjacent to the Project which Landlord has provided for
the exclusive use of particular tenants or occupants of the Project and/or the
Premises (except that Landlord shall maintain, on a common basis, any exclusive
parking spaces and the cost of such maintenance shall be included in “Operating
Expenses,” as defined below).

 

Section 1.4 Common Facilities Use. Landlord grants to Tenant and its authorized
representatives and invitees a nonexclusive right to use the Common Facilities
for ingress and egress, with others who are entitled to use the Common
Facilities, subject to Landlord’s reserved rights hereinafter set forth.
Landlord reserves the right to change the Common Facilities or the layout
thereof, and to add other buildings and improvements to the Project and remove
buildings and improvements from the Project, from time to time so long as such
change does not materially adversely affect Tenant’s use of the Premises.
Landlord shall also have the right to remeasure other buildings in the Project
and to adjust the Proportionate Share for all tenants in the Project as a result
of any such remeasurement. Landlord reserves for itself and its assigns a
nonexclusive easement on, over and across the Common Facilities for the purpose
of vehicular (including trucks of all sizes) and pedestrian ingress and egress.
Tenant expressly acknowledges that Landlord has informed Tenant that Landlord
will likely subdivide the Project, and demolish some of the existing buildings
in the Project, and that subsequent thereto a new project may be constructed (by
Landlord or otherwise) in its place, which new “project” will not be a part of
the Project.

 

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Section 1.5 Common Facilities Operation. Landlord shall have the right to:

 

(a) Establish and enforce rules and regulations applicable to all tenants and
occupants concerning the maintenance, management, use and operation of the
Common Facilities.

 

(b) Close any of the Common Facilities to whatever extent required in the
opinion of Landlord’s counsel to prevent a dedication of any of the Common
Facilities or the accrual of any rights of any person or of the public to the
Common Facilities, but Landlord shall use reasonable efforts not to interfere
with Tenant’s use of the Premises.

 

(c) Close temporarily any of the Common Facilities for maintenance purposes.

 

(d) Select a person or company to maintain and operate any of the Common
Facilities if at any time Landlord determines that the best interests of the
Project will be served by having any of the Common Facilities maintained and
operated by that person or company. Landlord shall have the right to negotiate
and enter into a contract with that person or company on such terms and
conditions and for such period of time as Landlord deems reasonable and proper
as to both service and cost.

 

(e) Landlord and its agents (and others receiving Landlord’s written permission)
while engaging in the work of constructing improvements or making repairs in the
Project, including construction of new buildings or building additions, shall
have the right to make use of portions of the accommodation areas, roads and
truckways; provided, however, that Landlord shall use its reasonable efforts not
to interfere with Tenant’s use of the Premises. In determining the
reasonableness of any such use, all pertinent factors shall be taken into
consideration including the interference, if any, with the operations of the
various businesses located in the Project, the availability of other space for
such purpose and the cost of using other space for such purpose, provided that
the entrance to the Premises or other tenants’ premises for customers and
service shall not be blocked.

 

Section 1.6 Signage. Tenant shall be entitled to the 2 Results Way portion of
the monument sign at the entrance to the Project which monument sign may be
relocated by Landlord before or after the Term Commencement Date. In addition,
Tenant shall have the exclusive right to place its name on the building sign
near the Premises subject to (i) Landlord’s prior review and approval, which
shall not be unreasonably withheld, conditioned or delayed, (ii) the receipt by
Tenant of all necessary governmental approvals therefor and (ii) the compliance
of any such signage with (1) the Results Way Corporate Park Sign Program
attached hereto as Exhibit “B” and incorporated herein by this reference and
(2) all legal requirements to construct, install, maintain, repair and replace
signs and other identifying materials containing the Tenant Name (as hereinafter
defined) in, on or about the Premises. As used herein, the “Tenant Name” means
Durect Corporation and any other legal name or trade name by which Tenant or its
products may be known. As part of the Tenant Name, Tenant may include any logo
commonly associated with Tenant or its products on such signage located on the
Premises.

 

Section 1.7 Parking. Tenant shall have the exclusive use of the parking garage
in the Building, along with the right to ten (10) spaces located near the front
entrance to the Building in the adjacent surface parking lot, which ten
(10) spaces may be designated by Tenant by appropriate signage as “Durect
Corporation Visitor Parking.” From time to time, Landlord shall have the right
to designate other parking spaces in the Project for the exclusive use of
particular tenants of the Project and/or a building, and Tenant shall not allow
its employees to park their vehicles in any parking spaces designated for the
exclusive use of other tenants. In addition, Landlord shall have the right to
designate “visitors only” parking spaces for the use of visitors to the Project
(as opposed to employees of tenants of the Project), in which case Tenant shall
not allow its employees to park their vehicles in any parking spaces so
designated. Landlord shall have no obligation to supervise or monitor the use of
the parking lot by tenants or third parties.

 

Article 2 — Term

 

Section 2.1 Term. Prior to tendering the Premises to Tenant, Landlord shall
complete construction of the tenant improvements to the first (1st) floor of the
Building (the “First Floor Improvements”), at Landlord’s sole cost and expense,
in accordance with the provisions of the Work Letter attached hereto as Exhibit
“C”. If the Premises have been

 

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tendered to Tenant on or before December 1, 2005 (which date may be extended as
set forth below) with the First Floor Improvements Substantially Completed (as
defined in Section 2.2 below), then the term of this Lease (the “Term”) shall
commence (the “Term Commencement Date”), and all rent and additional rent shall
commence to accrue (the “Rent Commencement Date”) on December 1, 2005 (or the
date as so extended). If the Premises have not been tendered to Tenant on or
before December 1, 2005 (or the date as so extended) with the First Floor
Improvements Substantially Completed, and the reason for the delay is not a
Tenant Delay (as defined in the Work Letter), then the Term Commencement Date
shall be the date on which the Premises are tendered to Tenant with the First
Floor Improvements Substantially Completed, and the Rent Commencement Date shall
be as many days after the Term Commencement Date as is equal to (i) the number
of days after December 1, 2005 (as such date may be extended) until the Premises
is tendered with the First Floor Improvements Substantially Completed, if the
Premises is tendered with the First Floor Improvements Substantially Completed
by March 1, 2006 (which date shall also be extended as set forth below), and
(ii) two (2) times the number of days after March 1, 2006 (as such date may be
extended) until the Premises is tendered with the First Floor Improvements
Substantially Completed, if the Premises is not tendered with the First Floor
Improvements Substantially Completed by March 1, 2006. The dates of December 1,
2005 and March 1, 2006 as used throughout this paragraph are contingent on
Tenant executing this Lease on or before August 31, 2005, and Landlord and
Tenant mutually agreeing to the Plans (as defined in the Work Letter) on or
before September 21, 2005. If either Tenant has not executed the lease on or
before August 31, 2005, or Landlord and Tenant have not mutually approved the
Plans on or before September 21, 2005, then the dates “December 1, 2005 and
March 1, 2006” shall each be extended on a day-for-day basis. Regardless of the
Rent Commencement Date applicable to the first floor of the Premises, Base Rent
shall commence to be due with respect to the second floor of the Premises on
December 1, 2006. If Substantial Completion of the First Floor Improvements has
not occurred by the Scheduled Term Commencement Date for any reason, Landlord
shall not be liable for any claims, damages or liabilities by reason thereof.
Landlord shall provide Tenant as much notice as circumstances reasonably allow
of the date when Landlord expects to achieve Substantial Completion, based upon
the progress of the work. Upon the execution and delivery of this Lease, the
terms and provisions hereof shall be fully binding on Landlord and Tenant prior
to the occurrence of the Term Commencement Date. Unless sooner terminated as
hereinafter provided, the Term shall end on the “Term Expiration Date” specified
in the Basic Lease Information. Once the Term Commencement Date and Term
Expiration Date have been determined, Landlord and Tenant shall memorialize the
Term Commencement Date and Term Expiration Date by executing the Acknowledgement
of Term Commencement Date in the form attached hereto as Exhibit ”D” and
incorporated herein by reference (“Commencement Acknowledgment”), but the
failure to do so will not affect the determination of such dates. For purposes
of determining whether Tenant has accepted possession of the Premises, Tenant
shall be deemed to have done so when Tenant (or any person or entity claiming
by, through or under Tenant) first moves any of its personnel, furnishings
and/or equipment into the Premises, except to the extent that Tenant is
explicitly authorized in this Lease to do any of the foregoing without being
deemed to have accepted possession of the Premises. Any early entry by Tenant
shall be at Tenant’s sole risk and shall be subject to all of the terms and
conditions of this Lease other than the obligation to pay Monthly Base Rent. In
permitting early entry, Landlord shall have the right, in its sole discretion,
to establish such rules, regulations and conditions as Landlord deems
appropriate. Early entry by Tenant shall only be permitted for purposes of
installing computer cable and telephone lines; shall not occur more than two
(2) weeks prior to the anticipated date of Substantial Completion; and shall be
performed in such manner as not to interfere with or otherwise delay
construction of the Improvements. If Landlord has failed to tender the Premises
to Tenant on or before the date that is six (6) months after the Scheduled Term
Commencement Date and such failure is not attributable to Unavoidable Delays (as
hereinafter defined), Tenant shall have the right to terminate this Lease at any
time prior to Landlord’s tender of the Premises. For purposes of this Lease
“Unavoidable Delays” means Landlord’s inability to fulfill or delay in
fulfilling any of its obligations under this Lease expressly or impliedly to be
performed by Landlord or Landlord’s inability to make or delay in making any
repairs, additions, alterations, or improvements, if Landlord’s inability or
delay is due to or arises by reason of strikes, labor troubles or by accident,
or by any cause whatsoever beyond Landlord’s reasonable control, including
governmental preemption in connection with a national emergency, shortages, and
the application of any present and future laws, rules, orders, ordinances,
regulations, statutes, requirements, codes and executive orders, extraordinary
and ordinary, or unavailability of labor, fuel, steam, water,

 

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electricity or materials, or delays caused by Tenant or other tenants,
mechanical breakdown, acts of God, enemy action, civil commotion, fire or other
casualty.

 

Section 2.2 Substantial Completion. As to any construction performed by any
party in the Premises, “Substantial Completion” or “Substantially Completed”
means that such work has been completed, as reasonably determined by Landlord’s
architect, in accordance with (a) the provisions of this Lease applicable
thereto, (b) the plans and specifications for such work, and (c) applicable law,
ordinances and other legal requirements, except for minor details of
construction, decoration and mechanical adjustments (i.e., “punch list” items),
if any, the noncompletion of which does not materially interfere with Tenant’s
use of the Premises or which in accordance with good construction practices
should be completed after the completion of other work in the Premises or in the
Project. Substantial Completion shall be deemed to have occurred notwithstanding
a requirement to complete “punch list” items or similar corrective work.

 

Section 2.3 Extension Option.

 

(a) Option. Tenant is given the option to extend the Term for three
(3) additional consecutive two (2) year periods (each, an “Option Term”)
following expiration of the initial Term (the “Initial Term”), by giving written
notice of exercise of such option (each, an “Option Notice”) to Landlord not
less than nine (9) months but not more than twelve (12) months before the
expiration of the Initial Term. Notwithstanding the foregoing, if there is an
Event of Default by Tenant on the date of giving the Option Notice, the Option
Notice will be deemed of no force or effect; or if Tenant is in default on the
date the Option Term is to commence, the Option Term shall not commence. The
Annual Base Rent for the first year of the Option Term shall be ninety-five
percent (95%) of the Fair Market Rental (as hereinafter defined) of the Premises
at the commencement of the Option Term (the “Adjustment Date”). The Monthly Base
Rent shall be adjusted, simultaneously with any and each such adjustment to the
Annual Base Rental, to equal one-twelfth (1/12) of the Annual Base Rent as so
adjusted.

 

(b) Fair Market Rental.

 

(i) “Fair Market Rental” shall mean the rate being charged to tenants renewing
existing leases for comparable buildings in comparable business parks in the
Cupertino area with similar amenities (“Comparable Business Parks”), taking into
consideration all relevant factors, based on use for general office
development/manufacturing, including: size, location, proposed term of the
lease, extent of services to be provided, and the time that the rental rate
under consideration is to become effective. Fair Market Rental as of the
Adjustment Date shall be determined by Landlord with written notice (the
“Notice”) given to Tenant not later than thirty (30) days after receipt of the
Option Notice, subject to Tenant’s right to arbitration as hereinafter provided.
Failure on the part of Tenant to demand arbitration within thirty (30) days
after receipt of the Notice from Landlord shall bind Tenant to the Fair Market
Rental as determined by Landlord. Should Tenant elect to arbitrate and should
the arbitration not have been concluded prior to the Adjustment Date, Tenant
shall pay the Annual Base Rent in effect during the last month of the Initial
Term to Landlord after the Adjustment Date. If the amount of the Fair Market
Rental as determined by arbitration is greater than or less than such Annual
Base Rent, then any adjustment required to adjust the amount previously paid
shall be made by adjustment in the next payment by Tenant of Monthly Base Rent.

 

(ii) If Tenant disputes the amount claimed by Landlord as Fair Market Rental,
Tenant may require that Landlord submit the dispute to arbitration. The
arbitration shall be conducted and determined in accordance with the then
prevailing rules of the American Arbitration Association or its successor for
arbitration of commercial disputes, except that the procedures and manner of
determination mandated by such rules shall be modified as follows:

 

(1) Tenant shall make demand for arbitration in writing within thirty (30) days
after service of the Notice, specifying therein the name and address of the
person to act as the arbitrator on Tenant’s behalf. The arbitrator shall be a
real estate broker with at least ten (10) years full-time commercial experience
who is familiar with the Fair Market Rental of Comparable Business Parks.
Failure on the part of Tenant to make the timely and proper demand for such
arbitration shall constitute a waiver of the right thereto. Within ten
(10) business days after the service of the demand for arbitration, Landlord
shall give notice to Tenant

 

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specifying the name and address of the person designated by Landlord to act as
arbitrator on its behalf, which arbitrator shall be similarly qualified. If
Landlord fails to notify Tenant of the appointment of its arbitrator, within or
by the time specified, then the arbitrator appointed by Tenant shall be the
arbitrator to determine the Fair Market Rental for the Premises.

 

(2) If two arbitrators are chosen pursuant to Subsection 2.3(b)(ii)(1) above,
the arbitrators so chosen shall meet within ten (10) business days after the
second arbitrator is appointed and shall attempt during such ten (10) business
day period to mutually agree on the Fair Market Rental. If during such ten
(10) business day period, the two arbitrators do not mutually agree upon the
Fair Market Rental, then during the same ten (10) business day period, they
shall appoint a third arbitrator, who shall be a competent and impartial person
with qualifications similar to those required of the first two arbitrators. If
they are unable to agree upon such appointment within five (5) business days
after expiration of such ten (10) day period, the third arbitrator shall be
selected by the parties themselves. If the parties do not agree on the third
arbitrator within five (5) business days after expiration of the foregoing five
(5) business day period, then either party, on behalf of both, may request
appointment of such a qualified person by the then president of the Santa Clara
County Board of Realtors or comparable organization in Santa Clara County. The
three arbitrators shall decide the dispute, if it has not been previously
resolved, by following the procedures set forth in Subsection 2.3(b)(ii)(3)
below. Each party shall pay the fees and expenses of its respective arbitrator
and both shall share the fees and expenses of the third arbitrator. Attorneys’
fees and expenses of counsel and of witnesses for the respective parties shall
be paid by the respective party engaging such counsel or calling such witnesses.

 

(3) The Fair Market Rental shall be fixed by the three arbitrators in accordance
with the following procedures. Each of the arbitrators selected by the parties
shall state, in writing, his or her determination of the Fair Market Rental
supported by the reasons therefor and shall make counterpart copies for each of
the other arbitrators. The arbitrators shall arrange for a simultaneous exchange
of such proposed resolutions within ten (10) business days after appointment of
the third arbitrator. If either arbitrator fails to deliver to the other
arbitrators his or her determination within such ten (10) business day period,
then the determination of the other arbitrator shall be final and binding upon
the parties. The role of the third arbitrator shall be to select which of the
two proposed resolutions more closely approximates his or her determination of
Fair Market Rental. The third arbitrator shall have no right to propose a middle
ground or any modification of either of the two proposed resolutions. The
resolution he or she chooses as that more closely approximating his or her
determination of the Fair Market Rental shall constitute the decision of the
arbitrators and shall be final and binding upon the parties. If either party
fails to pay its share of the fees of the third arbitrator within five
(5) business days after receipt of an invoice, or fails to execute and deliver
any documents reasonably required by the third arbitrator within five
(5) business days after receipt thereof, then the Fair Market Rental shall be
determined solely by the arbitrator selected by the other party.

 

(4) In the event of a failure, refusal or inability of any arbitrator to act,
his or her successor shall be appointed by him or her, but in the case of the
third arbitrator, his or her successor shall be appointed in the same manner as
that set forth herein with respect to the appointment of the original third
arbitrator. The arbitrators shall attempt to decide the issue within ten
(10) business days after the appointment of the third arbitrator. Any decision
in which the arbitrator appointed by Landlord and the arbitrator appointed by
Tenant concur shall be binding and conclusive upon the parties, except that such
arbitrators shall not attempt by themselves to mutually ascertain the Fair
Market Rental and any such determination, in a manner other than that provided
for in Subsection 2.3(b)(ii)(3) hereof, shall not be binding on the parties.

 

(5) The arbitrators shall have the right to consult experts and competent
authorities for factual information or evidence pertaining to a determination of
Fair Market Rental, but any such consultation shall be made in the presence of
both parties with full right on their part to cross-examine. The arbitrators
shall render the decision and award in writing with counterpart copies to each
party. The arbitrators shall have no power to modify the provisions of this
Lease.

 

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Article 3 — Rent

 

Section 3.1 Base Rent. Tenant shall pay to Landlord for the use of the Premises,
in lawful money of the United States, Annual Base Rent in the amount specified
in the Basic Lease Information (subject to adjustment as provided in Article 4),
payable without notice or demand in equal monthly installments in advance,
beginning on the Term Commencement Date with respect to the 22,786 rentable
square feet on the first floor of the Premises, and on December 1, 2006 with
respect to the 17,774 rentable square feet on the second floor of the Premises.
The Base Rent for the second floor of the Premises shall commence at the per
square foot rate in effect with respect to the first floor of the Premises as of
December 1, 2006 and shall increase at the same time(s) as Base Rent increases
with respect to the first floor of the Premises. Base Rent shall be payable on
the first day of each calendar month during the Term in the sums specified in
the Basic Lease Information (the “Monthly Base Rent”).

 

Section 3.2 Payment. All payments required to be made by Tenant under this Lease
shall be made without any setoff, deduction or counterclaim whatsoever and shall
be made payable to and delivered to Landlord at such place as Landlord may
designate.

 

Section 3.3 Partial Months. If the Term Commencement Date is a day other than
the first day of a calendar month or if the Term expires or is terminated on a
day other than the last day of a calendar month, then the Monthly Base Rent for
the first and last fractional months of the Term shall be prorated on the basis
of a thirty (30) day month.

 

Section 3.4 Advance Rent. Upon execution of this Lease, Tenant shall pay to
Landlord the sum specified in the Basic Lease Information as “Advance Rent.” The
Advance Rent shall be applied to Tenant’s obligation to pay Monthly Base Rent
for the first month or months in which Monthly Base Rent is due.

 

Section 3.5 “Net” Lease. This Lease is intended to be a “net” lease, and Monthly
Base Rent shall be paid to Landlord absolutely net of all costs and expenses of
owning, operating, maintaining and repairing the Premises, and the Project,
except to the extent that this Lease expressly requires Landlord to pay any of
such costs.

 

Article 4 — Operating Expenses and Direct Expenses

 

Section 4.1 Proportionate Share of Operating Expenses; Payment of Direct
Expenses. Tenant shall pay to Landlord with respect to the entire Premises,
commencing on the Term Commencement Date, and on the first day of each calendar
month thereafter, in addition to Monthly Base Rent, an amount estimated by
Landlord to be equal to Tenant’s “Proportionate Share” of “Operating Expenses”
(each as defined below) and Tenant’s share of Direct Expenses (as defined
below); provided, however, Landlord may, at Tenant’s sole cost, repair any
damage to the Common Facilities caused by the negligence or act or omission of
Tenant, its agents, employees, servants or invitees, or Landlord may require
Tenant to make such repairs. Unless otherwise specified in this Lease, whenever
Tenant is required to pay its “Proportionate Share,” such Proportionate Share
shall be the ratio (expressed as a percentage) which the number of Rentable
Square Feet then contained in the Premises bears to the total number of Rentable
Square Feet then contained in the Project, as each may change from time to time;
however, if portions of the Project are maintained, managed or in some other way
treated separately with respect to costs of which Tenant is to pay a portion,
then, at Landlord’s option, the denominator used for calculating Tenant’s
Proportionate Share shall be the total number of Rentable Square Feet contained
in that portion of the Project in which the Premises are included for purposes
of such maintenance, management or other costs. For example, if Landlord elects
not to bill Taxes respecting the Premises as part of Direct Expenses, and if
certain portions of the Project are separately assessed for tax purposes, then,
at Landlord’s option, the denominator used for Tenant’s Proportionate Share of
Taxes would be the total number of Rentable Square Feet contained in that
portion of the Project which is included in the same tax bill as the Premises.
In addition, Landlord shall have the option of billing certain Operating
Expenses on a building-by-building basis (“Direct Expenses”), in which case
Tenant’s share of any such Direct Expenses relating to the Premises shall be one
hundred percent (100%). Without limiting the foregoing, “Direct Expenses” might
include: (a) submetered or equitably prorated charges for electricity, water,
gas and sewer; (b) maintenance and repair service contracts for HVAC units and
elevators in the Premises; and (c) fire/life safety monitoring costs and roof
repairs for the Premises. If Landlord submeters or prorates any of such charges,
then Landlord’s allocation, made reasonably

 

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and in good faith, shall be determinative and binding on Tenant. As of the date
of this Lease, and except as otherwise provided in this Lease, Tenant’s
Proportionate Share of Operating Expenses is the percentage specified in the
Basic Lease Information.

 

Section 4.2 Operating Expense and Direct Expense Billing. Landlord may, at or
after the start of any calendar year, notify Tenant of the amount which Landlord
estimates will be Tenant’s monthly Direct Expenses and monthly Proportionate
Share of Operating Expenses for such calendar year, and the amount thereof shall
be added to the Monthly Base Rent payments required to be made by Tenant in such
year. A Statement (the “Statement”) of the Direct Expenses and Proportionate
Share of Operating Expenses payable by Tenant for each year shall be given to
Tenant within a reasonable period of time after the end of each calendar year.
If Tenant’s Direct Expenses and/or Proportionate Share of Operating Expenses as
shown on such Statement is greater or less than the corresponding total amounts
actually paid by Tenant during the year covered by such Statement, then within
thirty (30) days after receipt of the Statement, Tenant shall pay in cash any
sums owed Landlord or, if applicable, Tenant shall receive a credit against any
rent next accruing for any sum owed Tenant, or if no rent is accruing, such
amount shall be refunded to Tenant. If this Lease expires or is terminated on a
day other than the last day of a calendar year, the amount of Direct Expenses
and Proportionate Share of Operating Expenses payable by Tenant during the year
in which this Lease expires or is terminated shall be prorated on the basis
which the number of days from the commencement of the calendar year to and
including the date on which this Lease expires or is terminated bears to three
hundred sixty-five (365), and shall be due and payable monthly in advance
notwithstanding the expiration or earlier termination of the Term. Following the
expiration or termination of this Lease, Landlord may deliver to Tenant an
estimate of the final Statement for such partial calendar year. If Tenant’s
Direct Expenses and/or Proportionate Share of Operating Expenses for such
partial calendar year as shown on such estimated Statement is different than the
total amount of Direct Expenses and/or Proportionate Share of Operating Expenses
actually paid by Tenant during such partial calendar year, then if over paid by
Tenant, Landlord will reimburse Tenant, and if underpaid by Tenant, Tenant will
pay Landlord, within fifteen (15) days after receipt of such estimated final
Statement, the amount of the net difference. Whether or not Landlord has
delivered to Tenant an estimated Statement at the end of the Term, following
expiration of the calendar year in which this Lease expired or was terminated,
Landlord shall give a final Statement to Tenant for such calendar year. If
Tenant’s Direct Expenses and/or Proportionate Share of any Operating Expenses as
shown on the final Statement is greater or less than the total amount of Direct
Expenses and/or Proportionate Share of Operating Expenses actually paid by
Tenant during the year covered by the final Statement, then within fifteen
(15) days after receipt of the Statement, the appropriate party shall pay to the
other party any net sums owed.

 

Section 4.3 Audit Rights. For a period of six (6) months after Tenant’s receipt
of the Statement, and provided Tenant has made full payment on account thereof,
Tenant shall be entitled, upon ten (10) days’ prior written notice, to inspect
and examine those books and records of Landlord relating to the determination of
Direct Expenses and Operating Expenses for the calendar year to which the
Statement relates. Such inspection shall take place during normal business hours
at Landlord’s office or at such other place as Landlord shall designate. If,
after such inspection, Tenant reasonably disputes the amount of Direct Expenses
or Operating Expenses charged by Landlord, Tenant may, by written notice to
Landlord, request an independent audit of such books and records. The audit
shall be conducted by a certified public accountant (“CPA”) acceptable to both
Landlord and Tenant. The CPA shall not be retained by Tenant on a contingency
fee basis (i.e., with the CPA’s fee based upon any recovery by Tenant). If,
within thirty (30) days after Landlord’s receipt of Tenant’s notice requesting
an audit, Landlord and Tenant are unable to agree on the CPA who will conduct
such audit, then Tenant shall designate a nationally recognized accounting firm
not then employed by Landlord or Tenant to conduct such audit. The audit shall
be limited to the determination of the amount of Direct Expenses and/or
Operating Expenses for the calendar year to which the Statement relates. If the
audit discloses that the amount of Direct Expenses and/or Operating Expenses
billed to Tenant was incorrect, the appropriate party shall pay to the other
party the deficiency or overpayment, as applicable. Tenant shall pay all costs
and expenses of the audit unless the audit finds that Landlord has overbilled by
more than 5%, in which case Landlord will pay for the audit. Tenant shall keep
any information gained from such audit confidential and shall not disclose it to
any other party. Tenant’s exercise of its audit rights hereunder shall not
relieve

 

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Tenant of its obligation to timely pay all sums due hereunder, including the
disputed Direct Expenses and/or Operating Expenses.

 

Section 4.4 Operating Expenses and Direct Expenses. The terms “Operating
Expenses” and “Direct Expenses” as used herein, means any and all sums expended
by Landlord for the management, ownership, maintenance, repair and operation of
the Common Facilities, the Premises, and the Project, including, without
limitation:

 

(a) Wages, salaries, social security and employment taxes, medical and other
types of insurance uniforms, training and retirement and pension plans, as well
as any adjustments thereto, for Landlord’s agents and any independent
contractors hired by Landlord to operate and maintain the Project.

 

(b) Costs of service, maintenance and inspection contracts for janitorial,
security, landscaping, rubbish removal, exterminating, elevator, fire and life
safety equipment, HVAC units, plumbing, electrical and mechanical equipment and
the costs of purchasing or renting mechanical equipment, supplies, tools,
materials and uniforms, and the costs of monitoring and inspection of fire and
life safety equipment.

 

(c) Premiums and other charges (including costs of claims adjustments) for
insurance and deductible amounts under the terms of such insurance (deductibles
not to exceed Twenty Thousand Dollars ($20,000.00) per occurrence), including,
without limitation, all risk, earthquake, terrorist, flood, public liability,
environmental, property damage and workers’ compensation insurance, and such
other insurance coverage in such amounts as Landlord, in its sole discretion,
shall elect to maintain. The initial Landlord named herein maintains insurance
for the Premises as part of a portfolio insurance program. So long as such
Landlord is the landlord hereunder, the property insurance coverage for the
Premises will not be materially different than such insurance maintained within
the portfolio program for similarly situated buildings.

 

(d) Costs of providing electricity, water, gas, sewer and other utilities for
the common areas.

 

(e) Costs of restriping, resurfacing and sweeping parking areas, planting and
landscaping (including replacement planting and landscaping), maintenance,
repair and replacement of directional signs and other markers, as well as
lighting.

 

(f) Sales, use and excise taxes on goods and services purchased by Landlord for
the Project.

 

(g) License, permit and inspection fees.

 

(h) Attorneys’, accountants’ and consultants’ fees.

 

(i) Fees for management and accounting services and costs incidental thereto,
whether provided by an independent management company, Landlord, or an affiliate
of Landlord.

 

(j) The cost of all capital improvements, equipment or devices (collectively,
“Capital Improvements”) installed or paid for by Landlord which are required or
desired: (i) for the health and safety of tenants and occupants; (ii) to conform
with any laws, rules, regulations or requirements of any governmental or
quasi-governmental authority having jurisdiction; (iii) to effect a labor
saving, energy saving or other economy, or to replace or resurface existing
capital items with like kind replacement or resurface. The cost of each Capital
Improvement, together with interest thereon, shall be amortized over the lesser
of (A) the “pay-back period” (as defined below, if applicable to such Capital
Improvement), or (B) the useful life of such Capital Improvement (as reasonably
determined by Landlord). Interest on the unamortized balance shall be at the
“Prime Rate” (as defined below) on the date the costs are incurred or such
higher rate as may have been paid by Landlord on borrowed funds. The “pay-back
period” means the period within which the anticipated savings from the use of
such Capital Improvement, as determined by Landlord, will equal the cost of such
Capital Improvement. The “Prime Rate” means the prime rate (or base rate)
reported in the Money Rates column or section of The Wall Street Journal as
being the base rate on corporate loans at large U.S. money center commercial
banks (whether or not such rate has actually been charged by any such bank) on
the

 

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first day on which The Wall Street Journal is published in the month preceding
the month in which the subject costs are incurred.

 

(k) Any capital improvement the cost of which is less than Ten Thousand Dollars
($10,000.00).

 

(l) Depreciation or amortization of the costs of materials, tools, supplies and
equipment purchased by Landlord to enable Landlord to supply services which
Landlord might otherwise contract for with a third party where such depreciation
and amortization would otherwise have been included in the charge for such third
party’s services.

 

(m) Compliance with air, water and noise quality and/or control statutes, laws,
codes, rules and regulations including statutes, laws, codes, rules and
regulations relating to toxic substances or hazardous wastes; provided, however,
this category shall not include costs of removal or otherwise incurred due to
the presence of toxic substances of hazardous wastes on or about the Project.

 

(n) Taxes (as defined in Section 4.6).

 

(o) Local civic association dues and fees related to the Project.

 

(p) A roof reserve of one cent per square foot of Rentable Area of the Project
per month.

 

(q) Fees for management and accounting services and costs incidental thereto,
whether provided by an independent management company, Landlord, or an affiliate
of Landlord in an amount not to exceed three percent (3%) of Annual Base Rent.

 

Notwithstanding the foregoing, to the extent any cost constituting an Operating
Expense is recovered directly from Tenant as a Direct Expense (or directly from
any other tenant of the Project), or paid by Tenant directly to the provider of
the service, then such cost shall be excluded from the determination of Tenant’s
Proportionate Share of Operating Expenses pursuant to this Article 4.

 

Section 4.5 Exclusions from Operating Expenses and Direct Expenses. Operating
Expenses and Direct Expenses shall not include:

 

(a) Leasing commissions, attorneys’ fees, costs, and disbursements and other
expenses incurred in connection with negotiations or disputes with tenants,
other occupants, or prospective tenants or other occupants, or legal fees
incurred in connection with this Lease.

 

(b) Expenses incurred in construction of tenant improvements or otherwise in
improving space for tenants or other occupants of vacant space in the Project.

 

(c) Costs incurred by Landlord for alterations which are considered capital
improvements and replacements under generally accepted accounting principles
consistently applied, and all other costs of a capital nature including, but not
limited to, capital improvements, capital repairs, capital equipment and capital
tools, all in conformity with generally accepted accounting principles
consistently applied, except as expressly permitted by Section 4.4.

 

(d) Depreciation of the buildings in the Project.

 

(e) Amounts paid to subsidiaries or other affiliates of Landlord (i.e., persons
or companies controlled by, under common control with, or which control,
Landlord) for services in or to the Premises, the land on which it is situated
or the Project (or any portion of any of the foregoing) to the extent only that
the cost of such services exceeds the competitive cost of such services were
they not so rendered by a subsidiary or other affiliate of Landlord.

 

(f) Payments of principal, interest, late fees, prepayment fees or other charges
on any debt secured by a mortgage or mortgages covering the Premises or any
portion of the Project, or rental payments under any ground or underlying lease
or leases (except to the extent allocable to the payment of real property
taxes).

 

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(g) Landlord’s general administrative overhead expenses for services not
specifically performed for the Project, or salaries of any officer or employee
of Landlord (or any subsidiary or affiliate of Landlord) above the level of
property manager.

 

(h) Any compensation paid to clerks, attendants, or other persons in commercial
concessions operated by Landlord at a profit.

 

(i) All items and services for which Tenant pays directly to third parties.

 

(j) Advertising and promotional expenditures.

 

(k) Any costs, fines, or penalties incurred due to violations by Landlord of any
governmental rule or authority, or due to late payment of any charge by
Landlord.

 

(l) Costs and expenses of the original design and construction of the Premises
or any other portion of the Project.

 

Section 4.6 Taxes. “Taxes” as used herein shall include all taxes, assessments
and charges (including costs and expenses of contesting the amount or validity
thereof or seeking a reduction by appropriate administrative or legal
proceedings) levied upon or with respect to the Project, the land on which the
Project is situated, or any personal property of Landlord used in connection
with the ownership, management, operation, repair and maintenance of the
Project, or Landlord’s interest in the Project, the land, or such personal
property, including, without limitation, all real property taxes and general and
special assessments; charges, fees, levies or assessments for transit, housing,
police, fire or other governmental services or purported benefits to the
Project; service payments in lieu of taxes; and any tax, fee or excise on the
act of entering into this Lease or any other lease of space in the Project, on
the use or occupancy of the Project or any part thereof, or on the rent payable
under any lease or in connection with the business of renting space in the
Project, which may now or hereafter be levied or assessed against Landlord by
the United States of America, the State of California, the County of Santa
Clara, or any political subdivision, public corporation, district or other
political or public entity, and any other tax, fee or other excise, however
described, that may be levied or assessed as a substitute for, or as an addition
to (in whole or in part) any other property taxes, whether or not now customary
or in the contemplation of the parties on the date of this Lease. In addition,
“Taxes” shall include the costs of any transit impact development or mitigation
fees required of Landlord by the City of Cupertino, County of Santa Clara or the
State of California. Taxes shall not include net income, documentary transfer,
gift, estate or inheritance taxes. Tenant shall reimburse Landlord upon demand
for any and all taxes, surcharges, levies, assessments, fees and charges payable
by Landlord, whether or not now customary or within the contemplation of the
parties hereto: (a) upon, measured by or reasonably attributable to the cost or
value of Tenant’s equipment, furniture, fixtures and other personal property
located in the Premises, or the cost or value of any leasehold improvements (but
only to the extent such leasehold improvements are separately assessed),
regardless of whether title to such improvements shall be in Tenant or Landlord;
or (b) upon or measured by any rent payable hereunder, including, without
limitation, any gross income tax, gross receipts tax or excise tax levied by the
city and/or county where the Project is located, the State of California, the
federal government of the United States or any other governmental body with
respect to the receipt of such rent.

 

Article 5 — Letter of Credit

 

Section 5.1 Letter of Credit.

 

Tenant shall deliver to Landlord, upon Tenant’s execution of this Lease, a
Letter of Credit (as hereinafter defined) in the amount specified in the Basic
Lease Information, as security for the faithful performance and observance by
Tenant of the terms, covenants and conditions of this Lease. The Letter of
Credit shall be in the form of a clean, irrevocable, non-documentary and
unconditional letter of credit (the “Letter of Credit”) issued by and drawable
upon any commercial bank which is a member of the New York Clearing House
Association or other bank satisfactory to Landlord, trust company, national
banking association or savings and loan association with offices for banking
purposes in the San Francisco Bay Area, California (the “Issuing Bank”), which
is either Wells Fargo Bank, N.A., or which has outstanding unsecured,

 

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uninsured and unguaranteed indebtedness, or shall have issued a letter of credit
or other credit facility that constitutes the primary security for any
outstanding indebtedness (which is otherwise uninsured and unguaranteed), that
is then rated, without regard to qualification of such rating by symbols such as
“+” or “-” or numerical notation, “Aa” or better by Moody’s Investors Service
and “AA” or better by Standard & Poor’s Rating Service, and has combined
capital, surplus and undivided profits of not less than Two Billion Dollars
($2,000,000,000.00). The Letter of Credit shall (a) name Landlord as
beneficiary, (b) have a term of not less than one year, (c) permit multiple
drawings, (d) be fully transferable by Landlord without the payment of any fees
or charges by Landlord, and (e) otherwise be in form and content satisfactory to
Landlord. If upon any transfer of the Letter of Credit, any fees or charges
shall be so imposed, then such fees or charges shall be payable solely by Tenant
and the Letter of Credit shall so specify. The Letter of Credit shall provide
that it shall be deemed automatically renewed, without amendment, for
consecutive periods of one year each thereafter during the Term (and in no event
shall the Letter of Credit expire prior to the thirtieth (30th) day following
the Term Expiration Date) unless the Issuing Bank sends duplicate notices (the
“Non-Renewal Notices”) to Landlord by certified mail, return receipt requested
(one to each of the two addresses for Landlord set forth in the Basic Lease
Information) not less than thirty (30) days next preceding the then expiration
date of the Letter of Credit stating that the Issuing Bank has elected not to
renew the Letter of Credit. The Issuing Bank shall agree with all drawers,
endorsers and bona fide holders that drafts drawn under and in compliance with
the terms of the Letter of Credit will be duly honored upon presentation to the
Issuing Bank at an office location in the San Francisco Bay Area. The Letter of
Credit shall be subject in all respects to the International Standby Practices
1998, International Chamber of Commerce Publication No. 590.

 

Section 5.2 Application of Security. If (a) an Event of Default by Tenant occurs
in the payment or performance of any of the terms, covenants or conditions of
this Lease, including the payment of Monthly Base Rent or any additional rent
due hereunder, or (b) Tenant fails to make any installment of Base Rent as and
when due, or (c) Landlord receives a Non-Renewal Notice, Landlord shall have the
right by sight draft to draw, at its election, all or a portion of the proceeds
of the Letter of Credit and thereafter hold, use, apply, or retain the whole or
any part of such proceeds, as the case may be, (x) to the extent required for
the payment of any portion of Annual Base Rent or any other sum as to which
Tenant is in default including (i) any sum which Landlord may expend or may be
required to expend by reason of Tenant’s default, and/or (ii) any damages to
which Landlord is entitled pursuant to this Lease, whether such damages accrue
before or after summary proceedings or other reentry by Landlord, and/or (y) as
a cash security deposit, unless and until, in the case of clause (c) above,
Tenant delivers to Landlord a substitute Letter of Credit which meets the
requirements of this Article 5. If Landlord applies any part of the proceeds of
the Letter of Credit, or cash security, Tenant, upon demand, shall deposit with
Landlord the amount so applied so that Landlord shall have the full amount
thereof on hand at all times during the Term. If Tenant shall comply with all of
the terms, covenants and conditions of this Lease, the Letter of Credit or cash
security, as the case may be, shall be returned to Tenant after the Term
Expiration Date and after delivery of possession of the Premises to Landlord in
the manner required by this Lease.

 

Section 5.3 Transfer. Upon a sale or other transfer of the Project or the
Premises, or any financing of Landlord’s interest therein, Landlord shall have
the right to transfer the Letter of Credit or the cash security to its
transferee or lender. With respect to the Letter of Credit, within five (5) days
after notice of such transfer or financing, Tenant, at its sole cost, shall
arrange for the transfer of the Letter of Credit to the new landlord or the
lender, as designated by Landlord in the foregoing notice or have the Letter of
Credit reissued in the name of the new landlord or the lender. Upon such
transfer, Tenant shall look solely to the new landlord or lender for the return
of the Letter of Credit or such cash security and the provisions hereof shall
apply to every transfer or assignment made of the Letter of Credit or such cash
security to a new landlord. Tenant shall not assign or encumber or attempt to
assign or encumber the Letter of Credit or such cash security and neither
Landlord nor its successors or assigns shall be bound by any such action or
attempted assignment, or encumbrance.

 

Article 6 — Use

 

Section 6.1 General. The Premises shall be used only for the purposes specified
in the Basic Lease Information. No other use will be permitted without
Landlord’s written consent, which consent may be withheld in Landlord’s sole
discretion.

 

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Section 6.2 No Nuisance or Waste. 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 Project or injure or annoy them
or use or allow the Premises to be used for any improper, immoral or
objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance
in, on, or about the Premises. Tenant shall not commit or suffer the commission
of any waste in, on, or about the Premises. Without Landlord’s prior consent,
Tenant shall not use the name, street address or likeness of the Premises for
any advertising, promotional or marketing purposes.

 

Section 6.3 No Illegal Use. Tenant shall not use the Premises or permit anything
to be done in or about the Premises which will in any way conflict with any law,
statute, ordinance, or governmental rule or regulation now in force or which may
hereafter be enacted or promulgated. Tenant shall not do or permit anything to
be done in or about the Premises or bring or keep anything therein which will in
any way increase the rate of fire or other insurance upon the Premises or any of
its contents, and Tenant shall, at its sole cost and expense, promptly comply
with all laws, statutes, ordinances, and governmental rules, regulations, and
requirements now in force or which may hereafter be in force, and with the
requirements of any board of insurance underwriters or other similar body now or
hereafter constituted relating to or affecting the condition, use, or occupancy
of the Premises, excluding structural changes not related to or affected by
(i) Tenant’s alterations or improvements; or (ii) the specific manner and nature
of Tenant’s use or occupancy of the Premises. The judgment of any court of
competent jurisdiction or the admission of Tenant in an action against Tenant,
whether Landlord be a party thereto or not, that Tenant has so violated any law,
statute, ordinance, or governmental rule, regulation, or requirement, shall be
conclusive of such violation as between Landlord and Tenant.

 

Section 6.4 Hazardous Substances. Tenant shall not cause or permit the escape,
disposal or release of any biologically or chemically active or other hazardous
substances or materials (a “Release”). Tenant shall not allow the storage, use
or handling of such substances or materials in any manner not sanctioned by law
or by the highest standards prevailing in the industry for the storage, use and
handling of such substances or materials, nor allow to be brought into the
Premises any such materials or substances except to use in the ordinary course
of Tenant’s business, and then only after written notice is given to Landlord of
the identity of such substances or materials. Without limitation, hazardous
substances and materials shall include those described in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601 et seq., the Resource Conservation and Recovery Act, as
amended 42 U.S.C. Section 6901 et seq., any applicable state or local laws and
the regulations adopted under these acts. If any lender or governmental agency
requires testing to ascertain whether there has been any Release, then the
reasonable costs thereof shall be reimbursed by Tenant to Landlord upon demand
as additional charges if such requirement applies to the Premises. In addition
Tenant shall execute affidavits, representations and the like from time to time
at Landlord’s request concerning Tenant’s best knowledge and belief regarding
the presence of hazardous substances or materials on the Premises. In all
events, Tenant shall indemnify Landlord and its property manager, its and their
agents and employees from and against any and all clean-up costs and expenses,
losses, damages, claims, fines, penalties or liabilities for: (i) any damage to
any property or injury, illness or death of any person from any Release on the
Premises occurring while Tenant is in possession, or elsewhere if caused by
Tenant or persons acting under Tenant or (ii) any unlawful use, handling or
storage of hazardous substances or materials at, to or from the Premises. The
covenants contained herein shall survive the expiration or earlier termination
of the Lease. California Health and Safety Code Section 25359.7(b) requires any
tenant of real property who knows, or has reasonable cause to believe, that any
release of a hazardous substance has come to be located on or beneath such real
property to give written notice of such condition to the owner. Tenant shall
comply with the requirements of Section 25359.7(b) and any successor statute
thereto and with all other statutes, laws, ordinances, rules, regulations and
orders of governmental authorities with respect to hazardous substances.
Landlord shall have the right to pursue all legal and equitable remedies
available to it in the event of failure of Tenant to comply with the
requirements of this Section 6.4.

 

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Article 7 — Services and Utilities

 

Section 7.1 Utilities. Tenant shall make all arrangements for, and shall pay all
costs of, installation and supply of utility facilities, telephone service and
all utilities furnished to or used by it; provided, however, that utilities for
the Common Facilities or which are provided jointly to tenants of the Project
shall be provided by Landlord as part of Operating Expenses.

 

Section 7.2 Use of Electrical Service by Tenant. Electricity used by Tenant in
the Premises shall be paid for by Tenant by separate charge billed by the
applicable utility company and payable directly by Tenant. Electrical service to
the Premises may be furnished by one or more companies providing electrical
generation, transmission and distribution services, and the cost of electricity
may consist of several different components or separate charges for such
services, such as generation, distribution and stranded cost charges. Landlord
shall have the exclusive right to select any company providing electrical
service to the Premises.

 

Section 7.3 Interruption of Access, Use or Services. Landlord shall not be
liable for any failure to provide access to the Premises, to assure the
beneficial use of the Premises or to furnish any services or utilities when such
failure is caused by natural occurrences, riots, civil disturbances,
insurrection, war, court order, public enemy, accidents, breakage, strikes,
lockouts, other labor disputes, the making of repairs, alterations or
improvements to the Premises or the Project, the inability to obtain an adequate
supply of fuel, gas, water, electricity or other supplies or by any other
condition beyond Landlord’s reasonable control, and Tenant shall not be entitled
to any damages resulting from such failure, nor shall such failure relieve
Tenant of the obligation to pay all sums due hereunder or constitute or be
construed as a constructive or other eviction of Tenant. If any governmental
entity promulgates or revises any statute, ordinance or building, fire or other
code, or imposes mandatory or voluntary controls or guidelines on Landlord or
the Project or any part thereof, relating to the use or conservation of energy,
water, gas, light or electricity or the provision of any other utility or
service provided with respect to this Lease, or if Landlord is required or
elects to make alterations to the Premises or the Project in order to comply
with such mandatory or voluntary controls or guidelines, Landlord may, in its
sole discretion, comply with such mandatory or voluntary controls or guidelines,
or make such alterations to the Premises or the Project. Neither such compliance
nor the making of such alterations shall in any event entitle Tenant to any
damages, relieve Tenant of the obligation to pay any of the sums due hereunder,
or constitute or be construed as a constructive or other eviction of Tenant.

 

Article 8 — Alterations

 

Section 8.1 General. Tenant shall neither make nor cause to be made any
alterations, additions or improvements (collectively, “Alterations”) in, on or
to any portion of the Common Facilities or any other portion of the Project
other than the Premises, any which Alterations to the Premises shall be made or
caused to be made in accordance with this Article 8. Tenant shall not make or
suffer to be made any Alterations in, on or to the Premises or any part thereof
without the prior written consent of Landlord, which consent will not be
unreasonably withheld; provided, however, Landlord may withhold its consent in
its sole discretion if any proposed Alterations will affect the structure or
safety of the Premises or its fire/life safety systems. When applying for any
such consent, Tenant shall furnish complete plans and specifications for the
desired Alterations, unless the cost thereof is less than Ten Thousand Dollars
($10,000.00) and such Alterations will not adversely affect the structural,
mechanical, electrical, plumbing or life safety systems of the Premises.
Subsequent to obtaining Landlord’s consent and prior to commencement of
construction of the Alterations, Tenant shall deliver to Landlord a copy of the
building permit and a copy of the executed construction contract covering the
Alterations. Tenant shall pay to Landlord upon demand a review fee in the amount
of one percent (1%) of the construction cost of all Alterations (including the
Second Floor Improvements, as hereinafter defined) (“Review Fee”) to compensate
Landlord for the cost of review and approval of the plans and specifications and
for additional administrative costs incurred in monitoring the construction of
the Alterations. If Landlord consents to the making of any Alterations, the same
shall be made by Tenant at Tenant’s sole cost and expense, and Tenant shall
engage the services of a contractor to make the same who has previously been
approved in writing by Landlord to work in the Project, which approval shall not
be unreasonably withheld. Landlord shall make available a list of at least three
(3) approved contractors and for Alterations affecting the Premises’ structural,
electrical, mechanical, plumbing or life safety systems, Tenant

 

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must use those approved contractors or subcontractors designated by Landlord.
Tenant shall require its contractor to maintain liability insurance of at least
Three Million Dollars ($3,000,000). Any construction, alteration, maintenance,
repair, replacement, installation, removal or decoration undertaken by Tenant in
connection with the Premises shall be completed in accordance with the plans and
specifications approved by Landlord, shall be carried out in a good, workmanlike
and prompt manner, shall comply with all applicable statutes, laws, ordinances,
regulations, rules, orders and requirements of the authorities having
jurisdiction thereof, and shall be subject to supervision by Landlord or its
employees, agents or contractors. Without Landlord’s prior written consent
Tenant shall not use any portion of the Common Facilities in connection with the
making of any Alterations. If the Alterations which Tenant causes to be
constructed result in Landlord being required to make any alterations and/or
improvements to other portions of the Project in order to comply with any
applicable statutes, laws, ordinances, regulations, rules, orders or
requirements (e.g. ordinances intended to provide full access to handicapped
persons), then Tenant shall reimburse Landlord upon demand for all costs and
expenses incurred by Landlord in making such alterations and/or improvements.
Any Alterations made by Tenant shall remain on and be surrendered with the
Premises upon the expiration or sooner termination of the Term, subject to the
provisions of Article 25 of this Lease.

 

Section 8.2 Second Floor Improvements. Tenant shall improve the Second Floor in
accordance with the provisions of this Article 8, including without limitation
Section 8.1, at its sole cost and expense, subject to Landlord’s Contribution,
as set forth below (the “Second Floor Improvements”). The Second Floor
Improvements may be installed by Tenant, subject to the provisions of this
Article 8, at any time following mutual execution of this Lease.

 

Landlord shall pay an amount not to exceed Seven Hundred Ninety-Nine Thousand
Eight Hundred Thirty and No/100 Dollars ($799,830.00) (the “Landlord’s
Contribution”) toward the cost of the Second Floor Improvements, provided as of
the date on which Landlord is required to make payment thereof in accordance
with this Section 8.2, (i) the Lease is in full force and effect, and (ii) no
Event of Default then exists. Tenant shall pay all costs of the Second Floor
Improvements in excess of Landlord’s Contribution. Landlord’s Contribution shall
be payable solely on account of labor directly related to the Second Floor
Improvements, materials delivered to the Premises in connection with the Second
Floor Improvements, the Review Fee applicable to the Second Floor Improvements,
architectural and engineering fees and costs, and building permit fees. In no
event may any portion of Landlord’s Contribution be used for the purchase or
installation of furniture, trade fixtures or equipment that is not permanently
affixed to the Premises, and will not be removed at the end of the Term. Tenant
shall not be entitled to receive any portion of Landlord’s Contribution not
actually expended by Tenant in the performance of the Second Floor Improvements,
nor shall Tenant have any right to apply any unexpended portion of Landlord’s
Contribution as a credit against rent or any other obligation of Tenant under
the Lease. Any amount of Landlord’s Contribution which has not been disbursed as
of December 1, 2007 shall be retained by Landlord and Tenant shall have no
further right to any portion thereof. Anything herein to the contrary
notwithstanding, Tenant may use a portion of the Landlord’s Contribution to pay
the Tenant’s Contribution as set forth in Section 5 of the Work Letter. If
Tenant elects to do so, the remaining Landlord’s Contribution under this
Section 8.2 will be reduced by the amount so used.

 

Landlord shall make progress payments of Landlord’s Contribution to Tenant or,
at Landlord’s sole option, directly to the contractor or applicable
subcontractor, on a monthly basis, for the work performed during the previous
month. Each of Landlord’s progress payments shall be limited to that fraction of
the total amount of such payment, the numerator of which is the amount of
Landlord’s Contribution, and the denominator of which is the total contract
price (or, if there is no specified or fixed contract price for the Second Floor
Improvements, then Landlord’s reasonable estimate thereof) for the performance
of all of the Second Floor Improvements shown on all plans and specifications
approved by Landlord. Provided that Tenant delivers requisitions to Landlord on
or prior to the tenth (10th) day of any month, such progress payments shall be
made within thirty (30) days next following the delivery to Landlord of
requisitions therefor, signed by the chief financial officer of Tenant, which
requisitions shall set forth the names of each contractor and subcontractor to
whom payment is due, and the amount thereof, and shall be accompanied by
(i) with the exception of the first requisition, copies of conditional waivers
and releases of lien upon progress payment in the form prescribed in by
applicable law from all contractors, subcontractors, and material suppliers
covering all work and materials which were the subject of previous progress
payments by Landlord and Tenant, (ii) a

 

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written certification from Tenant’s architect that the work for which the
requisition is being made has been completed substantially in accordance with
the Final Plans and (iii) such other documents and information as Landlord may
reasonably request. Any requisition made following the tenth (10th) day of any
month shall be paid no later than the last day of the month following the month
in which such requisitions are made. Upon completion of the Second Floor
Improvements, and in any event not later than December 1, 2008, Tenant shall
furnish to Landlord (A) final “as-built” plans and specifications for the Second
Floor Improvements (in “CAD” form) and (B) final, unconditional lien waivers and
releases in the form prescribed by applicable law by all contractors,
subcontractors and material suppliers covering all of the Second Floor
Improvements. Notwithstanding anything to the contrary set forth in this
Section 8.2, if Tenant does not pay any contractor or supplier as required by
this provision, Landlord shall have the right, but not the obligation, to
promptly pay to such contractor or supplier all sums so due from Tenant, and
Tenant agrees the same shall be deemed additional rent and shall be paid by
Tenant within ten (10) days after Landlord delivers to Tenant an invoice
therefor.

 

Section 8.3 Notice. Tenant shall give Landlord at least ten (10 days prior
written notice of commencement of any work of construction, alteration,
maintenance, repair or replacement in order to enable Landlord to post and
record notices of nonresponsibility. Tenant shall keep the Premises, Common
Facilities, and the Project free from any liens arising out of any work
performed, materials furnished or obligations incurred by Tenant. Within ten
(10) days after completion of any Alterations, Tenant shall deliver to Landlord
fully executed California Civil Code Section 3262 lien releases from each
contractor and subcontractor performing work in the Premises.

 

Section 8.4 Labor Relations. If any construction, alteration, addition,
improvement or decoration of the Premises by Tenant interferes with the
harmonious labor relations in existence in the Project, all such work shall be
halted immediately by Tenant until such time as construction can proceed without
any such interference.

 

Section 8.5 Indemnity. Tenant shall indemnify, defend and hold Landlord harmless
against any and all loss, cost, damage, injury and expense arising out of or in
any way related to claims for work or labor performed, or materials or supplies
furnished, to or at the request of Tenant or in connection with performance of
any work done for the account of Tenant in the Premises and the Common
Facilities, whether or not Tenant obtained Landlord’s permission to have such
work done, labor performed, or materials or supplies furnished.

 

Article 9 — Repairs

 

Section 9.1 Common Facilities. Landlord shall maintain the Common Facilities,
the roof, HVAC units and elevators as well as the exterior and structural parts
of the Premises. The costs of doing so shall be included in Direct Expenses,
except costs with respect to the Common Facilities shall be included in
Operating Expenses. Landlord shall have no further responsibility to maintain
the Premises.

 

Section 9.2 Tenant Repairs. No representations, except as contained herein or
endorsed hereon, have been made to Tenant respecting the condition of the
Premises, and the acceptance of possession of the Premises by Tenant shall be
conclusive evidence as against Tenant that the Premises are as of the Term
Commencement Date in a tenantable and good condition. Tenant shall take good
care of the Premises and shall make all repairs to all improvements within the
Premises, whether constructed by or at the direction of Landlord or Tenant, in
order to preserve the Premises in good working order and condition; provided
that Tenant shall not make any repairs in or to the walls, ceilings, flooring or
electrical or telephone/communication closets, or any other similar major
repairs (“Major Repairs”) without Landlord’s prior written approval, which
approval shall not be unreasonably withheld. At Landlord’s option, Landlord may
elect to make the necessary Major Repairs. Tenant shall reimburse Landlord, upon
demand, for the cost of all Major Repairs and, subject to the provisions of
Sections 12.1 and 13.1, for the cost of any and all structural repairs or
replacements necessitated or occasioned by the acts, omissions or negligence of
Tenant or any person claiming through or under Tenant, or any of their servants,
employees, contractors, agents, visitors or licensees, or by the use or
occupancy or manner of use or occupancy of the Premises by Tenant or any such
person. Landlord shall not be liable for, and there shall be no abatement of
rent with

 

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respect to, any injury to or interference with Tenant’s business arising from
any repairs, maintenance, alteration or improvement in or to any portion of the
Premises or the Common Facilities or in or to the fixtures, appurtenances or
equipment therein. Tenant hereby waives all right to make repairs at Landlord’s
expense under the provisions of Sections 1932(1), 1941 and 1942 of the
California Civil Code, and instead, all improvements, repairs and/or maintenance
expenses incurred in connection with the Premises shall be at the expense of
Tenant, and shall be considered as part of the consideration for leasing the
Premises. Except as otherwise set forth in Section 12.1, all damage or injury
done to the Premises by Tenant or by any person who may be in or upon the
Premises with Tenant’s consent or at Tenant’s invitation, shall be paid for by
Tenant, and Tenant shall, at the termination of this Lease, surrender the
Premises to Landlord in as good condition and repair as when accepted by Tenant,
reasonable wear and tear excepted and otherwise in accordance with Article 25.
Landlord shall have no obligation to repaint the Premises, or perform any other
improvements to the Premises, during the Term.

 

Article 10 — Assignment and Subletting

 

Section 10.1 No Assignment or Subletting Without Consent. Tenant shall not,
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld: (a) assign, mortgage, pledge, encumber or otherwise
transfer this Lease, the term or estate hereby granted, or any interest
hereunder; (b) permit the Premises or any part thereof to be utilized by anyone
other than Tenant (whether as concessionaire, franchisee, licensee, permittee or
otherwise) except for licensees of Tenant required to be at the Premises to
provide services to Tenant in connection with Tenant’s business on the Premises;
or (c) except as hereinafter provided, sublet or offer or advertise for
subletting the Premises or any part thereof. Any assignment, mortgage, pledge,
encumbrance, transfer or sublease without Landlord’s consent shall be voidable
and, at Landlord’s election, shall constitute a default. If Tenant is a
corporation, any dissolution, merger, consolidation or other reorganization of
Tenant, or the sale or other transfer in the aggregate during the Term of a
controlling percentage of the capital stock of Tenant or the sale of fifty
percent (50%) or more of the value of the assets of Tenant, shall be deemed a
voluntary assignment of this Lease by Tenant. The phrase “controlling
percentage” shall mean the ownership of, and the right to vote, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of
Tenant’s capital stock issued, outstanding, and entitled to vote for the
election of directors. The preceding two sentences shall not apply to
corporations, the stock of which is traded through an exchange or over the
counter. If Tenant is a partnership, a withdrawal or change, voluntary,
involuntary, or by operation of law of any partner or partners owning a total of
fifty percent (50%) or more of the partnership, or the dissolution of the
partnership, shall be deemed a voluntary assignment of this Lease by Tenant. If
Tenant consists of more than one person, a purported assignment, voluntary,
involuntary, or by operation of law, by any one of the persons executing this
Lease shall be deemed a voluntary assignment of this Lease by Tenant. If,
without Landlord’s consent, this Lease is assigned, or any part of the Premises
is sublet or occupied by anyone other than Tenant or this Lease is encumbered
(by operation of law or otherwise), Landlord may collect rent from the assignee,
subtenant or occupant, and apply the net amount collected to the rent herein
reserved. No such collection shall be deemed a waiver of the provisions of this
Article 10, an acceptance of the assignee, subtenant or occupant as tenant, or a
release of Tenant from the performance of Tenant’s covenants hereunder, and in
all cases Tenant shall remain fully liable for its obligations under this Lease.

 

Section 10.2 Notice and Procedure. If at any time or from time to time during
the Term, Tenant desires to assign this Lease with respect to, or to sublet, all
or any part of the Premises, then at least ten (10) business days, but not more
than one hundred twenty (120) days, prior to the date when Tenant desires the
assignment or subletting to be effective (the “Transfer Date”), Tenant shall
give Landlord a notice (the “Notice”) which shall set forth the name, address
and business of the proposed assignee or subtenant; information (including
financial statements and references) concerning the character of the proposed
assignee or subtenant; in the case of a subletting, a detailed description of
the space proposed to be sublet (the “Space”) which Space, if it does not
consist of the entire Premises, must be a single, self-contained unit demised by
Tenant in accordance with all applicable laws; any rights of the proposed
assignee or subtenant to use Tenant’s improvements and the like; the Transfer
Date; and the fixed rent and/or other consideration and all other material terms
and conditions of the proposed assignment or subletting, all in such detail as
Landlord may reasonably require. If Landlord requests additional detail, the
Notice shall not be deemed to have been received until Landlord receives such

 

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additional detail. Landlord shall have the option, exercisable by giving notice
to Tenant at any time within ten (10) business days after Landlord’s receipt of
the Notice (the “Recapture Period”) (a) in the case of an assignment or
sublease, to terminate this Lease in its entirety or as to the Space, for a term
or sublease term for all or substantially all of the remaining Term, as
applicable, in which event Tenant shall be relieved of all further obligations
hereunder with respect thereto as of the Transfer Date; or (b) in the case of a
sublease, to sublet the Space from Tenant upon the terms and conditions set
forth in the Notice, except that the rent shall be the lower of the per square
foot Monthly Base Rent and additional rent described in Article 4 payable under
this Lease for the Space, or that part of the rent and other consideration set
forth in the Notice which is applicable to the Space (each, a “Recapture
Right”). No failure of Landlord to exercise a Recapture Right shall be deemed to
be Landlord’s consent to the assignment of this Lease or the subletting of all
or any portion of the Premises. Upon request by Tenant prior to Tenant’s
entering into an agreement with an assignee or subtenant, Landlord shall notify
Tenant whether or not Landlord would exercise its right to terminate this Lease
or with respect to the Space, as applicable. If Landlord determines to waive its
right to terminate this Lease or with respect to the Space, as applicable,
Landlord shall only be bound by such waiver if Tenant delivers a Notice to
Landlord within three (3) months after receipt of Landlord’s waiver. In
addition, no waiver by Landlord of its right to terminate this Lease or with
respect to any Space, as applicable, shall constitute or be deemed a waiver of
such right with respect to future assignments or subleases, nor shall it be
deemed a waiver of Landlord’s right to withhold consent to any particular
assignment or subletting. If, after receipt of any Notice, Landlord exercises
its right to terminate this Lease or with respect to the Space, as applicable,
Tenant shall have the right, exercisable by written notice to Landlord within
ten (10) days after receipt of Landlord’s notice, to rescind its Notice. If
Landlord exercises its option to sublet the Space, Tenant shall sublet the Space
to Landlord upon the terms and conditions contained in the Notice (except for
monthly rental as specified above); provided, however, that: (i) Landlord shall
at all times under such sublease have the right and option further to sublet the
Space without obtaining Tenant’s consent or sharing any of the economic
consideration received by Landlord; (ii) the provisions of Article 6 shall not
be applicable thereto; and (iii) Landlord and its subtenants shall have the
right to use in common with Tenant all lavatories, corridors and lobbies which
are within the Premises and the use of which is reasonably required for the use
of the Space.

 

Section 10.3 Consent Not to be Unreasonably Withheld. If Landlord does not
exercise a Recapture Right as described above then Landlord shall notify Tenant
no later than the end of the Recapture Period, whether Landlord consents to the
proposed Transfer, and, if Landlord fails to so notify Tenant within the
Recapture Period, Landlord shall be deemed to have consented to the proposed
Transfer. Landlord shall be permitted to consider any reasonable factor in
determining whether or not to withhold its consent to a proposed assignment or
sublease. Without limiting the other instances in which it may be reasonable for
Landlord to withhold its consent to an assignment or sublease, it shall be
reasonable for Landlord to withhold its consent if any of the following
conditions are not satisfied:

 

(a) The proposed transferee shall be at least as creditworthy as is Tenant as of
the date hereof, and shall have the financial strength and stability to perform
all obligations under this Lease to be performed by Tenant;

 

(b) The proposed use of the Space by the transferee shall (i) comply with the
provisions of Article 6 hereof, (ii) be consistent with the general character of
businesses carried on by other tenants of space in the Project or by tenants of
a first-class business park, (iii) not be manufacturing, (iv) not increase the
likelihood of damage or destruction, (v) not be likely to cause an increase in
insurance premiums for insurance policies applicable to the Premises or the
Project, and (vi) not otherwise have or cause a material adverse impact on the
Premises, the Project or Landlord’s interest therein;

 

(c) Any ground lessor or mortgagee whose consent to such transfer is required
fails to consent thereto; and

 

(d) At the time of the request, no Event of Default under this Lease, or under
any other lease between Tenant and Landlord or any affiliate of Landlord, shall
have occurred and be continuing.

 

Tenant shall have the burden of demonstrating that each of the foregoing
conditions has been satisfied.

 

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Section 10.4 Assignments and Subleases. Provided Landlord has consented to such
assignment or subletting, Tenant shall be free to assign this Lease or sublet
the Space to any third party subject to the following conditions:

 

(a) At the time of the transfer, no Event of Default under this Lease, or under
any other lease between Tenant and Landlord or any affiliate of Landlord, shall
have occurred and be continuing;

 

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

 

(c) No assignment or sublease shall be valid and no assignee or sublessee shall
take possession of the Premises or the Space, as applicable, until an executed
counterpart of the assignment or sublease has been delivered to Landlord;

 

(d) No assignee or sublessee shall have a right further to assign or sublet
without Landlord’s consent thereto in each instance, which consent shall not be
unreasonably withheld;

 

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

 

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

 

(g) If Landlord consents to a proposed assignment or sublease and Tenant fails
to execute and deliver to Landlord such assignment or sublease within ninety
(90) days after the giving of such consent, then Tenant shall again comply with
all of the provisions and conditions of Section 10.4 before assigning this Lease
or subletting all or part of the Premises; and

 

(h) If Tenant enters into any assignment or sublease permitted hereunder or
consented to by Landlord, Tenant shall, within sixty (60) days of such
assignment or sublease, deliver to Landlord a list of Tenant’s reasonable
third-party brokerage fees, legal fees and architectural fees paid or to be paid
in connection with such transaction and any actual costs incurred by Tenant in
separately demising the subleased Space (collectively, “Transaction Costs”),
together with a list of all of Tenant’s property to be transferred to such
Transferee. Tenant shall deliver to Landlord evidence of the payment of such
Transaction Costs promptly after the same are paid. In consideration of such
assignment or subletting, Tenant shall pay to Landlord:

 

(i) In the case of an assignment, fifty percent (50%) of all sums and other
consideration paid to Tenant by the Transferee for or by reason of such
assignment after first deducting the Transaction Costs; or

 

(ii) In the case of a sublease, fifty percent (50%) of any consideration payable
under the sublease to Tenant by the Transferee which exceeds on a per square
foot basis the Annual Base Rent accruing during the term of the sublease in
respect of the subleased space after first deducting the monthly amortized
amount of Transaction Costs. The sums payable under this clause shall be paid by
Tenant to Landlord monthly as and when paid by the subtenant to Tenant.

 

(i) Each sublease shall be subject and subordinate to this Lease and to the
matters to which this Lease is or shall be subordinate; and Tenant and each
Transferee shall be deemed to have agreed that upon the occurrence and during
the continuation of an Event of Default hereunder, Tenant has hereby assigned to
Landlord, and Landlord may, at its option, accept such assignment of, all right,
title and interest of Tenant as sublandlord under such sublease, together with
all modifications, extensions and renewals thereof then in effect and such
Transferee shall, at Landlord’s option, attorn to Landlord pursuant to the then
executory provisions of such sublease, except that Landlord shall not be
(A) liable for any previous act or omission of Tenant under such sublease,
(B) subject to any counterclaim, offset or defense not expressly provided in
such sublease, which theretofore accrued to such Transferee against Tenant,
(C) bound by any previous modification of such sublease not consented to by
Landlord or by any prepayment of more than 1 month’s rent, or (D) bound to
return such Transferee’s

 

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security deposit, if any, except to the extent Landlord shall receive actual
possession of such deposit and such Transferee shall be entitled to the return
of all or any portion of such deposit under the terms of its sublease. The
provisions of this Section shall be self-operative, and no further instrument
shall be required to give effect to this provision, provided that the Transferee
shall execute and deliver to Landlord any instruments Landlord may reasonably
request to evidence and confirm such subordination and attornment.

 

Section 10.5 Permitted Transferees.

 

(a) Right of Tenant. Notwithstanding anything contained in this Article 10 to
the contrary, as long as no Event of Default then exists, Tenant shall have the
right, subject to the terms and conditions hereinafter set forth, without the
consent of Landlord but upon at least ten (10) business days prior written
notice to Landlord, to do the following:

 

(i) Assign its interest in this Lease to (A) any corporation which is a
successor to Tenant either by merger or consolidation, (B) a purchaser of all or
substantially all of Tenant’s assets (provided such purchaser shall have also
assumed substantially all of Tenant’s liabilities), or (C) a corporation,
partnership or other entity which shall control, be under the control of, or be
under common control with, Tenant (the term “control” as used herein shall be
deemed to mean ownership, directly or indirectly, of more than fifty percent
(50%) of the outstanding voting stock of a corporation, or other majority equity
and control interest if Tenant is not a corporation) (any such entity being a
“Permitted Transferee”); or

 

(ii) Sublease all or any portion of the Premises to a Permitted Transferee.

 

(b) Deliveries by Tenant. Tenant shall, within ten (10) business days after
execution thereof, deliver the following to Landlord:

 

(i) A duplicate original instrument of assignment in form and substance
reasonably satisfactory to Landlord, duly executed by Tenant and the assignee in
which the assignee shall expressly agree to assume, observe, perform, and be
bound by all of the terms, covenants and conditions of this Lease on Tenant’s
part to be observed and performed; or

 

(ii) A duplicate original sublease in form and substance reasonably satisfactory
to Landlord, duly executed by Tenant and the subtenant.

 

Section 10.6 Limitation on Remedies. Tenant hereby waives the provisions of
Section 1995.310 of the California Civil Code, or any similar or successor laws,
now or hereinafter in effect, and all other remedies, including, without
limitation, any right at law or equity to terminate this Lease, on its own
behalf and, to the extent permitted under all applicable laws, on behalf of the
proposed transferee. Tenant acknowledges that Tenant’s rights under this
Article 10 satisfy the conditions set forth in Section 1951.4 of the California
Civil Code with respect to the availability to Landlord of certain remedies for
a default by Tenant under this Lease.

 

Section 10.7 Continuing Liability of Tenant. Regardless of Landlord’s consent,
no subletting or assignment shall release Tenant’s obligation or alter the
primary liability of Tenant to pay the rent and to perform all other obligations
to be performed by Tenant hereunder. The acceptance of rent by Landlord from any
other person shall not be deemed to be a waiver by Landlord of any provision
hereof. Consent to one assignment or subletting shall not be deemed consent to
any subsequent assignment or subletting. If any assignee of Tenant or any
successor of Tenant defaults in the performance of any of the terms hereof,
Landlord may proceed directly against Tenant without the necessity of exhausting
remedies against such assignee or successor. Landlord may consent to subsequent
assignments or subletting of this Lease or amendments or modifications to this
Lease with assignees of Tenant, without notifying Tenant, or any successor of
Tenant, and without obtaining its or their consent thereto, and such action
shall not relieve Tenant of its liability under this Lease, but no such
subsequent assignment or subletting to which Tenant has not consented shall
increase any of Tenant’s obligations hereunder. If Tenant assigns this Lease, or
sublets all or a portion of the Premises, or requests the consent of Landlord to
any assignment or subletting, or if Tenant requests the

 

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consent of Landlord for any act that Tenant proposes to do, then Tenant shall
pay Landlord’s reasonable attorneys’ fees incurred in connection therewith.

 

Section 10.8 Bankruptcy. If a petition is filed by or against Tenant for relief
under Title 11 of the United States Code, as amended (the “Bankruptcy Code”),
and Tenant (including for purposes of this Section Tenant’s successor in
bankruptcy, whether a trustee or Tenant as debtor in possession) assumes and
proposes to assign, or proposes to assume and assign, this Lease pursuant to the
provisions of the Bankruptcy Code to any person or entity who has made or
accepted a bona fide offer to accept an assignment of this Lease on terms
acceptable to Tenant, then notice of the proposed assignment setting forth
(a) the name and address of the proposed assignee, (b) all of the terms and
conditions of the offer and proposed assignment, and (c) the adequate assurance
to be furnished by the proposed assignee of its future performance under the
Lease, shall be given to Landlord by Tenant no later than twenty (20) days after
Tenant has made or received such offer, but in no event later than ten (10) days
prior to the date on which Tenant applies to a court of competent jurisdiction
for authority and approval to enter into the proposed assignment. Landlord shall
have the prior right and option, to be exercised by notice to Tenant given at
any time prior to the date on which the court order authorizing such assignment
becomes final and nonappealable, to receive an assignment of this Lease upon the
same terms and conditions, and for the same consideration, if any, as the
proposed assignee, less any brokerage commissions which may otherwise be payable
out of the consideration to be paid by the proposed assignee for the assignment
of this Lease. If this Lease is assigned pursuant to the provisions of the
Bankruptcy Code, Landlord: (i) may require from the assignee a deposit or other
security for the performance of its obligations under the Lease in an amount
substantially the same as would have been required by Landlord upon the initial
leasing to a tenant similar to the assignee; and (ii) shall receive, as
additional rent, the sums and economic consideration described in Section 10.2.
Any person or entity to which this Lease is assigned pursuant to the provisions
of the Bankruptcy Code shall be deemed, without further act or documentation, to
have assumed all of the Tenant’s obligations arising under this Lease on and
after the date of such assignment. Any such assignee shall, upon demand, execute
and deliver to Landlord an instrument confirming such assumption. No provision
of this Lease shall be deemed a waiver of Landlord’s rights or remedies under
the Bankruptcy Code to oppose any assumption and/or assignment of this Lease, to
require a timely performance of Tenant’s obligations under this Lease, or to
regain possession of the Premises if this Lease has neither been assumed nor
rejected within sixty (60) days after the date of the order for relief or within
such additional time as a court of competent jurisdiction may have fixed.
Notwithstanding anything in this Lease to the contrary, all amounts payable by
Tenant to or on behalf of Landlord under this Lease, whether or not expressly
denominated as rent, shall constitute rent for the purposes of
Section 502(b)(6) of the Bankruptcy Code.

 

Article 11 — Indemnification

 

Section 11.1 Waiver of Liability. Landlord shall not be liable or responsible in
any way for, and Tenant hereby waives all claims, whether in contract or tort,
against Landlord, its partners, members, shareholders, officers, directors,
employees, asset managers and property managers with respect to or arising out
of: (a) any death or any injury of any nature whatsoever that may be suffered or
sustained by Tenant or any employee, licensee, invitee, guest, agent or customer
of Tenant or any other person, from any causes whatsoever, or (b) any loss or
damage or injury to any property outside or within the Premises belonging to
Tenant or to any Tenant Items (as hereinafter defined) and any resulting
business interruption or loss of earnings, or belonging to its employees,
agents, customers, licensees, invitees, guests or any other person, regardless
of whether such death, injury, loss or damage is caused in whole or in part by
the active or passive negligence of Landlord, its partners, members,
shareholders, officers, directors, employees, asset managers or property
managers except for Landlord’s gross negligence or willful misconduct. Without
limiting the generality of the foregoing, Landlord shall not be liable for any
damage or damages of any nature whatsoever to persons or property caused by
explosion, fire, theft or breakage, by sprinkler, drainage or plumbing systems,
by failure for any cause to supply adequate drainage, by the interruption of the
telephone cable distribution system, any public utility or service, by steam,
gas, water, rain or other substances leaking, issuing or flowing into any part
of the Premises, by natural occurrence, acts of the public enemy, riot, strike,
insurrection, war, court order, requisition or order of governmental body or
authority, or for any damage or inconvenience which may arise through repair,
maintenance, construction or alteration of any part of the Building, or by
anything done or omitted to be done by any tenant,

 

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occupant or person in the Building. Tenant acknowledges and agrees that Landlord
has no obligation to carry insurance on: (i) any loss or damage to any Tenant
Items and (ii) any loss suffered by Tenant due to interruption of Tenant’s
business, including without limitation any loss of earnings. In addition,
Landlord shall not be liable for any loss, injury or damage of any nature or
description for which Tenant is required to carry insurance or which Tenant
actually insures, whichever is greater, regardless of whether such loss, injury
or damage is caused in whole or in part by the active or passive negligence of
Landlord, its partners, members, shareholders, officers, directors, employees,
asset managers or property managers.

 

Section 11.2 Indemnity. To the fullest extent permitted by law, and except for
claims for which Landlord is required to obtain a waiver of subrogation from its
insurers pursuant to Section 13.1 and excluding Landlord’s gross negligence or
willful misconduct, Tenant shall protect, indemnify, defend and hold Landlord,
its partners, members, officers, shareholders, directors, employees, asset
managers and property managers harmless from and against any and all losses,
damages, claims, or liability for any damage to any property or injury, illness
or death of any person: (a) occurring in, on, or about the Premises, or any part
thereof, arising at any time and from any cause, regardless of whether caused in
whole or in part by the active or passive negligence of Landlord, its employees,
asset managers or property managers; and (b) occurring in, on, or about any part
of the Building other than the Premises, when such damage, injury, illness or
death shall be caused in whole or in part by the negligence or willful
misconduct of Tenant, its agents, servants, contractors, partners, officers,
employees, customers, guests, invitees or licensees (including, without
limitation, when such damage, injury, illness or death shall have been caused in
part by the active or passive negligence of Landlord, its employees, asset
managers or property managers). Tenant shall also protect, indemnify, defend and
hold Landlord, its partners, members, officers, shareholders, directors,
employees, asset managers and property managers harmless from and against any
and all losses, damages, claims and liability resulting from Tenant’s breach of
any of its obligations under this Lease, including without limitation Tenant’s
obligation to carry specified insurance, and any damage to the Building’s
telephone cable distribution system caused by Tenant, its contractors, servants,
agents, partners, officers, employees, customers, guests, invitees or licensees.
The provisions of this Section shall not be limited by the insurance coverage
carried or required to be carried by Tenant pursuant to Article 32 and shall
survive the expiration or termination of this Lease with respect to any
accident, event, damage, injury, illness or death occurring prior to such
termination. For all purposes under this Lease any deliberate action on the part
of Landlord, its employees, officers, shareholders, partners, members, or
property managers taken in good faith in the exercise of such persons’ assigned
duties and responsibilities shall not constitute negligence or willful
misconduct.

 

Section 11.3 Limitation of Liability. Neither the partners or members comprising
Landlord, nor the partners, members, shareholders, directors, officers, agents
or employees of any of the foregoing (collectively, the “Parties”) shall be
liable for the performance of Landlord’s obligations under this Lease. Tenant
shall look solely to Landlord to enforce Landlord’s obligations hereunder and
shall not seek any damages against any of the Parties. The liability of Landlord
for Landlord’s obligations under this Lease shall not exceed and shall be
limited to Landlord’s interest in the Project as such interest exists from time
to time and Tenant shall not look to the property or assets of any of the
Parties or to the other property of Landlord in seeking either to enforce
Landlord’s obligations under this Lease or to satisfy a judgment for Landlord’s
failure to perform such obligations.

 

Article 12 — Destruction or Damage

 

Section 12.1 Destruction or Damage. In the event of a fire or other casualty in
or to the Premises, Tenant shall immediately give notice thereof to Landlord.
Except as otherwise expressly provided below, determination as to the amount of
damage to the Premises or to the Building’s structure, the time required for
repair and other issues relating to damage and restoration shall be determined
by Landlord’s architect, whose determination shall be final and binding on
Tenant. The following provisions shall apply to fire, earthquake, act of God,
the elements or other casualty occurring in the Premises and/or the Building:

 

(a) Landlord shall not carry insurance on, and shall not be responsible for
restoration of damage to, any of the Tenant Items. Subject to the terms of this
Article 12, Landlord shall carry insurance on, and shall be responsible for
restoration of damage to the Base

 

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Building Improvements (as hereinafter defined). For purposes of this Lease, the
term “Base Building Improvements” shall refer to those certain improvements
described on Exhibit “E” attached hereto and incorporated herein by reference.

 

(b) Subject to the provisions of Subsection 12.1.1(g), if the damage is to any
of the Tenant Items, then Tenant, at its cost, shall promptly repair such
damage.

 

(c) If (i) the damage is limited solely to the Premises, (ii) all repairs to and
restoration of damage or destruction to the Base Building Improvements can be
Substantially Completed within twelve (12) months from the date of damage or
destruction, and (iii) and so long as Landlord deems it economically feasible so
to repair and restore the Building, and provided that sufficient insurance
proceeds are available to Landlord to complete such repair and restoration
obligations, then Landlord shall repair and restore the Base Building
Improvements, and shall proceed diligently to do so. If insurance proceeds
sufficient to fund such repairs and restoration are not available, then
Landlord, in its sole discretion, may (A) contribute the excess of the (x) cost
of such repairs and restoration over (y) available insurance proceeds and may
then undertake such repairs and restoration and this Lease shall remain in full
force and effect, or (B) terminate this Lease.

 

(d) If portions of the Project outside the boundaries of the Premises are
damaged or destroyed (whether or not the Premises are also damaged or destroyed)
and the Base Building Improvements in such portions of the Building can be
Substantially Completed within twelve (12) months from the date of damage or
destruction, and so long as Landlord deems it economically feasible so to repair
and restore the Building, and provided that sufficient insurance proceeds are
available to Landlord to complete such repair and restoration obligations, then
Landlord shall be obligated to repair and restore such Base Building
Improvements. If insurance proceeds sufficient to fund such repairs and
restoration are not available, then Landlord, in its sole discretion, may
(A) contribute the excess of the (i) cost of such repairs and restoration over
(ii) available insurance proceeds and may then undertake such repairs and
restoration and this Lease shall remain in full force and effect, or
(B) terminate this Lease

 

(e) If Landlord has the right and elects not to undertake repairs and
restoration pursuant to Subsection 12.1.1(c) or 12.1(d), then Landlord shall
notify Tenant within sixty (60) days after the date of such damage or
destruction and either Tenant or Landlord may terminate this Lease within thirty
(30) days after the date of such notice.

 

(f) During any period when Tenant’s use of the Premises is significantly
affected by damage or destruction, rent shall abate proportionately, as
reasonably determined by Landlord, until the earlier of: (i) the date Landlord
has Substantially Completed Landlord’s repairs and restoration of the Base
Building Improvements and, if Landlord elects to undertake such repairs and
restoration pursuant to Subsection 12.1(g), the applicable Tenant Items; and
(ii) the date Tenant recommences business in the Premises, and no portion of the
rent so abated shall be subject to subsequent recapture.

 

(g) The proceeds from any insurance paid by reason of damage to or destruction
of the Premises or the Building or any part thereof insured by Landlord shall
belong and be paid to Landlord subject to the rights of any Mortgagee (as
hereinafter defined) under any Mortgage (as hereinafter defined).

 

(h) Tenant waives the benefit of California Civil Code Sections 1932(2) and
1933(4) providing for termination of hiring upon destruction of the thing hired.

 

(i) Notwithstanding the foregoing, Landlord shall have no obligation to repair
or restore any portion of the Premises or the Building in the event of damage or
destruction occurring during the last year of the Term. However, if Tenant,
within ten (10) days after receipt of such notice, gives written notice to
Landlord of its election to extend the Term for a period of at least two
(2) years in accordance with any then exercisable option set forth in this
Lease, Landlord shall repair and restore the Base Building Improvements in
accordance with this Section 12.1 (unless Landlord is entitled to and does
terminate this Lease as otherwise provided in Section 12.1(e) or elsewhere in
this Lease). In the event of damage or destruction occurring during the last
year of the Term, Tenant shall also have the right to terminate this Lease upon
written notice to Landlord within thirty (30) days following the event of damage
or destruction.

 

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(j) At all times during the Term and notwithstanding the parties’ obligations
under Article 30, Landlord shall be the sole owner of the Premises as existing
on the date of this Lease and any additions, alterations or improvements thereto
constructed prior to the expiration or earlier termination of the Term to the
extent funded by Landlord. At all times during the Term, Tenant shall be the
sole owner of any additions, alterations or improvements to the Premises
constructed during the Term to the extent paid for by Tenant. At the expiration
or earlier termination of the Term, any additions, alterations or improvements
owned by Tenant during the Term pursuant to the foregoing shall become the
property of Landlord and remain upon and be surrendered by Tenant with the
Premises, except as otherwise provided in, or as Landlord may elect pursuant to,
Section 25.1.

 

Article 13 — Waiver of Subrogation

 

Section 13.1 Waiver of Subrogation. Landlord and Tenant shall each have their
property insurance policies issued in such form as to provide that the insurer
waives any right of subrogation against the other party, its employees, property
managers and asset managers. Each party shall indemnify the other against any
loss or expense, including reasonable attorneys’ fees, resulting from the
failure to obtain such waiver of subrogation.

 

Article 14 — Rules and Regulations

 

Section 14.1 Rules and Regulations. Tenant shall faithfully observe and comply
with the Rules and Regulations of the Project, a copy of which is attached
hereto as Exhibit ”F”, and, after notice thereof, all reasonable modifications
thereof and additions thereto from time to time promulgated in writing by
Landlord, all of which are hereby incorporated herein by this reference (“Rules
and Regulations”). Landlord shall not be responsible to Tenant for the
nonperformance by any other tenant or occupant of the Project of any of the
Rules and Regulations.

 

Article 15 — Entry by Landlord

 

Section 15.1 Entry by Landlord. Upon twenty-four (24) hours prior notice to
Tenant (or at any time in case of emergency or for the purposes described in
clauses (d) and (f) below), Landlord, its agents, contractors, vendors and
service providers shall have the right to enter the Premises at reasonable hours
to: (a) inspect the same; (b) exhibit the same to prospective purchasers,
lenders or tenants; (c) determine whether Tenant is complying with all of its
obligations hereunder; (d) supply any service to be provided by Landlord to
Tenant hereunder or to any other tenant of the Project; (e) post notices of
nonresponsibility; and (f) make repairs required of Landlord under the terms
hereof or make repairs to any adjoining space or utility services or make
repairs, alterations or improvements to any other portion of the Project;
provided, however, that all such work shall be done as promptly as reasonably
possible and so as to cause as little interference to Tenant as reasonably
possible. 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 such entry.
In an emergency in order to obtain entry to the Premises, Landlord shall have
the right to use any and all means which Landlord may deem proper to open any
doors in, on or about the Premises (excluding Tenant’s vaults, safes, controlled
substance areas, and similar areas agreed upon in writing by Tenant and
Landlord), and no entry to the Premises obtained by Landlord by any of such
means shall under any circumstance be construed or deemed to be a forcible or
unlawful entry into, or a detainer of, the Premises or an eviction, actual or
constructive, of Tenant from the Premises, or any portion thereof.

 

Section 15.2 Alterations to Project. Landlord shall have the right from time to
time to alter the Project and, without the same constituting an actual or
constructive eviction and without incurring any liability to Tenant therefor, to
change the arrangement or location of the Common Facilities or other public
parts of the Project and to change the name, number or designation by which the
Project is commonly known, provided any such change does not unreasonably
reduce, interfere with or deprive Tenant of access to the Premises. If any such
alteration increases or decreases the number of Rentable Square Feet in the
Project, then Landlord shall cause its space analyst to recompute the Rentable
Area of the Project based on the Measurement Standards and shall inform Tenant
of its revised Proportionate Share, as adjusted

 

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to reflect the new Rentable Area of the Project. Landlord’s space analyst’s
recomputation of the Rentable Area of the Project shall be binding on Tenant.

 

Article 16 — Default

 

Section 16.1 Events of Default. In addition to any other event specified in this
Lease as an event of default, the occurrence of any one or more of the following
events (“Events of Default”) shall constitute a breach of this Lease by Tenant:
(a) failure by Tenant to pay any rent, including Direct Expenses and Tenant’s
Proportionate Share of Operating Expenses, when and as the same becomes due and
payable and after the failure to cure the default within three (3) days after
receipt of written notice from Landlord of such failure provided, any notice
given by Landlord in compliance with Section 1951.2 of the California Civil Code
shall satisfy the foregoing notice requirement, and Landlord shall not be
obligated to deliver any additional notice(s) to Tenant prior to commencing an
action for unlawful detainer under such Civil Code section; (b) failure by
Tenant to pay any other sum when and as the same becomes due and payable if such
failure continues for more than ten (10) days after notice of such failure to
pay from Landlord; (c) failure by Tenant to perform or observe any other
obligations of Tenant hereunder, or to comply with the Rules and Regulations, if
such failure continues for more than ten (10) days after notice thereof from
Landlord, unless such default cannot reasonably be cured within such ten
(10) day period and Tenant shall within such period commence with due diligence
and dispatch the curing of such default, and, having so commenced, shall
thereafter prosecute or complete with due diligence and dispatch the curing of
such default, provided in all events the same is completed within ninety
(90) days; (d) the making by Tenant of a general assignment for the benefit of
creditors, or the admission of its inability to pay its debts as they become due
or the filing of a petition, case or proceeding in bankruptcy, or the
adjudication of Tenant as bankrupt or insolvent, or the filing of a petition
seeking any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, or the filing of an answer admitting or failing reasonably to
contest the material allegations of a petition filed against it in any such
proceeding, or the seeking or consenting to or acquiescence in the appointment
of any trustee, receiver or liquidator of Tenant or any material part of its
properties; (e) the failure to have any proceeding against Tenant seeking any
reorganization, arrangement, composition, enforcement, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation, dismissed within ninety (90) days after commencement, or the
failure to have the appointment, without the consent or acquiescence of Tenant,
of any trustee, receiver or liquidator of Tenant or of any material part of its
properties vacated within ninety (90) days after such appointment; (f) the
failure to have any levy upon this Lease or any estate of Tenant hereunder
pursuant to any attachment or execution vacated within ten (10) days after such
attachment or execution; or (g) if Landlord applies any part of the Security
Deposit, and Tenant fails to deposit with Landlord the amount so applied by
Landlord, or to provide Landlord with a replacement Letter of Credit, if
applicable, within five (5) days after notice by Landlord to Tenant stating the
amount applied.

 

Section 16.2 Landlord’s Remedies. If an Event of Default occurs, Landlord, at
any time thereafter, may give a written termination notice to Tenant, and on the
date specified in such notice (which shall be not less than three (3) days after
the giving of such notice), Tenant’s right to possession shall terminate and
this Lease shall terminate, unless on or before such date all sums identified in
such three (3) day notice have been paid by Tenant and all other breaches of
this Lease by Tenant at the time existing shall have been fully remedied to the
satisfaction of Landlord. If Landlord terminates this Lease pursuant to the
provisions of this Section, Landlord shall have all the rights and remedies of a
landlord provided by Section 1951.2 of the California Civil Code or any
successor code section. Upon such termination, in addition to any other rights
and remedies to which Landlord may be entitled under applicable law, Landlord
may recover from Tenant: (a) the worth at the time of award of the unpaid rent
which had been earned at the time of termination; (b) the worth at the time of
award of the amount by which the unpaid rent which would have been earned after
termination until the time of award exceeds the amount of such rent loss that
Tenant proves could have been reasonably avoided; (c) the worth at the time of
award of the amount by which the unpaid rent for the balance of the term of this
Lease after the time of award exceeds the amount of such rent loss that Tenant
proves could be reasonably avoided; and (d) any other amount necessary to
compensate Landlord for all the detriment proximately caused by Tenant’s failure
to perform its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom. The “worth at the time of

 

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award” of the amounts referred to in clauses (a) and (b) above shall be computed
by allowing interest at the rate set forth in Section 16.4 hereof. The worth at
the time of award of the amount referred to in clause (c) above shall be
computed by discounting such amount at a rate equal to the discount rate of the
Federal Reserve Board of San Francisco at the time of award plus one percentage
point. Tenant agrees that such charges shall be recoverable by Landlord under
California Code of Civil Procedure Section 1174(b) or any similar, successor or
related provision of law.

 

Section 16.3 Interest. Every installment of rent and every other payment due
hereunder from Tenant to Landlord which shall not be paid within ten (10) days
after the same shall have become due and payable shall bear interest at a rate
of interest (the “Interest Rate”) equal to the Prime Rate plus five percent
(5%) per annum, or at the highest rate legally permitted, whichever is less,
from the date that the same became due and payable until paid, whether or not
demand be made therefor. With respect to the first two (2) delinquencies
occurring during any twelve(12) consecutive month period Landlord shall give
Tenant ten (10) days notice within which to cure the subject delinquency before
assessing the interest charge.

 

Section 16.4 Late Charges. Tenant acknowledges that late payment by Tenant to
Landlord of Monthly Base Rent or Direct Expenses or Tenant’s Proportionate Share
of Operating Expenses will cause Landlord to incur costs not contemplated by
this Lease, the exact amount of such costs being extremely difficult and
impracticable to fix. Such costs include, without limitation, processing and
accounting charges, and late charges that may be imposed on Landlord by the
terms of any note secured by an encumbrance covering the Premises. Therefore, if
any installment of Monthly Base Rent or Direct Expenses or Tenant’s
Proportionate Share of Operating Expenses due from Tenant is not received by
Landlord within five (5) days after the payment is due, Tenant shall pay to
Landlord on demand an additional sum equal to five percent (5%) of the overdue
amount as a late charge. The parties agree that this late charge represents a
fair and reasonable estimate of the costs that Landlord will incur by reason of
such late payment by Tenant. Acceptance of any late charge shall not constitute
a waiver of Tenant’s default with respect to the overdue amount, or prevent
Landlord from exercising any of the other rights and remedies available to
Landlord. With respect to the first two (2) delinquencies occurring during any
twelve (12) consecutive month period Landlord shall give Tenant ten (10) days
notice within which to cure the subject delinquency before assessing the late
charge.

 

Section 16.5 Lease Continues Until Termination. If Tenant has breached this
Lease and abandoned the Premises, Landlord may elect to exercise its rights
pursuant to California Civil Code Section 1951.4 and to continue this Lease in
effect for so long as Landlord does not terminate Tenant’s right to possession,
and Landlord may enforce all its rights and remedies under this Lease, including
the right to recover the rent as it becomes due under this Lease. Acts of
maintenance or preservation or efforts to relet the Premises or the appointment
of a receiver upon initiative of Landlord to protect Landlord’s interest under
this Lease shall not constitute a termination of Tenant’s right to possession.

 

Section 16.6 Other Rights of Landlord. If Tenant fails to pay any additional
rent when due, Landlord, in addition to any other right or remedy, shall have
the same rights and remedies as in the case of a default by Tenant in the
payment of Monthly Base Rent. If Tenant is in arrears in the payment of Rent,
Tenant waives Tenant’s right, if any, to designate the items against which any
payments made by Tenant are to be credited, and Landlord may apply any payments
made by Tenant to any items Landlord sees fit, regardless of any request by
Tenant.

 

Section 16.7 Legal Impediment to Notice. Notwithstanding anything to the
contrary set forth in this Lease, Tenant’s failure to (i) pay any installment of
Minimum Rent, Tenant’s Proportionate Share of Operating Expenses or Direct
Expenses or other sum payable under this Lease, upon the date when payment is
due, or (ii) observe, keep or perform any of the other terms, covenants,
agreements or conditions set forth in this Lease shall constitute a default
without the requirement of notice if, at the time of such failure or at any time
thereafter, Landlord is prevented by injunction, stay or operation of law from
giving to Tenant a notice of Tenant’s failure to make such payment when due or
observe, keep or perform such terms, covenants, agreements or conditions, it
being agreed that the requirement of notice to Tenant set forth in Sections 16.2
or elsewhere in this Lease would not have been agreed to by Landlord in the
absence of this provision.

 

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Section 16.8 General.

 

(a) All rights, powers and remedies of Landlord hereunder and under any other
agreement now or hereafter in force between Landlord and Tenant shall be
cumulative and not alternative and shall be in addition to all rights, powers
and remedies given to Landlord at law or in equity. The exercise of any one or
more of such rights or remedies shall not impair Landlord’s right to exercise
any other right or remedy including any and all rights and remedies of Landlord
under California Civil Code Section 1951.8, California Code of Civil Procedure
Section 1161 et seq., or any similar, successor or related statute.

 

(b) If, after Tenant’s abandonment of the Premises, Tenant leaves behind any of
Tenant’s property, then Landlord shall store such Tenant’s property at a
warehouse or any other commercially reasonable location at the risk, expense and
for the account of Tenant, and such property shall be released only upon
Tenant’s payment of such charges, together with moving and other costs relating
thereto and all other sums due and owing under this Lease. If Tenant does not
reclaim such Tenant’s property within the period permitted by law, Landlord may
sell such Tenant’s property in accordance with law and apply the proceeds of
such sale to any sums due and owing hereunder, or retain said property, granting
Tenant credit against sums due and owing hereunder for the reasonable value of
such property.

 

Article 17 — Landlord’s Right to Cure Defaults

 

If Tenant defaults in the performance of its obligations under this Lease,
Landlord, without waiving such default, may perform such obligations at Tenant’s
expense: (a) immediately, and without notice, in the case of emergency or if the
default (i) materially interferes with the use by any other tenant of the
Project, (ii) materially interferes with the efficient operation of the Project,
(iii) results in a violation of any applicable law, statute, regulation, order
or rule, or (iv) results or will result in a cancellation of any insurance
policy maintained by Landlord, and (b) in any other case if such default
continues after ten (10) days from the date Landlord gives notice of Landlord’s
intention to perform the defaulted obligation. All costs and expenses incurred
by Landlord in connection with any such performance by it and all costs and
expenses, including reasonable counsel fees and disbursements, incurred by
Landlord in any action or proceeding (including any unlawful detainer
proceeding) brought by Landlord to enforce any obligation of Tenant under this
Lease and/or right of Landlord in or to the Premises, shall be paid by Tenant to
Landlord on demand, with interest thereon at the Interest Rate from the date
incurred by Landlord. Except as expressly provided to the contrary in this
Lease, all costs and expenses which, pursuant to this Lease are incurred by
Landlord and payable to Landlord by Tenant, and all charges, amounts and sums
payable to Landlord by Tenant for any property, material, labor, utility or
other services which, pursuant to this Lease or at the request and for the
account of Tenant, are provided, furnished or rendered by Landlord, shall become
due and payable by Tenant to Landlord in accordance with the terms of the bills
rendered by Landlord to Tenant.

 

Article 18 — Attorneys’ Fees

 

Section 18.1 Lease Disputes.

 

(a) Landlord and Tenant agree that all disputes arising, directly or indirectly,
out of or relating to this Lease, and all actions to enforce this Lease, shall
be dealt with and adjudicated in the state courts of the State of California or
the United States District Court for the Northern District of California and for
that purpose hereby expressly and irrevocably submits itself to the jurisdiction
of such courts. Tenant agrees that so far as is permitted under applicable law,
this consent to personal jurisdiction shall be self-operative and no further
instrument or action, other than service of process in one of the manners
specified in this Lease, or as otherwise permitted by law, shall be necessary in
order to confer jurisdiction upon it in any such court.

 

(b) In any action or proceeding brought by either party against the other under
this Lease, the prevailing party shall be entitled to recover from the other
party its reasonable professional fees for attorneys, appraisers and
accountants, its reasonable investigation costs, and any other reasonable legal
expenses and actual court costs incurred by the prevailing party in such action
or proceeding.

 

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Article 19 — Holding Over

 

Section 19.1 Holding Over. Landlord and Tenant recognize that Landlord’s damages
resulting from Tenant’s failure to timely surrender possession of the Premises
may be substantial, may exceed the amount of the rent payable hereunder, and
will be impossible to accurately measure. Accordingly, if possession of the
Premises is not surrendered to Landlord on the Expiration Date or sooner
termination of this Lease, in addition to any other rights or remedies Landlord
may have hereunder or at law, Tenant shall (a) pay to Landlord for each month
(or any portion thereof) during which Tenant holds over in the Premises after
the Expiration Date or sooner termination of this Lease, a sum equal to the
aggregate of (i) 150% of the Monthly Base Rent payable under this Lease for the
last full calendar month of the Term and (ii) the amount of Direct Expenses and
Tenant’s Proportionate Share of Operating Expenses applicable to such holdover
period; (b) provided Tenant has been given at least thirty (30) days prior
written notice that Landlord has entered into a lease with a “New Tenant” (as
hereinafter defined), be liable to Landlord for (i) any payment or rent
concession which Landlord may be required to make to any tenant obtained by
Landlord for all or any part of the Premises (a “New Tenant”) in order to induce
such New Tenant not to terminate its lease by reason of the holding-over by
Tenant, and (ii) the loss of the benefit of the bargain if any New Tenant shall
terminate its lease by reason of the holding-over by Tenant, and indemnify
Landlord against all claims for damages by any New Tenant. No holding-over by
Tenant, nor the payment to Landlord of the amounts specified above, shall
operate to extend the Term hereof. Nothing herein contained shall be deemed to
permit Tenant to retain possession of the Premises after the Expiration Date or
sooner termination of this Lease, and no acceptance by Landlord of payments from
Tenant after the Expiration Date or sooner termination of this Lease shall be
deemed to be other than on account of the amount to be paid by Tenant in
accordance with the provisions of this Section 19.1.

 

Article 20 — Waiver

 

Section 20.1 Waiver. The failure of Landlord to exercise its rights in
connection with any breach or violation of any term, covenant or condition
herein contained shall not be deemed to be a waiver of such term, covenant or
condition or any subsequent breach of the same or any other term, covenant or
condition herein contained. The subsequent acceptance of rent hereunder by
Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of
any term, covenant or condition of this Lease other than the failure of Tenant
to pay the particular rent so accepted, regardless of Landlord’s knowledge of
such preceding breach at the time of acceptance of such rent.

 

Article 21 — Eminent Domain

 

Section 21.1 Taking of Premises. If all or any part of the Premises is taken by
any public or quasi public authority as a result of the exercise of the power of
eminent domain, this Lease shall terminate as to the part so taken as of the
date of taking, and, in the case of a partial taking, either Landlord or Tenant
shall have the right to terminate this Lease as to the balance of the Premises
by written notice to the other within thirty (30) days after the date of such
taking, provided, however, that a condition to the exercise by Tenant of such
right to terminate shall be that the portion of the Premises taken shall, in
Landlord’s judgment, be of such extent and nature as substantially to handicap,
impede and impair Tenant’s use of the balance of the Premises. If a material
part of the Premises is condemned or taken or if substantial alteration or
reconstruction of the Premises shall, in Landlord’s opinion, be necessary or
desirable as a result of such condemnation or taking, Landlord may terminate
this Lease by written notice to Tenant within thirty (30) days after the date of
taking.

 

Section 21.2 Condemnation Award. Landlord shall be entitled to any and all
compensation, damages, income, rent, awards, and any interest therein whatsoever
which may be paid or made in connection with any taking, except for what the
condemning agency awards separately to Tenant for its loss of equipment, moving
expenses, etc. and Tenant shall have no claim against Landlord for the value of
any unexpired term of this Lease or otherwise. In the event of a partial taking
of the Premises which does not result in a termination of this Lease, the
Monthly Base Rent thereafter to be paid shall be equitably reduced by Landlord.
Each party waives the provisions of California Code of Civil Procedure
Section 1265.130 allowing either

 

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party to petition the Superior Court to terminate this Lease in the event of a
partial taking of the Premises.

 

Section 21.3 Temporary Taking. Notwithstanding any of the provisions hereof to
the contrary, if all of the Premises shall be temporarily condemned or taken for
governmental occupancy for a period of more than one year, this Lease shall
terminate as of the date of taking and Landlord shall be entitled to any and all
compensation, damages, income, rent and awards in connection therewith except
Tenant’s separate award and as set forth in Section 21.2 above.

 

Article 22 — Sale by Landlord

 

Section 22.1 Sale by Landlord. A sale or conveyance by Landlord of the Premises
shall operate to release Landlord from any future liability upon any of the
agreements, obligations, covenants or conditions, express or implied, herein
contained in favor of Tenant, and Tenant agrees to look solely to the
responsibility of the successor in interest of Landlord in and to this Lease.
This Lease shall not be affected by any such sale, however, and Tenant agrees to
attorn to the purchaser or assignee, such attornment to be effective and
self-operative without the execution of any further instruments by any of the
parties to this Lease.

 

Article 23 — Subordination

 

Section 23.1 Subordination and Attornment. This Lease is subject and subordinate
to all Mortgages and, at the request of any Mortgagee, Tenant shall attorn to
such Mortgagee, its successors in interest or any purchaser in a foreclosure
sale. “Mortgage(s)” means any mortgage, trust indenture or other financing
document which may now or hereafter affect the Premises or the Project or any
ground lease or underlying lease and the leasehold interest created thereby, and
all renewals, extensions, supplements, amendments, modifications, consolidations
and replacements thereof or thereto, substitutions therefor, and advances made
thereunder; and the term “Mortgagee(s)” means any mortgagee, trustee or other
holder of a Mortgage.

 

(a) If a Mortgagee or any other person or entity shall succeed to the rights of
Landlord under this Lease, whether through possession or foreclosure action or
the delivery of a deed or a new Mortgage, then at the request of the successor
landlord and upon such successor landlord’s written agreement to accept Tenant’s
attornment and to recognize Tenant’s interest under this Lease, Tenant shall be
deemed to have attorned to and recognized such successor landlord as Landlord
under this Lease. The provisions of this Section 23.1 are self-operative and
require no further instruments to give effect hereto; provided, however, that
Tenant shall promptly execute and deliver any instrument that such successor
landlord may reasonably request evidencing such attornment and containing such
other terms and conditions as may be required by such Mortgagee, provided such
terms and conditions do not increase the rent, increase Tenant’s obligations or
adversely affect Tenant’s rights under this Lease. Upon such attornment this
Lease shall continue in full force and effect as a direct lease between such
successor landlord and Tenant upon all of the terms, conditions and covenants
set forth in this Lease except that such successor landlord shall not be

 

(i) liable for any act or omission of Landlord (except to the extent such act or
omission continues beyond the date when such successor landlord succeeds to
Landlord’s interest and Tenant gives notice of such act or omission);

 

(ii) subject to any defense, claim, counterclaim, set-off or offsets which
Tenant may have against Landlord for any default that is not a continuing
breach;

 

(iii) bound by any prepayment of more than one (1) month’s rent to any prior
landlord;

 

(iv) bound by any obligation to perform any work or to make improvements to the
Premises except for repairs and maintenance required to be made by Landlord
under this Lease, and repairs to the Premises as a result of damage by fire or
other casualty or a partial condemnation pursuant to the provisions of this
Lease, but only to the extent that such repairs can reasonably be made from the
net proceeds of any

 

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insurance or condemnation awards, respectively, actually made available to such
successor landlord;

 

(v) bound by any modification, amendment or renewal of this Lease made without
such lender’s consent;

 

(vi) liable for the repayment of any security deposit or surrender of any letter
of credit, unless and until such security deposit actually is paid or such
letter of credit is actually delivered to such successor landlord; or

 

(b) Tenant shall from time to time within ten (10) business days of request from
Landlord execute and deliver any documents or instruments that may be reasonably
required by any future Mortgagee to effectuate any subordination.

 

Section 23.2 Subordination to Future Loans. As a condition to any subordination
of this Lease to any future Mortgage, Landlord shall deliver to Tenant for
execution a non-disturbance agreement from such Mortgagee(s) in the lender’s
standard form, which non-disturbance agreement shall provide that so long as
there exists no Event of Default hereunder, Tenant shall not be evicted from the
Premises, nor shall Tenant’s rights under this Lease be disturbed, by reason of
such subordination, by reason of any default under any Mortgage by Landlord, or
by reason of foreclosure of such Mortgage, or exercise of the statutory power of
sale, or receipt of a deed in lieu of foreclosure. Any Mortgagee may elect that
this Lease shall have priority over the Mortgage and, upon notification to
Tenant by such Mortgagee, this Lease shall be deemed to have priority over such
Mortgage, regardless of the date of this Lease.

 

Section 23.3 Tenant’s Termination Right. As long as any Mortgage exists, Tenant
shall not seek to terminate this Lease by reason of any act or omission of
Landlord until (a) Tenant shall have given notice of such act or omission to all
Mortgagees, and (b) a reasonable period of time shall have elapsed following the
giving of notice of such default and the expiration of any applicable notice or
grace periods (unless such act or omission is not capable of being remedied
within a reasonable period of time), during which period such Mortgagees shall
have the right, but not the obligation, to remedy such act or omission and
thereafter diligently proceed to so remedy such act or obligation. If any
Mortgagee elects to remedy such act or omission of Landlord, Tenant shall not
seek to terminate this Lease so long as such Mortgagee is proceeding with
reasonable diligence to effect such remedy.

 

Article 24 — No Merger

 

Section 24.1 No Merger. The voluntary or other surrender of this Lease by
Tenant, or a mutual cancellation thereof, shall not work a merger, and shall, at
the option of Landlord, terminate any or all existing subleases or subtenancies,
or operate as an assignment to Landlord of any or all of such subleases or
subtenancies.

 

Article 25 — Surrender of Premises

 

Section 25.1 Surrender of Premises. At the end of the Term or upon sooner
termination of this Lease, Tenant shall peaceably deliver up to Landlord
possession of the Premises, together with all improvements, alterations or
additions upon or belonging to the same, by whomsoever made, in the same
condition as received, or first installed, reasonable wear and tear and damage
caused by casualty that Tenant is not required to repair excepted. Tenant may,
upon the termination of this Lease, remove all movable partitions of less than
full height from floor to ceiling, as well as counters and other trade fixtures
installed by Tenant at Tenant’s cost, repairing any damage caused by such
removal. Property not so removed shall be deemed abandoned by Tenant and title
to the same shall thereupon pass to Landlord. Tenant shall, upon the expiration
or sooner termination of this Lease, remove all telecommunications, computer or
data cabling installed by or for Tenant, repairing any damage caused by such
removal. Upon request by Landlord at the time Landlord’s consent for the
improvement or addition was given and except for Landlord improvements for the
First Floor and the Second Floor Improvements (other than as set forth in the
next sentence), unless otherwise agreed to in writing by Landlord, Tenant, at
its cost, shall, upon the expiration or sooner termination of this Lease, remove
any or all permanent improvements or additions to the Premises installed by
Tenant and all movable

 

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partitions, counters, and other trade fixtures and repair any damage resulting
from such removal. Anything herein to the contrary notwithstanding, Landlord
may, at the time Landlord’s consent for improvements to the second floor is
given, condition such consent on Tenant’s agreement to remove any or all labs
from the second floor of the Premises upon the expiration or sooner termination
of this Lease and repair any damage resulting from such removal.

 

Article 26 — Estoppel Certificate

 

Section 26.1 Estoppel Certificate. At any time and from time to time, but in no
event on less than ten (10) business days’ prior written request by Landlord,
Tenant shall execute, acknowledge and deliver to Landlord, promptly upon
request, a certificate certifying: (a) that Tenant has accepted the Premises
(or, if Tenant has not done so, that Tenant has not accepted the Premises, and
specifying the reasons therefor); (b) the commencement and expiration dates of
this Lease; (c) whether there are then existing any defaults by Landlord in the
performance of its obligations under this Lease (and, if so, specifying the
same); (d) that this Lease is unmodified and in full force and effect (or, if
there have been modifications, that this Lease is in full force and effect, as
modified, and stating the date and nature of each modification); (e) the
capacity of the person executing such certificate, and that such person is duly
authorized to execute the same on behalf of Tenant; (f) the date, if any, to
which rent and other sums payable hereunder have been paid; (g) that no notice
has been received by Tenant of any default which has not been cured, except as
to defaults specified in the certificate; (h) the amount of any security deposit
and prepaid rent; and (i) such other matters as may be reasonably requested by
Landlord. Any such certificate may be relied upon by any prospective purchaser
or Mortgagee or prospective Mortgagee. Tenant shall indemnify and hold Landlord
harmless from and against all costs, damages, expenses, liabilities and fees,
including, without limitation, reasonable attorneys’ fees and any consequential
damages or lost profits, arising from or in any way related to or connected with
Tenant’s failure to deliver any such certificate within the time specified in
this Section 26.1.

 

Article 27 — No Light, Air or View Easement

 

Section 27.1 No Light, Air or View Easement. Any diminution or shutting off of
light, air or view by any structure which is now or may hereafter be erected on
lands adjacent to the Premises shall in no way affect this Lease or impose any
liability on Landlord. Noise, dust or vibration or other incidents to new
construction of improvements on lands adjacent to or in the vicinity of the
Premises, whether or not owned by Landlord, shall in no way affect this Lease or
impose any liability on Landlord.

 

Article 28 — Notices

 

Section 28.1 Notices. All notices and demands which may or are required to be
given by either party to the other hereunder shall be in writing and shall be
deemed to have been fully given when (a) deposited in the United States mail,
certified or registered, postage prepaid, or (b) delivered to a reputable and
reliable courier, and, in either event, addressed as follows: prior to the date
on which Tenant accepts possession of the Premises, at Tenant’s address prior to
occupancy set out in the Basic Lease Information, and thereafter to Tenant at
the Premises or at the address for Tenant set out in the Basic Lease
Information, or to such other place as Tenant may from time to time designate in
a notice to Landlord; and to Landlord at the address specified in the Basic
Lease Information, or to such other place as Landlord may from time to time
designate in a notice to Tenant. Tenant hereby appoints as its agent to receive
the service of all dispossessory or distraint proceedings and notices thereunder
the person in charge of or occupying the Premises at the time, and if no person
shall be in charge of or occupying the same, then such service may be made by
attaching the same to the main entrance of the Premises.

 

Article 29 -- Successors

 

Section 29.1 Successors. All the terms, covenants, and conditions hereof shall
be binding upon and inure to the benefit of the heirs, executors,
administrators, successors, and assigns of the parties hereto, provided that
nothing in this Section shall be deemed to permit any assignment, subletting,
occupancy or use by Tenant contrary to the provision of Article 10.

 

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Article 30 — Insurance

 

Section 30.1 Liability Insurance. Tenant, at its cost, shall maintain commercial
general liability insurance, insuring against all liability arising out of or in
connection with Tenant’s use or occupancy of the Premises or the exercise of any
rights of Tenant pursuant to this Lease, utilizing the standard ISO Occurrence
Form CG0001, or equivalent, including contractual liability coverage, with
minimum limits of Five Million Dollars ($5,000,000.00) per occurrence and Five
Million Dollars ($5,000,000.00) annual aggregate. The amount of such liability
insurance required to be maintained by Tenant hereunder shall not be construed
to limit Tenant’s indemnity obligations in this Lease or other liability
hereunder. Such insurance shall name Landlord, its partners, officers,
directors, members, shareholders, lenders, asset managers, property managers,
Mortgagees and Lessors whose names have been furnished to Tenant (collectively,
the “Additional Insured Parties”) as additional insureds (using ISO Form CG 2010
(11/85), or equivalent), and shall provide that it is primary insurance and not
“excess over” or contributory with any other valid, existing and applicable
insurance in force for or on behalf of Landlord. Tenant’s liability policy shall
not have a deductible in excess of Ten Thousand Dollars ($10,000.00). Once
during the Term, but not before December 1, 2006, if, in the reasonable opinion
of any Mortgagee or Lessor or of any insurance consultant retained by Landlord,
the amount of Tenant’s liability insurance coverage is not adequate, Tenant
shall, upon notice from Landlord, increase the insurance coverage either as
required by such Mortgagee or Lessor or recommended by Landlord’s insurance
consultant. Tenant’s insurance may be maintained under blanket policies covering
more than one location of Tenant.

 

Section 30.2 Tenant’s Property Insurance. Tenant, at its cost, shall maintain on
all of its personal property, and all Alterations and other improvements in the
Premises other than the Base Building Improvements (whether initially
constructed by Landlord or Tenant or any third party) (collectively, the “Tenant
Items”) and all other personal property located in the Premises property
insurance in the amount of one hundred percent (100%) of the insurable
replacement cost, from time to time, without a co-insurance penalty and with a
deductible which does not exceed Ten Thousand Dollars ($10,000.00), utilizing
the ISO Causes of Loss–Special Form CP 1030, or equivalent (commonly referred to
as “All Risk”), including business income insurance (insuring against loss of
income and extra expense in such amounts as will reimburse Tenant for direct or
indirect loss of earnings and incurred costs, attributable to the perils covered
by Tenant’s property insurance, for a period of twelve (12) months). The
proceeds from any such policy shall be used by Tenant for the replacement of
such Tenant Items. Landlord shall be named, as its interest may appear, on
Tenant’s property policy. The “replacement cost” of the improvements to be
insured under this Article 30 shall be determined by the company issuing the
insurance policy at the time the policy is initially obtained. Not more
frequently than once every three (3) years, Landlord shall have the right to
notify Tenant that it elects to have the replacement cost redetermined by an
insurance company or insurance consultant. The redetermination shall be made
promptly and in accordance with the rules and practices of the Board of Fire
Underwriters, or a like board recognized and generally accepted by the insurance
company, and each party shall be promptly notified of the results by the
company. The insurance policy shall be adjusted to conform with the redetermined
replacement cost.

 

Section 30.3 Tenant’s Worker’s Compensation Insurance. Tenant, at its cost,
shall maintain in full force workers’ compensation insurance in compliance with
the applicable Laws of the state where the Premises are located, and employer’s
liability insurance in an amount of not less than One Million Dollars
($1,000,000.00).

 

Section 30.4 Insurance Criteria. On or prior to the Term Commencement Date and
not less than ten (10) days prior to the expiration of the term of such
coverage, Tenant shall deliver to Landlord a certification from Tenant’s
insurance company on the forms currently designated “Acord 28” (Evidence of
Property Insurance) and “Acord 25-S” (Certificate of Liability Insurance), or
the equivalent, provided that attached to the Acord 25-S is an endorsement
naming the Additional Insured Parties as additional insureds, which shall be
binding on Tenant’s insurance company, and which shall expressly provide that
(a) such certification conveys to the Additional Insured Parties all the rights
and privileges afforded under the policies as primary insurance, and
(b) contains an unconditional obligation of the insurance company to advise all
of the Additional Insured Parties in writing by certified mail, return receipt
requested, at least thirty (30) days in advance of any termination or change to
the policies that would affect the interest of any of the Additional Insured
Parties, except that ten (10) days’ prior written notice may be given in the
case of nonpayment of premiums. In lieu of such certificates,

 

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Landlord shall have the right to require Tenant to deliver to Landlord, and if
so required by Landlord, Tenant shall deliver to Landlord, copies of the
policies of insurance required to be carried pursuant to this Article 32 showing
that the Additional Insured Parties are named as additional insureds. All of
Tenant’s insurance required hereunder shall be issued by insurance companies
authorized to do business in the state where the Premises are located, with a
Best’s Rating of not less than A- and a Financial Size Category of not less than
VIII, as rated in the most recent edition of Best’s Insurance Reports or such
other financial rating as Landlord may notify Tenant that Landlord at such time
considers appropriate.

 

Section 30.5 Landlord’s Insurance. Landlord, at its cost (but subject to
reimbursement pursuant to the terms of Article 4), shall maintain (a) commercial
general liability insurance, including contractual liability coverage, with a
minimum combined single limit of Five Million Dollars ($5,000,000.00) per
occurrence, insuring against all liability of Landlord and its authorized
representatives arising out of or in connection with Landlord’s ownership of the
Premises; and (b) property insurance on an occurrence basis using the ISO causes
of loss –special form, or equivalent in an amount sufficient to prevent a
co-insurance penalty; and (c) business income insurance covering a period of at
least twelve (12) months. Landlord may satisfy its obligations with respect to
the insurance it is required to maintain hereunder by means of “blanket” and
“excess liability” insurance policies.

 

Article 31 — Waiver of Trial by Jury; Counterclaim

 

Section 31.1 Jury Trial Waiver. THE PARTIES HEREBY AGREE THAT THIS LEASE
CONSTITUTES A WRITTEN CONSENT TO WAIVER OF TRIAL BY JURY PURSUANT TO THE
PROVISIONS OF CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 631 AND EACH PARTY DOES
HEREBY CONSTITUTE AND APPOINT THE OTHER PARTY ITS TRUE AND LAWFUL
ATTORNEY-IN-FACT, WHICH APPOINTMENT IS COUPLED WITH AN INTEREST, AND EACH PARTY
DOES HEREBY AUTHORIZE AND EMPOWER THE OTHER PARTY, IN THE NAME, PLACE AND STEAD
OF SUCH PARTY, TO FILE THIS LEASE WITH THE CLERK OR JUDGE OF ANY COURT OF
COMPETENT JURISDICTION AS A STATUTORY WRITTEN CONSENT TO WAIVER OF TRIAL BY
JURY.

 

LANDLORD’S INITIALS: _____             TENANT’S INITIALS: _____

 

Section 31.2 Waiver of Counterclaim. If Landlord commences any summary
proceeding against Tenant, Tenant will not interpose any counterclaim of any
nature or description in any such proceeding (unless failure to interpose such
counterclaim would preclude Tenant from asserting in a separate action the claim
which is the subject of such counterclaim), and will not seek to consolidate
such proceeding with any other action which may have been or will be brought in
any other court by Tenant.

 

Article 32 — Miscellaneous

 

Section 32.1 Captions. The captions and headings of the Articles and Sections in
this Lease are for convenience only and shall not in any way limit or be deemed
to construe or interpret the terms and provisions hereof.

 

Section 32.2 Time of Essence. Time is of the essence of this Lease and of all
provisions hereof, except with respect to the delivery of possession of the
Premises at the commencement of the term hereof.

 

Section 32.3 Number and Genders; Joint and Several Liability. The words
“Landlord” and “Tenant,” as used herein, shall include the plural as well as the
singular. Words used in the masculine gender include the feminine and neuter. If
there is more than one Landlord or Tenant, the obligations hereunder imposed
upon Landlord and Tenant shall be joint and several.

 

Section 32.4 Governing Law. This Lease shall be construed and enforced in
accordance with the laws of the State of California.

 

35

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Section 32.5 Cumulative Remedies. It is understood and agreed that the remedies
herein given to Landlord shall be cumulative and are in addition to any other
remedies available to Landlord at law or in equity, by statute or otherwise, and
the exercise of any one remedy by Landlord shall not be to the exclusion of any
other remedy.

 

Section 32.6 Entire Agreement. The terms of this Lease are intended by the
parties as a final expression of their agreement with respect to such terms as
are included in this Lease and may not be contradicted by evidence of any prior
or contemporaneous agreement. The parties further intend that this Lease
constitutes the complete and exclusive statement of its terms and that no
extrinsic evidence whatsoever may be introduced in any judicial proceedings, if
any, involving this Lease.

 

Section 32.7 Invalidity. If any provision of this Lease or the application
thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such provision
to persons or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected thereby, and each provision of this Lease
shall be valid and be enforced to the full extent permitted by law.

 

Section 32.8 Authority. If Tenant signs as a corporation or a partnership, each
of the persons executing this Lease on behalf of Tenant does hereby covenant and
warrant that Tenant is a duly authorized and existing entity, that Tenant has
and is qualified to do business in California, that Tenant has full right and
authority to enter into this Lease, and that each and both of the persons
signing on behalf of Tenant are authorized to do so. Upon Landlord’s request,
Tenant shall provide Landlord with evidence reasonably satisfactory to Landlord
confirming the foregoing covenants and warranties.

 

Section 32.9 No Offer. No contractual or other rights shall exist between
Landlord and Tenant with respect to the Premises until both have executed and
delivered this Lease, notwithstanding that rental deposits have been received by
Landlord and notwithstanding that Landlord has delivered to Tenant an unexecuted
copy of this Lease. The submission of this Lease to Tenant shall be for
examination purposes only, and does not and shall not constitute a reservation
of or an option for the Tenant to lease, or otherwise create any interest by
Tenant in the Premises or any other premises situated in the Project. Execution
of this Lease by Tenant and return to Landlord shall not be binding upon
Landlord, notwithstanding any time interval, until Landlord has in fact executed
and delivered this Lease to Tenant.

 

Section 32.10 No Representations or Warranties. Neither Landlord nor Landlord’s
agents or attorneys have made any representations or warranties with respect to
the Premises, the Project or this Lease, except as expressly set forth herein,
and no rights, easements or licenses are or shall be acquired by Tenant by
implication or otherwise.

 

Section 32.11 Brokers. Tenant represents that it has not incurred an obligation
to any broker in connection with this Lease, other than Landlord’s broker and
Tenant’s broker listed in the Basic Lease Information, and Tenant shall hold
Landlord harmless from and against any and all liability, loss, damage, expense,
claim, action, demand, suit or obligation arising out of or relating to a breach
by Tenant of this representation.

 

Section 32.12 Amendments. This Lease may not be altered, changed, or amended
except by an instrument signed by both parties hereto.

 

36

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IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease in
quadruplicate on the dates set forth below and this Lease shall be effective as
of the latter of such dates.

 

TENANT:

      LANDLORD:

DURECT CORPORATION,

      RWC, LLC,

a Delaware corporation

      a California limited liability company

By:

 

/s/ Felix Theeuwes

     

By:

 

Grosvenor California Limited,

a California corporation

Its:

 

Chairman & CSO

     

Its:

 

Managing Member

By:

  Paula Mendenahall      

By:

 

/s/

Its:

  SR VP OPERATIONS      

Its:

   

Date: August 31, 2005

     

By:

 

/s/

           

Its:

 

President

           

Date:

   

 

37

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EXHIBIT A

 

SITE PLAN FOR THE PROJECT

(WITH PREMISES/BUILDING SHOWN IN CROSSHATCH)

 

LOGO [g25367img1.jpg]

 

FOUR RESULTS WAY

FIVE RESULTS WAY

ONE RESULTS WAY

ONE RESULTS WAY

ONE RESULTS WAY

SIX RESULTS WAY

ONE RESULTS WAY

THREE RESULTS WAY

TWO RESULTS WAY

 

A-1

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EXHIBIT B

 

RESULTS WAY CORPORATE PARK SIGN PROGRAM

 

Intentionally Omitted.

 

B-1

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EXHIBIT C

 

WORK LETTER

 

1. Landlord and Tenant have each approved the space plans for the Premises dated
August 30, 2005 (the “Space Plans”) by Studios Architecture (“Landlord’s
Architect”), a copy of which is attached hereto as Exhibit C-1.

 

2. Within five (5) days after execution of this Lease, Tenant shall provide
Landlord’s Architect with all information reasonably required in order to
prepare detailed plans and specifications (the “Working Drawings”) showing the
specific tenant improvements (the “Improvements”) which Tenant desires to have
Landlord construct on the Premises. Failure of Tenant to provide such
information within the time period set forth above shall constitute a Tenant
Delay (as hereinafter defined). The Working Drawings shall be based upon the
Space Plans. The information which Tenant is to convey to Landlord’s Architect
within the time period set forth above shall include, without limitation, the
following:

 

(a) location and type of all partitions;

 

(b) location and type of all doors, including hardware;

 

(c) location and type of glass partitions, windows and doors, including framing;

 

(d) location and type of Tenant’s telephone and other communication equipment;

 

(e) all critical dimensions necessary for construction of the Improvements;

 

(f) location of all new and existing electrical outlets (including, without
limitation, floor monuments), switches, telephone outlets and lighting;

 

(g) location and type of special outlets for Tenant’s equipment with special
electrical requirements, including manufacturer’s specifications for use and
operation;

 

(h) location, weight per square foot and description of any heavy equipment or
filing systems exceeding fifty (50) pounds per square foot;

 

(i) all special air conditioning or ventilation requirements;

 

(j) floor covering types and colors;

 

(k) wall covering and base types and colors;

 

(l) paint types and colors;

 

(m) location and type of plumbing and kitchen equipment;

 

(n) all millwork and built-in equipment with size, hook-up requirements and
finishes approved by Tenant;

 

(o) all bracing and support of special walls and dimensions;

 

(p) height and type of ceiling, if different from Premises-standard;

 

(q) special purpose rooms including, without limitation, computer rooms,
kitchens, and x-ray rooms, and notation if services of special technical
consultants will be required; and

 

(r) such other detail as Landlord shall reasonably request.

 

Tenant shall, within two (2) business days after receipt of the Working
Drawings, advise Landlord of any reasonable changes which Tenant requests in
order to conform the Working Drawings to Space Plans. If Tenant reasonably
disapproves of the Working Drawings

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

as being inconsistent with the Space Plans, specifying in reasonable detail its
reasons therefor, Landlord shall cause Landlord’s Architect to revise the
Working Drawings as disapproved by Tenant and resubmit the revised Working
Drawings to Tenant. Tenant shall, within two (2) business days after receipt of
Landlord’s Architect’s revised Working Drawings, advise Landlord of any
additional reasonable changes which Tenant requests in order to conform the
Working Drawings to the Space Plans. If Tenant disapproves the revised Working
Drawings specifying the reason therefor, Landlord shall, to the extent such
proposed changes are reasonable, within fifteen (15) days of receipt of Tenant’s
required changes, cause Landlord’s Architect to revise the Working Drawings and
resubmit them to Tenant. Tenant shall, again within two (2) business days after
receipt of Landlord’s Architect’s revised Working Drawings, advise Landlord of
further changes, if any, required for Tenant’s approval. This process shall
continue until Tenant has approved the revised Working Drawings. Notwithstanding
anything to the contrary contained in the immediately preceding sentence, in no
event shall Landlord be required to cause more than three (3) revisions to the
Working Drawings. Tenant agrees not to withhold or deny its approval
unreasonably.

 

3. Preparation and approval of the Working Drawings shall proceed as indicated
below and each action by Tenant completed on or before the date herein
specified.

 

Action

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

  

Due Date

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

(a) Submission of detailed information to Landlord’s Architect

   5 days after execution of this Lease

(b) Delivery of written notice approving or disapproving Working Drawings

   2 business days after receipt thereof

(c) Submission, if necessary, of information necessary to redesign Working
Drawings

   5 days after receipt of Landlord’s notice of disapproval, if applicable

(d) Delivery of written notice of final approval of Working Drawings

   2 business days after receipt

 

4. Landlord shall construct the Improvements as shown on the Space Plans, using
Project-standard materials and procedures. Tenant shall bear the cost of any
Improvements which differ from Premises Standard. Any changes to the final
Working Drawings subsequent to Landlord’s approval thereof which are requested
by Tenant, required by any governmental agency, required as a result of delays
in construction or required for any other reason whatsoever shall be
incorporated into the work by means of a change order. All change orders shall
be forwarded to Landlord for approval and costing. Tenant shall be given a
written cost estimate for the completion of such change order which must be
approved and paid for by Tenant within five (5) business days of billing and any
unpaid portions shall bear interest from the date due at the Interest Rate (as
defined in the Lease).

 

5. The cost of constructing the Improvements shall be borne by Landlord, except
that Tenant shall contribute the sum of Forty-Two Thousand and no/100 Dollars
($42,000.00) toward the cost of the Improvements (“Tenant’s Contribution”).
Subject to the provisions of Section 8.2 of the Lease (which permits Tenant to
“pay” Tenant’s Contribution out of the Landlord’s Contribution toward the Second
Floor Improvements), Tenant’s Contribution shall be paid to Landlord upon
written notice from Landlord (the “Permits Notice) that permits for the
Imrprovements have been issued. Landlord shall not be required to commence to
construct the Improvements unless and until Tenant has paid Tenant’s
Contribution (either in cash, or by using the Landlord’s Contribution, as herein
described), and Tenant’s failure to pay Tenant’s Contribution to Landlord within
ten (10) days after receipt of the Permits Notice shall constitute a “Tenant’s
Delay”.

 

6. The date of Substantial Completion of the Improvements shall be fixed by
Landlord, Landlord’s contractor, or Landlord’s Architect in a notice to Tenant,
which notice shall state that the Premises are, or prior to the commencement
date fixed in such notice will be, substantially completed and ready for
occupancy by Tenant. If Landlord shall be delayed in Substantial Completion of
the Improvements as a result of:

 

(a) Tenant’s failure to submit the information necessary for the preparation of
the Working Drawings on or before the dates or within the time periods called
for;

 

C-2

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(b) Tenant’s change(s) in the Working Drawings after such dates;

 

(c) Tenant’s failure to make necessary arrangements with the telephone company
and Tenant’s telephone and communication consultants;

 

(d) Tenant’s failure to pay the Tenant’s Contribution to Landlord in a timely
manner; or

 

(e) Any other delays requested or caused by the acts or omissions of Tenant, its
agents, employees, architects or engineers (all of the foregoing being referred
to herein collectively as “Tenant’s Delay”);

 

then the Term Commencement Date shall be the earlier of:

 

(i) the date on which Tenant accepts possession of the Premises, or

 

(ii) that number of days prior to the actual date of Substantial Completion of
the Improvements which is equal to the total number of days of Tenant’s Delay.

 

Tenant acknowledges that changes to the Working Drawings may result in delays
for preparation of revised Working Drawings, re-pricing and/or construction, all
of which will constitute Tenant’s Delay. Tenant further acknowledges that the
time required to obtain any unique or custom items desired by Tenant, or the
choice by Tenant of any items which differ from, and take longer to obtain than,
Premises-standard items, will likely result in Tenant’s Delay.

 

7. Tenant shall examine the Premises before taking occupancy, and occupancy by
Tenant shall be conclusive evidence against Tenant that at that time the
Premises were in good order and satisfactory condition; provided, however, that
Tenant shall have fifteen (15) days after Landlord’s tender of possession to
identify “punch list” items, which “punch list” items shall be promptly
corrected by Landlord.

 

8. (a) All defined terms as used and not otherwise defined herein shall have the
meanings ascribed to them in the Lease.

 

(b) Tenant agrees that, in connection with Tenant’s use of the Premises during
construction of the Improvements under any early access right granted in the
Lease, Landlord shall not be liable in any way for injury, loss, or damage which
may occur to any installations made in the Premises by Tenant, or to any
personal property placed therein, the same being at Tenant’s sole risk.

 

(c) Except as expressly set forth herein, Landlord has no other agreement with
Tenant and Landlord has no other obligation to do any other work or pay any
amounts with respect to the Premises. Any other work in the Premises which may
be permitted by Landlord pursuant to the terms and conditions of the Lease shall
be done at Tenant’s sole cost and expense and in accordance with the terms and
conditions of the Lease.

 

(d) This Work Letter shall not be deemed applicable to any additional space
added to the original 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 thereto in the event of a renewal or extension of the initial
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 thereto.

 

(e) The failure by Tenant to pay any monies due Landlord pursuant to this Work
Letter within the time period herein stated shall be deemed a default under the
terms of the Lease for which Landlord shall be entitled to exercise all remedies
available to Landlord for nonpayment of rent. All late payments shall bear
interest at the Interest Rate specified in the Lease.

 

C-3

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EXHIBIT C-1

 

APPROVED SPACE PLAN

 

LOGO [g25367img2.jpg]

 

DURECT CORPORATION

 

FIRST FLOOR FIT PLAN

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

EXHIBIT D

 

ACKNOWLEDGMENT OF TERM

COMMENCEMENT DATE

 

To:

 

__________________________

      Date:  

______________________

   

__________________________

               

__________________________

           

 

  Re: Lease dated ________________, 20__, between RWC LLC, a California limited
liability company, Landlord, and _________________________________, Tenant,
concerning in the Premises located at ______________________ Results Way,
Cupertino, California

 

Ladies and Gentlemen:

 

In accordance with the above-referenced lease (the “Lease”), we wish to advise
you and/or confirm the following information:

 

1. The Premises have been accepted by Tenant as being substantially complete in
accordance with the Lease and there is no deficiency in construction.

 

2. Tenant has possession of the Premises and acknowledges that, pursuant to the
provisions of the Lease, the Term Commencement Date is ______________________,
20__; [the Rent Commencement Date is ______________________, 20__] and the
Expiration Date is _______________________, 2___.

 

3. The Rentable Area of the Premises is ______ square feet; .

 

4. Tenant’s Proportionate Share, as adjusted based upon the Rentable Area of the
Premises, is ___________%.

 

5. The [Deposit][Letter of Credit] is $                                        
    .

 

6. The Annual Base Rent is $                                             .

 

7. The Monthly Base Rent is $                                        .

 

8. In accordance with the Lease, Annual Base Rent commenced to accrue on the
Term Commencement Date, subject to any rent abatement provided for in the Lease.

 

9. If the Term Commencement Date is other than the first day of a calendar
month, the unapplied balance of the Advance Rent shall be applied toward
Tenant’s Monthly Base Rent for the first full month of the Term thereafter.

 

D-1

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10. Monthly Base Rent is due and payable in advance on the first day of each and
every month during the term of the Lease. Your rent checks should be made
payable to RWC, LLC at                                         
                                                                             
                                        
                                        
                                                             .

 

LANDLORD:

     

AGREED AND ACCEPTED:

RWC , LLC,

     

TENANT:

a California limited liability company

                       

_____________________________,

By:

 

Grosvenor California Limited,

     

a ____________________________

   

a California corporation

       

Its:

 

Managing Member

                        By:                    

Its:

        By:                    

Its:

                                By:                    

Its:

        By:                    

Its:

         

Date:

       

Date:

               

 

D-2

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EXHIBIT E

 

Results Way Corporate Park

 

Base Building Improvements

 

1. Structural shell to include the foundations, floors, walls, columns, and
roof.

 

2. ADA compliant restrooms with Landlord’s standard fixtures and finishes.

 

3. Concrete shell interiors. Drywall areas will be taped for smooth wall or
texture at Tenant’s cost. Wall furring and insulation and/or ceiling insulation,
as required by Title 24 or mechanical calculations.

 

4. ADA complaint elevator with an emergency telephone and standard manufacturer
cab finishes.

 

5. HVAC system excluding distribution, below-roof ducting, piping, title 24
Energy Compliance, and controls. Two (2) 60-ton VAV carrier roof-top units and
one (1) boiler.

 

6. Main sprinkler system with exposed branch lines excluding sprinkler heads,
sprinkler branch lines, drops, valves, mains etc.

 

7. All bearing walls and roof structural framing.

 

8. Safety, access controls, and security systems (fire alarms, strobes, exit
lights, etc.) for base building only.

 

9. 1,200 amp 277/480V electrical service for lighting and power suitable for
ordinary office use. Power stubbed at the building electrical room. Excludes all
routing, electrical distribution, and upgrades.

 

10. ADA compliant access/exiting.

 

11. Site landscaping.

 

12. Building and site monument signage structures.

 

13. Existing telephone MPOE, consisting of a 1200 pair service, located in Four
Results Way. One 4-inch conduit for telephone cabling will be provided from the
main MPOE, to Five Results Way.

 

14. Ceiling framing.

 

15. Stair handrails.

 

E-1

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EXHIBIT F

 

RULES AND REGULATIONS

 

1. The Common Facilities, sidewalks, driveways, halls, passages, exits,
vestibules, entrances, public areas, elevators and stairways of the Premises and
the Project shall not be obstructed by any tenant or used for any purpose other
than ingress to and egress from their respective premises. No tenant and no
employee or invitee of any tenant shall go upon the roof of the Premises, except
as authorized under a tenant’s lease. Each tenant shall, at such tenant’s
expense, keep the sidewalks, curbs and patios adjacent to its premises clean and
free from dirt, refuse and other obstructions.

 

2. No sign, placard, picture, name, advertisement or notice visible from the
exterior of any tenant’s premises shall be inscribed, painted, affixed or
otherwise displayed by any tenant on any part of its premises or in the Project
without the prior written consent of Landlord or except as expressly allowed in
such tenant’s lease. Landlord shall have the right to remove, at Tenant’s
expense and without notice or liability, any sign installed or displayed in
violation of this rule. All approved signs or lettering on doors, windows and
walls shall be printed, painted, affixed or inscribed at the expense of Tenant
by a person or entity approved by Landlord, using materials and a style and
format approved by Landlord. Written material (including artwork) visible from
outside the Premises will not be permitted without the prior written consent of
Landlord or except as expressly allowed in such tenant’s lease.

 

3. The Premises shall not be used for the storage of merchandise held for sale
to the general public, for lodging or for sleeping. Except as provided in a
tenant’s lease or otherwise approved by Landlord, no cooking shall be done or
permitted by any tenant on its premises; provided, however, that Tenant may use
Underwriter’s Laboratory approved microwave ovens or equipment for brewing
coffee, tea, hot chocolate and similar beverages, provided that such use is in
accordance with all applicable federal, state and city laws, codes, ordinances,
rules and regulations. Repair and maintenance of such equipment shall be at
Tenant’s expense.

 

4. Each tenant shall be responsible for keeping its premises clean and in good
order. No tenant shall cause any unnecessary labor by reason of such tenant’s
carelessness or indifference in the preservation of good order and cleanliness.

 

5. Upon request, each tenant shall provide keys, key cards and access codes to
Landlord so that Landlord can have access to such tenant’s premises in the event
of an emergency. Each tenant, upon the termination of its tenancy, shall deliver
to Landlord all keys, cards and/or access codes to doors in its premises. As to
secure areas, in an emergency, Landlord may use any means to enter and Tenant
shall indemnify Landlord from and against all costs, expenses and liability
arising by virtue of such emergency entry.

 

6. Prior to installing heavy objects, furniture or equipment in the Premises,
Tenant shall confirm the capacity of the Premises to bear such loads and Tenant
shall not exceed such capacity at any time.

 

7. No tenant shall use or keep in its premises or in the Common Facilities any
kerosene, gasoline or flammable or combustible fluid or material other than
limited quantities thereof reasonably necessary for the operation or maintenance
of office equipment. Without Landlord’s prior written approval, no tenant shall
use any method of heating or air conditioning other than that supplied by
Landlord. No tenant shall use or keep or permit to be used or kept any hazardous
or toxic materials or any foul or noxious gas or substance in its premises. No
tenant shall interfere in any way with the business or activities of other
tenants of the Project or permit its premises to be occupied or used in any
manner that is offensive or objectionable to Landlord or other occupants of the
Project by reason of noise, odors, vibrations or any other reason.

 

8. Landlord shall have the right, exercisable without notice and without
liability to any tenant, to change the name and street address of the Premises
or the Project, except as otherwise provided in a tenant’s lease.

 

F-1

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9. In the case of invasion, mob, riot, public excitement or other circumstances
rendering such action advisable in Landlord’s opinion, Landlord reserves the
right to prevent access to the Premises or the Project during the continuance of
the same by such action as Landlord may deem appropriate including closing doors
or perimeter gates. Landlord also reserves the right to exclude or expel from
the Premises or the Project any person who, in Landlord’s judgment, is
intoxicated or under the influence of liquor or drugs or who is in violation of
any of the Rules and Regulations for the Premises or the Project.

 

10. Tenant shall ensure that the doors of the Premises are closed and locked,
and that all water faucets, water apparatus and utilities are shut off before
Tenant or Tenant’s employees leave the Premises, so as to prevent waste or
damage.

 

11. The lavatory rooms, toilets, urinals, wash bowls and other fixtures 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 deposited therein.

 

12. No tenant shall install any radio or television antenna, loud speaker or
other device on the roof or the exterior walls of its premises, except as
authorized in such tenant’s lease or in writing by Landlord. No awnings,
air-conditioning or other projections shall be attached to the outside walls or
windowsills of the Premises or otherwise project from the Premises, without the
prior written consent of Landlord.

 

13. Each tenant shall store all its trash and garbage in a tidy manner within
appropriate trash receptacles and in an area designated by Landlord. No material
shall be placed in the trash boxes or receptacles if such material is of such
nature that it may not be disposed of in the ordinary and customary manner of
removing and disposing of trash and garbage without being in violation of any
law or ordinance governing such disposal.

 

14. Canvassing, peddling, soliciting and distribution of handbills or any other
written materials in the Common Facilities are prohibited and each tenant shall
cooperate to prevent the same.

 

15. Tenant shall not make or permit any noise in the Premises or the Common
Facilities that is annoying, unpleasant or distasteful, or interferes in any way
with other tenants of the Project or those having business with them.

 

16. Tenant shall not bring into or keep within the Common Facilities any
unleashed pets or animals

 

17. Tenant’s employees may bring bicycles into Tenant’s own Premises; however,
bicycles shall only be ridden on roads and bike paths and not on sidewalks or
other portions of the Project and Common Facilities. The use of skateboards,
skates, rollerblades, and scooters is prohibited at all times in the Common
Facilities.

 

18. Tenants shall not use the Common Facilities for events, activities or
parties (for example, employee parties) without Landlord’s prior written
consent. Any request for Landlord’s permission to use such facilities shall be
made at least ten (10) days prior to the event. Tenant’s use shall be subject to
such conditions as Landlord in its discretion may specify.

 

19. The requirements of Tenant will be attended to only upon application by an
authorized individual to the office of Landlord’s property manager by telephone.
Employees of Landlord and its property manager shall not perform any work or do
anything outside of their regular duties unless under special instructions from
Landlord.

 

20. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental agency
with respect to the Premises, the Project and the Common Facilities.

 

21. Tenant assumes all responsibility for protecting its Premises from theft,
robbery and pilferage, which includes keeping doors, windows and other means of
entry to the Premises closed and locked when unattended. Roof access hatches
must remain shut and locked at all times.

 

F-2

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22. Tenant’s employees shall not park their vehicles in any parking areas
designated by Landlord as areas for parking by visitors to the Premises or the
Project or for other tenants of the Project. Landlord may, in its sole
discretion, designate separate areas for bicycles and motorcycles. Landlord may
establish additional Rules and Regulations that apply to the parking areas.

 

23. There shall be no smoking in the Premises. As used herein, the term
“smoking” means carrying or holding of a lighted pipe, cigar or cigarette of any
kind, or any other lighted smoking equipment or the lighting thereof or emitting
or exhaling the smoke of a pipe, cigar or cigarette of any kind. Each tenant
shall cooperate to enforce this prohibition, including giving notice of such to
its employees.

 

24. Alcoholic beverages shall not be served or consumed in the Common Facilities
at any time.

 

25. Landlord may waive any one or more of these Rules and Regulations for the
benefit of any particular tenant or tenants, but no such waiver by Landlord
shall be construed as a waiver of such Rules and Regulations in favor of any
other tenant or tenants, nor prevent Landlord from thereafter enforcing any such
Rules and Regulations against any or all of the tenants of the Project.

 

26. 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 premises in the Project. To the extent
that these Rules and Regulations are inconsistent with any provision of the
Lease, the provisions of the Lease shall control.

 

27. Landlord reserves the right to make such other reasonable Rules and
Regulations as, in its judgment, may from time to time be needed for the safety,
care and cleanliness of the Premises or the Project, and for the preservation of
the order therein.

 

28. Landlord shall not be responsible to Tenant or to any other person for the
non-observance or violation of these Rules and Regulations by any other tenant
or other person. Tenant shall be deemed to have read these rules and to have
agreed to abide by them as a condition to its occupancy of the space leased.

 

F-3

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EXHIBIT G

 

BUILDING 3

EXTENSION AND EXPANSION RIGHTS

 

Extension Rights – The existing tenant has the option to extend the term of its
lease for a 5-year term commencing February 1, 2008.

 

Expansion Rights – None.

 

G-1