Exhibit 10.53

 

LEASE

(Single Tenant; Net)

 

BETWEEN

 

THE IRVINE COMPANY

 

AND

 

MICRO THERAPEUTICS, INC.

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INDEX TO LEASE

 

ARTICLE I. BASIC LEASE PROVISIONS

   1

ARTICLE II. PREMISES

   3

SECTION 2.1.

   LEASED PREMISES    3

SECTION 2.2.

   ACCEPTANCE OF PREMISES    3

SECTION 2.3.

   BUILDING NAME AND ADDRESS    3

SECTION 2.4.

   LANDLORD’S RESPONSIBILITIES    3

ARTICLE III. TERM

   4

SECTION 3.1.

   GENERAL    4

SECTION 3.2.

   EARLY OCCUPANCY    4

SECTION 3.3.

   RIGHT TO EXTEND THIS LEASE    4

ARTICLE IV. RENT AND OPERATING EXPENSES

   5

SECTION 4.1.

   BASIC RENT    5

SECTION 4.2.

   OPERATING EXPENSES    5

SECTION 4.3.

   SECURITY DEPOSIT    9

ARTICLE V. USES

   10

SECTION 5.1.

   USE    10

SECTION 5.2.

   SIGNS    10

SECTION 5.3.

   HAZARDOUS MATERIALS    10

ARTICLE VI. COMMON AREAS; SERVICES

   12

SECTION 6.1.

   UTILITIES AND SERVICES    12

SECTION 6.2.

   OPERATION AND MAINTENANCE OF COMMON AREAS    13

SECTION 6.3.

   USE OF COMMON AREAS    13

SECTION 6.4.

   PARKING    13

SECTION 6.5.

   CHANGES AND ADDITIONS BY LANDLORD    14

ARTICLE VII. MAINTAINING THE PREMISES

   14

SECTION 7.1.

   TENANT’S MAINTENANCE AND REPAIR    14

SECTION 7.2.

   LANDLORD’S MAINTENANCE AND REPAIR    14

SECTION 7.3.

   ALTERATIONS    14

SECTION 7.4.

   MECHANIC’S LIENS    15

SECTION 7.5.

   ENTRY AND INSPECTION    16

ARTICLE VIII. TAXES AND ASSESSMENTS ON TENANT’S PROPERTY

   16

ARTICLE IX. ASSIGNMENT AND SUBLETTING

   16

SECTION 9.1.

   RIGHTS OF PARTIES    16

SECTION 9.2.

   EFFECT OF TRANSFER    17

SECTION 9.3.

   SUBLEASE REQUIREMENTS    18

SECTION 9.4.

   CERTAIN TRANSFERS    18

ARTICLE X. INSURANCE AND INDEMNITY

   19

SECTION 10.1.

   TENANT’S INSURANCE    19

SECTION 10.2.

   LANDLORD’S INSURANCE    19

SECTION 10.3.

   JOINT INDEMNITY    19

SECTION 10.4.

   LANDLORD’S NONLIABILITY    19

SECTION 10.5.

   WAIVER OF SUBROGATION    20

ARTICLE XI. DAMAGE OR DESTRUCTION

   20

SECTION 11.1.

   RESTORATION    20

SECTION 11.2.

   LEASE GOVERNS    21

ARTICLE XII. EMINENT DOMAIN

   21

SECTION 12.1.

   TOTAL OR PARTIAL TAKING    21

SECTION 12.2.

   TEMPORARY TAKING    21

SECTION 12.3.

   TAKING OF PARKING AREA    21

ARTICLE XIII. SUBORDINATION; ESTOPPEL CERTIFICATE; FINANCIALS

   22

SECTION 13.1.

   SUBORDINATION    22

SECTION 13.2.

   ESTOPPEL CERTIFICATE    22

SECTION 13.3.

   FINANCIALS    22

ARTICLE XIV. EVENTS OF DEFAULT AND REMEDIES

   22

SECTION 14.1.

   TENANT’S DEFAULTS    22

SECTION 14.2.

   LANDLORD’S REMEDIES    23

SECTION 14.3.

   LATE PAYMENTS    24

 

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SECTION 14.4.

   RIGHT OF LANDLORD TO PERFORM    25

SECTION 14.5.

   DEFAULT BY LANDLORD    25

SECTION 14.6.

   EXPENSES AND LEGAL FEES    25

SECTION 14.7.

   WAIVER OF JURY TRIAL    25

SECTION 14.8.

   SATISFACTION OF JUDGMENT    25

SECTION 14.9.

   LIMITATION OF ACTIONS AGAINST LANDLORD    26

ARTICLE XV. END OF TERM

   26

SECTION 15.1.

   HOLDING OVER    26

SECTION 15.2.

   MERGER ON TERMINATION    26

SECTION 15.3.

   SURRENDER OF PREMISES; REMOVAL OF PROPERTY    26

ARTICLE XVI. PAYMENTS AND NOTICES

   26

ARTICLE XVII. RULES AND REGULATIONS

   27

ARTICLE XVIII. BROKER’S COMMISSION

   27

ARTICLE XIX. TRANSFER OF LANDLORD’S INTEREST

   27

ARTICLE XX. INTERPRETATION

   27

SECTION 20.1.

   GENDER AND NUMBER    27

SECTION 20.2.

   HEADINGS    27

SECTION 20.3.

   JOINT AND SEVERAL LIABILITY    27

SECTION 20.4.

   SUCCESSORS    27

SECTION 20.5.

   TIME OF ESSENCE    27

SECTION 20.6.

   CONTROLLING LAW/VENUE    27

SECTION 20.7.

   SEVERABILITY    27

SECTION 20.8.

   WAIVER AND CUMULATIVE REMEDIES    28

SECTION 20.9.

   INABILITY TO PERFORM    28

SECTION 20.10.

   ENTIRE AGREEMENT    28

SECTION 20.11.

   QUIET ENJOYMENT    28

SECTION 20.12.

   SURVIVAL    28

SECTION 20.13.

   INTERPRETATION    28

ARTICLE XXI. EXECUTION AND RECORDING

   28

SECTION 21.1.

   COUNTERPARTS    28

SECTION 21.2.

   CORPORATE, LIMITED LIABILITY COMPANY AND PARTNERSHIP AUTHORITY    28

SECTION 21.3.

   EXECUTION OF LEASE; NO OPTION OR OFFER    28

SECTION 21.4.

   RECORDING    28

SECTION 21.5.

   AMENDMENTS    28

SECTION 21.6.

   EXECUTED COPY    29

SECTION 21.7.

   ATTACHMENTS    29

ARTICLE XXII. MISCELLANEOUS

   29

SECTION 22.1.

   NONDISCLOSURE OF LEASE TERMS    29

SECTION 22.2.

   GUARANTY    29

SECTION 22.3.

   CHANGES REQUESTED BY LENDER    29

SECTION 22.4.

   MORTGAGEE PROTECTION    29

SECTION 22.5.

   COVENANTS AND CONDITIONS    29

SECTION 22.6.

   SECURITY MEASURES    29

 

EXHIBITS

    

Exhibit A

   Description of Premises

Exhibit B

   Environmental Questionnaire

Exhibit C

   Landlord’s Disclosures

Exhibit D

   Insurance Requirements

Exhibit E

   Rules and Regulations

Exhibit F

   Irrevocable Standby Letter of Credit

Exhibit X

   Work Letter

Exhibit X-1

   Preliminary Cost Estimate

Exhibit Y

   Project Site Plan

 

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LEASE

(Single Tenant; Net)

 

THIS LEASE is made as of the 13th day of October, 2005, by and between THE
IRVINE COMPANY, a Delaware corporation hereafter called “Landlord,” and MICRO
THERAPEUTICS, INC., a Delaware corporation, hereinafter called “Tenant.”

 

ARTICLE I. BASIC LEASE PROVISIONS

 

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

 

1. Premises: The Premises are more particularly described in Section 2.1.

 

Address of Building: 9775 Toledo, Irvine, CA

 

2. Project Description (if applicable): Bake Technology Park

 

3. Use of Premises: General office, manufacturing, and warehouse

 

4. Estimated Early Occupancy Date: Twenty-Four (24) weeks from and after the
date of this Lease.

 

5. Term: Sixty (60) months, plus such additional days as may be required to
cause this Lease to terminate on the final day of the calendar month.

 

6. Basic Rent: Commencing on the Commencement Date, the Basic Rent shall be
Sixty Eight Thousand Dollars ($68,000.00) per month.

 

Basic Rent is subject to adjustment as follows:

 

Commencing nine (9) months following the Commencement Date, the Basic Rent shall
be Eighty One Thousand Nine Hundred Thirty-Eight Dollars ($81,938.00) per month,
based on $.85 per rentable square foot.

 

Commencing twelve (12) months following the Commencement Date, the Basic Rent
shall be Eighty Four Thousand Eight Hundred Thirty Dollars ($84,830.00) per
month, based on $.88 per rentable square foot.

 

Commencing twenty-four (24) months following the Commencement Date, the Basic
Rent shall be Eighty Six Thousand Seven Hundred Fifty-Eight Dollars ($86,758.00)
per month, based on $86,758.00, per month, based on $.90 per rentable square
foot.

 

Commencing thirty-six (36) months following the Commencement Date, the Basic
Rent shall be Eighty Nine Thousand Six Hundred Fifty Dollars ($89,650.00) per
month, based on $.93 per rentable square foot.

 

Commencing forty-eight (48) months following the Commencement Date, the Basic
Rent shall be Ninety Two Thousand Five Hundred Forty-Two Dollars ($92,542.00)
per month, based on $.96 per rentable square foot.

 

7. Guarantor(s): None

 

8. Floor Area: Approximately 96,398 rentable square feet

 

9. Security Deposit: $101,796.00 [see also Section 4.4 for Letter of Credit
requirements]

 

10. Broker(s): Voit Commercial

 

11. Additional Insureds: None

 

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12. Address for Payments and Notices:

 

LANDLORD    TENANT

THE IRVINE COMPANY

dba Office Properties

8105 Irvine Center Drive, Suite 300

Irvine, CA 92618

Attn: Vice President, Operations, Technology Portfolio

  

MICRO THERAPEUTICS, INC.

9775 Toledo

Irvine, CA 92618

with a copy of notices to:    with a copy of notices to:

THE IRVINE COMPANY

dba Office Properties

8105 Irvine Center Drive, Suite 300

Irvine, CA 92618

Attn: Senior Vice President, Operations Office Properties

  

STRADLING YOCCA CARLSON & RAUTH

600 Newport Center Drive, Suite 1600

Newport Beach, CA 92660

Attn: Bruce Feuchter

 

13. Tenant’s Liability Insurance Requirement: $2,000,000.00

 

14. Vehicle Parking Spaces: Three Hundred Eighteen (318)

 

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ARTICLE II. PREMISES

 

SECTION 2.1. LEASED PREMISES. Landlord leases to Tenant and Tenant leases from
Landlord the premises shown in Exhibit A (the “Premises”), containing
approximately the rentable square footage set forth as the “Floor Area” in Item
8 of the Basic Lease Provisions. The Premises consist of all of the Floor Area
within the building identified in Item 1 of the Basic Lease Provisions (the
Premises together with such building and the underlying real property, are
called the “Building”), and is a portion of the project identified in Item 2 of
the Basic Lease Provisions and shown in Exhibit Y, if any (the “Project”). If
the Project is not already completed, Landlord makes no representation that the
Project, if any, as shown on Exhibit Y, (a) will be completed or that it will be
constructed as shown on Exhibit Y without change, or (b) to the extent the
Project is constructed, it will not be changed from the Project as shown on
Exhibit Y. All references to “Floor Area” in this Lease shall mean the rentable
square footage set forth in Item 8 of the Basic Lease Provisions. The rentable
square footage set forth in Item 8 may include or have been adjusted by various
factors, including, without limitation, a load factor for any vertical
penetrations, stairwells or similar features or areas of the Building. Tenant
agrees that the Floor Area set forth in Item 8 shall be binding on Landlord and
Tenant for purposes of this Lease regardless of whether any future or differing
measurements of the Premises or the Building are consistent or inconsistent with
the Floor Area set forth in Item 8.

 

SECTION 2.2. ACCEPTANCE OF PREMISES. Tenant acknowledges that neither Landlord
nor any representative of Landlord has made any representation or warranty with
respect to the Premises, the Building or the Project or their respective
suitability or fitness for any purpose, including without limitation any
representations or warranties regarding the compliance of Tenant’s use of the
Premises with the applicable zoning or regarding any other land use matters, and
Tenant shall be solely responsible as to such matters. Further, neither Landlord
nor any representative of Landlord has made any representations or warranties
regarding (i) what other tenants or uses may be permitted or intended in the
Building or the Project, (ii) any exclusivity of use by Tenant with respect to
its permitted use of the Premises as set forth in Item 3 of the Basic Lease
Provisions, or (iii) any construction of portions of the Project not yet
completed. Tenant further acknowledges that neither Landlord nor any
representative of Landlord has agreed to undertake any alterations or additions
or construct any improvements to the Premises except as expressly provided in
this Lease. As of the Early Occupancy Date, Tenant shall be conclusively deemed
to have accepted the Premises and those portions of the Building and Project in
which Tenant has any rights under this Lease, which acceptance shall mean that
it is conclusively established that the Premises and those portions of the
Building and Project in which Tenant has any rights under this Lease were in
satisfactory condition and in conformity with the provisions of this Lease,
subject only to: (A) those defective or incomplete portions of the Tenant
Improvements constructed by Landlord pursuant to the Work Letter attached hereto
as Exhibit X (“Work Letter”), which Tenant shall have itemized on a written
punch list and delivered to Landlord within thirty (30) days after the
Commencement Date (as defined in Section 3.1, and (B) Landlord’s obligations
contained in Section 2.4 below. Nothing contained in this Section shall affect
the commencement of the Term or the obligation of Tenant to pay rent. Landlord
shall diligently complete all punch list items of which it is notified as
provided above.

 

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

 

SECTION 2.4. LANDLORD’S RESPONSIBILITIES.

 

(a) Notwithstanding the provisions of Section 7.2 of this Lease, Landlord shall
correct, repair and/or replace any non-compliance of the Building exterior, the
Tenant Improvements and/or the Common Areas with all applicable building permits
and codes in effect as of the Commencement Date, including without limitation,
the provisions of Title III of the Americans With Disabilities Act (“ADA”) in
effect as of the Commencement Date. Said costs of compliance shall be Landlord’s
sole cost and shall not be part of Project Costs. Landlord shall correct, repair
or replace any non-compliance of the Building exterior, the Tenant Improvements
and the Common Areas with any revisions or amendments to the ADA which become
effective after the Commencement Date, provided that the amortized cost of such
repairs or replacements (amortized over the useful life thereof using a market
cost of funds reasonably determined by Landlord) shall be included as Project
Costs payable by Tenant. All other ADA compliance issues which pertain to the
Premises, including without limitation, in connection with Tenant’s construction
of any alterations or other improvements in the Premises (and any resulting ADA
compliance requirements in the Common Areas if Landlord shall consent to same as
more particularly provided in Section 7.3 of this Lease) and the operation of
Tenant’s business and employment practices in the Premises, shall be the
responsibility of Tenant at its sole cost and expense. The repairs, corrections
or replacements required of Landlord or of Tenant under the foregoing provisions
of this Section 2.4(a) shall be made promptly following notice of non-compliance
from any applicable governmental agency.

 

(b) Landlord warrants to Tenant that the plumbing, fire sprinkler, lighting,
heating, ventilation and air conditioning systems serving the Premises (the
“Building Systems”) shall be in good operating condition on the Commencement
Date, and that the roof of the Building shall be in a “weather-tight” condition
as of the Commencement Date. Provided that Tenant shall notify Landlord of a
non-compliance with the foregoing warranty as to the Building Systems not later
than thirty (30) days following the Commencement Date, and/or of a
non-compliance with the foregoing warranty as to the roof of the Building not
later than one hundred eighty (180) days following the Commencement Date, then
Landlord shall, except as otherwise provided in this Lease, promptly after
receipt of written notice from Tenant setting forth the nature and extent of
such non-compliance, rectify same at

 

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Landlord’s cost and expense, except for the application of available repair
reserves maintained as part of Project Costs.

 

ARTICLE III. TERM

 

SECTION 3.1. GENERAL. The Term of this Lease (“Term”) shall be for the period
shown in Item 5 of the Basic Lease Provisions. The Term shall commence
(“Commencement Date”) on the next day following the expiration of the “Early
Occupancy Period” (as defined in Section 3.2 below). The date on which this
Lease is scheduled to terminate is referred to as the “Expiration Date.” Prior
to Tenant’s taking of possession of the Premises, the parties shall memorialize
on a form provided by Landlord the actual Early Occupancy Date and the
Expiration Date of this Lease. Tenant’s failure to execute that form shall not
affect the validity of Landlord’s determination of those dates or Tenant’s
obligation to pay rent hereunder.

 

SECTION 3.2. EARLY OCCUPANCY. Tenant shall be permitted, subject to the terms
and conditions of this Section 3.2 herein provided, to occupy the Premises for
its business operations for that period (the “Early Occupancy Period”) equal to
thirty (30) days following the date (the “Early Occupancy Date”) that the tenant
improvements constructed by Landlord pursuant to the attached Work Letter (the
“Tenant Improvements”) are substantially completed but for minor punch list
matters, a temporary or permanent certificate of occupancy has been issued to
the Premises by the City of Irvine, and the Premises, as so improved, are
tendered to Tenant. If Landlord, for any reason whatsoever, cannot deliver
possession of the Premises to Tenant on or before the Estimated Early Occupancy
Date as set forth in Item 4 of the Basic Lease Provisions (“Estimated Early
Occupancy Date”), this Lease shall not be void or voidable nor shall Landlord be
liable to Tenant for any resulting loss or damage. However, Tenant shall not be
liable for any rent and the Commencement Date of this Lease shall not occur
until the next day following the expiration of the Early Occupancy Period (as
more particularly provided in Section 3.1 above), except that if Landlord cannot
so tender possession of the Premises on the Estimated Early Occupancy Date due
to any action or inaction of Tenant (including without limitation any “Tenant
Delay” described in the Work Letter attached to this Lease), then the Early
Occupancy Date shall be deemed to have occurred (and the Early Occupancy Period
shall be deemed to have commenced) on the date Landlord would have been able to
deliver the Premises to Tenant but for Tenant’s action or inaction, including
without limitation any Tenant Delay described in the attached Work Letter.

 

Tenant’s occupancy of the Premises during the Early Occupancy Period shall be
subject to the following terms and conditions: (a) concurrently with the
execution and delivery of this Lease, and prior to any such early occupancy by
Tenant, Tenant shall deliver to Landlord (i) the first installment of Basic Rent
and Operating Expenses due under the Lease (ii) the Security Deposit set forth
in Item 9 of the Basic Lease Provisions, and (iii) the required certificate(s)
of insurance and a completed Hazardous Material Survey Form (see Exhibit C
attached hereto); and (b) Tenant’s occupancy of the Premises during the Early
Occupancy Period shall be subject to all of the covenants and conditions on
Tenant’s part contained in this Lease (including, without limitation, the
covenants contained in Sections 5.3, 6.1, 7.1, 7.3, 7.4, 10.1 and 10.3 of the
Lease), except for the obligation to pay Basic Rent and Operating Expenses.

 

Notwithstanding anything to the contrary contained in this Section 3.2, if for
any reason other than “Tenant Delays” (as defined in the Work Letter attached
hereto), or other matters beyond Landlord’s reasonable control, the actual Early
Occupancy Date has not occurred by the date that is one hundred twenty
(120) days following the Estimated Early Occupancy Date shown on Item 4 of the
Basic Lease Provisions, then Tenant may, by written notice to Landlord given at
any time thereafter but prior to the actual occurrence of the Early Occupancy
Date, elect to terminate this Lease. Notwithstanding the foregoing, if at any
time during the construction period, Landlord reasonably believes that the Early
Occupancy Date will not occur on or before one hundred twenty (120) days
following the Estimated Early Occupancy Date, Landlord may notify Tenant in
writing of such fact and of a new outside date on or before which the Early
Occupancy Date will occur, and Tenant must elect within ten (10) days of receipt
of such notice to either terminate this Lease or waive its right to terminate
this Lease provided the Early Occupancy Date occurs on or prior to the new
outside date established by Landlord in such notice to Tenant. Tenant’s failure
to elect to terminate this Lease within such ten (10) day period shall be deemed
Tenant’s waiver of its right to terminate this Lease as provided in this
paragraph as to the previous outside date, but not as to the new outside date
established by said notice.

 

SECTION 3.3. RIGHT TO EXTEND THIS LEASE. Provided that no Event of Default has
occurred under any provision of this Lease at the time of exercise of the
extension right granted herein, and provided further that Tenant is occupying
the entire Premises and has not assigned or sublet any of its interest in this
Lease (except pursuant to a “Permitted Transfer” as hereinafter defined), then
Tenant may extend the Term of this Lease for two (2) periods of thirty-six
(36) months each. Tenant shall exercise its right to extend the Term by and only
by delivering to Landlord, not less than nine (9) months or more than twelve
(12) months prior to the expiration date of the Term, Tenant’s irrevocable
written notice of its commitment to extend (the “Commitment Notice”). The Basic
Rent payable under the Lease during any extension of the Term shall be
determined as provided in the following provisions.

 

If Landlord and Tenant have not by then been able to agree upon the Basic Rent
for the extension of the Term, then within one hundred twenty (120) and ninety
(90) days prior to the expiration date of the Term, Landlord shall notify Tenant
in writing of the Basic Rent that would reflect the prevailing market rental
rate for each 36-month renewal of comparable space in the Project (together with
any increases thereof during the extension period) as of the commencement of the
extension period (“Landlord’s Determination”). Should Tenant disagree with the
Landlord’s Determination, then Tenant shall, not later than twenty (20) days
thereafter, notify Landlord in writing of

 

4

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Tenant’s determination of those rental terms (“Tenant’s Determination”). In no
event, however, shall Landlord’s Determination or Tenant’s Determination be less
than the Basic Rent payable by Tenant during the then-scheduled final month of
the initial Term. Within ten (10) days following delivery of the Tenant’s
Determination, the parties shall attempt to agree on an appraiser to determine
the fair market rental. If the parties are unable to agree in that time, then
each party shall designate an appraiser within ten (10) days thereafter. Should
either party fail to so designate an appraiser within that time, then the
appraiser designated by the other party shall determine the fair market rental.
Should each of the parties timely designate an appraiser, then the two
appraisers so designated shall appoint a third appraiser who shall, acting
alone, determine the fair market rental for the Premises. Any appraiser
designated hereunder shall have an MAI certification with not less than five
(5) years experience in the valuation of commercial industrial buildings in the
vicinity of the Project.

 

Within thirty (30) days following the selection of the appraiser and such
appraiser’s receipt of the Landlord’s Determination and the Tenant’s
Determination, the appraiser shall determine whether the rental rate determined
by Landlord or by Tenant more accurately reflects the fair market rental rate
for each 36-month renewal of the Lease for the Premises, as reasonably
extrapolated to the commencement of the extension period. Accordingly, either
the Landlord’s Determination or the Tenant’s Determination shall be selected by
the appraiser as the fair market rental rate for the extension period. In making
such determination, the appraiser shall consider rental comparables for the
Project (provided that if there are an insufficient number of comparables within
the project, the appraiser shall consider rental comparables for similarly
improved space within the vicinity of the Project with appropriate adjustment
for location and quality of project), but the appraiser shall not attribute any
factor for market tenant improvement allowances or brokerage commissions in
making its determination of the fair market rental rate. At any time before the
decision of the appraiser is rendered, either party may, by written notice to
the other party, accept the rental terms submitted by the other party, in which
event such terms shall be deemed adopted as the agreed fair market rental. The
fees of the appraiser(s) shall be borne entirely by the party whose
determination of the fair market rental rate was not accepted by the appraiser.

 

Within twenty (20) days after the determination of the fair market rental,
Landlord shall prepare an appropriate amendment to this Lease for the extension
period, and Tenant shall execute and return same to Landlord within ten
(10) days after Tenant’s receipt of same. Should the fair market rental not be
established by the commencement of the extension period, then Tenant shall
continue paying rent at the rate in effect during the last month of the initial
Term, and a lump sum adjustment shall be made promptly upon the determination of
such new rental.

 

If Tenant fails to timely exercise the extension right granted herein within the
time period expressly set forth for exercise by Tenant in the initial paragraph
of this Section 3.3, Tenant’s right to extend the Term shall be extinguished and
the Lease shall automatically terminate as of the expiration date of the Term,
without any extension and without any liability to Landlord. Any attempt to
assign or transfer any right or interest created by this Section 3.3 (except for
a “Permitted Transfer”) shall be void from its inception. Tenant shall have no
other right to extend the Term beyond each thirty-six (36) month extension
period created by this Section 3.3. Unless agreed to in a writing signed by
Landlord and Tenant, any extension of the Term, whether created by an amendment
to this Lease or by a holdover of the Premises by Tenant, or otherwise, shall be
deemed a part of, and not in addition to, any duly exercised extension period
permitted by this Section 3.3.

 

ARTICLE IV. RENT AND OPERATING EXPENSES

 

SECTION 4.1. BASIC RENT. From and after the Commencement Date, Tenant shall pay
to Landlord without deduction or offset (except as expressly provided in this
Lease), the rental amount for the Premises shown in Item 6 of the Basic Lease
Provisions (the “Basic Rent”), including subsequent adjustments, if any. Any
rental adjustment to Basic Rent shown in Item 6 shall be deemed to occur on the
specified monthly anniversary of the Commencement Date, whether or not the
Commencement Date occurs at the end of a calendar month. The rent shall be due
and payable in advance commencing on the Commencement Date (as prorated for any
partial month) and continuing thereafter on the first day of each successive
calendar month of the Term. No demand, notice or invoice shall be required for
the payment of Basic Rent. An installment of rent in the amount of one (1) full
month’s Basic Rent at the initial rate specified in Item 6 of the Basic Lease
Provisions and one (1) month’s estimated Tenant’s Share of Operating Expenses
(as defined in Section 4.2) shall be delivered to Landlord concurrently with
Tenant’s execution of this Lease and shall be applied against the Basic Rent and
Operating Expenses first due hereunder.

 

SECTION 4.2. OPERATING EXPENSES.

 

(a) From and after the Commencement Date, Tenant shall pay to Landlord, as
additional rent, Tenant’s Share of all Operating Expenses, as defined in
Section 4.2(f), incurred by Landlord in the operation of the Building and the
Project. The term “Tenant’s Share” means one hundred percent (100%) of Operating
Expenses reasonably determined by Landlord to benefit or relate substantially to
the Building rather than the entire Project, plus that portion of any Operating
Expenses determined by multiplying the cost of such item by a fraction, the
numerator of which is the Floor Area and the denominator of which is the total
rentable square footage, as reasonably determined from time to time by Landlord,
of (i) all of the buildings in the Project, as reasonably determined by
Landlord, for expenses determined by Landlord to benefit or relate substantially
to the entire Project rather than any specific building or (ii) all or some of
the buildings within the Project as well as all or a portion of other property
owned by Landlord and/or its affiliates, for expenses which benefit or relate to
such buildings within the Project and such other real property. In the event
that Landlord reasonably determines that any premises within any building within
the Project or any portion of a building or project within a larger area incurs
a non-proportional benefit from any expense, or is the non-proportional cause of
any such expense, Landlord may, allocate a greater

 

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percentage of such Operating Expense to such premises, building or project, as
applicable. The full amount of any management fee payable by Landlord for the
management of Tenant’s Premises that is calculated as a percentage of the rent
payable by Tenant shall be paid in full by Tenant as additional rent.

 

(b) Prior to the start of each full Expense Recovery Period (as defined in this
Section 4.2), Landlord shall give Tenant a written estimate of the amount of
Tenant’s Share of Operating Expenses for the applicable Expense Recovery Period.
Failure to provide such estimate shall not relieve Tenant from its obligation to
pay Tenant’s Share of Operating Expenses or estimated amounts thereof, if and
when Landlord provides such estimate or final payment amount. Tenant shall pay
the estimated amounts to Landlord in equal monthly installments, in advance
concurrently with payments of Basic Rent. If Landlord has not furnished its
written estimate for any Expense Recovery Period by the time set forth above,
Tenant shall continue to pay monthly the estimated Tenant’s Share of Operating
Expenses in effect during the prior Expense Recovery Period; provided that when
the new estimate is delivered to Tenant, Tenant shall, at the next monthly
payment date, pay any accrued estimated Tenant’s Share of Operating Expenses
based upon the new estimate. For purposes hereof, “Expense Recovery Period”
shall mean every twelve month period during the Term (or portion thereof for the
first and last lease years) commencing July 1 and ending June 30, provided that
Landlord shall have the right to change the date on which an Expense Recovery
Period commences in which event appropriate reasonable adjustments shall be made
to Tenant’s Share of Operating Expenses so that the amount payable by Tenant
shall not materially vary as a result of such change.

 

(c) Within one hundred twenty (120) days after the end of each Expense Recovery
Period, Landlord shall furnish to Tenant a statement showing in reasonable
detail the actual or prorated Tenant’s Share of Operating Expenses incurred by
Landlord during the period, and the parties shall within thirty (30) days
thereafter make any payment or allowance necessary to adjust Tenant’s estimated
payments of Tenant’s Share of Operating Expenses, if any, to the actual Tenant’s
Share of Operating Expenses as shown by the annual statement. Any delay or
failure by Landlord in delivering any statement hereunder shall not constitute a
waiver of Landlord’s right to require Tenant to pay Tenant’s Share of Operating
Expenses pursuant hereto. Any amount due Tenant shall be credited against
installments next coming due under this Section 4.2, and any deficiency shall be
paid by Tenant together with the next installment. Should Tenant fail to object
in writing to Landlord’s determination of Tenant’s Share of Operating Expenses,
or fail to give written notice of its intent to audit Landlord’s Operating
Expenses pursuant to the provisions of the next succeeding paragraph, within
sixty (60) days following delivery of Landlord’s expense statement, Landlord’s
determination of Tenant’s Share of Operating Expenses for the applicable Expense
Recovery Period shall be conclusive and binding on the parties for all purposes
and any future claims to the contrary shall be barred.

 

Provided no Event of Default has occurred, Tenant shall have the right to cause
a certified public accountant, engaged on a non-contingency fee basis, to audit
Operating Expenses by inspecting Landlord’s general ledger of expenses not more
than once during any Expense Recovery Period. However, to the extent that
insurance premiums or any other component of Operating Expenses is determined by
Landlord on the basis of an internal allocation of costs utilizing information
Landlord in good faith deems proprietary, such expense component shall not be
subject to audit so long as it does not exceed the amount per square foot
typically imposed by landlords of other first class business parks in Orange
County, California. Tenant shall give notice to Landlord of Tenant’s intent to
audit within sixty (60) days after Tenant’s receipt of Landlord’s expense
statement which sets forth Tenant’s Share of Landlord’s actual Operating
Expenses. Such audit shall be conducted at a mutually agreeable time during
normal business hours at the office of Landlord or its management agent where
such accounts are maintained. If Tenant’s audit determines that actual Operating
Expenses have been overstated by more than five percent (5%), then subject to
Landlord’s right to review and/or contest the audit results, Landlord shall
reimburse Tenant for the reasonable out-of-pocket costs of such audit. Tenant’s
rent shall be appropriately adjusted to reflect any overstatement in Operating
Expenses. In the event of a dispute between Landlord and Tenant regarding such
audit, such dispute shall be submitted and resolved by binding arbitration
pursuant to Article III of the attached Work Letter. All of the information
obtained by Tenant and/or its auditor in connection with such audit, as well as
any compromise, settlement, or adjustment reached between Landlord and Tenant as
a result thereof, shall be held in strict confidence and, except as may be
required pursuant to litigation, shall not be disclosed to any third party,
directly or indirectly, by Tenant or its auditor or any of their officers,
agents or employees. Landlord may require Tenant’s auditor to execute a separate
confidentiality agreement affirming the foregoing as a condition precedent to
any audit. In the event of a violation of this confidentiality covenant in
connection with any audit, then in addition to any other legal or equitable
remedy available to Landlord, Tenant shall forfeit its right to any
reconciliation or cost reimbursement payment from Landlord due to said audit
(and any such payment theretofore made by Landlord shall be promptly returned by
Tenant), and Tenant shall have no further audit rights under this Lease.
Notwithstanding the foregoing, Tenant shall have no right of audit with respect
to any Expense Recovery Period unless the total Operating Expenses per square
foot for such Expense Recovery Period, as set forth in Landlord’s annual expense
reconciliation, exceed the total Operating Expenses per square foot during the
initial Expense Recovery Period during the Term, as increased by the percentage
change in the United States Department of Labor, Bureau of Labor Statistics,
Consumer Price Index for all Urban Consumers, Los Angeles – Riverside – Orange
County Area Average, all items (1982-84 = 100) (the “Index”), which change in
the Index shall be measured by comparing the Index published for January of the
initial Expense Recovery Period during the Term with the Index published for
January of the applicable Expense Recovery Period.

 

(d) Even though this Lease has terminated and the Tenant has vacated the
Premises, when the final determination is made of Tenant’s Share of Operating
Expenses for the Expense Recovery Period in which this Lease terminates, Tenant
shall within thirty (30) days of written notice pay the entire increase over the
estimated Tenant’s Share of Operating Expenses already paid. Conversely, any
overpayment by Tenant shall be rebated by Landlord to Tenant not later than
thirty (30) days after such final determination.

 

6

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(e) If, at any time during any Expense Recovery Period, any one or more of the
Operating Expenses are increased to a rate(s) or amount(s) in excess of the
rate(s) or amount(s) used in calculating the estimated Tenant’s Share of
Operating Expenses for the year, then the estimate of Tenant’s Share of
Operating Expenses may be increased by written notice from Landlord for the
month in which such rate(s) or amount(s) becomes effective and for all
succeeding months by an amount equal to Tenant’s Share of the increase. If
Landlord gives Tenant written notice of the amount or estimated amount of the
increase, the month in which the increase will or has become effective, then
Tenant shall pay the increase to Landlord as a part of Tenant’s monthly payments
of the estimated Tenant’s Share of Operating Expenses as provided in
Section 4.2(b), commencing with the month following Tenant’s receipt of
Landlord’s notice. In addition, Tenant shall pay upon written request any such
increases which were incurred prior to the Tenant commencing to pay such monthly
increase.

 

(f) The term “Operating Expenses” shall mean and include all Project Costs, as
defined in subsection (g), and Property Taxes, as defined in subsection (h).

 

(g) The term “Project Costs” shall include all expenses of operation, repair and
maintenance of the Building and the Project, including without limitation all
appurtenant Common Areas (as defined in Section 6.2), and shall include the
following charges by way of illustration but not limitation: water and sewer
charges; insurance premiums and deductibles and/or reasonable premium and
deductible equivalents should Landlord elect to self-insure all or any portion
of any risk that Landlord is authorized to insure hereunder; license, permit,
and inspection fees; light; power; window washing; trash pickup; heating,
ventilating and air conditioning; supplies; materials; equipment; tools; the
cost of any environmental, insurance, tax or other consultant utilized by
Landlord in connection with the Building and/or Project; establishment of
reasonable reserves for replacements and/or repairs; costs incurred in
connection with compliance with any laws or changes in laws applicable to the
Building or the Project; the cost of any capital investments or replacements
(other than tenant improvements for specific tenants) to the extent of the
amortized amount thereof over the useful life of such capital investments or
replacements calculated at a market cost of funds, all as determined by
Landlord, for each such year of useful life during the Term (“Permitted Capital
Items”); costs associated with the maintenance of an air conditioning, heating
and ventilation service agreement, and maintenance of an intrabuilding network
cable service agreement for any intrabuilding network cable telecommunications
lines within the Project, and any other installation, maintenance, repair and
replacement costs associated with such lines; capital costs associated with a
requirement related to demands on utilities by Project tenants, including
without limitation the cost to obtain additional phone connections; labor; any
expense incurred pursuant to Sections 6.1, 6.2, 6.4, 7.2, and 10.2; reasonably
allocated wages and salaries, fringe benefits, and payroll taxes for
administrative and other personnel directly applicable to the Building and/or
Project, including both Landlord’s personnel and outside personnel, and a
reasonable overhead/management fee for the professional operation of the Project
(provided that any allocated wages and salaries, benefits and payroll taxes and
any overhead/management fee shall not, in the aggregate, exceed
market-competitive charges for the management of comparable projects in the
vicinity of the Project). It is understood and agreed that Project Costs may
include competitive charges for direct services (including, without limitation,
management and/or operations services) provided by any subsidiary, division or
affiliate of Landlord.

 

(h) The term “Property Taxes” as used herein shall include any form of federal,
state, county or local government or municipal taxes, fees, charges or other
impositions of every kind (whether general, special, ordinary or extraordinary)
related to the ownership, leasing or operation of the Premises, Building or
Project, including without limitation, the following: (i) all real estate taxes
or personal property taxes, as such property taxes may be reassessed from time
to time; and (ii) other taxes, charges and assessments which are levied with
respect to this Lease or to the Building and/or the Project, and any
improvements, fixtures and equipment and other property of Landlord located in
the Building and/or the Project, (iii) all assessments and fees for public
improvements, services, and facilities and impacts thereon, including without
limitation arising out of any Community Facilities Districts, “Mello Roos”
districts, similar assessment districts, and any traffic impact mitigation
assessments or fees; (iv) any tax, surcharge or assessment which shall be levied
in addition to or in lieu of real estate or personal property taxes, other than
taxes covered by Article VIII; and (v) taxes based on the receipt of rent
(including gross receipts or sales taxes applicable to the receipt of rent), and
(vi) costs and expenses incurred in contesting the amount or validity of any
Property Tax by appropriate proceedings. Notwithstanding the foregoing, general
net income or franchise taxes imposed against Landlord shall be excluded.

 

(i) Notwithstanding the provisions of this Section 4.2 to the contrary,
Operating Expenses shall not include any cost or expense identified as the
responsibility of Landlord at its sole cost and expense and not an Operating
Expense or a Project cost by the express terms of this Lease, and shall not
include any of the following:

 

(1) Any ground lease rental;

 

(2) Costs which are deemed capital expenditures under generally accepted account
principles consistently applied or otherwise (“Capital Items”), except for
Permitted Capital Items and any other items specifically authorized herein;

 

(3) Rentals for items (except when needed in connection with normal repairs and
maintenance of permanent systems) which if purchased, rather than rented, would
constitute a Capital Item which is specifically excluded in (2) above;

 

(4) Costs incurred for the repair of any casualty damage to the Building and
Project if and to the extent that such repair costs exceed Two Hundred Fifty
Thousand Dollars ($250,000.00) per occurrence;

 

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(5) Costs, including permit, license and inspection costs, incurred with respect
to the installation of tenants’ or other occupants’ improvements in the Building
or Project or incurred in renovating or otherwise improving, decorating,
painting, or redecorating vacant space for tenants or other occupants of the
Building or Project;

 

(6) Depreciation, amortization and interest payments, except as provided herein
and except on materials, tools, supplies and vendor-type equipment purchased by
Landlord to enable Landlord to supply services Landlord might otherwise contract
for with a third party where such depreciation, amortization and interest
payments would otherwise have been included in the charge for such third party’s
services, all as determined in accordance with generally accepted accounting
principles, consistently applied, and when depreciation or amortization is
permitted or required, the item shall be amortized over its reasonably
anticipated useful life;

 

(7) Marketing costs including, without limitation, leasing commissions,
attorneys’ fees in connection with the negotiation and preparation of letters,
deal memos, letters of intent, leases, subleases and/or assignments, space
planning costs, and other costs and expenses incurred in connection with lease,
sublease and/or assignment negotiations and transactions with present or
prospective tenants or other occupants of the Project;

 

(8) Expenses in connection with services or other benefits which are not
provided to Tenant or for which Tenant is charged directly but which are
provided to another tenant or occupant of the Project;

 

(9) Overhead and profit increment paid to Landlord or to subsidiaries or
affiliates of the Landlord for goods and/or services in or to the Project to the
extent the same exceeds the costs of such goods and/or services rendered by
unaffiliated third parties on a competitive basis;

 

(10) Interest, principal, points and frees on debts or amortization on any
mortgage or mortgages;

 

(11) Any compensation paid to clerks, attendants or other persons in commercial
concessions operated by Landlord;

 

(12) Advertising and promotional expenditures;

 

(13) Electric power costs for which any tenant directly contracts with the local
public service company or of which any tenant is separately metered or
submetered and pays Landlord directly;

 

(14) Tax penalties incurred as a result of the failure by Landlord to make
payments and/or to file any tax or informational returns when due;

 

(15) Notwithstanding any contrary provision of the Lease, including, without
limitation, any provision relating to capital expenditures, any and all costs
arising from the presence of those items set forth on Landlord’s Disclosure
attached to this Lease as Exhibit C and made a part hereof and Hazardous
Materials in or about the Premises, the Building or the Project including,
without limitation, Hazardous Materials in the ground water or soil, except to
the extent Tenant is responsible therefor as provided in Section 5.3 of this
Lease;

 

(16) Costs arising from charitable or political contributions;

 

(17) Costs for the acquisition of (as opposed to the maintenance of) sculpture,
paintings or other objects of art;

 

(18) Costs (including in connection therewith all attorneys; fees and costs of
settlement judgments and payments in lieu thereof) arising from claims, disputes
or potential disputes in connection with potential or actual claims, litigation
or arbitrations pertaining to Landlord and/or the Building and/or the Project;

 

(19) Costs associated with the operation of the business of the entity which
constitutes Landlord as the same are distinguished from the costs of operation,
repair and/or maintenance of the Project, including corporate accounting and
legal matters, costs of defending any lawsuits with any mortgagee (except as the
actions of Tenant may be un issue), costs of selling, syndicating, financing,
mortgaging or hypothecating any of Landlord’s interest in the Project, costs of
any disputes between Landlord and its employees (if any) not engaged in Building
operation, disputes of Landlord with Building management, or outside fees paid
in connection with disputes with other tenants;

 

(20) Costs of any initial “tap fees” or any initial sewer or water connection
fees for the Building;

 

(21) Any “validated” parking for any person or entity;

 

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(22) Any “finders fees,” brokerage commissions, job placement costs or job
advertising cost;

 

(23) The cost of any training or incentive programs, other than for tenant life
safety information services;

 

(24) “In-house” legal and/or accounting fees; and

 

(25) Reserves of any kind or for any purpose except as specifically authorized
herein (provided that Project Costs shall not include both reserves and
amortized payments for the same items for concurrent time periods).

 

SECTION 4.3. SECURITY DEPOSIT. Concurrently with Tenant’s delivery of this
Lease, Tenant shall deposit with Landlord the sum, if any, stated in Item 9 of
the Basic Lease Provisions, to be held by Landlord as security for the full and
faithful performance of all of Tenant’s obligations under this Lease (the
“Security Deposit”). Landlord shall not be required to keep this Security
Deposit separate from its general funds, and Tenant shall not be entitled to
interest on the Security Deposit. Subject to the last sentence of this Section,
the Security Deposit shall be understood and agreed to be the property of
Landlord upon Landlord’s receipt thereof, and may be utilized by Landlord in its
sole and absolute discretion towards the payment of all expenses by Landlord for
which Tenant would be required to reimburse Landlord under this Lease, including
without limitation brokerage commissions and Tenant Improvement costs. Upon any
Event of Default by Tenant (as defined in Section 14.1), Landlord may, in its
sole and absolute discretion, retain, use or apply the whole or any part of the
Security Deposit to pay any sum which Tenant is obligated to pay under this
Lease, sums that Landlord may expend or be required to expend by reason of the
Event of Default by Tenant or any loss or damage that Landlord may suffer by
reason of the Event of Default or costs incurred by Landlord in connection with
the repair or restoration of the Premises pursuant to Section 15.3 of this Lease
upon expiration or earlier termination of this Lease. In no event shall Landlord
be obligated to apply the Security Deposit upon an Event of Default and
Landlord’s rights and remedies resulting from an Event of Default, including
without limitation, Tenant’s failure to pay Basic Rent, Tenant’s Share of
Operating Expenses or any other amount due to Landlord pursuant to this Lease,
shall not be diminished or altered in any respect due to the fact that Landlord
is holding the Security Deposit. If any portion of the Security Deposit is
applied by Landlord as permitted by this Section, Tenant shall within five
(5) days after written demand by Landlord deposit cash with Landlord in an
amount sufficient to restore the Security Deposit to its original amount. If
Tenant fully performs its obligations under this Lease, the Security Deposit
shall be returned to Tenant (or, at Landlord’s option, to the last assignee of
Tenant’s interest in this Lease) within thirty (30) days after the expiration of
the Term, provided that Tenant agrees that Landlord may retain the Security
Deposit to the extent and until such time as all amounts due from Tenant in
accordance with this Lease have been determined and paid in full and Tenant
agrees that Tenant shall have no claim against Landlord for Landlord’s retaining
such Security Deposit to the extent provided in this Section.

 

SECTION 4.4. LETTER OF CREDIT. In addition to the Security Deposit and as
security hereunder, Tenant shall deliver to Landlord, concurrently with Tenant’s
execution of this Lease, an irrevocable standby letter of credit in the amount
of One Million Dollars ($1,000,000.00). Said letter of credit shall be in form
and with the substance of EXHIBIT F attached hereto, and issued by
                                                  [Bank] or by another financial
institution reasonably acceptable to Landlord. The letter of credit shall
provide for automatic annual renewals through that date which is sixty (60) days
after the Expiration Date of the Term of this Lease (including any extensions of
the Term as provided in this Lease). In the event the letter of credit is not
renewed by the issuing financial institution on or before twenty (20) days prior
to the then-scheduled expiration date of the letter of credit, then Landlord
shall have the right to draw the full amount of such letter of credit and to
hold such amount as part of the Security Deposit pursuant to Section 4.3 of this
Lease. Upon any “Event of Default” by Tenant (as defined in Section 14.1),
Landlord shall be entitled to draw upon said letter of credit by the issuance of
Landlord’s sole written demand to the issuing financial institution, which draw
shall be in an amount necessary to cure the default in question and to
compensate Landlord for all damages incurred thereby, as determined by Landlord
in its sole and absolute discretion, and if such amount cannot be readily
determined by Landlord, then the full amount of the letter of credit can be
drawn by Landlord pending determination of said amount. Notwithstanding the
foregoing, while the amount of any such draw shall be determined in Landlord’s
sole and absolute discretion as provided in the foregoing, if the amount of any
such draw(s) shall ultimately exceed the amount of damages actually incurred by
Landlord as the result of Tenant’s default (as determined pursuant to the
applicable provisions of Article XIV of this Lease), then Landlord shall
promptly refund any such excess to Tenant. Any such draw shall be without waiver
or any rights Landlord may have under this Lease or at law or in equity as a
result of the default, as a setoff for full or partial compensation for the
default. If any portion of the letter of credit is drawn after a default by
Tenant, Tenant shall within five (5) days after written demand by Landlord
restore the letter of credit. Failure to so restore said letter of credit within
said five (5) days shall be a default by Tenant under this Lease. Partial
drawings upon said letter of credit shall be permitted.

 

In the event that no Event of Default has occurred at any time during the Term
hereof, and provided further that Tenant has not at any time been more than ten
(10) days late on more than two (2) occasions with respect to any payments of
rent due under the Lease, then upon the written request of Tenant, Landlord
shall authorize in writing consecutive reductions to the principal amount of the
letter of credit in the amount of Five Hundred Thousand ($500,000.00) each upon
the expiration of the twenty-fifth (25th) and thirty-seventh (37th) months of
the Term.

 

9

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ARTICLE V. USES

 

SECTION 5.1. USE. Tenant shall use the Premises only for the purposes stated in
Item 3 of the Basic Lease Provisions, all in accordance with applicable laws and
restrictions and pursuant to approvals to be obtained by Tenant from all
relevant and required governmental agencies and authorities. The parties agree
that any contrary use shall be deemed to cause material and irreparable harm to
Landlord and shall entitle Landlord to injunctive relief in addition to any
other available remedy. Tenant, at its expense, shall procure, maintain and make
available for Landlord’s inspection throughout the Term, all governmental
approvals, licenses and permits required for the proper and lawful conduct of
Tenant’s permitted use of the Premises. Tenant shall not do or permit anything
to be done in or about the Premises which will in any way interfere with the
rights of other occupants of the Building or the Project, or use or allow the
Premises to be used for any unlawful purpose, nor shall Tenant permit any
nuisance or commit any waste in the Premises or the Project. Tenant shall not
perform any work or conduct any business whatsoever in the Project other than
inside the Premises. Tenant shall not do or permit to be done anything which
will invalidate or increase the cost of any insurance policy(ies) covering the
Building, the Project and/or their contents, and shall comply with all
applicable insurance underwriters rules. Tenant shall comply at its expense with
all present and future laws, ordinances, restrictions, regulations, orders,
rules and requirements of all governmental authorities that pertain to Tenant or
its use of the Premises, including without limitation all federal and state
occupational health and safety requirements, whether or not Tenant’s compliance
will necessitate expenditures or interfere with its use and enjoyment of the
Premises. Tenant shall comply at its expense with all present and future
covenants, conditions, easements or restrictions now or hereafter affecting or
encumbering the Building and/or Project, and any amendments or modifications
thereto, including without limitation the payment by Tenant of any periodic or
special dues or assessments charged against the Premises or Tenant which may be
allocated to the Premises or Tenant in accordance with the provisions thereof.
Tenant shall promptly upon demand reimburse Landlord for any additional
insurance premium charged by reason of Tenant’s failure to comply with the
provisions of this Section, and shall indemnify Landlord from any liability
and/or expense resulting from Tenant’s noncompliance. As used in this
Section 5.1, the term “permit” shall be deemed to mean “knowingly permit” in
connection with anything that Tenant permits to be done on or about the Premises
or the Project. Notwithstanding anything to the contrary contained in this
Section 5.1, in the event Tenant’s obligation for compliance with all future and
present laws, ordinances, restrictions, regulations, orders, rules and
requirements of all governmental authorities, and with all present and future
covenants, conditions, easements or restrictions now or hereafter affecting or
encumbering the Building and/or the Project, results in a capital improvement on
Tenant’s part (or Tenant’s being obligated to reimburse Landlord for a capital
improvement), then Tenant shall only be responsible for the amortized cost of
such capital improvement (amortized at a market cost of funds as reasonably
determined by Landlord) over the useful life of said improvement during the
Term, except in the event such obligation for capital improvements is required
due to Tenant’s particular use of the Premises (in which case Tenant shall be
fully responsible for the entire cost and installation of each capital
investment). Subject to the express provisions of this Lease, Tenant shall have
full access to and use of the Premises twenty-four (24) hours a day, seven
(7) days a week, fifty-two (52) weeks a year.

 

SECTION 5.2. SIGNS. Tenant shall have the right to one (1) exterior “building
top” sign on the Building in a location designated by Landlord, subject to
Landlord’s right of prior approval that such exterior signage is in compliance
with the Signage Criteria (defined below). Except as provided in the foregoing
sentence, Tenant shall have no right to maintain signs in any location in, on or
about the Premises, the Building or the Project and shall not place or erect any
signs that are visible from the exterior of the Building. The size, design,
graphics, material, style, color and other physical aspects of any permitted
sign shall be subject to Landlord’s written determination, as reasonably
determined by Landlord, prior to installation, that signage is in compliance
with any covenants, conditions or restrictions encumbering the Premises and
Landlord’s signage program for the Project, as in effect from time to time and
approved by the City in which the Premises are located (“Signage Criteria”).
Prior to placing or erecting any such signs, Tenant shall obtain and deliver to
Landlord a copy of any applicable municipal or other governmental permits and
approvals and comply with any applicable insurance requirements for such
signage. Tenant shall be responsible for the cost of any permitted sign,
including the fabrication, installation, maintenance and removal thereof and the
cost of any permits therefor. If Tenant fails to maintain its sign in good
condition, or if Tenant fails to remove same upon termination of this Lease and
repair and restore any damage caused by the sign or its removal, Landlord may do
so at Tenant’s expense. Landlord shall have the right to temporarily remove any
signs in connection with any repairs or maintenance in or upon the Building. The
term “sign” as used in this Section shall include all signs, designs, monuments,
displays, advertising materials, logos, banners, projected images, pennants,
decals, pictures, notices, lettering, numerals or graphics.

 

SECTION 5.3. HAZARDOUS MATERIALS.

 

(a) For purposes of this Lease, the term “Hazardous Materials” includes (i) any
“hazardous material” as defined in Section 25501(o) of the California Health and
Safety Code, (ii) hydrocarbons, polychlorinated biphenyls or asbestos, (iii) any
toxic or hazardous materials, substances, wastes or materials as defined
pursuant to any other applicable state, federal or local law or regulation, and
(iv) any other substance or matter which may result in liability to any person
or entity as a result of such person’s possession, use, release or distribution
of such substance or matter under any statutory or common law theory.

 

(b) Tenant shall not cause or permit any Hazardous Materials to be brought upon,
stored, used, generated, released or disposed of on, under, from or about the
Premises (including without limitation the soil and groundwater thereunder)
without the prior written consent of Landlord, which consent may be given or
withheld in Landlord’s sole and absolute discretion. Notwithstanding the
foregoing: (A) Tenant shall have the right, without obtaining prior written
consent of Landlord, to utilize within the Premises a reasonable quantity of
standard office

 

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products that may contain Hazardous Materials (such as photocopy toner, “White
Out”, and the like), provided however, that (i) Tenant shall maintain such
products in their original retail packaging, shall follow all instructions on
such packaging with respect to the storage, use and disposal of such products,
and shall otherwise comply with all applicable laws with respect to such
products, and (ii) all of the other terms and provisions of this Section 5.3
shall apply with respect to Tenant’s storage, use and disposal of all such
products; and (B) Landlord hereby consents to the use by Tenant of the kinds and
quantities of Hazardous Materials shown in the Environmental Questionnaire
delivered to Landlord prior to the execution of this Lease, provided that all of
the terms and conditions of this Section 5.3 shall apply with respect to
Tenant’s storage, use and disposal of all such Hazardous Materials. Landlord
may, in reasonable discretion, place such conditions as Landlord deems
appropriate with respect to Tenant’s use of any such Hazardous Materials, and
may further require that Tenant demonstrate that any such Hazardous Materials
are necessary or useful to Tenant’s business and will be generated, stored, used
and disposed of in a manner that complies with all applicable laws and
regulations pertaining thereto and with good business practices. Tenant
understands that Landlord may utilize an environmental consultant to assist in
determining conditions of approval in connection with the storage, generation,
release, disposal or use of Hazardous Materials by Tenant on or about the
Premises, and/or to conduct periodic inspections of the storage, generation,
use, release and/or disposal of such Hazardous Materials by Tenant on and from
the Premises, and Tenant agrees that any costs incurred by Landlord in
connection therewith shall be reimbursed by Tenant to Landlord as additional
rent hereunder upon demand.

 

(c) Prior to the execution of this Lease, Tenant shall complete, execute and
deliver to Landlord an Environmental Questionnaire and Disclosure Statement (the
“Environmental Questionnaire”) in the form of Exhibit B attached hereto. The
completed Environmental Questionnaire shall be deemed incorporated into this
Lease for all purposes, and Landlord shall be entitled to rely fully on the
information contained therein. On each anniversary of the Commencement Date
until the expiration or sooner termination of this Lease, Tenant shall disclose
to Landlord in writing the names and amounts of all Hazardous Materials which
were stored, generated, used, released and/or disposed of on, under or about the
Premises for the twelve-month period prior thereto, and which Tenant desires to
store, generate, use, release and/or dispose of on, under or about the Premises
for the succeeding twelve-month period. In addition, to the extent Tenant is
permitted to utilize Hazardous Materials upon the Premises, Tenant shall
promptly provide Landlord with complete and legible copies of all the following
environmental documents relating thereto: reports filed pursuant to any
self-reporting requirements; permit applications, permits, monitoring reports,
emergency response or action plans, workplace exposure and community exposure
warnings or notices and all other reports, disclosures, plans or documents (even
those which may be characterized as confidential) relating to water discharges,
air pollution, waste generation or disposal, and underground storage tanks for
Hazardous Materials; orders, reports, notices, listings and correspondence (even
those which may be considered confidential) of or concerning the release,
investigation of, compliance, cleanup, remedial and corrective actions, and
abatement of Hazardous Materials; and all complaints, pleadings and other legal
documents filed by or against Tenant related to Tenant’s use, handling, storage,
release and/or disposal of Hazardous Materials.

 

(d) Landlord and its agents shall have the right, but not the obligation, to
inspect, sample and/or monitor the Premises and/or the soil or groundwater
thereunder, during business hours upon at least 24 hours prior written or oral
notice, to determine whether Tenant is complying with the terms of this
Section 5.3, and in connection therewith Tenant shall provide Landlord with full
access to all facilities, records and personnel related thereto. If Tenant is
not in compliance with any of the provisions of this Section 5.3, or in the
event of a release of any Hazardous Material on, under or about the Premises
caused or permitted by Tenant, its agents, employees, contractors, licensees or
invitees, Landlord and its agents shall have the right, but not the obligation,
without limitation upon any of Landlord’s other rights and remedies under this
Lease, to immediately enter upon the Premises without notice and to discharge
Tenant’s obligations under this Section 5.3 at Tenant’s expense, including
without limitation the taking of emergency or long-term remedial action.
Landlord and its agents shall minimize interference with Tenant’s business in
connection therewith, but shall not be liable for any such interference. In
addition, Landlord, at Tenant’s expense, shall have the right, but not the
obligation, to join and participate in any legal proceedings or actions
initiated in connection with any claims arising out of the storage, generation,
use, release and/or disposal by Tenant or its agents, employees, contractors,
licensees or invitees of Hazardous Materials on, under, from or about the
Premises.

 

(e) If the presence of any Hazardous Materials on, under, from or about the
Premises or the Project caused or permitted by Tenant or its agents, employees,
contractors, licensees or invitees results in (i) injury to any person,
(ii) injury to or any contamination of the Premises or the Project, or
(iii) injury to or contamination of any real or personal property wherever
situated, Tenant, at its expense, shall promptly take all actions necessary to
return the Premises and the Project and any other affected real or personal
property owned by Landlord to the condition existing prior to the introduction
of such Hazardous Materials and to remedy or repair any such injury or
contamination, including without limitation, any cleanup, remediation, removal,
disposal, neutralization or other treatment of any such Hazardous Materials.
Notwithstanding the foregoing, Tenant shall not, without Landlord’s prior
written consent, which consent may be given or withheld in Landlord’s sole and
absolute discretion, take any remedial action in response to the presence of any
Hazardous Materials on, from, under or about the Premises or the Project or any
other affected real or personal property owned by Landlord or enter into any
similar agreement, consent, decree or other compromise with any governmental
agency with respect to any Hazardous Materials claims; provided however,
Landlord’s prior written consent shall not be necessary in the event that the
presence of Hazardous Materials on, under or about the Premises or the Project
or any other affected real or personal property owned by Landlord (i) imposes an
immediate threat to the health, safety or welfare of any individual and (ii) is
of such a nature that an immediate remedial response is necessary and it is not
possible to obtain Landlord’s consent before taking such action. To the fullest
extent permitted by law, Tenant shall indemnify, hold harmless, protect and
defend (with attorneys acceptable to Landlord) Landlord and any successors to
all or any portion of Landlord’s

 

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interest in the Premises and the Project and any other real or personal property
owned by Landlord from and against any and all liabilities, losses, damages,
diminution in value, judgments, fines, demands, claims, recoveries,
deficiencies, costs and expenses (including without limitation attorneys’ fees,
court costs and other professional expenses), whether foreseeable or
unforeseeable, arising directly or indirectly out of the use, generation,
storage, treatment, release, on- or off-site disposal or transportation of
Hazardous Materials on, into, from, under or about the Premises, the Building or
the Project and any other real or personal property owned by Landlord caused or
permitted by Tenant, its agents, employees, contractors, licensees or invitees.
Such indemnity obligation shall specifically include, without limitation, the
cost of any required or necessary repair, restoration, cleanup or detoxification
of the Premises, the Building and the Project and any other real or personal
property owned by Landlord, the preparation of any closure or other required
plans, whether or not such action is required or necessary during the Term or
after the expiration of this Lease and any loss of rental due to the inability
to lease the Premises or any portion of the Building or Project as a result of
such Hazardous Material or remediation thereof. If it is at any time discovered
that Tenant or its agents, employees, contractors, licensees or invitees may
have caused or permitted the release of a Hazardous Material on, under, from or
about the Premises, the Building or the Project or any other real or personal
property owned by Landlord, Tenant shall, at Landlord’s request, immediately
prepare and submit to Landlord a comprehensive plan, subject to Landlord’s
approval (not to be unreasonably withheld), specifying the actions to be taken
by Tenant to return the Premises, the Building or the Project or any other real
or personal property owned by Landlord to the condition existing prior to the
introduction of such Hazardous Materials. Upon Landlord’s approval of such
cleanup plan, Tenant shall, at its expense, and without limitation of any rights
and remedies of Landlord under this Lease or at law or in equity, immediately
implement such plan and proceed to cleanup such Hazardous Materials in
accordance with all applicable laws and as required by such plan and this Lease.
The provisions of this Section 5.3(e) shall expressly survive the expiration or
sooner termination of this Lease. As used in this Section 5.3(e), the terms
“permit” and “permitted” shall be deemed to mean “knowingly permit” and
“knowingly permitted” in connection with anything that Tenant permits, or has
permitted, to be done on or about the Premises or the Project.

 

(f) Landlord hereby discloses to Tenant, and Tenant hereby acknowledges, certain
facts relating to Hazardous Materials at the Project known by Landlord to exist
as of the date of this Lease, as more particularly described in Exhibit C
attached hereto. Tenant shall have no liability or responsibility with respect
to the Hazardous Materials facts described in Exhibit C. nor with respect to any
Hazardous Materials which: (i) were not caused or permitted by Tenant, its
agents, employees, contractors, licensees or invitees, (ii) were the result of
violations of any “Hazardous Materials Laws” (as hereinafter defined) relating
to the Premises, the Building or the Project (the Premises, the Building, and
the Project shall be collectively referred to herein as the “Property”) which
violations existed as of the Commencement Date, or (iii) were present in, on,
under or about any part of the Property as of the Commencement Date, or that
were brought into, onto, about, or under any part of the Property by anyone
other than Tenant or its agents, employees, contractors, licensees or invitees.
“Hazardous Materials Laws” shall mean and include all federal, state, and local
laws relating to the environment or to Hazardous Materials, including, but not
limited to, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (42 U.S.C. Section 9601 et seq.), each as amended from time to time.
Notwithstanding the foregoing, Tenant agrees to notify its agents, employees,
contractors, licensees, and invitees of any exposure or potential exposure to
Hazardous Materials at the Premises that Landlord brings to Tenant’s attention.
Tenant hereby acknowledges that this disclosure satisfies any obligation of
Landlord to Tenant pursuant to California Health & Safety Code Section 25359.7,
or any amendment or substitute thereto or any other disclosure obligations of
Landlord.

 

(g) Landlord shall take responsibility, at its sole cost and expense, for any
governmentally-ordered clean-up, remediation, removal, disposal, neutralization
or other treatment of those Hazardous Materials conditions for which Tenant has
no liability or responsibility as described in Section 5.3(f) above. The
foregoing obligation on the part of Landlord shall include the reasonable costs
(including, without limitation, reasonable attorney’s fees) of defending Tenant
from and against any legal action or proceeding instituted by any governmental
agency in connection with such clean-up, remediation, removal, disposal,
neutralization or other treatment of such conditions, provided that Tenant
promptly tenders such defense to Landlord. Tenant agrees to notify its agents,
employees, contractors, licensees, and invitees of any exposure or potential
exposure to Hazardous Materials at the Premises that Landlord brings to Tenant’s
attention.

 

(h) Except as disclosed in Section 5.3(g) above (and/or as may otherwise be
disclosed to Tenant in writing), Landlord represents that, to “Landlord’s
knowledge” (as hereinafter defined), there are no Hazardous Materials in or
about the Premises which are in violation of any applicable federal, state or
local law, ordinance or regulation. As used herein, “Landlord’s knowledge” shall
mean the actual knowledge, without duty of inquiry or investigation, of the
current employees or authorized agents of Landlord responsible for Hazardous
Materials compliance matters.

 

ARTICLE VI. COMMON AREAS; SERVICES

 

SECTION 6.1. UTILITIES AND SERVICES. Tenant shall be responsible for and shall
pay promptly, directly to the appropriate supplier, all charges for water, gas,
electricity, sewer, heat, light, power, telephone, telecommunications service,
refuse pickup, janitorial service, interior landscape maintenance and all other
utilities, materials and services furnished directly to Tenant or the Premises
or used by Tenant in, on or about the Premises during the Term, together with
any taxes thereon. If any utilities or services are not separately metered or
assessed to Tenant, Landlord shall make a reasonable determination of Tenant’s
proportionate share of the cost of such utilities and services, and Tenant shall
pay such amount to Landlord, as an item of additional rent, within ten (10) days
after receipt of Landlord’s statement or invoice therefor. Alternatively,
Landlord may elect to include such cost in the definition of Project Costs in
which event Tenant shall pay Tenant’s proportionate share of such costs in the

 

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manner set forth in Section 4.2. Tenant shall also pay to Landlord as an item of
additional rent, within ten (10) days after receipt of Landlord’s statement or
invoice therefor, Landlord’s “Standard Charges” (as hereinafter defined, which
shall be in addition to the electricity charge paid to the utility provider) for
Tenant’s “after hours” usage of each HVAC unit servicing the Premises. “After
hours” shall mean more than three hundred hours (300) hours of usage of each
HVAC unit servicing the Premises during any month during the Term, and shall be
determined based upon the operation of the applicable HVAC unit during each
month on a “non-cumulative” basis (without regard to Tenant’s usage or nonusage
of said unit during other months during the Term). Landlord’s “Standard Charges”
for “after hours” usage shall mean: (i) Five Dollars ($5.00) for each “after
hours” of usage of any 1-5 ton package HVAC unit; (ii) Seven Dollars and Fifty
Cents ($7.50) for each “after hours” of usage of any 6-30 ton package HVAC unit;
and (iii) Ten Dollars ($10.00) for each “after hours” of usage of any 30+ ton
package HVAC unit. Landlord shall not be liable for damages or otherwise for any
failure or interruption of any utility or other service furnished to the
Premises, and no such failure or interruption shall be deemed an eviction or
entitle Tenant to terminate this Lease or withhold or abate any rent due
hereunder. Landlord shall, upon at least 24 hours prior oral or written notice
and during normal business hours (except in case of emergency when no notice
shall be required), have free access to the Building and Premises to install,
maintain, repair, replace or remove all electrical and mechanical installations
of Landlord. Tenant acknowledges that the costs incurred by Landlord related to
providing above-standard utilities to Tenant, including, without limitation,
telephone lines, may be charged to Tenant.

 

Notwithstanding the foregoing, if as a result of the direct actions of Landlord,
its employees, contractors or authorized agents, for more than three
(3) consecutive business days following written notice to Landlord there is no
HVAC or electricity services to all or a portion of the Premises, or such an
interruption of other essential utilities and building services, such as fire
protection or water, so that all or a portion of the Premises cannot be used by
Tenant, then Tenant’s Basic Rent (or an equitable portion of such Basic Rent to
the extent that less than all of the Premises are affected) shall thereafter be
abated until the Premises are again usable by Tenant; provided, however, that if
Landlord is diligently pursuing the repair of such utilities or services and
Landlord provides substitute services reasonably suitable for Tenant’s purposes,
as for example, bringing in portable air-conditioning equipment, then there
shall not be an abatement of Basic Rent. The foregoing provisions shall be
Tenant’s sole recourse and remedy in the event of such an interruption of
services, and shall not apply in case of the actions of parties other than
Landlord, its employees, contractors or authorized agents, or in the case of
damage to, or destruction of, the Premises (which shall be governed by the
provisions of Article XI of the Lease). Any disputes concerning the foregoing
provisions shall be submitted to and resolved by JAMS arbitration pursuant to
the provisions of Article III of the attached Work Letter.

 

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

 

SECTION 6.3. USE OF COMMON AREAS. The occupancy by Tenant of the Premises shall
include the use of the Common Areas in common with Landlord and with all others
for whose convenience and use the Common Areas may be provided by Landlord,
subject, however, to compliance with all rules and regulations as are prescribed
from time to time by Landlord. Landlord shall operate and maintain the Common
Areas in the manner Landlord may reasonably determine to be appropriate. All
costs incurred by Landlord for the maintenance and operation of the Common Areas
shall be included in Project Costs except to the extent any particular cost
incurred is related to or associated with a specific tenant and can be charged
to such tenant of the Project. Landlord shall at all times during the Term have
exclusive control of the Common Areas, and may restrain or permit any use or
occupancy, except as authorized by Landlord’s rules and regulations. Tenant
shall keep the Common Areas clear of any obstruction or unauthorized use related
to Tenant’s operations or use of Premises, including without limitation,
planters and furniture. Nothing in this Lease shall be deemed to impose
liability upon Landlord for any damage to or loss of the property of, or for any
injury to, Tenant, its invitees or employees. Landlord may temporarily close any
portion of the Common Areas for repairs, remodeling and/or alterations, to
prevent a public dedication or the accrual of prescriptive rights, or for any
other reason deemed sufficient by Landlord, without liability to Landlord.

 

SECTION 6.4. PARKING. Tenant shall be entitled to the number of vehicle parking
spaces set forth in Item 14 of the Basic Lease Provisions, which spaces shall be
unreserved and unassigned, on those portions of the Common Areas designated by
Landlord for parking. Tenant shall not use more parking spaces than such number.
All parking spaces shall be used only for parking of vehicles no larger than
full size passenger automobiles, sports utility vehicles or pickup trucks.
Tenant shall not permit or allow any vehicles that belong to or are controlled
by Tenant or Tenant’s employees, suppliers, shippers, customers or invitees to
be loaded, unloaded or parked in areas other than those designated by Landlord
for such activities. If Tenant permits or allows any of the prohibited
activities described above, then Landlord shall have the right, without notice,
in addition to such other rights and remedies that Landlord may have, to remove
or tow away the vehicle involved and charge the costs to Tenant. Parking within
the Common Areas shall be limited to striped parking stalls, and no parking
shall be permitted in any driveways, access ways or in any area which would
prohibit or impede the free flow of traffic within the Common Areas. There shall
be no parking of any vehicles for longer than a forty-eight (48) hour period
unless otherwise authorized by Landlord, and vehicles which have been abandoned
or parked in violation of the terms hereof may be towed away at the owner’s
expense. Nothing contained in this Lease shall be deemed to create liability
upon Landlord for any damage to motor vehicles of visitors or employees, for any
loss of property from within those

 

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motor vehicles, or for any injury to Tenant, its visitors or employees, unless
ultimately determined to be caused by the sole active negligence or willful
misconduct of Landlord. Landlord shall have the right to establish, and from
time to time amend, and to enforce against all users all reasonable rules and
regulations (including the designation of areas for employee parking) that
Landlord may deem necessary and advisable for the proper and efficient operation
and maintenance of parking within the Common Areas. Landlord shall have the
right to construct, maintain and operate lighting facilities within the parking
areas; to change the area, level, location and arrangement of the parking areas
and improvements therein; to restrict parking by tenants, their officers, agents
and employees to employee parking areas; to enforce parking charges (by
operation of meters or otherwise); and to do and perform such other acts in and
to the parking areas and improvements therein as, in the use of good business
judgment, Landlord shall determine to be advisable. Any person using the parking
area shall observe all directional signs and arrows and any posted speed limits.
In no event shall Tenant interfere with the use and enjoyment of the parking
area by other tenants of the Project or their employees or invitees. Parking
areas shall be used only for parking vehicles. Washing, waxing, cleaning or
servicing of vehicles, or the storage of vehicles for longer than 48-hours, is
prohibited unless otherwise authorized by Landlord. Tenant shall be liable for
any damage to the parking areas caused by Tenant or Tenant’s employees,
suppliers, shippers, customers or invitees, including without limitation damage
from excess oil leakage. Tenant shall have no right to install any fixtures,
equipment or personal property in the parking areas.

 

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

 

ARTICLE VII. MAINTAINING THE PREMISES

 

SECTION 7.1. TENANT’S MAINTENANCE AND REPAIR. Tenant at its sole expense shall
maintain and make all repairs and replacements necessary to keep the Premises
and the Building in the condition as existed on the Early Occupancy Date (or on
any later date that the improvements may have been installed), excepting
ordinary wear and tear, including without limitation all interior glass, doors,
door closures, hardware, fixtures, electrical, plumbing, fire extinguisher
equipment and other equipment installed in the Premises and all Alterations
constructed by Tenant pursuant to Section 7.3 below. Any damage or deterioration
of the Premises shall not be deemed ordinary wear and tear if the same could
have been prevented by good maintenance practices by Tenant. As part of its
maintenance obligations hereunder, Tenant shall, at Landlord’s request, provide
Landlord with copies of all maintenance schedules, reports and notices prepared
by, for or on behalf of Tenant. All repairs and replacements shall be at least
equal in quality to the original work, shall be made only by a licensed
contractor approved in writing in advance by Landlord and shall be made only at
the time or times approved by Landlord (which approval shall not be unreasonably
withheld, conditioned or delayed by Landlord). Any contractor utilized by Tenant
shall be subject to Landlord’s standard requirements for contractors, as
modified from time to time. Landlord may impose reasonable restrictions and
requirements with respect to repairs, as provided in Section 7.3, and the
provisions of Section 7.4 shall apply to all repairs. Alternatively, Landlord
may elect to perform any repair and maintenance of the electrical and mechanical
systems and any air conditioning, ventilating or heating equipment serving the
Premises and include the cost thereof as part of Tenant’s Share of Operating
Expenses. If Tenant fails to properly maintain and/or repair the Premises as
herein provided following Landlord’s notice and the expiration of the applicable
cure period (or earlier if Landlord reasonably determines that such work must be
performed prior to such time in order to avoid damage to the Premises or
Building or other detriment), then Landlord may elect, but shall have no
obligation, to perform any repair or maintenance required hereunder on behalf of
Tenant and at Tenant’s expense, and Tenant shall reimburse Landlord upon demand
for all costs incurred upon submission of an invoice.

 

SECTION 7.2. LANDLORD’S MAINTENANCE AND REPAIR. Subject to Section 7.1 and
Article XI, Landlord shall provide service, maintenance and repair with respect
to any air conditioning, ventilating or heating equipment which serves the
Premises (exclusive, however, of supplemental HVAC equipment serving only the
Premises), and shall maintain in good repair the roof, foundations, footings,
the exterior surfaces of the exterior walls of the Building (including exterior
glass), and the structural, electrical and mechanical systems, except that
Tenant at its expense shall make all repairs which Landlord deems reasonably
necessary as a result of the act or negligence of Tenant, its agents, employees,
invitees, subtenants or contractors. Landlord shall have the right to employ or
designate any reputable person or firm, including any employee or agent of
Landlord or any of Landlord’s affiliates or divisions, to perform any service,
repair or maintenance function. Landlord need not make any other improvements or
repairs except as specifically required under this Lease, and nothing contained
in this Section shall limit Landlord’s right to reimbursement from Tenant for
maintenance, repair costs and replacement costs as provided elsewhere in this
Lease. Tenant understands that it shall not make repairs at Landlord’s expense
or by rental offset. Tenant further understands that Landlord shall not be
required to make any repairs to the roof, foundations, footings, the exterior
surfaces of the exterior walls of the Building (excluding exterior glass), or
structural, electrical or mechanical systems unless and until Tenant has
notified Landlord in writing of the need for such repair and Landlord shall have
a reasonable period of time thereafter to commence and complete said repair, if
warranted. All costs of any maintenance, repairs and replacement on the part of
Landlord provided hereunder shall be considered part of Project Costs.

 

SECTION 7.3. ALTERATIONS. Except as otherwise provided in this Section, Tenant
shall make no alterations, additions, fixtures or improvements (“Alterations”)
to the Premises or the Building without the prior

 

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written consent of Landlord, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, Tenant may make Alterations to the Premises
costing less than Twenty-Five Thousand Dollars ($25,000.00) during each calendar
year of the Term without Landlord’s consent but with prior notice to Landlord,
provided, however, that any Alterations which change the structural, electrical
or mechanical systems of the Premises, or which require a governmental permit as
a prerequisite to the construction thereof, shall require Landlord’s prior
written consent, which shall not be unreasonably withheld. Notwithstanding
anything to the contrary contained in either of the foregoing sentences,
however, no Alterations shall: (i) affect the exterior of the Building or
outside areas (or be visible from adjoining sites), or (ii) affect or penetrate
any of the structural portions of the Building, including but not limited to the
roof, or (iii) require any change to the basic floor plan of the Premises
(including, without limitation, the adding of any additional “office” square
footage) or any change to any structural or mechanical systems of the Premises,
or (iv) fail to comply with any applicable governmental requirements or require
any governmental permit as a prerequisite to the construction thereof, or
(v) result in the Premises requiring building services beyond the level normally
provided to other tenants, or (vi) interfere in any manner with the proper
functioning of, or Landlord’s access to, any mechanical, electrical, plumbing or
HVAC systems, facilities or equipment located in or serving the Building, or
(vii) diminish the value of the Premises including, without limitation, using
lesser quality materials than those existing in the Premises, or (viii) alter or
replace Standard Improvements. Further, in the event that any Alteration would
result in a change from Landlord’s building standard materials and
specifications for the Project (“Standard Improvements”), Tenant shall be
responsible for the cost of replacing such non-standard improvement
(“Non-Standard Improvement”) with the applicable Standard Improvement
(“Replacements”) which Replacements shall be completed prior to the Expiration
Date or earlier termination of this Lease. Landlord may impose any condition to
its consent, including but not limited to a requirement that the installation
and/or removal of all Alterations and Replacements be covered by a lien and
completion bond satisfactory to Landlord in its reasonable discretion and
requirements as to the manner and time of performance of such work. Landlord
shall in all events, whether or not Landlord’s consent is required, have the
right to approve the contractor performing the installation and removal of
Alterations and Replacements (which approval shall not be unreasonably withheld,
delayed or conditioned), and Tenant shall not permit any contractor not approved
by Landlord to perform any work on the Premises or on the Building. Tenant shall
obtain all required permits for the installation and removal of Alterations and
Replacements and shall perform the installation and removal of Alterations and
Replacements in compliance with all applicable laws, regulations and ordinances,
including without limitation the Americans with Disabilities Act, all covenants,
conditions and restrictions affecting the Project, and the Rules and Regulations
as described in Article XVII. Tenant understands and agrees that Landlord shall
be entitled to a supervision fee in the amount of five percent (5%) of the cost
of such Alterations either requiring a permit from the City of Irvine or
affecting any mechanical, electrical, plumbing or HVAC systems, facilities or
equipment located in or serving the Building. Under no circumstances shall
Tenant make any Alterations or Replacements which incorporate any Hazardous
Materials, including without limitation asbestos-containing construction
materials into the Premises, the Building or the Common Area. If any
governmental entity requires, as a condition to any proposed Alterations by
Tenant, that improvements be made to the Common Areas, and if Landlord consents
to such improvements to the Common Areas (which consent may be withheld in the
sole and absolute discretion of Landlord), then Tenant shall, at Tenant’s sole
expense, make such required improvements to the Common Areas in such manner,
utilizing such materials, and with such contractors, architects and engineers as
Landlord may require in its sole and absolute discretion. Any request for
Landlord’s consent to any proposed Alterations shall be made in writing and
shall contain architectural plans describing the work in detail reasonably
satisfactory to Landlord. Landlord may elect to cause its architect to review
Tenant’s architectural plans, and the reasonable cost of that review shall be
reimbursed by Tenant. Should the work proposed by Tenant and consented to by
Landlord modify the basic floor plan of the Premises, then Tenant shall, at its
expense, furnish Landlord with as-built drawings and CAD disks compatible with
Landlord’s systems and standards. Unless Landlord otherwise agrees in writing,
all Alterations made or affixed to the Premises, the Building or to the Common
Area (excluding moveable trade fixtures and furniture), including without
limitation all Tenant Improvements constructed pursuant to the Work Letter
(except as otherwise provided in the Work Letter), shall become the property of
Landlord and shall be surrendered with the Premises at the end of the Term;
except that Landlord may, as provided in the next succeeding paragraph of this
Section 7.3, require Tenant to remove by the Expiration Date or sooner
termination date of this Lease, all or any of the Alterations installed either
by Tenant or by Landlord at Tenant’s request, and to repair any damage to the
Premises, the Building or the Common Area arising from that removal and restore
the Premises to their condition prior to making such Alterations.

 

As of the Expiration Date or earlier termination date of this Lease, Landlord
shall have the right to require Tenant to remove any Alterations made by Tenant
to the Premises and to replace same with the applicable Replacements, whether or
not Landlord’s consent was required. Notwithstanding the foregoing, if at the
time of requesting Landlord’s consent to any such Alterations, Tenant shall
request in writing whether or not Landlord shall require such Alterations to be
removed and replaced as of the Expiration Date or earlier termination date of
this Lease, then Landlord’s right to require Tenant to remove and replace such
Alterations shall be exercised, if at all, at the time of Landlord’s consent
thereto.

 

SECTION 7.4. MECHANIC’S LIENS. Tenant shall keep the Premises free from any
liens arising out of any work performed, materials furnished, or obligations
incurred by or for Tenant. Upon request by Landlord, Tenant shall promptly (but
in no event later than ten (10) business days following such request) cause any
such lien to be released by posting a bond in accordance with California Civil
Code Section 3143 or any successor statute. In the event that Tenant shall not,
within thirty (30) days following the imposition of any lien, cause the lien to
be released of record by payment or posting of a proper bond, Landlord shall
have, in addition to all other available remedies, the right to cause the lien
to be released by any means it deems proper, including payment of or defense
against the claim giving rise to the lien. All expenses so incurred by Landlord,
including Landlord’s attorneys’ fees, shall be reimbursed by Tenant upon demand,
together with interest from the date of payment by Landlord at the

 

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maximum rate permitted by law until paid. Tenant shall give Landlord no less
than ten (10) days prior notice in writing before commencing construction of any
kind on the Premises or Common Area and shall again notify Landlord that
construction has commenced, such notice to be given on the actual date on which
construction commences, so that Landlord may post and maintain notices of
nonresponsibility on the Premises or Common Area, as applicable, which notices
Landlord shall have the right to post and which Tenant agrees it shall not
disturb. Tenant shall also provide Landlord notice in writing within ten
(10) days following the date on which such work is substantially completed. The
provisions of this Section shall expressly survive the expiration or sooner
termination of this Lease.

 

SECTION 7.5. ENTRY AND INSPECTION. Landlord shall during normal business hours,
upon at least 24 hours prior written or oral notice and with a Tenant escort if
Tenant so chooses (except in emergencies, when no notice or escort shall be
required) have the right to enter the Premises to inspect them, to supply
services in accordance with this Lease, to have access to install, repair,
maintain, replace or remove all electrical and mechanical installations of
Landlord and to protect the interests of Landlord in the Premises, and to submit
the Premises to prospective or actual purchasers or encumbrance holders (or,
during the last one hundred and eighty (180) days of the Term or when an uncured
Tenant Event of Default exists, to prospective tenants), all without being
deemed to have caused an eviction of Tenant and without abatement of rent except
as provided elsewhere in this Lease. Landlord shall have the right, if desired
and subject to Tenant’s reasonable security requirements, to retain a key which
unlocks all of the doors in the Premises, excluding Tenant’s vaults and safes,
and Landlord shall have the right to use any and all means which Landlord may
deem proper to open the doors in an emergency in order to obtain entry to the
Premises, and any entry to the Premises obtained by Landlord shall not under any
circumstances be deemed to be a forcible or unlawful entry into, or a detainer
of, the Premises, or any eviction of Tenant from the Premises.

 

ARTICLE VIII. TAXES AND ASSESSMENTS ON TENANT’S PROPERTY

 

Tenant shall be liable for and shall pay, at least ten (10) days before
delinquency, all taxes and assessments levied against all personal property of
Tenant located in the Premises, and, if required by Landlord, against all Non
Standard Improvements to the Premises (as defined in Section 7.3) made by
Landlord or Tenant, and against any Alterations (as defined in Section 7.3) made
to the Premises or the Building by or on behalf of Tenant. If requested by
Landlord, Tenant shall cause its personal property, Non-Standard Improvements
and Alterations to be assessed and billed separately from the real property of
which the Premises form a part. If any taxes required to be paid by Tenant on
Tenant’s personal property, Non-Standard Improvements and/or Alterations are
levied against Landlord or Landlord’s property and if Landlord pays the same, or
if the assessed value of Landlord’s property is increased by the inclusion of a
value placed upon the personal property, Non-Standard Improvements and/or
Alterations and if Landlord pays the taxes based upon the increased assessment,
Landlord shall have the right to require that Tenant pay to Landlord the taxes
so levied against Landlord or the proportion of the taxes resulting from the
increase in the assessment. In calculating what portion of any tax bill which is
assessed against Landlord separately, or Landlord and Tenant jointly, is
attributable to Tenant’s Non-Standard Improvements, Alterations and personal
property, Landlord’s reasonable determination shall be conclusive.

 

ARTICLE IX. ASSIGNMENT AND SUBLETTING

 

SECTION 9.1. RIGHTS OF PARTIES.

 

(a) Notwithstanding any provision of this Lease to the contrary, and except as
to “Permitted Transfers” (as defined in Section 9.4 below), Tenant will not,
either voluntarily or by operation of law, assign, sublet, encumber, or
otherwise transfer all or any part of Tenant’s interest in this Lease or the
Premises, or permit the Premises to be occupied by anyone other than Tenant,
without Landlord’s prior written consent, which consent shall not unreasonably
be withheld in accordance with the provisions of Section 9.1(b). No assignment
(whether voluntary, involuntary or by operation of law) and no subletting shall
be valid or effective without Landlord’s prior written consent and, at
Landlord’s election, any such assignment or subletting shall be void and of no
force and effect and any such attempted assignment or subletting shall
constitute an Event of Default of this Lease. Landlord shall not be deemed to
have given its consent to any assignment or subletting by any course of action
other than written consent. To the extent not prohibited by provisions of the
Bankruptcy Code, 11 U.S.C. Section 101 et seq., (the “Bankruptcy Code”),
including Section 365(f)(l), Tenant on behalf of itself and its creditors,
administrators and assigns waives the applicability of Section 365(e) of the
Bankruptcy Code unless the proposed assignee of the Trustee for the estate of
the bankrupt meets Landlord’s standard for consent as set forth in
Section 9.1(b) of this Lease. If this Lease is assigned to any person or entity
pursuant to the provisions of the Bankruptcy Code, any and all monies or other
considerations to be delivered in connection with the assignment shall be
delivered to Landlord, shall be and remain the exclusive property of Landlord
and shall not constitute property of Tenant or of the estate of Tenant within
the meaning of the Bankruptcy Code. Any person or entity to which this Lease is
assigned pursuant to the provisions of the Bankruptcy Code shall be deemed to
have assumed all of the obligations arising under this Lease on and after the
date of the assignment, and shall upon demand execute and deliver to Landlord an
instrument confirming that assumption.

 

(b) If Tenant desires to transfer an interest in this Lease or the Premises, it
shall first notify Landlord of its desire and shall submit in writing to
Landlord: (i) the name and address of the proposed transferee; (ii) the nature
of any proposed transferee’s business to be carried on in the Premises;
(iii) the terms and provisions of any proposed sublease, assignment or other
transfer, including a copy of the proposed assignment, sublease or transfer
form; (iv) evidence that the proposed assignee, subtenant or transferee will
comply with the requirements of Exhibit D hereto; (v) a completed Environmental
Questionnaire from the proposed assignee, subtenant or transferee;

 

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(vi) any other information requested by Landlord and reasonably related to the
transfer and (vii) the fee described in Section 9.1(e). Except as provided in
Section 9.1(c), Landlord shall not unreasonably withhold its consent, provided
that the parties agree that it shall be reasonable for Landlord to withhold its
consent if: (1) the use of the Premises will not be consistent with the
provisions of this Lease or with Landlord’s binding commitment(s) to other
tenants of the Building and Project; (2) the proposed assignee or subtenant has
been required by any prior landlord, lender or governmental authority to take
remedial action in connection with Hazardous Materials contaminating a property
arising out of the proposed assignee’s or subtenant’s actions or use of the
property in question or is subject to any enforcement order issued by any
governmental authority in connection with the use, disposal or storage of a
Hazardous Material; (3) insurance requirements of the proposed assignee or
subtenant may not be brought into conformity with Landlord’s then current
leasing practice; (4) a proposed subtenant or assignee has not demonstrated to
the reasonable satisfaction of Landlord that it is financially responsible or
has failed to submit to Landlord all reasonable information as requested by
Landlord concerning the proposed subtenant or assignee, including, but not
limited to, a certified balance sheet of the proposed subtenant or assignee as
of a date within ninety (90) days of the request for Landlord’s consent,
statements of income or profit and loss of the proposed subtenant or assignee
for the two-year period preceding the request for Landlord’s consent, and/or a
certification signed by the proposed subtenant or assignee that it has not been
evicted or been in arrears in rent at any other leased premises for the 3-year
period preceding the request for Landlord’s consent; (5) the proposed assignee
or subtenant is an existing tenant of the Building or Project or a prospect with
whom Landlord is actively negotiating to become a tenant at the Building or
Project; or (6) the proposed transfer will impose additional material burdens or
adverse tax effects on Landlord. Tenant’s exterior signage rights are personal
to Tenant and may not be assigned or transferred to any assignee of this Lease
or subtenant of the Premises. Notwithstanding the foregoing, Landlord shall not
unreasonably withhold its consent to a transfer of such signage rights in
connection with Tenant’s assignment of this Lease, provided that Landlord shall
have the right of prior approval that such signage continues to comply with the
Sign Criteria and the other requirements of Section 5.2 of this Lease, and
provided further that any name and/or graphics on such signage do not materially
devalue the Project as determined by Landlord in its sole and absolute
discretion.

 

If Landlord consents to the proposed transfer, Tenant may within ninety
(90) days after the date of the consent effect the transfer upon the terms
described in the information furnished to Landlord; provided that any material
change in the terms shall be subject to Landlord’s consent as set forth in this
Section 9.1. Landlord shall approve or disapprove any requested transfer within
fifteen (15) business days following receipt of Tenant’s written request, the
information set forth above, and the fee set forth below.

 

(c) Notwithstanding the provisions of Section 9.1(b) above, in lieu of
consenting to a proposed assignment or subletting, Landlord may elect, within
the fifteen (15) business day period permitted for Landlord to approve or
disapprove a requested transfer, to (i) sublease the Premises (or the portion
proposed to be subleased), or take an assignment of Tenant’s interest in this
Lease, upon substantially the same terms as offered to the proposed subtenant or
assignee (excluding terms relating to the purchase of personal property, the use
of Tenant’s name or the continuation of Tenant’s business), or (ii) terminate
this Lease as to the portion of the Premises proposed to be subleased or
assigned with a proportionate abatement in the rent payable under this Lease,
effective thirty (30) days’ following written notice by Landlord of its election
to so sublease or terminate. Landlord may thereafter, at its option, assign,
sublet or re-let any space so sublet, obtained by assignment or obtained by
termination to any third party, including without limitation the proposed
transferee of Tenant.

 

(d) In the event that Landlord approves the requested assignment or subletting,
Tenant agrees that fifty percent (50%) of any amounts paid by the assignee or
subtenant, however described, in excess of (i) the Basic Rent payable by Tenant
hereunder, or in the case of a sublease of a portion of the Premises, in excess
of the Basic Rent reasonably allocable to such portion as determined by
Landlord, plus (ii) Tenant’s direct out-of-pocket costs which Tenant certifies
to Landlord have been paid to provide occupancy related services to such
assignee or subtenant of a nature commonly provided by landlords of similar
space, plus (iii) the amount of brokerage commissions, attorneys’ fees and
tenant improvement or refurbishment costs paid by Tenant in connection with any
such assignment or sublease, shall be the property of Landlord and such amounts
shall be payable directly to Landlord by the assignee or subtenant or, at
Landlord’s option, by Tenant within ten (10) days of Tenant’s receipt thereof.
Landlord shall have the right to review or audit the books and records of
Tenant, or have such books and records reviewed or audited by an outside
accountant, to confirm any such direct out-of-pocket costs. In the event that
such direct out-of-pocket costs claimed by Tenant are overstated by more than
five percent (5%), Tenant shall reimburse Landlord for any of Landlord’s costs
related to such review or audit. At Landlord’s request, a written agreement
shall be entered into by and among Tenant, Landlord and the proposed assignee or
subtenant confirming the requirements of this Section 9.1(d).

 

(e) Tenant shall pay to Landlord a fee equal to the greater of (i) Landlord’s
actual and reasonable costs related to such assignment, subletting or other
transfer or (ii) Five Hundred Dollars ($500.00), to process any request by
Tenant for an assignment, subletting or other transfer under this Lease. Tenant
shall pay Landlord the sum of Five Hundred Dollars ($500.00) concurrently with
Tenant’s request for consent to any assignment, subletting or other transfer,
and Landlord shall have no obligation to consider such request unless
accompanied by such payment. Tenant shall pay Landlord upon demand any costs in
excess of such payment to the extent Landlord’s actual and reasonable costs
related to such request exceeds $500.00. Such fee is hereby acknowledged as a
reasonable amount to reimburse Landlord for its costs of review and evaluation
of a proposed transfer.

 

SECTION 9.2. EFFECT OF TRANSFER. No subletting or assignment, even with the
consent of Landlord, shall relieve Tenant of its obligation to pay rent and to
perform all its other obligations under this Lease. Moreover, Tenant shall
indemnify and hold Landlord harmless, as provided in Section 10.3, for any act
or omission by an assignee or subtenant. Each assignee, other than Landlord,
shall assume all obligations of Tenant under this

 

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Lease and shall be liable jointly and severally with Tenant for the payment of
all rent, and for the due performance of all of Tenant’s obligations, under this
Lease. No assignment or subletting shall be effective or binding on Landlord
unless documentation in form and substance satisfactory to Landlord in its
reasonable discretion evidencing the transfer, and in the case of an assignment,
the assignee’s assumption of the obligations of Tenant under this Lease, is
delivered to Landlord and both the assignee/subtenant and Tenant deliver to
Landlord an executed consent to transfer instrument prepared by Landlord and
consistent with the requirements of this Article. The acceptance by Landlord of
any payment due under this Lease from any other person shall not be deemed to be
a waiver by Landlord of any provision of this Lease or to be a consent to any
transfer. Consent by Landlord to one or more transfers shall not operate as a
waiver or estoppel to the future enforcement by Landlord of its rights under
this Lease or as a consent to any subsequent transfer.

 

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

 

(a) Each and every provision contained in this Lease (other than with respect to
the payment of rent hereunder) is incorporated by reference into and made a part
of such sublease, with “Landlord” hereunder meaning the sublandlord therein and
“Tenant” hereunder meaning the subtenant therein.

 

(b) Tenant hereby irrevocably assigns to Landlord all of Tenant’s interest in
all rentals and income arising from any sublease of the Premises, and Landlord
may collect such rent and income and apply same toward Tenant’s obligations
under this Lease; provided, however, that until there is an Event of Default by
Tenant, Tenant shall have the right to receive and collect the sublease rentals.
Landlord shall not, by reason of this assignment or the collection of sublease
rentals, be deemed liable to the subtenant for the performance of any of
Tenant’s obligations under the sublease. Tenant hereby irrevocably authorizes
and directs any subtenant, upon receipt of a written notice from Landlord
stating that an uncured Event of Default exists in the performance of Tenant’s
obligations under this Lease, to pay to Landlord all sums then and thereafter
due under the sublease. Tenant agrees that the subtenant may rely on that notice
without any duty of further inquiry and notwithstanding any notice or claim by
Tenant to the contrary. Tenant shall have no right or claim against the
subtenant or Landlord for any rentals so paid to Landlord.

 

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

 

SECTION 9.4. CERTAIN TRANSFERS. The following shall be deemed to constitute an
assignment of this Lease; (a) the sale of all or substantially all of Tenant’s
assets (other than bulk sales in the ordinary course of business), (b) if Tenant
is a corporation, an unincorporated association, a limited liability company or
a partnership, the transfer, assignment or hypothecation of any stock or
interest in such corporation, association, limited liability company or
partnership in the aggregate of fifty percent (50%) (except for publicly traded
shares of stock constituting a transfer of fifty percent (50%) or more in the
aggregate, so long as no change in the controlling interest of Tenant occurs as
a result thereof), or (c) any other direct or indirect change of control of
Tenant, including, without limitation, change of control of Tenant’s parent
company or a Permitted Transfer by Tenant or its parent company; provided,
however, that this provision shall not apply to an initial public offering of
the securities of Tenant or if Tenant is a publicly traded company.
Notwithstanding the foregoing, Landlord’s consent shall not be required for the
assignment of this Lease or a sublease of all or a portion of the Premises to an
“Affiliate” (as hereinafter defined) of Tenant (collectively, a “Permitted
Transfer”), so long as (i) the net worth of the successor or reorganized entity
after such Permitted Transfer is at least equal to the greater of the net worth
of Tenant as of the execution of this Lease by Landlord or the net worth of
Tenant immediately prior to the date of such Permitted Transfer, evidence of
which, satisfactory to Landlord, shall be presented to Landlord prior to such
Permitted Transfer, (ii) Tenant shall provide to Landlord, prior to such
Permitted Transfer, written notice of such Permitted Transfer or reorganization
and such assignment documentation and other information as Landlord may
reasonably require in connection therewith, and (iii) all of the other terms and
requirements Section 9.2 and 9.3 (but not of Section 9.1) shall apply with
respect to such Permitted Transfer. An “Affiliate” means any entity that
(i) controls, is controlled by, or is under common control with Tenant,
(ii) results from the transfer of all or substantially all of Tenant’s assets or
stock, (iii) results from the merger or consolidation of Tenant with another
entity, or (iv) succeeds to all or substantially all of the business and assets
of Tenant. For purposes of the foregoing sentence, “control” means the direct or
indirect ownership of more than fifty percent (50%) of the voting securities of
an entity or possession of the right to vote more than fifty percent (50%) of
the voting interest in the ordinary discretion of the entity’s affairs.

 

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ARTICLE X. INSURANCE AND INDEMNITY

 

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

 

SECTION 10.2. LANDLORD’S INSURANCE. Landlord may, at its election, provide any
or all of the following types of insurance, with or without deductible and in
amounts and coverages as may be determined by Landlord in its sole and absolute
discretion: property insurance, subject to standard exclusions, covering the
Building and/or Project, and such other risks as Landlord or its mortgagees may
from time to time deem appropriate, including coverage for the Tenant
Improvements constructed by Landlord pursuant to the Work Letter (if any)
attached hereto, and commercial general liability coverage. Landlord shall not
be required to carry insurance of any kind on Tenant’s Alterations or on
Tenant’s other property, including, without limitation, Tenant’s trade fixtures,
furnishings, equipment, signs and all other items of personal property, and
Landlord shall not be obligated to repair or replace that property should damage
occur. All proceeds of insurance maintained by Landlord upon the Building and/or
Project shall be the property of Landlord, whether or not Landlord is obligated
to or elects to make any repairs. At Landlord’s option, Landlord may self-insure
all or any portion of the risks for which Landlord elects to provide insurance
hereunder.

 

SECTION 10.3. JOINT INDEMNITY.

 

(a) To the fullest extent permitted by law, Tenant shall defend, indemnify,
protect, save and hold harmless Landlord, its agents, and affiliates of
Landlord, including, without limitation, any corporations or other entities
controlling, controlled by or under common control with Landlord, from and
against any and all claims, liabilities, costs or expenses arising either before
or after the Commencement Date from Tenant’s use or occupancy of the Premises,
the Building or the Common Areas, including, without limitation, the use by
Tenant, its agents, employees, invitees or licensees of any recreational
facilities within the Common Areas, or from the conduct of its business, or from
any activity, work, or thing done, permitted or suffered by Tenant or its
agents, employees, invitees or licensees in or about the Premises, the Building
or the Common Areas, or from any Event of Default in the performance of any
obligation on Tenant’s part to be performed under this Lease, or from any act or
negligence of Tenant or its agents, employees, visitors, patrons, guests,
invitees or licensees. Landlord may, at its option, require Tenant to assume
Landlord’s defense in any action covered by this Section 10.3(a) through counsel
reasonably satisfactory to Landlord. The provisions of this Section 10.3(a)
shall expressly survive the expiration or sooner termination of this Lease.
Tenant’s obligations under this Section shall not apply in the event that the
claim, liability, cost or expense is (i) caused by the active negligence or
willful misconduct of Landlord, or (ii) is covered by Landlord’s indemnity
obligations set forth in Section 10.3(b) below.

 

(b) To the fullest extent permitted by law, but subject to the express
limitations on liability contained in this Lease (including, without limitation,
the provisions of Sections 10.4, 10.5 and 14.8 of this Lease), Landlord shall
defend, indemnify, protect, save and hold harmless Tenant, its agents and any
and all affiliates of Tenant, including without limitation, any corporations, or
other entities controlling, controlled by or under common control with Tenant,
from and against any and all claims, liabilities, costs or expenses arising
either before or after the Commencement Date from the active negligence or
willful misconduct of Landlord, its employees or authorized agents in connection
with the operation, maintenance or repair of the Building and/or the Common
Areas of the Project. Tenant may, at its option, require Landlord to assume
Tenant’s defense in actions covered by this Section 10.3(b) through counsel
reasonably satisfactory to Tenant. The provisions of this Section 10.3(b) shall
expressly survive the expiration or sooner termination of this Lease. Landlord’s
obligations under this Section 10.3(b) shall not apply in the event that the
claim, liability, cost or expense is (i) caused by the active negligence or
willful misconduct of Tenant, or (ii) is covered by Tenant’s indemnity
obligations set forth in Section 10.3(a) above.

 

SECTION 10.4. LANDLORD’S NONLIABILITY. Subject only to the express indemnity
obligation on Landlord’s part relating to claims, liabilities, costs or expenses
for personal injury to or death of persons contained in Section 10.3(b) of this
Lease, Landlord shall not be liable to Tenant, its employees, agents and
invitees, and Tenant hereby waives all claims against Landlord and knowingly
assumes the risk of for loss of or damage to any property, or any injury to any
person, or any other loss, cost, damage, injury or liability whatsoever
resulting from Acts of God, acts of civil disobedience or insurrection, acts or
omissions of third parties and/or of other tenants within the Project or their
agents, employees, contractors, guests or invitees, fire, explosion, falling
plaster, steam, gas, electricity, water or rain which may leak or flow from or
into any part of the Premises or from the breakage, leakage, obstruction or
other defects of the pipes, sprinklers, wires, appliances, plumbing, air
conditioning, electrical works, roof, windows or other fixtures in the Building,
whether the damage or injury results from conditions arising in the Premises or
in other portions of the Building. Notwithstanding any provision of this Lease
to the contrary, including, without limitation, the provisions of
Section 10.3(b) of this Lease, Landlord shall in no event be liable to Tenant,
its employees, agents, and invitees, and Tenant hereby waives all claims against
Landlord, for loss or interruption of Tenant’s business or income (including,
without limitation, any consequential damages and lost profit or opportunity
costs), or any other loss, cost, damage, injury or liability resulting from, but
not limited to, Acts of God, acts of civil disobedience or insurrection, acts or
omissions (criminal or otherwise) of any third parties. It is understood that
any such condition may require the temporary evacuation or closure of all or a
portion of the Building. Landlord shall have no liability (including without
limitation consequential damages and lost profit or opportunity costs) and,
except as provided in Sections 11.1 and 12.1 below, there shall be no abatement
of rent, by reason of any injury to or interference with Tenant’s business
arising from the making of any repairs, alterations or improvements to any
portion of the Building, including repairs to the Premises, nor shall any
related activity by Landlord constitute an actual or constructive eviction;
provided, however, that in making repairs, alterations or

 

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improvements, Landlord shall interfere as little as reasonably practicable with
the conduct of Tenant’s business in the Premises. Should Tenant elect to receive
any service or products from a concessionaire, licensee or third party tenant of
Landlord, Landlord shall have no liability for any services or products so
provided or for any breach of contract by such third party provider. Neither
Landlord nor its agents shall be liable for interference with light or other
similar intangible interests. Tenant shall immediately notify Landlord in case
of fire or accident in the Premises, the Building or the Project and of defects
in any improvements or equipment.

 

SECTION 10.5. WAIVER OF SUBROGATION. Landlord and Tenant each hereby waives all
rights of recovery against the other and the other’s agents on account of loss
and damage occasioned to the property of such waiving party to the extent that
the waiving party is entitled to proceeds for such loss or damage under any
property insurance policies carried or required to be carried by the provisions
of this Lease; provided however, that the foregoing waiver shall not apply to
the extent of Tenant’s obligations to pay deductibles under any such policies
and this Lease. By this waiver it is the intent of the parties that neither
Landlord nor Tenant shall be liable to any insurance company (by way of
subrogation or otherwise) insuring the other party for any loss or damage
insured against under any property insurance policies contemplated by this
Lease, even though such loss or damage might be occasioned by the negligence of
such party, its agents, employees, contractors, guests or invitees.

 

ARTICLE XI. DAMAGE OR DESTRUCTION

 

SECTION 11.1. RESTORATION.

 

(a) If the Premises or the Building or a part thereof are materially damaged by
any fire, flood, earthquake or other casualty, Landlord shall have the right to
terminate this Lease upon written notice to Tenant if: (i) Landlord reasonably
determines that proceeds necessary to pay the full cost of repair is not
available from Landlord’s insurance, including without limitation earthquake
insurance, plus such additional amounts Tenant elects, at its option, to
contribute, excluding however the deductible (for which Tenant shall be
responsible for Tenant’s Share); (ii) Landlord reasonably determines that the
Premises cannot, with reasonable diligence, be fully repaired by Landlord (or
cannot be safely repaired because of the presence of hazardous factors,
including without limitation Hazardous Materials, earthquake faults, and other
similar dangers) within two hundred seventy (270) days after the date of the
damage; (iii) an uncured Event of Default by Tenant has occurred; or (iv) the
material damage occurs during the final twelve (12) months of the Term. Landlord
shall notify Tenant in writing (“Landlord’s Notice”) within sixty (60) days
after the damage occurs as to (A) whether Landlord is terminating this Lease as
a result of such material damage and (B) if Landlord is not terminating this
Lease, the number of days within which Landlord has estimated that the Premises,
with reasonable diligence, are likely to be fully repaired. In the event
Landlord elects to terminate this Lease, this Lease shall terminate as of the
date specified for termination by Landlord’s Notice (which termination date
shall in no event be later than sixty (60) days following the date of the
damage, or, if no such date is specified, such termination shall be the date of
Landlord’s Notice).

 

(b) If Landlord has the right to terminate this Lease pursuant to
Section 11.1(a) and does not elect to so terminate this Lease, and provided that
at the time of Landlord’s Notice neither an Event of Default exists nor has
Landlord delivered Tenant a notice of any failure by Tenant to fulfill an
obligation under this Lease which, unless cured by Tenant within the applicable
grace period, would constitute an Event of Default, then within ten (10) days
following delivery of Landlord’s Notice pursuant to Section 11.1(a), Tenant may
elect to terminate this Lease by written notice to Landlord, but only if
(i) Landlord’s Notice specifies that Landlord has determined that the Premises
cannot be repaired, with reasonable diligence, within two hundred seventy
(270) days after the date of damage or (ii) the casualty has occurred within the
final twelve (12) months of the Term and such material damage has a materially
adverse impact on Tenant’s continued use of the Premises. If Tenant fails to
provide such termination notice within such ten (10) day period, Tenant shall be
deemed to have waived any termination right under this Section 11.1(b) or any
other applicable law.

 

(c) In the event that neither Landlord nor Tenant terminates this Lease pursuant
to this Section 11.1 as a result of material damage to the Building or Premises
resulting from a casualty, Landlord shall repair all material damage to the
Premises or the Building as soon as reasonably possible and this Lease shall
continue in effect for the remainder of the Term. Subject to any provision to
the contrary in the Work Letter, such repair by Landlord shall include repair of
material damage to the Tenant Improvements constructed pursuant to the Work
Letter, so long as insurance proceeds from insurance required to be carried by
Tenant are made available to Landlord. Landlord shall have the right, but not
the obligation, to repair or replace any other leasehold improvements made by
Tenant or any Alterations (as defined in Section 7.3) constructed by Tenant. If
Landlord elects to repair or replace such leasehold improvements and/or
Alterations, all insurance proceeds available for such repair or replacement
shall be made available to Landlord. Landlord shall have no liability to Tenant
in the event that the Premises or the Building has not been fully repaired
within the time period specified by Landlord in Landlord’s Notice to Tenant as
described in Section 11.1(a). Notwithstanding the foregoing, the repair of
damage to the Premises to the extent such damage is not material shall be
governed by Sections 7.1 and 7.2.

 

Notwithstanding anything to the contrary contained in this Section 11.1(c), if
for any reasons other than delays caused by Tenant or other matters beyond
Landlord’s reasonable control, the Premises and/or the Building have not been
substantially repaired within thirty (30) days following the time period
specified in Landlord’s Notice to Tenant as described in Section 11.1(a), then
Tenant may, by written notice to Landlord given at any time thereafter but prior
to the actual date of the substantial completion of the repair of the Premises
or the Building, elect to terminate this Lease. Notwithstanding the foregoing,
if at any time during the construction period, Landlord reasonably determines
that the substantial completion of said repairs will be delayed beyond thirty
(30) days following the time period specified in Landlord’s Notice (for reasons
other than Tenant-caused delays and/or force

 

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majeure delays), then Landlord may notify Tenant in writing of such
determination and of a new outside date for completion of such repairs, and
Tenant must elect within ten (10) days of receipt of such notice to either
terminate this Lease or waive its right to terminate this Lease provided such
repairs are substantially completed within thirty (30) days following the new
outside date established by Landlord in such notice to Tenant. Tenant’s failure
to elect to terminate this Lease within such ten (10) day period shall be deemed
Tenant’s waiver of its right to terminate this Lease as provided in this
paragraph as to the previous outside date, but not as to the new outside date
established by said notice.

 

(d) Commencing on the date of such material damage to the Building, and ending
on the sooner of the date the damage is repaired or the date this Lease is
terminated, the rental to be paid under this Lease shall be abated in the same
proportion that the Floor Area of the Premises that is rendered unusable by the
damage from time to time bears to the total Floor Area of the Premises, as
reasonably determined by Landlord, but only to the extent that Landlord is
entitled to reimbursement from the proceeds of the business interruption
insurance required of Tenant pursuant to Exhibit D.

 

(e) Landlord shall not be required to repair or replace any improvements or
fixtures that Tenant is obligated to repair or replace pursuant to Section 7.1
or any other provision of this Lease and Tenant shall continue to be obligated
to so repair or replace any such improvements or fixtures, notwithstanding any
provisions to the contrary in this Article XI. In addition, but subject to the
provisions of Section 10.5, in the event the damage or destruction to the
Premises or Building are due in substantial part to the fault or neglect of
Tenant or its employees, subtenants, invitees or representatives, the costs of
such repairs or replacement to the Premises or Building shall be borne by Tenant
to the extent that insurance proceeds sufficient to complete such repair or
replacement are not made available to Landlord, and in addition, Tenant shall
not be entitled to terminate this Lease as a result, notwithstanding the
provisions of Section 11.1(b).

 

(f) Tenant shall fully cooperate with Landlord in removing Tenant’s personal
property and any debris from the Premises to facilitate all inspections of the
Premises and the making of any repairs. Notwithstanding anything to the contrary
contained in this Lease, if Landlord in good faith believes there is a risk of
injury to persons or damage to property from entry into the Building or Premises
following any damage or destruction thereto, Landlord may restrict entry into
the Building or the Premises by Tenant, its employees, agents and contractors in
a non-discriminatory manner, without being deemed to have violated Tenant’s
rights of quiet enjoyment to, or made an unlawful detainer of, or evicted Tenant
from, the Premises. Upon request, Landlord shall consult with Tenant to
determine if there are safe methods of entry into the Building or the Premises
solely in order to allow Tenant to retrieve files, data in computers, and
necessary inventory, subject however to all indemnities and waivers of liability
from Tenant to Landlord contained in this Lease and any additional indemnities
and waivers of liability which Landlord may require.

 

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

 

ARTICLE XII. EMINENT DOMAIN

 

SECTION 12.1. TOTAL OR PARTIAL TAKING. If all or a material portion of the
Premises is taken by any lawful authority by exercise of the right of eminent
domain, or sold to prevent a taking, either Tenant or Landlord may terminate
this Lease effective as of the date possession is required to be surrendered to
the authority. In the event title to a portion of the Building or Project,
whether or not including a portion of the Premises, is taken or sold in lieu of
taking, and if Landlord elects to restore the Building in such a way as to alter
the Premises materially, either party may terminate this Lease, by written
notice to the other party, effective on the date of vesting of title. In the
event neither party has elected to terminate this Lease as provided above, then
Landlord shall promptly, after receipt of a sufficient condemnation award,
proceed to restore the Premises to substantially their condition prior to the
taking, and a proportionate allowance shall be made to Tenant for the rent
corresponding to the time during which, and to the part of the Premises of
which, Tenant is deprived on account of the taking and restoration. In the event
of a taking, Landlord shall be entitled to the entire amount of the condemnation
award without deduction for any estate or interest of Tenant; provided that
nothing in this Section shall be deemed to give Landlord any interest in, or
prevent Tenant from seeking any award against the taking authority for, the
taking of personal property and fixtures belonging to Tenant, Tenant’s goodwill
or for relocation or business interruption expenses recoverable from the taking
authority.

 

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

 

SECTION 12.3. TAKING OF PARKING AREA. In the event there shall be a taking of
the parking area such that Landlord can no longer provide sufficient parking to
comply with this Lease, Landlord may substitute reasonably equivalent parking in
a location reasonably close to the Building; provided that if Landlord fails to
make that substitution within thirty (30) days following the taking and if the
taking materially impairs Tenant’s use and enjoyment of the Premises, Tenant
may, at its option, terminate this Lease by written notice to Landlord. If this
Lease is not so terminated by Tenant, there shall be no abatement of rent and
this Lease shall continue in effect.

 

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ARTICLE XIII. SUBORDINATION; ESTOPPEL CERTIFICATE; FINANCIALS

 

SECTION 13.1. SUBORDINATION. At the option of Landlord or any lender of
Landlord’s that obtains a security interest in the Building, this Lease shall be
either superior or subordinate to all ground or underlying leases, mortgages and
deeds of trust, if any, which may hereafter affect the Building, and to all
renewals, modifications, consolidations, replacements and extensions thereof;
provided, that so long as no Event of Default occurs under this Lease, Tenant’s
possession and quiet enjoyment of the Premises shall not be disturbed and this
Lease shall not terminate in the event of termination of any such ground or
underlying lease, or the foreclosure of any such mortgage or deed of trust, to
which this Lease has been subordinated pursuant to this Section. Tenant shall
execute and deliver any commercially reasonable documents or agreements
requested by Landlord or such lessor or lender which provide Tenant with the
non-disturbance protections set forth in this Section. In the event of a
termination or foreclosure, Tenant shall become a tenant of and attorn to the
successor-in-interest to Landlord upon the same terms and conditions as are
contained in this Lease, and shall execute any commercially reasonable
instrument required by Landlord’s successor for that purpose. Tenant shall also,
upon written request of Landlord, execute and deliver all commercially
reasonable instruments as may be required from time to time to subordinate the
rights of Tenant under this Lease to any ground or underlying lease or to the
lien of any mortgage or deed of trust (provided that such instruments include
the nondisturbance and attornment provisions set forth above), or, if requested
by Landlord, to subordinate, in whole or in part, any ground or underlying lease
or the lien of any mortgage or deed of trust to this Lease. Tenant agrees that
any purchaser at a foreclosure sale or lender taking title under a deed-in-lieu
of foreclosure shall not be responsible for any act or omission of a prior
landlord, shall not be subject to any offsets or defenses Tenant may have
against a prior landlord, and shall not be liable for the return of the security
deposit to the extent it is not actually received by such purchaser or bound by
any rent paid for more than the current month in which the foreclosure occurred.
Landlord hereby represents to Tenant that, as of the date of this Lease, no
ground or underlying lease, mortgage or deed of trust referred to in this
Section 13.1 encumbers the Premises and/or the Building.

 

SECTION 13.2. ESTOPPEL CERTIFICATE.

 

(a) Tenant shall, at any time upon not less than twenty (20) days prior written
notice from Landlord, execute, acknowledge and deliver to Landlord, in any form
that Landlord may reasonably require, a statement in writing (i) certifying that
this Lease is unmodified and in full force and effect (or, if modified, stating
the nature of the modification and certifying that this Lease, as modified, is
in full force and effect) and the dates to which the rental, additional rent and
other charges have been paid in advance, if any, and (ii) acknowledging that, to
Tenant’s knowledge, there are no uncured defaults on the part of Landlord, or
specifying each default if any are claimed, and (iii) setting forth all further
information that Landlord or any purchaser or encumbrancer may reasonably
require. Tenant’s statement may be relied upon by any prospective purchaser or
encumbrancer of all or any portion of the Building or Project.

 

(b) Notwithstanding any other rights and remedies of Landlord, Tenant’s failure
to deliver any estoppel statement within the provided time shall be conclusive
upon Tenant that (i) this Lease is in full force and effect, without
modification except as may be represented by Landlord, (ii) to Tenant’s
knowledge, there are no uncured Events of Default in Landlord’s performance, and
(iii) not more than one month’s rental has been paid in advance.

 

SECTION 13.3. FINANCIALS.

 

(a) Tenant shall deliver to Landlord, prior to the execution of this Lease and
thereafter at any time upon Landlord’s request (but not more frequently than
once in any calendar year), Tenant’s current tax returns and financial
statements, certified true, accurate and complete by the chief financial officer
of Tenant, including a balance sheet and profit and loss statement for the most
recent prior year, or, in the event Tenant is a publicly traded corporation on a
nationally recognized stock exchange, Tenant’s current financial reports filed
with the Securities and Exchange Commission (collectively, the “Statements”),
which Statements shall accurately and completely reflect the financial condition
of Tenant. Landlord agrees that it will keep the Statements confidential, except
that Landlord shall have the right to deliver the same to any proposed purchaser
of the Building or Project, and to any encumbrancer of all or any portion of the
Building or Project; provided any such purchaser agrees to keep such Statements
confidential.

 

(b) Tenant acknowledges that Landlord is relying on the Statements in its
determination to enter into this Lease, and Tenant represents to Landlord, which
representation shall be deemed made on the date of this Lease and again on the
Commencement Date, that no material adverse change in the financial condition of
Tenant, as reflected in the Statements, has occurred since the date Tenant
delivered the Statements to Landlord. The Statements are represented and
warranted by Tenant to be materially correct and to accurately and fully reflect
Tenant’s true financial condition in all material respects as of the date of
submission by any Statements to Landlord.

 

ARTICLE XIV. EVENTS OF DEFAULT AND REMEDIES

 

SECTION 14.1. TENANT’S DEFAULTS. In addition to any other breaches of this Lease
which are defined as Events of Default in this Lease, the occurrence of any one
or more of the following events shall constitute an Event of Default by Tenant:

 

(a) The failure by Tenant to make any payment of Basic Rent or additional rent
required to be made by Tenant, as and when due, where the failure continues for
a period of five (5) days after written notice from

 

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Landlord to Tenant; provided, however, that any such notice shall be in lieu of,
and not in addition to, any notice required under California Code of Civil
Procedure Section 1161 and 1161(a) as amended. For purposes of these Events of
Default and remedies provisions, the term “additional rent” shall be deemed to
include all amounts of any type whatsoever other than Basic Rent to be paid by
Tenant pursuant to the terms of this Lease.

 

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

 

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

 

(d) The failure of Tenant to timely and fully provide any subordination
agreement, estoppel certificate or financial statements in accordance with the
requirements of Article XIII.

 

(e) The abandonment of the Premises by Tenant.

 

(f) The failure or inability by Tenant to observe or perform any of the express
or implied covenants or provisions of this Lease to be observed or performed by
Tenant, other than as specified in this Section 14.1, where the failure
continues for a period of thirty (30) days after written notice from Landlord to
Tenant or such shorter period as is specified in any other provision of this
Lease; provided, however, that any such notice shall be in lieu of, and not in
addition to, any notice required under California Code of Civil Procedure
Section 1161 and 1161(a) as amended. However, if the nature of the failure is
such that more than thirty (30) days are reasonably required for its cure, then
Tenant shall not be deemed to have committed an Event of Default if Tenant
commences the cure within thirty (30) days, and thereafter diligently pursues
the cure to completion.

 

(g) (i) The making by Tenant of any general assignment for the benefit of
creditors; (ii) the filing by or against Tenant of a petition to have Tenant
adjudged a Chapter 7 debtor under the Bankruptcy Code or to have debts
discharged or a petition for reorganization or arrangement under any law
relating to bankruptcy (unless, in the case of a petition filed against Tenant,
the same is dismissed within thirty (30) days); (iii) the appointment of a
trustee or receiver to take possession of substantially all of Tenant’s assets
located at the Premises or of Tenant’s interest in this Lease, if possession is
not restored to Tenant within thirty (30) days; (iv) the attachment, execution
or other judicial seizure of substantially all of Tenant’s assets located at the
Premises or of Tenant’s interest in this Lease, where the seizure is not
discharged within thirty (30) days; (v) Tenant’s convening of a meeting of its
creditors for the purpose of effecting a moratorium upon or composition of its
debts or (vi) the failure of Tenant to pay its material obligations to creditors
as and when they become due and payable, other than as a result of a good faith
dispute by Tenant as to the amount due to such creditors. Landlord shall not be
deemed to have knowledge of any event described in this Section 14.1(g) unless
notification in writing is received by Landlord, nor shall there be any
presumption attributable to Landlord of Tenant’s insolvency. In the event that
any provision of this Section 14.l(g) is contrary to applicable law, the
provision shall be of no force or effect.

 

SECTION 14.2. LANDLORD’S REMEDIES.

 

(a) If an Event of Default by Tenant occurs, then in addition to any other
remedies available to Landlord, Landlord may exercise the following remedies:

 

(i) Landlord may terminate Tenant’s right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Tenant shall
immediately surrender possession of the Premises to Landlord. Such termination
shall not affect any accrued obligations of Tenant under this Lease. Upon
termination, Landlord shall have the right to reenter the Premises and remove
all persons and property. Landlord shall also be entitled to recover from
Tenant:

 

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

 

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

 

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

 

(4) Any other amount necessary to compensate Landlord for all the detriment
proximately caused by Tenant’s failure to perform its obligations under this
Lease or which in the ordinary course of things would be likely to result from
Tenant’s Event of Default, including, but not limited to, the cost of recovering
possession of the Premises, refurbishment of the Premises, marketing costs,
commissions and other expenses of reletting, including necessary repair, the
unamortized portion of any tenant improvements and brokerage commissions funded
by Landlord in connection with this Lease, reasonable attorneys’ fees, and any
other reasonable costs; and

 

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(5) At Landlord’s election, all other amounts in addition to or in lieu of the
foregoing as may be permitted by law. The term “rent” as used in the Lease shall
be deemed to mean the Basic Rent, Tenant’s Share of Operating Expenses and any
other sums required to be paid by Tenant to Landlord pursuant to the terms of
this Lease, including, without limitation, any sums that may be owing from
Tenant pursuant to Section 4.3 of this Lease. Any sum, other than Basic Rent,
shall be computed on the basis of the average monthly amount accruing during the
twenty-four (24) month period immediately prior to the Event of Default, except
that if it becomes necessary to compute such rental before the twenty-four
(24) month period has occurred, then the computation shall be on the basis of
the average monthly amount during the shorter period. As used in Sections
14.2(a)(i) (1) and (2) above, the “worth at the time of award” shall be computed
by allowing interest at the rate of ten percent (10%) per annum. As used in
Section 14.2(a)(i)(3) above, the “worth at the time of award” shall be computed
by discounting the amount at the discount rate of the Federal Reserve Bank of
San Francisco at the time of award plus one percent (1%).

 

(ii) Landlord may elect not to terminate Tenant’s right to possession of the
Premises, in which event Landlord may continue to enforce all of its rights and
remedies under this Lease, including the right to collect all rent as it becomes
due. Efforts by the Landlord to maintain, preserve or relet the Premises, or the
appointment of a receiver to protect the Landlord’s interests under this Lease,
shall not constitute a termination of the Tenant’s right to possession of the
Premises. In the event that Landlord elects to avail itself of the remedy
provided by this Section 14.2(a)(ii), Landlord shall not unreasonably withhold
its consent to an assignment or subletting of the Premises subject to the
reasonable standards for Landlord’s consent as are contained in this Lease.

 

(b) Landlord shall be under no obligation to observe or perform any covenant of
this Lease on its part to be observed or performed which accrues after the date
of any Event of Default by Tenant unless and until the Event of Default is cured
by Tenant, it being understood and agreed that the performance by Landlord of
its obligations under this Lease are expressly conditioned upon Tenant’s full
and timely performance of its obligations under this Lease. The various rights
and remedies reserved to Landlord in this Lease or otherwise shall be cumulative
and, except as otherwise provided by California law, Landlord may pursue any or
all of its rights and remedies at the same time.

 

(c) No delay or omission of Landlord to exercise any right or remedy shall be
construed as a waiver of the right or remedy or of any breach or Event of
Default by Tenant. The acceptance by Landlord of rent shall not be a (i) waiver
of any preceding breach or Event of Default by Tenant of any provision of this
Lease, other than the failure of Tenant to pay the particular rent accepted,
regardless of Landlord’s knowledge of the preceding breach or Event of Default
at the time of acceptance of rent, or (ii) a waiver of Landlord’s right to
exercise any remedy available to Landlord by virtue of the breach or Event of
Default. The acceptance of any payment from a debtor in possession, a trustee, a
receiver or any other person acting on behalf of Tenant or Tenant’s estate shall
not waive or cure a breach or Event of Default under Section 14.1. No payment by
Tenant or receipt by Landlord of a lesser amount than the rent required by this
Lease shall be deemed to be other than a partial payment on account of the
earliest due stipulated rent, nor shall any endorsement or statement on any
check or letter be deemed an accord and satisfaction and Landlord shall accept
the check or payment without prejudice to Landlord’s right to recover the
balance of the rent or pursue any other remedy available to it. No act or thing
done by Landlord or Landlord’s agents during the Term shall be deemed an
acceptance of a surrender of the Premises, and no agreement to accept a
surrender shall be valid unless in writing and signed by Landlord. No employee
of Landlord or of Landlord’s agents shall have any power to accept the keys to
the Premises prior to the termination of this Lease, and the delivery of the
keys to any employee shall not operate as a termination of this Lease or a
surrender of the Premises.

 

(d) Any agreement for free or abated rent or other charges, or for the giving or
paying by Landlord to or for Tenant of any cash or other bonus, inducement or
consideration for Tenant’s entering into this Lease (“Inducement Provisions”)
shall be deemed conditioned upon Tenant’s full and faithful performance of the
terms, covenants and conditions of this Lease. Upon an Event of Default under
this Lease by Tenant, any such Inducement Provisions shall automatically be
deemed deleted from this Lease and of no further force or effect and the amount
of any rent reduction or abatement or other bonus or consideration already given
by Landlord or received by Tenant as an Inducement shall be immediately due and
payable by Tenant to Landlord, notwithstanding any subsequent cure of said Event
of Default by Tenant. The acceptance by Landlord of rent or the cure of the
Event of Default which initiated the operation of this Section 14.1 shall not be
deemed a waiver by Landlord of the provisions of this Section 14.2(d).

 

SECTION 14.3. LATE PAYMENTS.

 

(a) Any payment due to Landlord under this Lease, including without limitation
Basic Rent, Tenant’s Share of Operating Expenses or any other payment due to
Landlord under this Lease, that is not received by Landlord within ten (10) days
following the date due shall bear interest at the maximum rate permitted by law
from the date due until fully paid. The payment of interest shall not cure any
breach or Event of Default by Tenant under this Lease. In addition, Tenant
acknowledges that the late payment by Tenant to Landlord of Basic Rent and
Tenant’s Share of Operating Expenses will cause Landlord to incur costs not
contemplated by this Lease, the exact amount of which will be extremely
difficult and impracticable to ascertain. Those costs may include, but are not
limited to, administrative, processing and accounting charges, and late charges
which may be imposed on Landlord by the terms of any ground lease, mortgage or
trust deed covering the Premises. Accordingly, if any Basic Rent or Tenant’s
Share of Operating Expenses due from Tenant shall not be received by Landlord or
Landlord’s designee within ten (10) days following the date due, then Tenant
shall pay to Landlord, in addition to the interest provided above, a late
charge, which the Tenant agrees is reasonable, in a sum equal to the greater of
five percent (5%) of the amount overdue or Two Hundred Fifty Dollars ($250.00)
for each delinquent payment; provided that the late charge

 

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shall be waived for the initial late payment by Tenant. Acceptance of a late
charge by Landlord shall not constitute a waiver of Tenant’s breach or Event of
Default with respect to the overdue amount, nor shall it prevent Landlord from
exercising any of its other rights and remedies. The parties agree that, as used
herein and in Section 7.4, the “maximum rate permitted by law” shall mean ten
percent (10%) per annum.

 

(b) Following each second installment of Basic Rent and/or the payment of
Tenant’s Share of Operating Expenses within any twelve (12) month period that is
not paid within ten (10) days following the date due, Landlord shall have the
option to require that beginning with the first payment of Basic Rent next due,
Basic Rent and the Tenant’s Share of Operating Expenses shall no longer be paid
in monthly installments but shall be payable quarterly three (3) months in
advance. Should Tenant deliver to Landlord, at any time during the Term, two
(2) or more insufficient checks, the Landlord may require that all monies then
and thereafter due from Tenant be paid to Landlord by cashier’s check. If any
check for any payment to Landlord hereunder is returned by the bank for any
reason, such payment shall not be deemed to have been received by Landlord and
Tenant shall be responsible for any applicable late charge, interest payment and
the charge to Landlord by its bank for such returned check. Nothing in this
Section shall be construed to compel Landlord to accept Basic Rent, Tenant’s
Share of Operating Expenses or any other payment from Tenant if there exists an
Event of Default unless such payment fully cures any and all such Event of
Default. Any acceptance of any such payment shall not be deemed to waive any
other right of Landlord under this Lease. Any payment by Tenant to Landlord may
be applied by Landlord, in its sole and absolute discretion, in any order
determined by Landlord to any amounts then due to Landlord.

 

SECTION 14.4. RIGHT OF LANDLORD TO PERFORM. All covenants and agreements to be
performed by Tenant under this Lease shall be performed at Tenant’s sole cost
and expense and without any abatement of rent or right of set-off. If Tenant
fails to pay any sum of money, other than rent payable to Landlord, or fails to
perform any other act on its part to be performed under this Lease, and the
failure continues beyond any applicable grace period set forth in Section 14.1,
then in addition to any other available remedies, Landlord may, at its election
make the payment or perform the other act on Tenant’s part and Tenant hereby
grants Landlord the right to enter onto the Premises upon at least 24 hours
prior notice to Tenant and during normal business hours (except in cases of
emergency when no notice shall be required) in order to carry out such
performance. Landlord’s election to make the payment or perform the act on
Tenant’s part shall not give rise to any responsibility of Landlord to continue
making the same or similar payments or performing the same or similar acts nor
shall Landlord be responsible to Tenant for any damage caused to Tenant as the
result of such performance by Landlord. Tenant shall, promptly upon demand by
Landlord, reimburse Landlord for all sums paid by Landlord and all necessary
incidental costs, together with interest at the maximum rate permitted by law
from the date of the payment by Landlord.

 

SECTION 14.5. DEFAULT BY LANDLORD. Landlord shall not be deemed to be in default
in the performance of any obligation under this Lease, and Tenant shall have no
rights to take any action against Landlord, unless and until Landlord has failed
to perform the obligation within thirty (30) days after written notice by Tenant
to Landlord specifying in reasonable detail the nature and extent of the
failure; provided, however, that if the nature of Landlord’s obligation is such
that more than thirty (30) days are required for its performance, then Landlord
shall not be deemed to be in default if it commences performance within the
thirty (30) day period and thereafter diligently pursues the cure to completion.
In the event of Landlord’s default under this Lease, Tenant’s sole remedies
shall be to seek damages or specific performance from Landlord, provided that
any damages shall be limited to Tenant’s actual out-of-pocket expenses and shall
in no event include any consequential damages, lost profits or opportunity
costs.

 

SECTION 14.6. EXPENSES AND LEGAL FEES. All sums reasonably incurred by Landlord
in connection with any Event of Default by Tenant under this Lease or holding
over of possession by Tenant after the expiration or earlier termination of this
Lease, or any action related to a filing for bankruptcy or reorganization by
Tenant, including without limitation all costs, expenses and actual accountants,
appraisers, attorneys and other professional fees, and any collection agency or
other collection charges, shall be due and payable to Landlord on demand, and
shall bear interest at the rate of ten percent (10%) per annum. Should either
Landlord or Tenant bring any action in connection with this Lease, the
prevailing party shall be entitled to recover as a part of the action its
reasonable attorneys’ fees, and all other costs. The prevailing party for the
purpose of this Section shall be determined by the trier of the facts.

 

SECTION 14.7. WAIVER OF JURY TRIAL. LANDLORD AND TENANT EACH ACKNOWLEDGES THAT
IT IS AWARE OF AND HAS HAD THE ADVICE OF COUNSEL OF ITS CHOICE WITH RESPECT TO
ITS RIGHTS TO TRIAL BY JURY, AND EACH PARTY DOES HEREBY EXPRESSLY AND KNOWINGLY
WAIVE AND RELEASE ALL SUCH RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BROUGHT BY EITHER PARTY HERETO AGAINST THE OTHER (AND/OR AGAINST
ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, OR SUBSIDIARY OR AFFILIATED
ENTITIES) ON ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH
THIS LEASE, TENANT’S USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM OF
INJURY OR DAMAGE. FURTHERMORE, THIS WAIVER AND RELEASE OF ALL RIGHTS TO A JURY
TRIAL IS DEEMED TO BE INDEPENDENT OF EACH AND EVERY OTHER PROVISION, COVENANT,
AND/OR CONDITION SET FORTH IN THIS LEASE.

 

SECTION 14.8. SATISFACTION OF JUDGMENT. The obligations of Landlord do not
constitute the personal obligations of the individual partners, trustees,
directors, officers or shareholders of Landlord or its constituent partners.
Should Tenant recover a money judgment against Landlord, such judgment shall be
satisfied only from the interest of Landlord in the Project and out of the rent
or other income from such property receivable by Landlord or out of
consideration received by Landlord from the sale or other disposition of all or
any part of

 

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Landlord’s right, title or interest in the Project and no action for any
deficiency may be sought or obtained by Tenant.

 

SECTION 14.9. LIMITATION OF ACTIONS AGAINST LANDLORD. Any claim, demand or right
of any kind by Tenant which is based upon or arises in connection with this
Lease, including without limitation any arising under a tort or contract cause
of action, shall be barred unless Tenant commences an action thereon within
twelve (12) months after the date that the act, omission, event or default upon
which the claim, demand or right arises, has occurred.

 

ARTICLE XV. END OF TERM

 

SECTION 15.1. HOLDING OVER. This Lease shall terminate without further notice
upon the expiration of the Term, and any holding over by Tenant after the
expiration shall not constitute a renewal or extension of this Lease, or give
Tenant any rights under this Lease, except when in writing signed by both
parties. Any period of time following the Expiration Date or earlier termination
of this Lease required for Tenant to remove its property or to place the
Premises in the condition required pursuant to Section 15.3 (or for Landlord to
do so if Tenant fails to do so) shall be deemed a holding over by Tenant. If
Tenant holds over for any period after the Expiration Date (or earlier
termination) of the Term without the prior written consent of Landlord, such
possession shall constitute a tenancy at sufferance only and an Event of Default
under this Lease; such holding over with the prior written consent of Landlord
shall constitute a month-to-month tenancy commencing on the first (1st) day
following the termination of this Lease and terminating thirty (30) days
following delivery of written notice of termination by either Landlord or Tenant
to the other. In either of such events, possession shall be subject to all of
the terms of this Lease, except that the monthly Basic Rent shall be the greater
of: (a) one hundred fifty percent (150%) of the Basic Rent for the month
immediately preceding the date of termination, or (b) the then currently
scheduled Basic Rent for comparable space in the Project. The acceptance by
Landlord of monthly holdover rental in a lesser amount shall not constitute a
waiver of Landlord’s right to recover the full amount due for any holdover by
Tenant, unless otherwise agreed in writing by Landlord. If Tenant fails to
surrender the Premises upon the expiration of this Lease despite demand to do so
by Landlord, Tenant shall indemnify and hold Landlord harmless from all loss or
liability, including without limitation, any claims made by any succeeding
tenant relating to such failure to surrender, provided Landlord has given
written notice to Tenant of such succeeding tenant. The foregoing provisions of
this Section are in addition to and do not affect Landlord’s right of re-entry
or any other rights of Landlord under this Lease or at law.

 

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

 

SECTION 15.3. SURRENDER OF PREMISES; REMOVAL OF PROPERTY. Subject to the
provisions of 7.3 of this Lease, upon the Expiration Date or upon any earlier
termination of this Lease, Tenant shall quit and surrender possession of the
Premises to Landlord in as good order, condition and repair as when received or
as hereafter may be improved by Landlord or Tenant, reasonable wear and tear,
casualty damage and repairs which are Landlord’s obligation excepted, and shall,
without expense to Landlord, remove or cause to be removed from the Premises all
personal property and debris, except for any items that Landlord may by written
authorization allow to remain. Tenant shall repair all damage to the Premises
resulting from the removal, which repair shall include the patching and filling
of holes and repair of structural damage, provided that Landlord may instead
elect to repair any structural damage at Tenant’s expense. If Tenant shall fail
to comply with the provisions of this Section, Landlord may effect the removal
and/or make any repairs, and the cost to Landlord shall be additional rent
payable by Tenant upon demand. If Tenant fails to remove Tenant’s personal
property from the Premises upon the expiration of the Term, Landlord may remove,
store, dispose of and/or retain such personal property, at Landlord’s option, in
accordance with then applicable laws, all at the expense of Tenant. If requested
by Landlord, Tenant shall execute, acknowledge and deliver to Landlord an
instrument in writing releasing and quitclaiming to Landlord all right, title
and interest of Tenant in the Premises.

 

ARTICLE XVI. PAYMENTS AND NOTICES

 

All sums payable by Tenant to Landlord shall be deemed to be rent under this
Lease and shall be paid, without deduction or offset (except as expressly
provided in this Lease), in lawful money of the United States to Landlord at its
address set forth in Item 12 of the Basic Lease Provisions, or at any other
place as Landlord may designate in writing. Unless this Lease expressly provides
otherwise, as for example in the payment of Basic Rent and the Tenant’s Share of
Operating Costs pursuant to Sections 4.1 and 4.2, all payments shall be due and
payable within five (5) days after demand. All payments requiring proration
shall be prorated on the basis of a thirty (30) day month and a three hundred
sixty (360) day year. Any notice, election, demand, consent, approval or other
communication to be given or other document to be delivered by either party to
the other may be delivered in person or by courier or overnight delivery service
to the other party, or may be deposited in the United States mail, duly
registered or certified, postage prepaid, return receipt requested, and
addressed to the other party at the address set forth in Item 12 of the Basic
Lease Provisions, or if to Tenant, at that address or, from and after the Early
Occupancy Date, at the Premises (whether or not Tenant has departed from,
abandoned or vacated the Premises). Either party may, by written notice to the
other, served in the manner provided in this Article, designate a different
address. If any notice or other document is sent by mail, it shall be deemed
served or delivered seventy-two (72) hours after mailing. If more than one
person or entity is named as Tenant under this Lease, service of any notice upon
any one of them shall be deemed as service upon all of them.

 

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ARTICLE XVII. RULES AND REGULATIONS

 

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

 

ARTICLE XVIII. BROKER’S COMMISSION

 

The parties recognize as the broker(s) who negotiated this Lease the firm(s), if
any, whose name(s) is (are) stated in Item 10 of the Basic Lease Provisions, and
agree that Landlord shall be responsible for the payment of brokerage
commissions to those broker(s) unless otherwise provided in this Lease. Each
party warrants to the other party that it has had no dealings with any other
real estate broker or agent in connection with the negotiation of this Lease,
and each party agrees to indemnify and hold the other party harmless from any
cost, expense or liability (including reasonable attorneys’ fees) for any
compensation, commissions or charges claimed by any other real estate broker or
agent employed or claiming to represent or to have been employed by the
indemnifying party in connection with the negotiation of this Lease. The
foregoing agreement shall survive the termination of this Lease. If Tenant fails
to take possession of the Premises or if this Lease otherwise terminates prior
to the Expiration Date as the result of failure of performance by Tenant,
Landlord shall be entitled to recover from Tenant the unamortized portion of any
brokerage commission funded by Landlord in addition to any other damages to
which Landlord may be entitled.

 

ARTICLE XIX. TRANSFER OF LANDLORD’S INTEREST

 

In the event of any transfer of Landlord’s interest in the Premises, provided
the transferee has expressly assumed in writing all obligations of Landlord
under this Lease accruing from and after the effective date of such transfer,
the transferor shall be automatically relieved of all further obligations on the
part of Landlord, and the transferor shall be relieved of any obligation to pay
any funds in which Tenant has an interest to the extent that such funds have
been turned over, subject to that interest, to the transferee and Tenant is
notified of the transfer as required by law . No beneficiary of a deed of trust
to which this Lease is or may be subordinate, and no landlord under a so-called
sale-leaseback, shall be responsible in connection with the Security Deposit,
unless the mortgagee or beneficiary under the deed of trust or the landlord
actually receives the Security Deposit. It is intended that the covenants and
obligations contained in this Lease on the part of Landlord shall, subject to
the foregoing, be binding on Landlord, its successors and assigns, only during
and in respect to their respective successive periods of ownership.

 

ARTICLE XX. INTERPRETATION

 

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

 

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

 

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

 

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

 

SECTION 20.5. TIME OF ESSENCE. Time is of the essence with respect to the
performance of every provision of this Lease.

 

SECTION 20.6. CONTROLLING LAW/VENUE. This Lease shall be governed by and
interpreted in accordance with the laws of the State of California. Any
litigation commenced concerning any matters whatsoever arising out of or in any
way connected to this Lease shall be initiated in the Superior Court of the
county in which the Project is located.

 

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

 

27

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be affected and each term and provision of this Lease shall be valid and
enforceable to the fullest extent permitted by law.

 

SECTION 20.8. WAIVER AND CUMULATIVE REMEDIES. One or more waivers by Landlord or
Tenant of any breach of any term, covenant or condition contained in this Lease
shall not be a waiver of any subsequent breach of the same or any other term,
covenant or condition. Consent to any act by one of the parties shall not be
deemed to render unnecessary the obtaining of that party’s consent to any
subsequent act. No breach by Tenant of this Lease shall be deemed to have been
waived by Landlord unless the waiver is in a writing signed by Landlord. The
rights and remedies of Landlord under this Lease shall be cumulative and in
addition to any and all other rights and remedies which Landlord may have.

 

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

 

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

 

SECTION 20.11. QUIET ENJOYMENT. Upon the observance and performance of all the
covenants, terms and conditions on Tenant’s part to be observed and performed,
and subject to the other provisions of this Lease, Tenant shall have the right
of quiet enjoyment and use of the Premises for the Term without hindrance or
interruption by Landlord or any other person claiming by or through Landlord.
The foregoing express covenant shall be in addition to and not in derogation of
any implied or other rights of quiet enjoyment Tenant may have under applicable
law.

 

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

 

SECTION 20.13. INTERPRETATION. This Lease shall not be construed in favor of or
against either party, but shall be construed as if both parties prepared this
Lease.

 

ARTICLE XXI. EXECUTION AND RECORDING

 

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

 

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

 

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

 

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

 

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

 

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SECTION 21.6. EXECUTED COPY. Any fully executed photocopy or similar
reproduction of this Lease shall be deemed an original for all purposes.

 

SECTION 21.7. ATTACHMENTS. All exhibits, amendments, riders and addenda attached
to this Lease are hereby incorporated into and made a part of this Lease.

 

ARTICLE XXII. MISCELLANEOUS

 

SECTION 22.1. NONDISCLOSURE OF LEASE TERMS. Tenant acknowledges and agrees that
the terms of this Lease are confidential and constitute proprietary information
of Landlord. Disclosure of the terms could adversely affect the ability of
Landlord to negotiate other leases and impair Landlord’s relationship with other
tenants. Accordingly, Tenant agrees that it, and its partners, officers,
directors, employees and attorneys, shall not intentionally and voluntarily
disclose, by public filings or otherwise, the terms and conditions of this Lease
(“Confidential Information”) to any third party, either directly or indirectly,
without the prior written consent of Landlord, which consent may be given or
withheld in Landlord’s sole and absolute discretion. The foregoing restriction
shall not apply if either: (i) Tenant is required to disclose the Confidential
Information in response to a subpoena or other regulatory, administrative or
court order, (ii) independent legal counsel to Tenant delivers a written opinion
to Landlord that Tenant is required to disclose the Confidential Information to,
or file a copy of this Lease with, any governmental agency or any stock
exchange; provided however, that in such event, Tenant shall, before making any
such disclosure (A) provide Landlord with prompt written notice of such required
disclosure, (B) at Tenant’s sole cost, take all reasonable legally available
steps to resist or narrow such requirement, including without limitation
preparing and filing a request for confidential treatment of the Confidential
Information and (C) if disclosure of the Confidential Information is required by
subpoena or other regulatory, administrative or court order, Tenant shall
provide Landlord with as much advance notice of the possibility of such
disclosure as practical so that Landlord may attempt to stop such disclosure or
obtain an order concerning such disclosure. The form and content of a request by
Tenant for confidential treatment of the Confidential Information shall be
provided to Landlord at least five (5) business days before its submission to
the applicable governmental agency or stock exchange and is subject to the prior
written approval of Landlord. In addition, Tenant may disclose the terms of this
Lease to prospective assignees of this Lease and prospective subtenants under
this Lease with whom Tenant is actively negotiating such an assignment or
sublease.

 

SECTION 22.2. GUARANTY. As a condition to the execution of this Lease by
Landlord, the obligations, covenants and performance of the Tenant as herein
provided shall be guaranteed in writing by the Guarantor(s) listed in Item 7 of
the Basic Lease Provisions (“Guarantor”), if any, on a form of guaranty provided
by Landlord (“Guaranty”). Any default by a Guarantor under the Guaranty shall be
deemed to be an Event of Default under the terms of this Lease. In addition, any
filing by or against a Guarantor of a petition to have such Guarantor adjudged a
Chapter 7 debtor under the Bankruptcy Code or to have debts discharged or a
petition for reorganization or arrangement under any law relating to bankruptcy
(unless, in the case of a petition filed against such Guarantor, the same is
dismissed within thirty (30) days), a Guarantor’s convening of a meeting of its
creditors for the purpose of effecting a moratorium upon or composition of its
debts or the failure of a Guarantor to pay its material obligations to creditors
as and when they become due and payable, other than as a result of a good faith
dispute by such Guarantor, shall be deemed to be an Event of Default by Tenant.

 

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

 

SECTION 22.4. MORTGAGEE PROTECTION. No act or failure to act on the part of
Landlord which would otherwise entitle Tenant to be relieved of its obligations
hereunder shall result in such a release or termination unless (a) Tenant has
given notice by registered or certified mail to any beneficiary of a deed of
trust or mortgage covering the Building whose address has been furnished to
Tenant and (b) such beneficiary is afforded a reasonable opportunity to cure the
default by Landlord (which in no event shall be less than sixty (60) days),
including, if necessary to effect the cure, time to obtain possession of the
Building by power of sale or judicial foreclosure provided that such foreclosure
remedy is diligently pursued. Tenant agrees that each beneficiary of a deed of
trust or mortgage covering the Building is an express third party beneficiary
hereof, Tenant shall have no right or claim for the collection of any deposit
from such beneficiary or from any purchaser at a foreclosure sale unless such
beneficiary or purchaser shall have actually received and not refunded the
deposit, and Tenant shall comply with any written directions by any beneficiary
to pay rent due hereunder directly to such beneficiary without determining
whether a default exists under such beneficiary’s deed of trust.

 

SECTION 22.5. COVENANTS AND CONDITIONS. All of the provisions of this Lease
shall be construed to be conditions as well as covenants as though the words
specifically expressing or imparting covenants and conditions were used in each
separate provision.

 

SECTION 22.6. SECURITY MEASURES. Tenant hereby acknowledges that Landlord shall
have no obligation whatsoever to provide guard service or other security
measures for the benefit of the Premises or the Project. Tenant assumes all
responsibility for the protection of Tenant, its employees, agents, invitees and
property from acts of third parties. Nothing herein contained shall prevent
Landlord, at its sole option, from providing security protection for the Project
or any part thereof, in which event the cost thereof shall be included within
the definition of Project Costs.

 

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LANDLORD:       TENANT:     THE IRVINE COMPANY      

MICRO THERAPEUTICS, INC.,

a Delaware corporation

By:   /s/ Clarence W. Barker       By:       /s/ Thomas C. Wilder III    
Clarence W. Barker           Name (Print):   Thomas C. Wilder III     Executive
Vice President           Title (Print):   President & CEO By:   /s/ E. Valiean
Wheeler       By:       /s/ Bruce Feuchter     E. Valiean Wheeler          
Name:   Bruce Feuchter     Executive Vice President, Asset Management          
Title:   Secretary

 

LOGO [g67237image004.jpg]

 

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LOGO [g67237image001.jpg]

 

Bake Tech I

9775 Toledo

 

LOGO [g67237image002.jpg]

 

Exhibit A

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EXHIBIT B

 

THE IRVINE COMPANY – INVESTMENT PROPERTIES GROUP

 

HAZARDOUS MATERIAL SURVEY FORM

 

The purpose of this form is to obtain information regarding the use of hazardous
substances on Investment Properties Group (“IPG”) property. Prospective tenants
and contractors should answer the questions in light of their proposed
activities on the premises. Existing tenants and contractors should answer the
questions as they relate to ongoing activities on the premises and should update
any information previously submitted.

 

If additional space is needed to answer the questions, you may attach separate
sheets of paper to this form. When completed, the form should be sent to the
following address:

 

THE IRVINE COMPANY MANAGEMENT OFFICE

8105 Irvine Center Drive, Suite 350

Irvine, CA 92618

 

Your cooperation in this matter is appreciated. If you have any questions,
please call your property manager at (949) 720-4400 for assistance.

 

1. GENERAL INFORMATION.

 

Name of Responding Company:             Check all that apply:  

Tenant                        ¨

 

Contractor

  ¨    

Prospective                ¨

 

Existing

  ¨

 

Mailing Address:            

 

Contact person & Title:                

Telephone Number: ¨                

Current TIC Tenant(s):                

Address of Lease Premises:                

 

Length of Lease or Contract Term:        

 

Prospective TIC Tenant(s):             Address of Leased Premises:            

 

Address of Current Operations:                               
                                        
                                                              

 

Describe the proposed operations to take place on the property, including
principal products manufactured or services to be conducted. Existing tenants
and contractors should describe any proposed changes to ongoing operations.    
 

 

2. HAZARDOUS MATERIALS. For the purposes of this Survey Form, the term
“hazardous material” means any raw material, product or agent considered
hazardous under any state or federal law. The term does not include wastes which
are intended to be discarded.

 

  2.1 Will any hazardous materials be used or stored on site?

 

Chemical Products

   Yes    ¨    No    ¨

Biological Hazards/ Infectious Wastes

   Yes    ¨    No    ¨

Radioactive Materials

   Yes    ¨    No    ¨

Petroleum Products

   Yes    ¨    No    ¨

 

1

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  2.2 List any hazardous materials to be used or stored, the quantities that
will be on-site at any given time, and the location and method of storage (e.g.,
bottles in storage closet on the premises).

 

Hazardous Materials

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

  

Location and Method
of Storage

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

   Quantity

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

___________________

  

___________________

   ___________________

___________________

  

___________________

   ___________________

___________________

  

___________________

   ___________________

___________________

  

___________________

   ___________________

 

  2.3 Is any underground storage of hazardous materials proposed or currently
conducted on the premises? Yes ¨ No ¨

 

If yes, describe the materials to be stored, and the size and construction of
the tank. Attach copies of any permits obtained for the underground storage of
such substances.

 

                                                                               
                                        
                                        
                                        

                                                                               
                                        
                                        
                                        

                                                                               
                                        
                                        
                                        

 

3. HAZARDOUS WASTE. For the purposes of this Survey Form, the term “hazardous
waste” means any waste (including biological, infectious or radioactive waste)
considered hazardous under any state or federal law, and which is intended to be
discarded.

 

  3.1 List any hazardous waste generated or to be generated on the premises, and
indicate the quantity generated on a monthly basis.

 

Hazardous Materials

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

  

Location and Method
of Storage

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

   Quantity

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

___________________

  

___________________

   ___________________

___________________

  

___________________

   ___________________

___________________

  

___________________

   ___________________

___________________

  

___________________

   ___________________

 

  3.2 Describe the method(s) of disposal (including recycling) for each waste.
Indicate where and how often disposal will take place.

 

Hazardous Materials

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

  

Location and Method
of Storage

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

   Disposal Method

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

___________________

  

___________________

   ___________________

___________________

  

___________________

   ___________________

___________________

  

___________________

   ___________________

___________________

  

___________________

   ___________________

 

  3.3 Is any treatment or processing of hazardous, infectious or radioactive
wastes currently conducted or proposed to be conducted on the premise?

Yes ¨ No ¨

 

If yes, please describe any existing or proposed treatment methods.

 

                                                                               
                                        
                                        
                                        

                                                                               
                                        
                                        
                                        

                                                                               
                                        
                                        
                                        

 

  3.4 Attach copies of any hazardous waste permits or licenses issued to your
company with respect to its operations on the premises.

 

2

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4. SPILLS

 

  4.1 During the past year, have any spills or releases of hazardous materials
occurred on the premises?   Yes ¨   No ¨

 

If so, please describe the spill and attach the results of any testing conducted
to determine the extent of such spills.

                                                                               
                                        
                                        
                                                   

                                                                               
                                        
                                        
                                                   

                                                                               
                                        
                                        
                                                   

 

  4.2 Were any agencies notified in connection with such spills?   Yes ¨   No ¨

 

If so, attach copies of any spill reports or other correspondence with
regulatory agencies.

 

  4.3 Were any clean-up actions undertaken in connection with the spills?   Yes
¨   No ¨

 

If so, briefly describe the actions taken. Attach copies of any clearance
letters obtained from any regulatory agencies involved and the results of any
final soil or groundwater sampling done upon completion of the clean-up work.

                                                                               
                                        
                                        
                                                   

                                                                               
                                        
                                        
                                                   

                                                                               
                                        
                                        
                                                   

 

5. WASTEWATER TREATMENT/DISCHARGE

 

  5.1 Do you discharge industrial wastewater to:

 

            storm dram?                sewer?             surface water?   
            no industrial discharge

 

  5.2 Is your industrial wastewater treated before discharge?   Yes ¨   No ¨

 

If yes, describe the type of treatment conducted.

                                                                               
                                        
                                        
                                                   

                                                                               
                                        
                                        
                                                   

                                                                               
                                        
                                        
                                                   

 

  5.3 Attach copies of any wastewater discharge permits issued to your company
with respect to its operations on the premises.

 

6. AIR DISCHARGES.

 

  6.1 Do you have any air filtration systems or stacks that discharge into the
air?

Yes ¨   No ¨

 

  6.2 Do you operate any equipment that requires air emissions permits?

Yes ¨   No ¨

 

  6.3 Attach copies of any air discharge permits pertaining to these operations.

 

7. HAZARDOUS MATERIALS DISCLOSURES.

 

  7.2 Does your company handle an aggregate of at least 500 pounds, 55 gallons
or 200 cubic feet of hazardous material at any given time?   Yes ¨   No ¨

 

  7.2 Has your company prepared a Hazardous Materials Disclosure – Chemical
Inventory and Business Emergency Plan or similar disclosure document pursuant to
state or county requirements? Yes ¨   No ¨

 

If so, attach a copy.

 

3

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

  7.3 Are any of the chemicals used in your operations regulated under
Proposition 65?

 

If so, describe the procedures followed to comply with these requirements.

 

_________________________________________________________________

_________________________________________________________________

_________________________________________________________________

 

  7.4 Is your company subject to OSHA Hazard Communication Standard
Requirements?   Yes ¨     No   ¨

 

If so, describe the procedures followed to comply with these requirements.

 

_________________________________________________________________

_________________________________________________________________

_________________________________________________________________

 

8. ANIMAL TESTING.

 

  8.1 Does your company bring or intend to bring live animals onto the premises
for research or development purposes?   Yes ¨     No ¨

 

If so, describe the activity.

 

_____________________________________________________________________________

_____________________________________________________________________________

_____________________________________________________________________________

 

  8.2 Does your company bring or intend to bring animal body parts or bodily
fluids onto the premises for research or development purposes?   Yes ¨     No ¨

 

If so, describe the activity.

 

_____________________________________________________________________________

_____________________________________________________________________________

_____________________________________________________________________________

 

9. ENFORCEMENT ACTIONS, COMPLAINTS.

 

  9.1 Has your company ever been subject to any agency enforcement actions,
administrative orders, lawsuits, or consent orders/decrees regarding
environmental compliance or health and safety?  Yes  ¨     No   ¨

 

If so, describe the actions and any continuing obligations imposed as a result
of these actions.

 

_____________________________________________________________________________

_____________________________________________________________________________

_____________________________________________________________________________

 

 

  9.2 Has your company ever received any request for information, notice of
violation or demand letter, complaint, or inquiry regarding environmental
compliance or health and safety? Yes  ¨    No  ¨

 

  9.3 Has an environmental audit ever been conducted which concerned operations
or activities on premises occupied by you? Yes  ¨    No  ¨

 

4

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

  9.4 If you answered “yes” to any questions in this section, describe the
environmental action or complaint and any continuing compliance obligation
imposed as a result of the same.

 

         

 

           

By:        

Name:

       

Title:

       

Date:

   

 

5

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EXHIBIT C

 

LANDLORD’S DISCLOSURES

 

SPECTRUM

 

The capitalized terms used and not otherwise defined in this Exhibit shall have
the same definitions as set forth in the Lease. The provisions of this Exhibit
shall supersede any inconsistent or conflicting provisions of the Lease.

 

1. Landlord has been informed that the El Toro Marine Corps Air Station (MCAS)
has been listed as a Federal Superfund site as a result of chemical releases
occurring over many years of occupancy. Various chemicals including jet fuel,
motor oil and solvents have been discharged in several areas throughout the MCAS
site. A regional study conducted by the Orange County Water District has
estimated that groundwaters beneath more than 2,900 acres have been impacted by
Trichloroethlene (TCE), an industrial solvent. There is a potential that this
substance may have migrated into the ground water underlying the Premises. The
U.S. Environmental Protection Agency, the Santa Ana Region Quality Control
Board, and the Orange County Health Care Agency are overseeing the
investigation/cleanup of this contamination. To the Landlord’s current actual
knowledge, the ground water in this area is used for irrigation purposes only,
and there is no practical impediment to the use or occupancy of the Premises due
to the El Toro discharges.

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

EXHIBIT D

 

TENANT’S INSURANCE

 

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

 

1. Tenant shall, at its sole cost and expense, commencing on the date Tenant is
given access to the Premises for any purpose and during the entire Term,
procure, pay for and keep in full force and effect: (i) commercial general
liability insurance with respect to the Premises and the operations of or on
behalf of Tenant in, on or about the Premises, including but not limited to
coverage for personal injury, independent contractors, broad form property
damage, fire and water legal liability, products liability (if a product is sold
from the Premises), and liquor law liability (if alcoholic beverages are sold,
served or consumed within the Premises), which policy(ies) shall be written on
an “occurrence” basis and for not less than the amount set forth in Item 13 of
the Basic Lease Provisions, with a combined single limit (with a $50,000 minimum
limit on fire legal liability) per occurrence for bodily injury, death, and
property damage liability, or the current limit of liability carried by Tenant,
whichever is greater, and subject to such increases in amounts as Landlord may
determine from time to time; (ii) workers’ compensation insurance coverage as
required by law, together with employers’ liability insurance of at least One
Million Dollars ($1,000,000.00); (iii) with respect to Alterations and the like
required or permitted to be made by Tenant under this Lease, builder’s risk
insurance, in an amount equal to the replacement cost of the work;
(iv) insurance against fire, vandalism, malicious mischief and such other
additional perils as may be included in a standard “special form” policy,
insuring Tenant’s Alterations, trade fixtures, furnishings, equipment and items
of personal property of Tenant located in the Premises, in an amount equal to
not less than ninety percent (90%) of their actual replacement cost (with
replacement cost endorsement); and (v) business interruption insurance in
amounts satisfactory to cover one (1) year of loss. In no event shall the limits
of any policy be considered as limiting the liability of Tenant under this
Lease.

 

2. Tenant shall, at its sole cost and expense, commencing on the date Tenant is
given access to the Premises for any purpose and during the entire Term,
procure, pay for and keep in full force and effect environmental impairment
insurance, with coverage of not less than Two Million Dollars ($2,000,000.00),
insuring (i) any Hazardous Materials shall be removed from the Premises,
(ii) the Premises shall be restored to a clean, healthy, safe and sanitary
condition, and (iii) any liability of Tenant, Landlord and Landlord’s officers,
directors, shareholders, agents, employees and representatives, arising from
such Hazardous Materials. Further, in the event that Landlord shall consent,
subsequent to the date of this Lease, to Tenant’s use, generation or storage of
Hazardous Materials on, under or about the Premises pursuant to Section 5.3 of
this Lease of Hazardous Materials which are different in kind and quantity than
those Hazardous Materials identified on Tenant’s Environmental Questionnaire
delivered to Landlord prior to the date of this Lease, then provided Landlord
reasonably determines that such different Hazardous Materials pose additional
risks and/or burdens to Landlord (or the Premises), Landlord shall have the
right to require Tenant to procure, pay for and keep in full force impairment
insurance with coverage of not less than Five Million Dollars ($5,000,000.00).

 

3. All policies of insurance required to be carried by Tenant pursuant to this
Exhibit D containing a deductible exceeding Ten Thousand Dollars ($10,000.00)
per occurrence must be approved in writing by Landlord prior to the issuance of
such policy. Tenant shall be solely responsible for the payment of all
deductibles.

 

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

 

5. Each policy evidencing insurance required to be carried by Tenant pursuant to
this Exhibit D shall contain the following provisions and/or clauses
satisfactory to Landlord: (i) with respect to Tenant’s commercial general
liability insurance, a provision that the policy and the coverage provided shall
be primary and that any coverage carried by Landlord shall be noncontributory
with respect to any policies carried by Tenant, together with a provision
including Landlord, the Additional Insureds identified in Item 11 of the Basic
Lease Provisions, and any other parties in interest designated by Landlord, as
additional insureds; (ii) except with respect to Tenant’s commercial general
liability insurance, a waiver by the insurer of any right to subrogation against
Landlord, its agents, employees, contractors and representatives which arises or
might arise by reason of any payment under the policy or by reason of any act or
omission of Landlord, its agents, employees, contractors or representatives; and
(iii) a provision that the insurer will not cancel or change the coverage
provided by the policy without first giving Landlord thirty (30) days prior
written notice.

 

1

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

 

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

 

2

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EXHIBIT E

 

RULES AND REGULATIONS

 

This Exhibit sets forth the rules and regulations governing Tenant’s use of the
Premises leased to Tenant pursuant to the terms, covenants and conditions of the
Lease to which this Exhibit is attached and therein made part thereof. In the
event of any conflict or inconsistency between this Exhibit and the Lease, the
Lease shall control.

 

1. Tenant shall not place anything or allow anything to be placed near the glass
of any window, door, partition or wall, which may appear unsightly from outside
the Premises.

 

2. The walls, walkways, sidewalks, entrance passages, elevators, stairwells,
courts and vestibules shall not be obstructed or used for any purpose other than
ingress and egress of pedestrian travel to and from the Premises, and shall not
be used for smoking, loitering or gathering, or to display, store or place any
merchandise, equipment or devices, or for any other purpose. The walkways,
sidewalks, entrance passageways, courts, vestibules and roof are not for the use
of the general public and Landlord shall in all cases retain the right to
control and prevent access thereto by all persons whose presence in the judgment
of the Landlord shall be prejudicial to the safety, character, reputation and
interests of the Building and its tenants, provided that nothing herein
contained shall be construed to prevent such access to persons with whom Tenant
normally deals in the ordinary course of Tenant’s business unless such persons
are engaged in illegal activities. Smoking is permitted outside the building and
within the project only in areas designated by Landlord. No tenant or employee
or invitee or agent of any tenant shall be permitted upon the roof of the
Building without prior written approval from Landlord.

 

3. No awnings or other projection shall be attached to the outside walls of the
Building. No security bars or gates, curtains, blinds, shades or screens shall
be attached to or hung in, or used in connection with, any window or door of the
Premises without the prior written consent of Landlord. Neither the interior nor
exterior of any windows shall be coated or otherwise sunscreened without the
express written consent of Landlord.

 

4. Tenant shall not mark, nail, paint, drill into, or in any way deface any part
of the Premises or the Building except to affix standard pictures or other wall
hangings on the interior walls of the premises so long as they are not visible
from the exterior of the building. Tenant shall not lay linoleum, tile, carpet
or other similar floor covering so that the same shall be affixed to the floor
of the Premises in any manner except as approved by Landlord in writing (such
approval not to be unreasonably withheld, delayed or conditioned). The expense
of repairing any damage resulting from a violation of this rule or removal of
any floor covering shall be borne by Tenant.

 

5. The toilet rooms, urinals, wash bowls and other plumbing apparatus shall not
be used for any purpose other than that for which they were constructed and no
foreign substance of any kind whatsoever shall be thrown therein. Any pipes or
tubing used by Tenant to transmit water to an appliance or device in the
Premises must be made of copper or stainless steel, and in no event shall
plastic tubing be used for that purpose. The expense of any breakage, stoppage
or damage resulting from the violation of this rule shall be borne by the tenant
who, or whose employees or invitees, caused it.

 

6. Landlord shall direct electricians as to the manner and location of any
future telephone wiring. No boring or cutting for wires will be allowed without
the prior consent of Landlord. The locations of the telephones, call boxes and
other office equipment affixed to the Premises shall be subject to the prior
written approval of Landlord.

 

7. The Premises shall not be used for manufacturing or for the storage of
merchandise except as such storage may be incidental to the permitted use of the
Premises. No exterior storage shall be allowed at any time without the prior
written approval of Landlord. The Premises shall not be used for cooking or
washing clothes without the prior written consent of Landlord, or for lodging or
sleeping or for any immoral or illegal purposes.

 

8. Tenant shall not make, or permit to be made, any unseemly or disturbing
noises or disturb or interfere with occupants of this or neighboring buildings
or premises or those having business with them, whether by the use of any
musical instrument, radio, phonograph, noise, or otherwise. Tenant shall not
use, keep or permit to be used, or kept, any foul or obnoxious gas or substance
in the Premises or permit or suffer the Premises to be used or occupied in any
manner offensive or objectionable to Landlord or other occupants of this or
neighboring buildings or premises by reason of any odors, fumes or gases.

 

9. No animals, except for seeing eye dogs, shall be permitted at any time within
the Premises.

 

10. Tenant shall not use the name of the Building or the Project in connection
with or in promoting or advertising the business of Tenant, except as Tenant’s
address, without the written consent of Landlord. Landlord shall have the right
to prohibit any advertising by any Tenant which, in Landlord’s reasonable
opinion, tends to impair the reputation of the Project or its desirability for
its intended uses, and upon written notice from Landlord any Tenant shall
refrain from or discontinue such advertising.

 

11. Canvassing, soliciting, peddling, parading, picketing, demonstrating or
otherwise engaging in any conduct that unreasonably impairs the value or use of
the Premises or the Project are prohibited and each Tenant shall cooperate to
prevent the same. Landlord shall have full and absolute authority to regulate or
prohibit the entrance to the Premises of any vendor, supplier, purveyor,
petitioner, proselytizer or other similar person if, in the good faith judgment
of Landlord, such person will be involved in general solicitation activities, or
the proselytizing,

 

1

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petitioning, or disturbance of other tenants or their customers or invitees, or
engaged or likely to engage in conduct which may in Landlord’s opinion distract
from the use of the Premises for its intended purpose. Notwithstanding the
foregoing, Landlord reserves the absolute right and discretion to limit or
prevent access to the Buildings by any food or beverage vendor, whether or not
invited by Tenant, and Landlord may condition such access upon the vendor’s
execution of an entry permit agreement which may contain provisions for
insurance coverage and/or the payment of a fee to Landlord.

 

12. No equipment of any type shall be placed on the Premises which in Landlord’s
opinion exceeds the load limits of the floor or otherwise threatens the
soundness of the structure or improvements of the Building.

 

13. Regular building hours of operation are from 6:00 AM to 6:00 PM Monday
through Friday and 9:00 AM to 1:00 PM on Saturday. No air conditioning unit or
other similar apparatus shall be installed or used by any Tenant without the
prior written consent of Landlord (not to be unreasonably withheld, conditioned
or delayed).

 

14. The entire Premises, including vestibules, entrances, parking areas, doors,
fixtures, windows and plate glass, shall at all times be maintained in a safe,
neat and clean condition by Tenant. All trash, refuse and waste materials shall
be regularly removed from the Premises by Tenant and placed in the containers at
the locations designated by Landlord for refuse collection. All cardboard boxes
must be “broken down” prior to being placed in the trash container. All
styrofoam chips must be bagged or otherwise contained prior to placement in the
trash container, so as not to constitute a nuisance. Pallets must be immediately
disposed of by tenant and may not be disposed of in the Landlord provided trash
container or enclosures. Pallets may be neatly stacked in an exterior location
on a temporary basis (no longer than 5 days) so long as Landlord has provided
prior written approval. The burning of trash, refuse or waste materials is
prohibited.

 

15. Tenant shall use at Tenant’s cost such pest extermination contractor as
Landlord may direct and at such intervals as Landlord may reasonably require.

 

16. All keys for the Premises shall be provided to Tenant by Landlord and Tenant
shall return to Landlord any of such keys so provided upon the termination of
the Lease. Tenant shall not change locks or install other locks on doors of the
Premises, without the prior written consent of Landlord (not to be unreasonably
withheld, delayed or conditioned). In the event of loss of any keys furnished by
Landlord for Tenant, Tenant shall pay to Landlord the costs thereof. Upon the
termination of its tenancy, Tenant shall deliver to Landlord all the keys to
lobby(s), suite(s) and telephone & electrical room(s) which have been furnished
to Tenant or which Tenant shall have had made.

 

17. No person shall enter or remain within the Project while intoxicated or
under the influence of liquor or drugs. Landlord shall have the right to exclude
or expel from the Project any person who, in the absolute discretion of
Landlord, is under the influence of liquor or drugs.

 

18. The moving of large or heavy objects shall occur only between those hours as
may be designated by, and only upon previous written notice to, Landlord, and
the persons employed to move those objects in or out of the Building must be
reasonably acceptable to Landlord. Without limiting the generality of the
foregoing, no freight, furniture or bulky matter of any description shall be
received into or moved out of the lobby of the Building or carried in the
elevator except between those hours so designated by Landlord.

 

19. Tenant shall not install equipment, such as but not limited to electronic
tabulating or computer equipment, requiring electrical or air conditioning
service in excess of that to be provided by Landlord under the Lease without
prior written consent of Landlord (not to be unreasonably withheld, conditioned
or delayed).

 

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

 

21. Landlord reserves the right to amend or supplement the foregoing Rules and
Regulations and to adopt and promulgate additional rules and regulations
applicable to the Premises. Notice of such rules and regulations and amendments
and supplements thereto, if any, shall be given to the Tenant.

 

2

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EXHIBIT F

 

IRREVOCABLE STANDBY LETTER OF CREDIT

 

Number:

    

Date:

    

Amount:

    

Expiration:

    

 

BENEFICIARY

 

ACCOUNT PARTY

The Irvine Company

   

550 Newport Center Drive

   

Newport Beach, CA 92660

   

Attn: Senior Vice President, Operations Office Properties

   

 

We hereby issue our Irrevocable Letter of Credit No.                      in
favor of The Irvine Company, and its successors and assigns for the account of
                        . We undertake to honor your draft or drafts, delivered
to us from time to time, for any sum or sums not to exceed a total of
                         ($                    ) in favor of said beneficiary
when accompanied by the draft described below and a letter from an officer of
The Irvine Company or such successor or assign that states as follows: “The
“Landlord” under the Lease pursuant to which this letter of credit was issued is
authorized to draw upon this Letter of Credit in the amount of the accompanying
draft according to the terms of its lease agreement with the Account Party as
“Tenant”.”

 

It is a condition of this letter of credit that it shall remain enforceable
against us for a period of                      from this date and further, that
it shall be deemed automatically extended for successive one-year periods
without amendment thereafter unless thirty (30) days prior to the expiration
date set forth above, or within thirty (30) days prior to the end of any yearly
Anniversary Date thereafter, you shall receive our notice in writing by
certified mail, return receipt requested, that we elect not to renew this letter
of credit for any subsequent year. We shall reissue this letter of credit to a
new party which is a successor or assign upon written request by The Irvine
Company or such successor or assign accompanied by a certificate that the Lease
pursuant to which this letter of credit was issued was assigned to such party.

 

The draft must be marked “Drawn under                      Letter of Credit No.
                 dated                     .”

 

There are no other conditions of this letter of credit. Except so far as
otherwise stated, this credit is subject to the Uniform Customs and Practice for
Documentary Credits (1993 Revision, International Chamber of Commerce,
Publication No. 500).

 

    By:     By:    

 

1

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EXHIBIT X

 

INDUSTRIAL WORK LETTER

 

DOLLAR ALLOWANCE

 

The tenant improvement work to be contracted for by Landlord hereunder (“Tenant
Improvement Work”) shall consist of the design and construction of all tenant
improvements (“Tenant Improvements”), including work in place as of the date
hereof, required for the Premises pursuant to the approved final Working
Drawings and Specifications (as hereinafter defined). All of the Tenant
Improvement Work shall be performed by a contractor selected by Landlord and in
accordance with the procedures and requirements set forth below.

 

I. ARCHITECTURAL AND CONSTRUCTION PROCEDURES.

 

  A. Tenant and Landlord have approved (i) a detailed space plan for the
Premises, prepared by Landlord’s architect, LPA, Inc., dated 8/25/05 (and
revised on 8/30/05 and on 9/21/05) (“Preliminary Plan”), and (ii) an estimate of
the cost to complete the Tenant Improvements in accordance with the Preliminary
Plan prepared by Landlord’s contractor, Turelk, Inc., dated 9/22/05 (the
“Preliminary Cost Estimate”). A copy of the Preliminary Cost Estimate is
attached as Exhibit X-1 hereto. The Tenant Improvement Work shall consist of
work itemized on the Preliminary Cost Estimate as the “Hard Cost Breakdown” and
the “Soft Cost Breakdown” (both “Standard” and “Nonstandard” items) and the
following “Alternates” on page 3 of 3 of the Preliminary Cost Estimate: “D,”
“F,” “J” and “K.”

 

  B. Within five (5) days following any request therefor by Landlord, Tenant
shall provide in writing to Landlord or Landlord’s architect all specifications
and information requested by Landlord for the preparation of final construction
documents and costing, including without limitation Tenant’s final selection of
paint and floor finishes, complete specifications and locations (including
electrical, load and HVAC requirements) of Tenant’s equipment (collectively,
“Programming Information”). Tenant’s failure timely to provide the Programming
Information shall constitute a Tenant Delay for purposes of this Lease. Tenant
understands that final construction documents for the Tenant Improvements shall
be predicated on the Programming Information, and accordingly that such
information must be accurate and complete and that any defects or problems due
to incomplete or inaccurate Programming Information shall be the responsibility
of the Tenant and that the Landlord shall have no obligation or liability for
such defects or problems arising from any incomplete or inaccurate Programming
Information. Any delays in the completion of the Tenant Improvements due to
incomplete or inaccurate Programming Information shall constitute a Tenant
Delay.

 

  C. Upon Tenant’s delivery of the complete Programming Information, Landlord’s
architect and engineers shall prepare and deliver to Tenant working drawings and
specifications (“Working Drawings and Specifications”), and Landlord’s
contractor shall prepare a final construction cost estimate (“Final Cost
Estimate”) for the Tenant Improvements in conformity with the Working Drawings
and Specifications. A copy of the Final Cost Estimate shall be delivered to
Tenant for its approval unless Tenant is not responsible for any Tenant’s
Contribution. Tenant shall have five (5) days from the receipt thereof to
approve or disapprove the Working Drawings and Specifications and (if delivered
to Tenant) the Final Cost Estimate. Tenant shall not unreasonably withhold or
delay its approval, and any disapproval or requested modification shall be
limited to items not consistent with the approved Preliminary Plan or
Preliminary Cost Estimate. Should Tenant disapprove the Working Drawings and
Specifications or the Final Cost Estimate, such disapproval shall be accompanied
by specific reasons for disapproval and a detailed list of requested revisions.
Any revision requested by Tenant and accepted by Landlord, in its reasonable
discretion, shall be incorporated into a revised set of Working Drawings and
Specifications and the Final Cost Estimate, and Tenant shall approve same in
writing within five (5) days of receipt without further revision.

 

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  D. In the event that Tenant requests in writing a revision to the Working
Drawings and Specifications (“Change”), and Landlord so approves such Change as
provided in Section I.E. herein, Landlord shall advise Tenant by written change
order as soon as is practical of any increase in the Completion Cost such Change
would cause. Tenant shall approve or disapprove such change order, if any, in
writing within two (2) days following Tenant’s receipt of such change order. If
Tenant approves any such change order, Landlord, at its election, may either
(i) require as a condition to the effectiveness of such change order that Tenant
pay the increase in the Completion Cost attributable to such change order
concurrently with delivery of Tenant’s approval of the change order, or
(ii) defer Tenant’s payment of such increase until the date ten (10) days after
delivery of invoices for same, provided however, that the Tenant Contribution
must in any event be paid in full prior to Tenant’s commencing occupancy of the
Premises. If Tenant disapproves any such change order, Tenant shall nonetheless
be responsible for the reasonable architectural and/or planning fees incurred in
preparing such change order. Landlord shall have no obligation to interrupt or
modify the Tenant Improvement Work pending Tenant’s approval of a change order,
but if Tenant fails to timely approve a change order, Landlord may (but shall
not be required to) suspend the applicable Tenant Improvement Work, in which
event any related critical path delays because of such suspension shall
constitute Tenant Delays hereunder.

 

  E. Landlord agrees that it shall not unreasonably withhold its consent to
Tenant’s requested Changes to the approved Tenant Improvements Work, unless
Landlord determines, in its sole and absolute discretion, that such requested
Change (i) is of a lesser quality than the improvements previously approved by
Landlord, (ii) fails to conform to applicable governmental requirements,
(iii) would result in the Premises requiring building services beyond the level
normally provided to other tenants, (iv) would delay construction of the Tenant
Improvements and Tenant declines to accept such delay in writing as a Tenant
Delay, (v) interferes in any manner with the proper functioning of, or
Landlord’s access to, any mechanical, electrical, plumbing or HVAC systems,
facilities or equipment in or serving the Building, or (vi) would have an
adverse aesthetic impact to the Premises or cause additional expenses to
Landlord in reletting the Premises. Unless Landlord otherwise agrees in writing,
in its sole and absolute discretion, all Tenant Improvements shall become the
property of Landlord and shall be surrendered with the Premises at the end of
the Term; except that Landlord may, by notice to Tenant given either prior to or
following the expiration or termination of the Lease, require Tenant either to
remove all or any of the Changes to the approved Tenant Improvements Work
approved by way of a Change, to repair any damage to the Premises or the Common
Area arising from such removal, and to replace such Changes with the approved
Tenant Improvements, or to reimburse Landlord for the reasonable cost of such
removal, repair and replacement upon demand. Any such removals, repairs and
replacements by Tenant shall be completed by the Expiration Date, or sooner
termination of this Lease, or within ten (10) days following notice to Tenant if
such notice is given following the Expiration Date or sooner termination.

 

  F.

Notwithstanding any provision in the Lease to the contrary, and not by way of
limitation of any other rights or remedies of Landlord, if Tenant fails to
comply with any of the time periods specified in this Work Letter, fails
otherwise to approve or reasonably disapprove any submittal within the time
period specified herein for such response (or if no time period is so specified,
within five (5) days following Tenant’s receipt thereof), fails to timely
provide all of the Programming Information requested by Landlord, fails to
approve in writing the Working Drawings and Specifications or the Final Cost
Estimate within the time provided herein, fails to timely deliver the Tenant’s
Contribution as required hereunder, requests any Changes, furnishes inaccurate
or erroneous Programming Information, specifications or other information, or
otherwise delays in any manner the completion of the Tenant Improvements
(including without limitation by specifying

 

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materials that are not readily available) or the issuance of an occupancy
certificate (any of the foregoing being referred to in this Lease as a “Tenant
Delay”), then Tenant shall bear any resulting additional construction cost or
other expenses, and the Commencement Date of this Lease shall be deemed to have
occurred for all purposes, including without limitation Tenant’s obligation to
pay rent, as of the date Landlord reasonably determines that it would have been
able to deliver the Premises to Tenant but for the collective Tenant Delays.
Should Landlord determine that the Commencement Date should be advanced in
accordance with the foregoing, it shall so notify Tenant in writing. Landlord’s
determination shall be conclusive unless Tenant notifies Landlord in writing,
within five (5) days thereafter, of Tenant’s election to contest same by
arbitration pursuant to Paragraph III below. Pending the outcome of such
arbitration proceedings, Tenant shall make timely payment of all rent due under
this Lease based upon the Commencement Date set forth in the aforesaid notice
from Landlord.

 

  G. Landlord shall permit Tenant and its agents to enter the Premises prior to
the Commencement Date of the Lease in order that Tenant may install fixtures,
furniture and cabling through Tenant’s own contractors prior to the Commencement
Date. Any such work shall be subject to Landlord’s prior written approval (not
to be unreasonably withheld, conditioned or delayed), and shall be performed in
a manner and upon terms and conditions and at times reasonably satisfactory to
Landlord’s representative. The foregoing license to enter the Premises prior to
the Commencement Date is, however, conditioned upon Tenant’s contractors and
their subcontractors and employees working in harmony and not interfering with
the work being performed by Landlord as determined by Landlord in Landlord’s
reasonable discretion. If at any time that entry shall cause disharmony or
interfere with the work being performed by Landlord as defined by Landlord in
Landlord’s sole and absolute discretion, this license may be withdrawn by
Landlord upon twenty-four (24) hours written notice to Tenant. That license is
further conditioned upon the compliance by Tenant’s contractors with all
requirements imposed by Landlord on third party contractors, including without
limitation the maintenance by Tenant and its contractors and subcontractors of
workers’ compensation and public liability and property damage insurance in
amounts and with companies and on forms reasonably satisfactory to Landlord,
with certificates of such insurance being furnished to Landlord prior to
proceeding with any such entry. The entry shall be deemed to be under all of the
provisions of the Lease except as to the covenants to pay rent. Landlord shall
not be liable in any way for any injury, loss or damage which may occur to any
such work being performed by Tenant, the same being solely at Tenant’s risk. In
no event shall the failure of Tenant’s contractors to complete any work in the
Premises extend the Commencement Date of this Lease beyond the date that
Landlord has completed its Tenant Improvement Work and tendered the Premises to
Tenant.

 

  H. Tenant hereby designates Bill Dippel (“Tenant’s Construction
Representative”), Telephone No. (949) 837-3700 Ext 208, as its representative,
agent and attorney-in-fact for all matters related to the Tenant Improvement
Work, including but not by way of limitation, for purposes of receiving notices,
approving submittals and issuing requests for Changes, and Landlord shall be
entitled to rely upon authorizations and directives of such person(s) as if
given directly by Tenant. The foregoing authorization is intended to provide
assurance to Landlord that it may rely upon the directives and decision making
of the Tenant’s Construction Representative with respect to the Tenant
Improvement Work and is not intended to limit or reduce Landlord’s right to
reasonably rely upon any decisions or directives given by other officers or
representatives of Tenant. Tenant may amend the designation of its Tenant’s
Construction Representative(s) at any time upon delivery of written notice to
Landlord.

 

II. COST OF TENANT IMPROVEMENTS

 

  A. Landlord shall complete, or cause to be completed, the Tenant Improvements,
at the construction cost shown in the Final Cost Estimate (subject to increases
for Landlord approved Changes), in accordance with final Working Drawings and
Specifications approved by both Landlord and Tenant.

 

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  B. Subject to the provisions of Section II.F below, Landlord shall pay up to
Two Million One Hundred Sixty-Eight Thousand Nine Hundred Fifty-Five Dollars
($2,168,955.00), based on $22.50 per rentable square foot of the Premises
(“Landlord’s Maximum Contribution”), of the final “Completion Cost” (as defined
below) of the Tenant Improvements. Tenant acknowledges that the Landlord’s
Maximum Contribution is intended only as the maximum amount Landlord will pay
toward approved Tenant Improvements, and not by way of limitation, any
partitions, modular office stations, fixtures, cabling, furniture and equipment
requested by Tenant are in no event subject to payment as part of Landlord’s
Contribution. In the event the Completion Cost of the Tenant Improvements is
less than the Landlord’s Maximum Contribution, Landlord’s actual contribution
toward the Completion Cost (“Landlord’s Contribution”) shall equal such lesser
amount, and Tenant shall have no right to receive any credit, refund or
allowance of any kind for any unused portion of the Landlord’s Maximum
Contribution nor shall Tenant be allowed to make revisions to an approved
Preliminary Plan, Working Drawings and Specifications or request a Change in an
effort to apply any unused portion of Landlord’s Maximum Contribution

 

  C. Tenant shall pay all Completion Costs attributable to any Changes requested
by the Tenant, any costs due to inaccurate or incomplete Programming Information
and the amount, if any, by which aggregate Completion Cost of the Tenant
Improvements exceeds the Maximum Landlord Contribution. The amounts to be paid
by Tenant for the Tenant Improvements pursuant to this Section II.C. are
sometimes cumulatively referred to herein as the “Tenant’s Contribution”.

 

  D. The “Completion Cost” shall mean all costs of Landlord in completing the
Tenant Improvements in accordance with the approved Working Drawings and
Specifications, including but not limited to the following: (i) payments made to
architects, engineers, contractors, subcontractors and other third party
consultants in the performance of the work, (ii) salaries and fringe benefits of
persons, if any, in the direct employ of Landlord performing any part of the
construction work, (iii) permit fees and other sums paid to governmental
agencies, and (iv) costs of all materials incorporated into the work or used in
connection with the work. The Completion Cost shall also include an
administrative/supervision fee to be paid to Landlord or to Landlord’s
management agent in the amount of five percent (5%) of the Completion Cost.
Unless expressly authorized in writing by Landlord, the Completion Cost shall
not include (and no portion of the Landlord Contribution shall be paid for) any
costs incurred by Tenant, including without limitation, any costs for space
planners, managers, advisors or consultants retained by Tenant in connection
with the Tenant Improvements.

 

  E. Prior to start of construction of the Tenant Improvements, Tenant shall pay
to Landlord in full the amount of the Tenant’s Contribution set forth in the
Final Cost Estimate (once approved by Tenant). If the actual Completion Cost of
the Tenant Improvements is greater than the Final Cost Estimate because of
Changes, modifications or extras not reflected on the approved Working Drawings
and Specifications, or because of Tenant Delays, then Tenant shall pay all such
additional costs within ten (10) days after written demand for same. The balance
of any sums not otherwise paid by Tenant shall be due and payable on or before
the Commencement Date of this Lease. If Tenant defaults in the payment of any
sums due under this Work Letter, Landlord shall (in addition to all other
remedies) have the same rights as in the case of Tenant’s failure to pay rent
under the Lease, including, without limitation, the right to terminate this
Lease and recover damages from Tenant and/or to charge a late payment fee and to
collect interest on delinquent payments, and Landlord may (but shall not be
required to) suspend the Tenant Improvement Work following such default, in
which event any delays because of such suspension shall constitute Tenant Delays
hereunder.

 

  F.

Any portion of the “Landlord’s Amortizing Contribution” (as hereinafter defined)
funded by Landlord towards the Completion Cost shall be amortized over the
initial

 

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60-month Term of the Lease using an interest factor of ten percent (10%) per
annum, and the Basic Rent payable during the initial sixty (60) months of this
Lease by Tenant shall be increased by said amortized payments, retroactive to
the Commencement Date of this Lease. Upon request by Landlord, the amount of
such rental adjustment shall be memorialized on a form provided by Landlord. In
the event that the amount of the rental adjustment is finally determined
subsequent to the Commencement Date, Tenant shall promptly pay to Landlord a
lump sum amount equal to the total accrued sums owing due to the retroactive
adjustment. As used herein, the “Landlord’s Amortizing Contribution” shall mean
that portion of the Landlord’s Contribution in excess of the amount of Two
Million Twenty-Four Thousand Three Hundred Fifty-Eight Dollars ($2,024,358.00),
based on $21.00 per rentable square foot of the Premises, actually funded by
Landlord towards the Completion Cost of the Tenant Improvements.

 

III. DISPUTE RESOLUTION

 

  A. All claims or disputes between Landlord and Tenant arising out of, or
relating to, this Work Letter shall be decided by the JAMS/ENDISPUTE (“JAMS”),
or its successor, with such arbitration to be held in Orange County, California,
unless the parties mutually agree otherwise. Within ten (10) business days
following submission to JAMS, JAMS shall designate three arbitrators and each
party may, within five (5) business days thereafter, veto one of the three
persons so designated. If two different designated arbitrators have been vetoed,
the third arbitrator shall hear and decide the matter. If less than two
(2) arbitrators are timely vetoed, JAMS shall select a single arbitrator from
the non-vetoed arbitrators originally designated by JAMS, who shall hear and
decide the matter. Any arbitration pursuant to this section shall be decided
within thirty (30) days of submission to JAMS. The decision of the arbitrator
shall be final and binding on the parties. In no event shall the arbitrator be
empowered or authorized to award consequential or punitive damages (including
any award for lost profit or opportunity costs or loss or interruption of
business or income). All costs associated with the arbitration shall be awarded
to the prevailing party as determined by the arbitrator.

 

  B. Notice of the demand for arbitration by either party to the Work Letter
shall be filed in writing with the other party to the Work Letter and with JAMS
and shall be made within a reasonable time after the dispute has arisen. The
award rendered by the arbitrator shall be final, and judgment may be entered
upon it in accordance with applicable law in any court having jurisdiction
thereof. Except by written consent of the person or entity sought to be joined,
no arbitration arising out of or relating to this Work Letter shall include, by
consolidation, joinder or in any other manner, any person or entity not a party
to the Work Letter unless (1) such person or entity is substantially involved in
a common question of fact or law, (2) the presence of such person or entity is
required if complete relief is to be accorded in the arbitration, or (3) the
interest or responsibility of such person or entity in the matter is not
insubstantial.

 

  C. The agreement herein among the parties to arbitrate shall be specifically
enforceable under prevailing law. The agreement to arbitrate hereunder shall
apply only to disputes arising out of, or relating to, this Work Letter, and
shall not apply to other matters of dispute under the Lease except as may be
expressly provided in the Lease.

 

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LOGO [g67237image001.jpg]

 

Bake Technology Park

 

LOGO [g67237image003.jpg]

 

Exhibit Y