Exhibit 10.37







	




Exhibit 10.37 




LEASE






BY AND
BETWEEN



ROTUNDA
PARTNERS II,
a
California limited liability company



as
Landlord



and



SCIENTIFIC
LEARNING CORPORATION,
a
Delaware corporation



as Tenant






October
1, 2003 (for reference purposes only)






300
Frank H. Ogawa Plaza



Oakland,
CA















	



TABLE OF CONTENTS



PAGE









	ARTICLE 1	 	REFERENCE	 	1
	 	1.1	 	References	 	1
	ARTICLE 2	 	LEASED PREMISES, TERM AND POSSESSION	 	3
	 	2.1	 	Demise Of Leased Premises	 	3
	 	2.2	 	Parking; Right To Use Outside Areas	 	4
	 	2.3	 	Commencement Date And Lease Term	 	4
	 	2.4	 	Delivery Of Possession	 	4
	 	2.5	 	Acceptance Of Possession	 	4
	 	2.6	 	Surrender Of Possession	 	4
	ARTICLE 3	 	RENT, LATE CHARGES AND SECURITY DEPOSITS	 	5
	 	3.1	 	Base Monthly Rent	 	5
	 	3.2	 	Additional Rent	 	5
	 	3.3	 	Landlord’s Termination Right or Rent Adjustment	 	5
	 	3.4	 	Late Charge, And Interest On Rent In Default	 	6
	 	3.5	 	Payment Of Rent	 	6
	 	3.6	 	Rental Sharing	 	6
	 	3.7	 	Security Deposit	 	6
	ARTICLE 4	 	USE OF LEASED PREMISES AND OUTSIDE AREA	 	7
	 	4.1	 	Permitted Use	 	7
	 	4.2	 	General Limitations On Use	 	7
	 	4.3	 	Trash Disposal	 	7
	 	4.4	 	Signs	 	8
	 	4.5	 	Compliance With Laws	 	8
	 	4.6	 	Compliance With Insurance Requirements	 	8
	 	4.7	 	Landlord’s Right To Enter	 	8
	 	4.8	 	Environmental Protection	 	8
	 	4.9	 	Reservations	 	9
	ARTICLE 5	 	REPAIRS, MAINTENANCE, SERVICES AND UTILITIES	 	10
	 	5.1	 	Repair And Maintenance	 	10
	 	 	 	(a)       Tenant’s Obligations	 	10
	 	 	 	(b)       Landlord’s Obligation	 	10
	 	5.2	 	Utilities	 	10
	 	5.3	 	Security	 	10
	 	5.4	 	Janitorial	 	10






	


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PAGE









	 	5.5	 	Energy And Resource Consumption	 	10
	 	5.6	 	Limitation Of Landlord’s Liability	 	10
	ARTICLE 6	 	ALTERATIONS AND IMPROVEMENTS	 	11
	 	6.1	 	By Tenant	 	11
	 	6.2	 	Ownership Of Improvements	 	11
	 	6.3	 	Alterations Required By Law	 	12
	 	6.4	 	Liens	 	12
	ARTICLE 7	 	ASSIGNMENT AND SUBLETTING BY TENANT	 	12
	 	7.1	 	By Tenant	 	12
	 	7.2	 	Merger, Reorganization, or Sale of Assets	 	13
	 	7.3	 	Landlord’s Election	 	13
	 	7.4	 	Assignment Consideration And Excess Rentals Defined	 	14
	 	7.5	 	Payments	 	14
	 	7.6	 	Effect Of Landlord’s Consent	 	14
	ARTICLE 8	 	LIMITATION ON LANDLORD’S LIABILITY AND INDEMNITY	 	14
	 	8.1	 	Limitation On Landlord’s Liability And Release	 	14
	 	8.2	 	Tenant’s Indemnification Of Landlord	 	15
	ARTICLE 9	 	INSURANCE	 	15
	 	9.1	 	Tenant’s Insurance	 	15
	 	9.2	 	Landlord’s Insurance	 	16
	 	9.3	 	Mutual Waiver Of Subrogation	 	17
	ARTICLE 10	 	DAMAGE TO LEASED PREMISES	 	17
	 	10.1	 	Landlord’s Duty To Restore	 	17
	 	10.2	 	Insurance Proceeds	 	17
	 	10.3	 	Landlord’s Right To Terminate	 	18
	 	10.4	 	Tenant’s Right To Terminate	 	18
	 	10.5	 	Tenant’s Waiver	 	18
	 	10.6	 	Abatement Of Rent	 	18
	ARTICLE 11	 	CONDEMNATION	 	19
	 	11.1	 	Tenant’s Right To Terminate	 	19
	 	11.2	 	Landlord’s Right To Terminate	 	19
	 	11.3	 	Restoration	 	19
	 	11.4	 	Temporary Taking	 	19
	 	11.5	 	Division Of Condemnation Award	 	19






	


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PAGE









	 	11.6	 	Abatement Of Rent	 	19
	 	11.7	 	Taking Defined	 	20
	ARTICLE 12	 	DEFAULT AND REMEDIES	 	20
	 	12.1	 	Events Of Tenant’s Default	 	20
	 	12.2	 	Landlord’s Remedies	 	21
	 	12.3	 	Landlord’s Default And Tenant’s Remedies	 	22
	 	12.4	 	Limitation Of Tenant’s Recourse	 	22
	 	12.5	 	Tenant’s Waiver	 	22
	ARTICLE 13	 	GENERAL PROVISIONS	 	23
	 	13.1	 	Taxes On Tenant’s Property	 	23
	 	13.2	 	Holding Over	 	23
	 	13.3	 	Subordination To Mortgages	 	23
	 	13.4	 	Tenant’s Attornment Upon Foreclosure	 	24
	 	13.5	 	Mortgagee Protection	 	24
	 	13.6	 	Estoppel Certificate	 	24
	 	13.7	 	Tenant’s Financial Information	 	24
	 	13.8	 	Transfer By Landlord	 	24
	 	13.9	 	Force Majeure	 	25
	 	13.10	 	Notices	 	25
	 	13.11	 	Attorneys’ Fees	 	25
	 	13.12	 	Definitions 	 	26
	 		 	(a)       Intentionally Deleted	 	26
	 		 	(b)       Intentionally Deleted	 	26
	 		 	(c)       Intentionally Deleted	 	26
	 		 	(d)       Intentionally Deleted	 	26
	 		 	(e)       Law	 	26
	 		 	(f)       Lender	 	26
	 		 	(g)       Private Restrictions	 	26
	 		 	(h)       Rent	 	26
	 	13.13	 	General Waivers	 	26
	 	13.14	 	Miscellaneous	 	26
	ARTICLE 14	 	CORPORATE AUTHORITY BROKERS AND ENTIRE AGREEMENT	 	27
	 	14.1	 	Corporate Authority	 	27
	 	14.2	 	Brokerage Commissions	 	27






	


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PAGE









	 	14.3	 	Entire Agreement	 	27
	 	14.4	 	Landlord’s Representations	 	27
	ARTICLE 15	 	OPTIONS TO EXTEND	 	27
	 	15.1	 	Options	 	27
	 	15.2	 	Fair Market Rent	 	28
	 	15.3	 	Determination	 	28
	 	15.4	 	Arbitration	 	28
	 	15.5	 	Improvement Allowance	 	29
	ARTICLE 16	 	RIGHT OF FIRST REFUSAL	 	29
	 	16.1	 	Right of First Refusal	 	29
	 	16.2	 	Intentionally Deleted	 	30
	 	16.3	 	Intentionally Deleted	 	30
	 	16.4	 	Intentionally Deleted	 	30
	ARTICLE 17	 	INTENTIONALLY DELETED	 	30
	 	17.1	 	Intentionally Deleted	 	30





	Exhibit A 	Lease
Termination Agreement



	Exhibit B 	Site
Plan



	Exhibit B-1 	Leased
Premises Location



	Exhibit C 	Intentionally
Deleted



	Exhibit D 	Commencement
Date Certificate



	Exhibit E 	Form
of Estoppel Certificate






	


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LEASE



        THIS
LEASE, dated October 1, 2003 for reference purposes only, is made by and
between ROTUNDA PARTNERS II, a California limited liability company
(“Landlord”) and SCIENTIFIC LEARNING CORPORATION, a Delaware
corporation (“Tenant”), to be effective and binding upon the parties
as of October 1, 2003 (the “Effective Date of this Lease”),
conditioned upon the full execution and delivery of the Termination Agreement
attached here to as Exhibit A.



        WHEREAS,
Landlord and Tenant entered into that certain Lease dated as of March 20,
2000 (the “Original Lease”) for space in the building located at 300
Frank H. Ogawa Plaza., Oakland, CA and described as the interior space on the
fifth (5th) and sixth (6th) floors and the seventh
(7th) floor penthouse consisting of approximately 69,483 rentable
square feet (the “Original Premises”).



        WHEREAS,
Landlord and Tenant have agreed to concurrently terminate the Original Lease
and enter into this Lease, for the purpose of changing the location of the
Leased Premises, extending the Lease Term, changing the rental rate, providing
for Tenant’s right of first refusal and making such other arrangements as
are more expressly set forth in this Lease.



ARTICLE 1



REFERENCE



1.1
References. All references in this Lease (subject to any further
clarifications contained in this Lease) to the following terms shall have the
following meaning or refer to the respective address, person, date, time period,
amount, percentage, calendar year or fiscal year as below set forth:









	 	Tenant’s Address for Notice:	 	Prior to the Commencement Date:



Scientific Learning Corporation

300 Frank H. Ogawa Plaza, Suite 500

Oakland, CA 94612



After the Commencement Date:





At the Leased Premises
	 
	 	Tenant’s Representative:	 	General Counsel
	 
	 	Landlord’s Address for Notices:	 	300 Frank H. Ogawa Plaza, Suite 340
Oakland, CA 94612
	 
	 	Landlord’s Representative:

Email address:

Phone Number:

Fax Number:	 	Rotunda Partners, Attention Len Epstein

kate@leaseoakland.com

(510) 268-8500

(510) 834-5380






	


1

















	 	Intended Delivery Date:	 	October 1, 2003
	 
	 	Intended Commencement Date:	 	October 1, 2003
	 
	 	Lease Term:	 	From October 1, 2003 through December 31, 2013
	 
	 	Lease Expiration Date:	 	December 31, 2013, unless earlier terminated
     in accordance with the terms of this Lease, or extended by Tenant pursuant to Article
     15.
	 
	 	Options to Renew:	 	Two (2) option(s) to renew, each for a term
     of five (5) years at 95% of Fair Market Value.
	 
	 	First Month’s Rent: 	 	Payable on October 1, 2003
	 
	 	Tenant’s Security Deposit: 	 	$900,000, ($300,000 of which was deposited
     with Landlord under the Original Lease, and $600,000 of which shall be deposited with Landlord
     concurrently with the execution of this Lease)
	 
	 	Late Charge Amount: 	 	Three Percent (3%) of the Delinquent Amount
	 
	 	Tenant’s Required Liability Coverage:	 	$2,000,000 Combined Single Limit
	 
	 	Tenant’s Broker: 	 	___none_________________________
	 
	 	Landlord’s Broker: 	 	___none_________________________
	 
	 	Property: 	 	That certain real property situated in the
     City of Oakland, State of California, improved with one building, which real property is shown
     on the Site Plan attached hereto as Exhibit “B” and is commonly known as or otherwise
     described as the Rotunda Building.
	 
	 	Building: 	 	That certain building on the Property in
     which the Leased Premises are located commonly known as 300 Frank H. Ogawa Plaza, Oakland, CA
     (the “Building”), which Building is shown outlined on Exhibit “B” hereto.
     The Building contains 242,031 square feet.
	 
	 	Outside Areas: 	 	The “Outside Areas” shall mean all
     areas which are located outside of and contiguous to the Building, as shown the Site Plan
     attached as Exhibit B, such as pedestrian walkways, parking areas, landscaped area, open areas
     and enclosed trash disposal areas.
	 
	 	Parking Area: 	 	The “Parking Area” shall mean all
     areas marked as such on the Site Plan attached as Exhibit B.
	 
	 	Leased Premises: 	 	The “Leased Premises” shall mean
     the space on the sixth (6th) floor and the seventh (7th) penthouse floor of the Building, to
     consist of approximately 30,483 rentable square feet in the location shown on the attached
     Exhibit B-1, entitled “Leased Premises Location”.






	


2

















	 	Original Build-out Space	 	n/a
	 
	 	Tenant’s Parking Spaces	 	40 Spaces
	 
	 	Tenant’s Percentage Share:	 	n/a
	 
	 	Base Year:	 	n/a
	 
	 	Base Monthly Rent:	 	The term “Base Monthly Rent for the Leased Premises shall mean the following:





	 	 	 	Period
Oct 1, 2003 - Dec 31, 2008	 	Monthly Amount
$2.57 per rentable sq. ft.
	 
	 	 	 	Jan 1, 2009 - Dec 31, 2009	 	$2.69 per rentable sq. ft.
	 
	 	 	 	Jan 1, 2010 - Dec 31, 2010	 	$2.82 per rentable sq. ft.
	 
	 	 	 	Jan 1, 2011 - Dec 31, 2011	 	$2.95 per rentable sq. ft.
	 
	 	 	 	Jan 1, 2012 - Dec 31, 2012	 	$3.09 per rentable sq. ft.
	 
	 	 	 	Jan 1, 2013 - Dec 31, 2013	 	$3.23 per rentable sq. ft.





	 	Permitted Use:	 	General Office, research and development,
marketing, sales and other related lawful uses.
	 
	 	Exhibits:	 	The term “Exhibits” shall mean the Exhibits
of this Lease which are described as follows:
	 
	 	 	 	Exhibit “A” - Termination Agreement.
	 
	 	 	 	Exhibit “B” - Site Plan showing the
Property, the Outside Areas, the Parking Area and delineating the Building in which the Leased Premises are to
be located.
	 
	 	 	 	Exhibit “B-1” - Map showing the Leased Premises Location
	 
	 	 	 	Exhibit “C” - Deleted
	 
	 	 	 	Exhibit “D” - Commencement Date Certificate
	 
	 	 	 	Exhibit “E” - Form of Tenant Estoppel Certificate






	


ARTICLE 2



LEASED
PREMISES, TERM AND POSSESSION



2.1 Demise Of
Leased Premises. Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord, for the Lease Term and upon the terms and subject to the
conditions of this Lease, that certain interior space described in
Article 1 as the Leased Premises, reserving and excepting to Landlord the
right to sixty-five percent (65%) of all assignment consideration and excess
rentals as provided in Article 7 below. Tenant’s lease of the Leased
Premises, together with the appurtenant right to use the Outside Areas as
described in Paragraph 2.2 below, shall be conditioned upon and be subject
to the continuing compliance by Tenant with (i) all the terms and
conditions of this Lease, and (ii) all Laws governing the use of the Leased
Premises and the Property.



3















	



2.2 Parking;
Right To Use Outside Areas. As an appurtenant right to Tenant’s right
to the use and occupancy of the Leased Premises, Tenant shall have the right to
use the Outside Areas in conjunction with its use of the Leased Premises solely
for the purposes for which they were designated and intended and for no other
purposes whatsoever. Tenant’s right to so use the Outside Areas shall be
subject to the limitations on such use as set forth in Article 1 and shall
terminate concurrently with any termination of this Lease. Subject to the
agreement between the City of Oakland and the Landlord with respect to the
parking lot, Tenant shall have the nonexclusive right to use 40 parking
spaces located in the Parking Area or in the Dalziel Building (located on Frank
H. Ogawa Plaza), at the prevailing rate which with respect to the Parking Area
is currently (and shall be for the first twelve months of the term) not more
than $100 per month for each space, payable concurrently with Base Monthly Rent
to either the Landlord, or, at Landlord’s direction, to any entity
operating the parking facility. The parties agree that if, at any time during
the term of the Lease, the number of spaces rented by Tenant in a given month
falls below 40 spaces, then Landlord shall have the right to reduce the number
of guaranteed spaces for the next month to as little as 110% of the number of
spaces used in the prior month. Landlord agrees to use reasonable efforts to
accommodate Tenant’s request for parking spaces in addition to
Tenant’s guaranteed amount. Landlord hereby covenants that so long as
Tenant pays for 20 spaces or more Landlord shall provide a parking attendant for
the Parking Area 7 days a week, during the hours of 8:00 am to 6:00 pm Monday
through Friday and 10:00 am to 3:00 pm Saturday and Sunday. Landlord agrees that
Tenant’s parking spaces shall be located in the Parking Area, except that,
if at any point, Tenant requests an increase in spaces over the number it was
using in the prior month, the new spaces may be located in the Dalziel Building
to the extent that additional spaces are not available in the Parking Area,
provided that, as spaces in the Parking Area become available, Tenant’s
spaces will, if Tenant so requests, be moved to the Parking Area.



2.3
Commencement Date And Lease Term. Subject to Paragraph 2.4 below,
the term of this Lease shall begin, and the Commencement Date shall be deemed to
have occurred on the actual Delivery Date, as determined pursuant to Section 2.4
below. The term of this Lease shall in all events end on the Lease Expiration
Date (as set forth in Article 1) unless extended or sooner terminated in
accordance with the terms of this Lease. The Lease Term shall be that period of
time commencing on the Commencement Date and ending on the Lease Expiration Date
(the “Lease Term”).



2.4 Delivery Of
Possession. Landlord shall deliver to Tenant possession of the Leased
Premises on October 1, 2003.



2.5 Acceptance
Of Possession. It is agreed that by occupying the Leased Premises, Tenant
shall be deemed to have accepted same and to have acknowledged that the Leased
Premises are in the condition called for hereunder, subject to reasonable
punchlist items (to be identified by Tenant in a written notice to Landlord
given within thirty (30) days of such occupancy) and latent defects.



2.6 Surrender
Of Possession. Immediately prior to the expiration or upon the sooner
termination of this Lease, Tenant shall remove all of Tenant’s equipment,
trade fixtures, furniture, supplies, wall decorations and other personal
property from within the Leased Premises, the Building and the Outside Areas,
and shall vacate and surrender the Leased Premises to Landlord in as good
condition, broom clean, as existed at the Commencement Date, damage by casualty
or condemnation (which events shall be governed by Articles 10 and 11) and
reasonable wear and tear excepted. Except for such reasonable wear and tear,
Tenant shall (i) repair all damage to the Leased Premises, the exterior of
the Building and the Outside Areas caused by Tenant’s removal of
Tenant’s property, (ii) patch and refinish, to Landlord’s
reasonable satisfaction, all penetrations made by Tenant or its employees to the
roof, floor, interior or exterior walls or ceiling of the Leased Premises and
the Building, whether such penetrations were made with Landlord’s approval
or not, and (iii) repair all stained or damaged ceiling tiles, wall
coverings and floor coverings if damage was caused by Tenant. Additionally, to
the extent that Landlord shall have notified Tenant in writing at the time that
particular improvements were completed that it desired to have certain
improvements made by Tenant or at the request of Tenant removed at the
expiration or sooner termination of the Lease, Tenant shall, upon the expiration
or sooner termination of the Lease, remove any such improvements constructed or
installed by Landlord or Tenant and repair all damage caused by such removal;
provided however, Tenant shall not be required to remove any improvements
installed prior to the Commencement Date. If the Leased Premises are not
surrendered to Landlord in the condition required by this paragraph at the
expiration or sooner termination of this Lease, Landlord may, at Tenant’s
expense, so remove Tenant’s signs, property and/or improvements not so
removed and make such repairs and replacements not so made or hire, at
Tenant’s expense, independent contractors to perform such work. Tenant
shall be liable to Landlord for all reasonable costs incurred by Landlord in
returning the Leased Premises to the required condition. Tenant shall pay to
Landlord the amount of all reasonable costs so incurred within ten (10) days of
Landlord’s billing Tenant for same. Tenant shall indemnify Landlord against
loss or liability resulting from delay by Tenant in surrendering the Leased
Premises, including, without limitation, any claims made by any succeeding
Tenant or any losses to Landlord with respect to lost opportunities to lease to
succeeding tenants.



4















	



ARTICLE 3



RENT,
LATE CHARGES AND SECURITY DEPOSITS



3.1 Base
Monthly Rent.



(a) Commencing on
the Commencement Date (as determined pursuant to Paragraph 2.3 above) and
continuing throughout the Lease Term, Tenant shall pay to Landlord, without
prior demand therefor, in advance on the first day of each calendar month, the
amount set forth as Base Monthly Rent.



3.2 Additional
Rent. In addition to the Base Monthly Rent for the Original Build-out Space,
Tenant shall pay to Landlord as additional rent (the “Additional
Rent”) the following amounts:



        
(a) Landlord’s share of the consideration received by Tenant upon
certain assignments and sublettings as required by Article 7.



        (b)
Any legal fees and costs that Tenant is obligated to pay or reimburse to
Landlord pursuant to Article 13; and



        (c)
Any amounts due Landlord from Tenant in the event Tenant leases space pursuant
to its right of first refusal under Article 16.



        (d)
Any other charges or reimbursements due Landlord from Tenant pursuant to the
terms of this Lease.



3.3
Landlord’s Termination Right or Rent Adjustment. In the event that
as of June 1, 2009, the then Fair Market Rent (as defined and determined in
accordance with Sections 15.3 and 15.4, below) of the Leased Premises is greater
than the Base Monthly Rent due and payable under this Lease on such date, then
Landlord shall have the right but not the obligation to require Tenant either
(1) to agree to increase the Base Monthly Rent hereunder to the then Fair Market
Rent of the Leased Premises, or (2) to terminate this Lease. On or before June
1, 2009 Landlord shall send a written notice to Tenant informing Tenant of
Landlord’s estimate of the then Fair Market Rent. Following Tenant’s
receipt of such notice, the then Fair Market Rent for the Leased Premises shall
be determined in accordance with the terms of Section 15.3 below. Within ten
(10) business days of the determination of the then Fair Market Rent for the
Leased Premises, Tenant shall send a notice to Landlord evidencing its election
to either agree to amend the Base Monthly Rent hereunder to be equal to the then
Fair Market Rent, or to terminate this Lease on the date specified in
Tenant’s notice, which shall be no later than 180 days following the date
of such notice. Tenant’s failure to respond to Landlord’s notice shall
be deemed to be Tenant’s election to accept the then Fair Market Rent.



5















	



3.4 Late
Charge, And Interest On Rent In Default.. Tenant acknowledges that the late
payment by Tenant of any monthly installment of Base Monthly Rent or any
Additional Rent will cause Landlord to incur certain costs and expenses not
contemplated under this Lease, the exact amounts of which are extremely
difficult or impractical to fix. Such costs and expenses will include without
limitation, administration and collection costs and processing and accounting
expenses. Therefore, if any installment of Base Monthly Rent is not received by
Landlord from Tenant when the same becomes due, Tenant shall immediately pay to
Landlord a late charge in an amount equal to the amount set forth in Article 1
as the “Late Charge Amount,” and if any Additional Rent is not
received by Landlord when the same becomes due, Tenant shall immediately pay to
Landlord a late charge in an amount equal to 3% of the Additional Rent not so
paid; provided, however, that once but only once in any twelve (12) month period
during the Lease Term, Tenant shall be entitled to written notice of non-receipt
of Base Monthly Rent or Additional Rent from Landlord, and Tenant shall not be
liable for any Late Charge Amount or other late charge hereunder if such
installment of Base Monthly Rent or Additional Rent is received by Landlord
within ten (10) days after Tenant’s receipt of such notice from Landlord.
Landlord and Tenant agree that this late charge represents a reasonable estimate
of such costs and expenses and is fair compensation to Landlord for the
anticipated loss Landlord would suffer by reason of Tenant’s failure to
make timely payment. In no event shall this provision for a late charge be
deemed to grant to Tenant a grace period or extension of time within which to
pay any rental installment or prevent Landlord from exercising any right or
remedy available to Landlord upon Tenant’s failure to pay each rental
installment due under this Lease when due, including the right to terminate this
Lease. If any rent remains delinquent for a period in excess of ten (10)
calendar days after notice from Landlord, then, in addition to such late charge,
Tenant shall pay to Landlord interest on any rent that is not so paid from said
tenth day at the then maximum rate of interest not prohibited or made usurious
by Law until paid.



3.5 Payment Of
Rent. Except as specifically provided otherwise in this Lease, all rent
shall be paid in lawful money of the United States, without any abatement,
reduction or offset for any reason whatsoever, to Landlord at such address as
Landlord may designate from time to time. Tenant’s obligation to pay Base
Monthly Rent and all Additional Rent shall be appropriately prorated at the
commencement and expiration of the Lease Term. The failure by Tenant to pay any
Additional Rent as required pursuant to this Lease when due shall be treated the
same as a failure by Tenant to pay Base Monthly Rent when due, and Landlord
shall have the same rights and remedies against Tenant as Landlord would have
had Tenant failed to pay the Base Monthly Rent when due.



3.6 Rental
Sharing. If at any point during the during the period from October 1, 2003
through March 31, 2009, Landlord shall have received an aggregate of $6,000,000
or more in rental payments (including operating expense pass-through expenses
and similar payments) relating to the fifth (5th) floor space of the
Leased Premises under the Original Lease, then from such point forward through
March 31, 2009, Landlord shall pay to Tenant, within thirty (30) days of
receipt, 25% of any amounts by which the aggregate rental payments, pass-through
expenses and similar expenses collected by Landlord exceeds the sum of
$6,000,000. Tenant shall have the right to inspect Landlord’s books and
records to verify such amounts, upon giving reasonable notice to Landlord.



3.7 Security
Deposit.



        (a)
Tenant deposited a net amount of $300,000 with Landlord as the Security Deposit
under the Original Lease (the $400,000 originally deposited less $100,000
returned to Tenant under the terms of the Original Lease). Concurrently with
execution of this Lease Tenant shall increase the Security Deposit to a total of
$900,000 by making an additional $600,000 deposit with Landlord, as security for
the performance by Tenant of the terms of this Lease to be performed by Tenant,
and not as prepayment of rent.



        (b)
Landlord may apply such portion or portions of the Security Deposit as are
reasonably necessary for the following purposes: (i) to remedy any default
by Tenant in the payment of Base Monthly Rent or Additional Rent or a late
charge or interest on defaulted rent, or any other monetary payment obligation
of Tenant under this Lease; (ii) to repair damage to the Leased Premises,
the Building or the Outside Areas caused or permitted to occur by Tenant;
(iii) to clean and restore and repair the Leased Premises, the Building or
the Outside Areas following their surrender to Landlord if not surrendered in
the condition required pursuant to the provisions of Article 2, and (iv) to
remedy any other default of Tenant to the extent permitted by Law including,
without limitation, paying in full on Tenant’s behalf any sums claimed by
materialmen or contractors of Tenant to be owing to them by Tenant for work done
or improvements made at Tenant’s request to the Leased Premises. In this
regard, Tenant hereby waives any restriction on the uses to which the Security
Deposit may be applied as contained in Section 1950.7(c) of the California Civil
Code and/or any successor statute. In the event the Security Deposit or any
portion thereof is so used, Tenant shall pay to Landlord, promptly upon demand,
an amount in cash sufficient to restore the Security Deposit to the full
original sum or shall replenish the letter of credit, if applicable. Landlord
shall not be deemed a trustee of the Security Deposit. Landlord may use the
Security Deposit in Landlord’s ordinary business and shall not be required
to segregate it from Landlord’s general accounts. Tenant shall not be
entitled to any interest on any cash Security Deposit held by Landlord. If
Landlord transfers the Building or the Property during the Lease Term, Landlord
may pay the Security Deposit to any subsequent owner in conformity with the
provisions of Section 1950.7 of the California Civil Code and/or any successor
statute, in which event the transferring landlord shall be released from all
liability for the return of the Security Deposit.



6















	



ARTICLE 4



USE OF
LEASED PREMISES AND OUTSIDE AREA



4.1 Permitted
Use. Tenant shall be entitled to use the Leased Premises solely for the
“Permitted Use” as set forth in Article 1 and for no other purpose
whatsoever. Tenant shall have the right to vacate the Leased Premises at any
time during the Term of this Lease, provided Tenant maintains the Leased
Premises in the same condition as if fully occupied and as otherwise required by
the terms of this Lease. Tenant shall have the right to use the Outside Areas in
conjunction with its Permitted Use of the Leased Premises solely for the
purposes for which they were designed and intended and for no other purposes
whatsoever.



4.2 General
Limitations On Use. Tenant shall not do or permit anything to be done in or
about the Leased Premises, the Building, the Outside Areas or the Property which
does or could (i) jeopardize the structural integrity of the Building or
(ii) cause damage to any part of the Leased Premises, the Building, the
Outside Areas or the Property. Tenant shall not operate any equipment within the
Leased Premises which does or could (i) injure, vibrate or shake the Leased
Premises or the Building, (ii) damage, overload or impair the efficient
operation of any electrical, plumbing, heating, ventilating or air conditioning
systems within or servicing the Leased Premises or the Building, or
(iii) damage or impair the efficient operation of the sprinkler system (if
any) within or servicing the Leased Premises or the Building. Tenant shall not
(i) install any equipment or antennas on or make any penetrations of the
exterior walls or roof of the Building or (ii) affix any equipment or make
any penetrations or cuts in the floors, ceiling or walls of the Leased Premises,
without Landlord’s prior written consent, which consent shall not be
unreasonably withheld; provided, however, that it shall be reasonable for
Landlord to withhold its consent if Tenant’s proposed installations or
penetrations impact the structural integrity of the Building. Tenant shall not
place any loads upon the floors, walls, ceiling or roof systems which could
endanger the structural integrity of the Building or damage its floors,
foundations or supporting structural components. Tenant shall not place any
explosive, flammable or harmful fluids or other waste materials in the drainage
systems of the Leased Premises, the Building, the Outside Areas or the Property.
Tenant shall not drain or discharge any fluids in the landscaped areas or across
the paved areas of the Property. Tenant shall not use any of the Outside Areas
for the storage of its materials, supplies, inventory or equipment and all such
materials, supplies, inventory or equipment shall at all times be stored within
the Leased Premises. Tenant shall not commit nor permit to be committed any
waste in or about the Leased Premises, the Building, the Outside Areas or the
Property.



4.3 Trash
Disposal. Landlord shall provide trash bins or other adequate garbage
disposal facilities within the trash enclosure areas provided or permitted by
Landlord outside the Leased Premises sufficient for the interim disposal of all
of its trash, garbage and waste. All such trash, garbage and waste temporarily
stored in such areas shall be stored in such a manner so that it is not visible
from outside of such areas, and Landlord shall cause such trash, garbage and
waste to be regularly removed from the Property. Tenant shall keep the Leased
Premises in a clean, safe and neat condition and keep the Outside Areas (except
the trash enclosure areas) free and clear of all of Tenant’s trash,
garbage, waste and/or boxes, pallets and containers containing same at all
times.



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4.4 Signs.
Other than business identification signs allowed pursuant to this Section,
Tenant shall not place or install on or within any portion of the Leased
Premises, the exterior of the Building, the Outside Areas or the Property any
sign, advertisement, banner, placard, or picture which is visible from the
exterior of the Leased Premises.



4.5 Compliance
With Laws. Tenant shall abide by and shall promptly observe and comply with,
at its sole cost and expense, all Laws respecting the use and occupancy of the
Leased Premises, the Building, the Outside Areas or the Property including,
without limitation, all Laws governing the use and/or disposal of Hazardous
Materials (except that Tenant shall not be responsible for any Hazardous
Materials at the Leased Premises, the Building, the Outside Areas or the
Property not introduced by Tenant, its agents, employees or invitees), and shall
defend with competent counsel, indemnify and hold Landlord harmless from any
claims, damages or liability resulting from Tenant’s failure to so abide,
observe, or comply. Tenant’s obligations hereunder shall survive the
expiration or sooner termination of this Lease.



4.6 Compliance
With Insurance Requirements. With respect to any insurance policies required
or permitted to be carried by Landlord in accordance with the provision of this
Lease, copies of which have been or will, upon Tenant’s written request
therefor, be provided to Tenant, Tenant shall not conduct nor permit any other
person to conduct any activities nor keep, store or use (or allow any other
person to keep, store or use) any item or thing within the Leased Premises, the
Building, the Outside Areas or the Property which (i) is prohibited under
the terms of any such policies, (ii) could result in the termination of the
coverage afforded under any of such policies, (iii) could give to the
insurance carrier the right to cancel any of such policies, or (iv) could
cause an increase in the rates (over standard rates) charged for the coverage
afforded under any of such policies. Tenant shall comply with all requirements
of any insurance company, insurance underwriter, or Board of Fire Underwriters
which are necessary to maintain, at standard rates, the insurance coverages
carried by either Landlord or Tenant pursuant to this Lease.



4.7
Landlord’s Right To Enter. Landlord and its agents shall have the
right to enter the Leased Premises during normal business hours after giving
Tenant reasonable notice and subject to Tenant’s reasonable security
measures for the purpose of (i) inspecting the same; (ii) showing the
Leased Premises to prospective purchasers, mortgagees or tenants;
(iii) making necessary alterations approved by Tenant, additions or
repairs; (iv) posting notices, and (v) performing any of Tenant’s
obligations when Tenant has failed to do so beyond any applicable notice and
cure period. Landlord shall have the right to enter the Leased Premises during
normal business hours and during all reasonable times, subject to Tenant’s
reasonable security measures, for purposes of supplying any maintenance or
services agreed to be supplied by Landlord. Landlord shall have the right to
enter the Outside Areas during normal business hours for purposes of
(i) inspecting the exterior of the Building and the Outside Areas;
(ii) posting notices of nonresponsibility (and for such purposes Tenant
shall provide Landlord at least thirty days’ prior written notice of any
work to be performed on the Leased Premises); and (iii) supplying any
services to be provided by Landlord. Any entry into the Leased Premises or the
Outside Areas obtained by Landlord in accordance with this paragraph shall not
under any circumstances be construed or deemed to be a forcible or unlawful
entry into, or a detainer of, the Leased Premises, or an eviction, actual or
constructive of Tenant from the Leased Premises or any portion thereof. In
exercising its rights under this Section, Landlord shall use commercially
reasonable efforts to minimize interference with Tenant’s use of the Leased
Premises and the Outside Areas.



4.8
Environmental Protection. Tenant’s obligations under this Section
shall survive the expiration or termination of this Lease.



        (a)
As used herein, the term “Hazardous Materials” shall mean any toxic or
hazardous substance, material or waste or any pollutant or infectious or
radioactive material, including but not limited to those substances, materials
or wastes regulated now or in the future under any of the following statutes or
regulations and any and all of those substances included within the definitions
of “hazardous substances,” “hazardous materials,”
“hazardous waste,” “hazardous chemical substance or
mixture,” “imminently hazardous chemical substance or mixture,”
“toxic substances,” “hazardous air pollutant,” “toxic
pollutant,” or “solid waste” in the (a) Comprehensive
Environmental Response, Compensation and Liability Act of 1990
(“CERCLA” or “Superfund”), as amended by the Superfund
Amendments and Reauthorization Act of 1986 (“SARA”), 42 U.S.C.
§ 9601 et seq., (b) Resource Conservation and Recovery Act of
1976 (“RCRA”), 42 U.S.C. § 6901 et seq., (c) Federal
Water Pollution Control Act (“FSPCA”), 33 U.S.C. § 1251
et seq., (d) Clean Air Act (“CAA”), 42 U.S.C. § 7401
et seq., (e) Toxic Substances Control Act (“TSCA”), 14 U.S.C.
§ 2601 et seq., (f) Hazardous Materials Transportation Act, 49
U.S.C. § 1801, et seq., (g) Carpenter-Presley-Tanner Hazardous
Substance Account Act (“California Superfund”), Cal. Health &
Safety Code § 25300 et seq., (h) California Hazardous Waste
Control Act, Cal. Health & Safety code § 25100 et seq.,
(i) Porter-Cologne Water Quality Control Act (“Porter-Cologne
Act”), Cal. Water Code § 13000 et seq., (j) Hazardous
Waste Disposal Land Use Law, Cal. Health & Safety codes § 25220
et seq., (k) Safe Drinking Water and Toxic Enforcement Act of 1986
(“Proposition 65”), Cal. Health & Safety code § 25249.5
et seq., (l) Hazardous Substances Underground Storage Tank Law, Cal.
Health & Safety code § 25280 et seq., (m) Air
Resources Law, Cal. Health & Safety Code § 39000
et seq., and (n) regulations promulgated pursuant to said laws or
any replacement thereof, or as similar terms are defined in the federal, state
and local laws, statutes, regulations, orders or rules. Hazardous Materials
shall also mean any and all other biohazardous wastes and substances, materials
and wastes which are, or in the future become, regulated under applicable Laws
for the protection of health or the environment, or which are classified as
hazardous or toxic substances, materials or wastes, pollutants or contaminants,
as defined, listed or regulated by any federal, state or local law, regulation
or order or by common law decision, including, without limitation,
(i) trichloroethylene, tetrachloroethylene, perchloroethylene and other
chlorinated solvents, (ii) any petroleum products or fractions thereof,
(iii) asbestos, (iv) polychlorinted biphenyls, (v) flammable
explosives, (vi) urea formaldehyde, (vii) radioactive materials and
waste, and (viii) materials and wastes that are harmful to or may threaten
human health, ecology or the environment.



8















	



        (b)
Notwithstanding anything to the contrary in this Lease, Tenant, at its sole
cost, shall comply with all Laws relating to the storage, use and disposal of
Hazardous Materials by Tenant, its subtenants, their respective agents,
employees, contractors or invitees (collectively, the “Tenant
Parties”). Tenant shall not store, use or dispose of any Hazardous
Materials except for diminimus amounts typically used in offices and/or those
Hazardous Materials listed in a Hazardous Materials management plan
(“HMMP”) which Tenant shall deliver to Landlord upon execution of this
Lease and update at least annually with Landlord (“Permitted
Materials”) which may be used, stored and disposed of provided
(i) such Permitted Materials are used, stored, transported, and disposed of
in strict compliance with applicable laws, (ii) such Permitted Materials
shall be limited to the materials listed on and may be used only in the
quantities specified in the HMMP, and (iii) Tenant shall provide Landlord
with copies of all material safety data sheets and other documentation required
under applicable Laws in connection with Tenant’s use of Permitted
Materials as and when such documentation is provided to any regulatory authority
having jurisdiction, in no event shall Tenant cause or permit to be discharged
into the plumbing or sewage system of the Building or onto the land underlying
or adjacent to the Building any Hazardous Materials. Tenant shall be solely
responsible for and shall defend, indemnify, and hold Landlord and its agents
harmless from and against all claims, costs and liabilities, including
attorneys’ fees and costs, arising out of or in connection with
Tenant’s storage, use and/or disposal of Hazardous Materials. If the
presence of Hazardous Materials on the Leased Premises caused or permitted by
Tenant results in contamination or deterioration of water or soil, then Tenant
shall promptly take any and all action necessary to clean up such contamination
as required by Law, but the foregoing shall in no event be deemed to constitute
permission by Landlord to allow the presence of such Hazardous Materials.



4.9
Reservations. Landlord reserves the right from time to time to grant,
without the consent or joinder of Tenant, such easements, rights of way and
dedications that Landlord deems necessary, and to cause the recordation of
parcel maps and covenants, conditions and restrictions, so long as such
easements, rights of way, dedications and covenants, conditions and restrictions
do not materially and adversely affect the use of the Leased Premises by Tenant,
materially and adversely affect Tenant’s parking rights, and do not
prohibit any Permitted Use. Tenant agrees to execute any documents reasonably
request by Landlord to effectuate any such easement rights, dedications, maps or
covenants, conditions and restrictions.



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ARTICLE 5



REPAIRS,
MAINTENANCE, SERVICES AND UTILITIES



5.1 Repair And
Maintenance. Except in the case of damage to or destruction of the Leased
Premises, the Building, the Outside Areas or the Property caused by an act of
God or other peril, in which case the provisions of Article 10 shall control,
the parties shall have the following obligations and responsibilities with
respect to the repair and maintenance of the Leased Premises, the Building, the
Outside Areas, and the Property.



        (a)
Tenant’s Obligations. Tenant shall, at all times during the Lease
Term and at its sole cost and expense, continuously keep and maintain the Leased
Premises, excluding all Improvements, but including alterations, fixtures and
furnishings, in good order, condition and repair, subject to the provisions of
this Article 5 and Article 10. At Landlord’s option, if Tenant fails to
repair and maintain within a reasonable time following Landlord’s notice to
Tenant that such repair and maintenance is necessary, Landlord may make such
repair and maintenance. Within thirty (30) days of its receipt of
Landlord’s invoice, Tenant shall pay to Landlord Landlord’s
out-of-pocket costs incurred in connection with such repair and maintenance.



        (b)
Landlord’s Obligation. Landlord shall at its sole cost and expense,
(i) regularly clean and at all times during the Lease Term, maintain in
good condition and repair all portions of the Property (including the Leased
Premises) except those required to be maintained by Tenant pursuant to
Section 5.1(a) above.



5.2
Utilities. Landlord shall provide at its sole cost and expense, adequate
gas, water and electricity to the Leased Premises, provided that if Tenant
requires HVAC after normal business hours (which shall be from 8:00 a.m. to 7:00
p.m., Monday through Friday, and from 9:00 a.m. to 1:00 p.m. on Saturdays)
Landlord may charge Tenant $40.00 for the first hour for each zone for which
after hours HVAC is requested, and $15.00 for each additional hour for each
zone. Tenant shall be responsible for arranging for telephone service n
Tenant’s own name, at Tenant’s sole cost and expense.



5.3
Security. Landlord shall provide, at its sole cost and expense, a
security guard service, twenty four hours a day, seven days a week, to provide
security for the Leased Premises, the Building, the Outside Areas and the
Property. In addition, Landlord, at its sole cost and expense, shall provide
escort services from the Leased Premises to parking spaces provided hereunder,
if requested to do so by Tenant, but only on Monday through Friday after 7:00
p.m.



5.4
Janitorial. Landlord shall provide at its sole cost and expense, adequate
janitorial services to the Leased Premises, Monday through Friday, consistent
with customary and reasonable janitorial practices in class A office buildings
in the San Francisco Bay area.



5.5 Energy And
Resource Consumption. Landlord may voluntarily cooperate in a reasonable
manner with the efforts of governmental agencies and/or utility suppliers in
reducing energy or other resource consumption within the Property. Tenant shall
not be entitled to terminate this Lease or to any reduction in or abatement of
rent by reason of such compliance or cooperation. Tenant agrees at all times to
cooperate fully with Landlord and to abide by all reasonable rules established
by Landlord (i) in order to maximize the efficient operation of the
electrical, heating, ventilating and air conditioning systems and all other
energy or other resource consumption systems with the Property and/or
(ii) in order to comply with the requirements and recommendations of
utility suppliers and governmental agencies regulating the consumption of energy
and/or other resources.



5.6 Limitation
Of Landlord’s Liability. Landlord shall not be liable to Tenant for
injury to Tenant, its employees, agents, invitees or contractors, damage to
Tenant’s property or loss of Tenant’s business or profits, nor shall
Tenant be entitled to terminate this Lease or to any reduction in or abatement
of rent by reason of (i) Landlord’s failure to provide security
services or systems within the Property for the protection of the Leased
Premises, the Building or the Outside Areas, or the protection of Tenant’s
property or Tenant’s employees, invitees, agents or contractors, or
(ii) Landlord’s failure to perform any maintenance or repairs to the
Leased Premises, the Building, the Outside Areas or the Property until Tenant
shall have first notified Landlord, in writing, of the need for such maintenance
or repairs, and then only after Landlord shall have had a reasonable period of
time following its receipt of such notice within which to perform such
maintenance or repairs (not to exceed thirty (30) days), or (iii) any
failure, interruption, rationing or other curtailment in the supply of water,
electric current, gas or other utility service to the Leased Premises, the
Building, the Outside Areas or the Property from whatever cause (other than to
the extent caused by Landlord’s negligence or willful misconduct), or
(iv) the unauthorized intrusion or entry into the Leased Premises by third
parties (other than Landlord).



10















	



ARTICLE 6



ALTERATIONS
AND IMPROVEMENTS



6.1 By
Tenant. This provision refers to alterations made to the Leased Premises
after Tenant’s initial occupancy of the Leased Premises. Tenant shall not
make any alterations to or modifications of the Leased Premises or construct any
improvements within the Leased Premises until Landlord shall have first
approved, in writing, the plans and specifications therefor, which approval
shall not be unreasonably withheld or delayed. Landlord’s approval shall be
deemed given if not denied by Landlord in a written notice to Tenant delivered
within fifteen (15) days following receipt of Tenant’s written request.
Tenant’s written request shall also contain a request for Landlord to elect
whether or not it will require Tenant to remove the subject alterations,
modifications or improvements at the expiration or earlier termination of this
Lease. If such additional request is not included, Landlord may make such
election at the expiration or earlier termination of this Lease (and for
purposes of Tenant’s removal obligations set forth in Section 2.6 above,
Landlord shall be deemed to have made the election at the time the alterations,
modifications or improvements were completed). All modifications, alterations or
improvements, once approved by Landlord, shall be made, constructed or installed
by Tenant at Tenant’s expense (including all permit fees and governmental
charges related thereto), using a licensed contractor first approved by
Landlord, in substantial compliance with the Landlord-approved plans and
specifications therefor. All work undertaken by Tenant shall be done in
accordance with all Laws and in a good and workmanlike manner using new
materials of good quality. Tenant shall not commence the making of any such
modifications or alterations or the construction of any such improvements until
(i) all required governmental approvals and permits shall have been
obtained, (ii) all requirements regarding insurance imposed by this Lease
have been satisfied, (iii) Tenant shall have given Landlord at least
fifteen (15) days prior written notice of its intention to commence such work so
that Landlord may post and file notices of non-responsibility, and (iv) if
requested by Landlord, Tenant shall have obtained contingent liability and broad
form builder’s risk insurance in an amount satisfactory to Landlord in its
reasonable discretion to cover any perils relating to the proposed work not
covered by insurance carried by Tenant pursuant to Article 9. In no event shall
Tenant make any modification, alterations or improvements whatsoever to the
Outside Areas or the exterior or structural components of the Building
including, without limitation, any cuts or penetrations in the floor, roof or
exterior walls of the Leased Premises (except to the extent Tenant has obtained
Landlord’s approval pursuant to Section 4.2). As used in this Article, the
term “modifications, alterations and/or improvements” shall include,
without limitation, the installation of additional electrical outlets, overhead
lighting fixtures, drains, sinks, partitions, doorways, or the like.
Notwithstanding the foregoing, Tenant, without Landlord’s prior written
consent, shall be permitted to make non-structural alterations to the Building,
provided that: (a) such alterations do not exceed $7,500 individually,
(b) Tenant shall timely provide Landlord the notice required,
(c) Tenant shall notify Landlord in writing within thirty (30) days of
completion of the alteration and deliver to Landlord a set of the plans and
specifications therefor, either “as built” or marked to show
construction changes made, and (d) Tenant shall, upon Landlord’s
request, remove the alteration at the termination of the Lease and restore the
Leased Premises to their condition prior to such alteration.



6.2 Ownership
Of Improvements. All modifications, alterations and improvements made or
added to the Leased Premises by Tenant (other than Tenant’s inventory,
equipment, movable furniture, wall decorations and trade fixtures) shall be
deemed real property and a part of the Leased Premises, but shall remain the
property of Tenant during the Lease. Any such modifications, alterations or
improvements, once completed, shall not be altered or removed from the Leased
Premises during the Lease Term without Landlord’s written approval first
obtained in accordance with the provisions of Paragraph 6.1 above. At the
expiration or sooner termination of this Lease, all such modifications,
alterations and improvements other than Tenant’s inventory, equipment,
movable furniture, wall decorations and trade fixtures, shall automatically
become the property of Landlord and shall be surrendered to Landlord as part of
the Leased Premises as required pursuant to Article 2, unless Landlord shall
require Tenant to remove any of such modifications, alterations or improvements
in accordance with the provisions of Article 2, in which case Tenant shall so
remove same. Landlord shall have no obligations to reimburse Tenant for all or
any portion of the cost or value of any such modifications, alterations or
improvements so surrendered to Landlord. All modifications, alterations or
improvements which are installed or constructed on or attached to the Leased
Premises by Landlord and/or at Landlord’s expense shall be deemed real
property and a part of the Leased Premises and shall be property of Landlord.
All lighting, plumbing, electrical, heating, ventilating and air conditioning
fixtures, partitioning, window coverings, wall coverings and floor coverings
installed by Tenant shall be deemed improvements to the Leased Premises and not
trade fixtures of Tenant. Landlord shall have no lien or interest whatsoever in
any of Tenant’s property or equipment located in the Leased Premises or
elsewhere, and Landlord waives any such liens and interests.



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6.3 Alterations
Required By Law. Tenant shall make all modifications, alterations and
improvements to the Leased Premises, at its sole cost, that are required by any
Law because of (i) Tenant’s use or occupancy of the Leased Premises,
(ii) Tenant’s application for any permit or governmental approval, or
(iii) Tenant’s making of any modifications, alterations or
improvements to or within the Leased Premises.



6.4 Liens.
Tenant shall keep the Property and every part thereof free from any lien, and
shall pay when due all bills arising out of any work performed, materials
furnished, or obligations incurred by Tenant, its agents, employees or
contractors relating to the Property. If any such claim of lien is recorded
against Tenant’s interest in this Lease, the Property or any part thereof,
Tenant shall bond against, discharge or otherwise cause such lien to be entirely
released within ten days after the same has been recorded. Tenant’s failure
to do so shall be conclusively deemed a material default under the terms of this
Lease.



ARTICLE 7



ASSIGNMENT
AND SUBLETTING BY TENANT



7.1 By
Tenant. Except in connection with a Permitted Transfer, Tenant shall not
sublet the Leased Premises or any portion thereof or assign its interest in this
Lease, whether voluntarily or by operation of Law, without Landlord’s prior
written consent which shall not be unreasonably withheld. Any attempted
subletting or assignment without Landlord’s prior written consent (except a
Permitted Transfer), at Landlord’s election, shall constitute a default by
Tenant under the terms of this Lease. The acceptance of rent by Landlord from
any person or entity other than Tenant, or the acceptance of rent by Landlord
from Tenant with knowledge of a violation of the provisions of this paragraph,
shall not be deemed to be a waiver by Landlord of any provision of this Article
or this Lease or to be a consent to any subletting by Tenant or any assignment
of Tenant’s interest in this Lease. Without limiting the circumstances in
which it may be reasonable for Landlord to withhold its consent to an assignment
or subletting, Landlord and Tenant acknowledge that it shall be reasonable for
Landlord to withhold its consent in the following instances:



        (a)
the proposed assignee or sublessee is a governmental agency;



        (b) the
use of the Leased Premises by the proposed assignee or sublessee would involve
occupancy by other than a Permitted Use as set forth in Article 1, would entail
any alterations which would lessen the value of the leasehold improvements in
the Leased Premises, or would require increased services by Landlord;



        (c)
the financial worth of the proposed assignee does not meet the credit standards
applied by Landlord at the time of the proposed assignment;



        (d)
the proposed assignee or sublessee in the ten years prior to the assignment or
sublease has filed for bankruptcy protection, has been the subject of an
involuntary bankruptcy, or has been adjudged insolvent;



12















	



        (e)
Landlord has experienced a previous default by or is in litigation with the
proposed assignee or sublessee;



        (f)
the use of the Leased Premises by the proposed assignee or sublessee will
violate any applicable law, ordinance or regulation;



        (g)
the proposed assignment or sublease fails to include all of the terms and
provisions required to be included therein pursuant to this Article 7;



        (h)
in the case of a subletting of less than the entire Leased Premises, if the
subletting would result in the division of any floor of the Building into more
than two subleased parcels or would require improvements to be made outside of
the Leased Premises;



        (i)
the proposed transferee is an existing tenant in the Building and the Landlord
at that time has comparable available space for lease in the Building.



7.2 Merger,
Reorganization, or Sale of Assets. Each of the following shall be deemed a
voluntary assignment of Tenant’s interest in this Lease: (a) dissolution,
merger, consolidation or other reorganization of Tenant; or (b) at any time that
the capital stock of Tenant is not publicly traded on a recognized exchange, the
sale or transfer in one or more transactions to one or more related parties of a
controlling percentage of the capital stock of Tenant; or (c) or the sale or
transfer of all or substantially all of the assets of Tenant. The phrase
“controlling percentage” means the ownership of and the right to vote
stock possessing more than fifty percent of the total combined voting power of
all classes of Tenant’s capital stock issued, outstanding and entitled to
vote for the election of directors. If Tenant is a partnership, a withdrawal or
change, voluntary, involuntary or by operation of Law, of any general partner,
or the dissolution of the partnership, shall be deemed a voluntary assignment of
Tenant’s interest in this Lease. Notwithstanding the foregoing, Tenant (or
any Permitted Transferee, as defined herein) may, without Landlord’s prior
written consent and without being subject to any of the provisions of this
Article 7, including without limitation, Landlord’s right to recapture any
portion of the Leased Premises, sublet the Leased Premises or assign this Lease
to (individually, a “Permitted Transferee,” collectively,
“Permitted Transferees”): (i) a subsidiary, affiliate, parent,
division, entity or joint venture controlling, controlled by or under common
control with Tenant; or (ii) a successor corporation related to Tenant by
merger, consolidation, nonbankruptcy reorganization, or government action; or
(iii) a purchaser of all or substantially all of the assets of Tenant;
provided that either (1) Tenant shall remain primarily liable under the Lease
(except in the event it is not the surviving entity in the merger) or (2) that
any Permitted Transferee under (i), (ii) or (iii) above has a net worth equal to
or greater than Tenant’s and does not have any contingent or off-balance
sheet liabilities that make it less credit worthy than Tenant as of the date of
this Lease. In the event any proposed assignee or subtenant under (i), (ii) or
(iii) above has a net worth less than Tenant or has contingent or off-balance
sheet liabilities that make it less credit worthy than Tenant, Landlord’s
consent (pursuant to Section 7.1 above) shall be required and all of the terms
and conditions of this Article 7 shall apply, except that Landlord shall not be
entitled to terminate this Lease pursuant to Section 7.3, and Landlord shall not
be entitled to any assignment consideration or excess rentals pursuant to
Section 7.5 of this Lease. If any proposed assignee or subtenant under (i), (ii)
or (iii) above does not qualify as a Permitted Transferee because it has a net
worth which is less than Tenant or has contingent or off-balance sheet
liabilities that make it less creditworthy than Tenant, then in the event
Landlord nevertheless consents (pursuant to the provisions of Section 7.1 above)
to such proposed assignee or subtenant, such proposed assignee or subtenant
shall constitute a Permitted Transferee under this Lease.



7.3
Landlord’s Election. If Tenant shall desire to assign its interest
under the Lease or to sublet all or any portion of the Leased Premises, except
in connection with a Permitted Transfer Tenant must first notify Landlord, in
writing, of its intent to so assign or sublet, at least twenty (20) days in
advance of the date it intends to so assign its interest in this Lease or sublet
the Leased Premises but not sooner than one hundred eighty days in advance of
such date, specifying in detail the terms of such proposed assignment or
subletting, including the name of the proposed assignee or sublessee, the
property assignee’s or sublessee’s intended use of the Leased
Premises, current financial statements (including a balance sheet, income
statement and statement of cash flow, all prepared in accordance with generally
accepted accounting principles) of such proposed assignee or sublessee, the form
of documents to be used in effectuating such assignment or subletting and such
other information as Landlord may reasonably request. Landlord shall have a
period of twenty (20) days following receipt of such notice and the required
information within which to do one of the following: (i) consent to such
requested assignment or subletting subject to Tenant’s compliance with the
conditions set forth in Paragraph 7.4 below, or (ii) refuse to so
consent to such requested assignment or subletting, provided that such consent
shall not be unreasonably refused, or (iii) in the case of an assignment of
this Lease or sublet of any part of the Leased Premises for the remainder of the
term, terminate this Lease. During such ten (10) day period, Tenant covenants
and agrees to supply to Landlord, upon request, all necessary or relevant
information which Landlord may reasonably request respecting such proposed
assignment or subletting and/or the proposed assignee or sublessee.
Notwithstanding the foregoing, if Landlord elects to terminate the Lease as
provided herein, Landlord shall notify Tenant thereof during such ten (10) day
period and Tenant shall either (i) accept Landlord’s termination or
(ii) rescind its request for consent to the assignment or subletting, in
which case the Lease shall continue in full force and effect between Tenant and
Landlord.



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7.4 Assignment
Consideration And Excess Rentals Defined. For purposes of this Article,
including any amendment to this Article by way of addendum or other writing, the
term “assignment consideration” shall mean all consideration to be
paid by the assignee to Tenant or to any other party on Tenant’s behalf or
for Tenant’s benefit as consideration for such assignment, after deduction
for reasonable leasing commissions and reasonable legal fees incurred by Tenant
in connection with such assignment and, the cost of tenant improvements made by
Tenant at Tenant’s sole cost and expense to prepare the Leased Premises for
the assignee, but without deduction for any other costs or expenses. The term
“excess rentals” shall mean all consideration to be paid by the
sublessee to Tenant or to any other party on Tenant’s behalf or for
Tenant’s benefit for the sublease of the Leased Premises in excess of the
rent due to Landlord under the terms of this Lease for the same period, after
deduction for reasonable leasing commissions and reasonable legal fees incurred
by Tenant in connection with such sublease and the cost of tenant improvements
made by Tenant at Tenant’s sole cost and expense to prepare the Leased
Premises for the subtenant, but without deduction for any other costs or
expenses. Tenant agrees that sixty-five percent (65%) of any assignment
consideration and/or excess rentals arising from any assignment or subletting by
Tenant which is to be paid to Landlord pursuant to this Article now is and shall
then be the property of Landlord and not the property of Tenant.



7.5
Payments. All payments required by this Article to be made to Landlord
shall be made in cash in full as and when they become due. At the time Tenant,
Tenant’s assignee or sublessee makes each such payment to Landlord, Tenant
or Tenant’s assignee or sublessee, as the case may be, shall deliver to
Landlord an itemized statement in reasonable detail showing the method by which
the amount due Landlord was calculated and certified by the party making such
payment as true and correct.



7.6 Effect Of
Landlord’s Consent. No subletting or assignment, even with the consent
of Landlord, shall relieve Tenant of its personal and primary obligation to pay
rent and to perform all of the other obligations to be performed by Tenant
hereunder. Consent by Landlord to one or more assignments of Tenant’s
interest in this Lease or to one or more sublettings of the Leased Premises
shall not be deemed to be a consent to any subsequent assignment or subletting.



ARTICLE 8



LIMITATION
ON LANDLORD’S LIABILITY AND INDEMNITY



8.1 Limitation
On Landlord’s Liability And Release. Landlord shall not be liable to
Tenant for, and Tenant hereby releases Landlord and its partners, principals,
members, officers, agents, employees, lenders, attorneys, and consultants from,
any and all liability, whether in contract, tort or on any other basis, for any
injury to or any damage sustained by Tenant, Tenant’s agents, employees,
contractors or invitees, any damage to Tenant’s property, or any loss to
Tenant’s business, loss of Tenant’s profits or other financial loss of
Tenant resulting from or attributable to the condition of, the management of,
the repair or maintenance of, the protection of, the supply of services or
utilities to, the damage in or destruction of the Leased Premises, the Building,
the Property or the Outside Areas, including without limitation (i) the
failure, interruption, rationing or other curtailment or cessation in the supply
of electricity, water, gas or other utility service to the Property, the
Building or the Leased Premises; (ii) the vandalism or forcible entry into
the Building or the Leased Premises; (iii) the penetration of water into or
onto any portion of the Leased Premises; (iv) the failure to provide security
and/or adequate lighting in or about the Property, the Building or the Leased
Premises, (v) the existence of any design or construction defects within the
Property, the Building or the Leased Premises; (vi) the failure of any
mechanical systems to function properly (such as the HVAC systems);
(vii) the blockage of access to any portion of the Property, the Building
or the Leased Premises, except that Tenant does not so release Landlord from
such liability to the extent such damage was proximately caused by
Landlord’s negligence, willful misconduct, or Landlord’s failure to
perform an obligation expressly undertaken pursuant to this Lease after a
reasonable period of time (not to exceed 15 days) shall have lapsed
following receipt of written notice from Tenant to so perform such obligation.
In this regard, Tenant acknowledges that it is fully apprised of the provisions
of Law relating to releases, and particularly to those provisions contained in
Section 1542 of the California Civil Code which reads as follows:



14


















	 	“A general release does not extend to claims which the creditor does not know
or suspect to exist in his favor at the time of executing the release, which
if known by him must have materially affected his settlement with the debtor.”	 






	


Notwithstanding such
statutory provision, and for the purpose of implementing a full and complete
release and discharge, Tenant hereby (i) waives the benefit of such
statutory provision and (ii) acknowledges that, subject to the exceptions
specifically set forth herein, the release and discharge set forth in this
paragraph is a full and complete settlement and release and discharge of all
claims and is intended to include in its effect, without limitation, all claims
which Tenant, as of the date hereof, does not know of or suspect to exist in its
favor.



8.2
Tenant’s Indemnification Of Landlord. Tenant shall defend with
competent counsel satisfactory to Landlord any claims made or legal actions
filed or threatened against Landlord with respect to the violation of any Law,
or the death, bodily injury, personal injury, property damage, or interference
with contractual or property rights suffered by any third party, occurring
within the Leased Premises or resulting from Tenant’s use or occupancy of
the Leased Premises, the Building or the Outside Areas, or resulting from
Tenant’s activities in or about the Leased Premises, the Building, the
Outside Areas or the Property, and Tenant shall indemnify and hold Landlord,
Landlord’s partners, principals, members, employees, agents and contractors
harmless from any loss liability, penalties, or expense whatsoever (including
any loss attributable to vacant space which otherwise would have been leased,
but for such activities) resulting therefrom, except to the extent proximately
caused by the negligence or willful misconduct of Landlord or Landlord’s
failure to perform an obligation expressly undertaken pursuant to this Lease
after a reasonable period of time not to exceed 15 days shall have lapsed
following receipt of written notice from Tenant to so perform such obligation.
This indemnity agreement shall survive the expiration or sooner termination of
this Lease. The parties acknowledge that this paragraph has been the subject of
negotiation.



ARTICLE 9



INSURANCE



9.1
Tenant’s Insurance. Tenant shall maintain insurance complying with
all of the following:



        (a)
Tenant shall procure, pay for and keep in full force and effect, at all times
during the Lease Term, the following:










	 	        (i)
Comprehensive general liability insurance insuring Tenant against liability for personal
injury, bodily injury, death and damage to property occurring within the Leased Premises,
or resulting from Tenant’s use or occupancy of the Leased Premises, the Building, the
Outside Areas or the Property, or resulting from Tenant’s activities in or about the
Leased Premises or the Property, with coverage in an amount equal to Tenant’s
Required Liability Coverage (as set forth in Article 1), which insurance shall contain a
“broad form liability” endorsement insuring Tenant’s performance of
Tenant’s obligations to indemnify Landlord as contained in this Lease.






	


15


















	 	        (ii)
Fire and property damage insurance in so-called “fire and extended coverage”
form insuring Tenant against loss from physical damage to Tenant’s personal property,
inventory, trade fixtures and equipment within the Leased Premises with coverage for the
full actual replacement cost thereof;






	 	        (iii)
Plate glass insurance, at actual replacement cost;






	 	        (iv)
Pressure vessel insurance, if applicable;






	 	        (v)
Workers’ compensation insurance and any other employee benefit insurance sufficient
to comply with all laws; and






	 	        (vi)
With respect to making of alterations or the construction of improvements or the like
undertaken by Tenant, contingent liability and builder’s risk insurance, in an amount
and with coverage reasonably satisfactory to Landlord.






	


        (b)
Each policy of liability insurance required to be carried by Tenant pursuant to
this paragraph or actually carried by Tenant with respect to the Leased Premises
or the Property: (i) shall, except with respect to insurance required by
subparagraph (a)(vi) above, name Landlord, and such others as are designated by
Landlord, as additional insureds; (ii) shall be primary insurance providing
that the insurer shall be liable for the full amount of the loss, up to and
including the total amount of liability set forth in the declaration of
coverage, without the right of contribution from or prior payment by any other
insurance coverage of Landlord; (iii) shall be in a form satisfactory to
Landlord; (iv) shall be carried with companies reasonably acceptable to
Landlord with Best’s ratings of at least A and XI; (v) shall provide
that such policy shall not be subject to cancellation, lapse or change except
after at least thirty days prior written notice to Landlord, and (vi) shall
contain a so-called “severability” or “cross liability”
endorsement. Each policy of property insurance maintained by Tenant with respect
to the Leased Premises or the Property or any property therein (i) shall
provide that such policy shall not be subject to cancellation, lapse or change
except after at least thirty days prior written notice to Landlord and
(ii) shall contain a waiver and/or a permission to waive by the insurer of
any right of subrogation against Landlord, its partners, principals, members,
officers, employees, agents and contractors, which might arise by reason of any
payment under such policy or by reason of any act or omission of Landlord, its
partners, principals, members, officers, employees, agents and contractors.



        (c)
Prior to the time Tenant or any of its contractors enters the Leased Premises,
Tenant shall deliver to Landlord, with respect to each policy of insurance
required to be carried by Tenant pursuant to this Article, a copy of such policy
(appropriately authenticated by the insurer as having been issued, premium paid)
or a certificate of the insurer certifying in form satisfactory to Landlord that
a policy has been issued, premium paid, providing the coverage required by this
Paragraph and containing the provisions specified herein. With respect to each
renewal or replacement of any such insurance, the requirements of this Paragraph
must be complied with not less than thirty days prior to the expiration or
cancellation of the policies being renewed or replaced. Landlord may, at any
time and from time to time, inspect and/or copy any and all insurance policies
required to be carried by Tenant pursuant to this Article. If Landlord’s
Lender, insurance broker, advisor or counsel reasonably determines at any time
that the amount of coverage set forth in Paragraph 9.1(a) for any policy of
insurance Tenant is required to carry pursuant to this Article is not adequate,
then Tenant shall increase the amount of coverage for such insurance to such
greater amount as Landlord’s Lender, insurance broker, advisor or counsel
reasonably deems adequate.



9.2
Landlord’s Insurance. With respect to insurance maintained by
Landlord:



        (a)
Landlord shall maintain, as the minimum coverage required of it by this Lease,
fire and property damage insurance in so-called “fire and extended
coverage” form insuring Landlord (and such others as Landlord may
designate) against loss from physical damage to the Building with coverage of
not less than one hundred percent (100%) of the full actual replacement cost
thereof and against loss of rents for a period of not less than six months. Such
fire and property damage insurance, at Landlord’s election but without any
requirements on Landlord’s behalf to do so, (i) may be written in
so-called “all risk” form, excluding only those perils commonly
excluded from such coverage by Landlord’s then property damage insurer;
(ii) may provide coverage for physical damage to the improvements so
insured for up to the entire full actual replacement cost thereof;
(iii) may be endorsed to cover loss or damage caused by any additional
perils against which Landlord may elect to insure, including earthquake and/or
flood; and/or (iv) may provide coverage for loss of rents for a period of
up to twelve months. Landlord shall not be required to cause such insurance to
cover any of Tenant’s personal property, inventory, and trade fixtures, or
any modifications, alterations or improvements made or constructed by Tenant to
or within the Leased Premises. Landlord shall use commercially reasonable
efforts to obtain such insurance at competitive rates.



16















	



        (b)
Landlord shall maintain comprehensive general liability insurance insuring
Landlord (and such others as are designated by Landlord) against liability for
personal injury, bodily injury, death, and damage to property occurring in, on
or about, or resulting from the use or occupancy of the Property, or any portion
thereof, with combined single limit coverage of at least Three Million Dollars
($3,000,000). Landlord may carry such greater coverage as Landlord or
Landlord’s Lender, insurance broker, advisor or counsel may from time to
time determine is reasonably necessary for the adequate protection of Landlord
and the Property.



        (c)
Landlord may maintain any other insurance which in the opinion of its insurance
broker, advisor or legal counsel is prudent in carry under the given
circumstances, provided such insurance is commonly carried by owners of property
similarly situated and operating under similar circumstances.



9.3 Mutual
Waiver Of Subrogation. Landlord hereby releases Tenant, and Tenant hereby
releases Landlord and its respective partners, principals, members, officers,
agents, employees and servants, from any and all liability for loss, damage or
injury to the property of the other in or about the Leased Premises or the
Property which is caused by or results from a peril or event or happening which
is covered by insurance actually carried and in force at the time of the loss by
the party sustaining such loss; provided, however, that such waiver shall
be effective only to the extent permitted by the insurance covering such loss
and to the extent such insurance is not prejudiced thereby.



ARTICLE
10



DAMAGE
TO LEASED PREMISES



10.1
Landlord’s Duty To Restore. If the Leased Premises, the Building or
the Outside Area are damaged by any peril after the Effective Date of this
Lease, Landlord shall restore the same, as and when required by this paragraph,
unless this Lease is terminated by Landlord pursuant to Paragraph 10.3 or
by Tenant pursuant to Paragraph 10.4. If this Lease is not so terminated,
then upon the issuance of all necessary governmental permits, Landlord shall
commence and diligently prosecute to completion the restoration of the Leased
Premises, the Building or the Outside Area, as the case may be, to the extent
then allowed by law, to substantially the same condition in which it existed as
of the Commencement Date. Landlord’s obligation to restore shall be limited
to the improvements constructed by Landlord. Landlord shall have no obligation
to restore any alterations made by Tenant to the Leased Premises or any of
Tenant’s personal property, inventory or trade fixtures. Upon completion of
the restoration by Landlord, Tenant shall forthwith replace or fully repair all
of Tenant’s personal property, inventory, trade fixtures to like or similar
conditions as existed at the time immediately prior to such damage or
destruction.



10.2 Insurance
Proceeds. All insurance proceeds available from the fire and property damage
insurance carried by Landlord shall be paid to and become the property of
Landlord. If this Lease is terminated pursuant to either Paragraph 10.3 or
10.4, all insurance proceeds available from insurance carried by Tenant which
cover loss of property that is Landlord’s property or would become
Landlord’s property on termination of this Lease shall be paid to and
become the property of Landlord, and the remainder of such proceeds shall be
paid to and become the property of Tenant. If this Lease is not terminated
pursuant to either Paragraph 10.3 or 10.4, all insurance proceeds available
from insurance carried by Tenant which cover loss to property that is
Landlord’s property shall be paid to and become the property of Landlord,
and all proceeds available from such insurance which cover loss to property
which would only become the property of Landlord upon the termination of this
Lease shall be paid to and remain the property of Tenant. The determination of
Landlord’s property and Tenant’s property shall be made pursuant to
Paragraph 6.2.



17















	



10.3
Landlord’s Right To Terminate. Landlord shall have the option to
terminate this Lease in the event any of the following occurs, which option may
be exercised only by delivery to Tenant of a written notice of election to
terminate within thirty days after the date of such damage or destruction:



        (a)
The Building is damaged by any peril covered by valid and collectible insurance
actually carried by Landlord and in force at the time of such damage or
destruction or by any peril which would have been covered by the insurance
Landlord is required to maintain pursuant to Section 9.2 (an “Insured
Peril”) to such an extent that the estimated cost to restore the Building
exceeds the lesser of (i) the insurance proceeds available from insurance
actually carried by Landlord (or which Landlord was required to carry pursuant
to Section 9.2(a) hereof) plus the amount of any deductible (up to a maximum
amount of five percent (5%) of the replacement cost of the Building), plus any
amount that the Tenant agrees in writing to contribute towards restoration, or
(ii) fifty percent of the then actual replacement cost of the Building;



        (b)
The Building is damaged by an uninsured peril, which peril Landlord was not
required to insure against pursuant to the provisions of Article 9 of this
Lease, provided, however, that, subject to the requirements of the holder of any
deed of trust encumbering the Property, Landlord shall not have the right to
terminate this Lease if Tenant notifies Landlord, within thirty (30) days after
Tenant receives Landlord’s written notice of termination pursuant to this
Section 10.3, that Tenant will pay for the cost of restoration of the Leased
Premises, in excess of any insurance proceeds to be received by Landlord.



        (c)
The Building is damaged by any peril and, because of the laws then in force, the
Building (i) cannot be restored at reasonable cost or (ii) if
restored, cannot be used for the same use being made thereof before such damage.



10.4
Tenant’s Right To Terminate. If the Leased Premises, the Building or
the Outside Area are damaged by any peril and Landlord does not elect to
terminate this Lease or is not entitled to terminate this Lease pursuant to this
Article, then as soon as reasonably practicable, Landlord shall furnish Tenant
with the written opinion of Landlord’s architect or construction consultant
as to when the restoration work required of Landlord may be complete. Tenant
shall have the option to terminate this Lease in the event any of the following
occurs, which option may be exercised only by delivery to Landlord of a written
notice of election to terminate within thirty (30) days after Tenant receives
from Landlord the estimate of the time needed to complete such restoration:



        (a)
If the time estimated to substantially complete the restoration exceeds nine (9)
months from and after the date the architect’s or construction
consultant’s written opinion is delivered; or



        (b)
If the damage occurred within twelve months of the last day of the then current
Lease Term, unless at the time of damage or destruction, Tenant has an option to
extend, in which case this Lease shall not terminate if Tenant elects to
exercise its option to extend.



10.5
Tenant’s Waiver. Landlord and Tenant agree that the provisions of
Paragraph 10.4 above, captioned “Tenant’s Right To
Terminate”, are intended to supersede and replace the provisions contained
in California Civil Code, Section 1932, Subdivision 2, and California Civil
Code, Section 1934, and accordingly, Tenant hereby waives the provisions of such
Civil Code Sections and the provisions of any successor Civil Code Sections or
similar laws hereinafter enacted.



10.6 Abatement
Of Rent. In the event of damage to the Leased Premises which does not result
in the termination of this Lease, the Base Monthly Rent (and any Additional
Rent) shall be temporarily abated during the period of restoration in proportion
in the degree to which Tenant’s use of the Leased Premises is impaired by
such damage.



18















	



ARTICLE
11



CONDEMNATION



11.1
Tenant’s Right To Terminate. Except as otherwise provided in
Paragraph 11.4 below regarding temporary takings, Tenant shall have the
option to terminate this Lease if, as a result of any taking, (i) all of
the Leased Premises is taken, or (ii) twenty-five percent (25%) or more of
the Leased Premises is taken and the part of the Leased Premises that remains
cannot, within a reasonable period of time, be made reasonably suitable for the
continued operation of Tenant’s business, or (iii) or a portion of the
Outside Area is taken such that the parking available to Tenant is reduced by
more than thirty-five percent (35%), and the Landlord does not, within a
reasonable period of time, provide alternative parking arrangements within a
reasonable walking distance of the Leased Premises. Tenant must exercise such
option within a reasonable period of time, to be effective on the later to occur
of (i) the date that possession of that portion of the Leased Premises that
is condemned is taken by the condemnor or (ii) the date Tenant vacated the
Leased Premises.



11.2
Landlord’s Right To Terminate. Except as otherwise provided in
Paragraph 11.4 below regarding temporary takings, Landlord shall have the
option to terminate this Lease if, as a result of any taking, (i) all of
the Leased Premises is taken, (ii) twenty-five percent (25%) or more of the
Leased Premises is taken and the part of the Leased Premises that remains
cannot, within a reasonable period of time, be made reasonably suitable for the
continued operation of Tenant’s business, or (iii) because of the laws
then in force, the Leased Premises may not be used for the same use being made
before such taking, whether or not restored as required by Paragraph 11.3
below. Any such option to terminate by Landlord must be exercised within a
reasonable period of time, to be effective as of the date possession is taken by
the condemnor.



11.3
Restoration. If any part of the Leased Premises or the Building is taken
and this Lease is not terminated, then Landlord shall, to the extent not
prohibited by laws then in force, repair any damage occasioned thereby to the
remainder thereof to a condition reasonably suitable for Tenant’s continued
operations and otherwise, to the extent practicable, in the manner and to the
extent provided in Paragraph 10.1.



11.4 Temporary
Taking. If a portion of the Leased Premises is temporarily taken for a
period of one year or less and such period does not extend beyond the Lease
Expiration Date, this Lease shall remain in effect. If any portion of the Leased
Premises is temporarily taken for a period which exceeds one year or which
extends beyond the Lease Expiration Date, then the rights of Landlord and Tenant
shall be determined in accordance with Paragraphs 11.1 and 11.2 above.



11.5 Division
Of Condemnation Award. Any award made for any taking of the Property, the
Building, or the Leased Premises, or any portion thereof, shall belong to and be
paid to Landlord, and Tenant hereby assigns to Landlord all of its right, title
and interest in any such award; provided, however, that Tenant shall be
entitled to receive any portion of the award that is made specifically
(i) for the taking of personal property, inventory or trade fixtures
belonging to Tenant, (ii) for the interruption of Tenant’s business or
its moving costs, or (iii) for the value of any leasehold improvements
installed and paid for by Tenant. The rights of Landlord and Tenant regarding
any condemnation shall be determined as provided in this Article, and each party
hereby waives the provisions of Section 1265.130 of the California Code of Civil
Procedure, and the provisions of any similar law hereinafter enacted, allowing
either party to petition the Superior Court of Alameda County to terminate this
Lease and/or otherwise allocate condemnation awards between Landlord and Tenant
in the event of a taking of the Leased Premises.



11.6 Abatement
Of Rent. In the event of a taking of the Leased Premises which does not
result in a termination of this Lease (other than a temporary taking), then, as
of the date possession is taken by the condemning authority, the Base Monthly
Rent shall be reduced in the same proportion that the area of that part of the
Leased Premises so taken (less any addition to the area of the Leased Premises
by reason of any reconstruction) bears to the area of the Leased Premises
immediately prior to such taking.



19















	



11.7 Taking
Defined. The term “taking” or “taken” as used in this
Article 11 shall mean any transfer or conveyance of all or any portion of the
Property to a public or quasi-public agency or other entity having the power of
eminent domain pursuant to or as a result of the exercise of such power by such
an agency, including any inverse condemnation and/or any sale or transfer by
Landlord of all or any portion of the Property to such an agency under threat of
condemnation or the exercise of such power.



ARTICLE
12



DEFAULT AND
REMEDIES



12.1 Events Of
Tenant’s Default. Tenant shall be in default of its obligations under
this Lease if any of the following events occur:



        (a)
Tenant shall have failed to pay Base Monthly Rent or any Additional Rent within
three (3) days after notice from Landlord that such rent is past due
provided, however, that such notice shall be concurrent with, and not in
addition to, any notice required by applicable Laws; or



        (b)
Tenant shall have done or permitted to be done any act, use or thing in its use,
occupancy or possession of the Leased Premises or the Building or the Outside
Areas which is prohibited by the terms of this Lease or Tenant shall have failed
to perform any term, covenant or condition of this Lease (except those requiring
the payment of Base Monthly Rent or Additional Rent, which failures shall be
governed by subparagraph (a) above) within thirty (30) days after written
notice from Landlord to Tenant specifying the nature of such failure and
requesting Tenant to perform same or within such longer period as is reasonably
required in the event such default is curable but not within such thirty (30)
day period, provided such cure is promptly commenced within such thirty
(30) day period and is thereafter diligently prosecuted to completion; or



        (c)
Tenant shall have sublet the Leased Premises or assigned or encumbered its
interest in this Lease in violation of the provisions contained in Article 7,
whether voluntarily or by operation of law; or



        (d)
Tenant or any Guarantor of this Lease shall have permitted or suffered the
sequestration or attachment of, or execution on, or the appointment of a
custodian or receiver with respect to, all or any substantial part of the
property or assets of Tenant (or such Guarantor) or any property or asset
essential to the conduct of Tenant’s (or such Guarantor’s) business,
and Tenant (or such Guarantor) shall have failed to obtain a return or release
of the same within thirty days thereafter, or prior to sale pursuant to such
sequestration, attachment or levy, whichever is earlier; or



        (e)
Tenant or any Guarantor of this Lease shall have made a general assignment of
all or a substantial part of its assets for the benefit of its creditors; or



        (f)
Tenant or any Guarantor of this Lease shall have allowed (or sought) to have
entered against it a decree or order which: (i) grants or constitutes an
order for relief, appointment of a trustee, or condemnation or a reorganization
plan under the bankruptcy laws of the United States; (ii) approves as
properly filed a petition seeking liquidation or reorganization under said
bankruptcy laws or any other debtor’s relief law or similar statute of the
United States or any state thereof; or (iii) otherwise directs the winding
up or liquidation of Tenant; provided, however, if any decree or order was
entered without Tenant’s consent or over Tenant’s objection, Landlord
may not terminate this Lease pursuant to this Subparagraph if such decree or
order is rescinded or reversed within thirty days after its original entry; or



        (g)
Tenant or any Guarantor of this Lease shall have availed itself of the
protection of any debtor’s relief law, moratorium law or other similar law
which does not require the prior entry of a decree or order; or



20















	



        (h)
Tenant shall have failed to pay any installment of the Termination Fee (as
defined in the Termination Agreement), and such failure shall have remained
uncured for ten (10) days following Tenant’s receipt of Landlord’s
written notice of non-payment.



12.2
Landlord’s Remedies. In the event of any default by Tenant, and
without limiting Landlord’s right to indemnification as provided in Article
8.2, Landlord shall have the following remedies, in addition to all other rights
and remedies provided by law or otherwise provided in this Lease, to which
Landlord may resort cumulatively, or in the alternative:



        (a)
Landlord may, at Landlord’s election, keep this Lease in effect and
enforce, by an action at law or in equity, all of its rights and remedies under
this Lease including, without limitation, (i) the right to recover the rent
and other sums as they become due by appropriate legal action, (ii) the
right to make payments required by Tenant, or perform Tenant’s obligations
and be reimbursed by Tenant for the cost thereof with interest at the then
maximum rate of interest not prohibited by law from the date the sum is paid by
Landlord until Landlord is reimbursed by Tenant, and (iii) the remedies of
injunctive relief and specific performance to prevent Tenant from violating the
terms of this Lease and/or to compel Tenant to perform its obligations under
this Lease, as the case may be.



        (b)
Landlord may, at Landlord’s election, terminate this Lease by giving Tenant
written notice of termination, in which event this Lease shall terminate on the
date set forth for termination in such notice, in which event Tenant shall
immediately surrender the Leased Premises to Landlord, and if Tenant fails to do
so, Landlord may, without prejudice to any other remedy which it may have for
possession or arrearages in rent, enter upon and take possession of the Leased
Premises and expel or remove Tenant and any other person who may be occupying
the Leased Premises or any part thereof, without being liable for prosecution or
any claim or damages therefor. Any termination under this subparagraph shall not
relieve Tenant from its obligation to pay to Landlord all Base Monthly Rent and
Additional Rent then or thereafter due, or any other sums due or thereafter
accruing to Landlord, or from any claim against Tenant for damages previously
accrued or then or thereafter accruing. In no event shall any one or more of the
following actions by Landlord, in the absence of a written election by Landlord
to terminate this Lease, constitute a termination of this Lease:










	 	        (i)
Appointment of a receiver or keeper in order to protect Landlord’s interest
hereunder;






	 	        (ii)
Consent to any subletting of the Leased Premises or assignment of this Lease by Tenant,
whether pursuant to the provisions hereof or otherwise; or






	 	        (iii)
Any action taken by Landlord or its partners, principals, members, officers, agents,
employees, or servants, which is intended to mitigate the adverse effects of any breach of
this Lease by Tenant, including, without limitation, any action taken to maintain and
preserve the Leased Premises on any action taken to relet the Leased Premises or any
portion thereof for the account at Tenant and in the name of Tenant.






	


        (c)
In the event Tenant breaches this Lease and abandons the Leased Premises,
Landlord may terminate this Lease, but this Lease shall not terminate unless
Landlord gives Tenant written notice of termination. If Landlord does not
terminate this Lease by giving written notice of termination, Landlord may
enforce all its rights and remedies under this Lease, including the right and
remedies provided by California Civil Code Section 1951.4 (“Landlord may
continue lease in effect after lessee’s breach and abandonment and recover
rent as it becomes due, if lessee has right to sublet or assign, subject only to
reasonable limitations”), as in effect on the Effective Date of this Lease.



        (d)
In the event Landlord terminates this Lease, Landlord shall be entitled, at
Landlord’s election, to the rights and remedies provided in California
Civil Code Section 1951.2, as in effect on the Effective Date of this Lease. For
purposes of computing damages pursuant to Section 1951.2, an interest rate equal
to the maximum rate of interest then not prohibited by law shall be used where
permitted. Such damages shall include, without limitation:



21


















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






	 	        (ii)
The worth at the time of award of the amount by which the unpaid rent for the balance of
the term after the time of award exceeds the amount of such rental loss that Tenant proves
could be reasonably avoided, computed by discounting such amount at the discount rate of
the Federal Reserve Bank of San Francisco, at the time of award plus one percent; and






	 	        (iii)
Any other amount necessary to compensate Landlord for all detriment proximately caused by
Tenant’s failure to perform Tenant’s obligations under this Lease, or which in
the ordinary course of things would be likely to result therefrom, including without
limitation, the following: (i) expenses for cleaning, repairing or restoring the
Leased Premises, (ii) expenses for altering, remodeling or otherwise improving the
Leased Premises for the purpose of reletting, including removal of existing leasehold
improvements and/or installation of additional leasehold improvements (regardless of how
the same is funded, including reduction of rent, a direct payment or allowance to a new
tenant, or otherwise), (iii) broker’s fees allocable to the remainder of the
term of this Lease, advertising costs and other expenses of reletting the Leased Premises;
(iv) costs of carrying and maintaining the Leased Premises, such as taxes, insurance
premiums, utility charges and security precautions, (v) expenses incurred in
removing, disposing of and/or storing any of Tenant’s personal property, inventory or
trade fixtures remaining therein; (vi) reasonable attorney’s fees, expert
witness fees, court costs and other reasonable expenses incurred by Landlord (but not
limited to taxable costs) in retaking possession of the Leased Premises, establishing
damages hereunder, and releasing the Leased Premises; and (vii) any other expenses,
costs or damages otherwise incurred or suffered as a result of Tenant’s default.






	


        (e)
In the event any rent check is returned for insufficient finds, by written
notice to Tenant, Landlord may require the Tenant to pay its rent thereafter by
wire transfer or cashiers check.



12.3
Landlord’s Default And Tenant’s Remedies. In the event Landlord
fails to perform its obligations under this Lease, Landlord shall nevertheless
not be in default under the terms of this Lease until such time as Tenant shall
have first given Landlord written notice specifying the nature of such failure
to perform its obligations, and then only after Landlord shall have had thirty
(30) days following its receipt of such notice within which to perform such
obligations; provided that, if longer than thirty (30) days is reasonably
required in order to perform such obligations, Landlord shall have such longer
period. In the event of Landlord’s default as above set forth, then, and
only then, Tenant may then proceed in equity or at law to compel Landlord to
perform its obligations and/or to recover damages proximately caused by such
failure to perform (except as and to the extent Tenant has waived its right to
damages as provided in this Lease).



12.4 Limitation
Of Tenant’s Recourse. If Landlord is a corporation, trust, partnership,
joint venture, limited liability company, unincorporated association, or other
form of business entity, Tenant agrees that (i) the obligations of Landlord
under this Lease shall not constitute personal obligations of the officers,
directors, trustees, partners, joint venturers, members, owners, stockholders,
or other principals of such business entity, and (ii) Tenant shall have
recourse only to the property of such corporation, trust, partnership, joint
venture, limited liability company, unincorporated association, or other form of
business entity for the satisfaction of such obligations and not against the
assets of such officers, directors, trustees, partners, joint venturers,
members, owners, stockholders or principals.



12.5
Tenant’s Waiver. Landlord and Tenant agree that the provisions of
Paragraph 12.3 above are intended to supersede and replace the provisions
of California Civil Code Sections 1932(1), 1941 and 1942, and accordingly,
Tenant hereby waives the provisions of California Civil Code Sections 1932(1),
1941 and 1942 and/or any similar or successor law regarding Tenant’s right
to terminate this Lease or to make repairs and deduct the expenses of such
repairs from the rent due under this Lease.



22















	



ARTICLE
13



GENERAL PROVISIONS



13.1 Taxes On
Tenant’s Property. Tenant shall pay before delinquency any and all
taxes, assessments, license fees, use fees, permit fees and public charges of
whatever nature or description levied, assessed or imposed against Tenant or
Landlord by a governmental agency arising out of, caused by reason of or based
upon Tenant’s estate in this Lease, Tenant’s ownership of property,
improvements made by Tenant to the Leased Premises or the Outside Areas,
improvements made by Landlord for Tenant’s use within the Leased Premises
or the Outside Areas, Tenant’s use (or estimated use) of public facilities
or services or Tenant’s consumption (or estimated consumption) of public
utilities, energy, water or other resources (collectively, “Tenant’s
Interest”). Upon demand by Landlord, Tenant shall furnish Landlord with
satisfactory evidence of these payments. If any such taxes, assessments, fees or
public charges are levied against Landlord, Landlord’s property, the
Building or the Property, or if the assessed value of the Building or the
Property is increased by the inclusion therein of a value placed upon
Tenant’s Interest, regardless of the validity thereof, Landlord shall have
the right to require Tenant to pay such taxes, and if not paid and satisfactory
evidence of payment delivered to Landlord at least ten days prior to
delinquency, then Landlord shall have the right to pay such taxes on
Tenant’s behalf and to invoice Tenant for the same. Tenant shall, within
the earlier to occur of (a) thirty (30) days of the date it receives an invoice
from Landlord setting forth the amount of such taxes, assessments, fees, or
public charge so levied, or (b) the due date of such invoice, pay to Landlord,
as Additional Rent, the amount set forth in such invoice. Failure by Tenant to
pay the amount so invoiced within such time period shall be conclusively deemed
a default by Tenant under this Lease. Tenant shall have the right to bring suit
in any court of competent jurisdiction to recover from the taxing authority the
amount of any such taxes, assessments, fees or public charges so paid.



13.2 Holding
Over. This Lease shall terminate without further notice on the Lease
Expiration Date (as set forth in Article 1). Any holding over by Tenant after
expiration of the Lease Term shall neither constitute a renewal nor extension of
this Lease nor give Tenant any rights in or to the Leased Premises except as
expressly provided in this Paragraph. Any such holding over to which Landlord
has consented shall be construed to be a tenancy from month to month, on the
same terms and conditions herein specified insofar as applicable, except that
the Base Monthly Rent shall be increased to an amount equal to one hundred fifty
percent (150%) of the Base Monthly Rent payable during the last full month
immediately preceding such holding over. Tenant acknowledges that if Tenant
holds over without Landlord’s consent, such holding over may compromise or
otherwise affect Landlord’s ability to enter into new leases with
prospective tenants regarding the Leased Premises. Therefor, if Tenant fails to
surrender the Leased Premises upon the expiration or termination of this Lease,
in addition to any other liabilities to Landlord accruing therefrom, Tenant
shall protect, defend, indemnify and hold Landlord harmless from and against all
claims resulting from such failure, including, without limiting the foregoing,
any claims made by any succeeding tenant founded upon such failure to surrender,
and any losses suffered by Landlord, including lost profits, resulting from such
failure to surrender.



13.3
Subordination To Mortgages. This Lease is subject to and subordinate to
all ground leases, mortgages and deeds of trust which affect the Building or the
Property and which are of public record as of the Effective Date of this Lease,
and to all renewals, modifications, consolidations, replacements and extensions
thereof. Landlord covenants to use its best efforts to obtain non-disturbance
agreements from all holders of ground leases, mortgages and deeds of trust in
effect as of the date of this Lease, in form reasonably satisfactory to Tenant,
within sixty (60) days of the date of this Lease. If Landlord shall fail to
obtain such non-disturbance agreements within such sixty (60) day period, Tenant
shall have thirty (30) days within which to terminate this Lease by written
notice to Landlord. Notwithstanding the foregoing, if the lessor under any such
ground lease or any lender holding any such mortgage or deed of trust shall
advise Landlord that it desires or requires this Lease to be made prior and
superior thereto, then, upon written request of Landlord to Tenant, Tenant shall
promptly execute, acknowledge and deliver any and all customary or reasonable
documents or instruments which Landlord and such lessor or lender deems
necessary or desirable to make this Lease prior thereto. Tenant hereby consents
to Landlord’s ground leasing the land underlying the Building or the
Property and/or encumbering the Building or the Property as security for future
loans on such terms as Landlord shall desire, all of which future ground leases,
mortgages or deeds of trust shall be subject to and subordinate to this Lease.
However, if any lessor under any such future ground lease or any lender holding
such future mortgage or deed of trust shall desire or require that this Lease be
made subject to and subordinate to such future ground lease, mortgage or deed of
trust, then Tenant agrees, within ten (10) days after Landlord’s written
request therefor, to execute, acknowledge and deliver to Landlord any and all
documents or instruments reasonably requested by Landlord or by such
lessor or lender as may be necessary or proper to assure the subordination of
this Lease to such future ground lease, mortgage or deed of trust, but only if
such lessor or lender agrees to recognize Tenant’s rights under this Lease
and agrees not to disturb Tenant’s quiet possession of the Leased Premises
so long as Tenant is not in default under this Lease. If Landlord assigns the
Lease as security for a loan, Tenant agrees to execute such documents as are
reasonably requested by the lender and to provide reasonable provisions in the
Lease protecting such lender’s security interest which are customarily
required by institutional lenders making loans secured by a deed of trust
provided that such documents do not materially increase Tenant’s
obligations or diminish its rights or remedies under this Lease.



23















	



13.4
Tenant’s Attornment Upon Foreclosure. Tenant shall, upon request,
attorn (i) to any purchaser of the Building or the Property at any
foreclosure sale or private sale conducted pursuant to any security instruments
encumbering the Building or the Property, (ii) to any grantee or transferee
designated in any deed given in lieu of foreclosure of any security interest
encumbering the Building or the Property, or (iii) to the lessor under an
underlying ground lease of the land underlying the Building or the Property,
should such ground lease be terminated; provided that such purchaser, grantee or
lessor recognizes Tenant’s rights under this Lease.



13.5 Mortgagee
Protection. In the event of any default on the part of Landlord, Tenant will
give notice by registered mail to any Lender or lessor under any underlying
ground lease who shall have requested, in writing, to Tenant that it be provided
with such notice, and Tenant shall offer such Lender or lessor a reasonable
opportunity to cure the default, including time to obtain possession of the
Leased Premises by power of sale or judicial foreclosure or other appropriate
legal proceedings if reasonably necessary to effect a cure.



13.6 Estoppel
Certificate. Each party (the “Responding Party”), within five
business days following any request by the other party (the “Requesting
Party”), will execute and deliver to the Requesting Party an estoppel
certificate substantially in form attached as Exhibit E,
(i) certifying that this Lease is unmodified and in full force and effect,
or, if modified, stating the nature of such modification and certifying that
this Lease, as so modified, is in full force and effect, (ii) stating the
date to which the rent and other charges are paid in advance, if any,
(iii) acknowledging that there are not, to the Responding Party’s
knowledge, any uncured defaults on the part of the Requesting Party hereunder,
or specifying such defaults if any are claimed, and (iv) certifying such
other information about this Lease as may be reasonably requested by the
Requesting Party, its Lender or prospective lenders, investors or purchasers.
Landlord and Tenant intend that any statement delivered pursuant to this
paragraph may be relied upon by any Lender or purchaser.



13.7
Tenant’s Financial Information. Tenant shall, within ten business
days after Landlord’s request therefor, deliver to Landlord a copy of
Tenant’s (and any guarantor’s) current publicly available financial
statements and any such other publicly available information reasonably
requested by Landlord regarding Tenant’s financial condition. Landlord
shall be entitled to disclose such financial statements or other information to
its Lender, to any present or prospective principal of or investor in Landlord,
or to any prospective Lender or purchaser of the Building, the Property, or any
portion thereof or interest therein. Any such information which is marked
“confidential” or “company secrets” (or is otherwise
similarly marked by Tenant) shall be confidential and shall not be disclosed by
Landlord to any third party except as specifically provided in this paragraph
and then only if the person to whom disclosure is made first agrees to be bound
by the requirements of this Section 13.7, unless the same becomes a part of the
public domain without the fault of Landlord.



13.8 Transfer
By Landlord. Landlord and its successors in interest shall have the right to
transfer their interest in the Building, the Property, or any portion thereof at
any time and to any person or entity. In the event of any such transfer, the
Landlord originally named herein (and in the case of any subsequent transfer,
the transferor), from the date of such transfer, (i) shall be automatically
relieved, without any further act by any person or entity, of all liability for
the performance of the obligations of the Landlord hereunder which may accrue
after the date of such transfer so long as the Security Deposit (or the
remaining amount of such Security Deposit after deductions made in accordance
with Section 3.7 of this Lease) is transferred to the transferee (or returned to
the Tenant) and the transferee has agreed to assume and perform all such
obligations which may accrue after the date of such transfer and (ii) shall
be relieved of all liability for the performance of the obligations of the
Landlord hereunder which have accrued before the date of transfer if its
transferee agrees to assume and perform all such prior obligations of the
Landlord hereunder. Tenant shall attorn to any such transferee. After the date
of any such transfer, the term “Landlord” as used herein shall mean
the transferee of such interest in the Building or the Property.



24















	



13.9 Force
Majeure. Subject to express provisions to the contrary set forth in this
Lease, the obligations of each of the parties under this Lease (other than the
obligations to pay money) shall be temporarily excused if such party is
prevented or delayed in performing such obligations by reason of any strikes,
lockouts or labor disputes; government restrictions, regulations, controls,
action or inaction; civil commotion; or extraordinary weather, fire or other
acts of God.



13.10
Notices. Any notice required or permitted to be given under this Lease
shall be in writing and (i) personally delivered, (ii) sent by United
States mail, registered or certified mail, postage prepaid, return receipt
requested, (iii) sent by Federal Express or similar nationally recognized
overnight courier service, or (iv) transmitted by facsimile with a hard
copy sent within one (1) business day by any of the foregoing means, and in all
cases addressed as follows, and such notice shall be deemed to have been given
upon the date of actual receipt or delivery (or refusal to accept delivery) at
the address specified below (or such other addresses as may be specified by
notice in the foregoing manner) as indicated on the return receipt or air bill:









	 	If to Landlord:	Rotunda Partners II

300 Frank H. Ogawa Plaza, 3rd Floor

Oakland, CA 94612

Attention: Len Epstein
	 
	 	If to Tenant:	Prior to Commencement Date:


Scientific Learning Corporation

300 Frank H. Ogawa Plaza, Suite 500

Oakland, CA  94612



Attention: General Counsel



After the Commencement Date:



At the Leased Premises.



Attention: General Counsel
	 
	 	with a copy to:	Cooley Godward LLP

One Maritime Plaza

20th Floor

San Francisco, California  94111

Attention: Anna Pope






	


Any notice given in
accordance with the foregoing shall be deemed received upon actual receipt or
refusal to accept delivery.



13.11
Attorneys’ Fees. In the event any party shall bring any action,
arbitration proceeding or legal proceeding alleging a breach of any provision of
this Lease, to recover rent, to terminate this Lease, or to enforce, protect,
determine or establish any term or covenant of this Lease or rights or duties
hereunder of either party, the prevailing party shall be entitled to recover
from the non-prevailing party as a part of such action or proceeding, or in a
separate action for that purpose brought within one year from the determination
of such proceeding, reasonable attorneys’ fees, expert witness fees, court
costs and other reasonable expenses incurred by the prevailing party.



25















	



13.12
Definitions. Any term that is given a special meaning by any provision in
this Lease shall, unless otherwise specifically stated, have such meaning
wherever used in this Lease or in any Addenda or amendment hereto. In addition
to the terms defined in Article 1, the following terms shall have the following
meanings:



        (a)
Intentionally Deleted.



        (b) Intentionally
Deleted.



        (c)
Intentionally Deleted.



        (d) Intentionally
Deleted.



        (e)
Law. The term “Law” shall mean any judicial decisions and any
statute, constitution, ordinance, resolution, regulation, rule, administrative
order, or other requirements of any municipal, county, state, federal, or other
governmental agency or authority having jurisdiction over the parties to this
Lease, the Leased Premises, the Building or the Property, or any of them, in
effect either at the Effective Date of this Lease or at any time during the
Lease Term, including, without limitation, any regulation, order, or policy of
any quasi-official entity or body (e.g. a board of fire examiners or a public
utility or special district).



        (f)
Lender. The term “Lender” shall mean the holder of any
promissory note or other evidence of indebtedness secured by the Property or any
portion thereof.



        (g)
Private Restrictions. The term “Private Restrictions” shall
mean (as they may exist from time to time) any and all covenants, conditions and
restrictions, private agreements, easements, and any other recorded documents or
instruments affecting the use of the Property, the Building, the Leased
Premises, or the Outside Areas.



        (h)
Rent. The term “Rent” shall mean collectively Base Monthly Rent
for the Leased Premises and any space which Tenant rents pursuant to its right
of first refusal under Article 16 , and all Additional Rent.



13.13 General
Waivers. One party’s consent to or approval of any act by the other
party requiring the first party’s consent or approval shall not be deemed
to waive or render unnecessary the first party’s consent to or approval of
any subsequent similar act by the other party. No waiver of any provision
hereof, or any waiver of any breach of any provision hereof, shall be effective
unless in writing and signed by the waiving party. The receipt by Landlord of
any rent or payment with or without knowledge of the breach of any other
provision hereof shall not be deemed a waiver of any such breach. No waiver of
any provision of this Lease shall be deemed a continuing waiver unless such
waiver specifically states so in writing and is signed by both Landlord and
Tenant. No delay or omission in the exercise of any right or remedy accruing to
either party upon any breach by the other party under this Lease shall impair
such right or remedy or be construed as a waiver of any such breach theretofore
or thereafter occurring. The waiver by either party of any breach of any
provision of this Lease shall not be deemed to be a waiver of any subsequent
breach of the same or any other provisions herein contained.



13.14
Miscellaneous. Should any provisions of this Lease prove to be invalid or
illegal, such invalidity or illegality shall in no way affect, impair or
invalidate any other provisions hereof, and such remaining provisions shall
remain in full force and effect. Time is of the essence with respect to the
performance of every provision of this Lease in which time of performance is a
factor. Any copy of this Lease which is executed by the parties shall be deemed
an original for all purposes. This Lease shall, subject to the provisions
regarding assignment, apply to and bind the respective heirs, successors,
executors, administrators and assigns of Landlord and Tenant. The term
“party” shall mean Landlord or Tenant as the context implies. If
Tenant consists of more than one person or entity, then all members of Tenant
shall be jointly and severally liable hereunder. This Lease shall be construed
and enforced in accordance with the Laws of the State in which the Leased
Premises are located. The captions in this Lease are for convenience only and
shall not be construed in the construction or interpretation of any provision
hereof. When the context of this Lease requires, the neuter gender includes the
masculine, the feminine, a partnership, corporation, limited liability company,
joint venture, or other form of business entity, and the singular includes the
plural. The terms “must,” “shall,” “will,” and
“agree” are mandatory. The term “may” is permissive. When a
party is required to do something by this Lease, it shall do so at its sole cost
and expense without right of reimbursement from the other party unless specific
provision is made therefor. Where Landlord’s consent is required hereunder,
the consent of any Lender is also required. Landlord and Tenant shall both be
deemed to have drafted this Lease, and the rule of construction that a document
is to be construed against the drafting party shall not be employed in the
construction or interpretation of this Lease. Where Tenant is obligated not to
perform any act or is not permitted to perform any act, Tenant is also obligated
to restrain any others reasonably within its control, including agents,
invitees, contractors, subcontractors and employees, from performing such act.
Landlord shall not become or be deemed a partner or a joint venturer with Tenant
by reason of any of the provisions of this Lease.



26















	



ARTICLE
14



CORPORATE
AUTHORITY
BROKERS AND ENTIRE AGREEMENT



14.1 Corporate
Authority. Each individual executing this Lease on behalf of either party
represents and warrants that such party is validly formed and duly authorized
and existing, that it is qualified to do business in the State in which the
Leased Premises are located, that it has the full right and legal authority to
enter into this Lease, and that he or she is duly authorized to execute and
deliver this Lease on its behalf in accordance with its terms.



14.2 Brokerage
Commissions. Each party represents, warrants and agrees that it has not had
any dealings with any real estate broker(s), leasing agent(s), finder(s) or
salesmen, other than the Brokers (as named in Article 1) with respect to the
lease by it of the Leased Premises pursuant to this Lease, agrees to indemnify,
defend with competent counsel, and hold the other party harmless from any
liability for the payment of any real estate brokerage commissions, leasing
commissions or finder’s fees claimed by any other real estate broker(s),
leasing agent(s), finder(s), or salesmen to be earned or due and payable by
reason of its agreement or promise (implied or otherwise) to pay such a
commission or finder’s fee by reason of this Lease. Landlord shall pay the
commission due to Brokers pursuant to a separate agreement between Brokers and
Landlord



14.3 Entire
Agreement. This Lease and the Exhibits (as described in Article 1), which
Exhibits are by this reference incorporated herein, constitute the entire
agreement between the parties, and there are no other agreements, understandings
or representations between the parties relating to the lease by Landlord of the
Leased Premises to Tenant, except as expressed herein. No subsequent changes,
modifications or additions to this Lease shall be binding upon the parties
unless in writing and signed by both Landlord and Tenant.



14.4
Landlord’s Representations. Tenant acknowledges that neither
Landlord nor any of its agents made any representations or warranties respecting
the Property, the Building or the Leased Premises, upon which Tenant relied in
entering into the Lease, which are not expressly set forth in this Lease. Tenant
further acknowledges that neither Landlord nor any of its agents made any
representations as to (i) whether the Leased Premises may be used for
Tenant’s intended use under existing Law, or (ii) the suitability of
the Leased Premises for the conduct of Tenant’s business and that Tenant
relies solely upon its own investigations with respect to such matters. Tenant
expressly waives any and all claims for damage by reason of any statement,
representation, warranty, promise or other agreement of Landlord or
Landlord’s agent(s), if any, not contained in this Lease or in any Exhibit
attached hereto.



ARTICLE
15



OPTIONS TO
EXTEND



15.1
Options. So long as Scientific Learning Corporation (or a Permitted
Transferee) is entitled to occupy the Leased Premises, and subject to the
condition set forth in clause (b) below, Tenant shall have two options to
extend the term of this Lease with respect to the entirety of the Leased
Premises, the first for a period of five (5) years from the expiration of the
last year of the Lease Term (the “First Extension Period”), and the
second (the “Second Extension Period”) for a period of five (5) years
from the expiration of the First Extension Period, subject to the following
conditions:



27















	



        (a)
Each option to extend shall be exercised, if at all, by written notice of
exercise given to Landlord by Tenant not more than eighteen (18) months nor less
than six (6) months prior to the expiration of the last year of the Lease Term
or the expiration of the First Extension Period, as applicable;



        (b)
Anything herein to the contrary notwithstanding, if Tenant is in default under
any of the material terms, covenants or conditions of this Lease beyond any
applicable notice and cure period, either at the time Tenant exercises either
extension option or on the commencement date of the First Extension Period or
the Second Extension Period, as applicable, Landlord shall have, in addition to
all of Landlord’s other rights and remedies provided in this Lease, the
right to terminate such option(s) to extend upon written notice to Tenant.



15.2 Fair
Market Rent. In the event the applicable option is exercised in a timely
fashion, the Lease shall be extended for the term of the applicable extension
period upon all of the terms and conditions of this Lease, provided that the
Base Monthly Rent for each extension period shall be 95% of the “Fair
Market Rent” for the Leased Premises, determined as set forth below.



15.3
Determination. Within 30 days after receipt of Tenant’s notice
of exercise, Landlord shall notify Tenant in writing of Landlord’s estimate
of the Base Monthly Rent for the first year of the applicable extension period.
For purposes hereof, “Fair Market Rent” shall mean the rent a willing
tenant would be willing to pay for similar space in similar buildings in similar
locations upon substantially the terms set forth in this Lease. Within
30 days after receipt of such notice from Landlord, Tenant shall have the
right either to (i) accept Landlord’s estimate of Fair Market Rent or
(ii) elect to arbitrate Landlord’s estimate of Fair Market Rent, such
arbitration to be conducted pursuant to the provisions hereof. Failure on the
part of Tenant to give written notice of its election to require arbitration of
Fair Market Rent within such 30-day period shall constitute acceptance of the
Fair Market Rent for the applicable extension period as calculated by Landlord.
If Tenant elects arbitration, the arbitration shall be concluded within
90 days after the date of Tenant’s election, subject to extension for
an additional 30-day period if a third arbitrator is required and does not act
in a timely manner. To the extent that arbitration has not been completed prior
to the expiration of any preceding period for which Base Monthly Rent has been
determined, Tenant shall pay Base Monthly Rent at the rate calculated by
Landlord, with the potential for an adjustment to be made once Fair Market Rent
is ultimately determined by arbitration.



15.4
Arbitration. In the event of arbitration, the judgment or the award
rendered in any such arbitration may be entered in any court having jurisdiction
and shall be final and binding between the parties. The arbitration shall be
conducted and determined in the City of Oakland in accordance with the then
prevailing rules of the American Arbitration Association or its successor for
arbitration of commercial disputes except to the extent that the procedures
mandated by such rules shall be modified as follows:



        (a)
Tenant shall make demand for arbitration in writing within 30 days after
service of Landlord’s determination of Fair Market Rent given under
Paragraph 15.3 above, specifying therein the name and address of the person
to act as the arbitrator on its behalf. The arbitrator shall be qualified as a
real estate appraiser familiar with the Fair Market Rent of similar office space
in the San Francisco/Oakland area who would qualify as an expert witness over
objection to give opinion testimony addressed to the issue in a court of
competent jurisdiction. Failure on the part of Tenant to make a proper demand in
a timely manner for such arbitration shall constitute a waiver of the right
thereto. Within 15 days after the service of the demand for arbitration,
Landlord shall give notice to Tenant, specifying the name and address of the
person designated by Landlord to act as arbitrator on its behalf who shall be
similarly qualified. If Landlord fails to notify Tenant of the appointment of
its arbitrator, within or by the time above specified, then the arbitrator
appointed by Tenant shall be the arbitrator to determine the issue.



        (b)
In the event that two arbitrators are chosen pursuant to Paragraph 15.4(a)
above, the arbitrators so chosen shall, within 15 days after the second
arbitrator is appointed determine the Fair Market Rent. If the two arbitrators
shall be unable to agree upon a determination of Fair Market Rent within such
15-day period, they, themselves, shall appoint a third arbitrator, who shall be
a competent and impartial person with qualifications similar to those required
of the first two arbitrators pursuant to Paragraph 15.4(a). In the event
they are unable to agree upon such appointment within seven days after
expiration of such 15-day period, the third arbitrator shall be selected by the
parties themselves, if they can agree thereon, within a further period of
15 days. If the parties do not so agree, then either party, on behalf of
both, may request appointment of such a qualified person by the then Presiding
Judge of the Superior Court of the County of Alameda. The three arbitrators
shall decide the dispute if it has not previously been resolved by following the
procedure set forth below.



28















	



        (c)
Where an issue cannot be resolved by agreement between the two arbitrators
selected by Landlord and Tenant or settlement between the parties during the
course of arbitration, the issue shall be resolved by the three arbitrators
within 15 days of the appointment of the third arbitrator in accordance
with the following procedure. The arbitrator selected by each of the parties
shall state in writing his determination of the Fair Market Rent supported by
the reasons therefor with counterpart copies to each party. The arbitrators
shall arrange for a simultaneous exchange of such proposed resolutions. The role
of the third arbitrator shall be to select which of the two proposed resolutions
most closely approximates his determination of Fair Market Rent. The third
arbitrator shall have no right to propose a middle ground or any modification of
either of the two proposed resolutions. The resolution he chooses as most
closely approximating his determination shall constitute the decision of the
arbitrators and be final and binding upon the parties.



        (d)
In the event of a failure, refusal or inability of any arbitrator to act, his
successor shall be appointed by him, but in the case of the third arbitrator,
his successor shall be appointed in the same manner as provided for appointment
of the third arbitrator. The arbitrators shall decide the issue within
15 days after the appointment of the third arbitrator. Any decision in
which the arbitrator appointed by Landlord and the arbitrator appointed by
Tenant concur shall be binding and conclusive upon the parties. Each party shall
pay the fee and expenses of its respective arbitrator and both shall share the
fee and expenses of the third arbitrator, if any, and the attorneys’ fees
and expenses of counsel for the respective parties and of witnesses shall be
paid by the respective party engaging such counsel or calling such witnesses.



        (e)
The arbitrators shall have the right to consult experts and competent
authorities to obtain factual information or evidence pertaining to a
determination of Fair Market Rent. The arbitrators shall render their decision
and award in writing with counterpart copies to each party. The arbitrators
shall have no power to modify the provisions of this Lease.



15.5
Improvement Allowance. Upon the commencement of any Extension Period,
Landlord shall pay to Tenant an amount up to $10.00 per rentable square feet,
which Tenant shall use pay or offset the costs to repaint and re-carpet the
Leased Premises, which shall otherwise be undertaken at Tenant’s cost and
expense.



ARTICLE
16



RIGHT OF
FIRST REFUSAL



16.1 Right of
First Refusal. So long as Scientific Learning Corporation (or a Permitted
Transferee) is entitled to occupy the Leased Premises as of its exercise of the
Right of First Refusal granted herein, and subject to the conditions set forth
below, Tenant shall have an ongoing right of first refusal to lease from
Landlord (the “Right of First Refusal”), all or portions of the 12,947
rentable square foot delineated on Exhibit B-1 as the 6th Floor
Remainder Space (the “6th Floor Remainder Space”) and all
the rentable square feet on the 5th Floor of the Building (the
“Fifth Floor Space”):



        (a)
At any time at which Landlord has a prospective tenant for the 6th
Floor Remainder Space and/or the Fifth Floor Space, Landlord shall notify Tenant
in writing (“Landlord’s Preliminary Notice”) and request that
Tenant respond within three (3) business days and inform Landlord whether Tenant
can say definitely that Tenant is not interested in such space. Landlord’s
Preliminary Notice shall state the location(s) of the space, square footage(s)
and rent(s) then being proposed by Landlord to the prospective tenant. If Tenant
notifies Landlord that Tenant is definitely not interested in such space,
Landlord may proceed to market the space and may enter into a lease of such
space to any third party within the following one hundred and twenty (120) days
without again offering such space to Tenant. If Tenant responds within the three
(3) business day period and informs Landlord that Tenant may be interested in
such space, then Landlord may proceed to market the space but shall be bound to
offer the space to Tenant in accordance with the balance of this Section 16.1,
including, without limitation, the obligation to provide Landlord’s Notice
to Tenant prior to leasing the space to any third party.



29















	



        (b)
The Right of First Refusal may be exercised, if at all, by one or a series of
written notices of exercise given to Landlord by Tenant within five (5) business
days following Tenant’s receipt of Landlord’s notice of its intent to
lease either the 6th Floor Remainder Space or the Fifth Floor Space
(the “Available Space”). This notice (the “Landlord’s
Notice”) shall consist of a statement that the Landlord intends to lease
the Available Space to a third party in the event Tenant does not exercise its
Right of First Refusal and a statement of the principal terms of the intended
lease, including all material financial terms. In the event Tenant shall have
failed to notify Landlord within such period of its election to lease the
Available Space, Tenant shall be deemed to have elected not to lease such
Available Space, and Landlord shall be entitled to lease the space upon the same
terms set forth in such offer to any third party;



        (c)
Notwithstanding anything to the contrary contained herein, if Tenant is in
default under any of the material terms, covenants or conditions of this Lease
beyond any applicable notice and cure period at the time Tenant exercises the
Right of First Refusal, Landlord shall have, in addition to all of
Landlord’s other rights and remedies provided in this Lease, the right to
terminate such Right of First Refusal upon notice to Tenant;



        (d)
If both the Fifth Floor Space and the 6th Floor Remainder Space are
offered to Tenant at the same time, Tenant may elect to lease both spaces or
neither space.



16.2
Intentionally Deleted.



16.3 Intentionally
Deleted.



16.4
Intentionally Deleted.



ARTICLE
17



INTENTIONALLY
DELETED



17.1
Intentionally Deleted.



30















	



        IN
WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the
respective dates below set forth with the intent to be legally bound thereby as
of the Effective Date of this Lease first above set forth.













	



Dated: October 7, 2003		LANDLORD:


ROTUNDA PARTNERS II, a LLC in California


By: /s/ Mark A. Moss

——————————————

Mark A. Moss

Managing Member










	




Dated: October 7, 2003 		TENANT:


SCIENTIFIC LEARNING CORPORATION, a Delaware corporation


By: /s/ Robert C. Bowen

——————————————

Robert C. Bowen

CEO