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Exhibit 10.6  


 
 

OFFICE LEASE    
    
    KILROY REALTY    
    


 
  PACIFIC CORPORATE CENTER    
    


 
  KILROY REALTY, L.P.,    
    
    a Delaware limited partnership,    
    
    as Landlord,    
    
    and    
    
    FAVRILLE, INC.,    
    
    a Delaware corporation,    
    
    as Tenant,    










  



 
 

TABLE OF CONTENTS    
    



	 
	 	 
	 	Page

	ARTICLE 1	 	PREMISES, BUILDING, PROJECT, AND COMMON AREAS	 	5
	

ARTICLE 2	
 	

LEASE TERM; OPTION TERM(S)	
 	

10
	

ARTICLE 3	
 	

BASE RENT	
 	

13
	

ARTICLE 4	
 	

ADDITIONAL RENT	
 	

14
	

ARTICLE 5	
 	

USE OF PREMISES	
 	

22
	

ARTICLE 6	
 	

SERVICES AND UTILITIES	
 	

23
	

ARTICLE 7	
 	

REPAIRS	
 	

26
	

ARTICLE 8	
 	

ADDITIONS AND ALTERATIONS	
 	

28
	

ARTICLE 9	
 	

COVENANT AGAINST LIENS	
 	

30
	

ARTICLE 10	
 	

INSURANCE	
 	

31
	

ARTICLE 11	
 	

DAMAGE AND DESTRUCTION	
 	

34
	

ARTICLE 12	
 	

NONWAIVER	
 	

37
	

ARTICLE 13	
 	

CONDEMNATION	
 	

37
	

ARTICLE 14	
 	

ASSIGNMENT AND SUBLETTING	
 	

38
	

ARTICLE 15	
 	

SURRENDER OF PREMISES; OWNERSHIP AND REMOVAL OF TRADE FIXTURES	
 	

43
	

ARTICLE 16	
 	

HOLDING OVER	
 	

43
	

ARTICLE 17	
 	

ESTOPPEL CERTIFICATES	
 	

44
	

ARTICLE 18	
 	

SUBORDINATION	
 	

44
	

ARTICLE 19	
 	

DEFAULTS; REMEDIES	
 	

45
	

ARTICLE 20	
 	

COVENANT OF QUIET ENJOYMENT	
 	

48
	

ARTICLE 21	
 	

SECURITY DEPOSIT; LETTER OF CREDIT	
 	

48
	

ARTICLE 22	
 	

TELECOMMUNICATIONS EQUIPMENT	
 	

52
	

ARTICLE 23	
 	

SIGNS	
 	

53
	

 	
 	

 	
 	

 



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ARTICLE 24	
 	

COMPLIANCE WITH LAW	
 	

55
	

ARTICLE 25	
 	

LATE CHARGES	
 	

56
	

ARTICLE 26	
 	

LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT	
 	

56
	

ARTICLE 27	
 	

ENTRY BY LANDLORD	
 	

57
	

ARTICLE 28	
 	

TENANT PARKING	
 	

58
	

ARTICLE 29	
 	

MISCELLANEOUS PROVISIONS	
 	

58




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INDEX    
    



	 
	 	Page(s)

	Accountant	 	23
	Additional Notice	 	27
	Additional Rent	 	15
	Affiliate	 	43
	Alterations	 	29
	Applicable Laws	 	56
	Award	 	14
	Bank Prime Loan	 	57
	Base Building	 	29
	Base Rent	 	14
	BOMA	 	7
	bona-fide third-party offer	 	8
	Brokers	 	64
	BS Exception	 	27
	Building Common Areas	 	7
	Building Common Areas	 	7
	Building Monument Sign	 	54
	Building Structure	 	27
	Building Systems	 	25
	Building Top Sign	 	54
	CC&Rs	 	24
	Central Plant Area	 	70
	CGCC	 	43
	Comparable Area	 	13
	Comparable Buildings	 	12
	Comparable Deals	 	12
	Comparable Term	 	12
	Cosmetic Alterations	 	29
	Damage Termination Date	 	37
	Damage Termination Notice	 	37
	Direct Expenses	 	16
	Eligibility Period	 	26
	Environmental Laws	 	66
	Estimate	 	22
	Estimate Statement	 	22
	Estimated Direct Expenses	 	22
	Excess	 	21
	Exercise Notice	 	13
	Expense Year	 	16
	First Refusal Notice	 	8
	First Refusal Space	 	8
	First Refusal Space Amendment	 	9
	First Refusal Space Commencement Date	 	10
	First Refusal Space Lease	 	10
	 	 	 





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	First Refusal Space Rent	 	10
	Force Majeure	 	62
	Ground Floor Lab Premises	 	6
	Ground Floor Office Premises	 	6
	Hazardous Material(s)	 	66
	HVAC	 	25
	Initial Notice	 	26
	Investment Agreement	 	70
	Landlord	 	1
	Landlord Default	 	26
	Landlord Parties	 	32
	Landlord Response Date	 	13
	Landlord Response Notice	 	13
	Landlord's Option Rent Calculation	 	13
	L-C	 	50
	L-C Amount	 	50
	L-C Security Deposit	 	53
	Lease	 	1
	Lease Commencement Date	 	11
	Lease Expiration Date	 	11
	Lease Term	 	11
	Lease Year	 	11
	Lines	 	66
	Mail	 	62
	Market Rent	 	12
	Mezzanine Premises	 	6
	Net Worth	 	43
	Neutral Arbitrator	 	14
	Nondisturbance Agreement	 	46
	Notices	 	62
	Objectionable Name	 	55
	Operating Expenses	 	16
	Option Rent	 	12
	Option Term	 	11
	Option Term TI Allowance	 	12
	Original Improvements	 	34
	Other Improvements	 	69
	Outside Agreement Date	 	13
	Permitted Assignee	 	11
	Premises	 	6
	Project Common Areas	 	7
	Project Common Areas,	 	7
	Proposition 13	 	20
	Reestablishment Notice	 	51
	Refusal Space Lease Term	 	10
	 	 	 



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	Renovations	 	65
	Rent Concessions	 	12
	Rent	 	15
	Required L-C Amount	 	51
	Required Thresholds	 	51
	Security Deposit	 	49
	Sign Specifications	 	55
	Statement	 	21
	Subject Space	 	39
	Summary	 	1
	Superior Right Holders	 	9
	Tax Expenses	 	19
	Telecommunications Equipment	 	53
	Tenant	 	1
	Tenant Parties	 	32
	Tenant Work Letter	 	6
	Tenant's Option Rent Calculation	 	13
	Tenant's Share	 	21
	Tenant's Signage	 	54
	Third Party Lease	 	9
	Third Party Lease Prohibition	 	10
	Third Party Tenant	 	9
	Transfer	 	42
	Transfer Notice	 	39
	Transfer Premium	 	41
	Transferee	 	39
	Transfers	 	39
	Working Capital	 	51




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PACIFIC CORPORATE CENTER    
    
    OFFICE LEASE    
    


        This Office Lease (the "Lease"), dated as of the date set forth in  Section 1 of the
Summary of Basic Lease Information (the "Summary"), below, is made by and
between KILROY REALTY, L.P., a Delaware limited partnership ("Landlord"), and FAVRILLE, INC., a Delaware corporation
("Tenant"). 


SUMMARY OF BASIC LEASE INFORMATION  



	 
	 	TERMS OF LEASE
 
	 	DESCRIPTION

	1.	 	Date:	 	January 31, 2003.
	

2.	
 	

Premises:	
 	

 
	

 	
 	

2.1    Building:	
 	

That certain building located at 10421 Pacific Center Court in the "Project" in Sorrento Mesa, which Building contains 79,871 rentable square feet of space.
	

 	
 	

2.2    Premises:	
 	

A total of approximately 48,502 rentable square feet of space consisting of (i) the "Mezzanine Premises," (ii) the "Ground Floor Lab Premises," and (iii) the "Ground Floor Office Premises," as set forth below and as more particularly
identified in Exhibit A to the Office Lease, which Premises is commonly known, collectively, as Suite 150.
	

 	
 	

      2.2.1    Mezzanine Premises:	
 	

Approximately 15,490 rentable square feet of space located on the mezzanine level of the Building.
	

 	
 	

      2.2.2    Ground Floor Lab Premises:	
 	

Approximately 22,175 rentable square feet of space located on the ground floor of the Building.
	

 	
 	

      2.2.3    Ground Floor Office Premises:	
 	

Approximately 10,837 rentable square feet of space located on the ground floor of the Building.
	

 	
 	

2.3    Project:	
 	

The Building is part of a multi-building project known as the "Pacific Corporate Center", as further set forth in Section 1.1.2 of this
Lease.
	

 	
 	

 	
 	

 






 

	

3.	
 	

Lease Term

(Article 2):	
 	

 
	

 	
 	

3.1    Length of Term:	
 	

Fifteen (15) years and six (6) months.
	

 	
 	

3.2    Lease Commencement Date:	
 	

March 1, 2003.
	

 	
 	

3.3    Lease Expiration Date:	
 	

August 31, 2018.
	

4.	
 	

Base Rent

(Article 3):	
 	

 








	Period During Lease Term
 
	 	Annualized

Base Rent
	 	Monthly*

Installment

of Base Rent

	March 1, 2003 through August 31, 2003.	 	$	246,941.64	 	$	20,578.47
	

September 1, 2003 through August 31, 2004.	
 	
$	

1,549,613.56	
 	
$	

129,134.46
	

September 1, 2004 through August 31, 2005.	
 	
$	

1,602,630.72	
 	
$	

133,552.56
	

September 1, 2005 through January 31, 2006.	
 	
$	

1,657,455.84	
 	
$	

138,121.32
	

February 1, 2006 through August 31, 2006.	
 	
$	

1,830,219.24	
 	
$	

152,518.27
	

September 1, 2006 through August 31, 2007.	
 	
$	

1,892,683.92	
 	
$	

157,723.66
	

September 1, 2007 through August 31, 2008.	
 	
$	

1,957,319.28	
 	
$	

163,109.94
	

September 1, 2008 through August 31, 2009.	
 	
$	

2,024,209.68	
 	
$	

168,684.14
	

September 1, 2009 through August 31, 2010.	
 	
$	

2,093,477.76	
 	
$	

174,456.48
	

September 1, 2010 through August 31, 2011.	
 	
$	

2,165,136.12	
 	
$	

180,428.01
	

September 1, 2011 through August 31, 2012.	
 	
$	

2,239,333.92	
 	
$	

186,611.16
	

September 1, 2012 through August 31, 2013.	
 	
$	

2,316,103.08	
 	
$	

193,008.59
	

September 1, 2013 through August 31, 2014.	
 	
$	

2,395,572.84	
 	
$	

199,631.07
	

September 1, 2014 through August 31, 2015.	
 	
$	

2,477,820.96	
 	
$	

206,485.08
	

September 1, 2015 through August 31, 2016.	
 	
$	

2,562,950.40	
 	
$	

213,579.20
	

September 1, 2016 through August 31, 2017.	
 	
$	

2,652,378.48	
 	
$	

221,031.54
	

September 1, 2017 through August 31, 2018.	
 	
$	

2,742,222.72	
 	
$	

228,518.56





2





 


	*
	The
Monthly Installment of Base Rent set forth above is equal the sum of (i) the Monthly Installment of Base Rent applicable to the "Mezzanine Premises," (ii) the Monthly
Installment of Base Rent applicable to the "Ground Floor Lab Premises," and (iii) the Monthly Installment of Base Rent applicable to the "Ground Floor Office Premises," as those terms are set
forth in Section 1.1.1 of this Lease, and as those amounts are set forth (for informational purposes only) in  Schedule 1, attached hereto.
Notwithstanding the foregoing schedule of Monthly Installments of Base Rent, the same is subject to those certain
Base Rent abatement rights to which Tenant is entitled pursuant to the express terms and conditions of Section 3.2 of this Lease. 






	5.	 	Intentionally Omitted:	 	 
	

6.	
 	

Tenant's Share

(Article 4):	
 	

Approximately 60.725%.
	

7.	
 	

Permitted Use

(Article 5):	
 	

Provided any such use is legally permissible, Tenant shall use the Premises solely for office, research and development, biotechnology labs, drug manufacturing, warehousing, and any other legally permitted uses pursuant to the applicable zoning and
the Pacific Corporate Center P.I.D.
	

8.	
 	

Security Deposit

(Article 21):	
 	

$152,518.27. In addition to the Security Deposit, Tenant shall have additional security obligations, in the form more particularly set forth in Section 21.2, which shall be subject to increases,
reductions and reinstatements pursuant to the TCCs of Section 21.2.
	

9.	
 	

Parking Spaces

(Article 28):	
 	

A total of one hundred forty-six (146) parking spaces (i.e., three (3) unreserved parking spaces for every 1,000 rentable square feet of the Premises).
	

10.	
 	

Address of Tenant

(Section 29.18):	
 	

Favrille, Inc.

10865 Altman Row

Suite 150

San Diego, California, 92121

Attention: Chief Financial Officer

(Prior to Lease Commencement Date)

 
	

 	
 	

 	
 	

 





3





 

	

 	
 	

and	
 	

Favrille, Inc.

10421 Pacific Center Court

Suite 150

San Diego, California 92121

Attention: Chief Financial Officer

(After Lease Commencement Date)



with a copy to:



Cooley Godward LLP

4401 Eastgate Mall

San Diego, California 92121

Attention: Elizabeth A. Willes, Esq.
	

11.	
 	

Address of Landlord

(Section 29.18):	
 	

See Section 29.18 of the Lease.
	

12.	
 	

Broker(s)

(Section 29.24):	
 	

For Landlord:



CB Richard Ellis

4365 Executive Drive, Suite 900

San Diego, CA 92121-2127

Attention: Doug Lozier

                  Jerry Keeney



For Tenant:



Colliers International

4660 La Jolla Village Drive, Suite 200

San Diego, California 92122

Attention: Kevin Craven

                  Thomas Mercer
	

13.	
 	

Tenant Improvement Allowance

(Section 2 of Exhibit B):	
 	

$6,056,379.00 (which amount consists of the "Original Allowance" ($5,739,000.00), and the "Additional Allowance" ($317,379.00) as those terms are set forth in Section 2.1 of the Tenant Work Letter
attached hereto as Exhibit B; provided, however, Landlord and Tenant hereby acknowledge that Tenant shall itself contribute, as an "Over-Allowance Amount," as that term is set forth in
Section 4.3 of the Tenant Work Letter, an amount equal to approximately $3,000,000.00 toward the cost of constructing the Tenant Improvements.




4






  



 
 

ARTICLE 1    
    
    PREMISES, BUILDING, PROJECT, AND COMMON AREAS    
    


        1.1    Premises, Building, Project and Common Areas.    



        1.1.1    The Premises.    Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord the premises set forth in Section 2.2 of the Summary (the "Premises"). The outline of
the Premises is set forth in Exhibit A attached hereto and each of the "Mezzanine Premises" (the "Mezzanine
Premises"), "Ground Floor Lab Premises" (the "Ground Floor Lab Premises"), and "Ground Floor Office Premises" (the
"Ground Floor Office Premises") has approximately the number of rentable square feet as set forth in  Section 2.2 of the Summary. The parties hereto
agree that the lease of the Premises is upon and subject to the terms, covenants and conditions
(the "TCCs") herein set forth, and Tenant covenants as a material part of the consideration for this Lease to keep and perform each and all of such TCCs
by it to be kept and performed and that this Lease is made upon the condition of such performance. The parties hereto hereby acknowledge that the purpose of  Exhibit A is to show the
approximate location of the Premises in the "Building," as that term is
defined in Section 1.1.2, below, only, and such Exhibit is not meant to constitute an agreement, representation or warranty as to the
construction of the Premises, the precise area thereof or the specific location of the "Common Areas," as that term is defined in  Section 1.1.3, below,
 or the elements thereof or of the accessways to the Premises or the
"Project," as that term is defined in Section 1.1.2, below. Except as specifically set forth in
this Lease and in the Tenant Work Letter attached hereto as Exhibit B (the "Tenant Work Letter"),
Landlord shall not be obligated to provide or pay for any improvement work or services related to the improvement of the Premises. Tenant also acknowledges that neither Landlord nor any agent of
Landlord has made any representation or warranty regarding the condition of the Premises, the Building or the Project or with respect to the suitability of any of the foregoing for the conduct of
Tenant's business, except as specifically set forth in this Lease and the Tenant Work Letter. The taking of possession of the Premises by Tenant shall conclusively establish that the Premises and the
Building were at such time in good and sanitary order, condition and repair, subject only to (i) a list of punchlist items provided to Landlord in writing within thirty (30) days
following Landlord's delivery of the Premises to Tenant, (ii) Landlord's obligations set forth in Article 7 of this Lease, including,
without limitation, Landlord's obligation to maintain, in accordance with Section 7.1 of this Lease, the "Building Structure" as that term is
defined in Section 7.1 of this Lease, and (iii) the TCCs of Section 1.1 of the
Tenant Work Letter. 


        1.1.2    The Building and The Project.    The Premises are a part of the building set forth in  Section 2.1 of the Summary
(the "Building"). The Building is part of a project known as
"Pacific Corporate Center." The term "Project," as used in this Lease, shall mean (i) the
Building and the Common Areas, (ii) the land (which is improved with landscaping, parking facilities and other improvements) upon which the Building and the Common Areas are located, and
(iii) the other buildings located adjacent to the Building and the land upon which such adjacent office buildings are located. 


        1.1.3    Common Areas.    Tenant shall have the non-exclusive right to use in
common with other tenants in the Project, and subject to the rules and regulations referred to in 



5





 

Article 5 of this Lease, those portions of the Project which are provided, from time to time, for use in common by Landlord, Tenant and any
other tenants of the Project (such areas, together with such other portions of the Project designated by Landlord, in its discretion, including certain areas designated for the exclusive use of
certain tenants, or to be shared by Landlord and certain tenants, are collectively referred to herein as the "Common Areas"). The Common Areas shall
consist of the "Project Common Areas" and the "Building Common Areas." The term
"Project Common Areas," as used in this Lease, shall mean the portion of the Project designated as such by Landlord. The term
"Building Common Areas," as used in this Lease, shall mean the portions of the Common Areas located within the Building designated as such by Landlord.
The manner in which the Common Areas are maintained and operated shall be at the reasonable discretion of Landlord and the use thereof shall be subject to such rules, regulations and restrictions as
Landlord may make from time to time as provided in Section 5.2 of this Lease, provided that Landlord shall at all times maintain and operate the
Common Areas in a first-class manner consistent with the "Comparable Buildings," as such term is defined in Section 2.2.2 of this Lease. Landlord
reserves the right to close temporarily, make alterations or additions to, or change the location of elements of the Project and the Common Areas as long as such changes do not (i) change the
nature of the Project to something other than a first-class project (ii) materially, adversely effect Tenant's use of the Premises for the Permitted Use, as granted under  Section 7 of the
Summary, (iii) materially, adversely reduce Tenant's ingress to or egress from the Project, Building, the Premises or the
parking areas servicing the same, or (iv) materially reduce the parking area available for use by Tenant. Except when and where Tenant's right of access is specifically excluded as a result of
(x) an emergency, (y) a requirement by law, or (z) a specific provision set forth in this Lease, Tenant shall have the right of access to the Premises, the Building, and the
Project parking facility twenty-four (24) hours per day, seven (7) days per week during the "Lease Term," as that term is defined in  Section 2.1, below. 




        1.2    Verification of Rentable Square Feet of Premises and Building.    For purposes of this
Lease, "rentable square feet" shall be calculated pursuant to Standard Method of Measuring Floor Area in Industrial Building, ANSI Z65.1—1996
("BOMA"). Within thirty (30) days after the Lease Commencement Date, Landlord's space planner/architect shall measure the rentable square feet of
the Premises in accordance with the provisions of this Section 1.2 and the results thereof shall be presented to Tenant in writing. Tenant's
space planner/architect may review Landlord's space planner/architect's determination of the number of rentable square feet of the Premises and Tenant may, within fifteen (15) business days
after Tenant's receipt of Landlord's space planner/architect's written determinzation, object to such determination by written notice to Landlord. Tenant's failure to deliver written notice of such
objection within said fifteen (15) business day period shall be deemed to constitute Tenant's
acceptance of Landlord's space planner/architect's determination. If Tenant objects to such determination, Landlord's space planner/architect and Tenant's space planner/architect shall promptly meet
and attempt to agree upon the rentable square footage of the Premises. If Landlord's space planner/architect and Tenant's space planner/architect cannot agree on the rentable square footage of the
Premises within thirty (30) days after Tenant's objection thereto, Landlord and Tenant shall mutually select an independent third party 


6





 

space
measurement professional to field measure the Premises pursuant to BOMA. Such independent third party measurement professional's determination shall be conclusive and binding on Landlord and
Tenant. Landlord and Tenant shall each pay one-half (1/2) of the fees and expenses of the independent third party space measurement professional. To the extent the
Lease Term commences prior to such final determination, Landlord's determination shall be utilized until a final determination is made, whereupon an appropriate adjustment, if necessary, shall be made
retroactively, and Landlord, or Tenant, as applicable, shall make appropriate payment to the other. In the event that it is determined, pursuant to the procedure described in this  Section 1.2 above,
 that the square footage amounts shall be different from those set forth in this Lease, all amounts, percentages and figures
appearing or referred to in this Lease based upon such incorrect amount (including, without limitation, the amount of the "Rent," and "Security Deposit," as those terms are defined in  Section 4.1
and Article 21 of this Lease, respectively) shall be modified in accordance
with such determination. Such final determination shall be confirmed in writing between Landlord and Tenant. 


        1.3    Right of First Refusal.    Landlord hereby grants to the Original Tenant and its
Affiliates, a right of first refusal with respect to the remaining space within the Building (the "First Refusal Space"). 



        1.3.1    Procedure for Lease.    



        1.3.1.1    Procedure for Offer.    Landlord shall notify Tenant (the
"First Refusal Notice") from time-to-time when and if Landlord receives a "bona-fide third-party offer" for the
First Refusal Space. Pursuant to such First Refusal Notice, Landlord shall offer to lease to Tenant the applicable First Refusal Space. The First Refusal Notice shall describe the First Refusal Space,
and the lease term, rent and other fundamental economic terms and conditions, including the method of measurement of rentable and usable square feet, upon which Landlord proposes to lease such First
Refusal Space pursuant to the bona-fide third-party offer. For purposes of this Section 1.3, a
"bona-fide third-party offer" shall mean a counter-offer received by Landlord to lease First Refusal Space from an unaffiliated and
qualified third party. For purposes of example only, the following would each constitute a bone-fide third-party offer: 




	(a)
	Landlord
receives a request for proposal from an unaffiliated and qualified third party. Landlord responds to the request for proposal with a lease proposal and
subsequently receives a written bona-fide counter proposal from the unaffiliated and qualified third party.



	(b)
	Landlord
receives a written offer to lease from an unaffiliated and qualified third party. Landlord responds to the offer with a written counter offer and subsequently
receives a bona-fide counter to Landlord's counter offer from the unaffiliated and qualified third party. 








        1.3.1.2    Procedure for Acceptance.    If Tenant wishes to exercise Tenant's right of first
refusal with respect to the First Refusal Space described in the First Refusal Notice, then within seven (7) business days of delivery of the First Refusal Notice to Tenant, Tenant shall
deliver notice to Landlord of Tenant's exercise of its right of first refusal with respect to all of the First Refusal Space described in the First Refusal Notice at the rent, for the term and upon
the other fundamental economic terms and conditions contained in such First Refusal Notice, 




7





 


including,
but not limited to rental concessions and improvement allowances; provided, however, Landlord shall make a determination as to whether, and if so to what extent, Tenant must provide
Landlord with financial security, such as a letter of credit or guaranty, for Tenant's rent obligations with regard to such First Refusal Space; provided further, however, that if Tenant's
then-existing creditworthiness, as reasonable determined by Landlord, is equal to the then-existing creditworthiness of the proposed third-party tenant, then the financial
security requirements set forth in the First Refusal Notice shall be no greater than the financial security then being required by Landlord from such third-party tenant. Such determination shall be
made by reviewing the extent of financial security then generally being imposed in Comparable Transactions upon tenants of comparable financial condition and credit history to the then existing
financial condition and credit history of Tenant (with appropriate adjustments to account for differences in the then-existing financial condition of Tenant and such other tenants). If
Tenant does not so notify Landlord within such seven (7) business day period of Tenant's exercise of its first refusal right, then Landlord shall be free to negotiate and enter into a lease for
the First Refusal Space to anyone whom it desires on terms which are no more favorable (except as set forth at the end of this sentence, below) to such tenant than those set forth in the First Refusal
Notice, within a period of one hundred eighty (180) days commencing upon the expiration of the seven (7) day period, after which time, Tenant's rights to such space under this  Section 1.3
shall renew; provided, however, that notwithstanding the foregoing Landlord may modify the rentable square feet of the First Refusal
Space by up to five percent (5%), may modify the lease term by up to five percent (5%) than that set forth in the First Refusal Notice, and may rent such First Refusal Space at a rent and other
fundamental economic terms and conditions which together, on an average annual "net effective" basis, as that term is defined below, are no more than five percent (5%) more favorable to such tenant
than set forth in the First Refusal Notice. As used in this Section 1.3.1.2, for purposes of determining the "net
effective" value of the rent, the determined face (or gross) rent to be paid under the terms of a particular lease shall be adjusted based upon the value of all monetary
concessions (specifically including, without limitation, any tenant improvement allowance and/or free rental period), where the value of such concessions are evenly spread over the entire lease term
on a straight-line basis, without interest. Notwithstanding the foregoing, Tenant's ongoing right of first refusal shall be subordinate to all currently-existing rights of
Thermoscan, Inc., a Delaware corporation (the "Superior Right Holder") set forth in that certain Standard Industrial Lease—Multi
Tenant, dated as of April 24, 1994, including any renewal, extension or expansion rights set forth in such lease, regardless of whether such renewal, extension or expansion rights are executed
strictly in accordance with their terms, or pursuant to a lease amendment or a new lease. After Landlord enters into any lease of First Refusal Space ("Third Party
Lease") with any such third party ("Third Party Tenant") in accordance with the foregoing, Tenant's rights under this  Section 1.3 shall be subordinate to the rights of the tenant under the Third Party Lease with respect to the space leased and encumbered pursuant
to the provisions of the Third Party Lease, all extensions and renewals thereof, all expansion options contained therein which are stated as Landlord delivery obligations within a certain time frame
for a certain amount of space, and all right of first offer expansions contained therein. 




        1.3.2    Amendment to Lease.    If Tenant timely exercises Tenant's right of first refusal to
lease First Refusal Space as set forth herein, Landlord and Tenant shall within thirty (30) days thereafter execute an amendment to this Lease (the "First Refusal Space
Amendment") for such First Refusal Space upon the terms set forth in the First Refusal Notice, 



8





 

including,
but not limited to rent (the "First Refusal Space Rent"), but otherwise upon the TCCs set forth in this Lease and this  Section 1.3. Notwithstanding
the foregoing, Landlord may, at its sole option, require that a separate lease be executed by Landlord and Tenant in
connection with Tenant's lease of the First Refusal Space, in which event such lease (the "First Refusal Space Lease") shall be on the same TCCs as this
Lease, except as provided in this Section 1.3 and specifically in this Lease to the contrary. The First Refusal Lease, if applicable, shall be
executed by Landlord and Tenant within thirty (30) days following Tenant's exercise of its right to lease the First Refusal Space. 


        1.3.3    No Defaults; Required Financial Condition of Tenant.    The rights contained in this  Section 1.3 shall be
personal to the Original Tenant and its Affiliates and may only be exercised by the Original Tenant or an Affiliate (and not
any assignee, sublessee or other transferee of the Original Tenant's interest in this Lease) if the Original Tenant and/or an Affiliate occupies not less than one hundred percent (100%) of the then
existing Premises. The right to lease Expansion Space as provided in this Section 1.3 may not be exercised if, as of the date of the attempted
exercise of the expansion option by Tenant, or as of the scheduled date of delivery of such Expansion Space to Tenant, (A) Tenant is in economic or material default pursuant to the terms of
this Lease (beyond any applicable notice and cure periods), (B) Tenant has previously been in economic or material default under this Lease (beyond any applicable notice and cure periods)
during the previous twenty-four (24) month period, or (C) Tenant fails to satisfy the "Threshold Requirements," as that term is set forth in  Section 21.2.2 of this Lease. 


        1.3.4    First Refusal Space Commencement Date.    The commencement date for the First Refusal
Space shall be the date set forth in the bona-fide third-party offer (the "First Refusal Space Commencement Date"), unless otherwise agreed
to by Landlord and Tenant. The term of Tenant's occupancy of the First Refusal Space shall be referred to herein as a "Refusal Space Lease Term." 



        1.3.5    Third Party Lease Restrictions.    Provided Tenant is not then in default pursuant to
the terms of this Lease (beyond any applicable notice and cure period), then to the extent that Landlord enters into a Third Party Lease for any First Refusal Space, Landlord hereby agrees that the
"permitted use" set forth in such Third Party Lease shall expressly include a prohibition (the "Third Party Prohibition") preventing such Third Party
Tenant from having or using products or processes that would invalidate Tenant's cGMP compliance status in, or materially and unreasonably prevent, hinder, or interrupt Tenant's ability to continually
function under cGMP conditions under the applicable laws and regulations of, California and the United States, and under the applicable statutes for any foreign regulatory body, including but not
limited to, Canada, Europe and Asia (which products and processes specifically include, but are not limited to, vivarium, biologics, virus, pathogens, mold, fungus, environmental or hazardous raw
materials, active final product of hazardous material, porous or construction material). In connection with such Third Party Prohibition and such Third Party Tenant's "permitted use," Landlord shall
allow Tenant to review such applicable "permitted use" and Third Party Prohibition for the sole purpose of determining whether or not the same would allow the Third Party Tenant to use the First
Refusal Space in a manner that would invalidate Tenant's cGMP validation or materially and unreasonably prevent, hinder, or interrupt Tenant's ability to continually function under cGMP conditions;
provided, however, Tenant's failure to object to such "permitted use" and/or Third Party Prohibition within seven (7) business days shall 



9





 

conclusively
establish that such "permitted use" and Third Party Prohibition do not invalidate Tenant's cGMP validation or materially and unreasonably prevent, hinder, or interrupt Tenant's ability
to continually function under cGMP conditions (provided such Third Party Tenant's actual use of the First Refusal Space complies with such "permitted use" and Third Party Prohibition). In addition,
Landlord hereby covenants that any tenant improvements to be constructed pursuant to such Third Party Lease shall be constructed in a commercially reasonable manner and that Landlord shall use
commercially reasonable efforts to minimize any environmental risk to Tenant's cGMP operations resulting from such construction. Landlord shall provide Tenant with five (5) business days prior
notice of any construction being performed on, to, or within the Building. 



 
 

ARTICLE 2    
    
    LEASE TERM: OPTION TERM(S)    
    



        2.1    Initial Lease Term.    The TCCs and provisions of this Lease shall be effective as of
the date of this Lease. The term of this Lease (the "Lease Term") shall be as set forth in  Section 3.1 of the Summary, shall commence on the date set
forth in Section 3.2 of the
Summary (the "Lease Commencement Date"), and shall terminate on the date set forth in Section 3.3
of the Summary (the "Lease Expiration Date") unless this Lease is sooner terminated as hereinafter provided. For purposes of this Lease, the term
"Lease Year" shall mean each consecutive twelve (12) month period during the Lease Term; provided, however, that the first Lease Year shall
commence on the Lease Commencement Date and end on the last day of the eleventh month thereafter and the second and each succeeding Lease Year shall commence on the first day of the next calendar
month; and further provided that the last Lease Year shall end on the Lease Expiration Date. At any time during the Lease Term, Landlord may deliver to Tenant a notice in the form as set forth in  Exhibit C, attached hereto, as a confirmation only of the information set forth therein, which Tenant shall execute and return to Landlord within
five (5) days of receipt thereof. 


        2.2    Option Term(s).    



        2.2.1    Option Right.    Landlord hereby grants the Original Tenant, its Affiliates and any
permitted assignee of the Original Tenant's interest in this Lease pursuant to Article 14 of this Lease (a "Permitted
Assignee"), two (2) options to extend the Lease Term for the entire Premises each by a period of five (5) years (each, an "Option
Term"). Such options shall be exercisable only by Notice delivered by Tenant to Landlord as provided below, provided that, as of the date of delivery of such Notice, Tenant is
not in Default under this Lease (beyond any applicable notice and cure periods). Upon the proper
exercise of an option to extend, and provided that, as of the end of the then applicable Lease term, Tenant is not in Default under this Lease (beyond any applicable notice and cure periods), the
Lease Term, as it applies to the entire Premises, shall be extended for a period of five (5) years. The rights contained in this  Section 2.2 shall only be exercised by the Original Tenant or
its Affiliate (and not any other assignee, sublessee or other transferee of the
Original Tenant's interest in this Lease) if Original Tenant and/or its Affiliate is in possession of the entire then-existing Premises. 



10





 

        2.2.2    Option Rent.    The Rent payable by Tenant during the Option Term (the
"Option Rent") shall be equal to the Market Rent as set forth below. For purposes of this Lease, the term "Market
Rent" shall mean rent (including additional rent and considering any "base year" or "expense stop" applicable thereto), including all escalations, at which tenants, as of the
commencement of the applicable term are, pursuant to transactions completed within the twelve (12) months prior to the date Tenant delivers to Landlord the "Exercise Notice," as that term is
set forth below, leasing non-sublease, non-encumbered, non-synthetic, non-equity space (unless such space was leased pursuant to a definition of "fair
market" comparable to the definition of Market Rent) comparable in size, location and quality to the Premises for a "Comparable Term," as that term is defined in this  Section 2.2.2 (the
"Comparable Deals"), which comparable space is located in the "Comparable
Buildings," as that term is defined in this Section 2.2.2, giving appropriate consideration to the annual rental rates per rentable square foot
(adjusting the base rent component of such rate to reflect a net value after accounting for whether or not utility expenses are directly paid by the tenant such as Tenant's direct utility payments
provided for in Section 6.1 of this Lease), the standard of measurement by which the rentable square footage is measured, and taking into
consideration only, and granting only, the following concessions (provided that the rent payable in Comparable Deals in which the terms of such Comparable Deals are determined by use of a discounted
fair market rate formula shall be equitably increased in order that such Comparable Deals will not reflect a discounted rate) (collectively, the "Rent
Concessions"): (a) rental abatement concessions or build-out periods, if any, being granted such tenants in connection with such comparable spaces;
(b) tenant improvements or allowances provided or to be provided for such comparable space, taking into account the value of the existing improvements in the Premises, such value to be based
upon the age, quality and layout of the improvements and the extent to which the same can be utilized by this particular Tenant, (c) Proposition 13 protection, and (d) all other monetary
concessions, if any, being granted such tenants in connection with such comparable space; provided, however, that notwithstanding anything to the contrary herein, no consideration shall be given to
the fact that Landlord is or is not required to pay a real estate brokerage commission in connection with the applicable term or the fact that the Comparable Deals do or do not involve the payment of
real estate brokerage commissions. The term "Comparable Term" shall refer to the length of the lease term, without consideration of options to extend
such term, for the space in question. In addition, the determination of the Market Rent shall include a determination as to whether, and if so to what extent, Tenant must provide Landlord with
financial security, such as a letter of credit or guaranty, for Tenant's rent obligations during any Option Term. Such determination shall be made by reviewing the extent of financial security then
generally being imposed in Comparable Transactions upon tenants of comparable financial condition and credit history to the then existing financial condition and credit history of Tenant (with
appropriate adjustments to account for differences in the then-existing financial condition of Tenant and such other tenants). If in determining the Market Rent, Tenant would, pursuant to
the Comparable Deals and the Rent Concessions set forth therein, otherwise be entitled to a tenant improvement or comparable allowance for the improvement of the Premises (the
"Option Term TI Allowance"), Tenant
shall not be entitled and shall not be compelled, to receive such Option Term TI Allowance and Landlord shall reduce the rental rate component of the Market Rent to be an effective rental rate which
takes into consideration that Tenant will not receive any Option Term TI Allowance. The term "Comparable Buildings" shall mean the Building and other
first-class office/lab/manufacturing buildings which are comparable to the Building in terms of age (based 



11





 

upon
the date of completion of construction or major renovation as to the building containing the portion of the Premises in question), quality of construction, level of services and amenities, size
and appearance, and are located in the Sorrento Mesa area of San Diego, California (the "Comparable Area"). 


        2.2.3    Exercise of Option.    The option contained in this  Section 2.2 shall be exercised by Tenant, if at all, only in
the manner set forth in this  Section 2.2.3. Tenant shall deliver notice (the "Exercise Notice") to Landlord not more than
fifteen (15) months nor less than nine (9) months prior to the expiration of the then Lease Term, stating that Tenant is exercising its option. Concurrently with such Exercise Notice,
Tenant shall deliver to Landlord Tenant's calculation of the Market Rent (the "Tenant's Option Rent Calculation"). Landlord shall deliver notice (the
"Landlord Response Notice") to Tenant on or before the later to occur of (i) the date which is thirty (30) days after Landlord's receipt
of the Exercise Notice and Tenant's Option Rent Calculation, and (ii) the date which is nine (9) months prior to the expiration of the then Lease Term (the
"Landlord Response Date"), stating that (A) Landlord is accepting Tenant's Option Rent Calculation as the Market Rent, or (B) rejecting
Tenant's Option Rent Calculation and setting forth Landlord's calculation of the Market Rent (the "Landlord's Option Rent Calculation"). Within ten
(10) business days of its receipt of the Landlord Response Notice, Tenant may, at its option, accept the Market Rent contained in the Landlord's Option Rent Calculation. If Tenant does not
affirmatively accept or Tenant rejects the Market Rent specified in the Landlord's Option Rent Calculation, the parties shall follow the procedure, and the Market Rent shall be determined as set forth
in Section 2.2.5. 


        2.2.4    No Defaults; Required Financial Condition of Tenant.    The rights contained in this  Section 2.2 shall be
personal to the Original Tenant, its Affiliates and any Permitted Assignee and may only be exercised by such Original
Tenant, Affiliate or Permitted Assignee (and not any other assignee, sublessee or other transferee of the Original Tenant's interest in this Lease) if the Original Tenant, Affiliate and/or Permitted
Assignee occupies not less than one hundred percent (100%) of the then existing Premises. The right to extend the Lease Term as provided in this  Section 2.2 may not be exercised if, as of the date
of the attempted exercise of the extension option by Tenant, or as of the commencement date
of such Option Term, (A) Tenant is in economic or material default pursuant to the terms of this Lease (beyond any applicable notice and cure periods), (B) Tenant has previously been in
economic or material default under this Lease (beyond any applicable notice and cure periods) during the previous twenty-four (24) month period, or (C) Tenant fails to
satisfy the Threshold Requirements. 


        2.2.5    Determination of Market Rent.    In the event Tenant objects or is deemed to have
objected to the Market Rent, Landlord and Tenant shall attempt to agree upon the Market Rent using reasonable good-faith efforts. If Landlord and Tenant fail to reach agreement within
sixty (60) days following Tenant's objection or deemed objection to the Landlord's Option Rent Calculation (the (the
"Outside Agreement Date"), then (i) in connection with the Option Rent, Landlord's Option Rent Calculation and Tenant's Option Rent Calculation,
each as previously delivered to the other party, shall be submitted to the arbitrators pursuant to the TCCs of this Section 2.2.4, and
(ii) in connection with any other contested calculation of market Rent, the parties shall each make a separate determination of the Market Rent and shall submit the same to the arbitrators
pursuant to the TCCs of this Section 2.2.5. The submittals 



12





 

shall
be made concurrently with the selection of the arbitrators pursuant to this Section 2.2.5 and shall be submitted to arbitration in
accordance with Section 2.2.5.1 through 2.2.5.5 of this Lease, but subject to the conditions, when appropriate, of  Section 2.2.3. 




        2.2.5.1    Landlord
and Tenant shall mutually and reasonably select and appoint one arbitrator who shall by profession be a real estate broker, appraiser or attorney (the
"Neutral Arbitrator") who shall have been active over the five (5) year period ending on the date of such appointment in the leasing (or
appraisal, as the case may be) of first-class office/lab/manufacturing properties in the Comparable Area. The determination of the Neutral Arbitrator shall be limited solely to the issue of whether
Landlord's or Tenant's submitted Market Rent, is the closest to the actual Market Rent as determined by the Neutral Arbitrator, taking into account the requirements of  Section 2.2.2 of this Lease.
Such Neutral Arbitrator shall be appointed within thirty (30) days after the applicable Outside Agreement
Date. Neither the Landlord nor Tenant may, directly or indirectly, consult with the Neutral Arbitrator prior to subsequent to his or her appearance. The Neutral Arbitrator shall be retained via an
engagement letter jointly prepared by Landlord's counsel and Tenant's counsel. 


        2.2.4.2    Within
thirty (30) days of the appointment of the Neutral Arbitrator, such Neutral Arbitrator shall reach a decision as to Market Rent and determine whether
the Landlord's or Tenant's determination of Market Rent as submitted pursuant to Section 2.2.5.1 and  Section 2.2.3 of this Lease is closest to
Market Rent as determined by such Neutral Arbitrator and simultaneously publish a ruling
("Award") indicating whether Landlord's or Tenant's submitted Market Rent is closest to the Market Rent as determined by the Neutral Arbitrator.
Following notification of the Award, the Landlord's or Tenant's submitted Market Rent determination, whichever is selected by the Neutral Arbitrator as being closest to Market rent shall become the
then applicable Market Rent. 


        2.2.4.3    The
Award issued by the Neutral Arbitrator shall be binding upon Landlord and Tenant. 


        2.2.4.4    If
Landlord and Tenant fail to agree upon and appoint the Neutral Arbitrator, then either party may petition Judicial Arbitration & Mediation
Services, Inc. ("JAMS") to designate an independent third party to appoint the Neutral Arbitrator, subject to criteria in  Section 2.2.5.1 of this
Lease. 



        2.2.4.5    The
cost of arbitration shall be paid by the party (either Landlord or Tenant) whose Market Rent is not selected by the Neutral Arbitrator. 





 
 

ARTICLE 3    
    
    BASE RENT    
    


        3.1    Base Rent.    Tenant shall pay, without prior notice or demand, to Landlord or
Landlord's agent at the management office of the Project, or, at Landlord's option, at such other place as Landlord may from time to time designate in writing, by a check for currency which, at the
time of payment, is legal tender for private or public debts in the United States of America, base rent ("Base Rent") as set forth in  Section 4 of the
Summary, payable in equal monthly 


13





 

installments
as set forth in Section 4 of the Summary in advance on or before the first day of each and every calendar month during the Lease
Term, without any setoff or deduction whatsoever. The Base Rent for the first full month of the Lease Term shall be paid at the time of Tenant's execution of this Lease. If any Rent payment date
(including the Lease Commencement Date) falls on a day of the month other than the first day of such month or if any payment of Rent is for a period which is shorter than one month, the Rent for any
fractional month shall accrue on a daily basis for the period from the date such payment is due to the end of such calendar month or to the end of the Lease Term at a rate per day which is equal to
1/365 of the applicable annual Rent. All other payments or adjustments required to be made under the TCCs of this Lease that require proration on a time basis shall be prorated on the
same basis. 


        3.2    Abated Base Rent.    Provided that the Original Tenant, Affiliate or Permitted Assignee
is not then in default (after expiration of any applicable notice and cure periods), then for the months of July 2006 and July 2007 only, such Original Tenant, Affiliate or Permitted
Assignee shall have no obligation to pay the Base Rent otherwise attributable to such months of July 2006 and July 2007. 


 
 

ARTICLE 4    
    
    ADDITIONAL RENT    
    



        4.1    General Terms.    In addition to paying the Base Rent specified in  Article 3 of this Lease, Tenant shall pay
"Tenant's Share" of the annual
"Direct Expenses," as those terms are defined in Sections 4.2.6 and 4.2.2, respectively, of this Lease.
Such payments by Tenant, together with any and all other amounts payable by Tenant to Landlord pursuant to the TCCs of this Lease, are hereinafter collectively referred to as the
"Additional Rent," and the Base Rent and the Additional Rent are herein collectively referred to as
"Rent." All amounts due under this Article 4 as Additional Rent shall be payable for the same
periods and in the same manner as the Base Rent. Without limitation on other obligations of Tenant which survive the expiration of the Lease Term, the obligations of Tenant to pay the Additional Rent
accruing during the Lease Term provided for in this Article 4 shall survive the expiration of the Lease Term. Landlord and Tenant understand and
agree that this Lease is a "Triple Net" Lease. Tenant recognizes and acknowledges, without limiting the generality of any other TCCs of this Lease, that it is the intent of the parties hereto that the
Base Rent provided to be paid by Tenant to Landlord shall be net to Landlord, and any and all expenses incurred in connection with the Premises, the Building and an applicable portion of the Common
Areas, or in connection with the operations thereof, include any and all taxes, assessments, general or special license fees, insurance premiums, public utility bills and costs of repair, maintenance
and operation of the Premise and the Project and all buildings, structures, permanent fixtures and other improvements comprised therein, together with the appurtenances thereto, shall be paid by
Tenant in addition to the Base Rent specified in this Lease, except as otherwise specifically set forth herein. 


        4.2    Definitions of Key Terms Relating to Additional Rent.    As used in this  Article 4, the following terms shall
have the meanings hereinafter set forth: 



        4.2.1    Intentionally Deleted.    



14







  




        4.2.2    "Direct Expenses" shall mean "Operating Expenses" and "Tax Expenses." 


        4.2.3    "Expense Year" shall mean each calendar year in which any portion of the Lease Term falls, through and including the
calendar year in which the Lease Term expires, provided that Landlord, upon notice to Tenant, may change the Expense Year from time to time to any other twelve (12) consecutive month period,
and, in the event of any such change, Tenant's Share of Direct Expenses shall be equitably adjusted for any Expense Year involved in any such change. 


        4.2.4    "Operating Expenses" shall mean all expenses, costs and amounts of every kind and nature which Landlord pays or accrues
during any Expense Year because of or in connection with the ownership, management, maintenance, security, repair, replacement, restoration or operation of the Project, or any portion thereof, except
as specifically set forth hereinbelow to the contrary. Without limiting the generality of the foregoing, Operating Expenses shall specifically include any and all of the following: (i) the cost
of supplying all utilities, the cost of operating, repairing, maintaining, and renovating the utility, telephone, mechanical, sanitary, storm drainage, and elevator systems, and the cost of
maintenance and service contracts in connection therewith; (ii) the cost of licenses, certificates, permits and inspections and the cost of contesting any governmental enactments which may
affect Operating Expenses, and the costs incurred in connection with a governmentally mandated transportation system management program or similar program; (iii) the cost of all insurance
carried by Landlord in connection with the Project; (iv) the cost of landscaping, relamping, and all supplies, tools, equipment and materials used in the operation, repair and maintenance of
the Project, or any portion thereof; (v) costs incurred in connection with the parking areas servicing the Project; (vi) fees and other costs, including management fees (which management
fee shall equal two and one-quarter percent (21/4%) of the Base Rent due under this Lease, unless increased pursuant to the terms of  Section 6.5 of this Lease), consulting
fees, legal fees and accounting fees, of all contractors and consultants in connection with the
management, operation, maintenance and repair of the Project; (vii) the fair rental value of any management office space reasonably attributable to the Project (as opposed to being attributable
to Landlord's non-Project activities); (viii) wages, salaries and other compensation and benefits, including taxes levied thereon, of all persons (other than persons generally
considered to be higher in rank than the position of Project manager) engaged in the operation, maintenance and security of the Project; (ix) costs under any recorded instrument pertaining to
the sharing of costs by the Project; (x) operation, repair, maintenance and replacement of all systems and equipment and components thereof of the Building; (xi) the cost of janitorial,
alarm, security and other services, replacement of wall and floor coverings, ceiling tiles and fixtures in common areas, maintenance and replacement of curbs and walkways, repair to the Building's
roof membrane; (xii) amortization (including interest on the unamortized cost) of the cost of acquiring or the rental expense of personal property used in the maintenance, operation and repair
of the Project, or any portion thereof, to the extent of cost savings reasonably anticipated by Landlord at the time of such expenditure to be incurred in connection therewith; (xiii) the cost
of capital improvements or other costs incurred in connection with the Project (A) which are intended to effect economies in the operation or maintenance of the Project, or any portion thereof,
(B) that are required to comply with present or anticipated conservation programs, (C) which are replacements or modifications of nonstructural items
located in the Common Areas required to keep the Common Areas in good order or condition, or (D) that are required under any governmental law or regulation by a 



15





 

federal,
state or local governmental agency, except for capital repairs, replacements or other improvements to remedy a condition existing prior to the Lease Commencement Date which an applicable
governmental authority, if it had knowledge of such condition prior to the Lease Commencement Date, would have then required to be remedied pursuant to then-current governmental laws or
regulations in their form existing as of the Lease Commencement Date and pursuant to the then-current interpretation of such governmental laws or regulations by the applicable governmental
authority as of the Lease Commencement Date; provided, however, that any capital expenditure shall be amortized with interest over its useful life, as reasonably determined by Landlord pursuant to
sound real estate accounting and management principles, consistently applied; (xiv) costs, fees, charges or assessments imposed by, or resulting from any mandate imposed on Landlord by, any
federal, state or local government for fire and police protection, trash removal, community services, or other services which do not constitute "Tax Expenses" as that term is defined in  Section 4.2.5, below; and (xv) payments under any easement, license, operating agreement, declaration, restrictive covenant, or instrument
pertaining to the sharing of costs by the Building. Notwithstanding the foregoing, for purposes of this Lease, Operating Expenses shall not, however, include: 



        (a)   all
costs relating to the maintenance and repair of the following structural items: (i) the foundation slab structure under the Building (ii) exterior wall
structure of the Building, and (iii) the roof structure of the Building (excluding the membrane), except to the extent such repairs are required due to the negligence or willful misconduct of
Tenant; 


        (b)   costs,
including marketing costs, legal fees, space planners' fees, advertising and promotional expenses, and brokerage fees incurred in connection with the original
construction or development, or original or future leasing of the Project, and costs, including permit, license and inspection costs, incurred with respect to the installation of tenant improvements
made for other tenants or incurred in renovating or otherwise improving, decorating, painting or redecorating vacant space for tenants or other occupants of the Project (excluding, however, such costs
relating to any common areas of the Project or parking facilities); 


        (c)   except
as set forth in items (xii), (xiii), and (xiv) above, depreciation, interest and principal payments on mortgages and other debt costs, if any, penalties
and interest, costs of capital repairs and alterations, and costs of capital improvements and equipment; 


        (d)   except
as otherwise specifically provided in item (xiii) above, costs incurred by Landlord in the repairs, capital additions, alterations or replacements made or
incurred to rectify or correct defects in original design, materials or workmanship in connection with the "Base Building," as that term is defined in  Section 8.2, portions of the Project;




        (e)   costs
for which the Landlord is reimbursed by any tenant or occupant of the Project or by insurance by its carrier or any tenant's carrier or by anyone else, and
electric power costs for which any tenant directly contracts with the local public service company; 


        (f)    any
bad debt loss, rent loss, or reserves for bad debts or rent loss; 




16





 


        (g)   costs
associated with the operation of the business of the partnership or entity which constitutes the Landlord, as the same are distinguished from the costs of
operation of the Project (which shall specifically include, but not be limited to, accounting costs associated with the operation of the Project). Costs associated with the operation of the business
of the partnership or entity which constitutes the Landlord include costs of partnership accounting and legal matters, costs of defending any lawsuits with any mortgagee (except as the actions of the
Tenant may be in issue), costs of selling, syndicating, financing, mortgaging or hypothecating any of the Landlord's interest in the Project, and costs incurred in connection with any disputes between
Landlord and its employees, between Landlord and Project management, or between Landlord and other tenants or occupants, and Landlord's general corporate overhead and general and administrative
expenses; 


        (h)   the
wages and benefits of any employee who does not devote substantially all of his or her employed time to the Project unless such wages and benefits are prorated to
reflect time spent on operating and managing the Project vis-a-vis time spent on matters unrelated to operating and managing the Project; provided, that in no event shall
Operating Expenses for purposes of this Lease include wages and/or benefits attributable to personnel above the level of Project manager; 



        (i)    interest,
charges and fees incurred on debt, payments on mortgages and/or amount paid as ground rental for the Project by the Landlord; 


        (j)    interest,
late charges and tax penalties incurred as a result of Landlord's gross negligence, inability or unwillingness to make payments or file returns when due; 


        (k)   overhead
and profit increment paid to the Landlord or to subsidiaries or affiliates of the Landlord for services in the Project to the extent the same exceeds the costs
of such services rendered by qualified, first-class unaffiliated third parties on a competitive basis; 



        (l)    any
compensation paid to clerks, attendants or other persons in commercial concessions operated by the Landlord, provided that any compensation paid to any concierge at
the Project shall be includable as an Operating Expense; 


        (m)  rentals
and other related expenses incurred—in leasing air conditioning systems, elevators or other equipment which if purchased the cost of which would be
excluded from Operating Expenses as a capital cost, except equipment not affixed to the Project which is used in providing janitorial or similar services and, further excepting from this exclusion
such equipment rented or leased to remedy or ameliorate an emergency condition in the Project; 



        (n)   all
items and services for which Tenant or any other tenant in the Project reimburses Landlord or which Landlord provides selectively to one or more tenants (other than
Tenant) without reimbursement; 


        (o)   costs,
other than those incurred in ordinary maintenance and repair, for sculpture, paintings, fountains or other objects of art; 




17





 


        (p)   any
costs expressly excluded from Operating Expenses elsewhere in this Lease; 


        (q)   any
costs expressly included as Tax Expenses pursuant to Section 4.2.5, below; 


        (r)   rent
for any office space occupied by Project management personnel to the extent the size or rental rate of such office space exceeds the size or fair market rental
value of office space occupied by management personnel of the Comparable Buildings in the vicinity of the Building, with adjustment where appropriate for the size of the applicable project; 


        (s)   reserves
for depreciation, amortization and other expenses; 


        (t)    costs
arising from the active negligence or willful misconduct of Landlord or its agents, employees, vendors, contractors, or providers of materials or services; and 


        (u)   costs
incurred to comply with laws relating to the removal of hazardous material (as defined under applicable law) which was in existence in the Building or on the
Project prior to the Lease Commencement Date, and was of such a nature that a federal, State or municipal governmental authority, if it had then had knowledge of the presence of such hazardous
material, in the state, and under the conditions that it then existed in the Building or on the Project, would have then required the removal of such hazardous material or other remedial or
containment action with respect thereto; and costs incurred to remove, remedy, contain, or treat hazardous material, which hazardous material is brought into the Building or onto the Project after the
date hereof by Landlord or any other tenant of the Project and is of such a nature, at that time, that a federal, State or municipal governmental authority, if it had then had knowledge of the
presence of such hazardous material, in the state, and under the conditions, that it then exists in the Building or on the Project, would have then required the removal of such hazardous material or
other remedial or containment action with respect thereto. 




        4.2.5    Taxes.    



        4.2.5.1    "Tax Expenses" shall mean all federal, state, county, or local governmental or municipal taxes, fees, charges or
other impositions of every kind and nature, whether general, special, ordinary or extraordinary, (including, without limitation, real estate taxes, general and special assessments, transit taxes,
leasehold taxes or taxes based upon the receipt of rent, including gross receipts or sales taxes applicable to the receipt of rent, unless required to be paid by Tenant, personal property taxes
imposed upon the fixtures, machinery, equipment, apparatus, systems and equipment, appurtenances, furniture and other personal property used in connection with the Project, or any portion thereof),
which shall be paid or accrued during any Expense Year (without regard to any different fiscal year used by such governmental or municipal authority) because of or in connection with the ownership,
leasing and operation of the Project, or any portion thereof. Notwithstanding anything to the contrary set forth in this Section 4.2.5, Tax
Expenses shall specifically exclude bonds and/or assessments which have been or, subsequent to the date hereof are, levied for the purpose of funding the costs 




18





 


of
construction of all or any portion of the Project or capital improvements constructed therein or about, or on-or off-site improvements with respect thereto, to the extent
such improvements are the sole responsibility of Landlord under the TCCs of this Lease. 



        4.2.5.2    Tax
Expenses shall include, without limitation: (i) Any tax on the rent, right to rent or other income from the Project, or any portion thereof, or as against
the business of leasing the Project, or any portion thereof; (ii) Any assessment, tax, fee, levy or charge in addition to, or in substitution, partially or totally, of any assessment, tax, fee,
levy or charge previously included within the definition of real property tax, it being acknowledged by Tenant and Landlord that Proposition 13 was adopted by the voters of the State of California in
the June 1978 election ("Proposition 13") and that assessments, taxes, fees, levies and charges may be imposed by governmental agencies for such
services as fire protection, street, sidewalk and road maintenance, refuse removal and for other governmental services formerly provided without charge to property owners or occupants, and, in further
recognition of the decrease in the level and quality of governmental services and amenities as a result of Proposition 13, Tax Expenses shall also include any governmental or private assessments or
the Project's contribution
towards a governmental or private cost-sharing agreement for the purpose of augmenting or improving the quality of services and amenities normally provided by governmental agencies;
(iii) Any assessment, tax, fee, levy, or charge allocable to or measured by the area of the Premises or the Rent payable hereunder, including, without limitation, any business or gross income
tax or excise tax with respect to the receipt of such rent, or upon or with respect to the possession, leasing, operating, management, maintenance, alteration, repair, use or occupancy by Tenant of
the Premises, or any portion thereof; and (iv) Any assessment, tax, fee, levy or charge, upon this transaction or any document to which Tenant is a party, creating or transferring an interest
or an estate in the Premises. 


        4.2.5.3    Any
costs and expenses (including, without limitation, reasonable attorneys' fees) incurred in attempting to protest, reduce or minimize Tax Expenses shall be
included in Tax Expenses in the Expense Year such expenses are paid. Except as set forth in Section 4.2.5.4, below, refunds of Tax Expenses shall
be credited against Tax Expenses and refunded to Tenant regardless of when received, based on the Expense Year to which the refund is applicable, provided that in no event shall the amount to be
refunded to Tenant for any such Expense Year exceed the total amount paid by Tenant as Additional Rent under this Article 4 for such Expense
Year. If Tax Expenses for any period during the Lease Term or any extension thereof are increased after payment thereof for any reason, including, without limitation, error or reassessment by
applicable governmental or municipal authorities, Tenant shall pay Landlord upon demand Tenant's Share of any such increased Tax Expenses included by Landlord as Building Tax Expenses pursuant to the
TCCs of this Lease. Notwithstanding anything to the contrary contained in this Section 4.2.8 (except as set forth in  Section 4.2.8.1, above),
there shall be excluded from Tax Expenses (i) all excess profits taxes, franchise taxes, gift taxes, capital
stock taxes, inheritance and succession taxes, estate taxes, federal and state income taxes, and other taxes to the extent applicable to Landlord's general or net income from all sources,
(ii) any items included as Operating Expenses, (iii) any items paid by Tenant under Section 4.5 of this Lease, and
(iv) transfer taxes associated with the sale or other transfer by Landlord of its interest in the Project. 




19





 




        4.2.6    "Tenant's Share" shall mean the percentage set forth in  Section 6 of the Summary. 




        4.3    Allocation of Direct Expenses.    



        4.3.1    Method of Allocation.    The parties acknowledge that the Building is a part of a
multi-building project and that the costs and expenses incurred in connection with the Project (i.e. the Direct Expenses) should be shared between the
tenants of the Building and the tenants of the other buildings in the Project. Accordingly, as set forth in Section 4.2 above, Direct Expenses
(which consists of Operating Expenses and Tax Expenses) are determined annually for the Project as a whole, and a portion of the Direct Expenses, which portion shall be determined by Landlord on an
equitable basis, shall be allocated to the Building (as opposed to any other buildings in the Project) and such portion shall be the Direct Expenses for purposes of this Lease. Such portion of Direct
Expenses allocated to the
Building shall include all Direct Expenses attributable solely to the Building and an equitable portion of the Direct Expenses attributable to the Project as a whole. 




        4.4    Calculation and Payment of Additional Rent.    Tenant shall pay to Landlord, in the
manner set forth in Section 4.4.1, below, and as Additional Rent, Tenant's Share of Direct Expenses for each Expense Year. 



        4.4.1    Statement of Actual Building Direct Expenses and Payment by Tenant.    Landlord shall
give to Tenant following the end of each Expense Year, a statement (the "Statement") which shall state the Building Direct Expenses incurred or accrued
for such preceding Expense Year, and which shall indicate the amount of Tenant's Share of Direct Expenses. Landlord shall use commercially reasonable efforts to deliver such Statement to Tenant on or
before May 1 following the end of the Expense Year to which such Statement relates. Upon receipt of the Statement for each Expense Year commencing or ending during the Lease Term, Tenant shall
pay, within thirty (30) days after receipt of the Statement, the full amount of Tenant's Share of Direct Expenses for such Expense Year, less the amounts, if any, paid during such Expense Year
as "Estimated Direct Expenses," as that term is defined in Section 4.4.2, below, and if Tenant paid more as Estimated Direct Expenses than the
actual Tenant's Share of Direct Expenses (an "Excess"), Tenant shall receive a credit in the amount of such Excess against Rent next due under this
Lease. The failure of Landlord to timely furnish the Statement for any Expense Year shall not prejudice Landlord or Tenant from enforcing its rights under this  Article 4. Even though the Lease Term
has expired and Tenant has vacated the Premises, when the final determination is made of Tenant's Share of
Direct Expenses for the Expense Year in which this Lease terminates, if Tenant's Share of Direct Expenses is greater than the amount of Estimated Direct Expenses previously paid by Tenant to Landlord,
Tenant shall, within thirty (30) days after receipt of the Statement, pay to Landlord such amount, and if Tenant paid more as Estimated Direct Expenses than the actual Tenant's Share of Direct
Expenses (again, an Excess), Landlord shall, within thirty (30) days, deliver a check payable to Tenant in the amount of such Excess. The provisions of this  Section 4.4.1 shall survive the
expiration or earlier termination of the Lease Term. Notwithstanding the immediately preceding sentence, Tenant
shall not be responsible for Tenant's Share of any Building Direct Expenses attributable to any Expense Year which are first billed to Tenant more than two (2) calendar years after the Lease
Expiration Date, provided that in any event Tenant shall be responsible for Tenant's Share 



20





 

of
Direct Expenses levied by any governmental authority or by any public utility companies at any time following the Lease Expiration Date which are attributable to any Expense Year. 



        4.4.2    Statement of Estimated Building Direct Expenses.    In addition, Landlord shall give
Tenant a yearly expense estimate statement (the "Estimate Statement") which shall set forth in general major categories Landlord's reasonable estimate
(the "Estimate") of what the total amount of Direct Expenses for the then-current Expense Year shall be and the estimated Tenant's Share of
Direct Expenses (the "Estimated Direct Expenses"). Landlord shall use commercially reasonable efforts to deliver such Estimate Statement to Tenant on or
before April 1 following the end of the Expense Year to which such Estimate Statement relates. The failure of Landlord to timely furnish the Estimate Statement for any Expense Year shall not
preclude Landlord from enforcing its rights to collect any Estimated Direct Expenses under this Article 4, nor shall Landlord be prohibited from
revising any Estimate Statement or Estimated Direct Expenses theretofore delivered to the extent
necessary. Thereafter, Tenant shall pay, within thirty (30) days after receipt of the Estimate Statement, a fraction of the Estimated Direct Expenses for the then-current Expense
Year (reduced by any amounts paid pursuant to the second to last sentence of this Section 4.4.2). Such fraction shall have as its numerator the
number of months which have elapsed in such current Expense Year, including the month of such payment, and twelve (12) as its denominator. Until a new Estimate Statement is furnished (which
Landlord shall have the right to deliver to Tenant at any time), Tenant shall pay monthly, with the monthly Base Rent installments, an amount equal to one-twelfth (1/12) of
the total Estimated Direct Expenses set forth in the previous Estimate Statement delivered by Landlord to Tenant. Throughout the Lease Term Landlord shall maintain books and records with respect to
Building Direct Expenses in accordance with generally accepted real estate accounting and management practices, consistently applied. 




        4.5    Taxes and Other Charges for Which Tenant Is Directly Responsible.    



        4.5.1    Tenant
shall be liable for and shall pay ten (10) days before delinquency, taxes levied against Tenant's equipment, furniture, fixtures and any other personal
property located in or about the Premises. If any such taxes on Tenant's equipment, furniture, fixtures and any other personal property are levied against Landlord or Landlord's property or if the
assessed value of Landlord's property is increased by the inclusion therein of a value placed upon such equipment, furniture, fixtures or any other personal property and if Landlord pays the taxes
based upon such increased assessment, which Landlord shall have the right to do regardless of the validity thereof but only under proper protest if requested by Tenant, Tenant shall upon demand repay
to Landlord the taxes so levied against Landlord or the proportion of such taxes resulting from such increase in the assessment, as the case may be. 


        4.5.2    If
the tenant improvements in the Premises, whether installed and/or paid for by Landlord or Tenant and whether or not affixed to the real property so as to become a
part thereof, are assessed for real property tax purposes at a valuation higher than the valuation at which tenant improvements conforming to Landlord's "building standard" in other space in the
Building are assessed (provided Landlord and Tenant hereby agree that such "building standard" valuation shall be deemed to equal $40.00 per rentable square foot), then the Tax Expenses levied against
Landlord or the property by reason of such excess assessed valuation shall be 



21





 

deemed
to be taxes levied against personal property of Tenant and shall be governed by the provisions of Section 4.5.1, above. 



        4.5.3    Notwithstanding
any contrary provision herein, Tenant shall pay prior to delinquency any (i) rent tax or sales tax, service tax, transfer tax or value added
tax, or any other applicable tax on the rent or services herein or otherwise respecting this Lease, (ii) taxes assessed upon or with respect to the possession, leasing, operation, management,
maintenance, alteration, repair, use or occupancy by Tenant of the Premises or any portion of the Project, including the Project parking facility; or (iii) taxes assessed upon this transaction
or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises. 



        4.5.4    Tenant
shall be liable for and shall pay directly to Landlord within thirty (30) days of being invoiced therefor, the actual cost, if any, incurred by
Landlord's for carrying, pursuant to the terms and conditions of Section 10.2, below, "Pollution Legal Liability Environmental Insurance." 




        4.6    Landlord's Books and Records.    Within two (2) years after receipt of a
Statement by Tenant, if Tenant disputes the amount of Additional Rent set forth in the Statement, a determination as to the proper amount shall be made, at Tenant's expense, by an independent
certified public accountant (the "Accountant") selected by Landlord and subject to Tenant's reasonable approval, by inspecting Landlord's records with
respect to the Statement at Landlord's offices, provided that Tenant is not then in Default under this Lease and Tenant has paid all amounts required to be paid under the applicable Estimate Statement
and Statement, as the case may be. In connection with such inspection, the Accountant must agree in advance to follow Landlord's reasonable rules and procedures regarding inspections of Landlord's
records, and shall execute a commercially reasonable confidentiality agreement regarding such inspection. If such determination by the Accountant proves that Direct Expenses were overstated by more
than five percent (5%), then the cost of the Accountant and the cost of such determination shall be paid for by Landlord. Tenant's failure to dispute the amount of Additional Rent set forth in any
Statement within two (2) years of Tenant's receipt of such Statement shall be deemed to be Tenant's approval of such Statement and Tenant, thereafter, waives the right or ability to dispute the
amounts set forth in such Statement. Tenant hereby acknowledges that Tenant's sole right to inspect Landlord's books and records and to contest the amount of Direct Expenses payable by Tenant shall be
as set forth in this Section 4.6, and Tenant hereby waives any and all other rights pursuant to Applicable Law to inspect such books and records
and/or to contest the amount of Direct Expenses payable by Tenant. 


 
 

ARTICLE 5    
    
    USE OF PREMISES    
    


        5.1    Permitted Use.    Tenant shall use the Premises solely for the Permitted Use set forth
in Section 7 of the Summary and Tenant shall not use or permit the Premises or the Project to be used for any other purpose or purposes
whatsoever without the prior written consent of Landlord, which may be withheld in Landlord's reasonable discretion. 


22







  





        5.2    Prohibited Uses.    The uses prohibited under this Lease shall include, without
limitation, use of the Premises or a portion therefor (i) offices of any agency or bureau of the United States or any state or political subdivision thereof; (ii) offices or agencies of
any foreign governmental or political subdivision thereof; (iii) medical/operational offices (as opposed to general offices) of any health care professionals; (iv) schools or other
training facilities which are not ancillary to corporate, executive or professional office use; (v) retail or restaurant uses; or (vi) communications firms such as radio and/or
television stations. Tenant further covenants and agrees that Tenant shall not use, or suffer or permit any person or persons to use, the Premises or any part thereof for any use or purpose contrary
to the provisions of the Rules and Regulations set forth in Exhibit D, attached hereto, or in violation of the laws of the United States of
America, the State of California, or the ordinances, regulations or requirements of the local municipal or county governing body or other lawful authorities having jurisdiction over the Project)
including, without limitation, any such laws, ordinances, regulations or requirements relating to hazardous materials or substances, as those terms are defined by applicable laws now or hereafter in
effect; provided, however, Landlord shall not enforce, change or modify the Rules and Regulations in a discriminatory manner and Landlord agrees that the Rules and Regulations shall not be
unreasonably modified or enforced in a manner which will unreasonably interfere with the normal and customary conduct of Tenant's business. Tenant shall not do or permit anything to be done in or
about the Premises which will in any way damage the reputation of the Project or obstruct or interfere with the rights of other tenants or occupants of the Building, or injure or annoy them or use or
allow the Premises to be used for any improper, unlawful or objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about the Premises. 


        5.3    CC&Rs.    Tenant shall comply with all recorded covenants, conditions, and restrictions
currently affecting the Project. Additionally, Tenant acknowledges that the Project may be subject to any future covenants, conditions, and restrictions (the
"CC&Rs") which Landlord, in Landlord's discretion, deems reasonably necessary or desirable (provided, however, such amendments and/or modifications do
not prohibit the Permitted Use in the Project and do not materially adversely interfere with Tenant's use and enjoyment of the Premises), and Tenant agrees that this Lease shall be subject and
subordinate to such CC&Rs. Landlord shall have the right to require Tenant to execute and acknowledge, within fifteen (15) business days of a request by Landlord, a "Recognition of Covenants,
Conditions, and Restriction," in a form substantially similar to that attached hereto as Exhibit F, agreeing to and acknowledging the CC&Rs. 


 
 

ARTICLE 6    
    
    SERVICES AND UTILITIES    
    



        6.1    Standard Tenant Services.    Landlord shall maintain and operate the Building in a
manner consistent with the Comparable Buildings, and shall keep the Building Structure in condition and repair consistent with the Comparable Buildings. 


        Notwithstanding
the foregoing, Tenant shall pay for all utilities (including without limitation, electricity, gas, sewer and water) attributable to its use of the entire Premises and
shall also provide its own janitorial and security services for the Premises. Such utility use shall 


23





 

include
electricity, water, and gas use for lighting, incidental use and "HVAC," as that term is defined below. In addition to the foregoing, Tenant shall provide, at Tenant's sole cost and expense,
pest control services to the Building in a manner consistent with or greater than the Comparable Buildings. All such Premises utility, janitorial, pest control and security payments shall be excluded
from Operating Expenses and shall be paid directly by Tenant prior to the date on which the same are due to the utility provider, janitorial company, pest control company, and/or security company, as
applicable. Landlord shall, to the extent reasonably practicable and at Tenant's cost, separately meter the Premises, and shall otherwise equitably determine Tenant's use of such utilities. 


        Landlord
shall not be required to provide any services other than with regard to its maintenance and repair obligation relating to the Building Structure and the Common Areas. 


        6.2    Tenant Maintained Building Systems; HVAC.    Tenant shall, at Tenant's sole cost and
expense, (i) maintain the Building's mechanical, electrical, life safety, plumbing, fire-sprinkler systems exclusively serving the Premises (except to the extent Landlord retains
repair and maintenance responsibility for the portion of such fire-sprinkler system contained in the Building Structure), (ii) subject to limitations imposed by all governmental
rules, regulations and guidelines applicable thereto, maintain (itself or through a service provider) heating and air conditioning to the Premises
("HVAC") (items identified in (i) and (ii) collectively, the "Building Systems"), and
(iii) maintain the remaining portions of the Premises which are not part of the "Building Structure," as that term is set forth in  Article 7 of this Lease to the extent such Building Structure
is to be maintained and repaired by Landlord. Such repair and maintenance costs and
expenses for the other building in
the Project shall be the responsibility of Landlord or the tenants thereof and shall not be included in Direct Expenses payable by Tenant. 


        6.3    Tenant Maintained Security.    Tenant hereby acknowledges that Landlord shall have no
obligation to provide guard service or other security measures for the benefit of the Premises, the Building or the Project. Any security measures desired by Tenant for the benefit of the Premises,
the Building or the Project shall be provided by Tenant, at Tenant's sole cost and expense. Tenant hereby assumes all responsibility for the protection of Tenant and its agents, employees,
contractors, invitees and guests, and the property thereof, from acts of third parties, including keeping doors locked and other means of entry to the Premises closed. 


        6.4    Tenant Maintenance Standards.    All Tenant maintained Building Systems, including
HVAC, shall be maintained in accordance with manufacturer specifications by Tenant in a commercially reasonable condition. In addition, Tenant shall provide to Landlord copies of any service contracts
and records of Tenant's maintenance of such Building Systems. 


        6.5    Landlord's Assumption Of Maintenance.    Landlord shall have the right, after
twenty-four (24) hours notice to Tenant, to inspect the Building, Building Systems, the "Central Plant Area," as that term is set forth in  Section 29.35, and/or Tenant's maintenance records,
in order to ensure compliance with this  Article 6. In the event Tenant fails, in the reasonable judgment of Landlord, to provide the maintenance services (or cause the same to be
provided) in accordance with the obligations set forth in this Article 6, Landlord shall deliver a written notice (a
"Maintenance Failure Notice") to Tenant stating with particularity the nature of such failure (such failure by Tenant to be known as a
"Tenant Maintenance Failure"). If such Tenant 


24





 

Maintenance
Failure continues at the end of the fifth (5th) business day following the date of delivery of such Maintenance Failure Notice, then Landlord shall have the right to provide
such maintenance and Tenant shall pay Landlord the cost thereof promptly upon being billed for same (including a percentage of the cost thereof sufficient to reimburse Landlord for all overhead,
general conditions, fees and other costs or expenses arising from Landlord's involvement with such maintenance); provided, however, in the event of an emergency, Landlord may take such remedial action
immediately following the delivery of the Maintenance Failure Notice. In the event more than two (2) Tenant Maintenance Failures occur during any calendar year during the Lease Term, Landlord
may, but need not, assume such repair and maintenance obligations on behalf of Tenant for the remainder of the Lease Term, in which case (i) Tenant shall pay Landlord the cost thereof promptly
upon being billed for same, and (ii) Landlord's management fee for the Project shall, notwithstanding the management fee set forth in  Section 4.2.4(vi), be increased to five percent (5%).
Tenant shall at all times maintain written records of maintenance and repairs and shall
provide Landlord, within five (5) business days following any request by Landlord therefor (which requests shall not occur more often than once per calendar quarter), a copy of all such
maintenance and repair records and/or reports. In addition, to the extent Tenant contracts with third parties to perform such maintenance (a "Service
Contract"), Tenant shall deliver full and complete copies of all such Service Contracts entered into by Tenant for the Building Systems to Landlord within thirty
(30) days after the effective date of such Service Contract. Any such cost or expense paid by Tenant pursuant to a Landlord approved Service Contract shall not be included in Operating
Expenses. 


        6.6    Interruption of Use.    Except as otherwise provided in this Lease, Tenant agrees that
Landlord shall not be liable for damages, by abatement of Rent or otherwise, for failure to furnish or delay in furnishing any service (including telephone and telecommunication services), or for any
diminution in the quality or quantity thereof, when such failure or delay or diminution is occasioned, in whole or in part, by breakage, repairs, replacements, or improvements, by any strike, lockout
or other labor trouble, by inability to secure electricity, gas, water, or other fuel at the Building or Project after reasonable effort to do so, by any riot or other dangerous condition, emergency,
accident or casualty whatsoever, by act or default of Tenant or other parties, or by any other cause beyond Landlord's reasonable control; and such failures or delays or diminution shall never be
deemed to constitute an eviction or disturbance of Tenant's use and possession of the Premises or relieve Tenant from paying Rent or performing any of its obligations under this Lease, except as
otherwise provided in this Lease. Furthermore, Landlord shall not be liable under any circumstances for consequential damages relating to the loss of, or injury to, property or for injury to, or
interference with, Tenant's business, including, without limitation, loss of profits, however occurring, through or in connection with or incidental to a failure to furnish any of the services or
utilities as set forth in this Article 6. 



        6.7    Rent Abatement.    If Landlord fails to perform the obligations required of Landlord
under the TCCs of this Lease and such failure causes all or a portion of the Premises to be untenantable and unusable by Tenant and such failure relates to the nonfunctioning of the heat, ventilation,
and air conditioning system in the Premises, the electricity in the Premises, the nonfunctioning of the elevator service to the Premises, or a failure to provide access to the Premises, Tenant shall
give Landlord notice (the "Initial Notice"), specifying such failure to perform by Landlord (the "Landlord
Default"). If Landlord has not cured such Landlord Default within five (5) business days after the receipt of the Initial Notice (the
"Eligibility  


25





 

 Period"), Tenant may deliver an additional notice to Landlord (the "Additional Notice"), specifying such Landlord Default and
Tenant's intention to abate the payment of Rent under this Lease. If Landlord does not cure such Landlord Default within five (5) business days of receipt of the Additional Notice, Tenant may,
upon written notice to Landlord, immediately abate Rent payable under this Lease for that portion of the Premises rendered untenantable and not used by Tenant, for the period beginning on the date
five (5) business days after the Initial Notice to the earlier of the date Landlord cures such Landlord Default or the date Tenant recommences the use of such portion of the Premises. Such
right to abate Rent shall be Tenant's sole and exclusive remedy at law or in equity for a Landlord Default. Except as provided in this  Section 6.4, nothing contained herein shall be interpreted to
mean that Tenant is excused from paying Rent due hereunder. 


 
 

ARTICLE 7    
    
    REPAIRS    
    


        7.1    In General.    Landlord shall maintain in first-class condition and operating order and
keep in good repair and condition the structural portions of the Building, including the foundation, floor/ceiling, slabs, roof structure (as opposed to roof membrane), curtain wall, exterior glass
and mullions, columns, beams, shafts (including elevator shafts, if any), stairs, parking areas, landscaping, exterior Project signage (as opposed to "Tenant Signage," as that term is set forth in  Section 23.4 of this Lease) and stairwells (collectively, "Building Structure") and the base
fire-sprinkler systems and other Building systems not exclusively serving the Premises which were not constructed by Tenant Parties, and the Common Areas; provided, however, that to the
extent such fire-sprinkler system (or other Building system, as applicable) as constructed by Landlord is altered by Tenant, Tenant shall thereafter be responsible therefor (at which time
any warranties relating to such systems shall be transferred to Tenant); provided further, however, that until such time as Tenant becomes responsible for the base fire-sprinkler systems
(or other Building system, as applicable) pursuant to the foregoing clause, all references to Building Structure shall be deemed to include such base fire-sprinkler system (or other
Building system, as applicable). Notwithstanding anything in this Lease to the contrary, Tenant shall be required to repair the Building Structure to the extent caused due to Tenant's use of the
Premises for other than normal and customary implementation of the Permitted Use, unless and to the extent such damage is covered by insurance carried or required to be carried by Landlord pursuant to  Article 10 and to which the waiver of subrogation is applicable (such obligation to the extent applicable to Tenant as qualified and conditioned
will hereinafter be defined as the "BS Exception"). Tenant shall, at Tenant's own expense, pursuant to the TCCs of this Lease, including, without
limitation Article 8 hereof, keep (i) that portion of the Building's roof membrane overlying the Premises, and (ii) the Premises,
including all Tenant Improvements, "Alterations," as that term is defined in Section 8.1 of this Lease, fixtures and the floor or floors of the
Premises, in good order, repair and condition at all times during the Lease Term (but such obligation shall not extend to the Building Structure except pursuant to the BS Exception); provided,
however, Landlord and Tenant hereby acknowledge and agree that Landlord shall retain responsibility for that portion of the Building's roof membrane which does not overly the Premises. In addition,
except as provided as part of Landlord's repair obligations set forth above or elsewhere in this Lease, Tenant shall, at Tenant's own expense (but under the supervision and subject to the prior
approval of Landlord to the extent the Building Structure is affected), and 


26





 

within
any reasonable period of time specified by Landlord, pursuant to the TCCs of this Lease, including without limitation Article 8 hereof,
promptly and adequately repair all damage to the Premises and replace or repair all damaged, broken, or worn fixtures and appurtenances (but such obligation shall not extend to the Building Structure
except pursuant to the BS Exception). except for damage caused by ordinary wear and tear; provided however, that, at Landlord's option, but only if Tenant fails to make such repairs, Landlord may,
after written notice to Tenant and Tenant's failure to repair (or failure to commence to repair and thereafter diligently prosecute the same to completion) within ten (10) days thereafter, but
need not, make such repairs and replacements (ordinary wear and tear excepted), and Tenant shall promptly pay Landlord the cost thereof (including a percentage of the cost thereof sufficient to
reimburse Landlord for all overhead, general conditions, fees and other costs or expenses arising from Landlord's involvement with such repairs and replacements). Landlord may, but shall not be
required to, enter the Premises during normal business hours, when accompanied by a representative of Tenant and upon an additional twenty-four (24) hours prior written notice to
make such repairs, alterations, improvements or additions to the Premises or to the Project or to any equipment located in the Project as Landlord shall be required or permitted to perform pursuant to
the TCCs of this Lease or as Landlord may be required to do by governmental or quasi-governmental authority or court order or decree. Except as specifically set forth in  Section 7.2 of this Lease,
below, Tenant hereby waives any and all rights under and benefits of subsection 1 of Section 1932 and Sections
1941 and 1942 of the California Civil Code or under any similar law, statute, or ordinance now or hereafter in effect. 


        7.2    Tenant's Right to Make Repairs.    Notwithstanding the provisions of  Section 7.1, above, if Tenant provides
notice to Landlord of an event or circumstance which requires the action of Landlord with respect to
repair and/or maintenance as set forth in Section 7.1, above and Landlord fails to provide such action within (30) days after receipt of
such notice, then Tenant may proceed to take the required action upon delivery of an additional ten (10) days notice to Landlord specifying that Tenant is taking such required action, and if
such action was required under the TCCs of this Lease to be taken by Landlord, then Tenant shall be entitled to prompt reimbursement by Landlord of Tenant's reasonable costs and expenses in taking
such action; provided, however, notwithstanding such thirty (30) day period, Landlord shall use commercially reasonable efforts to expedite such repairs to ensure completion as soon as
reasonably practicable. In the event Tenant takes such action, Tenant shall use only those contractors used by Landlord in the Building for similar work unless such contractors are unwilling or unable
to perform such work, in which event Tenant may utilize the services of any other qualified contractor which normally and regularly performs similar work in the Comparable Buildings. If Landlord
delivers to Tenant within thirty (30) days after receipt of Tenant's invoice, a written objection to the payment of such invoice, setting forth with reasonable particularly Landlord's reasons
for its claim that such action did not have to be taken by Landlord pursuant to the TCCs of this Lease or that the charges are excessive (in which case Landlord shall pay the amount it contends would
not have been excessive), then, as Tenant's sole remedy, Tenant may proceed to institute legal proceedings against Landlord to collect the amount set forth in the subject invoice; provided that under
no circumstances shall Tenant be allowed to (i) deduct such disputed amount from Rent, or (ii) terminate this Lease. If Tenant receives a non-appealable final judgment
against Landlord in connection with such legal proceedings. Tenant may deduct the amount of the judgment, not to exceed the amount of the unpaid portion of the relevant invoice, from the Base Rent
next due and owing under this Lease; 


27





 

provided,
however, Tenant may not deduct the amount of the judgment against more than fifty percent (50%) of Base Rent next due and owing (until such time as the entire amount of such judgment is
deducted) to the extent following a foreclosure or a deed-in-lieu of foreclosure. 


 
 

ARTICLE 8    
    
    ADDITIONS AND ALTERATIONS    
    



        8.1    Landlord's Consent to Alterations.    Tenant may not make any improvements,
alterations, additions or changes to the Premises or any mechanical, plumbing or HVAC facilities or systems pertaining to the Premises (collectively, the
"Alterations") without first procuring the prior written consent of Landlord to such Alterations, which consent shall be requested by Tenant not less
than fifteen (15) business days prior to the commencement thereof, and which consent shall not be unreasonably withheld by Landlord, provided it shall be deemed reasonable for Landlord to
withhold its consent to any Alteration which adversely affects the structural portions or the systems or equipment of the Building or is visible from the exterior of the Building. Notwithstanding the
foregoing, Tenant shall be permitted to make Alterations following fifteen (15) days notice to Landlord, but without Landlord's prior consent, to the extent that such Alterations do not
(i) involve the expenditure of more than $100,000.00 in the aggregate in any Lease Year; (ii) adversely affect the systems and equipment of the Building or the Building Structure, or
(iii) adversely affect the exterior appearance of the Building (the "Cosmetic Alterations"). The construction of the initial improvements to the
Premises shall be governed by the terms of the Tenant Work Letter and not the terms of this Article 8. 



        8.2    Manner of Construction.    Landlord may impose, as a condition of its consent to any
and all Alterations or repairs of the Premises or about the Premises, such requirements as Landlord in its reasonable discretion may deem desirable; provided, however, such requirement shall at a
minimum include, but not limited to, the following: (i) the requirement that Tenant utilize for such purposes only contractors reasonably approved by Landlord, (ii) the requirement that
upon Landlord's request made at the time such consent is granted, Tenant shall, at Tenant's expense, remove such Alterations upon the expiration or any early termination of the Lease Term and return
the affected portion of the Premises to the condition existing immediately following the installation of the Tenant Improvements; (iii) the requirement that a copy of Tenant's contract(s) with
its contractors be delivered to Landlord prior to the commencement of any such construction (which contracts shall state that all change orders must be approved, in writing, by Landlord prior to
implementation); (iv) Landlord's review and approval of the final budget (contractor's cost proposal) for such Alterations or repairs; and (v) the requirement that Tenant shall meet with
Landlord, prior to the commencement of any construction, to discuss Landlord's design parameters and code compliance issues. Tenant shall construct such Alterations and perform such repairs in a good
and workmanlike manner, in conformance with any and all applicable federal,
state, county or municipal laws, rules and regulations and pursuant to a valid building permit, issued by the City of San Diego, all in conformance with Landlord's construction rules and regulations.
In the event Tenant performs any Alterations in the Premises which require or give rise to governmentally required changes to the "Base Building," as that term is defined below, then Landlord shall,
at Tenant's expense, make such changes to the Base Building. The "Base Building" shall consist of the Building Structure. In performing the work of any
such Alterations, Tenant shall have the work performed in such manner so as not to 


28





 

obstruct
access to the Project or any portion thereof, by any other tenant of the Project, and so as not to obstruct the business of Landlord or other tenants in the Project. Tenant shall not use
(and upon notice from Landlord shall cease using) contractors, services, workmen, labor, materials or equipment that, in Landlord's reasonable judgment, would disturb labor harmony with the workforce
or trades engaged in performing other work, labor or services in or about the Building or the Common Areas. In addition to Tenant's obligations under  Article 9 of this Lease, upon completion of any
Alterations, Tenant agrees to cause a Notice of Completion to be recorded in the office of the
Recorder of the County of San Diego in accordance with Section 3093 of the Civil Code of the State of California or any successor statute, and Tenant shall deliver to the Project construction
manager a reproducible copy of the "as built" drawings of the Alterations, to the extent applicable, as well as all permits, approvals and other documents issued by any governmental agency in
connection with the Alterations. 


        8.3    Payment for Improvements.    Tenant shall sign Landlord's standard contractor's rules
and regulations to the extent the same are commercially reasonable. Except with regard to Cosmetic Alterations for which there shall be no such charge, whether or not Tenant orders any work directly
from Landlord, Tenant shall pay to Landlord an amount equal to one percent (1%) of the cost of such work to compensate Landlord for all overhead, general conditions, fees and other costs and expenses
arising from Landlord's involvement with such work. 


        8.4    Construction Insurance.    In addition to the requirements of  Article 10 of this Lease, in the event that Tenant
makes any Alterations, prior to the commencement of such Alterations, Tenant shall provide
Landlord with evidence that Tenant carries "Builder's All Risk" insurance in an amount reasonably approved by Landlord covering the construction of such Alterations, and such other insurance as
Landlord may reasonably require, it being understood and agreed that all of such Alterations shall be insured by Tenant pursuant to Article 10 of
this Lease immediately upon completion thereof. In addition, for any Alterations with an aggregate cost equal to or greater than $100,000.00 in any Lease Year, Tenant shall obtain a lien and
completion bond or some alternate form of security reasonably satisfactory to Landlord in an amount sufficient to ensure the lien-free completion of such Alterations and naming Landlord as
a co-obligee ("Alteration Security"); provided, however, if Tenant meets or exceeds one or both of the financial thresholds set forth in  Sections 21.2.2.2(ii) and
(iii) of this Lease, then Tenant shall not be required to obtain such Alteration Security. 



        8.5    Landlord's Property.    All Alterations, improvements, fixtures, equipment and/or
appurtenances which may be installed or placed in or about the Premises, from time to time, shall be at the sole cost of Tenant and shall be and become the property of Landlord, except as more
particularly set forth below. Notwithstanding the foregoing, and provided that (A) the same are not Tenant Improvements
constructed pursuant to the terms of the Tenant Work Letter, and (B) Landlord has not previously identified the same as "must-remain" items pursuant to the procedure set forth
below, Tenant may remove any other Alterations, improvements, fixtures and/or equipment which Tenant can substantiate to Landlord have not been paid for (in whole or in part) with any Tenant
improvement allowance funds provided to Tenant by Landlord, provided Tenant repairs any damage to the Premises and Building caused by such removal and returns the affected portion of the Premises to a
building standard tenant improved condition as reasonably determined by Landlord. Furthermore, Landlord may, by written notice to Tenant prior to the end of the Lease Term, or given following any
earlier termination of this Lease, 


29





 

require
Tenant, at Tenant's expense, to (i) remove any Alterations or improvements in the Premises installed pursuant to this Article 8,
and/or (ii) remove any "Above Building Standard Tenant Improvements," as that term is defined in Section 2.4 of the Tenant Work Letter,
located within the Premises and replace the same with then existing "Building Standard Tenant Improvements," as that term is defined in  Section 2.3 of the Tenant Work Letter, and to repair any
damage to the Premises and Building caused by such removal and returns the affected
portion of the Premises to a building standard tenant improved condition as reasonably determined by Landlord; provided, however, if in connection with its request for Landlord's approval for
particular Alterations, (1) Tenant requests Landlord's decision with regard to the removal of such Alterations, and (2) Landlord thereafter agrees in writing to waive the removal
requirement when approving such Alterations, then Tenant shall not be required to so remove such Alterations; provided further, however, that Landlord may, in connection with Landlord's approval for
particular Alterations (or, in Landlord's approval is not required or sought, then within thirty (30) days of Landlord being notified of such Alterations), identify particular Alterations as
those which must-remain in the Premises and become the property of Landlord. If Tenant fails to complete such removal and/or to repair any damage caused by the removal of any Alterations
or improvements in the Premises, and returns the affected portion of the Premises to a building standard tenant improved condition as determined by Landlord, then at Landlord's option, either
(X) Tenant shall be deemed to be holding over in the Premises and Rent shall continue to accrue in accordance with the terms of  Article 16, below, until such work shall be completed, or
(Y) Landlord may do so and may charge the cost thereof to Tenant. Tenant hereby
protects, defends, indemnifies and holds Landlord harmless from any liability, cost, obligation, expense or claim of lien in any manner relating to the violation of the foregoing provisions, which
obligations of Tenant shall survive the expiration or earlier termination of this Lease. 


 
 

ARTICLE 9    
    
    COVENANT AGAINST LIENS    
    


        Tenant shall keep the Project and Premises free from any liens or encumbrances arising out of the work performed, materials furnished or obligations incurred by
or on behalf of Tenant, and shall protect, defend, indemnify and hold Landlord harmless from and against any claims, liabilities, judgments or costs (including, without limitation, reasonable
attorneys' fees and costs) arising out of same or in connection therewith. Tenant shall give Landlord notice at least twenty (20) days prior to the
commencement of any such work on the Premises (or such additional time as may be necessary under applicable laws) to afford Landlord the opportunity of posting and recording appropriate notices of
non-responsibility. Tenant shall remove any such lien or encumbrance by bond or otherwise within ten (10) days after notice by Landlord, and if Tenant shall fail to do so, Landlord
may pay the amount necessary to remove such lien or encumbrance, without being responsible for investigating the validity thereof. The amount so paid shall be deemed Additional Rent under this Lease
payable upon demand, without limitation as to other remedies available to Landlord under this Lease. Nothing contained in this Lease shall authorize Tenant to do any act which shall subject Landlord's
title to the Building or Premises to any liens or encumbrances whether claimed by operation of law or express or implied contract. Any claim to a lien or encumbrance upon the Building or Premises
arising in connection with any such work or respecting the Premises not performed by or at the request of Landlord shall be null and void, or at Landlord's option shall attach only against Tenant's
interest in the Premises and shall 


30







  





in all respects be subordinate to Landlord's title to the Project, Building and Premises. Notwithstanding anything in this Article 9 to the
contrary, Landlord hereby acknowledges and agrees that Tenant may grant a security interest to Tenant's construction lender pursuant to the express terms and conditions of  Section 5.5 of the Tenant
Work Letter. 


 
 

ARTICLE 10    
    
    INSURANCE    
    


        10.1    Indemnification and Waiver.    Tenant hereby releases Landlord from all risk of damage
to property or injury to persons in, upon or about the Premises from any cause whatsoever (other than Landlord's and Landlord Parties' negligence or willful misconduct) and agrees that Landlord, its
partners, subpartners and their respective officers, agents, servants, employees, and independent contractors (collectively, "Landlord Parties") shall
not be liable for, and are hereby released from any responsibility for, any damage either to person or property or resulting from the loss of use thereof, which damage is sustained by Tenant or by
other persons claiming through Tenant (other than Landlord's and Landlord Parties' negligence or willful misconduct). Tenant shall indemnify, defend, protect, and hold harmless the Landlord Parties
from any and all loss, cost, damage, expense and liability (including without limitation court costs and reasonable attorneys' fees) incurred in connection with or arising from any cause in or on the
Premises (other than Landlord's and Landlord Parties' negligence or willful misconduct), any acts, omissions or negligence of Tenant or of any person claiming by, through or under Tenant, or of the
contractors, agents, servants, employees, invitees, guests or licensees of Tenant (collectively, the "Tenant Parties") or any such Tenant Parties, in,
on or about the Project or any breach of the TCCs of this Lease, either prior to, during, or after the expiration of the Lease Term, provided that the terms of the foregoing indemnity shall not apply
to the negligence or willful misconduct of Landlord. Should Landlord be named as a defendant in any suit brought against Tenant in connection with or arising out of Tenant's occupancy of the Premises,
Tenant shall pay to Landlord its costs and expenses incurred in such suit, including without limitation, its actual professional fees such as appraisers', accountants' and attorneys' fees. Further,
Tenant's agreement to indemnify Landlord pursuant to this Section 10.1 is not intended and shall not relieve any insurance carrier of its
obligations under policies required to be carried by Tenant pursuant to the provisions of this Lease, to the extent such policies cover the matters subject to Tenant's indemnification obligations; nor
shall they supersede any inconsistent agreement of the parties set forth in any other provision of this Lease. The provisions of this  Section 10.1 shall survive the expiration or sooner termination
of this Lease with respect to any claims or liability arising in connection with
any event occurring prior to such expiration or termination. Notwithstanding anything to the contrary contained in this Lease, nothing in this Lease
shall impose any obligations on Tenant or Landlord to be responsible or liable for, and each hereby releases the other from all liability for, consequential damages other than those consequential
damages incurred by Landlord in connection with a holdover of the Premises by Tenant after the expiration or earlier termination of this Lease. 


        10.2    Landlord's Fire, Casualty and Liability Insurance.    Landlord shall carry commercial
general liability insurance with respect to the Building during the Lease Term, and shall further insure the Building during the Lease Term against loss or damage due to fire and other casualties
covered within the classification of fire and extended coverage, vandalism 


31





 

coverage
and malicious mischief, sprinkler leakage, water damage and special extended coverage. Such coverage shall be in such amounts, from such companies, and on such other terms and conditions, as
Landlord may from time to time reasonably determine; provided, however, such coverage shall be for the full replacement value of the Building and the Project in compliance with all
then-existing Applicable Laws. Additionally, at the option of Landlord, such insurance coverage may include the risks of (i) earthquakes, (ii) flood damage and additional
hazards, (iii) a rental loss endorsement, (iv) one or more loss payee endorsements in favor of the holders of any mortgages or deeds of trust encumbering the interest of Landlord in the
Building or the ground or underlying lessors of the Building, or any portion thereof, and (v) "Pollution Legal Liability Environmental Insurance," as that term is set forth below; provided,
however, that to the extent Tenant is not in default of this Lease (beyond any applicable notice and cure periods), Tenant shall have the option, upon thirty (30) days written notice to
Landlord, to itself carry such Pollution Legal Liability Environmental Insurance in lieu of Landlord carrying such insurance; provided further, however, to the extent Tenant elects to carry such
Pollution Legal Liability Environment Insurance pursuant to the foregoing option, Tenant shall comply with the express coverage requirements set forth hereinbelow and such insurance coverage shall
otherwise comply with the TCCs of Section 10.4, below. Notwithstanding the foregoing provisions of this  Section 10.2, the coverage and amounts of
insurance carried by Landlord in connection with the Building shall, at a minimum, be comparable to the
coverage and amounts of insurance which are carried by reasonably prudent landlords of Comparable Buildings, and Worker's Compensation and Employer's Liability coverage as required by applicable law.
Tenant shall, at Tenant's expense, comply with all commercially reasonable insurance company requirements pertaining to the use of the Premises. If Tenant's conduct or use of the Premises causes any
increase in the premium for such insurance policies then Tenant shall reimburse Landlord for any such increase. Tenant, at Tenant's expense, shall comply with all rules, orders, regulations or
requirements of the American Insurance Association (formerly the National Board of Fire Underwriters) and with any similar body. For purposes of this Lease, the "Pollution
Legal Liability Environmental Insurance" (aka an "Owner's Policy" of environmental insurance) shall mean insurance (1) from an insurance carrier with a credit rating of
no less than AAA, it being acknowledged and agreed by Landlord that, as of the date of this Lease, Kemper, AIG, Chubb, Zurich and the XL Insurance Company currently satisfy such credit rating, and
(2) providing, at a minimum, the following: (a) an initial 5-year policy term (with successive 1-year terms renewable on a rolling annual basis, until such time
as the policy term equals or exceeds the Lease Expiration Date), (b) $2,000,000 coverage per incident or occurrence, (c) $2,000,000 aggregate coverage, (d) a deductible or
self-insured retention of no more than $25,000, and (c) coverage for: (A) known and unknown pre-existing conditions; (B) unknown and later discovered
conditions; (C) on-site and off-site third-party claims for bodily injury or property damage; and (D) legal defense expenses. All other terms, coverage,
exclusions, or conditions of the policy shall be at Landlord's sole and complete discretion. 


        10.3    Tenant's Insurance.    Tenant shall maintain the following coverages in the following
amounts. 



        10.3.1 Commercial
General Liability Insurance covering the insured against claims of bodily injury, personal injury and property damage (including loss of use thereof)
arising out of Tenant's operations, and contractual liabilities (covering the performance by Tenant of its indemnity agreements) including a Board Form endorsement covering the insuring 



32





 

provisions
of this Lease and, to the extent consistent with commercially standard policies of such insurance coverage, the performance by Tenant of the indemnity agreements set forth in  Section 10.1 of this
Lease, for limits of liability not less than: 



	Bodily Injury and Property Damage Liability	 	$5,000,000 each occurrence

$5,000,000 annual aggregate
	Personal Injury Liability	 	$5,000,000 each occurrence

$5,000,000 annual aggregate

0% Insured's participation






        10.3.2 Physical
Damage Insurance covering (i) all office furniture, business and trade fixtures, office equipment, free-standing cabinet work, movable
partitions, merchandise and all other items of Tenant's property on the Premises installed by, for, or at the expense of Tenant, (ii) the "Tenant Improvements," as that term is defined in  Section 2.1 of the Tenant Work Letter, and any other improvements which exist in the Premises as of the Lease Commencement Date (excluding the
Base Building) (the "Original Improvements"), and (iii) all other improvements, alterations and additions to the Premises made by Tenant. Such
insurance shall be written on a "special cause of loss" physical loss or damage basis, for the full replacement cost value (subject to reasonable deductible amounts) new without deduction for
depreciation of the covered items and in amounts that meet any co-insurance clauses of the policies of insurance and shall include coverage for damage or other loss caused by fire or other
peril including, but not limited to, vandalism and malicious mischief, theft, water damage of any type (provided the following shall not require Tenant to carry flood insurance, which flood insurance
may instead be carried by Landlord pursuant to Section 10.2,
above), including sprinkler leakage, bursting or stoppage of pipes, and explosion, and providing business interruption coverage for a period of one year. 



        10.3.3 Worker's
Compensation and Employer's Liability or other similar insurance pursuant to all applicable state and local statutes and regulations. 




        10.4    Form of Policies.    The minimum limits of policies of insurance required of Tenant
under this Lease shall in no event limit the liability of Tenant under this Lease. Such insurance shall (i) name Landlord, and any other party the Landlord so specifies that has a material
financial interest in the Project, as an additional insured, including Landlord's managing agent, if any; (ii) specifically cover the liability assumed by Tenant under this Lease, including,
but not limited to, Tenant's obligations under Section 10.1 of this Lease to the extent consistent with commercially standard policies of such
insurance coverage; (iii) be issued by an insurance company having a rating of not less than A-X in Best's Insurance Guide or which is otherwise acceptable to Landlord and licensed
to do business in the State of California; (iv) be primary insurance as to all claims thereunder and provide that any insurance carried by Landlord is excess and is non-contributing
with any insurance requirement of Tenant; (v) be in form and content reasonably acceptable to Landlord; and (vi) provide that said insurance shall not be canceled or coverage materially
changed unless ten (10) days' prior written notice shall have been given to Landlord and any mortgagee of Landlord, the identity of whom has been provided to Tenant in writing. Tenant shall
deliver said policy or policies or certificates thereof to Landlord on or before the Lease Commencement Date and at least thirty (30) days before the 


33





 

expiration
dates thereof. In the event Tenant shall fail to procure such insurance, or to deliver such policies or certificate, Landlord may, at its option, after written notice to Tenant and
Tenant's failure to obtain such insurance within five (5) days thereafter, procure such policies for the account of Tenant, and the cost thereof shall be paid to Landlord within thirty
(30) days after delivery to Tenant of bills therefor. 


        10.5    Subrogation.    Landlord and Tenant intend that their respective property loss risks
shall be borne by reasonable insurance carriers to the extent above provided, and Landlord and Tenant hereby agree to look solely to, and seek recovery only from, their respective insurance carriers
in the event of a property loss to the extent that such coverage is agreed to be provided hereunder. The parties each hereby waive all rights and claims against each other for such losses, and waive
all rights of subrogation of their respective insurers, provided such waiver of subrogation shall not affect the right to the insured to recover thereunder. The parties agree that their respective
insurance policies are now, or shall be, endorsed such that the waiver of subrogation shall not affect the right of the insured to recover thereunder, so long as no material additional premium is
charged therefor (unless the other party agrees to pay such additional premium). 


        10.6    Additional Insurance Obligations.    Tenant shall carry and maintain during the entire
Lease Term, at Tenant's sole cost and expense, increased amounts of the insurance required to be carried by Tenant pursuant to this Article 10
and such other reasonable types of insurance coverage and in such reasonable
amounts covering the Premises and Tenant's operations therein, as may be reasonably requested by Landlord, but in no event in excess of the amounts and types of insurance then being required by
landlords of other Comparable Buildings. 


 
 

ARTICLE 11    
    
    DAMAGE AND DESTRUCTION    
    


        11.1    Repair of Damage to Premises by Landlord.    Tenant shall promptly notify Landlord of
any damage to the Premises resulting from fire or any other casualty. If the Premises or any Common Areas serving or providing access to the Premises shall be damaged by fire or other casualty,
Landlord shall promptly and diligently, subject to reasonable delays for insurance adjustment or other matters beyond Landlord's reasonable control (specifically including, without limitation, any
requirement to obtain any license, clearance or other authorization of any kind required to enter into and restore the Premises issued by any governmental or quasi-governmental agency having
jurisdiction over the use, storage, release or removal of "Hazardous Materials," as that term is set forth in Section 29.33 of this Lease, below,
in, on or about the Premises (collectively, the "Hazardous Materials Clearances"), which Hazardous Materials Clearances shall be obtained by Tenant),
and subject to all other terms of this Article 11, restore the Base Building and such Common Areas. Such restoration shall be to substantially
the same condition of the Base Building and the Common Areas prior to the casualty, except for modifications required by zoning and building codes and other laws or by the holder of a mortgage on the
Building or Project or any other modifications to the Common Areas deemed desirable by Landlord, which are consistent with the character of the Project, provided that access to the Premises and any
common restrooms serving the Premises shall not be materially impaired. Upon the occurrence of any damage to the Premises, Tenant shall, at its 


34





 

sole
cost and expense, repair any injury or damage to the Tenant Improvements and the Original Improvements installed in the Premises and shall return such Tenant Improvements and Original
Improvements to the condition existing immediately prior to such casualty (provided such Tenant Improvements and Original Improvements were properly maintained pursuant to the TCCs of this Lease prior
to such casualty), except for modifications required by "Applicable Laws," as that term is set forth in Article 24 of this Lease. Prior to the
commencement of construction, Tenant shall submit to Landlord, for Landlord's review and approval, all plans, specifications and working drawings relating thereto, and Tenant shall select the
contractors, subject to Landlord's reasonable approval, to perform such improvement work. Landlord shall not be liable for any inconvenience or annoyance to Tenant or its visitors, or injury to
Tenant's business resulting in any way from such damage or the repair thereof; provided however, that if such fire or other casualty shall have damaged the Premises or Common Areas necessary to
Tenant's occupancy, and the Premises are not occupied by Tenant as a result thereof, then during the time and to the extent the Premises are unfit for occupancy, the Rent shall be abated in proportion
to the ratio that the amount of rentable square feet of the Premises which is unfit for occupancy for the purposes permitted under this Lease bears to the total rentable square feet of the Premises;
provided further, however, that if any Hazardous Materials Clearances are required to be obtained by Tenant before such restoration can begin, such abatement of Rent shall continue for only so long as
Tenant, in Landlord's reasonable judgment, diligently pursues obtaining such required Hazardous Materials Clearances. Tenant's right to rent abatement pursuant to the preceding sentence shall
terminate as of the date which is reasonably determined by Landlord to be the date Tenant should have completed repairs to the Premises assuming Tenant used reasonable due diligence in connection
therewith. 


        11.2    Landlord's Option to Repair.    Notwithstanding the terms of  Section 11.1 of this Lease, Landlord may elect not
to rebuild and/or restore the Building and/or Project, and instead terminate this Lease, by
notifying Tenant in writing of such termination within sixty (60) days after the date of discovery of the damage, such notice to include a termination date giving Tenant sixty (60) days
to vacate the Premises, but Landlord may so elect only if the Building or Project shall be damaged by fire or other casualty or cause, whether or not the Premises are affected, and one or more of the
following conditions is present: (i) in Landlord's reasonable judgment, repairs cannot reasonably be completed within one hundred eighty (180) days after the date of discovery of the
damage (when such repairs are made without the payment of overtime or other premiums); (ii) the holder of any mortgage on the Building or Project or ground lessor with respect to the Building
or Project shall require that the insurance proceeds or any portion thereof be used to retire the mortgage debt, or shall terminate the ground lease, as the case may be; (iii) the damage is not
fully covered by the insurance policies Landlord is required to carry pursuant to the TCCs of this Lease; (iv) Landlord cannot, pursuant to the applicable laws then in effect, rebuild the
Building or Common Areas so that they will be substantially the same structurally or architecturally; or (v) the damage occurs during the last twelve (12) months of the Lease Term;
provided, however, that if Landlord does not elect to terminate this Lease pursuant to Landlord's termination right as provided above, and the repairs cannot, in the reasonable opinion of Landlord, be
completed within one hundred eighty (180) days after being commenced, Tenant may elect, no earlier than sixty (60) days after the date of the damage and not later than ninety
(90) days after the date of such damage, to terminate this Lease by written notice to Landlord effective as of the date specified in the notice, which date shall not be less than thirty
(30) days nor more than sixty (60) days after the date such notice is given by Tenant. Furthermore, if 


35





 

neither
Landlord nor Tenant has terminated this Lease, and the repairs are not actually completed within such 180-day period, Tenant shall have the right to terminate this Lease during
the first five (5) business days of each calendar month following the end of such period until such time as the repairs are complete, by notice to Landlord (the "Damage
Termination Notice"), effective as of a date set forth in the Damage Termination Notice (the "Damage Termination Date"), which
Damage Termination Date shall not be less than ten (10) business days following the end of each such month. Notwithstanding the foregoing, if Tenant delivers a Damage Termination Notice to
Landlord, then Landlord shall have the right to suspend the occurrence of the Damage Termination Date for a period ending thirty (30) days after the Damage Termination Date set forth in the
Damage Termination Notice by delivering to Tenant, within five (5) business days of Landlord's receipt of the Damage Termination Notice, a certificate of Landlord's contractor responsible for
the repair of the damage certifying that it is such contractor's good faith judgment that the repairs shall be substantially completed within thirty (30) days after the Damage Termination Date.
If repairs shall be substantially completed prior to the expiration of such thirty-day period, then the Damage Termination Notice shall be of no force or effect, but if the repairs shall
not be substantially completed within such thirty-day period, then this Lease shall terminate upon the expiration of such thirty-day period. At any time, from time to time,
after the date occurring sixty (60) days after the date of the damage, Tenant may request that Landlord inform Tenant of Landlord's reasonable opinion of the date of completion of the repairs
and Landlord shall respond to such request within five (5) business days. Notwithstanding the provisions of this Section 11.2, Tenant
shall have the right to terminate this Lease under this Section 11.2 only if each of the following conditions is satisfied: (a) the damage
to the Project by fire or other casualty was not caused by the gross negligence or intentional act of Tenant or its partners or subpartners and their respective officers, agents, servants, employees,
and independent contractors; (b) as a result of the damage, Tenant cannot reasonably conduct business from the Premises; and, (c) as a result of the damage to the Project, Tenant does
not occupy or use the Premises at all. In the event this Lease is terminated in accordance with the terms of this Section 11.2, Tenant shall
assign to Landlord (or to any party designated by Landlord) all insurance proceeds payable to Tenant under Tenant's insurance required under  Section 10.3.2 of this Lease; provided, however, that
notwithstanding anything to the contrary set forth above, Tenant shall be entitled to
retain a portion of such proceeds equal to the then-remaining unamortized amount (based on a straight-line amortization over the initial Lease Term) of the "Initial TI
Disbursement" and the "Over-Allowance Amount," as those terms are set forth in Sections 2.2.2.1 and 4.2.1, respectively, of the Tenant Work
Letter. 


        11.3    Waiver of Statutory Provisions.    The provisions of this Lease, including this  Article 11, constitute an
express agreement between Landlord and Tenant with respect to any and all damage to, or destruction of, all or any part
of the Premises, the Building or the Project, and any statute or regulation of the State of California, including, without limitation, Sections 1932(2) and 1933(4) of the California Civil Code, with
respect to any rights or obligations concerning damage or destruction in the absence of an express agreement between the parties, and any other statute or regulation, now or hereafter in effect, shall
have no application to this Lease or any damage or destruction to all or any part of the Premises, the Building or the Project. 


36





 
 
 

ARTICLE 12    
    
    NONWAIVER    
    


        No provision of this Lease shall be deemed waived by either party hereto unless expressly waived in a writing signed thereby. The waiver by either party hereto of
any breach of any term, covenant or condition herein contained shall not be deemed to be a waiver of any subsequent breach of same or any other term, covenant or condition herein contained. The
subsequent acceptance of Rent hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease. other than the failure of
Tenant to pay the particular Rent so accepted, regardless of Landlord's knowledge of such preceding breach at the time of acceptance of such Rent. No acceptance of a lesser amount than the Rent herein
stipulated shall be deemed a waiver of Landlord's right to receive the full amount due, nor shall any endorsement or statement on any check or payment or any letter accompanying such check or payment
be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the full amount due. No receipt of monies by Landlord from Tenant
after the termination of this Lease shall in any way alter the length of the Lease Term or of Tenant's right of possession hereunder, or after the giving of any notice shall reinstate, continue or
extend the Lease Term or affect any notice given Tenant prior to the receipt of such monies, it being agreed that after the service of notice or the commencement of a suit, or after final judgment for
possession of the Premises, Landlord may receive and collect any Rent due, and the payment of said Rent shall not waive or affect said notice, suit or judgment. 


 
 

ARTICLE 13    
    
    CONDEMNATION    
    


        If the whole or any part of the Premises or the Building shall be taken by power of eminent domain or condemned by any competent authority for any public or
quasi-public use or purpose, or if any adjacent property or street shall be so taken or condemned, or reconfigured or vacated by such authority in such manner as to require the use, reconstruction or
remodeling of any part of the Premises or Building, or if Landlord shall grant a deed or other instrument in lieu of such taking by eminent domain or condemnation, Landlord shall have the option to
terminate this Lease effective as of the date possession is required to be surrendered to the authority. If more than fifty percent (50%) of the rentable square feet of the Premises is taken, or if
access to the Premises is substantially impaired, in each case for a period in excess of one hundred eighty (180) days, Tenant shall have the option to terminate this Lease effective as of the
date possession is required to be surrendered to the authority. Tenant shall not because of such taking assert any claim against Landlord or the authority for any compensation because of such taking
and Landlord shall be entitled to the entire award or payment in connection therewith, except that Tenant shall have the right to file any separate claim available to Tenant for any taking of
(i) Tenant's personal property, and (ii) improvements and fixtures
belonging to Tenant and removable by Tenant upon expiration of the Lease Term pursuant to the TCCs of this Lease, and for moving expenses, so long as such claims do not diminish the award available to
Landlord, its ground lessor with respect to the Building or Project or its mortgagee, and such claim is payable separately to Tenant. All Rent shall be apportioned as of the date of such termination.
If any 


37





 

part
of the Premises shall be taken, and this Lease shall not be so terminated, the Rent shall be proportionately abated. Tenant hereby waives any and all rights it might otherwise have pursuant to
Section 1265.130 of The California Code of Civil Procedure. Notwithstanding anything to the contrary contained in this Article 13, in the
event of a temporary taking of all or any portion of the Premises for a period of one hundred and eighty (180) days or less, then this Lease shall not terminate but the Base Rent and the
Additional Rent shall be abated for the period of such taking in proportion to the ratio that the amount of rentable square feet of the Premises taken bears to the total rentable square feet of the
Premises. Landlord shall be entitled to receive the entire award made in connection with any such temporary taking. 


 
 

ARTICLE 14    
    
    ASSIGNMENT AND SUBLETTING    
    


        14.1    Transfers.    Tenant shall not, without the prior written consent of Landlord, assign,
mortgage, pledge, hypothecate, encumber, or permit any lien to attach to, or otherwise transfer, this Lease or any interest hereunder, permit any assignment, or other transfer of this Lease or any
interest hereunder by operation of law, sublet the Premises or any part thereof, or enter into any license or concession agreements or otherwise permit the occupancy or use of the Premises or any part
thereof by any persons other than Tenant and its employees and contractors (all of the foregoing are hereinafter sometimes referred to collectively as
"Transfers" and any person to whom any Transfer is made or sought to be made is hereinafter sometimes referred to as a
"Transferee"). If Tenant desires Landlord's consent to any Transfer, Tenant shall notify Landlord in writing, which notice (the
"Transfer Notice") shall include (i) the proposed effective date of the Transfer, which shall not be less than thirty (30) days nor more
than one hundred eighty (180) days after the date of delivery of the Transfer Notice, (ii) a description of the portion of the Premises to be transferred (the
"Subject Space"), (iii) all of the terms of the proposed Transfer and the consideration therefor, including calculation of the
"Transfer Premium", as that term is defined in Section 14.3 below, in connection with such
Transfer, the name and address of the proposed Transferee, and a copy of all existing executed and/or proposed documentation pertaining to the proposed Transfer, including all existing operative
documents to be executed to evidence such Transfer or the agreements incidental or related to such Transfer, (iv) current financial statements of the proposed Transferee certified by an
officer, partner or owner thereof, business credit and personal references and history of the proposed Transferee and any other information required by Landlord which will enable Landlord to determine
the financial responsibility, character, and reputation of the proposed Transferee, nature of such Transferee's business and proposed use of the Subject Space
and (v) an executed estoppel certificate from Tenant in the form attached hereto as Exhibit E. Any Transfer made without Landlord's prior
written consent shall, at Landlord's option, be null, void and of no effect, and shall, at Landlord's option, constitute a default by Tenant under this Lease. Whether or not Landlord consents to any
proposed Transfer, Tenant shall, within thirty (30) days after written request by Landlord, reimburse Landlord for all reasonable and actual out-of-pocket third-party
costs and expenses incurred by Landlord in connection with its review of a proposed Transfer; provided that such costs and expenses shall not exceed One Thousand Five Hundred and No/100 Dollars
($1,500.00) for a Transfer in the ordinary course of business. Landlord and Tenant hereby agree that a proposed Transfer shall not be considered "in the ordinary course of 


38





 

business"
if such Transfer involves the review of documentation by Landlord on more than two (2) occasions with regard to a single proposed Transfer. 



        14.2    Landlord's Consent.    Landlord shall not unreasonably withhold its consent to any
proposed Transfer of the Subject Space to the Transferee on the terms specified in the Transfer Notice. Without limitation as to other reasonable grounds for withholding consent, the parties hereby
agree that it shall be reasonable under this Lease and under any applicable law for Landlord to withhold consent to any proposed Transfer where one or more of the following apply: 



        14.2.1 The
Transferee is of a character or reputation or engaged in a business which is not consistent with the quality of the Building or the Project; 



        14.2.2 The
Transferee intends to use the Subject Space for purposes which are not permitted under this Lease; 


        14.2.3 The
Transferee is either a governmental agency or instrumentality thereof; 


        14.2.4 The
Transferee is not a party of reasonable financial worth and/or financial stability in light of the responsibilities to be undertaken in connection with the
Transfer on the date consent is requested; 


        14.2.5 The
proposed Transfer would cause a violation of another lease for space in the Project, or would give an occupant of the Project a right to cancel its lease; 



        14.2.6 The
terms of the proposed Transfer will allow the Transferee to exercise a right of renewal, right of expansion, right of first offer, or other similar right held by
Tenant (or will allow the Transferee to occupy space leased by Tenant pursuant to any such right); or 


        14.2.7 Either
the proposed Transferee, or any person or entity which directly or indirectly, controls, is controlled by, or is under common control with, the proposed
Transferee, (i) occupies space in the Project at the time of the request for consent, or (ii) is negotiating with Landlord to lease space in the Project at such time, or (iii) has
negotiated with Landlord during the six (6)-month period immediately preceding the Transfer Notice, and Landlord has available space in the Project suitable for such proposed Transferee; or 


        14.2.8 The
Transferee does not intend to occupy the entire Premises and conduct its business therefrom for a substantial portion of the term of the Transfer. 




        If
Landlord consents to any Transfer pursuant to the terms of this Section 14.2 (and does not exercise any recapture rights
Landlord may have under Section 14.4 of this Lease), Tenant may within six (6) months after Landlord's consent, but not later than the
expiration of said six-month period, enter into such Transfer of the Premises or portion thereof, upon substantially the same terms and conditions as are set forth in the Transfer Notice
furnished by Tenant to Landlord pursuant to Section 14.1 of this Lease, provided that if there are any changes in the terms and conditions from
those specified in the Transfer Notice (i) such that Landlord would initially have been entitled to refuse its consent to such Transfer under this  Section 14.2, or (ii) which would cause
the proposed Transfer to be more favorable to the Transferee than the 


39







  





terms set forth in Tenant's original Transfer Notice, Tenant shall again submit the Transfer to Landlord for its approval and other action under this  Article 14 (including Landlord's right of
recapture, if any, under Section 14.4 of this
Lease). Notwithstanding anything to the contrary in this Lease, if Tenant or any proposed Transferee claims that Landlord has unreasonably withheld or delayed its consent under  Section 14.2 or
otherwise has breached or acted unreasonably under this Article 14, their
sole remedies shall be a declaratory judgment and an injunction for the relief sought without any monetary damages, and Tenant hereby waives all other remedies, including, without limitation, any
right at law or equity to terminate this Lease, on its own behalf and, to the extent permitted under all applicable laws, on behalf of the proposed Transferee. Tenant shall indemnify, defend and hold
harmless Landlord from any and all liability, losses, claims, damages, costs, expenses, causes of action and proceedings involving any third party or parties (including without limitation Tenant's
proposed subtenant or assignee) who claim they were damaged by Landlord's wrongful withholding or conditioning of Landlord's consent, unless a court of competent jurisdiction determines that Landlord
was wrongful in its withholding or conditioning of its consent. 


        14.3    Transfer Premium.    If Landlord consents to a Transfer, as a condition thereto which
the parties hereby agree is reasonable, Tenant shall pay to Landlord fifty percent (50%) of any "Transfer Premium," as that term is defined in this  Section 14.3, received by Tenant from such
Transferee. "Transfer Premium" shall mean all rent,
additional rent or other consideration payable by such Transferee in connection with the Transfer in excess of the Rent and Additional Rent payable by Tenant under this Lease during the term of the
Transfer on a per rentable square foot basis if less than all of the Premises is transferred, after deducting the reasonable expenses incurred by Tenant for (i) any changes, alterations and
improvements to the Premises in connection with the Transfer, (ii) any free base rent reasonably provided to the Transferee, and (iii) any commercially reasonable brokerage commissions
and legal fees in connection with the Transfer. "Transfer Premium" shall also include, but not be limited to, key money, bonus money or other cash consideration paid by Transferee to Tenant in
connection with such Transfer, and any payment in excess of fair market value for services rendered by Tenant to Transferee or for assets, fixtures, inventory, equipment, or furniture transferred by
Tenant to Transferee in connection with such Transfer. In the calculations of the Rent (as it relates to the Transfer Premium calculated under this  Section 14.3), and the Transferee's Rent and
Quoted Rent under Section 14.2 of this Lease,
the Rent paid during each annual period for the Subject Space, and the Transferee's Rent and the Quoted Rent, shall be computed after adjusting such rent to the actual effective rent to be paid,
taking into consideration any and all leasehold concessions granted in connection therewith, including, but not limited to, any rent credit and tenant improvement allowance. For purposes of
calculating any such effective rent all such concessions shall be amortized on a straight-line basis over the relevant term. 


        14.4    Landlord's Option as to Subject Space.    In the event that a proposed Transfer, if
consented to, would cause fifty percent (50%) or more of the Premises to be subleased or assigned to a party other than Original Tenant and/or its Affiliates, then notwithstanding anything to the
contrary contained in this Article 14, Notwithstanding anything to the contrary contained in this  Article 14, Landlord shall have the option, by
giving written notice to Tenant within thirty (30) days after receipt of any Transfer
Notice, to
recapture the Subject Space. Such recapture notice shall cancel and terminate this Lease with respect to the Subject Space as of the date stated in the Transfer Notice as the effective date of the
proposed Transfer until the last day 


40





 

of
the term of the Transfer as set forth in the Transfer Notice (or at Landlord's option, shall cause the Transfer to be made to Landlord or its agent, in which case the parties shall execute the
Transfer documentation promptly thereafter). In the event of a recapture by Landlord, if this Lease shall be canceled with respect to less than the entire Premises, the Rent reserved herein shall be
prorated on the basis of the number of rentable square feet retained by Tenant in proportion to the number of rentable square feet contained in the Premises, and this Lease as so amended shall
continue thereafter in full force and effect, and upon request of either party, the parties shall execute written confirmation of the same. If Landlord declines, or fails to elect in a timely manner
to recapture the Subject Space under this Section 14.4, then, provided Landlord has consented to the proposed Transfer, Tenant shall be entitled
to proceed to transfer the Subject Space to the proposed Transferee, subject to provisions of this Article 14. 


        14.5    Effect of Transfer.    If Landlord consents to a Transfer, (i) the TCCs of this
Lease shall in no way be deemed to have been waived or modified, (ii) such consent shall not be deemed consent to any further Transfer by either Tenant or a Transferee, (iii) Tenant
shall deliver to Landlord, promptly after execution, an original executed copy of all documentation pertaining to the Transfer in form reasonably acceptable to Landlord, (iv) Tenant shall
furnish upon Landlord's request a complete statement, certified by Tenant's chief financial officer, setting forth in detail the computation of any Transfer Premium Tenant has derived and shall derive
from such Transfer, and (v) no Transfer relating to this Lease or agreement entered into with respect thereto, whether with or without Landlord's consent, shall relieve Tenant or any guarantor
of the Lease from any liability under this Lease, including, without limitation, in connection with the Subject Space. Landlord or its authorized representatives shall have the right at all reasonable
times to audit the books, records and papers of Tenant relating to any Transfer, and shall have the right to make copies thereof. If the Transfer Premium respecting any Transfer shall be found
understated, Tenant shall, within thirty (30) days after demand, pay the deficiency, and if understated by more than five percent (5%), Tenant shall pay Landlord's costs of such audit. 


        14.6    Additional Transfers.    For purposes of this Lease, the term
"Transfer" shall also include (i) if Tenant is a partnership, the withdrawal or change, voluntary, involuntary or by operation of law, or
transfer of fifty percent (50%) or more of partnership interests, within a twelve (12)-month period, or the dissolution of the partnership without immediate reconstitution thereof, and (ii) if
Tenant is a closely held corporation (i.e., whose stock is not publicly held and not traded through a nationally recognized exchange or over the
counter), (A) the merger, consolidation or other reorganization of Tenant in which the holders of Tenant's outstanding voting stock immediately prior to such transaction own, immediately after
such transaction, securities representing less than fifty percent (50%) of the voting power of the corporation or other entity surviving such transaction, (B) the sale or other transfer by the
Tenant of an aggregate of fifty percent (50%) or more of the voting shares of Tenant in a single transaction or series of transactions, within any twelve (12)-month period (other than in connection
with a capital raising transaction involving the sale of capital stock of Tenant to bona fide third-party investors), or (C) the sale, mortgage, exclusive license, hypothecation or pledge of
all or substantially all of the value of the unencumbered assets of Tenant in a single transaction or series of transactions
within a twelve (12)-month period. Notwithstanding anything to the contrary set forth in this Article 14 to the contrary, in no event shall an
offering of stock to (1) third parties by means of a public offering (either an initial public offering or a subsequent public 


41





 

offering)
through a recognized stock market, or (2) in connection with research and development partnerships or collaborative agreements, constitute a "Transfer." 


        14.7    Occurrence of Default.    Any Transfer hereunder shall be subordinate and subject to
the provisions of this Lease, and if this Lease shall be terminated during the term of any Transfer, Landlord shall have the right to: (i) treat such Transfer as canceled and repossess the
Subject Space by any lawful means, or (ii) require that such Transferee attorn to and recognize Landlord as its landlord under any such Transfer. If Tenant shall be in default under this Lease,
Landlord is hereby irrevocably authorized, as Tenant's agent and attorney-in-fact, to direct any Transferee to make all payments under or in connection with the Transfer
directly to Landlord (which Landlord shall apply towards Tenant's obligations under this Lease) until such default is cured. Such Transferee shall rely on any representation by Landlord that Tenant is
in default hereunder, without any need for confirmation thereof by Tenant. Upon any assignment, the assignee shall assume in writing all obligations and covenants of Tenant thereafter to be performed
or observed under this Lease. No collection or acceptance of rent by Landlord from any Transferee shall be deemed a waiver of any provision of this  Article 14 or the approval of any Transferee or a
release of Tenant from any obligation under this Lease, whether theretofore or thereafter
accruing. In no event shall Landlord's enforcement of any provision of this Lease against any Transferee be deemed a waiver of Landlord's right to enforce any term of this Lease against Tenant or any
other person. If Tenant's obligations hereunder have been guaranteed, Landlord's consent to any Transfer shall not be effective unless the guarantor also consents to such Transfer. 


        14.8    Non-Transfers.    Notwithstanding anything to the contrary contained in
this Article 14, an assignment or subletting of all or a portion of the Premises to (i) an affiliate of Tenant (an entity which is
controlled by, controls or is under common control, as such term is defined in California General Corporations Code ("CGCC") Sections 160 and 5045,
with, Tenant), (ii) an entity which merges with or acquires or is acquired by, Tenant or a parent of Tenant, as defined in CGCC Sections 175 and 5064, or a subsidiary, as defined in CGCC
Sections 189 and 5073, of Tenant's parent or Affiliate, or (iii) a transferee of substantially all of the assets of Tenant (collectively, an
"Affiliate") along with any other entity which will qualify as an "affiliate" under CGCC 150 and 5031, shall not be deemed a Transfer under this  Article 14, provided that at least fifteen (15) days prior to such assignment or sublease (a) Tenant provides Landlord with
reasonable evidence, certified by Tenant's chief financial officer and chief executive officer (and, to the extent such reasonable evidence relates to an Affiliate, such Affiliate's chief financial
officer and chief executive officer), that, to the best of each of their knowledge (without any duty to audit), such transferee entity maintains a net worth, calculated in accordance with generally
accepted accounting principles, consistently applied ("Net Worth"), equal to or greater than the Net Worth of Tenant either immediately prior to the
time of such assignment or sublease or at the time this Lease is executed; (b) Tenant notifies Landlord of any such assignment or
sublease and promptly supplies Landlord with any documents or information reasonably requested by Landlord regarding such assignment or sublease or such Affiliate; and (c) such assignment or
sublease is not a subterfuge by Tenant to avoid its obligations under this Lease. In the event an assignment or sublease to an Affiliate is made pursuant to the TCCs of this  Section 14.8, Tenant
shall be relieved of its obligations under this Lease to the extent the same become the TCCs of such Affiliate pursuant to
such assignment or sublease. 


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ARTICLE 15    
    
    SURRENDER OF PREMISES; OWNERSHIP AND
  REMOVAL OF TRADE FIXTURES    
    


        15.1    Surrender of Premises.    No act or thing done by Landlord or any agent or employee of
Landlord during the Lease Term shall be deemed to constitute an acceptance by Landlord of a surrender of the Premises unless such intent is specifically acknowledged in writing by Landlord. The
delivery of keys to the Premises to Landlord or any agent or employee of Landlord shall not constitute a surrender of the Premises or effect a termination of this Lease, whether or not the keys are
thereafter retained by Landlord, and notwithstanding such delivery Tenant shall be entitled to the return of such keys at any reasonable time upon request until this Lease shall have been properly
terminated. The voluntary or other surrender of this Lease by Tenant, whether accepted by Landlord or not, or a mutual termination hereof, shall not work a merger, and at the option of Landlord shall
operate as an assignment to Landlord of all subleases or subtenancies affecting the Premises or terminate any or all such sublessees or subtenancies. 


        15.2    Removal of Tenant Property by Tenant.    Upon the expiration of the Lease Term, or
upon any earlier termination of this Lease, Tenant shall, subject to the provisions of Section 8.5, this  Article 15 and Section 29.33, quit and surrender possession of the Premises to Landlord in
as good order and condition as when Tenant took possession and as thereafter improved by Landlord and/or Tenant, reasonable wear and tear and repairs which are specifically made the responsibility of
Landlord hereunder excepted. Upon such expiration or termination, Tenant shall, without expense to Landlord, remove or cause to be removed from the Premises all debris and rubbish, and such items of
furniture, equipment, business and trade fixtures, freestanding cabinet work, movable partitions and other articles of personal property owned by Tenant or installed or placed by Tenant at its expense
in the Premises, and such similar articles of any other persons claiming under Tenant, as Landlord may, in its sole discretion, require to be removed, and Tenant shall repair at its own expense all
damage to the Premises and Building resulting from such removal. 


 
 

ARTICLE 16    
    
    HOLDING OVER    
    


        If Tenant holds over after the expiration of the Lease Term or earlier termination thereof, with or without the express or implied consent of Landlord, such
tenancy shall be from month-to-month only, and shall not constitute a renewal hereof or an extension for any further term, and in such case Rent shall be payable at a monthly
rate equal to the product of (i) the Rent applicable during the last rental period of the Lease Term under this Lease, and (ii) a percentage equal to one hundred fifty percent (150%)
during the first two (2) months immediately following the expiration or earlier termination of the Lease Term, and two hundred percent (200%) thereafter. Such
month-to-month tenancy shall be subject to every other applicable term, covenant and agreement contained herein. Nothing contained in this  Article 16 shall be construed as consent by Landlord to
any holding over by Tenant, and Landlord expressly reserves the right to require Tenant
to surrender possession of the Premises to Landlord as provided in this Lease upon the expiration or other termination of this Lease. The provisions of 


43





 

this  Article 16 shall not be deemed to limit or constitute a waiver of any other rights or remedies of Landlord provided herein or at law. If
Tenant fails to surrender the Premises upon the termination or expiration of this Lease, in addition to any other liabilities to Landlord accruing therefrom, Tenant shall protect, defend, indemnify
and hold Landlord harmless from all loss, costs (including reasonable attorneys' fees) and liability resulting from such failure, including, without limiting the generality of the foregoing, any
claims made by any succeeding tenant founded upon such failure to surrender and any lost profits to Landlord resulting therefrom. 


 
 

ARTICLE 17    
    
    ESTOPPEL CERTIFICATES    
    


        Within ten (10) days following a request in writing by Landlord, Tenant shall execute, acknowledge and deliver to Landlord an estoppel certificate, which,
as submitted by Landlord, shall be substantially in the form of Exhibit E, attached hereto (or such other form as may be reasonably required by
any prospective mortgagee or purchaser of the Project, or any portion thereof), indicating therein any exceptions thereto that may exist at that time, and shall also contain any other information
reasonably requested by Landlord or Landlord's mortgagee or prospective mortgagee. Any such certificate may be relied upon by any prospective mortgagee or purchaser of all or any portion of the
Project. Tenant shall
execute and deliver whatever other commercially reasonable instruments may be reasonably required for such purposes. At any time during the Lease Term, Landlord may require Tenant to provide Landlord
with its most recently prepared financial statement and financial statements of the two (2) years prior to the most recently prepared financial statement year. Such statements shall be prepared
in accordance with generally accepted accounting principles and, if such is the normal practice of Tenant, shall be audited by an independent certified public accountant. Failure of Tenant to timely
execute, acknowledge and deliver such estoppel certificate or other commercially reasonable instruments shall constitute an acceptance of the Premises and an acknowledgment by Tenant that statements
included in the estoppel certificate are true and correct, without exception. Any such financial statement or other information which is marked "confidential" or "company secret(s)" (or is otherwise
similarly marked by Tenant) shall be confidential and shall not be disclosed by Landlord to any third party (other than its partners, administrators, consultants, financial, legal and a prospective or
current purchaser, mortgagee, or ground or underlying lessor of the Building or the Project, a prospective Transferee, and except as required by applicable law or in connection with a dispute or
litigation hereunder or as required by a subpoena) except as specifically provided in this Article 17 and then only if the person to whom
disclosure is made first agrees to be bound by the requirements of this Article 17. 


 
 

ARTICLE 18    
    
    SUBORDINATION    
    


        Subject to Tenant's receipt of an appropriate non-disturbance agreement(s) as set forth below, this Lease shall be subject and subordinate to all
present and future ground or underlying leases of the Building or Project and to the lien of any mortgage, trust deed or other encumbrances now or hereafter in force against the Building or Project or
any part thereof, if any, and to all renewals, extensions, modifications, consolidations and replacements thereof, and 


44





 

to
all advances made or hereafter to be made upon the security of such mortgages or trust deeds, unless the holders of such mortgages, trust deeds or other encumbrances, or the lessors under such
ground lease or underlying leases, require in writing that this Lease be superior thereto. Tenant covenants and agrees in the event any proceedings are brought for the foreclosure of any such mortgage
or deed in lieu thereof (or if any ground lease is terminated), to attorn, without any deductions or set-offs whatsoever, to the lienholder or purchaser or any successors thereto upon any
such foreclosure sale or deed in lieu thereof (or to the ground lessor), if so requested to do so by such purchaser or lienholder or ground lessor, and to recognize such purchaser or lienholder or
ground lessor as the lessor under this Lease, provided such lienholder or purchaser or ground lessor shall agree to accept this Lease and not disturb Tenant's occupancy, so long as Tenant timely pays
the rent and observes and performs the TCCs of this Lease to be observed and performed by Tenant. Landlord's delivery to Tenant of a commercially reasonable non-disturbance agreement(s)
(the "Nondisturbance Agreement") in favor of Tenant from any such ground lessor, mortgage holders or lien holders of Landlord who later come into
existence at any time prior to the expiration of the Lease Term shall be in consideration of, and a condition precedent to, Tenant's agreement to be bound by the terms and conditions of this  Article 18; provided Tenant shall execute and return such Nondisturbance Agreement to Landlord within four (4) days of its receipt
thereof. Nothing contained herein shall require Tenant to waive any of Landlord's obligations under this Lease, including, without limitation, Landlord's obligation to fund the Tenant Improvement
Allowance (and Tenant's offset rights for such failure). Landlord's interest herein may be assigned as security at any time to any lienholder. Tenant shall, within four (4) days of request by
Landlord, execute such further instruments or assurances as Landlord may reasonably deem necessary to evidence or confirm the subordination or superiority of this Lease to any such mortgages, trust
deeds, ground leases or underlying leases. Tenant waives the provisions of any current or future statute, rule or law which may give or purport to give Tenant any right or election to terminate or
otherwise adversely affect this Lease and the obligations of the Tenant hereunder in the event of any foreclosure proceeding or sale. 


 
 

ARTICLE 19    
    
    DEFAULTS; REMEDIES    
    


        19.1    Events of Default.    The occurrence of any of the following shall constitute a
default of this Lease by Tenant: 



        19.1.1    Any
failure by Tenant to pay any Rent or any other charge required to be paid under this Lease, or any part thereof, within five (5) business days after
Tenant's receipt from Landlord of written notice that the same was not paid when due; or 


        19.1.2    Except
where a specific time period is otherwise set forth for Tenant's performance in this Lease, in which event the failure to perform by Tenant within such time
period shall be a default by Tenant under this Section 19.1.2, any failure by Tenant to observe or perform any other provision, covenant or
condition of this Lease to be observed or performed by Tenant where such failure continues for thirty (30) days after written notice thereof from Landlord to Tenant; provided that if the nature
of such default is such that the same cannot reasonably be cured within a thirty (30) day period, Tenant shall not be deemed to be in default if 



45





 

it
diligently commences such cure within such period and thereafter diligently proceeds to rectify and cure such default, but in no event exceeding a period of time in excess of sixty
(60) days after written notice thereof from Landlord to Tenant; or 



        19.1.3    To
the extent permitted by law, a general assignment by Tenant or any guarantor of this Lease for the benefit of creditors, or the taking of any corporate action in
furtherance of bankruptcy or dissolution whether or not there exists any proceeding under an insolvency or bankruptcy law, or the filing by or against Tenant or any guarantor of any proceeding under
an insolvency or bankruptcy law, unless in the case of a proceeding filed against Tenant or any guarantor the same is dismissed within sixty (60) days, or the appointment of a trustee or
receiver to take possession of all or substantially all of the assets of Tenant or any guarantor, unless possession is restored to Tenant or such guarantor within thirty (30) days, or any
execution or other judicially authorized seizure of all or substantially all of Tenant's assets located upon the Premises or of Tenant's interest in this Lease, unless such seizure is discharged
within thirty (30) days; or 


        19.1.4    Intentionally
Omitted; or 


        19.1.5    The
failure by Tenant to observe or perform according to the provisions of Section 5.2, or 8.4 of this Lease,
or Articles 14, 17 or 18 of this Lease where such failure continues for more than five (5) business days after notice from Landlord. 




        The
notice periods provided herein are in lieu of, and not in addition to, any notice periods provided by law. 


        19.2    Remedies Upon Default.    Upon the occurrence of any event of default by Tenant,
Landlord shall have, in addition to any other remedies available to Landlord at law or in equity (all of which remedies shall be distinct, separate and cumulative), the option to pursue any one or
more of the following remedies, each and all of which shall be cumulative and nonexclusive, without any notice or demand whatsoever. 



        19.2.1    Terminate
this Lease, in which event Tenant shall immediately surrender the 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 Premises and expel or remove Tenant and any other person who may be occupying the Premises or
any part thereof, without being liable for prosecution or any claim or damages therefor; and Landlord may recover from Tenant the following: 



        (a)   The
worth at the time of award of any unpaid rent which has been earned at the time of such termination; plus 



        (b)   The
worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such
rental loss that Tenant proves could have been reasonably avoided; plus 


        (c)   The
worth at the time of award of the amount by which the unpaid rent for the balance of the Lease Term after the time of award exceeds the amount of such rental loss
that Tenant proves could have been reasonably avoided; plus 




46





 


        (d)   Any
other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under this Lease or which in
the ordinary course of things would be likely to result therefrom, specifically including but not limited to, brokerage commissions and advertising expenses incurred, expenses of remodeling the
Premises or any portion thereof for a new tenant, whether for the same or a different use, and any special concessions made to obtain a new tenant; and 


        (e)   At
Landlord's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable law. 




        The
term "rent" as used in this Section 19.2 shall be deemed to be and to mean all
sums of every nature required to be paid by Tenant pursuant to the terms of this Lease, whether to Landlord or to others. As used in Sections 19.2.1(a) and
(b), above, the "worth at the time of award" shall be computed by allowing interest at the rate set forth in Article 25
of this Lease, but in no case greater than the maximum amount of such interest permitted by law. As used in Section 19.2.1(c), above, the "worth
at the time of award" shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). 


        19.2.2    Landlord
shall have the remedy described in California Civil Code Section 1951.4 (lessor may continue lease in effect after lessee's breach and abandonment and
recover rent as it becomes due, if lessee has the right to sublet or assign, subject only to reasonable limitations). Accordingly, if Landlord does not elect to terminate this Lease on account of any
default by Tenant, Landlord may, from time to time, without terminating this Lease, enforce all of its rights and remedies under this Lease, including the right to recover all rent as it becomes due. 



        19.2.3    Landlord
shall at all times have the rights and remedies (which shall be cumulative with each other and cumulative and in addition to those rights and remedies
available under Sections 19.2.1 and 19.2.2, above, or any law or other provision of this Lease), without prior demand or notice except as required by
applicable law, to seek any declaratory, injunctive or other equitable relief, and specifically enforce this Lease, or restrain or enjoin a violation or breach of any provision hereof. 




        19.3    Subleases of Tenant.    Whether or not Landlord elects to terminate this Lease on
account of any default by Tenant, as set forth in this Article 19, Landlord shall have the right to terminate any and all subleases, licenses,
concessions or other consensual arrangements for possession entered into by Tenant and affecting the Premises or may, in Landlord's sole discretion, succeed to Tenant's interest in such subleases,
licenses, concessions or arrangements. In the event of Landlord's election to succeed to Tenant's interest in any such subleases, licenses, concessions or arrangements, Tenant shall, as of the date of
notice by Landlord of such election, have no further right to or interest in the rent or other consideration receivable thereunder. 



        19.4    Form of Payment After Default.    Following the occurrence of an event of default by
Tenant, Landlord shall have the right to require that any or all subsequent amounts paid by Tenant to Landlord hereunder, whether to cure the default in question or otherwise, be paid in the form of
cash, money order, cashier's or certified check drawn on an institution 


47





 

acceptable
to Landlord, or by other means approved by Landlord, notwithstanding any prior practice of accepting payments in any different form. 



        19.5    Efforts to Relet.    No re-entry or repossession, repairs, maintenance,
changes, alterations and additions, reletting, appointment of a receiver to protect Landlord's interests hereunder, or any other action or omission by Landlord shall be construed as an election by
Landlord to terminate this Lease or Tenant's right to possession, or to accept a surrender of the Premises, nor shall same operate to release Tenant in whole or in part from any of Tenant's
obligations hereunder, unless express written notice of such intention is sent by Landlord to Tenant. Tenant hereby irrevocably waives any right otherwise available under any law to redeem or
reinstate this Lease. 


        19.6    Landlord Default.    Notwithstanding anything to the contrary set forth in this Lease,
Landlord shall be in default in the performance of any obligation required to be performed by Landlord pursuant to this Lease if Landlord fails to perform such obligation within thirty
(30) days after the receipt of notice from Tenant specifying in detail Landlord's failure to perform; provided, however, if the nature of Landlord's obligation is such that more than thirty
(30) days are required for its performance, then Landlord shall not be in default under this Lease if it shall commence such performance within such thirty (30) day period and thereafter
diligently pursues the same to completion. Upon any such default by Landlord under this Lease, Tenant may, except as otherwise specifically provided in this Lease to the contrary, exercise any of its
rights provided at law or in equity. Any award from a court or arbitrator in favor of Tenant requiring payment by Landlord which is not paid by Landlord within the time period directed by such award,
may be offset by Tenant from Rent next due and payable under this Lease; provided, however, Tenant may not deduct the amount of the award against more than fifty percent (50%) of Base Rent next due
and owing (until such time as the entire amount of such judgment is deducted) to the extent following a foreclosure or a deed-in-lieu of foreclosure. 


 
 

ARTICLE 20    
    
    COVENANT OF QUIET ENJOYMENT    
    


        Landlord covenants that Tenant, on paying the Rent, charges for services and other payments herein reserved and on keeping, observing and performing all the other
TCCs, provisions and agreements herein contained on the part of Tenant to be kept, observed and performed, shall, during the Lease Term, peaceably and quietly have, hold and enjoy the Premises subject
to the TCCs, provisions and agreements hereof without interference by any persons lawfully claiming by or through Landlord. The foregoing covenant is in lieu of any other covenant express or implied. 


 
 

ARTICLE 21    
    
    SECURITY DEPOSIT; LETTER OF CREDIT    
    


        21.1    Security Deposit.    Concurrent with Tenant's execution of this Lease, Tenant shall
deposit with Landlord a security deposit (the "Security Deposit") in the amount set forth in  Section 8 of the Summary, as security for the faithful
performance by Tenant of all of its 


48







  





obligations under this Lease. If Tenant defaults with respect to any provisions of this Lease, including, but not limited to, the provisions relating to the payment of Rent, the removal of property
and the repair of resultant damage, Landlord may, without notice to Tenant, but shall not be required to apply all or any part of the Security Deposit for the payment of any Rent or any other sum in
default and Tenant shall, upon demand therefor, restore the Security Deposit to its original amount. Any unapplied portion of the Security Deposit shall be returned to Tenant, or, at Landlord's
option, to the last assignee of Tenant's interest hereunder, within sixty (60) days following the expiration of the Lease Term. Tenant shall not be entitled to any interest on the Security
Deposit. Tenant hereby waives the provisions of Section 1950.7 of the California Civil Code, or any successor statute. 


        21.2    Letter of Credit.    




        21.2.1    Delivery of Letter of Credit.    As additional security for Tenant's obligations
under this Lease, Tenant shall deliver to Landlord, concurrently with the mutual execution of this Lease, an unconditional, clean, irrevocable letter of credit (the
"L-C") in an amount as set forth in Section 21.2.2, below (the
"L-C Amount"), which L-C shall be issued by a money-center bank (a bank which accepts deposits, maintains accounts, has a local
Southern California office which will negotiate a letter of credit, and whose deposits are insured by the FDIC) reasonably acceptable to Landlord, and which L-C shall be in the form of  Exhibit G, attached hereto. Tenant shall pay all expenses, points and/or fees incurred by Tenant in obtaining the L-C. 


        21.2.2    L-C Amount.    



        21.2.2.1    Calculation of L-C Amount.    For purposes of this Lease, the
"L-C Amount" shall initially be $1,549,613.56; provided, however, that commencing on February 1, 2006, and continuing for the
remainder of the Lease Term, the L-C Amount shall be increased to an amount equal to twelve (12) months of the then-current Monthly Installment of Base Rent. 


        21.2.2.2    Conditional Increase/Reduction of L-C Amount.    Landlord and Tenant
hereby acknowledge and agree that the L-C Amount is subject to increase and reduction throughout the Lease Term at the end of each financial quarter as set forth in this  Section 21.2.2.2. The
starting L-C Amount shall be as set forth in  Section 21.2.2.1, above. Thereafter, the actual amount of the L-C posted by Tenant shall be equal to the L-C Amount, as
such L-C Amount may be conditionally reduced as follows: 



        (i)    to
the extent that Tenant maintains a "Working Capital," as defined below, in excess of Twenty Million and No/100 Dollars ($20,000,000.00) for four
(4) consecutive financial quarters during the Lease Term, a reduction of fifty percent (50%); 


        (ii)   to
the extent that Tenant maintains a Working Capital in excess of Twenty Million and No/100 Dollars ($20,000,000.00) for eight (8) consecutive financial
quarters during the Lease Term, a reduction of one hundred percent (100%); 






49





 




        (iii)  to
the extent that Tenant maintains a Working Capital in excess of Forty Million and No/100 Dollars ($40,000,000.00) for four (4) consecutive financial quarters
during the Lease Term, a reduction of one hundred percent (100%). 






As
soon as reasonably practical following the end of each financial quarter during the Lease Term, the L-C Amount shall be recalculated pursuant to the terms of  Section 21.2.2.1, above, and any
percentage reductions, which are applicable to the L-C pursuant to subparagraphs (i) through
(iii), above, shall be applied in order to determine the then-existing amount of L-C which Tenant is required to post (the "Required L-C
Amount"). In the event the determined Required L-C Amount is less than the amount of the actual L-C then-posted by Tenant, Tenant shall have
the right to cause the amount of the then-current L-C to be reduced to the Required L-C Amount, and Landlord shall timely execute and deliver such commercially
reasonable documents to the issuer(s) of the L-C as are presented to Landlord by such issuer(s) and as may be reasonably necessary to effectuate the change to the Required L-C
Amount. Likewise, in the event that the Required L-C Amount is greater than the amount of the L-C then posted by Tenant, Tenant shall upon its receipt of written notice from
Landlord (the "Reestablishment Notice"), cause the amount of the then-current L-C to be increased to equal the Required
L-C Amount. In addition, in the event that, following the completion of each financial quarter throughout the Lease Term (A) Tenant fails to timely deliver the unaudited quarterly
financial statements, or the annual audited financial statements required for Tenant to make a determination with regard to such Required Thresholds, or (B) Tenant is in economic default under
the Lease (beyond any applicable notice and cure periods) more than twice during the immediately preceding twelve (12) months, then Tenant shall, upon receipt of a Reestablishment Notice, cause
the L-C to be reestablished with the then applicable L-C Amount. For purposes of this Section 21.2.2,
"Working Capital," means then-current assets of Tenant less then-current liabilities from Tenant's previous quarterly financial
statements, which Working Capital shall include then-current receivables (zero (0) to sixty (60) days only). In connection with this  Section 21.2.2, Tenant shall provide Landlord
(1) Tenant's current financial statements (applicable to the financial quarter which just
ended) certified by Tenant's Chief Executive Officer and Tenant's Chief Financial Officer, within thirty (30) business days following the end of each financial quarter during the Lease Term,
(2) Tenant's current annual financial statement (applicable to the financial year which just ended) audited and certified by an independent certified public
accountant, within one hundred twenty (120) days following the end of each financial year during the Lease Term, and (3) a disclosure statement of any material adverse changes in
Tenant's business. The financial thresholds set forth in subparagraphs (i) through (iii), above, are, collectively, the "Required Thresholds."
Notwithstanding anything in this Section 21.2.2 to the contrary, however, to the extent that the square footage of the Premises expands to
greater than 48,502 rentable square feet, then the Required Thresholds shall be automatically increased by multiplying the same by a fraction, the numerator of which shall be the number of rentable
square feet in the then-existing Premises, and the denominator of which shall equal 48,502. 



        21.2.3    FAILURE TO REINSTATE; LIQUIDATED DAMAGES.    IN THE EVENT THAT TENANT FAILS, WITHIN
TWENTY (20) DAYS FOLLOWING TENANT'S RECEIPT OF A REESTABLISHMENT NOTICE, TO CAUSE THE L-C TO BE REESTABLISHED IN THE REQUIRED L-C AMOUNT, THEN TENANT'S MONTHLY 




50





 


INSTALLMENT
OF BASE RENT SHALL BE INCREASED BY ONE HUNDRED FIFTY PERCENT (150%) OF ITS THEN EXISTING LEVEL DURING THE PERIOD COMMENCING ON THE DATE WHICH IS TWENTY (20) DAYS AFTER TENANT'S
RECEIPT OF SUCH REESTABLISHMENT NOTICE AND ENDING ON THE EARLIER TO OCCUR OF (I) THE DATE SUCH L-C IS REESTABLISHED PURSUANT TO THE TERMS OF THIS SECTION
21.2, OR (II) THE DATE WHICH IS NINETY (90) DAYS AFTER THE DATE OF SUCH REESTABLISHMENT NOTICE. IN THE EVENT THAT TENANT FAILS, DURING SUCH NINETY (90) DAY
PERIOD FOLLOWING THE DATE OF THE REESTABLISHMENT NOTICE, TO CAUSE THE L-C TO BE REESTABLISHED IN THE REQUIRED L-C AMOUNT, THEN TENANT'S MONTHLY INSTALLMENT OF BASE RENT SHALL
BE INCREASED BY TWO HUNDRED PERCENT (200%) OF ITS THEN EXISTING LEVEL DURING THE PERIOD COMMENCING ON THE DATE WHICH IS NINETY (90) DAYS AFTER THE DATE OF SUCH REESTABLISHMENT NOTICE AND ENDING
ON THE DATE SUCH L-C IS RE-ISSUED/REESTABLISHED PURSUANT TO THE TERMS OF THIS SECTION 21.2. THE PARTIES AGREE THAT IT WOULD BE
IMPRACTICABLE AND EXTREMELY DIFFICULT TO ASCERTAIN THE ACTUAL DAMAGES SUFFERED BY LANDLORD AS A RESULT OF TENANT'S FAILURE TO TIMELY REESTABLISH THE L-C FOLLOWING THE REESTABLISHMENT
NOTICE AS REQUIRED IN THIS SECTION 21.2, AND THAT UNDER THE CIRCUMSTANCES EXISTING AS OF THE DATE OF THIS LEASE, THE LIQUIDATED DAMAGES PROVIDED FOR IN
THIS SECTION 21.2.3 REPRESENT A REASONABLE ESTIMATE OF THE DAMAGES WHICH LANDLORD WILL INCUR AS A RESULT OF SUCH FAILURE, PROVIDED, HOWEVER, THAT THIS
PROVISION SHALL NOT WAIVE OR AFFECT LANDLORD'S RIGHTS AND TENANT'S INDEMNITY OBLIGATIONS UNDER OTHER SECTIONS OF THIS LEASE (EXCEPT THAT THE PARTIES SPECIFICALLY AGREE THAT THE FOREGOING PROVISION WAS
AGREED TO IN LIEU OF MAKING FAILURE TO RE-ESTABLISH THE L-C A DEFAULT UNDER THE LEASE). THE PARTIES ACKNOWLEDGE THAT THE PAYMENT OF SUCH LIQUIDATED DAMAGES IS NOT INTENDED AS A
FORFEITURE OR PENALTY WITHIN THE MEANING OF CALIFORNIA CIVIL CODE SECTION 3275 OR 3369, BUT IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO LANDLORD PURSUANT TO CALIFORNIA CIVIL CODE SECTION 1671. THE
PARTIES HAVE SET FORTH THEIR INITIALS BELOW TO INDICATE THEIR AGREEMENT WITH THE LIQUIDATED DAMAGES PROVISION CONTAINED IN THIS SECTION 21.2.3. 




	/s/ SRS	 	/s/ JPL
	LANDLORD'S INITIALS	 	TENANT'S INITIALS







        21.2.4    Application of Letter of Credit.    The L-C shall be held by Landlord as
security for the faithful performance by Tenant of all the TCCs of this Lease to be kept and performed by Tenant during the Lease Term. The L-C shall not be mortgaged, assigned or
encumbered in any manner whatsoever by Tenant without the prior written consent of Landlord. If Tenant defaults with respect to any provisions of this Lease, including, but not limited to, the
provisions relating to the payment of Rent, or if Tenant fails to renew the L-C at least thirty (30) 




51





 


days
before its expiration, Landlord may, but shall not be required to, draw upon all or any portion of the L-C for payment of any Rent or any other sum in default, or for the payment of
any amount that Landlord may reasonably spend or may become obligated to spend by reason of Tenant's default, or to compensate Landlord for any other loss or damage that Landlord may suffer by reason
of Tenant's default. The use, application or retention of the L-C, or any portion thereof, by Landlord shall not prevent Landlord from exercising any other right or remedy provided by this
Lease or by law, it being intended that Landlord shall not first be required to proceed against the L-C and shall not operate as a limitation on any recovery to which Landlord may
otherwise be entitled. Any amount of the L-C which is drawn upon by Landlord, but is not used or applied by Landlord, shall be held by Landlord and deemed a security deposit (the
"L-C Security Deposit") and, in connection with such L-C Security Deposit, Tenant hereby waives the provisions of
Section 1950.7 of the California Civil Code, or any successor statute. If any portion of the L-C is drawn upon and used or applied by Landlord, Tenant shall, within ten
(10) days after written demand therefor, either (i) deposit cash with Landlord (which cash shall constitute part of the L-C Security Deposit) in an amount sufficient to cause
the sum of the L-C Security Deposit and the amount of the remaining L-C to be equivalent to the amount of the L-C then required under this Lease (and if any portion
of the L-C Security Deposit is thereafter used or applied, Tenant shall restore such L-C Security Deposit to the amount then required under this Lease pursuant to the
foregoing), or (ii) reinstate the L-C to the amount then required under this Lease, in which case any unused portion of the then-existing L-C Security
Deposit shall be returned to Tenant. Tenant acknowledges that Landlord has the right to transfer or mortgage its interest in the Project and in this Lease and Tenant agrees that in the event of any
such transfer or mortgage, Landlord shall have the right to transfer or assign the L-C Security Deposit and/or the L-C to the transferee or mortgagee, and in the event of such
transfer, Tenant shall look solely to such transferee or mortgagee for the return of the L-C Security Deposit and/or the L-C, provided such transferee agrees in writing to be
liable to Tenant for the return of the L-C. Landlord shall pay all costs and fees, if any, charged by the issuing bank to transfer the L-C. Tenant shall, within five
(5) days of request by Landlord, execute such further instruments or assurances as Landlord may reasonably deem necessary to evidence or confirm Landlord's transfer or assignment of the
L-C Security Deposit and/or the L-C to such transferee or mortgagee. If Tenant is not then in default under this Lease, the L-C Security Deposit and/or the
L-C, or any balance thereof, shall be returned to Tenant within forty-five (45) days following the expiration of the Lease Term. 




 
 

ARTICLE 22    
    
    TELECOMMUNICATIONS EQUIPMENT    
    


        At any time during the Lease Term, subject to the TCCs of this Article 22 and  Article 8 of this Lease, Tenant may install, at Tenant's sole cost and expense, but without the payment of any Rent or a license or similar fee
or charge, a satellite or microwave dish or other communications, HVAC or other equipment servicing the business conducted by Tenant from within the Premises (all such equipment,
including non-telecommunication equipment is, for the sake of convenience, defined collectively as the "Telecommunications Equipment") upon
the roof of the Building. The physical appearance and the size of the Telecommunications Equipment shall be subject to Landlord's reasonable approval, the location of any such installation of the
Telecommunications Equipment shall be designated by Tenant subject to 


52





 

Landlord's
reasonable approval and Landlord may require Tenant to install screening around such Telecommunications Equipment, at Tenant's sole cost and expense, as reasonably designated by Landlord.
Tenant shall maintain such Telecommunications Equipment, at Tenant's sole cost and expense. In the event Tenant elects to exercise its right to install the Telecommunication Equipment, then Tenant
shall give Landlord prior notice thereof. Tenant shall remove such Telecommunications Equipment upon the expiration or earlier termination of this Lease and shall restore such area to the condition
the same existed prior to the installation of such Telecommunications Equipment. Such Telecommunications Equipment shall be installed pursuant to plans and specifications approved by Landlord, which
approval will not be unreasonably withheld. Such Telecommunications Equipment shall, in all instances, comply with applicable governmental laws, codes, rules and regulations. The rights contained in
this Article 22 shall be personal to the Original Tenant and its Affiliates and may only be exercised by the Original Tenant or an Affiliate (and
not any assignee, sublessee or other transferee of the Original Tenant's interest in this Lease) if the Original Tenant and/or an Affiliate is in occupancy of at least sixty percent (60%) of the
then-existing Premises. Landlord shall reserve the concurrent right to use the roof for its own use and for third-party use for installation of satellite dish and antenna devices similar
to Tenant's Telecommunications Equipment (collectively, the "Landlord TCE"), provided such Landlord TCE shall not interfere with Tenant's operations on
the roof of the Building, and provided Landlord maintains, restores and repairs the Building rooftop space associated with such Landlord TCE. To the extent Landlord elects to install Landlord TCE on
the Building rooftop, Landlord shall be responsible for the maintenance, repair and restoration of such Landlord TCE. Landlord shall be responsible for (and shall make all necessary repairs and
replacements for) any damage to Tenant's Telecommunications Equipment due to the actions or omissions of Landlord or Landlord Parties (or any third party to whom Landlord has granted roof access
rights). Tenant shall be responsible for (and shall make all necessary repairs and replacements for) any damage to the Landlord TCE due to the negligence or willful misconduct of Tenant. 


 
 

ARTICLE 23    
    
    SIGNS    
    


        23.1    Prohibited Signage and Other Items.    Any signs, notices, logos, pictures, names or
advertisements which are installed and that have not been separately approved by Landlord may be removed without notice by Landlord at the sole expense of Tenant. Except as expressly permitted
pursuant to Section 23.2, below, Tenant may not install any signs on the exterior or roof of the Project or the
Common Areas. Any signs, window coverings, or blinds (even if the same are located behind the Landlord-approved window coverings for the Building), or other items visible from the exterior of the
Premises or Building, shall be subject to the prior approval of Landlord, in its sole discretion. 


        23.2    Tenant's Signage.    Tenant shall be entitled to install the following signage in
connection with Tenant's lease of the Premises (collectively, the "Tenant's Signage"): 




	(i)
	One
(1) building sign identifying Tenant's name and logo located at the top of the Building (the "Building Top Sign"), as more
particularly identified on Exhibit A-2 attached hereto; and 




53





 


	(ii)
	Non-exclusive
signage on a pro-rata portion (vis-á-vis the rentable square footage of the Premises as compared to the
rentable square footage of the Building) of the monument located adjacent to the entrance of the Building (the "Building Monument Sign"). Tenant hereby
acknowledges and agrees that Landlord may, at Landlord's sole cost and expense, place a standard "owned and managed" sign on such Project Monument Sign, provided that such "owned and managed" sign
shall not be larger than Tenant's sign. Landlord may also, at Landlord's sole cost and expense, install a small sign indicating its ownership and management of the Building in the interior of the
Building lobby in a location and of a size reasonably approved by Tenant. 






        23.2.1    Specifications and Permits.    Tenant's Signage shall set forth Tenant's name and
logo as determined by Tenant in its sole discretion; provided, however, in no event shall Tenant's Signage include an "Objectionable Name," as that term is defined in  Section 23.2.2, of this Lease.
The graphics, materials, color, design, lettering, lighting, size, illumination, specifications and exact location
of Tenant's Signage (collectively, the "Sign Specifications") shall be subject to the prior written approval of Landlord, which approval shall not be
unreasonably withheld, conditioned or delayed, and shall be consistent and compatible with the quality and nature of the Project and Landlord's Building standard signage program. For purposes of this  Section 23.2.1, the reference to "name" shall mean name and/or logo. In addition, Tenant's Signage shall be subject to Tenant's receipt of all
required governmental permits and approvals and shall be subject to all Applicable Law and to any covenants, conditions and restrictions affecting the Project. Landlord shall use commercially
reasonable efforts to assist Tenant in obtaining all necessary governmental permits and approvals for Tenant's Signage. Tenant hereby acknowledges that, notwithstanding Landlord's approval of Tenant's
Signage, Landlord has made no representation or warranty to Tenant with respect to the probability of obtaining all necessary governmental approvals and permits for Tenant's Signage. In the event
Tenant does not receive the necessary governmental approvals and permits for Tenant's Signage, Tenant's and Landlord's rights and obligations under the remaining TCCs of this Lease shall be
unaffected. 


        23.2.2    Objectionable Name.    To the extent Original Tenant desires to change the name
and/or logo set forth on Tenant's Signage, such name and/or logo shall not have a name which relates to an entity which is of a character or reputation, or is associated with a political faction or
orientation, which is inconsistent with the quality of the Project, or which would otherwise reasonably offend a landlord of the Comparable Buildings (an "Objectionable
Name"). The parties hereby agree that the name "Favrille, Inc.," or any reasonable derivation thereof, shall not be deemed an Objectionable Name. 


        23.2.3    Termination of Right to Tenant's Signage.    The rights contained in this  Section 23.2 shall be personal to the
Original Tenant and may only be exercised by the Original Tenant (and not any assignee, sublessee or
transferee of the Original Tenant's interest in this Lease) if the Original Tenant is in occupancy of no less than sixty percent (60%) of the then existing Premises. 




54





 


        23.2.4    Cost and Maintenance.    The costs of the actual signs comprising Tenant's Signage
and the installation, design, construction, and any and all other costs associated with Tenant's Signage, including, without limitation, utility charges and hook-up fees, permits, and
maintenance and repairs, shall be the sole responsibility of Tenant; provided, however, up to a total of Ten Thousand and No/100 Dollars ($10,000.00) of the actual costs of such initial installation,
design and construction shall be subject to reimbursement from the Tenant Improvement Allowance pursuant to Section 2.2.1 of the Tenant Work
Letter. Should Tenant's Signage require repairs and/or maintenance, as determined in Landlord's reasonable judgment, Landlord shall have the right to provide notice thereof to Tenant and Tenant shall
cause such repairs and/or maintenance to be performed within thirty (30) days after receipt of such notice from Landlord, at Tenant's sole cost and expense; provided, however, if such repairs
and/or maintenance are reasonably expected to require longer than thirty (30) days to perform, Tenant shall commence such repairs and/or maintenance within such thirty (30) day period
and shall diligently prosecute such repairs and maintenance to completion. Should Tenant fail to perform such repairs and/or maintenance within the periods described in the immediately preceding
sentence, Landlord shall, upon the delivery of an additional ten (10) business days' prior written notice, have the right to cause such work to be performed and to charge Tenant as Additional
Rent for the cost (including a percentage of the cost thereof sufficient to reimburse Landlord for all overhead, general conditions, fees and other costs or expenses arising from Landlord's
involvement with such repairs and/or maintenance) of such work. Upon the expiration or earlier termination of this Lease, Tenant shall, at Tenant's sole cost and expense, cause Tenant's Signage to be
removed and shall cause the areas in which such Tenant's Signage was located to be restored to the condition existing immediately prior to the placement of such Tenant's Signage except for ordinary
wear and tear. If Tenant fails to timely remove such Tenant's Signage or to restore the areas in which such Tenant's Signage was located, as provided in the immediately preceding sentence, then
Landlord may perform such work, and all costs incurred by Landlord in so performing (including a percentage of the cost thereof sufficient to reimburse Landlord for all overhead, general conditions,
fees and other costs or expenses arising from Landlord's involvement with such repairs and/or maintenance) shall be reimbursed by Tenant to Landlord within thirty (30) days after Tenant's
receipt of an invoice therefor. The TCCs of this Section 23.2.4 shall survive the expiration or earlier termination of this Lease. 




 
 

ARTICLE 24    
    
    COMPLIANCE WITH LAW    
    


        Tenant shall not do anything or suffer anything to be done in or about the Premises or the Project which will in any way conflict with any law, statute, ordinance
or other governmental rule, regulation or requirement now in force or which may hereafter be enacted or promulgated (collectively, "Applicable Laws").
At its sole cost and expense, Tenant shall promptly comply with all such Applicable Laws which relate to (i) Tenant's use of a portion of the Premises for non-general office use,
(ii) the Alterations or Tenant Improvements in the Premises, or (iii) the Base Building, but, as to the Base Building, only to the extent such obligations are triggered by Tenant's
Alterations, the Tenant Improvements, or use of a portion of the Premises for non-general office use. Should any standard or regulation now or hereafter be imposed on Landlord or Tenant by
a state, federal or local governmental body charged with the establishment, regulation and enforcement of occupational, health or safety standards for employers, employees, 


55





 

landlords
or tenants, then Tenant agrees, at its sole cost and expense, to comply promptly with such standards or regulations which are applicable to Tenant's business. The judgment of any court of
competent jurisdiction or the admission of Tenant in any judicial action, regardless of whether Landlord is a party thereto, that Tenant has violated any of said governmental measures, shall be
conclusive of that fact as between Landlord and Tenant. Landlord shall comply with all Applicable Laws relating to (a) the Base Building, or (b) the Ground Floor Office Premises to the
extent required for general office use (as opposed to Tenant's particular use), provided that compliance with such Applicable Laws is not the responsibility of Tenant under this Lease, and provided
further that Landlord's failure to comply therewith would (1) prohibit Tenant from obtaining or maintaining a certificate of occupancy for the Premises, (2) unreasonably and materially
affect the safety of Tenant's employees or create a significant health hazard for Tenant's employees, (3) invalidate Tenant's cGMP compliance status in, or materially and unreasonably prevent,
hinder, or interrupt Tenant's ability to continually function under cGMP conditions under the applicable laws and regulations of, California and the United States, and under the applicable statutes
for any foreign regulatory body, including but not limited to, Canada, Europe and Asia, or (4) materially increase the costs incurred by Tenant to comply with its maintenance obligations under
the TCCs of this Lease. Landlord shall be permitted to include in Operating Expenses any costs or expenses incurred by Landlord under this  Article 24 to the extent consistent with the terms of
Section 4.2.4, above. 


 
 

ARTICLE 25    
    
    LATE CHARGES    
    


        If any installment of Rent or any other sum due from Tenant shall not be received by Landlord or Landlord's designee within five (5) business days after
said amount is due, then Tenant shall pay to Landlord a late charge equal to five percent (5%) of the overdue amount plus any attorneys' fees incurred by Landlord by reason of Tenant's failure to pay
Rent and/or other charges when due hereunder. The late charge shall be deemed Additional Rent and the right to require it shall be in addition to all of Landlord's other rights and remedies hereunder
or at law and shall not be construed as liquidated damages or as limiting Landlord's remedies in any manner. In addition to the late charge described above, any Rent or other amounts owing hereunder
which are not paid within ten (10) days after the date they are due shall bear interest from the date when due until paid at a rate per annum equal to the lesser of (i) the annual
"Bank Prime Loan" rate cited in the Federal Reserve Statistical Release Publication G. 13(415), published on the first Tuesday of each calendar month
(or such other comparable index as Landlord and Tenant shall reasonably agree upon if such rate ceases to be published) plus four (4) percentage points, and (ii) the highest rate
permitted by applicable law. 


 
 

ARTICLE 26    
    
    LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT    
    


        26.1    Landlord's Cure.    All covenants and agreements to be kept or performed by Tenant
under this Lease shall be performed by Tenant at Tenant's sole cost and expense and without any reduction of Rent, except to the extent, if any, otherwise expressly provided herein. If Tenant shall
fail to perform any obligation under this Lease, and such failure shall continue in 


56







  





excess of the time allowed under Section 19.1.2, above, unless a specific time period is otherwise stated in this Lease, Landlord may, but shall
not be obligated to, make any such payment or perform any such act on Tenant's part without waiving its rights based upon any default of Tenant and without releasing Tenant from any obligations
hereunder. 


        26.2    Tenant's Reimbursement.    Except as may be specifically provided to the contrary in
this Lease, Tenant shall pay to Landlord, upon delivery by Landlord to Tenant of statements therefor: (i) sums equal to expenditures reasonably made and obligations incurred by Landlord in
connection with the remedying by Landlord of Tenant's defaults pursuant to the provisions of Section 26.1; (ii) sums equal to all losses,
costs, liabilities, damages and expenses referred to in Article 10 of this Lease; and (iii) sums equal to all expenditures made and
obligations incurred by Landlord in collecting or attempting to collect the Rent or in enforcing or attempting to enforce any rights of Landlord under this Lease or pursuant to law, including, without
limitation, all reasonable legal fees and other amounts so expended. Tenant's obligations under this Section 26.2 shall survive the expiration or
sooner termination of the Lease Term. 


 
 

ARTICLE 27    
    
    ENTRY BY LANDLORD    
    


        Landlord reserves the right at all reasonable times (during Building Hours with respect to items (i) and (ii) below) and upon at least
twenty-four (24) hours prior notice to Tenant (except in the case of an emergency) and at all times (except in the case of an emergency) accompanied by an authorized representative
of Tenant and subject to Tenant's reasonable rules and regulations, to enter the Premises to (i) inspect them; (ii) show the Premises to prospective purchasers, or to current or
prospective mortgagees, ground or underlying lessors or insurers, or during the last nine (9) months of the Lease Term, to prospective tenants; (iii) post notices of nonresponsibility;
or (iv) alter, improve or repair the Premises or the Building as permitted or required by the terms of this Lease, or for structural alterations, repairs or improvements to the Building
Structure. Notwithstanding anything to the contrary contained in this Article 27, Landlord may enter the Premises at any time to
(A) perform services required of Landlord under this Lease after reasonable notice to Tenant; (B) take possession due to any breach of this Lease in the manner provided herein; and
(C) perform any covenants of Tenant which Tenant fails to perform (after any applicable notice and cure periods). Landlord may make any such entries without the abatement of Rent, except as
otherwise provided in this Lease, and may take such reasonable steps as required to accomplish the stated purposes; provided, however, except for (i) emergencies, (ii) repairs,
alterations, improvements or additions required by governmental or quasi-governmental authorities or court order or decree, or (iii) repairs which are the obligation of Tenant hereunder, any
such entry shall be performed in a manner so as not to unreasonably interfere with Tenant's use of the Premises and shall be performed after normal business hours if reasonably practical. With respect
to items (ii) and (iii) above, Landlord shall use commercially reasonable efforts to
not materially interfere with Tenant's use of, or access to, the Premises. Except as otherwise set forth in Section 6.4, Tenant hereby waives any
claims for damages or for any injuries or inconvenience to or interference with Tenant's business, lost profits, any loss of occupancy or quiet enjoyment of the Premises, and any other loss occasioned
thereby. For each of the above purposes, Landlord shall at all times have a key with which to unlock all the doors in the Premises, excluding Tenant's vaults, safes and special security areas
designated in advance 


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by
Tenant. In an emergency, Landlord shall have the right to use any means that Landlord may deem proper to open the doors in and to the Premises. Any entry into the Premises by Landlord in the
manner hereinbefore described shall not be deemed to be a forcible or unlawful entry into, or a detainer of, the Premises, or an actual or constructive eviction of Tenant from any portion of the
Premises. No provision of this Lease shall be construed as obligating Landlord to perform any repairs, alterations or decorations except as otherwise expressly agreed to be performed by Landlord
herein. 


 
 

ARTICLE 28    
    
    TENANT PARKING    
    


        Tenant shall be entitled to utilize, without charge, commencing on the Lease Commencement Date, the amount of parking spaces set forth in  Section 9 of the Summary, on a monthly basis throughout the Lease Term, which parking spaces shall pertain to the Project parking facility.
Notwithstanding the foregoing, Tenant shall be responsible for the full amount of any taxes imposed by any governmental authority in connection with the renting of such parking spaces by Tenant or the
use of the parking facility by Tenant. Tenant's continued right to use the parking spaces is conditioned upon Tenant abiding by all rules and regulations which are prescribed from time to time for the
orderly operation and use of the parking facility where the parking spaces are located, including any sticker or other identification system established by Landlord, Tenant's cooperation in seeing
that Tenant's employees and visitors also comply with such rules and regulations and Tenant not being in default under this Lease. Subject to Landlord's continued satisfaction of its obligation to
provide Tenant the number of parking spaces required by the TCCs of this Lease, Landlord specifically reserves the right to change the size, configuration, design, layout and all other aspects of the
Project parking facility at any time and Tenant acknowledges and agrees that Landlord may, without incurring any liability to Tenant and without any abatement of Rent under this Lease, from time to
time, close-off or restrict access to the Project parking facility for purposes of permitting or facilitating any such construction, alteration or improvements. Landlord may delegate its
responsibilities hereunder to a parking operator in which case such parking operator shall have all the rights of control attributed hereby to the Landlord. The parking spaces rented by Tenant
pursuant to this Article 28 are provided to Tenant solely for use by Tenant's own personnel and such spaces may not be transferred, assigned,
subleased or otherwise alienated by Tenant without Landlord's prior approval; provided, however, Landlord shall be deemed to have granted such approval with regard to Non-Transfers and
Transfers approved pursuant to the TCCs of Article 14. Tenant may validate visitor parking by such method or methods as the Landlord may
establish, at the validation rate from time to time generally applicable to visitor parking. 


 
 

ARTICLE 29    
    
    MISCELLANEOUS PROVISIONS    
    


        29.1    Terms; Captions.    The words "Landlord" and "Tenant" as used herein shall include the
plural as well as the singular. The necessary grammatical changes required to make the provisions hereof apply either to corporations or partnerships or individuals, men or women, as the case may
require, shall in all cases be assumed as though in each case fully expressed. 


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The
captions of Articles and Sections are for convenience only and shall not be deemed to limit, construe, affect or alter the meaning of such Articles and Sections. 



        29.2    Binding Effect.    Subject to all other provisions of this Lease, each of the
covenants, conditions and provisions of this Lease shall extend to and shall, as the case may require, bind or inure to the benefit not only of Landlord and of Tenant, but also of their respective
heirs, personal representatives, successors or assigns, provided this clause shall not permit any assignment by Tenant contrary to the provisions of  Article 14 of this Lease. 


        29.3    No Air Rights.    No rights to any view or to light or air over any property, whether
belonging to Landlord or any other person, are granted to Tenant by this Lease. If at any time any windows of the Premises are temporarily darkened or the light or view therefrom is obstructed by
reason of any repairs, improvements, maintenance or cleaning in or about the Project, the same shall be without liability to Landlord and without any reduction or diminution of Tenant's obligations
under this Lease. 


        29.4    Modification of Lease.    Should any current or prospective mortgagee or ground lessor
for the Building or Project require a modification of this Lease, which modification will not cause an increased cost or expense to Tenant or in any other way materially and adversely change the
rights and obligations of Tenant hereunder, then and in such event, Tenant agrees that this Lease may be so modified and agrees to execute whatever documents are reasonably required therefor and to
deliver the same to Landlord within ten (10) days following a request therefor. At the request of Landlord or any mortgagee or ground lessor, Tenant agrees to execute a short form of Lease and
deliver the same to Landlord within ten (10) days following the request therefor. 


        29.5    Transfer of Landlord's Interest.    Tenant acknowledges that Landlord has the right to
transfer all or any portion of its interest in the Project or Building and in this Lease, and Tenant agrees that in the event of any such transfer, Landlord shall automatically be released from all
liability under this Lease accruing after the date such transfer and Tenant agrees to look solely to such transferee for the performance of Landlord's obligations hereunder after the date of transfer
and such transferee shall be deemed to have fully assumed and be liable for all obligations of this Lease to be performed by Landlord, including the return of any Security Deposit, and Tenant shall
attorn to such transferee. Tenant further acknowledges that Landlord may assign its interest in this Lease to a mortgage lender as additional security and agrees that such an assignment shall not
release Landlord from its obligations hereunder and that Tenant shall continue to look to Landlord for the performance of its obligations hereunder. 


        29.6    Prohibition Against Recording.    Except as provided in  Section 29.4 of this Lease, neither this Lease, nor any
memorandum, affidavit or other writing with respect thereto, shall be recorded by Tenant
or by anyone acting through, under or on behalf of Tenant. 


        29.7    Landlord's Title.    Landlord's title is and always shall be paramount to the title of
Tenant. Nothing herein contained shall empower Tenant to do any act which can, shall or may encumber the title of Landlord. 


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        29.8    Relationship of Parties.    Nothing contained in this Lease shall be deemed or
construed by the parties hereto or by any third party to create the relationship of principal and agent, partnership, joint venturer or any association between Landlord and Tenant. 


        29.9    Application of Payments.    Landlord shall have the right to apply payments received
from Tenant pursuant to this Lease, regardless of Tenant's designation of such payments, to satisfy any obligations of Tenant hereunder, in such order and amounts as Landlord, in its sole discretion,
may elect. 


        29.10    Time of Essence.    Time is of the essence with respect to the performance of every
provision of this Lease in which time of performance is a factor. 


        29.11    Partial Invalidity.    If any term, provision or condition contained in this Lease
shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term, provision or condition to persons or circumstances other than those with respect to
which it is invalid or
unenforceable, shall not be affected thereby, and each and every other term, provision and condition of this Lease shall be valid and enforceable to the fullest extent possible permitted by law. 


        29.12    No Warranty.    In executing and delivering this Lease, Tenant has not relied on any
representations, including, but not limited to, any representation as to the amount of any item comprising Additional Rent or the amount of the Additional Rent in the aggregate or that Landlord is
furnishing the same services to other tenants, at all, on the same level or on the same basis, or any warranty or any statement of Landlord which is not set forth herein or in one or more of the
exhibits attached hereto. 


        29.13    Landlord Exculpation.    The liability of Landlord or the Landlord Parties to Tenant
for any default by Landlord under this Lease or arising in connection herewith or with Landlord's operation, management, leasing, repair, renovation, alteration or any other matter relating to the
Project or the Premises shall be limited solely and exclusively to an amount which is equal to the lesser of (a) the interest of Landlord in the Building or (b) the equity interest
Landlord would have in the Building if the Building were encumbered by third-party debt in an amount equal to eighty percent (80%) of the value of the Building (as such value is determined by
Landlord), following the payment of any outstanding liens and/or mortgages in connection with the Project; provided, however, in no event shall the foregoing be deemed to limit any obligation Landlord
may have pursuant to the TCCs of this Lease to return to Tenant the Security Deposit and/or the L-C Security Deposit. Neither Landlord, nor any of the Landlord Parties shall have any
personal liability therefor, and Tenant hereby expressly waives and releases such personal liability on behalf of itself and all persons claiming by, through or under Tenant. The limitations of
liability contained in this Section 29.13 shall inure to the benefit of Landlord's and the Landlord Parties' present and future partners,
beneficiaries, officers, directors, trustees, shareholders, agents and employees, and their respective partners, heirs, successors and assigns. Under no circumstances shall any present or future
partner of Landlord (if Landlord is a partnership), or trustee or beneficiary (if Landlord or any partner of Landlord is a trust), have any liability for the performance of Landlord's obligations
under this Lease. Notwithstanding any contrary provision herein, neither Landlord nor the Landlord Parties shall be liable under any circumstances for consequential damages arising from any injury or
damage to, or interference 


60





 

with,
Tenant's business, including but not limited to, loss of profits, loss of rents or other revenues, loss of business opportunity, loss of goodwill or loss of use, in each case, however
occurring. 


        29.14    Entire Agreement.    It is understood and acknowledged that there are no oral
agreements between the parties hereto affecting this Lease and this Lease constitutes the parties' entire agreement with respect to the leasing of the Premises and supersedes and cancels any and all
previous negotiations, arrangements, brochures, agreements and understandings, if any, between the parties hereto or displayed by Landlord to Tenant with respect to the subject matter thereof, and
none thereof shall be used to interpret or construe this Lease. None of the terms, covenants, conditions or provisions of this Lease can be modified, deleted or added to except in writing signed by
the parties hereto. 


        29.15    Right to Lease.    Subject to the TCC's of  Section 1.3 of this Lease, Landlord reserves the absolute right to
effect such other tenancies in the Project as Landlord in the exercise of its
sole business judgment shall determine to best promote the interests of the Building or Project. Tenant does not rely on the fact, nor does Landlord represent, that any specific tenant or type or
number of tenants shall, during the Lease Term, occupy any space in the Building or Project. 



        29.16    Force Majeure.    Any prevention, delay or stoppage due to strikes, lockouts, labor
disputes, acts of God, inability to obtain services, labor, or materials or reasonable substitutes therefor, governmental actions, civil commotions, fire or other casualty, and other causes beyond the
reasonable control of the party obligated to perform, except with respect to the obligations imposed with regard to Rent and other charges to be paid by Tenant pursuant to this Lease and except as to
Tenant's obligations under Articles 5 and 24 of this Lease (collectively, a "Force Majeure"),
notwithstanding anything to the contrary contained in this Lease, shall excuse the performance of such party for a period equal to any such prevention, delay or stoppage and, therefore, if this Lease
specifies a time period for performance of an obligation of either party, that time period shall be extended by the period of any delay in such party's performance caused by a Force Majeure. 


        29.17    Waiver of Redemption by Tenant.    Tenant hereby waives, for Tenant and for all those
claiming under Tenant, any and all rights now or hereafter existing to redeem by order or judgment of any court or by any legal process or writ, Tenant's right of occupancy of the Premises after any
termination of this Lease. 


        29.18    Notices.    All notices, demands, statements, designations, approvals or other
communications (collectively, "Notices") given or required to be given by either party to the other hereunder or by law shall be in writing, shall be
(A) sent by United States certified or registered mail, postage prepaid, return receipt requested ("Mail"), (B) transmitted by telecopy,
if such telecopy is promptly followed by a Notice sent by Mail, (C) delivered by a nationally recognized overnight courier, or (D) delivered personally. Any Notice shall be sent,
transmitted, or delivered, as the case may be, to Tenant at the appropriate address set forth in Section 10 of the Summary, or to such other
place as Tenant may from time to time designate in a Notice to Landlord, or to Landlord at the addresses set forth below, or to such other places as Landlord may from time to time designate in a
Notice to Tenant. Any Notice will be deemed given (i) 


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three
(3) days after the date it is posted if sent by Mail, (ii) the date the telecopy is transmitted, (iii) the date the overnight courier delivery is made, or (iv) the
date personal delivery is made or attempted to be made (to the extent such attempted delivery is refused). If Tenant is notified of the identity and address of Landlord's mortgagee or ground or
underlying lessor, Tenant shall give to such mortgagee or ground or underlying lessor written notice of any default by Landlord under the terms of this Lease by registered or certified mail, and such
mortgagee or ground or underlying lessor shall be given the same opportunity as Landlord following the date it receive writing notice of such default, to cure such default prior to Tenant's exercising
any remedy available to Tenant. As of the date of this Lease, any Notices to Landlord must be sent, transmitted, or delivered, as the case may be, to the following addresses: 




Kilroy
Realty Corporation

12200 West Olympic Boulevard

Suite 200

Los Angeles, California 90064

Attention: Legal Department 


with
copies to: 


Kilroy
Realty Corporation

3811 Valley Centre Drive, Suite 300

San Diego, California 92130

Attention: Mr. Roger Simsiman 


and



Allen
Matkins Leek Gamble & Mallory LLP

1901 Avenue of the Stars, Suite 1800

Los Angeles, California 90067

Attention: Anton N. Natsis, Esq. 






        29.19    Joint and Several.    If there is more than one Tenant, the obligations imposed upon
Tenant under this Lease shall be joint and several. 


        29.20    Authority.    If Tenant or Landlord is a corporation, trust or partnership, each
individual executing this Lease on behalf of Tenant or Landlord hereby represents and warrants that Landlord or Tenant, as appropriate, is a duly formed and existing entity qualified to do business in
California and that Landlord or Tenant, as appropriate, has full right and authority to execute and deliver this Lease and that each person signing on behalf of Landlord or Tenant, as appropriate, is
authorized to do so. Tenant shall, within ten (10) days after execution of this Lease, deliver to Landlord satisfactory evidence of (i) good standing in Tenant's state of incorporation
and (ii) qualification to do business in California. 


        29.21    Attorneys' Fees.    In the event that either Landlord or Tenant should bring suit for
the possession of the Premises, for the recovery of any sum due under this Lease, or because of the breach of any provision of this Lease or for any other relief against the other, then all costs and
expenses, including
reasonable attorneys' fees, incurred by the prevailing party therein shall be paid by the other party, which obligation on the part of the other party shall be deemed to 


62





 

have
accrued on the date of the commencement of such action and shall be enforceable whether or not the action is prosecuted to judgment. 


        29.22    Governing Law: WAIVER OF TRIAL BY JURY.    This Lease shall be construed and enforced
in accordance with the laws of the State of California. IN ANY ACTION OR PROCEEDING ARISING HEREFROM, LANDLORD AND TENANT HEREBY CONSENT TO (I) THE JURISDICTION OF ANY COMPETENT COURT WITHIN
THE STATE OF CALIFORNIA, (II) SERVICE OF PROCESS BY ANY MEANS AUTHORIZED BY CALIFORNIA LAW, AND (III) IN THE INTEREST OF SAVING TIME AND EXPENSE, TRIAL WITHOUT A JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER OR THEIR SUCCESSORS IN RESPECT OF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS LEASE, THE RELATIONSHIP OF
LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM FOR INJURY OR DAMAGE, OR ANY EMERGENCY OR STATUTORY REMEDY. IN THE EVENT LANDLORD COMMENCES ANY SUMMARY PROCEEDINGS OR
ACTION FOR NONPAYMENT OF BASE RENT OR ADDITIONAL RENT, TENANT SHALL NOT INTERPOSE ANY COUNTERCLAIM OF ANY NATURE OR DESCRIPTION (UNLESS SUCH COUNTERCLAIM SHALL BE MANDATORY) IN ANY SUCH PROCEEDING OR
ACTION, BUT SHALL BE RELEGATED TO AN INDEPENDENT ACTION AT LAW. 


        29.23    Submission of Lease.    Submission of this instrument for examination or signature by
Tenant does not constitute a reservation of, option for or option to lease, and it is not effective as a lease or otherwise until execution and delivery by both Landlord and Tenant. 



        29.24    Brokers.    Landlord and Tenant hereby warrant to each other that they have had no
dealings with any real estate broker or agent in connection with the negotiation of this Lease, excepting only the real estate brokers or agents specified in  Section 12 of the Summary (the
"Brokers"), and that they know of no other real estate broker or agent who is entitled to a commission in
connection with this Lease. Each party agrees to indemnify and defend the other party against and hold the other party harmless from any and all claims, demands, losses, liabilities, lawsuits,
judgments, costs and expenses (including without limitation reasonable attorneys' fees) with respect to any leasing commission or equivalent compensation alleged to be owing on account of any dealings
with any real estate broker or agent, other than the Brokers, occurring by, through, or under the indemnifying party. 


        29.25    Independent Covenants.    This Lease shall be construed as though the covenants
herein between Landlord and Tenant are independent and not dependent and Tenant hereby expressly waives the benefit of any statute to the contrary and agrees that if Landlord fails to perform its
obligations set forth herein, Tenant shall not be entitled to make any repairs or perform any acts hereunder at
Landlord's expense or to any setoff of the Rent or other amounts owing hereunder against Landlord, except as expressly set forth in this Lease. 


        29.26    Project or Building Name and Signage.    Landlord shall have the right at any time to
change the name of the Project or Building and, subject to the TCCs of Section 23.2, Landlord shall have the right to install, affix and maintain
any and all signs on the exterior and on the interior of the Project or Building as Landlord may, in Landlord's sole discretion, desire. 


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Tenant
shall not use the name of the Project or Building or use pictures or illustrations of the Project or Building in advertising or other publicity or for any purpose other than as the address of
the business to be conducted by Tenant in the Premises, without the prior written consent of Landlord. 


        29.27    Counterparts.    This Lease may be executed in counterparts with the same effect as
if both parties hereto had executed the same document. Both counterparts shall be construed together and shall constitute a single lease. 


        29.28    Confidentiality.    Tenant acknowledges that the content of this Lease and any
related documents are confidential information. Tenant shall keep such confidential information strictly confidential and shall not disclose such confidential information to any person or entity other
than Tenant's financial, legal, and space planning consultants, and except as required to be disclosed by any applicable law or regulation. Landlord and Tenant hereby acknowledge that a copy of this
Lease would be attached to Tenant's filings, if any, with the Securities and Exchange Commission. 


        29.29    Transportation Management.    Tenant shall fully comply with all present or future
governmental programs intended to manage parking, transportation or traffic in and around the Building, and in connection therewith, Tenant shall take responsible action for the transportation
planning and management of all employees located at the Premises by working directly with Landlord, any governmental transportation management organization or any other transportation-related
committees or entities. 


        29.30    Building Renovations.    It is specifically understood and agreed that Landlord has
made no representation or warranty to Tenant and has no obligation and has made no promises to alter, remodel, improve, renovate, repair or decorate the Premises, Building, or any part thereof and
that no representations respecting the condition of the Premises or the Building have been made by Landlord to Tenant except as specifically set forth herein or in the Tenant Work Letter. However,
Tenant hereby acknowledges that Landlord is currently renovating or may during the Lease Term renovate, improve, alter, or modify (collectively, the
"Renovations") the Project, the Building and/or the Premises including without limitation the parking structure, common areas, systems and equipment,
roof, and structural portions of the same, which Renovations may include, without limitation, (i) installing sprinklers in the Building common areas and tenant spaces, (ii) modifying the
common areas and tenant
spaces to comply with applicable laws and regulations, including regulations relating to the physically disabled, seismic conditions, and building safety and security, and (iii) installing new
floor covering, lighting, and wall coverings in the Building common areas, and in connection with any Renovations, Landlord may, among other things, erect scaffolding or other necessary structures in
the Building, limit or eliminate access to portions of the Project, including portions of the common areas, or perform work in the Building, which work may create noise, dust or leave debris in the
Building. To the extent that such Renovations and Landlord's actions do not violate the TCCs of Article 28 and/or the last sentence of  Section 1.1.3 of this Lease, Tenant hereby agrees that such Renovations and Landlord's actions in connection with such Renovations shall in no
way constitute a constructive eviction of Tenant nor entitle Tenant to any abatement of Rent. Landlord shall have no responsibility or for any reason be liable to Tenant for any direct or indirect
injury to or interference with Tenant's business arising from the Renovations, nor shall Tenant be entitled to 


64





 

any
compensation or damages from Landlord for loss of the use of the whole or any part of the Premises or of Tenant's personal property or improvements resulting from the Renovations or Landlord's
actions in connection with such Renovations, or for any inconvenience or annoyance occasioned by such Renovations or Landlord's actions. Notwithstanding anything set forth in this  Section 29.30 to
the contrary, Landlord shall provide Tenant with five (5) business days prior notice of any Renovations and shall use
commercially reasonable efforts to minimize any interference with Tenant's business caused by Landlord's actions in connection with such Renovations. 


        29.31    No Violation.    Tenant and Landlord each hereby warrant and represent that neither
its execution of nor performance under this Lease shall cause such party to be in violation of any agreement, instrument, contract, law, rule or regulation by which it is bound, and each party shall
protect, defend, indemnify and hold the other harmless against any claims, demands, losses, damages, liabilities, costs and expenses, including, without limitation, reasonable attorneys' fees and
costs, arising from such party's breach of this warranty and representation. 



        29.32    Communications and Computer Lines.    Tenant may install, maintain, replace, remove
or use any communications or computer wires and cables (collectively, the "Lines") at the Project in or serving the Premises, provided that
(i) Tenant shall obtain Landlord's prior written consent (which consent shall not be unreasonably withheld), use an experienced and qualified contractor approved in writing by Landlord, and
comply with all of the other provisions of Articles 7 and 8 of this Lease, (ii) the Lines therefor (including riser cables) shall be
appropriately insulated to prevent excessive electromagnetic fields or radiation, and shall be surrounded by a protective conduit reasonably acceptable to Landlord, (iii) any new or existing
Lines servicing the Premises shall comply with all applicable governmental laws and regulations, (iv) as a condition to permitting the installation of new Lines, Landlord may require that
Tenant remove existing Lines located in or serving the Premises and repair any damage in connection with such removal, and (v) Tenant shall pay all costs in connection therewith. Landlord
reserves the right to require that Tenant remove any Lines located in or serving the Premises which are installed in violation of these provisions, or which are at any time in violation of any laws or
represent a dangerous or potentially dangerous condition. 


        29.33    Hazardous Substances.    




        29.33.1    Definitions.    For purposes of this Lease, the following definitions shall apply:
"Hazardous Material(s)" shall mean any solid, liquid or gaseous substance or material that is described or characterized as a toxic or hazardous
substance, waste, material, pollutant, contaminant or infectious waste, or any matter that in certain specified quantities would be injurious to the public health or welfare, or words of similar
import, in any of the "Environmental Laws," as that term is defined below, or any other words which are intended to define, list or classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, toxicity or reproductive toxicity and includes, without limitation, asbestos, petroleum (including crude oil or any fraction thereof, natural
gas, natural gas liquids, liquefied natural gas, or synthetic gas usable for fuel, or any mixture thereof), petroleum products, polychlorinated biphenyls, urea formaldehyde, radon gas, nuclear or
radioactive matter, medical waste, soot, vapors, fumes, acids, alkalis, chemicals, microbial matters (such as molds, fungi or other bacterial matters), biological agents and chemicals which 




65





 


may
cause adverse health effects, including but not limited to, cancers and/or toxicity. "Environmental Laws" shall mean any and all federal, state,
local or quasi-governmental laws (whether under common law, statute or otherwise), ordinances, decrees, codes, rulings, awards, rules, regulations or guidance or policy documents now or hereafter
enacted or promulgated and as amended from time to time, in any way relating to (i) the protection of the environment, the health and safety of persons (including employees), property or the
public welfare from actual or potential release, discharge, escape or emission (whether past or present) of any Hazardous Materials or (ii) the manufacture, processing, distribution, use,
treatment, storage, disposal transport or handling of any Hazardous Materials. 



        29.33.2    Compliance with Environmental Laws.    Landlord covenants that during the Lease
Term, Landlord shall comply with all Environmental Laws in accordance with, and as required by, the TCCs of Article 24 of this Lease. Tenant
shall not sell, use, or store in or around the Premises any Hazardous Materials, except if stored, properly packaged and labeled, disposed of and/or used in accordance with applicable Environmental
Laws. In addition, Tenant agrees that it: (i) shall not cause or suffer to occur, the release, discharge, escape or emission of any Hazardous Materials at, upon, under or within the Premises or
any contiguous or adjacent premises; (ii) shall notify Landlord promptly following receipt of any knowledge with respect to any actual release, discharge, escape or emission (whether past or
present) of any Hazardous Materials at, upon, under or within the Premises; (iii) shall promptly forward to Landlord copies of all orders, notices, permits, applications and other
communications and reports in connection with any release, discharge, escape or emission of any Hazardous Materials at, upon, under or within the Premises or any contiguous or adjacent premises, and
(iv) in connection with Tenant's surrender of the Premises upon the expiration or earlier termination of this Lease, Tenant shall deliver the same free of Hazardous Materials brought upon, kept
or used in or about the Premises by any persons, and shall obtain and provide to Landlord (A) all Hazardous Materials Clearances, (B) evidence from the applicable governmental entities
of "closure" of all permits which had been required for Tenant's use of the Premises, together with "no futher action letters" from such applicable governmental entities and a "no futher action
letter" for unrestricted future use of the Premises, and (C) a Phase I report with regard to the Premises. Such Phase I report shall be (x) performed by an environmental assessment or
engineering firm and on a scope of work acceptable to Landlord in its sole discretion, (y) shall identify Landlord as a beneficiary of such report, and (z) completed no earlier than six
(6) months prior to the expiration of this Lease and no later than the Lease Expiration Date;
provided, however, in the event this Lease is terminated early for any reason, Tenant shall complete such Phase I report within a commercially reasonable time immediately following such early
termination of this Lease. Such Phase I report shall either (1) indicate that the property shows no evidence of reasonably possible hazardous materials contamination of the building, soil or
groundwater; or (2) recommend further investigation of the site, in which event, if such further investigation relates to Tenant's or the Tenant Parties' use of the Premises, then it shall be
performed by an environmental assessment or engineering firm and on a scope of work acceptable to Landlord in its sole discretion and at the Tenant's sole expense. Such additional investigation, if
any, shall be completed within sixty (60) days of such recommendation. Landlord and Tenant hereby agree that for purposes of establishing a baseline, Landlord shall, promptly following the date
of this Lease, obtain and provide to Tenant an updated Phase I report with regard to the Premises; provided, however, and Tenant shall reimburse Landlord for one-half (1/2) of the
cost or fees reasonably incurred for such report as Additional Rent. 




66











  




        29.33.3    List of Documents and Operations.    As a material inducement to Landlord to allow
Tenant to use Hazardous Materials in connection with its business, Tenant agrees to deliver to Landlord, prior to the Lease Commencement Date, a list identifying each type of Hazardous Materials to be
present on the Premises and setting forth any and all governmental approvals or permits required in connection with the presence of such Hazardous Materials on the Premises (the
"Hazardous Materials List"). Tenant shall deliver to Landlord an updated Hazardous Materials List at least once a year and shall also deliver an updated
list before any new Hazardous Material(s) is brought onto to the Premises. Tenant shall deliver to Landlord true and correct copies of the following documents (the "Haz Mat
Documents") related to the handling, use, storage, disposal and emission of Hazardous Materials prior to the Lease Commencement Date, or if unavailable at that time, concurrent
with the receipt from, or submission to, a governmental agency: permits; approvals; reports; storage and manufacturing plans; notice of violations of any laws; plans relating to the installation of
any storage tanks to be installed in or under the Project (provided, said installation of tanks shall only be permitted after Landlord has given Tenant its written consent to do so, which consent may
be withheld in Landlord's sole and absolute discretion); and all closure plans or any other documents required by any and all federal, state, and local governmental agencies and authorities for any
storage tanks installed in, on or under the Project for the closure of any such tanks. Tenant is not required, however, to provide Landlord with any portion(s) of the Haz Mat Documents containing
information of a proprietary nature which, in and of themselves, do not contain a reference to any Hazardous Materials or hazardous activities. It is not the intent of this  Section 29.33.3 to
provide Landlord with information which could be detrimental to Tenant's business should such information become possessed by
Tenant's competitors. In connection with the foregoing, Tenant hereby represents and warrants to Landlord that neither Tenant, or any of its legal predecessors, has been required by any prior
landlord, lender or governmental authority at any time to take remedial action in connection with Hazardous Materials contaminating a property which contamination was permitted by Tenant or resulting
from Tenant's action or use of the property in question, and Tenant is not subject to any enforcement order issued by any governmental authority in connection with the use, disposal or storage of a
Hazardous Materials. If Landlord determines that this representation and warranty was not true as of the date of this Lease, Landlord shall have the right to terminate this Lease in Landlord's sole
and absolute discretion. 


        29.33.4    Landlord's Right of Environmental Audit.    Landlord may, upon reasonable notice to
Tenant, be granted access to and enter the Premises no more than once annually to perform or cause to have performed an environmental inspection, site assessment or audit. Such environmental inspector
or auditor may be chosen by Landlord, in its sole discretion, and be performed at Landlord's sole expense. To the extent that the report prepared upon such inspection, assessment or audit, indicates
the presence of Hazardous Materials (due to Tenant or the Tenant Parties) in violation of Environmental Laws, or provides recommendations or suggestions to prohibit the release, discharge, escape or
emission of any Hazardous Materials (by Tenant or the Tenant Parties) at, upon, under or within the Premises, or to comply with any Environmental Laws related to Tenant's or the Tenant Parties' use of
the Premises (including the use of Hazardous Materials therein), Tenant shall promptly, at Tenant's sole expense, comply with any reasonable recommendations or suggestions, including, but not limited
to performing such additional investigative or subsurface investigations or remediation(s) as reasonably recommended by such inspector or auditor (taking into account all legal requirements and 




67





 


governmental
agency recommendations). Notwithstanding the above, if at any time, Landlord has actual notice or reasonable cause to believe that Tenant has violated, or permitted any violations of any
Environmental Law, then Landlord will be entitled to perform its environmental inspection, assessment or audit at any time, notwithstanding the above mentioned annual limitation, and Tenant must
reimburse Landlord for the cost or fees incurred for such as Additional Rent. 


        29.33.5    Indemnifications.    Landlord agrees to indemnify, defend, protect and hold
harmless the Tenant and the Tenant Parties from and against any liability, obligation, damage or costs, including without limitation, attorneys' fees and costs, resulting directly or indirectly from
any use, presence, removal or disposal of any Hazardous Materials to the extent such liability, obligation, damage or costs (i) was a result of actions caused or permitted by Landlord or a
Landlord Party, or (ii) arose prior to the date of this Lease. Tenant agrees to indemnify, defend, protect and hold harmless Landlord and the Landlord Parties from and against any liability,
obligation, damage or costs, including without limitation, attorneys' fees and costs, resulting directly or indirectly from any use, presence, removal or disposal of any Hazardous Materials or breach
of any provision of this section, to the extent such liability, obligation, damage or costs was a result of actions caused or permitted by Tenant or a Tenant Party. These mutual environmental
indemnities shall survive any expiration or termination of this Lease, and are not affected by any claims of breach of any other provisions of this Lease. 


        29.33.6    Ongoing Obligations.    All obligations of Tenant hereunder not fully performed as
of the termination of the Lease Term, including the obligations of Tenant pursuant to this Section 29.33, shall survive the expiration or earlier
termination of the Lease, including, without limitation, indemnity obligations, payment obligations with respect to Rent and obligations concerning the condition and repair of the Premises. 





        29.34    Development of the Project.    




        29.34.1    Subdivision.    Landlord reserves the right to further subdivide all or a portion
of the Project. Tenant agrees to execute and deliver, upon demand by Landlord and in the form requested by Landlord, any additional documents needed to conform this Lease to the circumstances
resulting from such subdivision, which shall be limited to description of the Project and/or Building. 



        29.34.2    The Other Improvements.    If portions of the Project or property adjacent to the
Project (collectively, the "Other Improvements") are owned by an entity other than Landlord, Landlord, at its option, may enter into an agreement with
the owner or owners of any or all of the Other Improvements to provide (i) for reciprocal rights of access and/or use of the Project and the Other Improvements, (ii) for the common
management, operation, maintenance, improvement and/or repair of all or any portion of the Project and the Other Improvements, (iii) for the allocation of a portion of the Direct Expenses to
the Other Improvements and the operating expenses and taxes for the Other Improvements to the Project, and (iv) for the use or improvement of the Other Improvements and/or the Project in
connection with the improvement, construction, and/or excavation of the Other
Improvements and/or the Project; provided that none of the foregoing materially adversely interfere with Tenant's rights, or increase Tenant's financial obligations, under this Lease. Nothing
contained herein shall be 




68





 


deemed
or construed to limit or otherwise affect Landlord's right to convey all or any portion of the Project or any other of Landlord's rights described in this Lease. 



        29.34.3    Construction of Project and Other Improvements.    Tenant acknowledges that
portions of the Project and/or the Other Improvements may be under construction following Tenant's occupancy of the Premises, and that such construction may result in levels of noise, dust,
obstruction of access, etc. which are in excess of that present in a fully constructed project. Landlord shall use its commercially reasonable efforts to minimize the disruption to Tenant and Tenant's
business from such construction and in no event shall Landlord be entitled to use Tenant's parking areas for construction staging, storage of equipment or other construction related activities without
Tenant's approval, which may be granted or withheld in Tenant's sole discretion. Tenant hereby waives any and all rent offsets or claims of constructive eviction which may arise in connection with
such construction. 





        29.35    Central Plant Area.    Subject to Landlord's approval, which shall not be
unreasonably withheld or delayed, and subject to the TCCs of this Section 29.36 and  Article 8 of this Lease, Tenant may install, for Tenant's own
use and at Tenant's sole cost and expense, but without the payment of any Rent or a
license or similar fee or charge, a central plant area containing a central plant, an emergency generator, cooling towers, storage enclosures and/or related enclosures and equipment (all such
equipment/enclosures defined collectively as the "Central Plant Area") in, on or adjacent to the Building (such location to be reasonably determined in
conjunction with Landlord and Landlord's reasonable requirements). The location, physical appearance and the size of the Central Plant Area shall be subject to Landlord's reasonable approval, and
Landlord may require Tenant to install screening around such Central Plant Area, at Tenant's sole cost and expense, as reasonably designated by Landlord; provided, however, that to the extent such
Central Plant Area is located on Project parking areas, the number of spaces so used shall commensurately reduce Landlord's obligation to provide a particular number of spaces as otherwise set forth
in Article 28 of this Lease. Tenant shall maintain such Central Plant Area, at Tenant's sole cost and expense. In the event Tenant elects to
exercise its right to install such Central Plant Area, then Tenant shall give Landlord no less than forty-five (45) days prior written notice thereof. Tenant shall reimburse to
Landlord the actual costs reasonably incurred by Landlord in reviewing and approving (or disapproving) such Central Plant Area, unless construction of the Central Plant Area is done as part of the
Tenant Improvements (in which case Landlord will already be receiving a fee to compensate. Landlord for its review and approval). Tenant shall remove such Central Plant Area upon the expiration or
earlier termination of this Lease and shall repair any damage to the Building caused by such removal and return the affected portion of the Premises to a building standard tenant improved condition as
determined by Landlord. Such Central Plant Area shall be installed pursuant to plans and specifications approved by Landlord, which approval will not be unreasonably withheld. Such Central Plant Area
shall, in all instances, comply with applicable governmental laws, codes, rules and regulations. 


        29.36    Landlord's Right to Invest in Tenant.    This Lease is subject to and conditioned
upon Tenant and Landlord entering into, concurrently with the full execution and delivery of this Lease, that certain investment agreement (the "Investment
Agreement") attached hereto as Exhibit H. 


69





 

        29.37    No Discrimination.    Tenant covenants by and for itself, its heirs, executors,
administrators and assigns, and all persons claiming under or through Tenant, and this Lease is made and accepted upon and subject to the following conditions: that there shall be no discrimination
against or segregation of any person or group of persons, on account of race, color, creed, sex, religion, marital status, ancestry or national origin in the leasing, subleasing, transferring, use or
enjoyment of the Premises, nor shall Tenant itself, or any person claiming under or through Tenant, establish or permit such practice or practices of discrimination or segregation with reference to
the selection, location, number, use or occupancy, of tenants, lessees, sublessees, subtenants or vendees in the Premises. 


        IN
WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be executed the day and date first above written. 



	 	 	"LANDLORD":
	

 	
 	

KILROY REALTY, L.P.,

a Delaware limited partnership
	

 	
 	

By:	
 	

Kilroy Realty Corporation,

a Maryland corporation,

General Partner
	

 	
 	

 	
 	

By:	
 	

/s/  STEVE R. SCOTT      

	 	 	 	 	 	 	Its:	 	Senior Vice President

	

 	
 	

 	
 	

By:	
 	

/s/  JEFFREY C. HAWKEN      

	 	 	 	 	 	 	Its:	 	Executive Vice President

Chief Operating Officer

	

 	
 	
"TENANT":
	

 	
 	

FAVRILLE, INC.,

a Delaware corporation
	

 	
 	

By:	
 	

/s/  JOHN P. LONGENECKER      

	 	 	 	 	Its:	 	PRES. / CEO

	

 	
 	

By:	
 	

/s/  TAMARA A. SEYMOUR      

	 	 	 	 	Its:	 	CFO





70






  



 
 

SCHEDULE 1    
    
    MONTHLY INSTALLMENT OF BASE RENT:
  CALCULATIONS FOR MEZZANINE PREMISES,
  GROUND FLOOR LAB PREMISES, AND
  GROUND FLOOR OFFICE PREMISES    
    


Monthly Installment of Base Rent for Mezzanine Premises.  



	Period

During

Lease Term
 
	 	Monthly

Installment

of Base Rent*
	 	Monthly

Rental Rate

per Rentable

Square Foot

	March 1, 2003 through August 31, 2003.	 	$	20,578.47	 	$	1.3285
	September 1, 2003 through August 31, 2004.	 	$	53,107.47	 	$	3.4285
	September 1, 2004 through August 31, 2005.	 	$	54,924.44	 	$	3.5458
	September 1, 2005 through January 31, 2006.	 	$	56,803.38	 	$	3.6671
	February 1, 2006 through August 31, 2006.	 	$	56,803.38	 	$	3.6671
	September 1, 2006 through August 31, 2007.	 	$	58,748.92	 	$	3.7927
	September 1, 2007 through August 31, 2008.	 	$	60,762.62	 	$	3.9227
	September 1, 2008 through August 31, 2009.	 	$	62,846.03	 	$	4.0572
	September 1, 2009 through August 31, 2010.	 	$	65,003.79	 	$	4.1965
	September 1, 2010 through August 31, 2011.	 	$	67,235.89	 	$	4.3406
	September 1, 2011 through August 31, 2012.	 	$	69,547.00	 	$	4.4898
	September 1, 2012 through August 31, 2013.	 	$	71,938.66	 	$	4.6442
	September 1, 2013 through August 31, 2014.	 	$	74,413.96	 	$	4.8040
	September 1, 2014 through August 31, 2015.	 	$	76,976.01	 	$	4.9694
	September 1, 2015 through August 31, 2016.	 	$	79,627.89	 	$	5.1406
	September 1, 2016 through August 31, 2017.	 	$	82,372.72	 	$	5.3178
	September 1, 2017 through August 31, 2018.	 	$	5,212.04	 	$	5.5011







	*
	The
Monthly Installment of Base Rent was calculated based on the Monthly Rental Rate per Rentable Square Foot, which Monthly Rental Rate per Rentable Square Foot was determined pursuant
to the express agreement of Landlord and Tenant. 


1





 

Monthly Installment of Base Rent for Ground Floor Lab Premises.  



	Period

During

Lease Term
 
	 	Monthly

Installment

of Base Rent**
	 	Monthly

Rental Rate

per Rentable

Square Foot

	March 1, 2003 through August 31, 2003.	 	$	0.00	 	$	0.0000
	September 1, 2003 through August 31, 2004.	 	$	76,026.99	 	$	3.4285
	September 1, 2004 through August 31, 2005.	 	$	78,628.12	 	$	3.5458
	September 1, 2005 through January 31, 2006.	 	$	81,317.94	 	$	3.6671
	February 1, 2006 through August 31, 2006.	 	$	81,317.94	 	$	3.6671
	September 1, 2006 through August 31, 2007.	 	$	84,103.12	 	$	3.7927
	September 1, 2007 through August 31, 2008.	 	$	86,985.87	 	$	3.9227
	September 1, 2008 through August 31, 2009.	 	$	89,968.41	 	$	4.0572
	September 1, 2009 through August 31, 2010.	 	$	93,057.39	 	$	4.1965
	September 1, 2010 through August 31, 2011.	 	$	96,252.81	 	$	4.3406
	September 1, 2011 through August 31, 2012.	 	$	99,561.32	 	$	4.4898
	September 1, 2012 through August 31, 2013.	 	$	102,985.14	 	$	4.6442
	September 1, 2013 through August 31, 2014.	 	$	106,528.70	 	$	4.8040
	September 1, 2014 through August 31, 2015.	 	$	110,196.45	 	$	4.9694
	September 1, 2015 through August 31, 2016.	 	$	113,992.81	 	$	5.1406
	September 1, 2016 through August 31, 2017.	 	$	117,922.22	 	$	5.3178
	September 1, 2017 through August 31, 2018.	 	$	121,986.89	 	$	5.5011







	**
	The
Monthly Installment of Base Rent was calculated based on the Monthly Rental Rate per Rentable Square Foot, which Monthly Rental Rate per Rentable Square Foot was determined
pursuant to the express agreement of Landlord and Tenant. 


2





 

Monthly Installment of Base Rent for Ground Floor Office Premises.  



	Period

During

Lease Term
 
	 	Monthly

Installment

of Base Rent***
	 	Monthly

Rental Rate

per Rentable

Square Foot

	March 1, 2003 through August 31, 2003.	 	$	0.00	 	$	0.0000
	September 1, 2003 through August 31, 2004.	 	$	0.00	 	$	0.0000
	September 1, 2004 through August 31, 2005.	 	$	0.00	 	$	0.0000
	September 1, 2005 through January 31, 2006.	 	$	0.00	 	$	0.0000
	February 1, 2006 through August 31, 2006.	 	$	14,396.95	 	$	1.3285
	September 1, 2006 through August 31, 2007.	 	$	14,871.62	 	$	1.3723
	September 1, 2007 through August 31, 2008.	 	$	15,361.45	 	$	1.4175
	September 1, 2008 through August 31, 2009.	 	$	15,869.70	 	$	1.4644
	September 1, 2009 through August 31, 2010.	 	$	16,396.30	 	$	1.5129
	September 1, 2010 through August 31, 2011.	 	$	16,939.31	 	$	1.5631
	September 1, 2011 through August 31, 2012.	 	$	17,502.84	 	$	1.6151
	September 1, 2012 through August 31, 2013.	 	$	18,084.79	 	$	1.6688
	September 1, 2013 through August 31, 2014.	 	$	18,688.41	 	$	1.7245
	September 1, 2014 through August 31, 2015.	 	$	19,312.62	 	$	1.7821
	September 1, 2015 through August 31, 2016.	 	$	19,958.50	 	$	1.8417
	September 1, 2016 through August 31, 2017.	 	$	20,736.60	 	$	1.9135
	September 1, 2017 through August 31, 2018.	 	$	21,319.63	 	$	1.9673







	***
	The
Monthly Installment of Base Rent was calculated based on the Monthly Rental Rate per Rentable Square Foot, which Monthly Rental Rate per Rentable Square Foot was determined
pursuant to the express agreement of Landlord and Tenant. 


3






  



 
 

EXHIBIT A    
    
    PACIFIC CORPORATE CENTER    
    
    OUTLINE OF PREMISES    
    


[ATTACHED]


1





 
 
 

10421 Pacific Center Court—Exhibit A    
    


Mezzanine
Area—15,490 s.f. 


Ground
Floor Lab—22,770 s.f. 


Ground
Floor Office—10,837 s.f. 



	1st Floorplan	 	[FLOORPLAN]
	

2nd Floorplan	
 	

[FLOORPLAN]




2





 
[FLOORPLAN]



3






  



 
 

EXHIBIT B    
    
    PACIFIC CORPORATE CENTER    
    
    TENANT WORK LETTER    
    


1








  



 
 

EXHIBIT B    
    
    PACIFIC CORPORATE CENTER    
    
    TENANT WORK LETTER    
    



        This Tenant Work Letter shall set forth the terms and conditions relating to the construction of the Premises. This Tenant Work Letter is essentially organized
chronologically and addresses the issues of the construction of the Premises, in sequence, as such issues will arise during the actual construction of the Premises. All references in this Tenant Work
Letter to Articles or Sections of "this Lease" shall mean the relevant portions of Articles 1 through 29 of the Office Lease to which this Tenant Work
Letter is attached as Exhibit B, and all references in this Tenant Work Letter to Sections of "this Tenant Work Letter" shall mean the relevant
portions of Sections 1 through 5 of this Tenant Work Letter. 


SECTION 1  


 DELIVERY OF THE PREMISES AND BASE BUILDING  


        1.1    Base Building as Constructed by Landlord.    In accordance with the TCCs of this Lease,
Landlord shall deliver the Premises and "Base Building," as that term is defined in Section 8.2 of the Lease, to Tenant. Except with regard to
the "Re-Roofing" and the "Mezzanine Repairs," as those terms are set forth, respectively, in Section 2.5 and 2.6 of this Tenant Work
Letter, the Base Building shall be in good condition and working order and shall comply with applicable building codes and other governmental laws, ordinances and regulations which were enacted prior
to the Lease Commencement Date to the extent the same would be required to obtain a certificate of occupancy on an unoccupied basis as of the date Landlord delivers the Premises and Base Building to
Tenant (collectively, the "Code") and Tenant shall, except as otherwise set forth in this Lease or in this Tenant Work Letter, accept the Premises and
Base Building from Landlord in their then existing, "as-is" condition, subject to the terms of this Tenant Work Letter, subject only to punchlist items and
Landlord's obligations set forth in Article 7 of the Lease, including, without limitation, Landlord's obligation to maintain in accordance with  Section 7.1 of the Lease the Building Structure. 


        1.2    Landlord Work.    Landlord shall, at Landlord's sole cost and expense, cause the
construction of certain Building Common Area modifications, as set forth on Schedule I, attached hereto ("Landlord
Work"). Tenant may not change or alter the Landlord Work. 


SECTION 2  


 TENANT IMPROVEMENTS  


        2.1    Tenant Improvement Allowance.    Tenant shall be entitled to a one-time
tenant improvement allowance (the "Tenant Improvement Allowance") in the amount up to $6,056,379.00 (which amount consists of (i) $5,739,000.00
(the "Original Allowance," which Original Allowance was calculated based upon $152.37 per Rentable
Square Foot for each of the 37,665 Rentable Square Feet of space located in, collectively, the Mezzanine Premises and the 


1





 

Ground
Floor Lab Premises), and (ii) $317,379.00 (the "Additional Allowance," which Additional
Allowance is a stipulated amount anticipated to offset the cost of the Mezzanine Repairs, "Tenant's Roofing Allocation," and the "Construction Expedition Fee," as those terms are set forth in  Sections 2.5 and
5.6 of this Tenant Work Letter) for the costs relating to the initial design and construction of Tenant's improvements and certain
additional costs, all of which are set forth in Section 2.2.1, below, as "Tenant Improvement Allowance Items" (the  "Tenant Improvements"). Landlord
and Tenant hereby acknowledge and agree that the Original Allowance and the Additional Allowance have been calculated
into the Base Rent. In no event shall Landlord be obligated to make disbursements pursuant to this Tenant Work Letter in a total amount which exceeds the Tenant Improvement Allowance. In addition,
Landlord and Tenant hereby acknowledge that Tenant shall itself contribute, as an "Over-Allowance Amount," as that term is set forth in  Section 4.2.1, below, an amount equal to approximately
$3,000,000.00 toward the cost of constructing the Tenant Improvements. 



        2.2    Disbursement of the Tenant Improvement Allowance.    



        2.2.1    Tenant Improvement Allowance Items.    Except as otherwise set forth in this Tenant
Work Letter, the Tenant Improvement Allowance shall be disbursed by Landlord only for the following items and costs (collectively the "Tenant Improvement Allowance
Items"): 



        2.2.1.1    Payment
of the fees of the "Architect" and the "Engineers," as those terms are defined in Section 3.1 of this
Tenant Work Letter; 


        2.2.1.2    The
payment of plan check, permit and license fees relating to construction of the Tenant Improvements, and the cost of installing and purchasing Tenant's voice and
data cabling (the Tenant Improvements Allowance Items set forth in Section 2.2.1.1, above, and in this  Section 2.2.1.2, shall, collectively, be
known as the "Soft Costs"); 



        2.2.1.3    The
cost of construction of the Tenant Improvements, including, without limitation, testing and inspection costs, freight elevator usage, hoisting and trash removal
costs, and contractors' fees and general conditions; 


        2.2.1.4    The
cost of any changes in the Base Building when such changes are required by the Construction Drawings (including if such changes are due to the fact that such
work is prepared on an unoccupied basis), such cost to include all direct architectural and/or engineering fees and expenses incurred in connection therewith; 


        2.2.1.5    The
cost of any changes to the Construction Drawings or Tenant Improvements required by Code; 



        2.2.1.6    The
cost of "Tenant's Signage," as that term is set forth in Section 23.2 of the Lease; provided, however,
that in no event shall Landlord be required to disburse any amount for Tenant's Signage in excess of Ten Thousand and No/100 Dollars ($10,000.00); 


        2.2.1.7    The
cost of the "Coordination Fee," as that term is defined in Section 4.2.2 of this Tenant Work Letter; 




2





 


        2.2.1.8    The
amount of the "Tenant Roofing Allocation," as that term is defined in Section 2.5 of this Tenant Work
Letter; 


        2.2.1.9    The
cost of the Mezzanine Repairs; 


        2.2.1.10    The
Construction Expedition Fee; 


        2.2.1.11    Sales
and use taxes; and 


        2.2.1.12    All
other costs required or allowed by the terms of this Tenant Work Letter to be expended by Landlord in connection with the construction of the Tenant
Improvements. 




        2.2.2    Disbursement of Tenant Improvement Allowance.    During the construction of the
Tenant Improvements, Landlord shall make monthly disbursements of the Tenant Improvement Allowance for Tenant Improvement Allowance Items for the benefit of Tenant and shall authorize the release of
monies for the benefit of Tenant as follows. 



        2.2.2.1    Monthly Disbursements.    Landlord and Tenant hereby acknowledge and agree that
Tenant itself shall directly fund the first Three Million and No/100 Dollars ($3,000,000) of the construction costs incurred in connection with the construction of the Tenant Improvements, which
$3,000,000 shall be known as the "Initial TI Disbursement." Following Tenant's full and complete
disbursement of the Initial TI Disbursement, on or before the fifth (5th) day of each calendar month during the remainder of the construction of the Tenant Improvements (each, a  "Submittal Date"), Tenant shall deliver to Landlord: (i) a request for payment of the "Contractor," as that term is defined in
Section 4.1 of this Tenant Work Letter, approved by Tenant, in a form to be provided by Landlord, showing the schedule, by trade, of percentage
of completion of the Tenant Improvements in the Premises, detailing the portion of the work completed and the portion not completed; (ii) invoices from all of "Tenant's Agents," as that term is
defined in Section 4.1.2 of this Tenant Work Letter, for labor rendered and materials delivered to the Premises; (iii) executed
conditional mechanic's lien releases from all of Tenant's Agents which shall comply with the appropriate provisions, as reasonably determined by Landlord, of California Civil Code
Section 3262(d); (iv) an executed unconditional mechanic's lien release from the applicable Tenant's Agent, which shall comply with the appropriate provisions, as reasonably determined
by Landlord, of California Civil Code Section 3262(d), for each conditional executed mechanic's lien releases provided to Landlord by Tenant in connection with its request for payment of the
Contractor for the immediately preceding calendar month; and (v) all other information reasonably requested by Landlord. Tenant's request for payment shall be deemed Tenant's acceptance and
approval of the work furnished and/or the materials supplied as set forth in Tenant's payment request, subject to any applicable warranties. On or before the date occurring forty-five
(45) days after the Submittal Date, and assuming Landlord receives all of the information described in items (i) through (iv), above, Landlord shall deliver a check to Tenant made
payable to Contractor (or the other of Tenant's Agents to be paid) in payment of the lesser of: (A) the amounts so requested by Tenant, as set forth in this  Section 2.2.2.1, above, less a ten
percent (10%) retention (the aggregate
amount of such retentions to be known as the "Final Retention"), and (B) the balance of any remaining available portion of the Tenant Improvement
Allowance (not including the Final Retention), provided that 




3





 


Landlord
does not dispute any request for payment based on non-compliance of any work with the "Approved Working Drawings," as that term is defined in  Section 3.4 below, or due to any substandard work, or
for any other reason. Landlord's payment of such amounts shall not be deemed Landlord's
approval or acceptance of the work furnished or materials supplied as set forth in Tenant's payment request. Tenant's failure to provide Landlord with any applicable portion of the
Over-Allowance Amount pursuant to schedule set forth in Section 4.2.1, below, shall immediately be deemed a monetary default under
the terms of the Lease and this Tenant Work Letter, and, therefore, in addition to any other rights and/or remedies Landlord may have, the terms of  Section 19.1.1 of the Lease and Section 5.4 of this Tenant Work Letter, shall apply. 


        2.2.2.2    Final Retention.    Subject to the provisions of this Tenant Work Letter, a check
for the Final Retention payable to Contractor shall be delivered by Landlord to Tenant on or before the date occurring forty-five (45) days following the completion of construction
of the Premises, provided that (i) Tenant delivers to Landlord properly executed conditional mechanics lien releases in compliance with both California Civil Code Section 3262(d)(2) and
either Section 3262(d)(3) or Section 3262(d)(4) (provided that Tenant shall provide Landlord with executed unconditional mechanics lien releases that comply with the foregoing within
thirty (30) days following Landlord payment of the Final Retention), (ii) Landlord has determined that no substandard work in the construction of the Tenant Improvements exists which
adversely affects the mechanical, electrical, plumbing, heating, ventilating and air conditioning, life-safety or other systems of the Building, the curtain wall of the Building, the
structure or exterior appearance of the Building, or any other tenant's use of such other tenant's leased premises in the Building, and (iii) Architect delivers to Landlord a certificate, in a
form reasonably acceptable to Landlord, certifying that the construction of the Tenant Improvements in the Premises has been substantially completed. Any undisbursed portion of the Tenant Improvement
Allowance that remains following Landlord's disbursement of the Final Retention shall be provided to Tenant (the "Over-Allowance Refund")
within sixty (60) days; provided, however, in no event shall the amount of such Over-Allowance Refund exceed the sum of (A) the Initial TI Disbursement, and (B) the
actual Over-Allowance Amount, if any, provided to Landlord by Tenant; provided further, however, at Tenant's discretion, up to $317,379.00 of the Over Allowance Refund (as designated by
Tenant, the "Reduction Application Amount") may be applied against Base Rent throughout the initial Lease Term as a reduction in each Monthly
Installment of Base Rent by an amount equal to $0.012 for each $1.00 of the Reduction Application Amount; provided, however, in such event Landlord and Tenant shall promptly execute an amendment to
the Lease setting forth a revised schedule of Base Rent incorporating such reduction. 


        2.2.2.3    Other Terms.    Landlord shall only be obligated to make disbursements from the
Tenant Improvement Allowance to the extent costs are incurred by Tenant for Tenant Improvement Allowance Items. All Tenant Improvement Allowance Items for which the Tenant Improvement Allowance has
been used shall be deemed Landlord's property under the terms of this Lease. 





        2.3    Standard Tenant Improvement Package.    Landlord has established specifications (the  "Building Standard Tenant Improvements") for the Building standard components to be used in the construction of the Tenant Improvements in the office
areas of the Premises, which Building Standard Tenant Improvements are set forth on Schedule 2, attached 


4





 

hereto.
The quality of Tenant Improvements shall be equal to or of greater quality than the quality of the Building Standard Tenant Improvements. 


        2.4    Removal of Above Building Standard Tenant Improvements.    "Above standard Tenant
Improvements" shall mean (a) any part of the Tenant Improvements which do not constitute Building Standard Tenant Improvements; and (b) a configuration of the Tenant Improvements which
is not usual and customary for either normal occupancy or generic wet/dry lab space. Landlord may require that Tenant remove any Above Standard Tenant Improvements in the lab portion of the Premises
identified by Landlord concurrently with Landlord's review and approval of the Approved Working Drawings to the extent such Tenant Improvements are unique and particular to Tenant
vis-à-vis generic wet/dry lab space (collectively, the "Extraordinary Alterations"), and to repair any damage to
the Premises and Building caused by such removal (reasonable wear and tear excepted); provided, however, if Landlord, in its approval of any Above Standard Tenant Improvements, fails to address the
removal requirement with regard to particular Above Standard Tenant Improvements, Landlord shall be deemed to have agreed to waive the removal requirement with regard to such particular Above Standard
Tenant Improvements; provided further, however, in no event shall identified Extraordinary Alterations include improvements which are industry standard improvements in research and development wet
labs. 


        2.5    Building Re-Roofing.    Landlord and Tenant hereby acknowledge and agree
that the roof membrane for the Building needs to be replaced. Tenant shall, in conjunction with the construction of the Tenant Improvements, cause the Building to be re-roofed (the  "Re-Roofing"), the
cost of which is anticipated to total $133,040.00. A portion of such costs equal to $84,420.00 shall be allocated to
Tenant as a Tenant Improvement Allowance Item (the "Tenant Roofing Allocation"), with the remaining $48,620.00 (the "LL Roofing
Allocation") to be paid by Landlord to Tenant within thirty (30) days of its receipt of an invoice therefore; provided, however, Tenant shall not deliver such invoice
until the Re-Roofing is complete. Except to the extent of prior written approval by Landlord (in which case such added costs shall be applied to the Tenant Roofing Allocation and LL
Roofing Allocation on a pro-rata basis), any increase in the cost of such Re-Roofing shall be added solely to the Tenant Roofing Allocation. With regard to such
Re-Roofing, provided that (i) the contract with the applicable contractor(s)/subcontractor(s) satisfies the requirements of  Section 4.2.2 of this Tenant Work Letter, and (ii) Tenant
assigns to Landlord all applicable guarantees or warranties in accordance with
the last sentence of Section 4.2.2.3, below, then to the extent of any defects in such roof membrane, Landlord shall directly enforce such
guarantees or warranties against the applicable contractor(s)/subcontractor(s) only. 


        2.6    Mezzanine Repairs.    Landlord and Tenant hereby acknowledge and agree that certain
Base Building repairs are required with regard to an approximately 4,000 square foot portion of the Mezzanine
Premises (the "Mezzanine Repairs"), and that Tenant shall, in conjunction with the construction of the Tenant Improvements, implement such Mezzanine
Repairs. The cost of such Mezzanine Repairs shall be a Tenant Improvement Allowance Item. 


        2.7    Failure to Disburse Tenant Improvement Allowance.    If Landlord fails to timely
fulfill its obligation to fund any portion of the Tenant Improvement Allowance or the amount of the LL Roofing Allocation, Tenant shall be entitled to deliver Notice ("Payment  


5





 

 Notice") thereof to Landlord and to any mortgage or trust deed holder of the Building whose identity and address have been previously provided to Tenant. If Landlord still
fails to fulfill any such obligation within twenty (20) business days after Landlord's receipt of the Payment Notice from Tenant and if Landlord fails to deliver Notice to Tenant within such
twenty (20) business day period explaining Landlord's reasons that Landlord believes that the amounts described in Tenant's Payment Notice are not due and payable by Landlord
("Refusal Notice"), Tenant shall be entitled to fund such portion of the Tenant Improvement Allowance and to offset the amount so funded against
Tenant's next obligations to pay Rent. However, if Tenant is in Default under Section 19.1.1 of this Lease at the time that such offset would
otherwise be applicable, Tenant shall not be entitled to such offset until such Default is cured. 


SECTION 3  


 CONSTRUCTION DRAWINGS  


        3.1    Selection of Architect/Construction Drawings.    Tenant shall retain an architect/space
planner selected by Tenant, subject to Landlord's reasonable approval (the "Architect") to prepare the "Construction Drawings," as that term is defined
in this Section 3.1. Tenant shall retain the engineering consultants selected by Tenant, subject to Landlord's reasonable approval (the  "Engineers")
to prepare all plans and engineering working drawings relating to the structural, mechanical, electrical, plumbing, HVAC, lifesafety, and
sprinkler work in the Premises, which work is not part of the Base Building. The plans and drawings to be prepared by Architect and the Engineers hereunder shall be known collectively as the  "Construction
Drawings." All Construction Drawings shall comply with the drawing format and specifications determined by Landlord, and shall be subject
to Landlord's approval, which approval shall not be unreasonably withheld. Tenant and Architect shall verify, in the field, the dimensions and conditions as shown on the relevant portions of the base
building plans, and Tenant and Architect shall be solely responsible for the same, and Landlord shall have no responsibility in connection therewith. Landlord's review of the Construction Drawings as
set forth in this Section 3, shall be for its sole purpose and shall not imply Landlord's review of the same, or obligate Landlord to review the
same, for quality, design, Code compliance or other like matters. Accordingly, notwithstanding that any Construction Drawings are reviewed by Landlord or its space planner, architect, engineers and
consultants, and notwithstanding any advice or assistance which may be rendered to Tenant by Landlord or Landlord's space planner, architect, engineers, and consultants, Landlord shall have no
liability whatsoever in connection therewith and shall not be responsible for any omissions or errors contained in the Construction Drawings, and Tenant's waiver and indemnity set forth in this Lease
shall specifically apply to the Construction Drawings. 


        3.2    Final Space Plan.    Tenant shall supply Landlord with four (4) copies signed by
Tenant of its final space plan for the Premises before any architectural working drawings or engineering drawings have been commenced. The final space plan (the "Final Space
Plan") shall include a layout and designation of all offices, rooms and other partitioning, their intended use, and equipment to be contained therein. Landlord may request
clarification or more specific drawings for special use items not included in the Final Space Plan. Landlord shall advise Tenant within five (5) business days after Landlord's receipt of the
Final Space Plan for the Premises if the same is, in Landlord's reasonable opinion based on the requirements of the Lease 


6





 

and
this Tenant Work Letter, unsatisfactory or incomplete in any respect. If Tenant is so advised, Tenant shall promptly cause the Final Space Plan to be revised to correct any deficiencies or other
matters Landlord may reasonably require. 


        3.3    Final Working Drawings.    After the Final Space Plan has been approved by Landlord,
Tenant shall supply the Engineers with a complete listing of standard and non-standard equipment and specifications, including, without limitation, B.T.U. calculations, electrical
requirements and special electrical receptacle requirements for the Premises, to enable the Engineers and the Architect to complete the "Final Working Drawings" (as that term is defined below) in the
manner as set forth below. Upon the approval of the Final Space Plan by Landlord and Tenant, Tenant shall promptly cause the Architect and the Engineers to complete the architectural and engineering
drawings for the Premises, and Architect shall compile architectural, structural, mechanical, electrical and plumbing working drawings in a form which is complete to allow subcontractors to bid on the
work and to obtain all applicable permits (which may be done by subspecialty if such subspecialty will be separately permitted by the City) (collectively, the "Final Working
Drawings") and shall submit the same to Landlord for Landlord's approval. Tenant shall supply Landlord with four (4) copies signed by Tenant of such Final Working
Drawings. Landlord shall advise Tenant within five (5) business days after Landlord's receipt of the Final Working Drawings for the Premises if the same is, in Landlord's reasonable opinion
based on the requirements of the Lease and this Tenant Work Letter, unsatisfactory or incomplete in any respect. If Tenant is so advised, Tenant shall immediately revise the Final Working Drawings in
accordance with such review and any disapproval of Landlord in connection therewith. In addition, if the Final Working Drawings or any amendment thereof or supplement thereto shall require alterations
in the Base Building (as contrasted with the Tenant Improvements), and if Landlord in its sole and exclusive discretion agrees to any such alterations, and notifies Tenant of the need and cost for
such alterations, then Tenant shall pay the cost of such required changes upon receipt of bills therefor; provided, however, such costs shall be deemed a Tenant Improvement Allowance Item pursuant to  Section 2.2.1.4 of this Tenant Work Letter. 



        3.4    Approved Working Drawings.    Notwithstanding anything in this Tenant Work Letter to
the contrary, Tenant shall not commence (or allow the commencement of) the construction of the Tenant Improvements until the Final Working Drawings are approved in writing by Landlord (the  "Approved Working
Drawings"). After approval by Landlord of the Final Working Drawings, Tenant may submit the same to the appropriate municipal
authorities for all applicable building permits. Tenant hereby agrees that neither Landlord nor Landlord's consultants shall be responsible for obtaining any building permit or certificate of
occupancy for the Premises and that obtaining the same shall be Tenant's responsibility; provided, however, that Landlord shall cooperate with Tenant in executing permit applications and performing
other ministerial acts reasonably necessary to enable Tenant to obtain any such permit or certificate of occupancy. Subject to the terms of  Section 4.2.1, below, no changes, modifications or
alterations in the Approved Working Drawings may be made without the prior written consent of
Landlord, which consent may not be unreasonably withheld. 


7






   SECTION 4  


 CONSTRUCTION OF THE TENANT IMPROVEMENTS  


        4.1    Tenant's Selection of Contractors.    



        4.1.1    The Contractor.    A general contractor shall be retained by Tenant to construct the
Tenant Improvements. Such general contractor ("Contractor") shall be selected by Tenant, subject to Landlord's reasonable approval, and Tenant shall
deliver to Landlord notice of its selection of the Contractor upon such selection. 


        4.1.2    Tenant's Agents.    All subcontractors, laborers, materialmen, and suppliers used by
Tenant (such subcontractors, laborers, materialmen, and suppliers, and the Contractor to be known collectively as "Tenant's Agents") must be approved in
writing by Landlord, which approval shall not be unreasonably withheld or delayed (and notwithstanding the term "agents" shall be independent contractors of Tenant). If Landlord does not approve any
of Tenant's proposed subcontractors, laborers, materialmen or suppliers, Tenant shall submit other proposed subcontractors, laborers, materialmen or suppliers for Landlord's written approval. 




        4.2    Construction of Tenant Improvements by Tenant's Agents.    



        4.2.1    Construction Contract; Cost Budget.    Prior to Tenant's execution of the
construction contract and general conditions with Contractor (the "Contract"), Tenant shall submit the Contract to Landlord for its approval, which
approval shall not be unreasonably withheld or delayed; provided, however, it shall be deemed reasonable for Landlord to withhold its approval if the Contract does not expressly state that
(i) all "change orders" which (x) involve the expenditure of more than $100,000.00 in the aggregate; (y) adversely affect the systems and equipment of the Building or the Building
Structure, or (z) adversely affect the exterior appearance of the Building, must be approved in advance by Landlord in writing, and (ii) Contractor must, in connection with any request
for payment pursuant to Section 2.2.2.1 of this Tenant Work Letter, above, request payment for all work completed as of the end of the month
immediately preceding the date of such submittal. Prior to the commencement of the construction of
the Tenant Improvements, and after Tenant has accepted all bids for the Tenant Improvements, Tenant shall submit to Landlord, for Landlord's review and approval, a detailed breakdown, by trade, of the
final costs to be incurred or which have been incurred, as set forth more particularly in Sections 2.2.1.1 through 2.2.1.12, above, in connection with
the design and construction of the Tenant Improvements to be performed by or at the direction of Tenant or the Contractor, which costs form a basis for the amount of the Contract (the  "Final Costs"). Prior to the commencement of construction of the Tenant Improvements, Tenant and Landlord shall identify the amount (the  "Over-Allowance Amount") equal to the difference between the amount of
the Final Costs and an amount equal to the sum of (A) the
Initial TI Disbursement, and (B) the Tenant Improvement Allowance (less any portion thereof already disbursed by Landlord, or in the process of being disbursed by Landlord, on or before the
commencement of construction of the Tenant Improvements). The Over-Allowance Amount shall be disbursed by Tenant following Landlord's disbursement of the Tenant Improvement Allowance, but
before Landlord disburses the Final Retention; provided, however, that notwithstanding the fact that 



8





 

Tenant
is itself disbursing such Over-Allowance Amount, Tenant shall otherwise comply with the disbursement procedure set forth in  Section 2.2.2.1, above. In the event that, after the Over-Allowance
Amount has been disbursed by Tenant, the costs relating to the
design and construction of the Tenant Improvements shall change, any additional costs necessary to such design and construction in excess of the Final Costs, shall be paid by Tenant as an increase to
the Over-Allowance Amount. 


        4.2.2    Tenant's Agents.    



        4.2.2.1    Landlord's General Conditions for Tenant's Agents and Tenant Improvement
Work.    Tenant's and Tenant's Agent's construction of the Tenant Improvements shall comply with the following: (i) the Tenant Improvements shall be
constructed in strict accordance with the Approved Working Drawings; (ii) any changes to the Approved Working Drawings which (1) involve the expenditure of more than $100,000.00 in the
aggregate; (2) adversely affect the systems and equipment of the Building or the Building Structure, or (3) adversely affect the exterior appearance of the Building, shall require
Landlord's prior written consent; (iii) Tenant's Agents shall submit schedules of all work relating to the Tenant's Improvements to Contractor and Contractor shall, within five
(5) business days of receipt thereof, inform Tenant's Agents of any changes which are necessary thereto, and Tenant's Agents shall adhere to such corrected schedule; and (iv) Tenant
shall abide by all rules made by Landlord's Building manager with respect to the use of freight, loading dock and service elevators, storage of materials, coordination of work with the contractors of
other tenants, and any other matter in connection with this Tenant Work Letter, including, without limitation, the construction of the Tenant Improvements. Tenant shall pay a logistical coordination
fee (the "Coordination Fee") to Landlord in an amount equal to the product of (A) one percent (1%), and (B) The "Hard Costs," as that term
is defined below, incurred in the construction of the Tenant Improvements. For purposes of this Tenant Work Letter, "Hard Costs" shall be deemed to be
an amount equal to the sum of (x) the Tenant Improvement Allowance, (y) the Initial TI Disbursement, and (z) the Over-Allowance Amount (as such amount may be increased
hereunder), less the actual amount of Soft Costs incurred in the construction of the Tenant Improvements, which Coordination Fee shall be for services relating to the coordination of the construction
of the Tenant Improvements. 


        4.2.2.2    Indemnity.    Tenant's indemnity of Landlord as set forth in this Lease shall also
apply with respect to any and all costs, losses, damages, injuries and liabilities incurred by Landlord Parties and related in any way to any act or omission of Tenant or Tenant's Agents at the
Project or in connection with the construction of the Tenant Improvements (as opposed to any work or construction performed by Landlord or Landlord's Parties in connection with Landlord's obligation
to deliver the Base Building pursuant to the TCCs of Section 1.1 of this Tenant Work Letter), or anyone directly employed by any of them, or in
connection with Tenant's non-payment of the Initial TI Disbursement and/or Over-Allowance Amount pursuant to the TCCs of Sections
2.2.2.1 and 4.2.1 of this Tenant Work Letter, respectively. Such indemnity by Tenant, as set forth in this Lease, shall also
apply with respect to any and all costs, losses, damages, injuries and liabilities incurred by Landlord Parties and related in any way to Landlord's performance of any ministerial acts reasonably
necessary (i) to permit Tenant to complete the Tenant Improvements, and (ii) to enable Tenant to obtain any building permit or 




9





 


certificate
of occupancy for the Premises; provided, however, that the foregoing indemnity shall not apply to the extent of Landlord's gross negligence or willful misconduct. 


        4.2.2.3    Requirements of Tenant's Agents.    Each of Tenant's Agents shall guarantee to
Tenant and for the benefit of Landlord that the portion of the Tenant Improvements for which it is responsible shall be free from any defects in workmanship and materials for a period of not less than
one (1) year from the date of completion thereof. Each of Tenant's Agents shall be responsible for the replacement or repair, without additional charge, of all work done or furnished in
accordance with its contract that shall become defective within one (1) year after the later to occur of (i) completion of the work performed by such contractor or subcontractors and
(ii) the Lease Commencement Date. The correction of such work shall include, without additional charge, all additional expenses and damages incurred in connection with such removal or
replacement of all or any part of the Tenant Improvements, and/or the Building and/or common areas that may be damaged or disturbed thereby. All such warranties or guarantees as to materials or
workmanship of or with respect to the Tenant Improvements shall be contained in the Contract or subcontract and shall be written such that such guarantees or warranties shall inure to the benefit of
both Landlord and Tenant, as their respective interests may appear, and can be directly enforced by either. Tenant covenants to give to Landlord any assignment or other assurances which may be
necessary to effect such right of direct enforcement. 


        4.2.2.4    Insurance Requirements.    



        4.2.2.4.1    General Coverages.    Contractor and all subcontractors shall carry worker's
compensation insurance covering all of their respective employees, and shall also carry public liability insurance, including property damage, all with limits, in form and with companies as are
required to be carried by Tenant as set forth in this Lease. 


        4.2.2.4.2    Special Coverages.    Tenant shall carry "Builder's All Risk" insurance in an
amount approved by Landlord covering the construction of the Tenant Improvements, and such other insurance as Landlord may require, it being understood and agreed that the Tenant Improvements shall be
insured by Tenant pursuant to this Lease immediately upon completion thereof. Such insurance shall be in amounts and shall include such extended coverage endorsements as may be reasonably required by
Landlord including, but not limited to, the requirement that all Contractor and all subcontractors shall carry excess liability and Products and Completed Operation Coverage insurance, each in amounts
not less than $500,000 per incident, $1,000,000 in aggregate, and in form and with companies as are required to be carried by Tenant as set forth in this Lease. 



        4.2.2.4.3    General Terms.    Certificates for all insurance carried pursuant to this  Section 4.2.2.4 shall be delivered to Landlord before the commencement of construction of the Tenant Improvements and before the Contractor's
equipment is moved onto the site. All such policies of insurance must contain a provision that the company writing said policy will give Landlord thirty (30) days prior written notice of any
cancellation or lapse of the effective date or any reduction in the amounts of such insurance. In the event that the Tenant Improvements are damaged by any cause during the course of the construction
thereof, Tenant 





10





 



shall
immediately repair the same at Tenant's sole cost and expense. Tenant shall use commercially reasonable efforts to ensure that Contractor and all subcontractors maintain all of the foregoing
insurance coverage in force until the Tenant Improvements are fully completed and accepted by Landlord, except for any Products and Completed Operation Coverage insurance required by Landlord, which
is to be maintained for ten (10) years following completion of the work and acceptance by Landlord and Tenant. All policies carried under this  Section 4.2.2.4 shall insure Landlord and Tenant,
as their interests may appear, as well as Contractor and Tenant's Agents. Tenant shall use
commercially reasonable efforts to ensure that all insurance, except Workers' Compensation, maintained by Contractor and all subcontractors shall preclude subrogation claims by the insurer against
anyone insured thereunder. Such insurance shall provide that it is primary insurance as respects the owner and that any other insurance maintained by owner is excess and noncontributing with the
insurance required hereunder. The requirements for the foregoing insurance shall not derogate from the provisions for indemnification of Landlord by Tenant under  Section 4.2.2.2 of this Tenant Work
Letter. 





        4.2.3    Governmental Compliance.    The Tenant Improvements shall comply in all respects with
the following: (i) the Code and other state, federal, city or quasi-governmental laws, codes, ordinances and regulations, as each may apply according to the rulings of the controlling public
official, agent or other person; (ii) applicable standards of the American Insurance Association (formerly, the National Board of Fire Underwriters) and the National Electrical Code; and
(iii) building material manufacturer's specifications. 


        4.2.4    Inspection by Landlord.    Landlord shall have the right to inspect the Tenant
Improvements at all times, provided however, that Landlord's failure to inspect the Tenant Improvements shall in no event constitute a waiver of any of Landlord's rights hereunder nor shall Landlord's
inspection of the Tenant Improvements constitute Landlord's approval of the same. Should Landlord disapprove any portion of the Tenant Improvements based on the failure of the Tenant Improvements to
conform to the Final Working Drawings, Landlord shall notify Tenant in writing of such disapproval and shall specify the
items disapproved. Any defects or deviations in, and/or disapproval by Landlord of, the Tenant Improvements shall be rectified by Tenant at no expense to Landlord, provided however, that in the event
Landlord determines that a defect or deviation exists or disapproves of any matter in connection with any portion of the Tenant Improvements and such defect, deviation or matter might adversely affect
the mechanical, electrical, plumbing, heating, ventilating and air conditioning or life-safety systems of the Building, the structure or exterior appearance of the Building or any other
tenant's use of such other tenant's leased premises, Landlord may, take such action as Landlord deems necessary, at Tenant's expense and without incurring any liability on Landlord's part, to correct
any such defect, deviation and/or matter, including, without limitation, causing the cessation of performance of the construction of the Tenant Improvements until such time as the defect, deviation
and/or matter is corrected to Landlord's satisfaction. 


        4.2.5    Meetings.    Commencing upon Tenant selection of the Contractor and Architect, Tenant
shall hold regular meetings at a reasonable time (but in no event to be required more often than weekly), with the Architect and the Contractor (or their agents) regarding the progress of the
preparation of Construction Drawings and the construction of the Tenant Improvements, which meetings shall be held at a location reasonably designated by Tenant or, in Landlord's discretion, at the
Premises, and Landlord and/or its agents shall receive prior notice 



11





 

of,
and shall have the right to attend, all such meetings, and, upon Landlord's request, certain of Tenant's Agents shall attend such meetings. In addition, minutes shall be taken at all such
meetings, a copy of which minutes shall be promptly delivered to Landlord. One such meeting each month shall include the review of Contractor's current request for payment. 




        4.3    Notice of Completion; Copy of Record Set of Plans.    Within ten (10) days after
completion of construction of the Tenant Improvements, Tenant shall cause a Notice of Completion to be recorded in the office of the Recorder of the county in which the Building is located in
accordance with Section 3093 of the Civil Code of the State of California or any successor statute, and shall furnish a copy thereof to Landlord upon such recordation. If Tenant fails to do so,
Landlord may execute and file the same on behalf of Tenant as Tenant's agent for such purpose, at Tenant's sole cost and expense. At the conclusion of construction, (i) Tenant shall cause the
Architect and Contractor (A) to update the Approved Working Drawings as necessary to reflect all changes made to the Approved Working Drawings during the course of construction, (B) to
certify to the best of their knowledge that the "record-set" of as-built drawings are true and correct, which certification shall survive the expiration or termination of this
Lease, and (C) to deliver to Landlord two (2) sets of copies of such record set of drawings within ninety (90) days following issuance of a certificate of occupancy for the
Premises, and (ii) Tenant shall deliver to Landlord a copy, bound in a binder (with an index), of all warranties, guaranties, and operating manuals and information relating to the improvements,
equipment, and systems in the Premises and the Re-Roofing. 


SECTION 5  


 MISCELLANEOUS  


        5.1    Tenant's Representative.    Tenant has designated Richard Murawski and Daniel De La
Vega, Jr. as its representatives with respect to the matters set forth in this Tenant Work Letter, each of whom shall have full authority and responsibility to act on behalf of the Tenant as required
in this Tenant Work Letter. 


        5.2    Landlord's Representative.    Landlord has designated Randy Jackson as its sole
representatives with respect to the matters set forth in this Tenant Work Letter, who, until further notice to Tenant, shall have full authority and responsibility to act on behalf of the Landlord as
required in this Tenant Work Letter. 


        5.3    Time of the Essence in This Tenant Work Letter.    Unless otherwise indicated, all
references herein to a "number of days" shall mean and refer to calendar days. If any item requiring approval is timely disapproved by Landlord, the procedure for preparation of the document and
approval thereof shall be repeated until the document is approved by Landlord. 


        5.4    Tenant's Lease Default.    Notwithstanding any provision to the contrary contained in
this Lease, if an economic or material default (after applicable notice and cure periods, if any) as described in the Lease or this Tenant Work Letter has occurred at any time on or before the
substantial completion of the Premises, then (i) in addition to all other rights and remedies granted to Landlord pursuant to this Lease, Landlord shall have the right to withhold payment of
all or any portion of the Tenant Improvement Allowance and/or Landlord may cause 


12





 

Contractor
to cease the construction of the Premises (in which case, Tenant shall be responsible for any delay in the substantial completion of the Premises caused by such work stoppage), and
(ii) all other obligations of Landlord under the terms of this Tenant Work Letter shall be forgiven until such time as such default is cured pursuant to the terms of this Lease (in which case,
Tenant shall be responsible for any delay in the substantial completion of the Premises caused by such inaction by Landlord). 


        5.5    Tenant's Construction Loan.    Landlord hereby acknowledges and agrees that Tenant may
finance its Initial TI Disbursement; provided, however, only up to a total of One Million Two Hundred Thousand and No/100 Dollars ($1,200,000.00), through a third-party lender (the  "Construction Lender") in the
form of a construction loan (the "Construction Loan"), which Construction Loan shall have a term of no more than three (3) years, may be
securitized pursuant to the terms of this Section 5.5 and the remainder of this Tenant Work Letter and the Lease. In connection with such
Construction Loan, Landlord hereby agrees that Tenant may, at Tenant's option, elect to have such Construction Lender receive either the "Leasehold Security Interest" or the "Equipment Security
Interest," as those terms are set forth in Sections 5.5.1 and 5.5.2 of this Tenant Work Letter, respectively. Tenant shall provide Landlord with a
written notice (the "SI Election Notice") of such election and specifying the applicable security interest as either the Leasehold Security Interest or
the Equipment Security Interest. Following Landlord's receipt of such SI Election Notice and at no out-of-pocket cost to Landlord, Landlord shall reasonably cooperate with
Tenant and Construction Lender to effectuate the elected security interest and to execute commercially reasonable documentation evidencing the establishment of such security interest for Construction
Lender. Immediately following the satisfaction of the Construction Loan, Construction Lender shall release the applicable security interest, and Tenant and Construction Lender shall cooperate to
effectuate such release, specifically including, but not limited to, the execution of commercially reasonable documentation required to effectuate such release. 



        5.5.1    Leasehold Security Interest.    For purposes of the Lease and this Tenant Work
Letter, the "Leasehold Security Interest" shall mean a security interest (benefiting Construction Lender) in Tenant's leasehold estate created by this
Lease, which may be evidenced by, among other things, a leasehold deed of trust. 


        5.5.2    Equipment Security Interest.    For purposes of the Lease and this Tenant Work
Letter, the "Equipment Security Interest" shall mean a security interest (benefiting Construction Lender) in that certain equipment being installed into
the Premises as part the Tenant Improvements which is specifically identified on Schedule 2, attached hereto (the  "Secured Improvements").
Notwithstanding any provision in this Tenant Work Letter or this Lease to the contrary, to the extent Equipment Security
Interest option is elected and the same is established to the benefit of the Construction Lender, in the event of a Tenant default pursuant to the terms of the Construction Loan agreement,
Construction Lender shall provide Landlord with a right of first offer to purchase each of the Secured Improvements at least thirty (30) days prior to Construction Lender removing such Secured
Improvements from the Premises. To the extent Construction Lender removes any Secured Improvements from the Premises for any reason, Construction Lender shall repair any damage to the Premises and/or
Building caused by such removal and shall return the affected portion of the Premises and/or the Building to a building standard tenant improved condition as reasonably determined by Landlord. 



13





 

        5.6    Construction Expedition.    Landlord and Tenant hereby acknowledge that
(i) Tenant desires the commencement of construction of the Tenant Improvements to occur as soon as possible to expedite the substantial completion of the Premises, and (ii) a condition
precedent to the commencement of construction of the Tenant Improvements is the vacancy of portions of the Premises by the existing occupants therein. Such existing occupants have agreed to terminate
their occupancy rights to, and vacate, certain portions of the Premises in exchange for consideration of, among other things, a fee in the amount of $152,959.00 (the  "Construction Expedition Fee").
Landlord shall, on behalf of Tenant and as a Tenant Improvement Allowance Item, pay such Construction Expedition Fee to
such existing occupants in accordance with the terms of a separate agreement between Landlord and such existing occupants. 



14










  



 
 

SCHEDULE 1    
    
    LANDLORD WORK    
    


[ATTACHED] 


1





 
 
 

10421 Pacific Center Court—Schedule 1    
    



	1st Floorplan	 	[FLOORPLAN]
	

2nd Floorplan	
 	

[FLOORPLAN]




Demising Wall—


2






  



 
 

SCHEDULE 2    
    
    SECURED IMPROVEMENTS    
    


[ATTACHED]



1





 
 
 

Favrille, Inc.
  Improvements Available for Security Interest for Lenders    
    



	Item No.
 
	 	Description
	 	Manufacturer
	 	Model/Part No.
	 	Quote/Cost

	1	 	cGMP Steam Sterilizer (clean autoclave)

PharmPro GMP Horizontal Sliding Double Door

Steam Sterilizer	 	Kuhlman Technologies	 	PP263660-D	 	$	207,000
	

2	
 	

Pure Steam Generator with 25 gph condensing

unit for WFI production	
 	

Kuhlman Technologies	
 	

PSG 250	
 	
$	

138,700
	

3	
 	

cGMP Steam Sterilizer (decon autoclave)

PharmPro GMP Horizontal Sliding Double Door

Steam Sterilizer	
 	

Kuhlman Technologies	
 	

PP263660-D	
 	
$	

207,000
	

4	
 	

GLP Steam Sterilizer (combination autoclave)

Vacuum Steam sterilizer, 60" chamber	
 	

Getinge Castle	
 	

Model 233	
 	
$	

75,000
	

5	
 	

Cardreader system and alarm	
 	

Northern	
 	

Model 750	
 	
$	

180,000
	

6	
 	

Coldroom

Custom 15x30x8, stainless interior, white

enamel exterior with auxillary cooling system

and humidity controls, and chartreader	
 	

Coldstoragemfg	
 	

15 × 30 × 8	
 	
$	

100,000
	

7	
 	

Gas Switchover Systems	
 	

Praxair

Praxair

Praxair	
 	

ADVFM-4631-43

ADVFM-4702

526-4031-000

Total:	
 	
$	

25,000
	

8	
 	

Uninterruptible Power Supply (UPS)

65kw	
 	

Powerware	
 	

model 9315	
 	
$	

70,000
	

9	
 	

Backup Generator

300 kva/240 kw 1/3 phase switchable

400hp John Deere	
 	

Multiquip	
 	

DCA-300SSJU2	
 	
$	

250,000
	

10	
 	

USP/DI water system with 2 tanks/loops	
 	

Puretec	
 	

 	
 	
$	

75,000
	

 	
 	
TOTAL	
 	

 	
 	

 	
 	
$	

1,327,700




2






  



 
 

EXHIBIT C    
    
    PACIFIC CORPORATE CENTER    
    
    NOTICE OF LEASE TERM DATES    
    



	To:	 	 
	 	 
	 	 	 
	 	 
	 	 	 
	 	 
	 	 	 
	 	 





	Re:
	Office
Lease dated                        ,
200  between                        ,
a                        ("Landlord"),
and                        ,
a                        ("Tenant") concerning Suite
                        on floor(s)
                        of the office building located
at                        ,    , California.
 




Gentlemen:



        In
accordance with the Office Lease (the "Lease"), we wish to advise you and/or confirm as follows: 



	1.
	The
Lease Term shall commence on or has commenced on                        for a term
of                        ending
on                        .



	2.
	Rent
commenced to accrue on                        , in the amount
of                        .




	3.
	If
the Lease Commencement Date is other than the first day of the month, the first billing will contain a pro rata adjustment. Each billing thereafter, with the exception of the final
billing, shall be for the full amount of the monthly installment as provided for in the Lease.



	4.
	Your
rent checks should be made payable
to                        at                 
       .



	5.
	The
exact number of rentable/usable square feet within the Premises is                        square feet.



	6.
	Tenant's
Share as adjusted based upon the exact number of usable square feet within the Premises is    %. 







	 	 	 	 	 	 	"Landlord":	 
	

 	
 	

 	
 	

 	
 	

 
	

,
	 	 	 	 	 	 	a	 	 
	 
	

 	
 	

 	
 	

 	
 	

By:	
 	

 
	

 
	 	 	 	 	 	 	 	 	Its:	 	 
	 
	

Agreed to and Accepted

as of                        , 200  .	
 	

 	
 	

 	
 	

 	

 
	

"Tenant":	
 	

 	
 	

 	
 	

 	

 
	

 
	
 	

 	
 	

 	
 	

 	

 
	

a	
 	

 
	
 	

 	
 	

 	
 	

 	

 
	

By:	
 	

 
	
 	

 	
 	

 	
 	

 	

 
	 	 	Its:	 	 
	 	 	 	 	 	 	 




1






  



 
 

EXHIBIT D    
    
    PACIFIC CORPORATE CENTER    
    
    RULES AND REGULATIONS    
    



        Tenant shall faithfully observe and comply with the following Rules and Regulations. Landlord shall not be responsible to Tenant for the nonperformance of any of
said Rules and Regulations by or otherwise with respect to the acts or omissions of any other tenants or occupants of the Project; provided, however, in no event shall Landlord enforce such Rules and
Regulations in a discriminatory manner to the detriment of Tenant. In the event of any conflict between the Rules and Regulations and the other provisions of this Lease, the latter shall control. 


        1.     Safes
and other heavy objects shall, if reasonably considered necessary by Landlord, stand on supports of such thickness as is necessary to properly distribute the
weight. Landlord will not be responsible for loss of or damage to any such safe or property in any case. Any damage to any part of the Building, its contents, occupants or visitors by moving or
maintaining any such safe or other property shall be the sole responsibility and expense of Tenant. 


        2.     The
requirements of Tenant will be attended to only upon application at Landlord's management office or at such office location designated by Landlord. Employees of
Landlord shall not perform any work or do anything outside their regular duties unless under special instructions from Landlord. 


        3.     No
advertisement, notice or handbill shall be exhibited, distributed, painted or affixed by Tenant on any part of the Pacific Corporate Center without the prior written
consent of the Landlord. Tenant shall not disturb, solicit, peddle, or canvass any occupant of the Pacific Corporate Center and shall cooperate with Landlord and its agents of Landlord to prevent
same. 


        4.     Tenant
shall not overload the floor of the Premises. 


        5.     Tenant
shall not use or keep in or on the Premises, the Building, or the Project any Kerosene, gasoline, explosive material, corrosive material, material capable of
emitting toxic fumes, or other inflammable or combustible fluid chemical, substitute or material, except in compliance with applicable law. Tenant shall maintain material safety data sheets for any
Hazardous Material used or kept on the Premises. 


        6.     Tenant
shall not use, keep or permit to be used or kept, any foul or noxious gas or substance in or on the Premises to the extent the same is noticeable in the Common
Areas of the Pacific Corporate Center or which affects other tenants of the Pacific Corporate Center. Tenant shall not throw anything out of doors, windows or skylights. 


        7.     No
cooking shall be done or permitted on the Premises (unless Tenant receives Landlord's prior written approval to install a cafeteria for its employees in the Premises),
nor shall the Premises be used for lodging. Notwithstanding the foregoing, Underwriters' laboratory-approved equipment and microwave ovens may be used in the Premises for heating food and brewing
coffee, tea, hot chocolate and similar beverages for employees and visitors, provided that such use is in accordance with all applicable federal, state, county and city laws, codes, ordinances, rules
and regulations. 


        8.     Intentionally
Omitted. 


        9.     Tenant
shall store all its trash and garbage within the interior of the Premises or in the appropriate external trash area(s) for the Building. No material shall be
placed in the trash boxes or receptacles if such material is of such nature that it may not be disposed of in the ordinary and customary manner of removing and disposing of trash and garbage in San
Diego, California without violation of any law or ordinance governing such disposal; provided, however, Tenant may maintain separate trash enclosures for the storage of non-conforming
disposal items to the extent Tenant satisfies 


1





 



and
complies with any applicable laws or other governmental regulations relating to the storage and disposal thereof. If the Premises is or becomes infested with vermin as a result of the use or any
misuse or neglect of the Premises by Tenant, its agents, servants, employees, contractors, visitors or licensees, Tenant shall forthwith, at Tenant's expense, cause the Premises to be exterminated
from time to time to the satisfaction of Landlord and shall employ such licensed exterminators as shall be approved in writing in advance by Landlord. 


        10.   Tenant
shall comply with all safety, fire protection and evacuation procedures and regulations established by any governmental agency. 


        11.   Neither
the interior nor exterior of any windows shall be coated or otherwise sunscreened without the prior written consent of Landlord. Tenant shall be responsible for
any damage to the window film on the exterior windows of the Premises and shall promptly repair any such damage at Tenant's sole cost and expense. 



        12.   Tenant
must comply with requests by the Landlord concerning the informing of their employees of items of reasonable importance to the Landlord
vis-à-vis the operation of the Project and the Pacific Corporate Center. 


        13.   Tenant
must comply with any applicable "NO-SMOKING" Ordinances. If Tenant is required under the ordinance to
adopt a written smoking policy, a copy of said policy shall be on file in the office of the Building. Additionally, Tenant must provide at least one area within the Premises in which its employees,
invitees and visitors may smoke, to the extent such area is required by law. 



        14.   Tenant
hereby acknowledges that Landlord shall have no obligation to provide guard service or other security measures for the benefit of the Premises, the Building or
the Project. Tenant hereby acknowledges and agrees that Landlord shall have no responsibility for the protection of Tenant and its agents, employees, contractors, invitees and guests, and the property
thereof, from acts of third parties, including keeping doors locked and other means of entry to the Premises closed, whether or not Landlord, at its option, elects to provide security protection for
the Project or any portion thereof. Tenant further assumes the risk that any safety and security devices, services and programs which Landlord elects, in its sole discretion, to provide may not be
effective, or may malfunction or be circumvented by an unauthorized third party, and Tenant shall, in addition to its other insurance obligations under this Lease, obtain its own insurance coverage to
the extent Tenant desires protection against losses related to such occurrences. Tenant shall cooperate in any reasonable safety or security program developed by Landlord or required by law. 


        15.   No
auction, liquidation, fire sale, going-out-of-business or bankruptcy sale shall be conducted in the Premises without the prior
written consent of Landlord. 


        16.   No
tenant shall use or permit the use of any portion of the Premises for living quarters, sleeping apartments or lodging rooms. 



        Landlord
reserves the right at any time to change or rescind any one or more of these Rules and Regulations, or to make such other and further reasonable, non-discriminatory
Rules and Regulations as in Landlord's judgment may from time to time be necessary (relative to a building occupied solely by one tenant) for the management, safety, care and cleanliness of the
Premises, Building, the Common Areas and the Project, and for the preservation of good order therein, as well as for the convenience of other occupants and tenants therein. Landlord may waive any one
or more of these Rules and Regulations for the benefit of any particular tenants, but no such waiver by Landlord shall be construed as a waiver of such Rules and Regulations in favor of any other
tenant, nor prevent Landlord from thereafter enforcing any such Rules or Regulations against any or all tenants of the Project; provided, however, in no event shall Landlord enforce such Rules and
Regulations in a discriminatory manner to the detriment of Tenant. Tenant shall be deemed to have read these Rules and Regulations and to have agreed to abide by them as a condition of its occupancy
of the Premises. 


2








  



 
 

EXHIBIT E    
    
    PACIFIC CORPORATE CENTER    
    
    FORM OF TENANT'S ESTOPPEL CERTIFICATE    
    


        The undersigned as Tenant under that certain Office Lease (the "Lease") made and entered into as
of                        , 200    by and between
                        as Landlord, and the undersigned as Tenant, for Premises on
the                        floor(s) of the office building located
at                        ,
                        ,
California                        ,
certifies as follows: 


        1.     Attached
hereto as Exhibit A is a true and correct copy of the Lease and all amendments and modifications thereto.
The documents contained in Exhibit A represent the entire agreement between the parties as to the Premises. 


        2.     The
undersigned currently occupies the Premises described in the Lease, the Lease Term commenced on                        , and the
Lease Term expires on                        , and
the undersigned has no option to terminate or cancel the Lease or to purchase all or any part of the Premises, the Building and/or the Project. 


        3.     Base
Rent became payable on                        . 


        4.     The
Lease is in full force and effect and has not been modified, supplemented or amended in any way except as provided in  Exhibit A. 



        5.     Tenant
has not transferred, assigned, or sublet any portion of the Premises nor entered into any license or concession agreements with respect thereto except as follows: 


        6.     Intentionally
Omitted. 


        7.     All
monthly installments of Base Rent, all Additional Rent and all monthly installments of estimated Additional Rent have been paid when due
through                        . The
current monthly installment of Base Rent is $                        . 


        8.     All
conditions of the Lease to be performed by Landlord necessary to the enforceability of the Lease have been satisfied and Landlord is not in default thereunder. In
addition, the undersigned has not delivered any notice to Landlord regarding a default by Landlord thereunder. 


        9.     No
rental has been paid more than thirty (30) days in advance and no security has been deposited with Landlord except as provided in the Lease. 



        10.   As
of the date hereof, there are no existing defenses or offsets, or, to the undersigned's knowledge, claims or any basis for a claim, that the undersigned has against
Landlord. 


        11.   If
Tenant is a corporation or partnership, each individual executing this Estoppel Certificate on behalf of Tenant hereby represents and warrants that Tenant is a duly
formed and existing entity qualified to do business in California and that Tenant has full right and authority to execute and deliver this Estoppel Certificate and that each person signing on behalf
of Tenant is authorized to do so. 


        12.   There
are no actions pending against the undersigned under the bankruptcy or similar laws of the United States or any state. 


        13.   Other
than in compliance with all applicable laws and incidental to the ordinary course of the use of the Premises, the undersigned has not used or stored any hazardous
substances in the Premises. 


        14.   To
the undersigned's knowledge, all tenant improvement work to be performed by Landlord under the Lease has been completed in accordance with the Lease and has been
accepted by the undersigned and all reimbursements and allowances due to the undersigned under the Lease in connection with any tenant improvement work have been paid in full. 


1





 



        The
undersigned acknowledges that this Estoppel Certificate may be delivered to Landlord or to a prospective mortgagee or prospective purchaser, and acknowledges that said prospective
mortgagee or
prospective purchaser will be relying upon the statements contained herein in making the loan or acquiring the property of which the Premises are a part and that receipt by it of this certificate is a
condition of making such loan or acquiring such property. 


        Executed
at                        on the            day
of                        , 200            . 



	 	 	"Tenant":	 
	

 	
 	

 
	

,
	 	 	a	 	 
	 
	

 	
 	

By:	
 	

 
	

 
	 	 	 	 	Its:	 	 
	 
	

 	
 	

By:	
 	

 
	

 
	 	 	 	 	Its:	 	 
	 




2






  



 
 

EXHIBIT F    
    
    PACIFIC CORPORATE CENTER    
    
    KILROY REALTY    
    


RECORDING
REQUESTED BY

AND WHEN RECORDED RETURN TO: 


ALLEN
MATKINS LECK GAMBLE

        & MALLORY LLP

1901 Avenue of the Stars

18th Floor

Los Angeles, California 90067

Attention: Anton N. Natsis, Esq. 


RECOGNITION OF COVENANTS,

CONDITIONS, AND RESTRICTIONS  


        This Recognition of Covenants, Conditions, and Restrictions (this "Agreement") is entered into as of the
    day of            , 200    , by and
between                        ("Landlord"),
and                        ("Tenant"), with reference to the following facts:
 


        A.    Landlord
and Tenant entered into that certain Office Lease Agreement dated            ,200    (the "Lease"). Pursuant to the Lease, Landlord leased to
Tenant and Tenant leased from Landlord space (the "Premises") located in an office building on certain real property described in  Exhibit A
attached hereto and incorporated herein by this reference (the "Property"). 


        B.    The
Premises are located in an office building located on real property which is part of an area owned by Landlord containing approximately    (    )
acres of real property located in the City of            , California (the "Project"), as more particularly described in  Exhibit B attached hereto and incorporated herein by this reference. 


        C.    Landlord,
as declarant, has previously recorded, or proposes to record concurrently with the recordation of this Agreement, a Declaration of Covenants, Conditions, and
Restrictions (the "Declaration"), dated                        ,
200    , in connection with the Project. 



        D.    Tenant
is agreeing to recognize and be bound by the terms of the Declaration, and the parties hereto desire to set forth their agreements concerning the same. 


        NOW,
THEREFORE, in consideration of (a) the foregoing recitals and the mutual agreements hereinafter set forth, and (b) for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows, 


        1.    Tenant's Recognition of Declaration.    Notwithstanding that the Lease has been executed prior to the
recordation of the Declaration, Tenant agrees that its use of the Premises and the Project shall be subject to, and shall comply with, all of the terms and conditions of the Declaration. 


        2.    Miscellaneous.    



        2.1   This
Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, estates, personal representatives, successors, and
assigns. 


        2.2   This
Agreement is made in, and shall be governed, enforced and construed under the laws of, the State of California. 



        2.3   This
Agreement constitutes the entire understanding and agreements of the parties with respect to the subject matter hereof, and shall supersede and replace all prior
understandings and 



1





 




agreements,
whether verbal or in writing. The parties confirm and acknowledge that there are no other promises, covenants, understandings, agreements, representations, or warranties with respect to
the subject matter of this Agreement except as expressly set forth herein. 



        2.4   This
Agreement is not to be modified, terminated, or amended in any respect, except pursuant to any instrument in writing duly executed by both of the parties hereto. 


        2.5   In
the event that either party hereto shall bring any legal action or other proceeding with respect to the breach, interpretation, or enforcement of this Agreement, or
with respect to any dispute relating to any transaction covered by this Agreement, the losing party in such action or proceeding shall reimburse the prevailing party therein for all reasonable costs
of litigation, including reasonable attorneys' fees, in such amount as may be determined by the court or other tribunal having jurisdiction, including matters on appeal. 



        2.6   All
captions and heading herein are for convenience and ease of reference only, and shall not be used or referred to in any way in connection with the interpretation or
enforcement of this Agreement. 


        2.7   If
any provision of this Agreement, as applied to any party or to any circumstance, shall be adjudged by a court of competent jurisdictions to be void or unenforceable
for any reason, the same shall not affect any other provision of this Agreement, the application of such provision under circumstances different form those adjudged by the court, or the validity or
enforceability of this Agreement as a whole. 


        2.8   Time
is of the essence of this Agreement. 


        2.9   The
Parties agree to execute any further documents, and take any further actions, as may be reasonable and appropriate in order to carry out the purpose and intent of
this Agreement. 


        2.10 As
used herein, the masculine, feminine or neuter gender, and the singular and plural numbers, shall each be deemed to include the others whenever and whatever the
context so indicates. 



2










   SIGNATURE PAGE OF RECOGNITION OF  


 COVENANTS, CONDITIONS AND RESTRICTIONS  


        IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. 



	 	 	"Landlord":	 
	

 	
 	

 
	

,
	

 	
 	

a	
 	

 
	

 
	

 	
 	

By:	
 	

 
	

 
	 	 	 	 	Its:	 	 
	 
	

 	
 	

"Tenant":	

 
	

 	
 	

 
	

,
	 	 	a	 	 
	 
	

 	
 	

By:	
 	

 
	

 
	 	 	 	 	Its:	 	 
	 
	

 	
 	

By:	
 	

 
	

 
	 	 	 	 	Its:	 	 
	 




3






  



 
 

EXHIBIT G    
    
    PACIFIC CORPORATE CENTER    
    
    FORM OF LETTER OF CREDIT
  (Letterhead of a money center bank
  acceptable to the Landlord)    
    



	 
	, 200	 
	 	 
	 

	 

	 

	 






Gentlemen:



        We
hereby establish our Irrevocable Letter of Credit and authorize you to draw on us at sight for the account
of                        ,
a                        , the aggregate amount of
                                         
                   
($                        ).
 


        Funds
under this Letter of Credit are available to the beneficiary hereof as follows: 


        Any
or all of the sums hereunder may be drawn down at any time and from time to time from and after the date hereof by a representative of Kilroy Realty, L.P., a Delaware limited
partnership ("Beneficiary") when accompanied by this Letter of Credit and a written statement signed by a representative of Beneficiary, certifying that such moneys are due and owing to Beneficiary. 


        This
Letter of Credit is transferable in its entirety at no cost to Beneficiary. Should a transfer be desired, such transfer will be subject to the return to us of this advice, together
with written instructions. 


        The
amount of each draft must be endorsed on the reverse hereof by the negotiating bank. We hereby agree that this Letter of Credit shall be duly honored upon presentation and delivery
of the certification specified above. 


        This
Letter of Credit shall expire on                        . 


        Notwithstanding
the above expiration date of this Letter of Credit, the term of this Letter of Credit shall be automatically renewed for successive, additional one (1) year
periods unless, at least thirty (30) days prior to any such date of expiration, the undersigned shall give written notice to Beneficiary, by certified mail, return receipt requested and at the
addresses set forth below or at such other address as may be given to the undersigned by Beneficiary, that this Letter of Credit will not be renewed. Unless otherwise directed by Beneficiary, any
notices to Beneficiary shall be sent to the following addresses: 



Kilroy
Realty Corporation

12200 West Olympic Boulevard

Suite 200

Los Angeles, California 90064

Attention: Legal Department 



with
copies to: 


Kilroy
Realty Corporation

3811 Valley Centre Drive, Suite 300




1





 




San
Diego, California 92130

Attention: Mr. Roger Simsiman 


and



Allen
Matkins Leck Gamble & Mallory LLP

1901 Avenue of the Stars, Suite 1800

Los Angeles, California 90067

Attention: Anton N. Natsis, Esq. 




        This
Letter of Credit is governed by the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication 500. 



	 	 	Very truly yours,

(Name of Issuing Bank)
	

 	
 	

By:	
 	

 





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EXHIBIT H    
    
    PACIFIC CORPORATE CENTER    
    
    INVESTMENT AGREEMENT    
    









 
 

INVESTMENT AGREEMENT    
    


        THIS INVESTMENT AGREEMENT (this "Agreement") is entered into as of January 31, 2003, by and between
FAVRILLE, INC., a Delaware corporation ("Favrille"), and KILROY REALTY, LP, a Delaware limited partnership
("Kilroy"). 


R E C I T A L S :  


        WHEREAS, Favrille and Kilroy are entering into that certain Office Lease dated as of January 31, 2003 ("Lease
Agreement") pursuant to which Favrille shall lease from Kilroy the Premises (as defined in the Lease Agreement) located at 10421 Pacific Center Court, San Diego, California;
and                                         
       


        WHEREAS,
the obligations of Kilroy to enter into the Lease Agreement are conditioned upon, among other things, the execution and delivery of this Agreement by Kilroy and Favrille: 


        NOW,
THEREFORE, in consideration of the mutual promises and covenants set forth herein, and for other good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, Kilroy and Favrille hereby agree as follows: 



        1)    Participation Rights.    Favrille hereby grants to Kilroy the right, but not the obligation, subject to the
necessary approval of Favrille's stockholders, to purchase up to Three Hundred Fifty Thousand Dollars ($350,000) of New Securities (as defined below) which Favrille may propose to sell and issue in
Favrille's Next Round Preferred Stock Financing (as defined below) (hereinafter referred to as Kilroy's "Participation Rights"). Kilroy may purchase the
New Securities on the same terms and at the same price at which Favrille proposes to sell the New Securities in the Next Round Preferred Stock Financing. Kilroy acknowledges that as a condition to its
purchase of any New Securities, Favrille may require that Kilroy also enter into related agreements under the Next Round Preferred Stock Financing, including voting agreements, rights of first refusal
agreements and co-sale agreements, but only to the extent that all other investors in the Next Round Preferred Stock Financing are similarly required to enter into such agreements. For these purposes,
"Next Round Preferred Stock Financing" means Favrille's next bona fide round of preferred stock equity financing resulting in gross proceeds to Favrille
of at least Three Million Dollars ($3,000,000). For these purposes "New Securities" shall mean the class or series of Favrille's preferred stock issued
in connection with the Next Round Preferred Stock Financing. Notwithstanding the foregoing, "New Securities" does not include (i) convertible
securities outstanding as of the date hereof and as reflected in Schedule 1 attached hereto; (ii) securities issued as a dividend or distribution with respect to those convertible
securities or upon conversion of those convertible securities; (iii) securities issued pursuant to the acquisition by Favrille of another
corporation or entity by consolidation, corporate reorganization, merger, or by purchase of all or substantially all of the assets of such corporation or entity as approved by Favrille's board of
directors; (iv) securities issued to Favrille's officers, directors, employees, consultants and advisors pursuant to plans, agreements or arrangements approved by Favrille's board of directors
or a committee thereof; (v) securities issued without consideration pursuant to a subdivision, stock split or other similar transaction; (vi) securities issued in connection with
equipment leasing, real estate leasing, bank financing, or similar transactions approved by Favrille's board of directors; or (vii) securities issued in connection with strategic alliances,
joint ventures, or other corporate partnerships, research and development agreements, product development or marketing agreements approved by Favrille's board of directors or a committee thereof. 


        Favrille
further agrees that in connection with a firm commitment underwritten initial public offering by the company (the "IPO"),
Favrille will use its commercially reasonable efforts to cause the managing underwriter or underwriters of such IPO to offer to Kilroy up to five percent (5%) of any shares included in a directed
share program for such IPO (the "IPO Shares") to be offered to Kilroy; provided, however, that the number of IPO Shares shall be subject to reasonable
reduction by Favrille if Favrille's board of directors determines in good faith, by duly adopted resolution, that the purchase by Kilroy of the number of IPO Shares determined in accordance with this
paragraph would be materially detrimental to the success of the IPO. Notwithstanding the foregoing, all action taken pursuant to this Agreement shall be made in accordance with all federal and state
securities laws, 





 



including,
without limitation, Rule 134 of the Securities Act of 1933, as amended, and all applicable rules and regulations promulgated by the National Association of Securities Dealers, Inc. and
other such self-regulating organizations. In the event that Favrille notifies Kilroy in writing that legal or regulatory restrictions prohibit the transactions contemplated by this Agreement, or that
Favrille's board of directors determines in good faith that allowing Kilroy to participate in the IPO would materially adversely affect the marketability of the IPO, then Favrille will not be required
to take the actions described in this paragraph and the parties shall agree to make mutually satisfactory arrangements in the alternative. In connection with any potential purchase under this letter,
Kilroy agrees to take all action that Favrille or its counsel reasonably deems necessary, appropriate or desirable in connection with such potential purchase of IPO Shares including, without
limitation, prompt notice of whether Kilroy desires to participate in the IPO if offered the opportunity by Favrille. This Agreement does not constitute any offer to sell, or a solicitation of an
offer to buy any securities of Favrille nor shall this letter be considered as granting a right to purchase IPO Shares to Kilroy or any other person. 


        2)    Notice of Issuance or Proposed Issuance of New Securities.    In the event Favrille proposes to undertake any
sale or issuance of New Securities, it shall give Kilroy written notice (the "Notice") of its intention, describing the type of New Securities, the
price, the terms upon which Favrille proposes to sell or issue the same, and a statement that Kilroy shall have ten (10) days to respond to such Notice. Kilroy shall have ten (10) days from the date
of receipt of the Notice to exercise its Participation Rights and agree
to purchase any or all of the New Securities allocable to it for the price and upon the terms specified in the Notice by giving written notice to Favrille and stating therein the aggregate number of
New Securities Kilroy desires to purchase ("Exercise Period"). Favrille shall also provide Kilroy with copies of any and all purchase documentation,
financial information and other information disseminated to potential investors so as to allow Kilroy to conduct its due diligence review of Favrille and the proposed sale or issuance of New
Securities. The purchase price payable by Kilroy may be paid (i) in cash; (ii) certified check; (iii) by cancellation of indebtedness; (iv) any other form of consideration
acceptable under the Next Round Preferred Stock Financing; (v) or pursuant to any other arrangement mutually agreeable to Favrille and Kilroy; or (vi) by any combination of the foregoing. In
the event Kilroy elects to exercise in part its Participation Rights within the Exercise Period ("Exercised New Securities"), Kilroy's Participation
Rights with respect to the portion of New Securities that were not exercised shall then expire. Kilroy's Participation Rights to purchase New Securities in the Next Round Preferred Stock Financing
shall be in preference to and have priority over all other rights of first offer granted by Favrille to any other third party in connection with participation in the Next Round Preferred Stock
Financing. 


        3)    Additional Rights of Kilroy.    If Kilroy elects to exercise its Participation Rights, then Kilroy shall be
treated pari passu to other investors in the Next Round Preferred Stock Financing, with respect to, but not limited to, (i) information rights (with respect to financial information and reports
provided to investors of Favrille); (ii) representations and warranties of Favrille in connection with financing documents; (iii) registration rights; (iv) rights of first offer
with respect to future sales of capital stock by Favrille; and (v) Kilroy shall be entitled to become a party to any investor rights agreement entered into between Favrille and any other investor in
the Next Round Preferred Stock Financing. 


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        4)    Notices.    All notices, requests, demands, and other communications under this Agreement shall be in writing
and shall be deemed to have been duly given on the date of service if served personally on the party to whom notice is to be given, or on the third day after mailing if mailed to the party to whom
notice is to be given, by first class mail registered or certified, postage prepaid, and properly addressed as follows: 



	If to Kilroy:	 	Kilroy Realty Corporation

12200 West Olympic Boulevard, Suite 200

Los Angeles, California 90064

Attention: Legal Department

Fax: (310) 481-6530
	

with copies to:	
 	

Kilroy Realty Corporation

3811 Valley Centre Drive, Suite 300

San Diego, California 92130

Attention: Mr. Roger Simsiman

Fax: (858) 523-0310
	

 	
 	

and
	

 	
 	

Allen Matkins Leck Gamble & Mallory LLP

1901 Avenue of the Stars, Suite 1800

Los Angeles, California 90067

Attention: Anton N. Natsis, Esq.

Fax: (310) 788-2410
	

If to Favrille:	
 	

Favrille, Inc.

10865 Altman Row, Suite 150

San Diego, California 92121

Attention: Chief Financial Officer

Fax: (858) 597-7040
	

with a copy to:	
 	

Cooley Godward LLP

4401 Eastgate Mall

San Diego, California 92121-9109

Attention: Frederick T. Muto, Esq.

Fax: (858) 550-6420






        5.    Termination.    This Agreement shall terminate upon the earlier of (a) a change in control of Favrille and (b)
immediately following the closing of Favrille's IPO (as defined above). For purposes of this Agreement, "change in control" shall mean a change in
ownership or control of Favrille effected through any of the following transactions: 




	(a)
	a
merger, consolidation or reorganization approved by Favrille's stockholders, unless securities representing more than fifty percent (50%) of the total combined voting power of the
voting securities of the successor company are immediately thereafter beneficially owned, directly or indirectly and in substantially the same proportion, by the persons who beneficially owned
Favrille's outstanding voting securities immediately prior to such transaction,



	(b)
	Favrille
sells or disposes of all or substantially all of Favrille's assets, or



	(c)
	the
acquisition directly or indirectly by any person or related group of persons of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Securities Exchange Act) of
securities possessing more than fifty percent (50%) of the total combined voting 




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power
of Favrille's outstanding securities pursuant to a tender or exchange offer made directly to Favrille's stockholders which the Board recommends such stockholders accept. 






        6.    No Impairment.    Favrille will not, by amendment of its Certificate of Incorporation or Bylaws, or through any
reclassification, dissolution, liquidation, issue or sale of securities, sale of assets, or any other voluntary action, willfully avoid or seek to avoid the observance or performance of any of the
terms hereof, but will at all times use commercially reasonable efforts in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate in order to
protect the rights of Kilroy hereunder. Without limiting the generality of the foregoing, Favrille will, to the extent commercially reasonable, take all actions that are necessary or appropriate in
order that Favrille may validly and legally issue to Kilroy fully paid and non-assessable shares of capital stock free from all
taxes, liens, changes, encumbrances, adverse claims and preemptive rights upon the exercise of the Participation Rights of Kilroy hereunder. 



        7.    Representations and Warranties.    Favrille represents and warrants that (i) there are no outstanding
convertible securities other than as reflected on Schedule 1 attached hereto, and (ii) it has full power and authority to enter into this Agreement and that this Agreement, when executed and delivered
by Favrille, will constitute the valid and legally binding obligation of Favrille, enforceable in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other laws of general application affecting enforcement of creditors' rights generally, and as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies. 


        Favrille
further agrees that it shall notify Kilroy if Kilroy's aggregate direct ownership of capital stock in Favrille exceeds ten percent (10%) of Favrille's outstanding shares of
capital stock (calculated on an as-converted to common stock basis). Favrille shall further notify Kilroy of any redemptions or other actions taken or proposed to be taken by Favrille or any other
person which may cause Kilroy's percentage of the capital stock of Favrille to increase above such ten percent (10%) threshold. 


        8.    REIT Limitations and Reporting Requirements.    



        8.1    REIT Limitations.    Notwithstanding anything to the contrary in this Agreement, Kilroy shall not, pursuant to
this Agreement, be entitled to acquire from Favrille equity interests representing more than (a) 9.9% of the total number of then outstanding shares of stock of Favrille (or such successor-in-
interest), measured at the time of acquisition (b) 9.9% of the total combined voting power of all classes of stock of Favrille (or such successor-in-interest) then entitled to vote for the election of
directors of Favrille (or such successor-in-interest), measured at the time of acquisition, or (c) 9.9% of the total value of all then outstanding shares of stock of Favrille (or such
successor-in-interest), measured at the time of acquisition, whichever of the three foregoing tests is the most restrictive. 



        8.2    Reporting Requirements.    Favrille and Kilroy hereby acknowledge that Kilroy, as a public real estate
investment trust (a "REIT"), has certain public reporting obligations. In order to assist Kilroy in meeting such reporting obligations, Favrille hereby
agrees that, to the extent Kilroy owns any equity interest in Favrille pursuant to, or in connection with, this Agreement, and to the extent Favrille's board of directors reasonably determines that
the fair market value of such equity interest has changed during any calendar quarter, then Favrille will, within thirty (30) days following the end of such calendar quarter, provide Kilroy with a
written determination of the then-current fair market value of any such equity interest in Favrille owned by Kilroy. Kilroy hereby agrees to reimburse Favrille, within ten (10) business days of an
invoice therefor, for Favrille's reasonable costs and expenses actually incurred in connection with providing such determination to Kilroy. Favrille's obligations pursuant to this Section 8.2 shall
automatically terminate on the date the New Securities that Kilroy has acquired, or any other securities issued upon conversion of such New Securities, are then either (i) listed for trading on an
exchange, (ii) 



4





 




quoted
on the Nasdaq National or Small-Cap Markets, or (iii) traded in the over-the-counter market. 




        9.    Fractional Shares.    In no event shall any fractional share of common stock or other securities be issued upon
Kilroy's exercise of its Participation Rights hereunder. If, upon such exercise in its entirety, Kilroy would, except as provided in this Paragraph 9, be entitled to receive a fractional share
of common stock or other securities, then Favrille shall issue the next higher number of full shares of common stock or other securities, issuing a full share with respect to such fractional share
provided that Kilroy delivers to Favrille full and adequate consideration for such full share. 


5







   
        10.    Reservation of Common Stock.    Favrille covenants that it will at all times from and after the date hereof
reserve and keep available such number of its authorized but unissued shares of common stock or other securities, or other property, as will be sufficient to provide for the exercise in full of the
Participation Rights represented by this Agreement. 



        11.    Severability.    In the event that any provision of this Agreement becomes or is declared by a court of
competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided
that no such severability shall be effective if it materially changes the economic benefit of this Agreement to any party. 


        12.    Entire Agreement; Modification; Waiver.    This Agreement sets forth the entire agreement of the parties hereto
with respect to the matters contained herein and no prior or contemporaneous agreement or understanding pertaining to any such matter shall be effective for any purpose. No supplement, modification or
amendment to this Agreement shall be binding unless executed in writing by all of the parties. No waiver of any of the provisions of this Agreement shall be deemed, or shall constitute, any waiver of
any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver. No waiver shall be binding unless executed in writing by the party making the waiver. 


        13.    Construction.    This Agreement shall be governed by and construed in accordance with the laws of the State of
California as applied to agreements among California residents, made and to be performed entirely within the State of California. 


        14.    Assignment.    This Agreement may not be assigned by either party, by operation of law or otherwise, without
the prior written consent of the other party; notwithstanding the foregoing, Kilroy shall have the right to assign its rights and obligations hereunder, to one or more of its affiliates (as defined
under the Securities Exchange Act of 1934, as amended), provided that any and all such transferees agree in writing to be bound by the terms hereof. 


6





 

        15.    Counterparts.    This Agreement may be executed in any number of counterparts and signature pages may be
delivered by facsimile, each of which may be executed by less than all of the parties hereto, and all of which together shall constitute one instrument. 



	 	 	KILROY REALTY, L.P.,
 a Delaware limited partnership
	

 	
 	

By:	
 	

Kilroy Realty Corporation,

a Maryland corporation,

General Partner
	

 	
 	

 	
 	

By:	
 	

/s/  STEVE R. SCOTT      

	 	 	 	 	 	 	Its:	Senior Vice President

	

 	
 	

 	
 	

By:	
 	

/s/  JEFFREY C. HAWKEN      
 Jeffrey C. Hawken
	 	 	 	 	 	 	Its:	Executive Vice President

Chief Operating Officer

	

 	
 	
FAVRILLE, INC.,

a Delaware corporation
	

 	
 	

By:	
 	

/s/  JOHN P. LONGENECKER      
 John P. Longenecker

President and Chief Executive Officer




7







 
 

SCHEDULE 1    
    
    Convertible Securities    
    


	1.
	Options
to purchase common stock issued pursuant to Favrille's 2001 Equity Incentive Plan.



	2.
	Favrille's
Series A Preferred Stock and Series B Preferred Stock.



	3.
	Warrant
to purchase 40,000 shares of Series A Preferred Stock issued by Favrille to Silicon Valley Bank. 









QuickLinks


OFFICE LEASE KILROY REALTY

PACIFIC CORPORATE CENTER

KILROY REALTY, L.P., a Delaware limited partnership, as Landlord, and FAVRILLE, INC., a Delaware corporation, as Tenant,



TABLE OF CONTENTS


INDEX


PACIFIC CORPORATE CENTER OFFICE LEASE


ARTICLE 1 PREMISES, BUILDING, PROJECT, AND COMMON AREAS

ARTICLE 2 LEASE TERM: OPTION TERM(S)

ARTICLE 3 BASE RENT

ARTICLE 4 ADDITIONAL RENT



ARTICLE 5 USE OF PREMISES


ARTICLE 6 SERVICES AND UTILITIES

ARTICLE 7 REPAIRS

ARTICLE 8 ADDITIONS AND ALTERATIONS

ARTICLE 9 COVENANT AGAINST LIENS


ARTICLE 10 INSURANCE

ARTICLE 11 DAMAGE AND DESTRUCTION

ARTICLE 12 NONWAIVER

ARTICLE 13 CONDEMNATION

ARTICLE 14 ASSIGNMENT AND SUBLETTING


ARTICLE 15 SURRENDER OF PREMISES; OWNERSHIP AND REMOVAL OF TRADE FIXTURES

ARTICLE 16 HOLDING OVER

ARTICLE 17 ESTOPPEL CERTIFICATES

ARTICLE 18 SUBORDINATION

ARTICLE 19 DEFAULTS; REMEDIES

ARTICLE 20 COVENANT OF QUIET ENJOYMENT

ARTICLE 21 SECURITY DEPOSIT; LETTER OF CREDIT


ARTICLE 22 TELECOMMUNICATIONS EQUIPMENT

ARTICLE 23 SIGNS

ARTICLE 24 COMPLIANCE WITH LAW

ARTICLE 25 LATE CHARGES

ARTICLE 26 LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT



ARTICLE 27 ENTRY BY LANDLORD

ARTICLE 28 TENANT PARKING

ARTICLE 29 MISCELLANEOUS PROVISIONS


SCHEDULE 1 MONTHLY INSTALLMENT OF BASE RENT: CALCULATIONS FOR MEZZANINE PREMISES, GROUND FLOOR LAB PREMISES, AND GROUND FLOOR OFFICE PREMISES


EXHIBIT A PACIFIC CORPORATE CENTER OUTLINE OF PREMISES

10421 Pacific Center Court—Exhibit A


EXHIBIT B PACIFIC CORPORATE CENTER TENANT WORK LETTER


EXHIBIT B PACIFIC CORPORATE CENTER TENANT WORK LETTER


SCHEDULE 1 LANDLORD WORK

10421 Pacific Center Court—Schedule 1



SCHEDULE 2 SECURED IMPROVEMENTS

Favrille, Inc. Improvements Available for Security Interest for Lenders



EXHIBIT C PACIFIC CORPORATE CENTER NOTICE OF LEASE TERM DATES



EXHIBIT D PACIFIC CORPORATE CENTER RULES AND REGULATIONS


EXHIBIT E PACIFIC CORPORATE CENTER FORM OF TENANT'S ESTOPPEL CERTIFICATE


EXHIBIT F PACIFIC CORPORATE CENTER KILROY REALTY


EXHIBIT G PACIFIC CORPORATE CENTER FORM OF LETTER OF CREDIT (Letterhead of a money center bank acceptable to the Landlord)


EXHIBIT H PACIFIC CORPORATE CENTER INVESTMENT AGREEMENT


INVESTMENT AGREEMENT


SCHEDULE 1 Convertible Securities