**Exhibit 10.1**

** **

SUB-SUBLEASE AGREEMENT

 

THIS SUB-SUBLEASE AGREEMENT (“Sub-sublease”) ismade this 30th day of May, 2008, by and between PROSODIE INTERACTIVECALIFORNIA, INC., (“Sub-sublandlord”) and Enernoc, Inc.  (“Sub-Sub-Tenant”)

 

1.   **Premises**.Sub-sublandlord agrees to Sub-sublease to Sub-subtenant, and Sub-subtenantagrees to Sub-sublease from Sub-sublandlord, approximately 8,766 rentablesquare feet  (“RSF”) of space located onthe eastern side of the 4th floor of the building located at 500Howard Street, San Francisco, CA 94105, as shown on the floor plan attachedhereto as Exhibit A (“Premises”).

 

2.   **Master Lease, Sublease and OtherAgreements**. Except as specifically set forthherein, this Sub-sublease is subject and subordinate to all of the terms andconditions of the Master Sublease, dated October 31, 2006, between SunMicrosystems, Inc., (‘‘Master Sublessor”) and Sub-sublandlord and thelease dated November 3, 2000 as amended (“Master Lease”) between UtahState Retirement Investment Fund, as the “Lessor” (“Master Lessor”), and MasterSublessor.   A copy of the MasterSublease is attached hereto as Exhibit B and incorporated herein by thisreference except that the following sections of the Master Sublease are notincorporated herein: Sections 1.1 through 1.19; Sections 2.1 and 2.3; Article 3;the first sentence of Section 4.1; Sections 4.2 and 4.3;Section 4.6;Sections 5.1 through 5.3; Article 6; Sections 7.1 and 7.2; Article 12;Section 13.2.1; Sections 14.1 and 14.4; Article 15; Article 16; Section 18.3;Section 18.4; Section 18.5;  Section 18.7and Section 18,9.  Whereincorporated into this Sub-sublease, the terms “Sublandlord”, “Subtenant”, “Premises”and “Sublease” in the Master Sublease shall refer to “Sub-sublandlord”, “Sub-subtenant”,“Premises” and “Sub-sublease”.  A copy ofthe Master Lease is attached hereto as Exhibit C and is incorporatedherein by this reference to the extent incorporated into the Master Sublease bySection 13.1 of the Master Sublease. Sub-sublandlordrepresents and warrants to Sub-subtenant that (i) the Master Sublease isin full force and effect and has not been amended, (ii) the ExpirationDate of the Master Sublease is March 31, 2012, and (iii) Sub-sublandlordis not aware of any default (or the occurrence of any events which wouldconstitute a default with the passage of time) on the part of (A) Sub-sublandlordor Master Sublessor under the Master Sublease or (B) Master Sublessor orMaster Lessor under the Master Lease.

 

Notwithstandinganything to the contrary in the Master Sublease or the Master Lease, in noevent shall Sub-subtenant have any liability, or responsibility, for theremoval or restoration for any alterations, improvements, or additions that arein existence as of the date of this Sub-sublease.  In addition, Sub-subtenant shall not beobligated to (i) pay the Rent to be paid by Sub-sublandlord under theSublease, (ii) cure any default of Sub-sublandlord under the Sublease, (iii) performany obligation of Sub-sublandlord under the Sublease which arose prior to theCommencement Date and Sub-sublandlord failed to perform, (iv) repair anydamage to the Premises, or cure any violation of law, caused by Sub-sublandlordor existing prior to the Commencement Date, (v) indemnify Master Lessor orMaster Sublessor with respect to any act, omission, negligence or willfulmisconduct of Sub-sublandlord, its agents employees or contractors, (vi) paylate fees, interest or damages due under the Master Sublease which relate tothe acts, omissions, willful misconduct, negligence or default ofSub-sublandlord under the Master Sublease, (vii) separately meter thePremises for utility service, (viii) provide its own janitorial services.

 

Sub-sublandlordagrees not to voluntarily terminate the Master Sublease before the expirationof the Term (as defined below). With respect to the, Sub-subtenant shall beentitled to all utilities, repairs and services furnished by Master Lessorunder the Master Lease and Master 

 

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Sublessor under theMaster Sublease.  Sub-sublandlord agreesto make reasonable and diligent efforts to enforce Master Lessor’s obligationsunder the Master Lease and Master Sublessor’s obligations under the MasterSublease, to the extent that Sub-Subtenant is a beneficiary thereof.  Whenever the consent of the Landlord isrequired under the Master Lease and/or consent of the Sublandlord under theSublease, and whenever the Landlord fails to perform its obligations under theMaster Lease or Sublandlord fails to perform its obligations under theSublease, Sub-Sublandlord agrees to use its reasonable, good faith efforts toobtain that consent or performance on behalf of Sub-Subtenant.

 

3.   **Commencement Date**.  TheCommencement Date of the Sub-sublease shall be upon the later of (i) deliveryof possession of the Premises to Sub-subtenant in the condition requiredhereunder and (ii) receipt by Sub-subtenant of the written consent of boththe Sub-Landlord (Sun MicroSystems, Inc.) and the MasterLandlord (Utah State Retirement Investment Fund) (the “Consents”) estimated tobe on or about June 1, 2008.  IfSub-sublandlord is unable to deliver possession of the Premises and theConsents by July 31, 2008, Sub-subtenant shall have the option toterminate the Sub-sublease.

 

4.   **Term**.

 

(a)  The term ofthis Sub-sublease (“the Term”) shall be for a period the Commencement Date, andshall expire on February 28, 2012 (the “Expiration Date”) unless soonerterminated pursuant to any provision of the Master Sublease or Master Leaseapplicable to the Premises (the “Expiration Date”).

 

(b) Early Access**.**  Sub-subtenant shallhave the right of early access to the Premises, rent free, beginning on June 1,2008, for the purpose of inspecting and planning the configuration andinstallation of its IT and telephone equipment, wiring, etc.  Sub-subtenant shall not be charged for rent,electricity or any other service during the Early Access period, providedspecial building services are not requested in order for Sub-subtenant toperform their own work.

 

5.   **Rent. **Rent shallcommence thirty (30) days from Commencement Date.

 

(a) Sub-subtenant shallpay to Sub-sublandlord each month during the Term of this Sub-sublease, baserent (“Base Rent”) as follows:

 
| Year 1: |   | $38.00 PSF |   | $27,759.00 per month |
|---------|--------|------------|--------|----------------------|
| Year 2: |   | $39.00 PSF |   | $28,489.50 per month |
| Year 3: |   | $40.00 PSF |   | $29,220.00 per month |
| Year 4: |   | $41.00 PSF |   | $29,950.50 per month |

 

(b)     BaseRent shall be abated for the first full calendar month of the Term.  Monthly Base Rent is due and payable on orbefore the first of each month thereafter. If the Commencement Date is not thefirst day of the month, then Sub- subtenant shall pay the prorated Base Rentfor the first partial month on the Commencement Date. The rent shall be paid toSub-sublandlord at the address set forth in Section 16 of thisSub-sublease, or at such other place as Sub-sublandlord may designate, inadvance, on the first day of each and every month throughout the term of thisSub-sublease without any notice, set off, or deduction whatsoever except aspermitted hereunder.

 

(c)     OperatingCosts and Taxes.  Sub-subtenant shallreceive a 2008 Base Year and commencing January 1, 2009, shall pay itsproportionate share of all Operating Costs and Taxes outlined in the underlyingSublease and Master Lease in excess of Operating Costs and 

 

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Taxesfor the 2008 Base Year. Sub-subtenant’s proportionate share shall be the ratiowhich the rentable area of the Premises bears to the rentable area of theMaster Premises, which ratio is agreed to be 3.91% as of the date of thisSub-sublease based on 8,766 rentable square feet of the Premises and 223,681rentable square feet of the Master Premises. Said sums (including any estimatesof such sums) shall be paid to Sub-sublandlord at the times required pursuantto the terms and conditions of the Master Sublease. Sub-sublandlord shallprovide Sub-subtenant with full and complete copies of Master Lessor’s annualreconciliation statements of Operating Costs and Taxes provided toSub-sublandlord under the Master Sublease promptly following Sub-sublessor’sreceipt of the same from Master Sublessor. Sub-subtenant shall have the abilityto request and receive after-hours HVAC in the Premises and Sub-sublandlordshall pursue such request with Master Sublessor upon Sub-subtenants request.Current building hours are Monday to Friday from 7:00 am until 6:00 pm andSaturday from 9:00 am to 1:00 pm. After-hours HVAC cost is currently $150 perhour with a 4 hour minimum; 72 hours notice required.

 

(d) LateCharge. If any rent is not paid within seven (7) days after the due date,Sub-Subtenant shall pay a late charge to Sub-sublandlord equal to 2% of theoverdue payment and interest on such amount at the Interest Rate (as defined inthe Master Lease).  Neither demand for,nor receipt of, any late charge called for under this sub-sublease will: (i) operateto waive any obligation to pay Rent; or (ii) limit the exercise of anyother right or remedy Sub-sublandlord may have under this Sub-sublease in caseof Sub-subtenant’s Default.

 

6.   **Security Deposit andPrepaid Rent**.   Sub-subtenantshall pay a one (1) month security deposit to Sub-sublandlord in the formof check in the amount of Twenty Seven Thousand, Seven Hundred Fifty Nine($27,759.00) Dollars.  Sub-subtenantshall not be paid any interest on such deposit. Security deposit shall be returned to Sub-subtenant upon the expirationof the Sub-sublease term, provided the Premises is returned in acceptablecondition; normal wear and tear expected.

 

7.   **Use of Premises; Parking;Improvements.**Sub-subtenant shall use the Premises only for generaloffice use and any other use currently permitted by the Master Lease.Sub-subtenant shall properly observe and comply with all laws with respect toSub-subtenant’s use of the Premises to the extent required under the MasterSublease.

 

(a)  Furniture,Fixtures & Equipment (FF&E)**: **Sub-subtenant shall have the rightto use the existing FF&E in the Premises throughout the term of theSub-sublease.  Sub-subtenant shall alsohave the right to purchase the existing FF&E in the Premises at the end ofthe lease term at a price to be negotiated within six (6) months but in noevent two (2) months from Sub-sublease expiration.  Sub-subtenant shall provide Sub-sublandlordwith written notice of its intent to purchase or not purchase thefurniture.  The existing furnitureinventory will exclude Sub-sublandlord’s Aeron chairs.  A final inventory list is attached hereto as Exhibit D.

 

(b)  Voice and Data: Sub-subtenantshall be allowed to use and reconfigure the existing voice and data networkwiring during the term of the Sub-sublease. To the best of Sub-sublandlord’sknowledge, the voice and data wiring are in good and operable condition.  Sub-subtenant shall be responsible for anyand all repairs and maintenance associated with such wiring and systems thataffect the Premises throughout the term of this Sub-sublease.

 

(c)  ParkingRights: Sub-subtenant shall have the right to use seven (7) parking spacesin the Building’s parking garage.

 

(d)  24Hour Access: Sub-subtenant shall have access to the Building and the Premises,seven (7) days a week, twenty four (24) hours per day, with electricservice being provided at all times. Sub-subtenant shall be responsible for anycharges associated with its 

 

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request for and usage of any after-hours HVACand utilities for the Premises.

 

(e)     Signage:Sub-subtenant shall have the right to the building lobby directory, elevatorlobby and suite signage per Master Lessor’s standard signage program atSub-sub-subtenant’s cost.

 

8.     **Alterations**.  Subject to the terms of the underlyingSublease and of the Master Lease, Sub-subtenant shall be permitted to makealterations to the Premises with the prior approval of Sub-sublandlord, MasterSublessor and Master Landlord’s approval. Sub-subtenant shall be responsible for the removal of any alterationsinstalled by Sub-subtenant upon expiration of the Sub-sublease term which willbe determined at the time of granting consent.

 

9.     **Assignment; Subletting.** Subject to the terms of the MasterSublease and Master Lease, Sub-subtenant shall be permitted to Sub-sub-subleasethe Premises with Sub-sublandlord’s, Master Sublessor’s and Master Lessor’sprior written approval which would not be unreasonably withheld or delayed.

 

10.   **Insurance**. Sub-subtenant shall maintain the insurancerequired of the “tenant” under Section 11.1 in the Master Lease, provided,however, that all rights and benefits specified for Master Lessor pursuant tothe Master Lease shall apply to and inure to the benefit of Master Lessor,Master Sublessor and Sub-sublandlord.

 

11**.   Condition and Delivery of Premises**. Sub-sublandlordshall deliver the Premises on the Commencement Date vacant of all occupants andclean and free of debris.

 

12**.   Relocation**. Subject to and in accordance with the termsof Section 18.3 of the Master Sublease, in the event that theSub-sublandlord is required to move to a Substitute Premises (as defined in theMaster Sublease), Sub-sublandlord will notify Sub-subtenant immediately uponreceiving notice from Master Sublessor of any possible relocation of thePremises. Such relocation shall not entitle Sub-subtenant to terminate thisSub-sublease so long as Master Sublessor or Sub-sublandlord agrees to pay thecosts of Sub-subtenant in relocating the Premises in accordance with Section 18.3of the Master Sublease.  Such space shallbe of similar quality, size and attributes of the Premises.  Sub-sublandlord shall pay all relocationcosts, including without limitation, those identified in Section 18.3 ofthe Master Sublease.

 

13.   **Default**. Theoccurrence of any of the following shall constitute a material breach of thisSub-sublease and a default by Sub-subtenant (a “Default”):

 

(a)  Sub-subtenant’sfailure to pay any installment of Base Rent, Additional Rent or any otherpayment due hereunder within ten (10) days after receipt of notice fromSub-sublandlord specifying such failure;

 

(b)  Sub-subtenant’sfailure to comply with any term, provision or covenant of this Sub- sublease,Sublease or the Master Lease (other than the payment of Base Rent, AdditionalRent or any other payment due hereunder) for a period of ten (10) daysafter written notice thereof; provided that the default cannot reasonably becured within a ten (10) day period, Sub-sub-subtenant shall have areasonable time to cure the default before Sub-sublandlord exercises its rightsunder this Sub-sublease, provided that Sub-subtenant has begun affirmative andreasonable efforts to cure the default within the initial ten (10) dayperiod and diligently pursues cure to completion;

 

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(c)  Sub-subtenantbecomes insolvent, transfers any property in fraud of Subtenant’s creditors, orassigns its assets for the benefit of creditors;

 

(d)  Sub-subtenantfiles a petition under any section of the Federal Bankruptcy Code, as amended,or under any similar law or statute of the United States of any State thereof;or Sub-subtenant is adjudicated a debtor or insolvent in proceedings filedagainst Sub-subtenant under any laws or statutes;

 

(e)  If any courtappoints a receiver or trustee for all or substantially all ofSub-sub-subtenant’s assets; or

 

(f)  TheSub-sublandlord may exercise, without limitation of any other rights and remediesavailable to it hereunder or at law or in equity, and all rights and remediesof Landlord set forth in the Master Lease in the event of a default by thetenant hereunder. No receipt of moneys by Sub-sublandlord from Sub-subtenantafter the exercise by Sub-sublandlord of its rights and remedies in the eventof a default hereunder (including, without limitation, the termination of thisSub-sublease) shall in any way extend the term of this Sub-sublease orSub-subtenant’s right of possession hereunder, nor shall the giving of anynotice thereafter reinstate, continue, or extend the term or affect any noticegiven to Sub-subtenant or any suit commenced or judgment entered prior toreceipt of such monies, except to the extent expressly agreed to by Sub-sublessor.

 

14.   **Consent of MasterSub-sublandlord and Master Lessor**. The Master Lease and MasterSublease requires that Sub-sublandlord obtain the consent of Master Lessor andMaster Sublessor to any subletting by Sub-sublandlord. This Sub-sublease shallnot be effective unless and until Master Lessor and Master Sublessor sign aconsent to this subletting satisfactory to Sub-sublandlord and Sub-subtenant.Sub-sublessor agrees that the consent of the Master Lessor must contain anacknowledgement of the parking rights granted to Sub-subtenant under Section 7(c) below.  If either Master Lessor or Master Sublessorfails to consent to this Sub-sublease, including the parking rights, by July 31,2008, then Sub-subtenant may terminate this Sub-sublease by written notice toSub-sublandlord and in such event neither party shall have any obligations tothe other party under this Sub-sublease.

 

15.   **Subtenant’s Insurance and Indemnity**.Sub-subtenant hereby waives claims against Master Lessor, Master Sublessor andSub-sublessor for death, injury, loss or damage of every kind and nature, ifand to the extent that Sub-sublandlord waives or releases such claims againstMaster Sublessor under the Master Sublease or Master Lessor under the MasterLease. Sub-sublandlord and Sub-subtenant shall each procure an appropriateclause in or endorsement to any property insurance covering the Premises (andthe premises subleased under the Master Sublease) and personal property,fixtures and equipment located therein, wherein the insurer waives subrogationor consents to a waiver of right of recovery, and, notwithstanding anything tothe contrary contained herein, Sub-sublandlord and Sub-subtenant agree not tomake any claim against, or seek to recover from, the other for any loss ordamage to its property or the property of others resulting from fire or otherhazards to the extent of coverage by such property insurance; provided,however, that the release, discharge, exoneration and covenant not to suecontained herein and in the Master Lease shall be limited by and be coextensivewith the terms and provisions of the waiver of subrogation or waiver of rightof recovery. Sub-subtenant acknowledges that Sub-sublandlord shall not carryinsurance for and shall not be responsible for Sub-subtenant’s furniture,fixtures, equipment or other property, and any loss suffered by Sub-Sub-subtenant due to the interruption of Sub-subtenant’s business.

 

Sub-subtenant shall indemnify, defend and holdSub-sublandlord harmless against 

 

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any claims, demands, judgments and awards, losses, liabilities andexpenses, including reasonable attorneys fees and costs, resulting from (i) thenegligence or willful misconduct of Sub-subtenant, its employees, agents andinvitees in the Building (ii) any act, omission or negligence ofSub-subtenant, its employees, agents and invitees in the Premises, (iii) anyalterations or improvements made to the Premises, whether Sub- sublessor gaveits consent thereto or not (iv) any violations of applicable law bySub-subtenant; and (v) any Default. Sub-subtenant’s obligation toindemnify and hold Sub-sublandlord harmless shall not extend to any portion ofa loss, judgment or award directly attributable to Sub- sublessor or itsagents, contractors’ or employees’ gross or active negligence or willfulmisconduct provided that Sub-sublandlord give Sun-subtenant prompt writtennotice of any such claim or threatened claim, and Sub-subtenant cooperates (atno expense to Sub-subtenant) in any defense or settlement of such claim.Sub-sublandlord’s and Sub-subtenant’s obligations under this Section shallsurvive the expiration or termination of this Sub-sublease.

 

Sub-sublandlord shall indemnify, defend and holdSub-subtenant harmless against any claims, demands, judgments and awards,losses, liabilities and expenses, including reasonable attorneys fees andcosts, resulting from (i) the negligence or willful misconduct ofSub-sublandlord, its employees, agents and invitees in the Building (ii) anyact, omission or negligence of Sub-subtenant, its employees, agents andinvitees in the remainder to the premises subleased to Sub-sublandlord underthe Master Sublease, and (iii) any default by Sub-sublandlord under, orearly termination of, the Master Sublease.

 

To the fullest extent allowed by applicable law, inthe event of any breach of this Sub- Sublease by either party, each party shallnot be liable for any punitive, exemplary or consequential damages, including,without limitation, any business interruption damages or loss of income orprofit there from, and all such remedies or damages are expressly waived.

 

16.   **Notice**. Any notice, approval,request, consent, bill, statement, or other communication required or permittedto be given, rendered, or made by either party hereto, shall be deemed givenfive (5) days from when sent when received or personally refused, shall bein writing, and shall be sent to the parties hereto by certified U.S. mail,postage prepaid, return receipt requested, or a recognized overnight deliveryservice such as Federal Express, at the following addresses:

 
| If  to Sub-sublandlord:               |            |   |
|---------------------------------------|-----------------|--------|
|                                  |            |   |
| PROSODIE INTERACTIVE CALIFORNIA, INC. |            |   |
| 855 SW 78th Avenue               |            |   |
| Suite 100                        |            |   |
| Plantation, FL 33324                  |            |   |
|                                  |            |   |
| Attention:                            | Arlene Matthews |   |   |
| Telephone:                            | 954 671-6558    |   |   |
| Fax:                                  | 954  671-6558   |   |   |
|                                  |            |   |
| If  to Sub-subtenant:                 |            |   |
|                                  |            |   |
| ENERNOC, INC.                         |            |   |
| 75 Federal Street, Suite 300     |            |   |
| Boston, MA 02110                      |            |   |

 

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| Attention:               | Julia Regan    |   |   |
|--------------------------|----------------|--------|--------|
| Telephone:               | 617 398-2202   |   |   |
| Fax:                     | 617-227-9910   |   |   |
|                     |           |   |
| With copy to:            |           |   |
|                     |           |   |
| EnerNOC, Inc             |           |   |
| 500  Howard Street,      |           |   |
| San  Francisco, CA 94105 |           |   |
|                     |           |   |
| Attention:               | Kiera Gilhooly |   |   |
| Telephone:               | 415.343.9510   |   |   |
| Fax:                     | 415.343.9559   |   |   |
|                          |                |        |        |  |

 

Eachparty shall have the right to designate by notice, in writing, any other addressto which such party’s notice is to be sent.

 

17.   **Surrender**. Onthe date upon which the term hereof shall expire or come to an end, whether onthe Expiration Date, by lapse of time, or otherwise, at Sub-subtenant’s solecost and expense, Sub-subtenant agrees to surrender the Premises toSub-sublandlord, vacant of all occupants and personal property belonging toSub-subtenant, clean and free of debris, with ordinary wear and tear expectedat the end of the sublease term.

 

18**.   Holding Over**.Sub-subtenant has no right to occupy the Premises or any portion thereof afterthe expiration of the Term or earlier termination of this Sub-sublease.

 

Inthe event Sub-subtenant or any party claiming by, through or underSub-subtenant holds over, Sub-sublandlord may exercise any and all remediesavailable to it at law or in equity to recover possession of the Premises, andto recover damages, including without limitation, all damages payable bySub-sublandlord to Master Sublessor by reason of such holdover. Without limitingthe damages recoverable under the foregoing sentence, for each and every monthor partial month that Sub-subtenant or any party claiming by, through or underSub-subtenant remains in occupancy of all or any portion of the Premises afterthe expiration of the Term or earlier termination of this Sub-sublease,Sub-subtenant must pay a holdover rent of 150% of the then existing Base Rentfor the first two (2) months of holdover. Beyond the initial two (2) monthperiod, Sub-subtenant’s holdover rent shall increase to 200% of its then BaseRent for the Premises as minimum damages and not as a penalty. The acceptanceby Sub-sublandlord of any lesser sum will be construed as payment on accountand not in satisfaction of damages for such holding over.

 

19.   **Severability**. If any terms orprovisions of this Sub-sublease or the application thereof to any person orcircumstance shall to any extent be invalid or unenforceable, the remainder ofthis Sub-sublease or the application of such term or provision to persons orcircumstances other than those as to which it is invalid or unenforceable,shall not be affected thereby; and each term and provision of this Sub-subleaseshall be valid and be enforceable to the fullest extend permitted by law.

 

20.   **Broker’s Commission**. Studley, asSub-subtenant’s exclusive representative, shall be paid a commission equal toOne Dollar and fifty cents ($1.50) per RSF, per leased year.  Staubach, as Sub-sublandlord’s broker, shallbe paid a commission equal to Seventy five cents ($0.75) per RSF, per leasedyear. Said commission shall be paid by Sub-sublandlord fifty (50%) percent uponlease execution and fifty (50%) percent upon the Lease 

 

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Commencement.

 

21.   **Governing Law**. The validity, construction,interpretation, and performance of the covenants and conditions containedherein shall be governed by and construed in accordance with the domestic lawsof the State of California, excluding, however, such laws as pertain toconflicts of law.

 

22.   **Force Majeure**. In no event shall  Sub-sublandlord be liable for failure toperform any obligation under this Sub-sublease in the event thatSub-sublandlord is prevented from so performing by strike, lockout, breakdown,accident, order or regulation of or by any governmental authority, or failureof supply, or because of war or other emergency, or for any similar dissimilarcause beyond Sub-sublandlords reasonable control or for any cause due to anyact or neglect of Sub-subtenant or its servants, agents, employees, licensees,or any person claiming by, through or under Sub-subtenant.

 

23.   **Attorneys’ Fees**. If either party hereto commences an actionagainst the other to enforce any obligation hereunder, upon the conclusion ofsuch action, the prevailing party will be entitled to recover from thenonprevailing party, the prevailing party’s costs for such action, including,but not limited to, reasonable attorney’s fees and court costs.

 

24.   **Entire Agreement**. ThisSub-sublease contains the entire agreement between the parties, and no rightsare created in favor of either party other than as specified or expresslycontemplated in this Sub-sublease, and the Master Sublease and Master Lease, tothe extent such is incorporated herein. In addition, no agreement shall beeffective to change or modify this Sub-sublease in whole or in part unless inwriting and duly signed by the party against whom enforcement of such change ormodification is sought.

 

IN WITNESS WHEREOF, the parties have hereto executedthis Sub-sublease on the date above written.

 
| **SUB-SUBLANDLORD**                        | **SUB-SUBTENANT**             |
|--------------------------------------------|-------------------------------|
| **PROSODIE  INTERACTIVE CALIFORNIA, INC.** | **ENERNOC,  INC.**            |
|                                       |                          |
|                                       |                          |
| BY:                                        | /S/ Marie Curtis              |   | By: | /S/ Neal Isaacson |
|                                       |                          |
| TITLE: Chief Financial Officer             | TITLE: Chief Financial Office |
|                                            |                               |  |  |  |

 

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EXHIBIT A

 

PREMISES

 

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EXHIBIT B

 

**SUBLEASE**

500 Howard Street, San Francisco CA

 

ThisSublease (“Sublease”), dated October 31, 2006 (the “Effective Date”), isentered into by and between SUN MICROSYSTEMS, INC., a Delaware corporation (“Sublandlord”),and PROSODIE INTERACTIVE, CALIFORNIA, a Delaware Corporation (“Subtenant”).

 

1.               BASIC SUBLEASE PROVISIONS

 

**Premises**: The Premises under this Sublease initially consistof approximately seventeen thousand, nine hundred forty-five (17,945) rentablesquare feet on floor 4 (the “Premises”), in the building commonly known asFoundry Square IV, 500 Howard Street, San Francisco, California (“Building”).The Premises demised hereunder consist of a portion of those certain premises (“MasterPremises”) consisting of approximately two hundred twenty-three thousand sixhundred eighty-one (223,681) retable square feet, which is demised pursuant tothe Master Lease. The Premises are depicted on **Exhibit A**to this Sublease. The final rentable square feet of the Premises shall bedetermined by Sublandlord’s architect using the “Standard Measure for MeasuringFloor Area in Office Buildings” published by the Secretariat, Building Ownersand Managers Association International (ANSI/BOMA Z65.1-1996), approved June 7,1996.

 

**Master Landlord**: Utah State Retirement InvestmentFund/Cottonwood.

 

**Master Lease**: Lease Agreement dated November 3, 2000,entered into by Sublandlord, as tenant, and K3 First Street Associates, LLC, aCalifornia limited liability company, predecessor-in-interest to MasterLandlord, as lessor (therein refereed to as “Landlord”), as subsequentlyamended by Amendment No. 1 dated November 30,2000 (“First Amendment”),Second Amendment to Lease Agreement dated March 29,2002 (“Second Amendment”),Third Amendment to Lease Agreement dated July 1, 2002 (“Third Agreement”),Fourth Amendment to Lease Agreement dated February 26,2004 (“FourthAmendment”), and Fifth Amendment to Lease Agreement dated February_, 2005 (“FifthAmendment”) with respect to certain property commonly known as 500 HowardStreet, San Francisco, California (the “Property”). The Lease Agreement, FirstAmendment, Second Amendment, Third Amendment, Fourth Amendment and FifthAmendment are attached hereto as **Exhibit B**and are hereinafter collectively refereed to as the “Master Lease.”

 

**Term**: Approximately sixty (60) months beginning on theCommencement Date and ending on the Expiration Date, unless terminated earlierin accordance with the terms and conditions of this Sublease.

 

**Estimated Commencement Date**: Upon SubstantialCompletion of Sublandlord work, but in no event later than One Hundred ThirtyFive (135) days after the Effective Date of this Sublease, subject to ForceMajeure.

 

**Commencement Date**: This Sublease shall be effective for allpurposes upon mutual execution and the Term shall begin on the CommencementDate, which shall be the date upon which both of the following events haveoccurred; (i) the date Sublandlord’s Work is Substantially Complete (asboth such terms are defined in the Work Letter); and (ii) the date theMaster Landlord delivers its written consent to this Sublease. In the eventthat the Sublandlord is unable to deliver the Premises within One Hundred (100)days after the Estimated Commencement Date, unless due to Subtenant Delay (asdefined in the Work Letter) or Force Majeure, then Subtenant shall have theright to terminate this Sublease by giving written notice thereof toSublandlord, at no cost or penalty to Subtenant. In the event the Subleaseterminates pursuant to this Section 1.6, Sublandlord shall returnSubtenant’s Security Deposit and any Rent held by Sublandlord held withinforty-five (45) days of the Sublease termination.

 

**Rent Commencement Date**: Three (3) monthsafter the Commencement Date.

 

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**Expiration Date**: The last day of the calendar month in whichfalls the fifth (5th) anniversary of the Commencement Date. Thus, ifthe Commencement Date is the Estimated Commencement Date in Section 1.5above, the Expiration Date will be December 31, 2011.

 

**Base Rent**: The Base Rent for the Premises shall be:

 
| **Period** | ** ** | **Annual Rate Per  Square Foot** | ** ** | **Annual Base Rent** | ** ** | **Monthly Base Rent** | ** ** |
|------------|------------|-------------------------------------------------|------------|--------------------------------|------------|---------------------------------|------------|
| ** ** | ** ** | ** **                                      | ** ** | ** **                     | ** ** | ** **                      | ** ** |
| ** ** | ** ** | ** **                                      | ** ** | ** **                     | ** ** | ** **                      | ** ** |
| ** ** | ** ** | ** **                                      | ** ** | ** **                     | ** ** | ** **                      | ** ** |

 

**Subtenant’s Share**: 8.02%

 

**Improvement Allowance**: NONE. See Work Letterattached as Exhibit C to this Sublease.

 

**Permitted Uses**: General office use and any other usecurrently permitted by the Master Lease.

 

**Security Deposit**: One (1) month of Base Rent based on anannual rental rate of $35.50, totaling Fifty Three Thousand, Eighty Sevendollars and 29/100 ($53,087.29).

 

**Address Payment of Rent**:

 
|                                   |               | Jones  Lang LaSalle                    |
|----------------------------------------|--------------------|----------------------------------------|
|                                   |               | C/o  Sun Microsystems, Inc.       |
|                                   |               | 525  William Penn Way, 20th Floor |
|                                   |               | Pittsburg,  PA 15259                   |
|                                   |               | Attn.:  Lease Administration           |
| **Sublandlord’s Notice Address:** | ** **         | ** **                             |
|                                   |               | Jones  Lang LaSalle                    |
|                                   |               | C/o  Sun Microsystems, Inc.       |
|                                   |               | 525  William Penn Way, 20th Floor      |
|                                   |               | Pittsburg,  PA 15259                   |
|                                   |               | Attn.:  Lease Administration           |
| With  a copy to:                       |               |                                   |
|                                   |               | Sun  Microsystems, Inc.           |
|                                   |               | 4150  Network Circle                   |
|                                   |               | MS  SCA12-202                          |
|                                   |               | Santa  Clara, CA 95054                 |
|                                   |               | Attn.:  Real Estate Counsel            |
| **Subtenant’s Notice Address:**   | ** **         | ** **                             |
|                                   |               | Prosodie  Interactive                  |
|                                   |               | Prior  to Commencement Date            |
|                                   |               | 160  Spear Street, Suite 330      |
|                                   |               | San  Francisco, CA 94105               |
|                                   |               |                                   |
|                                   |               | After  Commencement Date:              |
|                                   |               | 500  Howard Street, 4th Floor          |
|                                   |               | San  Francisco, CA 94105               |
|                                   |               | Attn.: Lease  Administration           |
|                                   |               |                                   |
| **Brokers**: For  Sublandlord:         | Jones Lang LaSalle |                                   |   |
|                                   | For Subtenant:     | The Staubach Company                   |
|                                   |               |                                   |
| **Guarantor**: Prosodie  S.A.     |               |                                   |
| **Sublease Base Year**: 2007      |               |                                   |
|                                        |                    |                                        |  |  |  |

 

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**Building Hours**: 7:00 A.M. to 6:00P.M. during BusinessDays (defined below), and (:00A.M. to 1:00P.M. on Saturdays, excluding Sundaysand Holidays (defined below).

 

**Business Days**: Monday through Friday of each week,exclusive of New Year’s Day, President’s Day, Memorial Day, Independence Day,Labor Day, Thanksgiving Day and Christmas Day (“Holidays”). Sublandlord maydesignate additional Holidays, provided that any additional Holidays arecommonly recognized by other office building landlords in San Francisco.

 

TheTerms in the Basic Sublease Provisions are used in this Sublease as definedterms and have the meanings given above. Other capitalized words and phraseshave the meanings given to them elsewhere in this Sublease or, if not definedherein, the meanings described to them in the Master Lease. Unless otherwiseindicated, all section and exhibit references are to the sections and exhibitsof this Sublease.

 

**2.     DEMISE OF PREMISES**

 

Sublandlord hereby subleases the Premises to Subtenant, and Subtenanthereby subleases the Premises from Sublandlord for the Term, on and subject tothe terms and conditions of this Sublease.

 

Sublandlord hereby assigns to Subtenant the non-exclusive right to usethe Common Areas within the Building and the Project in the same manner andsubject to the same conditions as Sublandlord is granted such rights under theMaster Lease.

 

Sublandlord hereby assigns to Subtenant its right to sublease up tonine (9) parking spaces in the Parking Facility on the same terms andconditions as apply to Sublandlord’s lease of such parking spaces under Section 1of Exhibit “E” to the Master Lease (including, without limitation,Subtenant’s payment of the Monthly Parking Rental). Subtenant shall contractdirectly with Master Landlord for such parking spaces and any Monthly ParkingRental shall be paid directly to Master Landlord and shall not constitute thepayment of Rent under this Sublease.

 

**3.     TERM**

 

The Term will commence on the Commencement Date specified in the BasicSublease Provisions. At Sublandlord’s request, Subtenant shall confirm, in writingon such reasonable form as Sublandlord may provide, the exact date that theCommencement Date occurred. If for any reason, the Commencement Date has notoccurred by the Estimated Commencement Date, Sublandlord will not be liabletherefore, nor will such failure affect the validity of this Sublease or theobligations of Subtenant hereunder. Notwithstanding anything herein to thecontrary: (i) In the event that the Commencement Date is actually delayedbeyond the Estimated Commencement Date due to an act of Sublandlord or itsagents or due to a Sublandlord Delay as defined in Section 3.2 of the WorkLetter, then Subtenant shall be entitled to an additional day of free rent foreach day of such delay; and (ii) in the event that the Commencement Dateis actually delayed beyond the Estimated Commencement Date due to an act ofSubtenant or its agents resulting in a Subtenant Delay as defined in Section 3.2of the Work Letter, then the free rent period between the Commencement Date andthe Rent Commencement Date shall be reduced for each day of such delay.

 

The Term will end on the Expiration Date, unless earlier terminated asprovided elsewhere in this Sublease, in which case the Term will end on suchearlier termination.

 

**4.****             ****RENT**

 

4.1 The consideration payable by Subtenant for the Premises consists ofthe Base Rent Specified in the Basic Sublease Provisions and the AdditionalRent set forth in Sections 4.3 and 4.4. Base Rent, Additional Rent and allother amounts, however designated, required to be paid 

 

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orreimbursed by Subtenant constitute and are collectively referred to as “Rent.”Subtenant’s covenant to pay Rent will be independent of every other covenant inthis Sublease.

 

4.2 Beginning on the Rent Commencement Date and constituting thereafteron the first day of each month during the Term, Subtenant must pay toSublandlord in advance, and without notice, demand, deduction or offset, themonthly amount of the Base Rent. Subtenant must pay the first full month’s Rentupon the Effective Date, and it the Commencement Date is not the first day ofthe month, then the Subtenant must pay the prorated Base Rent for the firstpartial month on the Commencement Date.

 

4.3  If in any calendar yearduring the Term, the total amount of Operating Costs and Taxes (as defined inthe Master Lease) for the Building exceed the amount of Operating Expenses inthe Sublease Base Year, then Subtenant shall pay to Sublandlord, as “AdditionalRent”, an amount which is the product of (1) the amount of such increasein Operating Expenses, multiplied by (2) Subtenant’s Share, Subtenant’sShare of increases in Operating Expenses for any partial calendar year duringthe Term shall be determined by multiplying the amount of Subtenant’s Share ofincrease in Operating Expense for the full calendar year by a fraction, thenumerator of which is the number of days during such calendar year fallingwithin the Term and the denominator of which is three hundred sixty-five (365).If in any calendar year during the Term, the amount of Taxes exceeds the amountof Taxes for the Sublease Base Year, then Subtenant shall pay, as AdditionalRent, an amount which is the product of (1) the amount of such increase inTaxes, multiplied by (2) Subtenants Share. Subtenant’s Share of increasesin Taxes for any partial calendar year during the Term shall be determined bymultiplying the amount of Subtenant’s Share of increase in Taxes for the fullcalendar year by a fraction, the numerator of which is the number of daysduring such calendar year falling within the Term and the denominators of whichis three hundred sixty-five (365).

 

4.4  Subtenant shall also pay asAdditional Rent, an amount equal to all expenses incurred by Sublandlord inproviding services to the Premises which are (i) required to be suppliedby Sublandlord under this Sublease but not by Master Landlord under the MasterLease, or (ii) supplied by Master Landlord under the Master Lease upon thecondition that Sublandlord pay or reimburse Master Landlord for such services,or (iii) not required by this Sublease but nevertheless furnished at therequest of Subtenant. Subtenant shall not be required to pay Additional, Rentas a result of Sublandlord’s exclusive use and needs.

 

AdditionalRent shall be paid within ten (10) business days after the delivery toSubtenant of an invoice therefore, except to the extent the Master LeaseOperating Costs and Taxes are payable by Sublandlord on an estimated basis, inwhich case the Additional Rent in respect thereto must be paid in advance whenBase Rent is due without notice or invoice based on Master Landlord’s estimates(provided, that Subtenant will be notified in writing of Master Landlord’sestimates (provided, that Subtenant will be notified in writing of MasterLandlord’s estimates of Operating Costs and Taxes and any changes thereto).Upon any reconciliation of estimated ad actual Master Lease Operating Costs andTaxes, the corresponding Additional Rent must be adjusted between Sublandlordand Subtenant (with appropriate reimbursements or additional payments) withintwenty (20) days after delivery to Subtenant of any reconciliation statementunder the Master Lease. For purposes of calculating Master Lease OperatingCosts and Taxes, Sublandlord will be entitled to rely conclusively on MasterLandlord’s determination of estimated and actual Master Lease Operating Costsand Taxes, in the event that within ninety (90) days after Subtenant’s receiptof the reconciliation statement, Subtenant reasonably believes that certain ofthe Operating Costs and Taxes include costs that are not properly includedwithin the term Operating Costs and Taxes or Master Landlord has erred incalculating the same, Subtenant may request in writing that Sublandlord, atSubtenant’s sole expenses, exercise its rights to inspect and/or audit MasterLandlord’s books and records pertaining to Operating Costs and Taxes to theextent permitted by Section 3.2 of the Master Lease (“Operating CostsAudit”). Sublandlord may delay the commencement of any such Operating CostsAudit until Subtenant deposits with Sublandlord a sum sufficient to coverSublandlord’s 

 

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estimatedexpenses in connection therewith. If Sublandlord obtains any reduction from MasterLandlord pursuant to any audit of Operating Costs and Taxes under the MasterLease, it shall make an appropriate adjustment, based on the amount actuallycredited to it (less Sublandlord’s reasonable costs and expenses in procuringsuch reduction in such expenses) and the period covered by such credit withinsixty (60) days after it receives any adjustment. Subtenant shall work in goodfaith to resolve any questions it may have relative to operating expense. IfSubtenant is unable to resolve its questions, it may audit Sublandlord’s booksat a location designated by Sublandlord during normal business hours. Subtenantshall receive reimbursement of its commercially reasonable audit costs if it isovercharged by more than five percent (5%) of the actual operating expensesduring the prior year. Subtenant’s auditor shall not be contingency based. IfSubtenant does not find a discrepancy greater than five percent (5%), Subtenantshall pay the commercially reasonable Sublandlord costs to oversee the audit. IfMaster Landlord receives a reduction of its prior year or years Real EstateTaxes due to an Ad Valorem tax protect (commonly known as a Proposition 8reduction) and Sublandlord receives a reduction in its prior years Real EstateTaxes as a result, Subtenant shall also receive its prorate share of anyreduction in its prior years Real Estate Taxes that it had previously paid toSublandlord.

 

4.5 AllRent must be paid to Sublandlord at the Address for Payment of Rent specifiedin the Basic Sublease Provisions, or to such other person or such other placeas Sublandlord may from time to time designate by giving notice in writing.

 

4.6 Ifany Rent is not paid within five (5) days after the date when due,Subtenant must pay a late charge to Sublandlord equal to all interest and latecharges as Sublandlord would sustain under the Master Lease in the event thatSublandlord were delinquent in paying such amount under the Master Lease.Neither demand for, nor receipt of, any late charge called for under this Subleasewill: (i) operate to waive any default by Subtenant or provide asubstitute for Subtenant’s full and timely performance of the obligation to payRent; or (ii) limit the exercise of any other right or remedy Sublandlordmay have under this Sublease in case of Subtenant’s Default.

 

**5.****             ****CONDITIONAND USE OF PREMISES**

 

5.1On or before the Commencement Date, Sublandlord agrees to perform, at its cost,that certain improvement work defined as “Sublandlord Work” in the Work Letterattached as **Exhibit C** in the accordancewith the terms and conditions of the Work Letter. Except for the SublandlordWork, Sublandlord shall have no obligation to improve or otherwise modify thePremises for Subtenant’s use. Subject to Sublandlord’s obligation to completethe Sublandlord Work, Subtenant shall accept the Premises in the “as is” and “withall faults” condition as of the Effective Date, including but not limited totitle, physical condition, size or dimensions of the Premises, and the zoning,building and land use restrictions applicable to the Premises.  Subtenant acknowledges that Sublandlord hasnot made any representations, warrantless or promises to Subtenant regardingthe Premises or the Building. Sublandlord shall deliver the Premises in acondition suitable for occupancy with all work that has been defined as “Sublandlord’sWork” ad shall be compliant with current building codes and regulations as ofthe Commencement Date. Within the first year of the term, Sublandlord shallcoordinate with its contractor for correction of any commercially reasonabledefects in the construction of the Premises that Subtenant identifies toSublandlord.

 

5.2  The Premises may be used and occupied solelyfor the Permitted Uses specified in the Basic Sublease Provisions. Subtenantmust not use or suffer or permit the Premises to be used for any other purposeexcept with Master Landlord’s and Sublandlord’s prior written consent, whicheither or both of Master Landlord and Sublandlord may withhold in its or theirsole and absolute discretion.

 

5.3  Subtenant specifically agrees that it shallmaintain, repair and replace all fixtures and improvements to the Premises(including supplemental HVAC, if any, serving the Premises) 

 

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inthe same condition and manner that Sublandlord is required to maintain, repairand replace such fixtures and improvements under the Master Lease.

 

5.4 SecurityServices.

 

5.4.1 Subtenant acknowledges that under the MasterLease, Master Landlord (and not Sublandlord) is the party responsible forproviding in accordance with the standards observed by other comparable firstclass office buildings in the South Financial District: (i) a lobbysecurity guard, including, without limitation, all base salary, bonus,benefits, and the costs of related improvements, fixtures and equipment in thelobby of the Building, as well as the reasonable cost of providing security onmulti-Subtenant floors, shall be an Operating Cost under the Sublease.Subtenant acknowledges that Subtenant (and not Master Landlord or Sublandlord)shall be solely responsible for providing security services to and in thePremises.

 

5.4.2 Notwithstanding the provisions of 5.4.1 above,Subtenant acknowledges and agrees that neither Master Landlord’s agreement to providesuch security services or Master Landlord’s actual provision of the same shalldirectly or indirectly create any liability (and Subtenant hereby waives anyclaim based on any such liability) on the part of the Master Landlord orSublandlord to Subtenant or to any persons occupying or visiting the Premisesor the Building, or any other person or entity with respect to any loss bytheft, injury or loss of life, or any other damage suffered or incurred inconnection with any entry into the Premises or any other breach of securitywith respect to the Premises or the Building.

 

5.5 Subtenantmust comply with all laws, ordinances, orders, rules and regulations ofall governmental authorities and of all insurance bodies and their fireprevention engineers at any time in force, applicable to the Premises or toSubtenant’s particular use or manner or use thereof, to the extent Sublandlordis obligated to perform the same with respect to the Master Premises under theMaster Lease.

 

5.6 Subtenantagrees to comply with all rules and regulations that Master Landlord hasmade or may hereafter from time to time make for the Building or the Project.Sublandlord and Subtenant will not be liable in any way for damage caused bythe non-observance by any of the other tenants of such similar covenants intheir leases or of such rules and regulations.

 

**6.****             ****SUBTENANT’SINSURANCE AND INDEMNITY**

 

6.1Sublandlord shall not be required to maintain the insurance required under Section 11.2of the Master Lease. Subtenant shall be required to maintain the insurancerequired of “tenant” under Section 11.1 of the Master Lease and shallcomply with the requirements set forth in 11.3 of the Master Lease.

 

6.2Subtenant hereby waives claims against Master Landlord and Sublandlord fordeath, injury, loss or damage of every kind and nature, if and to the extentthat Sublandlord waives or releases such claims against Master Landlord underthe Master Lease. Sublandlord and Subtenant shall each procure an appropriateclause in or endorsement to any property insurance covering the Premises andpersonal property, fixtures and equipment located therein, wherein the insurerwaives subrogation or consent to a waiver of right of recovery, and,notwithstanding anything to the contrary contained herein, Sublandlord andSubtenant agree not to make any claim against, or seek to recover from, theother for any loss or damage to its property or the property of othersresulting form the fire or tore hazards to the extent covered by such propertyinsurance; provided, however, that the release, discharge, exoneration andcovenant not to sue contained herein and in the Master Lease shall be limitedby and be coextensive with the terms and provisions of the waiver ofsubrogation or the waiver of right of recovery. Subtenant acknowledges thatSublandlord shall not carry insurance for and shall not be 

 

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responsiblefor, (i) Subtenant furniture, fixtures, equipment or other property, and (ii) anyloss suffered by Subtenant due to the interruption of Subtenant’s business.

 

6.3Subtenant shall indemnify, defend and hold Sublandlord harmless against anyclaims, demands, judgments and awards, losses , liabilities and expenses,including reasonable attorneys fees and costs, resulting from (i) the useand occupancy of the Premises and the Building by Subtenant, its employees,agents and invitees, (ii) any act, error, omission or negligence ofSubtenant, its employees agents and invitees in, on or about the Premises andthe Building, (iii) any alterations or improvements made to the Premises,whether Sublandlord gave its consent thereto or not, (iv) any violationsof applicable law by Subtenant; and (v) any Default. Subtenant’sobligation to indemnify and hold Sublandlord harmless shall not extend to anyportion of a loss, judgment or award directly attributable to Sublandlord orits agents, contractors’ or employees’ gross or active negligence or willfulmisconduct. Sublandlord’s and Subtenant’s obligations under this Section shallsurvive the expiration or termination of this Sublease.

 

6.4Subtenant hereby agrees to indemnify, defend and hold harmless Sublandlord andMaster Landlord on the same terms and conditions provided in the Master Leasefor Sublandlord (as the “tenant” thereunder) to indemnify the Master Landlord,as if each of the Master Landlord and Sublandlord were “Landlord” thereunder;provided, however, that Subtenant will have no obligation to indemnify, defendor hold harmless either Master Landlord (subject to Master Landlord’s consenthereto) or Sublandlord under such terms and conditions in the master Lease tothe extent that any of the claims, demands, liabilities or causes of action atissue are caused by Master Landlord’s, Sublandlord’s or any of their respectiveagents, contractors or employees, gross negligence or willful misconduct.

 

6.5To the fullest extent allowed by applicable law, in the event of any breach ofthis Sublease by Sublandlord, Sublandlord shall not be liable to Subtenant forany punitive, exemplary or consequential damages incurred by Subtenant,including, without limitation, any damages related to the interruption ofSubtenant’s business or loss of income or profit therefrom, and Subtenanthereby releases Sublandlord from any and all such damages.

 

**7.****             ****ASSIGNMENTAND SUBLETTING**

 

7.1Subtenant shall not assign, sublease, transfer or encumber any interest in thisSublease or allow any third party to use any portion of the Premises(collectively or individually, a “Transfer”) without the prior written consentof Sublandlord, which consent shall not be unreasonably withheld, conditionedor delayed. Without limitation, it is agreed that Sublandlord’s consent shallnot be considered unreasonably withheld if (i) the proposed Transfereewould not meet any condition specified in Section 14.2(b) of theMaster Lease; or (ii) Sublandlord is unable to obtain the consent ofMaster Landlord to the proposed Transfer, if the proposed Transfer is nototherwise permitted under the Lease without the Master Landlord’s consent.Subtenant herby waives the provision of Section 1995.310 of the CaliforniaCivil Code, or any similar or successor laws now or hereinafter in effect, andall other remedies, including, without limitation, any right at law or equityto terminate this Sublease, on its own behalf and, to the extent permittedunder all applicable laws, on behalf of every proposed transferee. Any willfulor deliberate attempted Transfer in violation of this Section shallconstitute a Default by Subtenant without necessity of notice or any grace orcure period and, at Sublandlord’s option, the attempted Transfer shall be void.Consent by Sublandlord to one or more Transfer(s) shall not operate as awaiver of Sublandlord’s rights to approve any subsequent Transfer. In no eventshall any Transfer release or relieve Subtenant from any obligation under thisSublease.

 

7.2In addition to the costs of Master Landlord reimbursable by Sublandlord toMaster Landlord under the Master Lease, Subtenant shall pay Sublandlord’s reasonableactual

 

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out-of-pocketcosts (not to exceed $3,000) incurred in connection with the review of anyrequest for consent to a Transfer.

 

7.3Any Transfer made by Subtenant in contravention of this Article 7 shall bevoid or voidable, at Sublandlord’s option, and shall constitute and irrevocablebreach of this Lease without necessity of notice or opportunity of Subtenant tocure.

 

7.4Any Bonus Rent (defined below) realized by Subtenant under any sublease orassignment shall be divided and paid as follows: fifty percent (50%) toSubtenant and fifty percent (50%) to Sublandlord. “Bonus Rent” shall mean theexcess of (i) all consideration received by Subtenant on account of aTransfer over (ii) the sum of the Rent and other charges payable bySubtenant to Sublandlord under this Sublease, after deducting for anysub-subtenant improvements, free rent, space planning fees and legal fees.

 

**8.****             ****REPAIRAND ALTERATIONS**

 

8.1Subtenant shall, at its sole cost and expense, promptly perform all maintenanceand repairs to the Premises necessary to keep the Premises in good conditionand repair reasonably consistent with the quality of other similar tenancies inthe Building, reasonable wear and tear over the Term and damage by casualtyexcepted, and otherwise in compliance with the provisions of the secondsentence of Section 7.1 of the Master Lease, except to the extent thatSublandlord has expressly assumed any such repair obligation under thisSublease. Subtenant’s repair obligations include, without limitation, repairsto: (i) floor covering; (ii) interior partitions; (iii) doors; (iv) theinterior side of demising walls; (v) electronic, phone and data cablingand related equipment (collectively, “Cable”) that is installed by or for theexclusive benefit of Subtenant and located in the Premises or other portions ofthe Building; (vi) any facilities serving Subtenant exclusively; and (vii) Alterationsperformed by contractors retained by Subtenant, including related HVAC balancing.All work shall be performed in accordance with the requirements of the MasterLease.

 

8.1.1Janitorial Services and Day to Day Services.

 

(a) Subtenant acknowledges that under theMaster Lease, Master Landlord (and not Sublandlord) is the party responsiblefor providing janitorial services to the Building and, if requested in writingby Subtenant, to the Premises. The Janitorial Services shall be providedutilizing union labor and to a standard consistent with comparable first classoffice building in the South Financial District. The reasonable cost ofproviding the Janitorial Services to the Premises shall be an Operating Costunder the Sublease.

 

(b) Subtenant acknowledges that under theMaster Lease, Master Landlord (and not Sublandlord) is the party responsiblefor providing day to day services to the Premises of such types and in suchquantities as are customarily furnished by institutional owners of comparablefirst class multi-tenant office buildings in the South Financial Districtleases on a so-called “fully serviced” basis (the “Standard Services”). TheStandard Services shall include, without limitation: (i) maintenance,repair servicing and adjustment of all Building Systems whether installed byMaster Landlord, Sublandlord, Subtenant or any other occupant of the Premises(including without limitation HVAC and sprinkler systems and equipment) to thepoint(s) of delivery of the Standard Services within the Premises (exceptto the extent Master Landlord has expressly conditioned its approval forinstallation of any specialized systems or equipment upon the requirement thatSubtenant, or another tenant of the Premises maintain and repair the same): (ii) monitoringelectricity, water, HVAC services and other utilities or services supplied to orconsumed by various occupants of the Premises and the Building as necessary toidentify and account for usage or consumption in excess of reasonable andcustomary amounts for standard office use; (iii) re-lamping of Buildingstandard fluorescent lights and replacement of Building standard lenses; (iv) exteriorwindow cleaning at regular intervals; (vi) day porter service; and (vii) otherservices customarily provided in well managed, comparable first classmulti-tenant office buildings in the South 

 

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FinancialDistrict leased on a so-called “fully serviced” basis. The reasonable cost ofproviding the Standard Services shall be an Operating Cost under the Sublease.

 

8.2Sublandlord shall only maintain the common areas of the Building that are notthe responsibility of Master Landlord to maintain under the Master Lease to thestandard specified in Section 7.1 of the Master Lease. In no event willSublandlord have any obligation to maintain or repair any portion of thePremises or the Building that Master Landlord is obligated to maintain orrepair. Notwithstanding the forgoing, upon written request by Subtenant,Sublandlord agrees to use commercially reasonable efforts to enforce anyprovision of the Master Lease that requires Master Landlord to make repairs orperform maintenance to the Building or the Premises.

 

8.3Subtenant may make Alterations (as defined in Article 6 of the MasterLease) to the Premises only with Sublandlord’s prior written consent (whichshall not be unreasonably withheld) and then only on the terms and conditionsspecified in Article 6 of the Master Lease (“Subtenant Alterations”).Subtenant may make cosmetic alterations or non-structural alterations, whichcost less than $5,000 without the consent of the Sublandlord, provided thatSubtenant provides Sublandlord and Master Landlord with written notice of suchintended alterations. In those circumstances where Master Landlord’s consent isrequired under Article 6 of the Master Lease, it shall be reasonable forSublandlord to withhold its consent if Master Landlord does not consent to suchAlterations. To the extent Subtenant seeks access to the vertical andhorizontal raceways in the Building pursuant to Section 9.4 of the MasterLease, such access shall be subject to Sublandlord’s reasonable access to suchareas is available to Sublandlord and other occupants of the Building. UponSubtenant’s written request, Sublandlord shall indicate at the time of itsconsent and approval of any alterations in the Premises whether it will requireSubtenant to remove the alterations upon the Expiration Date. Subtenant shallreimburse Sublandlord for its reasonable out of pocket fees for reviewing andsupervising construction of improvements.

 

**9.****             ****CASUALTYAND EMINENT DOMAIN**

 

9.1In the event of a casualty affecting the Building or the Premises, or of ataking of all or a part of the Building or the Premises under the power ofeminent domain, Sublandlord will be entitled to exercise any right it may haveto terminate the Master Lease without first obtaining the consent or approvalof Subtenant.

 

9.2To the extent that the casualty or taking directly affects the Premises, ifSublandlord obtains from Master Landlord any abatement of rent in connectionwith the relevant casualty or condemnation, then Subtenant shall have thebenefit of such abatement of rent (comparable to its then current rentalamount) in the same proportion that the area of the Building affect by suchabatement of rent bears to the area of the Premises, provided Sublandlord shallnot be required to bring any action under the Master Lease to enforce any rentabatement provisions.

 

9.3If, in the event of a casualty, the Master Lease imposes on Sublandlord theobligation to repair or restore leasehold improvements or alterations withinthe Master Premises, Subtenant must be responsible for repair or restoration ofleasehold improvements within the Premises, including, but not limited to, theSubtenant Improvement and any Subtenant Alterations, and the leaseholdimprovements existing on the Effective Date. Sublandlord shall not in any eventbe responsible for reconstruction of any portion of the Premises that is theresponsibility of Master Landlord under the Master Lease, provided that ifSublandlord does not terminate the Master Lease, then Sublandlord will usecommercially reasonable efforts to enforce any provision of the Master Leasethat shall require Master Landlord to reconstruct the Building or Premises.

 

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**10.****      ****SURRENDER**

 

10.1On the Expiration Date, or upon the earlier termination of the Sublease or ofSubtenant’s right to possession of the Premises, Subtenant must at oncesurrender and deliver up the Premises, together with all improvements thereon,to Sublandlord in good condition and repair, reasonable wear and tear expected:conditions existing because of Subtenant’s failure to perform maintenance,repairs or replacements as required of Subtenant under this Sublease will notbe deemed “reasonable wear and tear.”

 

10.2Subtenant shall remove any of its personal property and fixtures incident toSubtenant’s business (“subtenant’s Property”) prior to the Expiration Date orupon the earlier termination of this Sublease or of Subtenant’s right topossession. Subtenant shall not be required to remove the improvementsinstalled as part of Sublandlord Work (except insofar as the same are notgeneral office improvements or include high density filing systems, computermainframes, libraries, telecom nodes, satellite dishes and signs), but shall berequired to remove any Subtenant Alterations it construed or installed pursuantto Section 8.3 of this Sublease, unless Sublandlord has instructedSubtenant otherwise, in writing. All Subtenant Alterations and SubtenantImprovements in or upon the Premises Subtenant is not required to remove willbecome a part of and will remain upon the Premises upon the Expiration Date orearlier termination of this Sublease or of Subtenant’s right to possessionwithout compensation, allowance or credit to Subtenant. Subtenant shall repairany damage occasioned by such removal of the Subtenant Alterations, and/orSubtenant’s Property, which obligation will survive termination of thisSublease. If Sublandlord or Master Landlord required removal of any SubtenantAlterations or a portion thereof, and Subtenant does not remove such, orSubtenant does not remove Subtenant’s Property from the Premises on or beforethe Expiration Date or the earlier termination of this Sublease, Sublandlordmay remove the same (and repair any damage occasioned thereby, and disposethereof, or at its election, remove and/or store the same. Subtenant shall paythe costs of such removal, repair and/or storage on demand.

 

10.3Subtenant will not be required to remove any alterations or improvements madeby Sublandlord prior to the Effective Date. If Sublandlord is required underthe Master Lease to remove any such alterations or improvements, Subtenant mustpermit Sublandlord to enter the Premises for a reasonable period of time priorto the Expiration Date, for the purpose of removing such alterations andimprovements and restoring the Premises as required by the Master Lease.

 

**11.****      ****HOLDING OVER**

 

11.1Subtenant has no right to occupy the Premises or any portion thereof after theexpiration of the Term or earlier termination of this Sublease.

 

11.2In the event Subtenant or any party claiming by, through or under Subtenantholds over, Sublandlord may exercise any and all remedies available to it atlaw or in equity to recover possession of the Premises, and to recover damages,including without limitation, all damages payable by Sublandlord to MasterLandlord by reason of such holdover. Without limiting the damages recoverableunder the foregoing sentence, for each and every month or partial month thatSubtenant or any party claiming by, through or under Subtenant remains inoccupancy of all or any portion of the Premises after the expiration of theTerm or earlier termination of this Sublease, Subtenant must pay, a holdoverrent of 150% of the then existing Base Rent for the first two (2) monthsof holdover. Beyond the initial two (2) month period, Subtenant’s holdoverrent shall increase to 200% of its then Base Rent for the Premises as minimumdamages and not as a penalty. The acceptance by Sublandlord of any lesser sumwill be construed as payment on account and not in satisfaction of damages forsuch holding over.

 

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**12. DEFAULT**

 

12.1Any one or more of the following events will be considered a “Default” bySubtenant:

 

12.1.1Subtenant fails to make any payment of Rent as and when the same is due, andsuch default shall continue for five (5) business days after notice ofsuch default is given to Subtenant, except that if Sublandlord shall have giventwo (2) such notices of default in the payment of any Rent in any 12-monthperiod, Subtenant shall not be entitled to any further notice of itsdelinquency in the payment of any Rent or an extended period in which to makepayment until such time as 12 consecutive months shall have elapsed withoutSubtenant having failed to make any such payment when due, and the occurrenceof any default in the payment of any Rent within such 12-month period after thegiving of two (2) such notices shall constitute an Event of Default;

 

12.1.2The occurrence or existence of any act or omission by Subtenant which isdescribed as a Default elsewhere in this Lease.

 

12.1.3Subtenant, by its act or omission, causes an event or condition that is anEvent of Default under the Master Lease, or would be an Event of Default underthe Master Lease, subject only to the delivery of any required notice orpassage of any cure or grace period, and such event or condition is not curedwithin a period equal to two thirds the cure or grace period provided in theMaster Lease for Sublandlord to cure such default.

 

12.1.4Subtenant fails to fulfill, keep, observe, or perform any of the othercovenants and obligations herein contained to be fulfilled, kept, observed andperformed by Subtenant, and such failure continues for more than five business (5) daysafter notice thereof in writing to Subtenant, provided however, if such failurecannot be cured within five business (5) days, then provided that Subtenantas commenced to cure such failure and diligently pursues a cure of suchfailure, Subtenant shall have such reasonable time, not to exceed thirty (30)days to cure such failure.

 

12.1.5Subtenant or any Guarantor: (a) ceases doing business as a going concern: (b) makesan assignment for the benefit of creditors: (c) makes a transfer in fraudof creditors: (d) admits in writing its inability to pay its debts whendue: (e) is adjudicated as insolvent: (f) files a petition (or filesan answer admitting the material allegations of a petition) under any stat orfederal bankruptcy or other Laws affection creditors’ rights: (g) fails,within sixty (60) days after the commencement of proceedings for relief underany state or federal bankruptcy or other Laws affecting creditors’ rights, tohave such proceedings dismissed; (h) has all or substantially all of itsassets subject to judicial seizure or attachment and such seizure or attachmentis not released within sixty (60) days; (i) consents to or acquiesces inthe appointment of a trustee, receiver or liquidator of all or any substantialpart of its assets; or (j) falls within sixty (60) days after theappointment of such a trustee, receiver or liquidator to have such appointmentvacated (each, an “Insolvency Proceeding”).

 

12.1.6Subtenant’s leasehold estate under this Sublease is taken by process oroperation of Law.

 

12.2Upon the occurrence of any one or more Default(s) by Subtenant,Sublandlord shall have all the remedies specified in Section 15.2 of theMaster Lease, including, without limitation, the remedies prescribed in Section 1951.4of the Civil Code of California, as set forth in the Master Lease.

 

12.3Any notice delivered by Sublandlord in connection with, or as a preconditionto, a Default by Subtenant will be in lieu of and not in addition to any noticeto pay rent or notice to perform covenant required under law.

 

**13.****      ****PROVISIONS REGARDING MASTER LEASE**

 

Incorporation. The following provisions of the MasterLease are incorporated by reference into this Sublease so that all obligationsof Sublandlord, as “tenant” thereunder, shall be obligations of Subtenanthereunder, except as expressly otherwise provided by this Sublease, and thenonly as applicable to the Premises:

 

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Articles and Sections 5.1 (as modified by the Fourth Amendment), 5.3,7.1, 7.3, 8, 9.1 (as modified by the Fourth Amendment), 9.2, 9.4, 10, 11.1,11.3, 12, 13, 14.2, 14.4, 14.6, 14.7, 14.8, 15.2, 16.1 16.2, 17, 18 (asmodified by the Fourth Amendment), 19.1, 20, 21.1, 23, 26, 27, 29.2, 33, 35,and 38 of the Master Lease;

 

Articles and Sections 1(d), 1(e), and 6 of the Addition ProvisionsRider attached as Exhibit “E” to the Master Lease; and

 

Exhibits “B” and “D” to the Mater Lease.

 

Limitations. The following limitations shall apply to theinterpretation and enforcement of provisions of the Master Lease which areincorporated in this Sublease under Section 13.1 above:

 

Any non-liability, release, indemnity or hold harmless provision, andany provisions pertaining to the waiver or subrogation rights and or the namingof a party under and insurance policy, in the Master Lease for the benefit ofMaster Landlord which are expressly incorporated herein by reference, shall bedeemed to inure to the benefit of Master Landlord and Sublandlord for thepurpose of this Sublease.

 

Any right of the Master Landlord for access or inspection under theMaster Lease and any right of the Master Landlord to do work in the Premises orin the Building or in, on or under the Common Areas under the Master Lease, andany right of the Master Landlord in respect of rules and regulations underthe Master Lease, shall be deemed to inure to the benefit of both the MasterLandlord and Sublandlord.

 

If any of the express provisions of this Sublease shall conflict withany of the provisions of the Master Lease incorporated by reference, suchconflict shall be resolved in every instance in favor of the express provisionsof this Sublease. If any incorporated provision of the Master Lease cross-referencesa provision of the Master Lease which is not incorporated in this Sublease,such cross-referenced Master Lease provision shall be disregarded except to theextent required for a fair and equitable interpretation of the incorporatedMaster Lease provision.

 

Any obligation of Sublandlord which is contained in this Sublease bythe incorporation by reference of the provisions of the Master Lease shall beobserved or performed by Sublandlord using commercially reasonable efforts tocause Master Landlord under the Master Lease to observe and/or perform thesame, and Sublandlord shall have a reasonable time to do so after writtennotice from Subtenant specifying with reasonable particularly the deficiency inSublandlord’s performance under this Sublease.

 

With respect to any approval or consent required to be obtained fromSublandlord under the Master Lease, such approval or consent must be obtainedfrom both Master Landlord and Sublandlord. Any approval or consent required ofSublandlord conclusively shall be deemed reasonably withheld if approval orconsent also is required of the Master Landlord, and Master Landlord withholdsMaster Landlord’s approval or consent after commercially reasonable efforts bySublandlord to obtain same from Master Landlord.

 

Assumption. Subtenant shall assume and perform for the benefitof Sublandlord and Master Landlord each and all of the conditions, covenantsand obligations to be performed by Sublandlord as Subtenant under the MasterLease to the extent said terms, covenants, conditions and obligations areincorporated in this Sublease, are not modified or limited hereby and areapplicable to the Premises demised hereby. Subtenant shall not commit or permitto be committed on the Premises any act or omission which would constitute abreach of any of the terms, covenants, conditions and obligations ofSublandlord under the Master Lease.

 

Subtenant’s Indemnity for Breach of Master Lease. Subtenantshall indemnify and save Sublandlord harmless against any loss, damage or injury,including, without limitation, reasonable attorneys’ fees, and/or any amountsassessed against Sublandlord by Master Landlord under the Master Lease onaccount of any Default by Subtenant that shall give rise to an actual orpotential Event of Default under the Master Lease, which Sublandlord may sufferor incur under the Master Lease as the result of Subtenant’s failure toobserve, perform or otherwise discharge its obligations under this Sublease,including, without limitation, any 

 

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provisionsof the Master Lease that are incorporated herein. Subtenant’s obligations inthis Section 13.4 shall survive the Expiration Date or earlier terminationof this Sublease. Notwithstanding any other provision of this Sublease to thecontrary, in the even of any failure of Subtenant to observe, perform orotherwise discharge its obligations under this Sublease (and after any noticeand opportunity to cure as may be required under this Sublease) that may causean Event of Default to occur under the Master Lease, Sublandlord may, inaddition to all other remedies granted to Sublandlord under this Sublease, takesuch action as may reasonably be required to prevent such matter from maturinginto an Event of Default under the Master Lease. Subtenant shall pay allexpenses reasonably incurred by Sublandlord in connection therewith (togetherwith interest thereon at the Interest Rate from the date of expenditure) withinthirty (30) days after demand by Sublandlord.

 

Subtenant recognizes that Sublandlord is not in a position to renderany of the services or to perform any of the obligations required of MasterLandlord by the terms of the Master Lease. Therefore, despite anything to thecontrary in this Sublease, Subtenant agrees that performance by Sublandlord ofits obligations under this Sublease is condition on performance by the MasterLandlord of its corresponding obligations under the Master Lease, andSublandlord will not be liable to Subtenant for any default of the MasterLandlord under the Master Lease. Subtenant will not have any claim againstSublandlord based on the Master Landlord’s failure or refusal to comply withany of the provisions of the Master Lease unless that failure or refusal is aresult of Sublandlord’s act or failure to act. Despite the Master Landlord’sfailure or refusal to comply with any of those provision of the Master Lease,this Sublease will remain in full force and effect and Subtenant will pay theBase Rent and Additional Rent and all other charges provided for in thisSublease without any abatement, deduction or setoff. In the event of a failureor refusal by Master Landlord to comply with any provisions of the MasterLease, Sublandlord’s obligation hereunder shall be limited to using commerciallyreasonable efforts to enforce the Master Lease within a reasonable time afterSubtenant provides notice to Sublandlord of Master Landlord’s failure orrefusal.

 

Subtenant shall indemnify and save Sublandlord harmless against anyloss, damage or injury, including, without limitation, reasonable attorneys’fees, and/or any amounts assessed against Sublandlord by Master Landlord underthe Master Lease on account of any Default by Subtenant that gives rise to adefault or potential default under the Master Lease, which Sublandlord maysuffer or incur under the Master Lease as the result of any breach by Subtenantof its obligations under this Sublease, including, without limitation, anyprovision of the Master Lease that are incorporated herein (except for theExcluded Provisions). Subtenant’s obligations hereunder shall survivetermination of this sublease. Notwithstanding any other provision of thisSublease to the contrary, in the event of a breach of this Sublease that maycause an event of default to occur under the Master Lease, Sublandlord may, inaddition to all other remedies granted to Sublandlord hereunder, at Subtenant’sexpense and after notice to Subtenant, take such action as may reasonablyrequired to prevent such Default by Subtenant form maturing into an incurableevent of default under the Master Lease, and Subtenant shall pay expensesdirectly incurred by Sublandlord as a result of such action within ten (10) daysafter written demand by Sublandlord.

 

**14.****      ****MASTER LANDLORD’S CONSENT**

 

This Sublease and the obligations of the parties hereunder areexpressly conditioned upon Sublandlord’s obtaining prior written consent heretoby Master Landlord, Subtenant must promptly deliver to Sublandlord anyinformation reasonably requested by Master Landlord (in connection with MasterLandlord’s approval of this Sublease) with respect to the nature and operationof Subtenant’s business and/or the financial condition of Subtenant.

 

Sublandlord and Subtenant hereby agree, for the benefit of MasterLandlord, that this Sublease will not (a) create privity of contractbetween Master Landlord and Subtenant; (b) be deemed to have amended theMaster Lease in any regard (unless Master Landlord will have 

 

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expresslyagreed in writing to such amendment); or (c) be construed as a waiver ofMaster Landlord’s right to consent to any assignment of the Master Lease bySublandlord or any further subletting of the Master Premises, or as a waiver ofMaster Landlord’s right to consent to any assignment by Subtenant of thisSublease or any sub-subletting of the Premises or any part thereof.

 

Sublandlord and Subtenant agree, for the benefit of Master Landlord,that Master Landlord shall not bear responsibility for any delay in commencementof this Sublease term.

 

If Master Landlord fails to consent to this Sublease within twenty (20)days after the Effective Date, either party shall have the right to terminatethis Sublease by giving written notice thereof to the other at any timethereafter.

 

**15. NOTICES**

 

15.1All notices which may or are required to be given by either party to the othermust be in writing to the addresses specified in the Basic Sublease Provisions,or at such place as a party may from time to time designate by notice inwriting. Notices will be deemed delivered (a) when receive or refused ifpersonally delivered; (b) four business days after being sent if sent byUnited States registered or certified mail, postage prepaid, return receiptrequested; or (c) two business days after being sent by a nationallyrecognized overnight commercial courier services providing receipted delivery.

 

15.2Subtenant agrees promptly to deliver to Sublandlord a copy of any notice,demand, request, consent or approval related to the Premises and received fromMaster Landlord or any governmental agency.

 

**16.****      ****SECURITY DEPOSIT**

 

Concurrently with Subtenant’s execution of this Sublease, Subtenantshall deposit with the Sublandlord the Security Deposit in the amount set forthin the Basic Sublease Provisions. The Security Deposit shall be held bySublandlord without liability for interest (unless required by law).Sublandlord shall not be required to keep the Security Deposit separate fromits other accounts.

 

Sublandlord shall hold the Security Deposit as security for theperformance of Subtenant’s obligations under this Sublease. The SecurityDeposit is not an advance payment of Rent or a measure of Subtenant’s liabilityfor damages.

 

Subtenant shall have no right to call upon Sublandlord to apply all orany part of the Security Deposit to cure any default or fulfill any obligationof Subtenant, but such use shall be solely in the discretion of Sublandlord.

 

Subtenant waives the provisions of all provisions of law now in forceof that became in force after the Effective Date of this Sublease (including,without limitation, California Civil Code Section 1950.7) that providethat Sublandlord may claim from a security deposit only those sums reasonablynecessary to remedy defaults in the payment of Rent, to repair damage caused bySubtenant, or to clean the Premises. Subtenant aggress that Sublandlord may, inaddition, claim those sums reasonably necessary to compensate Sublandlord forany other foreseeable or unforeseeable loss or damage caused by the act oromission of Subtenant or Subtenant’s officers, agents, employees, independentcontractors, or invitees.

 

In the event of a Default, Sublandlord may, from time to time, withoutprejudice to any other remedy, use all or a portion of the Security Deposit tosatisfy past due Rent or to cure any uncured Default by Subtenant, or inSublandlord’s discretion apply such Security Deposit after a Default, to (a) payany Rent or other sum in default; (b) pay any amount that Sublandlord mayspend or become obligated to spend in exercising Sublandlord’s rights under Article 12;or (c) compensate Sublandlord for any expense, loss or damage thatSublandlord may suffer because of Subtenant’s Default. In the even thatSublandlord applies any portion of the Security Deposit as permitted in thisSection; Subtenant shall restore the Security Deposit to its original amountwithin five (5) days for Sublandlord’s demand. Sublandlord shall notifySubtenant in writing of 

 

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anydefaults, including any damages whereby it intends to subtract the cost fromthe Security Deposit.

 

Sublandlord shall return any unapplied portion of the Security Depositto Subtenant within forty-five (45) days after the last to occur of: (i) thedetermination of Subtenant’s Share of any Operating Costs and Taxes for thefinal year or portion of a year of the Term; (ii) the date Subtenantsurrenders possession of the Premises to Sublandlord in accordance with thisSublease, or (iii) the Expiration Date, unless there is a Default bySubtenant in existence on such date.

 

If Sublandlord conveys Sublandlord’s interests under this Sublease, theSecurity Deposit may be assigned or negotiated by Sublandlord to Sublandlord’sgrantee, and if so assigned or negotiated, provided Sublandlord gives Subtenantnotice of the name of such grantee, Subtenant aggress to look solely to suchgrantee for the proper application of the security Deposit in accordance withthe terms of this Section and the return thereof in accordance herewith.Upon delivery of such notice, Subtenant hereby releases the Sublandlord namedherein of any and all liability with respect to the Security Deposit, theapplication of any proceeds thereform and its return, and Subtenant agrees tolook solely to such grantee. This provision shall also apply to subsequentgrantees. Neither the holder of a mortgage nor the Master Landlord shall beresponsible to Subtenant for the return or application of the Security Deposit,whether or not it succeeds to the position of Sublandlord hereunder, unless theSecurity Deposit shall have been actually received by such mortgage holder orMaster Landlord.

 

17.         **OPTION TO RENEW**. Provided theSublease is in full force and effect, Subtenant is not in default under any ofthe other terms and conditions of the Sublease at the time of notification orcommencement, and this Sublease has not been assigned, Subtenant shall have anoption to renew (“Renewal Option”) this Sublease for a term for the periodcommencing on the date following the Expiration Date under Section 1.8above and continuing until April 14, 2018. (“Renewal Term”), on the sameterms and conditions set forth in this Sublease, except as modified by theterms, covenants and conditions as set forth below:

 

If Subtenant elects to exercise the Renewal Option, then Subtenantshall provide Sublandlord with written notice no earlier than the date which iseighteen (18) months prior to the Expiration Date under Section 1.8 above,and no later than the date which is twelve (12) months before such ExpirationDate. If Sublandlord fails to provide such notice, Subtenant shall have nofurther or additional right to extend or renew the Term of this Sublease.

 

The annual Base Rent and Monthly Base Rent in effect at the expirationof the then current Term of this Sublease shall be adjusted to reflect thePrevailing Market (defined below) rate as of the date the applicable RenewalTerm is to commence, taking into account the specific provisions of thisSublease which will remain constant. Sublandlord shall advise Subtenant of thenew Annual Base Rent and Monthly Base Rent for the Premises thirty (30) daysafter receipt or Subtenant’s written notice of exercise of the Renewal Option.Unless Subtenant notifies Sublandlord of its objection to Sublandlord’sdetermination of the Prevailing Market Rate within thirty (30) days afterreceipt thereof, the same shall be the Annual Base Rent and Monthly Base Rentfor the Renewal Term. If Subtenant makes timely objection to Sublandlord’sdetermination of the Prevailing Market Rate, the parties shall negotiate ingood faith the Prevailing Market Rate. However, if the parties have not reachedagreement on the Prevailing Market Rate within ninety (90) days after exerciseof the Renewal Option, Subtenant, by written notice to Sublandlord (the “ArbitrationNotice”) shall have the right to have the Prevailing Market Rate for thePremises within the ninety day (90) period described and Subtenant fails totimely exercise its right to arbitrate, Subtenant’s Renewal Option shall bedeemed to be null and void and of no further force and effect. In no eventshall the Annual Base Rent and Monthly Base Rent for the applicable RenewalTerm be less than the Annual Base Rent and Monthly Base Rent in the preceding period.

 

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17.2.1If Subtenant provides Sublandlord with an Arbitration Notice, Sublandlord andSubtenant, within five (5) days after the date of the Arbitration Notice,shall each simultaneously submit to the other, in a sealed envelope, its goodfaith estimate of the Prevailing Market rate for the Premises during theRenewal Term (collectively refereed to as the “Estimates”). If the higher ofsuch Estimates is not more than 105% of the lower of such Estimates, thenprevailing Market rate shall be the average of the two Estimates. If thePrevailing Market rate is not resolved by the exchange of Estimates, then,within seven (7) days after the exchange of Estimates, Sublandlord andSubtenants shall each select an appraiser to determine which of the twoEstimates most closely reflects the Prevailing Market rate for the Premisesduring the Renewal Term. Each appraiser so selected shall be certified as anMAI appraiser of as an ASA appraiser and shall have had at least five (5) yearsexperience within the previous ten (10) years as a real estate appraiserworking in San Francisco, California, with working knowledge of current rentalrates and practices. For purposes hereof, an “MAI” appraiser means anindividual who holds a MAI designation conferred by, and its an independentmember of, the American Institute of Real Estate Appraisers (or its successororganization, or in the event there is no successor organization, theorganization and designation most similar), and an “ASA” appraiser means anindividual who holds the Senior Member designation conferred by, and is inindependent member of, the American Society of Appraisers (or its successororganization, or, in the event there is no successor organization, the organizationand designation most similar).

 

17.2.2Upon selection, Sublandlord’s and Subtenant’s appraisers shall work together ingood faith to agree upon which of the two Estimates most closely reflects thePrevailing Market rate for the Premises. The Estimate chosen by such appraisersshall be binding on both Sublandlord and Subtenant as the Base Rent rate forthe Premises during the Renewal Term. If either Sublandlord or Subtenant failsto appoint an appraiser within the seven (7) day period referred to above,the appraiser appointed by the other party shall be the sole appraiser for thepurposes hereof. If the two appraisers cannot agree upon which of the twoEstimates most closely reflects the Prevailing Market within twenty (20) daysafter their appointment, then, within ten (10) days after the expirationof such twenty (20) day period, the two appraisers shall select a thirdappraiser meeting the aforementioned criteria. Once the third appraiser (i.e.arbitrator) as been selected as provided for above, then, as soon thereafter aspracticable but in any case within fourteen (14) days, the arbitrator shallmake his determination of which of the two Estimates most closely reflects thePrevailing Market rate and such Estimate shall be binding on by Sublandlord andSubtenant as the Base Rent rate for the Premises. If the arbitrator believesthat expert advice would materially assist him, he may retain one or morequalified persons to provide such expert advice. The parties shall shareequally in the costs of the arbitrator and of any experts retained by thearbitrator. Any fees of any appraiser, counsel or experts engaged directly bySublandlord or Subtenant, however, shall be home by the party retaining suchappraiser, counsel or expert.

 

17.2.3If the Prevailing Market rate has not been determined by the commencement dateof the renewal Term, Subtenant shall pay Base Rent upon the terms andconditions in effect during the last month of the initial Term for the Premisesuntil such time as the Prevailing Market rate has been determined. Upon suchdetermination, the Base Rent for the Premises shall be retroactively adjustedto the commencement of the Renewal Term for the Premise. If such adjustmentresults in an underpayment of Base Rent by Subtenant, Subtenant 

 

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shallpay Sublandlord the amount of such underpayment within thirty (30) days afterthe determination thereof. If such adjustment results in an overpayment of BaseRent by Subtenant, Sublandlord shall credit such overpayment against the nextinstallment of Base Rent due under the Sublease and, to the extent necessary,any subsequent installments, until the entire amount of such overpayment hasbeen credited against Base Rent.

 

17.3The Renewal Option is not transferable; the parties hereto acknowledge andagree that they intend that the Renewal Option shall be “personal” to Subtenantas set forth above and that in no event will any assignee or sublease have anyright to exercise the aforesaid options to renew.

 

17.4If Subtenant fails to validly exercise the Renewal Option, Subtenant shall haveno further right extend the term of this Sublease.

 

17.5For purposes of this Section, “Prevailing Market” shall mean the arms lengthfair market annual rental rate per rentable square foot under comparabletransactions entered into on or about the date on which the Prevailing Marketrate is being determined hereunder for space comparable to the Premises in theBuilding and comparable buildings, taking into account all then-relevantfactors. The determination of the Prevailing Market rate shall take intoaccount any material economic differences between the terms of this Subleaseand any comparable transactions, such as rent abatements, construction costs,the value of replicating existing improvements and other concessions and themanner. If any, in which the Sublandlord under any such Sublease is reimbursedfor operating expenses and taxes and shall further take into account all otherthen-relevant factors.

 

**18.****      ****MISCELLANEOUS**

 

18.1Subtenant shall be entitled to signage (a) in the main lobby and (b) inthe fourth floor elevator lobby. The location, quality, design, style, lightingand size of such signage shall be consistent with the Building’s standardsignage program and shall be subject to Sublandlord’s prior written approval,which shall not be unreasonably withheld, conditioned or delayed. ProvidedSublandlord installs a lobby directory (although such installation shall not bea condition to the Commencement Date of this Sublease), Subtenant shall beentitled to one (1) line on such lobby directory to display the Subtenant’sname and location in the Building. Subtenant shall not have the right to erectan exterior sign. Sublandlord shall be responsible for all costs associatedwith signage. Subtenant may not erect signage that is visible from outside theBuilding, unless it obtains the prior written consent of Sublandlord and MasterLandlord, which consent may be withheld in its or their sole discretion.

 

18.2Subtenant, upon seventy-two (72) hours advance notice to Sublandlord, shallhave the right to receive supplemental HVAC service during hours other thanBuilding Hours. Subtenants shall pay Sublandlord the standard charge for suchsupplemental HVAC service as reasonably determined by Master Landlord from timeto time, which shall be reasonably related to Sublandlord’s cost to provide anysuch service and reasonably competitive with the amounts charged by landlordsof Comparable Building for such services. Subtenant may request same-day “fansonly” service from the Building Manger, which shall be charged at theprevailing rate for such service.

 

18.3Sublandlord at its sole expense, on at least ninety (90) days prior writtennotice, may require Subtenant to move from the Premises to other space ofcomparable size and décor in the Building (the “Substitute Premises”). TheSubstitute Premises must substantially contain similar finishes as the Premisesand be in substantially the same condition as the Premises are required to beunder the term of this Sublease, be approximately the same rentable squarefootage as the Premise, and not less than be contained all on one (1) floorof the 

 

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Building,and have substantially the same number and type of work stations, offices,break rooms and reception areas, labs, servers, telephone rooms and conferencerooms as are contained in the Premises as of the date Subtenant receivesSublandlord’s notice of relocation. In the event of any such relocation,Sublandlord will pay all expenses of preparing and decorating the SubstitutePremises so that they will be substantially similar to the Premises from whichSubtenant is moving, and Sublandlord will also pay the expense of moving Subtenant’sfurniture and equipment to the Substitute Premises. Sublandlord also shall paySubtenant’s other reasonable costs of relocation to the Substitute Premises,including the cost of printing and distributing change of address notices toSubtenant’s customers and one month’s supply of stationary showing the newsuite number of the Substitute Premises, the removal of all existing IT andtelephone wiring in the Premises and the installation of all new IT andtelephone wiring in the new premises. Sublandlord may not relocate Subtenantwithin 18-months of the expiration of this Sublease. In the event Sublandlordmust relocate Subtenant within 18-months of Sublease expiration, Subtenantshall have the right to terminate this Sublease at no penalty or cost to Subtenant.

 

18.4Each party warrants to the other that it has had no dealings with any broker oragent in connection with this Sublease, except the Brokers specified in theBasic Sublease Provisions and whose commissions shall be payable by separateagreement. Each party covenants to protect, defend, indemnify and hold harmlessthe other party from and against any and all costs (including reasonableattorneys’ fees), expense or liability for any compensation, commission andcharges claimed by any broker or other agent, other than the Brokers, withrespect to this Sublease or the negotiation thereof on behalf of such party.

 

INGRAFTON PARTNERS L.P v. SUPERIOR COURT, 36 CAL. 4TH 944(2005), THE CALIFORNIA SUPREME COURT RULED THAT CONTRACTUAL, PRE-DISPUTE JURYTRAIL WAIVERS ARE UNENFORCABLE. THE PARTIES, HOWEVER, ANTICIPATE THAT THECALIFORNIA LEGISUATURE WILL ENACT LEGISLATION TO PERMIT SUCH WAIVERS IN CERTAINCASES. IN ANTICIPATION OF SUCH LEGISLATION, SUBLANDLORD AND SUBTENANT HEREBYWAIVE, AS OF THE EFFECTIVE DATE OF SUCH LEGISLATION AND TO THE EXTENT PERMITTEDBY APPLICABLE LAW, TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIMBROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER OR THEIR SUCCESSORSIN RESPECT OF ANY MATTER ARAISING OUT OF OR IN CONNECTION WITH, EITHER DIRECTLYOR INDIRECTLY, THIS SUBLEASE, OR THE SUBJECT MATTER HEREOF, SUBTENANTS USE OROCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM FOR INJURY OR DAMAGE.

 

18.5This Sublease and the rights and obligations of the parties shall be interpreted,construed and enforced in accordance with the laws of the state in which thePremises are located, and Sublandlord and Subtenant hereby irrevocably consentto the jurisdiction and proper venue of such state.

 

18.6The expiration of the Term, whether by lapse of time or otherwise, shall notrelive either party of any obligations under this Sublease which accrued priorto or which may continue to accrue after the expiration or early termination ofthis Sublease. Without limited the scope of the prior sentence, it is agreedthat Subtenant’s obligations under any provision of this Sublease, or the termsof the Master Lease which are expressly incorporated into this Sublease, thatis expressly provided by its terms to survive termination of this Sublease shallsurvive the expiration or early termination of this Sublease.

 

18.7If any term or provision of this Sublease shall to any extent be invalid orunenforceable, the remainder of this Sublease shall not be affected, and eachprovision of this Sublease shall be valid and enforced to the fullest extentpermitted by law.

 

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18.8The headings and titles to the Articles and Sections of this Sublease are forconvenience only and shall have no effect on the interpretation of any part ofthe Sublease.

 

18.9All understandings and agreements previously made between the parties aresuperseded by this Sublease, and neither party is relying upon any warranty,statement or representation not contained in this Sublease. This Sublease maybe modified only by a written agreement signed by Sublandlord and Subtenant.

 

18.10Each party represents and warrants to the other that the person or personsexecuting this Sublease for the representing party are fully authorized to soact and no other action is required to bind Sublandlord to this Sublease andthat the representing party has the right and power to execute and deliver thisSublease and to perform its obligations hereunder, subject only to MasterLandlord’s consent, and that the representing party is duly organized and ingood standing in its state of formation and is authorized to conduct businessin the state where the Premises are located.

 

[Remainder of page intentionally blank.]

 

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Inwitness whereof, Sublandlord and Subtenant have executed this Sublease on thedates set forth below, intending to be bound hereby as of the Effective Date.

 

 
| SUBLANDLORD:            |               | SUBTENANT:                      |
|-------------------------|--------------------|---------------------------------|
|                    |               |                            |
| SUN MICROSYSTEMS, INC., |               | PROSODIE INTERACTIVE,CALIFORNIA |
| a  Delaware corporation |               | a  Delaware Corporation         |
|                    |               |                            |
| By:                     | /S/  Charles Barry |                            | By: | /S/   Nicolas Dourassoff |
| Its:  Senior Director   |               | Its:  CEO                       |
| Date:  11/7/2006        |               | Date:  10/3/06                  |
|                         |                    |                                 |  |  |

 

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EXHIBIT C

 

LEASE AGREEMENT

 

between

 

K3 FIRST STREET ASSOCIATES, LLC

 

as “Landlord”

 

and

 

SUN MICROSYSTEMS, INC.

 

as “Tenant”

 

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THISLEASE AGREEMENT (this “Lease”) is made as of the Lease Date set forth in theBasic Lease Information, by and between the Landlord identified in the BasicLease Information (“Landlord”), and the Tenant identified in the Basic LeaseInformation (“Tenant”), Landlord and Tenant hereby agree as follows:

 

1.               PREMISES

 

Grant Landlord hereby leases to Tenant, and Tenant herebyleases from Landlord, upon the terms and subject to the conditions of thisLease, the office space identified in the Basic Lease Information as thePremises (the “Premises”), in the Building located at the address specified inthe Basic Lease Information (the “Building”). The approximate configuration and location of the Premises is shown on Exhibit A.Landlord and Tenant agrees that the rentable area of the Premises for allpurposes under this Lease shall be the Rentable Area specified in the BasicLease Information, subject to modification per Paragraph 1.2 below.  The Building, together with the parkingfacilities serving the Building (the “Parking Facility”), and the parcel(s) ofland on which the Building and the Parking Facility are situated (collectively,the “Property”), is part of the Project identified in the Basic LeaseInformation (the “Project”).

 

Rentable Square Footage of Premises, Building and Project

 

(a)          Landlord and Tenant agreethat, except as modified per this Section 1.2 the rentable area of thePremises and of the Building for all purposes under this Lease shall be therentable square footage specified in the Basic Lease Information.  Upon the completion of all of the buildingscomprising the Project, Landlord shall notify Tenant of the rentable squarefootage of the Project for purposes of calculating the Building’s AllocableShare.  Upon completion of the Building Shell(as that term is defined in Exhibit F) for the Building, Landlord’s basebuilding architect (the “Architect”) shall measure both the Premises within theBuilding, the Building and the Project using the “Standard Measure forMeasuring Floor Area in Office Buildings” published by the Secretarial BuildingOwners and Managers Association International (ANSI/BOMA Z65.1-1996), approved June 7,1996 (the “BOMA Standard”).

 

(b)         Landlord shall promptlynotify Tenant of the Architect’s determination of the rentable square footageof the Premises, the Building and the Project. Tenant reserves the right to have its space planner or architect measurethe Premises, the Building and the Project to confirm that the measurements providedby the Architect are accurate and conform to the BOMA Standard.  Any discrepancy between the measurementsobtained by the Architect and the measurements obtained by the Tenant withrespect to the Premises within the Building and the Building shall be promptlyresolved by the parties through good faith negotiation in accordance with BOMAStandards.

 

Landlord Warranties.  Landlord warrants that on the delivery datefor the Premises (i) the Premises (solely to the extent constructed byLandlord), the Building, the Land and the Project shall comply with all laws,codes, ordinances, and other governmental requirements (including, but notlimited to, zoning ordinances and the Americans with Disabilities Act) thenapplicable to the use, construction, condition and occupancy of the Premises,the Building, the Land and the Project, and (ii) the Premises (solely tothe extent constructed by Landlord), the Building and the Project, includingthe improvements and equipment therein, and the Common Areas shall be in goodworking order, condition, and repair, with each floor free and clear of debris.

 

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Landlord Maintenance Warranty If Landlord is responsiblefor the construction of the Tenant Improvements pursuant to the Work LeuerAgreement, Landlord shall obtain customary warranties and guaranties from thecontractor or contractors performing such work and/or the manufacturers ofequipment installed therein.  If Tenantmakes repairs to any component of the Premises or any of its systems notcovered by the Landlord’s warranty contained in this Section 1.4 but forwhich Landlord has obtained a contractor’s or manufacturer’s warranty, thenLandlord shall, upon request by Tenant, use its good faith efforts to pursueits rights under any such warranties for the benefit of Tenant.

 

2.               TERM POSSESSION

 

2.1The term of this Lease (the “Term”) shall commence on the Commencement Date asdescribed below and, unless sooner terminated, shall expire on the ExpirationDate set forth in the Basic Lease Information (The “Expiration Date”).  The “Commencement Date” shall be the RentCommencement Date (as that term is defined below) with respect to the lastfloor of the Premises delivered by Landlord to Tenant.  The parties anticipate that the CommencementDate will occur on or about February 8, 2003 (the “Scheduled CommencementDate”); provided, however, that Landlord shall not be liable for any claims,damages or liabilities if the Premises are not ready for occupancy by theScheduled Commencement Date. If the Premises are not delivered by the Landlordto Tenant, with all of Landlord’s Work substantially complete by May 8,2003 (“Outside Substantial Completion Date”), subject to the force majeure (notto exceed 180 days) or any Tenant Delay (as that term is hereinafter defined).  Tenant shall have the right to terminate thisLease giving Landlord written notice at any time after the SubstantialCompletion Deadline and prior to substantial completion of Landlord’s Work, inwhich case this Lease will be terminated. Landlord and Tenant acknowledge and agree that Landlord shall deliver toTenant the Premises in increments of two (2) floors every 30-45 days inthe condition required by Exhibit F attached hereto.  Notwithstanding anything to the contrarycontained herein, all of the terms and conditions of this Lease shall apply tothe floors of the Premises delivered to Tenant prior to Commencement Date; andthe rent commencement date (the “Rent Commencement Date”) with respect to eachfloor delivered to Tenant shall be the earlier of (a) one hundred twenty(120) days after the date on which Landlord tenders possession of such floor ofthe Premises to Tenant with Landlord’s Work therein Substantially Complete orthe date such floor would have been Substantially Complete but for TenantDelays, or (b) the date upon which Tenant, with Landlord’s writtenpermission, actually occupies and conducts business on such floor(s) ofthe Premises. Tenant shall pay to Landlord Base Rent and Additional Rent withrespect to any such floor(s) of the Premises commencing on the RentCommencement Date with respect to such floor(s) of the Premises. Landlordand Tenant acknowledge and agree that certain rent and other obligations maycommence earlier than the Commencement Date, on a phased basis, as floorswithin the Premises are delivered to Tenant, all as provided above.  However, for purposes of determining the Termand the first and subsequent lease years, there shall be a single CommencementDate, determined as provided above, with respect to the Building. Promptlyafter the Rent Commencement Date with respect to each floor is ascertained,Landlord and Tenant shall execute, in recordable form, a written declarationsetting forth the Rent Commencement Date for such floor.  Promptly after the Commencement Date withrespect to this Lease, Landlord and Tenant shall confirm such Commencement Datein writing in the form of the Commencement Date Agreement attached hereto as Exhibit C.“Tenant Delay” means any act or omission of Tenant or its agents, employees,vendors or contractors that actually delays the Substantial Completion of theLandlord Work, including, without limitation: (1) Tenant’s failure tofurnish information or approvals within 

 

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anytime period specified in this Lease, including the failure to prepare orapprove preliminary or final plans by any applicable due date; (2) informedby Landlord that the selection may result in a delay; (3) changesrequested or made by Tenant to previously approved plans and specifications,including Additional Shell Construction Items; (4) performance of work inthe Premises by Tenant of Tenant’s contractor(s) during the performance ofthe Landlord Work after reasonable notice from Landlords that such work is interferingwith the progress of Landlord Work; or (5) if the performance of anyportion of the Landlord Work depends on the prior or simultaneous performanceof work by Tenant, a delay by Tenant or Tenant’s contractor(s) in thecompletion of such work after reasonable notice from Landlord.  If the parties disagree as to whether or nota “Tenant Delay” has occurred, the parties shall resolve such dispute througharbitration as provided in Section 37. As used in this Lease, “Month” shall mean a calendar month, except thatif the Term beings on a day other than the first day of a calendar month, thefirst “month” shall be the period from (and including) the Commencement Datethrough (and including) the last day of the first full calendar month followingthe Commencement Date falls and if the Term ends on a day other than the lastday of a calendar month, the last “month” shall be the period from (andincluding) the day on which the Term ends. Landlord and Tenant each will usecommercially reasonable efforts to accommodate the other’s work, so thatneither unreasonably interferes with or causes delay to the other.

 

2.2Landlord to Provide Notice. Landlord shall provide Tenant with six (6) months prior writtennotice of any revision in the delivery date for any of the floors, Landlordshall update the notice upon any material modification which would affectTenant’s construction drawings.  Landlordshall provide Tenant written notice thirty (30) days prior to the completiondate for any floors to be delivered to Tenant for construction of tenantimprovements. Landlord shall provide Tenant not less than 60 days prior writtennotice of the date the base building improvements for the floors of theBuilding will be completed and a temporary certificate of occupancy issued.

 

3.               RENT

 

3.1 Base Rent. Tenant agrees to pay toLandlord the Base Rent set forth in the Basic Lease Information, without priornotice or demand, set off or deduction except as permitted in this Lease, onthe first day of each and every calendar month during the Term as providedabove.  The Base Rent shall be increasedas of the end of the fifth (5th) Lease Year and as of the end of thetenth (10th) Lease Year (each as “Adjustment Date”) if as of anAdjustment Date, the Consumer Price Index for All Urban Consumers, U.S. CityAverage (“Index”), published by the United States Department of Labor’s Bureauof Labor Statistics, has increased over the Base Period Index.  For purposes of this Lease, the Base PeriodIndex is the Index for the calendar month in which the Commencement Dateoccurs.  The Base Period Index shall becompared with the Index for the month in which the Adjustment Date occurs (“ComparisonMonth”). If the Index for any Comparison Month is higher than the Base PeriodIndex, then the Base Rent shall be increased by the identical percentageincrease of the Index for the Comparison Month over the Base Index commencingwith the next Base Rent payment date. In no event shall the Base Rent be lessthan that set forth hereinabove. If the Bureau of Labor Statistics discontinuespublication of the Index, publishes the Index less frequently, or alters theIndex in a material manner, then Landlord may adopt a substitute Index orprocedure which reasonably reflects and monitors consumer prices. Landlord andTenant hereby agree to promptly enter into a written amendment to this Leaseevidencing any such increase in Base Rent.

 

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BaseRent for any partial month at the beginning or end of the Term shall be proratedbased on the actual number of days in that month.

 

3.2Additional Rent. Landlord and Tenant intend that this shall be a “net”lease, pursuant to which Tenant pays or reimburses Landlord for all costs andexpenses incurred in connection with the management, operation, maintenance,and repair of the Property, as further provided herein.

 

(a)          Definitions.

 

(1)          **“Operating Costs”**means allcommercially reasonable, actual and necessary costs of managing, operating,maintaining and repairing the Property, including all costs, expenditures, feesand charges for: (A) operation, maintenance and repair of the Buildingincluding all common areas and other improvements or facilities located on, inor under the Property relating to the Building, and including structural andnon-structural repairs, repair or replacement of glass (interior or exterior),sky lights located within or on the Building, floors doors, landscaping andother repairs and replacements, but excluding all structural repairs, upgradesor replacements except those necessitated by, or associated with TenantImprovements of Tenant for other than general office purposes, such aslibraries, high density filing stations, computer mainframes and vaults: (B) allcosts of operating, maintaining, repairing and replacing the heating,ventilating and air-conditioning (“HVAC”), and plumbing, electrical, lighting,fire protection, life safety, security, elevator and mechanical systems servingthe Building (“Building Systems”) and other operating equipment, except thosesystems which are separately metered for Tenant’s use for which Tenant shallpay all charges relating thereto separately: (provided that the amount of anycapital expenditures (i.e. expenditures that are to be capitalized, rather thanexpensed, under the Internal Revenue Code) shall be amortized on astraight-line basis over the applicable recovery period of the capital item soreplaced determined in accordance with the Internal Revenue Code, with intereston the unamortized balance at a rate equal to the Prime Rate (as that term isdefined below) plus one percent (1%)): (C) costs of maintenance andreplacement of landscaping, sidewalks, curbs, gutters, walkways, driveways,loading areas, utility lines, fences and signs located on the Property andequipment and all other elements of the Property provided, however that theamount of any capital expenditure shall be amortized on a straight line basisover the applicable recovery period of the capital expenditure determined inaccordance with the Internal Revenue Code, with interest on the unamortizedbalance at a rate equal to the Prime Rate plus one percent (1%)). (D) Utilitiesand services (including recycling programs and trash removal), and associatedsupplies and materials, except those utilities and services for which Tenantpays separately; (E) compensation (including employment taxes and fringebenefits) for persons who perform duties in connection with the operation,management, maintenance and repair of the Building, such compensation to beappropriately allocated for persons who also perform duties unrelated to theBuilding; (F) property including coverage for earthquake and flood, ifrequired by Lender and if so, 

 

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policies with commercially reasonable premiums and deductibles)liability, rental income and other insurance relating to the Property, andexpenditures for deductive amounts paid under such insurance provided, however,that the total amount of any deductible included as an Operating Cost hall notexceed (G) licenses, permits and inspections; (H) complying with therequirements of any law, statue, ordinance or governmental rule orregulation or any orders pursuant thereto (collectively (“Laws”) enacted,adopted or effective and enacted or adopted and mandated prior to theCommencement Date but not including capital expenditures, the cost of which areaddressed in subsection (I) below (1) amortization of capitalimprovements but only to the extent required to comply with Laws, or which actuallyreduce Operating Costs (but only to the extent that they do), with interest onthe unamortized balance at a rate equal to the Prime Rate plus one percent(1%)), in accordance with generally accepted accounting practices consistentlyapplied; (J) an office in the Project (excluding expenses of furnishingand equipping such office); (K) property management fees (not to exceedtwo percent (2%) of the gross income from the Project (i.e. Base rent plusOperating Expenses except Tenant’s separately measured expenses); (L) accounting,legal and other professional services incurred in connection with the operationof the Property and the calculation of Operating Costs and Taxes; (M) areasonable allowance for depreciation on machinery and equipment used to maintainthe Property and any personal property tax on personal property owned byLandlord and used in the operation of the Property; (N) contesting thevalidity or applicability of any Laws that may affect the Property providedLandlord notifies Tenant in writing of its intent to contest such Laws andTenant fails to object to such contest in writing delivered to Landlord withinfifteen (15) days of Landlord’s notice; (O) the Building’s Allocable Shareof any shared or common area maintenance fees and expenses (including costs andexpenses of operating, managing, owning and maintaining the common areas of theProject), which costs and expenses are of kind and nature of Operating Costsand Taxes; and (P) any other expense or charge, whether or nothereinbefore described, which in accordance with generally accepted propertymanagement practices would be considered an expense of managing, operating,maintaining and repairing the Property. Operating Costs shall also include the Building’s Allocable Share ofexpenses, costs and disbursements relating to or incurred or paid in connectionwith the management, operation, repair and maintenance of the Project of whichthe Building is a part, as equitably determined by Landlord, which expenses,costs and disbursements relate to or benefit directly the Building or theProject. Operating costs for any year during which average occupancy of theBuilding is less than one hundred percent (100%) during the entire calendaryear. For purposes of this Section 3.2(a)(1), the “Prime Rate” for aparticular expenditure shall be the prime rate as announced by the Bank ofAmerica, San Francisco, or its successor (without subsequent modification), asof the date of completion of construction of the item for which the expenditureis made. Landlord acknowledges and agrees that Landlord shall use commercially 

 

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reasonable judgment (based upon other landlords of other first classoffice projects in the downtown San Francisco area) in determining whether ornot to replace any aspect of the Building, Building systems and the like.

 

Notwithstandingthe foregoing, Operating Costs shall not include (i) capital expendituresother than those specifically enumerated above in Sections 3.2(a)(1)(I) above;(ii) costs of special services rendered to individual tenants (includingTenant) for which a special charge is made; (iii) interest and principalpayments on loans or indebtedness secured by the Building; (iv) costs ofimprovements for Tenant or other tenants of the Building; (v) costs ofservices or other benefits of a type which are not available to Tenant butwhich are available to other tenants or occupants, and costs for which Landlordis entitled to be reimbursed by other tenants of the Building other thanthrough payment of tenants shares of increases in Operating Costs and Taxes; (vii) depreciationor amortization other than as specifically enumerated in the definition ofOperating Costs above; (viii) costs, fines or penalties incurred due toLandlord’s violation of any Law; (ix) repairs, alterations, additions,improvements or replacements made to rectify or correct any defect in thedesign, materials or workmanship of the Building or common areas or to complywith any requirements of any governmental authority in effect as of theCommencement Date; (x) damage and repairs attributable to fire or othercasualty of the type which Landlord has insured to the extent of proceedsactually recovered by Landlord or would have been recoverable had Landlord carriedany insurance expressly required to be carried by Landlord her under; (xi)damage and repairs necessitated by the negligence or willful misconduct ofLandlord or Landlord’s employees, contractors or agents; (xii) executivesalaries above the level of Building Manager; (xiii) that portion of salariesof service personnel attributable to services that such service personnelperform that are not in connection with the management, operation, repair ormaintenance of the Building or Common Areas; (xiv) Landlord’s general overheadexpenses; (xv) costs (including permit, license and inspection fees) incurredin renovating or otherwise improving, decorating, painting or altering spacefor other tenants or other occupants or vacant, leasable space in the Building;(xvi) interest, penalties or other costs arising out of Landlord’s failure tomake timely payment of its obligations; (xvii) overhead and profit paid tosubsidiaries or affiliate of Landlord for management or other services for theProperty or the Building or for supplies or other material to the extent thatthe costs of the services, supplies or material exceed the market costs of theservices, supplies or materials if they were not provided by a subsidiary or anaffiliate; (xviii) costs incurred to test, survey, cleanup, contain, abate,remove or otherwise remedy Hazardous Materials (as defined in Section 5.2(a))from the Property unless the Hazardous Materials were in, about or on theProperty as a result of Tenant’s acts or omissions; (xix) costs incurred inconnection with any portion of the Project which is used for parking (e.g. theParking Facility) and for which parking fees are charged; (xx) costs incurredin advertising and promotional activities for the Project (including gifts andpromotional services to tenants or other parties); (xxi) development or impactfees or similar governmental charges paid by Landlord in order to develop and 

 

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constructthe Building and the Project; and (xxii) costs incurred in connection with anyportion of the Project which is used for retail purposes. In no event shallLandlord collect more than 100% of any cost actually incurred by Landlord.

 

(2)          **“Taxes”**means: all realproperty taxes and general, special or district assessments or othergovernmental impositions, or whatever kind, nature of origin imposed on or byreason of the ownership or use of the Property; governmental charges, fees orassessments for transit or traffic mitigation (including area-wide trafficimprovement assessments and transportation system management fees), housing,plaice, fire or other governmental service or purported benefits to theProperty; service payments in lieu of takes and taxes and assessments of everykind and nature whatsoever levied or assessed in addition to, in lieu of or insubstitution for existing or additional real property taxes on the Property;any increases in the foregoing caused by changes in assessed valuation, taxrate or other factors or circumstances; and the reasonable cost of contestingby appropriate proceedings the amount or validity of any taxes, assessments orcharges described above, provided Landlord notifies Tenant in writing of itsintent to contest such taxes or assessments and Tenant fails to object to suchcontest in writing delivered to Landlord within fifteen (15) days of Landlord’snotice. To the extent paid or owed by Tenant or other tenants as “Tenant’sTaxes” (as defined in Section 8-*Tenant’s Taxes*),“Tenant’s Taxes” shall be excluded from Taxes. Taxes for any year in which the building is less than fully occupiedshall be calculated based upon Taxes which would have been incurred if theBuilding were fully assessed by the appropriate taxing authority to reflect aone hundred percent (100%) occupied Building with all tenant’s improvementscompleted.  Not withstanding anything tothe contrary contained in this Lease, the following shall not constitute Taxesfor purposes of this Lease; (i) state, local, federal, personal orcorporate income tax measured by the income of Landlord; (ii) any estateor inheritance taxes; (iii) any franchise, succession or corporatetransfer taxes; (iv) interest on taxes or penalties resulting fromLandlord’s failure to pay taxes; and (v) real estate taxes resulting fromover standard improvements made by other tenants. In no event shall Landlordcollect more than 100% of any cost actually incurred by Landlord.

 

Notwithstanding the foregoing, if any sale or change of ownership of all or anyportion of the Property is consummated during the first two (2) years ofthe Term and, solely as a result, all or part of the Property is reassessed fortax purposes by the appropriate governmental authority, then (a) duringthe first year of the Term, Tenant shall be required to pay Tenant’s Share ofthe real property taxes that would have been in effect if Landlord has notconsummated the transfer, including, without limitation, the amount by whichthe Taxes would have increased under Proposition 13 pursuant to the annualmandated or permitted tax increases there under even if the transfer had notoccurred (the “Original Tax Base”), but no portion of the increase in Taxesresulting solely from the transfer over the Original 

 

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TaxBase (the “Transfer Increase”); and (b) during the second year of theTerm, Tenant shall pay Tenant’s Share of the Original Tax Base and fiftypercent (50%) of the Transfer Increase.

 

(3)          “Tenant’s Share” means theRentable Area of the Premises divided by the total Rentable Area of theBuilding.  Landlord and Tenantacknowledge and agree that Tenant’s Share of the Building shall be one hundredpercent (100%) as Tenant is leasing all of the rentable office area in suchBuilding.  If the Rentable Area of theBuilding is changed or the Rentable Area of the Premises is changed by Tenant’sleasing of additional space hereunder or for any other reason, Tenant’s Shareshall be adjusted accordingly.

 

(b)         Additional Rent

 

(1)   Tenant shallpay Landlord as “Additional Rent” for each calendar year or portion of thereofduring the Rent Period Tenant’s Share of the sum of (i) Operating Costsfor the period, and (ii) Taxes for such period.

 

(2)   Prior to theCommencement Date, and prior to the end of each calendar year thereafter,Landlord shall notify Tenant of Landlord’s reasonable estimate of OperatingCosts, Taxes and Tenant’s Additional Rent for the following calendar year.  Landlord’s estimate with respect to theBuilding shall include a comparison, by each category, of the prior year’sOperating Costs (in terms of both dollars and percentages) and, if requested byTenant, shall include reasonable detailed documentation to support Landlord’sestimate. If Landlord does not provide an estimate (and, if requested byTenant, reasonable detailed documentation) to Tenant prior to the commencementof the new calendar year, Tenant shall continue, until the month after Tenantreceives Landlord’s estimate of the revised Operating Costs (and, if requestedby Tenant, reasonable detailed documentation), to pay the Operating Costs basedon the prior year’s estimate.  Commencingon the first day of January of each calendar year and continuing on thefirst day of every month thereafter in such year, Tenant shall pay to Landlordone-twelfth (1/12th) of the estimated Additional Rent. If Landlordthereafter reasonably estimates that Operating Costs or Taxes for such yearwill vary from Landlord’s prior estimate, Landlord may, by written notice toTenant, revise the estimate for such year (and Additional Rent shall thereafterbe payable based on the revised estimate); provided, however that Landlordshall only be permitted to revise its estimate of the Operating Costs and/orTaxes once during each calendar year. In the event that Landlord reasonablybelieves that one or more categories of Operating Costs will be five percent(5%) or more than the estimated last provided to Tenant then Landlord shallnotify Tenant prior to issuing the year end statement. Landlord’s statement ofOperating Costs shall be certified by a certified public accountant or signedand certified to be correct by Landlord.

 

(3)          (i) As soon asreasonably practicable after the end of each calendar year of the Term, but inno event later than July 1st of each year, Landlord shall furnishTenant a statement with respect to such year, showing Operating Costs, Taxesand Additional Rent for the year, and the total payments made by Tenant withrespect thereto.  Any 

 

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objectionof Tenant to Landlord’s statement and resolution of any dispute shall notpostpone the time for payment of any amounts due Tenant or Landlord based onLandlord’s statement, nor shall any failure of Landlord to deliver Landlord’sstatement in a timely manner relieve Tenant of Tenant’s obligation to pay anyamounts due Landlord based on Landlord’s statement.

 

(4)          If Tenant’s Additional Rentas finally determined for the year exceeds the total payments made by Tenant onaccount thereof, Tenant shall pay Landlord the deficiency within thirty (30)days of Tenant’s receipt of Landlord’s statement. If the total payments made byTenant on account thereof exceed Tenant’s Additional Rent as finally determinedfor the year, Landlord shall credit toward the rent next due from Tenant underthis Lease an amount equal to Tenant’s excess payment. For any partial calendaryear at the beginning or end of the Term during which period Tenant is requiredto pay Additional Rent under this Lease, Additional Rent shall be prorated onthe basis of 365-day year by computing Tenant’s Share of Operating Costs andTaxes for the entire year and then prorating such amount for the number of daysduring such year included in the Term during which period Tenant is required topay Additional Rent under this Lease. Notwithstanding the termination of thisLease, Landlord shall pay to Tenant or Tenant shall pay to Landlord, as thecase may be, within thirty (30) days after Tenant’s receipt of Landlord’s finalstatement for the calendar year in which this Lease terminates, the differencebetween Tenant’s Additional Rent, as finally determined by Landlord, and thetotal amount previously paid by Tenant on account thereof.

 

Iffor any reason Taxes for any year during the Term are reduced, refunded orotherwise changed, Tenant’s Additional rent shall be adjusted accordingly. IfTaxes are temporarily reduced as a result of space in the Building being leasedto a tenant that is entitled to an exemption from property, taxes or othertaxes, then for purposed of determining Additional Rent for each year in whichTaxes are reduced by any such exemption, Taxes for such year shall becalculated on the basis of the amount the Taxes for the year would have been inthe absence of the exemption. The obligations of Landlord to refund anyoverpayment of Additional Rent and of Tenant to pay any Additional Rent notpreviously paid shall survive the expiration of the Term.

 

(5)          In the event that within one(1) year after Tenant’s receipt of the Statement for the prior calendaryear, Tenant reasonably believes that certain of the Operating Costs charged byLandlord include costs that are not properly included within the term “OperatingCosts” or that Landlord has erred in calculating same, Tenant shall have theright to audit Landlord’s books and records in accordance with this paragraph.Tenant shall e In the event that within one (1) year after Tenant’sreceipt of the Statement for the prior calendar year, Tenant reasonablybelieves that certain of the Operating Costs charged by Landlord include coststhat are not properly included within the term “Operating Costs” or thatLandlord has erred in calculating same, Tenant shall have the right to auditLandlord’s books and records in accordance with this paragraph. Tenant shallexercise such audit 

 

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rightby providing Landlord with a written notice of Tenant’s exercise of such auditright within such one-year period and a statement enumerating reasonablydetailed reasons for Tenant’s objections to the statement issued by Landlord(the “Audit Notice”). Upon the receipt by Landlord of an Audit Notice, Landlordshall instruct its property manager at the Building to meet with a designatedemployee or representative of Tenant (the “Tenant Representative”) to discussthe objections set forth in the Audit Notice, Landlord shall provide the TenantRepresentative with reasonable access to Landlord’s books and records at theBuilding relating to Operating Costs for the calendar year in question in orderto attempt to resolve the issues raised by Tenant in the Audit Notice. If,within thirty (30) days after Landlord’s receipt of the Audit Notice, Landlordand Tenant are unable to resolve Tenant’s objections, then not later than sixty(60) days after the expiration of such 30-day period, Tenant shall notifyLandlord if Tenant wishes to employ an independent, reputable certified publicaccounting firm charging for its services on an hourly rate (and not acontingent fee) basis (“Acceptable Accountants”) to inspect and audit Landlord’sbooks and records for the Building relating to the objections raised in Tenant’sstatement. Such audit shall be limited to a determination of whether or notLandlord calculated the Operating Costs in accordance with the terms andconditions of this Lease and normal and customary accounting methods used byowners of similar buildings in the area for calculating Tenant’s AdditionalRent. All costs and expenses of any such audit shall be paid by Tenant, unlessa discrepancy of three percent (3%) or greater is found in the OperatingExpenses to be paid by Tenant, in which event Landlord shall pay the reasonableout-of-pocket cost of the audit. Any audit performed pursuant to the terms ofthis section shall be conducted only by the Acceptable Accountants at theoffices of Landlord’s property manager at the Building. Notwithstandinganything contained herein to the contrary, Tenant shall be entitled to exerciseits audit right pursuant to this section only in strict accordance with theforegoing procedures no more often than once per calendar year and each suchaudit shall relate only to the calendar year most recently ended except if suchaudit reveals a bona fide error or overcharge in which case Tenant shall havethe right to audit previous years books and records solely as to such expenseitem or charge. In the event that Tenant fails to notify Landlord within theforegoing one-year period that Tenant object to the statements, then Tenant’sright to audit such year’s statement shall be null and void. In the event of abona fide dispute between Landlord and Tenant as to the validity of the resultsof any audit by Tenant or amount of any claimed overcharge, Landlord and Tenanthereby agree to resolve such dispute in accordance with the terms of Section 37of this Lease.

 

3.3Payment of Rent  All amountspayable or reimbursable by Tenant under this Lease, including late charges andinterest, shall constitute rent and shall be payable and recoverable as rent inthe manner provided in this Lease. All sums payable to Landlord on demand underthe terms of this Lease shall be payable within thirty days after the receiptof written invoice from

 

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Landlord of the amounts due. Except as otherwise provided by thisLease, all rent shall be paid without offset, recoupment or deduction in lawfulmoney of the United States of America to Landlord at Landlord’s Address forPayment of Rent as set forth in the Basic Lease Information, or to such otherperson or at such other place as Landlord may from time to time designate toTenant in writing.

 

4.     SECURITYDEPOSIT. Intentionally Deleted.

 

5.     USEAND COMPLIANCE WITH LAWS

 

5.1 (a) Uses. The Premises shall be used for general office, whichshall include engineering and any other ancillary office use with is consistentwith the operation of the Building as a first class office building and for noother use or purpose. Tenant shall comply with all present and future Lawsrelating to Tenant’s use or occupancy of the Premises (and make any repairs,alterations or improvements as required to comply with all such Laws), andshall observe the “Building Rules” (as defined in Section 27-Rules andRegulations); provided, however, Tenant shall not be responsible for orrequired to make structural improvements or alterations to the Premises exceptto the extent the structural improvements or alterations are required as aresult of Tenant’s use of the Premises for other than general office purposes,such as the construction or installation of high density filing systems,libraries, engineering labs or server rooms. Tenant shall not do, bring, keepor sell anything in or about the Premises that is prohibited by, or that will causea cancellation of or a material increase in the existing premium for, anyinsurance policy covering the Property or any part thereof. Tenant shall notpermit the Premises to be occupied or used in any manner that will constitutewaste or a nuisance, or disturb the quiet enjoyment of or otherwise annoy othertenants in the Building. Without limiting the foregoing, the Premises shall notbe used for educational activities (except Tenant’s business trainingactivities), practice of medicine or any of the healing arts or providingsocial services. Tenant shall not, without the prior consent of Landlord, whichconsent shall not be unreasonably withheld, conditioned or delayed, (i) bringinto the Building or the Premises anything that may cause substantial noise,odor or vibration, overload the floors in the remises or the Building or any ofthe HVAC or other Building Systems, or jeopardize the structural integrity ofthe Building or any part thereof; or (ii) connect to the utility systemsof the Building any apparatus, machinery or other equipment which has a totalconnected electrical design load in excess of the rated design load for theBuilding. Subject to Landlord’s rights hereunder to limit access to theBuilding or the Premises in the event of an emergency or in connection withwork or repairs performed by Landlord and subject to Landlord’s procedures withrespect to after-hours access, Tenant shall have the right to access thePremises twenty-four (24) hours a day, seven (7) days a week, 365 days peryear. Tenant shall have the right, if and to the extent permitted by applicableLaws and in accordance therewith to use the connecting stairways in theBuilding so long as such use by Tenant does not create a fire hazard orinterfere with the functioning of the HVAC system. Tenant shall have the rightto install its own external security car reader system for access to thebuilding and as long as Tenant leases all of the office space in the Buildingto establish dedicated, secure elevators, including freight elevators, andsecured lobby access to those elevators serving Tenant’s floors, subject toLandlord’s right of access to all times as provided elsewhere in this lease andsubject to the rules and regulations regarding access/security proceduresdeveloped in accordance with sub clause (b) below.

 

(b) Security/Access Control. Landlord and Tenant hereby agree tocooperate in good faith to jointly develop access and security procedures andprotocol for the Building. So long as Tenant is leasing all of the office spacein the Building, Tenant, at Tenant’s sole cost and expense, will have the rightto: provide on-site security measure for the Building, including the right tohave a lobby guard 24 hours/7days/365 days per year, 

 

 

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installation of security cameras, require the registration of allpersons entering or leaving the Building during non-business hours ofoperation, and require identification for access to the Building. In the eventTenant ceases to lease all of the office space in the Building, Landlord mayelect to undertake such procedures as Landlord deems appropriate for othermulti-tenant office buildings in the Project at Landlord’s expense (subject toLandlord’s right to be reimbursed as part of Operating Costs). Further,Landlord will evacuate the Building for cause, suspected cause, or for drillpurposes, and take other actions that Landlord deems necessary or appropriateto prevent any threat of property loss or damage, bodily injury or businessinterruption; provided, however, that such measure shall be implemented in away as not to inconvenience Tenants unreasonably with at least thirty (30) daysprior notice to Tenant. Further, Landlord shall provide, at Landlord’s cost(subject to reimbursement by Tenant as part of Operating Costs), a guard whoshall patrol all of the Project, including the Building, twenty-four (24) hoursper day, seven (7) days per week. Tenant shall pay separately all costsand expenses of any security services or measures initiated by Tenant. Allcosts and security measures provided for or contracted for by Landlord shall bepaid by Landlord subject to Tenant’s obligation to reimburse such costs andexpenses as part of Operating Costs. If and to the extent Landlord is responsiblefor security/access control for the Building, Tenant or its Representativesshall cooperate and comply with such security measures, and Tenant shallrequest that Tenant’s Visitors cooperate and comply with such securitymeasures.  Landlord, its agents andemployees shall have no liability to Tenant or its Representatives or Visitorsfor the implementation or exercise of, or the failure to implement or exercise,any such security measures or for any resulting disturbance of Tenant’s use orenjoyment of the Premises. Landlord agrees that Landlord and any of its agentsor contractors, who will need unaccompanied access to the Premises, must firstpass Tenant’s corporate security screening program, “Sunscreen,” before accessis granted, except in case of emergencies. IF any of Landlord’s agents orcontractors fail such security screening program, such agents and othercontractors shall be accompanied by a representative of Tenant at all times inthe Premises during business hours and shall not be allowed on the Premisesafter business hours. Landlord hereby agrees that the areas containing exteriordoors and loading docks shall contain illumination at a minimum of five (5) foodcandles of light at six (6) feet above ground.

 

(c) MPOE/Risers, Landlord and Tenant hereby acknowledge and agreethat so long as Tenant leases all of the office space in the Building, Tenantshall have the sole right to use and control the Building’s main point of entry(MPOE), risers and chases. The MPOE shall be a single 8 foot by 8 foot closet.While Tenant shall have the right to secure such MPOE areas, Landlord shallhave the right of access at all times but Landlord must be accompanied by arepresentative of Tenant except in cases of emergency.

 

5.2 Use of Project. Throughout the Term, Landlord shall maintainand operate the Project as a Class A office complex, and shall not allowany portion of the Project to be used for any use that is not consistent with aClass-A office complex.

 

5.3 Hazardous Materials

 

(a) Definitions

 

(1) **“Hazardous Materials”**shall mean any substance: (A) that now or in the future is regulated orgoverned by, requires investigation or remediation under, or is defined as ahazardous waste, hazardous substance, pollutant or contaminant under anygovernmental statute, code, ordinance, regulation, rule or order, and anyamendment thereto, including for example only the Comprehensive EnvironmentalResponse Compensation and Liability Act, 42 U.S.C 9601 et seq., and theResource 

 

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Conservation and Recovery Act, 42 U.S.C 6901 et seq., or (B) thatis toxic, explosive, corrosive, flammable, radioactive, carcinogenic, dangerousor otherwise hazardous, including gasoline, diesel fuel, petroleumhydrocarbons, polychlorinated biphenyls (PCBs), asbestos, radon and ureaformaldehyde foam insulation.

 

(2) **“EnvironmentalRequirements”**shall mean all present and future Laws, orders,permits, licenses, approvals, authorizations and other requirements of any kindapplicable to Hazardous Materials.

 

(3) **“Handled by Tenant”**and **“Handling by Tenant”** shall mean andrefer to any installation, handling, generation, storage, use, disposal,discharge, release, abatement, removal, transportation, or any other activityof any type by Tenant or its agents, employees, contractors, licenses,assignees, sub lessees, transferees or representatives (collectively, **“Representatives”**) or its guests, customers, invitees, orvisitors (collectively, **“Visitors”**), ator about the Premises in connection with or involving Hazardous Materials.

 

(4) “Environmental Losses” shall meanall costs and expenses of any kind, damages, including foreseeable andunforeseeable consequential damages, fines and penalties incurred in connectionwith any violation of Environmental Requirements by Tenant or its agents, orcontractors and all losses of any kind attributable to the diminution of value,loss of use or adverse effects on marketability or use of any portion of thePremises or Property resulting therefrom.

 

(b)Tenant’s Covenants. No Hazardous Materials shall be handledby Tenant at or about the Premises or Property without Landlord’s prior writtenconsent, which consent may be granted, denied, or conditioned upon compliancewith Landlord’s requirements, all in Landlord’s absolute discretion.Notwithstanding the foregoing, normal quantities and use of those HazardousMaterials customarily used in the conduct of general office activities, such ascopier fluids and cleaning supplies (“Permitted Hazardous Materials”), may beused and stored at the Premises without Landlord’s prior written consent,provided that Tenant’s activities at or about the Premises and Property and theHandling by Tenant of all Hazardous Materials shall comply at all time with allEnvironmental Requirements. At the expiration or termination of this Lease,Tenant shall promptly remove from the Premises and Property all HazardousMaterials Handled by Tenant at the Premises of the Property. Tenant shall keepLandlord fully and promptly informed of all Handling by Tenant of HazardousMaterials other than Permitted Hazardous Materials. Tenant shall be responsibleand liable for the compliance with all the provisions of this Section byall of Tenant’s Representatives and Visitors, and all of Tenant’s obligationsunder this Section (including its indemnification obligations underparagraph (e) below) shall survive the expiration or termination of thisLease.

 

(c) Compliance. Tenant shall at Tenant’s expense promptlytake all actions required by any governmental agency or entity, in connectionwith or as a result of the Handling by Tenant of Hazardous Materials at orabout the Premises or Property, including inspection and testing, performingall cleanup, removal and remediation work required with respect to thoseHazardous Materials, complying with all closure requirements and post-closuremonitoring, and filing all required reports or plans. All of the foregoing workand all Handling by Tenant of all Hazardous Materials shall be performed in agood, safe and workmanlike manner by consultants qualified and licensed toundertake such work and in a manner that will not unreasonably interfere withany other tenants quiet enjoyment of the Property or Landlord’s use, operation,leasing and sale of the Property. Tenant shall deliver to Landlord prior todelivery, to any governmental agency, or promptly after receipt from any suchagency, copies of all permits, manifests, closure or 

 

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remedial action plans, notices, and all other documents relating to theHandling by Tenant of Hazardous Materials at or about the Premises or Property.If any lien attaches to the Premises or the Property in connection with or as aresult of the Handling by Tenant of Hazardous Materials, and Tenant does notcause the same to be released, by payment, bonding or otherwise, within ten (10) businessdays after the attachment thereof, Landlord shall have the right but not theobligation to cause the same to be released and any sums expended by Landlordin connection therewith shall be payable by Tenant on demand.

 

(d) Landlord’s Rights. Landlord shall have the right, butnot the obligation, to enter the Premises upon forty-eight (48) hours priorwritten notice to Tenant, except in instances in which Landlord, in itsreasonable discretion, deems an emergency to exist, at any reasonable time (i) toconfirm Tenant’s compliance with the provisions of this Section, and (ii) toperform Tenant’s obligations under this section if Tenant has failed to do soor commence to do so within five (5) days after written notice to Tenant.Landlord shall also have the right to engage qualified Hazardous Materialsconsultants to inspect the Premises and review the Handling by Tenant ofHazardous Materials, including review of all permits, reports, plans, and otherdocuments regarding same, the costs of which shall be reimbursed by Tenant toLandlord within ten (10) days written request (with supporting invoice)therefore to the extent such costs are incurred by Landlord in connection withor as a result of Tenant’s breach of any obligations hereunder or a complianceactivity by Tenant that is governmentally mandated. Tenant shall pay toLandlord on demand the costs of Landlord’s consultants’ fees and all costsincurred by Landlord in performing Tenant’s obligations under this Section.Landlord shall use reasonable efforts to minimize any interference with Tenant’sbusiness caused by Landlord’s entry into the Premises, but Landlord shall notbe responsible for any interference caused thereby.

 

(e) Tenant’s Indemnification. Tenant agrees to indemnify,defend and hold harmless Landlord and its partners or members and its or theirpartners, members, directors, officers, shareholders, employees and agents fromall Environmental Losses and all other claims, actions, losses, damages,liabilities, costs and expenses of every kind, including reasonable attorneys’,experts’ and consultants’ fees and costs, incurred at any time and arising fromor in connection with the Handling by Tenant of Hazardous Materials at or aboutthe Property or Tenant’s failure to comply in full with all EnvironmentalRequirements with respect to Premises.

 

(f) Landlord’s Indemnification. Landlord shall indemnify,defend, protect and hold harmless Tenant and its officers, directors,employees, shareholders and agents from and against any and all claims, loss,proceedings, damages, causes of action, liability, costs or expenses (includingreasonable attorneys’ fees) arising as a result of the handling, installation,storage, generation, use, disposal, discharge, release, abatement, removal, ortransportation of Hazardous Materials by Landlord, its agents, employees,contractors or representatives in, on or about the Premises, the Building orthe Property, which are not the result of the activities of Tenant.

 

6.               Alterations.

 

6.1 Tenant shall not make any alterations, improvements or changes tothe Premises, other than the Tenant Improvements (“**Alterations**”),without Landlord’s prior written consent, which consent shall not beunreasonably withheld, conditioned or delayed, which consent shall be given byLandlord if at all, within five (5) business days after Landlord’s receiptof Tenant’s request to make such Alterations and all other information requiredto be submitted to Landlord pursuant to this Section 6. Any suchAlterations shall be completed by Tenant at Tenant’s sole cost and expense: (i) withdue diligence, in a good and workmanlike manner, using new materials: (ii) incompliance with plans 

 

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and specifications reasonably approved by Landlord: (iii) incompliance with the construction rules and regulations reasonablypromulgated by Landlord from time to time: and (iv) in accordance with allapplicable Laws (including all work, whether structural or non-structural,inside or outside the Premises, required to comply fully with all applicableLaws and necessitated by Tenant’s work). Landlord shall notify Tenant inwriting at the time that Landlord consents to the Alterations, or, if noconsent is required, within ten (10) days after Tenant’s written request,as to whether Tenant must remove the Alterations at the end of the Term:provided, however, that Tenant shall not be required to remove any general officeimprovements but shall remove and repair to its original state, all highdensity filing systems, server rooms, computer mainframes, libraries, telecomnodes, satellite dishes and signs erected with Landlord’s approval under thisLease. Landlord hereby agrees to notify Tenant as part of Landlord’s review ofTenant’s Final Construction Documents whether or not any of the tenantimprovements to the Premises which Tenant will be making will be required to beremoved by Tenant pursuant to this Section 6.1, provided, however, thatLandlord may not require Tenant to remove the partitions, doors or othervertical elements of offices, conference rooms, break rooms, copy rooms andother general purpose office rooms, or other standard general-purpose office improvements.Landlord will consent to a space plan characterized by a high-density ofprivate offices similar to Tenant’s preliminary plans attached hereto as Exhibit G.Notwithstanding anything to the contrary contained in this Section, Tenantshall have the right, without Landlord’s consent, to make non-structuralalterations, additions or improvements that to not affect the BuildingStructure, Building Systems (except for Building Systems included in TenantImprovements), the HVAC, or the Common Areas or exterior of the Building to theextent the cost of any particular alteration, addition or improvement costsless than Two Hundred Thousand Dollars ($200,000.00), excluding carpet andpaint. If any work outside the Premises or any work on or adjustment to any ofthe Building Systems, is required in connection with or as a result of Tenant’swork, such work shall be performed at Tenant’s expense by contractorsreasonably approved by Landlord. Landlord’s right to review and approve (orwithhold approval of) Tenant’s plans, drawings, specifications, contractor(s) andother aspects of construction work proposed by Tenant is intended solely toprotect Landlord, the Property and Landlord’s interests. NO approval or consentby Landlord shall be deemed or construed to be a representation or warranty byLandlord as to the adequacy, sufficiency, fitness or suitability thereof orcompliance thereof with applicable Laws or other requirements. Except asotherwise provided in Landlord’s consent, all Alterations shall upon installationbecome part of the realty and be the property of Landlord.

 

6.2 Before making any Alterations which require Landlord’s consent,Tenant shall submit to Landlord for Landlord’s prior approval schematicdrawings of the work to be performed, and the name of the contractor and allsubcontractors proposed by Tenant to make the Alterations. Tenant shallreimburse Landlord within 30 days of receipt of a written invoice for allreasonable and actual out-of-pocket expenses incurred by Landlord in connectionwith any Alterations made by Tenant, including actual and reasonable feescharged by Landlord’s contractors or consultants to review plans andspecifications prepared by Tenant and to update the existing as-built plans andspecifications of the Building to reflect the Alterations, not to exceed FiveThousand Dollars ($5,000.00). Tenant shall obtain all applicable permits,authorizations and governmental approvals and deliver copies of the same toLandlord before commencement of any Alterations.

 

6.3 Tenant shall keep the Premises and the Property free and clear ofall liens arising out of any work performed, materials furnished or obligationsincurred by Tenant. If any such lien attaches to the Premises or the Property,and Tenant does not cause the same to be released by payment, bonding orotherwise within ten (10) business days after the attachment thereof,Landlord shall have the right but not the obligation to cause the 

 

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same to be released, and any sums expended by Landlord in connectiontherewith shall be payable by Tenant within 30 days after receipt of writteninvoice with interest thereon from the date of expenditure by Landlord at theInterest Rate (as defined in Section 16.2-*Interest*).Tenant shall give Landlord at least ten (10) days notice prior to thecommencement of any Alterations and cooperate with Landlord in posting andmaintaining notices of non-responsibility in connection therewith.

 

6.4 Subject to the provisions of Section 5- Use and Compliancewith Laws and the foregoing provisions of this Section, Tenant may install andmaintain furnishings, equipment, movable partitions, business equipment andother trade fixtures (“Trade Fixtures”) in the Premises, provided that theTrade Fixtures do not become and integral part of the Premises or the Building.Tenant shall promptly repair any damage to the Premises or the Building causedby any installation or removal of such Trade Fixtures.

 

7.               MAINTENANCE ANDREPAIRS.

 

7.1 By taking possession of the Premises Tenant agrees that thePremises are then in a good and tenantable condition, subject to latent defectsof which Tenant must notify Landlord in writing within one (1) year afterthe delivery of the Premises affected by the defect to Tenant, except forlatent structural defects of which Tenant must notify Landlord within 10 yearsafter such date. During the Term, Tenant at Tenant’s expense but under thedirection of Landlord, shall repair and maintain the Premises, including theinterior walls, floor coverings, ceiling (ceiling tiles and grid), TenantImprovements, Alterations, fire extinguishers, outlets and fixtures, and anyappliances (including dishwashers, hot water heaters and garbage disposers) inthe Premises, in a condition customary for well managed, high quality officebuildings in San Francisco and keep the Premises in a clean, safe and orderlycondition.

 

7.2 Landlord shall maintain or cause to be maintained in a mannercustomary for well managed, high quality office buildings in San Francisco, thestructural portions of the roof and roof membrane, foundations, floors andexterior walls of the Building, the Building Systems (except for BuildingSystems included in the Tenant Improvements), and the public and common areasof the Property, such as elevators, stairs, corridors and public restrooms;provided, however, that Tenant shall pay the cost of repairs for damagedoccasioned by Tenant’s use of the Premises or the Property (other than normalwear and tear and damage for which Landlord carries insurance) or any negligentact or omission of Tenant or Tenant’s Representatives or Visitors. Landlordshall be under no obligation to inspect the Premises. Tenant shall promptlyreport in writing to Landlord any defective condition known to Tenant whichLandlord is required to repair. Landlord shall be responsible for latentdefects not discovered by Tenant through the normal course of inspection. As amaterial part of the consideration for this Lease, Tenant hereby waives anybenefits of any applicable existing or future Law, including the provisions ofCalifornia Civil Code Sections 1932(1), 1941 and 1942, that allows a tenant tomake repairs at its landlord’s expense. In the event that Landlord defaultsunder its obligations under this Lease, Tenant shall promptly notify Landlordin writing of such default and Landlord shall have thirty (30) days withinwhich to cure such default (or if such default is not capable of being curedwithin such time, Landlord shall diligently proceed to cure such default). Inthe even that Landlord does not cure the default within such 30-day period ordoes not diligently proceed to cure such default if such default is not capableof being cured within such 30-day period, Tenant shall have the right to curesuch default on Landlord’s behalf and Landlord shall promptly reimburse Tenantfor all reasonable, out-of-pocket expenses incurred by Tenant in connectionwith such cure.

 

7.3 Provided that Landlord’s activities do not materially and adverselyaffect Tenant’s use of the Premises or the common areas of the Building duringnormal business hours 

 

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on business days, Landlord hereby reserves the right, at any time andfrom time to time, without liability to Tenant, and without constituting aneviction, constructive or otherwise, or entitling Tenant to any abatement ofrent or to terminate this Lease or otherwise releasing Tenant from any ofTenant’s obligations under this Lease:

 

(a) To make alterations, additions,repairs, improvements to or in the Building;

 

(b) To change the Building’s name orstreet address, subject to the terms of Section 35.2 hereof;

 

(c) To install and maintain any and all signson the exterior and interior of the Building, subject to Tenant’s rights under Section 35(Signage)hereof; and

 

(d)         If any governmentalauthority promulgates or revises any Law or imposes mandatory or voluntarycontrols or guidelines on Landlord or the Property relating to the use ofconservation of energy or utilities or the reduction of automobile or otheremissions or reduction or management of traffic or parking on the Property(collectively “Controls”), to comply with such Controls, if mandatory, or makeany alterations to the Property related thereto.

 

8.               TENANT’S TAXES. “**Tenant’s Taxes**” shall mean (a) all taxes, assessments,license fees and other governmental charger or impositions levied or assessedagainst or with respect to Tenant’s personal property or Trade Fixtures in thePremises, whether any such imposition is levied directly against Tenant orlevied again Landlord or the Property, (b) all actual rental, excise,sales or transaction privilege taxes arising out of this Lease (excluding,however, state and federal personal or corporate income taxes measured by theincome of Landlord from all sources) imposed by any taxing authority uponLandlord or upon Landlord’s receipt of any rent payable by Tenant pursuant tothe terms of this Lease (“Rental Tax”), and (c) any increase in Taxesattributable to inclusion of a value placed on Tenant’s personal property,Trade Fixtures or Alterations. Tenant shall pay any Rental Tax to Landlord inaddition to and at the same time as Base Rent is payable under this Lease, andshall pay all other Tenant’s Taxes before delinquency (and, at Landlord’srequest, shall furnish Landlord satisfactory evidence thereof). If Landlordpays Tenant’s Taxes or any portion thereof, Tenant shall reimburse Landlordwithin 30 days after receipt of written invoice for the amount of such payment,together with interest at the Interest Rate from the date of Landlord’s paymentto the date of Tenant’s reimbursement; provided, however, Landlord shall notpay Tenant’s Taxes prior to delinquency and Landlord shall notify Tenant inwriting ten (10) days in advance of its intent to pay Tenant’s Taxes.

 

9.               UTILITIES ANDSERVICES.

 

9.1 Description of Services. Landlord shall furnish to thePremises electricity, hot and cold water, passenger and freight elevatorservice and heat, ventilation and air conditioning in accordance with the BaseBuilding description attached as Exhibit F-1. All such services/utilitiesshall be separately metered to the Premises, as provided in Section 9.2(b) below,and Tenant shall pay directly all such costs relating thereto as provided below.Landlord and Tenant acknowledge and agree that Tenant shall provide andcontract for its own janitorial services to the Premises, at Tenant’s sole costand expense, which janitorial services shall be comparable in quality andservices to other janitorial services rendered in other first class officebuildings.

 

9.2 Payment for Additional Utilities and Services.

 

(a) If the temperature otherwisemaintained in any portion of the Premises by the HVAC systems of the Buildingis affected as a result of (i) any lights, machines or equipment used byTenant in the premises other than reasonable and customary numbers and types ofgeneral office equipment customarily used in the conduct of general officeactivities, or (ii) the occupancy of the Premises by more than one person 

 

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per 150 square feet of rentable area, then Landlord shall have theright, in consultation with Tenant, to install any machinery or equipmentreasonably necessary to restore the temperature, including modifications to thestandard air-conditioning equipment. The reasonable cost of any such equipmentand modifications, including the reasonable cost of installation and anyadditional cost of operation and maintenance of the same, shall be paid byTenant to Landlord within thirty (30) days after Landlord’s written requesttherefore.

 

(b) As part of the Tenant Improvements,Tenant shall separately meter or submeter the consumption of all utilities tothe Premises and Tenant hereby agrees to pay, in the case of those utilitieswhich are separately metered, all utilities charges, as and when due andpayable, to the utility provider and in the case of those utilities which areseparately submetered, to pay to Landlord, when invoiced by Landlord, allchanges associated with such submetered utilities.

 

9.3 Interruption of Services. In the event of an interruptionin, or failure or inability, to provide any of the services or utilitiesdescribed in Section 9.1- “*Description of Services*”(**a “Service Failure”**), such ServiceFailure shall not regardless of its duration, constitute an eviction of Tenant,constructive or otherwise, or impose upon Landlord any liability whatsoever,including, but not limited to, liability of consequential damages or loss of businessby Tenant or, except as provided herein, entitle Tenant to an abatement of rentor to terminate this Lease.

 

(a) If any Service Failure not caused byTenant or its Representatives prevents Tenant from reasonably using a materialportion of the Premises and Tenant in fact ceases to use such portion of thePremises, Tenant shall be entitled to an abatement of Base Rent and AdditionalRent with respect to the portion of the Premises that Tenant is prevented fromusing by reason of such Service Failure in the following circumstances: (i) ifLandlord fails to commence reasonable efforts to remedy the Service Failurewithin two (2) Business Days following the occurrence of the ServiceFailure or fails thereafter to pursue diligently reasonable action to remedythe Service Failure, the abatement of rent shall commence the next business dayfollowing the Service Failure and continue for the balance of the period duringwith Tenant is so prevented from using such portion of the Premises; and (ii) ifthe Service Failure in all events is not remedied within ten (10) daysfollowing the occurrence of the Service Failure and Tenant in fact does not usesuch portion of the Premises for an uninterrupted period of ten (10) daysor more by reason of such Service Failure, the abatement of rent shall commenceno later than the eleventh (11th) day following the occurrence ofthe Service Failure and continue for the balance of the period during whichTenant is so prevented from using such portion of the Premises.

 

(b) If a Service Failure is caused byTenant or its Representatives, Landlord shall nonetheless remedy the ServiceFailure, at the expense of Tenant, pursuant to Landlord’s maintenance andrepair obligations under Section 7- “*Maintenance and Repair*”or Section 12.1- “*Landlord’s Duty to Repair*,”as the case may be, but Tenant shall not be entitled to an abatement of rent orto terminate this Lease as a result of any such Service Failure.

 

(c) Notwithstanding Tenant’s entitlement to rent abatement underthe preceding provisions, Tenant shall continue to pay Tenant’s then currentrent until such time as Landlord and Tenant agree on the amount of the rentabatement, If Landlord and Tenant are unable to agree on the amount of suchabatement within ten (10) Business Days of the date they commencenegotiations regarding the abatement, then either party may submit the matterto binding arbitration pursuant to sections 1280 et seq. of the California Codeof Civil Procedure.

 

(d) In addition to the foregoing provisions, if there is a ServiceFailure not caused by Tenant or its Representatives and such Service Failureprevents Tenant from conducting its business in the Premises in the manner inwhich Tenant intends to conduct such business, and 

 

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(i) Landlord fails to commence reasonable efforts to remedy theService Failure within ten (10) days following the occurrence of theService Failure and thereafter use reasonably diligent efforts to remedy theService Failure, or (ii) the Service Failure in all events is notremediated within four (4) months following its occurrence and Tenant infact does not substantially conduct its business in the Premises in the mannerin which Tenant intends to conduct business for an uninterrupted period of four(4) months or more, Tenant shall have the right to terminate this Lease bywritten notice delivered to Landlord within ten (10) Business Daysfollowing the event described in clauses (i) or (ii) above givingrise to the right to terminate.

 

(e) Where the cause of a Service Failure is within the control ofa public utility or other public or quasi-public entity outside Landlord’scontrol, written notification to such utility or entity of the Service Failureand request to remedy the failure shall constitute “reasonable efforts” byLandlord to remedy the Service Failure.

 

(f) Tenant hereby waives the provisions of California Civil Code Section 1932(1) orany other applicable existing or future law, ordinance or governmentalregulation permitting the termination of this Lease due to such interruption,failure or inability.

 

9.4 Tenant’s Access. Landlord shall provide Tenant access to thevertical and horizontal raceways in the Building to permit Tenant to installTenant’s utility and/or telecommunication lines separately or in common withother building lines. Tenant shall also be permitted reasonable access to roofof the Building to install, maintain and replace satellite dishes and/or othertelecommunications equipment installed pursuant to Section 37(Telecommunications Equipment) hereof.

 

10.         EXCULPATION ANDINDEMNIFICATION.

 

10.1                           Landlord’sLiability to Tenant.  Landlord shallnot be liable to Tenant for any loss, injury or other damage to any person orproperty (including Tenant or Tenant’s property) in or about the Premises orthe Property from any cause (including defects in the Property or in anyequipment in the Property; fire, explosion or other casualty; bursting,rupture, leakage or overflow of any plumbing or other pipes or lines, sprinklers,tanks, drains, drinking fountains or washstands in, above, or about thePremises or the Property; or acts of other tenants in the Property), and Tenanthereby waives all claims against Landlord for any such loss, injury or damageand the cost and expense of defending against claims relating thereto, exceptsuch loss, injury or damage to the extent caused by Landlord’s negligence orwillful misconduct; provided, however, that Landlord shall indemnify, protect,defend and hold Tenant harmless from and against any claims, actions,liabilities, damages, costs or expenses, including reasonable attorneys’ feesand costs incurred in defending against the same (“Claims”) asserted by thirdparties against Tenant for such loss, injury or damages, to the extent the sameare caused by the willful or negligent acts or omissions of Landlord or itsauthorized representatives. Notwithstanding any other provision of this Leaseto the contrary, however, in no event shall Landlord be liable to Tenant forany punitive or consequential damages or damages for loss of business byTenant.

 

10.2                           Tenant’sIndemnification of Landlord. Tenant shall indemnify, protect, defend andhold harmless Landlord from and against Claims to the extent arising from (a) theacts or omissions of Tenant of Tenant’s Representatives or Visitors in or aboutthe Property, or (b) any construction or other work undertaken by Tenanton the Premises (including any design defects), or (c) any breach ordefault under this Lease by Tenant, excepting only Claims to the extent theyare caused by the negligent or willful acts or omissions of Landlord or itsauthorized representatives. Notwithstanding any other provision of this Leaseto the contrary, in no event shall tenant be liable to Landlord for any punitiveor 

 

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consequential damages, and Tenant andLandlord agree and understand that Landlord’s remedies set forth in Section 15.2(Remedies) hereof constitute actual, not consequential, damages.

 

10.3                           Survival.The obligations of the parties under this Section 10 shall survive theexpiration or termination of this Lease.

 

11                                    INSURANCE

 

11.1                           Tenant’sInsurance.

 

(a)          Tenant shall maintain infull force throughout the Term, commercial general liability insurance providingcoverage on an occurrence form basis with limits of not less than Two MillionDollars ($2,000,000.00) each occurrence for bodily injury and property damagecombined, and Five Million Dollars ($5,000,000.00) annual general aggregate andTwo Million Dollars ($2,000,000.00) products and completed operations annualaggregate. Tenant’s liability insurance policy or policies shall; (i) includepremises and operations liability coverage, broad form property damage coverageincluding completed operations, blanket contractual liability coverageincluding, to the maximum extent possible, coverage for the indemnificationobligations of Tenant under this Lease and personal and advertising injurycoverage; (ii) provide that the insurance company pas the duty to defendall insured’s under the policy; (iii) provide that defense costs are paidin addition to and do not deplete any of the policy limits; (iv) coverliabilities arising out of or incurred in connection with Tenant’s use oroccupancy of the Premises or the Property; and (v) extend coverage tocover liability for the actions of Tenant’s Representatives and Visitors.

 

(b)         Tenant shall at all timemaintain in effect with respect to any Alterations and Tenant’s Trade Fixturesand personal property, commercial property insurance providing coverage, on an “allrisk” or “special form” basis, in an amount equal to at least 90% of the fullreplacement cost of the covered property. Tenant may carry, such insuranceunder a blanket policy, provided that such policy provides coverage equivalentto a separate policy. During the Term, the proceeds from any such policies ofinsurance shall be used for the repair or replacement of the Alterations, TradeFixtures and personal property so insured. Landlord will have no obligation tocarry insurance on any Alterations or on Tenant’s Trade Fixtures or personalproperty.

 

(c)          Each policy of insurancerequired under this Section shall: (ii) be maintained at Tenant’ssole cost and expense, and (iii) require at least thirty (30) days’written notice to Landlord prior to any cancellation or nonrenewal of insurancecoverage. Insurance companies issuing such policies shall have ratingclassifications of “A” or better and financial size category ratings of “X” orbetter according to the latest edition of the A.M. Best Key Rating Guide.All insurance companies issuing such policies shall be license to do businessin the state where the Property is located. Tenant shall provide to Landlord,upon Landlord’s written request, evidence that the insurance required to becarried by Tenant pursuant to this Section, is in full force and effect.

 

(d)         [Intentionally Omitted].

 

(e)          Each policy of liabilityinsurance required by this Section shall: (i) contain a crossliability endorsement or separation of insured’s clause; (ii) provide thatany waiver of subrogation rights or release prior to a loss does not voidcoverage; and (iii) provide that it is primary to and not contributingwith, any policy of insurance carried by Landlord covering the same loss.

 

(f)            Prior to occupancy ofthe Premises by Tenant, and not less than thirty (30) days prior to expirationof any policy thereafter, Tenant shall furnish to 

 

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Landlord a certificate of insurance reflectingthat the insurance required by this Section is in force.

 

(g)         All or any portion of theinsurance coverages Tenant is required to maintain under this Lease may bemaintained under a program of Tenant self-insurance or under policies thatinclude self-insurance retentions or deductibles larger than those typicallycarried by similarly situated tenants. Before the Commencement Date, Tenantshall advise Landlord of the self-insurance program, specifying limits andamounts of umbrella coverage and self-insured retentions, or deductibles.Landlord is considered to consent to such self-insurance program as long as itis effective and Tenant’s net worth and current assets exceed $250,000,000 and$250,000,000 respectively.

 

11.2                           Landlord’sInsurance. At all times during the Term, Landlord shall maintain in effectinsurance on the Building with responsible insurers, on an “all risk” or “specialform” basis, insuring the Building and the Tenant Improvements in an amountequal to at least 90% of the replacement cost thereof, excluding land,foundations, footings and underground installations, together with insuranceagainst sprinkler damager, vandalism and malicious mischief. In addition,Landlord shall maintain during the Term of this Lease commercial general liabilityinsurance on an occurrence form basis with limits of Two Million Dollars($2,000,000.00) each occurrence for bodily injury and property damage combinedand Three Million Dollars ($3,000,000.00) annual general aggregate. Theinsurers shall be authorized to do business in the State of California and thepolicies of insurance with respect to property loss or damage by fire or othercasualty shall contain a waiver or subrogation. Landlord may, but shall not beobligated to, carry insurance against additional perils and/or in greateramounts.

 

11.3                           PropertyInsurance-Waiver of Subrogation. Landlord and Tenant each hereby waive anyright of recovery against the other and the partners, members, shareholders,officers, directors and authorized representatives of the other for any loss ordamage that is covered by any policy of property insurance maintained by eitherparty (or required by this Lease to be maintained) with respect to the Premisesor the Property or any operation therein. If any such policy of insurancerelating to this Lease or to the Premises or the Property does not permit theforegoing waiver or if the coverage under any such policy would be invalidatedas a result of such waiver, the party maintaining such policy shall obtain fromthe insurer under such policy a waiver of all rights of recovery, by way ofsubrogation against either party in connection with any claim, loss or damagecovered by such policy.

 

12.         DAMAGE OR DESTRUCTION.

 

12.1 Landlord’s Duty to Repair.

 

(a) If all or a substantial part of thePremises are rendered untenantable or inaccessible by damage to all or any partof the Property from fire or other casualty then, unless either party isentitled to and elect to terminate this Lease pursuant to Sections 12.1-Landlord’s Right to Terminate and 12.3- Tenant’s Right to Terminate. Landlordshall, at its expense, use reasonable efforts to repair and restore thePremises and/or the Property, as the case may be, to substantially their formercondition to the extent permitted by then applicable Laws; provided, however,that in no event shall Landlord have any obligation for repair or restorationbeyond the extent of insurance process payable to Landlord for such repair orrestoration, or for any of Tenant’s personal property, Trade Fixtures orAlterations.

 

(b) If Landlord is required or elects torepair damage to the Premises and/or the Property, this Lease shall continue ineffect, but Tenant’s Base Rent and Additional Rent from the date of thiscasualty through the date of substantial completion of the repair shall beabated with regard to any portion of the Premises that Tenant is prevented fromusing by 

 

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reason of such damage or its repair. In no event shall Landlord beliable to Tenant by reason of any injury to or interference with Tenant’sbusiness or property arising form fire or other casualty or by reason of anyrepairs to any part of the Property necessitated by such casualty.

 

12.2 Landlord’s Right to Terminate. Landlord may elect toterminate this Lease following damage by fire or other casualty under thefollowing circumstances:

 

(a) If, in the reasonable judgment ofLandlord, the Premises and the Property cannot be substantially repaired andrestored under applicable Laws or as a result of a dispute with Landlord’sinsurer or Mortgagee within one (1) year from the date of the casualty;

 

(b) If the Building is damaged ordestroyed to the extent that, in the reasonable judgment of Landlord, the costto repair and restore the Building would exceed twenty-five percent (25%) ofthe full replacement cost of the Building, whether or not the premises are atall damaged or destroyed; or

 

(c) If the fire or other casualty occursduring the last year of the Term or, if an Extension Option has been exercised,during the last year of the applicable Extension Period.

 

If any of the circumstances described in subparagraphs (a), (b) or(c) of this Section 12.2 occur or arise, Landlord shall notify Tenantin writing of that fact within ninety (90) days after the date of the casualty(such 90 day period plus any applicable 30 day period set forth in Section 12.3(b) hereofshall be referred to herein as the “Lease Status Period”) and in such noticeLandlord shall also advise Tenant whether Landlord has elected to terminatethis Lease as provided above. Landlord may elect to terminate this Lease inaccordance with this Section 12.2 to the extent it also terminates allother lease within the Building. If other buildings in the Project aresimilarly damaged and destroyed at the same time that the Building is damagedand destroyed and Landlord owns and controls suck other buildings, thenLandlord may elect to terminate this Lease (i) only to the extern it alsoterminates the leases in such other building(s), and (ii) if Tenant leasespace in such other building(s), Landlord also terminates such other lease(s).

 

12.3 Tenant’s Right to Terminate. If all or a substantial partof the Premises are rendered untenantable or inaccessible by damage to all orany part of the Property from fire or other casualty, then Tenant may elect toterminate this Lease under the following circumstances:

 

(a) Where Landlord either (i) failsto apply for any permits required for such repair and restoration within thirty(30) days following the expiration of the Lease Status Period (without eitherparty, terminating this Lease) or Landlord thereafter fails to proceed todiligently pursue reasonable efforts to obtain such perm its, or (ii) hasfailed to commence such repair or restoration within thirty (30) days afterissuance of required permits and approvals or, in any case, one hundred fifty(150) days after the damage or destruction, or (iii) has so commenced suchrepair or restoration and thereafter fails to diligently pursue reasonableefforts to complete such repair or restoration, which failure has continued fora continuous period of at least thirty (30) days or the aggregate of suchfailures exceed thirty (30) business days; provided, however, that if Landlordshall be delayed in pursing and completing such repair or restoration by reasonof any Force Majeure Events, then such one hundred fifty (150) and thirty (30)day periods shall be extended for the period of time (not to exceed in theaggregate three hundred (300) days) equal to the period of the delay. In suchan event, Tenant may elect to terminate this Lease by notice given to Landlordwithin twenty (20) Business Days after such one hundred fifty (150) or thirty(30) day periods as such periods may have been extended pursuant to thepreceding sentence, effective as of the end of the next calendar month afterLandlord’s receipt of such notice.

 

(b) In the circumstance described inSubsections 12.2(a), (b), and (c) above; in which event Tenant may electto terminate this Lease by giving Landlord notice of such election to terminatewithin thirty (30) days after Landlord’s notice to Tenant pursuant to Section 12.2-*Landlord’s Right to Terminate*.

 

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12.4 Waiver. Landlord and Tenant each hereby waive theprovisions of California Civil Code Sections 1932(2), 1933(4) and anyother applicable existing or future Law permitting the termination of a leaseagreement in the event of damage or destruction under any circumstances otherthan as provided in Sections 12.2-*Landlord’s Right toTerminate* and 12.3- *Tenant’s Right toTerminate*.

 

13. CONDEMNATION.

 

13.1 (a) “**Award**”shall mean all compensation, sums, or anything of value awarded, paid orreceived on a total or partial Condemnation.

 

(b) “**Condemnation**”shall mean (i) a permanent taking (or a temporary taking for a periodextending beyond the end of the Term) pursuant to the exercise of the power ofcondemnation or eminent domain by any public or quasi-public authority, privatecorporation or individual having such power (“Condemner”), whether by legalproceedings or otherwise, or (ii) a voluntary sale or transfer by Landlordto any such authority, either under threat of condemnation or while legalproceedings for condemnation are pending.

 

(c) “**Date ofCondemnation**” shall mean the earlier of the date that title to theproperty, taken is vested in the Condemner or the date the Condemner has theright to possession of the property being condemned.

 

13.2 Effect on Lease.

 

(a) If the Premises are totally taken byCondemnation, this Lease shall terminate as of the Date of Condemnation. If aportion but not all of the Premises is taken by Condemnation, this Lease shallremain in effect; provided, however, that if the portion of the Premisesremaining after the Condemnation will be unsuitable for Tenant’s continued use,then upon notice to Landlord within thirty (30) days after Landlord notifiesTenant of the Condemnation, Tenant may terminate this Lease effective as of theDate of Condemnation.

 

(b) If twenty-five percent (25%) or moreof the Land or of the floor area in the Building is taken by Condemnation, orif as a result of any Condemnation the Building is no longer reasonablysuitable for use as an office building, whether or not any portion of thePremises is taken, Landlord may elect to terminate this Lease, effective as ofthe Date of Condemnation, by notice to Tenant within thirty (30) days after theDate of Condemnation.

 

(c) If all or a portion of the Premisesis temporarily taken by a Condemner for a period not extending beyond the endof the Term or exceeding 180 days, this Lease shall remain in full force andeffect.

 

13.3 Restoration. If this Lease is not terminated as provided inSection 13.2- Effect on Lease, Landlord, at its expense, shall diligentlyproceed to repair and resolve the Premises to substantially its formercondition (to the extent permitted by then applicable Laws) and/or repair andrestore the Building to an architecturally complete office building; provided,however, that Landlord’s obligation to so repair and restore shall be limitedto the amount of any Award paid to Landlord and not required to be paid to anyMortgagee (as defined in Section 20.2 below). In no event shall Landlordhave any obligation to repair or replace any improvements in the Premisesbeyond the amount of any Award paid to Landlord for such repair or to repair orreplace any of Tenant’s personal property, Trade Fixtures, or Alterations.

 

13.4 Abatement and Reduction of Rent. If any portion of thePremises is taken in a Condemnation or is rendered permanently untenantable byrepairs necessitated by the Condemnation, and this Lease is not terminated, theBase Rent and Additional Rent payable under this Lease shall be proportionallyreduced as of the Date of Condemnation based upon the percentage of rentablesquare feet in the Premises so taken or rendered permanently untenantable. Inaddition, if this Lease remains in effect following a Condemnation and Landlordproceeds to repair and restore the Premises, the Base Rent and Additional Rentpayable under this Lease shall be abated during the period of such repair orrestoration to the extent such repairs prevent Tenant’s use of the Premises.

 

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13.5 Awards. Any Award made shall be paid to Landlord, andTenant hereby assigns to Landlord, and waives all interest in or claim to, anysuch Award, including any claim for the value of the unexpired Term; provided,however, that Tenant shall be entitled to receive, or to prosecute a separateclaim for, an Award for a temporary taking of the Premises or a portion thereofby a Condemner where this Lease is not terminated (to the extent such Awardrelates to the unexpired Term), or an Award or portion thereof separatelydesignated for relocation expenses or the interruption of or damage to Tenant’sbusiness or as compensation for Tenant’s personal property, Trade Fixtures orAlterations.

 

13.6 Waiver. Landlord and Tenant each hereby waive the provisions ofCalifornia Code of Civil Procedure Section 1265.130 and any otherapplicable existing or future Laws allowing either party to petition for atermination of this Lease upon a partial taking of the Premises and/or theProperty.

 

14. ASSIGNMENT AND SUBLETTING.

 

14.1       Landlord’s ConsentRequired. Tenant shall not assign, mortgage, pledge, hypothecate orencumber this Lease or any interest therein, or sublet or license, or in anyother manner transfer all or any part of Tenant’s interest under this Lease(each and all a “Transfer”), without the prior written consent of Landlord,which (subject to the other provisions of this Section 14) shall not beunreasonably withheld, conditioned or delayed. If Tenant is a non-publiclytraded corporation, any sale or other transfer, including any consolidation,merger or reorganizations, of the majority of the voting stock of Tenant issuedand outstanding at any given time during the Term of this Lease or any sale orother transfer of a majority of the partnership interest in Tenant, if Tenantis a partnership, shall constitute an assignment for purposes of this Lease.Notwithstanding anything to the contrary contained in this Lease, Tenant mayassign this Lease or may sublet the Premises without Landlord’s consent for anyuse permitted under this Lease, without Landlord’s consent, to any corporationor other entity which controls, is controlled by, or is under common controlwith Tenant, or to any corporation or other entity resulting from a merger,reorganization or consolidation with Tenant, or to any person or entity whichacquires controlling interest in Tenant’s stock or substantially all of theassets of Tenant as going concern (collectively, an “Affiliate”), provided thatthe Affiliate assumes in writing all of Tenant’s obligations under this Leaseand that Tenant gives Landlord such reasonable information as Landlord shallreasonably request regarding the Affiliate. Notwithstanding any provision inthis Lease to the contrary, Tenant shall not mortgage, pledge, hypothecate orotherwise encumber all or any portion of Tenant’s interest under this Lease.

 

14.2       Reasonable Consent.

 

(a)          If Tenant complies withthe following conditions, Landlord shall not unreasonably withhold its consentto the subletting of the Premises or any portion thereof or the assignment ofthis Lease. Prior to any proposed Transfer, Tenant shall submit in writing toLandlord (i) the name and legal composition of the proposed assignee,subtenant, user or other transferee (each a “Transferee”); (ii) the natureof the business proposed to be carried on in the Premises; (iii) a currentbalance sheet, income statements for the last two years and such otherreasonable financial and other publicly available information concerning theproposed Transferee as Landlord may reasonably request; and (iv) a copy ofthe proposed assignment, sublease or other agreement governing the proposedTransfer. Within ten (10) days after Landlord receives all suchinformation it shall notify Tenant whether it approves or disapproves suchTransfer.

 

(b)         The parties hereto agreeand acknowledge that, among other circumstances for which Landlord couldreasonably withhold consent to a proposed Transfer, it shall be reasonable forLandlord to withhold consent where (i) the proposed Transferee does 

 

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not intent itself to occupy the entireportion of the Premises assigned or sublet, (ii) Landlord reasonablydisapproves of the character of the business to be conducted by the Transfereeat the Premises, or (iii) the Transferee is a governmental agency or unitor an existing tenant in the project (unless such existing tenant’s space needscannot be accommodated in the Project, which case Tenant may sublease to suchexisting tenant, subject to the other terms and conditions of this Lease).Landlord and Tenant agree that Tenant may utilize the services or brokers tosublease or assign under this Lease.

 

14.3       Excess Consideration.If Landlord consents to the Transfer, Tenant shall pay to Landlord asadditional rent, within thirty (30) days after receipt by Tenant, fifty percent(50%) of any net consideration paid by the Transferee for the Transfer,including, in the case of a sublease, the excess of the rent and other considerationpayable by the subtenant over the amount of Base Rent and Additional Rentpayable hereunder applicable to the subleased space after reimbursement toTenant of all costs of the Transfer, including, but not limited to, brokeragecommissions, the cost of any improvements made in connection with the Transfer,and attorneys’’ fees. All costs paid by Tenant in connection with the Transfershall be deducted as of the effective date of the Transfer.

 

14.4       No Release Of Tenant.No consent by Landlord to any Transfer shall relieve Tenant of any obligationto be performed by Tenant under this Lease, whether occurring before or aftersuch consent, assignment, subletting or other Transfer. Each Transferee shallbe jointly and severally liable with Tenant (and Tenant shall be jointly andseverally liable with each Transferee) for the payment of rent (or, in the caseof all sublease, rent in the amount set forth in the Sublease) and for theperformance of all other terms and provisions of this Lease applicable to the spacetransferred. The consent by Landlord to any Transfer shall not relieve Tenantor any such Transferee from the obligation to obtain Landlord’s express priorwritten consent to any subsequent Transfer by Tenant or any Transferee. Theacceptance of rent by Landlord from any other person shall not be deemed to bea waiver by Landlord of any provision of this Lease or to be consent to anyTransfer.

 

14.5       Expenses and AttorneysFees. Tenant shall pay to Landlord within 30 days after receipt of writteninvoice all actual third-party costs and expenses (including reasonableattorneys’ fees) incurred by Landlord in connection with reviewing orconsenting to any proposed Transfer (including any request for consent to, orany waiver of Landlord’s rights in connection with, any security interest inany of Tenant’s property that the Premises) not to exceed one thousand dollars($1,000.00).

 

14.6       Effectiveness ofTransfer. Prior to the date on which any permitted Transfer (whether or notrequiring Landlord’s consent) becomes effective, Tenant shall deliver toLandlord a counterpart of the fully executed Transfer document and Landlord’sstandard form of Consent to Assignment or Consent to Sublease executed byTenant and the Transferee in which each of Tenant and the Transferee confirmsits obligations pursuant to this Lease. Failure or refusal of a Transferee toexecute any such instrument shall not release or discharge the Transferee fromliability as provided herein. The voluntary, involuntary or other surrender of thisLease by Tenant, or a mutual cancellation by Landlord and Tenant, shall notwork a merger, and any such surrender or cancellation shall, at the option ofLandlord, either terminated all or any existing sublease or operate as anassignment to Landlord of any or all of such subleases.

 

14.7       Landlord’s Rights toTerminate. Notwithstanding any of the above provisions of this Section tothe contrary, if Tenant notifies Landlord that it desires to enter into aTransfer and if such Transfer (taken separately or in conjunction with previousTransfers) involve either (i) an assignment of the Lease or (ii) asublease of all the Premises or a Material Portion of the Premises for all orsubstantially all of the remaining Term of this Lease, then Landlord, in lieuof consenting to such Transfer may elect (x) in the case of an assignmentor a sublease of the entire Premises to terminate this Lease, or (y) inthe case of a sublease of 

 

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less than the entire Premises, to terminatethis Lease as it relates to the space proposed to be subleased by Tenant. Insuch event, this Lease will terminate (or the space proposed to be subleasedwill be removed from the Premises subject to other terms of this Lease) and theBase Rent and Tenant’s Share under this Lease shall be proportionately reducedon the date the Transfer was proposed to be effective, and the Landlord maylease such space to any party, including the prospective Transferee identifiedby Tenant. The term “Material Portion” shall mean fifty percent (50%) of thethen current Premises leased by Tenant hereunder, either individually or whentaken together with previous sublet proportions of the Premises during theinitial Term of this Lease, and any portion of the then current Premises duringany Extension Term, Landlord shall reimburse Tenant for all reasonable,out-out-pockets costs of Tenant related to any proposed Transfer if Landlordelects to recapture such space. Landlord’s recapture right shall not apply toany assignments or subleases to an Affiliate of Tenant.

 

14.8       Assignment of SubleaseRights. Tenant hereby absolutely and irrevocably assigns to Landlord anyand all rights to receive rent and other consideration from any sublease andagrees that Landlord, as assignee or as attorney-in-fact for Tenant forpurposes hereof, or a receiver for Tenant appointed on Landlord’s applicationmay (but shall not be obligated to) collect such rents and other considerationand apply the same toward Tenant’s obligations to Landlord under this Lease;provided, however, that Landlord grants to Tenant at all times prior tooccurrence of any Event of Default by Tenant a revocable license to collectsuch rents (which license shall automatically and without notice be and bedeemed to have been revoked and terminated immediately upon any Event ofDefault).

 

15.         DEFAULT AND REMEDIES.

 

15.1 Events of Default. The occurrence of any of the followingshall constitute an “event of Default” by Tenant if remaining uncured after theexpiration of any applicable cure periods:

 

(a) Tenant fails to make any regularly scheduled payment of rentwhen due if payment in full is not received by Landlord within five (5) daysafter written notice that it is due. With respect to any non regularlyscheduled payment of Rent, if Tenant fails to make any payment of such rentwithin thirty (30) days after written notice to Tenant.

 

(b) Tenant violates the restrictions on Transfer set forth in Section 14-*Assignment and Subletting*.

 

(c) Tenant ceases doing business as a going concern; makes anassignment for the benefit of creditors; is adjudicated an insolvent, files apetition (or files an answer admitting the material allegations of a petition)seeking relief under any under any state or federal bankruptcy or other statute,law or regulation affecting the creditors’ rights; all or substantially all ofTenant’s assets are subject to judicial seizure or attachment and are notreleased within 30 days, or Tenant consents to or acquiesces in the appointmentof a trustee, receiver or liquidator for Tenant or for all or any substantialpart of Tenant’s assets.

 

(d) Tenant fails, within ninety (90) days after the commencementof any proceedings against Tenant seeking relief under any state or federalbankruptcy or other statue, law or regulation affecting creditors’ rights, tohave such proceedings dismissed, or Tenant fails, within ninety (90) days afteran appointment, without Tenant’s consent or acquiescence, of any trustee,receiver or liquidator for Tenant or for all or any substantial part of Tenant’sassets, to have such appointment vacated.

 

(e) Tenant fails to perform or comply with any provision of thisLease other than those described in (a) through (d) above, and doesnot fully cure such failure within thirty (30) days after notice to Tenant or,if such failure cannot be cured within such thirty (30)-day period, Tenantfails within such thirty (30)-day period to commence, and thereafter diligentlyproceed with, all actions necessary to cure such failure as soon as reasonablypossible.

 

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15.2 Remedies. Upon the occurrence of an Event of Default,Landlord shall have the following remedies, which shall not be exclusive bustshall be cumulative and shall be in addition to any other remedies now orhereafter allowed by law:

 

(a) Landlord may terminate Tenant’s right to possession of thepremises at any time by written notice to Tenant. Tenant expressly acknowledgesthat in the absence of such written notice from Landlord, no other act ofLandlord, including reentry into the Premises, efforts to relet the Premise,reletting of the Premises for Tenant’s account, storage of Tenant’s personalproperty and Trade Fixtures, acceptance of keys to the Premises from Tenant orexercise of any other rights and remedies under this Section, shall constitutean acceptance of Tenant’s surrender of the Premises or constitute a terminatingon this Lease or of the Tenant’s right to possession of the Premises. Upon suchtermination in writing of Tenant’s right to possession of the Premises, asherein provided, this Lease shall terminate and Landlord shall be entitled torecover damages from Tenant as provided in California Civil Code Section 1951.2and any other applicable existing or future Law providing for recovery ofdamages for such breach, including the worth at the time of award of the amountby which the rent which would be payable by Tenant hereunder for the remainderof the Term after the date of the award of damages, including Additional Rentas reasonably estimated by Landlord, exceeds the amount of such rental loss asTenant proves could have been reasonably avoided, discounted at the discountrate published by the Federal Reserve Bank of San Francisco for member banks atthe time of the award plus one percent (1%).

 

(b) Landlord shall have the remedy described in California CivilCode Section 1951.4 (Landlord may continue this Lease in effect afterTenant’s breach and abandonment and recover rent as it becomes due, if Tenanthas the right to sublet or assign, subject only to reasonable limitations).

 

(c) Landlord may cure the Event of Default as Tenant’s expense. IfLandlord pays any sum or incurs any expense in curing the Event of Default,Tenant shall reimburse Landlord upon demand for the amount of such payment orexpense with interest at the Interest Rate from the date the sum I paid or theexpense is incurred until Landlord is reimbursed by Tenant.

 

(d) Landlord may remove all Tenants’ property from the Premises,and such property may be stored by Landlord in a public warehouse or elsewhereat the sole cost and for the account of Tenant. If Landlord does not elect tostore any or all of Tenant’s property left in the Premises, Landlord mayconsider such property, to be abandoned by Tenant, and Landlord may thereupondispose of such property in any manner deemed appropriate by Landlord. Anyproceeds realized by Landlord on the disposal of any such property shall beapplied first to offset all expenses of storage and sale, then credited againstTenant’s outstanding obligations to Landlord under this Lease, and any balanceremaining after satisfaction of all obligations of Tenant under this Leaseshall be delivered to Tenant.

 

16.         LATE CHARGE AND INTEREST.

 

16.1 Late Charge. If any payment of rent is not received byLandlord within five (5) days after written notice that such amount wasdue, Tenant shall pay to Landlord on demand as a late charge an additionalamount equal to two percent (2%) of the overdue payment. A late charge shallnot be imposed more than once on any particular installment not paid when due,but imposition of a late charge on any payment not maid when due does noteliminate or supersede late charges imposed on other (prior) payments not madewhen due or preclude imposition of a late charge on other installments orpayments not made when due. The foregoing notwithstanding, a late charge shallnot be imposed on the first two late payments made in any twelve (12) monthperiod commencing with the Commencement Date of this Lease.

 

16.2 Interest. In addition to the late charges referred toabove, which are intended to defray Landlord’s costs resulting from latepayments, any payment due Tenant or Landlord not paid within five (5) daysafter it was due shall bear interest from the date due until paid at the PrimeRate plus 2% (as published by the Bank of America, San Francisco, or itssuccessor) per 

 

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annum or the maximum lawful rate under applicable laws, whichever isless (the “Interest Rate”). Acceptance of any late charge and/or interest shallnot constitute a waiver of Tenant’s or Landlord’s default with respect to theoverdue sum or prevent Tenant or Landlord from exercising any of its otherrights and remedies under this Lease.

 

17.         WAIVER. No provisions ofthis Lease shall be deemed waived by Landlord or Tenant unless such waiver isin a writing signed by such party. The waiver by such party of any breach ofany provision of this Lease shall not be deemed a waiver of such provision orof any subsequent breach of the same or any other provision of this Lease. Nodelay pr omission on the exercise of any right or remedy upon any default shallimpair such right or remedy or be constructed as a waiver. Landlord’sacceptance of any payments of rent due under this Lease shall not be deemed awaiver of any default by Tenant under this Lease (including Tenant’s recurrentfailure to timely pay rent) other than Tenant’s nonpayment of the acceptedsums, and no endorsement or statement on any other check or accompanying anycheck or payment shall be deemed an accord and satisfaction. Landlord’s consentto or approval of any act by Tenant requiring Landlord’s consent or approvalshall not be deemed to waive or render unnecessary Landlord’s consent to orapproval of any subsequent act by Tenant.

 

18.         ENTRY, INSPECTION ANDCLOSURE. Upon not less than two (2) Business Days’ prior written notice toTenant (and without notice in emergencies), Landlord and its authorizedrepresentatives may enter the Premises at all reasonable times to determinewhether the Premises are in good condition, to determine whether Tenant iscomplying with its obligations under this Lease, to perform any maintenance orrepair of the Premises or the Building that Landlord has the right orobligation to perform, to install or repair improvements for other tenantswhere access to the Premises is required for such installation or repair, toserve, post or keep posted any notices required or allowed under the provisionsof this Lease and, at any time during the Term, to show the Premises toprospective brokers, agents, buyers, transferees, Mortgagees or, during thelast twelve (12) months of the Term, to show the Premises to prospectivetenants, or to do any other act or thing necessary for the safety orpreservation of the Premises or the Building. When reasonably necessaryLandlord may temporarily close entrances, doors, corridors, elevators or otherfacilities in the Building without liability to Tenant by reason of such closure.Subject to the other terms of this Lease, Tenant shall have the right to haveany agents or contractors of Landlord escorted by a representative of Tenant atall times. Landlord shall conduct its activities under this Section in amanner that will minimize inconvience to Tenant without unreasonable additionalexpense to Landlord. In no event shall Tenant be entitled to an abatement ofrent on account of any entry by Landlord, and Landlord shall not be liable inany manner for any inconvience, loss of business or other damage to Tenant orother persons arising out of Landlord’s entry, on the Premises in accordancewith this Section. No action by Landlord pursuant to this paragraph shallconstitute an eviction of Tenant, constructive or otherwise, entitle Tenant toan abatement of rent or to terminate this Lease or otherwise releases Tenantfrom any of Tenant’s obligations under this Lease.

 

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19.         SURRENDER AND HOLDINGOVER.

 

19.1 Surrender. Upon the expiration or termination of thisLease, Tenant shall surrender the Premises and all Tenant Improvements andAlterations to Landlord broom clean and in their original condition, except forreasonable wear and tear, damage from casualty or condemnation and any changesresulting from approved Alterations; provided, however, that Tenant shallremove from the Premises all Tenant’s personal property, Trade Fixtures andAlterations that Tenant has the right or is required by Landlord to removeunder the provisions of this Lease, and repair any damage caused by suchremoval. If such removal is not completed before the expiration or terminationof the Term, Landlord shall have the right (but no obligation) to remove thesame, and Tenant shall pay Landlord within thirty (30) receipt of a writteninvoice for all costs of removal and storage thereof. Landlord shall also havethe right to retain or dispose of all or any portion of such property if Tenantdoes not pay all such costs and retrieve the property within ten (10) daysafter notice from Landlord (in which event title to all such property describedin Landlord’s notice shall be transferred to and vest in Landlord). Tenantwaives all Claims against Landlord for any damage or loss to Tenant resultingfrom Landlord’s removal, storage, retention, or disposition of any suchproperty. Upon expiration or termination of this Lease or of Tenant’spossession, whichever is earliest, Tenant shall surrender all keys to thePremises or any other part of the Building and shall deliver to Landlord allkeys for or make known to Landlord the combination of locks on all safes,cabinets and vaults that may be located in the Premises. Tenant’s obligationsunder this Section shall survive the expiration or termination of thisLease.

 

19.2 Holding Over. If Tenant (directly or through any Transfereeor other successor-in-interest of Tenant) remains in possession of the Premisesafter the expiration or termination of this Lease, Tenant’s continuedpossession shall be on the basis of a tenancy at the sufferance of Landlord. Insuch event, Tenant shall continue to comply with or perform all of the termsand obligations of Tenant under this Lease, expect that the monthly Base Rentduring Tenant’s holding over shall be one hundred thirty-five percent (135%) ofthe Base Rent payable in the last full month prior to the termination hereoffor the first four months following the expiration of the Term and thereafter,one hundred fifty percent (150%) of the Base Rent payable in the last fullmonth prior to the termination hereof. Acceptance by Landlord of rent aftersuch termination shall not constitute a renewal of this Lease; and nothingcontained in this provision shall be deemed to waive Landlord’s right ofre-entry or any other right hereunder or at law. Tenant shall indemnify, defendand hold Landlord harmless from and against all Claims arising or resultingdirectly or indirectly from Tenant’s failure to timely surrender the Premises,including (i) any rent payable by or any loss, cost, or damages claimed byany prospective tenant of the Premises, and (ii) Landlord’s damages as aresult of such prospective tenant rescinding or refusing to enter into theprospective lease of the Premises by reason of such failure to timely surrenderthe Premises.

 

20.         ENCUMBRANCES.

 

20.1 Subordination. This Lease is expressly made subject andsubordinate to any mortgage, deed of trust, ground lease, underlying lease prlike encumbrance affecting any part of the Property or any interest of Landlordtherein which is now existing or hereafter executed or recorded (“Encumbrance”).The foregoing notwithstanding, however, as to current and future Encumbrances,Landlord shall obtain from the holder of any Encumbrance a subordination,non-disturbance and attornment agreement, reasonably acceptable to Tenant,which shall provide that the holder of the Encumbrance agrees that this Leaseshall survive the termination of the Encumbrance by lapse of time, foreclosureor otherwise so long as Tenant is not in default under this Lease after theexpiration of any applicable cure period and pursuant to which Tenant shallagree to attorn to such holder of the Encumbrance. Provided that the holder ofthe Encumbrance provides Tenant with a non-disturbance agreement as provided inthe preceding sentence, Tenant shall execute and deliver to Landlord, withintwenty (20) days after written 

 

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request therefore by Landlord and in a form reasonably requested byLandlord, any additional documents evidencing the subordination of this Leasewith respect to any such Encumbrance and the non-disturbance agreement of theholder of any such Encumbrance. If the interest of Landlord in the Property istransferred pursuant to or in lieu of proceedings for enforcement of anyEncumbrance, Tenant shall immediately and automatically attorn to the newowner, and this Lease shall continue in full force and effect as a direct leasebetween the transferee and Tenant on the terms and conditions set forth in thisLease.

 

20.2 Mortgagee Protection. Tenant agrees to give any holder ofany Encumbrance covering any part of the Property (“Mortgagee”), by registeredmail, a copy of any notice of default served upon Landlord, provided that priorto such notice Tenant has been notified in writing (by way of notice ofassignment of rents and leases, or otherwise) of the address of such Mortgagee.If Landlord shall have failed to cure such default within thirty (30) days fromthe effective date of such notice of default, then the Mortgagee shall have anadditional thirty (30) days within which to cure such default of if suchdefault cannot be cured within that time, then such additional time as may benecessary to cure such default (including the time necessary to gain possessionof the Property if necessary to effect such cure and if the default does notmaterially and adversely affect Tenant’s tendency), and this Lease shall not beterminated so long as such remedies are being diligently pursued.

 

21. ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS.

 

21.1 Withintwenty (20) days after written request therefore, Tenant shall execute anddeliver to Landlord, a certificate stating that to Tenant’s actual knowledge asof the date of the certificate, this Lease is in full force and effect, describingany amendments or modifications hereto, acknowledging that this Lease issubordinate or prior, as the case may be, to any Encumbrance and stating anyother information regarding the status of the Lease Landlord may reasonablyrequest, including the Term, the monthly Base Rent, the date to which Rent hasbeen paid, the amount of any security deposit or prepaid rent, whether to thebest of the Tenant’s knowledge, Landlord is in default under the terms of theLease, and whether Landlord has completed its construction obligationshereunder (if any). Any person or entity purchasing, acquiring an interest inor extending in financing with respect to the Property shall be entitled torely upon any such certificate. If Tenant fails to deliver such certificatewithin ten (10) days after Landlord’s second written request therefore,Tenant shall be deemed to have approved and shall be bound by such estoppelscertificate.

 

21.2 Within ten (10) days after written request therefore, but nomore than once a year, Tenant shall deliver to Landlord a copy of the financialstatements (including at least a year end balance sheet and a statement ofprofit and loss) of Tenant for each of the three most recently completed years,prepared in accordance with generally accepted accounting principles (and, ifsuch is Tenant’s normal practice, audited by an independent certified publicaccountant), all then available subsequent interim statements, and such otherfinancial information as may reasonably be requested by Landlord or required byany Mortgagee. Notwithstanding the foregoing, Landlord hereby waives the rightto request such financial statements so long as the named tenant under thislease is a public corporation whose shares are traded on a nationallyrecognized stock market or exchange.

 

22.         NOTICES. Any notice,demand, request, consent or approval that either party desires or is requiredto give to the other party under this lease shall b in writing and shall beserved personally, delivered by messenger or courier service or sent by U.S.certified mail, return receipt requested, postage prepaid, addressed to theother party at the party’s address for notices set forth in the Basic LeaseInformation. Notices delivered personally will be effective immediately 

 

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upon receipt (or refusal of delivery orreceipt); notices sent by independent messenger or courier service will beeffective one (1) day after acceptance by the independent service fordelivery; notices sent by mail in accordance with this Section will beeffective three (3) days after mailing. Either party may change itsaddress for notices hereunder by a notice to the other party, complying withthis Section. If Tenant sublets the Premises, notices from Landlord shall beeffective on the subtenant when given to Tenant pursuant to this Section.

 

23.         ATTORNEYS’ FEES.

 

23.1 Prevailing Party. In the event of any litigation orarbitration regarding any rights and obligations under this Lease, theprevailing party shall be entitled to recover reasonable attorneys’ fees, andcourt costs in addition to any other relief, which may be granted. The “prevailingparty” shall mean the party receiving substantially the relief desired, whetherby settlement, dismissal, summary, judgment, or otherwise.

 

23.2 Other Litigation. If Landlord, without fault on Landlord’spart, is made a party to any litigation instituted by Tenant or by any thirdparty against Tenant, or by or against any Transferee or other occupant of thePremises or otherwise arising out of or resulting from any act or transactionof Tenant or of any such Transferee or occupant, Tenant shall hold Landlordharmless from any judgment rendered against Landlord or the Premises or anypart thereof, and reimburse Landlord upon demand for all costs and expenses,including reasonable attorneys’ fees, incurred by Landlord in or in connectionwith such litigation.

 

24.         QUIET POSSESSION. Subjectto Tenant’s full and timely performance of all of Tenant’s obligations underthis Lease and subject to terms of this Lease, including Section 20-*Emcumbrances*, Tenant shall have the quiet possession of thePremises throughout the Term as against any personas or entities lawfullyclaiming by, through or under Landlord.

 

25.         SECURITY MEASURES [INTENTIONALLYOMITTED]

 

26.         FORCE MAJEURE. IfLandlord is delayed, interrupted or prevented from performing any of itsobligations under this Lease, including its obligations under the Work Letter(if any), and such delay, interruption or prevention is due to fire, act ofGod, governmental act or failure to act, unavailability of materials or anycause outside the reasonable control of Landlord, then the time for performanceof the affected obligations of Landlord shall be extended for a periodequivalent to the period of such delay, interruption or prevention.

 

27.         RULES AND REGULATIONS.Tenant shall be bound by and shall comply with the rules and regulationsattached to and made a part of this Lease as Exhibit C to the extent thoserules and regulations are not in conflict with the terms of this Lease, aswell as any reasonable rules and regulations hereafter adopted by Landlordfor all tenants of the Building, upon notice to Tenant thereof (collectively,the “**Building Rules**”). Landlord shall not beresponsible to Tenant or to any other person for any violation of, or failureto observe, the Building Rules by any other tenant or other person.

 

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Landlord shall not discriminate againstTenant in enforcing the rules and regulations.

 

28.         LANDLORD’S LIABILITY. Theterm “Landlord,” as used in this Lease, shall mean only the owner or owners ofthe Building at the time in question. In the event of any conveyance andprovided that the transferee of Landlord assumes in writing all of theobligations of Landlord under this lease from and after the date of suchconveyance of title to the Building, then from and after the date of suchconveyance, the transferor Landlord shall be relieved of all liabi8lity withrespect to Landlord’s obligations to be performed under this Lease after thedate of such conveyance. Notwithstanding any other term or provision of thisLease, the liability of Landlord for its obligations under this Lease islimited solely to Landlord’s interest in the Building as the same may from timeto time be encumbered, and no personal liability shall at any time be assertedor enforceable against any other assets of Landlord or against Landlord’spartners or members or its on their respective partners, shareholders, members,directors, officers, or managers on account of any Landlord’s obligations oractions under this Lease.

 

29.         CONSENTS AND APPROVALS.

 

29.1 [INTENTIONALLY OMITTED]

 

29.2 No Liability Imposed on Landlord. The review and/orapproval by Landlord of any intern or matter to be reviewed or approved byLandlord under the terms of this Lease or any Exhibits or Addenda hereto shallnot impose upon Landlord any liability for the accuracy or sufficiency of anysuch item or matter or the quality or sustainability of such item for itsintended use. Any such review or approval is for the sole purpose of protectingLandlord’s interest in the Property, and no third parties, including Tenant orthe Representatives and Visitors of Tenant or any person or entity claiming by,through or under Tenant, shall have any rights as a consequence thereof.

 

30.         BROKERS. Each partywarrants and represents to the other that in the negotiating or making of this Leaseneither the representing party nor anyone acting on the representing party’sbehalf has dealt with any broker or finder whatsoever who might be entitled toa fee or commission for this Lease except Jones Lang LaSalle who representedTenant. Each party shall indemnify and hold harmless the other from any claimor claims, including costs, expenses and attorney’s fees incurred by thenon-indemnifying party asserted by any other broker or finder for a fee orcommission based upon any dealings with or statements made by the indemnifyingparty or its representatives. Tenant acknowledges that Tenant shall be solelyresponsible for the payment of a brokerage commission or similar fees orcompensation for brokers representing Tenant. Tenant shall, however, have theright to utilize a brokerage allowanced to be provided by Landlord of up to$5.00 per rentable square foot of space in the Premises (the “BrokerageAllowance”). Tenant shall elect to receive the Brokerage Allowance, if at all,by written notice 

 

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to Landlord on or before thirty (30) daysafter the full execution of this Lease. If and to the extent Landlord elects toutilize the Brokerage Allowance, Base Rent over the initial Term of this Leaseshall be increased monthly to reflect the monthly amortized amount of suchBrokerage Allowance utilized by Tenant (amortized at eleven percent 11% perannum) over the initial Term of this Lease.

 

31.         RELOCATION OF PREMISES[INTENTIONALLY OMITTED]

 

32.         ENTIRE AGREEMENT. ThisLease, including the Exhibits and any Addenda attached hereto, and thedocuments refereed to herein, if any, constitute the entire agreement betweenLandlord and Tenant with respect to the leasing of space by Tenant in theBuilding, and supersede all prior or contemporaneous agreements,understandings, proposals and other representations by or between Landlord andTenant, whether written or oral. Neither Landlord nor Landlord’s agents havemade any representations or warranties with respect to the Premises, theBuilding, the Project or this Lease except as expressly set forth herein, andno rights, easements or licenses shall be acquired by Tenant by implication orotherwise unless expressly set forth herein. The submission of this Lease for examinationdoes not constitute an option fro the Premises and this Lease shall becomeeffective as a binding agreement only upon execution and delivery thereof byLandlord to Tenant.

 

33.         MISCELLANEOUS. This Leasemay not be amended or modified except by a writing signed by Landlord andTenant. Subject to Section 14-Assignment and Subletting and Section 28-Landlord’sLiability, this Lease shall be binding on and shall inure to the benefit of theparties and their respective successors, assigns and legal representatives. Thedetermination that any provisions hereof may be void, invalid, illegal orunenforceable shall not impair any other provisions hereof and all such otherprovisions of this Lease shall remain in full force and effect. Theunenforceability, invalidity or illegality of any provision of this Lease underparticular circumstances shall not render unenforceable, invalid or illegalother provisions of this Lease, or the same provisions under othercircumstances. This Lease shall be constructed and interpreted in accordancewith the laws (excluding conflict of laws principles) of the State in which theBuilding is located. The provisions of this Lease shall be constructed inaccordance with the fair meaning of the language used and shall not be strictlyconstructed against either party. When required by the context of this Lease,the singular includes the plural. Wherever the term “including” is used in thisLease, it shall be interpreted as meaning “including, but not limited to” thematter or matters thereafter enumerated. The captions contained in this Leaseare for purposes of convenience only and are not to used to interpret orconstrue this Lease. If more than one person or 

 

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entity is identified as Tenant hereunder, theobligations of each and all of them under this Lease shall be joint andseveral. Time is of the essence with respect to this Lease, except as to theconditions relating to the delivery of possession of the Premises to Tenant. NeitherLandlord nor Tenant shall record this Lease.

 

34.         AUTHORITY. If Tenant is acorporation, partnership, limited liability company or other form of businessentity, each of the persons executing this Lease on behalf of Tenant warrantsand represents that Tenant is a duty organized and validly existing entity thatTenant has full right and authority to enter into this Lease and that thepersons signing on behalf of Tenant are authorized to do so and have the powerto bind Tenant to this Lease.

 

35.         SIGNAGE.

 

35.1 Tenant shall have the right, at no additional cost to Tenant, todisplay its corporate identification signs in prominent locations on any lobbydirectory, monument signs, and at each entrance to the Premises. Provided that,and for so long as, Tenant lease and occupies (without regard to any subleaseportion of the Premise) at least fifty percent (50%) of the office space in theBuilding, Tenant shall have the right to install and maintain, at its sole costand expense, a parapel sign located on the roof or side of the Building and aneyebrow sign located on the first floor level of the Building. All of Tenant’srights hereunder are subject to Tenant’s obtaining all necessary governmentalapprovals and permits for such signage and subject tot Landlord’s prior writtenapproval of the design, size, color, location and all other aspects of suchsignage, which approval shall not be unreasonably withheld, condition ordelayed. Tenant shall install and remove such signs in accordance with theprovisions of Article 6 (Alterations) hereof. Tenant shall at all times,maintain all signs in good condition and repair and shall indemnify, defend andhold harmless Landlord from any demands, suits, claims, damages, costs orexpenses, losses or liabilities (including reasonable attorneys’ fees andcosts) arising from or associated with the installation and/or maintenance ofsuch signs. Landlord agrees to reasonably cooperate with Tenant, at no cost toLandlord, in pursuing the necessary approvals or permits for such signs.

 

35.2 Landlord and Tenant acknowledge and agree that the initial name ofthe Project shall be “**Foundry Square**.”Landlord hereby agrees that if and so long as Tenant leases and occupies morethan fifty percent (50%) of all of the office space in the Project, thenLandlord shall not have the right to change the name of the Project to the nameof any other tenant in the Project. Further, if Tenant leases and occupies allof the office space in at least three (3) buildings of the Project, Tenantshall have the right to change the name of the Project to a name which mayinclude the words “**Sun Microsystems**”or other words selected by Tenant, subject to Landlord’s reasonable approval.

 

35.3 Tenant’s right under this Section 35 shall be personal toTenant and if Tenant requests any assignment of this Lease (except to anAffiliate), Tenant’s rights under this Section shall not be transferableto assignable without the express prior written consent of Landlord, whichconsent may be granted, withheld or conditioned in Landlord’s sole and absolutediscretion.

 

36.         TELECOMMUNICATIONSEQUIPMENT. Tenant shall have the non-exclusive right to install at its solecost and expense, satellite dishes on the roof of the Building at a locationreasonably acceptable to Landlord. Tenant shall install and remove such telecomnode and satellite dish in accordance with the provisions of Article 6(Alterations) hereof. Tenant’s rights to install a satellite dish are and shallbe non 

 

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exclusive. Prior to any such installation (orrelocation) of any satellite dish by Tenant, Tenant shall furnish detailedplans and specifications for the installation, including the proposed locationand method of attachment, to Landlord for approval, which approval shall not beunreasonably withheld, conditioned or delayed. Any such installation shall beattractively screened as may be required by Landlord or applicable governmentalrequirements. Landlord may require use of a non-penetrating roof mount. Ifreasonably requested by Landlord, a roofing company acceptable to Landlordshall at Tenant’s expenses install an appropriate base upon which Tenant’sinstillation shall be mounted. All aspects and phases of Tenant’s installation,including any antenna or camera and any associated electronic or otherequipment, wiring, conduit, roof mount and, base, shall at all times be subjectto supervision and approval by Landlord and Landlord’s consultants., whichconsent shall not be unreasonably withheld, conditioned or delayed. Allapproval and supervision rights of Landlord are intended solely to protectLandlord’s interests; Landlord shall have no obligation to Tenant to exerciseany such power of supervision or approval. Tenant shall be responsible forprocuring prior to any installation and maintaining in force at all timesthereafter any and all consents, approvals, licenses and permits as may berequired for the lawful installation, use and operation of Tenant’s system.Landlord makes no warranties or representations as to the permissibility of anysuch installation by Tenant. All costs and expenses incurred in connection withany such installation or proposed installation by Tenant, including anyreasonably necessary costs or expenses incurred in good faith by Landlord inconnection with review or supervision thereof, shall be borne by Tenant (andTenant shall within thirty (30) days after demand from Landlord pay orreimburse Landlord for such costs and expenses). Tenant shall be permittedaccess to the area on the roof where any such installation may be made asnecessary for the installation and maintenance thereof. Tenant shall at alltimes and at Tenant’s sole expense be responsible for proper maintenance of anysuch installation and all governmental permits and approvals required inconnection therewith (including compliance with any and all conditions attachedthereto). Any such installation and the roof area on which it is located shallbe deemed to be part of the Premises for purposes of Tenant’s insurance andindemnification obligations under this Lease. Tenant may at any time, and shallat expiration or earlier termination of the Term, if so requested by Landlord,remove Tenant’s satellite dish, restore the building to the condition existingprior to Tenant’s satellite dish, and repair any damage caused by Tenant’sinstallation or removal of Tenant’s satellite dish.

 

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37.         ARBRITRATION. IN theevent of any bona fide dispute between Landlord and Tenant as to any matterunder this Lease, except with respect to any default by Tenant under Section 15.1(a) ofthis Lease and except as may be expressly provided elsewhere in this Lease,Landlord and Tenant hereby agree that such disagreement shall be finally settledby binding arbitration pursuant to the Commercial Arbitration Rules thenin effect of the American Arbitration Association. The arbitrators shalldetermine the rights and obligations of the parties according to the terms andconditions of this Lease and the applicable laws of the State of California.The decision issued by the arbitrators pursuant to this Section shall befinal and not subject to appeal. It is the intent of the parties that, barringextraordinary circumstances, any arbitration pursuant to this Section shallbe concluded within sixty (60) days of the date such arbitration is firstinitiated by one or both of the parties. Except as provided in Section 23.1above, Landlord and Tenant shall each pay its own costs, including attorneyfees, incurred in preparing for and participating in the arbitration proceedingand each shall pay one-half of the cost of the arbitrators. Any decision by thearbitrators, shall be in writing, signed by the arbitrators and shall includethe reasons for the decision.

 

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IN WITNESS WHEREOF, Landlord and Tenant have entered into this Lease asof the date first above written.

 
| TENANT:                           | LANDLORD:                                                                       |
|-----------------------------------|---------------------------------------------------------------------------------|
|                              | K3 FIRST STREET ASSOCIATES,  LLC, a California limited liability  company       |
|                              | By Howard Street Investors, LLC, a  CA limited liability company, a,  manager   |
|                              |                                                                            |
|                              |                                                                            |
| SUNMICROSYSTEMS, INC., a Delaware |                                                                            |
| Corporation                       | By: KFRITZ Investors, LLC,a  California limited liability company,  its Manager |
|                              |                                                                            |
|                              | By: WWA Investors, LLC, a  California limited liability company,  its Manager   |

 
| By:                                  | /S/ Corey Wong      |   | By:    | /S/ William Wilson III |
|--------------------------------------|---------------------|--------|--------|------------------------|
| Director of Real Estate              | Manager             |
|                                 |                |   |   |
| By:                                  | /S/ William Agrello |   |   |                   |
| Sr. Vice President                   |                |   |
|                                 |                |   |   |
| By:                                  | /S/ Michael Morris  |   |   |                   |
| Sr. Vice President                   |                |   |
| General Counsel & Secretary |                |

 

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EXHIBIT D

 

FURNITURE

 

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