**Exhibit 10.5**

 

**AMENDEDAND RESTATED OFFICE LEASE**

 

**KILROYREALTY**

 

**PACIFICCORPORATE CENTER**

 

 

**KILROYREALTY****,****L****.****P****.**,

 

a Delaware limited partnership,

 

as Landlord,

 

and

 

**FAVRILLE,INC.**,

 

a Delaware corporation,

 

as Tenant.

 

----

 

**TABLEOF CONTENTS**

 
| ** **      | ** **                                                      | **Page** |
|-----------------|-----------------------------------------------------------------|----------|
|            |                                                            |     |
| ARTICLE 1  | PREMISES, BUILDING, PROJECT, AND COMMON AREAS                   | 6        |
|            |                                                            |     |
| ARTICLE 2  | LEASE TERM; OPTION TERM(S)                                      | 8        |
|            |                                                            |     |
| ARTICLE 3  | BASE RENT                                                       | 11       |
|            |                                                            |     |
| ARTICLE 4  | ADDITIONAL  RENT                                                | 12       |
|            |                                                            |     |
| ARTICLE 5  | USE  OF PREMISES                                                | 20       |
|            |                                                            |     |
| ARTICLE 6  | SERVICES AND UTILITIES                                          | 21       |
|            |                                                            |     |
| ARTICLE 7  | REPAIRS                                                         | 25       |
|            |                                                            |     |
| ARTICLE 8  | ADDITIONS AND ALTERATIONS                                       | 26       |
|            |                                                            |     |
| ARTICLE 9  | COVENANT AGAINST LIENS                                          | 29       |
|            |                                                            |     |
| ARTICLE 10 | INSURANCE                                                       | 29       |
|            |                                                            |     |
| ARTICLE 11 | DAMAGE AND DESTRUCTION                                          | 33       |
|            |                                                            |     |
| ARTICLE 12 | NONWAIVER                                                       | 36       |
|            |                                                            |     |
| ARTICLE 13 | CONDEMNATION                                                    | 36       |
|            |                                                            |     |
| ARTICLE 14 | ASSIGNMENT AND SUBLETTING                                       | 37       |
|            |                                                            |     |
| ARTICLE 15 | SURRENDER OF PREMISES; OWNERSHIP AND  REMOVAL OF TRADE FIXTURES | 41       |
|            |                                                            |     |
| ARTICLE 16 | HOLDING OVER                                                    | 42       |
|            |                                                            |     |
| ARTICLE 17 | ESTOPPEL CERTIFICATES                                           | 43       |
|            |                                                            |     |
| ARTICLE 18 | SUBORDINATION                                                   | 43       |
|            |                                                            |     |
| ARTICLE 19 | DEFAULTS; REMEDIES                                              | 44       |
|            |                                                            |     |
| ARTICLE 20 | COVENANT OF QUIET ENJOYMENT                                     | 47       |
|            |                                                            |     |
| ARTICLE 21 | SECURITY DEPOSIT; LETTER OF CREDIT                              | 48       |
|            |                                                            |     |
| ARTICLE 22 | TELECOMMUNICATIONS EQUIPMENT                                    | 52       |
|            |                                                            |     |
| ARTICLE 23 | SIGNS                                                           | 53       |

 

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| ARTICLE 24 | COMPLIANCE WITH LAW                                        | 55     |
|-----------------|------------------------------------------------------------|--------|
|            |                                                       |   |
| ARTICLE 25 | LATE CHARGES                                               | 56     |
|            |                                                       |   |
| ARTICLE 26 | LANDLORD’S RIGHT TO CURE DEFAULT; PAYMENTS  BY TENANT | 56     |
|            |                                                       |   |
| ARTICLE 27 | ENTRY BY LANDLORD                                          | 57     |
|            |                                                       |   |
| ARTICLE 28 | TENANT PARKING                                             | 57     |
|            |                                                       |   |
| ARTICLE 29 | MISCELLANEOUS PROVISIONS                                   | 58     |

 

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INDEX

 
| ** **                | **Page(s)** |
|---------------------------|-------------|
|                      |        |
| Accountant                | 20          |   |
| Additional Notice         | 25          |   |
| Additional Rent           | 12          |   |
| Affiliate                 | 41          |   |
| Alterations               | 26          |   |
| Applicable Laws           | 55          |   |
| Award                     | 11          |   |
| Bank Prime Loan           | 56          |   |
| Base Building             | 27          |   |
| Base Rent                 | 11          |   |
| Brokers                   | 63          |   |
| BS Exception              | 25          |   |
| Building Monument Sign    | 53          |   |
| Building Structure        | 25          |   |
| Building System           | 22          |   |
| Building Systems          | 22          |   |
| Building Top Sign         | 53          |   |
| CC&Rs                 | 21          |   |
| CGCC                      | 41          |   |
| cGMP Standard             | 3           |   |
| Comparable Area           | 10          |   |
| Comparable Buildings      | 9           |   |
| Comparable Deals          | 9           |   |
| Comparable Term           | 9           |   |
| Cosmetic Alterations      | 27          |   |
| Damage Termination Date   | 35          |   |
| Damage Termination Notice | 35          |   |
| Direct Expenses           | 12          |   |
| Eligibility Period        | 25          |   |
| Environmental  Laws       | 65          |   |
| Estimate                  | 19          |   |
| Estimate Statement        | 19          |   |
| Estimated Direct Expenses | 19          |   |
| Excess                    | 18          |   |
| Exercise Notice           | 10          |   |
| Existing Tenant           | 6           |   |
| Expense Year              | 13          |   |
| Force Majeure             | 61          |   |
| Hazardous Material(s)     | 65          |   |
| HVAC                      | 22          |   |
| Initial Notice            | 25          |   |
| Landlord                  | 1           |   |
| Landlord Default          | 25          |   |
| Landlord Parties          | 29          |   |

 

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| ** **                              | **Page(s)** |
|-----------------------------------------|-------------|
|                                    |        |
| Landlord Response Date                  | 10          |   |
| Landlord Response Notice                | 10          |   |
| Landlord’s Option Rent Calculation | 10          |   |
| L-C                                     | 48          |   |
| L-C Amount                              | 48          |   |
| L-C Security Deposit                    | 51          |   |
| Lease                                   | 1           |   |
| Lease Commencement Date                 | 8           |   |
| Lease Expiration Date                   | 8           |   |
| Lease Term                              | 8           |   |
| Lease Year                              | 8           |   |
| Lines                                   | 65          |   |
| Mail                                    | 61          |   |
| Market Rent                             | 8           |   |
| Neutral Arbitrator                      | 11          |   |
| Nondisturbance Agreement                | 44          |   |
| Notices                                 | 61          |   |
| Objectionable Name                      | 54          |   |
| Operating Expenses                      | 13          |   |
| Option Rent                             | 8           |   |
| Option Term                             | 8           |   |
| Option Term TI Allowance                | 9           |   |
| Original Improvements                   | 32          |   |
| Other Improvements                      | 68          |   |
| Outside Agreement Date                  | 10          |   |
| Permitted Assignee                      | 8           |   |
| Permitted Use                           | 3           |   |
| Premises                                | 6           |   |
| Proposition 13                          | 17          |   |
| Reestablishment Notice                  | 49          |   |
| Renovations                             | 64          |   |
| Rent Concessions                        | 9           |   |
| Rent.                                   | 12          |   |
| Required L-C Amount                     | 49          |   |
| Required Thresholds                     | 50          |   |
| Sign Specifications                     | 54          |   |
| Statement                               | 18          |   |
| Subject Space                           | 37          |   |
| Summary                                 | 1           |   |
| Tax Expenses                            | 16          |   |
| Telecommunications Equipment            | 52          |   |
| Tenant                                  | 1           |   |
| Tenant Parties                          | 30          |   |
| Tenant Work Letter                      | 6           |   |
| Tenant’s Maintenance Obligations   | 22          |   |

 

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| ** **                            | **Page(s)** |
|---------------------------------------|-------------|
|                                  |        |
| Tenant’s Option Rent Calculation | 10          |   |
| Tenant’s Share                   | 18          |   |
| Tenant’s Signage                 | 53          |   |
| Transfer                              | 40          |   |
| Transfer Notice                       | 37          |   |
| Transfer Premium                      | 39          |   |
| Transferee                            | 37          |   |
| Transfers                             | 37          |   |
| Working Capital                       | 50          |   |

 

iii

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**PACIFICCORPORATE CENTER**

 

**AMENDEDAND RESTATED OFFICE LEASE**

 

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

 

**SUMMARYOF BASIC LEASE INFORMATION**

 
| **TERMS OF LEASE** |              | **DESCRIPTION**          |
|--------------------|-------------------|--------------------------|
|               |              |                     |   |   |
| 1.                 | Date:             |                     |   |   |
|               |              |                     |   |   |
|               | 1.1               | Date of Lease:           |   | October 31, 2005. |
|               |              |                     |   |   |
|               | 1.2               | Effective Date:          |   | November 1, 2005. |
|               |              |                     |   |   |
| 2.                 | Premises:         |                     |   |
|               | 2.1               | Building:                |   | That certain building located at 10421  Pacific Center Court in the “Project” in Sorrento Mesa, which Building  contains 79,871 rentable square feet of space. |
|               |              |                     |   |   |
|               | 2.2               | Premises:                |   | All of the leasable area within the  Building, as more particularly identified in **Exhibit A** to the Office Lease. |
|               |              |                     |   |   |
|               | 2.3               | Project:                 |   | The Building is part of a multi-building  project known as the “**Pacific Corporate  Center**”, as further set forth in Section 1.1.2 of this  Lease. |
| 3.                 | Lease Term        |                     |   |
|               | (Article 2): |                     |   |
|               |              |                     |   |   |
|               | 3.1               | Length of Term:          |   | Nineteen (19) years and eight (8) months. |
|               | 3.2               | Lease Commencement Date: |   | November 1, 2005 |
|               | 3.3               | Lease Expiration Date:   |   | June 30, 2025. |

 

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|   | 4. | Base Rent (Article 3): |   |   |
|--------|----|-----------------------------|--------|--------|

 
| ** **                                            | ** ** | ** **             | ** **   | ** **             | ** ** | **Approximate Monthly** | ** ** |
|-------------------------------------------------------|------------|------------------------|--------------|------------------------|------------|-------------------------|------------|
| **Period**                                            | ** ** | ** **             | ** **   | **Monthly**            | ** ** | **Rental Rate**         | ** ** |
| **During**                                            | ** ** | **Annualized**         | ** **   | **Installment**        | ** ** | **per Rentable**        | ** ** |
| **Lease Term**                                        | ** ** | **Base Rent**          | ** **   | **of Base Rent**       | ** ** | **Square Foot**         | ** ** |
|                                                  |       |                   |         |                   |       |                    |       |
| November 1, 2005 – January 31,  2007   |       | See **Exhibit I** |         | See **Exhibit I** |       | See **Exhibit I**  |       |
| February 1, 2007 – January 31,  2008   |       | $                      | 3,450,427.20 |                   | $          | 287,535.60              |       | $ | 3.6000 |   |
| February 1, 2008 – January 31,  2009   |       | $                      | 3,571,192.15 |                   | $          | 297,599.35              |       | $ | 3.7260 |   |
| February 1, 2009 – January 31,  2010   |       | $                      | 3,696,183.88 |                   | $          | 308,015.32              |       | $ | 3.8564 |   |
| February 1, 2010 – January 31,  2011   |       | $                      | 3,825,550.31 |                   | $          | 318,795.86              |       | $ | 3.9914 |   |
| February 1, 2011 – January 31,  2012   |       | $                      | 3,959,444.57 |                   | $          | 329,953.71              |       | $ | 4.1311 |   |
| February 1, 20012 – January 31,  20013 |       | $                      | 4,098,025.13 |                   | $          | 341,502.09              |       | $ | 4.2757 |   |
| February 1, 2013 – January 31,  2014   |       | $                      | 4,241,456.01 |                   | $          | 353,454.67              |       | $ | 4.4253 |   |
| February 1, 2014 – January 31,  2015   |       | $                      | 4,389,906.97 |                   | $          | 365,825.58              |       | $ | 4.5802 |   |
| February 1, 2015 – January 31,  2016   |       | $                      | 4,543,553.72 |                   | $          | 378,629.48              |       | $ | 4.7405 |   |
| February 1, 2016 – January 31,  2017   |       | $                      | 4,702,578.10 |                   | $          | 391,881.51              |       | $ | 4.9064 |   |
| February 1, 2017 – January 31,  2018   |       | $                      | 4,867,168.33 |                   | $          | 405,597.36              |       | $ | 5.0782 |   |
| February 1, 2018 – January 31,  2019   |       | $                      | 5,037,519.22 |                   | $          | 419,793.27              |       | $ | 5.2559 |   |
| February 1, 2019 – January 31,  2020   |       | $                      | 5,213,832.40 |                   | $          | 434,486.03              |       | $ | 5.4398 |   |
| February 1, 2020 – January 31,  2021   |       | $                      | 5,396,316.53 |                   | $          | 449,693.04              |       | $ | 5.6302 |   |
| February 1, 2021 – January 31,  2022   |       | $                      | 5,585,187.61 |                   | $          | 465,432.30              |       | $ | 5.8273 |   |

 

2

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| ** **                                          | ** ** | ** **     | ** **   | ** **       | ** ** | **Approximate Monthly** | ** ** |
|-----------------------------------------------------|------------|----------------|--------------|------------------|------------|-------------------------|------------|
| **Period**                                          | ** ** | ** **     | ** **   | **Monthly**      | ** ** | **Rental Rate**         | ** ** |
| **During**                                          | ** ** | **Annualized** | ** **   | **Installment**  | ** ** | **per Rentable**        | ** ** |
| **Lease Term**                                      | ** ** | **Base Rent**  | ** **   | **of Base Rent** | ** ** | **Square Foot**         | ** ** |
|                                                |       |           |         |             |       |                    |       |
| February 1, 2022 – January 31,  2023 |       | $              | 5,780,669.18 |             | $          | 481,722.43              |       | $ | 6.0313 |   |
| February 1, 2023 – January 31,  2024 |       | $              | 5,982,992.60 |             | $          | 498,582.72              |       | $ | 6.2423 |   |
| February 1, 2024 – January 31,  2025 |       | $              | 6,192,397.34 |             | $          | 516,033.11              |       | $ | 6.4608 |   |
| February 1, 2005 – June 30, 2025     |       | $              | 6,409,131.25 |             | $          | 534,094.27              |       | $ | 6.6869 |   |

 
| 5.     | Intentionally Omitted:                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------|----------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 6.     | Tenant’s Share  (Article 4): | 100%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 7.     | Permitted Use  (Article 5):       | Tenant shall use the Premises solely for  biotechnology labs and pharmaceutical manufacturing (in accordance with the  Federal Drug Administration’s current Good Manufacturing Practices (“**cGMP Standard**”)), together with related  offices uses (collectively, the “**Permitted  Use**”); provided, however, that notwithstanding anything to the  contrary set forth hereinabove, and as more particularly set forth in the  Lease, Tenant shall be responsible for operating and maintaining the Premises  pursuant to, and in no event may such Permitted Use violate, (A) Landlord’s  “Rules and Regulations,” as that term is set forth in Section 5.2  of this Lease, (B) all “Applicable Laws,” as that term is set forth in Article 24  of this Lease, (C) all applicable zoning, building codes, the “CC&Rs,”  as that term is set forth in Section 5.3 of this Lease, and the  Pacific Corporate Center P.I.D., and (D) the character of the Project as  a first-class Project. |
|   |                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 8.     | Security Deposit  (Article 21):   | $355,727.60. In addition to the Security  Deposit, Tenant shall have additional security obligations, in the form more  particularly set forth in Section 21.2, which shall be subject to  increases, reductions and reinstatements pursuant to the TCCs of Section 21.2.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |

 

3

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| 9.     | Parking Spaces  (Article 28):                             | A total of one hundred fifty-nine (159)  parking spaces (i.e., two (2) unreserved parking spaces for every 1,000  rentable square feet of the Premises). |
|--------|----------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                           |                                                                                                                                                          |
| 10.    | Address of Tenant  (Section 29.18):                       |                                                                                                                                                          |
|   |                                                           |                                                                                                                                                          |
|   |                                                           | Favrille, Inc.                                                                                                                                           |
|   |                                                           | 10421 Pacific Center Court                                                                                                                                    |
|   |                                                           | Suite 150                                                                                                                                                |
|   |                                                           | San Diego, California 92121                                                                                                                                   |
|   |                                                           | Attention: Chief Financial Officer                                                                                                                            |
|   |                                                           | (*Prior to and after Lease  Commencement Date*)                                                                                                               |
|   |                                                           |                                                                                                                                                          |
|   |                                                           | with a copy to:                                                                                                                                               |
|   |                                                           |                                                                                                                                                          |
|   |                                                           | Cooley Godward LLP                                                                                                                                            |
|   |                                                           | 101 California Street, 5th Floor                                                                                                                              |
|   |                                                           | San Francisco, California 94111                                                                                                                               |
|   |                                                           | Attention: Helen Sedwick, Esq.                                                                                                                           |
|   |                                                           |                                                                                                                                                          |
| 11.    | Address of Landlord  (Section 29.18):                     | See Section 29.18 of the Lease.                                                                                                                          |
|   |                                                           |                                                                                                                                                          |
| 12.    | Broker(s)  (Section 29.24):                               | For Tenant:                                                                                                                                                   |
|   |                                                           | Colliers International                                                                                                                                        |
|   |                                                           | 4660 La Jolla Village Drive, Suite 200                                                                                                                   |
|   |                                                           | San Diego, California 92122                                                                                                                                   |
|   |                                                           | Attention:                                                                                                                                                    | Kevin Craven |
|   |                                                           |                                                                                                                                                          | Thomas Mercer |
|   |                                                           |                                                                                                                                                          |
| 13.    | Improvement Allowance  (Section 2 of **Exhibit B**): | $10,000,000.00.                                                                                                                                               |

 

4

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**PACIFICCORPORATE CENTER**

 

**AMENDEDAND RESTATED OFFICE LEASE**

 

**RECITALS :**

 

A.                                   This Amended andRestated Office Lease (“**Office Lease**”),which includes the preceding Summary of Basic Lease Information (the “**Summary**”) attached hereto and incorporatedherein by this reference (the Office Lease and Summary are sometimescollectively referred to herein as the “**Lease**”),dated as of the date set forth in Section 1 of the Summary is madeby and between KILROY REALTY, L.P., a Delaware limited partnership (“**Landlord**”), and FAVRILLE, INC., a Delawarecorporation (“**Tenant**”).

 

B.                                     Landlord, andTenant previously entered into that certain Office Lease dated January 31,2004 (the “**Original Office Lease**”),as amended by that certain First Amendment to Lease dated July 2004 (the “**First Amendment**”), that certain SecondAmendment to Lease dated October 11, 2004 (the “**Second Amendment**”), that certain Third Amendment to Leasedated July 8, 2005 (the **“Third Amendment**”),and that certain Fourth Amendment to Lease dated October 31, 2005 (the “**Fourth Amendment**”), whereby Landlord leasedto Tenant and Tenant leased from Landlord the entire building located at 10421Pacific Center Court, San Diego, California (the “**10421 Building**”) comprised (i) those certain premises(the “**Original Premises**”)consisting of 48,502 rentable square feet of space located on the first (1st)and second (2nd) floors of the Building, (ii) thosecertain premises (the “**First ExpansionPremises**”) consisting of 13,987 rentable square feet of spacelocated on the second (2nd) floor of the Building, and (iii) thosecertain premises (the “**Third ExpansionPremises**”) consisting of approximately 17,382 rentable square feetlocated on the first (1st) floor of the Building (the OriginalPremises, the First Expansion Premises and the Third Expansion Premises are,collectively, (x) initially referred to herein as the “**Premises**,” and (x) alternatively, andthroughout the Lease Term, referred to herein as the “**10421 Premises**”).  The Office Lease, the First Amendment, theSecond Amendment, the Third Amendment and the Fourth Amendment are,collectively, the “**Original Lease**.”

 

C.                                     The OriginalOffice Lease was initially entered into by Landlord and Tenant with respect tothe Original Premises only, and because such Original Premises did not comprisethe entire Building, the rights and obligations of both Landlord and Tenantunder the terms of the Original Office Lease were structured so as to be a partof, and integrated with, a larger, multi-tenant building.  Following the execution of the ThirdAmendment and Tenant’s lease of the Third Expansion Premises, Landlord leasesto Tenant and Tenant leases from Landlord the entire Building.  As a result thereof, the parties acknowledgeand agree that certain of the terms and conditions relating directly to amulti-tenant building which are set forth in the Original Lease are no longerapplicable.

 

D.                                    Landlord and Tenantdesire to amend and restate the terms of the Original Lease in their entirety,effective as of the Effective Date, as set forth herein.

 

5

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E.                                      Following thedate of this Lease, Landlord and Tenant desire to expand the 10421 Premises toinclude the entire building (the “**10445Premises**”) located at 10445 Pacific Center Court, San Diego,California (the “**10445 Building**”).  However, as such 10445 Premises is currentlyoccupied by a third party (“**Nuera**”)pursuant to an existing lease between Landlord and Nuera (the “**Nuera Lease**”), Landlord and Tenantacknowledge that such expansion, and Landlord’s ability to deliver the 10445Building to Tenant, is expressly conditioned upon the termination or expirationof the Nuera Lease as set forth more particularly in Section 29.37 of thisLease.  In the event that the Nuera Lease is so terminated, or upon theexpiration thereof, then Landlord and Tenant shall immediately thereafter enterinto that certain First Amendment to Amended and Restated Office Lease (whichshall amend this Lease) in the form attached hereto as **Exhibit H** (the “**First Amendment to Amended and Restated Office Lease**”).  All of the terms and conditions of thisLease, as amended by the terms of such First Amendment to Amended and RestatedOffice Lease, shall be effective immediately upon the full execution anddelivery of such First Amendment to Amended and Restated Office Lease by andbetween Landlord and Tenant (the “**10445Premises Effective Date**”).

 

F.                                      Upon the date setforth in Section 1.2 of the Summary (the “**Effective Date**”),  thisLease shall amend and restate the Original Lease in its entirety and shallthereafter supersede the Original Lease. The provisions of the Original Lease shall remain in effect as to allperiods prior to the Effective Date.

 

**AGREEMENT :**

 

# **ARTICLE 1**

#  

# **PREMISES, BUILDING, PROJECT, ANDCOMMON AREAS**

#  

## 1.1                                 **Premises, Building, Project and Common Areas**.

##  

### 1.1.1                        **The Premises**. Landlord hereby leases to Tenant and Tenant hereby leases from Landlordthe premises set forth in Section 2.2 of the Summary (the “**Premises**”). The outline of the Premises is set forth in **Exhibit A** attached hereto andcomprises all of the leasable area with in the Building.  The parties hereto agree that the lease ofthe Premises is upon and subject to the terms, covenants and conditions (the “**TCCs**”)****hereinset forth, and Tenant covenants as a material part of the consideration forthis Lease to keep and perform each and all of such TCCs by it to be kept andperformed and that this Lease is made upon the condition of suchperformance.  The parties hereto herebyacknowledge that the purpose of **Exhibit A**is to show the approximate location of the Premises in the “**Building**,” as that term is defined in Section 1.1.2,below, only, and such Exhibit is not meant to constitute an agreement,representation or warranty as to the construction of the Premises, the precisearea thereof or the specific location of the “**CommonAreas**,” as that term is defined in Section 1.1.3, below,or the elements thereof or of the accessways to the Premises or the “**Project**,” as that term is defined in Section 1.1.2,below.  Landlord and Tenant acknowledgethat Tenant has been occupying the entire Premises pursuant to the OriginalLease, and therefore except as specifically set forth in this Lease and in theTenant Work Letter attached hereto as **Exhibit B**(the “**Tenant Work**

 

6

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### **Letter**”), Landlord shall not be obligated toprovide or pay for any improvement work or services related to the improvementof the Premises and Tenant shall continue to accept the Premises in itspresently existing, “as is” condition, subject only to Landlord’s ongoingobligations set forth in Article 7 of this Lease, including,without limitation, Landlord’s ongoing obligation to maintain the “BuildingStructure,” as that term is defined in, and pursuant to the TCCs of, Section 7.1.  Tenant also acknowledges that neitherLandlord nor any agent of Landlord has made any representation or warrantyregarding the condition of the Premises, the Building or the Project or withrespect to the suitability of any of the foregoing for the conduct of Tenant’sbusiness, except as specifically set forth in this Lease and the Tenant WorkLetter.

###  

### 1.1.2                        **The Building and The Project**.  The Premises initially constitutes all of thebuilding set forth in Section 2.1 of the Summary (the “**Building**”). The Building is part of a project known as “**Pacific Corporate Center**.” The term “**Project**,” as usedin this Lease, shall mean (i) the Building and the Common Areas, (ii) theland (which is improved with landscaping, parking facilities and otherimprovements) upon which the Building and the Common Areas are located, and (iii) the10445 Building located immediately adjacent to the Building and the land uponwhich such 10445 Building is****located.

###  

### 1.1.3                        **Common Areas**. Tenant shall have the non-exclusive right to use in common with othertenants in the Project, and subject to the rules and regulations referredto in Article 5 of this Lease, those portions of the Project whichare provided, from time to time, for use in common by Landlord, Tenant and anyother tenants of the Project (such areas, together with such other portions ofthe Project designated by Landlord, in its discretion, including certain areasdesignated for the exclusive use of certain tenants, or to be shared byLandlord and certain tenants, are collectively referred to herein as the “**Common Areas**”).  The manner in which the Common Areas aremaintained and operated shall be at the reasonable discretion of Landlord andthe use thereof shall be subject to such rules, regulations and restrictions asLandlord may make from time to time as provided in Section 5.2 ofthis Lease, provided that Landlord shall at all times maintain and operate theCommon Areas in a first-class manner consistent with the “Comparable Buildings,”as such term is defined in Section 2.2.2 of this Lease.  Landlord reserves the right to closetemporarily, make alterations or additions to, or change the location ofelements of the Project and the Common Areas as long as such changes do not (i) changethe nature of the Project to something other than a first-class project (ii) materially,adversely effect Tenant’s use of the Premises for the Permitted Use, as grantedunder Section 7 of the Summary, (iii) materially, adverselyreduce Tenant’s ingress to or egress from the Project, Building, the Premisesor the parking areas servicing the same, or (iv) materially reduce theparking area available for use by Tenant. Except when and where Tenant’s right of access is specifically excludedas a result of (x) an emergency, (y) a requirement by law, or(z) a specific provision set forth in this Lease, Tenant shall have theright of access to the Premises, the Building, and the Project parking facilitytwenty-four (24) hours per day, seven (7) days per week during the “LeaseTerm,” as that term is defined in Section 2.1,****below and any “**Option Term**,” as that term is defined in Section 2.2,below.

###  

## 1.2                                 **Stipulation of Rentable Square Feet of Premises and Building**.  For purposes of this Lease, “rentable squarefeet” of the initial Premises and 10421 Building shall be deemed as set forthin Section 2.1 of the Summary.

 

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# **ARTICLE 2**

#  

# **LEASE TERM; OPTION TERM(S)**

#  

## 2.1                                 **Initial Lease Term**.  The TCCs and provisions of this Lease shallbe effective as of the date of this Lease. The term of this Lease (the “**LeaseTerm**”) shall be as set forth in Section 3.1 of theSummary, shall commence on the date set forth in Section 3.2 of theSummary (the “**Lease Commencement Date**”),and shall terminate on the date set forth in Section 3.3 of theSummary (the “**Lease Expiration Date**”)unless this Lease is sooner terminated as hereinafter provided.  For purposes of this Lease, the term “**Lease Year**” shall mean each consecutivetwelve (12) month period during the Lease Term; provided, however, that thefirst Lease Year shall commence on the Lease Commencement Date and end on thelast day of the eleventh month thereafter and the second and each succeedingLease Year shall commence on the first day of the next calendar month; andfurther provided that the last Lease Year shall end on the Lease ExpirationDate.  At any time during the Lease Term,Landlord may deliver to Tenant a notice in the form as set forth in **Exhibit C**, attached hereto, as aconfirmation only of the information set forth therein, which Tenant shallexecute and return to Landlord within five (5) days of receipt thereof.

##  

## 2.2                                 **Option Term(s)**.

##  

### 2.2.1                        **Option Right**. Landlord hereby grants the Tenant originally named herein (the “**Original Tenant**”), its “Affiliates” (asthat term is defined in Section 14.8, below) and any permitted assignee ofthe Original Tenant’s interest in this Lease pursuant to Article 14of this Lease (a “**Permitted Assignee**”),two (2) options to extend the Lease Term for the entire 10421Premises each by a period of five****(5) years(each, an “**Option Term**”).  Such options shall be exercisable only byNotice delivered by Tenant to Landlord as provided below, provided that, as ofthe date of delivery of such Notice, Tenant is not in default under this Lease(beyond any applicable notice and cure periods).  Upon the proper exercise of an option to extend,and provided that, as of the end of the then applicable Lease term, Tenant isnot in default under this Lease (beyond any applicable notice and cureperiods), the Lease Term, as it applies to the entire 10421 Premises, shall beextended for a period of five (5) years. The rights contained in this Section 2.2 shall only beexercised by the Original Tenant, its Affiliate or a Permitted Assignee (andnot any other assignee, sublessee or other transferee of the Original Tenant’sinterest in this Lease) if Original Tenant, its Affiliate and/or a PermittedAssignee is in possession of the entire then-existing 10421 Premises.  In the event the 10445 Premises is leased byTenant, Tenant’s right to extend the Lease Term with respect to such 10445Premises shall be as expressly set forth in the First Amendment to Amended andRestated Office Lease, and which right shall be independent of the right toextend the Lease Term with respect to the 10421 Premises as set forth in this Section 2.2.Accordingly, Tenant shall have the right to exercise the applicable optionrights with respect to the 10421 Premises, the 10445 Premises, or both, inTenant’s sole discretion.

###  

### 2.2.2                        **Option Rent**.  TheRent payable by Tenant during the Option Term (the “**Option Rent**”) shall be equal to the Market Rent as set forthbelow.  For purposes of this Lease, theterm “**Market Rent**” shall mean rent(including additional rent and considering any “base year” or “expense stop”applicable thereto), including all escalations, at which tenants, as of the

 

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### commencementof the applicable term are, pursuant to transactions completed within thetwenty-four (24) months prior to the date Tenant delivers to Landlord the “ExerciseNotice,” as that term is set forth below, leasing non-sublease, non-encumbered,non-synthetic, non-equity space (unless such space was leased pursuant to adefinition of “fair market” comparable to the definition of Market Rent)comparable in size, location and quality to the Premises for a “ComparableTerm,” as that term is defined in this Section 2.2.2 (the “**Comparable Deals**”), which comparable spaceis located in the “Comparable Buildings,” as that term is defined in this Section 2.2.2,giving appropriate consideration to the annual rental rates per rentable squarefoot (adjusting the base rent component of such rate to reflect a net valueafter accounting for whether or not utility expenses are directly paid by thetenant such as Tenant’s direct utility payments provided for in Section 6.1of this Lease), the standard of measurement by which the rentable squarefootage is measured, parking ratios, general access to such ComparableBuildings, the general visibility of such Comparable Buildings, and taking intoconsideration only, and granting only, the following concessions (provided thatthe rent payable in Comparable Deals in which the terms of such ComparableDeals are determined by use of a discounted fair market rate formula shall beequitably increased in order that such Comparable Deals will not reflect adiscounted rate) (collectively, the “**RentConcessions**”):  (a) rentalabatement concessions or build-out periods, if any, being granted such tenantsin connection with such comparable spaces; (b) tenant improvements orallowances provided or to be provided for such comparable space, taking intoaccount the value of the existing improvements in the Premises, such value tobe based upon the age, quality and layout of the improvements and the extent towhich the same can be utilized by this particular Tenant, (c) Proposition13 protection, and (d) all other monetary concessions, if any, beinggranted such tenants in connection with such comparable space; provided,however, that notwithstanding anything to the contrary herein, no considerationshall be given to the fact that Landlord is or is not required to pay a realestate brokerage commission in connection with the applicable term or the factthat the Comparable Deals do or do not involve the payment of real estatebrokerage commissions.  The term “**Comparable Term**” shall refer to the lengthof the lease term, without consideration of options to extend such term, forthe space in question.  In addition, thedetermination of the Market Rent shall include a determination as to whether,and if so to what extent, Tenant must provide Landlord with financial security,such as a letter of credit or guaranty, for Tenant’s rent obligations duringany Option Term.  Such determinationshall be made by reviewing the extent of financial security then generallybeing imposed in Comparable Transactions upon tenants of comparable financialcondition and credit history to the then existing financial condition andcredit history of Tenant (with appropriate adjustments to account fordifferences in the then-existing financial condition of Tenant and such othertenants).  If in determining the MarketRent, Tenant would, pursuant to the Comparable Deals and the Rent Concessionsset forth therein, otherwise be entitled to a tenant improvement or comparable allowancefor the improvement of the Premises (the “**OptionTerm TI Allowance**”), Tenant shall not be entitled, and shall not becompelled, to receive such Option Term TI Allowance and Landlord shall reducethe rental rate component of the Market Rent to be an effective rental ratewhich takes into consideration that Tenant will not receive any Option Term TIAllowance.  The term “**Comparable Buildings**” shall mean theBuilding and other first-class “cGMP/lab buildings” which are comparable to theBuilding in terms of age (based upon the date of completion of construction ormajor renovation as to the building containing the portion of the Premises inquestion), quality of construction, level of services and amenities, size

 

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### andappearance, and are located in the Sorrento Mesa, University Towne Center andTorrey Pines area of San Diego, California (the “**Comparable Area**”).

###  

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

###  

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

###  

### 2.2.5                        **Determination of Market Rent**.  In the event Tenant objects or is deemed tohave objected to the Market Rent, Landlord and Tenant shall attempt to agreeupon the Market Rent using reasonable good-faith efforts.  If Landlord and Tenant fail to reachagreement within sixty (60) days following Tenant’s objection or deemed objectionto the Landlord’s Option Rent Calculation (the (the “**Outside Agreement Date**”), then (i) in connection with theOption Rent, Landlord’s Option Rent Calculation and Tenant’s Option RentCalculation, each as previously delivered to the other party, shall besubmitted to the arbitrators pursuant to the TCCs of this Section 2.2.4,and (ii) in connection with any other contested calculation of marketRent, the parties shall each make a separate determination of the Market Rentand shall submit the same to the arbitrators pursuant to the TCCs of this Section 2.2.5.  The submittals shall be made concurrentlywith the selection of the arbitrators pursuant to this Section 2.2.5and shall be submitted to arbitration in accordance with Section 2.2.5.1through 2.2.5.5 of this Lease, but subject to the conditions, whenappropriate, of Section 2.2.3.

 

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### 2.2.5.1               Landlord andTenant shall mutually and reasonably select and appoint one arbitrator whoshall by profession be a real estate broker, appraiser or attorney (the “**Neutral Arbitrator**”) who shall have beenactive over the five (5) year period ending on the date of suchappointment in the leasing (or appraisal, as the case may be) of first-classoffice/lab/manufacturing properties in the Comparable Area.  The determination of the Neutral Arbitratorshall be limited solely to the issue of whether Landlord’s or Tenant’ssubmitted Market Rent, is the closest to the actual Market Rent as determinedby the Neutral Arbitrator, taking into account the requirements of Section 2.2.2of this Lease.  Such Neutral Arbitratorshall be appointed within thirty (30) days after the applicable OutsideAgreement Date.  Neither the Landlord norTenant may, directly or indirectly, consult with the Neutral Arbitrator priorto subsequent to his or her appearance. The Neutral Arbitrator shall be retained via an engagement letterjointly prepared by Landlord’s counsel and Tenant’s counsel.

###  

### 2.2.4.2               Within thirty(30) days of the appointment of the Neutral Arbitrator, such Neutral Arbitratorshall reach a decision as to Market Rent and determine whether the Landlord’sor Tenant’s determination of Market Rent as submitted pursuant to Section 2.2.5.1and Section 2.2.3 of this Lease is closest to Market Rent asdetermined by such Neutral Arbitrator and simultaneously publish a ruling (“**Award**”) indicating whether Landlord’s orTenant’s submitted Market Rent is closest to the Market Rent as determined bythe Neutral Arbitrator.  Followingnotification of the Award, the Landlord’s or Tenant’s submitted Market Rentdetermination, whichever is selected by the Neutral Arbitrator as being closestto Market rent shall become the then applicable Market Rent.

###  

### 2.2.4.3               The Awardissued by the Neutral Arbitrator shall be binding upon Landlord and Tenant.

###  

### 2.2.4.4               If Landlord andTenant fail to agree upon and appoint the Neutral Arbitrator, then either partymay petition Judicial Arbitration & Mediation Services, Inc. (“**JAMS**”) to designate an independent thirdparty to appoint the Neutral Arbitrator, subject to criteria in Section 2.2.5.1of this Lease.

###  

### 2.2.4.5               The cost ofarbitration shall be paid by the party (either Landlord or Tenant) whose MarketRent is not selected by the Neutral Arbitrator.

###  

# **ARTICLE 3**

#  

# **BASE RENT**

#  

Tenant shall pay, without prior notice ordemand, to Landlord or Landlord’s agent at the management office of theProject, or, at Landlord’s option, at such other place as Landlord may fromtime to time designate in writing, by a check for currency which, at the timeof payment, is legal tender for private or public debts in the United States ofAmerica, base rent (“**Base Rent**”)as set forth in Section 4 of the Summary, payable in equal monthlyinstallments as set forth in Section 4 of the Summary in advance onor before the first day of each and every calendar month during the Lease Term,without any setoff or deduction whatsoever. The Base Rent for the first full month of the Lease Term shall be paidat the time of Tenant’s execution of this Lease.  If any Rent payment date (including the LeaseCommencement Date) falls on a day of the month other

 

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than the first day of such month or if any payment of Rent is for aperiod which is shorter than one month, the Rent for any fractional month shallaccrue on a daily basis for the period from the date such payment is due to theend of such calendar month or to the end of the Lease Term at a rate per daywhich is equal to 1/365 of the applicable annual Rent.  All other payments or adjustments required tobe made under the TCCs of this Lease that require proration on a time basisshall be prorated on the same basis.

 

# **ARTICLE 4**

#  

# **ADDITIONAL RENT**

#  

## 4.1                                 **General Terms**.

##  

### 4.1.1                        **“Triple-Net” Lease**.  Landlord and Tenant understand and agree thatthis Lease is a “Triple Net” Lease. Tenant recognizes and acknowledges, without limiting the generality ofany other TCCs of this Lease, that it is the intent of the parties hereto thatthe Base Rent provided to be paid by Tenant to Landlord shall be net toLandlord, and any and all expenses incurred in connection with the Premises,the Building and an applicable portion of the Common Areas, or in connectionwith the operations thereof, include any and all taxes, assessments, general orspecial license fees, insurance premiums, public utility bills and costs ofrepair, maintenance and operation of the Premises and the Project and allbuildings, structures, permanent fixtures and other improvements comprisedtherein, together with the appurtenances thereto, shall be paid by Tenant inaddition to the Base Rent specified in this Lease, except as otherwisespecifically set forth herein.

###  

### 4.1.2                        **Direct Payments; Additional Rent**.  In addition to paying the Base Rent specifiedin Article 3 of this Lease, Tenant shall, prior to and throughoutthe Lease Term, directly pay for (i) all utilities service chargesaccruing with regard to the Premises during the Lease Term, and (ii) allother costs required to be paid directly by Tenant pursuant to the TCCs of thisLease.  Additionally, Tenant shall pay toLandlord “**Tenant’s Share**” of theannual “**Direct Expenses**,” as thoseterms are defined in Sections 4.2.6 and 4.2.2,respectively, of this Lease.  Suchpayments of Tenant’s Share of Direct Expenses by Tenant, together with any andall other amounts payable by Tenant to Landlord pursuant to the TCCs of thisLease, are hereinafter collectively referred to as the “**Additional Rent**,” and the Base Rent and theAdditional Rent are herein collectively referred to as “**Rent**.” All amounts due under this Article 4 as Additional Rentshall be payable for the same periods and in the same manner as the BaseRent.  Without limitation on otherobligations of Tenant which survive the expiration of the Lease Term, the obligationsof Tenant to pay the Additional Rent accruing during the Lease Term providedfor in this Article 4 shall survive the expiration of the LeaseTerm.

###  

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

##  

### 4.2.1                        IntentionallyDeleted.

###  

### 4.2.2                        “**Direct Expenses**” shall mean “OperatingExpenses” and “Tax Expenses.”

 

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### 4.2.3                        “**Expense Year**” shall mean each calendar yearin which any portion of the Lease Term falls, through and including thecalendar year in which the Lease Term expires, provided that Landlord, uponnotice to Tenant, may change the Expense Year from time to time to any othertwelve (12) consecutive month period, and, in the event of any such change,Tenant’s Share of Direct Expenses shall be equitably adjusted for any ExpenseYear involved in any such change.

###  

### 4.2.4                        “**Operating Expenses**” shall mean allexpenses, costs and amounts of every kind and nature which Landlord pays oraccrues during any Expense Year because of or in connection with the ownership,management, maintenance, security, repair, replacement, restoration oroperation of the Project, or any portion thereof, except as specifically setforth hereinbelow to the contrary. Without limiting the generality of the foregoing, Operating Expensesshall specifically include any and all of the following:  (i) the cost of supplying all utilitiesto the Common Areas (as opposed to the cost of utilities to the Premises, whichare to be directly paid by Tenant, or to the premises of third-party tenants inthe Project), the cost of operating, repairing, maintaining, and renovating theutility, telephone, mechanical, sanitary, storm drainage, and elevator systems,and the cost of maintenance and service contracts in connection therewith; (ii) thecost of licenses, certificates, permits and inspections and the cost ofcontesting any governmental enactments which may affect Operating Expenses, andthe costs incurred in connection with a governmentally mandated transportationsystem management program or similar program; (iii) the cost of allinsurance carried by Landlord in connection with the Project; (iv) thecost of landscaping, relamping, and all supplies, tools, equipment andmaterials used in the operation, repair and maintenance of the Project, or anyportion thereof; (v) costs incurred in connection with the parking areasservicing the Project; (vi) fees and other costs, including managementfees (which management fee shall equal two and one-quarter percent (21⁄4%) of theBase Rent due under this Lease, unless increased pursuant to the terms of Section 6.5of this Lease), consulting fees, legal fees and accounting fees, of allcontractors and consultants in connection with the management, operation,maintenance and repair of the Project; (vii) the fair rental value of anymanagement office space reasonably attributable to the Project (as opposed tobeing attributable to Landlord’s non-Project activities); (viii) wages,salaries and other compensation and benefits, including taxes levied thereon,of all persons (other than persons generally considered to be higher in rankthan the position of Project manager) engaged in the operation, maintenance andsecurity of the Project; (ix) costs under any recorded instrumentpertaining to the sharing of costs by the Project; (x) operation, repair,maintenance and replacement of all systems and equipment and components thereofof the Building; (xi) the cost of janitorial, alarm, security and otherservices, replacement of wall and floor coverings, ceiling tiles and fixturesin common areas, maintenance and replacement of curbs and walkways, repair tothe Building’s roof membrane; (xii) amortization (including interest onthe unamortized cost) of the cost of acquiring or the rental expense ofpersonal property used in the maintenance, operation and repair of the Project,or any portion thereof, to the extent of cost savings reasonably anticipated byLandlord at the time of such expenditure to be incurred in connectiontherewith; (xiii) the cost of capital improvements or other costs incurredin connection with the Project (A) which are intended to effect economiesin the operation or maintenance of the Project, or any portion thereof, (B) thatare required to comply with present or anticipated conservation programs, (C) whichare replacements or modifications of nonstructural items located in the CommonAreas required to keep the Common Areas in good order or condition, or (D) thatare required under any governmental law or regulation by a federal, state orlocal

 

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### governmentalagency, except for capital repairs, replacements or other improvements toremedy a condition existing prior to the Lease Commencement Date which anapplicable governmental authority, if it had knowledge of such condition priorto the Lease Commencement Date, would have then required to be remediedpursuant to then-current governmental laws or regulations in their formexisting as of the Lease Commencement Date and pursuant to the then-currentinterpretation of such governmental laws or regulations by the applicablegovernmental authority as of the Lease Commencement Date; provided, however,that any capital expenditure shall be amortized with interest over its usefullife, as reasonably determined by Landlord pursuant to sound real estateaccounting and management principles, consistently applied; (xiv) costs, fees,charges or assessments imposed by, or resulting from any mandate imposed onLandlord by, any federal, state or local government for fire and policeprotection, trash removal, community services, or other services which do notconstitute “Tax Expenses” as that term is defined in Section 4.2.5,below; and (xv) payments under any easement, license, operating agreement,declaration, restrictive covenant, or instrument pertaining to the sharing ofcosts by the Building.  Notwithstandingthe foregoing, for purposes of this Lease, Operating Expenses shall not,however, include:

###  

##### (a)                                  all costsrelating to the maintenance and repair of the following structural items:  (i) the foundation slab structure underthe Building (ii) exterior wall structure of the Building, and (iii) theroof structure of the Building (excluding the membrane), except to the extentsuch repairs are required due to the negligence or willful misconduct ofTenant;

#####  

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

#####  

##### (c)                                  except as setforth in items (xii), (xiii), and (xiv) above, depreciation, interest andprincipal payments on mortgages and other debt costs, if any, penalties andinterest, costs of capital repairs and alterations, and costs of capital improvementsand equipment;

#####  

##### (d)                                 except asotherwise specifically provided in item (xiii) above, costs incurred byLandlord in the repairs, capital additions, alterations or replacements made orincurred to rectify or correct defects in original design, materials orworkmanship in connection with the “Base Building,” as that term is defined in Section 8.2,portions of the Project (as so excluded, the “**Non-ReimbursableCapital Improvements**”);

#####  

##### (e)                                  costs for whichthe Landlord is reimbursed by any tenant or occupant of the Project or byinsurance by its carrier or any tenant’s carrier or by anyone else, andelectric power costs for which any tenant directly contracts with the localpublic service company;

 

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

#####  

##### (g)                                 costsassociated with the operation of the business of the partnership or entitywhich constitutes the Landlord, as the same are distinguished from the costs ofoperation of the Project (which shall specifically include, but not be limitedto, accounting costs associated with the operation of the Project).  Costs associated with the operation of thebusiness of the partnership or entity which constitutes the Landlord includecosts of partnership accounting and legal matters, costs of defending anylawsuits with any mortgagee (except as the actions of the Tenant may be inissue), costs of selling, syndicating, financing, mortgaging or hypothecatingany of the Landlord’s interest in the Project, and costs incurred in connectionwith any disputes between Landlord and its employees, between Landlord andProject management, or between Landlord and other tenants or occupants, andLandlord’s general corporate overhead and general and administrative expenses;

#####  

##### (h)                                 the wages andbenefits of any employee who does not devote substantially all of his or heremployed time to the Project unless such wages and benefits are prorated toreflect time spent on operating and managing the Project vis-a-vis time spenton matters unrelated to operating and managing the Project; provided, that inno event shall Operating Expenses for purposes of this Lease include wagesand/or benefits attributable to personnel above the level of Project manager;

#####  

##### (i)                                     interest, chargesand fees incurred on debt, payments on mortgages and/or amount paid as groundrental for the Project by the Landlord;

#####  

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

#####  

##### (k)                                  overhead andprofit increment paid to the Landlord or to subsidiaries or affiliates of theLandlord for services in the Project to the extent the same exceeds the costsof such services rendered by qualified, first-class unaffiliated third partieson a competitive basis;

#####  

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

#####  

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

#####  

##### (n)                                 all items andservices for which Tenant or any other tenant in the Project reimbursesLandlord or which Landlord provides selectively to one or more tenants (otherthan Tenant) without reimbursement;

 

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

#####  

##### (p)                                 any costsexpressly excluded from Operating Expenses elsewhere in this Lease;

#####  

##### (q)                                 any costsexpressly included as  Tax Expensespursuant to Section 4.2.5, below;

#####  

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

#####  

##### (s)                                  reserves fordepreciation, amortization and other expenses;

#####  

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

#####  

##### (u)                                 costs incurredto comply with laws relating to the removal of hazardous material (as definedunder applicable law) which was in existence in the Building or on the Projectprior to the Commencement date of the Original Office Lease, and was of such anature that a federal, State or municipal governmental authority, if it hadthen had knowledge of the presence of such hazardous material, in the state,and under the conditions that it then existed in the Building or on theProject, would have then required the removal of such hazardous material orother remedial or containment action with respect thereto; and costs incurredto remove, remedy, contain, or treat hazardous material, which hazardousmaterial is brought into the Building or onto the Project after the date hereofby Landlord or any other tenant of the Project and is of such a nature, at thattime, that a federal, State or municipal governmental authority, if it had thenhad knowledge of the presence of such hazardous material, in the state, andunder the conditions, that it then exists in the Building or on the Project,would have then required the removal of such hazardous material or other remedialor containment action with respect thereto.

#####  

### 4.2.5                        **Taxes**.

###  

#### 4.2.5.1               “**Tax Expenses**” shall mean all federal,state, county, or local governmental or municipal taxes, fees, charges or otherimpositions of every kind and nature, whether general, special, ordinary orextraordinary, (including, without limitation, real estate taxes, general andspecial assessments, transit taxes, leasehold taxes or taxes based upon thereceipt of rent, including gross receipts or sales taxes applicable to thereceipt of rent, unless required to be paid by Tenant, personal property taxesimposed upon the fixtures, machinery, equipment, apparatus, systems andequipment, appurtenances, furniture and other personal property used inconnection with the Project, or any portion thereof), which shall be paid oraccrued during any Expense Year (without regard to any different fiscal yearused by such governmental or municipal authority) because of or in connectionwith the ownership, leasing

 

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#### andoperation of the Project, or any portion thereof.  Notwithstanding anything to the contrary setforth in this Section 4.2.5, Tax Expenses shall specificallyexclude bonds and/or assessments which have been or, subsequent to the datehereof are, levied for the purpose of funding the costs of construction of allor any portion of the Project or capital improvements constructed therein orabout, or on-or off-site improvements with respect thereto, to the extent suchimprovements are the sole responsibility of Landlord under the TCCs of thisLease.

####  

#### 4.2.5.2               Tax Expensesshall include, without limitation:  (i) Anytax on the rent, right to rent or other income from the Project, or any portionthereof, or as against the business of leasing the Project, or any portionthereof; (ii) Any assessment, tax, fee, levy or charge in addition to, orin substitution, partially or totally, of any assessment, tax, fee, levy orcharge previously included within the definition of real property tax, it beingacknowledged by Tenant and Landlord that Proposition 13 was adopted by thevoters of the State of California in the June 1978 election (“**Proposition 13**”) and that assessments,taxes, fees, levies and charges may be imposed by governmental agencies forsuch services as fire protection, street, sidewalk and road maintenance, refuseremoval and for other governmental services formerly provided without charge toproperty owners or occupants, and, in further recognition of the decrease inthe level and quality of governmental services and amenities as a result ofProposition 13, Tax Expenses shall also include any governmental or privateassessments or the Project’s contribution towards a governmental or privatecost-sharing agreement for the purpose of augmenting or improving the qualityof services and amenities normally provided by governmental agencies; (iii) Anyassessment, tax, fee, levy, or charge allocable to or measured by the area ofthe Premises or the Rent payable hereunder, including, without limitation, anybusiness or gross income tax or excise tax with respect to the receipt of suchrent, or upon or with respect to the possession, leasing, operating,management, maintenance, alteration, repair, use or occupancy by Tenant of thePremises, or any portion thereof; and (iv) Any assessment, tax, fee, levyor charge, upon this transaction or any document to which Tenant is a party,creating or transferring an interest or an estate in the Premises.

####  

#### 4.2.5.3               Any costs andexpenses (including, without limitation, reasonable attorneys’ fees) incurredin attempting to protest, reduce or minimize Tax Expenses shall be included inTax Expenses in the Expense Year such expenses are paid.  Except as set forth in Section 4.2.5.4,below, refunds of Tax Expenses shall be credited against Tax Expenses andrefunded to Tenant regardless of when received, based on the Expense Year towhich the refund is applicable, provided that in no event shall the amount tobe refunded to Tenant for any such Expense Year exceed the total amount paid byTenant as Additional Rent under this Article 4 for such ExpenseYear.  If Tax Expenses for any periodduring the Lease Term or any extension thereof are increased after paymentthereof for any reason, including, without limitation, error or reassessment byapplicable governmental or municipal authorities, Tenant shall pay Landlordupon demand Tenant’s Share of any such increased Tax Expenses included byLandlord as Building Tax Expenses pursuant to the TCCs of this Lease.  Notwithstanding anything to the contrarycontained in this Section 4.2.8 (except as set forth in Section 4.2.8.1,above), there shall be excluded from Tax Expenses (i) all excess profitstaxes, franchise taxes, gift taxes, capital stock taxes, inheritance andsuccession taxes, estate taxes, federal and state income taxes, and other taxesto the extent applicable to Landlord’s general or net income from all sources, (ii) anyitems included as Operating Expenses, (iii) any items paid by Tenant underSection 4.5 of this

 

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#### Lease,and (iv) transfer taxes associated with the sale or other transfer byLandlord of its interest in the Project.

####  

### 4.2.6                        “**Tenant’s Share**” shall mean the percentageset forth in Section 6 of the Summary.

###  

## 4.3                                 **Allocation of Direct Expenses**.

##  

### 4.3.1                        **Method of Allocation**.  The parties acknowledge that the Building isa part of a multi-building project and that the costs and expenses incurred inconnection with the Project (i.e. the Direct Expenses) should be sharedbetween the tenants of the Building and the tenants of the other buildings inthe Project.  Accordingly, as set forthin Section 4.2 above, Direct Expenses (which consists of OperatingExpenses and Tax Expenses) are determined annually for the Project as a whole,and a portion of the Direct Expenses, which portion shall be determined byLandlord on an equitable basis, shall be allocated to the Building (as opposedto any other buildings in the Project) and such portion shall be the DirectExpenses for purposes of this Lease. Such portion of Direct Expenses allocated to the Building shall includeall Direct Expenses attributable solely to the Building and an equitableportion of the Direct Expenses attributable to the Project as a whole.

###  

## 4.4                                 **Calculation and Payment of Additional Rent**.  Tenant shall pay to Landlord, in the mannerset forth in Section 4.4.1, below, and as Additional Rent, Tenant’sShare of Direct Expenses for each Expense Year.

##  

### 4.4.1                        **Statement of Actual Building Direct Expenses and Payment by Tenant**.** **Landlordshall give to Tenant following the end of each Expense Year, a statement (the “**Statement**”) which shall state the BuildingDirect Expenses incurred or accrued for such preceding Expense Year, and whichshall indicate the amount of Tenant’s Share of Direct Expenses.  Landlord shall use commercially reasonableefforts to deliver such Statement to Tenant on or before May 1 followingthe end of the Expense Year to which such Statement relates.  Upon receipt of the Statement for eachExpense Year commencing or ending during the Lease Term, Tenant shall pay,within thirty (30) days after receipt of the Statement, the full amount ofTenant’s Share of Direct Expenses for such Expense Year, less the amounts, ifany, paid during such Expense Year as “Estimated Direct Expenses,” as that termis defined in Section 4.4.2, below, and if Tenant paid more asEstimated Direct Expenses than the actual Tenant’s Share of Direct Expenses (an“**Excess**”), Tenant shall receive acredit in the amount of such Excess against Rent next due under thisLease.  The failure of Landlord to timelyfurnish the Statement for any Expense Year shall not prejudice Landlord orTenant from enforcing its rights under this Article 4.  Even though the Lease Term has expired andTenant has vacated the Premises, when the final determination is made of Tenant’sShare of Direct Expenses for the Expense Year in which this Lease terminates,if Tenant’s Share of Direct Expenses is greater than the amount of EstimatedDirect Expenses previously paid by Tenant to Landlord, Tenant shall, withinthirty (30) days after receipt of the Statement, pay to Landlord such amount,and if Tenant paid more as Estimated Direct Expenses than the actual Tenant’sShare of Direct Expenses (again, an Excess), Landlord shall, within thirty (30)days, deliver a check payable to Tenant in the amount of such Excess.  The provisions of this Section 4.4.1shall survive the expiration or earlier termination of the Lease Term.  Notwithstanding the immediately precedingsentence,

 

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### Tenantshall not be responsible for Tenant’s Share of any Building Direct Expensesattributable to any Expense Year which are first billed to Tenant more than two(2) calendar years after the Lease Expiration Date, provided that in anyevent Tenant shall be responsible for Tenant’s Share of Direct Expenses leviedby any governmental authority or by any public utility companies at any timefollowing the Lease Expiration Date which are attributable to any Expense Year.

###  

### 4.4.2                        **Statement of Estimated Building Direct Expenses**.** **Inaddition, Landlord shall give Tenant a yearly expense estimate statement (the “**Estimate Statement**”) which shall set forthin general major categories Landlord’s reasonable estimate (the “**Estimate**”) of what the total amount ofDirect Expenses for the then-current Expense Year shall be and the estimatedTenant’s Share of Direct Expenses (the “**EstimatedDirect Expenses**”).  Landlordshall use commercially reasonable efforts to deliver such Estimate Statement toTenant on or before April 1 following the end of the Expense Year to whichsuch Estimate Statement relates.  Thefailure of Landlord to timely furnish the Estimate Statement for any ExpenseYear shall not preclude Landlord from enforcing its rights to collect anyEstimated Direct Expenses under this Article 4, nor shall Landlordbe prohibited from revising any Estimate Statement or Estimated Direct Expensestheretofore delivered to the extent necessary. Thereafter, Tenant shall pay, within thirty (30) days after receipt ofthe Estimate Statement, a fraction of the Estimated Direct Expenses for thethen-current Expense Year (reduced by any amounts paid pursuant to the secondto last sentence of this Section 4.4.2).  Such fraction shall have as its numerator thenumber of months which have elapsed in such current Expense Year, including themonth of such payment, and twelve (12) as its denominator.  Until a new Estimate Statement is furnished(which Landlord shall have the right to deliver to Tenant at any time), Tenantshall pay monthly, with the monthly Base Rent installments, an amount equal toone-twelfth (1/12) of the total Estimated Direct Expenses set forth in theprevious Estimate Statement delivered by Landlord to Tenant.  Throughout the Lease Term Landlord shallmaintain books and records with respect to Building Direct Expenses inaccordance with generally accepted real estate accounting and managementpractices, consistently applied.

###  

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

##  

### 4.5.1                        Tenant shall beliable for and shall pay ten (10) days before delinquency, taxes leviedagainst Tenant’s equipment, furniture, fixtures and any other personal propertylocated in or about the Premises.  If anysuch taxes on Tenant’s equipment, furniture, fixtures and any other personalproperty are levied against Landlord or Landlord’s property or if the assessedvalue of Landlord’s property is increased by the inclusion therein of a valueplaced upon such equipment, furniture, fixtures or any other personal propertyand if Landlord pays the taxes based upon such increased assessment, whichLandlord shall have the right to do regardless of the validity thereof but onlyunder proper protest if requested by Tenant, Tenant shall upon demand repay toLandlord the taxes so levied against Landlord or the proportion of such taxesresulting from such increase in the assessment, as the case may be.

###  

### 4.5.2                        If the tenantimprovements in the Premises, whether installed and/or paid for by Landlord orTenant and whether or not affixed to the real property so as to become a partthereof, are assessed for real property tax purposes at a valuation higher thanthe valuation at which tenant improvements conforming to Landlord’s “buildingstandard” in other space in the Building are assessed, then the Tax Expenseslevied against Landlord or the property by reason

 

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### ofsuch excess assessed valuation shall be deemed to be taxes levied against personalproperty of Tenant and shall be governed by the provisions of Section 4.5.1,above.

###  

### 4.5.3                        Notwithstandingany contrary provision herein, Tenant shall pay prior to delinquency any (i) renttax or sales tax, service tax, transfer tax or value added tax, or any otherapplicable tax on the rent or services herein or otherwise respecting thisLease, (ii) taxes assessed upon or with respect to the possession,leasing, operation, management, maintenance, alteration, repair, use oroccupancy by Tenant of the Premises or any portion of the Project, includingthe Project parking facility; or (iii) taxes assessed upon thistransaction or any document to which Tenant is a party creating or transferringan interest or an estate in the Premises.

###  

### 4.5.4                        Tenant shall beliable for and shall pay directly to Landlord within thirty (30) days of beinginvoiced therefor, the actual cost, if any, incurred by Landlord’s forcarrying, pursuant to the terms and conditions of Section 10.2,below, “Pollution Legal Liability Environmental Insurance.”

###  

## 4.6                                 **Landlord’s Books and Records**.  Within two (2) years after receipt of aStatement by Tenant, if Tenant disputes the amount of Additional Rent set forthin the Statement, a determination as to the proper amount shall be made, atTenant’s expense, by an independent certified public accountant (the “**Accountant**”) selected by Landlord andsubject to Tenant’s reasonable approval, by inspecting Landlord’s records withrespect to the Statement at Landlord’s offices, provided that Tenant is notthen in default under this Lease (beyond any applicable notice and cureperiods) and Tenant has paid all amounts required to be paid under theapplicable Estimate Statement and Statement, as the case may be.  In connection with such inspection, the Accountantmust agree in advance to follow Landlord’s reasonable rules and proceduresregarding inspections of Landlord’s records, and shall execute a commerciallyreasonable confidentiality agreement regarding such inspection.  If such determination by the Accountantproves that Direct Expenses were overstated by more than five percent (5%),then the cost of the Accountant and the cost of such determination shall bepaid for by Landlord.  Tenant’s failureto dispute the amount of Additional Rent set forth in any Statement within two (2) yearsof Tenant’s receipt of such Statement shall be deemed to be Tenant’s approvalof such Statement and Tenant, thereafter, waives the right or ability todispute the amounts set forth in such Statement.  Tenant hereby acknowledges that Tenant’s soleright to inspect Landlord’s books and records and to contest the amount ofDirect Expenses payable by Tenant shall be as set forth in this Section 4.6,and Tenant hereby waives any and all other rights pursuant to Applicable Law toinspect such books and records and/or to contest the amount of Direct Expensespayable by Tenant.  

##  

# **ARTICLE 5**

#  

# **USE OF PREMISES**

#  

## 5.1                                 **Permitted Use**. Tenant shall use the Premises solely for the Permitted Use set forth in Section 7of the Summary and Tenant shall not use or permit the Premises or the Projectto be used for any other purpose or purposes whatsoever without the priorwritten consent of Landlord, which may be withheld in Landlord’s reasonablediscretion.

 

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## 5.2                                 **Prohibited Uses**.  Theuses prohibited under this Lease shall include, without limitation, use of thePremises or a portion thereof for (i) offices of any agency or bureau ofthe United States or any state or political subdivision thereof; (ii) officesor agencies of any foreign governmental or political subdivision thereof; (iii) medical/operationaloffices (as opposed to general offices) of any health care professionals; (iv) schoolsor other training facilities which are not ancillary to corporate, executive orprofessional office use; (v) retail or restaurant uses; or (vi) communicationsfirms such as radio and/or television stations. Tenant further covenants and agrees that Tenant shall not use, or sufferor permit any person or persons to use, the Premises or any part thereof forany use or purpose contrary to the provisions of the Rules and Regulationsset forth in **Exhibit D**,attached hereto, or in violation of the laws of the United States of America,the State of California, or the ordinances, regulations or requirements of thelocal municipal or county governing body or other lawful authorities havingjurisdiction over the Project) including, without limitation, any such laws,ordinances, regulations or requirements relating to hazardous materials orsubstances, as those terms are defined by applicable laws now or hereafter ineffect; provided, however, Landlord shall not enforce, change or modify the Rules andRegulations in a discriminatory manner and Landlord agrees that the Rules andRegulations shall not be unreasonably modified or enforced in a manner whichwill unreasonably interfere with the normal and customary conduct of Tenant’sbusiness.  Tenant shall not do or permitanything to be done in or about the Premises which will in any way damage thereputation of the Project or obstruct or interfere with the rights of othertenants or occupants of the Building, or injure or annoy them or use or allowthe Premises to be used for any improper, unlawful or objectionable purpose, norshall Tenant cause, maintain or permit any nuisance in, on or about thePremises.

##  

## 5.3                                 **CC&Rs**.  Tenantshall comply with all recorded covenants, conditions, and restrictionscurrently affecting the Project. Additionally, Tenant acknowledges that the Project may be subject to anyfuture covenants, conditions, and restrictions (the “**CC&Rs**”) which Landlord, in Landlord’s discretion, deemsreasonably necessary or desirable (provided, however, such amendments and/ormodifications do not prohibit the Permitted Use in the Project and do notmaterially adversely interfere with Tenant’s use and enjoyment of thePremises), and Tenant agrees that this Lease shall be subject and subordinateto such CC&Rs.  Landlord shall havethe right to require Tenant to execute and acknowledge, within fifteen (15)business days of a request by Landlord, a “Recognition of Covenants,Conditions, and Restriction,” in a form substantially similar to that attachedhereto as **Exhibit F**,agreeing to and acknowledging the CC&Rs.

##  

# **ARTICLE 6**

#  

# **SERVICES AND UTILITIES;TENANT’S MAINTENANCE AND REPAIR OBLIGATIONS**

#  

## 6.1                                 **Providing Services and Utilities**.  Tenant hereby acknowledges that Landlord haspreviously provided, and shall maintain pursuant to the TCCs of Article 7of this Lease, the currently existing facilities for the provision of utilitiesto the exterior areas of the Project and to the point of entry in the Building(i.e., to the main utility distribution systems located therein), and Tenantshall provide and maintain the facilities for the distribution of suchutilities from such entry point to the interior of the Premises.  Landlord shall not be responsible for, andTenant

 

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## shallbe solely responsible for, paying all third party utility service charges forall utilities consumed within the Building on and after the Lease CommencementDate, and within the Project from and after the 10445 Premises Effective Date,as are necessary for Tenant’s use of the Premises, including, withoutlimitation, if applicable, electricity, potable water, natural gas, sewagedisposal, and solid waste disposal.  Inaddition Tenant shall be solely responsible for providing any security andjanitorial service required by Tenant. Landlord shall reasonably cooperate with Tenant, in connection withTenant’s application for and renewal of any permits or agreements with utilitycompanies in connection with the providing of utility services to the Buildingon and after the Lease Commencement Date, and within the Project from and afterthe 10445 Premises Effective Date.  Inconnection with the foregoing, Tenant shall directly pay one hundred percent(100%) of the third-party charges of all such utilities and services (e.g.,electricity, gas, sewer and water utilities) attributable to its use of theBuilding on and after the Lease Commencement Date, and within the Project fromand after the 10445 Premises Effective Date, which payments shall be made on orprior to the date on which the same are due to the applicable utility andservice providers.

##  

## 6.2                                 **Tenant Maintained Building Systems; HVAC**.  Except with regard to the Building Structureand exterior portions of the Project which shall be maintained by Landlordpursuant to the TCCs of Section 7.1, below, Tenant shall maintain,repair and replace all Premises improvements. The improvements to be so maintained, repaired, improved and/or replacedby Tenant include, without limitation, the interior portion of the Premises, (i) theinterior utility systems (specifically including, without limitation, allplumbing and sewer systems and any “Alterations” (as that term is defined in Section 8.1,below) thereof), (ii) the roof membrane and mechanical, electrical, lifesafety, plumbing, fire-sprinkler systems serving the Building, (iii) anyimprovements or equipment installed by Tenant, specifically including anyTenant improvements constructed pursuant to the Tenant Work Letter or any “Alterations”constructed pursuant to the TCCs of Article 8, (iv) the main heating,ventilating, air conditioning (“**HVAC**”),andthe electrical, plumbing and lifesafety infrastructure distribution systemslocated within the Building, (v) the “Central Plant Area,” as that term isset forth in Section 29.35, and (vi) any other element of theProject not expressly the responsibility of Landlord pursuant to the TCCs of Section 7.1(individually, a “**Building System**”and collectively, the “**Building Systems**”).  Tenant shall perform its maintenance andrepair obligations set forth in this Section 6.2 (“**Tenant’s Maintenance Obligations**”), atTenant’s sole, direct cost.

##  

## 6.3                                 **Tenant Maintained Security**.  Tenant hereby acknowledges that Landlordshall have no obligation to provide guard service or other security measuresfor the benefit of the Premises, the Building or the Project.  Any security measures desired by Tenant forthe benefit of the Premises, the Building or the Project shall be provided byTenant, at Tenant’s sole cost and expense. Tenant hereby assumes all responsibility for the protection of Tenantand its agents, employees, contractors, invitees and guests, and the propertythereof, from acts of third parties, including keeping doors locked and othermeans of entry to the Premises closed.

##  

## 6.4                                 **Tenant Maintenance Standards**.  All Building Systems, including HVAC, shallbe maintained, repaired and replaced by Tenant (i) in a commerciallyreasonable first-class condition, (ii) in accordance with any applicablemanufacturer specifications relating to any particular component of suchBuilding Systems, (iii) in accordance with Applicable Laws, and (iv) inaccordance with any requirements of the cGMP Standard.

 

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### 6.4.1                        **Maintenance Meetings**.  At the written request of Landlord (a “**MM Request**”), Tenant shall arrange to meetand confer with Landlord (at a mutually reasonable and convenient time andlocation), as to the status of the maintenance, repair, replacement and otherwork required to be performed by each of them under this Lease (each, a “**Maintenance Meeting**”); provided, however,in no event shall Tenant be required to participate in more than one suchMaintenance Meeting in any calendar quarter throughout the Lease Term, unlesssuch a Maintenance Meeting is required in connection with an emergencysituation or event.

###  

### 6.4.2                        **Service Contracts; Books and Records**.  To the extent Tenant contracts with thirdparties to perform its maintenance, repair and replacement obligationshereunder, or any portion thereof (each, a “**ServiceContract**”), Tenant shall deliver full and complete copies of allsuch Service Contracts entered into by Tenant for the Building Systems toLandlord within thirty (30) days after the effective date of such ServiceContract.  In addition, Tenant shallregularly, in accordance with commercially reasonable standards, generate andmaintain preventive maintenance records relating to the Building’s mechanicaland main electrical systems, including life safety, elevators and the centralplant (“**Books and Records**”).

###  

### 6.4.3                        **M&R Reports****. **In connection with, and inadvance of, any such Maintenance Meeting, Tenant shall promptly deliver anyBooks and Records, together with any maintenance, repair and replacementreports, documents and back-up materials related to any major repair orreplacement work performed or then scheduled to be performed by Tenant underthe Lease (collectively, the “**M&R Reports**”).

###  

### 6.4.4                        **Tenant’s Responsibilities Upon Termination of Management of the Project**.  Upon the expiration or earlier termination ofthis Lease for any reason, or upon Landlord’s recapture of Tenant’s maintenanceand repair obligations pursuant to the TCCs of Section 6.5, below, Tenantshall forthwith, without necessity of demand or notice, deliver the followingto Landlord, or Landlord’s appointed agent on the effective date of expirationor termination (except to the extent that any such item has already beendelivered to Landlord).

###  

### (i)                                     Copies of theBooks and Records for the most recent full calendar year and any subsequentpartial calendar year.

###  

### (ii)                                  Any third partywarranties, guaranties and operating manuals in Tenant’s possession relating tothe improvements in the Project and any Building Systems being maintained byTenant (copies thereof where reasonably acceptable).

###  

### (iii)                               All keysrelated to the telephone closets, janitorial closets, electrical closets,storage rooms, storage areas, SDG&E rooms or areas, rooftop access points,and other areas which would traditionally be characterized as Common Areas.

###  

### (iv)                              A certificationthat Tenant has maintained those portions of the Project, Building and Premisesrequired to be maintained by Tenant in accordance with the TCCs of this Article 6.

###  

### Theobligation of Tenant to deliver the foregoing shall survive the termination ofthe Lease.

 

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### 6.4.5                        **Assignment of Warranties**.  As of the Effective Date, Landlord assigns toTenant all of Landlord’s rights under any and all warranties and servicecontracts, to the extent existing, which relate to any Building System or othermaintenance obligations of Tenant under the terms of this Lease.

###  

## 6.5                                 **Landlord’s Assumption Of Maintenance**.  Landlord shall have the right, aftertwenty-four (24) hours notice to Tenant, to inspect the Building, BuildingSystems, the Central Plant Area, and/or Tenant’s Books and Records, in order toensure compliance with this Article 6.  In the event Tenant fails, in the reasonablejudgment of Landlord, to provide the maintenance services (or cause the same tobe provided) in accordance with the obligations set forth in this Article 6,Landlord shall deliver a written notice (a “**MaintenanceFailure Notice**”) to Tenant stating with particularity the nature ofsuch failure (such failure by Tenant to be known as a “**Tenant Maintenance Failure**”).  If such Tenant Maintenance Failure continuesat the end of the fifth (5th) business dayfollowing the date of delivery of such Maintenance Failure Notice, thenLandlord shall have the right to provide such maintenance and Tenant shall payLandlord the cost thereof promptly upon being billed for same (including apercentage of the cost thereof sufficient to reimburse Landlord for alloverhead, general conditions, fees and other costs or expenses arising fromLandlord’s involvement with such maintenance); provided, however, in the eventof an emergency, Landlord may take such remedial action immediately followingthe delivery of the Maintenance Failure Notice. In the event more than two (2) Tenant Maintenance Failures occurduring any calendar year during the Lease Term, Landlord may, but need not,assume such repair and maintenance obligations on behalf of Tenant for theremainder of the Lease Term, in which case (i) Tenant shall pay Landlordthe cost thereof promptly upon being billed for same, and (ii) Landlord’smanagement fee for the Project shall, notwithstanding the management fee setforth in Section 4.2.4(vi), be increased to five percent (5%).

##  

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

##  

## 6.7                                 **Rent Abatement**.  IfLandlord fails to perform the obligations required of Landlord under the TCCsof this Lease and such failure causes all or a portion of the Premises to beuntenantable and unusable by Tenant and such failure relates to thenonfunctioning of the heat, ventilation, and air conditioning system in thePremises, the electricity in the Premises, the

 

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## nonfunctioningof the elevator service to the Premises, or a failure to provide access to thePremises, Tenant shall give Landlord notice (the “**Initial Notice**”), specifying such failure to perform byLandlord (the “**Landlord Default**”).  If Landlord has not cured such LandlordDefault within five (5) business days after the receipt of the InitialNotice (the “**Eligibility Period**”),Tenant may deliver an additional notice to Landlord (the “**Additional Notice**”), specifying suchLandlord Default and Tenant’s intention to abate the payment of Rent under thisLease.  If Landlord does not cure suchLandlord Default within five (5) business days of receipt of theAdditional Notice, Tenant may, upon written notice to Landlord, immediatelyabate Rent payable under this Lease for that portion of the Premises rendereduntenantable and not used by Tenant, for the period beginning on the date five (5) businessdays after the Initial Notice to the earlier of the date Landlord cures suchLandlord Default or the date Tenant recommences the use of such portion of thePremises.  Such right to abate Rent shallbe Tenant’s sole and exclusive remedy at law or in equity for a LandlordDefault.  Except as provided in this Section 6.4,nothing contained herein shall be interpreted to mean that Tenant is excusedfrom paying Rent due hereunder.

##  

# **ARTICLE 7**

#  

# **BUILDING STRUCTURE &PROJECT EXTERIOR REPAIRS**

#  

## 7.1                                 **Landlord’s Maintenance Obligations**.** **Landlord shall repair,replace and maintain in a first-class condition and operating order thestructural portions of the Building, including, without limitation, thefoundation, floor slabs, Building skin and roof (not including the roofmembrane), curtain wall (including gaskets and seals), exterior glass andmullions, columns, beams, shafts and stairwells (collectively, “**Building Structure**”), and all portions ofthe Project existing outside of the Building including, without limitation, theparking facilities, sidewalks, gutters, and landscaping and hardscaping;provided, however, for the purposes of this Article 7, the BuildingStructure shall not apply to the extent of any Alteration or other improvementsthereto made by or on behalf of Tenant under the terms of this Lease or theOriginal Lease.  Notwithstanding anythingin this Lease to the contrary, Tenant shall be required to repair the BuildingStructure to the extent caused due to Tenant’s use of the Premises for otherthan normal and customary implementation of the Permitted Use, unless and tothe extent such damage is covered by insurance carried or required to becarried by Landlord pursuant to Article 10 and to which the waiverof subrogation is applicable (such obligation to the extent applicable toTenant as qualified and conditioned will hereinafter be defined as the “**BS Exception**”).  While Landlord shall perform all of such workallocated to Landlord under this Section 7.1 (collectively, the “**LL Maintenance Obligations**”), thereasonable, actual costs related to Landlord’s performance of reasonablyrequired maintenance included with such LL Maintenance Obligations shall beincluded in Operating Expenses (except to the extent such costs are incurredfor Non-Reimbursable Capital Improvements). Any entry of the Premises by Landlord in connection with the foregoingshall be done consistent with the terms of Article 27 of thisLease.  Tenant acknowledges that, Tenantshall, at Tenant’s own expense, pursuant to the TCCs of this Lease, including,without limitation Article 6 and Article 8 hereof,remain responsible for the maintenance, repair and replacement of all of theremaining portions of the Building (i.e., the Building Structure).Except asspecifically set forth in Section 7.2 of this Lease, below, Tenanthereby waives any and all rights under and benefits of subsection 1 of Section

 

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## 1932and Sections 1941 and 1942 of the California Civil Code or under any similarlaw, statute, or ordinance now or hereafter in effect.

##  

## 7.2                                 **Tenant’s Right to Make Repairs**.  Notwithstanding the provisions of Section 7.1,above, if Tenant provides notice to Landlord of an event or circumstance whichrequires the action of Landlord with respect to repair and/or maintenance asset forth in Section 7.1, above and Landlord fails to provide suchaction within (30) days after receipt of such notice, then Tenant may proceedto take the required action upon delivery of an additional ten (10) daysnotice to Landlord specifying that Tenant is taking such required action, andif such action was required under the TCCs of this Lease to be taken byLandlord, then Tenant shall be entitled to prompt reimbursement by Landlord ofTenant’s reasonable costs and expenses in taking such action; provided,however, notwithstanding such thirty (30) day period, Landlord shall usecommercially reasonable efforts to expedite such repairs to ensure completionas soon as reasonably practicable.  Inthe event Tenant takes such action, Tenant shall use only those contractorsused by Landlord in the Building for similar work unless such contractors areunwilling or unable to perform such work, in which event Tenant may utilize theservices of any other qualified contractor which normally and regularlyperforms similar work in the Comparable Buildings.  If Landlord delivers to Tenant within thirty(30) days after receipt of Tenant’s invoice, a written objection to the paymentof such invoice, setting forth with reasonable particularity Landlord’s reasonsfor its claim that such action did not have to be taken by Landlord pursuant tothe TCCs of this Lease or that the charges are excessive (in which caseLandlord shall pay the amount it contends would not have been excessive), then,as Tenant’s sole remedy, Tenant may proceed to institute legal proceedingsagainst Landlord to collect the amount set forth in the subject invoice;provided that under no circumstances shall Tenant be allowed to (i) deductsuch disputed amount from Rent, or (ii) terminate this Lease.  If Tenant receives a non-appealable finaljudgment against Landlord in connection with such legal proceedings, Tenant maydeduct the amount of the judgment, not to exceed the amount of the unpaidportion of the relevant invoice, from the Base Rent next due and owing underthis Lease; provided, however, Tenant may not deduct the amount of the judgmentagainst more than fifty percent (50%) of Base Rent next due and owing (untilsuch time as the entire amount of such judgment is deducted) to the extentfollowing a foreclosure or a deed-in-lieu of foreclosure.

##  

# **ARTICLE 8**

#  

# **ADDITIONS AND ALTERATIONS**

#  

## 8.1                                 **Landlord’s Consent to Alterations**. ** **Tenant may not make anyimprovements, alterations, additions, repairs or changes to the Premises or anymechanical, plumbing or HVAC facilities or systems pertaining to the Premises(collectively, the “**Alterations**”)without first procuring the prior written consent of Landlord to suchAlterations, which consent shall be requested by Tenant not less than fifteen(15) business days prior to the commencement thereof, and which consent shallnot be unreasonably withheld by Landlord, provided it shall be deemedreasonable for Landlord to withhold its consent to any Alteration whichadversely affects the structural portions or the systems or equipment of theBuilding or is visible from the exterior of the Building.  Notwithstanding the foregoing, Tenant shallbe permitted to make Alterations following fifteen (15) days notice toLandlord, but without Landlord’s prior consent, to the extent that suchAlterations do not (i) involve the expenditure of more than $100,000.00 inthe

 

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## aggregatein any Lease Year; (ii) adversely affect the systems and equipment of theBuilding or the Building Structure, or (iii) adversely affect the exteriorappearance of the Building (the “**CosmeticAlterations**”).  Theconstruction of the initial improvements to the Premises shall be governed bythe terms of the Tenant Work Letter and not the terms of this Article 8.

##  

## 8.2                                 **Manner of Construction**. ** **Landlord may impose, asa condition of its consent to any and all Alterations or repairs of thePremises or about the Premises, such requirements as Landlord in its reasonablediscretion may deem desirable; provided, however, such requirement shall at aminimum include, but not limited to, the following:  (i) the requirement that Tenant utilizefor such purposes only contractors reasonably approved by Landlord, (ii) therequirement that upon Landlord’s request made at the time such consent isgranted, Tenant shall, at Tenant’s expense, remove such Alterations upon theexpiration or any early termination of the Lease Term and return the affectedportion of the Premises to a building standard general laboratory improvedcondition consistent with the cGMP Standard and otherwise as reasonablydetermined by Landlord; (iii) the requirement that a copy of Tenant’scontract(s) with its contractors be delivered to Landlord prior to thecommencement of any such construction (which contracts shall state that allchange orders must be approved, in writing, by Landlord prior toimplementation); (iv) Landlord’s review and approval of the final budget(contractor’s cost proposal) for such Alterations or repairs; and (v) therequirement that Tenant shall meet with Landlord, prior to the commencement ofany construction, to discuss Landlord’s design parameters and code complianceissues.  Tenant shall construct suchAlterations and perform such repairs in a good and workmanlike manner, inconformance with any and all applicable federal, state, county or municipallaws, rules and regulations and pursuant to a valid building permit,issued by the City of San Diego, all in conformance with Landlord’sconstruction rules and regulations. In the event Tenant performs any Alterations in the Premises whichrequire or give rise to governmentally required changes to the “Base Building,”as that term is defined below, then Landlord shall, at Tenant’s expense, makesuch changes to the Base Building.  The “**Base Building**” shall consist of theBuilding Structure.  In performing thework of any such Alterations, Tenant shall have the work performed in suchmanner so as not to obstruct access to the Project or any portion thereof, byany other tenant of the Project, and so as not to obstruct the business ofLandlord or other tenants in the Project.  Tenant shall not use(and upon notice from Landlord shall cease using) contractors, services,workmen, labor, materials or equipment that, in Landlord’s reasonable judgment,would disturb labor harmony with the workforce or trades engaged in performingother work, labor or services in or about the Building or the CommonAreas.  In addition to Tenant’sobligations under Article 9 of this Lease, upon completion of anyAlterations, Tenant agrees to cause a Notice of Completion to be recorded in theoffice of the Recorder of the County of San Diego in accordance with Section 3093of the Civil Code of the State of California or any successor statute, andTenant shall deliver to the Project construction manager a reproducible copy ofthe “as built” drawings of the Alterations, to the extent applicable, as wellas all permits, approvals and other documents issued by any governmental agencyin connection with the Alterations.

##  

## 8.3                                 **Payment for Improvements**.** **Tenant shall signLandlord’s standard contractor’s rules and regulations to the extent thesame are commercially reasonable.  Exceptwith regard to Cosmetic Alterations for which there shall be no such charge,whether or not Tenant orders any work directly from Landlord, Tenant shall payto Landlord an amount equal to one percent (1%)

 

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## ofthe cost of such work to compensate Landlord for all overhead, generalconditions, fees and other costs and expenses arising from Landlord’sinvolvement with such work.

##  

## 8.4                                 **Construction Insurance**.** **In addition to therequirements of Article 10 of this Lease, in the event that Tenantmakes any Alterations, prior to the commencement of such Alterations, Tenantshall provide Landlord with evidence that Tenant carries “Builder’s All Risk”insurance in an amount reasonably approved by Landlord covering theconstruction of such Alterations, and such other insurance as Landlord mayreasonably require, it being understood and agreed that all of such Alterationsshall be insured by Tenant pursuant to Article 10 of this Leaseimmediately upon completion thereof.  Inaddition, for any Alterations with an aggregate cost equal to or greater than$100,000.00 in any Lease Year, Tenant shall obtain a lien and completion bondor some alternate form of security reasonably satisfactory to Landlord in anamount sufficient to ensure the lien-free completion of such Alterations andnaming Landlord as a co-obligee (“**AlterationSecurity**”); provided, however, if Tenant meets or exceeds one or bothof the financial thresholds set forth in Sections 21.2.2.2(ii) and (iii) ofthis Lease, then Tenant shall not be required to obtain such AlterationSecurity.

##  

## 8.5                                 **Landlord’s Property**.  Landlord and Tenant hereby acknowledges andagree that (i) all Alterations, improvements, fixtures, affixed equipmentand/or appurtenances which may be installed or placed in or about the Premises,from time to time, shall be at the sole cost of Tenant and shall be and becomethe property of Landlord, except as more particularly set forth below, and (ii) theTenant Improvements to be constructed in the Premises pursuant to the TCCs ofthe Tenant Work Letter shall, upon completion of the same, be and become a partof the Premises and the property of Landlord. Notwithstanding the foregoing, and provided that (A) the same arenot Tenant Improvements constructed pursuant to the terms of the Tenant WorkLetter, and (B) Landlord has not previously identified the same as “must-remain”items pursuant to the procedure set forth below, Tenant may remove any otherAlterations, improvements, fixtures and/or equipment which Tenant cansubstantiate to Landlord have not been paid for (in whole or in part) with anyimprovement allowance funds provided to Tenant by Landlord, provided Tenant repairsany damage to the Premises and Building caused by such removal and returns theaffected portion of the Premises to a building standard general laboratoryimproved condition as reasonably determined by Landlord.  Furthermore, Landlord may, by written noticeto Tenant prior to the end of the Lease Term, or given following any earliertermination of this Lease, require Tenant, at Tenant’s expense, to (i) removeany Alterations or improvements in the Premises installed pursuant to this Article 8,and/or (ii) remove any “Above Building Standard Tenant Improvements,” asthat term is defined in Section 2.4 of the Tenant Work Letter,located within the Premises and replace the same with then existing “BuildingStandard Tenant Improvements,” as that term is defined in Section 2.3of the Tenant Work Letter, and to repair any damage to the Premises andBuilding caused by such removal and returns the affected portion of thePremises to a building standard tenant improved condition as reasonablydetermined by Landlord; provided, however, if in connection with its requestfor Landlord’s approval for particular Alterations, (1) Tenant requestsLandlord’s decision with regard to the removal of such Alterations, and (2) Landlordthereafter agrees in writing to waive the removal requirement when approvingsuch Alterations, then Tenant shall not be required to so remove suchAlterations; provided further, however, that Landlord may, in connection withLandlord’s approval for particular Alterations (or, in Landlord’s approval isnot required or sought, then within thirty (30) days of Landlord being notifiedof such Alterations), identify particular

 

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## Alterationsas those which must-remain in the Premises and become the property ofLandlord.  If Tenant fails to completesuch removal and/or to repair any damage caused by the removal of anyAlterations or improvements in the Premises, and returns the affected portionof the Premises to a building standard tenant improved condition as determinedby Landlord, then at Landlord’s option, either (X) Tenant shall be deemedto be holding over in the Premises and Rent shall continue to accrue inaccordance with the terms of Article 16, below, until such workshall be completed, or (Y) Landlord may do so and may charge the costthereof to Tenant.  Tenant herebyprotects, defends, indemnifies and holds Landlord harmless from any liability,cost, obligation, expense or claim of lien in any manner relating to theviolation of the foregoing provisions, which obligations of Tenant shallsurvive the expiration or earlier termination of this Lease.

##  

# **ARTICLE 9**

#  

# **COVENANT AGAINST LIENS**

#  

Tenant shall keep the Project and Premisesfree from any liens or encumbrances arising out of the work performed, materialsfurnished or obligations incurred by or on behalf of Tenant, and shall protect,defend, indemnify and hold Landlord harmless from and against any claims,liabilities, judgments or costs (including, without limitation, reasonableattorneys’ fees and costs) arising out of same or in connection therewith.  Tenant shall give Landlord notice at leasttwenty (20) days prior to the commencement of any such work on the Premises (orsuch additional time as may be necessary under applicable laws) to afford Landlordthe opportunity of posting and recording appropriate notices ofnon-responsibility.  Tenant shall removeany such lien or encumbrance by bond or otherwise within ten (10) daysafter notice by Landlord, and if Tenant shall fail to do so, Landlord may paythe amount necessary to remove such lien or encumbrance, without beingresponsible for investigating the validity thereof.  The amount so paid shall be deemed AdditionalRent under this Lease payable upon demand, without limitation as to other remediesavailable to Landlord under this Lease. Nothing contained in this Lease shall authorize Tenant to do any actwhich shall subject Landlord’s title to the Building or Premises to any liensor encumbrances whether claimed by operation of law or express or impliedcontract.  Any claim to a lien orencumbrance upon the Building or Premises arising in connection with any suchwork or respecting the Premises not performed by or at the request of Landlordshall be null and void, or at Landlord’s option shall attach only againstTenant’s interest in the Premises and shall in all respects be subordinate toLandlord’s title to the Project, Building and Premises.  Notwithstanding anything in this Article 9to the contrary, Landlord hereby acknowledges and agrees that Tenant may granta security interest to Tenant’s construction lender pursuant to the expressterms and conditions of Section 5.5 of the Tenant Work Letter.

 

# **ARTICLE 10**

#  

# **INSURANCE**

#  

## 10.1                           **Indemnification and Waiver**.  Tenant hereby releases Landlord from all riskof damage to property or injury to persons in, upon or about the Premises fromany cause whatsoever (other than Landlord’s and Landlord Parties’ negligence orwillful misconduct) and agrees that Landlord, its partners, subpartners andtheir respective officers, agents, servants, employees, and independentcontractors (collectively, “**Landlord Parties**”)shall not be liable to

 

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## Tenantfor, and are hereby released from any responsibility to Tenant for, any damageeither to person or property or resulting from the loss of use thereof, whichdamage is sustained by Tenant or by other persons claiming through Tenant(other than damage arising due to Landlord’s and Landlord Parties’ negligenceor willful misconduct).  Tenant shallindemnify, defend, protect, and hold harmless the Landlord Parties from any andall loss, cost, damage, expense and liability (including without limitationcourt costs and reasonable attorneys’ fees) incurred in connection with or arisingfrom any cause in or on the Premises (other than Landlord’s and LandlordParties’ negligence or willful misconduct), any acts, omissions or negligenceof Tenant or of any person claiming by, through or under Tenant, or of thecontractors, agents, servants, employees, or licensees of Tenant (collectively,the “**Tenant Parties**”), in, on orabout the Project or any breach of the TCCs of this Lease, either prior to,during, or after the expiration of the Lease Term, provided that the terms ofthe foregoing indemnity shall not apply to the negligence or willful misconductof Landlord or any Landlord Party. Should Landlord be named as a defendant in any suit brought againstTenant in connection with or arising out of Tenant’s occupancy of the Premisesand subject to the indemnification provision hereinabove, Tenant shall pay toLandlord its costs and expenses incurred in such suit, including withoutlimitation, its actual professional fees such as appraisers’, accountants’ andattorneys’ fees.  Further, Tenant’sagreement to indemnify Landlord pursuant to this Section 10.1 isnot intended and shall not relieve any insurance carrier of its obligationsunder policies required to be carried by Tenant or Landlord pursuant to theprovisions of this Lease, to the extent such policies cover the matters subjectto Tenant’s indemnification obligations; nor shall they supersede anyinconsistent agreement of the parties set forth in any other provision of thisLease.  The provisions of this Section 10.1shall survive the expiration or sooner termination of this Lease with respectto any claims or liability arising in connection with any event occurring priorto such expiration or termination. Notwithstanding anything to the contrary contained in this Lease,nothing in this Lease shall impose any obligations on Tenant or Landlord to beresponsible or liable for, and each hereby releases the other from allliability for, consequential damages other than those consequential damagesincurred by Landlord in connection with a holdover of the Premises by Tenantafter the expiration or earlier termination of this Lease.

##  

## 10.2                           **Landlord’s Fire, Casualty and Liability Insurance**.** **Landlordshall carry commercial general liability insurance with respect to the Projectand Building during the Lease Term, shall further insure the Project andBuilding Structure during the Lease Term against loss or damage due to fire andother casualties covered within the classification of fire and extendedcoverage, vandalism coverage and malicious mischief, sprinkler leakage, waterdamage and special extended coverage, as well as flood damage and additionalhazards, and shall further carry rental interruption coverage for a period ofone year.  Such coverage shall be in suchamounts, from such companies, and on such other terms and conditions, asLandlord may from time to time reasonably determine; provided, however, suchcoverage shall be for the full replacement value of the Building Structure andthe Project in compliance with all then-existing Applicable Laws.  Additionally, at the option of Landlord, suchinsurance coverage may include the risks of (i) earthquakes, (ii) oneor more loss payee endorsements in favor of the holders of any mortgages ordeeds of trust encumbering the interest of Landlord in the Building or theground or underlying lessors of the Building, or any portion thereof, and (iii) ”PollutionLegal Liability Environmental Insurance,” as that term is set forth below;provided, however, that to the extent Tenant is not in default of this Lease(beyond any applicable notice and cure periods), Tenant shall have the option,upon thirty (30) days written notice to Landlord, to itself carry such

 

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## PollutionLegal Liability Environmental Insurance in lieu of Landlord carrying suchinsurance; provided further, however, to the extent Tenant elects to carry suchPollution Legal Liability Environment Insurance pursuant to the foregoingoption, Tenant shall comply with the express coverage requirements set forthhereinbelow and such insurance coverage shall otherwise comply with the TCCs ofSection 10.4, below. Notwithstanding the foregoing provisions of this Section 10.2,the coverage and amounts of insurance carried by Landlord in connection with theBuilding shall, at a minimum, be comparable to the coverage and amounts ofinsurance which are carried by reasonably prudent landlords of ComparableBuildings, and Worker’s Compensation and Employer’s Liability coverage asrequired by applicable law.  Tenantshall, at Tenant’s expense, comply with all commercially reasonable insurancecompany requirements pertaining to the use of the Premises.  If Tenant’s conduct or use of the Premisescauses any increase in the premium for such insurance policies then Tenantshall reimburse Landlord for any such increase. Tenant, at Tenant’s expense,shall comply with all rules, orders, regulations or requirements of theAmerican Insurance Association (formerly the National Board of FireUnderwriters) and with any similar body. For purposes of this Lease, the “**PollutionLegal Liability Environmental Insurance**” (aka an “Owner’s Policy” ofenvironmental insurance) shall mean insurance (1) from an insurancecarrier with a credit rating of no less than AAA, it being acknowledged andagreed by Landlord that, as of the date of this Lease, Kemper, AIG, Chubb,Zurich and the XL Insurance Company currently satisfy such credit rating, and (2) providing,at a minimum, the following:  (a) aninitial 5-year policy term (with successive 1-year terms renewable on a rollingannual basis, until such time as the policy term equals or exceeds the LeaseExpiration Date), (b) $2,000,000 coverage per incident or occurrence, (c) $2,000,000aggregate coverage, (d) a deductible or self-insured retention of no morethan $25,000, and (e) coverage for: (A) known and unknownpre-existing conditions; (B) unknown and later discovered conditions; (C) on-siteand off-site third-party claims for bodily injury or property damage; and (D) legaldefense expenses.  Furthermore, thepolicy of insurance must include an automatic extended reporting period thatprovides the Insured a period of no less than sixty (60) days following theeffective date of termination of coverage in which to provide written notice tothe insurance carrier of claims first made and reported within the automaticextended reporting period.  All otherterms, coverage, exclusions, or conditions of the policy shall be at Landlord’ssole and complete discretion.

##  

## 10.3                           **Tenant’s Insurance**.  Tenant shall maintain the following coveragesin the following amounts.

##  

### 10.3.1                  CommercialGeneral Liability Insurance covering the insured against claims of bodilyinjury, personal injury and property damage (including loss of use thereof)arising out of Tenant’s operations, and contractual liabilities (covering theperformance by Tenant of its indemnity agreements) including a Broad Form endorsementcovering the insuring provisions of this Lease and, to the extent consistentwith commercially standard policies of such insurance coverage, the performanceby Tenant of the indemnity agreements set forth in Section 10.1 ofthis Lease, for limits of liability not less than:

 
| Bodily Injury and         |   | $5,000,000 each occurrence  |
|---------------------------|--------|-----------------------------|
| Property Damage Liability |   | $5,000,000 annual aggregate |

 

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| Personal Injury Liability |   | $5,000,000 each occurrence      |
|---------------------------|--------|---------------------------------|
|                      |   | $5,000,000 annual aggregate     |
|                      |   | 0% Insured’s participation |

###  

### 10.3.2                  Physical DamageInsurance covering (i) all office furniture, business and trade fixtures,office equipment, free-standing cabinet work, movable partitions, merchandiseand all other items of Tenant’s property on the Premises installed by, for, orat the expense of Tenant, (ii) the Building Systems, the “Tenant Improvements,”as that term is defined in Section 2.1 of the Tenant Work Letter,and any other improvements which exist in the Premises as of the LeaseCommencement Date (excluding the Base Building) (the “**Original Improvements**”), and (iii) allother improvements, alterations and additions to the Premises made byTenant.  Such insurance shall be writtenon a “special cause of loss” physical loss or damage basis, for the fullreplacement cost value (subject to reasonable deductible amounts) new withoutdeduction for depreciation of the covered items and in amounts that meet anyco-insurance clauses of the policies of insurance and shall include coveragefor damage or other loss caused by fire or other peril including, but notlimited to, vandalism and malicious mischief, theft, water damage of any type(provided the following shall not require Tenant to carry flood insurance,which flood insurance may instead be carried by Landlord pursuant to Section 10.2,above), including sprinkler leakage, bursting or stoppage of pipes, andexplosion.

###  

### 10.3.3                  Worker’sCompensation and Employer’s Liability or other similar insurance pursuant toall applicable state and local statutes and regulations.

###  

## 10.4                           **Form of Policies**.** **The minimum limits ofpolicies of insurance required of Tenant under this Lease shall in no eventlimit the liability of Tenant under this Lease. Such insurance shall (i) name Landlord, and any other party theLandlord so specifies that has a material financial interest in the Project, asan additional insured, including Landlord’s managing agent, if any; (ii) specificallycover the liability assumed by Tenant under this Lease, including, but notlimited to, Tenant’s obligations under Section 10.1 of this Leaseto the extent consistent with commercially standard policies of such insurancecoverage; (iii) be issued by an insurance company having a rating of notless than A-X in Best’s Insurance Guide or which is otherwise acceptable toLandlord and licensed to do business in the State of California; (iv) beprimary insurance as to all claims thereunder and provide that any insurancecarried by Landlord is excess and is non-contributing with any insurancerequirement of Tenant; (v) be in form and content reasonably acceptable toLandlord; and (vi) provide that said insurance shall not be canceled orcoverage materially changed unless ten (10) days’ prior written noticeshall have been given to Landlord and any mortgagee of Landlord, the identityof whom has been provided to Tenant in writing. Tenant shall deliver said policy or policies or certificates thereof toLandlord on or before the Lease Commencement Date and at least thirty (30) daysbefore the expiration dates thereof.  Inthe event Tenant shall fail to procure such insurance, or to deliver suchpolicies or certificate, Landlord may, at its option, after written notice toTenant and Tenant’s failure to obtain such insurance within five (5) daysthereafter, procure such policies for the account of Tenant, and the costthereof shall be paid to Landlord within thirty (30) days after delivery toTenant of bills therefor.

 

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## 10.5                           **Subrogation**. Landlord and Tenant intend that their respective property loss risksshall be borne by reasonable insurance carriers to the extent above provided,and, notwithstanding any provisions to the contrary set forth in this Lease,Landlord and Tenant hereby agree to look solely to, and seek recovery onlyfrom, their respective insurance carriers in the event of a property loss tothe extent that such coverage is agreed to be provided hereunder.  The parties each hereby waive all rights andclaims against each other for such losses, and waive all rights of subrogationof their respective insurers, provided such waiver of subrogation shall notaffect the right to the insured to recover thereunder.  The parties agree that their respectiveinsurance policies are now, or shall be, endorsed such that the waiver ofsubrogation shall not affect the right of the insured to recover thereunder, solong as no material additional premium is charged therefor (unless the otherparty agrees to pay such additional premium).

##  

## 10.6                           **Additional Insurance Obligations**.** **Tenant shall carry andmaintain during the entire Lease Term, at Tenant’s sole cost and expense,increased amounts of the insurance required to be carried by Tenant pursuant tothis Article 10 and such other reasonable types of insurancecoverage and in such reasonable amounts covering the Premises and Tenant’soperations therein, as may be reasonably requested by Landlord, but in no eventin excess of the amounts and types of insurance then being required bylandlords of other Comparable Buildings.

##  

## 10.7                           **Risk Management Obligations**.  Landlord and Tenant shall promptly adviseeach other as to (i) any alleged accidents or casualty known by thereporting party which are substantially likely to result in the assertion of aclaim against the other party, and (ii) the occurrence of any substantialcasualty damage to the Project known to the reporting party.  Landlord and Tenant shall notify each otherpromptly of any threatened or pending condemnation, rezoning or othergovernmental orders, proceedings or lawsuits involving the Project.

##  

# **ARTICLE 11**

#  

# **DAMAGE AND DESTRUCTION**

#  

## 11.1                           **Repair of Damage to Premises by Landlord**.** **Ifthe Building Structure or any portions of the Project existing outside of theBuilding serving or providing access to the Premises shall be damaged by fireor other casualty, Landlord shall promptly and diligently, subject toreasonable delays for insurance adjustment or other matters beyond Landlord’sreasonable control (specifically including, without limitation, any requirementto obtain any license, clearance or other authorization of any kind required toenter into and restore the Premises issued by any governmental orquasi-governmental agency having jurisdiction over the use, storage, release orremoval of “Hazardous Materials,” as that term is set forth in Section 29.33of this Lease, below, in, on or about the Premises (collectively, the “**Hazardous Materials Clearances**”), whichHazardous Materials Clearances shall be obtained by Tenant), and subject to allother terms of this Article 11, restore the Building Structure andall such portions of the Project existing outside of the Building.  Such restoration shall be to substantiallythe same condition of the Building Structure and exterior Project componentsprior to the casualty, except for modifications required by zoning and buildingcodes and other laws or by the holder of a mortgage on the Building or Projector any other modifications to the exterior Project components deemed desirableby Landlord, which are consistent with the character of the

 

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## Project,provided that access to the Premises and any common restrooms serving thePremises shall not be materially impaired. Upon the occurrence of any damage to the Premises, Tenant shall, at itssole cost and expense, repair any injury or damage to the Building Systems,Tenant Improvements and the Original Improvements installed in the Premises andshall return such Building Systems, Tenant Improvements and OriginalImprovements to the condition existing immediately prior to such casualty(provided such Building Systems, Tenant Improvements and Original Improvementswere properly maintained pursuant to the TCCs of this Lease prior to suchcasualty), except for modifications required by “Applicable Laws,” as that termis set forth in Article 24 of this Lease.  Prior to the commencement of construction,Tenant shall submit to Landlord, for Landlord’s review and approval, all plans,specifications and working drawings relating thereto, and Tenant shall selectthe contractors, subject to Landlord’s reasonable approval, to perform suchimprovement work.  Landlord shall not beliable for any inconvenience or annoyance to Tenant or its visitors, or injuryto Tenant’s business resulting in any way from such damage or the repairthereof; provided however, that if such fire or other casualty shall havedamaged the Premises or Common Areas necessary to Tenant’s occupancy, and thePremises are not occupied by Tenant as a result thereof, then during the timeand to the extent the Premises are unfit for occupancy, the Rent shall beabated in proportion to the ratio that the amount of rentable square feet ofthe Premises which is unfit for occupancy for the purposes permitted under thisLease bears to the total rentable square feet of the Premises; providedfurther, however, that if any Hazardous Materials Clearances are required to beobtained by Tenant before such restoration can begin, such abatement of Rentshall continue for only so long as Tenant, in Landlord’s reasonable judgment,diligently pursues obtaining such required Hazardous Materials Clearances.  Tenant’s right to rent abatement pursuant tothe preceding sentence shall terminate as of the date which is reasonablydetermined by Landlord to be the date Tenant should have completed repairs tothe Premises assuming Tenant used reasonable due diligence in connectiontherewith.

##  

## 11.2                           **Landlord’s Option to Repair**.** **Notwithstanding theterms of Section 11.1 of this Lease, Landlord may elect not torebuild and/or restore the Building Structure and/or exterior Projectcomponents, and instead terminate this Lease, by notifying Tenant in writing ofsuch termination within sixty (60) days after the date of discovery of thedamage, such notice to include a termination date giving Tenant sixty (60) daysto vacate the Premises, but Landlord may so elect only if the BuildingStructure or exterior Project components shall be damaged by fire or othercasualty or cause, whether or not the Premises are affected, and one or more ofthe following conditions is present: (i) in Landlord’s reasonablejudgment, repairs cannot reasonably be completed within one hundred eighty(180) days after the date of discovery of the damage (when such repairs aremade without the payment of overtime or other premiums); (ii) the holderof any mortgage on the Building or Project or ground lessor with respect to theBuilding or Project shall require that the insurance proceeds or any portionthereof be used to retire the mortgage debt, or shall terminate the groundlease, as the case may be; (iii) the damage is not fully covered by theinsurance policies Landlord is required to carry pursuant to the TCCs of thisLease; (iv) Landlord cannot, pursuant to the applicable laws then ineffect, rebuild the Building Structure or exterior Project components so thatthey will be substantially the same structurally or architecturally; or (v) thedamage occurs during the last twelve (12) months of the Lease Term; provided,however, that if Landlord does not elect to terminate this Lease pursuant toLandlord’s termination right as provided above, and the repairs cannot, in thereasonable opinion of Landlord, be completed within one hundred eighty (180)days after being commenced, Tenant

 

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## mayelect, no earlier than sixty (60) days after the date of the damage and notlater than ninety (90) days after the date of such damage, to terminate thisLease by written notice to Landlord effective as of the date specified in thenotice, which date shall not be less than thirty (30) days nor more than sixty(60) days after the date such notice is given by Tenant.  Furthermore, if neither Landlord nor Tenanthas terminated this Lease, and the repairs are not actually completed withinsuch 180-day period, Tenant shall have the right to terminate this Lease duringthe first five (5) business days of each calendar month following the endof such period until such time as the repairs are complete, by notice toLandlord (the “**Damage Termination Notice**”),effective as of a date set forth in the Damage Termination Notice (the “**Damage Termination Date**”), which DamageTermination Date shall not be less than ten (10) business days followingthe end of each such month. Notwithstanding the foregoing, if Tenant delivers a Damage TerminationNotice to Landlord, then Landlord shall have the right to suspend theoccurrence of the Damage Termination Date for a period ending thirty (30) daysafter the Damage Termination Date set forth in the Damage Termination Notice bydelivering to Tenant, within five (5) business days of Landlord’s receiptof the Damage Termination Notice, a certificate of Landlord’s contractorresponsible for the repair of the damage certifying that it is such contractor’sgood faith judgment that the repairs shall be substantially completed withinthirty (30) days after the Damage Termination Date.  If repairs shall be substantially completedprior to the expiration of such thirty-day period, then the Damage TerminationNotice shall be of no force or effect, but if the repairs shall not besubstantially completed within such thirty-day period, then this Lease shallterminate upon the expiration of such thirty-day period.  At any time, from time to time, after thedate occurring sixty (60) days after the date of the damage, Tenant may requestthat Landlord inform Tenant of Landlord’s reasonable opinion of the date ofcompletion of the repairs and Landlord shall respond to such request withinfive (5) business days. Notwithstanding the provisions of this Section 11.2, Tenantshall have the right to terminate this Lease under this Section 11.2only if each of the following conditions is satisfied: (a) the damage tothe Project by fire or other casualty was not caused by the gross negligence orintentional act of Tenant or its partners or subpartners and their respectiveofficers, agents, servants, employees, and independent contractors; (b) asa result of the damage, Tenant cannot reasonably conduct business from thePremises; and, (c) as a result of the damage to the Project, Tenant doesnot occupy or use the Premises at all. In the event this Lease is terminated in accordance with the terms ofthis Section 11.2, Tenant shall assign to Landlord (or to any partydesignated by Landlord) all insurance proceeds payable to Tenant under Tenant’sinsurance required under Section 10.3.2 of this Lease; provided,however, that notwithstanding anything to the contrary set forth above, Tenantshall be entitled to retain a portion of such proceeds equal to thethen-remaining unamortized amount (based on a straight-line amortization over theinitial Lease Term) of the “Initial TI Disbursement” and the “Over-AllowanceAmount,” as those terms are set forth in Sections 2.2.2.1 and 4.2.1,respectively, of the Tenant Work Letter.

##  

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

 

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# **ARTICLE 12**

 

# **NONWAIVER**

 

No provision of this Lease shall be deemed waived byeither party hereto unless expressly waived in a writing signed thereby.  The waiver by either party hereto of anybreach of any term, covenant or condition herein contained shall not be deemedto be a waiver of any subsequent breach of same or any other term, covenant orcondition herein contained.  Thesubsequent acceptance of Rent hereunder by Landlord shall not be deemed to be awaiver of any preceding breach by Tenant of any term, covenant or condition ofthis Lease, other than the failure of Tenant to pay the particular Rent soaccepted, regardless of Landlord’s knowledge of such preceding breach at thetime of acceptance of such Rent.  Noacceptance of a lesser amount than the Rent herein stipulated shall be deemed awaiver of Landlord’s right to receive the full amount due, nor shall anyendorsement or statement on any check or payment or any letter accompanyingsuch check or payment be deemed an accord and satisfaction, and Landlord mayaccept such check or payment without prejudice to Landlord’s right to recoverthe full amount due.  No receipt ofmonies by Landlord from Tenant after the termination of this Lease shall in anyway alter the length of the Lease Term or of Tenant’s right of possessionhereunder, or after the giving of any notice shall reinstate, continue orextend the Lease Term or affect any notice given Tenant prior to the receipt ofsuch monies, it being agreed that after the service of notice or the commencementof a suit, or after final judgment for possession of the Premises, Landlord mayreceive and collect any Rent due, and the payment of said Rent shall not waiveor affect said notice, suit or judgment.

 

# **ARTICLE 13**

 

# **CONDEMNATION**

 

If the whole or any part of the Premises or theBuilding shall be taken by power of eminent domain or condemned by anycompetent authority for any public or quasi-public use or purpose, or if anyadjacent property or street shall be so taken or condemned, or reconfigured orvacated by such authority in such manner as to require the use, reconstructionor remodeling of any part of the Premises or Building, or if Landlord shallgrant a deed or other instrument in lieu of such taking by eminent domain orcondemnation, Landlord shall have the option to terminate this Lease effectiveas of the date possession is required to be surrendered to the authority.  If more than fifty percent (50%) of therentable square feet of the Premises is taken, or if access to the Premises issubstantially impaired, in each case for a period in excess of one hundredeighty (180) days, Tenant shall have the option to terminate this Leaseeffective as of the date possession is required to be surrendered to theauthority.  Tenant shall not because ofsuch taking assert any claim against Landlord or the authority for anycompensation because of such taking and Landlord shall be entitled to theentire award or payment in connection therewith, except that Tenant shall havethe right to file any separate claim available to Tenant for any taking of (i) Tenant’spersonal property, and (ii) improvements and fixtures belonging to Tenantand removable by Tenant upon expiration of the Lease Term pursuant to the TCCsof this Lease, and for moving expenses, so long as such claims do not diminishthe award available to Landlord, its ground lessor with respect to the Buildingor Project or its mortgagee, and such claim is payable separately toTenant.  All Rent shall be apportioned asof the date of such termination.  If any

 

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part of the Premises shall be taken, and this Leaseshall not be so terminated, the Rent shall be proportionately abated.  Tenant hereby waives any and all rights itmight otherwise have pursuant to Section 1265.130 of The California Codeof Civil Procedure.  Notwithstandinganything to the contrary contained in this Article 13, in the eventof a temporary taking of all or any portion of the Premises for a period of onehundred and eighty (180) days or less, then this Lease shall not terminate butthe Base Rent and the Additional Rent shall be abated for the period of suchtaking in proportion to the ratio that the amount of rentable square feet ofthe Premises taken bears to the total rentable square feet of thePremises.  Landlord shall be entitled toreceive the entire award made in connection with any such temporary taking.

 

# **ARTICLE 14**

 

# **ASSIGNMENTAND SUBLETTING**

 

## 14.1                           **Transfers**. Tenant shall not, without the prior written consent of Landlord as setforth more particularly in Section 14.2, below, assign, mortgage, pledge,hypothecate, encumber, or permit any lien to attach to, or otherwise transfer,this Lease or any interest hereunder, permit any assignment, or other transferof this Lease or any interest hereunder by operation of law, sublet thePremises or any part thereof, or enter into any license or concessionagreements or otherwise permit the occupancy or use of the Premises or any partthereof by any persons other than Tenant and its employees and contractors (allof the foregoing are hereinafter sometimes referred to collectively as “**Transfers**” and any person to whom any Transfer is made orsought to be made is hereinafter sometimes referred to as a “**Transferee**”).  IfTenant desires Landlord’s consent to any Transfer, Tenant shall notify Landlordin writing, which notice (the “**Transfer Notice**”)shall include (i) the proposed effective date of the Transfer, which shallnot be less than thirty (30) days nor more than one hundred eighty (180) daysafter the date of delivery of the Transfer Notice, (ii) a description ofthe portion of the Premises to be transferred (the “**SubjectSpace**”), (iii) all of the terms of the proposed Transfer andthe consideration therefor, including calculation of the “**Transfer Premium**”, as that term is definedin Section 14.3 below, in connection with such Transfer, the nameand address of the proposed Transferee, and a copy of all existing executedand/or proposed documentation pertaining to the proposed Transfer, includingall existing operative documents to be executed to evidence such Transfer orthe agreements incidental or related to such Transfer, (iv) currentfinancial statements of the proposed Transferee certified by an officer,partner or owner thereof, business credit and personal references and historyof the proposed Transferee and any other information required by Landlord whichwill enable Landlord to determine the financial responsibility, character, andreputation of the proposed Transferee, nature of such Transferee’s business andproposed use of the Subject Space and (v) an executed estoppel certificatefrom Tenant in the form attached hereto as **Exhibit E**.  Any Transfer made without Landlord’s priorwritten consent shall, at Landlord’s option, be null, void and of no effect,and shall, at Landlord’s option, constitute a default by Tenant under thisLease.  Whether or not Landlord consentsto any proposed Transfer, Tenant shall, within thirty (30) days after writtenrequest by Landlord, reimburse Landlord for all reasonable and actualout-of-pocket third-party costs and expenses incurred by Landlord in connectionwith its review of a proposed Transfer; provided that such costs and expensesshall not exceed One Thousand Five Hundred and No/100 Dollars ($1,500.00) for aTransfer in the ordinary course of business. Landlord and Tenant hereby agree that a proposed Transfer shall not beconsidered “in the ordinary course of business” if such Transfer involves thereview of

 

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## documentationby Landlord on more than two (2) occasions with regard to a singleproposed Transfer.

##  

## 14.2                           **Landlord’s Consent**.  Landlord shall not unreasonably withhold itsconsent to any proposed Transfer of the Subject Space to the Transferee on theterms specified in the Transfer Notice. Without limitation as to other reasonable grounds for withholdingconsent, the parties hereby agree that it shall be reasonable under this Leaseand under any applicable law for Landlord to withhold consent to any proposedTransfer where one or more of the following apply:

##  

### 14.2.1                  TheTransferee is of a character or reputation or engaged in a business which isnot consistent with the quality of the Building or the Project;

###  

### 14.2.2                  TheTransferee intends to use the Subject Space for purposes which are notpermitted under this Lease;

###  

### 14.2.3                  The Transferee is either agovernmental agency or instrumentality thereof;

###  

### 14.2.4                  TheTransferee is not a party of reasonable financial worth and/or financialstability in light of the responsibilities to be undertaken in connection withthe Transfer on the date consent is requested;

###  

### 14.2.5                  The proposedTransfer would cause a violation of another lease for space in the Project, orwould give an occupant of the Project a right to cancel its lease;

###  

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

###  

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

###  

### 14.2.8                  TheTransferee does not intend to occupy the entire Premises and conduct itsbusiness therefrom for a substantial portion of the term of the Transfer.

###  

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

 

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

 

## 14.3                           **Transfer Premium**.  If Landlord consents to a Transfer, as a conditionthereto which the parties hereby agree is reasonable, Tenant shall pay toLandlord fifty percent (50%) of any “Transfer Premium,” as that term is definedin this Section 14.3, received by Tenant from such Transferee.  “**Transfer Premium**”shall mean all rent, additional rent or other consideration payable by suchTransferee in connection with the Transfer in excess of the Rent and AdditionalRent payable by Tenant under this Lease during the term of the Transfer on aper rentable square foot basis if less than all of the Premises is transferred,after deducting the reasonable expenses incurred by Tenant for (i) anychanges, alterations and improvements to the Premises in connection with theTransfer, (ii) any free base rent reasonably provided to the Transferee,and (iii) any commercially reasonable brokerage commissions and legal feesin connection with the Transfer.  “TransferPremium” shall also include, but not be limited to, key money, bonus money orother cash consideration paid by Transferee to Tenant in connection with suchTransfer, and any payment in excess of fair market value for services renderedby Tenant to Transferee or for assets, fixtures, inventory, equipment, orfurniture transferred by Tenant to Transferee in connection with such Transfer.  In the calculations of the Rent (as itrelates to the Transfer Premium calculated under this Section 14.3),and the Transferee’s Rent and Quoted Rent under Section 14.2 ofthis Lease, the Rent paid during each annual period for the Subject Space, andthe Transferee’s Rent and the Quoted Rent, shall be computed after adjustingsuch rent to the actual effective rent to be paid,  taking into consideration any and allleasehold concessions granted in connection therewith, including, but notlimited to, any rent credit and improvement allowance.  For purposes of calculating any sucheffective rent all such concessions shall be amortized on a straight-line basisover the relevant term.

##  

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

 

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## of theterm of the Transfer as set forth in the Transfer Notice (or at Landlord’soption, shall cause the Transfer to be made to Landlord or its agent, in whichcase the parties shall execute the Transfer documentation promptlythereafter).  In the event of a recaptureby Landlord, if this Lease shall be canceled with respect to less than theentire Premises, the Rent reserved herein shall be prorated on the basis of thenumber of rentable square feet retained by Tenant in proportion to the numberof rentable square feet contained in the Premises, and this Lease as so amendedshall continue thereafter in full force and effect, and upon request of eitherparty, the parties shall execute written confirmation of the same.  If Landlord declines, or fails to elect in atimely manner to recapture the Subject Space under this Section 14.4,then, provided Landlord has consented to the proposed Transfer, Tenant shall beentitled to proceed to transfer the Subject Space to the proposed Transferee,subject to provisions of this Article 14.

##  

## 14.5                           **Effect of Transfer**.  If Landlord consents to a Transfer, (i) theTCCs of this Lease shall in no way be deemed to have been waived or modified, (ii) suchconsent shall not be deemed consent to any further Transfer by either Tenant ora Transferee, (iii) Tenant shall deliver to Landlord, promptly afterexecution, an original executed copy of all documentation pertaining to theTransfer in form reasonably acceptable to Landlord, (iv) Tenant shallfurnish upon Landlord’s request a complete statement, certified by Tenant’schief financial officer, setting forth in detail the computation of anyTransfer Premium Tenant has derived and shall derive from such Transfer, and (v) noTransfer relating to this Lease or agreement entered into with respect thereto,whether with or without Landlord’s consent, shall relieve Tenant or anyguarantor of the Lease from any liability under this Lease, including, withoutlimitation, in connection with the Subject Space.  Landlord or its authorized representativesshall have the right at all reasonable times to audit the books, records andpapers of Tenant relating to any Transfer, and shall have the right to makecopies thereof.  If the Transfer Premiumrespecting any Transfer shall be found understated, Tenant shall, within thirty(30) days after demand, pay the deficiency, and if understated by more thanfive percent (5%), Tenant shall pay Landlord’s costs of such audit.

##  

## 14.6                           **Additional Transfers**.  For purposes of this Lease, the term “**Transfer**” shall also include (i) if Tenant is apartnership, the withdrawal or change, voluntary, involuntary or by operationof law, or transfer of fifty percent (50%) or more of partnership interests,within a twelve (12)-month period, or the dissolution of the partnershipwithout immediate reconstitution thereof, and (ii) if Tenant is a closelyheld corporation (*i.e.*, whose stock is not publiclyheld and not traded through a nationally recognized exchange or over thecounter), (A) the merger, consolidation or other reorganization of Tenantin which the holders of Tenant’s outstanding voting stock immediately prior tosuch transaction own, immediately after such transaction, securitiesrepresenting less than fifty percent (50%) of the voting power of thecorporation or other entity surviving such transaction, (B) the sale orother transfer by the Tenant of an aggregate of fifty percent (50%) or more ofthe voting shares of Tenant in a single transaction or series of transactions,within any twelve (12)-month period (other than in connection with a capitalraising transaction involving the sale of capital stock of Tenant to bona fidethird-party investors), or (C) the sale, mortgage, exclusive license,hypothecation or pledge of all or substantially all of the value of theunencumbered assets of Tenant in a single transaction or series of transactionswithin a twelve (12)-month period. Notwithstanding anything to the contrary set forth in this Article 14to the contrary, in no event shall an offering of stock to (1) thirdparties by means of a public offering (either an initial public offering or asubsequent public

 

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## offering)through a recognized stock market, or (2) in connection with research anddevelopment partnerships or collaborative agreements, constitute a “Transfer.”

##  

## 14.7                           **Occurrence of Default**.  Any Transfer hereunder shall be subordinateand subject to the provisions of this Lease, and if this Lease shall beterminated during the term of any Transfer, Landlord shall have the right to:  (i) treat such Transfer as canceled andrepossess the Subject Space by any lawful means, or (ii) require that suchTransferee attorn to and recognize Landlord as its landlord under any suchTransfer.  If Tenant shall be in defaultunder this Lease, Landlord is hereby irrevocably authorized, as Tenant’s agentand attorney-in-fact, to direct any Transferee to make all payments under or inconnection with the Transfer directly to Landlord (which Landlord shall applytowards Tenant’s obligations under this Lease) until such default iscured.  Such Transferee shall rely on anyrepresentation by Landlord that Tenant is in default hereunder, without anyneed for confirmation thereof by Tenant. Upon any assignment, the assignee shall assume in writing allobligations and covenants of Tenant thereafter to be performed or observedunder this Lease.  No collection oracceptance of rent by Landlord from any Transferee shall be deemed a waiver ofany provision of this Article 14 or the approval of any Transfereeor a release of Tenant from any obligation under this Lease, whethertheretofore or thereafter accruing.  Inno event shall Landlord’s enforcement of any provision of this Lease againstany Transferee be deemed a waiver of Landlord’s right to enforce any term ofthis Lease against Tenant or any other person. If Tenant’s obligations hereunder have been guaranteed, Landlord’sconsent to any Transfer shall not be effective unless the guarantor alsoconsents to such Transfer.

##  

## 14.8                           **Non-Transfers**.** **Notwithstandinganything to the contrary contained in this Article 14, to theextent the Original Tenant in not then in default under this Lease (beyond anyapplicable notice and cure periods), an assignment or subletting of allor a portion of the Premises to (i) an affiliate of Tenant (an entitywhich is controlled by, controls or is under common control, as such term isdefined in California General Corporations Code (“**CGCC**”) Sections 160 and 5045, with, Tenant), (ii) anentity which merges with or acquires or is acquired by, Tenant or a parent ofTenant, as defined in CGCC Sections 175 and 5064, or a subsidiary, as definedin CGCC Sections 189 and 5073, of Tenant’s parent or Affiliate, or (iii) atransferee of substantially all of the assets of Tenant (collectively, an “**Affiliate**”) along with any other entitywhich will qualify as an “affiliate” under CGCC 150 and 5031, shall not bedeemed a Transfer under this Article 14, provided that Tenantnotifies Landlord of any such assignment or sublease and promptly suppliesLandlord with any documents or information reasonably requested by Landlordregarding such assignment or sublease or such Affiliate, and suchassignment or sublease is not a subterfuge by Tenant to avoid its obligationsunder this Lease, or otherwise “releases” the Original Tenant from suchobligations.

##  

# **ARTICLE 15**

 

# **SURRENDEROF PREMISES; OWNERSHIP AND**

# **REMOVALOF TRADE FIXTURES**

 

## 15.1                           **Surrender of Premises**.  No act or thing done by Landlord or any agentor employee of Landlord during the Lease Term shall be deemed to constitute anacceptance by Landlord of a surrender of the Premises unless such intent isspecifically acknowledged in

 

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## writingby Landlord.  The delivery of keys to thePremises to Landlord or any agent or employee of Landlord shall not constitutea surrender of the Premises or effect a termination of this Lease, whether ornot the keys are thereafter retained by Landlord, and notwithstanding suchdelivery Tenant shall be entitled to the return of such keys at any reasonabletime upon request until this Lease shall have been properly terminated.  The voluntary or other surrender of thisLease by Tenant, whether accepted by Landlord or not, or a mutual terminationhereof, shall not work a merger, and at the option of Landlord shall operate asan assignment to Landlord of all subleases or subtenancies affecting thePremises or terminate any or all such sublessees or subtenancies.

##  

## 15.2                           **Removal of Tenant Property by Tenant**.  Upon the expiration of the Lease Term, orupon any earlier termination of this Lease, Tenant shall, subject to theprovisions of Section 8.5, this Article 15 and Section 29.33,quit and surrender possession of the Premises to Landlord in as good order andcondition as when Tenant took possession and as thereafter improved by Landlordand/or Tenant, reasonable wear and tear and repairs which are specifically madethe responsibility of Landlord hereunder excepted.  Upon such expiration or termination, Tenantshall, without expense to Landlord, remove or cause to be removed from thePremises all debris and rubbish, and such items of furniture, equipment,business and trade fixtures, free-standing cabinet work, movable partitions andother articles of personal property owned by Tenant or installed or placed byTenant at its expense in the Premises, and such similar articles of any otherpersons claiming under Tenant, as Landlord may, in its sole discretion, requireto be removed, and Tenant shall repair at its own expense all damage to thePremises and Building resulting from such removal.

##  

# **ARTICLE 16**

 

# **HOLDINGOVER**

 

If Tenant holds over after the expiration of the LeaseTerm or earlier termination thereof, with or without the express or impliedconsent of Landlord, such tenancy shall be from month-to-month only, and shallnot constitute a renewal hereof or an extension for any further term, and insuch case Rent shall be payable at a monthly rate equal to the product of (i) theRent applicable during the last rental period of the Lease Term under this Lease,and (ii) a percentage equal to one hundred fifty percent (150%) during thefirst two (2) months immediately following the expiration or earliertermination of the Lease Term, and two hundred percent (200%) thereafter.  Such month-to-month tenancy shall be subjectto every other applicable term, covenant and agreement contained herein.  Nothing contained in this Article 16shall be construed as consent by Landlord to any holding over by Tenant, andLandlord expressly reserves the right to require Tenant to surrender possessionof the Premises to Landlord as provided in this Lease upon the expiration orother termination of this Lease.  Theprovisions of this Article 16 shall not be deemed to limit orconstitute a waiver of any other rights or remedies of Landlord provided hereinor at law.  If Tenant fails to surrenderthe Premises upon the termination or expiration of this Lease, in addition toany other liabilities to Landlord accruing therefrom, Tenant shall protect,defend, indemnify and hold Landlord harmless from all loss, costs (includingreasonable attorneys’ fees) and liability resulting from such failure,including, without limiting the generality of the foregoing, any claims made byany succeeding tenant founded upon such failure to surrender and any lostprofits to Landlord resulting therefrom.

 

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# **ARTICLE 17**

 

# **ESTOPPELCERTIFICATES**

 

Within ten (10) days following a request inwriting by Landlord, Tenant shall execute, acknowledge and deliver to Landlordan estoppel certificate, which, as submitted by Landlord, shall besubstantially in the form of **Exhibit E**,attached hereto (or such other form as may be reasonably required by anyprospective mortgagee or purchaser of the Project, or any portion thereof),indicating therein any exceptions thereto that may exist at that time, andshall also contain any other information reasonably requested by Landlord orLandlord’s mortgagee or prospective mortgagee. Any such certificate may be relied upon by any prospective mortgagee orpurchaser of all or any portion of the Project. Tenant shall execute and deliver whatever other commercially reasonableinstruments may be reasonably required for such purposes.  At any time during the Lease Term, Landlordmay require Tenant to provide Landlord with its most recently preparedfinancial statement and financial statements of the two (2) years prior tothe most recently prepared financial statement year.  Such statements shall be prepared inaccordance with generally accepted accounting principles and, if such is thenormal practice of Tenant, shall be audited by an independent certified publicaccountant.  Failure of Tenant to timelyexecute, acknowledge and deliver such estoppel certificate or othercommercially reasonable instruments shall constitute an acceptance of thePremises and an acknowledgment by Tenant that statements included in theestoppel certificate are true and correct, without exception.  Any such financial statement or otherinformation which is marked “confidential” or “company secret(s)” (or isotherwise similarly marked by Tenant) shall be confidential and shall not bedisclosed by Landlord to any third party (other than its partners,administrators, consultants, financial, legal and a prospective or currentpurchaser, mortgagee, or ground or underlying lessor of the Building or theProject, a prospective Transferee, and except as required by applicable law orin connection with a dispute or litigation hereunder or as required by asubpoena) except as specifically provided in this Article 17 andthen only if the person to whom disclosure is made first agrees to be bound bythe requirements of this Article 17.

 

# **ARTICLE 18**

 

# **SUBORDINATION**

 

Subject to Tenant’s receipt of an appropriatenon-disturbance agreement(s) as set forth below, this Lease shall be subjectand subordinate to all present and future ground or underlying leases of theBuilding or Project and to the lien of any mortgage, trust deed or otherencumbrances now or hereafter in force against the Building or Project or anypart thereof, if any, and to all renewals, extensions, modifications,consolidations and replacements thereof, and to all advances made or hereafterto be made upon the security of such mortgages or trust deeds, unless the holdersof such mortgages, trust deeds or other encumbrances, or the lessors under suchground lease or underlying leases, require in writing that this Lease besuperior thereto.  Tenant covenants andagrees in the event any proceedings are brought for the foreclosure of any suchmortgage or deed in lieu thereof (or if any ground lease is terminated), toattorn, without any deductions or set-offs whatsoever, to the lienholder orpurchaser or any successors thereto upon any such foreclosure sale or deed in lieuthereof (or to the ground lessor), if so requested to do so by such purchaseror lienholder or ground lessor, and to recognize such purchaser or

 

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lienholder or ground lessor as the lessor under thisLease, provided such lienholder or purchaser or ground lessor shall agree toaccept this Lease and not disturb Tenant’s occupancy, so long as Tenant timelypays the rent and observes and performs the TCCs of this Lease to be observedand performed by Tenant.  Landlord’sdelivery to Tenant of a fully executed commercially reasonable non-disturbanceagreement(s) (the “**Nondisturbance Agreement**”) in favor of Tenant from any suchground lessor, mortgage holders or lien holders of Landlord who later come intoexistence at any time prior to the expiration of the Lease Term shall be inconsideration of, and a condition precedent to, Tenant’s agreement to be boundby the terms and conditions of this Article 18; provided Tenantshall execute and return such Nondisturbance Agreement to Landlord within ten (10) daysof its receipt thereof.  Nothingcontained herein shall require Tenant to waive any of Landlord’s obligationsunder this Lease, including, without limitation, Landlord’s obligation to fundthe Improvement Allowance (and Tenant’s offset rights for such failure).  Landlord’s interest herein may be assigned assecurity at any time to any lienholder. Tenant shall, within four (4) days of request by Landlord, executesuch further instruments or assurances as Landlord may reasonably deemnecessary to evidence or confirm the subordination or superiority of this Leaseto any such mortgages, trust deeds, ground leases or underlying leases.  Tenant waives the provisions of any currentor future statute, rule or law which may give or purport to give Tenantany right or election to terminate or otherwise adversely affect this Lease andthe obligations of the Tenant hereunder in the event of any foreclosureproceeding or sale.

 

# **ARTICLE 19**

 

# **DEFAULTS;REMEDIES**

 

## 19.1                           **Events of Default**.  The occurrence of any of the following shallconstitute a default of this Lease by Tenant:

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### 19.1.1                  Any failureby Tenant to pay any Rent or any other charge required to be paid under thisLease, or any part thereof, within five (5) business days after Tenant’sreceipt from Landlord of written notice that the same was not paid when due; or

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### 19.1.2                  Except wherea specific time period is otherwise set forth for Tenant’s performance in thisLease, in which event the failure to perform by Tenant within such time periodshall be a default by Tenant under this Section 19.1.2, any failureby Tenant to observe or perform any other provision, covenant or condition ofthis Lease to be observed or performed by Tenant where such failure continuesfor thirty (30) days after written notice thereof from Landlord to Tenant;provided that if the nature of such default is such that the same cannotreasonably be cured within a thirty (30) day period, Tenant shall not be deemedto be in default if it diligently commences such cure within such period andthereafter diligently proceeds to rectify and cure such default, but in noevent exceeding a period of time in excess of sixty (60) days after writtennotice thereof from Landlord to Tenant; or

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### 19.1.3                  To the extentpermitted by law, a general assignment by Tenant or any guarantor of this Leasefor the benefit of creditors, or the taking of any corporate action infurtherance of bankruptcy or dissolution whether or not there exists anyproceeding under an insolvency or bankruptcy law, or the filing by or againstTenant or any guarantor of any

 

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### proceedingunder an insolvency or bankruptcy law, unless in the case of a proceeding filedagainst Tenant or any guarantor the same is dismissed within sixty (60) days,or the appointment of a trustee or receiver to take possession of all orsubstantially all of the assets of Tenant or any guarantor, unless possessionis restored to Tenant or such guarantor within thirty (30) days, or anyexecution or other judicially authorized seizure of all or substantially all ofTenant’s assets located upon the Premises or of Tenant’s interest in thisLease, unless such seizure is discharged within thirty (30) days; or

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### 19.1.4                  IntentionallyOmitted; or

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

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The notice periods provided herein are in lieu of, andnot in addition to, any notice periods provided by law.

 

## 19.2                           **Remedies Upon Default**.  Upon the occurrence of any event of defaultby Tenant, Landlord shall have, in addition to any other remedies available toLandlord at law or in equity (all of which remedies shall be distinct, separateand cumulative), the option to pursue any one or more of the followingremedies, each and all of which shall be cumulative and nonexclusive, withoutany notice or demand whatsoever.

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### 19.2.1                  Terminatethis Lease, in which event Tenant shall immediately surrender the Premises toLandlord, and if Tenant fails to do so, Landlord may, without prejudice to anyother remedy which it may have for possession or arrearages in rent, enter uponand take possession of the Premises and expel or remove Tenant and any otherperson who may be occupying the Premises or any part thereof, without beingliable for prosecution or any claim or damages therefor; and Landlord mayrecover from Tenant the following:

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##### (a)                                  The worth atthe time of award of any unpaid rent which has been earned at the time of suchtermination; plus

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##### (b)                                 The worth atthe time of award of the amount by which the unpaid rent which would have beenearned after termination until the time of award exceeds the amount of suchrental loss that Tenant proves could have been reasonably avoided; plus

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##### (c)                                  The worth atthe time of award of the amount by which the unpaid rent for the balance of theLease Term after the time of award exceeds the amount of such rental loss thatTenant proves could have been reasonably avoided; plus

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##### (d)                                 Any otheramount necessary to compensate Landlord for all the detriment proximatelycaused by Tenant’s failure to perform its obligations under this Lease or whichin the ordinary course of things would be likely to result therefrom,specifically including but not limited to, brokerage commissions andadvertising expenses incurred, expenses of remodeling the Premises or anyportion thereof for a new tenant, whether for the same or a different use, andany special concessions made to obtain a new tenant; and

 

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##### (e)                                  At Landlord’selection, such other amounts in addition to or in lieu of the foregoing as maybe permitted from time to time by applicable law.

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

 

### 19.2.2                  Landlordshall have the remedy described in California Civil Code Section 1951.4(lessor may continue lease in effect after lessee’s breach and abandonment andrecover rent as it becomes due, if lessee has the right to sublet or assign,subject only to reasonable limitations). Accordingly, if Landlord does not elect to terminate this Lease onaccount of any default by Tenant, Landlord may, from time to time, withoutterminating this Lease, enforce all of its rights and remedies under thisLease, including the right to recover all rent as it becomes due.

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### 19.2.3                  Landlordshall at all times have the rights and remedies (which shall be cumulative witheach other and cumulative and in addition to those rights and remediesavailable under Sections 19.2.1 and 19.2.2, above, or any lawor other provision of this Lease), without prior demand or notice except asrequired by applicable law, to seek any declaratory, injunctive or otherequitable relief, and specifically enforce this Lease, or restrain or enjoin aviolation or breach of any provision hereof.

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

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## 19.4                           **Form of Payment After Default**.  Following the occurrence of an event ofdefault by Tenant, Landlord shall have the right to require that any or allsubsequent amounts paid by Tenant to Landlord hereunder, whether to cure thedefault in question or otherwise, be paid in the form of cash, money order,cashier’s or certified check drawn on an institution acceptable to Landlord, orby other means approved by Landlord, notwithstanding any prior practice ofaccepting payments in any different form.

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## 19.5                           **Efforts to Relet**.  No re-entry or repossession, repairs,maintenance, changes, alterations and additions, reletting, appointment of areceiver to protect Landlord’s interests hereunder, or any other action oromission by Landlord shall be construed as an election by Landlord to terminatethis Lease or Tenant’s right to possession, or to accept a surrender of the

 

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## Premises,nor shall same operate to release Tenant in whole or in part from any of Tenant’sobligations hereunder, unless express written notice of such intention is sentby Landlord to Tenant.  Tenant herebyirrevocably waives any right otherwise available under any law to redeem orreinstate this Lease.

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## 19.6                           **Landlord Default**.  Notwithstanding anything to the contrary setforth in this Lease, Landlord shall be in default in the performance of theobligations required to be performed by Landlord pursuant to this Lease (i) ifLandlord fails to timely fulfill its obligation to fund any portion of theImprovement Allowance pursuant to the terms set forth in the Tenant Work Letteror in the First Amendment Work Letter (which is to be attached to the FirstAmendment to Amended and Restated Office Lease), but only to the extentLandlord does not (A) subsequently cure such failure within twenty (20)business days following its receipt of written notice of such failure fromTenant (a “**Payment Failure Notice**”),or (B) deliver notice (a “**Refusal Notice**”)to Tenant within such twenty (20) business day period explaining (withreasonable specificity) Landlord’s reasons supporting Landlord’s position thatthe amounts described in the Payment Failure Notice are not, in fact, then dueand payable by Landlord (in which case Landlord shallpromptly fund the amount of the Improvement Allowance, if any, that Landlorddoes not contest is then due and payable by Landlord), or (ii) if Landlordfails to perform any other such obligation within thirty (30) days after thereceipt of notice from Tenant specifying in detail Landlord’s failure toperform; provided, however, if the nature of Landlord’s obligation is such thatmore than thirty (30) days are required for its performance, then Landlordshall not be in default under this Lease if it shall commence such performancewithin such thirty (30) day period and thereafter diligently pursues the sameto completion.  Upon any such default byLandlord under this Lease, Tenant may, except as otherwise specificallyprovided in this Lease to the contrary, exercise any of its rights provided atlaw or in equity.  Any award from a courtor arbitrator in favor of Tenant requiring payment by Landlord which is notpaid by Landlord within the time period directed by such award, may be offsetby Tenant from Rent next due and payable under this Lease;provided, however, Tenant may not deduct the amount of the award against morethan fifty percent (50%) of Base Rent next due and owing (until such time asthe entire amount of such judgment is deducted).

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# **ARTICLE 20**

 

# **COVENANTOF QUIET ENJOYMENT**

 

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

 

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# **ARTICLE 21**

 

# **SECURITYDEPOSIT; LETTER OF CREDIT**

 

## 21.1                           **Security Deposit**.  The amount of the Security Deposit shallequal Three Hundred Fifty-Five Thousand Seven Hundred Twenty-Seven and 60/100Dollars ($355,727.60), as set forth in Section 8 of theSummary.  Landlord and Tenant acknowledgethat, in accordance with the Original Lease, Tenant has previously deliveredthe sum of One Hundred Sixty-Six Thousand Eighteen and 27/100 Dollars($166,018.27) to Landlord as security for the faithful performance by Tenant ofthe terms, covenants and conditions of the Lease.  Concurrently with Tenant’s execution of thisLease, Tenant shall deposit with Landlord an additional amount equal to OneHundred Eighty-Nine Thousand Seven Hundred Nine and 33/100 Dollars($189,709.33), and the resulting total amount shall be held by Landlord assecurity for the faithful performance by Tenant of all of its obligations underthis Lease.  If Tenant defaults withrespect to any provisions of this Lease, including, but not limited to, theprovisions relating to the payment of Rent, the removal of property and therepair of resultant damage, Landlord may, without notice to Tenant, but shallnot be required to apply all or any part of the Security Deposit for thepayment of any Rent or any other sum in default and Tenant shall, upon demandtherefor, restore the Security Deposit to its original amount.  Any unapplied portion of the Security Depositshall be returned to Tenant, or, at Landlord’s option, to the last assignee ofTenant’s interest hereunder, within sixty (60) days following the expiration ofthe Lease Term.  Tenant shall not beentitled to any interest on the Security Deposit.  Tenant hereby waives the provisions of Section 1950.7of the California Civil Code, or any successor statute.

##  

## 21.2                           **Letter of Credit**.

 

### 21.2.1                  **Delivery of Letter of Credit**.  As additional security for Tenant’sobligations under this Lease, Tenant shall deliver to Landlord, as set forthbelow, an unconditional, clean, irrevocable letter of credit (the “**L-C**”) in an amount as set forth in Section 21.2.2,below (the “**L-C Amount**”), whichL-C shall be issued by a money-center bank (a bank which accepts deposits, maintainsaccounts, has a local Southern California office which will negotiate a letterof credit, and whose deposits are insured by the FDIC) reasonably acceptable toLandlord, and which L-C shall be in the form of **Exhibit G**, attached hereto.  Tenant shall pay all expenses, points and/orfees incurred by Tenant in obtaining the L-C. Landlord and Tenant acknowledge that, in accordancewith Article 21 of the Original Office Lease, Tenant has previouslydelivered an L-C in the amount of $1,549,613.56 (the “**Existing L-C**”) to Landlord as security forthe faithful performance by Tenant of the terms, covenants and conditions ofthe Original Lease.  On or before theearlier to occur of (i) January 1, 2007, and (ii) the date ofthe first distribution of any portion of the Improvement Allowance pursuant to Section 2of the Tenant Work Letter attached hereto as **Exhibit B**, Tenant shall amend the Existing L-C to increase theamount available thereunder to $3,450,427.20 (the “**Amended L-C**”), which Amended L-C shall bein the form, and subject to all the terms, set forth in this Section 21.2.

 

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### 21.2.2                  **L-C Amount**.

 

#### 21.2.2.1         **Calculation of L-C Amount**.  For purposes of this Lease, the “**L-C Amount**” shall initially be $3,450,427.20; provided,however, that commencing on February 1, 2008, and continuing for theremainder of the Lease Term, the L-C Amount shall be increased to an amountequal to twelve (12) months of the then-current Monthly Installment of BaseRent for the 10421 Building.

####  

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

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#### (i) to the extent that Tenantmaintains a “Working Capital,” as defined below, in excess of Thirty Millionand No/100 Dollars ($30,000,000.00) for four (4) consecutive financialquarters during the Lease Term, a reduction of fifty percent (50%);

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#### (ii) to the extent that Tenantmaintains a Working Capital in excess of Thirty Million and No/100 Dollars($30,000,000.00) for eight (8) consecutive financial quarters during theLease Term, a reduction of one hundred percent (100%);

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#### (iii) to the extent that Tenantmaintains a Working Capital in excess of Fifty Million and No/100 Dollars($50,000,000.00) for four (4) consecutive financial quarters during theLease Term, a reduction of one hundred percent (100%).

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#### As soon as reasonably practicalfollowing the end of each financial quarter during the Lease Term, the L-CAmount shall be recalculated pursuant to the terms of Section 21.2.2.1,above, and any percentage reductions, which are applicable to the L-C pursuantto subparagraphs (i) through (iii), above, shall be applied inorder to determine the then-existing amount of L-C which Tenant is required topost (the “**Required L-C Amount**”).  In the event the determined Required L-CAmount is less than the amount of the actual L-C then-posted by Tenant, Tenantshall have the right to cause the amount of the then-current L-C to be reducedto the Required L-C Amount, and Landlord shall timely execute and deliver suchcommercially reasonable documents to the issuer(s) of the L-C as are presentedto Landlord by such issuer(s) and as may be reasonably necessary to effectuatethe change to the Required L-C Amount. Likewise, in the event that the Required L-C Amount is greater than theamount of the L-C then posted by Tenant, Tenant shall upon its receipt of written notice from Landlord (the “**Reestablishment Notice**”), cause the amount of the then-current L-C to be increased toequal the Required L-C Amount.  Inaddition, in the event that, following the completion of each financial quarterthroughout the Lease Term (A) Tenant fails to deliver timely the unauditedquarterly financial statements, or the annual audited financial statementsrequired for Tenant to make a determination with regard to such RequiredThresholds, (B) Tenant is in economic default under

 

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#### the Lease (beyond any applicablenotice and cure periods) more than twice during the immediately precedingtwelve (12) months, or (C) following any reduction of the L-C Amount underthe terms of subparagraphs (i), (ii) or (iii), above, Tenant failsduring any one (1) financial quarter thereafter to maintain a WorkingCapital in excess of Thirty Million and No/100 Dollars ($30,000,000.00), thenTenant shall, upon receipt of a ReestablishmentNotice, cause the L-C to bereestablished with the then applicable L-C Amount (as determined in accordancewith the terms of Section 22.2.2.1, above).  The L-C Amount shall thereafter be subject toconditional reduction as set forth herein. For purposes of this Section 21.2.2, “**Working Capital**,” means then-current assetsof Tenant less then-current liabilities from Tenant’s previous quarterlyfinancial statements, which Working Capital shall include then-currentreceivables (zero (0) to sixty (60) days only). In connection with this Section 21.2.2, Tenant shall provideLandlord (1) Tenant’s current financial statements (applicable to thefinancial quarter which just ended) certified by Tenant’s Chief ExecutiveOfficer and Tenant’s Chief Financial Officer, within thirty (30) business daysfollowing the end of each financial quarter during the Lease Term, (2) Tenant’scurrent annual financial statement (applicable to the financial year which justended) audited and certified by an independent certifiedpublic accountant, within one hundred twenty (120) days following theend of each financial year during the Lease Term, and (3) a disclosurestatement of any material adverse changes in Tenant’s business.  The financial thresholds set forth insubparagraphs (i) through (iii), above, are, collectively, the “**Required Thresholds.**”

####  

### 21.2.3                  **FAILURE TO REINSTATE;****LIQUIDATED DAMAGES**.  IN THE EVENT THAT TENANT FAILS, WITHIN TWENTY(20) DAYS FOLLOWING TENANT’S RECEIPT OF A REESTABLISHMENT NOTICE, TO CAUSE THEL-C TO BE REESTABLISHED IN THE REQUIRED L-C AMOUNT, THEN TENANT’S MONTHLYINSTALLMENT OF BASE RENT SHALL BE INCREASED BY ONE HUNDRED FIFTY PERCENT (150%)OF ITS THEN EXISTING LEVEL DURING THE PERIOD COMMENCING ON THE DATE WHICH ISTWENTY (20) DAYS AFTER TENANT’S RECEIPT OF SUCH REESTABLISHMENT NOTICE ANDENDING ON THE EARLIER TO OCCUR OF (I) THE DATE SUCH L-C IS REESTABLISHEDPURSUANT TO THE TERMS OF THIS SECTION 21.2, OR (II) THE DATEWHICH IS NINETY (90) DAYS AFTER THE DATE OF SUCH REESTABLISHMENT NOTICE.  IN THE EVENT THAT TENANT FAILS, DURING SUCHNINETY (90) DAY PERIOD FOLLOWING THE DATE OF THE REESTABLISHMENT NOTICE, TOCAUSE THE L-C TO BE REESTABLISHED IN THE REQUIRED L-C AMOUNT, THEN TENANT’SMONTHLY INSTALLMENT OF BASE RENT SHALL BE INCREASED BY TWO HUNDRED PERCENT(200%) OF ITS THEN EXISTING LEVEL DURING THE PERIOD COMMENCING ON THE DATEWHICH IS NINETY (90) DAYS AFTER THE DATE OF SUCH REESTABLISHMENT NOTICE ANDENDING ON THE DATE SUCH L-C IS RE-ISSUED/REESTABLISHED PURSUANT TO THE TERMS OFTHIS SECTION 21.2. THE PARTIES AGREE THAT IT WOULD BE IMPRACTICABLEAND EXTREMELY DIFFICULT TO ASCERTAIN THE ACTUAL DAMAGES SUFFERED BY LANDLORD ASA RESULT OF TENANT’S FAILURE TO TIMELY REESTABLISH THE L-C FOLLOWING THEREESTABLISHMENT NOTICE AS REQUIRED IN THIS SECTION 21.2, AND THATUNDER THE CIRCUMSTANCES EXISTING AS OF THE DATE OF THIS LEASE, THE LIQUIDATEDDAMAGES PROVIDED FOR IN THIS SECTION 21.2.3 REPRESENT A REASONABLEESTIMATE OF THE DAMAGES WHICH LANDLORD WILL INCUR AS A RESULT OF SUCH FAILURE,PROVIDED, HOWEVER, THAT THIS PROVISION SHALL NOT WAIVE OR AFFECT

 

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### LANDLORD’SRIGHTS AND TENANT’S INDEMNITY OBLIGATIONS UNDER OTHER SECTIONS OF THIS LEASE(EXCEPT THAT THE PARTIES SPECIFICALLY AGREE THAT THE FOREGOING PROVISION WASAGREED TO IN LIEU OF MAKING FAILURE TO RE-ESTABLISH THE L-C A DEFAULT UNDER THELEASE).  THE PARTIES ACKNOWLEDGE THAT THEPAYMENT OF SUCH LIQUIDATED DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTYWITHIN THE MEANING OF CALIFORNIA CIVIL CODE SECTION 3275 OR 3369, BUTIS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO LANDLORD PURSUANT TO CALIFORNIACIVIL CODE SECTION 1671.  THEPARTIES HAVE SET FORTH THEIR INITIALS BELOW TO INDICATE THEIR AGREEMENT WITHTHE LIQUIDATED DAMAGES PROVISION CONTAINED IN THIS SECTION 21.2.3.

 

 
| /s/  JCH                      /s/  SS |   | /s/  JPL                |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|--------|
| LANDLORD’S  INITIALS                                                                                                                           |   | TENANT’S  INITIALS |   |

 

### 21.2.4                  **Application ofLetter of Credit**. The L-C shall be held by Landlord as security for the faithfulperformance by Tenant of all the TCCs of this Lease to be kept and performed byTenant during the Lease Term.  The L-Cshall not be mortgaged, assigned or encumbered in any manner whatsoever byTenant without the prior written consent of Landlord.  If Tenant defaults with respect to anyprovisions of this Lease, including, but not limited to, the provisionsrelating to the payment of Rent, or if Tenant fails to renew the L-C at leastthirty (30) days before its expiration, Landlord may, but shall not be requiredto, draw upon all or any portion of the L-C for payment of any Rent or anyother sum in default, or for the payment of any amount that Landlord mayreasonably spend or may become obligated to spend by reason of Tenant’sdefault, or to compensate Landlord for any other loss or damage that Landlordmay suffer by reason of Tenant’s default. The use, application or retention of the L-C, or any portion thereof, byLandlord shall not prevent Landlord from exercising any other right or remedyprovided by this Lease or by law, it being intended that Landlord shall notfirst be required to proceed against the L-C and shall not operate as alimitation on any recovery to which Landlord may otherwise be entitled.  Any amount of the L-C which is drawn upon byLandlord, but is not used or applied by Landlord, shall be held by Landlord anddeemed a security deposit (the “**L-C SecurityDeposit**”) and, in connection with such L-C Security Deposit, Tenanthereby waives the provisions of Section 1950.7 of the California CivilCode, or any successor statute.  If anyportion of the L-C is drawn upon and used or applied by Landlord, Tenant shall,within ten (10) days after written demand therefor, either (i) depositcash with Landlord (which cash shall constitute part of the L-C SecurityDeposit) in an amount sufficient to cause the sum of the L-C Security Depositand the amount of the remaining L-C to be equivalent to the amount of the L-Cthen required under this Lease (and if any portion of the L-C Security Depositis thereafter used or applied, Tenant shall restore such L-C Security Depositto the amount then required under this Lease pursuant to the foregoing), or (ii) reinstatethe L-C to the amount then required under this Lease, in which case any unusedportion of the then-existing L-C Security Deposit shall be returned toTenant.  Tenant acknowledges thatLandlord has the right to transfer or mortgage its interest in the Project andin this Lease and Tenant agrees that in the event of any such transfer ormortgage, Landlord shall have the right to transfer or assign the L-C SecurityDeposit and/or the

 

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### L-C tothe transferee or mortgagee, and in the event of such transfer, Tenant shalllook solely to such transferee or mortgagee for the return of the L-C SecurityDeposit and/or the L-C, provided such transferee agrees in writing to be liableto Tenant for the return of the L-C. Landlord shall pay all costs and fees, if any, charged by the issuingbank to transfer the L-C.  Tenant shall,within five (5) days of request by Landlord, execute such furtherinstruments or assurances as Landlord may reasonably deem necessary to evidenceor confirm Landlord’s transfer or assignment of the L-C Security Deposit and/orthe L-C to such transferee or mortgagee. If Tenant is not then in default under this Lease, the L-C Security Depositand/or the L-C, or any balance thereof, shall be returned to Tenant withinforty-five (45) days following the expiration of the Lease Term.

###  

# **ARTICLE 22**

 

# **TELECOMMUNICATIONSEQUIPMENT**

 

At any time during the Lease Term, subject to the TCCsof this Article 22 and Article 8 of this Lease, Tenantmay install, at Tenant’s sole cost and expense, but without the payment of anyRent or a license or similar fee or charge, a satellite or microwave dish orother communications, HVAC or other equipment servicing the business conductedby Tenant from within the Premises (all such equipment, includingnon-telecommunication equipment is, for the sake of convenience, definedcollectively as the “**Telecommunications Equipment**”) upon the roof of theBuilding.  The physical appearance andthe size of the Telecommunications Equipment shall be subject to Landlord’sreasonable approval, the location of any such installation of theTelecommunications Equipment shall be designated by Tenant subject to Landlord’sreasonable approval and Landlord may require Tenant to install screening aroundsuch Telecommunications Equipment, at Tenant’s sole cost and expense, asreasonably designated by Landlord. Tenant shall maintain such Telecommunications Equipment, at Tenant’ssole cost and expense.  In the eventTenant elects to exercise its right to install the Telecommunication Equipment,then Tenant shall give Landlord prior notice thereof.  Tenant shall remove such TelecommunicationsEquipment upon the expiration or earlier termination of this Lease and shallrestore such area to the condition the same existed prior to the installationof such Telecommunications Equipment. Such Telecommunications Equipment shall be installed pursuant to plansand specifications approved by Landlord, which approval will not beunreasonably withheld.  SuchTelecommunications Equipment shall, in all instances, comply with applicablegovernmental laws, codes, rules and regulations.  The rights contained in this Article 22shall be personal to the Original Tenant and its Affiliates and may only beexercised by the Original Tenant or an Affiliate (and not any assignee,sublessee or other transferee of the Original Tenant’s interest in this Lease)if the Original Tenant and/or an Affiliate is in occupancy of at least sixtypercent (60%) of the then-existing Premises. Landlord shall reserve the concurrent right to use the roof for its ownuse and for third-party use for installation of satellite dish and antennadevices similar to Tenant’s Telecommunications Equipment (collectively, the “**Landlord TCE**”), provided such Landlord TCEshall not interfere with Tenant’s operations on the roof of the Building, andprovided Landlord maintains, restores and repairs the Building rooftop spaceassociated with such Landlord TCE.  Tothe extent Landlord elects to install Landlord TCE on the Building rooftop,Landlord shall be responsible for the maintenance, repair and restoration ofsuch Landlord TCE.  Landlord shall beresponsible for (and shall make all necessary repairs and replacements for) anydamage to Tenant’s Telecommunications Equipment

 

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due to the actions or omissions of Landlord orLandlord Parties (or any third party to whom Landlord has granted roof accessrights).  Tenant shall be responsible for(and shall make all necessary repairs and replacements for) any damage to theLandlord TCE due to the negligence or willful misconduct of Tenant.

 

# **ARTICLE 23**

 

# **SIGNS**

 

## 23.1                           **Prohibited Signage and Other Items**.  Any signs, notices, logos, pictures, names oradvertisements which are installed and that have not been separately approvedby Landlord may be removed without notice by Landlord at the sole expense ofTenant.  Except as expressly permittedpursuant to Section 23.2, below, Tenant may not install any signson the exterior or roof of the Project or the Common Areas.  Any signs, window coverings, or blinds (evenif the same are located behind the Landlord-approved window coverings for theBuilding), or other items visible from the exterior of the Premises orBuilding, shall be subject to the prior approval of Landlord, in its solediscretion.

##  

## 23.2                           **Tenant’s Signage**.  Tenant shall be entitledto install the following signage in connection with Tenant’s lease of thePremises (collectively, the “**Tenant’s Signage**”):

##  

## (i)                     One(1) building sign identifying Tenant’s name and logo located at the top ofthe Building (the “**Building Top Sign**”),as more particularly identified on **Exhibit A-2**attached hereto; and

##  

## (ii)                  Non-exclusivesignage on a pro-rata portion (vis-á-vis the rentable square footage of thePremises as compared to the rentable square footage of the Building) of themonument located adjacent to the entrance of the Building (the “**Building Monument Sign**”).  Tenant hereby acknowledges and agrees thatLandlord may, at Landlord’s sole cost and expense, place a standard “owned andmanaged” sign on such Project Monument Sign, provided that such “owned andmanaged” sign shall not be larger than Tenant’s sign.  Landlord may also, at Landlord’s sole costand expense, install a small sign indicating its ownership and management ofthe Building in the interior of the Building lobby in a location and of a sizereasonably approved by Tenant.

##  

To the extent that Tenant leases all of the 10421Building and the 10445 Building, Tenant shall be permitted to install, and theterm “**Tenant’s Signage**” shall berevised to mean, all signage that is legally permitted in the Project;provided, however, Landlord shall retain the right for limited identificationsignage as identified in item (ii) above.

 

### 23.2.1                  **Specificationsand Permits**.  Tenant’sSignage shall set forth Tenant’s name and logo as determined by Tenant in itssole discretion; provided, however, in no event shall Tenant’s Signage includean “Objectionable Name,” as that term is defined in Section 23.2.2,of this Lease.  The graphics, materials,color, design, lettering, lighting, size,

 

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### illumination, specifications and exact location of Tenant’s Signage(collectively, the “**Sign Specifications**”)shall be subject to the prior written approval of Landlord, which approvalshall not be unreasonably withheld, conditioned or delayed, and shall beconsistent and compatible with the quality and nature of the Project and Landlord’sBuilding standard signage program.  For purposes of this Section 23.2.1,the reference to “name” shall mean name and/or logo.  In addition, Tenant’s Signage shall besubject to Tenant’s receipt of all required governmental permits and approvalsand shall be subject to all Applicable Law and to any covenants, conditions andrestrictions affecting the Project. Landlord shall use commercially reasonable efforts to assist Tenant inobtaining all necessary governmental permits and approvals for Tenant’sSignage.  Tenant hereby acknowledgesthat, notwithstanding Landlord’s approval of Tenant’s Signage, Landlord hasmade no representation or warranty to Tenant with respect to the probability ofobtaining all necessary governmental approvals and permits for Tenant’sSignage.  In the event Tenant does notreceive the necessary governmental approvals and permits for Tenant’s Signage,Tenant’s and Landlord’s rights and obligations under the remaining TCCs of thisLease shall be unaffected.

###  

### 23.2.2                  **Objectionable Name**.  To the extent Original Tenant desires tochange the name and/or logo set forth on Tenant’s Signage, such name and/orlogo shall not have a name which relates to an entity which is of a characteror reputation, or is associated with a political faction or orientation, whichis inconsistent with the quality of the Project, or which would otherwisereasonably offend a landlord of the Comparable Buildings (an “**Objectionable Name**”). The parties hereby agree that the name “Favrille, Inc.,” or anyreasonable derivation thereof, shall not be deemed an Objectionable Name.

###  

### 23.2.3                  **Terminationof Right to Tenant’s Signage**. The rights contained in this Section 23.2 shall be personalto the Original Tenant and may only be exercised by the Original Tenant (andnot any assignee, sublessee or transferee of the Original Tenant’s interest inthis Lease) if the Original Tenant is in occupancy of no less than sixty percent (60%)of the then existing Premises.

###  

### 23.2.4                  **Cost and Maintenance**.  The costs of the actual signs comprisingTenant’s Signage and the installation, design, construction, and any and allother costs associated with Tenant’s Signage, including, without limitation,utility charges and hook-up fees, permits, and maintenance and repairs, shallbe the sole responsibility of Tenant; provided, however, up to a total of TenThousand and No/100 Dollars ($10,000.00) of the actual costs of such initialinstallation, design and construction shall be subject to reimbursement from theImprovement Allowance pursuant to Section 2.2.1 of the Tenant WorkLetter.  ShouldTenant’s Signage require repairs and/or maintenance, as determined in Landlord’sreasonable judgment, Landlord shall have the right to provide notice thereof toTenant and Tenant shall cause such repairs and/or maintenance to be performedwithin thirty (30) days after receipt of such notice from Landlord, at Tenant’ssole cost and expense; provided, however, if such repairs and/or maintenanceare reasonably expected to require longer than thirty (30) days to perform,Tenant shall commence such repairs and/or maintenance within such thirty (30)day period and shall diligently prosecute such repairs and maintenance tocompletion.  Should Tenant fail toperform such repairs and/or maintenance within the periods described in theimmediately preceding sentence, Landlord shall, upon the delivery of anadditional ten (10) business days’ prior written notice, have the right tocause such work to be performed and to charge Tenant as Additional Rent for thecost (including

 

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### a percentage of the cost thereof sufficient to reimburse Landlord forall overhead, general conditions, fees and other costs or expenses arising fromLandlord’s involvement with such repairs and/or maintenance) of such work.  Upon the expiration or earlier termination ofthis Lease, Tenant shall, at Tenant’s sole cost and expense, cause Tenant’sSignage to be removed and shall cause the areas in which such Tenant’s Signagewas located to be restored to the condition existing immediately prior to theplacement of such Tenant’s Signage except for ordinary wear and tear.  If Tenant fails to timely remove such Tenant’sSignage or to restore the areas in which such Tenant’s Signage was located, asprovided in the immediately preceding sentence, then Landlord may perform suchwork, and all costs incurred by Landlord in so performing (including apercentage of the cost thereof sufficient to reimburse Landlord for alloverhead, general conditions, fees and other costs or expenses arising fromLandlord’s involvement with such repairs and/or maintenance) shall bereimbursed by Tenant to Landlord within thirty (30) days after Tenant’s receiptof an invoice therefor.  The TCCs of thisSection 23.2.4 shall survive the expiration or earlier terminationof this Lease.

###  

# **ARTICLE 24**

 

# **COMPLIANCEWITH LAW**

 

Tenant shall not do anything or suffer anything to bedone in or about the Premises or the Project which will in any way conflictwith any law, statute, ordinance or other governmental rule, regulation orrequirement now in force or which may hereafter be enacted or promulgated(collectively, “**Applicable Laws**”).  At its sole cost and expense, Tenant shallpromptly comply with all such Applicable Laws which relate to (i) Tenant’suse of a portion of the Premises for non-general office use, (ii) theAlterations or Tenant Improvements in the Premises, or (iii) the BuildingSystems, and (iv) the Building Structure, but, as to the BuildingStructure, only to the extent such obligations are triggered by Tenant’sAlterations, the Tenant Improvements, the Tenant’s modification of the BuildingStructure or use of a portion of the Premises for non-general office use.  Should any standard or regulation now orhereafter be imposed on Landlord or Tenant by a state, federal or localgovernmental body charged with the establishment, regulation and enforcement ofoccupational, health or safety standards for employers, employees, landlords ortenants, then Tenant agrees, at its sole cost and expense, to comply promptlywith such standards or regulations which are applicable to Tenant’sbusiness.  The judgment of any court ofcompetent jurisdiction or the admission of Tenant in any judicial action,regardless of whether Landlord is a party thereto, that Tenant has violated anyof said governmental measures, shall be conclusive of that fact as betweenLandlord and Tenant.  Landlord shallcomply with all Applicable Laws relating to (a) the Building Structure,and (b) the exterior Project components, provided that compliance withsuch Applicable Laws is not the responsibility of Tenant under this Lease, andprovided further that Landlord’s failure to comply therewith would (1) prohibitTenant from obtaining or maintaining a certificate of occupancy for thePremises, (2) unreasonably and materially affect the safety of Tenant’semployees or create a significant health hazard for Tenant’s employees, (3) invalidateTenant’scGMP compliance status in, or materially and unreasonably prevent, hinder, orinterrupt Tenant’s ability to continually function under cGMP conditions underthe applicable laws and regulations of, California and the United States, andunder the applicable statutes for any foreign regulatory body, including butnot limited to, Canada, Europe and Asia, or (4) materially increase thecosts incurred by Tenant to comply with its maintenance obligations under theTCCs of this Lease. Landlord shall be

 

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permitted to include in Operating Expenses any costsor expenses incurred by Landlord under this Article 24 to theextent consistent with the terms of Section 4.2.4, above.

 

# **ARTICLE 25**

 

# **LATECHARGES**

 

If any installment of Rent or any other sum due fromTenant shall not be received by Landlord or Landlord’s designee within five (5) businessdays after said amount is due, then Tenant shall pay to Landlord a late chargeequal to five percent (5%) of the overdue amount plus any attorneys’ feesincurred by Landlord by reason of Tenant’s failure to pay Rent and/or othercharges when due hereunder.  The latecharge shall be deemed Additional Rent and the right to require it shall be inaddition to all of Landlord’s other rights and remedies hereunder or at law andshall not be construed as liquidated damages or as limiting Landlord’s remediesin any manner.  In addition to the latecharge described above, any Rent or other amounts owing hereunder which are notpaid within ten (10) days after the date they are due shall bear interestfrom the date when due until paid at a rate per annum equal to the lesser of (i) theannual “**Bank Prime Loan**” ratecited in the Federal Reserve Statistical Release Publication G.13(415),published on the first Tuesday of each calendar month (or such other comparableindex as Landlord and Tenant shall reasonably agree upon if such rate ceases tobe published) plus four (4) percentage points, and (ii) the highestrate permitted by applicable law.

 

# **ARTICLE 26**

 

# **LANDLORD’SRIGHT TO CURE DEFAULT; PAYMENTS BY TENANT**

 

## 26.1                           **Landlord’s Cure**.  All covenants and agreements to be kept orperformed by Tenant under this Lease shall be performed by Tenant at Tenant’ssole cost and expense and without any reduction of Rent, except to the extent,if any, otherwise expressly provided herein. If Tenant shall fail to perform any obligation under this Lease, andsuch failure shall continue in excess of the time allowed under Section 19.1.2,above, unless a specific time period is otherwise stated in this Lease,Landlord may, but shall not be obligated to, make any such payment or performany such act on Tenant’s part without waiving its rights based upon any defaultof Tenant and without releasing Tenant from any obligations hereunder.

##  

## 26.2                           **Tenant’s Reimbursement**.  Except as may be specifically provided to thecontrary in this Lease, Tenant shall pay to Landlord, upon delivery by Landlordto Tenant of statements therefor:  (i) sumsequal to expenditures reasonably made and obligations incurred by Landlord inconnection with the remedying by Landlord of Tenant’s defaults pursuant to theprovisions of Section 26.1; (ii) sums equal to all losses,costs, liabilities, damages and expenses referred to in Article 10of this Lease; and (iii) sums equal to all expenditures made and obligationsincurred by Landlord in collecting or attempting to collect the Rent or inenforcing or attempting to enforce any rights of Landlord under this Lease orpursuant to law, including, without limitation, all reasonable legal fees andother amounts so expended.  Tenant’sobligations under this Section 26.2 shall survive the expiration orsooner termination of the Lease Term.

 

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# **ARTICLE 27**

 

# **ENTRYBY LANDLORD**

 

Landlord reserves the right at all reasonable times(during Building Hours with respect to items (i) and (ii) below) andupon at least twenty-four (24) hours prior notice to Tenant (except in the caseof an emergency) and at all times (except in the case of an emergency)accompanied by an authorized representative of Tenant and subject to Tenant’sreasonable rules and regulations, to enter the Premises to (i) inspectthem; (ii) show the Premises to prospective purchasers, or to current orprospective mortgagees, ground or underlying lessors or insurers, or during thelast nine (9) months of the Lease Term, to prospective tenants; (iii) postnotices of nonresponsibility; or (iv) alter, improve or repair thePremises or the Building as permitted or required by the terms of this Lease,or for structural alterations, repairs or improvements to the BuildingStructure.  Notwithstanding anything tothe contrary contained in this Article 27, Landlord may enter thePremises at any time to (A) perform services required of Landlord underthis Lease after reasonable notice to Tenant; (B) take possession due toany breach of this Lease in the manner provided herein; and (C) performany covenants of Tenant which Tenant fails to perform (after any applicablenotice and cure periods).  Landlord maymake any such entries without the abatement of Rent, except as otherwiseprovided in this Lease, and may take such reasonable steps as required toaccomplish the stated purposes; provided, however, except for (i) emergencies,(ii) repairs, alterations, improvements or additions required bygovernmental or quasi-governmental authorities or court order or decree, or (iii) repairswhich are the obligation of Tenant hereunder, any such entry shall be performedin a manner so as not to unreasonably interfere with Tenant’s use of the Premisesand shall be performed after normal business hours if reasonablypractical.  With respect to items (ii) and(iii) above, Landlord shall use commercially reasonable efforts to notmaterially interfere with Tenant’s use of, or access to, the Premises.  Except as otherwise set forth in Section 6.4,Tenant hereby waives any claims for damages or for any injuries orinconvenience to or interference with Tenant’s business, lost profits, any lossof occupancy or quiet enjoyment of the Premises, and any other loss occasionedthereby.  For each of the above purposes,Landlord shall at all times have a key with which to unlock all the doors inthe Premises, excluding Tenant’s vaults, safes and special security areasdesignated in advance by Tenant.  In anemergency, Landlord shall have the right to use any means that Landlord maydeem proper to open the doors in and to the Premises.  Any entry into the Premises by Landlord inthe manner hereinbefore described shall not be deemed to be a forcible orunlawful entry into, or a detainer of, the Premises, or an actual orconstructive eviction of Tenant from any portion of the Premises.  No provision of this Lease shall be construedas obligating Landlord to perform any repairs, alterations or decorationsexcept as otherwise expressly agreed to be performed by Landlord herein.

 

# **ARTICLE 28**

 

# **TENANTPARKING**

 

Tenant shall be entitled to utilize, without charge,commencing on the Lease Commencement Date, the amount of parking spaces setforth in Section 9 of the Summary, on a monthly basis throughoutthe Lease Term, which parking spaces shall pertain to the Project parkingfacility.  Notwithstanding the foregoing,Tenant shall be responsible for the full amount

 

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of any taxes imposed by any governmental authority inconnection with the renting of such parking spaces by Tenant or the use of theparking facility by Tenant.  Tenant’scontinued right to use the parking spaces is conditioned upon Tenant abiding byall rules and regulations which are prescribed from time to time for theorderly operation and use of the parking facility where the parking spaces arelocated, including any sticker or other identification system established byLandlord, Tenant’s cooperation in seeing that Tenant’s employees and visitorsalso comply with such rules and regulations and Tenant not being indefault under this Lease.  Subject toLandlord’s continued satisfaction of its obligation to provide Tenant thenumber of parking spaces required by the TCCs of this Lease, Landlordspecifically reserves the right to change the size, configuration, design,layout and all other aspects of the Project parking facility at any time andTenant acknowledges and agrees that Landlord may, without incurring any liabilityto Tenant and without any abatement of Rent under this Lease, from time totime, close-off or restrict access to the Project parking facility for purposesof permitting or facilitating any such construction, alteration orimprovements.  Landlord may delegate itsresponsibilities hereunder to a parking operator in which case such parkingoperator shall have all the rights of control attributed hereby to theLandlord.  The parking spaces rented byTenant pursuant to this Article 28 are provided to Tenant solelyfor use by Tenant’s own personnel and such spaces may not be transferred,assigned, subleased or otherwise alienated by Tenant without Landlord’s priorapproval; provided, however, Landlord shall be deemed to have granted suchapproval with regard to Non-Transfers and Transfers approved pursuant to theTCCs of Article 14.  Tenantmay validate visitor parking by such method or methods as the Landlord mayestablish, at the validation rate from time to time generally applicable tovisitor parking.

 

# **ARTICLE 29**

 

# **MISCELLANEOUSPROVISIONS**

 

## 29.1                           **Terms; Captions**.  The words “Landlord” and “Tenant” as usedherein shall include the plural as well as the singular.  The necessary grammatical changes required tomake the provisions hereof apply either to corporations or partnerships orindividuals, men or women, as the case may require, shall in all cases beassumed as though in each case fully expressed. The captions of Articles and Sections are for convenience only and shallnot be deemed to limit, construe, affect or alter the meaning of such Articlesand Sections.

##  

## 29.2                           **Binding Effect**.  Subject to all other provisions of thisLease, each of the covenants, conditions and provisions of this Lease shallextend to and shall, as the case may require, bind or inure to the benefit notonly of Landlord and of Tenant, but also of their respective heirs, personalrepresentatives, successors or assigns, provided this clause shall not permitany assignment by Tenant contrary to the provisions of Article 14of this Lease.

##  

## 29.3                           **No Air Rights**.  No rights to any view or to light or air overany property, whether belonging to Landlord or any other person, are granted toTenant by this Lease.  If at any time anywindows of the Premises are temporarily darkened or the light or view therefromis obstructed by reason of any repairs, improvements, maintenance or cleaningin or about the Project, the same shall be without liability to Landlord andwithout any reduction or diminution of Tenant’s obligations under this Lease.

 

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## 29.4                           **Modification of Lease**.  Should any current or prospective mortgageeor ground lessor for the Building or Project require a modification of thisLease, which modification will not cause an increased cost or expense to Tenantor in any other way materially and adversely change the rights and obligationsof Tenant hereunder, then and in such event, Tenant agrees that this Lease maybe so modified and agrees to execute whatever documents are reasonably requiredtherefor and to deliver the same to Landlord within ten (10) daysfollowing a request therefor.  At therequest of Landlord or any mortgagee or ground lessor, Tenant agrees to executea short form of Lease and deliver the same to Landlord within ten (10) daysfollowing the request therefor.

##  

## 29.5                           **Transfer of Landlord’s Interest**.  Tenant acknowledges that Landlord has theright to transfer all or any portion of its interest in the Project or Buildingand in this Lease, and Tenant agrees that in the event of any such transfer,Landlord shall automatically be released from all liability under this Leaseaccruing after the date such transfer and Tenant agrees to look solely to suchtransferee for the performance of Landlord’s obligations hereunder after thedate of transfer and such transferee shall be deemed to have fully assumed andbe liable for all obligations of this Lease to be performed by Landlord,including the return of any Security Deposit, and Tenant shall attorn to suchtransferee.  Tenant further acknowledgesthat Landlord may assign its interest in this Lease to a mortgage lender asadditional security and agrees that such an assignment shall not releaseLandlord from its obligations hereunder and that Tenant shall continue to lookto Landlord for the performance of its obligations hereunder.

##  

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

##  

## 29.7                           **Landlord’s Title**.  Landlord’s title is and always shall beparamount to the title of Tenant. Nothing herein contained shall empower Tenant to do any act which can,shall or may encumber the title of Landlord.

##  

## 29.8                           **Relationship of Parties**.  Nothing contained in this Lease shall bedeemed or construed by the parties hereto or by any third party to create therelationship of principal and agent, partnership, joint venturer or anyassociation between Landlord and Tenant.

##  

## 29.9                           **Application of Payments**.  Landlord shall have the right to applypayments received from Tenant pursuant to this Lease, regardless of Tenant’sdesignation of such payments, to satisfy any obligations of Tenant hereunder,in such order and amounts as Landlord, in its sole discretion, may elect.

##  

## 29.10                     **Time of Essence**.  Time is of the essence with respect to theperformance of every provision of this Lease in which time of performance is afactor.

##  

## 29.11                     **Partial Invalidity**.  If any term, provision or condition containedin this Lease shall, to any extent, be invalid or unenforceable, the remainderof this Lease, or the application of such term, provision or condition topersons or circumstances other than those with respect to which it is invalidor unenforceable, shall not be affected thereby, and each and every other term,

 

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## provisionand condition of this Lease shall be valid and enforceable to the fullestextent possible permitted by law.

##  

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

##  

## 29.13                     **Landlord Exculpation**.  The liability of Landlord or the LandlordParties to Tenant for any default by Landlord under this Lease or arising inconnection herewith or with Landlord’s operation, management, leasing, repair,renovation, alteration or any other matter relating to the Project or thePremises shall be limited solely and exclusively to an amount which is equal tothe lesser of (a) the interest of Landlord in the Building or (b) theequity interest Landlord would have in the Building if the Building wereencumbered by third-party debt in an amount equal to eighty percent (80%) ofthe value of the Building (as such value is determined by Landlord), followingthe payment of any outstanding liens and/or mortgages in connection with theProject; provided, however, in no event shall the foregoing be deemed to limitany obligation Landlord may have pursuant to the TCCs of this Lease to returnor pay the Improvement Allowance as set forth in the Tenant Work Letter, or toTenant the Security Deposit and/or the L-C Security Deposit.  Neither Landlord, nor any of the LandlordParties shall have any personal liability therefor, and Tenant hereby expresslywaives and releases such personal liability on behalf of itself and all personsclaiming by, through or under Tenant. The limitations of liability contained in this Section 29.13shall inure to the benefit of Landlord’s and the Landlord Parties’ present andfuture partners, beneficiaries, officers, directors, trustees, shareholders,agents and employees, and their respective partners, heirs, successors andassigns.  Under no circumstances shallany present or future partner of Landlord (if Landlord is a partnership), ortrustee or beneficiary (if Landlord or any partner of Landlord is a trust),have any liability for the performance of Landlord’s obligations under thisLease.  Notwithstanding any contraryprovision herein, neither Landlord nor the Landlord Parties shall be liableunder any circumstances for consequential damages arising from any injury or damageto, or interference with, Tenant’s business, including but not limited to, lossof profits, loss of rents or other revenues, loss of business opportunity, lossof goodwill or loss of use, in each case, however occurring.

##  

## 29.14                     **Entire Agreement**.  It is understood and acknowledged that thereare no oral agreements between the parties hereto affecting this Lease and thisLease constitutes the parties’ entire agreement with respect to the leasing ofthe Premises and supersedes and cancels any and all previous negotiations,arrangements, brochures, agreements and understandings, if any, between theparties hereto or displayed by Landlord to Tenant with respect to the subjectmatter thereof, and none thereof shall be used to interpret or construe this Lease.  None of the terms, covenants, conditions orprovisions of this Lease can be modified, deleted or added to except in writingsigned by the parties hereto.

##  

## 29.15                     **Right to Lease**.  Subject to the TCC’s of Section 1.3of this Lease, Landlord reserves the absolute right to effect such othertenancies in the Project as Landlord in the exercise

 

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## of itssole business judgment shall determine to best promote the interests of theBuilding or Project.  Tenant does notrely on the fact, nor does Landlord represent, that any specific tenant or typeor number of tenants shall, during the Lease Term, occupy any space in theBuilding or Project.

##  

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

##  

## 29.17                     **Waiver of Redemption by Tenant**.  Tenant hereby waives, for Tenant and for allthose claiming under Tenant, any and all rights now or hereafter existing toredeem by order or judgment of any court or by any legal process or writ,Tenant’s right of occupancy of the Premises after any termination of thisLease.

##  

## 29.18                     **Notices**. All notices, demands, statements, designations, approvals or othercommunications (collectively, “**Notices**”) givenor required to be given by either party to the other hereunder or by law shallbe in writing, shall be (A) sent by United States certified or registeredmail, postage prepaid, return receipt requested (“**Mail**”),(B) transmitted by telecopy, if such telecopy is promptly followed by aNotice sent by Mail, (C) delivered by a nationally recognized overnightcourier, or (D) delivered personally. Any Notice shall be sent, transmitted, or delivered, as the case may be,to Tenant at the appropriate address set forth in Section 10 of theSummary, or to such other place as Tenant may from time to time designate in aNotice to Landlord, or to Landlord at the addresses set forth below, or to suchother places as Landlord may from time to time designate in a Notice toTenant.  Any Notice will be deemed given (i) three(3) days after the date it is posted if sent by Mail, (ii) the datethe telecopy is transmitted, (iii) the date the overnight courier deliveryis made, or (iv) the date personal delivery is made or attempted to bemade (to the extent such attempted delivery is refused).  If Tenant is notified of the identity andaddress of Landlord’s mortgagee or ground or underlying lessor, Tenant shallgive to such mortgagee or ground or underlying lessor written notice of anydefault by Landlord under the terms of this Lease by registered or certifiedmail, and such mortgagee or ground or underlying lessor shall be given the sameopportunity as Landlord following the date it receive writing notice of suchdefault, to cure such default prior to Tenant’s exercising any remedy availableto Tenant.  As of the date of this Lease,any Notices to Landlord must be sent, transmitted, or delivered, as the casemay be, to the following addresses:

##  

Kilroy Realty Corporation

12200 West Olympic Boulevard

Suite 200

 

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Los Angeles, California  90064

Attention:  Legal Department

 

with copies to:

 

Kilroy Realty Corporation

3611 Valley Centre Drive, Suite 550

San Diego, California 92130

Attention:  Mr. BrianGalligan

 

and

 

Allen Matkins LeckGamble & Mallory LLP

1901 Avenue of theStars, Suite 1800

Los Angeles,California 90067

Attention:  Anton N. Natsis, Esq.

 

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

##  

## 29.20                     **Authority**. If Tenant or Landlord is a corporation, trust or partnership, eachindividual executing this Lease on behalf of Tenant or Landlord herebyrepresents and warrants that Landlord or Tenant, as appropriate, is a dulyformed and existing entity qualified to do business in California and thatLandlord or Tenant, as appropriate, has full right and authority to execute anddeliver this Lease and that each person signing on behalf of Landlord orTenant, as appropriate, is authorized to do so. Tenant shall, within ten (10) days after execution of this Lease,deliver to Landlord satisfactory evidence of (i) good standing in Tenant’sstate of incorporation and (ii) qualification to do business inCalifornia.

##  

## 29.21                     **Attorneys’ Fees**.  In the event that either Landlord or Tenantshould bring suit for the possession of the Premises, for the recovery of anysum due under this Lease, or because of the breach of any provision of thisLease or for any other relief against the other, then all costs and expenses,including reasonable attorneys’ fees, incurred by the prevailing party thereinshall be paid by the other party, which obligation on the part of the otherparty shall be deemed to have accrued on the date of the commencement of suchaction and shall be enforceable whether or not the action is prosecuted tojudgment.

##  

## 29.22                     **Governing Law; WAIVER OF TRIAL BY JURY**.  This Lease shall be construed and enforced inaccordance with the laws of the State of California.  IN ANY ACTION OR PROCEEDING ARISING HEREFROM,LANDLORD AND TENANT HEREBY CONSENT TO (I) THE JURISDICTION OF ANY COMPETENTCOURT WITHIN THE STATE OF CALIFORNIA, (II) SERVICE OF PROCESS BY ANY MEANSAUTHORIZED BY CALIFORNIA LAW, AND (III) IN THE INTEREST OF SAVING TIME ANDEXPENSE, TRIAL WITHOUT A JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHTBY EITHER OF THE PARTIES HERETO AGAINST THE OTHER OR THEIR SUCCESSORS IN RESPECTOF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS LEASE, THE RELATIONSHIPOF LANDLORD AND TENANT, TENANT’S USE OR OCCUPANCY OF THE PREMISES, AND/OR ANYCLAIM FOR INJURY OR

 

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## DAMAGE,OR ANY EMERGENCY OR STATUTORY REMEDY.  INTHE EVENT LANDLORD COMMENCES ANY SUMMARY PROCEEDINGS OR ACTION FOR NONPAYMENTOF BASE RENT OR ADDITIONAL RENT, TENANT SHALL NOT INTERPOSE ANY COUNTERCLAIM OFANY NATURE OR DESCRIPTION (UNLESS SUCH COUNTERCLAIM SHALL BE MANDATORY) IN ANYSUCH PROCEEDING OR ACTION, BUT SHALL BE RELEGATED TO AN INDEPENDENT ACTION ATLAW.

##  

## 29.23                     **Submission of Lease**.  Submission of this instrument for examinationor signature by Tenant does not constitute a reservation of, option for oroption to lease, and it is not effective as a lease or otherwise untilexecution and delivery by both Landlord and Tenant.

##  

## 29.24                     **Brokers**. Landlord and Tenant hereby warrant to each other that they have had nodealings with any real estate broker or agent in connection with thenegotiation of this Lease, excepting only the real estate brokers or agentsspecified in Section 12 of the Summary (the “**Brokers**”),and that they know of no other real estate broker or agent who is entitled to acommission in connection with this Lease. Each party agrees to indemnify and defend the other party against andhold the other party harmless from any and all claims, demands, losses,liabilities, lawsuits, judgments, costs and expenses (including withoutlimitation reasonable attorneys’ fees) with respect to any leasing commissionor equivalent compensation alleged to be owing on account of any dealings withany real estate broker or agent, other than the Brokers, occurring by, through,or under the indemnifying party.

##  

## 29.25                     **Independent Covenants**.  This Lease shall be construed as though thecovenants herein between Landlord and Tenant are independent and not dependentand Tenant hereby expressly waives the benefit of any statute to the contraryand agrees that if Landlord fails to perform its obligations set forth herein,Tenant shall not be entitled to make any repairs or perform any acts hereunderat Landlord’s expense or to any setoff of the Rent or other amounts owinghereunder against Landlord, except as expressly set forth in this Lease.

##  

## 29.26                     **Project or Building Name and Signage**.  Landlord shall have the right at any time tochange the name of the Project or Building and, subject to the TCCs of Section 23.2,Landlord shall have the right to install, affix and maintain any and all signson the exterior and on the interior of the Project or Building as Landlord may,in Landlord’s sole discretion, desire. Tenant shall not use the name of the Project or Building or use picturesor illustrations of the Project or Building in advertising or other publicityor for any purpose other than as the address of the business to be conducted byTenant in the Premises, without the prior written consent of Landlord.

##  

## 29.27                     **Counterparts**.  This Lease may be executed in counterpartswith the same effect as if both parties hereto had executed the samedocument.  Both counterparts shall beconstrued together and shall constitute a single lease.

##  

## 29.28                     **Confidentiality**.  Tenant acknowledges that the content of thisLease and any related documents are confidential information.  Tenant shall keep such confidentialinformation strictly confidential and shall not disclose such confidentialinformation to any person or entity other than Tenant’s financial, legal, andspace planning consultants, and except as required to be disclosed by anyapplicable law or regulation.  Landlordand Tenant hereby acknowledge that a

 

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## copy ofthis Lease would be attached to Tenant’s filings, if any, with the Securitiesand Exchange Commission.

##  

## 29.29                     **Transportation Management**.  Tenant shall fully comply with all present orfuture governmental programs intended to manage parking, transportation ortraffic in and around the Building, and in connection therewith, Tenant shalltake responsible action for the transportation planning and management of allemployees located at the Premises by working directly with Landlord, anygovernmental transportation management organization or any othertransportation-related committees or entities.

##  

## 29.30                     **Building Renovations**.  It is specifically understood and agreed thatLandlord has made no representation or warranty to Tenant and has no obligationand has made no promises to alter, remodel, improve, renovate, repair ordecorate the Premises, Building, or any part thereof and that norepresentations respecting the condition of the Premises or the Building havebeen made by Landlord to Tenant except as specifically set forth herein or inthe Tenant Work Letter.  However, Tenanthereby acknowledges that Landlord is currently renovating or may during theLease Term renovate, improve, alter, or modify (collectively, the “**Renovations**”) the Project, the Building and/or the Premisesincluding without limitation the parking structure, common areas, systems andequipment, roof, and structural portions of the same, which Renovations mayinclude, without limitation, (i) installing sprinklers in the Buildingcommon areas and tenant spaces, (ii) modifying the common areas and tenantspaces to comply with applicable laws and regulations, including regulationsrelating to the physically disabled, seismic conditions, and building safetyand security, and (iii) installing new floor covering, lighting, and wallcoverings in the Building common areas, and in connection with any Renovations,Landlord may, among other things, erect scaffolding or other necessarystructures in the Building, limit or eliminate access to portions of theProject, including portions of the common areas, or perform work in theBuilding, which work may create noise, dust or leave debris in theBuilding.  To the extent that suchRenovations and Landlord’s actions do not violate the TCCs of Article 28and/or the last sentence of Section 1.1.3 of this Lease, Tenanthereby agrees that such Renovations and Landlord’s actions in connection withsuch Renovations shall in no way constitute a constructive eviction of Tenantnor entitle Tenant to any abatement of Rent. Landlord shall have no responsibility or for any reason be liable toTenant for any direct or indirect injury to or interference with Tenant’sbusiness arising from the Renovations, nor shall Tenant be entitled to anycompensation or damages from Landlord for loss of the use of the whole or anypart of the Premises or of Tenant’s personal property or improvements resultingfrom the Renovations or Landlord’s actions in connection with such Renovations,or for any inconvenience or annoyance occasioned by such Renovations orLandlord’s actions.  Notwithstandinganything set forth in this Section 29.30 to the contrary, Landlordshall provide Tenant with five (5) business days prior notice of anyRenovations and shall use commercially reasonable efforts to minimize anyinterference with Tenant’s business caused by Landlord’s actions in connectionwith such Renovations.

##  

## 29.31                     **No Violation**.  Tenant and Landlord each hereby warrant andrepresent that neither its execution of nor performance under this Lease shallcause such party to be in violation of any agreement, instrument, contract,law, rule or regulation by which it is bound, and each party shallprotect, defend, indemnify and hold the other harmless against any claims,demands,

 

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## losses,damages, liabilities, costs and expenses, including, without limitation,reasonable attorneys’ fees and costs, arising from such party’s breach of thiswarranty and representation.

##  

## 29.32                     **Communications and Computer Lines**.  Tenant may install, maintain, replace, removeor use any communications or computer wires and cables (collectively, the “**Lines**”) at the Project in or serving the Premises, providedthat (i) Tenant shall obtain Landlord’s prior written consent (whichconsent shall not be unreasonably withheld), use an experienced and qualifiedcontractor approved in writing by Landlord, and comply with all of the otherprovisions of Articles 7 and 8 of this Lease, (ii) theLines therefor (including riser cables) shall be appropriately insulated toprevent excessive electromagnetic fields or radiation, and shall be surroundedby a protective conduit reasonably acceptable to Landlord, (iii) any newor existing Lines servicing the Premises shall comply with all applicablegovernmental laws and regulations, (iv) as a condition to permitting theinstallation of new Lines, Landlord may require that Tenant remove existingLines located in or serving the Premises and repair any damage in connectionwith such removal, and (v) Tenant shall pay all costs in connectiontherewith.  Landlord reserves the rightto require that Tenant remove any Lines located in or serving the Premiseswhich are installed in violation of these provisions, or which are at any timein violation of any laws or represent a dangerous or potentially dangerouscondition.

##  

## 29.33                     **Hazardous Substances**.

 

### 29.33.1            **Definitions**.  For purposes of this Lease, the followingdefinitions shall apply:  “**Hazardous Material(s)**” shall mean any solid, liquid orgaseous substance or material that is described or characterized as a toxic orhazardous substance, waste, material, pollutant, contaminant or infectiouswaste, or any matter that in certain specified quantities would be injurious tothe public health or welfare, or words of similar import, in any of the “EnvironmentalLaws,” as that term is defined below, or any other words which are intended todefine, list or classify substances by reason of deleterious properties such asignitability, corrosivity, reactivity, carcinogenicity, toxicity orreproductive toxicity and includes, without limitation, asbestos, petroleum (includingcrude oil or any fraction thereof, natural gas, natural gas liquids, liquefiednatural gas, or synthetic gas usable for fuel, or any mixture thereof),petroleum products, polychlorinated biphenyls, urea formaldehyde, radon gas,nuclear or radioactive matter, medical waste, soot, vapors, fumes, acids,alkalis, chemicals, microbial matters (such as molds, fungi or other bacterialmatters), biological agents and chemicals which may cause adverse healtheffects, including but not limited to, cancers and /or toxicity.  “**Environmental Laws**”shall mean any and all federal, state, local or quasi-governmental laws(whether under common law, statute or otherwise), ordinances, decrees, codes,rulings, awards, rules, regulations or guidance or policy documents now orhereafter enacted or promulgated and as amended from time to time, in any wayrelating to (i) the protection of the environment, the health and safetyof persons (including employees), property or the public welfare from actual orpotential release, discharge, escape or emission (whether past or present) ofany Hazardous Materials or (ii) the manufacture, processing, distribution,use, treatment, storage, disposal, transport or handling of any HazardousMaterials.

###  

### 29.33.2            **Compliancewith Environmental Laws**. Landlord covenants that during the Lease Term, Landlord shall complywith all Environmental Laws in accordance with, and as required by, the TCCs ofArticle 24 of this Lease. Tenant shall not sell, use, or store in or

 

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### around the Premises any Hazardous Materials, except if stored, properlypackaged and labeled, disposed of and/or used in accordance with applicableEnvironmental Laws.  In addition, Tenantagrees that it: (i) shall not cause or suffer to occur, the release,discharge, escape or emission of any Hazardous Materials at, upon, under orwithin the Premises or any contiguous or adjacent premises; (ii) shallnotify Landlord promptly following receipt of any knowledge with respect to anyactual release, discharge, escape or emission (whether past or present) of anyHazardous Materials at, upon, under or within the Premises; (iii) shallpromptly forward to Landlord copies of all orders, notices, permits,applications and other communications and reports in connection with anyrelease, discharge, escape or emission of any Hazardous Materials at, upon,under or within the Premises or any contiguous or adjacent premises, and (iv) inconnection with Tenant’s surrender of the Premises upon the expiration orearlier termination of this Lease, Tenant shall deliver the same free ofHazardous Materials brought upon, kept or used in or about the Premises by anypersons during the Lease Term or the term of the Original Lease, and shallobtain and provide to Landlord (A) all Hazardous Materials Clearances, (B) evidencefrom the applicable governmental entities of “closure” of all permits which hadbeen required for Tenant’s use of the Premises, together with “no furtheraction letters” from such applicable governmental entities and a “no furtheraction letter” for unrestricted future use of the Premises, and (C) aPhase I report with regard to the Premises. Such Phase I report shall be (x) performed by an environmentalassessment or engineering firm and on a scope of work acceptable to Landlord inits sole discretion, (y) shall identify Landlord as a beneficiary of suchreport, and (z) completed no earlier than six (6) months prior to theexpiration of this Lease and no later than the Lease Expiration Date; provided,however, in the event this Lease is terminated early for any reason, Tenantshall complete such Phase I report within a commercially reasonable timeimmediately following such early termination of this Lease.  Such Phase I report shall either (1) indicatethat the property shows no evidence of reasonably possible hazardous materialscontamination of the building, soil or groundwater; or (2) recommendfurther investigation of the site, in which event, if such furtherinvestigation relates to Tenant’s or the Tenant Parties’ use of the Premises,then it shall be performed by an environmental assessment or engineering firmand on a scope of work acceptable to Landlord in its sole discretion and at theTenant’s sole expense.  Such additionalinvestigation, if any, shall be completed within sixty (60) days of suchrecommendation.  Landlord and Tenanthereby agree that for purposes of establishing a baseline, Landlord shall,promptly following the date of this Lease, obtain and provide to Tenant anupdated Phase I report with regard to the Premises; provided, however, andTenant shall reimburse Landlord for one-half (1⁄2) of the cost or fees reasonablyincurred for such report as Additional Rent.

###  

### 29.33.3            **Listof Documents and Operations**. The parties acknowledge that Tenant has delivered to Landlord a listidentifying each type of Hazardous Materials to be present on the Premises andsetting forth any and all governmental approvals or permits required inconnection with the presence of such Hazardous Materials on the Premises (the “**Hazardous Materials List**”).  Tenant shall deliver to Landlord an updatedHazardous Materials List at least once a year and shall also deliver an updatedlist before any new Hazardous Material(s) is brought onto to the Premises.  Tenant shall deliver to Landlord true andcorrect copies of the following documents (the “**Haz Mat Documents**”) related to the handling, use, storage,disposal and emission of Hazardous Materials prior to the Lease CommencementDate, or if unavailable at that time, concurrent with the receipt from, orsubmission to, a governmental agency: permits; approvals; reports; storage and manufacturing plans; notice ofviolations of any laws; plans relating to the installation of any storage tanksto be installed in or under the Project (provided,

 

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### said installation of tanks shall only be permitted after Landlord hasgiven Tenant its written consent to do so, which consent may be withheld inLandlord’s sole and absolute discretion); and all closure plans or any otherdocuments required by any and all federal, state, and local governmentalagencies and authorities for any storage tanks installed in, on or under theProject for the closure of any such tanks. Tenant is not required, however, to provide Landlord with any portion(s)of the Haz Mat Documents containing information of a proprietary nature which,in and of themselves, do not contain a reference to any Hazardous Materials orhazardous activities.  It is not the intentof this Section 29.33.3 to provide Landlord with information whichcould be detrimental to Tenant’s business should such information becomepossessed by Tenant’s competitors.  Inconnection with the foregoing, Tenant hereby represents and warrants to Landlordthat neither Tenant, or any of its legal predecessors, has been required by anyprior landlord, lender or governmental authority at any time to take remedialaction in connection with Hazardous Materials contaminating a property whichcontamination was permitted by Tenant or resulting from Tenant’s action or useof the property in question, and Tenant is not subject to any enforcement orderissued by any governmental authority in connection with the use, disposal orstorage of a Hazardous Materials.  IfLandlord determines that this representation and warranty was not true as ofthe date of this Lease, Landlord shall have the right to terminate this Leasein Landlord’s sole and absolute discretion.

###  

### 29.33.4            **Landlord’sRight of Environmental Audit. **Landlord may, upon reasonable notice to Tenant, be granted access toand enter the Premises no more than once annually to perform or cause to haveperformed an environmental inspection, site assessment or audit.  Such environmental inspector or auditor may bechosen by Landlord, in its sole discretion, and be performed at Landlord’s soleexpense.  To the extent that the reportprepared upon such inspection, assessment or audit, indicates the presence ofHazardous Materials (due to Tenant or the Tenant Parties) in violation ofEnvironmental Laws, or provides recommendations or suggestions to prohibit therelease, discharge, escape or emission of any Hazardous Materials (by Tenant orthe Tenant Parties) at, upon, under or within the Premises, or to comply with anyEnvironmental Laws related to Tenant’s or the Tenant Parties’ use of thePremises (including the use of Hazardous Materials therein), Tenant shallpromptly, at Tenant’s sole expense, comply with any reasonable recommendationsor suggestions, including, but not limited to performing such additionalinvestigative or subsurface investigations or remediation(s) as reasonablyrecommended by such inspector or auditor (taking into account all legalrequirements and governmental agency recommendations).  Notwithstanding the above, if at any time,Landlord has actual notice or reasonable cause to believe that Tenant hasviolated, or permitted any violations of any Environmental Law, then Landlordwill be entitled to perform its environmental inspection, assessment or auditat any time, notwithstanding the above mentioned annual limitation, and Tenantmust reimburse Landlord for the cost or fees incurred for such as AdditionalRent.

###  

### 29.33.5            **Indemnifications**.   Landlord agrees to indemnify, defend,protect and hold harmless the Tenant and the Tenant Parties from and againstany liability, obligation, damage or costs, including without limitation,attorneys’ fees and costs, resulting directly or indirectly from any use,presence, removal or disposal of any Hazardous Materials to the extent suchliability, obligation, damage or costs (i) was a result of actions causedor permitted by Landlord or a Landlord Party, or (ii) arose prior to thedate of Tenant’s occupancy of any portion of the Premises, including, withoutlimitation, Tenant’s occupancy of the Premises under the

 

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### terms of the Original Lease. Tenant agrees to indemnify, defend, protect and hold harmless Landlordand the Landlord Parties from and against any liability, obligation, damage orcosts, including without limitation, attorneys’ fees and costs, resultingdirectly or indirectly from any use, presence, removal or disposal of anyHazardous Materials or breach of any provision of this section, to the extentsuch liability, obligation, damage or costs was a result of actions caused orpermitted by Tenant or a Tenant Party. These mutual environmental indemnities shall survive any expiration ortermination of this Lease, and are not affected by any claims of breach of anyother provisions of this Lease.

###  

### 29.33.6            **Ongoing Obligations**.  All obligations of Tenant hereunder not fullyperformed as of the termination of the Lease Term, including the obligations ofTenant pursuant to this Section 29.33, shall survive the expirationor earlier termination of the Lease, including, without limitation, indemnityobligations, payment obligations with respect to Rent and obligationsconcerning the condition and repair of the Premises.

###  

## 29.34                     **Development of the Project**.

 

### 29.34.1            **Subdivision**.  Landlord reserves the right to furthersubdivide all or a portion of the Project. Tenant agrees to execute and deliver, upon demand by Landlord and in theform requested by Landlord, any additional documents needed to conform thisLease to the circumstances resulting from such subdivision, which shall belimited to description of the Project and/or Building.

###  

### 29.34.2            **The Other Improvements**.  If portions of the Project or propertyadjacent to the Project (collectively, the “**OtherImprovements**”) are owned by an entity other than Landlord, Landlord,at its option, may enter into an agreement with the owner or owners of any orall of the Other Improvements to provide (i) for reciprocal rights ofaccess and/or use of the Project and the Other Improvements, (ii) for thecommon management, operation, maintenance, improvement and/or repair of all orany portion of the Project and the Other Improvements, (iii) for theallocation of a portion of the Direct Expenses to the Other Improvements andthe operating expenses and taxes for the Other Improvements to the Project, and(iv) for the use or improvement of the Other Improvements and/or theProject in connection with the improvement, construction, and/or excavation ofthe Other Improvements and/or the Project; provided that none of the foregoingmaterially adversely interfere with Tenant’s rights, or increase Tenant’sfinancial obligations, under this Lease. Nothing contained herein shall be deemed or construed to limit orotherwise affect Landlord’s right to convey all or any portion of the Projector any other of Landlord’s rights described in this Lease.

###  

### 29.34.3            **Construction of Project and Other Improvements**.  Tenant acknowledges that portions of theProject and/or the Other Improvements may be under construction followingTenant’s occupancy of the Premises, and that such construction may result inlevels of noise, dust, obstruction of access, etc. which are in excess of thatpresent in a fully constructed project. Landlord shall use its commercially reasonable efforts to minimize thedisruption to Tenant and Tenant’s business from such construction and in noevent shall Landlord be entitled to use Tenant’s parking areas for constructionstaging, storage of equipment or other construction related activities withoutTenant’s approval, which may be granted or withheld in

 

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### Tenant’ssole discretion.  Tenant hereby waivesany and all rent offsets or claims of constructive eviction which may arise inconnection with such construction.

###  

### 29.34.4            **Tenant’s Lease of the Entire Project**.  To the extent thatTenant leases all of the 10421 Building and the 10445 Building, the terms ofthis Section 29.34 shall not apply.

###  

## 29.35                     **Central Plant Area**.  Tenant has constructed that certain “**Central Plant Area**” pursuant to the termsof the Original Lease.  Tenantshall continue to maintain such Central Plant Area, at Tenant’s sole cost andexpense.  Tenant shall remove suchCentral Plant Area upon the expiration or earlier termination of this Lease andshall repairany damage to the Building caused by such removal and return the affectedportion of the Premises to a building standard tenant improved condition asdetermined by Landlord. Such Central Plant Area shall, in all instances, comply with applicablegovernmental laws, codes, rules and regulations.

##  

## 29.36                     **No Discrimination**.  Tenant covenants by and for itself, itsheirs, executors, administrators and assigns, and all persons claiming under orthrough Tenant, and this Lease is made and accepted upon and subject to thefollowing conditions:  that there shallbe no discrimination against or segregation of any person or group of persons,on account of race, color, creed, sex, religion, marital status, ancestry ornational origin in the leasing, subleasing, transferring, use, or enjoyment ofthe Premises, nor shall Tenant itself, or any person claiming under or throughTenant, establish or permit such practice or practices of discrimination orsegregation with reference to the selection, location, number, use oroccupancy, of tenants, lessees, sublessees, subtenants or vendees in thePremises.

##  

## 29.37                     **10445 Premises; Sublease Space; Alternate Temporary Space**.  Landlord shall use commercially reasonableefforts to cause the termination of the Nuera Lease (which termination shalloccur following the full execution and unconditional delivery [*i.e.*, with no conditions to theeffectiveness of such termination agreement outstanding] of a lease terminationagreement with respect to the Nuera Lease, in a manner acceptable to Landlordin its sole and absolute discretion) to occur on or before January 31,2006; provided, however, that Landlord shall have no liability whatsoever toTenant relating to or arising from Landlord’s inability or failure to enterinto such a termination agreement or deliver the 10445 Premises to Tenant, orLandlord’s delay in entering into such a termination agreement or deliveringthe 10445 Premises to Tenant.

##  

### 29.37.1            **NueraSublease**.  In the eventthat Landlord in unable to timely cause the termination of the Nuera Lease onor before January 31, 2006, then commencing as of such date, Tenant shalluse good faith, diligent efforts to enter into a sublease agreement directlywith Nuera (the “**Nuera Sublease**”)on terms acceptable to Tenant in its reasonable discretion, whereby Tenantwould sublease from Nuera at least 20,000 rentable square feet of the 10445Premises and which Nuera Sublease would commence no later than June 1,2006.  The parties hereto acknowledgethat Landlord is using, and Landlord agrees to continue to use commerciallyreasonable efforts to assist Tenant in entering into such Nuera Sublease.  Landlord shall have no liability whatsoeverto Tenant relating to or arising from any inability of Tenant to enter intosuch Nuera Sublease or any delay in Tenant’s occupancy of the sublease premisesunder such Nuera Sublease.

 

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### 29.37.2            **Temporary Space**. In the event thatLandlord in unable to timely cause the termination of the Nuera Lease as setforth in Section 29.37, above, and in the event that despite Tenant’sgood faith, diligent efforts, Tenant is unable to enter into such NueraSublease as set forth in Section 39.37.1, above (which failureshall be deemed not to have occurred in the event that Tenant refuses to enterinto the Nuera Sublease on commercially reasonable terms) on or before June 1,2006, then no later than June 1, 2006, Landlord shall provide Tenant withat least 20,000 rentable square feet of space in the building located at 6340Sequence Drive, San Diego, California 92121 (the “**Temporary Space**”).  The term of Tenant’s lease of the TemporarySpace shall terminate on the date (the “**TemporarySpace Expiration Date**”) which is ninety-one (91) days following thedate upon which Landlord tenders possession of all or any portion of the 10445Premises to Tenant.  Tenant’s possessionof the Temporary Space shall be subject to the terms and conditions of thisLease as though such Temporary Space were included in the Premises, except that(A) Tenant shall not be required to pay Base Rent or, generally, Tenant’sShare of the Direct Expenses otherwise attributable to such Temporary Spaceduring Tenant’s period of occupancy of theTemporary Space; provided, however, Tenant shall pay for all utilities andother costs incurred in connection with Tenant’s use and occupancy of theTemporary Space, (B) Tenant shall have no right to assign, subleaseor otherwise transfer its interest with respect to the Temporary Space, (C) Tenantshall accept the Temporary Space in its existing “as is” condition, (D) Tenantshall not make any alterations or improvements to the Temporary Space or anyportion thereof, without Landlords prior written approval, which approval maybe withheld in Landlord’s sole discretion, (E) the terms of the TenantWork Letter shall be inapplicable to the Temporary Space, and (F) Landlordshall have no obligation to provide or pay for improvements of any kind withrespect to the Temporary Space.   Tenantshall vacate and surrender the Temporary Space to Landlord on or before theTemporary Space Expiration Date in as good order and condition as when Tenanttook possession, reasonable wear and tear excepted.  Tenant shall be solely responsible for allcosts incurred in connection with moving in and out of the Temporary Space.

###  

# **ARTICLE 30**

 

# **RIGHT OF FIRST NEGOTIATION**

 

## 30.1                           **Landlord’s Right of First Negotiation**.Throughout the Lease Term, in the event that Tenant desires to lease, subleaseor purchase space (other than the Premises) within San Diego County, then priorto communicating such space requirement to the marketplace (whether throughdistribution of a “request for proposal” therefor or otherwise), Tenant shallfirst provide Landlord with ten (10) business days advance written noticeof such space requirement, which notice shall set forth the general terms ofsuch space requirements.  During the ten (10) businessdays following Landlord’s receipt of such notice, Landlord shall have the rightto submit to Tenant a proposal with respect to such requirements, and Tenantagrees to consider any such proposal in good faith and to meet with Landlorddiscuss its offer.  Neither such noticenor any proposal shall create any binding obligation on the part of either party,including any obligation to enter into or continue any negotiations withrespect thereto.  Landlord agrees tomaintain the confidentiality of Tenant’s space requirements (unless and untilTenant makes such space requirement public), and Tenant agrees to maintain theconfidentiality of any proposal by Landlord, and the parties shall not todisclose the same to any parties other than their respective financial, legal, andspace planning consultants, and except as required to be disclosed by any

 

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## applicablelaw or regulation.   Tenant’s obligationto provide Landlord such notice and opportunity to submit a proposal shallexpire at such time as the named Landlord hereunder transfers the Property toany party other than an affiliated entity which controls, in controlled by orunder common control as the named Landlord.

 

## [*continued on the following page*]

 

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

 
| ** ** |       | **“LANDLORD”:**       |
|------------|------------|---------------------------------|
| ** ** |       | ** **                      |
| ** ** | ** ** | KILROY  REALTY, L.P.,           |
| ** ** | ** ** | a  Delaware limited partnership |
| ** ** | ** ** |                            |
| ** ** | ** ** | By:                             | Kilroy  Realty Corporation, |
| ** ** | ** ** |                            | a  Maryland corporation, |
| ** ** | ** ** |                            | General  Partner |
| ** ** | ** ** |                            |   |
| ** ** | ** ** |                            | By | :   /s/  Jeffrey C. Hawken |   |
| ** ** | ** ** |                            |   |
| ** ** | ** ** |                            |   |     Its: |  Executive  Vice President |   |
| ** ** | ** ** |                            |   |   |
| ** ** | ** ** |                            |   |   |  Chief  Operating Officer |   |
| ** ** | ** ** | ** **                      |
| ** ** | ** ** |                            | By: |             /s/ Steve Scott |   |
| ** ** | ** ** | ** **                      |
| ** ** | ** ** |                            |   |     Its: |  Senior  Vice President |   |
| ** ** | ** ** | ** **                      |
| ** ** | ** ** | **“TENANT”:**         |
| ** ** |       |                            |
| ** ** |       | FAVRILLE,  INC.,                |
| ** ** |       | a  Delaware corporation         |
| ** ** |       |                            |
| ** ** | ** ** | By:                             |    /s/  John P. Longenecker | ** ** |
| ** ** |       |                            |
| ** ** | ** ** |                            |    Its: |     President  and CEO |   |
| ** ** |       |                            |
| ** ** | ** ** | By:                             |    /s/  Tamara A. Seymour | ** ** |
| ** ** | ** ** |                            |   |
| ** ** | ** ** |                            |    Its: |     Chief  Financial Officer |   |
|            |            |                                 |  |  |  |  |  |  |  |  |  |  |

 

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**EXHIBIT A**

 

**PACIFIC CORPORATE CENTER**

 

**OUTLINE OF PREMISES**

 

**[ATTACHED]**

 

1

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**EXHIBIT B**

 

**PACIFIC CORPORATE CENTER**

 

**TENANT WORK LETTER**

 

**[ATTACHED]**

 

1

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**EXHIBIT B**

 

**PACIFIC CORPORATE CENTER**

 

**TENANT WORK LETTER**

 

This Tenant WorkLetter shall set forth the terms and conditions relating to the construction ofthe Premises.  This Tenant Work Letter isessentially organized chronologically and addresses the issues of theconstruction of the Premises, in sequence, as such issues will arise during theactual construction of the Premises.  Allreferences in this Tenant Work Letter to Articles or Sections of “this Lease”shall mean the relevant portions of Articles 1 through 29 ofthe Amended and Restated Office Lease to which this Tenant Work Letter isattached as **Exhibit B**,and all references in this Tenant Work Letter to Sections of “this Tenant WorkLetter” shall mean the relevant portions of Sections 1 through 5of this Tenant Work Letter.

 

SECTION 1

 

**PREMISES**

 

Landlord and Tenant acknowledge that Tenant has beenoccupying the Premises pursuant to the Original Lease.  Except as specifically set forth herein or inthe Lease, Landlord shall not be obligated to construct or install anyimprovements or facilities of any kind in the Premises, and Tenant shallcontinue to accept the Premises in its currently-existing, “as-is” condition,subject to Landlord express obligations set forth in Article 7 of thisLease, including, without limitation, with respect to the BuildingStructure.  

 

SECTION 2

 

**TENANT IMPROVEMENTS**

 

2.1                                 **Improvement Allowance**.  Tenant shall be entitled to a one-timeimprovement allowance (the “**ImprovementAllowance**”) in the amount of Ten Million and No/100 Dollars($10,000,000.00) for the costs relating to the “hard costs” of the constructionof Tenant’s improvements which are permanently affixed to the Premises (the “**Tenant Improvements**”) and Landlordand Tenant hereby acknowledge and agree that all such Tenant Improvementsshall, upon completion of the same, be and become a part of the Premises andthe property of Landlord. In no event shall Landlord be obligated to make disbursements pursuantto this Tenant Work Letter in a total amount which exceeds the ImprovementAllowance.

 

2.2                                 **Disbursement of the Improvement Allowance**.

 

2.2.1                        **Improvement Allowance Items**.  Except as otherwise set forth in this TenantWork Letter, the Tenant Improvement Allowance shall be disbursed by Landlord(each of which disbursements shall be made pursuant to Landlord’s disbursementprocess) for costs related to the construction of the Tenant Improvements andfor the following items and costs (collectively the “**Improvement Allowance Items**”):

 

1

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2.2.1.1               The hard cost of construction of theTenant Improvements, including, without limitation, testing and inspectioncosts, freight elevator usage, hoisting and trash removal costs, andcontractors’ fees and general conditions;

 

2.2.1.2               The cost of any changes in the BaseBuilding when such changes are required by the Construction Drawings (includingif such changes are due to the fact that such work is prepared on an unoccupiedbasis), provided that such cost shall not include any architectural and/orengineering fees and expenses incurred in connection therewith;

 

2.2.1.3               The cost of any changes to the TenantImprovements required by Code;

 

2.2.1.4               The cost of the “Landlord SupervisionFee,” as that term is defined in Section 4.2.2 of this Tenant WorkLetter; and

 

2.2.1.5               All other costs required or allowed bythe terms of this Tenant Work Letter to be expended by Landlord in connectionwith the construction of the Tenant Improvements.

 

Tenant expresslyacknowledges and agrees that no portion of the Improvement Allowance may beused for any “soft costs” in connection with the design, permitting orconstruction of the Tenant Improvements, which soft costs shall include,without limitation, (i) payment of the fees of the “Architect” and the “Engineers,”as those terms are defined in Section 3.1 of this Tenant WorkLetter, (ii) the payment of plan check, permit and license fees relatingto construction of the Tenant Improvements, and (iii) the cost of any ofTenant’s furniture, fixtures or equipment. 

 

2.3                                 **Standard Tenant Improvement Package**.  Landlord has established specifications (the “**Building Standard Tenant Improvements**”) forthe Building standard components to be used in the construction of the TenantImprovements in the office areas of the Premises, which Building StandardTenant Improvements are set forth on **Schedule 1**,attached hereto.  The quality of TenantImprovements shall be equal to or of greater quality than the quality of theBuilding Standard Tenant Improvements.

 

2.4                                 **Removal of Above Building Standard Tenant Improvements**.  “**AboveStandard Tenant Improvements**” shall mean (a) any part of theoffice portions of the Tenant Improvements which do not constitute BuildingStandard Tenant Improvements; (b) a configuration of the Tenant Improvementswhich is not usual and customary for either normal occupancy or generic wet/drylab space; and (c) Tenant Improvements of a nature specific to the cGMPStandards.  Landlord may require that Tenant,upon the expiration or any earlier termination of this Lease, remove any AboveStandard Tenant Improvements in the lab portion of the Premises identified byLandlord concurrently with Landlord’s review and approval of the ApprovedWorking Drawings to the extent such Tenant Improvements are unique and particularto Tenant vis-à-vis generic wet/dry lab space (collectively, the “**Extraordinary Alterations**”), and to repairany damage to the Premises and Building caused by such removal (reasonable wearand tear excepted); provided, however, if Landlord, in its approval of anyAbove Standard Tenant Improvements, fails to address the removal requirementwith regard to particular Above

 

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Standard Tenant Improvements,Landlord shall be deemed to have agreed to waive the removal requirement withregard to such particular Above Standard Tenant Improvements; provided further,however, in no event shall identified Extraordinary Alterations includeimprovements which are industry standard improvements in research and developmentwet labs.

 

SECTION 3

 

**CONSTRUCTION DRAWINGS**

 

3.1                                 **Selection of Architect/Construction Drawings**.  Tenant shall retain an architect/spaceplanner selected by Tenant, subject to Landlord’s reasonable approval (the “**Architect**”) to prepare the “Construction Drawings,”as that term is defined in this Section 3.1.  Tenant shall retain the engineeringconsultants selected by Tenant, subject to Landlord’s reasonable approval (the “**Engineers**”) to prepare all plans andengineering working drawings relating to the structural, mechanical,electrical, plumbing, HVAC, lifesafety, and sprinkler work in the Premises,which work is not part of the Base Building. Landlord shall approve or disapprove of Tenant’s proposed Architect orEngineers, as the case may be, within five (5) business days followingTenant’s submission of the name(s) of Tenant’s proposed Architects orEngineers, respectively, together with all documentation and other informationreasonably required by Landlord.  Theplans and drawings to be prepared by Architect and the Engineers hereundershall be known collectively as the “**ConstructionDrawings**.”  All ConstructionDrawings shall comply with the drawing format and specifications determined byLandlord, and shall be subject to Landlord’s approval, which approval shall notbe unreasonably withheld.  Tenant andArchitect shall verify, in the field, the dimensions and conditions as shown onthe relevant portions of the base building plans, and Tenant and Architectshall be solely responsible for the same, and Landlord shall have noresponsibility in connection therewith. Landlord’s review of the Construction Drawings as set forth in this Section 3,shall be for its sole purpose and shall not imply Landlord’s review of thesame, or obligate Landlord to review the same, for quality, design, Codecompliance or other like matters. Accordingly, notwithstanding that any Construction Drawings are reviewedby Landlord or its space planner, architect, engineers and consultants, andnotwithstanding any advice or assistance which may be rendered to Tenant byLandlord or Landlord’s space planner, architect, engineers, and consultants,Landlord shall have no liability whatsoever in connection therewith and shallnot be responsible for any omissions or errors contained in the ConstructionDrawings, and Tenant’s waiver and indemnity set forth in this Lease shallspecifically apply to the Construction Drawings.

 

3.2                                 **Final Space Plan**.  Tenant shall supply Landlord with four (4) copiessigned by Tenant of its final space plan for the Premises before anyarchitectural working drawings or engineering drawings have beencommenced.  The final space plan (the “**Final Space Plan**”) shall include a layoutand designation of all offices, rooms and other partitioning, their intendeduse, and equipment to be contained therein. Landlord may request clarification or more specific drawings for specialuse items not included in the Final Space Plan. Landlord shall, within ten (10) business days after Landlord’sreceipt of the Final Space Plan, (i) approve the Final Space Plan, (ii) approvethe Final Space Plan subject to specified conditions to be complied with whenthe Final Working Drawings are submitted by Tenant to Landlord, or (iii) disapprovethe Final Space Plan and return the same to Tenant with detailed requestedrevisions.  If Landlord disapproves theFinal Space Plan, Tenant shall resubmit the Final Space Plan to Landlord, and

 

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Landlordshall approve or disapprove of the resubmitted Final Space Plan, based upon thecriteria set forth in this Section 3.2 (except that Landlord’sdisapproval of the Final Space Plan, as resubmitted, shall be final), withinfive (5) business days after Landlord receives such resubmitted FinalSpace Plan.  If Tenant is so advised,Tenant shall promptly cause the Final Space Plan to be revised to correct anydeficiencies or other matters Landlord may reasonably require.

 

3.3                                 **Final Working Drawings**.  After the Final Space Plan has been approvedby Landlord, Tenant shall supply the Engineers with a complete listing ofstandard and non-standard equipment and specifications, including, withoutlimitation, B.T.U. calculations, electrical requirements and special electricalreceptacle requirements for the Premises, to enable the Engineers and theArchitect to complete the “Final Working Drawings” (as that term is definedbelow) in the manner as set forth below. Upon the approval of the Final Space Plan by Landlord and Tenant, Tenantshall promptly cause the Architect and the Engineers to complete thearchitectural and engineering drawings for the Premises, and Architect shallcompile architectural, structural, mechanical, electrical and plumbing workingdrawings in a form which is complete to allow subcontractors to bid on the workand to obtain all applicable permits (which may be done by subspecialty if suchsubspecialty will be separately permitted by the City) (collectively, the “**Final Working Drawings**”) and shall submitthe same to Landlord for Landlord’s approval. Tenant shall supply Landlord with four (4) copies signed by Tenantof such Final Working Drawings.  Landlordshall, within ten (10) business days after Landlord’s receipt of the FinalWorking Drawings, (i) approve the Final Working Drawings, (ii) approvethe Final Working Drawings subject to specified conditions to be satisfied byTenant prior to submitting the Approved Working Drawings for permits as setforth in Section 3.4, below, or (iii) disapprove the FinalWorking Drawings and return the same to Tenant with detailed requestedrevisions.  If Landlord disapproves theFinal Working Drawings, Tenant shall resubmit the Final Working Drawings toLandlord, and Landlord shall approve or disapprove of the resubmitted FinalWorking Drawings (except that Landlord’s disapproval of the Final WorkingDrawings, as resubmitted, shall be final), within five (5) business daysafter Landlord receives such resubmitted Final Working Drawings.  If Tenant is so advised, Tenant shallimmediately revise the Final Working Drawings in accordance with such reviewand any disapproval of Landlord in connection therewith.  In addition, if the Final Working Drawings orany amendment thereof or supplement thereto shall require alterations in theBase Building (as contrasted with the Tenant Improvements), and if Landlord inits sole and exclusive discretion agrees to any such alterations, and notifiesTenant of the need and cost for such alterations, then Tenant shall pay, at itssole cost and expense, the cost of such required changes upon receipt of billstherefor.

 

3.4                                 **Approved Working Drawings**.  Notwithstanding anything in this Tenant WorkLetter to the contrary, Tenant shall not commence (or allow the commencementof) the construction of the Tenant Improvements until the Final WorkingDrawings are approved in writing by Landlord (the “**Approved Working Drawings**”). After approval by Landlord of the Final Working Drawings, Tenant maysubmit the same to the appropriate municipal authorities for all applicablebuilding permits.  Tenant hereby agreesthat neither Landlord nor Landlord’s consultants shall be responsible forobtaining any building permit or certificate of occupancy for the Premises andthat obtaining the same shall be Tenant’s responsibility; provided, however,that Landlord shall cooperate with Tenant in executing permit applications andperforming other ministerial acts reasonably necessary to enable Tenant toobtain any such permit or certificate of

 

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occupancy.  Subject to the terms of Section 4.2.1,below, no changes, modifications or alterations in the Approved WorkingDrawings may be made without the prior written consent of Landlord, whichconsent may not be unreasonably withheld.

 

SECTION 4

 

**CONSTRUCTION OF THE TENANT IMPROVEMENTS**

 

4.1                                 **The Contractor**.  Tenant shall select, subject to Landlord’sreasonable approval, three (3) licensed general contractors (the “**Bidding Contractors**”) to bid on theconstruction of the Tenant Improvements. Following such selection, Tenant shall solicit bids from the BiddingContractors and, following such bidding process, shall select which BiddingContractor shall be the contractor to construct the Tenant Improvements (the “**Contractor**”).  Landlord shall independently retain theContractor to construct the Tenant Improvements in accordance with the ApprovedWorking Drawings.  All subcontractors,materialmen and suppliers are subject to Tenant’s prior approval, whichapproval shall not be unreasonably withheld, conditioned or delayed,

 

4.2                                 **Construction of Tenant Improvements by Contractorunder the Supervision of Landlord and Tenant**.

 

4.2.1                        **Construction Contract; Over-Allowance Amount**.  Landlord and Tenant shall jointly negotiateand prepare the form of the construction contract (the “**Contract**”) to be executed by and betweenLandlord and the Contractor. Notwithstanding the foregoing, the Contract shall expressly state thatall “change orders” which (x) involve the expenditure of more than$25,000.00 in the aggregate; (y) adversely affect the systems andequipment of the Building or the Building Structure, or (z) adverselyaffect the exterior appearance of the Building, must beapproved in advance by Landlord and Tenant in writing.  Prior to the commencement of the constructionof the Tenant Improvements, and after Tenant has accepted all bids for theTenant Improvements, Landlord shall submit to Tenant, for Tenant’s review andapproval, a detailed breakdown, by trade, of the final costs to be incurred orwhich have been incurred, as set forth more particularly in Sections 2.2.1.1through 2.2.1.5, above, in connection with the design and construction ofthe Tenant Improvements, which costs form a basis for the amount of theContract (the “**Final Costs**”).  Prior to the commencement of construction ofthe Tenant Improvements, Tenant and Landlord shall identify the amount (the “**Over-Allowance Amount**”) equal to thedifference between the amount of the Final Costs and the Improvement Allowance(less any portion thereof already disbursed by Landlord, or in the process ofbeing disbursed by Landlord, on or before the commencement of construction ofthe Tenant Improvements).  To the extentthere exists an Over-Allowance Amount, then following Landlord’s disbursementof ninety percent (90%) of the Improvement Allowance to the Contractor (i.e.,all of such Improvement Allowance minus a ten percent (10%) retention (the “**Final Retention**”) which Final Retentionshall only be disbursed by Landlord to the Contractor following the completionof the Tenant Improvements and in accordance with the terms of the Contract),Tenant shall, at Tenant’s sole cost, pay to Contractor an amount equal to thetotal amount then due and owing to the Contractor (other than any correspondingFinal Retention which shall be paid concurrently with Landlord’s payment of itsportion of the Final Retention to the Contractor), and such payment by Tenantshall be a condition to Landlord’s obligation to pay the Final Retention.  In

 

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noevent shall any delays resulting from any failure by Tenant to pay any suchamount be deemed to be a Landlord Caused Delay (as that term is defined in Section 5.1,below).  In the event that, after theFinal Costs have been determined, any revisions, changes, or substitutionsshall be made to the Construction Drawings or the Tenant Improvements, anyadditional costs which arise in connection with such revisions, changes orsubstitutions or any other additional costs shall be deemed to be an addition tothe Over-Allowance Amount.

 

4.2.2                        **Supervision of Contractor**. Landlord and Tenant shall jointly supervise the construction of theTenant Improvements by Contractor. Landlord and Tenant shall mutually cooperate with each other in all phasesof such supervision in order to for the Tenant Improvements to be completed ina timely manner in accordance with the Approved Working Drawings.  Notwithstanding such joint supervision,Tenant shall pay a construction supervision and management fee (the “**Landlord Supervision Fee**”) to Landlord inan amount equal to the product of (A) one percent (1%), and (B) thecosts incurred with the Improvement Allowance Items identified in Sections2.2.1.1 – 2.2.1.3, and 2.2.1.5 (whether paid for via theImprovement Allowance or as an Over-Allowance Amount, which LandlordSupervision Fee shall be for services relating to the coordination of theconstruction of the Tenant Improvements.

 

4.2.3                        **Contractor’s Warranties and Guaranties**.  Landlord hereby assigns to Tenant allwarranties and guaranties by Contractor relating to the Tenant Improvements,and Tenant hereby waives all claims against Landlord relating to, or arisingout of the construction of, the Tenant Improvements and which claims arecovered by such warranties.

 

4.2.4                        **Indemnity**.  Tenant’sindemnity of Landlord as set forth in this Lease shall also apply with respectto any and all costs, losses, damages, injuries and liabilities incurred byLandlord Parties and related in any way to any act or omission of Tenant orTenant’s Architect at the Project; provided, however, that the foregoingindemnity shall not apply to the extent of Landlord’s gross negligence orwillful misconduct.

 

4.2.5                        **Requirements of Contractor**.  The Contractor shall guarantee to Landlordand for the benefit of Tenant that the portion of the Tenant Improvements forwhich it is responsible shall be free from any defects in workmanship andmaterials for a period of not less than one (1) year from the date ofcompletion thereof, and that the Contractor shall be responsible for thereplacement or repair, without additional charge, of all work done or furnishedin accordance with its contract that shall become defective within one (1) yearafter the later to occur of (i) completion of the work performed by suchcontractor or subcontractors and (ii) the Lease Commencement Date.  The correction of such work shall include,without additional charge, all additional expenses and damages incurred inconnection with such removal or replacement of all or any part of the TenantImprovements, and/or the Building and/or common areas that may be damaged ordisturbed thereby.  All such warrantiesor guarantees as to materials or workmanship of or with respect to the TenantImprovements shall be contained in the Contract or subcontract and shall be writtensuch that such guarantees or warranties shall inure to the benefit of bothLandlord and Tenant, as their respective interests may appear, and may bedirectly enforced by either.  Landlordcovenants to give to Tenant any assignment or other assurances which may benecessary to effect such right of direct enforcement.

 

4.2.6                        **InsuranceRequirements**.

 

 

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4.2.6.1               **GeneralCoverages**.  Contractor andall subcontractors shall carry worker’s compensation insurance covering all oftheir respective employees, and shall also carry public liability insurance,including property damage, all with limits, in form and with companies as arerequired to be carried by Tenant as set forth in this Lease.

 

4.2.6.2               **SpecialCoverages**.  “Builder’s AllRisk” insurance in an amount approved by Landlord covering the construction ofthe Tenant Improvements, and such other insurance as Landlord may require, itbeing understood and agreed that the Tenant Improvements shall be insured byTenant pursuant to this Lease immediately upon completion thereof.  Such insurance shall be in amounts and shallinclude such extended coverage endorsements as may be reasonably required byLandlord including, but not limited to, the requirement that all Contractor andall subcontractors shall carry excess liability and Products and CompletedOperation Coverage insurance, each in amounts not less than $500,000 perincident, $1,000,000 in aggregate, and in form and with companies as arerequired to be carried by Tenant as set forth in this Lease.

 

4.2.6.3               **GeneralTerms**.  Certificates forall insurance carried pursuant to this Section 4.2.6.3 shall bedelivered to Landlord and Tenant before the commencement of construction of theTenant Improvements and before the Contractor’s equipment is moved onto thesite.  All such policies of insurancemust contain a provision that the company writing said policy will giveLandlord and Tenant thirty (30) days prior written notice of any cancellationor lapse of the effective date or any reduction in the amounts of suchinsurance.  In the event that the TenantImprovements are damaged by any cause during the course of the constructionthereof, Landlord shall immediately repair the same.  Landlord shall use commercially reasonableefforts to ensure that Contractor and all subcontractors maintain all of theforegoing insurance coverage in force until the Tenant Improvements are fullycompleted and accepted by Tenant, except for any Products and CompletedOperation Coverage insurance, which is to be maintained for ten (10) yearsfollowing completion of the work and acceptance by Landlord and Tenant.  All policies carried under this Section 4.2.6.3shall insure Landlord and Tenant, as their interests may appear, as well asContractor and Tenant’s Agents.  Landlordshall use commercially reasonable efforts to ensure that all insurance, exceptWorkers’ Compensation, maintained by Contractor and all subcontractors shallpreclude subrogation claims by the insurer against anyone insuredthereunder.  Such insurance shall providethat it is primary insurance as respects the owner and that any other insurancemaintained by owner is excess and noncontributing with the insurance requiredhereunder.  The requirements for theforegoing insurance shall not derogate from the provisions for indemnificationof Landlord by Tenant under Section 4.2.4 of this Tenant WorkLetter.

 

4.2.7                        **Governmental Compliance**. The Tenant Improvements shall comply in all respects with thefollowing:  (i) the Code and otherstate, federal, city or quasi-governmental laws, codes, ordinances andregulations, as each may apply according to the rulings of the controllingpublic official, agent or other person; (ii) applicable standards of theAmerican Insurance Association (formerly, the National Board of FireUnderwriters) and the National Electrical Code; and (iii) buildingmaterial manufacturer’s specifications.

 

4.2.8                        **Inspection**. Landlord and Tenant shall each have the right to inspect the TenantImprovements at all times, provided however, that Landlord’s or Tenant’sfailure to

 

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inspectthe Tenant Improvements shall in no event constitute a waiver of any ofLandlord’s or Tenant’s, respectively, rights hereunder nor shall any suchinspection of the Tenant Improvements constitute either party’s approval of thesame.  Should either party disapprove anyportion of the Tenant Improvements based on the failure of the TenantImprovements to conform to the Final Working Drawings, the disapproving partyshall notify the other in writing of such disapproval and shall specify theitems disapproved.  Any defects ordeviations in, and/or such disapproval of, the Tenant Improvements shall be rectifiedby Landlord.

 

4.2.9                        **Meetings**.  Commencingupon Tenant’s selection of the Contractor and Architect, Landlord and Tenantshall hold regular meetings at a reasonable time (but in no event to berequired more often than weekly), with the Architect and the Contractor (ortheir agents) regarding the progress of the preparation of ConstructionDrawings and the construction of the Tenant Improvements, which meetings shallbe held at a location reasonably designated by Tenant or, in Landlord’sdiscretion, at the Premises.  Inaddition, minutes shall be taken at all such meetings, a copy of which minutesshall be promptly delivered to Landlord. One such meeting each month shall include the review of Contractor’scurrent request for payment.

 

4.3                                 **Notice of Completion; Copy of Record Set of Plans**.  Within ten (10) days after completion ofconstruction of the Tenant Improvements, Landlord shall cause a Notice ofCompletion to be recorded in the office of the Recorder of the county in whichthe Building is located in accordance with Section 3093 of the Civil Codeof the State of California or any successor statute, and shall furnish a copythereof to Tenant upon such recordation. If Landlord fails to do so, Tenant may execute and file the same onbehalf of Landlord as Landlord’s agent for such purpose, at Landlord’s solecost and expense.  At the conclusion ofconstruction, (i) Landlord and Tenant shall cause the Architect andContractor (A) to update the Approved Working Drawings as necessary toreflect all changes made to the Approved Working Drawings during the course ofconstruction, (B) to certify to the best of their knowledge that the “record-set”of as-built drawings are true and correct, which certification shall survivethe expiration or termination of this Lease, and (C) to deliver toLandlord and Tenant two (2) sets of copies of such record set of drawingswithin ninety (90) days following issuance of a certificate of occupancy forthe Premises, and (ii) Landlord shall deliver to Tenant a copy, bound in abinder (with an index), of all warranties, guaranties, and operating manualsand information relating to the improvements, equipment, and systems in thePremises.

 

4.4                                 **Cooperation and Joint Efforts**.  Landlord and Tenant hereby acknowledge thatthe design and construction of the Tenant Improvements will require both ofLandlord and Tenant to mutually cooperate in good faith, using diligent andcommercially reasonable efforts to reach agreement or otherwise cooperate inconnection with a significant amount of design and construction milestones andaction items, only the most significant of which milestones and items arespecifically addressed in this Tenant Work Letter.  Landlord and Tenant each hereby commit to socooperate in good faith, and to use such diligent and commercially reasonableefforts.  Such cooperative efforts shallinclude the parties’ prompt sharing of information with regard to municipal orlocal planning group meetings which may affect the construction of the TenantImprovements so as to provide all relevant parties an opportunity to attend thesame.

 

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SECTION 5

 

**LANDLORDCAUSED DELAY**

 

5.1                                 **Landlord Caused Delays**.  If there shall be a delay or there are delaysin the “Substantial Completion of the Tenant Improvements” (as that term isdefined in Section 5.4, below) due to a “Landlord Caused Delay,” thenTenant shall be entitled to the “Substantial Completion Rent Abatement” as moreparticularly set forth in Section 5.3, below.  As used in this Tenant Work Letter, “**Landlord Caused Delay**” shall mean actualdelays to the extent resulting from the acts or omissions of Landlordincluding, but not limited to (i) failure of Landlord to timely approve ordisapprove any Construction Drawings; (ii) material and unreasonableinterference by Landlord, its agents, employees or contractors with theSubstantial Completion of the Tenant Improvements and which objectivelypreclude or delay the construction of tenant improvements in the Building byany person, which interference relates to access by Tenant, or the Contractorto the Building or any Building facilities (including loading docks and freightelevators) or service (including temporary power and parking areas as providedherein) during normal construction hours, or the use thereof during normalconstruction hours; (iii) delays due to the acts or failures to act ofLandlord, its agents, employees or contractors including without limitation anysuch acts or failures to act with respect to payment of the ImprovementAllowance.  

 

5.2                                 **Determination of a Landlord Caused Delay**.  If Tenant contends that a Landlord CausedDelay has occurred, Tenant shall immediately notify Landlord in writing (the “**Delay Notice**”) of the event that constitutes such LandlordCaused Delay.  If such action, inactionor circumstance qualifies as a Landlord Caused Delay, then a Landlord CausedDelay shall be deemed to have occurred commencing on the date such action,inaction or circumstance first occurred, and ending on the date such delayends.  Each day during such period shallbe referred to herein as a “**Landlord DelayDay**;” provided, however, to the extent Tenant is aware (or usingcommercially reasonable due diligence, should be aware) of an event thatotherwise constitutes a Landlord Caused Delay and fails to immediately providea Delay Notice to Landlord, then the number of Landlord Delay Days shall bereduced by the number of calendar days occurring during the period commencingon the date when Tenant became aware (or using commercially reasonable duediligence, should have become aware) of such event and the date upon whichTenant actually provides a Delay Notice to Landlord in connection with thesame.  

 

5.3                                 **Substantial Completion Rent Abatement**.  In the event a Landlord Delay shall bedetermined to have occurred as set forth in Section 5.2, above,then commencing on February 1, 2007, and continuing for each LandlordDelay Day (such period, the “**SubstantialCommencement Rent Abatement Period**”), Tenant shall receive aday-for-day abatement of the Base Rent otherwise attributable to the10421 Premises (as opposed to the 10445 Premises) (the “**Substantial Completion Rent Abatement**”) foreach Landlord Delay Day. 

 

5.4                                 **Definition of Substantial Completion of the TenantImprovements**.  Forpurposes of this Section 5, “**SubstantialCompletion of the Tenant Improvements**” shall mean completion ofconstruction of the Tenant Improvements in the Premises pursuant to theApproved Working Drawings as evidenced by a Certificate of Completion from theArchitect,

 

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withthe exception of any punch list items and any tenant fixtures, work-stations,built-in furniture, or equipment to be installed by Tenant or under thesupervision of Contractor.

 

SECTION 6

 

**MISCELLANEOUS**

 

6.1                                 **Tenant’s Representative**.  Tenant has designated Richard Murawski andTamara Seymour as its representatives with respect to the matters set forth inthis Tenant Work Letter, each of whom shall have full authority andresponsibility to act on behalf of the Tenant as required in this Tenant WorkLetter.

 

6.2                                 **Landlord’s Representative**.  Landlord has designated Jim Edwards as itssole representatives with respect to the matters set forth in this Tenant WorkLetter, who, until further notice to Tenant, shall have full authority andresponsibility to act on behalf of the Landlord as required in this Tenant WorkLetter.

 

6.3                                 **Time of the Essence in This Tenant Work Letter**.  Unless otherwise indicated, all referencesherein to a “number of days” shall mean and refer to calendar days.  If any item requiring approval is timelydisapproved by Landlord, the procedure for preparation of the document andapproval thereof shall be repeated until the document is approved by Landlord.

 

6.4                                 **Tenant’s Lease Default**.  Notwithstanding any provision to the contrarycontained in this Lease, if an economic or material default (after applicablenotice and cure periods, if any) as described in the Lease or this Tenant WorkLetter has occurred at any time on or before the substantial completion of theTenant Improvements, then (i) in addition to all other rights and remediesgranted to Landlord pursuant to this Lease, Landlord shall have the right towithhold payment of all or any portion of the Improvement Allowance(in whichcase, Tenant shall be responsible for any delay in the substantial completionof the Premises caused thereby), and (ii) all other obligations ofLandlord under the terms of this Tenant Work Letter shall be forgiven untilsuch time as such default is cured pursuant to the terms of this Lease (inwhich case, Tenant shall be responsible for any delay in the substantialcompletion of the Premises caused by such inaction by Landlord).

 

6.5                                 **No Constructive Eviction**.  Tenant hereby acknowledges that,notwithstanding Tenant’s occupancy of the Premises during the construction ofthe Tenant Improvements by Landlord, Landlord shall be permitted to constructthe Tenant Improvements in the Premises during normal business hours, inaccordance with a schedule agreed to by Landlord and Tenant. Such schedule mayinvolve construction outside business hours as requested by Tenant, and Tenanthereby acknowledges that such scheduling may involve overtime or other costpremiums which may increase the cost of the construction of the TenantImprovements.  Since Tenant is currentlyoccupying the Premises, Landlord agrees that it shall use commerciallyreasonable efforts to perform the Tenant Improvements in a manner so as tominimize interference with Tenant use of the Premises.  Tenant shall cooperate in good faith withLandlord and Landlord’s construction schedule so that the TenantImprovements will be completed in a timely manner, and Tenant shall provide aclear working area for such work, if necessary (including, but not limited to,the moving of furniture, fixtures and Tenant’s property away from the area inwhich

 

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Landlordis constructing the Tenant Improvements). Tenant hereby agrees that the construction of the Tenant Improvementsshall in no way constitute a constructive eviction of Tenant nor (except asprovided in Section 5 of this Tenant Work Letter) entitle Tenant to anyabatement of rent.  Landlord shall haveno responsibility or for any reason be liable to Tenant for any direct orindirect injury to or interference with Tenant’s business arising from theTenant Improvements, nor (except to the extent arising due to the grossnegligence or willful misconduct of Landlord or any of its employees or agents,or the breach by Landlord of its obligations herein) shall Tenant be entitledto any compensation or damages from Landlord for loss of the use of the wholeor any part of the Premises or of Tenant’s personal property or improvementsresulting from the Tenant Improvements or Landlord’s actions in connection withthe Tenant Improvements, or for any inconvenience or annoyance occasioned bythe Tenant Improvements or Landlord’s actions in connection with the TenantImprovements.

 

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**SCHEDULE 1**

 

**BUILDINGSTANDARD TENANT IMPROVEMENTS**

 

**[ATTACHED]**

 

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**EXHIBIT C**

 

**PACIFIC CORPORATE CENTER**

 

**NOTICE OF LEASE TERM DATES**

 

To:                                                                                                                                  

 

 

 

 

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

 

Gentlemen:

 

In accordance withthe Office Lease (the “Lease”), we wish to advise you and/or confirm asfollows:

 

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

 

2.                                       Rentcommenced to accrue on                                  ,in the amount of                                  .

 

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

 

4.                                       Yourrent checks should be made payable to                                  at                                  .

 

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

 

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6.                                       Tenant’sShare as adjusted based upon the exact number of usable square feet within the Premisesis                             %.

 
|                                                                                                                                                                                                    | “Landlord”: |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------|
|                                                                                                                                                                                                    |                  |
|                                                                                                                                                                                                    |                  | , |
|                                                                                                                                                                                                    | a                     |   |   |
|                                                                                                                                                                                                    |                  |   |
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|                                                                                                                                                                                                    | By:                   |   |   |
|                                                                                                                                                                                                    |                  | Its: |   |   |
|                                                                                                                                                                                                    |                  |   |
| Agreed to and Accepted  as of                        ,  200    . |                  |
|                                                                                                                                                                                                    |                  |
| “Tenant”:                                                                                                                                                                                     |                  |
|                                                                                                                                                                                                    |                  |
|                                                                                                                                                                                                    |                  |   |
| a                                                                                                                                                                                                       |                  |   |   |
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| By:                                                                                                                                                                                                     |                  |   |   |
|                                                                                                                                                                                                    | Its:                  |   |   |   |
|                                                                                                                                                                                                         |                       |  |  |  |  |  |  |  |  |  |

 

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**EXHIBIT D**

 

**PACIFIC CORPORATE CENTER**

 

**RULES AND REGULATIONS**

** **

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

 

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

 

2.                                       Therequirements of Tenant will be attended to only upon application at Landlord’smanagement office or at such office location designated by Landlord.  Employees of Landlord shall not perform anywork or do anything outside their regular duties unless under specialinstructions from Landlord.

 

3.                                       Noadvertisement, notice or handbill shall be exhibited, distributed, painted oraffixed by Tenant on any part of the Pacific Corporate Center without the priorwritten consent of the Landlord.  Tenantshall not disturb, solicit, peddle, or canvass any occupant of the PacificCorporate Center and shall cooperate with Landlord and its agents of Landlordto prevent same.

 

4.                                       Tenantshall not overload the floor of the Premises.

 

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

 

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

 

7.                                       Nocooking shall be done or permitted on the Premises (unless Tenant receivesLandlord’s prior written approval to install a cafeteria for its employees inthe Premises), nor shall the Premises be used for lodging.  Notwithstanding the foregoing, Underwriters’laboratory-approved equipment and microwave ovens may be used in the Premisesfor heating food and

 

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brewing coffee, tea, hot chocolate and similarbeverages for employees and visitors, provided that such use is in accordancewith all applicable federal, state, county and city laws, codes, ordinances, rules andregulations.

 

8.                                       IntentionallyOmitted.

 

9.                                       Tenantshall store all its trash and garbage within the interior of the Premises or inthe appropriate external trash area(s) for the Building.  No material shall be placed in the trashboxes or receptacles if such material is of such nature that it may not bedisposed of in the ordinary and customary manner of removing and disposing oftrash and garbage in San Diego, California without violation of any law orordinance governing such disposal; provided, however, Tenant may maintainseparate trash enclosures for the storage of non-conforming disposal items tothe extent Tenant satisfies and complies with any applicable laws or othergovernmental regulations relating to the storage and disposal thereof.  If the Premises is or becomes infested withvermin as a result of the use or any misuse or neglect of the Premises by Tenant,its agents, servants, employees, contractors, visitors or licensees, Tenantshall forthwith, at Tenant’s expense, cause the Premises to be exterminatedfrom time to time to the satisfaction of Landlord and shall employ suchlicensed exterminators as shall be approved in writing in advance by Landlord.

 

10.                                 Tenantshall comply with all safety, fire protection and evacuation procedures andregulations established by any governmental agency.

 

11.                                 Neitherthe interior nor exterior of any windows shall be coated or otherwisesunscreened without the prior written consent of Landlord.  Tenant shall be responsible for any damage tothe window film on the exterior windows of the Premises and shall promptlyrepair any such damage at Tenant’s sole cost and expense.

 

12.                                 Tenantmust comply with requests by the Landlord concerning the informing of theiremployees of items of reasonable importance to the Landlord vis-à-vis theoperation of the Project and the Pacific Corporate Center.

 

13.                                 Tenantmust comply with any applicable “**NO-SMOKING**”Ordinances.  If Tenant is required underthe ordinance to adopt a written smoking policy, a copy of said policy shall beon file in the office of the Building. Additionally, Tenant must provide at least one area within the Premisesin which its employees, invitees and visitors may smoke, to the extent sucharea is required by law.

 

14.                                 Tenanthereby acknowledges that Landlord shall have no obligation to provide guardservice or other security measures for the benefit of the Premises, theBuilding or the Project.  Tenant herebyacknowledges and agrees that Landlord shall have no responsibility for theprotection of Tenant and its agents, employees, contractors, invitees andguests, and the property thereof, from acts of third parties, including keepingdoors locked and other means of entry to the Premises closed, whether or notLandlord, at its option, elects to provide security protection for the Projector any portion thereof.  Tenant further assumesthe risk that any safety and security devices, services and programs whichLandlord elects, in its sole discretion, to provide may not be effective, ormay malfunction or be circumvented by an unauthorized third

 

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party, and Tenant shall, in addition to its otherinsurance obligations under this Lease, obtain its own insurance coverage tothe extent Tenant desires protection against losses related to suchoccurrences.  Tenant shall cooperate inany reasonable safety or security program developed by Landlord or required bylaw.

 

15.                                 Noauction, liquidation, fire sale, going-out-of-business or bankruptcy sale shallbe conducted in the Premises without the prior written consent of Landlord.

 

16.                                 Notenant shall use or permit the use of any portion of the Premises for livingquarters, sleeping apartments or lodging rooms.

 

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

 

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**EXHIBIT E**

 

**PACIFIC CORPORATE CENTER**

 

**FORM OF TENANT’S ESTOPPEL CERTIFICATE**

 

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

 

1.                                       Attachedhereto as Exhibit A is a true and correct copy of the Lease and allamendments and modifications thereto. The documents contained in Exhibit A represent the entireagreement between the parties as to the Premises.

 

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

 

3.                                       BaseRent became payable on                            .

 

4.                                       TheLease is in full force and effect and has not been modified, supplemented oramended in any way except as provided in Exhibit A.

 

5.                                       Tenanthas not transferred, assigned, or sublet any portion of the Premises norentered into any license or concession agreements with respect thereto exceptas follows:

 

6.                                       IntentionallyOmitted.

 

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

 

8.                                       Allconditions of the Lease to be performed by Landlord necessary to theenforceability of the Lease have been satisfied and Landlord is not in defaultthereunder.  In addition, the undersignedhas not delivered any notice to Landlord regarding a default by Landlordthereunder.

 

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

 

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10.                                 Asof the date hereof, there are no existing defenses or offsets, or, to theundersigned’s knowledge, claims or any basis for a claim, that the undersignedhas against Landlord.

 

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

 

12.                                 Thereare no actions pending against the undersigned under the bankruptcy or similarlaws of the United States or any state.

 

13.                                 Otherthan in compliance with all applicable laws and incidental to the ordinarycourse of the use of the Premises, the undersigned has not used or stored anyhazardous substances in the Premises.

 

14.                                 Tothe undersigned’s knowledge, all tenant improvement work to be performed byLandlord under the Lease has been completed in accordance with the Lease andhas been accepted by the undersigned and all reimbursements and allowances dueto the undersigned under the Lease in connection with any tenant improvementwork have been paid in full.

 

The undersignedacknowledges that this Estoppel Certificate may be delivered to Landlord or toa prospective mortgagee or prospective purchaser, and acknowledges that saidprospective mortgagee or prospective purchaser will be relying upon thestatements contained herein in making the loan or acquiring the property ofwhich the Premises are a part and that receipt by it of this certificate is acondition of making such loan or acquiring such property.

 

Executed at                            on the           day of                            ,200      .

 
|   | “Tenant” |   |
|--------|--------------------|--------|
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**EXHIBIT F**

 

**PACIFICCORPORATE CENTER**

 

**KILROYREALTY**

 

RECORDING REQUESTED BY

AND WHEN RECORDED RETURN TO:

 

ALLEN MATKINS LECK GAMBLE

& MALLORY LLP

 

1901 Avenue of the Stars

18th Floor

Los Angeles, California 90067

Attention:  Anton N. Natsis, Esq.

 

** **

**RECOGNITIONOF COVENANTS,**

**CONDITIONS,AND RESTRICTIONS**

 

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

 

A.                                   Landlord and Tenantentered into that certain Office Lease Agreement dated           ,200     (the “Lease”).  Pursuant to the Lease, Landlord leased toTenant and Tenant leased from Landlord space (the “**Premises**”) located in an office building on certain realproperty described in **Exhibit A**attached hereto and incorporated herein by this reference (the “**Property**”).

 

B.                                     The Premises arelocated in an office building located on real property which is part of an areaowned by Landlord containing approximately       (    ) acres of real property located in the City of                        ,California (the “**Project**”), asmore particularly described in **Exhibit B**attached hereto and incorporated herein by this reference.

 

C.                                     Landlord, asdeclarant, has previously recorded, or proposes to record concurrently with therecordation of this Agreement, a Declaration of Covenants, Conditions, andRestrictions (the “**Declaration**”),dated                                 ,200    , in connection with the Project.

 

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

 

NOW, THEREFORE, in consideration of (a) theforegoing recitals and the mutual agreements hereinafter set forth, and (b) forother good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, the parties hereto agree as follows,

 

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1.                                       Tenant’sRecognition of Declaration. Notwithstanding that the Lease has been executed prior to therecordation of the Declaration, Tenant agrees that its use of the Premises andthe Project shall be subject to, and shall comply with, all of the terms andconditions of the Declaration.

 

2.                                       Miscellaneous.

 

2.1                                 This Agreement shallbe binding upon and inure to the benefit of the parties hereto and theirrespective heirs, estates, personal representatives, successors, and assigns.

 

2.2                                 This Agreement is madein, and shall be governed, enforced and construed under the laws of, the Stateof California.

 

2.3                                 This Agreementconstitutes the entire understanding and agreements of the parties with respectto the subject matter hereof, and shall supersede and replace all priorunderstandings and agreements, whether verbal or in writing.  The parties confirm and acknowledge thatthere are no other promises, covenants, understandings, agreements,representations, or warranties with respect to the subject matter of thisAgreement except as expressly set forth herein.

 

2.4                                 This Agreement is notto be modified, terminated, or amended in any respect, except pursuant to anyinstrument in writing duly executed by both of the parties hereto.

 

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

 

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

 

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

 

2.8                                 Time is of the essenceof this Agreement.

 

2.9                                 The Parties agree toexecute any further documents, and take any further actions, as may bereasonable and appropriate in order to carry out the purpose and intent of thisAgreement.

 

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

 

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**SIGNATUREPAGE OF RECOGNITION OF**

 

**COVENANTS,CONDITIONS AND RESTRICTIONS**

 

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

 
|   |   | “Landlord”: |   |
|--------|--------|-----------------------|--------|
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**EXHIBIT G**

 

**PACIFICCORPORATE CENTER**

 

**FORM OFLETTER OF CREDIT**

**(Letterheadof a money center bank**

**acceptableto the Landlord)**

 

                            ,200  

                                                  

                                                  

                                                  

                                                  

 

Gentlemen:

 

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

 

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

 

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

 

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

 

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

 

This Letter of Credit shall expire on                             .

 

Notwithstanding the above expiration date ofthis Letter of Credit, the term of this Letter of Credit shall be automaticallyrenewed for successive, additional one (1) year periods unless, at leastthirty (30) days prior to any such date of expiration, the undersigned shallgive written notice to Beneficiary, by certified mail, return receipt requestedand at the addresses set forth below or at such other address as may be givento the undersigned by Beneficiary, that this Letter of Credit will not berenewed.  Unless otherwise directed byBeneficiary, any notices to Beneficiary shall be sent to the followingaddresses:

 

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Kilroy Realty Corporation12200 West Olympic BoulevardSuite 200Los Angeles, California  90064Attention:  Legal Department

 

with copiesto:

 

Kilroy Realty Corporation

3611 Valley Centre Drive, Suite 550San Diego, California  92130Attention:  Mr. Brian Galligan

 

and

 

Allen MatkinsLeck Gamble & Mallory LLP

1901 Avenue ofthe Stars, Suite 1800

Los Angeles,California 90067

Attention:  Anton N. Natsis, Esq.

 

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

 

 
|   | Very truly yours,      |
|--------|------------------------|
|   | (Name of Issuing Bank) |
|   |                   |
|   | By:                    |   |   |

 

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**EXHIBIT H**

 

**PACIFICCORPORATE CENTER**

 

**FIRSTAMENDMENT TO AMENDED AND RESTATED OFFICE LEASE**

 

**[ATTACHED]**

 

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**FIRSTAMENDMENT TO AMENDED AND RESTATED OFFICE LEASE**

 

This FIRST AMENDMENT TO AMENDED AND RESTATEDOFFICE LEASE (“**First Amendment**”)is made and entered into as of the        day ofOctober, 2005, by and between KILROY REALTY, L.P., a Delaware limited partnership(“**Landlord**”), and FAVRILLE, INC.,a Delaware corporation  (“**Tenant**”).

 

RECITALS :

 

A.                                   Landlord and Tenantentered into that certain Amended and Restated Office Lease dated as of October 31,2005 (the “**Lease**”), wherebyLandlord leased to Tenant and Tenant leased from Landlord those certainpremises consisting of 79,871 rentable square feet of space (“**Existing Premises**”) and comprising theentire building located at 10421 Pacific Center Court, San Diego,California  92121 (the “**10421 Building**”).  The Existing Premises is referred to in theLease as the “10421 Premises.”

 

B.                                     Tenant desires toexpand the Existing Premises to include that certain space consisting ofapproximately 48,709 rentable square feet of space (the “**Expansion Premises**”), and comprising theentire building located at 10445 Pacific Center Court, San Diego,California  92121 (the “**10445 Building**”) as delineated on **Exhibit A** attached hereto and madea part hereof.  The Expansion Premises isreferred to in the Lease as the “10445 Premises,” and the 10421 Building andthe 10445 Building are part of the project commonly known as “**Pacific Corporate Center**.”  In connection therewith, Landlord and Tenantdesire to amend the Lease as hereinafter provided.

 

AGREEMENT :

 

NOW, THEREFORE, in consideration of theforegoing recitals and the mutual covenants contained herein, and for othergood and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, the parties hereto hereby agree as follows:

 

# 1.                                       **Capitalized Terms**. All capitalized terms when used herein shall have the same meaning as isgiven such terms in the Lease unless expressly superseded by the terms of thisFirst Amendment.

#  

# 2.                                       **Premises**.

#  

## 2.1.                              **Modification of Premises**. Effective as of the date (the “**ExpansionCommencement Date**”) which is the earlier to occur of (i) theninety-first (91st) day following the date upon which Landlordtenders possession of the entire Expansion Premises to Tenant for constructionof the Tenant Improvements therein (which delivery shall in no event occurprior to February 28, 2006), and (ii) March 1, 2007, Tenantshall lease from Landlord and Landlord shall

 

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## lease to Tenant the Expansion Premises.  Consequently, effective upon the ExpansionCommencement Date, the Premises (as that term is defined in the Lease) shall beincreased to include the Expansion Premises. Landlord and Tenant hereby acknowledge that such addition of theExpansion Premises to the Existing Premises shall, effective as of theExpansion Commencement Date, increase the size of the Premises to approximately128,580 rentable square feet.  TheExisting Premises and the Expansion Premises may hereinafter collectively bereferred to as the “**Premises**.”

##  

## 2.2.                              **Verification of RentableSquare Feet of Expansion Premises**.  Forpurposes of the Lease, the “rentable square feet” of the Expansion Premisesshall be calculated pursuant to the Building Owners and Managers AssociationStandard Method of Measuring Floor Area in Industrial Building, and itaccompanying guidelines (“BOMA”).  Withinthirty (30) days after the Expansion Commencement Date, Tenant’s spaceplanner/architect shall measure the rentable square feet of the ExpansionPremises in accordance with the provisions of this Section, and the resultsthereof shall be presented to Landlord in writing.  Landlord’s space planner/architect may reviewTenant’s space planner/architect’s determination of the number of rentablesquare feet of the Expansion Premises and Landlord may, within fifteen (15)business days after Landlord’s receipt of Tenant’s space planner/architect’swritten determination, object to such determination by written notice toTenant.  Landlord’s failure to deliverwritten notice of such objection within said fifteen (15) business day periodshall be deemed to constitute Landlord’s acceptance of Tenant’s spaceplanner/architect’s determination.  IfLandlord objects to such determination, Landlord’s space planner/architect andTenant’s space planner/architect shall promptly meet and attempt to agree uponthe rentable square footage of the Expansion Premises.  If Landlord’s space planner/architect andTenant’s space planner/architect cannot agree on the rentable square footage ofthe Expansion Premises within thirty (30) days after Landlord’s objection thereto,Landlord and Tenant shall mutually select an independent third party spacemeasurement professional to field measure the Expansion Premises pursuant toBOMA.  Such independent third partymeasurement professional’s determination shall be conclusive and binding onLandlord and Tenant.  Landlord and Tenantshall each pay one-half (1⁄2) of the fees and expenses of the independent thirdparty space measurement professional.  Tothe extent the Lease Term commences prior to such final determination, Tenant’sdetermination shall be utilized until a final determination is made, whereuponan appropriate adjustment, if necessary, shall be made retroactively, andLandlord, or Tenant, as applicable, shall make appropriate payment to theother.  In the event that it isdetermined, pursuant to the procedure described in this Section above,that the square footage amounts shall be different from those set forth in thisAmendment, all amounts, percentages and figures appearing or referred to inthis Amendment based upon such incorrect amount shall be modified in accordancewith such determination.  Such finaldetermination shall be confirmed in writing between Landlord and Tenant.

##  

## 2.3.                              **Use of the Premises**. Tenant’s use of the Expansion Premises shall be subject to all of theTCCs of the Lease; provided, however, with respect to the Expansion Premisesonly, and provided any such use is legally permissible, Tenant shall use theExpansion Premises solely for general office use, research and development,warehousing, biotechnology labs, pharmaceutical manufacturing (in accordancewith cGMP), and any other uses related thereto, all pursuant to the applicablezoning and the Pacific Corporate Center P.I.D.

 

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## 2.4.                              **Maintenance and Repairof the Premises**.  Tenant’s maintenance and repair obligationswith respect to the Expansion Premises shall subject to all of the TCCs of the Lease; provided, however Tenant shallkeep the Expansion Premises in first class order, repair, condition andappearance at all times during the Expansion Term in a manner consistent withthe “Comparable Buildings,” as that term is defined in Section 3.2.2,below.

##  

# 3.                                       **Lease Term**.

#  

## 3.1.                              **Expansion Term**. The term of Tenant’s lease of the Expansion Premises (the “**Expansion Term**”) shall commence on theExpansion Commencement Date and expire coterminously with Tenant’s Lease of theExisting Premises on the Lease Expiration Date (i.e.,  June 20, 2025), unless sooner terminatedas provided in the Lease, as hereby amended.

##  

## 3.2.                              **Expansion Term OptionRight**.

##  

### 3.2.1.                     **Option Right**. Landlord hereby grants the Original Tenant, its Affiliates and anyPermitted Assignee, two (2) options to extend the Expansion Term forthe entire Expansion Premises each by a period of five****(5) years (each, an “**Option Term**”) as set forth in this Section 3.2.  The TCCs of Section 2.2 of theLease shall not be applicable to the Expansion Premises.  Such options shall be exercisable only byNotice delivered by Tenant to Landlord as provided below, provided that, as ofthe date of delivery of such Notice, Tenant is not in default under the Lease(as amended, beyond any applicable notice and cure periods).  Upon the proper exercise of an option toextend, and provided that, as of the end of the then applicable Expansion Term,Tenant is not in default under the Lease (as amended, beyond any applicablenotice and cure periods), the Expansion Term, as it applies to the entireExpansion Premises, shall be extended for a period of five (5) years.

###  

### 3.2.2.                     **Option Rent**. The Rent payable by Tenant during the Option Term (the “**Option Rent**”) shall be equal to the MarketRent as set forth below.  For purposes ofthis Section 3.2, the term “**MarketRent**” shall mean rent (including additional rent and considering any“base year” or “expense stop” applicable thereto), including all escalations,at which tenants, as of the commencement of the applicable term are, pursuantto transactions completed within the twenty-four (24) months prior to the dateTenant delivers to Landlord the “Exercise Notice,” as that term is set forthbelow, leasing non-sublease, non-encumbered, non-synthetic, non-equity space(unless such space was leased pursuant to a definition of “fair market”comparable to the definition of Market Rent) comparable in size, location andquality to the Expansion Premises for a “Comparable Term,” as that term isdefined in this Section 3.2.2 (the “**Comparable Deals**”), which comparable space is located in the “ComparableBuildings,” as that term is defined in this Section 3.2.2, givingappropriate consideration to the annual rental rates per rentable square foot(adjusting the base rent component of such rate to reflect a net value afteraccounting for whether or not utility expenses are directly paid by the tenantsuch as Tenant’s direct utility payments provided for in Section 6.1of the Lease), the standard of measurement by which the rentable square footageis measured, parking ratios, general access to such Comparable Buildings, thegeneral visibility of such Comparable Buildings, and taking into considerationonly, and granting only, the following concessions (provided that the rentpayable in Comparable Deals in which the terms of such Comparable Deals aredetermined by use of a discounted fair market rate formula shall be equitablyincreased in order that such Comparable

 

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### Deals will not reflect a discounted rate)(collectively, the “**Rent Concessions**”):  (a) rental abatement concessions orbuild-out periods, if any, being granted such tenants in connection with suchcomparable spaces; (b) tenant improvements or allowances provided or to beprovided for such comparable space, taking into account the value of theexisting improvements in the Expansion Premises, such value to be based uponthe age, quality and layout of the improvements and the extent to which thesame can be utilized by this particular Tenant, (c) Proposition 13protection, and (d) all other monetary concessions, if any, being grantedsuch tenants in connection with such comparable space; provided, however, thatnotwithstanding anything to the contrary herein, no consideration shall begiven to the fact that Landlord is or is not required to pay a real estatebrokerage commission in connection with the applicable term or the fact thatthe Comparable Deals do or do not involve the payment of real estate brokeragecommissions.  The term “**Comparable Term**” shall refer to the lengthof the lease term, without consideration of options to extend such term, forthe space in question.  In addition, thedetermination of the Market Rent shall include a determination as to whether,and if so to what extent, Tenant must provide Landlord with financial security,such as a letter of credit or guaranty, for Tenant’s rent obligations duringany Option Term.  Such determinationshall be made by reviewing the extent of financial security then generallybeing imposed in Comparable Transactions upon tenants of comparable financial conditionand credit history to the then existing financial condition and credit historyof Tenant (with appropriate adjustments to account for differences in thethen-existing financial condition of Tenant and such other tenants).  If in determining the Market Rent, Tenantwould, pursuant to the Comparable Deals and the Rent Concessions set forththerein, otherwise be entitled to a tenant improvement or comparable allowancefor the improvement of the Expansion Premises (the “**Option Term TI Allowance**”), Tenant shall not be entitled, andshall not be compelled, to receive such Option Term TI Allowance and Landlordshall reduce the rental rate component of the Market Rent to be an effectiverental rate which takes into consideration that Tenant will not receive anyOption Term TI Allowance.  The term “**Comparable Buildings**” shall mean theBuilding and other office and research/development buildings which arecomparable to the Building in terms of age (based upon the date of completionof construction or major renovation as to the building containing the portionof the Expansion Premises in question), quality of construction, level ofservices and amenities, size and appearance, and are located in the SorrentoMesa area of San Diego, California (the “**ComparableArea**”).

###  

### 3.2.3.                     **Exercise of Option**. The option contained in this Section 3.2 shall be exercisedby Tenant, if at all, only in the manner set forth in this Section 3.2.3.  Tenant shall deliver notice (the “**Exercise Notice**”) to Landlord not more thanfifteen (15) months nor less than nine (9) months prior to the expirationof the then Expansion Term, stating that Tenant is exercising its option.  Concurrently with such Exercise Notice,Tenant shall deliver to Landlord Tenant’s calculation of the Market Rent (the “**Tenant’s Option Rent Calculation**”).  Landlord shall deliver notice (the “**Landlord Response Notice**”) to Tenant on orbefore the later to occur of (i) the date which is thirty (30) days afterLandlord’s receipt of the Exercise Notice and Tenant’s Option Rent Calculation,and (ii) the date which is nine (9) months prior to the expiration ofthe then Expansion Term (the “**LandlordResponse Date**”), stating that (A) Landlord is accepting Tenant’sOption Rent Calculation as the Market Rent, or (B) rejecting Tenant’sOption Rent Calculation and setting forth Landlord’s calculation of the MarketRent (the “**Landlord’s Option Rent Calculation**”).  Within ten (10) business days of itsreceipt of the Landlord Response Notice, Tenant may, at its option, accept theMarket Rent contained in the

 

4

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### Landlord’s Option Rent Calculation.  If Tenant does not affirmatively accept orTenant rejects the Market Rent specified in the Landlord’s Option RentCalculation, the parties shall follow the procedure, and the Market Rent shallbe determined as set forth in Section 3.2.5.

###  

### 3.2.4.                     **No Defaults; RequiredFinancial Condition of Tenant**.  Therights contained in this Section 3.2 shall be personal to theOriginal Tenant, its Affiliates and any Permitted Assignee and may only beexercised by such Original Tenant, Affiliate or Permitted Assignee (and not anyother assignee, sublessee or other transferee of the Original Tenant’s interestin the Lease, as amended) if the Original Tenant, Affiliate and/or PermittedAssignee occupies not less than one hundred percent (100%) of the then existingExpansion Premises.  The right to extendthe Expansion Term as provided in this Section 3.2 may not beexercised if, as of the date of the attempted exercise of the extension optionby Tenant, or as of the commencement date of such Option Term, (A) Tenantis in economic or material default pursuant to the terms of the Lease (asamended, beyond any applicable notice and cure periods), (B) Tenant haspreviously been in economic or material default under the Lease (as amended,beyond any applicable notice and cure periods) during the previous twenty-four(24) month period, or (C) Tenant fails to satisfy the “ThresholdRequirements,” as that term is set forth in Section 21.2.2 of theLease.

###  

### 3.2.5.                     **Determination of MarketRent**.  In the event Tenant objects or is deemed tohave objected to the Market Rent, Landlord and Tenant shall attempt to agreeupon the Market Rent using reasonable good-faith efforts.  If Landlord and Tenant fail to reachagreement within sixty (60) days following Tenant’s objection or deemedobjection to the Landlord’s Option Rent Calculation (the (the “**Outside Agreement Date**”), then (i) inconnection with the Option Rent, Landlord’s Option Rent Calculation and Tenant’sOption Rent Calculation, each as previously delivered to the other party, shallbe submitted to the arbitrators pursuant to the TCCs of this Section 3.2.4,and (ii) in connection with any other contested calculation of marketRent, the parties shall each make a separate determination of the Market Rentand shall submit the same to the arbitrators pursuant to the TCCs of this Section 3.2.5.  The submittals shall be made concurrentlywith the selection of the arbitrators pursuant to this Section 3.2.5and shall be submitted to arbitration in accordance with Section 3.2.5.1through 3.2.5.5 of this First Amendment, but subject to theconditions, when appropriate, of Section 3.2.3.

###  

#### 3.2.5.1.            Landlord and Tenant shall mutually andreasonably select and appoint one arbitrator who shall by profession be a realestate broker, appraiser or attorney (the “**NeutralArbitrator**”) who shall have been active over the five (5) yearperiod ending on the date of such appointment in the leasing (or appraisal, asthe case may be) of first-class office/lab/manufacturing properties in theComparable Area.  The determination ofthe Neutral Arbitrator shall be limited solely to the issue of whether Landlord’sor Tenant’s submitted Market Rent, is the closest to the actual Market Rent asdetermined by the Neutral Arbitrator, taking into account the requirements of Section 3.2.2of this First Amendment.  Such NeutralArbitrator shall be appointed within thirty (30) days after the applicableOutside Agreement Date.  Neither theLandlord nor Tenant may, directly or indirectly, consult with the NeutralArbitrator prior to subsequent to his or her appearance.  The Neutral Arbitrator shall be retained viaan engagement letter jointly prepared by Landlord’s counsel and Tenant’scounsel.

 

5

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#### 3.2.5.2.            Within thirty (30) days of theappointment of the Neutral Arbitrator, such Neutral Arbitrator shall reach adecision as to Market Rent and determine whether the Landlord’s or Tenant’sdetermination of Market Rent as submitted pursuant to Section 3.2.5.1and Section 3.2.3 of this First Amendment is closest to Market Rentas determined by such Neutral Arbitrator and simultaneously publish a ruling (“**Award**”) indicating whether Landlord’s orTenant’s submitted Market Rent is closest to the Market Rent as determined bythe Neutral Arbitrator.  Followingnotification of the Award, the Landlord’s or Tenant’s submitted Market Rentdetermination, whichever is selected by the Neutral Arbitrator as being closestto Market rent shall become the then applicable Market Rent.

####  

#### 3.2.5.3.            The Award issued by the NeutralArbitrator shall be binding upon Landlord and Tenant.

####  

#### 3.2.5.4.            If Landlord and Tenant fail to agree uponand appoint the Neutral Arbitrator, then either party may petition JudicialArbitration & Mediation Services, Inc. (“**JAMS**”) to designate an independent thirdparty to appoint the Neutral Arbitrator, subject to criteria in Section 3.2.5.1of this First Amendment.

####  

#### 3.2.5.5.            The cost of arbitration shall be paid bythe party (either Landlord or Tenant) whose Market Rent is not selected by theNeutral Arbitrator.

####  

## 3.3.                              **Expansion PremisesTermination Right**.  Notwithstanding anything to the contrary inthe Lease (as hereby amended), Tenant shall have one-time option to terminateand cancel the Lease with respect to the Expansion Premises only effective asof June 1, 2017 (the “**Termination Date**”)upon Tenant’s delivery of written notice to Landlord (the “**Termination Notice**”), which notice shall bedelivered to Landlord on or before December 31, 2016.  Subject to Landlord’s timely receipt of theTermination Notice, the Lease (as hereby amended) with respect to the ExpansionPremises only shall automatically terminate and be of no further force oreffect, and Landlord and Tenant shall be relieved of their respectiveobligations under the Lease (as hereby amended) with respect to the ExpansionPremises, as of the Termination Date, except with respect to those obligationsset forth in the Lease (as amended) which specifically survive the expirationor earlier termination of the Lease, including, without limitation, the paymentby Tenant of all amounts owed by Tenant under the Lease (as hereby amended)with respect to the Expansion Premises arising or accruing prior to theTermination Date.  The termination rightsgranted to Tenant under this Section 3.3 are personal to theOriginal Tenant, any Affiliate or a Permitted Assignee and may not be assignedor transferred to any other person or entity.

##  

# 4.                                       **Base Rent**.

#  

## 4.1.                              **Existing Premises**. Notwithstanding anything to the contrary in the Lease as hereby amended,Tenant shall continue to pay Base Rent for the Existing Premises in accordancewith the terms of Article 3 of the Lease.

##  

## 4.2.                              **Expansion Premises**. Commencing on the Expansion Commencement Date and continuing throughoutthe Expansion Term, Tenant shall pay to Landlord monthly installments of BaseRent for the Expansion Premises as follows:

 

6

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| **Lease Years, Commencing  on the Expansion  Commencement Date,  During Expansion Term** | ** ** | **Annualized  Base Rent** | ** **   | **Monthly  Installment  of Base Rent** | ** ** | **Approximate Monthly  Rental Rate  per Rentable  Square Foot** | ** ** |
|-----------------------------------------------------------------------------------------------|------------|---------------------------|--------------|----------------------------------------|------------|-----------------------------------------------------------------|------------|
|                                                                                          |       |                      |         |                                   |       |                                                            |       |
| 1                                                                                             |       | $                         | 818,311.20   |                                   | $          | 68,192.60                                                       |       | $ | 1.4000 |   |
|                                                                                          |       |                      |         |                                   |       |                                                            |       |   |   |   |
| 2                                                                                             |       | $                         | 846,952.09   |                                   | $          | 70,579.34                                                       |       | $ | 1.4490 |   |
|                                                                                          |       |                      |         |                                   |       |                                                            |       |   |   |   |
| 3                                                                                             |       | $                         | 876,595.42   |                                   | $          | 73,049.62                                                       |       | $ | 1.4997 |   |
|                                                                                          |       |                      |         |                                   |       |                                                            |       |   |   |   |
| 4                                                                                             |       | $                         | 907,276.25   |                                   | $          | 75,606.35                                                       |       | $ | 1.5522 |   |
|                                                                                          |       |                      |         |                                   |       |                                                            |       |   |   |   |
| 5                                                                                             |       | $                         | 939,030.92   |                                   | $          | 78,252.58                                                       |       | $ | 1.6065 |   |
|                                                                                          |       |                      |         |                                   |       |                                                            |       |   |   |   |
| 6                                                                                             |       | $                         | 971,897.01   |                                   | $          | 80,991.42                                                       |       | $ | 1.6628 |   |
|                                                                                          |       |                      |         |                                   |       |                                                            |       |   |   |   |
| 7                                                                                             |       | $                         | 1,005,913.40 |                                   | $          | 83,826.12                                                       |       | $ | 1.7210 |   |
|                                                                                          |       |                      |         |                                   |       |                                                            |       |   |   |   |
| 8                                                                                             |       | $                         | 1,041,120.37 |                                   | $          | 86,760.03                                                       |       | $ | 1.7812 |   |
|                                                                                          |       |                      |         |                                   |       |                                                            |       |   |   |   |
| 9                                                                                             |       | $                         | 1,077,559.58 |                                   | $          | 89,796.63                                                       |       | $ | 1.8435 |   |
|                                                                                          |       |                      |         |                                   |       |                                                            |       |   |   |   |
| 10                                                                                            |       | $                         | 1,115,274.17 |                                   | $          | 92,939.51                                                       |       | $ | 1.9081 |   |
|                                                                                          |       |                      |         |                                   |       |                                                            |       |   |   |   |
| 11                                                                                            |       | $                         | 1,154,308.76 |                                   | $          | 96,192.40                                                       |       | $ | 1.9748 |   |
|                                                                                          |       |                      |         |                                   |       |                                                            |       |   |   |   |
| 12                                                                                            |       | $                         | 1,194,709.57 |                                   | $          | 99,559.13                                                       |       | $ | 2.0440 |   |
|                                                                                          |       |                      |         |                                   |       |                                                            |       |   |   |   |
| 13                                                                                            |       | $                         | 1,236,524.41 |                                   | $          | 103,043.70                                                      |       | $ | 2.1155 |   |
|                                                                                          |       |                      |         |                                   |       |                                                            |       |   |   |   |
| 14                                                                                            |       | $                         | 1,279,802.76 |                                   | $          | 106,650.23                                                      |       | $ | 2.1895 |   |
|                                                                                          |       |                      |         |                                   |       |                                                            |       |   |   |   |
| 15                                                                                            |       | $                         | 1,324,595.86 |                                   | $          | 110,382.99                                                      |       | $ | 2.2662 |   |
|                                                                                          |       |                      |         |                                   |       |                                                            |       |   |   |   |
| 16                                                                                            |       | $                         | 1,370,956.71 |                                   | $          | 114,246.39                                                      |       | $ | 2.3455 |   |
|                                                                                          |       |                      |         |                                   |       |                                                            |       |   |   |   |
| 17                                                                                            |       | $                         | 1,418,940.20 |                                   | $          | 118,245.02                                                      |       | $ | 2.4276 |   |
|                                                                                          |       |                      |         |                                   |       |                                                            |       |   |   |   |
| 18                                                                                            |       | $                         | 1,468,603.10 |                                   | $          | 122,383.59                                                      |       | $ | 2.5125 |   |
|                                                                                          |       |                      |         |                                   |       |                                                            |       |   |   |   |
| 19                                                                                            |       | $                         | 1,520,004.21 |                                   | $          | 126,667.02                                                      |       | $ | 2.6005 |   |
|                                                                                          |       |                      |         |                                   |       |                                                            |       |   |   |   |
| 20 though Lease Expiration Date                                                               |       | $                         | 1,573,204.36 |                                   | $          | 131,100.36                                                      |       | $ | 2.6915 |   |

 

## On or before the Expansion Commencement Date,Tenant shall pay to Landlord the Base Rent payable for the Expansion Premisesfor the first full month of the Expansion Term.

 

7

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# 5.                                       **Tenant’s Share ofBuilding Direct Expenses**.

#  

## 5.1.                              **Existing Premises**. Notwithstanding anything in the Lease, as hereby amended, to thecontrary, Tenant shall continue to pay Tenant’s Share of Direct Expenses inconnection with the Existing Premises and attributable to the 10421 Building inaccordance with the terms of the Lease.

##  

## 5.2.                              **Expansion Premises**. Except as specifically set forth in this Section 5.2,commencing on the Expansion Commencement Date, Tenant shall pay Tenant’s Shareof Direct Expenses in connection with the Expansion Premises in accordance withthe terms of Article 4 of the Lease, provided that with respect tothe calculation of Tenant’s Share of Direct Expenses in connection with theExpansion Premises and attributable to the 10445 Building, Tenant’s Share shallequal 100%.

##  

# 6.                                       **Abated Rent**. In the event that Tenant is not then in economic default of the Lease(as hereby amended, and beyond any applicable notice and cure period), thenduring the twelve month period commencing on the Expansion Commencement Dateand ending on the day immediately prior to the first anniversary of theExpansion Commencement Date (the “**RentAbatement Period**”), Tenant shall only be obligated to pay one-half(1⁄2) of (i) the Base Rent and (ii) Tenant’s Share of Direct Expenses,which are otherwise attributable to the Expansion Premises during such RentAbatement Period (the “**Rent Abatement**”).  To the extent that Tenant is in such economicdefault of the Lease (as hereby amended, and beyond any applicable notice andcure period) as of the first day of any calendar month that is part of the RentAbatement Period, then Tenant shall be obligated to immediately pay the fullamount of the Base Rent and Tenant’s Share of Direct Expenses otherwise (butfor the Rent Abatement) attributable to the Expansion Premises during suchcalendar month (each such month, a “**DeferredAbatement Month**”); provided, however, that following Tenant’s fullpayment of any and all such amounts and Tenant’s cure of any such economicdefault, the Rent Abatement Period shall be extended one (1) month foreach Deferred Abatement Month; provided further, however, in no event shall thetotal dollar amount of such Rent Abatement exceed the dollar amount of the RentAbatement otherwise attributable to the first twelve months immediatelyfollowing the Expansion Commencement Date.

#  

# 7.                                       **Expansion Improvements**. Except as specifically set forth herein, Landlord shall not be obligatedto provide or pay for any improvement work or services related to theimprovement of the Expansion Premises, and Tenant shall accept the ExpansionPremises in its presently existing, “as-is” condition.  The improvements in the Expansion Premisesshall be constructed pursuant to the terms of the First Amendment Work Letterattached hereto as **Exhibit B**(the “**First Amendment Work Letter**”).  The terms and conditions of the FirstAmendment Work Letter shall not be applicable to the construction of theExisting Premises.

#  

# 8.                                       **Parking**. Effective as of the Expansion Commencement Date and continuingthroughout the Expansion Term, Tenant shall be entitled to utilize, withoutcharge, up to one hundred ninety-four (194) unreserved parking passes inconnection with Tenant’s lease of the Expansion Premises (the “**Expansion Parking Passes**”) (i.e., four (4) unreservedparking spaces for every 1,000 rentable square feet of the ExpansionPremises).  Except as set forth in this

 

8

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# Section 8, Tenant’s use of the Expansion Parking Passesshall be in accordance with the provisions of Article 28 of theLease.

#  

# 9.                                       **Security Deposit**. Landlord and Tenant acknowledge that, in accordance with Section 21.1of the Lease, Tenant has previously delivered the sum of Three Hundred Fifty-FiveThousand Seven Hundred Twenty-Seven and 60/100 Dollars ($355,727.60) (the “**Existing Security Deposit**”) to Landlord assecurity for the faithful performance by Tenant of the terms, covenants andconditions of the Lease with respect to the Existing Premises.  Landlord shall continue to retain theExisting Security Deposit as security for the faithful performance by Tenant ofthe terms, covenants and conditions of the Lease, as hereby amended, withrespect to the Expansion Premises. Notwithstanding the foregoing, to the extent that Tenant timely electsto exercise its termination right with respect to the Expansion Premises as setforth in Section 3.3, above, then subject to the terms andconditions of Section 21.1 of the Lease, the amount of the SecurityDeposit shall be reduced to Two Hundred Eight-Seven Thousand Five HundredThirty-Five and No/100 Dollars ($287,535.00) and Landlord shall, withinforty-five days following the Termination Date, return an amount equal toSixty-Eight Thousand One Hundred Ninety-Two and 60/100 Dollars ($68,192.60) toTenant.

#  

# 10.                                 **Broker**. Landlord and Tenant hereby warrant to each other that they have had nodealings with any real estate broker or agent in connection with thenegotiation of this First Amendment other than Colliers International (the “**Broker**”), and that they know of no otherreal estate broker or agent who is entitled to a commission in connection withthis First Amendment.  Each party agreesto indemnify and defend the other party against and hold the other partyharmless from any and all claims, demands, losses, liabilities, lawsuits,judgments, and costs and expenses (including, without limitation, reasonableattorneys’ fees) with respect to any leasing commission or equivalentcompensation alleged to be owing on account of the indemnifying party’sdealings with any real estate broker or agent, other than the Broker, occurringby, through, or under the indemnifying party. The terms of this Section 10 shall survive the expiration orearlier termination of this First Amendment.

#  

# 11.                                 **Effectiveness of ThisFirst Amendment**.  Landlord and Tenant hereby acknowledge thatthe Expansion Premises is currently occupied by a third-party (the “**Existing Tenant**”) pursuant to an existinglease between Landlord and the Existing Tenant (the “**Existing Lease**”). Notwithstanding the full execution and delivery of this First Amendmentbetween Landlord and Tenant, this First Amendment is expressly conditioned uponthe termination of the Existing Lease, which shall occur following the fullexecution and unconditional delivery (i.e., no conditions to the effectivenessof such termination agreement) of a lease termination agreement with respect tothe Existing Lease (the “**Existing LeaseTermination Agreement**”), in a manner acceptable to Landlord in itssole and absolute discretion.  Followingthe full execution and delivery of this First Amendment between Landlord andTenant, Landlord agrees to use commercially reasonable efforts to enter intosuch Existing Lease Termination Agreement. Landlord shall have no liability whatsoever to Tenant relating to orarising from Landlord’s inability or failure to deliver, or Landlord’s delay indelivering, the Expansion Premises to Tenant.

 

9

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# 12.                                 **No Further Modification**. Except as set forth in this First Amendment, all of the terms andprovisions of the Lease shall apply with respect to the Expansion Premises andshall remain unmodified and in full force and effect.

#  

IN WITNESS WHEREOF, this First Amendment hasbeen executed as of the day and year first above written.  

 
|   |   | **“LANDLORD”:**      |                       |
|--------|--------|--------------------------------|----------------------------|
|   |   |                           |                       |
|   |   | KILROY REALTY, L.P.,           |                       |
|   |   | a Delaware limited partnership |                       |
|   |   |                           |                       |
|   |   | By:                            | Kilroy Realty Corporation, |   |
|   |   |                           | a Maryland corporation,    |   |
|   |   |                           | General Partner            |   |
|   |   |                           |                       |
|   |   |                           | By:                        |   |   |
|   |   |                           |                       |   |   |
|   |   |                           |                       |    Its: |   |   |   |
|   |   |                           |                       |
|   |   |                           | By:                        |   |   |
|   |   |                           |                       |   |   |
|   |   |                           |                       |    Its: |   |   |   |
|   |   |                           |                       |
|   |   | **“TENANT”:**        |                       |
|   |   |                           |                       |
|   |   | FAVRILLE, INC.,                |                       |
|   |   | a Delaware corporation         |                       |
|   |   |                           |                       |
|   |   |                           | By:                        |   |   |
|   |   |                           |                       |   |   |
|   |   |                           |                       |    Its: |   |   |   |
|   |   |                           |                       |
|   |   |                           | By:                        |   |   |
|   |   |                           |                       |   |   |
|   |   |                           |                       |    Its: |   |   |   |
|        |        |                                |                            |  |  |  |  |  |

 

10

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**EXHIBIT A**

 

**PACIFICCORPORATE CENTER**

 

**OUTLINEOF EXPANSION PREMISES**

 

**[ATTACHED]**

 

1

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**EXHIBIT B**

 

**PACIFICCORPORATE CENTER**

 

**FIRSTAMENDMENT WORK LETTER**

 

**[ATTACHED]**

 

1

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**EXHIBIT B**

 

**PACIFICCORPORATE CENTER**

 

**FIRSTAMENDMENT WORK LETTER**

 

This First Amendment Work Letter shall setforth the terms and conditions relating to the construction of the ExpansionPremises which shall be referred to in this First Amendment Work Letter as the “**Premises**.” This First Amendment Work Letter is essentially organizedchronologically and addresses the issues of the construction of the Premises,in sequence, as such issues will arise during the actual construction of the Premises.  All references in this First Amendment WorkLetter to Sections of “**this Amendment**”shall mean the relevant portion of the First Amendment to which this FirstAmendment Work Letter is attached as **Exhibit B**and of which this First Amendment Work Letter forms a part, all references inthis First Amendment Work Letter to Articles or Sections of “this Lease” shallmean the relevant portions of Articles 1 through 29 of theAmended and Restated Office Lease being amended by this Amendment, and allreferences in this First Amendment Work Letter to Sections of “this Tenant WorkLetter” shall mean the relevant portions of Sections 1 through 5of this First Amendment Work Letter.

 

SECTION 1**DELIVERY OF THE PREMISES AND BASE BUILDING**

 

In accordance with the TCCs of this Lease andthis Amendment, Landlord shall deliver the Premises and “Base Building,” asthat term is defined in Section 8.2 of the Lease, of such Premisesto Tenant.  The Base Building shall be ingood condition and working order and shall comply with applicable buildingcodes and other governmental laws, ordinances and regulations which wereenacted prior to the date of this Amendment to the extent the same would berequired to obtain a certificate of occupancy on an unoccupied basis as of thedate Landlord delivers the Premises and Base Building to Tenant (collectively,the “**Code**”).  In connection with, and to the extentconsistent with, the foregoing obligation, Landlord shall address the issuesraised by Tenant in that certain memorandum prepared by Tenant entitled 10445 PCC Code Compliance Summaryand dated October 21, 2005, under the following headings:  “Accessible Parking,” “Curb Ramps,” and “Toiletand Bathing Facilities (Including Dressing & Fitting Rooms).  Tenant shall, except as otherwise set forthin this Lease or in this Tenant Work Letter, accept the Premises and BaseBuilding from Landlord in their then existing, “as-is” condition, subject tothe terms of this Tenant Work Letter, subject only to punchlist items andLandlord’s obligations set forth in Article 7 of this Lease,including, without limitation, Landlord’s obligation to maintain in accordancewith Section 7.1 of the Lease the Building Structure.

 

SECTION 2**TENANT IMPROVEMENTS**

 

2.1                                 **Improvement Allowance**.  Tenant shall be entitled to a one-timeimprovement allowance (the “**ImprovementAllowance**”) in the amount of One Million Two Hundred

 

1

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Thousand and No/100 Dollars ($1,200,000.00) for the costs relating tothe initial design and construction of Tenant’s improvements and certainadditional costs, all of which are set forth in Section 2.2.1,below, as “Improvement Allowance Items” (the “**TenantImprovements**”) and Landlord and Tenant hereby acknowledges and agreethat all such Tenant Improvements shall, upon completion of the same, be andbecome a part of the Premises and the property of Landlord.  In no event shall Landlord be obligated tomake disbursements pursuant to this Tenant Work Letter in a total amount whichexceeds the Improvement Allowance.

 

2.2                                 **Disbursement of the Improvement Allowance**.

 

2.2.1                        **Improvement Allowance Items**.  Except as otherwise set forth in this TenantWork Letter, the Tenant Improvement Allowance shall be disbursed by Landlord(each of which disbursements shall be made pursuant to Landlord’s disbursementprocess) for costs related to the construction of the Tenant Improvements andfor the following items and costs (collectively the “**Improvement Allowance Items**”):

 

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

 

2.2.1.2               The payment of plan check, permit andlicense fees relating to construction of the Tenant Improvements, and the costof installing and purchasing Tenant’s voice and data cabling (the TenantImprovements Allowance Items set forth in Section 2.2.1.1, above,and in this Section 2.2.1.2, shall, collectively, be known as the “**Soft Costs**”);

 

2.2.1.3               The cost of construction of the TenantImprovements, including, without limitation, testing and inspection costs,freight elevator usage, hoisting and trash removal costs, and contractors’ feesand general conditions;

 

2.2.1.4               The cost of any changes in the BaseBuilding when such changes are required by the Construction Drawings (includingif such changes are due to the fact that such work is prepared on an unoccupiedbasis), such cost to include all direct architectural and/or engineering feesand expenses incurred in connection therewith;

 

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

 

2.2.1.6               The cost of the “Coordination Fee,” asthat term is defined in Section 4.2.2 of this Tenant Work Letter;and

 

2.2.1.7               All other costs required or allowed bythe terms of this Tenant Work Letter to be expended by Landlord in connectionwith the construction of the Tenant Improvements.

 

2.2.2                        **Other Terms**. Landlord shall only be obligated to make disbursements from theImprovement Allowance to the extent costs are incurred by Tenant forImprovement Allowance Items.  AllImprovement Allowance Items for which the Improvement Allowance has been usedshall be deemed Landlord’s property under the terms of this Lease.

 

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2.3                                 **Standard Tenant Improvement Package**.  Landlord has established specifications (the “**Building Standard Tenant Improvements**”) forthe Building standard components to be used in the construction of the TenantImprovements in the office areas of the Premises, which Building StandardTenant Improvements are set forth on **Schedule 1**,attached hereto.  The quality of TenantImprovements shall be equal to or of greater quality than the quality of theBuilding Standard Tenant Improvements.

 

2.4                                 **Removal of Above Building Standard Tenant Improvements**.  “**AboveStandard Tenant Improvements**” shall mean (a) any part of theTenant Improvements which do not constitute Building Standard TenantImprovements; and (b) a configuration of the Tenant Improvements which isnot usual and customary for either normal occupancy or generic wet/dry labspace.  Landlord may require that Tenant,upon the expiration or any earlier termination of this Lease, remove any AboveStandard Tenant Improvements in the lab portion of the Premises identified by Landlordconcurrently with Landlord’s review and approval of the Approved WorkingDrawings to the extent such Tenant Improvements are unique and particular toTenant vis-à-vis generic wet/dry lab space (collectively, the “**Extraordinary Alterations**”), and to repairany damage to the Premises and Building caused by such removal (reasonable wearand tear excepted); provided, however, if Landlord, in its approval of anyAbove Standard Tenant Improvements, fails to address the removal requirementwith regard to particular Above Standard Tenant Improvements, Landlord shall bedeemed to have agreed to waive the removal requirement with regard to suchparticular Above Standard Tenant Improvements; provided further, however, in noevent shall identified Extraordinary Alterations include improvements which areindustry standard improvements in research and development wet labs.

 

SECTION 3**CONSTRUCTION DRAWINGS**

 

3.1                                 **Selection of Architect/Construction Drawings**.  Tenant shall retain an architect/spaceplanner selected by Tenant, subject to Landlord’s reasonable approval (the “**Architect**”) to prepare the “ConstructionDrawings,” as that term is defined in this Section 3.1.  Tenant shall retain the engineeringconsultants selected by Tenant, subject to Landlord’s reasonable approval (the “**Engineers**”) to prepare all plans andengineering working drawings relating to the structural, mechanical,electrical, plumbing, HVAC, life safety, and sprinkler work in the Premises,which work is not part of the Base Building. Landlord shall approve or disapprove of Tenant’s proposed Architect orEngineers, as the case may be, within five (5) business days followingTenant’s submission of the name(s) of Tenant’s proposed Architects orEngineers, respectively, together with all documentation and other informationreasonably required by Landlord.  Theplans and drawings to be prepared by Architect and the Engineers hereundershall be known collectively as the “**ConstructionDrawings**.”  All ConstructionDrawings shall comply with the drawing format and specifications determined byLandlord, and shall be subject to Landlord’s approval, which approval shall notbe unreasonably withheld.  Tenant andArchitect shall verify, in the field, the dimensions and conditions as shown onthe relevant portions of the base building plans, and Tenant and Architectshall be solely responsible for the same, and Landlord shall have noresponsibility in connection therewith. Landlord’s review of the Construction Drawings as set forth in this Section 3,shall be for its sole purpose and shall not imply Landlord’s review of thesame, or obligate Landlord to review the same, for

 

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quality, design, Code compliance or other like matters.  Accordingly, notwithstanding that anyConstruction Drawings are reviewed by Landlord or its space planner, architect,engineers and consultants, and notwithstanding any advice or assistance whichmay be rendered to Tenant by Landlord or Landlord’s space planner, architect,engineers, and consultants, Landlord shall have no liability whatsoever inconnection therewith and shall not be responsible for any omissions or errorscontained in the Construction Drawings, and Tenant’s waiver and indemnity setforth in this Lease shall specifically apply to the Construction Drawings.

 

3.2                                 **Final Space Plan**.  Tenant shall supply Landlord with four (4) copiessigned by Tenant of its final space plan for the Premises before anyarchitectural working drawings or engineering drawings have beencommenced.  The final space plan (the “**Final Space Plan**”) shall include a layoutand designation of all offices, rooms and other partitioning, their intendeduse, and equipment to be contained therein. Landlord may request clarification or more specific drawings for specialuse items not included in the Final Space Plan. Landlord shall, within ten (10) business days after Landlord’sreceipt of the Final Space Plan, (i) approve the Final Space Plan, (ii) approvethe Final Space Plan subject to specified conditions to be complied with whenthe Final Working Drawings are submitted by Tenant to Landlord, or (iii) disapprovethe Final Space Plan and return the same to Tenant with detailed requestedrevisions.  If Landlord disapproves theFinal Space Plan, Tenant shall resubmit the Final Space Plan to Landlord, andLandlord shall approve or disapprove of the resubmitted Final Space Plan, basedupon the criteria set forth in this Section 3.2 (except thatLandlord’s disapproval of the Final Space Plan, as resubmitted, shall be final),within five (5) business days after Landlord receives such resubmittedFinal Space Plan.  If Tenant is soadvised, Tenant shall promptly cause the Final Space Plan to be revised tocorrect any deficiencies or other matters Landlord may reasonably require.

 

3.3                                 **Final Working Drawings**.  After the Final Space Plan has been approvedby Landlord, Tenant shall supply the Engineers with a complete listing ofstandard and non-standard equipment and specifications, including, withoutlimitation, B.T.U. calculations, electrical requirements and special electricalreceptacle requirements for the Premises, to enable the Engineers and theArchitect to complete the “Final Working Drawings” (as that term is definedbelow) in the manner as set forth below. Upon the approval of the Final Space Plan by Landlord and Tenant, Tenantshall promptly cause the Architect and the Engineers to complete thearchitectural and engineering drawings for the Premises, and Architect shallcompile architectural, structural, mechanical, electrical and plumbing workingdrawings in a form which is complete to allow subcontractors to bid on the workand to obtain all applicable permits (which may be done by subspecialty if suchsubspecialty will be separately permitted by the City) (collectively, the “**Final Working Drawings**”) and shall submitthe same to Landlord for Landlord’s approval. Tenant shall supply Landlord with four (4) copies signed by Tenantof such Final Working Drawings.  Landlordshall, within ten (10) business days after Landlord’s receipt of the FinalWorking

 

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Drawings, (i) approve the Final Working Drawings, (ii) approvethe Final Working Drawings subject to specified conditions to be satisfied byTenant prior to submitting the Approved Working Drawings for permits as setforth in Section 3.4, below, or (iii) disapprove the FinalWorking Drawings and return the same to Tenant with detailed requestedrevisions.  If Landlord disapproves theFinal Working Drawings, Tenant shall resubmit the Final Working Drawings toLandlord, and Landlord shall approve or disapprove of the resubmitted FinalWorking Drawings (except that Landlord’s disapproval of the Final WorkingDrawings, as resubmitted, shall be final), within five (5) business daysafter Landlord receives such resubmitted Final Working Drawings.  If Tenant is so advised, Tenant shallimmediately revise the Final Working Drawings in accordance with such reviewand any disapproval of Landlord in connection therewith.  In addition, if the Final Working Drawings orany amendment thereof or supplement thereto shall require alterations in theBase Building (as contrasted with the Tenant Improvements), and if Landlord inits sole and exclusive discretion agrees to any such alterations, and notifiesTenant of the need and cost for such alterations, then Tenant shall pay, at itssole cost and expense, the cost of such required changes upon receipt of billstherefor.

 

3.4                                 **Approved Working Drawings**.  Notwithstanding anything in this Tenant WorkLetter to the contrary, Tenant shall not commence (or allow the commencementof) the construction of the Tenant Improvements until the Final WorkingDrawings are approved in writing by Landlord (the “**Approved Working Drawings**”). After approval by Landlord of the Final Working Drawings, Tenant maysubmit the same to the appropriate municipal authorities for all applicablebuilding permits.  Tenant hereby agreesthat neither Landlord nor Landlord’s consultants shall be responsible forobtaining any building permit or certificate of occupancy for the Premises andthat obtaining the same shall be Tenant’s responsibility; provided, however,that Landlord shall cooperate with Tenant in executing permit applications andperforming other ministerial acts reasonably necessary to enable Tenant toobtain any such permit or certificate of occupancy.  Subject to the terms of Section 4.2.1,below, no changes, modifications or alterations in the Approved WorkingDrawings may be made without the prior written consent of Landlord, whichconsent may not be unreasonably withheld.

 

SECTION 4**CONSTRUCTION OF THE TENANT IMPROVEMENTS**

 

4.1                                 **The Contractor**.  Tenant shall select, subject to Landlord’sreasonable approval, three (3) licensed general contractors (the “**Bidding Contractors**”) to bid on theconstruction of the Tenant Improvements. Following such selection, Tenant shall solicit bids from the BiddingContractors and, following such bidding process, shall select which BiddingContractor shall be the contractor to construct the Tenant Improvements (the “**Contractor**”).  Landlord shall independently retain theContractor to construct the Tenant Improvements in accordance with the ApprovedWorking Drawings.  All subcontractors,materialmen and suppliers are subject to Tenant’s prior approval, whichapproval shall not be unreasonably withheld, conditioned or delayed.

 

4.2                                 **Construction of Tenant Improvements by Contractorunder the Supervision of Landlord and Tenant**.

 

4.2.1                        **Construction Contract; Over-Allowance Amount**.  Landlord and Tenant shall jointly negotiateand prepare the form of the construction contract (the “**Contract**”) to be executed by and betweenLandlord and the Contractor. Notwithstanding the foregoing, the Contract shall expressly state thatall “change orders” which (x) involve the expenditure of more than$25,000.00 in the aggregate; (y) adversely affect the systems andequipment of the Building or the Building Structure, or (z) adverselyaffect the exterior appearance of the Building, must be approved in advance byLandlord and Tenant in writing.  Prior tothe commencement of the

 

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construction of the Tenant Improvements, and after Tenant has acceptedall bids for the Tenant Improvements, Landlord shall submit to Tenant, forTenant’s review and approval, a detailed breakdown, by trade, of the finalcosts to be incurred or which have been incurred, as set forth moreparticularly in Sections 2.2.1.1 through 2.2.1.7, above, in connectionwith the design and construction of the Tenant Improvements, which costs form abasis for the amount of the Contract (the “**FinalCosts**”).  Prior to thecommencement of construction of the Tenant Improvements, Tenant and Landlordshall identify the amount (the “**Over-AllowanceAmount**”) equal to the difference between the amount of the FinalCosts and the Improvement Allowance (less any portion thereof already disbursedby Landlord, or in the process of being disbursed by Landlord, on or before thecommencement of construction of the Tenant Improvements).  To the extent there exists an Over-AllowanceAmount, then following Landlord’s disbursement of ninety percent (90%) of theImprovement Allowance to the Contractor (i.e., all of such ImprovementAllowance minus a ten percent (10%) retention (the “**Final Retention**”) which Final Retention shall only bedisbursed by Landlord to the Contractor following the completion of the TenantImprovements and in accordance with the terms of the Contract), Tenant shall,at Tenant’s sole cost, pay to Contractor an amount equal to the total amountthen due and owing to the Contractor (other than any corresponding FinalRetention which shall be paid concurrently with Landlord’s payment of itsportion of the Final Retention to the Contractor), and such payment by Tenantshall be a condition to Landlord’s obligation to pay the Final Retention.  In no event shall any delays resulting fromany failure by Tenant to pay any such amount be deemed to be a Landlord CausedDelay (as that term is defined in Section 5.1, below).  In the event that, after the Final Costs havebeen determined, any revisions, changes, or substitutions shall be made to theConstruction Drawings or the Tenant Improvements, any additional costs whicharise in connection with such revisions, changes or substitutions or any otheradditional costs shall be deemed to be an addition to the Over-AllowanceAmount.

 

4.2.2                        **Supervision of Contractor**. Landlord and Tenant shall jointly supervise the construction of theTenant Improvements by Contractor.  Landlordand Tenant shall mutually cooperate with each other in all phases of suchsupervision in order to for the Tenant Improvements to be completed in a timelymanner in accordance with the Approved Working Drawings.  Notwithstanding such joint supervision, Tenantshall pay a construction supervision and management fee (the “**Landlord Supervision Fee**”) to Landlord inan amount equal to the product of (A) one percent (1%), and (B) thehard costs incurred with the Improvement Allowance Items identified in Sections2.2.1.3 – 2.2.1.5 (whether paid for via the Improvement Allowance oras an Over-Allowance Amount, which Landlord Supervision Fee shall be forservices relating to the coordination of the construction of the TenantImprovements.

 

4.2.3                        **Contractor’s Warranties and Guaranties**.  Landlord hereby assigns to Tenant allwarranties and guaranties by Contractor relating to the Tenant Improvements,and Tenant hereby waives all claims against Landlord relating to, or arisingout of the construction of, the Tenant Improvements and which claims arecovered by such warranties.

 

4.2.4                        **Indemnity**.  Tenant’sindemnity of Landlord as set forth in this Lease shall also apply with respectto any and all costs, losses, damages, injuries and liabilities incurred byLandlord Parties and related in any way to any act or omission of Tenant orTenant’s Architect at the Project; provided, however, that the foregoingindemnity shall not apply to the extent of Landlord’s gross negligence orwillful misconduct.

 

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4.2.5                        **Requirements of Contractor**.  The Contractor shall guarantee to Landlordand for the benefit of Tenant that the portion of the Tenant Improvements forwhich it is responsible shall be free from any defects in workmanship and materialsfor a period of not less than one (1) year from the date of completionthereof, and that the Contractor shall be responsible for the replacement orrepair, without additional charge, of all work done or furnished in accordancewith its contract that shall become defective within one (1) year afterthe later to occur of (i) completion of the work performed by suchcontractor or subcontractors and (ii) the Lease Commencement Date.  The correction of such work shall include,without additional charge, all additional expenses and damages incurred inconnection with such removal or replacement of all or any part of the TenantImprovements, and/or the Building and/or common areas that may be damaged ordisturbed thereby.  All such warrantiesor guarantees as to materials or workmanship of or with respect to the TenantImprovements shall be contained in the Contract or subcontract and shall bewritten such that such guarantees or warranties shall inure to the benefit ofboth Landlord and Tenant, as their respective interests may appear, and may bedirectly enforced by either.  Landlordcovenants to give to Tenant any assignment or other assurances which may benecessary to effect such right of direct enforcement.

 

4.2.6                        **Insurance Requirements**.

 

4.2.6.1               **GeneralCoverages**.  Contractor andall subcontractors shall carry worker’s compensation insurance covering all oftheir respective employees, and shall also carry public liability insurance,including property damage, all with limits, in form and with companies as arerequired to be carried by Tenant as set forth in this Lease.

 

4.2.6.2               **SpecialCoverages**.  “Builder’s AllRisk” insurance in an amount approved by Landlord covering the construction ofthe Tenant Improvements, and such other insurance as Landlord may require, itbeing understood and agreed that the Tenant Improvements shall be insured byTenant pursuant to this Lease immediately upon completion thereof.  Such insurance shall be in amounts and shallinclude such extended coverage endorsements as may be reasonably required byLandlord including, but not limited to, the requirement that all Contractor andall subcontractors shall carry excess liability and Products and CompletedOperation Coverage insurance, each in amounts not less than $500,000 per incident,$1,000,000 in aggregate, and in form and with companies as are required to becarried by Tenant as set forth in this Lease.

 

4.2.6.3               **GeneralTerms**.  Certificates forall insurance carried pursuant to this Section 4.2.6.3 shall bedelivered to Landlord and Tenant before the commencement of construction of theTenant Improvements and before the Contractor’s equipment is moved onto thesite.  All such policies of insurancemust contain a provision that the company writing said policy will giveLandlord and Tenant thirty (30) days prior written notice of any cancellationor lapse of the effective date or any reduction in the amounts of suchinsurance.  In the event that the TenantImprovements are damaged by any cause during the course of the constructionthereof, Landlord shall immediately repair the same.  Landlord shall use commercially reasonableefforts to ensure that Contractor and all subcontractors maintain all of theforegoing insurance coverage in force until the Tenant Improvements are fullycompleted and accepted by Tenant, except for any Products and CompletedOperation Coverage insurance, which is to be maintained for ten (10) yearsfollowing completion of the work and acceptance by Landlord and

 

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Tenant.  All policies carriedunder this Section 4.2.6.3 shall insure Landlord and Tenant, astheir interests may appear, as well as Contractor and Tenant’s Agents.  Landlord shall use commercially reasonableefforts to ensure that all insurance, except Workers’ Compensation, maintainedby Contractor and all subcontractors shall preclude subrogation claims by theinsurer against anyone insured thereunder. Such insurance shall provide that it is primary insurance as respectsthe owner and that any other insurance maintained by owner is excess andnoncontributing with the insurance required hereunder.  The requirements for the foregoing insuranceshall not derogate from the provisions for indemnification of Landlord byTenant under Section 4.2.4 of this Tenant Work Letter.

 

4.2.7                        **Governmental Compliance**. The Tenant Improvements shall comply in all respects with thefollowing:  (i) the Code and otherstate, federal, city or quasi-governmental laws, codes, ordinances andregulations, as each may apply according to the rulings of the controllingpublic official, agent or other person; (ii) applicable standards of theAmerican Insurance Association (formerly, the National Board of FireUnderwriters) and the National Electrical Code; and (iii) building materialmanufacturer’s specifications.

 

4.2.8                        **Inspection**. Landlord and Tenant shall each have the right to inspect the TenantImprovements at all times, provided however, that Landlord’s or Tenant’sfailure to inspect the Tenant Improvements shall in no event constitute awaiver of any of Landlord’s or Tenant’s, respectively, rights hereunder norshall any such inspection of the Tenant Improvements constitute either party’sapproval of the same.  Should eitherparty disapprove any portion of the Tenant Improvements based on the failure ofthe Tenant Improvements to conform to the Final Working Drawings, thedisapproving party shall notify the other in writing of such disapproval andshall specify the items disapproved.  Anydefects or deviations in, and/or such disapproval of, the Tenant Improvementsshall be rectified by Landlord.

 

4.2.9                        **Meetings**. Commencing upon Tenant’s selection of the Contractor and Architect,Landlord and Tenant shall hold regular meetings at a reasonable time (but in noevent to be required more often than weekly), with the Architect and theContractor (or their agents) regarding the progress of the preparation ofConstruction Drawings and the construction of the Tenant Improvements, whichmeetings shall be held at a location reasonably designated by Tenant or, inLandlord’s discretion, at the Premises. In addition, minutes shall be taken at all such meetings, a copy ofwhich minutes shall be promptly delivered to Landlord.  One such meeting each month shall include thereview of Contractor’s current request for payment.

 

4.3                                 **Notice of Completion; Copy of Record Set of Plans**.  Within ten (10) days after completion ofconstruction of the Tenant Improvements, Landlord shall cause a Notice ofCompletion to be recorded in the office of the Recorder of the county in whichthe Building is located in accordance with Section 3093 of the Civil Codeof the State of California or any successor statute, and shall furnish a copythereof to Tenant upon such recordation. If Landlord fails to do so, Tenant may execute and file the same onbehalf of Landlord as Landlord’s agent for such purpose, at Landlord’s solecost and expense.  At the conclusion ofconstruction, (i) Landlord and Tenant shall cause the Architect andContractor (A) to update the Approved Working Drawings as necessary toreflect all changes made to the Approved Working Drawings during the course ofconstruction, (B) to certify to the best of their knowledge that the “record-set”of as-built drawings are true and correct, which certification shall survivethe expiration or

 

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termination of this Lease, and (C) to deliver to Landlord andTenant two (2) sets of copies of such record set of drawings within ninety(90) days following issuance of a certificate of occupancy for the Premises,and (ii) Landlord shall deliver to Tenant a copy, bound in a binder (withan index), of all warranties, guaranties, and operating manuals and informationrelating to the improvements, equipment, and systems in the Premises.

 

4.4                                 **Cooperation and Joint Efforts**.  Landlord and Tenant hereby acknowledge thatthe design and construction of the Tenant Improvements will require both ofLandlord and Tenant to mutually cooperate in good faith, using diligent andcommercially reasonable efforts to reach agreement or otherwise cooperate inconnection with a significant amount of design and construction milestones andaction items, only the most significant of which milestones and items arespecifically addressed in this Tenant Work Letter.  Landlord and Tenant each hereby commit to socooperate in good faith, and to use such diligent and commercially reasonableefforts.  Such cooperative efforts shallinclude the parties’ prompt sharing of information with regard to municipal or localplanning group meetings which may affect the construction of the TenantImprovements so as to provide all relevant parties an opportunity to attend thesame.

 

SECTION 5

 

**LANDLORD CAUSED DELAY**

 

5.1                                 **Landlord Caused Delays**.  If there shall be a delay or there are delaysin the “Substantial Completion of the Tenant Improvements” (as that term isdefined in Section 5.4, below) due to a “Landlord Caused Delay,” thenTenant shall be entitled to the “Substantial Completion Rent Abatement” as moreparticularly set forth in Section 5.3, below.  As used in this Tenant Work Letter, “**Landlord Caused Delay**” shall mean actualdelays to the extent resulting from the acts or omissions of Landlordincluding, but not limited to (i) failure of Landlord to timely approve ordisapprove any Construction Drawings; (ii) material and unreasonableinterference by Landlord, its agents, employees or contractors with theSubstantial Completion of the Tenant Improvements and which objectivelypreclude or delay the construction of tenant improvements in the Building byany person, which interference relates to access by Tenant, or the Contractorto the Building or any Building facilities (including loading docks and freightelevators) or service (including temporary power and parking areas as providedherein) during normal construction hours, or the use thereof during normalconstruction hours; (iii) delays due to the acts or failures to act ofLandlord, its agents, employees or contractors including without limitation anysuch acts or failures to act with respect to payment of the ImprovementAllowance.

 

5.2                                 **Determination of a Landlord Caused Delay**.  If Tenant contends that a Landlord CausedDelay has occurred, Tenant shall immediately notify Landlord in writing (the “**Delay Notice**”) of the event thatconstitutes such Landlord Caused Delay. If such action, inaction or circumstance qualifies as a Landlord CausedDelay, then a Landlord Caused Delay shall be deemed to have occurred commencingon the date such action, inaction or circumstance first occurred, and ending onthe date such delay ends.  Each dayduring such period shall be referred to herein as a “**Landlord Delay Day**;” provided, however, to the extent Tenantis aware (or using commercially reasonable due diligence, should be aware) ofan event that otherwise constitutes a Landlord Caused Delay and fails toimmediately provide a Delay Notice to

 

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Landlord, then the number of Landlord Delay Days shall be reduced bythe number of calendar days occurring during the period commencing on the datewhen Tenant became aware (or using commercially reasonable due diligence,should have become aware) of such event and the date upon which Tenant actuallyprovides a Delay Notice to Landlord in connection with the same.

 

5.3                                 **Substantial Completion Rent Abatement**.  In the event a Landlord Delay shall bedetermined to have occurred as set forth in Section 5.2, above,then commencing on the Expansion Commencement Date, and continuing for eachLandlord Delay Day (such period, the “**SubstantialCommencement Rent Abatement Period**”), Tenant shall receive aday-for-day abatement of the Base Rent otherwise attributable to the10445 Premises (as opposed to the 10421 Premises) (the “**Substantial Completion Rent Abatement**”) foreach Landlord Delay Day.

 

5.4                                 **Definition of Substantial Completion of the TenantImprovements**.  Forpurposes of this Section 5, “**SubstantialCompletion of the Tenant Improvements**” shall mean completion ofconstruction of the Tenant Improvements in the Premises pursuant to theApproved Working Drawings as evidenced by a Certificate of Completion from theArchitect, with the exception of any punch list items and any tenant fixtures,work-stations, built-in furniture, or equipment to be installed by Tenant orunder the supervision of Contractor.

 

SECTION 6**MISCELLANEOUS**

 

6.1                                 **Tenant’s Representative**.  Tenant has designated Richard Murawski andTamara Seymour as its representatives with respect to the matters set forth inthis Tenant Work Letter, each of whom shall have full authority andresponsibility to act on behalf of the Tenant as required in this Tenant WorkLetter.

 

6.2                                 **Landlord’s Representative**.  Landlord has designated Jim Edwards as itssole representatives with respect to the matters set forth in this Tenant WorkLetter, who, until further notice to Tenant, shall have full authority andresponsibility to act on behalf of the Landlord as required in this Tenant WorkLetter.

 

6.3                                 **Time of the Essence in This Tenant Work Letter**.  Unless otherwise indicated, all referencesherein to a “number of days” shall mean and refer to calendar days.  If any item requiring approval is timelydisapproved by Landlord, the procedure for preparation of the document andapproval thereof shall be repeated until the document is approved by Landlord.

 

6.4                                 **Tenant’s Lease Default**.  Notwithstanding any provision to the contrarycontained in this Lease, if an economic or material default (after applicablenotice and cure periods, if any) as described in the Lease or this Tenant WorkLetter has occurred at any time on or before the substantial completion of theTenant Improvements, then (i) in addition to all other rights and remediesgranted to Landlord pursuant to this Lease, Landlord shall have the right towithhold payment of all or any portion of the Improvement Allowance(in whichcase, Tenant shall be responsible for any delay in the substantial completion ofthe Premises caused thereby),

 

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and (ii) all other obligations of Landlord under the terms of thisTenant Work Letter shall be forgiven until such time as such default is curedpursuant to the terms of this Lease (in which case, Tenant shall be responsiblefor any delay in the substantial completion of the Premises caused by suchinaction by Landlord).

 

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**SCHEDULE 1**

 

**BUILDINGSTANDARD TENANT IMPROVEMENTS**

 

**[ATTACHED]**

 

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**EXHIBIT I**

 

**BASERENT FOR THE PREMISES PRIOR TO FEBRUARY 1, 2007**

 

1.                                       **Original Premises**.

 
| **Period  During  Lease Term**                        | ** ** | **Annualized  Base Rent** | ** **   | **Monthly  Installment  of Base Rent** | ** ** |
|-------------------------------------------------------|------------|---------------------------|--------------|----------------------------------------|------------|
| ** **                                            | ** ** | ** **                | ** **   | ** **                             | ** ** |
| Effective Date – January 31, 2006           |       | $                         | 1,657,455.84 |                                   | $          | 138,121.32 |   |
|                                                  |       |                      |         |                                   |       |
| February 1, 2006 – August 31,  2006.*  |       | $                         | 1,830,219.24 | *                                      | $          | 152,518.27 | * |
|                                                  |       |                      |         |                                   |       |
| September 1, 2006 – January 31,  2007. |       | $                         | 1,892,683.92 |                                   | $          | 157,723.66 |   |

 

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*                                         Providedthat the Original Tenant, Affiliate or Permitted Assignee is not then indefault of this Lease (after expiration of any applicable notice and cureperiods), then the Original Tenant, Affiliate or Permitted Assignee shall haveno obligation to pay the Base Rent otherwise attributable to Original Premisesduring the month of July 2006.

 

2.                                       **First Expansion Premises**.

 
| **Period  During  Lease Term**                  | ** ** | **Annualized  Base Rent** | ** ** | **Monthly  Installment  of Base Rent** | ** ** | **Approximate Monthly  Rental Rate  per Rentable  Square Foot** | ** ** |
|-------------------------------------------------|------------|---------------------------|------------|----------------------------------------|------------|-----------------------------------------------------------------|------------|
| ** **                                      | ** ** | ** **                | ** ** | ** **                             | ** ** | ** **                                                      | ** ** |
| Effective Date – July 31, 2006        |       | $                         | 157,101.96 |                                   | $          | 13,091.83                                                       |       | $ | 0.9360 |   |
|                                            |       |                      |       |                                   |       |                                                            |       |
| August 1, 2006 –January 31, 2007 |       | $                         | 163,386.00 |                                   | $          | 13,615.50                                                       |       | $ | 0.9734 |   |

 

3.                                       **Third Expansion Premises**.

 
| **Period  During  Lease Term**                  | ** ** | **Annualized  Base Rent** | ** ** | **Monthly  Installment  of Base Rent** | ** ** | **Approximate Monthly  Rental Rate  per Rentable  Square Foot** | ** ** |
|-------------------------------------------------|------------|---------------------------|------------|----------------------------------------|------------|-----------------------------------------------------------------|------------|
| ** **                                      | ** ** | ** **                | ** ** | ** **                             | ** ** | ** **                                                      | ** ** |
| Effective Date – July 31, 2006        |       | $                         | 162,000.00 |                                   | $          | 13,500.00                                                       |       | $ | 0.781 |   |
|                                            |       |                      |       |                                   |       |                                                            |       |
| August 1, 2006 –January 31, 2007 |       | $                         | 167,670.00 |                                   | $          | 13,972.50                                                       |       | $ | 0.808 |   |

 

Effective as of February 1, 2007, the Base Rent applicable to theentire Premises shall be as more particularly set forth in Section 4 ofthe Summary of this Lease.

 

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