exv10w31






exhibit 10.31




LEASE



THIS LEASE is made on the 14 day of MARCH, 2006, by and between Los Gatos Business Park, a
California limited partnership (hereinafter called “Lessor”) and StrataLight Communications, Inc.,
a Delaware corporation (hereinafter called “Lessee”).



IN CONSIDERATION OF THE MUTUAL PROMISES HEREIN CONTAINED, THE PARTIES AGREE AS FOLLOWS:



1. Premises. Lessor leases to Lessee, and Lessee leases from Lessor, upon the terms and
conditions herein set forth, those certain Premises (“Premises”) situated in the Town of Los Gatos,
County of Santa Clara, California, as outlined in Exhibit “A” attached hereto and described
as follows: approximately 33,290 rentable square foot building commonly known as 151 Albright Way,
Los Gatos, California. Lessee’s pro-rata share of the building is 100.00%.



2. Term. The term of this Lease shall be for five (5) years, commencing upon Substantial
Completion of the Lessee Improvements (the “Commencement Date”), as such terms are defined in the
Work Letter attached hereto as Exhibit B (the “Work Letter”), and ending on the last day of
the sixtieth (60th) full calendar month thereafter (the “Expiration Date”), unless
sooner terminated pursuant to any provision hereof. The parties anticipate that the Commencement
Date will occur on June 9,2006.



3. Rent. Commencing on the first day of the 1st Rent Year (as defined herein
below), Lessee shall pay to Lessor rent for the Premises according to the schedule below in lawful
money of the United States of America. Rent shall be paid without deduction or offset, prior
notice, or demand, at such place as may be designated from time to time by Lessor. Lessee shall pay
to Lessor $41,613.00 upon execution of the Lease, which sum represents the amount of the third
month’s rent. Monthly rent shall be paid in advance on the first (1st) day of each calendar month
as follows:




	 	 	 	 	 
	Period	 	Monthly Rent/NNN
	1st Rent Year
	 	$	41,613.00	 
	2nd Rent Year
	 	$	43,277.00	 
	3rd Rent Year
	 	$	44,942.00	 
	4th Rent Year
	 	$	46,606.00	 
	5th Rent Year
	 	$	48,271.00	 





The “1st Rent Year” shall commence on the date that is sixty (60) days after the
Commencement Date and shall end on the last day of the twelfth (12th) full calendar month following
the Commencement Date. Each period of twelve (12) calendar months thereafter shall be a “Rent Year”
except that the 5th Rent Year shall end on the Expiration Date. Lessee’s obligation to
pay the reimbursable expenses and utilities described in Section 10 of this Lease shall commence on
the Commencement Date.




     Rent for any period during the term hereof which is for less than one (1) full month shall be
a pro-rata portion of the monthly rent payment. Lessee acknowledges that late payment by Lessee



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to Lessor of rent or any other payment due Lessor will cause Lessor to incur costs not
contemplated by this Lease, the exact amount of such costs being extremely difficult and
impracticable to fix. Such costs include, without limitation, processing and accounting charges,
and late charges that may be imposed on Lessor by the terms of any encumbrance and note secured by
any encumbrance covering the Premises. Therefore, if any installment of rent or other payment due
from Lessee is not received by Lessor on the date it is due and payable, Lessee shall pay to
Lessor an additional sum of ten percent (10%) of the overdue amount as a late charge. The parties
agree that this late charge represents a fair and reasonable estimate of the costs that Lessor
will incur by reason of late payment by Lessee. Acceptance of any late charge shall not constitute
a waiver of Lessee’s default with respect to the overdue amount, nor prevent Lessor from
exercising any of the other rights and remedies available to Lessor. Notwithstanding the
foregoing, Lessor shall give Lessee notice of non-payment of any rent or other payments required
of Lessee under this Lease and five (5) business days after delivery of such notice to cure such
non-payment once in each calendar year before assessing the late charge in such calendar year
pursuant to this Paragraph 3.




     If, for any reason whatsoever, Lessor cannot deliver possession of the Premises on the
commencement date set forth in Paragraph 2 above, this Lease shall not be void or voidable, nor
shall Lessor be liable to Lessee for any loss or damage resulting therefrom; but in such event,
Lessee shall not be obligated to pay rent until possession of the Premises is tendered to Lessee
and the commencement and termination dates of this Lease shall be revised to conform to the date of
Lessor’s delivery of possession. Notwithstanding anything to the contrary in this Lease: (1) if the
Commencement Date has not occurred for any reason whatsoever, other than a Lessee Delay (as such
term is defined in the Work Letter) on or before June 30, 2006, then, the date Lessee is otherwise
obliged to commence payment of rent shall be delayed by one day for each day that the Commencement
Date is delayed beyond June 30, 2006, and (2) if the Commencement Date has not occurred for any
reason whatsoever, other than a Lessee Delay (as such term is defined in the Work Letter) on or
before July 31, 2006, in addition to Lessee’s other rights or remedies, Lessee may, at any time
thereafter, terminate the Lease by written notice to Lessor, whereupon any security deposit and any
advance payment of rent previously paid by Lessee to Lessor shall be promptly reimbursed to Lessee.
Upon mutual execution and delivery of this Lease, Lessor shall provide Lessee with early access to
the Premises for the purpose of installing Lessee’s furniture, fixtures and equipment provided such
access does not interfere with Lessor’s construction of the Lessee Improvements. In the event that
Lessor shall permit Lessee to occupy the Premises prior to the commencement date of the term, such
occupancy shall be subject to all of the provisions of this Lease, excluding the obligation to pay
rent.




A. All taxes, insurance premiums, reimbursable expenses and utilities, late charges, costs
and expenses which Lessee is required to pay hereunder, together with all interest and
penalties that may accrue thereon in the event of Lessee’s failure to pay such amounts,
and all reasonable damages, costs, and attorney’s fees and expenses which Lessor may incur
by reason of any default of Lessee or failure on Lessee’s part to comply with the terms of
this Lease, shall be deemed to be additional rent (hereinafter, “Additional Rent”), and,
in the event of non-payment by Lessee, Lessor shall have all of the rights and remedies
with respect thereto as Lessor has for the non-payment of monthly installment of rent.



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4. Option to Extend Term.





A. Lessee shall have the option to extend the term on all the provisions contained in this
Lease for one (1) two (2)-year period (“extended term”) at an adjusted rental calculated as
provided in Subparagraph B below on the condition that:




	 	(a)	 	Lessee has given to Lessor written notice of exercise of that option (“option
notice”) at least nine (9) but no more than twelve (12) months before expiration of the
initial term or extended term(s), as the case may be.
	 
	 	(b)	 	Lessee is not in default in the performance of any of the terms and conditions
of the Lease on the date of giving the option notice, and Lessee is not in default on
the date that the extended term is to commence.






B. The rent during the Extended Term shall be 95% of the fair market monthly rent (“Fair
Market Rent”) for the Premises as of the commencement date of the Extended Term, as
determined by the agreement of the parties or, if the parties cannot agree within sixty (60)
days prior to the commencement of such Extended Term, then by determination by commercial
real estate brokers as set forth in Exhibit C to this Lease . In determining the
Fair Market Rent, the parties (and in the absence of their agreement, the brokers) shall
determine the Fair Market Rent by taking into consideration the rents being charged at the
time such determination is to be made for similar space in similar properties in the Los
Gatos area pursuant to leases with terms and provisions substantially similar to those
contained in this Lease. All other terms and conditions contained in the Lease, as the same
may be amended from time to time by the parties in accordance with the provisions of the
Lease, shall remain in full force and effect and shall apply during the Extended Term.




C. The option to extend shall be personal to Lessee, and shall not be transferable or
assignable to any other person or entity other than a any transferee under an “exempt
sublet”, as such term is defined in Article 21.F of this Lease. If Lessee has exercised its
option to extend, the phrase “Lease term” as used in this Lease shall mean the initial term
of the Lease and the extended term(s).


5. Security Deposit. Upon Lessee’s execution of this Lease, Lessee shall deposit with
Lessor a Security Deposit in the sum of Forty-One Thousand Six Hundred Thirteen and 00/100 Dollars
($41,613.00) and, on or before the Commencement Date, Lessee shall deposit an additional Eighty-Three
Thousand Two Hundred Twenty-Six and 00/100 Dollars ($83,226.00) (for a total Security Deposit
of One Hundred Twenty-Four Thousand Eight Hundred Thirty-Nine and 00/100 Dollars ($124,839.00)) to
secure the full and faithful performance by Lessee of each term, covenant, and condition of this
Lease. If Lessee shall at any time fail to make any payment or fail to keep or perform any term,
covenant, or condition on its part to be made or performed or kept under this Lease, Lessor may,
but shall not be obligated to and without waiving or releasing Lessee from any obligation under
this Lease, use, apply, or retain the whole or any part of said Security Deposit (a) to the extent
of any sum due to Lessor; or (b) to compensate Lessor for any loss, damage, attorneys’ fees or
expense sustained by Lessor due to Lessee’s default. In such event, Lessee shall, within five (5)
days of written demand by Lessor, remit to Lessor sufficient funds to restore the Security





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Deposit to its original sum. No interest shall accrue on the Security Deposit. Should Lessee
comply with all the terms, covenants, and conditions of this Lease and, at the end of the term of
this Lease, leave the Premises in the condition required by this Lease, then said Security Deposit
or any balance thereof, less any sums owing to Lessor, shall be returned to Lessee within fifteen
(15) days after the termination of this Lease and vacancy of the Premises by Lessee. Lessor can
maintain the Security Deposit separate and apart from Lessor’s general funds, or can co-mingle the
Security Deposit with the Lessor’s general and other funds.




     In the event that Lessee is not in default of the Lease, $41,613.00 of said deposit shall be
applied to the Monthly Rent for the 23rd full calendar month following with
Commencement Date and $41,613.00 shall be applied to Monthly Rent for the 24th full
calendar month following the Commencement Date.


6. Use of the Premises. The Premises shall be used exclusively for the purpose of general
office, administration, light manufacturing and assembly, testing, marketing, engineering,
shipping and receiving and any other legal uses directly related to Lessee’s business and for no
other purpose without Lessor’s prior written consent.




     Lessee shall not use or permit the Premises, or any part thereof, to be used for any purpose
or purposes other than the purpose for which the Premises are hereby leased; and no use shall be
made or permitted to be made of the Premises, nor acts done, which will increase the existing rate
of insurance upon the building in which the Premises are located, or cause a cancellation of any
insurance policy covering said building, or any part thereof, nor shall Lessee sell or permit to
be kept, used, or sold, in or about the Premises, any article which may be prohibited by the
standard form of fire insurance policies. Lessee shall not commit or suffer to be committed any
waste upon the Premises or any public or private nuisance or other act or thing which may disturb
the quiet enjoyment of any other tenant in the building in which the premises are located; nor,
without limiting the generality of the foregoing, shall Lessee allow the Premises to be used for
any improper, immoral, unlawful, or objectionable purpose.



     Lessee shall not place any harmful liquids in the drainage system of the Premises or of the
building of which the Premises form a part. No waste materials or refuse shall be dumped upon or
permitted to remain upon any part of the Premises outside of the building proper except in trash
containers placed inside exterior enclosures designated for that purpose by Lessor, or inside the
building proper where designated by Lessor. No materials, supplies, equipment, finished or
semifinished products, raw materials, or articles of any nature shall be stored upon or permitted
to remain on any portion of the Premises outside of the building proper. Lessee shall comply with
all the covenants, conditions, and/or restrictions (“C.C. & R.’s”) affecting the Premises.



     Lessor represents and warrants to Lessee that to the best of its knowledge there are no Toxic
or Hazardous materials present on, at or under the Premises, which shall be deemed to include
underlying land and groundwater, at the time of Lessee’s occupancy and that, prior to the
Commencement Date, Lessor has obtained any closure certificates for the Premises from the
applicable governmental authorities with respect to prior occupants of the Premises. Lessor shall
indemnify, defend and hold harmless Lessee, its partners, directors, officers, employees, lenders,
and successors against all claims, obligations, liabilities, demands, damages, judgments, and
costs,



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including reasonable attorneys’ fees arising from or in connection with any prior Toxic or
Hazardous materials that existed prior to Lessee’s occupancy of the Premises.




     Lessee in turn represents to Lessor that it does not now and will not in the future permit
the use or storage on the Premises of Toxic or Hazardous materials, excluding, however basic
janitorial, maintenance and office supplies, and materials commonly used in connection with
Lessee’s business as described in paragraph 6 hereof, including, without limitation, solder and
small quantities of solvents. For purposes of this paragraph 6 “Toxic or Hazardous Materials”
shall mean any product, substance, chemical, material or waste whose presence, nature, quality
and/or intensity or existence, use, manufacture, disposal, transportation, spill, release or
effect, either by itself or in combination with other materials expected to be on the leased
premises, is either (i) potentially injurious to the public health, safety or welfare, the
environment, or the leased premises; (ii) regulated or monitored by any governmental authority; or
(iii) a basis for potential liability of Lessee and Lessor to any governmental agency or third
party under any applicable statute or common law theory. “Toxic or Hazardous Materials” shall
include, but not be limited to, hydrocarbons, petroleum, gasoline, crude oil or any products or
by-products thereof.



     Lessee hereunder shall be responsible for and indemnify, and hold Lessor and its partners,
directors, officers, employees, lenders, successors and assigns harmless from all claims,
obligations, liabilities, demands, damages, judgments and costs, including reasonable attorneys’
fees arising at any time during or in connection with Lessee’s causing or permitting any materials
referred to under any governmental provisions or regulatory scheme as “hazardous” or “toxic” or
which contain petroleum, gasoline, or other petroleum product, to be brought upon, stored,
manufactured, generated, handled, disposed, or used on, under or about the Premises in violation
of the provisions of this Article 6 and applicable environmental laws. Lessee’s and Lessor’s
obligations hereunder shall survive the termination of this Lease.



     If, at any time during the term of this Lease, Lessor suspects that toxic waste, spillage, or
other contaminants may be present on the Premises, Lessor may order a soils report, or its
equivalent, at Lessor’s expense. Lessee shall pay the reasonable costs of such report within
fifteen (15) days from the date of the invoice by Lessor if it is determined that Lessee or
Lessee’s agents, employees, contractors or invitees released or caused Toxic or Hazardous materials
on or about the Premises in violation of the provisions of this Article 6 and applicable
environmental laws. If any such toxic waste, spillage, or other contaminants are found upon the
Premises which were released by Lessee or Lessee’s agents, employees or invitees in violation of
the provisions of this Article 6 and applicable environmental laws, Lessee shall deposit with
Lessor, within fifteen (15) days of notice from Lessor to Lessee to do so, the amount necessary to
remove the substances and remedy the problem in accordance with applicable law.



     Lessee shall abide by all laws, ordinances, and statutes, as they now exist or may hereafter
be enacted by legislative bodies having jurisdiction thereof, relating to its use and occupancy of
the Premises. Notwithstanding anything to the contrary in this Lease, if, during the term of this
Lease, any alteration, addition, or change of any sort through all or any portion of the Premises
or of the building of which the Premises form a part, is required by law, regulation, ordinance,
or order of any public agency (“Laws”), then, if such legal requirement is not imposed because of
Lessee’s specific use of the Premises (other than for general office use) and is not “triggered”
by Lessee’s




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alterations or Lessee’s application for a building permit or any other governmental approval (in
which instance Lessee shall be responsible for 100% of the cost of such improvement)(other than
the Lessee Improvements), Lessor shall be responsible for constructing such improvement, and
Lessee shall be responsible for its proportional share of the cost for said improvement, amortized
over the useful life of such improvement that coincides with the remaining Lease term including
any extensions. Lessor represents and warrants that as of the date hereof it has not received any
notice that the Premises or the building of which the Premises form a part is currently in
violation of any Laws or that any improvements are required by Laws.



7. Improvements: Lessor shall provide Lessee with an allowance of $18.55 per square foot of
the Premises for the construction of the Lessee Improvements (as such term is defined in the Work
Letter attached hereto as Exhibit B) Upon Lessee’s request, Lessor agrees that it will
provide an additional allowance of up to $5 per square foot of the Premises to be amortized over
the term of the Lease at a rate of 8% per year. However, Lessor and Lessee shall make best efforts
to construct the Lessee Improvements within the $18.55 per square foot allowance.



8. Taxes and Assessments.





A. Lessee shall pay before delinquency any and all taxes, assessments, license fees, and
public charges levied, assessed, or imposed upon or against Lessee’s fixtures, equipment,
furnishings, furniture, appliances, and personal property installed or located on or within
the Premises. Lessee shall cause said fixtures, equipment, furnishings, furniture,
appliances, and personal property to be assessed and billed separately from the real
property of Lessor. If any of Lessee’s said personal property shall be assessed with
Lessor’s real property, Lessee shall pay to Lessor the taxes attributable to Lessee within
ten (10) business days after receipt of a written statement from Lessor setting forth the
taxes applicable to Lessee’s property.




B. All property taxes or assessments levied or assessed by or hereafter levied or assessed
by any governmental authority against the Premises or any portion of such taxes or
assessments which becomes due or accrued during the term of this Lease shall be paid by
Lessor; provided, however, that Lessee shall not be required to pay any portion of any tax
or assessment expense or any increase therein (a) levied on Lessor’s rental income, unless
such tax or assessment is imposed in lieu of real property taxes; (b) in excess of the
amount which would be payable if such tax or assessment expense were paid in installments
over the longest permitted term; or (c) attributable to Lessor’s net income, inheritance,
gift, transfer, estate or state taxes. Lessee shall pay to Lessor Lessee’s proportionate
share of such taxes or assessments within fifteen (15) days of receipt of Lessor’s invoice
demanding such payment. Lessee’s liability hereunder shall be prorated to reflect the
commencement and termination dates of this Lease.


9. Insurance.





A. Indemnity. Lessee agrees to indemnify, defend and save Lessor against and hold




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Lessor harmless from any and all demands, claims, causes of action, judgments, obligations, or
liabilities, and all reasonable expenses incurred in investigating or resisting the same
(including reasonable attorneys’ fees) on account of, or arising out of Lessee’s use, or occupancy
of the Premises. This Lease is made on the express condition that Lessor shall not be liable for,
or suffer loss by reason of, injury to person or property, from whatever cause, in any way
connected with the condition, use, or occupancy of the Premises, specifically including, without
limitation, any liability for injury to the person or property of Lessee, its agents, officers,
employees, licensees, and invitees, except to the extent such loss, injury or damage was caused by
Lessor’s negligence or willful misconduct.




B. Liability Insurance. Lessee shall, at its expense, obtain and keep in force during the
term of this Lease a policy of Commercial General Liability insurance insuring Lessee, with
cross-liability endorsements, against any liability arising out of the condition, use, or occupancy
of the Premises and all areas appurtenant thereto, including parking areas and property insurance
to cover Lessee’s persona] property, equipment, inventory, fixtures and tenant improvements on the
Premises. Lessor shall be named as an additional insured on the CGL policy. Such insurance shall be
in an amount satisfactory to Lessor of not less than one million dollars ($1,000,000) for each
occurrence for bodily injury and physical damage to the property and two million dollars
($2,000,000) general aggregate limit. The insurance shall be with companies approved by Lessor,
which approval Lessor agrees not to withhold unreasonably. Prior to possession, Lessee shall
deliver to Lessor a certificate of insurance and endorsement evidencing the existence of the policy
which (1) as to the CGL policy names Lessor as an additional insured, (2) shall not be canceled or
altered without thirty (30) days’ prior written notice to Lessor, (3) insures performance of the
indemnity set forth in Section A of Paragraph 9, and (4) coverage is primary and any coverage by
Lessor is in excess thereto.




C. Property Insurance. Lessor shall obtain and keep in force during the term of this Lease
a policy or policies of insurance covering (a) loss or damage to the Premises (which may include
earthquake and/or flood insurance), in the amount of the full replacement value thereof, and (b)
Lessor’s liability insurance. Lessee shall pay to Lessor its pro-rata share of the cost of the
premium of said insurance within fifteen (15) days of Lessee’s receipt of Lessor’s invoice
demanding such payment. Lessee acknowledges that such insurance procured by Lessor, including,
without limitation, any earthquake insurance, shall contain a deductible (not to exceed $10,000.00
per occurrence) which reduces Lessee’s cost for such insurance, and, in the event of loss or
damage, Lessee shall be required to pay to Lessor Lessee’s pro-rata share of the amount of such
deductible.




D. Notwithstanding anything in this Lease to the contrary, Lessor and Lessee hereby releases each
other and their respective agents, employees, successors, assignees and sublessees from all
liability for injury to any person or damage to any property that is caused by or results from a
risk which is actually insured against, which is required to be insured against under this Lease,
or which would normally be covered by “all risk” property insurance, without regard to the
negligence or misconduct of the person or entity so released. All of Lessor’s and Lessee’s repair
and indemnity obligations under this Lease



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shall be subject to the waiver and release contained in this paragraph. Each party shall
cause each insurance policy it obtains to provide that the insurer thereunder waives all
recovery by way of subrogation as required herein in connection with any injury or damage
covered by such policy.


10. Reimbursable Expenses and Utilities. Commencing on the Commencement Date and thereafter
during the term of this Lease, Lessee shall pay its pro-rata share based on square footage of all
water, gas, light, power, electricity, telephone, HVAC maintenance and repairs, trash removal,
landscaping, sewer charges, and all other services, including normal and customary property
management fees, supplied to or consumed on the Premises; provided, however, that Lessee shall in
no event have any obligation to perform or to pay directly, or to reimburse Lessor for, all or any
portion of the following repairs, maintenance, improvements, replacements, premiums, claims,
losses, fees, charges, costs and expenses (collectively, “Costs”): (a) Costs occasioned by the act,
omission or violation of any law by Lessor, or Lessor’s agents, employees or contractors; (b) Costs
to correct any construction defect in the Premises or to comply with any covenant, condition,
restriction, underwriter’s requirement or law applicable to the Premises on the Commencement Date;
(c) [intentionally omitted]; (d) interest, charges and fees incurred on debt; (f) expense reserves;
(g) [intentionally omitted]; (h) Costs which could properly be capitalized under generally accepted
accounting principles, except as provided in Paragraph 11.A. of this Lease; and (i) wages,
compensation, and labor burden for any employee not stationed on the Project on a full-time basis
(other than Lessor’s maintenance employee, who works on other properties in Lessor’s portfolio, and
who is charged on an hourly basis to the applicable property) or any fee, profit or compensation
retained by Lessor or its affiliates for management and administration of the Project in excess of
three percent (3%) of Monthly Rent. In the event that any such services are billed directly to
Lessor, then Lessee shall pay Lessor for such expenses within ten (10) days of Lessee’s receipt of
Lessor’s invoice demanding payment.



11. Repairs and Maintenance.





	 	A.	 	Subject to provisions of paragraph 15 of this Lease, Lessor shall keep and
maintain in good order, condition and repair the structural elements of the Premises
including the roof, roof membrane, paving, floor slab, foundation, exterior walls,
landscaping, and irrigation. Lessor shall make such repairs, replacements, alterations
or improvements as Lessor deems reasonably necessary with respect to such structural
elements and Lessee shall pay to Lessor, within ten (10) business days of Lessor’s
invoice to Lessee therefor, Lessee’s pro-rata share of such repairs, replacements,
alterations or improvements. In the event that the cost of any replacement or
improvement exceeds $25,000 per occurrence, the amount in excess of $25,000 shall be
amortized, on a straight line basis, over the useful life of such replacements or
improvements as reasonably determined by Lessor using manufacturers’ guidelines. Lessee
shall be obligated to pay its pro-rata share of such excess on a monthly basis, as
Additional Rent, for as long as the useful life coincides with the lease term.
Notwithstanding the foregoing, but subject to the provisions of Paragraph 9.D of this
Lease, if the reason for any repair, replacement, alteration or improvement is caused
by Lessee or arises because of a breach of Lessee’s obligations under this Lease, then
Lessee shall pay 100% of the




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	 	 	 	costs or expense to remedy the same.






	 	B.	 	Except as expressly provided in Subparagraph A above, Lessee shall, at its
sole cost, keep and maintain the entire Premises and every part thereof, including,
without limitation, the windows, window frames, plate glass, glazing, truck doors,
doors, all door hardware, interior of the Premises, interior walls and partitions, and
electrical, plumbing, and lighting, systems in good and sanitary order, condition, and
repair. Lessor shall maintain a service contract for the maintenance of all heating,
air conditioning, and ventilation equipment with a licensed and insuranced contractor.
Lessee shall reimburse Lessor pursuant to Paragraph 10 above for the cost of said
maintenance contract.






     Should Lessee fail to maintain the Premises or make repairs required of Lessee
hereunder forthwith upon notice from Lessor, Lessor, in addition to all other
remedies available hereunder or by law, and without waiving any alternative
remedies, may make the same, and in that event, Lessee shall reimburse Lessor as
additional rent for the cost of such maintenance or repairs on the later of: (a) the
next date upon which rent becomes due; or (b) within ten (10) business days
following receipt of Lessor’s invoice.




     Lessee hereby expressly waives the provision of Subsection 1 of Section 1932,
and Sections 1941 and 1942 of the Civil Code of California and all rights to make
repairs at the expense of Lessor, as provided in Section 1942 of said Civil Code.


12. Alterations and Additions. Lessee shall not make, or suffer to be made, any
alterations, improvements, or additions in, on, or about, or to the Premises or any part thereof,
without prior written consent of Lessor, which consent Lessor shall not unreasonably withhold, and
without a valid building permit issued by the appropriate governmental authority. Lessor retains,
at his sole option, the right to retain a General Contractor of his own choosing to perform all
repairs, alterations, improvements, or additions in, on, about, or to said Premises or any part
thereof that Lessor is required to perform under this Lease. As a condition to giving such consent,
Lessor may require that Lessee agree to remove any such alterations, improvements, or additions at
the termination of this Lease, and to restore the Premises to their prior condition; provided,
however, that Lessor shall have no right to require Lessee to remove any alterations unless it
notifies Lessee at the time it consents to such alteration that it shall require such alteration to
be removed. Notwithstanding anything to the contrary in this Section 12, Lessee may construct
non-structural alterations, additions and improvements (“Alterations”) in the Premises without
Lessor’s prior approval, but on not less than five (5) business days prior written notice to
Lessor, if the cost of any such project does not exceed Twenty-Five Thousand Dollars ($25,000);
provided, however, that in no event shall Lessee perform any Alterations on the roof of the
building without first obtaining Lessor’s consent, and, as a condition to granting such consent,
Lessor may require Lessee to take such steps as are reasonably necessary to prevent any warranty
applicable to the roof from being voided, including, without limitation, requiring that Lessor’s
designated contractor perform or supervise any work that pertains to the roof. Any alteration,
addition, or improvement to the Premises, shall become the property of Lessor upon





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installation, and shall remain upon and be surrendered with the Premises at the termination of
this Lease. Alterations and additions which are not to be deemed as trade fixtures include
heating, lighting, electrical systems, air conditioning (other than supplemental HVAC units
installed by Lessee), partitioning, electrical signs, carpeting, or any other installation which
has become an integral part of the Premises. In the event that Lessor consents to Lessee’s making
any alterations, improvements, or additions, Lessee shall be responsible for the timely posting of
notices of non-responsibility on Lessor’s behalf, which shall remain posted until completion of
the alterations, additions, or improvements. Lessee’s failure to post notices of
non-responsibility as required hereunder shall be a breach of this Lease.




     Notwithstanding anything to the contrary in this Lease, if, during the term of this Lease,
any alteration, addition, or change of any sort through all or any portion of the Premises or of
the building of which the Premises form a part, is required by any Laws, then, if such legal
requirement is not imposed because of Lessee’s specific use of the Premises (other than for
general office use) and is not “triggered” by Lessee’s alterations or Lessee’s application for a
building permit or any other governmental approval (in which instance Lessee shall be responsible
for 100% of the cost of such improvement)(other than the Lessee Improvements), Lessor shall be
responsible for constructing such improvement, and Lessee shall be responsible for its
proportional share of the cost for said improvement, amortized over the useful life of such
improvement that coincides with the remaining Lease term including any extensions. Lessor
represents and warrants that as of the date hereof it has not received any notice that the
Premises or the building of which the Premises form a part is currently in violation of any Laws
or that any improvements are required by Laws.


13. Acceptance of the Premises and Covenant to Surrender. By entry and taking possession of
the Premises pursuant to this Lease, Lessee accepts the Premises as being in good and sanitary
order, condition, and repair, and accepts the Premises in their condition existing as of date of
such entry, and Lessee further accepts any tenant improvements to be constructed by Lessor, if any,
as being completed in accordance with the plans and specifications for such improvements subject to
the completion of any “‘Punch List Items” (as defined in the Work Letter attached hereto). Lessor
represents that as of the Lease Commencement, the roof, walls and structural components of the
building, HVAC system, electrical, plumbing and lighting shall be in good working order. Lessor
shall assign to Lessee any and all existing warranties for the building.




     Lessee agrees on the last day of the term hereof, or on sooner termination of this Lease, to
surrender the Premises, together with all alterations, additions, and improvements which may have
been made in, to, or on the Premises by Lessor or Lessee, unto Lessor in good and sanitary order,
condition, and repair, excepting for such wear and tear as would be normal for the period of the
Lessee’s occupancy and damage by Casualty or Condemnation. Lessee, on or before the end of the
term or sooner termination of this Lease, shall remove all its personal property, trade fixtures,
equipment, and data and phone cabling from the Premises, and all property not so removed shall be
deemed abandoned by Lessee. Lessee further agrees that at the end of the term or sooner
termination of this Lease, Lessee shall restore the Premises to its original condition (excepting
any restoration requirements waived in Section 12 of this Lease), normal wear and tear excepted.
In no



Page 10 of 29









 







event shall Lessee be required to remove the Lessee Improvements and restore the Premises to its
condition existing prior to the installation of the Lessee Improvements.



     If the Premises are not surrendered at the end of the term or sooner termination of this
Lease, Lessee shall indemnify Lessor against loss or liability resulting from delay by Lessee in
so surrendering the Premises, including, without limitation, any claims made by any succeeding
tenant founded on such delay.


14. Default.





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






(i) Any failure by Lessee to pay any Rent or any other charge required to be paid
under this Lease, or any part thereof, within five (5) days after such payment is
due; or




(ii) Any failure by Lessee to observe or perform any other provision, covenant or
condition of this Lease to be observed or performed by Lessee where such failure
continues for thirty (30) days after written notice thereof from Lessor to Lessee;
provided however, that any such notice shall be in lieu of, and not in addition to,
any notice required under California Code of Civil Procedure Section 1161 or any
similar or successor law; and provided further that if the nature of such default
is such that the same cannot reasonably be cured within a thirty (30) day period,
Lessee shall not be deemed to be in default if it diligently commences such cure
within such period and thereafter diligently proceeds to rectify and cure said
default as soon as possible; or




(iii) Abandonment of the Premises by Lessee. Abandonment is herein defined to
include, but is not limited to, any absence by Lessee from the Premises for three
(3) business days or longer while in default of any provision of this Lease.




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






(i) Terminate this Lease, in which event Lessee shall immediately surrender the
Premises to Lessor, and if Lessee fails to do so, Lessor may, without prejudice to
any other remedy which it may have for possession or arrearages in rent, enter upon
and take possession of the Premises and expel or remove Lessee and any other person
who may be occupying the Premises or any part thereof, without being liable for
prosecution or any claim or damages therefor; and Lessor may recover from Lessee
the following:




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



Page 11 of 29









 






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




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




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




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




The term “rent” as used in this Section 14 B. shall be deemed to be and to mean those sums as
described in Section 3.A. above to be paid by Lessee. As used in Paragraphs 14 B.(i)(l) and
(2), above, the “worth at the time of award” shall be computed by allowing interest at the
rate of six percent (6%) per annum, but in no case greater than the maximum amount of such
interest permitted by law. As used in Paragraph 14.B.(i)(3) above, the “worth at the time of
award” shall be computed by discounting such amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award plus one percent (1%).




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




(iii) Waiver of Default. No waiver by Lessor or Lessee of any violation or breach of
any of the terms, provisions and covenants herein contained shall be deemed or construed to
constitute a waiver of any other or later violation or breach of the same or any other of the
terms, provisions, and covenants herein contained. Forbearance by Lessor in enforcement of
one or more of the remedies herein provided upon an event of default shall not be deemed or
construed to constitute a waiver of such default. The acceptance of any Rent hereunder by
Lessor following the occurrence of any default, whether or not known to Lessor,



Page 12 of 29









 







shall not be deemed a waiver of any such default, except only a default in the
payment of the Rent so accepted.




(iv) Efforts to Relet. For the purposes of this Section 14, Lessee’s right
to possession shall not be deemed to have been terminated by efforts of Lessor to
relet the Premises, by its acts of maintenance or preservation with respect to the
Premises, or by appointment of a receiver to protect Lessor’s interests hereunder.
The foregoing enumeration is not exhaustive, but merely illustrative of acts which
may be performed by Lessor without terminating Lessee’s right to possession.




(v) Application of Funds. If Lessor elects to relet the Premises as
provided in this Paragraph, rent that Lessor receives from reletting shall be
applied to the payment of: (1.) any indebtedness from Lessee to Lessor other than
rent due from Lessee; (2.) all costs, including for maintenance, incurred by Lessor
in reletting; (3.) rent due and unpaid under this Lease. After deducting the
payments referred to in this Paragraph, any sum remaining from the rent Lessor
receives from reletting shall be held by Lessor and applied in payment of future
rent as rent becomes due under this Lease. In no event shall Lessee be entitled to
any excess rent received by Lessor. If, on the date rent is due under this Lease,
the rent received from reletting is less than the rent due on that date, Lessee
shall pay to Lessor, in addition to the remaining rent due, all costs, including
for maintenance, Lessor incurred in reletting that remain after applying the rent
received from the reletting, as provided in this Paragraph.




(vi) Lessor’s Right to Cure Default. Lessor, at any time after Lessee
commits a default, can cure the default at Lessee’s cost. If Lessor at any time, by
reason of Lessee’s default, pays any sum or does any act that requires the payment
of any sum, the sum paid by Lessor shall be due immediately from Lessee to Lessor at
the time the sum is paid, and if paid at a later date shall bear interest at the
maximum rate an individual is permitted by law to charge from the date the sum is
paid by Lessor until Lessor is reimbursed by Lessee. The sum, together with interest
on it, shall be additional rent.




     Rent not paid when due shall bear interest at the maximum rate an individual is
permitted by law to charge from the date due until paid.


15. Destruction. In the event the Premises are destroyed in whole or in part from any
cause, Lessor may, at its option, (1.) rebuild or restore the Premises to their condition prior to
the damage or destruction or (2.) terminate the Lease.




     If Lessor does not give Lessee notice in writing within thirty (30) days after the date on
which occurred the destruction of the Premises of its election either to rebuild and restore the
Premises, or to terminate this Lease, Lessor shall be deemed to have elected to rebuild or restore
them, in which event Lessor agrees, at its expense, promptly to rebuild or restore the Premises to
its condition prior to the damage or destruction. If Lessor does not complete the rebuilding or




Page 13 of 29









 







restoration within one hundred eighty (180) days following the date of destruction (such period of
time to be extended for delays caused by the fault or neglect of Lessee of because of acts of God,
acts of public agencies, labor disputes, strikes, fires, freight embargoes, rainy or stormy
weather, inability to obtain materials, supplies or fuels, acts of contractors or subcontractors,
or delay of the contractors or subcontractors due to such causes or other contingencies beyond
control of Lessor), then Lessee shall have the right to terminate this Lease by giving fifteen
(15) days prior written notice to Lessor. Lessor’s obligation to rebuild or restore shall not
include restoration of Lessee’s trade fixtures, equipment, merchandise, or any improvements,
alterations, or additions made by Lessee to the Premises.




     Unless this Lease is terminated pursuant to the foregoing provisions, this Lease shall remain
in full force and effect. Lessee hereby expressly waives the provisions of Section 1932,
Subdivision 2, and Section 1933, Subdivision 4, of the California Civil Code.



     Notwithstanding anything to the contrary in this Article 15: (i) if the Premises are damaged
by any peril and Lessor does not terminate the Lease, then Lessee shall have the option to
terminate the Lease if the Premises cannot be, or are not in fact, fully restored by Lessor to
their prior condition for any reason whatsoever within one hundred eighty (180) days after the
damage, and (ii) if the Premises are damaged by any peril during the last twelve (12) months of
the Lease term, Lessee shall have the option to terminate this Lease by giving written notice to
Lessor within thirty (30) days after the date of the damage estimate, and this Lease shall
terminate as of the date specified by Lessee in its termination notice, which date shall not be
before the date of such notice or more than ninety (90) days after the date of such notice. During
any period of time following a casualty where all or any portion of the Premises is not suitable
for Lessee’s use, as reasonably determined by Lessee, than all rent due under this Lease shall be
equitably abated during such period based on the extent to which Lessee’s use and enjoyment of the
Premises is diminished.


16. Condemnation. If any part of the Premises shall be taken for any public or quasi-public
use, under any statute of by right of eminent domain, or private purchase in lieu thereof, and a
part thereof remains, which is susceptible of occupation hereunder, this Lease shall, as to the
part so taken, terminate as of the date title shall vest in the condemnor or purchaser, and the
rent payable hereunder shall be adjusted so that the Lessee shall be required to pay for the
remainder of the term only such portion of such rent as the value of the part remaining after
taking such bears to the value of the entire Premises prior to such taking. Lessor shall have the
option to terminate this Lease in the event that such taking causes a reduction in rent payable
hereunder by fifty percent (50%) or more. If all of the Premises or such part thereof be taken so
that there does not remain a portion susceptible for occupation hereunder, as reasonably necessary
for Lessee’s conduct of its business as contemplated in this Lease, this Lease shall thereupon
terminate. If a part of all of the Premises be taken, all compensation awarded upon such taking
shall go to the Lessor, and the Lessee shall have no claim thereto, and the Lessee hereby
irrevocably assigns and transfers to the Lessor any right to compensation or damages to which the
Lessee may become entitled during the term hereof by reason of the purchase or condemnation of all
or a part of the Premises, except that Lessee shall have the right to recover its share of any award
or consideration for (1.) moving expenses; (2.) loss or damage to Lessee’s trade fixtures,
furnishings, equipment, and other personal property; and (3.) business goodwill.





Page 14 of 29









 







17. Free from Liens. Lessee shall (1.) pay for all labor and services performed or
materials used by or furnished to Lessee at Lessee’s request, or any contractor employed by Lessee
with respect to the Premises, and (2.) indemnify, defend, and hold Lessor and the Premises harmless
and free from any liens, claims, demands, encumbrances, or judgments created or suffered by reason
of any labor or services performed or materials used by or furnished to Lessee or any contractor
employed by Lessee with respect to the Premises, and (3.) give notice to Lessor in writing five (5)
days prior to employing any laborer or contractor to perform services related, or receiving
materials for use upon the Premises, and (4.) shall post, on behalf of Lessor, a notice of
non-responsibility in accordance with the statutory requirements of the California Civil Code,
Section 3094, or any amendment thereof. In the event an improvement bond with a public agency in
connection with the above is required to be posted, Lessee agrees to include Lessor as an
additional obligee.



18. Compliance with Laws. Subject to the last grammatical paragraph in Section 12 of this
Lease, Lessee shall, at its own cost, comply with and observe all requirements of all municipal,
county, state, and federal authority now in force, or which may hereafter be in force, pertaining
to the use and occupancy of the Premises.



19. Subordination. Lessee agrees that this Lease shall, at the option of Lessor, be
subjected and subordinated to any mortgage, deed of trust, or other instrument of security, which
has been or shall be placed on the land and building, or land or building of which the Premises
form a part, and this subordination is hereby made effective without any further act of Lessee or
Lessor. The Lessee shall, at any time hereinafter, on demand, execute any commercially reasonable
instruments, releases, or other documents that may be required by any mortgagee, mortgagor,
trustor, or beneficiary under any deed of trust, for the purpose of subjecting or subordinating
this Lease to the lien of any such mortgage, deed of trust, or other instrument of security. If
Lessee fails to execute and deliver any such documents or instruments within ten (10) days after
Lessor’s request, then Lessee shall be in default under this Lease. Lessor shall use commercially
reasonable efforts to obtain, as soon as possible following the mutual execution and delivery of
this Lease, from any lenders or ground lessors of the Premises a written agreement in form
reasonably satisfactory to Lessee providing for recognition of Lessee’s interests under the Lease
in the event of a foreclosure of the lender’s security interest or termination of the ground lease.
The failure of Lessor to obtain from any such lenders or ground lessors such a non-disturbance
agreement shall not constitute a default hereunder by Lessor, it being understood that Lessor’s
sole obligation is to use commercially reasonable efforts to obtain the execution and delivery of
such a non- disturbance agreement.



20. Abandonment. Lessee shall not abandon the Premises at any time during the term; and if
Lessee shall abandon, or surrender said Premises, or be dispossessed by process of law, or
otherwise, any personal property belonging to Lessee and left on the Premises shall be deemed to be
abandoned, at the option of Lessor, except such property as may be mortgaged to Lessor; provided,
however, that Lessee shall not be deemed to have abandoned or vacated the Premises so long as
Lessee continues to pay all rents as and when due, and otherwise performs pursuant to the terms and
conditions of this Lease.



21. Assignment and Subletting.




Page 15 of 29









 






A. Definitions. For purposes of this Paragraph 21, the following terms shall be
defined as follows:




	 	(i)	 	Sublet. The term “Sublet” shall mean any transfer, sublet, assignment, license
or concession agreement, change of ownership, mortgage, or hypothecation of this
Lease or the Lessee’s interest in the Lease or in and to all or a portion of the
Premises.
	 
	 	(ii)	 	Subrent. The term “Subrent” shall mean any consideration of any kind
received, or to be received, by Lessee from a Sublessee if such sums are related
to Lessee’s interest in this Lease or in the Premises, including, but not
limited to, bonus money and payments (in excess of book value) for Lessee’s
assets including its trade fixtures, and equipment and other personal property.
	 
	 	(iii)	 	Sublessee. The term “Sublessee” shall mean the person or entity with whom a
Sublet agreement is proposed to be or is made.






B. Lessor’s Consent. Lessee shall not enter into a Sublet without Lessor’s prior
written consent, which consent shall not be unreasonably withheld. Any attempted or
purported Sublet without Lessor’s prior written consent shall be void and confer no rights
upon any third person. In determining whether or not to consent to a proposed Sublet, Lessor
may consider the following factors, among others, all of which shall be deemed reasonable;
(i) whether the proposed Sublessee has the financial wherewithal to pay the rent as
established in the sublease as reasonably determined by Lessor at the time Lessor’s Consent
is requested; (ii) whether the proposed use of the Premises by the proposed Sublessee is
consistent with the permitted use for the Premises set forth in Paragraph 6 of this Lease;
(iii) whether the experience and business reputation of the proposed Sublessee is equal to
or greater than that of Lessee; (iv) whether the rent payable by the Sublessee under the
proposed Sublet is set below the current fair market sublease rent for the subleased
Premises as a subterfuge to avoid paying to Lessor its share of the profit on such
transaction; and (v) whether Lessor’s consent will result in a breach of any other lease or
agreement to which Lessor is a party affecting the Building. Each Sublessee shall agree in
writing, for the benefit of Lessor, to assume, to be bound by, and to perform the terms and
conditions and covenants of this Lease to be performed by Lessee. Notwithstanding anything
contained herein, Lessee shall not be released from liability for the performance of each
term, condition and covenant of this Lease by reason of Lessor’s consent to a Sublet unless
Lessor specifically grants such release in writing. Consent by Lessor to any Sublet shall
not be deemed a consent to any subsequent Sublet. Lessee shall reimburse Lessor for all
reasonable costs and attorneys’ fees incurred by Lessor in connection with the evaluation,
processing and/or documentation of any requested Sublet, whether or not Lessor’s consent is
granted, in an amount not to exceed One Thousand Dollars ($1,000.00) per request. Lessor’s
reasonable costs shall include the cost of any review or investigation by Lessor of any
hazardous or toxic materials which may be used, stored, or disposed of at the Premises by
the Sublessee, including fees paid to consultants hired to perform such review or
investigation.



Page 16 of 29









 






C. Information to be Furnished. If Lessee desires at any time to Sublet the Premises
or any portion thereof, it shall first notify Lessor of its desire to do so and shall submit
in writing to Lessor: (i) the name and legal composition of the proposed Sublessee, (ii) the
nature of the proposed Sublessee’s business to be carried on in the Premises; (iii) the
terms and provisions of the proposed Sublet and a copy of the proposed Sublet form
containing a description of the subject premises; (iv) a statement of all consideration to
be paid by the Sublessee in connection with the Sublet; (v) a current financial statement of
Lessee; and (vi) such financial information, including financial statements, as Lessor may
reasonably request concerning the proposed Sublessee, provided that, if requested by Lessee,
Lessor shall execute a commercially reasonable form of non-disclosure agreement with respect
to such statements.




D. Lessor’s Alternatives. At any time within fifteen (15) days after the Lessor’s
receipt of the information specified in Paragraph 21.C, Lessor may, by written notice to
Lessee, elect: (i) to consent to the Sublet by Lessee; (ii) to reasonably refuse its consent
to the Sublet, or (iii) elect to terminate this Lease, or in the case of a partial Sublet,
terminate this Lease as to the portion of the Premises proposed to be Sublet. If Lessor
consents to the Sublet, Lessee may thereafter enter into a valid Sublet of the Premises or
portion thereof, upon the terms and conditions and with the proposed Sublessee set forth in
the information furnished by Lessee to Lessor pursuant to Paragraph 21.B., subject, however,
at Lessor’s election, to the condition that fifty percent (50%) of any excess of the Subrent
over the Rent required to be paid by Lessee under this Lease shall be paid to Lessor but
only if any such excess remains after Lessee has first deducted its attorneys’ fees
associated with the Sublet, the costs of any improvements or improvement allowance relating
to the Sublet, and any broker commissions associated with the Sublet.




E. [Intentionally Omitted.]




F. Exempt Sublets. Notwithstanding the above, Lessor’s prior written consent shall
not be required for an assignment of this Lease to an entity which controls, is controlled
by or under common control with, Lessee, to a corporation into which Lessee merges or
consolidates, to a successor entity related to Lessee by non-bankruptcy reorganization, or
government action, or to a purchaser of substantially all of Lessee’s assets located in the
Premises provided that (i) Lessee gives Lessor prior written notice of the name any such
assignee, (ii) at the time of such assignment, the assignee has net worth that is equal to
or greater than the net worth of Lessee immediately prior to such assignment; and (iii) the
assignee assumes, in writing, for the benefit of Lessor, all of Lessee’s obligations under
the Lease. In addition, and notwithstanding anything to the contrary in this Paragraph 21,
neither (i) the sale, transfer or public offering of Lessee’s capital stock, (ii) the
institutional, venture or other private financing by Lessee to raise additional capital, nor
(iii) any change of control of Lessee resulting from (i) or (ii) shall be deemed an
assignment of the Lease or a subletting of the Premises, and Lessor’s consent shall not be
required for any of the foregoing transactions.


22. Parking Charges. Lessee agrees to pay upon demand, based on its percent of occupancy of
the entire Premises, its pro-rata share of any parking charges, surcharges, or any other cost





Page 17 of 29









 







hereafter levied or assessed by local, state, or federal governmental agencies in connection with
the use of the parking facilities serving the Premises, including, without limitation, parking
surcharge imposed by or under the authority of the Federal Environmental Protection Agency.
Notwithstanding the foregoing, Lessee shall not be charged for the use of parking provided under
this Lease unless the applicable local, state or federal governmental agency imposes on tax, fee,
levy, or other charge on parking at similar buildings in Los Gatos.



23. Insolvency or Bankruptcy. Either (1.) the appointment of a receiver to take possession
of all or substantially all of the assets of Lessee, or (2.) a general assignment by Lessee for the
benefit of creditors, or (3.) any action taken or suffered by Lessee under any insolvency or
bankruptcy act shall constitute a breach of this Lease by Lessee. Upon the happening of any such
event, this Lease shall terminate ten (10) days after written notice of termination from Lessor to
Lessee. This section is to be applied consistent with the applicable state and federal law in
effect at the time such event occurs.



24. Lessor Loan or Sale. Lessee agrees promptly following request by Lessor to (1.) execute
and deliver to Lessor any commercially reasonable documents, including estoppel certificates
presented to Lessee by Lessor, (a.) certifying that this Lease is unmodified and in full force and
effect, or, if modified, stating the nature of such modification and certifying that this Lease, as
so modified, is in full force and effect and the date to which the rent and other charges are paid
in advance, if any, and (b.) acknowledging that there are not, to Lessee’s knowledge, any uncured
defaults on the part of Lessor hereunder, and (c.) evidencing the status of the Lease as may be
required either by a lender making a loan to Lessor, to be secured by deed of trust or mortgage
covering the Premises, or a purchaser of the Premises from Lessor, and (2.) to deliver to Lessor
the current financial statements of Lessee, including a balance sheet and profit and loss
statement, for the current fiscal year and the two immediately prior fiscal years, if available.
Lessee’s failure to deliver an estoppel certificate within ten (10) days following such request
shall constitute a default under this Lease and shall be conclusive upon Lessee that this Lease is
in full force and effect and has not been modified except as may be represented by Lessor.



25. Surrender of Lease. The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, shall not work a merger nor relieve Lessee of any of Lessee’s
obligations under this Lease, and shall, at the option of Lessor, terminate all or any existing
Subleases or Subtenancies, or may, at the option of Lessor, operate as an assignment to Lessor of
any or all such Subleases or Subtenancies.



26. Attorneys’ Fees. If, for any reason, any suit be initiated to enforce any provision of
this Lease, the prevailing party shall be entitled to legal costs, expert witness expenses, and
reasonable attorneys’ fees, as fixed by the court.



27. Notices. All notices to be given to Lessee may be given in writing, personally, or by
depositing the same in the United States mail, postage prepaid, and addressed to Lessee at the said
Premises, whether or not Lessee has departed from, abandoned, or vacated the Premises. Any notice
or document required or permitted by this Lease to be given Lessor shall be addressed to Lessor at
the address set forth below, or at such other address as it may have theretofore specified by
notice delivered in accordance herewith:









Page 18 of 29









 











	 	 	 
	LESSOR:

	 	Los Gatos Business Park
	 

	 	900 Welch Road, Suite 10
	 

	 	Palo Alto, California 94304
	 
	 	 
	LESSEE:

	 	StrataLight Communications, Inc.
	 

	 	151 Albright Way
	 

	 	Los Gatos, California 95032
	 
	 	 
	With a copy to:

	 	Pillsbury Winthrop Shaw Pittman LLP
	 

	 	Attn: Stanley F. Pierson
	 

	 	2475 Hanover Street
	 

	 	Palo Alto, CA 94304





28. Transfer of Security. If any security be given by Lessee to Lessor to secure the
faithful performance of all or any of the covenants of this Lease on the part of Lessee, Lessor
shall transfer and/or deliver the security, as such, to the purchaser of the reversion, in the
event that the reversion be sold, and thereupon Lessor shall be discharged from any further
liability in reference thereto, upon the assumption by such transferee of lessor’s obligations
under this Lease.



29. Waiver. The waiver by Lessor or Lessee of any breach of any term, covenant, or
condition, herein contained shall not be deemed to be a waiver of such term, covenant, or
condition, or any subsequent breach of the same or any other term, covenant, or condition herein
contained. The subsequent acceptance of rent hereunder by lessor shall not be deemed to be a waiver
of any preceding breach by Lessee of any term, covenant, or condition of this Lease, other than the
failure of Lessee to pay the particular rental so accepted, regardless of Lessor’s knowledge of
such preceding breach at the time of acceptance of such rent.



30. Holding Over. Lessee shall have the right to negotiate with Lessor in order to allow
Lessee to holdover in the Premises with Lessor’s consent at a rental rate equal to the greater of
fair market rent for the Premises (as reasonably determined by Lessor in good faith) or the base
rent then in effect under this Lease during the last month of this Lease prior to the commencement
of such a holdover period. Any holding over after the expiration of the term or any extension
thereof, without the consent of lessor, shall be construed to be a tenancy at sufferance, at a
rental of one and one- half (1 1/2) times the previous month’s rental rate per month, and shall
otherwise be on the terms and conditions herein specified, so far as applicable.



31. Covenants. Conditions, and Restrictions. Attached hereto, marked Exhibit “C” and by
this reference incorporated as if set out in full, are Covenants, Conditions, and Restrictions
pertaining to Los Gatos Business Park. As a condition to this Lease, Lessee agrees to abide by all
of said Covenants, Conditions, and Restrictions. Moreover, such reasonable rules and regulations as
may be hereafter adopted by Lessor for the safety, care, and cleanliness of the Premises and the
preservation of good order thereon, are hereby expressly made a part hereof, and Lessee agrees to
obey all such rules and regulations.



32. Limitation on Lessor’s Liability. If Lessor is in default of this Lease, and, as a
consequence,





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Lessee recovers a money judgment against Lessor, the judgment shall be satisfied only out of the
proceeds of sale received on execution of the judgment and levy against the right, title, and
interest of Lessor in the Premises, or in the building, other improvements, and land of which the
Premises are part, and out of rent or other income from such real property receivable by Lessor or
out of the consideration received by Lessor from the sale or other disposition of all or any part
of Lessor’s right, title, and interest in the Premises or in the building, other improvements, and
land of which the Premises are part. Neither Lessor nor any of the partners comprising the
partnership designated as Lessor shall be personally liable for any deficiency.



33. Expansion. Lessee shall notify Lessor from time to time of its possible interest for
more space within Los Gatos Business Park. Lessor shall have five (5) business days to respond to
Lessee with the current availability of space or any potential availability that Lessor has actual
knowledge of. This shall not be a default provision of the Lease.



34. Right to Terminate. Lessee shall have the right to terminate this Lease at the end of
the 3rd Rent Year by providing Lessor with six (6) months prior written notice of its
intent to terminate, which notice may be given such that the termination date would be the last day
of the 3rd Rent Year (the “Termination Notice”). The Termination Notice shall specify
Lessee’s desired termination date, which date shall not be earlier than six (6) months after the
date of the Termination Notice (the “Termination Date”) Should Lessee exercise its right to
terminate, Lessee shall pay to Lessor an amount equal to six (6) months of Monthly Rent and
Additional Rent next coming due after the Termination Date, along with the unamortized portion of
the Lessor’s Allowance (as such term is defined in the Work Letter) and the leasing commissions
paid with respect to the initial term of this Lease (the “Termination Fee”). Within five (5)
business days after Lessee’s written request, Lessor shall provide Lessee with the amount of the
Termination Fee based on the Termination Date. Notwithstanding the foregoing, Lessor shall rebate
to Lessee all or a portion of the Termination Fee in the event Lessor realizes a gain above
Lessee’s remaining Rent obligation under the Lease according to the following formula: Lessee’s
entire remaining Rent obligation under the Lease for the period of time from and after the
Termination Date to and including the Expiration Date (such period the “Remaining Period”) shall be
calculated, and in the event Lessor leases the Premises to a third party for all or any portion of
the Remaining Term, then the new rental due to Lessor shall be computed for the applicable portion
of the Remaining Period. In the event the third party’s rent through the same period is in excess
of Lessee’s Rent obligation through such period, then Lessee shall receive the excess rent as a
rebate up to the amount of the termination fee. Lessor shall promptly remit the rebate amount to
Lessee following the commencement date of the new lease.



35. Signage. Lessee, at Lessee’s sole cost, shall have the right to building and monument
signage per Los Gatos Business Park standards and Town regulations.



36. Miscellaneous.





	 	A.	 	Time is of the essence of this Lease, and of each and all of its provisions.
	 
	 	B.	 	The term “building” shall mean the building in which the Premises are situated.
	 
	 	C.	 	If the building is leased to more than one tenant, then each such tenant, its agents,




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	 	 	 	officers, employees, and invitees, shall have the non-exclusive right (in
conjunction with the use of the part of the building leased to such tenant) to make
reasonable use of any driveways, sidewalks, and parking areas located on the parcel
of land on which the building is situated, except such parking areas as may from
time to time be leased for exclusive use by other tenant(s).






	 	D.	 	Lessee’s such reasonable use of parking areas shall not exceed that percent of
the total parking areas which is equal to the ratio which floor space of the Premises
bears to floor space of the building.
	 
	 	E.	 	The term “assign” shall include the term “transfer.”
	 
	 	F.	 	The invalidity or unenforceability of any provision of this Lease shall not
affect the validity or enforceability of the remainder of this Lease.
	 
	 	G.	 	All parties hereto have equally participated in the preparation of this Lease.
	 
	 	H.	 	The headings and titles to the Paragraphs of this Lease are not a part of this
Lease and shall have no effect upon the construction or interpretation of any part
thereof.
	 
	 	I.	 	Lessor has made no representation(s) whatsoever to Lessee (express or implied)
except as may be expressly stated in writing in this Lease instrument.
	 
	 	J.	 	This instrument contains all of the agreements and conditions made between the
parties hereto, and may not be modified orally or in any other manner than by
agreement in writing, signed by all of the parties hereto or their respective
successors in interest.
	 
	 	K.	 	It is understood and agreed that the remedies herein given to Lessor shall be
cumulative, and the exercise of any one remedy by Lessor shall not be to the exclusion
of any other remedy.
	 
	 	L.	 	The covenants and conditions herein contained shall, subject to the provisions
as to assignment, apply to and bind the heirs, successors, executors, and
administrators, and assigns of all the parties hereto; and all of the parties hereto
shall jointly and severally be liable hereunder.
	 
	 	M.	 	This Lease has been negotiated by the parties hereto and the language hereof
shall not be construed for or against either party.
	 
	 	N.	 	All exhibits to which reference is made are deemed incorporated into this
Lease, whether covenants or conditions, on the part of Lessee shall be deemed to be
both covenants and conditions.
	 
	 	 	 	[Remainder of Page Intentionally Blank. Signatures on Following Page.]





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     IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease on the date first
above-written.



	 	 	 
	LESSOR:

	 	LESSEE:
	Los Gatos Business Park

	 	StrataLight Communications, Inc.
	 
	 	 
	BY: /s/ Carolee White

	 	BY: /s/ Illegible
	 

	 	 


	Carolee White, Trustee
	 	 
	General Partner
	 	 
	 
	 	 
	DATE: 3/15/04

	 	DATE: 3/14/06







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