exv10w23



 





Exhibit
10.23


LEASE

(Multi-Tenant; Net)

McCarthy Center



BETWEEN




THE IRVINE COMPANY LLC




AND




SONICS, INC.





 









 








INDEX TO LEASE




	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE I. BASIC LEASE PROVISIONS	 	 	1	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE II. PREMISES	 	 	3	 
	 
	 	SECTION 2.1.	 	LEASED PREMISES 	 	 	3	 
	 
	 	SECTION 2.2.	 	ACCEPTANCE OF PREMISES 	 	 	3	 
	 
	 	SECTION 2.3.	 	BUILDING NAME AND ADDRESS 	 	 	3	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE III. TERM	 	 	3	 
	 
	 	SECTION 3.1.	 	GENERAL 	 	 	3	 
	 
	 	SECTION 3.2.	 	DELAY IN POSSESSION	 	 	4	 
	 
	 	SECTION 3.3.	 	RIGHT TO EXTEND THIS LEASE 	 	 	4	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE IV. RENT AND OPERATING EXPENSES	 	 	5	 
	 
	 	SECTION 4.1.	 	BASIC RENT 	 	 	5	 
	 
	 	SECTION 4.2.	 	OPERATING EXPENSES 	 	 	5	 
	 
	 	SECTION 4.3.	 	SECURITY DEPOSIT 	 	 	7	 
	 
	 	SECTION 4.4.	 	LETTER OF CREDIT 	 	 	8	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE V. USES	 	 	8	 
	 
	 	SECTION 5.1.	 	USE 	 	 	8	 
	 
	 	SECTION 5.2.	 	SIGNS 	 	 	9	 
	 
	 	SECTION 5.3.	 	HAZARDOUS MATERIALS 	 	 	9	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VI. COMMON AREAS; SERVICES	 	 	11	 
	 
	 	SECTION 6.1.	 	UTILITIES AND SERVICES 	 	 	11	 
	 
	 	SECTION 6.2.	 	OPERATION AND MAINTENANCE OF COMMON AREAS 	 	 	11	 
	 
	 	SECTION 6.3.	 	USE OF COMMON AREAS 	 	 	11	 
	 
	 	SECTION 6.4.	 	PARKING 	 	 	12	 
	 
	 	SECTION 6.5.	 	CHANGES AND ADDITIONS BY LANDLORD 	 	 	12	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VII. MAINTAINING THE PREMISES	 	 	12	 
	 
	 	SECTION 7.1.	 	TENANT’S MAINTENANCE AND REPAIR 	 	 	12	 
	 
	 	SECTION 7.2.	 	LANDLORD’S MAINTENANCE AND REPAIR 	 	 	13	 
	 
	 	SECTION 7.3.	 	ALTERATIONS	 	 	13	 
	 
	 	SECTION 7.4.	 	MECHANIC’S LIENS 	 	 	14	 
	 
	 	SECTION 7.5.	 	ENTRY AND INSPECTION 	 	 	14	 
	 
	 	SECTION 7.6.	 	SPACE PLANNING AND SUBSTITUTION 	 	 	14	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VIII. TAXES AND ASSESSMENTS
ON TENANT’S PROPERTY	 	 	14	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE IX. ASSIGNMENT AND SUBLETTING	 	 	14	 
	 
	 	SECTION 9.1.	 	RIGHTS OF PARTIES 	 	 	14	 
	 
	 	SECTION 9.2.	 	EFFECT OF TRANSFER 	 	 	16	 
	 
	 	SECTION 9.3.	 	SUBLEASE REQUIREMENTS 	 	 	16	 
	 
	 	SECTION 9.4.	 	CERTAIN TRANSFERS 	 	 	16	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE X. INSURANCE AND INDEMNITY	 	 	17	 
	 
	 	SECTION 10.1.	 	TENANT’S INSURANCE 	 	 	17	 
	 
	 	SECTION 10.2.	 	LANDLORD’S INSURANCE 	 	 	17	 
	 
	 	SECTION 10.3.	 	TENANT’S INDEMNITY 	 	 	17	 
	 
	 	SECTION 10.4.	 	LANDLORD’S NONLIABILITY 	 	 	17	 
	 
	 	SECTION 10.5.	 	WAIVER OF SUBROGATION 	 	 	18	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XI. DAMAGE OR DESTRUCTION	 	 	18	 
	 
	 	SECTION 11.1.	 	RESTORATION 	 	 	18	 
	 
	 	SECTION 11.2.	 	LEASE GOVERNS 	 	 	19	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XII. EMINENT DOMAIN	 	 	19	 
	 
	 	SECTION 12.1.	 	TOTAL OR PARTIAL TAKING 	 	 	19	 
	 
	 	SECTION 12.2.	 	TEMPORARY TAKING 	 	 	19	 
	 
	 	SECTION 12.3.	 	TAKING OF PARKING AREA 	 	 	19	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XIII. SUBORDINATION; ESTOPPEL CERTIFICATE; FINANCIALS	 	 	19	 
	 
	 	SECTION 13.1.	 	SUBORDINATION 	 	 	19	 
	 
	 	SECTION 13.2.	 	ESTOPPEL CERTIFICATE 	 	 	20	 
	 
	 	SECTION 13.3.	 	FINANCIALS 	 	 	20	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XIV. EVENTS OF DEFAULT AND REMEDIES	 	 	20	 






i









 






	 	 	 	 	 	 	 	 	 
	 
	 	SECTION 14.1.	 	TENANT'S DEFAULTS 	 	 	20	 
	 
	 	SECTION 14.2.	 	LANDLORD'S REMEDIES 	 	 	21	 
	 
	 	SECTION 14.3.	 	LATE PAYMENTS 	 	 	22	 
	 
	 	SECTION 14.4.	 	RIGHT OF LANDLORD TO PERFORM 	 	 	23	 
	 
	 	SECTION 14.5.	 	DEFAULT BY LANDLORD 	 	 	23	 
	 
	 	SECTION 14.6.	 	EXPENSES AND LEGAL FEES 	 	 	23	 
	 
	 	SECTION 14.7.	 	WAIVER OF JURY TRIAL/JUDICIAL REFERENCE 	 	 	23	 
	 
	 	SECTION 14.8.	 	SATISFACTION OF JUDGMENT 	 	 	24	 
	 
	 	SECTION 14.9.	 	LIMITATION OF ACTIONS AGAINST LANDLORD 	 	 	24	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XV. END OF TERM	 	 	24	 
	 
	 	SECTION 15.1.	 	HOLDING OVER 	 	 	24	 
	 
	 	SECTION 15.2.	 	MERGER ON TERMINATION 	 	 	25	 
	 
	 	SECTION 15.3.	 	SURRENDER OF PREMISES; REMOVAL OF PROPERTY 	 	 	25	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XVI. PAYMENTS AND NOTICES	 	 	25	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XVII. RULES AND REGULATIONS	 	 	25	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XVIII. BROKER’S COMMISSION	 	 	25	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XIX. TRANSFER OF LANDLORD’S INTEREST	 	 	26	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XX. INTERPRETATION	 	 	26	 
	 
	 	SECTION 20.1.	 	GENDER AND NUMBER 	 	 	26	 
	 
	 	SECTION 20.2.	 	HEADINGS 	 	 	26	 
	 
	 	SECTION 20.3.	 	JOINT AND SEVERAL LIABILITY 	 	 	26	 
	 
	 	SECTION 20.4.	 	SUCCESSORS 	 	 	26	 
	 
	 	SECTION 20.5.	 	TIME OF ESSENCE 	 	 	26	 
	 
	 	SECTION 20.6.	 	CONTROLLING LAW/VENUE 	 	 	26	 
	 
	 	SECTION 20.7.	 	SEVERABILITY 	 	 	26	 
	 
	 	SECTION 20.8.	 	WAIVER AND CUMULATIVE REMEDIES 	 	 	26	 
	 
	 	SECTION 20.9.	 	INABILITY TO PERFORM 	 	 	26	 
	 
	 	SECTION 20.10.	 	ENTIRE AGREEMENT 	 	 	26	 
	 
	 	SECTION 20.11.	 	QUIET ENJOYMENT 	 	 	27	 
	 
	 	SECTION 20.12.	 	SURVIVAL 	 	 	27	 
	 
	 	SECTION 20.13.	 	INTERPRETATION 	 	 	27	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XXI. EXECUTION AND RECORDING	 	 	27	 
	 
	 	SECTION 21.1.	 	COUNTERPARTS 	 	 	27	 
	 
	 	SECTION 21.2.	 	CORPORATE, LIMITED LIABILITY COMPANY AND PARTNERSHIP AUTHORITY 	 	 	27	 
	 
	 	SECTION 21.3.	 	EXECUTION OF LEASE; NO OPTION OR OFFER 	 	 	27	 
	 
	 	SECTION 21.4.	 	RECORDING 	 	 	27	 
	 
	 	SECTION 21.5.	 	AMENDMENTS 	 	 	27	 
	 
	 	SECTION 21.6.	 	EXECUTED COPY 	 	 	27	 
	 
	 	SECTION 21.7.	 	ATTACHMENTS 	 	 	27	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XXII. MISCELLANEOUS	 	 	27	 
	 
	 	SECTION 22.1.	 	NONDISCLOSURE OF LEASE TERMS 	 	 	27	 
	 
	 	SECTION 22.2.	 	GUARANTEE 	 	 	27	 
	 
	 	SECTION 22.3.	 	CHANGES REQUESTED BY LENDER 	 	 	27	 
	 
	 	SECTION 22.4.	 	MORTGAGEE PROTECTION 	 	 	28	 
	 
	 	SECTION 22.5.	 	COVENANTS AND CONDITIONS 	 	 	28	 
	 
	 	SECTION 22.6.	 	SECURITY MEASURES 	 	 	28	 
	 
	 	SECTION 22.7.	 	SDN LIST 	 	 	28	 






	 	 	 
	EXHIBITS
	 	 
	Exhibit A
	 	Description of Premises
	Exhibit B
	 	Environmental Questionnaire
	Exhibit C
	 	Landlord’s Disclosures
	Exhibit D
	 	Insurance Requirements
	Exhibit E
	 	Rules and Regulations
	Exhibit F
	 	Letter of Credit Format
	Exhibit X
	 	Work Letter
	Exhibit Y
	 	Project Site Plan







ii









 








LEASE 

(Multi-Tenant; Net)




     THIS
LEASE is made as of the 26 day of November, 2007 by and between
THE IRVINE COMPANY LLC, a Delaware limited liability company hereafter called “Landlord,” and
SONICS, INC., a Delaware corporation, hereinafter called “Tenant.”



ARTICLE I. BASIC LEASE PROVISIONS




     Each reference in this Lease to the “Basic Lease Provisions” shall mean and refer to the
following collective terms, the application of which shall be governed by the provisions in the
remaining Articles of this Lease.




	1.	 	Premises: Suite Nos. 200 and 220 (the Premises are more particularly described in
Section 2.1). Address of Building: 890 N. McCarthy Blvd., Milpitas, CA





2. Project Description (if applicable): McCarthy Center





	3.	 	Use of Premises: General office, research and development, sales and light storage and other
related legal uses.
	 
	4.	 	Estimated Commencement Date: January 11, 2008 (but not sooner than January 1, 2008).








	5.	 	Term: Thirty Seven (37) months, plus such additional days as may be required to cause this
Lease to terminate on the final day of the calendar month.






	6.	 	Basic Rent: Commencing on the Commencement Date, the Basic Rent shall be Twenty Eight
Thousand Four Hundred Dollars ($28,400.00) per month, based on $1.30 per rentable square foot.
	 
	 	 	Basic Rent is subject to adjustment as follows:
	 
	 	 	Commencing twelve (12) months following the Commencement Date, the Basic Rent shall be
Twenty Nine Thousand Four Hundred Ninety-Two Dollars ($29,492.00) per month, based on $1.35
per rentable square foot.
	 
	 	 	Commencing twenty-four (24) months following the Commencement Date, the Basic Rent shall
be Thirty Thousand Five Hundred Eighty-Four Dollars ($30,584.00) per month, based on $1.40
per rentable square foot.






	7.	 	Guarantor(s): None
	 
	8.	 	Floor Area: Approximately 21,846 rentable square feet
	 
	9.	 	Security Deposit: $70,000.00 [see also Section 4.4 for Letter of Credit requirements]
	 
	10.	 	Broker(s): “Landlord’s Broker”: Irvine Realty Company and CB Richard Ellis




                        “Tenant’s Broker”: Colliers International





	11.	 	Additional Insureds: McCarthy Center Partners LLC, a Delaware limited liability company

	 
	12.	 	Address for Notices:





	 	 	 
	LANDLORD


THE IRVINE COMPANY LLC 

550 Newport Center Drive 

Newport Beach, CA 92660

Attn: Senior Vice President, Operations

          Irvine Office Properties

	 	TENANT


SONICS, INC.

890 N. McCarthy Blvd., Suite 200

Milpitas, CA 95035
	 
	with a copy of notices to:
	 	 
	 
	THE IRVINE COMPANY LLC 

550 Newport Center Drive  

Newport Beach, CA 92660  

Attn: Vice President, Operations

          Irvine Office Properties, Technology Portfolio
	 	 







	13.	 	Address for Payments: All payments due under this Lease shall be made to the address shown
on the invoice for the payment due, or if no address is shown, to Landlord’s notice address
above.





14. Tenant’s Liability Insurance Requirement: $2,000,000.00





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	15.	 	Vehicle Parking Spaces: Eighty Seven (87)






2









 








ARTICLE II. PREMISES




     SECTION 2.1. LEASED PREMISES. Landlord leases to Tenant and Tenant leases from Landlord the
premises shown in Exhibit A (the “Premises”), containing approximately the rentable
square footage set forth as the “Floor Area” in Item 8 of the Basic Lease Provisions and known
by the suite number identified in Item 1 of the Basic Lease Provisions. The Premises are located
in the building identified in Item 1 of the Basic Lease Provisions (the Premises together with
such building and the underlying real property, are called the “Building”), and is a portion of
the project identified in Item 2 of the Basic Lease Provisions and shown in Exhibit Y.
if any (the “Project”). If the Project is not already completed, Landlord makes no
representation that the Project, if any, as shown on Exhibit Y. (a) will be completed or
that it will be constructed as shown on Exhibit Y without change, or (b) to the extent
the Project is constructed, it will not be changed from the Project as shown on Exhibit
Y. All references to “Floor Area” in this Lease shall mean the rentable square footage set
forth in Item 8 of the Basic Lease Provisions. The rentable square footage set forth in Item 8
may include or have been adjusted by various factors, including, without limitation, a load
factor to allocate a proportionate share of any vertical penetrations, stairwells, common lobby
or common features or areas of the Building. Tenant agrees that the Floor Area set forth in Item
8 shall be binding on Landlord and Tenant for purposes of this Lease regardless of whether any
future or differing measurements of the Premises or the Building are consistent or inconsistent
with the Floor Area set forth in Item 8. The Premises are a portion of certain real property
which is leased by Landlord pursuant to that certain Master Lease dated December 31, 2003 (the
“Master Lease”) by and between McCarthy Center Partners LLC, a Delaware limited liability
company, subsequently merged into California Diversified LLC, a Delaware limited liability
company (“Master Lessor”), as “Landlord”, and Landlord as “Tenant”. That certain Master Lease
(Short Form -Memorandum) was recorded on December 31, 2003 as Document No. 17553727 in the
Official Records of Santa Clara County, California



     SECTION 2.2. ACCEPTANCE OF PREMISES. Tenant acknowledges that neither Landlord nor any
representative of Landlord has made any representation or warranty with respect to the Premises,
the Building or the Project or their respective suitability or fitness for any purpose, including
without limitation any representations or warranties regarding the compliance of Tenant’s use of
the Premises with the applicable zoning or regarding any other land use matters, and Tenant shall
be solely responsible as to such matters. Further, neither Landlord nor any representative of
Landlord has made any representations or warranties regarding (i) what other tenants or uses may be
permitted or intended in the Building or the Project, (ii) any exclusivity of use by Tenant with
respect to its permitted use of the Premises as set forth in Item 3 of the Basic Lease Provisions,
or (iii) any construction of portions of the Project not yet completed. Tenant further acknowledges
that neither Landlord nor any representative of Landlord has agreed to undertake any alterations or
additions or to construct any improvements to the Premises except as expressly provided in this
Lease and/or the Work Letter, if any, attached hereto as Exhibit X (the “Work Letter”), and
that the flooring materials which may be installed within portions of the Premises located on the
ground floor of the Building may be limited by the moisture content of the Building slab and
underlying soils. As of the Commencement Date, Tenant shall be conclusively deemed to have accepted
the Premises and those portions of the Building and Project in which Tenant has any rights under
this Lease, which acceptance shall mean that it is conclusively established that the Premises and
those portions of the Building and Project in which Tenant has any rights under this Lease were in
satisfactory condition and in conformity with the provisions of this Lease, subject only to those
defective or incomplete portions of the Tenant Improvements constructed by Landlord pursuant to the
 Work Letter which Tenant shall have itemized on a written punch list and delivered to Landlord
within thirty (30) days after the Commencement Date (as defined in Section 3.1). If no items are
required of Landlord under the Work Letter, Tenant shall be conclusively deemed to have accepted
the Premises, and those portions of the Building and Project in which Tenant has any rights under
this Lease, in their existing condition as of the Commencement Date, and to have waived any and all
right or claim regardless of the nature thereof against Landlord arising out of the condition of
the Premises, the Building or the Project. Nothing contained in this Section shall affect the
commencement of the Term or the obligation of Tenant to pay rent. Landlord shall diligently
complete all punch list items of which it is notified as provided above.



     SECTION 2.3. BUILDING NAME AND ADDRESS. Tenant shall not utilize any name selected by
Landlord from time to time for the Building and/or the Project as any part of Tenant’s corporate
or trade name. Landlord shall have the right to change the name, address, number or designation
of the Building or Project without liability to Tenant. Notwithstanding the foregoing, Landlord
shall reimburse Tenant for all reasonable out-of-pocket expenses incurred by Tenant, including
without limitation, Tenant’s costs of obtaining new business cards, stationery and informing
Tenant’s customers and vendors of Tenant’s new address, not to exceed Five Thousand Dollars
($5,000.00) in the aggregate, resulting from any changed name, number or designation of the
Building or Project initiated by Landlord.



ARTICLE III. TERM




     SECTION 3.1. GENERAL. The term of this Lease (“Term”) shall be for the period shown in Item 5
of the Basic Lease Provisions. Subject to the provisions of Section 3.2 below, the Term shall
commence (“Commencement Date”) on the earlier of (a) the date Tenant acquires possession of or
commences use of the
Premises for its business operations, or (b) the later to occur of: (i) the date the
Premises are tendered to Tenant, provided that the Premises shall not be tendered to Tenant
until any approvals by relevant governmental authorities of the tenant improvements
constructed by Landlord pursuant to the Work Letter (“Tenant Improvements”) which are
required for occupancy of the Premises have been obtained (as evidenced by written approval
thereof in accordance with the building permits issued for the Tenant Improvements or
issuance of a temporary or final
certificate of occupancy for the Premises), or (ii) January 1, 2008. The date on which this Lease
is scheduled to terminate is referred to as the “Expiration Date.” Prior to Tenant’s taking
of possession of the Premises, the parties shall memorialize on a form provided by Landlord
(the “Commencement Date Memorandum”) the actual Commencement Date and the Expiration Date of
this Lease. Should Tenant fail to execute and return the




3









 







Commencement Date Memorandum to Landlord within ten (10) business days (or provide specific
written objections thereto within that period), then Landlord’s determination of the Commencement
and Expiration Dates as set forth in the Commencement Date Memorandum shall be conclusive.




     SECTION 3.2. DELAY IN POSSESSION. If Landlord, for any reason whatsoever, cannot deliver
possession of the Premises to Tenant prior or subsequent to the Estimated Commencement Date as set
forth in Item 4 of the Basic Lease Provisions (“Estimated Commencement Date”), this Lease shall not
be void or voidable nor shall Landlord be liable to Tenant for any resulting loss or damage.
However, Tenant shall not be liable for any rent until the Commencement Date occurs as provided in
Section 3.1 above, except that if Landlord cannot tender possession of the Premises in accordance
with the provisions of Section 3.1(b) above due to any action or inaction of Tenant (including
without limitation any Tenant Delay described in the Work Letter, if any, attached to this Lease),
then the Commencement Date shall be deemed to have occurred and Landlord shall be entitled to full
performance by Tenant (including the payment of rent) from the date Landlord would have been able
to so tender possession of the Premises to Tenant but for Tenant’s action or inaction, including
without limitation any Tenant Delay described in the attached Work Letter, if any.



     Notwithstanding anything to the contrary contained in this Section 3.2, if for any reason
other than “Tenant Delays” (as defined in the Work Letter attached hereto), or other matters
beyond Landlord’s reasonable control, the actual Commencement Date has not occurred by the date
that is one hundred twenty (120) days following the Estimated Commencement Date (the “Outside
Date”), then Tenant may, by written notice to Landlord given at any time thereafter but prior to
the actual occurrence of the Commencement Date, elect to terminate this Lease; provided, however,
that if the Commencement Date occurs within ten (10) business days after delivery to Landlord of
Tenant’s termination notice, this Lease shall continue in full force and effect. If the
Commencement Date has not occurred within ten (10) business days after the date of delivery of
Tenant’s termination notice, then this Lease shall terminate as of the tenth (10th) business day
after delivery of the termination notice, and Landlord shall promptly return to Tenant any prepaid
rent and/or Security Deposit delivered to Landlord. Notwithstanding the foregoing, if at any time
during the construction period, Landlord reasonably believes that the Commencement Date will not
occur on or before the Outside Date, Landlord shall have the right to notify Tenant in writing of
such fact and of a new Outside Date on or before which the Commencement Date will occur (the “New
Outside Date”), and Tenant must elect within ten (10) days of delivery of such notice to either
terminate this Lease or waive its right to terminate this Lease (provided the Commencement Date
does occur on or prior to the new Outside Date established by Landlord in such notice to Tenant).
Tenant’s failure to elect to terminate this Lease within such ten (10) day period shall be deemed
Tenant’s waiver of its right to terminate this Lease as provided in this paragraph as to the
original Outside Date, but not as to the New Outside Date established by said notice.



     SECTION 3.3. RIGHT TO EXTEND THIS LEASE. Provided that no Event of Default has occurred under
any provision of this Lease, either at the time of exercise of the extension right granted herein
or at the time of the commencement of such extension, and provided further that Tenant is
occupying the entire Premises and has not assigned or sublet any of its interest in this Lease
(except in connection with a “Permitted Transfer” as hereinafter defined), then Tenant may extend
the Term of this Lease for one (1) period of thirty-six (36) months. Tenant shall exercise its
right to extend the Term by and only by delivering to Landlord, not less than six (6) months or
more than nine (9) months prior to the expiration date of the Term, Tenant’s irrevocable written
notice of its commitment to extend (the “Commitment Notice”). The Basic Rent payable under the
Lease during any extension of the Term shall be determined as provided in the following
provisions.



     If Landlord and Tenant have not by then been able to agree upon the Basic Rent for the
extension of the Term, then within one hundred twenty (120) and ninety (90) days prior to the
expiration date of the Term, Landlord shall notify Tenant in writing of the Basic Rent that would
reflect the prevailing market rental rate for a 36-month renewal of comparable space in the
Project (together with any increases thereof during the extension period) as of the commencement
of the extension period (“Landlord’s Determination”). Should Tenant disagree with the Landlord’s
Determination, then Tenant shall, not later than twenty (20) days thereafter, notify Landlord in
writing of Tenant’s determination of those rental terms (“Tenant’s Determination”). In no event,
however, shall Landlord’s Determination or Tenant’s Determination be less than the Basic Rent
payable by Tenant during the then-scheduled final month of the initial Term. Within ten (10) days
following delivery of the Tenant’s Determination, the parties shall attempt to agree on an
appraiser to determine the fair market rental. If the parties are unable to agree in that time,
then each party shall designate an appraiser within ten (10) days thereafter. Should either party
fail to so designate an appraiser within that time, then the appraiser designated by the other
party shall determine the fair market rental. Should each of the parties timely designate an
appraiser, then the two appraisers so designated shall appoint a third appraiser who shall, acting
alone, determine the fair market rental for the Premises. Any appraiser designated hereunder shall
have an MAI certification with not less than five (5) years experience in the valuation of
commercial industrial buildings in the vicinity of the Project.



     Within thirty (30) days following the selection of the appraiser and such appraiser’s receipt
of the Landlord’s Determination and the Tenant’s Determination, the appraiser shall determine
whether the rental rate determined by Landlord or by Tenant more accurately reflects the fair
market rental rate for the 36-month renewal of the Lease for the Premises, as reasonably
extrapolated to the commencement of the extension period. Accordingly, either the Landlord’s
Determination or the Tenant’s Determination shall be selected by the appraiser as the fair market
rental rate for the extension period. In making such determination, the appraiser shall consider
rental comparables for the Project (provided that if there are an insufficient number of
comparables within the Project, the appraiser shall consider rental comparables for similarly
improved space in the North San Jose/Milpitas/South Fremont marketplace with appropriate
adjustment for location and quality of project), but the appraiser shall not attribute any factor
for market tenant improvement allowances or brokerage commissions in making its determination of
the fair market rental rate. At any time before the decision of the appraiser is rendered, either
party may, by written notice to the other party, accept the rental terms submitted by the other
party, in which



4









 




event such terms shall be deemed adopted as the agreed fair market rental. The fees of the
appraiser(s) shall be borne entirely by the party whose determination of the fair market rental
rate was not accepted by the appraiser.




     Within twenty (20) days after the determination of the fair market rental, Landlord shall
prepare an appropriate amendment to this Lease for the extension period, and Tenant shall execute
and return same to Landlord within ten (10) days after Tenant’s receipt of same. Should the fair
market rental not be established by the commencement of the extension period, then Tenant shall
continue paying rent at the rate in effect during the last month of the initial Term, and a lump
sum adjustment shall be made promptly upon the determination of such new rental.



     If Tenant fails to timely exercise the extension right granted herein within the time
period expressly set forth for exercise by Tenant in the initial paragraph of this Section 3.3,
Tenant’s right to extend the Term shall be extinguished and the Lease shall automatically
terminate as of the expiration date of the Term, without any extension and without any liability
to Landlord. Tenant’s rights under this Section 3.3 shall belong solely to Sonics, Inc., a
Delaware corporation, and any attempted assignment or transfer of such rights (except in
connection with a Permitted Transfer) shall be void and of no force and effect. Tenant shall
have no other right to extend the Term beyond the single thirty-six (36) month extension period
created by this Section 3.3. Unless agreed to in a writing signed by Landlord and Tenant, any
extension of the Term, whether created by an amendment to this Lease or by a holdover of the
Premises by Tenant, or otherwise, shall be deemed a part of, and not in addition to, any duly
exercised extension period permitted by this Section 3.3.



ARTICLE
IV. RENT AND OPERATING EXPENSES




     SECTION 4.1. BASIC RENT. From and after the Commencement Date, Tenant shall pay to Landlord
without deduction or offset, the rental amount for the Premises shown in Item 6 of the Basic
Lease Provisions (the “Basic Rent”), including subsequent adjustments, if any. If the
Commencement Date is other than the first day of the calendar month, any rental adjustments shown
in Item 6 occurring with reference to the monthly anniversary of the Commencement Date, shall be
deemed to occur on the first day of the next calendar month following the specified monthly
anniversary of the Commencement Date. The rent shall be due and payable in advance commencing on
the Commencement Date (as prorated for any partial month) and continuing thereafter on the first
day of each successive calendar month of the Term. No demand, notice or invoice shall be required
for the payment of Basic Rent. An installment of rent in the amount of one (1) full month’s Basic
Rent at the initial rate specified in Item 6 of the Basic Lease Provisions and one (1) month’s
estimated Tenant’s Share of Operating Expenses (as defined in Section 4.2) shall be delivered to
Landlord concurrently with Tenant’s execution of this Lease and shall be applied against the
Basic Rent and Operating Expenses first due hereunder.



     SECTION 4.2. OPERATING EXPENSES.



     (a) From and after Commencement Date, Tenant shall pay to Landlord, as additional rent,
Tenant’s
Share of all Operating Expenses, as defined in Section 4.2(f), incurred by Landlord in the
operation of the Building
and the Project. The term “Tenant’s Share” means that portion of any Operating Expenses
determined by
multiplying the cost of such item by a fraction, the numerator of which is the Floor Area
and the denominator of
which is the total rentable square footage, as reasonably determined from time to time by
Landlord, of (i) the
Building, for expenses reasonably determined by Landlord to benefit or relate substantially
to the Building rather
than the entire Project, (ii) all or some of the buildings in the Project, for expenses
reasonably determined by
Landlord to benefit or relate substantially to all or some of the buildings in the Project
rather than any specific
building; or (iii) all or some of the buildings within the Project as well as all or a
portion of other property owned by
Landlord and/or its affiliates, for expenses reasonably determined by Landlord to benefit or
relate substantially to such buildings within the Project and such other property. Landlord
reserves the right to allocate to the entire Project any Operating Expenses which may benefit
or substantially relate to a particular building within the Project in order to maintain
greater consistency of Operating Expenses among buildings within the Project. In the event
that Landlord determines in its sole and absolute discretion that the Premises or the
Building incur a non-proportional benefit from any expense, or is the non-proportional cause
of any such expense, Landlord may allocate a greater percentage of such Operating Expense to
the Premises or the Building. In the event that any management and/or overhead fee payable or
imposed by Landlord for the management of Tenant’s Premises is calculated as a percentage of
the rent payable by Tenant and other tenants of Landlord, then the full amount of such
management and/or overhead fee which is attributable to the rent paid by Tenant shall be
additional rent payable by Tenant, in full, provided, however, that Landlord may elect to
include such full amount as part of Tenant’s Share of Operating Expenses.

     (b) Prior to the start of each full Expense Recovery Period (as defined in this Section
4.2), Landlord
shall give Tenant a written estimate of the amount of Tenant’s Share of Operating Expenses
for the applicable
Expense Recovery Period. Any delay or failure by Landlord in providing such estimate shall
not relieve Tenant
from its obligation to pay Tenant’s Share of Operating Expenses or estimated amounts
thereof, if and when Landlord
provides such estimate or final payment amount. Tenant shall pay the estimated amounts to
Landlord in equal
monthly installments, in advance concurrently with payments of Basic Rent. If Landlord has
not furnished its
written estimate for any Expense Recovery Period by the time set forth above, Tenant shall
continue to pay monthly
the estimated Tenant’s Share of Operating Expenses in effect during the prior Expense
Recovery Period; provided
that when the new estimate is delivered to Tenant, Tenant shall, at the next monthly payment
date, pay any accrued
estimated Tenant’s Share of Operating Expenses based upon the new estimate. For purposes
hereof, “Expense
Recovery Period” shall mean every twelve month period during the Term (or portion thereof
for the first and last
lease years) commencing July 1 and ending June 30, provided that Landlord shall have the
right to change the date
on which an Expense Recovery Period commences in which event appropriate reasonable
adjustments shall be made




5









 







to Tenant’s Share of Operating Expenses so that the amount payable by Tenant shall not materially
vary as a result of such change.




     (c) Within one hundred twenty (120) days after the end of each Expense Recovery Period,
Landlord shall furnish to Tenant a statement (a “Reconciliation Statement”) showing in reasonable
detail the actual or prorated Tenant’s Share of Operating Expenses incurred by Landlord during
such Expense Recovery Period, and the parties shall within thirty (30) days thereafter make any
payment or allowance necessary to adjust Tenant’s estimated payments of Tenant’s Share of
Operating Expenses, if any, to the actual Tenant’s Share of Operating Expenses as shown by the
Reconciliation Statement. Any delay or failure by Landlord in delivering any Reconciliation
Statement shall not constitute a waiver of Landlord’s right to require Tenant to pay Tenant’s
Share of Operating Expenses pursuant hereto. Any amount due Tenant shall be credited against
installments next coming due under this Section 4.2, and any deficiency shall be paid by Tenant
together with the next installment. Should Tenant fail to object in writing to Landlord’s
determination of Tenant’s Share of Operating Expenses within sixty (60) days following delivery of
Landlord’s Reconciliation Statement, Landlord’s determination of Tenant’s Share of Operating
Expenses for the applicable Expense Recovery Period shall be conclusive and binding on the parties
for all purposes and any future claims to the contrary shall be barred.



     (d) Even though this Lease has terminated and the Tenant has vacated the Premises, when the
final determination is made of Tenant’s Share of Operating Expenses for the Expense Recovery
Period in which this Lease terminates, Tenant shall within thirty (30) days of written notice pay
the entire increase over the estimated Tenant’s Share of Operating Expenses already paid.
Conversely, any overpayment by Tenant shall be rebated by Landlord to Tenant not later than thirty
(30) days after such final determination.



     (e) If, at any time during any Expense Recovery Period, any one or more of the Operating
Expenses are increased to a rate(s) or amount(s) in excess of the rate(s) or amount(s) used in
calculating the estimated Tenant’s Share of Operating Expenses for the year, then the estimate of
Tenant’s Share of Operating Expenses may be increased by written notice from Landlord for the month
in which such rate(s) or amount(s) becomes effective and for all succeeding months by an amount
equal to the estimated amount of Tenant’s Share of the increase. If Landlord gives Tenant written
notice of the amount or estimated amount of the increase and the month in which the increase will
or has become effective, then Tenant shall pay the increase to Landlord as a part of Tenant’s
monthly payments of the estimated Tenant’s Share of Operating Expenses as provided in Section
4.2(b), commencing with the month following delivery of Landlord’s notice. In addition, Tenant
shall pay upon written request any such increases which were incurred prior to the Tenant
commencing to pay such monthly increase.



     (f) The term “Operating Expenses” shall mean and include all Project Costs, as defined in
subsection (g), and Property Taxes, as defined in subsection (h).



     (g) The term “Project Costs” shall mean all expenses of operation, management, repair,
replacement and maintenance of the Building and the Project, including without limitation all
appurtenant Common Areas (as defined in Section 6.2), and shall include the following charges by
way of illustration but not limitation: water and sewer charges; insurance premiums and
deductibles and/or reasonable premium and deductible equivalents should Landlord elect to
self-insure all or any portion of any risk that Landlord is authorized to insure hereunder;
license, permit, and inspection fees; light; power; window washing; trash pickup; janitorial
services to any interior Common Areas; heating, ventilating and air conditioning; supplies;
materials; equipment; tools; the cost of any environmental, insurance, tax, legal or other
consultant utilized by Landlord in connection with the Building and/or Project; establishment of
reasonable reserves for replacements and/or repairs (provided that Landlord shall not
simultaneously reserve for, and amortize the replacement cost of, the same component during
concurrent time periods, nor shall Landlord amortize the replacement cost of a component to the
extent such component has been funded by reserves); costs incurred in connection with compliance
with any laws or changes in laws applicable to the Building or the Project; the cost of any
capital improvements or replacements (other than tenant improvements for specific tenants) to the
extent of the amortized amount thereof over the useful life of such capital improvements or
replacements (or, if such capital improvements or replacements are anticipated to achieve a cost
savings as to the Operating Expenses, any shorter estimated period of time over which the cost of
the capital improvements or replacements would be recovered from the estimated cost savings)
calculated at a market cost of funds, all as determined by Landlord, for each year of useful life
or shorter recovery period of such capital expenditure whether such capital expenditure occurs
during or prior to the Term (provided, however, that Tenant’s Share of Project Costs for amortized
capital expenditures [exclusive of roof reserves] which have occurred prior to July 1, 2007 shall
not exceed the annualized amount of Two Thousand Four Hundred Five Dollars ($2,405.00); costs
associated with the maintenance of an air conditioning, heating and ventilation service agreement;
labor; reasonably allocated wages and salaries, fringe benefits, and payroll taxes for
administrative and other personnel directly applicable to the Building and/or Project, including
both Landlord’s personnel and outside personnel; any expense incurred pursuant to Sections 6.1,
6.2, 6.4, 7.2, and 10.2; and reasonable overhead and/or management fees for the professional
operation of the Project. It is understood and agreed that Project Costs may include competitive
charges for direct services (including, without limitation, management and/or operations services)
provided by any subsidiary, division or affiliate of Landlord.



     (h) The term “Property Taxes” as used herein shall include any form of federal, state,
county or local
government or municipal taxes, fees, charges or other impositions of every kind (whether general,
special, ordinary or extraordinary) related to the ownership, leasing or operation of the
Premises, Building or Project, including without limitation, the following: (i) all real estate
taxes or personal property taxes levied against the Premises, the Building or Project, as such
property taxes may be reassessed from time to time; and (ii) other taxes, charges and assessments
which are levied with respect to this Lease or to the Building and/or the Project, and any
improvements, fixtures and equipment and other property of Landlord located in the Building and/or
the Project, (iii) all assessments and fees for public improvements, services, and facilities and
impacts thereon, including without limitation arising out of any Community Facilities Districts,
“Mello Roos” districts, similar assessment districts, and




6









 







any traffic impact mitigation assessments or fees; (iv) any tax, surcharge or assessment which
shall be levied in addition to or in lieu of real estate or personal property taxes, other than
taxes covered by Article VIII; and (v) taxes based on the receipt of rent (including gross
receipts or sales taxes applicable to the receipt of rent), and (vi) costs and expenses incurred
in contesting the amount or validity of any Property Tax by appropriate proceedings.
Notwithstanding the foregoing, general net income or franchise taxes imposed against Landlord
shall be excluded.




     (i) Operating Costs shall exclude (in addition to any exclusions expressly set forth in the
Lease) all of
the following:



          (1) Except as otherwise provided in the Lease, amortization and depreciation on the Building
and the Project;




          (2) Interest, principal, attorney fees, costs of environmental investigations or reports,
points, fees and other lender costs and closing costs on any mortgage or mortgages, ground lease
payments or other debt instrument encumbering the Project;




          (3) Costs associated with the investigation or remediation of Hazardous Materials anywhere
in the Building, Common Areas, or on or under the Project (unless Tenant has responsibility
therefore as provided in
Section 5.3 of this Lease);




          (4) The cost of any special service provided to any other tenant of the Building or Project,
or paid to any such tenant, which is not provided to Tenant, or is available to Tenant only for an
additional direct charge (in addition to Tenant’s payment of Tenant’s Share of Operations Costs);




          (5) Leasing commissions, tenant improvements, advertising and promotional expenses and legal
fees for preparation of leases (or any other agreement) in connection with leasing space in the
Project;




          (6) Costs arising from the breach by Landlord of its obligation under this Lease;





          (7) Rents payable with respect to any ground lease or underlying lease affecting the
Project;




          (8) Court costs and legal fees incurred in connection with disputes with any other
tenants;




          (9) Costs for services for which Landlord is directly reimbursed by third parties, and costs
actually recovered by Landlord pursuant to its insurance policies or from any condemnation
proceeds;




          (10) Salaries of management personnel above the level of property manager or building
engineer;




          (11) Repairs or replacements to the Building or Project covered by warranties or guaranties,
to the extent actually collected by Landlord;




          (12) Costs of the original construction by Landlord of the Building shell improvements and
the Tenant Improvements, including without limitation, cost to bring the original construction of
the Building shell improvements and Tenant Improvements into compliance with codes in effect as of
the date of construction or permits issued therefor;




          (13) Costs of the construction of new rentable floor space in the Project or elsewhere in the
Building;




          (14) Costs, fees and compensation paid to Landlord, or to Landlord’s subsidiaries or
affiliates, for services in or to the Project to the extent that same exceed charges for
comparable services rendered by an unaffiliated third party of comparable skill and reputation;




          (15) Costs associated with: (1) operation of the business of the ownership of the Project or
entity that constitutes Landlord or Landlord’s property manager, as distinguished from the cost of
the operation, management, repair, replacement and/or maintenance of the Building or Project,
including the costs of partnership or LLC accounting and legal matters, defending or prosecuting
any lawsuit with a mortgagee, lender, broker, tenant, occupant or other party, or (2) Landlord’s
general entity overhead and general administrative expenses, including the salaries of management
personnel who are not engaged in the operation, management, replacement and/or maintenance, and/or
repair of the Building or Project; and




          (16) Expenses arising out of the operation, management, maintenance, or repair of any retail
premises in the Project to the extent those costs are materially higher than those attributable to
the office portion of the Project.




     SECTION 4.3. SECURITY DEPOSIT. Concurrently with Tenant’s delivery of this Lease, Tenant
shall deposit with Landlord the sum, if any, stated in Item 9 of the Basic Lease Provisions, to be
held by Landlord as security for the full and faithful performance of all of Tenant’s obligations
under this Lease (the “Security Deposit”). Landlord shall not be required to keep this Security
Deposit separate from its general funds, and Tenant shall not be entitled to interest on the
Security Deposit. Subject to the last sentence of this Section, the Security Deposit shall be
understood and agreed to be the property of Landlord upon Landlord’s receipt thereof, and may be
utilized by Landlord in its sole and absolute discretion towards the payment of all expenses by
Landlord for which Tenant would be required to reimburse Landlord under this Lease, including
without limitation brokerage




7









 







commissions and Tenant Improvement costs. Upon any Event of Default by Tenant (as defined in
Section 14.1), Landlord may, in its sole and absolute discretion and notwithstanding any contrary
provision of Civil Code Section 1950.7, retain, use or apply the whole or any part of the Security
Deposit to pay any sum which Tenant is obligated to pay under this Lease including, without
limitation, amounts estimated by Landlord as the amounts due it for prospective rent and for
damages pursuant to Section 14.2(a)(i) of this Lease and/or Civil code Section 1951.2, sums that
Landlord may expend or be required to expend by reason of the Event of Default by Tenant or any
loss or damage that Landlord may suffer by reason of the Event of Default or costs incurred by
Landlord in connection with the repair or restoration of the Premises pursuant to Section 15.3 of
this Lease upon expiration or earlier termination of this Lease. In no event shall Landlord be
obligated to apply the Security Deposit upon an Event of Default and Landlord’s rights and
remedies resulting from an Event of Default, including without limitation, Tenant’s failure to pay
Basic Rent, Tenant’s Share of Operating Expenses or any other amount due to Landlord pursuant to
this Lease, shall not be diminished or altered in any respect due to the fact that Landlord is
holding the Security Deposit. If any portion of the Security Deposit is applied by Landlord as
permitted by this Section, Tenant shall within five (5) days after written demand by Landlord
deposit cash with Landlord in an amount sufficient to restore the Security Deposit to its original
amount. If Tenant fully performs its obligations under this Lease, the Security Deposit shall be
returned to Tenant (or, at Landlord’s option, to the last assignee of Tenant’s interest in this
Lease) within thirty (30) days after the expiration of the Term, provided that Tenant agrees that
Landlord may retain the Security Deposit to the extent and until such time as all amounts due from
Tenant in accordance with this Lease have been determined and paid in full and Tenant agrees that
Tenant shall have no claim against Landlord for Landlord’s retaining such Security Deposit to the
extent provided in this Section.




     SECTION 4.4. LETTER OF CREDIT. In addition to the Security Deposit and as security hereunder,
Tenant shall deliver to Landlord, concurrently with Tenant’s execution of this Lease, an
irrevocable standby Letter of Credit in the amount of One Hundred Thirty Thousand Dollars
($130,000.00) (the “Letter of Credit”). The Letter of Credit shall be in form and with the
substance of EXHIBIT F attached hereto (or otherwise acceptable to Landlord), and shall be
issued by Silicon Valley Bank or by another financial institution acceptable to Landlord. The
Letter of Credit shall be maintained in full force and effect through that date which is sixty
(60) days after the Expiration Date of the Term of this Lease (including any extensions of the
Term as provided in this Lease). In the event the Letter of Credit is not renewed by the issuing
financial institution (or in the event that Tenant shall not deliver a replacement Letter of
Credit from another financial institution acceptable to Landlord) on or before thirty (30) days
prior to the then-scheduled expiration date of the Letter of Credit, then Landlord shall have the
right to draw the full amount of such Letter of Credit and to hold such amount as part of the
Security Deposit pursuant to Section 4.3 of this Lease. Upon any “Event of Default” by Tenant (as
hereinafter defined), Landlord shall be entitled to draw upon said Letter of Credit by the
issuance of Landlord’s sole written demand to the issuing financial institution, which draw shall
be in an amount necessary to pay any sum which Tenant is obligated to pay under this Lease
notwithstanding any contrary provision of Civil Code Section 1950.7, including, without
limitation, sums that Landlord may expend or be required to expend by reason of the Event of
Default by Tenant or any loss or damage that Landlord may suffer by reason of the Event of
Default, or costs incurred by Landlord in connection with the repair or restoration of the
Premises pursuant to Section 15.3 of this Lease upon expiration or earlier termination of this
Lease and, following an election by Landlord to terminate this Lease pursuant to Section
14.2(a)(i) of this Lease, an amount estimated by Landlord as the amount due for prospective rent
and for damages pursuant to Section 14.2(a)(i) of this Lease and/or Civil Code 1951.2. If the
amount of such draw cannot be readily determined by Landlord, then the full amount of the Letter
of Credit may be drawn by Landlord pending determination of said amount. Notwithstanding the
foregoing, while the amount of any such draw shall be solely determined by Landlord as provided in
the foregoing, if the amount of any such draw(s) shall ultimately exceed the amount of damages
actually incurred by Landlord as the result of Tenant’s default (as determined pursuant to the
applicable provisions of Article XIV of this Lease), then Landlord shall promptly refund any such
excess to Tenant. Any such draw shall be without waiver or any rights Landlord may have under this
Lease or at law or in equity as a result of the default, as a setoff for full or partial
compensation for the default. If any portion of the Letter of Credit is drawn after a default by
Tenant, Tenant shall within five (5) days after written demand by Landlord restore the Letter of
Credit. Failure to so restore said Letter of Credit within said five (5) days shall be a default
by Tenant under this Lease. Partial drawings upon said Letter of Credit shall be permitted.



     Provided
that no Event of Default has occurred under any provisions of this Lease at any time
during the Term, and provided further that Tenant has not been more than ten (10) days late more
than twice during the Term with respect to any payments of rent due under the Lease, then upon the
written request of Tenant, Landlord shall authorize in writing consecutive reductions to the
principal amount of the Letter of Credit in the amounts of Sixty Five Thousand Dollars
($65,000.00) each upon the expiration of the twelfth (12th) and twenty-fourth
(24th) months of the Term.



ARTICLE
V. USES




     SECTION 5.1. USE. Tenant shall use the Premises only for the purposes stated in Item 3 of the
Basic Lease Provisions, all in accordance with applicable laws and restrictions and pursuant to
approvals to be obtained by Tenant from all relevant and required governmental agencies and
authorities. The parties agree that any contrary use shall be deemed to cause material and
irreparable harm to Landlord and shall entitle Landlord to injunctive relief in addition to any
other available remedy. Tenant, at its expense, shall procure, maintain and make available for
Landlord’s inspection throughout the Term, all governmental approvals, licenses and permits
required for the proper and lawful conduct of Tenant’s permitted use of the Premises. Tenant shall
not do or permit anything to be done in or about the Premises which will in any way interfere with
the rights of other occupants of the Building or the Project, or use or allow the Premises to be
used for any unlawful purpose, nor shall Tenant permit any nuisance or commit any waste in the
Premises or the Project. Tenant shall not perform any work or conduct any business whatsoever in
the Project other than inside the Premises. Tenant shall not do or permit to be done anything which
will invalidate or increase the cost of any insurance policy(ies) covering the Building, the
Project and/or their contents, and shall comply with all applicable insurance underwriters rules.
Tenant shall comply at its expense with




8









 







all present and future laws, ordinances, restrictions, regulations, orders, rules and requirements
of all governmental authorities that pertain to Tenant or its use of the Premises, including
without limitation all federal and state occupational health and safety requirements, whether or
not Tenant’s compliance will necessitate expenditures or interfere with its use and enjoyment of
the Premises. Notwithstanding the foregoing, to the extent that construction or rehabilitation is
required in connection with the foregoing compliance, Landlord shall perform such construction or
rehabilitation and the costs thereof, subject to the limitations on capital improvements contained
in Section 4.2(g), shall be considered as part of “Project Costs” (except to the extent that such
compliance results from Tenant’s particular use of the Premises [including, without limitation,
ADA compliance by Tenant in connection with its business and employment practices in the
Premises], in which event Tenant shall perform all required construction and/or rehabilitation at
its sole cost and expense). Tenant shall comply at its expense with all present and future
covenants, conditions, easements or restrictions now or hereafter affecting or encumbering the
Building and/or Project, and any amendments or modifications thereto, including without limitation
the payment by Tenant of any periodic or special dues or assessments charged against the Premises
or Tenant which may be allocated to the Premises or Tenant in accordance with the provisions
thereof. Tenant shall promptly upon demand reimburse Landlord for any additional insurance premium
charged by reason of Tenant’s failure to comply with the provisions of this Section, and shall
indemnify Landlord from any liability and/or expense resulting from Tenant’s noncompliance.




     SECTION 5.2. SIGNS. Except for Landlord’s standard suite and lobby directory signage, and
except for one (1) “building top” sign on the southeast corner of the facade of the Building
containing the main entry and one (1) sign panel on the monument sign in front of the Building,
Tenant shall have no right to maintain signs in any location in, on or about the Premises, the
Building or the Project and shall not place or erect any signs that are visible from the exterior
of the Building. All permitted signage shall identify Tenant’s name and/or logo and shall be
installed in a location designated by Landlord. The size, design, graphics, material, style, color
and other physical aspects of any permitted sign shall be subject to Landlord’s written
determination, as determined solely by Landlord, prior to installation, that signage is in
compliance with any covenants, conditions or restrictions encumbering the Premises and Landlord’s
signage program for the Project, as in effect from time to time and approved by the City in which
the Premises are located (“Signage Criteria”). Prior to placing or erecting any such signs, Tenant
shall obtain and deliver to Landlord a copy of any applicable municipal or other governmental
permits and approvals and comply with any applicable insurance requirements for such signage.
Tenant shall be responsible for all costs of any permitted sign, including, without limitation, the
fabrication, installation, maintenance and removal thereof and the cost of any permits therefor. If
Tenant fails to maintain its sign in good condition, or if Tenant fails to remove same upon
termination of this Lease and repair and restore any damage caused by the sign or its removal,
Landlord may do so at Tenant’s expense. Landlord shall have the right to temporarily remove any
signs in connection with any repairs or maintenance in or upon the Building. The term “sign” as
used in this Section shall include all signs, designs, monuments, displays, advertising materials,
logos, banners, projected images, pennants, decals, pictures, notices, lettering, numerals or
graphics.



     SECTION 5.3. HAZARDOUS MATERIALS.



     (a) For purposes of this Lease, the term “Hazardous Materials” means (i) any “hazardous
material” as defined in Section 25501(o) of the California Health and Safety Code, (ii)
hydrocarbons, polychlorinated biphenyls or asbestos, (iii) any toxic or hazardous materials,
substances, wastes or materials as defined pursuant to any other applicable state, federal or
local law or regulation, and (iv) any other substance or matter which may result in liability to
any person or entity as a result of such person’s possession, use, storage, release or
distribution of such substance or matter under any statutory or common law theory.



     (b) Tenant shall not cause or permit any Hazardous Materials to be brought upon, stored,
used, generated, released or disposed of on, under, from or about the Premises (including without
limitation the soil and groundwater thereunder) without the prior written consent of Landlord,
which consent may be given or withheld in Landlord’s sole and absolute discretion. Notwithstanding
the foregoing, Tenant shall have the right, without obtaining prior written consent of Landlord,
to utilize within the Premises a reasonable quantity of standard office products that may contain
Hazardous Materials (such as photocopy toner, “White Out”, and the like), provided
however, that (i) Tenant shall maintain such products in their original retail packaging,
shall follow all instructions on such packaging with respect to the storage, use and disposal of
such products, and shall otherwise comply with all applicable laws with respect to such products,
and (ii) all of the other terms and provisions of this Section 5.3 shall apply with respect to
Tenant’s storage, use and disposal of all such products. Landlord may, in its sole and absolute
discretion, place such conditions as Landlord deems appropriate with respect to Tenant’s use,
storage and/or disposal of any Hazardous Materials requiring Landlord’s consent. Tenant
understands that Landlord may utilize a third party environmental consultant to assist in
determining conditions of approval in connection with the storage, generation, release, disposal
or use of Hazardous Materials by Tenant on or about the Premises, and Tenant agrees that the
reasonable costs incurred by Landlord in connection therewith shall be reimbursed by Tenant to
Landlord as additional rent hereunder upon demand. In addition, Landlord my utilize a third party
environmental consultant to conduct periodic inspections of the storage, generation, use, release
and/or disposal of Hazardous Materials by Tenant on and from the Premises and, in the event such
inspections reveal that Tenant is in violation of its obligations under this Section with respect
to the storage, generation, release, disposal or use of Hazardous Materials, Tenant shall bear the
reasonable costs incurred by Landlord in connection with such inspections.



     (c) Prior to the execution of this Lease, Tenant shall complete, execute and deliver to
Landlord an Environmental Questionnaire and Disclosure Statement (the “Environmental
Questionnaire”) in the form of Exhibit B attached hereto. The completed Environmental
Questionnaire shall be deemed incorporated into this Lease for all purposes, and Landlord shall be
entitled to rely fully on the information contained therein. On each anniversary of the
Commencement Date until the expiration or sooner termination of this Lease, Tenant shall disclose
to Landlord in writing the names and amounts of all Hazardous Materials which were stored,
generated, used, released and/or disposed of on, under or about the Premises for the twelve-month
period prior thereto, and



9









 




which Tenant desires to store, generate, use, release and/or dispose of on, under or about the
Premises for the succeeding twelve-month period. In addition, to the extent Tenant is permitted
to utilize Hazardous Materials upon the Premises, Tenant shall promptly provide Landlord with
complete and legible copies of all the following environmental documents relating thereto:
reports filed pursuant to any self-reporting requirements; permit applications, permits,
monitoring reports, emergency response or action plans, workplace exposure and community exposure
warnings or notices and all other reports, disclosures, plans or documents (even those which may
be characterized as confidential) relating to water discharges, air pollution, waste generation
or disposal, and underground storage tanks for Hazardous Materials; orders, reports, notices,
listings and correspondence (even those which may be considered confidential) of or concerning
the release, investigation, compliance, cleanup, remedial and corrective actions, and abatement
of Hazardous Materials; and all complaints, pleadings and other legal documents filed by or
against Tenant related to Tenant’s storage, generation, use, release and/or disposal of Hazardous
Materials.




     (d) Landlord and its agents shall have the right, but not the obligation, to inspect, sample
and/or monitor the Premises and/or the soil or groundwater thereunder at any time to determine
whether Tenant is complying with the terms of this Section 5.3, and in connection therewith
Tenant shall provide Landlord with full access to all facilities, records and personnel related
thereto. If Tenant is not in compliance with any of the provisions of this Section 5.3, or in the
event of a release of any Hazardous Material on, under, from or about the Premises caused or
permitted by Tenant, its agents, employees, contractors, licensees or invitees, Landlord and its
agents shall have the right, but not the obligation, without limitation upon any of Landlord’s
other rights and remedies under this Lease, to immediately enter upon the Premises without notice
and to discharge Tenant’s obligations under this Section 5.3 at Tenant’s expense, including
without limitation the taking of emergency or long-term remedial action. Landlord and its agents
shall endeavor to minimize interference with Tenant’s business in connection therewith, but shall
not be liable for any such interference. In addition, Landlord, at Tenant’s expense, shall have
the right, but not the obligation, to join and participate in any legal proceedings or actions
initiated in connection with any claims arising out of the storage, generation, use, release
and/or disposal by Tenant or its agents, employees, contractors, licensees or invitees of
Hazardous Materials on, under, from or about the Premises.



     (e) If the presence of any Hazardous Materials on, under, from or about the Premises or the
Project caused or permitted by Tenant or its agents, employees, contractors, licensees or
invitees results in (i) injury to any person, (ii) injury to or any contamination of the Premises
or the Project, or (iii) injury to or contamination of any real or personal property wherever
situated, Tenant, at its expense, shall promptly take all actions necessary to return the
Premises and the Project and any other affected real or personal property owned by Landlord to
the condition existing prior to the introduction of such Hazardous Materials and to remedy or
repair any such injury or contamination, including without limitation, any cleanup, remediation,
removal, disposal, neutralization or other treatment of any such Hazardous Materials.
Notwithstanding the foregoing, Tenant shall not, without Landlord’s prior written consent, which
consent may be given or withheld in Landlord’s sole and absolute discretion, take any remedial
action in response to the presence of any Hazardous Materials on, under, from or about the
Premises or the Project or any other affected real or personal property owned by Landlord or
enter into any similar agreement, consent, decree or other compromise with any governmental
agency with respect to any Hazardous Materials claims; provided however, Landlord’s prior written
consent shall not be necessary in the event that the presence of Hazardous Materials on, under,
from or about the Premises or the Project or any other affected real or personal property owned
by Landlord (i) imposes an immediate threat to the health, safety or welfare of any individual
and (ii) is of such a nature that an immediate remedial response is necessary and it is not
possible to obtain Landlord’s consent before taking such action. To the fullest extent permitted
by law, Tenant shall indemnify, hold harmless, protect and defend (with attorneys acceptable to
Landlord) Landlord and Master Lessor, and any successors to all or any portion of Landlord’s
and/or Master Lessor’s interest in the Premises and in the Project and in any other real or
personal property owned by Landlord or Master Lessor, from and against any and all liabilities,
losses, damages, diminution in value, judgments, fines, demands, claims, recoveries,
deficiencies, costs and expenses (including without limitation attorneys’ fees, court costs and
other professional expenses), whether foreseeable or unforeseeable, arising directly or
indirectly out of the use, generation, storage, treatment, release, on- or off-site
disposal or transportation of Hazardous Materials on, into, from, under or about the Premises, the
Building or the Project and any other real or personal property owned by Landlord or Master
Lessor caused or permitted by Tenant, its agents, employees, contractors, licensees or
invitees. Such indemnity obligation shall specifically include, without limitation, the cost
of any required or necessary repair, restoration, cleanup or detoxification of the Premises,
the Building and the Project and any other real or personal property owned by Landlord or
Master Lessor, the preparation of any closure or other required plans, whether such action is
required or necessary during the Term or after the expiration of this Lease and any loss of
rental due to the inability to lease the Premises or any portion of the Building or Project
as a result of such Hazardous Materials, the remediation thereof or any repair, restoration
or
cleanup related thereto. If it is at any time discovered that Tenant or its agents, employees,
contractors, licensees or invitees may have caused or permitted the release of any Hazardous
Materials on, under, from or about the Premises, the Building or the Project or any other
real or personal property owned by Landlord or Master Lessor, Tenant shall, at Landlord’s
request, immediately prepare and submit to Landlord a comprehensive plan, subject to
Landlord’s approval, specifying the actions to be taken by Tenant to return the Premises, the
Building or the Project or any other real or personal property owned by Landlord or Master
Lessor, to the condition existing prior to the introduction of such Hazardous Materials. Upon
Landlord’s approval of such plan, Tenant shall, at its expense, and without limitation of any
rights and remedies of Landlord under this Lease or at law or in equity, immediately
implement such plan and proceed to cleanup, remediate and/or remove all such Hazardous
Materials in accordance with all applicable laws and as required by such plan and this Lease.
The provisions of this Section 5.3(e) shall expressly survive the expiration or sooner
termination of this Lease.



     (f) Landlord hereby discloses to Tenant, and Tenant hereby acknowledges, certain facts
relating to
Hazardous Materials at the Project known by Landlord to exist as of the date of this Lease,
as more particularly
described in Exhibit C attached hereto. Tenant shall have no liability or
responsibility with respect to the Hazardous
Materials facts described in Exhibit C, nor with respect to any Hazardous Materials
which were not caused or




10









 







permitted by Tenant, its agents, employees, contractors, licensees or invitees. Notwithstanding the
preceding two sentences, Tenant agrees to notify its agents, employees, contractors, licensees, and
invitees of any exposure or potential exposure to Hazardous Materials at the Premises that Landlord
brings to Tenant’s attention. Tenant hereby acknowledges that this disclosure satisfies any
obligation of Landlord to Tenant pursuant to California Health & Safety Code Section 25359.7, or
any amendment or substitute thereto or any other disclosure obligations of Landlord.




ARTICLE VI. COMMON AREAS; SERVICES




     SECTION 6.1. UTILITIES AND SERVICES. Tenant shall be responsible for and shall pay promptly,
directly to the appropriate supplier, all charges for water, gas, electricity, sewer, heat, light,
power, telephone, telecommunications service, refuse pickup, janitorial service, interior
landscape maintenance and all other utilities, materials and services furnished directly to Tenant
or the Premises or used by Tenant in, on or about the Premises during the Term, together with any
taxes thereon. If any utilities or services are not separately metered or assessed to Tenant,
Landlord shall make a reasonable determination of Tenant’s proportionate share of the cost of such
utilities and services, and Tenant shall pay such amount to Landlord, as an item of additional
rent, within ten (10) days after delivery of Landlord’s statement or invoice therefor.
Alternatively, Landlord may elect to include such cost in the definition of Project Costs in which
event Tenant shall pay Tenant’s proportionate share of such costs in the manner set forth in
Section 4.2. Tenant shall also pay to Landlord as an item of additional rent, within ten (10) days
after delivery of Landlord’s statement or invoice therefor, Landlord’s “standard charges” (as
hereinafter defined, which shall be in addition to the electricity charge paid to the utility
provider) for “after hours” usage by Tenant of each HVAC unit servicing the Premises. If the HVAC
unit(s) servicing the Premises also serve other leased premises in the Building, “after hours”
shall mean usage of said unit(s) before 6:00 A.M. or after 6:00 P.M. on Mondays through Fridays,
before 9:00 A.M. or after 1:00 P.M. on Saturdays and all day on Sundays, subject to reasonable
adjustment of said hours by Landlord. If the HVAC unit(s) serve only the Premises, “after hours”
shall mean more than sixty-six (66) hours of usage during any week during the Term. “After hours”
usage shall be determined based upon the operation of the applicable HVAC unit during each of the
foregoing periods on a “non-cumulative” basis (that is, without regard to Tenant’s usage or
nonusage of other unit(s) serving the Premises, or of the applicable unit during other periods of
the Term). As used herein, “standard charges” shall mean the following charges for each hour of
“after hours” use (in addition to the applicable electricity charges paid to the utility provider)
of the following described HVAC units: (i) $5.00 per hour for 1-5 ton HVAC units, (ii) $7.50 per
hour for 6-30 ton HVAC units and (iii) $10.00 per hour for HVAC units of greater than 30 tons.
Landlord shall not be liable for damages or otherwise for any failure or interruption of any
utility or other service furnished to the Premises, and no such failure or interruption shall be
deemed an eviction or entitle Tenant to terminate this Lease or withhold or abate any rent due
hereunder. Landlord shall at all reasonable times have free access to the Building and Premises to
install, maintain, repair, replace or remove all electrical and mechanical installations of
Landlord. Tenant acknowledges that the costs incurred by Landlord related to providing
above-standard utilities and services to Tenant, including, without limitation, telephone lines,
may be charged to Tenant.



     Notwithstanding the foregoing, if as a result of the direct actions of Landlord, its
employees, contractors or authorized agents, for more than three (3) consecutive business days
following written notice to Landlord there is no HVAC or electricity services to all or a portion
of the Premises, or such an interruption of other essential utilities and building services, such
as fire protection or water, so that all or a portion of the Premises cannot be used by Tenant,
then Tenant’s Basic Rent (or an equitable portion of such Basic Rent to the extent that less than
all of the Premises are affected) shall thereafter be abated until the Premises are again usable
by Tenant; provided, however, that if Landlord is diligently pursuing the repair of such utilities
or services and Landlord provides substitute services reasonably suitable for Tenant’s purposes,
as for example, bringing in portable air-conditioning equipment, then there shall not be an
abatement of Basic Rent. The foregoing provisions shall be Tenant’s sole recourse and remedy in
the event of such an interruption of services, and shall not apply in case of the actions of
parties other than Landlord, its employees, contractors or authorized agents, or in the case of
damage to, or destruction of, the Premises (which shall be governed by the provisions of Article
XI of the Lease).



     SECTION 6.2. OPERATION AND MAINTENANCE OF COMMON AREAS. During the Term, Landlord shall
operate and maintain all Common Areas within the Building and the Project in good condition and
repair in the manner Landlord may determine to be appropriate. All costs incurred by Landlord for
the maintenance and operation of the Common Areas shall be included in Project Costs except to the
extent any particular cost incurred is related to or associated with a specific tenant and can be
charged to such tenant of the Project. The term “Common Areas” shall mean all areas within the
exterior boundaries of the Building and other buildings in the Project which are not held for
exclusive use by persons entitled to occupy space, and all other appurtenant areas and
improvements within the Project provided by Landlord for the common use of Landlord and tenants
and their respective employees and invitees, including without limitation parking areas and
structures, driveways, sidewalks, landscaped and planted areas, hallways and interior stairwells
not located within the premises of any tenant, common electrical rooms and roof access entries,
common entrances and lobbies, elevators, and restrooms not located within the premises of any
tenant.



     SECTION 6.3. USE OF COMMON AREAS. The occupancy by Tenant of the Premises shall include the
use of the Common Areas in common with Landlord and with all others for whose convenience and use
the Common Areas may be provided by Landlord, subject, however, to compliance with all rules and
regulations as are prescribed from time to time by Landlord. Landlord shall at all times during
the Term have exclusive control of the Common Areas, and may restrain or permit any use or
occupancy, except as authorized by Landlord’s rules and regulations. Tenant shall keep the Common
Areas clear of any obstruction or unauthorized use related to Tenant’s operations or use of
Premises, including without limitation, planters and furniture. Nothing in this Lease shall be
deemed to impose liability upon Landlord for any damage to or loss of the property of, or for any
injury to, Tenant, its invitees or employees. Landlord may temporarily close any portion of the
Common Areas for repairs, remodeling and/or alterations, to prevent a public dedication or the
accrual of prescriptive rights, or for any other



11









 




reason deemed sufficient by Landlord, without liability to Tenant. Landlord’s temporary closure
of any portion of the Common Areas for such purposes shall not deprive Tenant of reasonable
access to the Premises or to the parking areas of the Project.




     SECTION 6.4. PARKING. Tenant shall be entitled to the number of vehicle parking spaces set
forth in Item 15 of the Basic Lease Provisions, which spaces shall be unreserved and unassigned,
on those portions of the Common Areas designated by Landlord for parking. Tenant shall not use
more parking spaces than such number. Such parking shall be free of additional assessment or
parking charge during the initial 37 months of the Term and during any extension of Term
exercised by Tenant pursuant to Section 3.3 of this Lease. All parking spaces shall be used only
for parking of vehicles no larger than full size passenger automobiles, sport utility vehicles or
pickup trucks. Tenant shall not permit or allow any vehicles that belong to or are controlled by
Tenant or Tenant’s employees, suppliers, shippers, customers or invitees to be loaded, unloaded
or parked in areas other than those designated by Landlord for such activities. If Tenant permits
or allows any of the prohibited activities described above, then Landlord shall have the right,
without notice, in addition to such other rights and remedies that Landlord may have, to remove
or tow away the vehicle involved and charge the costs to Tenant. Parking within the Common Areas
shall be limited to striped parking stalls, and no parking shall be permitted in any driveways,
access ways or in any area which would prohibit or impede the free flow of traffic within the
Common Areas. There shall be no parking of any vehicles for longer than a forty-eight (48) hour
period unless otherwise authorized by Landlord, and vehicles which have been abandoned or parked
in violation of the terms hereof may be towed away at the owner’s expense. Nothing contained in
this Lease shall be deemed to create liability upon Landlord for any damage to motor vehicles of
visitors or employees, for any loss of property from within those motor vehicles, or for any
injury to Tenant, its visitors or employees, unless ultimately determined to be caused by the
sole active negligence or willful misconduct of Landlord. Landlord shall have the right to
establish, and from time to time amend, and to enforce against all users all reasonable rules and
regulations (including the designation of areas for employee parking) that Landlord may deem
necessary and advisable for the proper and efficient operation and maintenance of parking within
the Common Areas. Landlord shall have the right to construct, maintain and operate lighting
facilities within the parking areas; to change the area, level, location and arrangement of the
parking areas and improvements therein; to restrict parking by tenants, their officers, agents
and employees to employee parking areas (provided that any employee parking areas designated by
Landlord shall be in portions of the Common Areas of the Project reasonably adjacent to the
Building); after the expiration of the initial 37 months of the Term of this Lease and any
extension of the Term exercised by Tenant pursuant to Section 3.3 of this Lease, to enforce
parking charges (by operation of meters or otherwise); and to do and perform such other acts in
and to the parking areas and improvements therein as, in the use of good business judgment,
Landlord shall determine to be advisable. Any person using the parking area shall observe all
directional signs and arrows and any posted speed limits. In no event shall Tenant interfere with
the use and enjoyment of the parking area by other tenants of the Project or their employees or
invitees. Parking areas shall be used only for parking vehicles. Washing, waxing, cleaning or
servicing of vehicles, or the storage of vehicles for longer than 48-hours, is prohibited unless
otherwise authorized by Landlord. Tenant shall be liable for any damage to the parking areas
caused by Tenant or Tenant’s employees, suppliers, shippers, customers or invitees, including
without limitation damage from excess oil leakage. Tenant shall have no right to install any
fixtures, equipment or personal property in the parking areas.



     SECTION 6.5. CHANGES AND ADDITIONS BY LANDLORD. Landlord reserves the right to make
alterations or additions to the Building or the Project, or to the attendant fixtures, equipment
and Common Areas. Landlord may at any time relocate or remove any of the various buildings,
parking areas, and other Common Areas, and may add buildings and areas to the Project from time
to time. No change shall entitle Tenant to any abatement of rent or other claim against
Landlord. No change by Landlord to the Common Areas shall: (i) materially impair access to and
from the Premises from the parking areas, (ii) reduce the number of vehicle parking spaces to
which Tenant is entitled under Section 6.4 of this Lease, or (iii) otherwise unreasonably
interfere with Tenant’s access to and use of the Premises, the parking areas and the Common
Areas adjacent to the Building in any material manner without Tenant’s prior written consent,
which shall not be unreasonably withheld.



ARTICLE VII. MAINTAINING THE PREMISES




     SECTION 7.1. TENANT’S MAINTENANCE AND REPAIR. Tenant at its sole expense shall maintain and
make all repairs and replacements necessary to keep the Premises in the condition as existed on
the Commencement Date (or on any later date that the improvements may have been installed),
excepting ordinary wear
and tear and damages due to casualty or condemnation, including without limitation all interior
glass, doors, door closures, hardware, fixtures, electrical, plumbing, fire extinguisher
equipment and other equipment installed in the Premises and all Alterations constructed by
Tenant pursuant to Section 7.3 below. Any damage or deterioration of the Premises shall not
be deemed ordinary wear and tear if the same could have been prevented by good
maintenance practices by Tenant. Tenant shall, at Landlord’s request, provide Landlord with copies
of all maintenance schedules, reports and notices prepared by, for or on behalf of Tenant.
All repairs and replacements shall be at least equal in quality to the original work, shall
be made only by a licensed contractor approved in writing in advance by Landlord and shall be
made only at the time or times approved by Landlord. Any contractor utilized by Tenant shall
be subject to Landlord’s standard requirements for contractors, as modified from time to
time. Landlord may impose reasonable restrictions and requirements with respect to repairs
and replacements, as provided in Section 7.3, and the provisions of Section 7.4 shall apply
to all repairs and replacements. Alternatively, Landlord may elect to perform any repair and
maintenance of the electrical and mechanical systems and any air conditioning, ventilating or
heating equipment serving the Premises and include the cost thereof as part of Tenant’s Share
of Operating Expenses. If Tenant fails to properly maintain and/or repair the Premises as
herein provided following Landlord’s notice and the expiration of the applicable cure period
(or earlier if Landlord determines that such work must be performed prior to such time in
order to avoid damage to the Premises or Building or other detriment), then Landlord may
elect, but shall have no obligation, to perform any repair or maintenance required hereunder
on behalf of Tenant and at Tenant’s expense, and Tenant shall reimburse Landlord upon demand
for all costs incurred.



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     SECTION 7.2. LANDLORD’S MAINTENANCE AND REPAIR. Subject to Section 7.1 and Article XI,
Landlord shall provide service, maintenance, repair and/or replacement with respect to any air
conditioning, ventilating or heating equipment and EMS system which serves the Premises
(exclusive, however, of supplemental HVAC equipment serving only the Premises), and shall maintain
in good repair the roof, foundations, footings, the exterior surfaces of the exterior walls of the
Building (including exterior glass), the structural, electrical and mechanical systems (including
elevators, if any, serving the Building(, except that Tenant at its expense shall make all repairs
which Landlord deems reasonably necessary as a result of the act or negligence of Tenant, its
agents, employees, invitees, subtenants or contractors. Landlord shall have the right to employ or
designate any reputable person or firm, including any employee or agent of Landlord or any of
Landlord’s affiliates or divisions, to perform any service, repair or maintenance function.
Landlord need not make any other improvements or repairs except as specifically required under
this Lease, and nothing contained in this Section shall limit Landlord’s right to reimbursement
from Tenant for maintenance, repair costs and replacement costs as provided elsewhere in this
Lease. Tenant understands that it shall not perform any maintenance or make any repairs or
replacements at Landlord’s expense and shall have no right to any rental offset for any
maintenance, repairs or replacements performed by Tenant. Tenant
further understands that Landlord
shall not be required to make any repairs to the roof, foundations, footings, the exterior
surfaces of the exterior walls of the Building (excluding exterior glass), or structural,
electrical or mechanical systems unless and until Tenant has notified Landlord in writing of the
need for such repair and Landlord shall have a reasonable period of time thereafter to commence
and complete said repair, if warranted. Except as otherwise expressly provided in this Lease, all
costs of any maintenance, repairs and replacements on the part of Landlord provided hereunder
shall be considered part of Project Costs.



     SECTION 7.3. ALTERATIONS. Except as otherwise provided in this Section, Tenant shall make no
alterations, additions, fixtures or improvements (“Alterations”) to the Premises or the Building
without the prior written consent of Landlord, which consent may be granted or withheld in
Landlord’s sole and absolute discretion. In the event that any requested Alteration would result in
a change from Landlord’s building standard materials and specifications for the Project (“Standard
Improvements”), Landlord may withhold consent to such Alteration in its sole and absolute
discretion. In the event Landlord so consents to a change from the Standard Improvements (such
change being referred to as a “Non-Standard Improvement”), Tenant shall be responsible for the cost
of replacing such Non-Standard Improvement with the applicable Standard Improvement
(“Replacements”) which Replacements shall be completed prior to the Expiration Date or earlier
termination of this Lease. Notwithstanding the foregoing, Tenant may make Alterations to the
Premises costing less than Twenty Five Thousand Dollars ($25,000.00) during each calendar year of
the Term without Landlord’s consent but with written notice to Landlord, provided, however, that no
such Alterations shall: (i) affect the exterior of the Building or outside areas (or be visible
from adjoining sites), or (ii) affect or penetrate any of the structural portions of the Building,
including but not limited to the roof, or (iii) require any change to the basic floor plan of the
Premises (including, without limitation, the adding of any additional “office” square footage) or
any change to any structural or mechanical systems of the Premises, or (iv) fail to comply with any
applicable governmental requirements or require any governmental permit as a prerequisite to the
construction thereof, or (v) result in the Premises requiring building services beyond the level
normally provided to other tenants, or (vi) interfere in any manner with the proper functioning of,
or Landlord’s access to, any mechanical, electrical, plumbing, elevator or HVAC systems, facilities
or equipment located in or serving the Building, or (vii) diminish the value of the Premises
including, without limitation, using lesser quality materials than those existing in the Premises,
or (viii) alter or replace Standard Improvements. Notwithstanding the foregoing but subject to
compliance with the following terms and conditions of this Section 7.3, Tenant shall have the right
to install the following Alterations in the Premises (provided that Tenant shall remove such
Alterations, repair the Premises and/or restore with Standard Improvements at the Expiration Date
or sooner termination of the Lease): accent paint on walls, upgrade of lighting in the reception
area and installation of display cabinetry in the reception area. Landlord may impose any condition
to its consent, including but not limited to a requirement that the installation and/or removal of
all Alterations and Replacements be covered by a lien and completion bond satisfactory to Landlord
in its sole and absolute discretion and requirements as to the manner and time of performance of
such work. Landlord shall in all events, whether or not Landlord’s consent is required, have the
right to approve prior to the commencement of any work the contractor performing the installation
and removal of Alterations and Replacements and Tenant shall not permit any contractor not approved
by Landlord to perform any work on the Premises or on the Building. Tenant shall obtain all
required permits for the installation and removal of Alterations and Replacements and shall perform
the installation and removal of Alterations and Replacements in compliance with all applicable
laws, regulations and ordinances, including without limitation the Americans with Disabilities Act,
all covenants, conditions and restrictions affecting the Project, and the Rules and Regulations as
described in Article XVII. Tenant understands and agrees that Landlord shall be entitled to a
supervision fee in the amount of five percent (5%) of the cost of the Alterations that require
Landlord’s consent. Under no circumstances shall Tenant make any Alterations or Replacements which
incorporate any Hazardous Materials, including without limitation asbestos-containing construction
materials into the Premises, the Building or the Common Area. In no event shall Tenant prosecute
any Alterations that result in picketing or labor demonstrations in or about the Building or
Project. If any governmental entity requires, as a condition to any proposed Alterations or
Replacements by Tenant, that improvements be made to the Common Areas, and if Landlord consents to
such improvements to the Common Areas (which consent may be withheld in the sole and absolute
discretion of Landlord), then Tenant shall, at Tenant’s sole expense, make such required
improvements to the Common Areas in such manner, utilizing such materials, and with such
contractors, architects and engineers as Landlord may require in its sole and absolute discretion.
Landlord shall have the right, but not the obligation, to elect to make any such improvements to be
made to the Common Areas at Tenant’s expense in which case Tenant shall reimburse Landlord upon
demand for all costs incurred in making such improvements. Any request for Landlord’s consent to
any proposed Alterations shall be made in writing and shall contain architectural plans describing
the work in detail reasonably satisfactory to Landlord. Landlord may elect to cause its architect
to review Tenant’s architectural plans, and the reasonable cost of that review shall be reimbursed
by Tenant. Should the work proposed by Tenant and consented to by Landlord modify the basic floor
plan of the Premises, then Tenant shall, at its expense, furnish Landlord with as-built drawings
and CAD disks compatible with Landlord’s systems and standards. Unless Landlord otherwise agrees
in writing, all Alterations made or affixed to the Premises, the



13









 




Building or to the Common Areas (excluding moveable trade fixtures and furniture), including
without limitation all Tenant Improvements constructed pursuant to the Work Letter (except as
otherwise provided in the Work Letter) and all telephone and data cabling, shall become the
property of Landlord and shall be surrendered with the Premises at the end of the Term; except
that Landlord may, by notice to Tenant given either prior to or following the expiration or
termination of this Lease, require Tenant to remove by the Expiration Date, or sooner
termination date of this Lease, or within ten (10) days following notice to Tenant that such
removal is required if notice is given following the Expiration Date or sooner
termination, all or any of the Alterations installed either by Tenant or by Landlord at Tenant’s
request, including without limitation all Tenant Improvements constructed pursuant to the Work
Letter (except as otherwise provided in the Work Letter) and all telephone and data cabling, and
to repair any damage to the Premises, the Building or the Common Areas arising from that removal
and restore the Premises to their condition prior to making such Alterations.




     SECTION 7.4. MECHANIC’S LIENS. Tenant shall keep the Premises free from any liens arising
out of any services or work performed, materials furnished, or obligations incurred by or for
Tenant. Upon request by Landlord, Tenant shall promptly (but in no
event later than five (5)
business days following such request) cause any such lien to be released by posting a bond in
accordance with California Civil Code Section 3143 or any successor statute. In the event that
Tenant shall not, within thirty (30) days following the imposition of any lien, cause the lien
to be released of record by payment or posting of a proper bond, Landlord shall have, in
addition to all other available remedies, the right to cause the lien to be released by any
means it deems proper, including payment of or defense against the claim giving rise to the
lien. All expenses so incurred by Landlord, including Landlord’s attorneys’ fees, and any
consequential or other damages incurred by Landlord arising out of such lien, shall be
reimbursed by Tenant upon demand, together with interest from the date of payment by Landlord at
the maximum rate permitted by law until paid. Tenant shall give Landlord no less than twenty
(20) days’ prior notice in writing before commencing construction of any kind on the Premises or
Common Areas and shall again notify Landlord that construction has commenced, such notice to be
given on the actual date on which construction commences, so that Landlord may post and maintain
notices of nonresponsibility on the Premises or Common Area, as applicable, which notices
Landlord shall have the right to post and which Tenant agrees it shall not disturb. Tenant shall
also provide Landlord notice in writing within ten (10) days following the date on which such
work is substantially completed. The provisions of this Section shall expressly survive the
expiration or sooner termination of this Lease.



     SECTION 7.5. ENTRY AND INSPECTION. Landlord shall at all reasonable times, upon written or
oral notice (except in emergencies, when no notice shall be required) have the right to enter
the Premises to inspect them, to supply services in accordance with this Lease, to perform any
work required or permitted to be performed by Landlord within the Premises, to have access to
install, repair, maintain, replace or remove all electrical and mechanical installations of
Landlord and to protect the interests of Landlord in the Premises, and to submit the Premises to
prospective or actual purchasers or encumbrance holders (or, during the last one hundred and
eighty (180) days of the Term or when an Event of Default exists, to prospective tenants), all
without being deemed to have caused an eviction of Tenant and without abatement of rent except
as provided elsewhere in this Lease. Landlord shall have the right, if desired, to retain a key
which unlocks all of the doors in the Premises, excluding Tenant’s vaults and safes, and
Landlord shall have the right to use any and all means which Landlord may deem proper to open
the doors in an emergency in order to obtain entry to the Premises, and any entry to the
Premises obtained by Landlord as provided in this Section 7.5 shall not be deemed to be a
forcible or unlawful entry into, or a detainer of, the Premises, or any eviction of Tenant from
the Premises.



ARTICLE VIII. TAXES AND ASSESSMENTS ON TENANT’S PROPERTY




     Tenant shall be liable for and shall pay, at least ten (10) days before delinquency, all
taxes and assessments levied against all personal property of Tenant located in the Premises,
and, if required by Landlord, against all Non Standard Improvements to the Premises (as defined
in Section 7.3) made by Landlord or Tenant, and against any Alterations (as defined in Section
7.3) made to the Premises or the Building by or on behalf of Tenant. If requested by Landlord,
Tenant shall cause its personal property, Non-Standard Improvements and Alterations to be
assessed and billed separately from the real property of which the Premises form a part. If any
taxes required to be paid by Tenant on Tenant’s personal property, Non-Standard Improvements
and/or Alterations are levied against Landlord or Landlord’s property and if Landlord pays the
same, or if the assessed value of Landlord’s property is increased by the inclusion of a value
placed upon Tenant’s personal property, Non-Standard Improvements and/or Alterations and if
Landlord pays the taxes based upon the increased assessment, Landlord shall have the right to
require that Tenant pay to Landlord the taxes so levied against Landlord or the proportion of the
taxes resulting from the increase in the assessment. In calculating what portion of any tax bill
which is assessed against Landlord separately, or Landlord and Tenant jointly, is attributable to
Tenant’s Non-Standard Improvements, Alterations and personal property, Landlord’s reasonable
determination shall be conclusive.



ARTICLE IX. ASSIGNMENT AND SUBLETTING




     SECTION 9.1. RIGHTS OF PARTIES.



     (a) Notwithstanding any provision of this Lease to the contrary, and except as to transfers
expressly permitted without Landlord’s consent pursuant to Section 9.4, Tenant will not, either
voluntarily or by operation of law, assign, sublet, encumber, or otherwise transfer all or any part
of Tenant’s interest in this Lease or the Premises, or permit the Premises to be occupied by anyone
other than Tenant, without Landlord’s prior written consent, which  consent shall not unreasonably
be withheld or conditioned in accordance with the provisions of Section 9.1(b). No assignment
(whether voluntary, involuntary or by operation of law) subletting or other transfer shall be valid
or effective without Landlord’s prior written consent and, at Landlord’s election, any such
assignment, subletting or other transfer shall be void and of no force and effect and any such
attempted assignment, subletting or other



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transfer shall constitute an Event of Default of this Lease. Landlord shall not be deemed to have
given its consent to any assignment, subletting or other transfer by any course of action,
including without limitation its acceptance of rent or any other payment due under this Lease
from any person or entity other than Tenant or its acceptance of any name for listing in the
Building directory, other than Landlord’s written consent. To the extent not prohibited by
provisions of the Bankruptcy Code, 11 U.S.C. Section 101
et seq., (the “Bankruptcy Code”),
including Section 365(f)(l), Tenant on behalf of itself and its creditors, administrators and
assigns waives the applicability of Section 365(e) of the Bankruptcy Code unless the proposed
assignee of the Trustee for the estate of the bankrupt meets Landlord’s standard for consent as
set forth in Section 9.1(b) of this Lease. If this Lease is assigned to any person or entity
pursuant to the provisions of the Bankruptcy Code, any and all monies or other considerations to
be delivered in connection with the assignment shall be delivered to Landlord, shall be and
remain the exclusive property of Landlord and shall not constitute property of Tenant or of the
estate of Tenant within the meaning of the Bankruptcy Code. Any person or entity to which this
Lease is assigned pursuant to the provisions of the Bankruptcy Code shall be deemed to have
assumed all of the obligations arising under this Lease on and after the date of the assignment,
and shall upon demand execute and deliver to Landlord an instrument confirming that assumption.




     (b) If Tenant desires to assign, sublease or otherwise transfer an interest in this Lease or
the Premises,
it shall first notify Landlord of its desire and shall submit in writing to Landlord: (i)
the name and address of the
proposed assignee, subtenant or transferee; (ii) the nature of any proposed assignee’s,
subtenant’s or transferee’s
business to be carried on in the Premises; (iii) the terms and provisions of any proposed
assignment, sublease or
other transfer, including a copy of the proposed assignment, sublease or transfer form; (iv)
evidence that the
proposed assignee, subtenant or transferee will comply with the requirements of Exhibit
D hereto; (v) a completed
Environmental Questionnaire from the proposed assignee, subtenant or transferee; (vi) any
other information
requested by Landlord and reasonably related to the transfer and (vii) the fee described in
Section 9.1(e). Except as
provided in Section 9.1 (c), Landlord shall not unreasonably withhold its consent, provided
that the parties agree that
it shall be reasonable for Landlord to withhold its consent if: (1) the use of the Premises
will not be consistent with
the provisions of this Lease or with Landlord’s commitment to other tenants of the Building
and Project; (2) the
proposed assignee, subtenant or transferee has been required by any prior landlord, lender
or governmental authority
to take remedial action in connection with Hazardous Materials contaminating a property
arising out of the proposed
assignee’s, subtenant’s or transferee’s actions or use of the property in question or is
subject to any enforcement
order issued by any governmental authority in connection with the use, disposal or storage
of a Hazardous Material;
(3) insurance requirements of the proposed assignee or subtenant may not be brought into
conformity with
Landlord’s then current leasing practice; (4) the proposed assignee, subtenant or transferee
has not demonstrated to
the reasonable satisfaction of Landlord that it is financially responsible or has failed to
submit to Landlord all
reasonable information as requested by Landlord concerning the proposed assignee, subtenant
or transferee,
including, but not limited to, a certified balance sheet of the proposed assignee, subtenant
or transferee as of a date
within ninety (90) days of the request for Landlord’s consent, statements of income or
profit and loss of the proposed
assignee, subtenant or transferee for the two-year period preceding the request for
Landlord’s consent, and/or a
certification signed by the proposed assignee, subtenant or transferee that it has not been
evicted from or been in
arrears in rent at any other leased premises for the 3-year period preceding the request for
Landlord’s consent; (5) the
proposed assignee, subtenant or transferee has not demonstrated to Landlord’s reasonable
satisfaction a record of
successful experience in business; (6) the proposed subtenant, assignee or transferee is an
existing tenant of the
Building or Project or a prospect with whom Landlord is negotiating to become a tenant at
the Building or Project;
or (7) the proposed assignment, sublease or transfer will impose additional burdens or
adverse tax effects on
Landlord. Tenant’s exterior signage rights are personal to Tenant and may not be assigned or
transferred to any
assignee of this Lease or subtenant of the Premises. Notwithstanding the foregoing, Landlord
shall not unreasonably
withhold its consent to a transfer of such signage rights in connection with Tenant’s
assignment of this Lease, in
connection with a Permitted Transfer, provided that Landlord shall have the right of prior
approval that such signage
continues to comply with the Sign Criteria and the other requirements of Section 5.2 of this
Lease, and provided
further that any name and/or graphics on such signage do not materially devalue the Project
as determined by
Landlord in its sole and absolute discretion.



     If Landlord consents to the proposed transfer, Tenant may within ninety (90) days after the
date of the consent effect the transfer upon the terms described in the information furnished to
Landlord; provided that any material change in the terms shall be subject to Landlord’s consent
as set forth in this Section 9.1. Landlord shall approve or disapprove any requested transfer
within thirty (30) days following delivery of Tenant’s written request, the information set forth
above, and the fee set forth below.



     (c) Notwithstanding the provisions of Section 9.1(b) above, in lieu of consenting to a
proposed
assignment of this Lease or to a subletting of fifty percent (50%) or more of the Floor Area
in the aggregate for all or
substantially all of the remainder of the Term, Landlord may elect, within the thirty (30)
day period permitted for
Landlord to approve or disapprove a requested transfer, to (i) sublease the Premises (or the
portion proposed to be so
subleased), or take an assignment of Tenant’s interest in this Lease, upon substantially the
same terms as offered to
the proposed subtenant or assignee (excluding terms relating to the purchase of personal
property, the use of
Tenant’s name or the continuation of Tenant’s business), respectively, or (ii) terminate this
Lease as to the portion of
the Premises proposed to be so subleased or assigned with a proportionate abatement in the rent
payable under this Lease, and the sublease, assignment or termination elected by Landlord
shall be effective thirty (30) days following written notice by Landlord of its election.
Landlord may thereafter, at its option, assign, sublet or re-let any space so sublet,
obtained by assignment or obtained by termination to any third party, including without
limitation the proposed transferee of Tenant. In the event of any termination of this Lease
as to a portion of the Premises pursuant to this Section 9.1(c), Landlord shall promptly
prepare and deliver to Tenant an amendment to this Lease appropriately amending those
provisions of the Lease affected by such termination, and Tenant shall execute and return
same to Landlord within twenty (20) business days thereafter subject to Tenant’s reasonable
review and approval thereof.



15









 





     (d) In the event that Landlord approves the requested assignment, subletting or other
transfer,
Landlord shall be entitled to receive fifty percent (50%) of any amounts paid by the assignee
or subtenant, however
described, in excess of (i) the Basic Rent payable by Tenant hereunder, or in the case of a
sublease of a portion of
the Premises, in excess of the Basic Rent reasonably allocable to such portion as determined
by Landlord, plus
(ii) Tenant’s direct out-of-pocket costs which Tenant certifies to Landlord have been paid to
provide occupancy
related services to such assignee or subtenant of a nature commonly provided by landlords of
similar space, plus (iii)
Tenant’s broker’s commissions, legal fees and tenant improvement costs incurred in connection
with such
assignment, subletting or other transfer, with such costs to be amortized on a straight-line
basis over the then
remaining term of this Lease or any shorter term of any sublease of the Premises or a portion
thereof. The amounts
due Landlord under this Section 9.1(d), shall be payable directly to Landlord by the assignee
or subtenant
concurrently with such assignee’s or subtenant’s payment(s) to Tenant, or, at Landlord’s
option, by Tenant within
ten (10) days of Tenant’s receipt thereof. Landlord shall have the right to review or audit
the books and records of
Tenant, or have such books and records reviewed or audited by an outside accountant, to
confirm any such direct
out-of-pocket costs. In the event that such direct out-of-pocket costs claimed by Tenant are
overstated by more than
five percent (5%), Tenant shall reimburse Landlord for any of Landlord’s costs related to such
review or audit. At
Landlord’s request, a written agreement shall be entered into by and among Tenant, Landlord
and the proposed
assignee or subtenant confirming the requirements of this Section 9.1(d).



     (e) Tenant shall pay to Landlord a fee equal to the greater of (i) Landlord’s actual costs
related to such
assignment, subletting or other transfer or (ii) Five Hundred Dollars ($500.00), to process
any request by Tenant for
an assignment, subletting or other transfer under this Lease. Tenant shall pay Landlord the
sum of Five Hundred
Dollars ($500.00) concurrently with Tenant’s request for consent to any assignment,
subletting or other transfer, and
Landlord shall have no obligation to consider such request unless accompanied by such
payment. Tenant shall pay
Landlord upon demand any costs in excess of such payment to the extent Landlord’s actual
costs related to such
request exceeds $500.00. Such fee is hereby acknowledged as a reasonable amount to reimburse
Landlord for its
costs of review and evaluation of a proposed transfer.



     SECTION 9.2. EFFECT OF TRANSFER. No assignment, subletting or other transfer, even with the
consent of Landlord, shall relieve Tenant of its obligation to pay rent and to perform all its
other obligations under this Lease. Moreover, Tenant shall indemnify and hold Landlord harmless,
as provided in Section 10.3, for any act or omission by an assignee, subtenant or transferee. Each
assignee, other than Landlord, shall assume all obligations of Tenant under this Lease and shall
be liable jointly and severally with Tenant for the payment of all rent, and for the due
performance of all of Tenant’s obligations, under this Lease. No assignment, subletting or
transfer shall be effective or binding on Landlord unless documentation in form and substance
satisfactory to Landlord in its reasonable discretion evidencing the transfer, and in the case of
an assignment, the assignee’s assumption of the obligations of Tenant under this Lease, is
delivered to Landlord and both the assignee/subtenant and Tenant deliver to Landlord an executed
consent to transfer instrument prepared by Landlord and consistent with the requirements of this
Article. Consent by Landlord to one or more transfers shall not operate as a waiver or estoppel to
the future enforcement by Landlord of its rights under this Lease or as a consent to any
subsequent transfer.



     SECTION 9.3. SUBLEASE REQUIREMENTS. The following terms and conditions shall apply to any
subletting by Tenant of all or any part of the Premises and shall be deemed included in each
sublease:



     (a) Each and every provision contained in this Lease (other than with respect to the payment
of rent
hereunder) is incorporated by reference into and made a part of such sublease, with
“Landlord” hereunder meaning
the sublandlord therein and “Tenant” hereunder meaning the subtenant therein.



     (b) Tenant hereby irrevocably assigns to Landlord all of Tenant’s interest in all rentals and
income
arising from any sublease of the Premises, and Landlord may collect such rent and income and
apply the same
toward Tenant’s obligations under this Lease; provided, however, that until there is an Event
of Default by Tenant,
Tenant shall have the right to receive and collect the sublease rentals. Landlord shall not,
by reason of this
assignment or the collection of sublease rentals, be deemed liable to the subtenant for the
performance of any of
Tenant’s obligations under the sublease. Tenant hereby irrevocably authorizes and directs any
subtenant, upon
receipt of a written notice from Landlord stating that an Event of Default exists in the
performance of Tenant’s
obligations under this Lease, to pay to Landlord all sums then and thereafter due under the
sublease. Tenant agrees
that the subtenant may rely on that notice without any duty of further inquiry and
notwithstanding any notice or
claim by Tenant to the contrary. Tenant shall have no right or claim against the subtenant or
Landlord for any
rentals so paid to Landlord.



     (c) In the event of the termination of this Lease for any reason, including without
limitation as the
result of an Event of Default by Tenant or by the mutual agreement of Landlord and Tenant,
Landlord may, at its
sole option, take over Tenant’s entire interest in any sublease and, upon notice from
Landlord, the subtenant shall
attorn to Landlord. In no event, however, shall Landlord be liable for any previous act or
omission by Tenant under
the sublease or for the return of any advance rental payments or deposits under the sublease
that have not been
actually delivered to Landlord, nor shall Landlord be bound by any sublease modification
executed without
Landlord’s consent or for any advance rental payment by the subtenant in excess of one
month’s rent. The
provisions of this Lease (other than with respect to the payment of rent), including without
limitation those
pertaining to insurance and indemnification, shall be deemed incorporated by reference into
the sublease despite the
termination of this Lease. In the event Landlord does not elect to take over Tenant’s
interest in a sublease in the
event of any such termination of this Lease, such sublease shall terminate concurrently with
the termination of this
Lease and such subtenant shall have no further rights under such sublease and Landlord shall
have no obligations to
such subtenant.



     SECTION 9.4. CERTAIN TRANSFERS. The following shall be deemed to constitute an assignment of
this Lease; (a) the sale of all or substantially all of Tenant’s assets (other than bulk sales in
the ordinary course of




16









 




business), (b) if Tenant is a corporation, an unincorporated association, a limited liability
company or a partnership, the transfer, assignment or hypothecation of any stock or interest in
such corporation, association, limited liability company or partnership in the aggregate of
twenty-five percent (25%) (except for publicly traded shares of stock constituting a transfer of
twenty-five percent (25%) or more in the aggregate, so long as no change in the controlling
interest of Tenant occurs as a result thereof), or (c) any other direct or indirect change of
control of Tenant, including, without limitation, change of control of Tenant’s parent company or
a merger by Tenant or its parent company. Notwithstanding the foregoing: (A) Landlord’s consent
shall not be required for the subletting of all or any portion of the Premises to any entity
controlling, under common control with, or controlled by Tenant (a “Tenant Affiliate”), and (B)
Landlord’s consent shall not be required for the assignment of this Lease to a Tenant Affiliate,
or as a result of a sale of all or substantially all of Tenant’s assets, the sale of the capital
stock of Tenant, or as the result of a merger by Tenant with or into another entity or a
reorganization of Tenant (a “Permitted Transfer”), so long as (i) the net worth of the Tenant
Affiliate or of the successor or reorganized entity after such Permitted Transfer is at least
equal to the greater of the net worth of Tenant as of the execution of this Lease by Landlord or
the net worth of Tenant immediately prior to the date of such Permitted Transfer, evidence of
which, satisfactory to Landlord, shall be presented to Landlord prior to such Permitted Transfer,
(ii) Tenant shall provide to Landlord, prior to such Permitted Transfer, written notice of such
Permitted Transfer and such assignment documentation and other information as Landlord may require
in connection therewith, and (iii) all of the terms and requirements of Section 9.2 and 9.3 (but
not of Section 9.1) shall apply with respect to such assignment.




ARTICLE X. INSURANCE AND INDEMNITY




     SECTION 10.1. TENANT’S INSURANCE. Tenant, at its sole cost and expense, shall provide and
maintain in effect the insurance described in Exhibit D. Evidence of that insurance must
be delivered to Landlord prior to the Commencement Date or any earlier date on which Tenant may
enter upon or take possession of the Premises for any reason whatsoever.



     SECTION 10.2. LANDLORD’S INSURANCE. Landlord may, at its election, provide any or all of the
following types of insurance, with or without deductible and in amounts and coverages as may be
determined by Landlord in its sole and absolute discretion: property insurance, subject to
standard exclusions, covering the Building and/or Project, and such other risks as Landlord or its
mortgagees may from time to time deem appropriate, including coverage for the Tenant Improvements
constructed by Landlord pursuant to the Work Letter (if any) attached hereto, and commercial
general liability coverage. Landlord shall not be required to carry insurance of any kind on
Tenant’s Alterations or on Tenant’s other property, including, without limitation, Tenant’s trade
fixtures, furnishings, equipment, signs and all other items of personal property, and Landlord
shall not be obligated to repair or replace that property should damage occur. All proceeds of
insurance maintained by Landlord upon the Building and/or Project shall be the property of
Landlord, whether or not Landlord is obligated to or elects to make any repairs. At Landlord’s
option, Landlord may self-insure all or any portion of the risks for which Landlord may elect to
provide insurance hereunder.



     SECTION 10.3. TENANT’S INDEMNITY. To the fullest extent permitted by law, Tenant shall defend,
indemnify, protect, save and hold harmless Landlord and Master Lessor, and their respective agents,
and any and all affiliates of Landlord, including, without limitation, any corporations or other
entities controlling, controlled by or under common control with Landlord or Master Lessor, from
and against any and all claims, demands, actions, losses, liabilities, costs or expenses arising
either before or after the Commencement Date from Tenant’s use or occupancy of the Premises, the
Building or the Common Areas, including, without limitation, the use by Tenant, its agents,
employees, invitees or licensees of any recreational facilities within the Common Areas; the
conduct of Tenant’s business; any activity, work, or thing done, permitted or suffered by Tenant or
its agents, employees, invitees or licensees in or about the Premises, the Building or the Common
Areas; any Event of Default in the performance of any obligation on Tenant’s part to be performed
under this Lease; or any act or negligence of Tenant or its agents, employees, visitors, patrons,
guests, invitees or licensees. Landlord may, at its option, require Tenant to assume Landlord’s
defense in any claim, action or proceeding covered by this Section through counsel satisfactory to
Landlord. The provisions of this Section shall expressly survive the expiration or sooner
termination of this Lease. Tenant’s obligations under this Section shall not apply in the event
that the claim, demand, action, loss, liability, cost or expense is caused solely by the active
negligence or willful misconduct of Landlord.



     SECTION 10.4. LANDLORD’S NONLIABILITY. Subject to the provisions of Section 10.5 below,
Landlord, its agents, and any and all affiliates of Landlord, shall not be liable to Tenant, its
employees, agents and/or invitees, and Tenant hereby waives all claims against Landlord, its
agents, and any and all affiliates of Landlord, for and knowingly assumes the risk of loss of or
damage to any property, or loss or interruption of business or income, or any other loss, cost,
damage, injury or liability whatsoever (including without limitation any consequential damages and
lost profit or opportunity costs), resulting from, but not limited to, Acts of God, acts of civil
disobedience or insurrection, acts or omissions of third parties and/or of other tenants within
the Project or their agents, employees, contractors, guests or invitees, fire, explosion, falling
plaster, steam, gas, electricity, water or rain which may leak or flow from or into any part of
the Premises, mold, or from the breakage, leakage, obstruction or other defects of the pipes,
sprinklers, wires, appliances, plumbing, air conditioning, electrical works, roof, windows or
other fixtures in the Building (whether the damage or injury results from conditions arising in
the Premises or in other portions of the Building), regardless of the negligence of Landlord, its
agents or any and all affiliates of Landlord in connection with any of the foregoing. It is
understood that any such condition may require the temporary evacuation or closure of all or a
portion of the Building. Landlord shall have no liability whatsoever (including without limitation
consequential damages and lost profit or opportunity costs) and, except as provided in Sections
11.1 and 12.1 below, there shall be no abatement of rent, by reason of any injury to or
interference with Tenant’s business arising from the making of any repairs, alterations or
improvements to any portion of the Building, including repairs to the Premises, nor shall any
related activity by Landlord constitute an actual or constructive eviction. In making repairs,
alterations or improvements, however, Landlord shall interfere as little as reasonably practicable
with the conduct of Tenant’s business in the Premises. Should Tenant elect to receive any service
or



17









 




products from a concessionaire, licensee or third party tenant of Landlord, Landlord shall have
no liability for any services or products so provided or for any breach of contract by such
third party provider. Neither Landlord nor its agents shall be liable for interference with
light or other similar intangible interests. Tenant shall immediately notify Landlord in case of
fire or accident on or about the Premises, and of defects in any improvements or equipment
installed on or about the Premises.




     SECTION 10.5. WAIVER OF SUBROGATION. Landlord and Tenant each hereby waives all rights of
recovery against the other and the other’s agents on account of loss and damage occasioned to the
property of such waiving party to the extent that the waiving party is entitled to proceeds for
such loss or damage under any property insurance policies carried or required to be carried by
the provisions of this Lease; provided however, that the foregoing waiver shall not apply to the
extent of Tenant’s obligations to pay deductibles under any such policies and this Lease. By this
waiver it is the intent of the parties that neither Landlord nor Tenant shall be liable to any
insurance company (by way of subrogation or otherwise) insuring the other party for any loss or
damage insured against under any property insurance policies contemplated by this Lease, even
though such loss or damage might be occasioned by the negligence of such party, its agents,
employees, contractors, guests or invitees.



ARTICLE XI. DAMAGE OR DESTRUCTION




     SECTION 11.1. RESTORATION.



     (a) If the Premises or the Building or a part thereof are materially damaged by any fire,
flood, earthquake or other casualty, Landlord shall have the right to terminate this Lease upon
written notice to Tenant if: (i) Landlord reasonably determines that proceeds necessary to pay the full cost of repair
are not available from Landlord’s insurance, including without limitation earthquake insurance, plus such
additional amounts Tenant elects, at its option, to contribute, excluding however the deductible (for which Tenant shall be
responsible for Tenant’s Share, provided that in no event shall Tenant’s Share of a deductible be greater than Fifty
Thousand Dollars ($50,000) for any single casualty [the “Deductible Cap” herein]); (ii) Landlord reasonably
determines that the Premises cannot, with reasonable diligence, be fully repaired by Landlord (or cannot be
safely repaired because of the presence of hazardous factors, including without limitation Hazardous Materials,
earthquake faults, and other similar dangers) within two hundred seventy (270) days after the date of the damage; (iii)
an Event of Default by Tenant has occurred; or (iv) the material damage occurs during the final twelve (12) months
of the Term. Landlord shall notify Tenant in writing (“Landlord’s Notice”) within sixty (60) days after the
damage occurs as to (A) whether Landlord is terminating this Lease as a result of such material damage and (B) if
Landlord is not terminating this Lease, the number of days within which Landlord estimates that the
Premises, with reasonable diligence, are likely to be fully repaired. In the event Landlord elects to terminate
this Lease, this Lease shall terminate thirty (30) days following the date of delivery of Landlord’s Notice.



     (b) If Landlord has the right to terminate this Lease pursuant to Section 11.1(a) and does
not elect to so terminate this Lease, and provided that at the time of Landlord’s Notice neither an
Event of Default exists nor has Landlord delivered to Tenant a notice of any failure by Tenant to fulfill an obligation
under this Lease which, unless cured by Tenant within the applicable grace period, would constitute an Event of Default, then
within thirty (30) days following delivery of Landlord’s Notice pursuant to Section 11.1(a),
Tenant may elect to terminate this Lease by written notice to Landlord, but only if (i)
Landlord’s Notice specifies that Landlord has determined that the Premises cannot be
repaired, with reasonable diligence, within two hundred seventy (270) days after the date of
damage or (ii) the casualty has occurred within the final twelve (12) months of the Term and
such material damage has a materially adverse impact on Tenant’s continued use of the
Premises. If Tenant fails to provide such termination notice within
such thirty (30) day period, Tenant shall be deemed to have waived any
termination right under this Section 11.1(b) or any other applicable law.



     (c) In the event that neither Landlord nor Tenant terminates this Lease pursuant to this
Section 11.1 as a result of material damage to the Building or Premises resulting from a casualty, Landlord
shall diligently repair all material damage to the Premises or the Building as soon as reasonably possible and this Lease
shall continue in effect for the remainder of the Term. Subject to any provision to the contrary
in the Work Letter, such repair by Landlord shall include repair of material damage to the Tenant
Improvements constructed pursuant to the Work Letter. Landlord’s repair of material damage shall
be at Landlord’s sole cost and expense except for any insurance  deductible (for which Tenant
shall be responsible for Tenant’s Share not to exceed, however, the Deductible Cap). Landlord
shall have the right, but not the obligation, to repair or replace any other leasehold
improvements made by Tenant or any Alterations (as defined in Section 7.3) constructed by Tenant
as part of Landlord’s repair of material damage, in which case Tenant shall make available to
Landlord upon demand insurance proceeds from insurance required to be maintained by Tenant. If
Landlord elects to repair or replace such leasehold improvements and/or Alterations, all insurance
proceeds available for such repair or replacement shall be made available to Landlord. Landlord
shall have no liability to Tenant in the event that the Premises or the Building has not been
fully repaired within the time period specified by Landlord in Landlord’s Notice to Tenant as
described in Section 11.1(a).



     Notwithstanding anything to the contrary contained in this Section 11.1(c), if for any
reasons other than delays caused by Tenant, or other matters beyond Landlord’s reasonable
control, the Premises and/or the Building have not been substantially repaired within thirty
(30) days following the time period specified in Landlord’s Notice to Tenant as described in
Section 11.1(a), then Tenant may, by written notice to Landlord given at any time thereafter but
prior to the actual date of the substantial completion of the repair of the Premises or the
Building, elect to terminate this Lease effective thirty (30) days from and after the date of
such notice; provided that if Landlord shall substantially complete such repairs on or before
the effective date of such termination, then Tenant’s election to terminate this Lease shall
thereupon be cancelled and of no further force or effect. Notwithstanding the foregoing, if at
any time during the construction period, Landlord reasonably determines that the substantial
completion of said repairs will be delayed beyond the time period specified in Landlord’s Notice
(for reasons other than Tenant-caused delays and/or force majeure delays), then Landlord may
notify Tenant in writing of such



18









 




determination and of a new outside date for completion of such repairs, and Tenant must elect
within five (5) days of receipt of such notice to either terminate this Lease or waive its right to
terminate this Lease, provided such repairs are substantially completed within thirty (30) days
following the new outside date established by Landlord in such notice to Tenant. Tenant’s failure
to elect to terminate this Lease within such five (5) day period shall be deemed Tenant’s waiver of
its right to terminate this Lease as provided in this paragraph as to the previous outside date,
but not as to the new outside date established by said notice.




     (d) Commencing on the date of such material damage to the Building, and ending on the sooner
of the date the damage is repaired or the date this Lease is terminated, the rental to be paid
under this Lease shall be abated in the same proportion that the Floor Area of the Premises that
is rendered unusable by the damage from time to time bears to the total Floor Area of the
Premises, as determined by Landlord, but only to the extent that Landlord is entitled to
reimbursement from the proceeds of the business interruption insurance required to be maintained
by Tenant pursuant to Exhibit D.



     (e) Subject to the provisions of Section 10.5, in the event the damage or destruction to the
Premises or Building are due in substantial part to the fault or neglect of Tenant or its
employees, subtenants, invitees or representatives, the costs of such repairs or replacement to
the Premises or Building shall be borne by Tenant, and in addition, Tenant shall not be entitled
to terminate this Lease as a result, notwithstanding the provisions of Section 11.1(b).



     (f) Tenant shall fully cooperate with Landlord in removing Tenant’s personal property and any
debris from the Premises to facilitate all inspections of the Premises and the making of any
repairs. Notwithstanding anything to the contrary contained in this Lease, if Landlord in good
faith believes there is a risk of injury to persons or damage to property from entry into the
Building or Premises following any damage or destruction thereto, Landlord may restrict entry into
the Building or the Premises by Tenant, its employees, agents and contractors in a
non-discriminatory manner, without being deemed to have violated Tenant’s rights of quiet
enjoyment to, or made an unlawful detainer of, or evicted Tenant from, the Premises. Upon request,
Landlord shall consult with Tenant to determine if there are safe methods of entry into the
Building or the Premises solely in order to allow Tenant to retrieve files, data in computers, and
necessary inventory, subject however to all indemnities and waivers of liability from Tenant to
Landlord contained in this Lease and any additional indemnities and waivers of liability which
Landlord may require.



     SECTION 11.2. LEASE GOVERNS. The provisions of this Lease, including without limitation
Section 11.1, shall govern any damage or destruction and shall accordingly supersede any contrary
statute or rule of law.



ARTICLE XII. EMINENT DOMAIN




     SECTION 12.1. TOTAL OR PARTIAL TAKING. If all or a material portion of the Premises is taken
by any lawful authority by exercise of the right of eminent domain, or sold to prevent a taking,
either Tenant or Landlord may terminate this Lease effective as of the date possession is required
to be surrendered to the authority. In the event title to a portion of the Building or Project,
whether or not including a portion of the Premises, is taken or sold to prevent a taking, and if
Landlord elects to restore the Building in such a way as to alter the Premises materially, either
party may terminate this Lease, by written notice to the other party, effective on the date of
vesting of title. In the event neither party has elected to terminate this Lease as provided
above, then Landlord shall promptly, after receipt of a sufficient condemnation award, proceed to
restore the Premises to substantially their condition prior to the taking, and a proportionate
allowance shall be made to Tenant for the rent corresponding to the time during which, and to the
part of the Premises of which, Tenant is deprived on account of the taking and restoration. In the
event of a taking, Landlord shall be entitled to the entire amount of the condemnation award
without deduction for any estate or interest of Tenant; provided that nothing in this Section
shall be deemed to give Landlord any interest in, or prevent Tenant from seeking any award against
the taking authority for, the taking of personal property and fixtures belonging to Tenant or for
relocation or business interruption expenses recoverable from the taking authority.



     SECTION 12.2. TEMPORARY TAKING. No temporary taking of the Premises shall terminate this
Lease or give Tenant any right to abatement of rent, and any award specifically attributable to a
temporary taking of the Premises shall belong entirely to Tenant. A temporary taking shall be
deemed to be a taking of the use or occupancy of the Premises for a period of not to exceed ninety
(90) days.



     SECTION 12.3. TAKING OF PARKING AREA. In the event there shall be a taking of the parking
area such that Landlord can no longer provide sufficient parking to comply with this Lease,
Landlord may substitute reasonably equivalent parking in a location reasonably close to the
Building; provided that if Landlord fails to make that substitution within thirty (30) days
following the taking and if the taking materially impairs Tenant’s use and enjoyment of the
Premises, Tenant may, at its option, terminate this Lease by written notice to Landlord. If this
Lease is not so terminated by Tenant, there shall be no abatement of rent and this Lease shall
continue in effect.



     ARTICLE XIII. SUBORDINATION; ESTOPPEL CERTIFICATE; FINANCIALS



     SECTION 13.1. SUBORDINATION. This Lease shall be subordinate to the Master Lease and to all
renewals, modifications and extensions thereof. Further, at the option of Landlord or any lender
of Landlord’s that obtains a security interest in the Building, this Lease shall be either
superior or subordinate to all ground or underlying leases, mortgages and deeds of trust, if any,
which may hereafter affect the Building, and to all renewals, modifications, consolidations,
replacements and extensions thereof. Notwithstanding the foregoing,
so long as no Event of Default
exists under this Lease, Tenant’s possession and quiet enjoyment of the Premises shall not be
disturbed and this Lease shall not terminate in the event of termination of the Master Lease or of
any such ground or underlying lease, or the foreclosure of any such mortgage or deed of trust, to
which this Lease has been subordinated



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pursuant to this Section. Tenant shall execute and deliver any commercially reasonable documents
or agreements requested by Landlord, Master Lessor or such lessor or lender which provide Tenant
with the non-disturbance protections set forth in this Section. In the event of a termination or
foreclosure, Tenant shall become a tenant of and attorn to the successor-in-interest to Landlord
upon the same terms and conditions as are contained in this Lease, and shall execute any
instrument reasonably required by Landlord’s successor for that purpose. Tenant shall also, upon written request of Landlord, execute and deliver all commercially reasonable instruments as
may be required from time to time to subordinate the rights of Tenant under this Lease to any
ground or underlying lease or to the lien of any mortgage or deed of trust (provided that
such instruments include the nondisturbance and attornment provisions set forth above), or,
if requested by Landlord, to subordinate, in whole or in part, any ground or underlying lease
or the lien of any mortgage or deed of trust to this Lease. Tenant agrees that any purchaser
at a foreclosure sale or lender taking title under a deed-in-lieu of foreclosure shall not be
responsible for any act or omission of a prior landlord, shall not be subject to any offsets
or defenses Tenant may have against a prior landlord, and shall not be liable for the return
of the security deposit to the extent it is not actually received by such purchaser or bound
by any rent paid for more than the current month in which the foreclosure occurred. Nothing
contained in the foregoing sentence, however, shall relieve any purchaser and/or lender from
responsibility for those obligations of “Landlord” under this Lease which are to be performed
subsequent to such purchaser and/or lender having both taken title to and possession of the
Premises, provided that Tenant shall give a “new” notice of default to such purchaser or
lender in connection with any default of such obligations, and such purchaser or lender being
thereafter afforded the benefit of the applicable “cure” rights pursuant to Section 14.5 of
this Lease.




     Landlord shall deliver to Tenant a nondisturbance and attornment agreement in connection
with the Master Lease, in commercially reasonable form, within thirty (30) days following the
execution of this Lease.



     SECTION 13.2. ESTOPPEL CERTIFICATE.



     (a) Tenant shall within fifteen (15) days following written request from Landlord, execute,
acknowledge and deliver to Landlord, in any form that Landlord may reasonably require, a
statement in writing (i) certifying that this Lease is unmodified and in full force and effect (or, if modified,
stating the nature of the modification and certifying that this Lease, as modified, is in full force and effect) and
the dates to which the rental, additional rent and other charges have been paid in advance, if any, and (ii) acknowledging
that, to Tenant’s knowledge, there are no uncured defaults on the part of Landlord, or specifying each
default if any are claimed, and (iii) setting forth all further information regarding the status of this Lease that Landlord or
any prospective purchaser or encumbrancer may reasonably require. Tenant’s statement may be
relied upon by any prospective purchaser or encumbrancer of all or any portion of the
Building or Project.



     (b) Notwithstanding any other rights and remedies of Landlord, Tenant’s failure to deliver
any estoppel statement within the provided time shall be conclusive upon Tenant that (i) this
Lease is in full force and effect, without modification except as may be represented by Landlord, (ii) there are no
uncured Events of Default in Landlord’s performance, and (iii) not more than one month’s rental has been paid in
advance.



     SECTION 13.3. FINANCIALS.



     (a) Tenant shall deliver to Landlord, prior to the execution of this Lease and thereafter at
any time and from time to time within ten (10) days following Landlord’s written request,
Tenant’s “current financial statements” (as hereinafter defined), certified to be true, accurate
and complete by the chief financial officer of Tenant, including a balance sheet and profit and
loss statement for the most recent prior year, (collectively, the “Statements”), which Statements
shall accurately and completely reflect the financial condition of Tenant; provided, however,
that in the event and so long as Tenant is a publicly traded corporation on a nationally
recognized stock exchange, the foregoing obligation to deliver the Statements shall be waived. As
used herein, Tenant’s “current financial statements” shall mean those statements most recently
prepared by Tenant in its ordinary course of business. If delivered to Landlord marked or
otherwise designated as “confidential,” Landlord agrees that it will keep the Statements
confidential, except that Landlord shall have the right to deliver the same to any proposed
purchaser of the Building or Project, and to any encumbrancer or proposed encumbrancer of all or
any portion of the Building or Project.



     (b) Tenant acknowledges that Landlord is relying on the Statements in its determination to
enter into this Lease, and Tenant represents to Landlord, which representation shall be deemed
made on the date of this Lease and again on the Commencement Date, that no material change in the
financial condition of Tenant, as reflected in the Statements, has occurred since the date Tenant
delivered the Statements to Landlord. The Statements are represented and warranted by Tenant to
be correct and to accurately and fully reflect Tenant’s true financial condition as of the date
of submission of any Statements to Landlord.



ARTICLE XIV. EVENTS OF DEFAULT AND REMEDIES




     SECTION 14.1. TENANT’S DEFAULTS. The occurrence of any one or more of the following events
(following the expiration of any cure period set forth below, if any is provided) shall
constitute an “Event of Default” by Tenant:



     (a) The failure by Tenant to make any payment of Basic Rent or additional rent required to
be made by Tenant, as and when due, where the failure continues for a period of five (5) days after
written notice from Landlord to Tenant; 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 and 1161(a) as amended. For purposes of these Events of Default and remedies
provisions, the term “additional rent” shall be deemed to include all amounts of any type
whatsoever other than Basic Rent to be paid by Tenant pursuant to the terms of this Lease and
the Work Letter.



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     (b) The assignment, sublease, encumbrance or other transfer of this Lease by Tenant, either
voluntarily or by operation of law, whether by judgment, execution, transfer by intestacy or
testacy, or other means, without the prior written consent of Landlord when consent is required by
this Lease.



     (c) The failure of Tenant to timely and fully provide any subordination agreement, estoppel
certificate or financial statements in accordance with the requirements of Article XIII, where the
failure continues for a period of ten (10) days after written notice from Landlord to Tenant.



     (d) The abandonment of the Premises by Tenant.



     (e) The failure or inability by Tenant to observe or perform any of the express or implied
covenants or provisions of this Lease to be observed or performed by Tenant, other than as
specified in this Section 14.1, where the failure continues for a period of thirty (30) days after
written notice from Landlord to Tenant or such shorter period as is specified in any other
provision of this Lease; 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 and 1161(a)
as amended. However, if the nature of the failure is such that more than thirty (30) days are
reasonably required for its cure, then an Event of Default shall not be deemed to have occurred if
Tenant commences the cure within thirty (30) days, and thereafter diligently pursues the cure to
completion.



     (f) (i) The making by Tenant of any general assignment for the benefit of creditors; (ii) the
filing by or against Tenant of a petition to have Tenant adjudged a Chapter 7 debtor under the
Bankruptcy Code, to have debts discharged or for reorganization or arrangement under any law
relating to bankruptcy (unless, in the case of a petition filed against Tenant, the same is
dismissed within thirty (30) days); (iii) the appointment of a trustee or receiver to take
possession of substantially all of Tenant’s assets located at the Premises or of Tenant’s interest
in this Lease, if possession is not restored to Tenant within thirty (30) days; (iv) the
attachment, execution or other judicial seizure of substantially all of Tenant’s assets located at
the Premises or of Tenant’s interest in this Lease, where the seizure is not discharged within
thirty (30) days; (v) Tenant’s convening of a meeting of its creditors for the purpose of
effecting a moratorium upon or composition of its debts or (vi) the failure of Tenant to pay its
material obligations to creditors as and when they become due and payable, other than as a result
of a good faith dispute by Tenant as to the amount due to such creditors. Landlord shall not be
deemed to have knowledge of any event described in this Section 14.1(f) unless notification in
writing is received by Landlord, nor shall there be any presumption attributable to Landlord of
Tenant’s insolvency. In the event that any provision of this Section 14.1(f) is contrary to
applicable law, the provision shall be of no force or effect.



     (g) Any other breach of this Lease which this Lease provides is an Event of Default.



     SECTION 14.2. LANDLORD’S REMEDIES.



     (a) If an Event of Default by Tenant occurs, then in addition to any other remedies available
to Landlord, Landlord may exercise the following remedies:



          (i)  Landlord may terminate Tenant’s right to possession of the Premises by any lawful
means, in which case this Lease shall terminate and Tenant shall immediately surrender possession
of the Premises to Landlord. Such termination shall not affect any accrued obligations of Tenant
under this Lease. Upon termination, Landlord shall have the right to reenter the Premises and
remove all persons and property. Landlord shall also be entitled to recover from Tenant (and to
retain, use or apply any Security Deposit held by Landlord towards amounts estimated by Landlord
as):




               (1) The worth at the time of award of the unpaid Basic Rent and additional rent which had
been earned at the time of termination;



               (2) The worth at the time of award of the amount by which the unpaid Basic Rent and
additional rent which would have been earned after termination until the time of award exceeds the
amount of such loss that Tenant proves could have been reasonably avoided;



               (3) The worth at the time of award of the amount by which the unpaid Basic Rent and
additional rent for the balance of the Term after the time of award exceeds the amount of such
loss that Tenant proves could be reasonably avoided;



               (4) Any other amount necessary to compensate Landlord for all the detriment proximately caused
by Tenant’s failure to perform its obligations under this Lease or which in the ordinary course of
things would be likely to result from Tenant’s Event of Default, including, but not limited to, the
cost of recovering possession of the Premises, refurbishment of the Premises, marketing costs,
commissions and other expenses of reletting, including necessary repair, the unamortized portion of
any tenant improvements and brokerage commissions funded by Landlord in connection with this Lease,
reasonable attorneys’ fees, and any other reasonable costs; and



               (5) At Landlord’s election, all other amounts in addition to or in lieu of the foregoing as
may be permitted by law. The term “rent” as used in the Lease shall be deemed to mean the Basic
Rent, Tenant’s Share of Operating Expenses and any other sums required to be paid by Tenant to
Landlord pursuant to the terms of this Lease whether or not designated as additional rent
hereunder, including, without limitation, any sums that may be owing from Tenant pursuant to
Section 4.3 of this Lease. Any sum, other than Basic Rent, shall be computed on the basis of the
average monthly amount accruing during the twenty-four (24) month period immediately prior to the
Event of Default, except that if it becomes necessary to compute such rental before the



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twenty-four (24) month period has occurred, then the computation shall be on the basis of the
average monthly amount during the shorter period. As used in Sections 14.2(a)(i) (1) and (2)
above, the “worth at the time of award” shall be computed by allowing interest at the rate of
ten percent (10%) per annum. As used in Section 14.2(a)(i)(3) above, the “worth at the time of
award” shall be computed by discounting the amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one percent (1%).




          (ii) Landlord may elect not to terminate Tenant’s right to possession of the Premises and
to continue to enforce all of its rights and remedies under this Lease, including the right to
collect all rent as it becomes due as provided in Civil Code Section 1951.4. Efforts by the
Landlord to maintain, preserve or relet the Premises, or the appointment of a receiver to
protect the Landlord’s interests under this Lease, shall not constitute a termination of the
Tenant’s right to possession of the Premises. In the event that Landlord elects to avail itself
of the remedy provided by this Section 14.2(a)(ii), Landlord shall not unreasonably withhold its
consent to an assignment or subletting of the Premises subject to the reasonable standards for
Landlord’s consent as are contained in this Lease.




     (b) Landlord shall be under no obligation to observe or perform any covenant of this Lease
on its part to be observed or performed which accrues after the date of any Event of Default by
Tenant unless and until the Event of Default is cured by Tenant, it being understood and agreed
that the performance by Landlord of its obligations under this Lease are expressly conditioned
upon Tenant’s full and timely performance of its obligations under this Lease. The various rights
and remedies reserved to Landlord in this Lease or otherwise shall be cumulative and, except as
otherwise provided by California law, Landlord may pursue any or all of its rights and remedies
at the same time.



     (c) No delay or omission of Landlord to exercise any right or remedy shall be construed as a
waiver of the right or remedy or of any breach or Event of Default by Tenant. The acceptance by
Landlord of rent shall not be a (i) waiver of any preceding breach or Event of Default by Tenant
of any provision of this Lease, other than the failure of Tenant to pay the particular rent
accepted, regardless of Landlord’s knowledge of the preceding breach or Event of Default at the
time of acceptance of rent, or (ii) a waiver of Landlord’s right to exercise any remedy available
to Landlord by virtue of the breach or Event of Default. The acceptance of any payment from a
debtor in possession, a trustee, a receiver or any other person acting on behalf of Tenant or
Tenant’s estate shall not waive or cure a breach or Event of Default under Section 14.1. No
payment by Tenant or receipt by Landlord of a lesser amount than the rent required by this Lease
shall be deemed to be other than a partial payment on account of the earliest due stipulated rent,
nor shall any endorsement or statement on any check or letter be deemed an accord and satisfaction
and Landlord shall accept the check or payment without prejudice to Landlord’s right to recover
the balance of the rent or pursue any other remedy available to it. No act or thing done by
Landlord or Landlord’s agents during the Term shall be deemed an acceptance of a surrender of the
Premises, and no agreement to accept a surrender shall be valid unless in writing and signed by
Landlord. No employee of Landlord or of Landlord’s agents shall have any power to accept the keys
to the Premises prior to the termination of this Lease, and the delivery of the keys to any
employee shall not operate as a termination of this Lease or a surrender of the Premises.



     (d) Any agreement for free or abated rent or other charges, or for the giving or paying by
Landlord to or for Tenant of any cash or other bonus, inducement or consideration for Tenant’s
entering into this Lease or any other concession agreed to by Landlord hereunder (“Inducement
Provisions”) shall be deemed conditioned upon Tenant’s full and faithful performance of the
terms, covenants and conditions of this Lease. Upon an Event of Default under this Lease by
Tenant, any such Inducement Provisions shall automatically be deemed deleted from this Lease and
of no further force or effect and the amount of any rent reduction or abatement or other bonus,
inducement or consideration or other concession already given by Landlord or received by Tenant
as an inducement shall be immediately due and payable by Tenant to Landlord, notwithstanding any
subsequent cure of said Event of Default by Tenant.



     SECTION 14.3. LATE PAYMENTS.



     (a) Any payment due to Landlord under this Lease, including without limitation Basic Rent,
Tenant’s Share of Operating Expenses or any other payment due to Landlord under this Lease whether or
not designated as additional rent hereunder, that is not received by Landlord within ten (10) days following the
date due shall bear interest at the maximum rate permitted by law from the date due until
fully paid. The payment of interest shall not cure any breach or Event of Default by Tenant
under this Lease. In addition, Tenant acknowledges that the late payment by Tenant to
Landlord of Basic Rent and Tenant’s Share of Operating Expenses will cause Landlord to incur
costs not contemplated by this Lease, the exact amount of which will be extremely difficult
and impracticable to ascertain. Those costs may include, but are not limited to,
administrative, processing and accounting charges, and late charges which may be imposed on
Landlord by the terms of any ground lease, mortgage or trust deed covering the Premises.
Accordingly, if any Basic Rent or Tenant’s Share of Operating Expenses due from Tenant shall
not be received by Landlord or Landlord’s designee within ten (10) days following the date due, then
Tenant shall pay to Landlord, in addition to the interest provided above, a late charge,
which the Tenant agrees is reasonable, in a sum equal to the greater of five percent (5%) of
the amount overdue or One Hundred Dollars ($100.00) for each delinquent payment; provided
that Landlord shall waive the payment of said late charge for the initial two (2) delinquent
payments of Basic Rent or Operating Expenses by Tenant. Acceptance of a late charge by
Landlord shall not constitute a waiver of Tenant’s breach or Event of Default with respect to
the overdue amount, nor shall it prevent Landlord from exercising any of its other rights and
remedies.



     (b) Following each second installment of Basic Rent and/or the payment of Tenant’s Share of
Operating Expenses within any twelve (12) month period that is not paid within ten (10) days
following the date due, Landlord shall have the option to require that beginning with the first payment of Basic
Rent next due, Basic Rent and the Tenant’s Share of Operating Expenses shall no longer be paid in monthly
installments but shall be payable quarterly three (3) months in advance. Should Tenant deliver to Landlord, at any time
during the Term, two



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(2) or more insufficient checks, the Landlord may require that all monies then and thereafter due
from Tenant be paid to Landlord by cashier’s check. If any check for any payment to Landlord
hereunder is returned by the bank for any reason, such payment shall not be deemed to have been
received by Landlord and Tenant shall be responsible for any applicable late charge, interest
payment and the charge to Landlord by its bank for such returned check. Nothing in this Section
shall be construed to compel Landlord to accept Basic Rent, Tenant’s Share of Operating Expenses or
any other payment from Tenant if there exists an Event of Default unless such payment fully cures
any and all such Events of Default. Any acceptance of any such payment shall not be deemed to waive
any other right of Landlord under this Lease. Any payment by Tenant to Landlord may be applied by
Landlord, in its sole and absolute discretion, in any order determined by Landlord to any amounts
then due to Landlord.




     SECTION 14.4. RIGHT OF LANDLORD TO PERFORM. All covenants and agreements to be performed by
Tenant under this Lease shall be performed at Tenant’s sole cost and expense and without any
abatement of rent or right of set-off. If Tenant fails to pay any sum of money, other than rent
payable to Landlord, or fails to perform any other act on its part to be performed under this
Lease, and the failure continues beyond any applicable grace period
set forth in Section 14.1, then
in addition to any other available remedies, Landlord may, at its election make the payment or
perform the other act on Tenant’s part and Tenant hereby grants Landlord the right to enter onto
the Premises in order to carry out such performance. Landlord’s election to make the payment or
perform the act on Tenant’s part shall not give rise to any responsibility of Landlord to continue
making the same or similar payments or performing the same or similar acts nor shall Landlord be
responsible to Tenant for any damage caused to Tenant as the result of such performance by
Landlord. Tenant shall, promptly upon demand by Landlord, reimburse Landlord for all sums paid by
Landlord and all necessary incidental costs, together with interest at the maximum rate permitted
by law from the date of the payment by Landlord.



     SECTION 14.5. DEFAULT BY LANDLORD. Landlord shall not be deemed to be in default in the
performance of any obligation under this Lease, and Tenant shall have no rights to take any action
against Landlord, unless and until Landlord has failed to perform the obligation within thirty
(30) days after written notice by Tenant to Landlord specifying in reasonable detail the nature
and extent of the failure; provided, however, that if the nature of Landlord’s obligation is such
that more than thirty (30) days are required for its performance, then Landlord shall not be
deemed to be in default if it commences performance within the thirty (30) day period and
thereafter diligently pursues the cure to completion. In the event of Landlord’s default under
this Lease, Tenant’s sole remedies shall be to seek damages or specific performance from Landlord,
provided that any damages shall be limited to Tenant’s actual out-of-pocket expenses and shall in
no event include any consequential damages, lost profits or opportunity costs.



     SECTION 14.6. EXPENSES AND LEGAL FEES. All sums reasonably incurred by Landlord in connection
with any Event of Default by Tenant under this Lease or holding over of possession by Tenant after
the expiration or earlier termination of this Lease, or any action related to a filing for
bankruptcy or reorganization by Tenant, including without limitation all costs, expenses and
actual accountants, appraisers, attorneys and other professional fees, and any collection agency
or other collection charges, shall be due and payable to Landlord on demand, and shall bear
interest at the rate of ten percent (10%) per annum. Should either Landlord or Tenant bring any
action in connection with this Lease, the prevailing party shall be entitled to recover as a part
of the action its reasonable attorneys’ fees, and all other costs. The prevailing party for the
purpose of this Section shall be determined by the trier of the facts.



     SECTION 14.7. WAIVER OF JURY TRIAL/JUDICIAL REFERENCE.



     (a) LANDLORD AND TENANT EACH ACKNOWLEDGES THAT IT IS AWARE OF AND HAS HAD THE ADVICE OF
COUNSEL OF ITS CHOICE WITH RESPECT TO ITS RIGHTS TO TRIAL BY JURY, AND, TO THE EXTENT ENFORCEABLE
UNDER CALIFORNIA LAW, EACH PARTY DOES HEREBY EXPRESSLY AND KNOWINGLY WAIVE AND RELEASE ALL SUCH
RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY HERETO
AGAINST THE OTHER (AND/OR AGAINST ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, OR SUBSIDIARY OR
AFFILIATED ENTITIES) ON ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS
LEASE, TENANT’S USE OR OCCUPANCY OF THE PREMISES AND/OR ANY CLAIM OF INJURY OR DAMAGE. FURTHERMORE,
THIS WAIVER AND RELEASE OF ALL RIGHTS TO A JURY TRIAL IS DEEMED TO BE INDEPENDENT OF EACH AND
EVERY OTHER PROVISION, COVENANT, AND/OR CONDITION SET FORTH IN THIS LEASE.



     (b) IN THE EVENT THAT THE JURY WAIVER PROVISIONS OF SECTION 14.7(a) ARE NOT ENFORCEABLE UNDER
CALIFORNIA LAW, THEN THE PROVISIONS OF THIS SECTION 14.7(b) SHALL APPLY. IT IS THE DESIRE AND
INTENTION OF THE PARTIES TO AGREE UPON A MECHANISM AND PROCEDURE UNDER WHICH CONTROVERSIES AND
DISPUTES ARISING OUT OF THIS LEASE OR RELATED TO THE PREMISES WILL BE RESOLVED IN A PROMPT AND
EXPEDITIOUS MANNER. ACCORDINGLY, EXCEPT WITH RESPECT TO ACTIONS FOR UNLAWFUL OR FORCIBLE DETAINER
OR WITH RESPECT TO THE PREJUDGMENT REMEDY OF ATTACHMENT, ANY ACTION, PROCEEDING OR COUNTERCLAIM
BROUGHT BY EITHER PARTY HERETO AGAINST THE OTHER (AND/OR AGAINST ITS OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS OR SUBSIDIARY OR AFFILIATED ENTITIES) ON ANY MATTERS WHATSOEVER ARISING OUT OF
OR IN ANY WAY CONNECTED WITH THIS LEASE, TENANT’S USE OR OCCUPANCY OF THE PREMISES AND/OR ANY
CLAIM OF INJURY OR DAMAGE, SHALL BE HEARD AND RESOLVED BY A REFEREE UNDER THE PROVISIONS OF THE
CALIFORNIA CODE OF CIVIL PROCEDURE, SECTIONS 638 — 645.1, INCLUSIVE (AS SAME MAY BE AMENDED, OR
ANY SUCCESSOR STATUTE(S) THERETO) (THE “REFEREE SECTIONS”). ANY FEE TO INITIATE THE JUDICIAL
REFERENCE PROCEEDINGS SHALL BE PAID BY THE PARTY INITIATING SUCH



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PROCEDURE; PROVIDED HOWEVER, THAT THE COSTS AND FEES, INCLUDING ANY INITIATION FEE, OF SUCH
PROCEEDING SHALL ULTIMATELY BE BORNE IN ACCORDANCE WITH SECTION 14.6 ABOVE. THE VENUE OF THE
PROCEEDINGS SHALL BE IN THE COUNTY IN WHICH THE PREMISES ARE LOCATED. WITHIN TEN (10) DAYS OF
DELIVERY BY ANY PARTY TO THE OTHER PARTY OF A WRITTEN REQUEST TO RESOLVE ANY DISPUTE OR
CONTROVERSY PURSUANT TO THIS SECTION 14.7(b), THE PARTIES SHALL AGREE UPON A SINGLE REFEREE WHO
SHALL TRY ALL ISSUES, WHETHER OF FACT OR LAW, AND REPORT A FINDING AND JUDGMENT ON SUCH ISSUES AS
REQUIRED BY THE REFEREE SECTIONS. IF THE PARTIES ARE UNABLE TO AGREE UPON A REFEREE WITHIN SUCH
TEN (10) DAY PERIOD, THEN ANY PARTY MAY THEREAFTER FILE A LAWSUIT IN THE COUNTY IN WHICH THE
PREMISES ARE LOCATED FOR THE PURPOSE OF APPOINTMENT OF A REFEREE UNDER CALIFORNIA CODE OF CIVIL
PROCEDURE SECTIONS 638 AND 640, AS SAME MAY BE AMENDED OF ANY SUCCESSOR STATUTE(S) THERETO. IF THE
REFEREE IS APPOINTED BY THE COURT, THE REFEREE SHALL BE A NEUTRAL AND IMPARTIAL RETIRED JUDGE WITH
SUBSTANTIAL EXPERIENCE IN THE RELEVANT MATTERS TO BE DETERMINED, FROM JAMS/ENDISPUTE, INC., THE
AMERICAN ARBITRATION ASSOCIATION OR SIMILAR MEDIATION/ARBITRATION ENTITY. THE PROPOSED REFEREE MAY
BE CHALLENGED BY ANY PARTY FOR ANY OF THE GROUNDS LISTED IN SECTION 641 OF THE CALIFORNIA CODE OF
CIVIL PROCEDURE, AS SAME MAY BE AMENDED OR ANY SUCCESSOR STATUTE(S) THERETO. THE REFEREE SHALL
HAVE THE POWER TO DECIDE ALL ISSUES OF FACT AND LAW AND REPORT HIS OR HER DECISION ON SUCH ISSUES,
AND TO ISSUE ALL RECOGNIZED REMEDIES AVAILABLE AT LAW OR IN EQUITY FOR ANY CAUSE OF ACTION THAT IS
BEFORE THE REFEREE, INCLUDING AN AWARD OF ATTORNEYS’ FEES AND COSTS IN ACCORDANCE WITH CALIFORNIA
LAW. THE REFEREE SHALL NOT, HOWEVER, HAVE THE POWER TO AWARD PUNITIVE DAMAGES, NOR ANY OTHER
DAMAGES WHICH ARE NOT PERMITTED BY THE EXPRESS PROVISIONS OF THIS LEASE, AND THE PARTIES HEREBY
WAIVE ANY RIGHT TO RECOVER ANY SUCH DAMAGES. THE PARTIES SHALL BE ENTITLED TO CONDUCT ALL
DISCOVERY AS PROVIDED IN THE CALIFORNIA CODE OF CIVIL PROCEDURE, AND THE REFEREE SHALL OVERSEE
DISCOVERY AND MAY ENFORCE ALL DISCOVERY ORDERS IN THE SAME MANNER AS ANY TRIAL COURT JUDGE, WITH
RIGHTS TO REGULATE DISCOVERY AND TO ISSUE AND ENFORCE SUBPOENAS, PROTECTIVE ORDERS AND OTHER
LIMITATIONS ON DISCOVERY AVAILABLE UNDER CALIFORNIA LAW. THE REFERENCE PROCEEDING SHALL BE
CONDUCTED IN ACCORDANCE WITH CALIFORNIA LAW (INCLUDING THE RULES OF EVIDENCE), AND IN ALL REGARDS,
THE REFEREE SHALL FOLLOW CALIFORNIA LAW APPLICABLE AT THE TIME OF THE REFERENCE PROCEEDING. IN
ACCORDANCE WITH SECTION 644 OF THE CALIFORNIA CODE OF CIVIL PROCEDURE, THE DECISION OF THE REFEREE
UPON THE WHOLE ISSUE MUST STAND AS THE DECISION OF THE COURT, AND UPON THE FILING OF THE STATEMENT
OF DECISION WITH THE CLERK OF THE COURT, OR WITH THE JUDGE IF THERE IS NO CLERK, JUDGMENT MAY BE
ENTERED THEREON IN THE SAME MANNER AS IF THE ACTION HAD BEEN TRIED BY THE COURT. THE PARTIES SHALL
PROMPTLY AND DILIGENTLY COOPERATE WITH ONE ANOTHER AND THE REFEREE, AND SHALL PERFORM SUCH ACTS AS
MAY BE NECESSARY TO OBTAIN A PROMPT AND EXPEDITIOUS RESOLUTION OF THE DISPUTE OR CONTROVERSY IN
ACCORDANCE WITH THE TERMS OF THIS SECTION 14.7(b). TO THE EXTENT THAT NO PENDING LAWSUIT HAS BEEN
FILED TO OBTAIN THE APPOINTMENT OF A REFEREE, ANY PARTY, AFTER THE ISSUANCE OF THE DECISION OF THE
REFEREE, MAY APPLY TO THE COURT OF THE COUNTY IN WHICH THE PREMISES ARE LOCATED FOR CONFIRMATION
BY THE COURT OF THE DECISION OF THE REFEREE IN THE SAME MANNER AS A
PETITION FOR CONFIRMATION OF
AN ARBITRATION AWARD PURSUANT TO CODE OF CIVIL PROCEDURE SECTION 1285 ET SEQ. (AS SAME MAY BE
AMENDED OR ANY SUCCESSOR STATUTE(S) THERETO).



     SECTION 14.8. SATISFACTION OF JUDGMENT. The obligations of Landlord do not constitute the
personal obligations of the individual partners, trustees, directors, officers, members or
shareholders of Landlord or its constituent partners or members. Should Tenant recover a money
judgment against Landlord, such judgment shall be satisfied only from the interest of Landlord in
the Project and out of the rent or other income from such property receivable by Landlord or out of
consideration received by Landlord from the sale or other disposition of all or any part of
Landlord’s right, title or interest in the Project and no action for any deficiency may be sought
or obtained by Tenant.



     SECTION 14.9. LIMITATION OF ACTIONS AGAINST LANDLORD. Any claim, demand or right of any kind
by Tenant which is based upon or arises in connection with this Lease, including without
limitation any arising under a tort or contract cause of action, shall be barred unless Tenant
commences an action thereon within the earlier of the time period prescribed by law or twelve (12)
months after the date that the act, omission, event or default upon which the claim, demand or
right arises, has been discovered (or reasonably should have been discovered) by Tenant.



ARTICLE XV. END OF TERM




     SECTION 15.1. HOLDING OVER. This Lease shall terminate without further notice upon the
expiration of the Term, and any holding over by Tenant after the expiration shall not constitute a
renewal or extension of this Lease, or give Tenant any rights under this Lease, except when in
writing signed by both parties. Any period of time following the Expiration Date or earlier
termination of this Lease required for Tenant to remove its property or to place the Premises in
the condition required pursuant to Section 15.3 (or for Landlord to do so if Tenant fails to do so)
shall be deemed a holding over by Tenant. If Tenant holds over for any period after the Expiration
Date (or earlier termination) of the Term without the prior written consent of Landlord, such
possession



24









 




shall constitute a tenancy at sufferance only and an Event of Default under this Lease; such
holding over with the prior written consent of Landlord shall constitute a month-to-month tenancy
commencing on the first (1st) day following the termination of this Lease and terminating thirty
(30) days following delivery of written notice of termination by either Landlord or Tenant to the
other. In either of such events, possession shall be subject to all of  the terms of this Lease,
except that the monthly Basic Rent shall be one hundred fifty percent (150%) of the greater of (a)
the Basic Rent for the month immediately preceding the date of termination or (b) the then
currently scheduled Basic Rent for comparable space in the Project. The acceptance by Landlord of
monthly holdover rental in a lesser amount shall not constitute a waiver of Landlord’s right to
recover the full amount due for any holdover by Tenant, unless otherwise agreed in writing by
Landlord. If Tenant fails to surrender the Premises upon the expiration of this Lease despite
demand to do so by Landlord, Tenant shall indemnify and hold Landlord harmless from all loss or
liability, including without limitation, any claims made by any succeeding tenant relating to such
failure to surrender. The foregoing provisions of this Section are in addition to and do not affect
Landlord’s right of re-entry or any other rights of Landlord under this Lease or at law.




     SECTION 15.2. MERGER ON TERMINATION. The voluntary or other surrender of this Lease by
Tenant, or a mutual termination of this Lease, shall terminate any or all existing subleases
unless Landlord, at its option, elects in writing to treat the surrender or termination as an
assignment to it of any or all subleases affecting the Premises.



     SECTION 15.3. SURRENDER OF PREMISES; REMOVAL OF PROPERTY. Subject to the provisions of
Section 7.3 of this Lease and of the Work Letter, if any, attached hereto, upon the Expiration
Date or upon any earlier termination of this Lease, Tenant shall quit and surrender possession of
the Premises to Landlord in as good order, condition and repair as when received or as hereafter
may be improved by Landlord or Tenant,  reasonable wear and tear, damages due to casualty and
condemnation and repairs which are Landlord’s obligation excepted, and shall, without expense to
Landlord, remove or cause to be removed from the Premises all personal property, removable trade
fixtures, and equipment and debris and perform all work required under Section 7.3 of this Lease
and/or the Work Letter, if any, attached hereto as to Replacements of Non-Standard Improvements
and removal of Alterations, except for any items that Landlord may by written authorization allow
to remain. Tenant shall repair all damage to the Premises resulting from the removal, which repair
shall include the patching and filling of holes and repair of structural damage, provided that
Landlord may instead elect to repair any structural damage at Tenant’s expense. If Tenant shall
fail to comply with the provisions of this Section, Landlord may effect the removal and/or make
any repairs, and the cost to Landlord shall be additional rent payable by Tenant upon demand. If
Tenant fails to remove Tenant’s personal property from the Premises upon the expiration of the
Term, Landlord may remove, store, dispose of and/or retain such personal property, at Landlord’s
option, in accordance with then applicable laws, all at the expense of Tenant. If requested by
Landlord, Tenant shall execute, acknowledge and deliver to Landlord an instrument in writing
releasing and quitclaiming to Landlord all right, title and interest of Tenant in the Premises.



ARTICLE XVI. PAYMENTS AND NOTICES




     All sums payable by Tenant to Landlord shall be deemed to be rent under this Lease and shall
be paid, without deduction or offset, in lawful money of the United States to Landlord at the
address specified in Item 13 of the Basic Lease Provisions, or at any other place as Landlord may
designate in writing. Unless this Lease expressly provides otherwise, as for example in the
payment of Basic Rent and the Tenant’s Share of Operating Expenses pursuant to Sections 4.1 and
4.2, all payments shall be due and payable within five (5) days after demand. All payments
requiring proration shall be prorated on the basis of the number of days in the pertinent
calendar month or year as applicable. Any notice, election, demand, consent, approval or other
communication to be given or other document to be delivered by either party to the other may be
delivered in person or by courier or overnight delivery service to the other party, or may be
deposited in the United States mail, duly registered or certified, postage prepaid, return
receipt requested, and addressed to the other party at the address set forth in Item 12 of the
Basic Lease Provisions, or if to Tenant, at that address or, from and after the Commencement
Date, at the Premises (whether or not Tenant has departed from, abandoned or vacated the
Premises). Either party may, by written notice to the other, served in the manner provided in
this Article, designate a different address. If any notice or other document is sent by mail,
duly registered or certified, it shall be deemed served or delivered seventy-two (72) hours after
mailing. If more than one person or entity is named as Tenant under this Lease, service of any
notice upon any one of them shall be deemed as service upon all of them.



ARTICLE XVII. RULES AND REGULATIONS




     Tenant agrees to observe faithfully and comply strictly with the Rules and Regulations,
attached as Exhibit E, and any reasonable and nondiscriminatory amendments, modifications
and/or additions as may be adopted and published by written notice to tenants by Landlord for the
safety, care, security, good order, or cleanliness of the Premises, Building, Project and Common
Areas. Landlord shall not be liable to Tenant for any violation of the Rules and Regulations or
the breach of any covenant or condition in any lease by any other tenant or such tenant’s agents,
employees, contractors, guests or invitees. One or more waivers by Landlord of any breach of the
Rules and Regulations by Tenant or by any other tenant(s) shall not be a waiver of any subsequent
breach of that rule or any other. Tenant’s failure to keep and observe the Rules and Regulations
shall constitute a breach of this Lease. In the case of any conflict between the Rules and
Regulations and this Lease, this Lease shall be controlling.



ARTICLE XVIII. BROKER’S COMMISSION




     The parties recognize as the broker(s) who negotiated this Lease the firm(s), whose name(s)
is (are) stated in Item 10 of the Basic Lease Provisions, and agree that Landlord shall be
responsible for the payment of brokerage commissions to those broker(s) unless otherwise provided
in this Lease. It is understood and agreed that Landlord’s Broker represents only Landlord in
this transaction and that Tenant’s Broker (if any) represents only Tenant. Each



25









 




party warrants that it has had no dealings with any other real estate broker or agent in
connection with the negotiation of this Lease, and agrees to indemnify and hold the other party
harmless from any cost, expense or liability (including reasonable attorneys’ fees) for any
compensation, commissions or charges claimed by any other real estate broker or agent employed by
the indemnifying party in connection with the negotiation of this Lease. The foregoing agreement
shall survive the termination of this Lease.




ARTICLE XIX. TRANSFER OF LANDLORD’S INTEREST




     In the event of any transfer of Landlord’s interest in the Premises, following the assumption
by the transferee of the obligations of “Landlord” under this Lease accruing from and after the
effective date of such transfer, the transferor shall be automatically relieved of all obligations
on the part of Landlord accruing under this Lease from and after the effective date of such
transfer, provided that any funds held by the transferor in which Tenant has an interest shall be
turned over, subject to that interest, to the transferee and Tenant is notified of the transfer as
required by law. No beneficiary of a deed of trust to which this Lease is or may be subordinate,
and no landlord under a so-called sale-leaseback, shall be responsible in connection with the
Security Deposit, unless the mortgagee or beneficiary under the deed of trust or the landlord
actually receives the Security Deposit. It is intended that the covenants and obligations
contained in this Lease on the part of Landlord shall, subject to the foregoing, be binding on
Landlord, its successors and assigns, only during and with respect to obligations arising during
their respective successive periods of ownership.



ARTICLE XX. INTERPRETATION




     SECTION 20.1. GENDER AND NUMBER. Whenever the context of this Lease requires, the words
“Landlord” and “Tenant” shall include the plural as well as the singular, and words used in
neuter, masculine or feminine genders shall include the others.



     SECTION 20.2. HEADINGS. The captions and headings of the articles and sections of this Lease
are for convenience only, are not a part of this Lease and shall have no effect upon its
construction or interpretation.



     SECTION 20.3. JOINT AND SEVERAL LIABILITY. If more than one person or entity is named as
Tenant, the obligations imposed upon each shall be joint and several and the act of or notice
from, or notice or refund to, or the signature of, any one or more of them shall be binding on all
of them with respect to the tenancy of this Lease, including, but not limited to, any renewal,
extension, termination or modification of this Lease.



     SECTION 20.4. SUCCESSORS. Subject to Articles IX and XIX, all rights and liabilities given to
or imposed upon Landlord and Tenant shall extend to and bind their respective heirs, executors,
administrators, successors and assigns. Nothing contained in this Section is intended, or shall be
construed, to grant to any person other than Landlord and Tenant and their successors and assigns
any rights or remedies under this Lease.



     SECTION 20.5. TIME OF ESSENCE. Time is of the essence with respect to the performance of
every provision of this Lease.



     SECTION 20.6. CONTROLLING LAW/VENUE. This Lease shall be governed by and interpreted in
accordance with the laws of the State of California. Any litigation commenced concerning any
matters whatsoever arising out of or in any way connected to this Lease shall be initiated in the
Superior Court of the county in which the Project is located.



     SECTION 20.7. SEVERABILITY. If any term or provision of this Lease, the deletion of which
would not adversely affect the receipt of any material benefit by either party or the deletion of
which is consented to by the party adversely affected, shall be held invalid or unenforceable to
any extent, the remainder of this Lease shall not be affected and each term and provision of this
Lease shall be valid and enforceable to the fullest extent permitted by law.



     SECTION 20.8. WAIVER AND CUMULATIVE REMEDIES. One or more waivers by Landlord or Tenant of
any breach of any term, covenant or condition contained in this Lease shall not be a waiver of any
subsequent breach of the same or any other term, covenant or condition. Consent to any act by one
of the parties shall not be deemed to render unnecessary the obtaining of that party’s consent to
any subsequent act. No breach by Tenant of this Lease shall be deemed to have been waived by
Landlord unless the waiver is in a writing signed by Landlord. The rights and remedies of Landlord
under this Lease shall be cumulative and in addition to any and all other rights and remedies
which Landlord may have.



     SECTION 20.9. INABILITY TO PERFORM. In the event that either party shall be delayed or
hindered in or prevented from the performance of any work or in performing any act required under
this Lease by reason of any cause beyond the reasonable control of that party, other than financial
inability, then the performance of the work or the doing of the act shall be excused for the period
of the delay and the time for performance shall be extended for a period equivalent to the period
of the delay. The provisions of this Section shall not operate to excuse Tenant from the prompt
payment of rent or from the timely performance of any other obligation under this Lease within
Tenant’s reasonable control.



     SECTION 20.10. ENTIRE AGREEMENT. This Lease and its exhibits and other attachments cover in
full each and every agreement of every kind between the parties concerning the Premises, the
Building, and the Project, and all preliminary negotiations, oral agreements, understandings
and/or practices, except those contained in this Lease, are superseded and of no further effect.
Tenant waives its rights to rely on any representations or promises made by Landlord or others
which are not contained in this Lease. No verbal agreement or implied



26









 




covenant shall be held to modify the provisions of this Lease, any statute, law, or custom to the
contrary notwithstanding.




     SECTION 20.11. QUIET ENJOYMENT. Upon the observance and performance of all the covenants,
terms and conditions on Tenant’s part to be observed and performed, and subject to the other
provisions of this Lease, Tenant shall have the right of quiet enjoyment and use of the Premises
for the Term without hindrance or interruption by Landlord or any other person claiming by or
through Landlord.



     SECTION 20.12. SURVIVAL. All covenants of Landlord or Tenant which reasonably would be
intended to survive the expiration or sooner termination of this Lease, including without
limitation any warranty or indemnity hereunder, shall so survive and continue to be binding upon
and inure to the benefit of the respective parties and their successors and assigns.



     SECTION 20.13. INTERPRETATION. This Lease shall not be construed in favor of or against
either party, but shall be construed as if both parties prepared this Lease.



ARTICLE XXI. EXECUTION AND RECORDING




     SECTION 21.1. COUNTERPARTS. This Lease may be executed in one or more counterparts, each of
which shall constitute an original and all of which shall be one and the same agreement.



     SECTION 21.2. CORPORATE, LIMITED LIABILITY COMPANY AND PARTNERSHIP AUTHORITY. If Tenant is a
corporation, limited liability company or partnership, each individual executing this Lease on
behalf of the corporation, limited liability company or partnership represents and warrants that
he or she is duly authorized to execute and deliver this Lease on behalf of the corporation,
limited liability company or partnership, and that this Lease is binding upon the corporation,
limited liability company or partnership in accordance with its terms. Tenant shall, at Landlord’s
request, deliver a certified copy of its board of directors’ resolution, operating agreement or
partnership agreement or certificate authorizing or evidencing the execution of this Lease.



     SECTION 21.3. EXECUTION OF LEASE; NO OPTION OR OFFER. The submission of this Lease to Tenant
shall be for examination purposes only, and shall not constitute an offer to or option for Tenant
to lease the Premises. Execution of this Lease by Tenant and its return to Landlord shall not be
binding upon Landlord, notwithstanding any time interval, until Landlord has in fact executed and
delivered this Lease to Tenant, it being intended that this Lease shall only become effective upon
execution by Landlord and delivery of a fully executed counterpart to Tenant.



     SECTION 21.4. RECORDING. Tenant shall not record this Lease without the prior written consent
of Landlord. Tenant, upon the request of Landlord, shall execute and acknowledge a “short form”
memorandum of this Lease for recording purposes.



     SECTION 21.5. AMENDMENTS. No amendment or termination of this Lease shall be effective unless
in writing signed by authorized signatories of Tenant and Landlord, or by their respective
successors in interest. No actions, policies, oral or informal arrangements, business dealings or
other course of conduct by or between the parties shall be deemed to modify this Lease in any
respect.



     SECTION 21.6. EXECUTED COPY. Any fully executed photocopy or similar reproduction of this
Lease shall be deemed an original for all purposes.



     SECTION 21.7. ATTACHMENTS. All exhibits, amendments, riders and addenda attached to this
Lease are hereby incorporated into and made a part of this Lease.



ARTICLE XXII. MISCELLANEOUS




     SECTION 22.1. NONDISCLOSURE OF LEASE TERMS. Tenant acknowledges and agrees that the terms of
this Lease are confidential and constitute proprietary information of Landlord. Disclosure of the
terms could adversely affect the ability of Landlord to negotiate other leases and impair
Landlord’s relationship with other tenants. Accordingly, Tenant agrees that it, and its partners,
members, shareholders, officers, directors, employees and attorneys, shall not intentionally and
voluntarily disclose, by public filings or otherwise, the terms and conditions of this Lease
(“Confidential Information”) to any third party, either directly or indirectly, without the prior
written consent of Landlord, which consent may be given or withheld in Landlord’s sole and
absolute discretion. The foregoing restriction shall not apply if either: (i) Tenant is required
to disclose the Confidential Information in response to a subpoena or other regulatory,
administrative or court order, or (ii) Tenant is required to disclose the Confidential Information
to, or file a copy of this Lease with, the Securities and Exchange Commission or other
governmental agency or any stock exchange. In addition, Tenant may disclose the terms of this
Lease to its lenders, attorneys and consultants and to prospective assignees of this Lease and
prospective subtenants under this Lease with whom Tenant is actively negotiating such an
assignment or sublease.



     SECTION 22.2. [Intentionally Deleted]



     SECTION 22.3. CHANGES REQUESTED BY LENDER. If, in connection with obtaining financing for
the Project, the lender shall request reasonable modifications in this Lease as a condition to the
financing, Tenant will not unreasonably withhold or delay its consent, provided that the
modifications do not materially increase the obligations or liability of Tenant or materially and
adversely affect the leasehold interest created by this Lease.



27









 





     SECTION 22.4. MORTGAGEE PROTECTION. No act or failure to act on the part of Landlord which
would otherwise entitle Tenant to be relieved of its obligations hereunder shall result in such a
release or termination unless (a) Tenant has given notice by registered or certified mail to any
beneficiary of a deed of trust or mortgage encumbering the Premises whose address has been
furnished to Tenant in writing and (b) such beneficiary is afforded a reasonable opportunity to
cure the default by Landlord (which in no event shall be less than sixty (60) days), including, if
necessary to effect the cure, time to obtain possession of the Premises by power of sale or
judicial foreclosure provided that such foreclosure remedy is diligently pursued. Tenant agrees
that each beneficiary of a deed of trust or mortgage encumbering the Premises is an express third
party beneficiary hereof, Tenant shall have no right or claim for the collection of any deposit
from such beneficiary or from any purchaser at a foreclosure sale unless such beneficiary or
purchaser shall have actually received and not refunded the deposit, and Tenant shall comply with
any written directions by any beneficiary to pay rent due hereunder directly to such beneficiary
without determining whether a default exists under such beneficiary’s deed of trust.



     SECTION 22.5. COVENANTS AND CONDITIONS. All of the provisions of this Lease shall be
construed to be conditions as well as covenants as though the words specifically expressing or
imparting covenants and conditions were used in each separate provision.



     SECTION 22.6. SECURITY MEASURES. Tenant hereby acknowledges that Landlord shall have no
obligation whatsoever to provide guard service or other security measures for the benefit of the
Premises or the Project. Tenant assumes all responsibility for the protection of Tenant, its
employees, agents, invitees and property from acts of third parties. Nothing herein contained
shall prevent Landlord, at its sole option, from providing security protection for the Project or
any part thereof, in which event the cost thereof shall be included within the definition of
Project Costs.



     SECTION 22.7. SDN LIST. Tenant hereby represents and warrants, to the best of its knowledge,
that neither Tenant nor any officer, director, employee, partner, member or other principal of
Tenant (collectively, “Tenant Parties”) is listed as a Specially Designated National and Blocked
Person (“SDN”) on the list of such persons and entities issued by the U.S. Treasury Office of
Foreign Assets Control (OFAC). In the event Tenant or any Tenant Party is or becomes listed as an
SDN, Tenant shall be deemed in breach of this Lease and Landlord shall have the right to terminate
this Lease immediately upon written notice to Tenant.



	 	 	 	 	 	 	 	 	 	 	 
	LANDLORD:	 	 	 	TENANT:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	THE IRVINE COMPANY LLC 

a Delaware limited liability company	 	 	 	SONICS, INC., 

a Delaware corporation	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Steven M. Case
 

Steven M. Case, Senior Vice President
	 	 
	 	By:
	 	/s/ Grant A. Pierce
 

Name (Print): Grant A. Pierce
	 	 
	 

	 	Leasing, Office Properties
	 	 	 	 	 	Title (Print): PRESIDENT & CEO	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Christopher J. Popma
 

Christopher J. Popma, Vice President
	 	 
	 	By:
	 	/s/ Martin Kovacich
 

Name: Martin Kovacich
	 	 
	 

	 	Operations, Office Properties
	 	 	 	 	 	Title: CFO	 	 







28











 






890 N. MCCARTHY BLVD., SUITES 200 & 220











Plans not to scale




EXHIBIT A




					
	 	 	 	 	 
	November 20, 2007
	 	1
	 	 






 









 





EXHIBIT B




THE IRVINE COMPANY — INVESTMENT PROPERTIES GROUP




HAZARDOUS MATERIAL SURVEY FORM




     The purpose of this form is to obtain information regarding the use of hazardous
substances on Investment Properties Group (“IPG”) property. Prospective tenants and
contractors should answer the questions in light of their proposed activities on the premises.
Existing tenants and contractors should answer the questions as they relate to ongoing
activities on the premises and should update any information previously submitted.



     If additional space is needed to answer the questions, you may attach separate sheets of
paper to this form. When completed, the form should be sent to the following address:



THE IRVINE COMPANY MANAGEMENT OFFICE

690 N. McCarthy Blvd., Suite 100

Milpitas, CA 95035




     Your cooperation in this matter is appreciated. If you have any questions, please
call your property manager at (949) 720-4400 for assistance.




	1.	 	GENERAL INFORMATION.






	 	 	 	 	 	 	 	 	 
	Name of Responding Company:	 	Sonics, Inc.
	Check all that apply:

	 	Tenant
	 	þ   
	 	Contractor   
	 	o   
	 

	 	Prospective   
	 	þ
	 	Existing
	 	o







Mailing
Address: 1098 Alta Avenue, Suite 101, Mountain View, CA




Contact person & Title: MARTIN KOVACICH, CFO




Telephone Number: (650)-605-6114




Current TIC Tenant(s):




	 	Address of Lease Premises:
	 
	 
	 	Length of Lease or Contract Term: 
	 






Prospective TIC Tenant(s):


Address
of Leased Premises: 890 N. McCarthy Blvd., Suite 200 & 220, Milpitas, CA




Address of Current Operations: 1098 Alta Avenue, Suite 101, Mountain View, CA




Describe the proposed operations to take place on the property, including principal
products manufactured or services to be conducted. Existing tenants and contractors
should describe any proposed changes to ongoing operations.




	 	 	General Office

	 
	 	 	 

	 
	 	 	 







	2.	 	HAZARDOUS MATERIALS. For the purposes of this Survey Form, the term
“hazardous material” means any raw material, product or agent considered hazardous
under any state or federal law. The term does not include wastes which are
intended to be discarded.







	 	2.1	 	Will any hazardous materials be used or stored on site?






	 	 	 	 	 	 	 	 	 	 	 
	Chemical Products
	 	Yes	 	 	 	o	 	No	 	þ        
	Biological Hazards/
Infectious Wastes
	 	Yes	 	 	 	o	 	No	 	þ
	Radioactive Materials
	 	Yes	 	 	 	o	 	No	 	þ
	Petroleum Products
	 	Yes	 	 	 	o	 	No	 	þ






					
	 	 	 	 	 
	
	 	1
	 	 











 









 












	 	2.2	 	List any hazardous materials to be used or stored, the quantities that
will be on-site at any given time, and the location and method of storage (e.g.,
bottles in storage closet on the premises).






	 	 	 	 	 
	 	 	Location and Method	 	 
	Hazardous Materials	 	of Storage	 	Quantity
	 	 	 	 	 
	N/A
	 	 
	 	 
	 
	 	 
	 	 
	 	 	 	 	 
	 
	 	 
	 	 
	 	 	 	 	 
	 
	 	 
	 	 
	 	 	 	 	 
	 
	 	 
	 	 






	 	2.3	 	Is any underground storage of hazardous materials proposed or currently
conducted on the premises? Yes o No þ

	 
	 	 	 	If yes, describe the materials to be stored, and the size and construction of the
tank. Attach copies of any permits obtained for the underground storage of such
substances.

	 
	 	 	 	 

	 
	 	 	 	 

	 
	 	 	 	 







	3.	 	HAZARDOUS WASTE. For the purposes of this Survey Form, the term “hazardous waste”
means any waste (including biological, infectious or radioactive waste) considered hazardous
under any state or federal law, and which is intended to be discarded.







	 	3.1	 	List any hazardous waste generated or to be generated on the premises,
and indicate the quantity generated on a monthly basis.






	 	 	 	 	 
	 	 	Location and Method	 	 
	Hazardous Materials	 	of Storage	 	Quantity
	 	 	 	 	 
	N/A
	 	 
	 	 
	 
	 	 
	 	 
	 	 	 	 	 
	 
	 	 
	 	 
	 	 	 	 	 
	 
	 	 
	 	 
	 	 	 	 	 
	 
	 	 
	 	 






	 	3.2	 	Describe the method(s) of disposal (including recycling) for each waste.
Indicate where and how often disposal will take place.






	 	 	 	 	 
	 	 	Location and Method	 	 
	Hazardous Materials	 	of Storage	 	Disposal Method
	 	 	 	 	 
	N/A
	 	 
	 	 
	 
	 	 
	 	 
	 	 	 	 	 
	 
	 	 
	 	 
	 	 	 	 	 
	 
	 	 
	 	 
	 	 	 	 	 
	 
	 	 
	 	 






	 	3.3	 	Is any treatment or processing of hazardous, infectious or radioactive
wastes currently conducted or proposed to be conducted on the premise? Yes o No þ

	 
	 	 	 	If yes, please describe any existing or proposed treatment methods.

	 
	 	 	 	 

	 
	 	 	 	 

	 
	 	 	 	 







3.4 Attach copies of any hazardous waste permits or licenses issued to your
company with respect to its operations on the premises.




					
	 	 	 	 	 
	
	 	2
	 	 







 









 









	4.	 	SPILLS







4.1 During the past year, have any spills or releases of hazardous
materials occurred
on the premises? Yes o No þ




     If so, please describe the spill and attach the results of any testing
conducted to determine the extent of such spills.




	 
	 	 

	 
	 	 

	 
	 	 







	 	4.2	 	Were any agencies notified in connection with such spills?
Yes o No o — N/A







     If so, attach copies of any spill reports or other correspondence with
regulatory agencies.




	 	4.3	 	Were any clean-up actions undertaken in connection
with the spills?

Yes o No o — N/A







     If so, briefly describe the actions taken. Attach copies of any clearance
letters obtained from any regulatory agencies involved and the results of any
final soil or groundwater sampling done upon completion of the clean-up work.




	 
	 	 

	 
	 	 

	 
	 	 







	5.	 	WASTEWATER
TREATMENT/DISCHARGE







	 	5.1	 	Do you discharge industrial wastewater to:






	 	 	 
	o storm drain?

	 	o sewer?
	o surface water?

	 	þ no industrial discharge







	 	5.2	 	Is your industrial wastewater treated before discharge?
Yes o No o  — N/A

	 
	 	 	 	If yes, describe the type of treatment conducted.






	 
	 	 

	 
	 	 

	 
	 	 







5.3 Attach copies of any wastewater discharge permits issued to your
company with respect to its operations on the premises.  —  N/A




	6.	 	AIR DISCHARGES.







	 	6.1	 	Do you have any air filtration systems or stacks that
discharge into the air? 
Yes o No þ

	 
	 	6.2	 	Do you operate any equipment that requires air emissions
permits? 
Yes o No þ

	 
	 	6.3	 	Attach copies of any air discharge permits pertaining to these operations.  — N/A






7. HAZARDOUS MATERIALS DISCLOSURES.




7.1 Does your company handle an aggregate of at least 500 pounds, 55 gallons or
200 cubic feet of hazardous material at any given time? Yes o No þ




7.2 Has your company prepared a Hazardous Materials Disclosure — Chemical
Inventory and Business Emergency Plan or similar disclosure document pursuant to
state or county requirements? Yes o No þ




     If so, attach a copy.









					
	 	 	 	 	 
	
	 	3
	 	 







 









 












	 	7.3	 	Are any of the chemicals used in your operations regulated under
Proposition 65?
No

	 
	 	 	 	If so, describe the procedures followed to comply with these
requirements.







	 
	 	 

	 
	 	 

	 
	 	 






7.4 Is your company subject to OSHA Hazard Communication Standard
Requirements? Yes o No þ




     If so, describe the procedures followed to comply with these requirements.




	 
	 	 

	 
	 	 

	 
	 	 






	8.	 	ANIMAL TESTING.







8.1 Does your company bring or intend to bring live animals onto the premises for
research or development purposes? Yes o No þ




     If so, describe the activity.





	 
	 	 

	 
	 	 

	 
	 	 





8.2 Does your company bring or intend to bring animal body parts or bodily
fluids onto the premises for research or development purposes? Yes o No þ




     If so, describe the activity.




	 
	 	 

	 
	 	 

	 
	 	 







	9.	 	ENFORCEMENT ACTIONS, COMPLAINTS.







9.1 Has your company ever been subject to any agency enforcement actions,
administrative orders, lawsuits, or consent orders/decrees regarding environmental
compliance or health and safety? Yes o No þ




     If so, describe the actions and any continuing obligations imposed as a result
of these actions.




	 
	 	 

	 
	 	 

	 
	 	 






9.2 Has your company ever received any request for information, notice of violation
or demand letter, complaint, or inquiry regarding environmental compliance or health
and safety? Yes o No þ




9.3 Has an environmental audit ever been conducted which concerned operations or
activities on premises occupied by you? Yes o No þ




					
	 	 	 	 	 
	November 20, 2007
	 	4
	 	 






 









 






9.4 If you answered “yes” to any questions in this section, describe the
environmental action or complaint and any continuing
compliance obligation imposed as a result of the same.




	 	 	N/A

	 
	 	 	 

	 
	 	 	 

	 
	 	 	 

	 
	 	 	 

	 





	 	 	 	 	 
	 	 	 
	 	 	 
	
 
	 	By:  	/s/ Martin Kovacich
 	 
	 	 	Name:  	MARTIN KOVACICH 	 
	 	 	Title:  	CFO 	 
	 	 	Date: 	November 21, 2007 	 





5 











 





EXHIBIT C




LANDLORD’S DISCLOSURES




None








 









 





EXHIBIT D




TENANT’S INSURANCE




     The following requirements for Tenant’s insurance shall be in effect at the Building, and
Tenant shall also cause any subtenant to comply with these requirements. Landlord reserves the
right to adopt reasonable nondiscriminatory modifications and additions to these insurance
requirements. Tenant agrees to obtain and present evidence to Landlord that it has fully complied
with the insurance requirements.



     1. Tenant shall, at its sole cost and expense, commencing on the date Tenant is given access
to the Premises for any purpose and during the entire Term, procure, pay for and keep in full force
and effect: (i) commercial general liability insurance with respect to the Premises and the
operations of or on behalf of Tenant in, on or about the Premises, including but not limited to
coverage for personal injury, contractual liability, independent contractors, broad form property
damage, fire legal liability, products liability (if a product is sold from the Premises), and
liquor law liability (if alcoholic beverages are sold, served or consumed within the Premises),
which policy(ies) shall be written on an “occurrence” basis and for not less than the amount set
forth in Item 14 of the Basic Lease Provisions, with a combined single limit (with a $50,000
minimum limit on fire legal liability) per occurrence for bodily injury, death, and property damage
liability, or the current limit of liability carried by Tenant, whichever is greater, and subject
to such increases in amounts as Landlord may determine from time to time; (ii) workers’
compensation insurance coverage as required by law, together with employers’ liability insurance of
at least One Million Dollars ($1,000,000.00); (iii) with respect to Alterations and the like
required or permitted to be made by Tenant under this Lease, builder’s risk insurance in an amount
equal to the replacement cost of the work; (iv) insurance against fire, vandalism, malicious
mischief and such other additional perils as may be included in a standard “special form” policy,
insuring Tenant’s Alterations, trade fixtures, furnishings, equipment and items of personal
property of Tenant located in the Premises, in an amount equal to not less than ninety percent
(90%) of their actual replacement cost (with replacement cost endorsement); and (v) business
interruption coverage in amounts satisfactory to cover one (1) year of loss. In no event shall the
limits of any policy be considered as limiting the liability of Tenant under this Lease.



     2. In the event Landlord consents to Tenant’s use, generation or storage of Hazardous
Materials on, under or about the Premises pursuant to Section 5.3 of this Lease, Landlord shall
have the continuing right to require Tenant, at Tenant’s sole cost and expense (provided the same
is available for purchase upon commercially reasonable terms), to purchase insurance specified and
approved by Landlord, with coverage not less than Five Million Dollars ($5,000,000.00), insuring
(i) any Hazardous Materials shall be removed from the Premises, (ii) the Premises shall be
restored to a clean, healthy, safe and sanitary condition, and (iii) any liability of Tenant,
Landlord and Landlord’s officers, directors, shareholders, agents, employees and representatives,
arising from such Hazardous Materials.



     3. All policies of insurance required to be carried by Tenant pursuant to this Exhibit
D shall be written by responsible insurance companies authorized to do business in the State
of California and with a general policyholder rating of not less than “A-” and financial rating of
not less than “VIII” in the most current Best’s Insurance Report. The deductible or other retained
limit under any policy carried by Tenant shall be commercially reasonable, and Tenant shall be
responsible for payment of such retained limit with full waiver of subrogation in favor of
Landlord. Any insurance required of Tenant may be furnished by Tenant under any blanket policy
carried by it or under a separate policy. A true and exact copy of each paid up policy evidencing
the insurance (appropriately authenticated by the insurer) or a certificate of insurance,
certifying that the policy has been issued, provides the coverage required by this Exhibit
D and contains the required provisions, together with endorsements acceptable to Landlord
evidencing the waiver of subrogation and additional insured provisions required below, shall be
delivered to Landlord prior to the date Tenant is given the right of possession of the Premises.
Proper evidence of the renewal of any insurance coverage shall also be delivered to Landlord not
less than thirty (30) days prior to the expiration of the coverage. In the event of a loss covered
by any policy under which Landlord is an additional insured, Landlord shall be entitled to review
a copy of such policy.



     4. Each policy evidencing insurance required to be carried by Tenant pursuant to this
Exhibit D shall contain the following provisions and/or clauses satisfactory to Landlord:
(i) with respect to Tenant’s commercial general liability insurance, a provision that the policy
and the coverage provided shall be primary and that any coverage carried by Landlord shall be in
excess of and noncontributory with respect to any policies carried by Tenant, together with a
provision including Landlord, the Additional Insureds identified in Item 11 of the Basic Lease
Provisions and any other parties in interest designated by Landlord, as additional insureds; (ii)
except with respect to Tenant’s commercial general liability insurance, a waiver by the insurer of
any right to subrogation against Landlord, its agents, employees, contractors and representatives
which arises or might arise by reason of any payment under the policy or by reason of any act or
omission of Landlord, its agents, employees, contractors or representatives; and (iii) a provision
that the insurer will not cancel or change the coverage provided by the policy without first
giving Landlord thirty (30) days prior written notice. Tenant shall also name Landlord, the
Additional Insureds identified in Item 11 of the Basic Lease Provisions and any other parties in
interest designated by Landlord, as additional insureds on any excess or umbrella liability
insurance policy carried by Tenant.



     5. In the event that Tenant fails to procure, maintain and/or pay for, at the times and for
the durations specified in this Exhibit D. any insurance required by this Exhibit
D. or fails to carry insurance required by any governmental authority, Landlord may at its
election procure that insurance and pay the premiums, in which event Tenant shall repay Landlord
all sums paid by Landlord, together with interest at the maximum rate permitted by law and any
related costs or expenses incurred by Landlord, within ten (10) days following Landlord’s written
demand to Tenant.
















 





          NOTICE TO TENANT: IN ACCORDANCE WITH THE TERMS OF THIS LEASE, TENANT MUST PROVIDE EVIDENCE OF
THE REQUIRED INSURANCE TO LANDLORD’S MANAGEMENT AGENT PRIOR TO BEING AFFORDED ACCESS TO THE
PREMISES.



			
	
	 	







2









 








EXHIBIT E 




RULES AND REGULATIONS




     This Exhibit sets forth the rules and regulations governing Tenant’s use of the Premises
leased to Tenant pursuant to the terms, covenants and conditions of the Lease to which this
Exhibit is attached and therein made part thereof. In the event of any conflict or inconsistency
between this Exhibit and the Lease, the Lease shall control.



     1. Tenant shall not place anything or allow anything to be placed near the glass of any
window, door, partition or wall, which may appear unsightly from outside the Premises.



     2. The walls, walkways, sidewalks, entrance passages, elevators, stairwells, courts and
vestibules shall not be obstructed or used for any purpose other than ingress and egress of
pedestrian travel to and from the Premises, and shall not be used for smoking, loitering or
gathering, or to display, store or place any merchandise, equipment or devices, or for any other
purpose. The walkways, sidewalks, entrance passageways, courts, vestibules and roof are not for
the use of the general public and Landlord shall in all cases retain the right to control and
prevent access thereto by all persons whose presence in the judgment of the Landlord shall be
prejudicial to the safety, character, reputation and interests of the Building and its tenants,
provided that nothing herein contained shall be construed to prevent such access to persons with
whom Tenant normally deals in the ordinary course of Tenant’s business unless such persons are
engaged in illegal activities. Smoking is permitted outside the building and within the project
only in areas designated by Landlord. Neither Tenant nor its employees, agents, contractors,
invitees or licensees shall bring any firearm, whether loaded or unloaded, into the Project at any
time. No tenant or employee or invitee or agent of any tenant shall be permitted upon the roof of
the Building without prior written approval from Landlord.



     3. No awnings or other projection shall be attached to the outside walls of the Building. No
security bars or gates, curtains, blinds, shades or screens shall be attached to or hung in, or
used in connection with, any window or door of the Premises without the prior written consent of
Landlord. Neither the interior nor exterior of any windows shall be coated or otherwise sunscreened
without the express written consent of Landlord.



     4. Tenant shall not mark, nail, paint, drill into, or in any way deface any part of the
Premises or the Building except to affix standard pictures or other
wall hangings on the interior
walls of the premises so long as they are not visible from the exterior of the building. Tenant
shall not lay linoleum, tile, carpet or other similar floor covering so that the same shall be
affixed to the floor of the Premises in any manner except as approved by Landlord in writing. The
expense of repairing any damage resulting from a violation of this rule or removal of any floor
covering shall be borne by Tenant.



     5. The toilet rooms, urinals, wash bowls and other plumbing apparatus shall not be used for
any purpose other than that for which they were constructed and no foreign substance of any kind
whatsoever shall be thrown therein. Any pipes or tubing used by Tenant to transmit water to an
appliance or device in the Premises must be made of copper or stainless steel, and in no event
shall plastic tubing be used for that purpose. The expense of any breakage, stoppage or damage
resulting from the violation of this rule shall be borne by the tenant who, or whose employees or
invitees, caused it.



     6. Landlord shall direct electricians as to the manner and location of any future telephone
wiring. No boring or cutting for wires will be allowed without the prior consent of Landlord. The
locations of the telephones, call boxes and other office equipment affixed to the Premises shall
be subject to the prior written approval of Landlord.



     7. The Premises shall not be used for manufacturing or for the storage of merchandise except
as such storage may be incidental to the permitted use of the Premises. No exterior storage shall
be allowed at any time without the prior written approval of Landlord. The Premises shall not be
used for cooking (except for microwave oven or similar cooking devices) or washing clothes without
the prior written consent of Landlord, or for lodging or sleeping or for any immoral or illegal
purposes.



     8. Tenant shall not make, or permit to be made, any unseemly or disturbing noises or disturb
or interfere with occupants of this or neighboring buildings or premises or those having business
with them, whether by the use of any musical instrument, radio, phonograph, noise, or otherwise.
Tenant shall not use, keep or permit to be used, or kept, any foul or obnoxious gas or substance
in the Premises or permit or suffer the Premises to be used or occupied in any manner offensive or
objectionable to Landlord or other occupants of this or neighboring buildings or premises by
reason of any odors, fumes or gases.



     9. No animals, except for seeing eye dogs, shall be permitted at any time within the
Premises.



     10. Tenant shall not use the name of the Building or the Project in connection with or in
promoting or advertising the business of Tenant, except as Tenant’s address, without the written
consent of Landlord. Landlord shall have the right to prohibit any advertising by any Tenant
which, in Landlord’s reasonable opinion, tends to impair the reputation of the Project or its
desirability for its intended uses, and upon written notice from Landlord any Tenant shall refrain
from or discontinue such advertising.



     11. Canvassing, soliciting, peddling, parading, picketing, demonstrating or otherwise
engaging in any conduct that unreasonably impairs the value or use of the Premises or the Project
are prohibited and each Tenant



			
	 
	 	1


















 




shall cooperate to prevent the same. Landlord shall have full and absolute authority to regulate
or prohibit the entrance to the Premises of any vendor, supplier, purveyor, petitioner,
proselytizer or other similar person if, in the good faith judgment of Landlord, such person
will be involved in general solicitation activities, or the proselytizing, petitioning, or
disturbance of other tenants or their customers or invitees, or engaged or likely to engage in
conduct which may in Landlord’s opinion distract from the use of the Premises for its intended
purpose. Notwithstanding the foregoing, Landlord reserves the absolute right and discretion to
limit or prevent access to the Buildings by any food or beverage vendor, whether or not invited
by Tenant, and Landlord may condition such access upon the vendor’s execution of an entry permit
agreement which may contain provisions for insurance coverage and/or the payment of a fee to
Landlord.




     12. No equipment of any type shall be placed on the Premises which in Landlord’s opinion
exceeds the load limits of the floor or otherwise threatens the soundness of the structure or
improvements of the Building.



     13. Regular building hours of operation are from 6:00 AM to 6:00 PM Monday through Friday
and 9:00 AM to 1:00 PM on Saturday. No air conditioning unit or other similar apparatus shall be
installed or used by any Tenant without the prior written consent of Landlord.



     14. The entire Premises, including vestibules, entrances, parking areas, doors, fixtures,
windows and plate glass, shall at all times be maintained in a safe, neat and clean condition by
Tenant. All trash, refuse and waste materials shall be regularly removed from the Premises by
Tenant and placed in the containers at the locations designated by Landlord for refuse
collection. All cardboard boxes must be “broken down” prior to being placed in the trash
container. All styrofoam chips must be bagged or otherwise contained prior to placement in the
trash container, so as not to constitute a nuisance. Pallets must be immediately disposed of by
tenant and may not be disposed of in the Landlord provided trash container or enclosures.
Pallets may be neatly stacked in an exterior location on a temporary basis (no longer than 5
days) so long as Landlord has provided prior written approval. The burning of trash, refuse or
waste materials is prohibited.



     15. Tenant shall use at Tenant’s cost such pest extermination contractor as Landlord may
direct and at such intervals as Landlord may require.



     16. Subject to any key card system installed by Tenant, all keys for the Premises shall
be provided to Tenant by Landlord and Tenant shall return to Landlord any of such keys so provided upon the
termination of the Lease. Tenant shall not change locks or install other locks on doors of the
Premises, without the prior written consent of Landlord. In the event of loss of any keys
furnished by Landlord for Tenant, Tenant shall pay to Landlord the costs thereof. Upon the
termination of its tenancy, Tenant shall deliver to Landlord all the keys to lobby(s), suite(s)
and telephone & electrical room(s) which have been furnished to Tenant or which Tenant shall
have had made.



     17. No person shall enter or remain within the Project while intoxicated or under the
influence of liquor or drugs. Landlord shall have the right to exclude or expel from the Project
any person who, in the absolute discretion of Landlord, is under the influence of liquor or
drugs.



     18. The moving of large or heavy objects shall occur only between those hours as may be
designated by, and only upon previous written notice to, Landlord, and the persons employed to
move those objects in or out of the Building must be reasonably acceptable to Landlord. Without
limiting the generality of the foregoing, no freight, furniture or bulky matter of any description
shall be received into or moved out of the lobby of the Building or carried in the elevator except between those hours as may be designated by Landlord.



     19. Tenant shall not install equipment, such as but not limited to electronic tabulating or
computer equipment, requiring electrical or air conditioning service in excess of that to be
provided by Landlord under the Lease without prior written consent of Landlord.



     20. Landlord may from time to time grant other tenants of the project individual and
temporary variances from these Rules, provided that any variance does not have a material adverse
effect on the use and enjoyment of the Premises by Tenant.



     21. Landlord reserves the right to reasonably amend or supplement the foregoing Rules and
Regulations and to adopt and promulgate additional reasonable rules and regulations applicable to
the Premises. Notice of such rules and regulations and amendments and supplements thereto, if
any, shall be given to the Tenant.



2









 






EXHIBIT F




IRREVOCABLE STANDBY LETTER OF CREDIT




	 	 	 
	Number:

	 	 


	Date:

	 	 


	Amount:

	 	 


	Expiration:

	 	 








	 	 	 	 	 
	BENEFICIARY

	 	ACCOUNT PARTY
	 	 
	 
	The Irvine Company

	 	 

	 	 
	550 Newport Center Drive

	 	 

	 	 
	Newport Beach, CA 92660

	 	 

	 	 
	Attn: Senior Vice President,
Operations
	 	 	 
	Office Properties
	 	 	 





We hereby
issue our Irrevocable Letter of Credit No. ___________
in favor of The Irvine
Company, and its successors and assigns for the account of                     . We undertake
to honor your draft or drafts, delivered to us from time to time, for any sum or sums not to
exceed a total of
                    
($                    ) in favor of said beneficiary when
accompanied by the draft described below and a letter from an officer of The Irvine Company or
such successor or assign that states as follows: “The “Landlord” under the Lease pursuant to which
this letter of credit was issued is authorized to draw upon this Letter of Credit in the amount of
the accompanying draft according to the terms of its lease agreement with the Account Party as
“Tenant”.”



It is a condition of this letter of credit that it shall remain enforceable against us for a period
of ___________ from
this date and further, that it shall be deemed automatically extended for successive one-year periods without amendment thereafter unless thirty (30) days prior to the
expiration date set forth above, or within thirty (30) days prior to the end of any yearly
Anniversary Date thereafter, you shall receive our notice in writing by certified mail, return
receipt requested, that we elect not to renew this letter of credit for any subsequent year. We
shall reissue this letter of credit to a new party which is a successor or assign upon written
request by The Irvine Company or such successor or assign accompanied by a certificate that the
Lease pursuant to which this letter of credit was issued was assigned to such party.



The draft must be marked “Drawn under                      Letter of Credit No.                     
dated                     .”



There are no other conditions of this letter of credit. Except so far as otherwise stated, this
credit is subject to the Uniform Customs and Practice for Documentary Credits (1993 Revision,
International Chamber of Commerce, Publication No. 500).




	 	 	 	 	 
	 	 	 
	
 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	By:  	
 	 	 
	 	 	 
	By:  	 	 	 
	 



1









 






EXHIBIT X




INDUSTRIAL WORK LETTER




DOLLAR ALLOWANCE



The tenant improvement work to be contracted for by Landlord hereunder (“Tenant Improvement Work”)
shall consist of the design and construction of all tenant improvements (“Tenant Improvements”),
including work in place as of the date hereof, required for the Premises pursuant to the approved
final Working Drawings and Specifications (as hereinafter defined). The Tenant Improvement Work may
also include floor mounted electrical outlets, data outlets, video screens, and mounts for cameras.
All of the Tenant Improvement Work shall be performed by a contractor selected by Landlord and in
accordance with the procedures and requirements set forth below.





	I.	 	ARCHITECTURAL AND CONSTRUCTION PROCEDURES.






	 	A.	 	Prior to the date of this Lease, Tenant and Landlord have approved
both (i) a pricing plan dated 11/05/07 prepared by Gensler
(“Preliminary Plan”), and (ii) a Preliminary Pricing #2 cost estimate
dated 11/14/07 prepared by Gensler of the cost to complete the Tenant
Improvements in accordance with the Preliminary Plan (“Preliminary
Cost Estimate”). The Preliminary Plan includes Landlord’s building
standard tenant improvements, materials and specifications for the
Project as set forth in Schedule I attached hereto (“Building
Standard Improvements”), except for changes and additions to the
Building Standards specifically noted in the Preliminary Plan or Cost
Estimate (any such addition or variation from the Standard
Improvements shall be referred to herein as a (“Non-Standard
Improvement”).
	 
	 	B.	 	Within five (5) days following request by Landlord or its architect,
Tenant shall provide in writing to Landlord or Landlord’s architect
all specifications and information requested by Landlord for the
preparation of final construction documents and costing, including
without limitation Tenant’s final selection of paint and floor
finishes, complete specifications and locations (including electrical,
load and HVAC requirements) of Tenant’s equipment, and details of all
Non-Standard Improvements (as defined above) which have been approved
by Landlord as part of the Preliminary Plan (collectively,
“Programming Information”). Tenant’s failure to timely provide the
Programming Information shall constitute a Tenant Delay for purposes
of this Lease. Tenant understands that final construction documents
for the Tenant Improvements shall be predicated on the Programming
Information, and accordingly that such information must be accurate and
complete and that any defects or problems due to incomplete or
inaccurate Programming Information shall be the responsibility of the
Tenant and that the Landlord shall have no obligation or liability for
such defects or problems arising from any incomplete or inaccurate
Programming Information. Any delays in the completion of the Tenant
Improvements due to incomplete or inaccurate Programming Information
shall constitute a Tenant Delay.
	 
	 	C.	 	Upon Tenant’s delivery of the complete Programming Information,
Landlord’s architect and engineers shall prepare and deliver to Tenant
working drawings and specifications (“Working Drawings and
Specifications”), and Landlord’s contractor shall prepare a final
construction cost estimate (“Final Cost Estimate”) for the Tenant
Improvements in conformity with the Working Drawings and
Specifications. A copy of the Final Cost Estimate shall be delivered
to Tenant for its approval unless there are no Non-Standard Tenant
Improvements and Tenant is not responsible for any Tenant’s
Contribution. Tenant shall have five (5) days from the receipt thereof
to approve or disapprove the Working Drawings and Specifications and
(if delivered to Tenant) the Final Cost Estimate. Tenant shall not
unreasonably withhold or delay its approval, and any disapproval or
requested modification shall be limited to items not consistent with
the approved Preliminary Plan or Preliminary Cost Estimate. Should
Tenant disapprove the Working Drawings and Specifications or the Final
Cost Estimate, such disapproval shall be accompanied by specific
reasons for disapproval and a detailed list of requested revisions.
Any revision requested by Tenant and accepted by Landlord, in its sole
and absolute discretion, shall be incorporated into a revised set of
Working Drawings and Specifications and the Final Cost Estimate, and
Tenant shall approve same in writing within five (5) days of receipt
without further revision. Except for “Changes” requested by Tenant and
approved by Landlord as provided in Section I.E below and except for
revisions required by code and/or by the City of Milpitas, Landlord
shall make no material revision to the approved Working Drawings and
Specifications without the prior approval of Tenant (which approval
shall not be unreasonably withheld).
	 
	 	D.	 	In the event that Tenant requests in writing a revision to the Working
Drawings and Specifications (“Change”), and Landlord so approves such
Change as provided in Section I.E. herein, Landlord shall advise
Tenant by written change order as soon as is practical of any increase
in the Completion Cost such Change would cause. Tenant shall approve
or disapprove such change order, if any, in writing within two (2)
days following Tenant’s receipt of such change order. If Tenant
approves any such change order, Landlord, at its election, may either
(i) require as a condition to the effectiveness of such change order
that Tenant pay the increase in the Completion Cost attributable to
such change order concurrently with delivery of Tenant’s approval of
the change order, or (ii) defer Tenant’s payment of such increase
until the date ten (10) days after delivery of invoices for same,
provided





1









 







	 	 	 	however, that the Tenant Contribution must in any event be paid in full prior to
Tenant’s commencing occupancy of the Premises. If Tenant disapproves any such
change order, Tenant shall nonetheless be responsible for the reasonable
architectural and/or planning fees incurred in preparing such change order.
Landlord shall have no obligation to interrupt or modify the Tenant Improvement
Work pending Tenant’s approval of a change order, but if Tenant fails to timely
approve a change order, Landlord may (but shall not be required to) suspend the
applicable Tenant Improvement Work, in which event any related critical path
delays because of such suspension shall constitute Tenant Delays hereunder.
	 
	 	E.	 	Landlord may consent in writing, in its sole and absolute discretion, to
Tenant’s request for a Change, including any modification of a Standard
Improvement to a Non-Standard Improvement in the Preliminary Plan or any
other modification of the Working Drawings and Specifications, if requested
in writing by Tenant. In addition, Landlord agrees that it shall not
unreasonably withhold its consent to Tenant’s requested Changes to
previously approved Non-Standard Improvements, unless Landlord determines,
in its sole and absolute discretion, that such requested Change to the
Non-Standard Improvements (i) is of a lesser quality than the Non-Standard
Improvements previously approved by Landlord, (ii) fails to conform to
applicable governmental requirements, (iii) would result in the Premises
requiring building services beyond the level normally provided to other
tenants, (iv) would delay construction of the Tenant Improvements and
Tenant declines to accept such delay in writing as a Tenant Delay, (v)
interferes in any manner with the proper functioning of, or Landlord’s
access to, any mechanical, electrical, plumbing or HVAC systems, facilities
or equipment in or serving the Building, or (vi) would have an adverse
aesthetic impact to the Premises or cause additional expenses to Landlord
in reletting the Premises. All Tenant Improvements shall become the
property of Landlord and shall be surrendered with the Premises at the end
of the Term; except that: (A) the HVAC unit installed in the tele/data room
and the miniblinds installed in the sidelights shall be removed and all
damage to the Premises shall be repaired by the Expiration Date or sooner
termination of the Lease, and (B) Landlord may, by notice to Tenant given
at the time of Landlord’s approval of a Change, require Tenant either to
remove all or any of the Tenant Improvements approved by way of a Change,
to repair any damage to the Premises or the Common Area arising from such
removal, and to replace Non-Standard Improvements approved by way of a
Change with the applicable Building Standard, or to reimburse Landlord for
the reasonable cost of such removal, repair and replacement upon demand.
Any such removals, repairs and replacements by Tenant shall be completed by
the Expiration Date, or sooner termination of this Lease.
	 
	 	F.	 	Notwithstanding any provision in the Lease to the contrary, and not by way
of limitation of any other rights or remedies of Landlord, if Tenant fails
to comply with any of the time periods specified in this Work Letter, fails
otherwise to approve or reasonably disapprove any submittal within the time
period specified herein for such response (or if no time period is so
specified, within five (5) days following Tenant’s receipt thereof), fails
to provide all of the Programming Information requested by Landlord within
the time provided herein, fails to approve in writing the Working Drawings
and Specifications or the Final Cost Estimate within the time provided
herein, fails to timely deliver the Tenant’s Contribution as required
hereunder, requests any Changes, furnishes inaccurate or erroneous
Programming Information, specifications or other information, or otherwise
delays in any manner the completion of the Tenant Improvements (including
without limitation by specifying materials that are not readily available)
or the issuance of an occupancy certificate (any of the foregoing being
referred to in this Lease as a “Tenant Delay”), then Tenant shall bear any
resulting additional construction cost or other expenses, and the
Commencement Date of this Lease shall be deemed to have occurred for all
purposes, including without limitation Tenant’s obligation to pay rent, as
of the date Landlord reasonably determines that it would have been able to
deliver the Premises to Tenant but for the collective Tenant Delays (but in
no event sooner than January 1, 2008). Should Landlord determine that the
Commencement Date should be advanced in accordance with the foregoing, it
shall so notify Tenant in writing. Landlord’s determination shall be
conclusive unless Tenant notifies Landlord in writing, within five (5) days
thereafter, of Tenant’s election to contest same by arbitration pursuant to
Paragraph III below. Pending the outcome of such arbitration proceedings,
Tenant shall make timely payment of all rent due under this Lease based
upon the Commencement Date set forth in the aforesaid notice from Landlord.
	 
	 	G.	 	Landlord shall permit Tenant and its agents to enter the Premises at least
two (2) weeks prior to the Commencement Date of the Lease in order that
Tenant may install fixtures, furniture and cabling through Tenant’s own
contractors prior to the Commencement Date. Any such work shall be subject
to Landlord’s prior written approval, and shall be performed in a manner
and upon terms and conditions and at times satisfactory to Landlord’s
representative. The foregoing license to enter the Premises prior to the
Commencement Date is, however, conditioned upon Tenant’s contractors and
their subcontractors and employees working in harmony and not interfering
with the work being performed by Landlord as determined by Landlord in
Landlord’s sole and absolute discretion. If at any time that entry shall
cause disharmony or interfere with the work being performed by Landlord as
defined by Landlord in Landlord’s sole and absolute discretion, this
license may be withdrawn by Landlord upon twenty-four (24) hours written
notice to Tenant. That license is further conditioned upon the compliance
by Tenant’s contractors with all requirements imposed by Landlord on third
party contractors, including without limitation the maintenance by Tenant
and its contractors and subcontractors of workers’ compensation and public
liability and property damage insurance in





2











 






	 	 	 	amounts and with companies and on forms satisfactory to Landlord, with certificates
of such insurance being furnished to Landlord prior to proceeding with any such
entry. The entry shall be deemed to be under all of the provisions of the Lease
except as to the covenants to pay Basic Rent and Operating Expenses. Landlord shall
not be liable in any way for any injury, loss or damage which may occur to any such
work being performed by Tenant, the same being solely at Tenant’s risk. In no event
shall the failure of Tenant’s contractors to complete any work in the Premises
extend the Commencement Date of this Lease beyond the date that Landlord has
completed its Tenant Improvement Work and tendered the Premises to Tenant.
	 
	 	H.	 	Tenant hereby designates Martin Kovacich (“Tenant’s Construction Representative”),
Telephone No. (650) 606-6114, as its representative, agent and attorney-in-fact for all
matters related to the Tenant Improvement Work, including but not by way of
limitation, for purposes of receiving notices, approving submittals and issuing
requests for Changes, and Landlord shall be entitled to rely upon authorizations
and directives of such person(s) as if given directly by Tenant. The foregoing
authorization is intended to provide assurance to Landlord that it may rely upon
the directives and decision making of the Tenant’s Construction Representative with
respect to the Tenant Improvement Work and is not intended to limit or reduce
Landlord’s right to reasonably rely upon any decisions or directives given by other
officers or representatives of Tenant. Tenant may amend the designation of its
Tenant’s Construction Representative(s) at any time upon delivery of written notice
to Landlord.






	II.	 	COST OF TENANT IMPROVEMENTS






	 	A.	 	Landlord shall complete, or cause to be completed, the Tenant Improvements,
at the construction cost shown in the Final Cost Estimate (subject to
increases for Landlord approved Changes and as otherwise provided in this
Work Letter), in accordance with final Working Drawings and Specifications
approved by both Landlord and Tenant.
	 
	 	B.	 	Landlord shall pay up to One Hundred Forty Four Thousand Six Hundred Thirty
Dollars ($144,630.00), based on $7.50 per usable square foot of the
Premises (“Landlord’s Maximum Contribution”), of the final “Completion
Cost” (as defined below), but applicable only to “Building Standard
Improvements” (as defined below). Tenant acknowledges that the Landlord’s
Maximum Contribution is intended only as the maximum amount Landlord will
pay toward Building Standard Improvements, and not by way of limitation,
any partitions, modular office stations, fixtures, cabling, furniture and
equipment requested by Tenant are not included in Building Standards and
are in no event subject to payment as part of Landlord’s Contribution;
provided, however, that Landlord acknowledges that the items described on
Schedule 2 attached to this Work Letter are both included in the
approved Preliminary Plan and/or in the approved Preliminary Cost Estimate
and are subject to being paid for from the Landlord’s Maximum Contribution.
In the event the sum of the cost of the Building Standard Improvements for
the Tenant Improvements is less than the Landlord’s Maximum Contribution,
Landlord’s actual contribution toward the Completion Cost (“Landlord’s
Contribution”) shall equal such lesser amount, and Tenant shall have no
right to receive any credit, refund or allowance of any kind for any unused
portion of the Landlord’s Maximum Contribution nor shall Tenant be allowed
to make revisions to an approved Preliminary Plan, Working Drawings and
Specifications or request a Change in an effort to apply any unused portion
of Landlord’s Maximum Contribution.
	 
	 	C.	 	Subject to the provisions for payment of the items shown on Schedule
2 from the Landlord’s Maximum Contribution contained in Section II.B
above, Tenant shall pay all Completion Costs attributable to Non-Standard
Improvements requested by Tenant (“Non-Standard Improvement Costs”),
including, but not by way of limitation: (i) costs for each variance or
upgrade which increases the cost of a Building Standard Improvement, and
(ii) the entire cost of any improvements or work which are additions (as
opposed to variances or upgrades) to the Standard Improvements (e.g.,
supplemental or back-up power or HVAC, extra finishes or millwork or
partitions). In addition, Tenant shall pay all Completion Costs
attributable to any Changes requested by the Tenant, any costs due to
inaccurate or incomplete Programming Information and the amount, if any, by
which aggregate costs for the Building Standard Improvements exceeds the
Maximum Landlord Contribution. The amounts to be paid by Tenant for the
Tenant Improvements pursuant to this Section II.C. are sometimes
cumulatively referred to herein as the “Tenant’s Contribution”.
	 
	 	D.	 	The “Completion Cost” shall mean all costs of Landlord in completing the
Tenant Improvements in accordance with the approved Working Drawings and
Specifications, including but not limited to the following: (i) payments
made to architects, engineers, contractors, subcontractors and other third
party consultants in the performance of the work, (ii) salaries and fringe
benefits of persons, if any, in the direct employ of Landlord performing
any part of the construction work, (iii) permit fees and other sums paid to
governmental agencies, and (iv) costs of all materials incorporated into
the work or used in connection with the work. The Completion Cost shall
also include an administrative/supervision fee to be paid to Landlord or to
Landlord’s management agent in the amount of five percent (5%) of the
Completion Cost. Unless expressly authorized in writing by Landlord, the
Completion Cost shall not include (and no portion of the Landlord
Contribution shall be paid for) any costs incurred by Tenant, including
without limitation, any costs for space planners, managers, advisors or
consultants retained by Tenant in connection with the Tenant Improvements.





3









 





	 	E.	 	Prior to start of construction of the Tenant Improvements, Tenant shall pay
to Landlord in full the amount of the Tenant’s Contribution set forth in
the approved Preliminary Cost Estimate or in the Final Cost Estimate (once
approved by Tenant). If the actual Completion Cost of the Tenant
Improvements is greater than the Final Cost Estimate because of Changes,
modifications or extras not reflected on the approved Working Drawings and
Specifications, or because of Tenant Delays, then Tenant shall pay all such
additional costs within ten (10) days after written demand for same. The
balance of any sums not otherwise paid by Tenant shall be due and payable
on or before the Commencement Date of this Lease. If Tenant defaults in the
payment of any sums due under this Work Letter, Landlord shall (in addition
to all other remedies) have the same rights as in the case of Tenant’s
failure to pay rent under the Lease, including, without limitation, the
right to terminate this Lease and recover damages from Tenant and/or to
charge a late payment fee and to collect interest on delinquent payments,
and Landlord may (but shall not be required to) suspend the Tenant
Improvement Work following such default, in which event any delays because
of such suspension shall constitute Tenant Delays hereunder.






	III.	 	DISPUTE RESOLUTION






	 	A.	 	All claims or disputes between Landlord and Tenant arising out of, or
relating to, this Work Letter shall be decided by the JAMS/ENDISPUTE
(“JAMS”), or its successor, with such arbitration to be held in Orange
County, California, unless the parties mutually agree otherwise. Within ten
(10) business days following submission to JAMS, JAMS shall designate three
arbitrators and each party may, within five (5) business days thereafter,
veto one of the three persons so designated. If two different designated
arbitrators have been vetoed, the third arbitrator shall hear and decide
the matter. If less than two (2) arbitrators are timely vetoed, JAMS shall
select a single arbitrator from the non- vetoed arbitrators originally
designated by JAMS, who shall hear and decide the matter. Any arbitration
pursuant to this section shall be decided within thirty (30) days of
submission to JAMS. The decision of the arbitrator shall be final and
binding on the parties. In no event shall the arbitrator be empowered or
authorized to award consequential or punitive damages (including any award
for lost profit or opportunity costs or loss or interruption of business or
income). All costs associated with the arbitration shall be awarded to the
prevailing party as determined by the arbitrator.
	 
	 	B.	 	Notice of the demand for arbitration by either party to the Work Letter
shall be filed in writing with the other party to the Work Letter and with
JAMS and shall be made within a reasonable time after the dispute has
arisen. The award rendered by the arbitrator shall be final, and judgment
may be entered upon it in accordance with applicable law in any court
having jurisdiction thereof. Except by written consent of the person or
entity sought to be joined, no arbitration arising out of or relating to
this Work Letter shall include, by consolidation, joinder or in any other
manner, any person or entity not a party to the Work Letter unless (1) such
person or entity is substantially involved in a common question of fact or
law, (2) the presence of such person or entity is required if complete
relief is to be accorded in the arbitration, or (3) the interest or
responsibility of such person or entity in the matter is not insubstantial.
	 
	 	C.	 	The agreement herein among the parties to arbitrate shall be specifically
enforceable under prevailing law. The agreement to arbitrate hereunder
shall apply only to disputes arising out of, or relating to, this Work
Letter, and shall not apply to other matters of dispute under the Lease
except as may be expressly provided in the Lease.






4












 





Schedule 1 to Work Letter




Mc Carthy Center

MILPITAS, CALIFORNIA




 





Tenant Improvement Outline Specifications




 




(NOTE: All
Tenant Improvements to be based on Landlord’s approved plans and to be
provided by the tenant during the Tenant Improvement phase.)




	 	 	 	 	 	 	 	 	 
	Tenant Standard GENERAL
	 	 	 	 	 	 	 	 
	office:	 	carpet	 	 	 	 
	 	 	Direct glue, from one of the following options:	 	 	 	 
	 	 	Designweave — Z6354 Tempest Esq.:	 	Designweave — Z6356 Techno:
	 

	 	a)
	 	553 Sted Wool
	 	a)
	 	336 Lido
	 

	 	b)
	 	773 Melba Toast
	 	b)
	 	252 Topaz
	 

	 	c)
	 	575 Silver Smoke
	 	c)
	 	518 Night Sky
	 

	 	d)
	 	535 Dolphin
	 	d)
	 	997 Silver Plum
	 

	 	e)
	 	454 Denim
	 	e)
	 	496 Galactic
	 
	 	 	 	 	 	 	 	 
	 	 	VINYL COMPOSITION TILE (VCT)

12x12VCT Armstrong Standard Excelon, from the following options:
	 

	 	a)
	 	51803 Pearl White
	 	c)
	 	51908 Pewter
	 

	 	b)
	 	51899 Cool White
	 	d)
	 	51899 Cool White






	 	 	 
	 
	 	 
	 

	 	PAINT/WALLS

5/8” gypsum drywall on 2-1/2” x 25 ga: metal studs, floor to
ceiling construction, no walls shall penetrate the grid unless
required by code. All walls shall be straight, and parallel to
building perimeter walls. All offices and rooms shall be
constructed of a standard size and tangent to a building shell or
core wall. Paint finish, one standard color to be Benjamin Moore
AC-40, Glacier White, flat finish.
	 
	 	 
	 

	 	BASE

2-1/2” Burke rubber base color Pearl 137P, straight at cut pie carpet,
coved at resilient flooring and
loop carpet.
	 
	 	 
	 

	 	RUBBER TRANSITION STRIP

Transition strip between carpet and resilient  flooring to be
Burke #150, color: to match adjacent V.C.T.
	 
	 	 
	 

	 	PLASTIC LAMINATE

Plastic laminate color at millwork to be Nevamar “Smoky White”,
Textured #S-7-27T.
	 
	 	 
	 

	 	CEILING

2x4 Armstrong 2776B Second Look ceiling tile in 9/16” T-bar grid.
Continuous grid throughout.
	 
	 	 
	 

	 	PERIMETER WALLS

Furring, 25 ga. metal studs with 5/8” gypsum drywall, with belt
insulation.
	 
	 	 
	 

	 	LIGHTING

2x4 fluorescent, 3-lamp energy saving ballast, 18-cell parabolic
lens fixture.
	 
	 	 
	 

	 	DOORS

1-3/4” solid core, 3”-0” x 8”-10”, plain
sliced made, Western
Integrated clear anodized aluminum frames, Schlage “D” series
“Sparta” latchset  hardware, dull chrome finish.
	 
	 	 
	 

	 	OFFICE SIDELITES

All interior offices to have sidelite glazing  adjacent to office
entry door. 2’ wide x door height, Western Integrated clear anodized
aluminium integral to door frame with clear tempered glass.






The designs illustrated in this exhibit are subject to modification from time

to time as determined to be necessary or appropriate by the developer.




					
	 	 	 	 	 
	11/14/03
	 	Page 8
	 	THE IRVINE COMPANY





 






 









 






Mc Carthy Center





 MILPITAS, CALIFORNIA




 





Tenant Improvement Outline Specifications

(Continued)




 





	 	 	 
	 
	 	 
	Tenant
Standard General 

office (continued):

	 	WINDOW COVERINGS

Vertical blinds: Mariak Industries PVC blinds at building perimeter windows, Model M-3000, Color:
	 

	 	Light Grey.
	 
	 	 
	 

	 	 
	 
	 	 
	Standard Tenant 

Mechanical:

	 	HVAC

Thermostats shall be provided with set points as required by Tile 24.

Perforated face ceiling diffusers and return air grilles in 2x4 ceiling grid.
VAV boxes with connection to main supply air duct and low pressure distribution ductwork to ceiling
diffusers.
	 
	 	 
	 

	 	Package unit and zonal control by Energy Management System.
	 
	 	 
	 

	 	Pneumatic thermostats with blank white cover shall be provided for each zone. Thermostats shall be
located adjacent to light switch at 48° above finished floor.
	 
	 	 
	 

	 	Exterior corner spaces with more than one exposure shall be provided with a separate zone.
	 
	 	 
	 

	 	Conference Room (or Training Room) 20’x13’ or larger shall be provided with a separate zone.
	 
	 	 
	 

	 	Exterior zone shall be limited to a single exposure and a maximum of 750 to 1000 square feet.

	 
	 	 
	 

	 	Interior zone shall be limited to a maximum of 2000 square feet.
	 
	 	 
	 

	 	FIRE PROTECTION

Pendant satin chrome plated, recessed heads, adjustable canopies, minimum K factor to be 5.62,
located at center of scored ceiling tie.

Ceiling drops.
	 
	 	 
	 

	 	 
	 
	 	 
	Standard Tenant
Electrical:
	 	 
	 
	 	 
	 

	 	ELECTRICAL SYSTEM

277/480 volt, three phase, four wire metered distribution section added to main service.

Electrical tenant distribution capacity suitable for 22 watts per s.f. to accommodate HVAC,
lighting, data
processing, computer loads and convenience outlets.

Tenant Electrical Room, located within the lease space, to include 270/480 volt and 120/208 volt
panels, transformer, lighting control panel, as required.

Building HVAC system is connected to the tenant distribution system.
	 
	 	 
	 

	 	LIGHTING

Open Office Areas: A/B switch per Tile 24, paired in double gang box, Leviton “Decora” white
plastic coverplate, 42” AFF to switch centerline with ceiling-mounted motion sensors. Private
Offices: A/B switched, wall-mounted motion sensors. 2x4 fluorescent light fixtures, 3-lamp energy
saving ballast, 18-cell parabolic lens fixture based upon one (1) fixture per 80 square feet
	 
	 	 
	 

	 	Exit signs: Internally illuminated, brushed stainless steel face.






The
designs illustrated in this exhibit are subject to modification from
time
to time as determined to
be necessary or appropriate by the developer.




					
	 	 	 	 	 
	11/14/03
	 	Page 9
	 	THE IRVINE COMPANY






      




 









 





Mc Carthy Center

MILPITAS, CALIFORNIA




 





Tenant
Improvement Outline Specifications

(Continued)




 





	 	 	 
	Standard Tenant Electrical

(continued):
	 	OUTLETS

Power 15-amp 125-volt specification grade duplex receptacle
mounted vertically, 18” AFF to centerline,
white plastic coverplate. Feeds to systems furniture by Tenant
to be via walls, furred columns or ceiling J-box. Power poles and
furniture by Tenant. Ratio of one (1) feed per eight (8)
workstations. Assumes four (4) circuits, eight (8) wire
configuration of systems furniture.
	 	 	 
	 
	 	Telephone/Data: Single gang box
with mud ring and pull string,
mounted vertically, 18” AFF to centerline, Cover plate by
telephone and/or cabling company. Teflon cable by tenant.
	 	 	 
	 
	 	One (1) empty 2’ conduit to be routed from Tenant’s Server Room,
4X8 backboard to building main telephone backboard.






END OF TENANT IMPROVEMENT OUTLINE SPECIFICATIONS




The designs illustrated in this exhibit are subject to modification from time

to time as determined to be necessary or appropriate by the developer.




					
	 	 	 	 	 
	11/14/03
	 	Page 10
	 	THE IRVINE COMPANY






 





McCarthy Center




 









 








Schedule 2 to Work Letter





	1.	 	floor-mounted electrical and data outlets;
	 
	2.	 	floor-mounted projector connectors;
	 
	3.	 	projection video screens and mounts for cameras;
	 
	4.	 	door locks for eight (8) office doors;
	 
	5.	 	miniblinds for sidelights in the offices and conference rooms;
	 
	6.	 	projector electrical;
	 
	7.	 	distribution board in the tele/data room; and

	 
	8.	 	3-ton HVAC unit installed in the tele/data room.




 









 
















Exhibit Y