**Exhibit 10.7**

 

**OFFICE SPACE LEASE**

 

**BETWEEN**

 

**THE IRVINE COMPANY**

** **

**AND**

** **

**GARDENBURGER, INC.**

** **

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**OFFICE SPACE LEASE**

 

THISLEASE is made as of the 21st day of August, 2003, by and between **THE IRVINE COMPANY**, hereafter called“Landlord,” and **GARDENBURGER, INC.**,an Oregon corporation, hereafter called “Tenant.”

 

**ARTICLE I.  BASIC LEASE PROVISIONS**

 

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

 

1.                    **Tenant’s Trade Name**:  N/A

 

2.                    **Premises:**  Suite No. 350 (the Premises are moreparticularly described in Section 2.1). 

 

**Address of Building:** 15615 Alton Parkway, Irvine, CA 92618

 

**Project Description**:  PalmCourt

 

3.                    **Use of Premises**:  General office and for no other use.

 

4.                    **Estimated Delivery Date**:  October 1, 2003

 

5.                     **Lease Term**:  Thirty-six (36) months, plus such additionaldays as may be required to cause this Lease to terminate on the final day of thecalendar month.

 

6.                    **BasicRent**:  Ten Thousand Three HundredTwenty-Two Dollars ($10,322.00) per month.

 

**Rental Adjustments**:

 

Commencingtwelve (12) months following the Commencement Date, the Basic Rent shall be TenThousand Eight Hundred Thirty-Eight Dollars ($10,838.00) per month.

 

Commencingtwenty-four (24) months following the Commencement Date, the Basic Rent shallbe Eleven Thousand Three Hundred Fifty-Four Dollars ($11,354.00) per month.

 

7.                     **Property Tax Base**:  The Property Taxes per rentable square footincurred by Landlord and attributable to the twelve month period ending June30, 2004 (the “Base Year”).

 

**Building Cost Base**: The Building Costs per rentable square foot incurred by Landlord andattributable to the Base Year.

 

**Expense Recovery Period**:  Every twelve month period during the Term(or portion thereof during the first and last Lease years) ending June 30.

 

8.                    **Floor Area of Premises**:  approximately 5,161 rentable square feet

 

9.                    **SecurityDeposit:** $12,489.00

 

10.              **Broker(s)**:  Lee & Associates 

 

11.              **PlanApproval Date**:  N/A

 

12.              **Parking**:  Eighteen (18) unreserved vehicle parkingspaces.

 

13.              **Addressfor Payments and Notices**:

 
| **LANDLORD**                                                                                                                      |   | **TENANT**                                                                 |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------|
|                                                                                                                              |   |                                                                       |
| The Irvine Company  8001 Irvine Center Drive, Suite 840  Irvine, CA  92618  Attn:  Property Manager                     |   | Gardenburger, Inc.  15615 Alton Parkway, Suite 350  Irvine, CA  92618 |
|                                                                                                                              |   |                                                                       |
| with a copy of notices to:                                                                                                        |   |                                                                       |
|                                                                                                                              |   |                                                                       |
| THE IRVINE COMPANY  P.O. Box 6370  Newport Beach, CA 92658-6370  Attn:  Vice President, Operations –  Office Properties |   |                                                                       |

 

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**ARTICLE II. PREMISES**

 

**SECTION 2.1.****                                    ****LEASEDPREMISES**.  Landlord leases to Tenant andTenant rents from Landlord the premises shown in Exhibit A (the “Premises”),containing approximately the floor area set forth in Item 8 of the Basic LeaseProvisions and known by the suite number identified in Item 2 of the BasicLease Provisions.  The Premises arelocated in the building identified in Item 2 of the Basic Lease Provisions (the“Building”), which is a portion of the project described in Item 2 (the“Project”).  If, upon completion of thespace plans for the Premises, Landlord’s architect or space planner determinesthat the rentable square footage of the Premises differs from that set forth inthe Basic Lease Provisions, then Landlord shall so notify Tenant and the BasicRent (as shown in Item 6 of the Basic Lease Provisions) shall be promptlyadjusted in proportion to the change in square footage.  Within five (5) days following Landlord’srequest, the parties shall memorialize the adjustments by executing anamendment to this Lease prepared by Landlord.

 

**SECTION 2.2.****                                    ****ACCEPTANCEOF PREMISES**.  Tenant acknowledges thatneither Landlord nor any representative of Landlord has made any representationor warranty with respect to the Premises or the Building or the suitability orfitness of either for any purpose, except as set forth in this Lease.  The taking of possession or use of thePremises by Tenant for any purpose other than construction shall conclusivelyestablish that the Premises and the Building were in satisfactory condition andin conformity with the provisions of this Lease in all respects, except forthose matters which Tenant shall have brought to Landlord’s attention on awritten punch list.  The list shall belimited to any items required to be accomplished by Landlord under the WorkLetter (if any) attached as Exhibit X, and shall be delivered to Landlordwithin thirty (30) days after the term (“Term”) of this Lease commences asprovided in Article III below.  If thereis no Work Letter, or if no items are required of Landlord under the WorkLetter, by taking possession of the Premises Tenant accepts the improvements intheir existing condition, and waives any right or claim against Landlordarising out of the condition of the Premises. Nothing contained in this Section shall affect the commencement of theTerm or the obligation of Tenant to pay rent. Landlord shall diligently complete all punch list items of which it isnotified as provided above.

 

**SECTION 2.3.****                                    ****BUILDINGNAME, ADDRESS AND DEPICTION**.  Tenantshall not utilize any name selected by Landlord from time to time for theBuilding and/or the Project as any part of Tenant’s corporate or tradename.  Landlord shall have the right tochange the name, number or designation of the Building or Project withoutliability to Tenant.  Tenant shall notuse any picture of the Building in its advertising, stationery or in any othermanner.

 

**ARTICLE III.  TERM**

 

**SECTION 3.1.****                                    ****GENERAL**.  The Term shall be for the period shown in Item5 of the Basic Lease Provisions.  TheTerm shall commence (“Commencement Date”) one (1) month following the date thePremises are “ready for occupancy” as described in Section 3.2 (the “DeliveryDate”).  Promptly following request byLandlord, the parties shall memorialize on a form provided by Landlord theactual Commencement Date and the expiration date (“Expiration Date”) of thisLease.

 

**SECTION 3.2.****                                    ****EARLYOCCUPANCY**.  It is understood that Landlordis currently constructing the Premises as a “spec suite” pursuant to a mutuallyagreeable space plan.  The Premisesshall be deemed “ready for occupancy” upon the tendered date, but only if andwhen Landlord, to the extent applicable, (a) has put into operation all buildingservices essential for the use of the Premises by Tenant, (b) has providedreasonable access to the Premises for Tenant so that it may be used withoutunnecessary interference, (c) has substantially completed all the work requiredto be done by Landlord in this Lease, and (d) has obtained requisitegovernmental approvals to Tenant’s occupancy. Notwithstanding the foregoing, however, if the prosecution of Landlord’simprovement work in the Premises is delayed due to any action or inaction byTenant, then the Premises shall be deemed ready for occupancy for purposeshereof as of the date Landlord would have been able to deliver the Premises toTenant but for Tenant’s delay(s). Following the full execution of this Lease, payment of all deposits duehereunder and delivery of proper evidence of insurance pursuant to Exhibit Dhereof, Tenant shall be permitted to occupy the Premises during the one (1)month period following the Delivery Date in order that it may install itsfurniture, telephone systems and data cabling equipment and commence its normalbusiness operations therein.  Tenant’saccess to the Premises prior to the Commencement Date shall be subject to allof the terms and obligations of this Lease, including the indemnity provisionsherein, except that Tenant shall not be required to pay Basic Rent during thatperiod.

 

**SECTION 3.3.****                                    ****RIGHTTO EXTEND THIS LEASE**.  Providedthat Tenant is not in default under any provision of this Lease at the time ofexercise of the extension right granted herein, and provided further thatTenant is occupying the entire Premises and has not assigned or sublet any ofits interest in this Lease (except in connection with an assignment of thisLease to a Tenant Affiliate as described in Section 9.1(f) hereof), Tenant mayextend the Term of this Lease for one (1) period of twenty-four (24)months.  Tenant shall exercise its rightto extend the Term by and only by delivering to Landlord, not less than nine(9) months or more than twelve (12) months prior to the expiration date of theTerm,

 

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Tenant’s written notice of its irrevocablecommitment to extend (the “Commitment Notice”).  Should Tenant fail timely to deliver the Commitment Notice, thenthis extension right shall thereupon lapse and be of no further force oreffect.  The Basic Rent payable underthe Lease during the extension of the Term shall be at the prevailing marketrental rate (including periodic adjustments) for comparable and similarlyimproved space within the Building as of the commencement of the extensionperiod, as determined by Landlord based on a reasonable extrapolation of itsthen-current leasing rates.  In no eventshall the monthly Basic Rent payable for the extension period be less than theBasic Rent payable during the month immediately preceding the commencement ofsuch extension period.  Promptlyfollowing receipt of the Commitment Notice, Landlord shall prepare anappropriate amendment to the Lease memorializing the extension of the Term inaccordance with the foregoing, and Tenant shall duly execute and return same toLandlord within fifteen (15) days. Should Tenant fail timely to execute and deliver the amendment, thenLandlord may, at its sole written election, either specifically enforce theCommitment Notice or extinguish Tenant’s right to extend the Term.  Should Landlord elect the latter, then thisLease shall terminate upon the scheduled date of expiration and Tenant’s rightsunder this paragraph shall be of no further force or effect.  Any attempt to assign or transfer any rightor interest created by this paragraph to other than a Tenant Affiliate shall bevoid from its inception.  Tenant shallhave no other right to extend the Term beyond the single twenty-four (24) monthextension created by this paragraph. Unless agreed to in a writing signed by Landlord and Tenant, anyextension of the Term, whether created by an amendment to this Lease or by aholdover 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 thisparagraph.  Time is specifically made ofthe essence of this paragraph.

 

**ARTICLE IV. RENT AND OPERATING EXPENSES**

 

**SECTION 4.1.****                                    ****BASICRENT**.  From and after theCommencement Date, Tenant shall pay to Landlord without deduction or offset aBasic Rent for the Premises in the total amount shown (including subsequentadjustments, if any) in Item 6 of the Basic Lease Provisions.  Any rental adjustment shown in Item 6 shallbe deemed to occur on the specified monthly anniversary of the CommencementDate, whether or not that date occurs at the end of a calendar month.  The rent shall be due and payable in advancecommencing on the Commencement Date and continuing thereafter on the first dayof each successive calendar month of the Term, as prorated for any partialmonth.  No demand, notice or invoiceshall be required.  An installment ofrent in the amount of one (1) full month’s Basic Rent at the initial rate specifiedin Item 6 of the Basic Lease Provisions shall be delivered to Landlord concurrentlywith Tenant’s execution of this Lease and shall be applied against the BasicRent first due hereunder; the next installment of Basic Rent shall be due onthe first day of the second calendar month of the Term, which installmentshall, if applicable, be appropriately prorated to reflect the amount prepaidfor that calendar month.

 

**SECTION 4.2.****                                    ****OPERATINGEXPENSE INCREASE**.

 

(a)                                  Commencing twelve(12) months following the Commencement Date, Tenant shall compensate Landlord,as additional rent, for Tenant’s proportionate shares of “Building Costs” and“Property Taxes,” as those terms are defined below, incurred by Landlord in theoperation of the Building and Project. Property Taxes and Building Costs are mutually exclusive and may bebilled separately or in combination as determined by Landlord.  Tenant’s proportionate share of PropertyTaxes shall equal the product of the rentable floor area of the Premisesmultiplied by the difference of (i) Property Taxes per rentable square footless (ii) the Property Tax Base set forth in Item 7 of the Basic LeaseProvisions.  Tenant’s proportionateshare of Building Costs shall equal the product of the rentable floor area ofthe Premises multiplied by the difference of (i) Building Costs per rentablesquare foot less (ii) the Building Cost Base set forth in Item 7 of the BasicLease Provisions.  Tenant acknowledgesLandlord’s rights to make changes or additions to the Building and/or Projectfrom time to time pursuant to Section 6.5 below, in which event the totalrentable square footage within the Building and/or Project may beadjusted.  For convenience of reference,Property Taxes and Building Costs may sometimes be collectively referred to as“Operating Expenses.”

 

(b)                                 Commencing priorto the start of the first full “Expense Recovery Period” of the Lease (asdefined in Item 7 of the Basic Lease Provisions), and prior to the start ofeach full or partial Expense Recovery Period thereafter, Landlord shall giveTenant a written estimate of the amount of Tenant’s proportionate shares ofBuilding Costs and Property Taxes for the Expense Recovery Period or portionthereof.  Commencing twelve (12) monthsfollowing the Commencement Date, Tenant shall pay the estimated amounts to Landlordin equal monthly installments, in advance, with Basic Rent.  If Landlord has not furnished its writtenestimate for any Expense Recovery Period by the time set forth above, Tenantshall continue to pay cost reimbursements at the rates established for theprior Expense Recovery Period, if any; provided that when the new estimate isdelivered to Tenant, Tenant shall, at the next monthly payment date, pay anyaccrued cost reimbursements based upon the new estimate.  Landlord may from time to time change theExpense Recovery Period to reflect a calendar year or a new fiscal year ofLandlord, as applicable, in which event Tenant’s share of Operating Expensesshall be equitably prorated for any partial year.

 

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(c)                                  Within one hundredtwenty (120) days after the end of each Expense Recovery Period, Landlord shallfurnish to Tenant a statement setting forth the actual or prorated PropertyTaxes and Building Costs attributable to that period, and the parties shallwithin thirty (30) days thereafter make any payment or allowance necessary toadjust Tenant’s estimated payments, if any, to Tenant’s actual proportionateshares as shown by the annual statement. If Tenant has not made estimated payments during the Expense RecoveryPeriod, any amount owing by Tenant pursuant to subsection (a) above shall bepaid to Landlord in accordance with Article XVI.  If actual Property Taxes or Building Costs allocable to Tenantduring any Expense Recovery Period are less than the Property Tax Base or theBuilding Cost Base, respectively, Landlord shall not be required to pay thatdifferential to Tenant, although Landlord shall refund any applicable estimatedpayments collected from Tenant.  ShouldTenant fail to object in writing to Landlord’s determination of actual OperatingExpenses within sixty (60) days following delivery of Landlord’s expensestatement, Landlord’s determination of actual Operating Expenses for theapplicable Expense Recovery Period shall be conclusive and binding on Tenant.

 

(d)                                 Even though the Leasehas terminated and the Tenant has vacated the Premises, when the finaldetermination is made of Tenant’s share of Property Taxes and Building Costsfor the Expense Recovery Period in which the Lease terminates, Tenant shallupon notice pay the entire increase due over the estimated expenses paid;conversely, any overpayment made in the event expenses decrease shall berebated by Landlord to Tenant.  However,in lieu thereof, Landlord may deliver a reasonable estimate of the anticipatedreconciliation amount to Tenant prior to the expiration of the Term, in whichevent the appropriate party shall fund that amount by the termination date.

 

(e)                                  If, at any timeduring any Expense Recovery Period, any one or more of the Operating Expensesare increased to a rate(s) or amount(s) in excess of the rate(s) or amount(s)used in calculating the estimated expenses for the year, then Tenant’sestimated share of Property Taxes or Building Costs, as applicable, shall beincreased for the month in which the increase becomes effective and for allsucceeding months by an amount equal to Tenant’s proportionate share of theincrease.  Landlord shall give Tenantwritten notice of the amount or estimated amount of the increase, the month inwhich the increase will become effective, Tenant’s monthly share thereof andthe months for which the payments are due. Tenant shall pay the increase to Landlord as a part of Tenant’s monthlypayments of estimated expenses as provided in paragraph (b) above, commencingwith the month in which effective.

 

(f)                                    The term “BuildingCosts” shall include all expenses of operation and maintenance of the Buildingand the Project, together with all appurtenant Common Areas (as defined inSection 6.2), and shall include the following charges by way of illustrationbut not limitation:  water and sewercharges; insurance premiums or reasonable premium equivalents should Landlordelect to self-insure any risk or deductible that Landlord is authorized toinsure hereunder; license, permit, and inspection fees; heat; light; power;janitorial services; access control/security costs, inclusive of the reasonablecost of improvements made to enhance access control systems and procedures;repairs; air conditioning; supplies; materials; equipment; tools; tenant services;programs instituted to comply with transportation management requirements;amortization of capital investments reasonably intended to produce a reductionin operating charges or energy conservation; amortization of capitalinvestments necessary to bring the Building into compliance with applicablelaws and building codes; labor; reasonably allocated wages and salaries, fringebenefits, and payroll taxes for administrative and other personnel directlyapplicable to the Building and/or Project, including both Landlord’s personneland outside personnel; any expense incurred pursuant to Sections 6.1, 6.2, 6.4,7.2, and 10.2 and Exhibits B and C below; and a reasonable overhead/managementfee.  It is understood that BuildingCosts shall include competitive charges for direct services provided by anysubsidiary or division of Landlord.  Inno event shall access control/security costs, insurance costs, or utilitycharges allocable to Tenant on a per square foot basis during any ExpenseRecovery Period be less than the corresponding amount for such component in theBuilding Cost Base.  The term “PropertyTaxes” as used herein shall include the following:  (i) all real estate taxes or personal property taxes, as suchproperty 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 theBuilding and/or the Project, and any improvements, fixtures and equipment andother property of Landlord located in the Building and/or the Project, exceptthat general net income and franchise taxes imposed against Landlord shall beexcluded; and (iii) any tax, surcharge or assessment which shall be levied inaddition to or in lieu of real estate or personal property taxes, other thantaxes covered by Article VIII; and (iv) costs and expenses incurred incontesting the amount or validity of any Property Tax by appropriateproceedings.  A copy of Landlord’sunaudited statement of expenses shall be made available to Tenant uponrequest.  The Building Costs, inclusiveof those for the Base Year, shall be extrapolated by Landlord to reflect atleast ninety-five percent (95%) occupancy of the rentable area of the Building.

 

**SECTION 4.3.****                                    ****SECURITYDEPOSIT**.  Concurrently with Tenant’sdelivery of this Lease, Tenant shall deposit with Landlord the sum, if any,stated in Item 9 of the Basic Lease Provisions (the “Security Deposit”), to beheld by Landlord as security for the full and faithful performance of Tenant’sobligations under this Lease to pay any rent as and when due, including withoutlimitation such additional rent as may be owing under any provision hereof, andto maintain the Premises as required by Sections 7.1 and 15.3 or any otherprovision of this Lease.  Upon anybreach of those obligations by Tenant, Landlord may apply all or part of theSecurity Deposit as full or partial compensation.  If any portion of the Security Deposit is so applied, Tenantshall within five (5) days after written demand by

 

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Landlord deposit cash with Landlord in anamount sufficient to restore the Security Deposit to its original amount.  Landlord shall not be required to keep thisSecurity Deposit separate from its general funds, and Tenant shall not beentitled to interest on the Security Deposit. In no event may Tenant utilize all or any portion of the SecurityDeposit as a payment toward any rental sum due under this Lease.  If Tenant fully performs its obligationsunder this Lease, the Security Deposit or any balance thereof shall be returnedto Tenant or, at Landlord’s option, to the last assignee of Tenant’s interestin this Lease.

 

**ARTICLE V. USES**

 

**SECTION 5.1.****                                    ****USE**.  Tenant shall use the Premises only for thepurposes stated in Item 3 of the Basic Lease Provisions.  The parties agree that any contrary useshall be deemed to cause material and irreparable harm to Landlord and shallentitle Landlord to injunctive relief in addition to any other availableremedy.  The uses prohibited under thisLease shall include, without limitation, use of the Premises or a portionthereof for (i) offices of any agency or bureau of the United States or anystate or political subdivision thereof; (ii) offices or agencies of any foreigngovernmental or political subdivision thereof; (iii) offices of any health careprofessionals or service organization; (iv) schools, temporary employmentagencies or other training facilities which are not ancillary to corporate,executive or professional office use; (v) retail or restaurant uses; or (vi) communicationsfirms such as radio and/or television stations.  Tenant shall not do or permit anything to be done in or about thePremises which will in any way interfere with the rights or quiet enjoyment ofother occupants of the Building or the Project, or use or allow the Premises tobe used for any unlawful purpose, nor shall Tenant permit any nuisance orcommit any waste in the Premises or the Project.  Tenant shall not do or permit to be done anything which willinvalidate or increase the cost of any insurance policy(ies) covering theBuilding, the Project and/or their contents, and shall comply with allapplicable insurance underwriters rules. Tenant shall comply at its expense with all present and future laws,ordinances and requirements of all governmental authorities that pertain toTenant or its use of the Premises, including without limitation all federal andstate occupational health and safety and handicap access requirements, whetheror not Tenant’s compliance will necessitate expenditures or interfere with itsuse and enjoyment of the Premises. Tenant shall not generate, handle, store or dispose of hazardous ortoxic materials (as such materials may be identified in any federal, state orlocal law or regulation) in the Premises or Project without the prior writtenconsent of Landlord; provided that the foregoing shall not be deemed toproscribe the use by Tenant of customary office supplies in normal quantitiesso long as such use comports with all applicable laws.  Tenant agrees that it shall promptlycomplete and deliver to Landlord any disclosure form regarding hazardous ortoxic materials that may be required by any governmental agency.  Tenant shall also, from time to time uponrequest by Landlord, execute such affidavits concerning Tenant’s best knowledgeand belief regarding the presence of hazardous or toxic materials in thePremises.  Landlord shall have the rightat any time to perform an assessment of the environmental condition of thePremises and of Tenant’s compliance with this Section.  As part of any such assessment, Landlordshall have the right, upon reasonable prior notice to Tenant, to enter andinspect the Premises and to perform tests, provided those tests are performedin a manner that minimizes disruption to Tenant.  Tenant will cooperate with Landlord in connection with anyassessment by, among other things, promptly responding to inquiries andproviding relevant documentation and records. The reasonable cost of the assessment/testing shall be reimbursed byTenant to Landlord if such assessment/testing determines that Tenant failed tocomply with the requirements of this Section. In all events Tenant shall indemnify Landlord in the manner elsewhereprovided in this Lease from any release of hazardous or toxic materials causedby Tenant, its agents, employees, contractors, subtenants or licensees.  The foregoing covenants shall survive theexpiration or earlier termination of this Lease.

 

**SECTION 5.2.****                                    ****SIGNS**.  Landlord shall affix and maintain a sign(restricted solely to Tenant’s name as set forth herein or such other name asLandlord may consent to in writing) adjacent to the entry door of the Premises,together with a directory strip listing Tenant’s name as set forth herein inthe lobby directory of the Building. Any subsequent changes to that initial signage shall be at Tenant’s soleexpense.  All signage shall conform tothe criteria for signs established by Landlord and shall be ordered throughLandlord.  Tenant shall not place orallow to be placed any other sign, decoration or advertising matter of any kindthat is visible from the exterior of the Premises.  Any violating sign or decoration may be immediately removed byLandlord at Tenant’s expense without notice and without the removalconstituting a breach of this Lease or entitling Tenant to claim damages.

 

**ARTICLE VI. LANDLORD SERVICES**

 

**SECTION 6.1.****                                    ****UTILITIESAND SERVICES**.  Landlord shall furnish to thePremises the utilities and services described in Exhibit B, subject to theconditions and payment obligations and standards set forth in this Lease.  Landlord shall not be liable for any failureto furnish any services or utilities when the failure is the result of anyaccident or other cause beyond Landlord’s reasonable control, nor shallLandlord be liable for damages resulting from power surges or any breakdown intelecommunications facilities or services. Landlord’s temporary inability to furnish any services or utilitiesshall not entitle Tenant to any damages, relieve Tenant of the obligation topay rent or

 

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constitute a constructive or other evictionof Tenant, except that Landlord shall diligently attempt to restore the serviceor utility promptly.  Tenant shallcomply with all rules and regulations which Landlord may reasonably establishfor the provision of services and utilities, and shall cooperate with allreasonable conservation practices established by Landlord.  Landlord shall at all reasonable times havefree access to all electrical and mechanical installations of Landlord.

 

**SECTION 6.2.****                                    ****OPERATIONAND MAINTENANCE OF COMMON AREAS**.  Duringthe Term, Landlord shall operate all Common Areas within the Building and theProject.  The term “Common Areas”  shall mean all areas within the Building andother buildings in the Project which are not held for exclusive use by personsentitled to occupy space, and all other appurtenant areas and improvementsprovided by Landlord for the common use of Landlord and tenants and theirrespective employees and invitees, including without limitation parking areasand structures, driveways, sidewalks, landscaped and planted areas, hallwaysand interior stairwells not located within the premises of any tenant, commonentrances and lobbies, elevators, and restrooms not located within the premisesof any tenant.

 

**SECTION 6.3.****                                    ****USEOF COMMON AREAS**.  The occupancy by Tenant of thePremises shall include the use of the Common Areas in common with Landlord andwith all others for whose convenience and use the Common Areas may be providedby Landlord, subject, however, to compliance with all rules and regulations asare prescribed from time to time by Landlord. Landlord shall at all times during the Term have exclusive control ofthe Common Areas, and may restrain or permit any use or occupancy, except asotherwise provided in this Lease or in Landlord’s rules and regulations.  Tenant shall keep the Common Areas clear ofany obstruction or unauthorized use related to Tenant’s operations.  Landlord may temporarily close any portionof the Common Areas for repairs, remodeling and/or alterations, to prevent apublic dedication or the accrual of prescriptive rights, or for any otherreasonable purpose.

 

**SECTION 6.4.****                                    ****PARKING**.  Parking shall be provided in accordance withthe provisions set forth in Exhibit C to this Lease.

 

**SECTION 6.5.****                                    ****CHANGESAND ADDITIONS BY LANDLORD**.  Landlordreserves the right to make alterations or additions to the Building or theProject, or to the attendant fixtures, equipment and Common Areas.  No change shall entitle Tenant to anyabatement of rent or other claim against Landlord, provided that the changedoes not deprive Tenant of reasonable access to or use of the Premises.

 

**ARTICLE VII. MAINTAINING THE PREMISES**

 

**SECTION 7.1.****                                    ****TENANT’SMAINTENANCE AND REPAIR**.  Subjectto Article XI, Tenant at its sole expense shall make all repairs necessary tokeep the Premises and all improvements and fixtures therein in the condition asexisted on the Commencement Date (or on any later date that the applicableimprovements may have been installed), excepting ordinary wear and tear.  Notwithstanding Section 7.2 below, Tenant’smaintenance obligation shall include without limitation all appliances,non-building standard lighting/electrical systems, and plumbing fixtures andinstallations located within or servicing only the Premises.  All repairs shall be at least equal inquality to the original work, shall be made only by a licensed, bondedcontractor approved in writing in advance by Landlord and shall be made only atthe time or times approved by Landlord. Any contractor utilized by Tenant shall be subject to Landlord’sstandard requirements for contractors, as modified from time to time.  Landlord may impose reasonable restrictionsand requirements with respect to repairs, as provided in Section 7.3, and theprovisions of Section 7.4 shall apply to all repairs.  Alternatively, should Landlord or its management agent agree tomake a repair on behalf of Tenant and at Tenant’s request, Tenant shallpromptly reimburse Landlord as additional rent for all costs incurred(including the standard coordination fee of Landlord’s management agent) uponsubmission of an invoice.

 

**SECTION 7.2.****                                    ****LANDLORD’SMAINTENANCE AND REPAIR**.  Subjectto Article XI, Landlord shall provide service, maintenance and repair withrespect to the heating, ventilating and air conditioning (“HVAC”) equipment ofthe Building (exclusive of any supplemental HVAC equipment servicing only thePremises) and shall maintain in good repair the Common Areas, roof, foundations,footings, the exterior surfaces of the exterior walls of the Building, and thestructural, electrical, mechanical and plumbing systems of the Building exceptas provided in Section 7.1 above. Landlord shall have the right to employ or designate any reputableperson or firm, including any employee or agent of Landlord or any ofLandlord’s affiliates or divisions, to perform any service, repair ormaintenance function.  Landlord need notmake any other improvements or repairs except as specifically required underthis Lease, and nothing contained in this Section shall limit Landlord’s rightto reimbursement from Tenant for maintenance, repair costs and replacementcosts as provided elsewhere in this Lease. Tenant understands that it shall not make repairs at Landlord’s expenseor by rental offset.  Except as providedin Sections 11.1 and 12.1 below, there shall be no abatement of rent and noliability of Landlord by reason of any injury to or interference with Tenant’sbusiness arising from the making of any repairs, alterations or improvements toany portion of the Building, including repairs to the Premises, nor shall anyrelated activity by Landlord constitute an actual or constructive

 

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eviction; provided, however, that in makingrepairs, alterations or improvements, Landlord shall interfere as little asreasonably practicable with the conduct of Tenant’s business in the Premises.

 

**SECTION 7.3.****                                    ****ALTERATIONS**.  Tenant shall make no alterations, additionsor improvements to the Premises without the prior written consent ofLandlord.  Landlord’s consent shall notbe unreasonably withheld as long as the proposed changes do not affect thestructural, electrical or mechanical components or systems of the Building, arenot visible from the exterior of the Premises, and utilize only buildingstandard materials.  Landlord mayimpose, as a condition to its consent, any requirements that Landlord in itsdiscretion may deem reasonable or desirable, including but not limited to a requirement that all work be covered by alien and completion bond satisfactory to Landlord and requirements as to themanner, time, and contractor for performance of the work.  Without limiting the generality of theforegoing, Tenant shall use Landlord’s designated mechanical and electricalcontractors for all work affecting the mechanical or electrical systems of theBuilding.  Should Tenant perform anywork that would necessitate any ancillary Building modification or otherexpenditure by Landlord, then Tenant shall promptly fund the cost thereof toLandlord.  Tenant shall obtain allrequired permits for the work and shall perform the work in compliance with allapplicable laws, regulations and ordinances, and Landlord shall be entitled toa supervision fee in the amount of five percent (5%) of the cost of thework.  Under no circumstances shallTenant make any improvement which incorporates asbestos-containing constructionmaterials into the Premises.  Anyrequest for Landlord’s consent shall be made in writing and shall containarchitectural plans describing the work in detail reasonably satisfactory toLandlord.  Landlord may elect to causeits architect to review Tenant’s architectural plans, and the reasonable costof that review shall be reimbursed by Tenant. Should the work proposed by Tenant modify the internal configuration ofthe Premises, then Tenant shall, at its expense, furnish Landlord with as-builtdrawings and CAD disks compatible with Landlord’s systems.  Unless Landlord otherwise agrees in writing,all alterations, additions or improvements affixed to the Premises (excludingmoveable trade fixtures and furniture) shall become the property of Landlordand shall be surrendered with the Premises at the end of the Term, except that Landlordmay, by notice to Tenant given at the time of Landlord’s consent to thealteration or improvement, require Tenant to remove by the Expiration Date, orsooner termination date of this Lease, all or any alterations, decorations,fixtures, additions, improvements and the like installed either by Tenant or byLandlord at Tenant’s request.  Tenantshall repair any damage to the Premises arising from that removal and restorethe affected area to its pre-existing condition, reasonable wear and tearexcepted.  Landlord may require Tenantto remove an improvement provided as part of the initial build-out pursuant toExhibit X, if any, if and only if the improvement is a non-building standarditem and Tenant is notified of the requirement prior to the build-out.  Except as otherwise provided in this Leaseor in any Exhibit to this Lease, should Landlord make any alteration orimprovement to the Premises at the request of Tenant, Landlord shall beentitled to prompt payment from Tenant of the cost thereof, inclusive of thestandard coordination fee of Landlord’s management agent.

 

**SECTION 7.4.****                                    ****MECHANIC’SLIENS**.  Tenant shall keep the Premisesfree from any liens arising out of any work performed, materials furnished, orobligations incurred by or for Tenant. Upon request by Landlord, Tenant shall promptly cause any such lien tobe released by posting a bond in accordance with California Civil Code Section3143 or any successor statute.  In theevent that Tenant shall not, within thirty (30) days following the impositionof any lien, cause the lien to be released of record by payment or posting of aproper 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, shall be reimbursed by Tenant promptlyfollowing Landlord’s demand, together with interest from the date of payment byLandlord at the maximum rate permitted by law until paid.  Tenant shall give Landlord no less thantwenty (20) days’ prior notice in writing before commencing construction of anykind on the Premises so that Landlord may post and maintain notices of nonresponsibilityon the Premises.

 

**SECTION 7.5.****                                    ****ENTRYAND INSPECTION**.  Landlord shall at allreasonable times have the right to enter the Premises to inspect them, tosupply services in accordance with this Lease, to protect the interests ofLandlord in the Premises, to make repairs and renovations as reasonably deemednecessary by Landlord, and to submit the Premises to prospective or actualpurchasers or encumbrance holders (or, during the final twelve months of theTerm or when an uncured Tenant default exists, to prospective tenants), allwithout being deemed to have caused an eviction of Tenant and without abatementof rent except as provided elsewhere in this Lease.  Landlord shall at all times have and retain a key which unlocksall of the doors in the Premises, excluding Tenant’s vaults and safes, andLandlord shall have the right to use any and all means which Landlord may deemproper to open the doors in an emergency in order to obtain entry to thePremises, and any entry to the Premises obtained by Landlord shall not underany circumstances be deemed to be a forcible or unlawful entry into, or adetainer of, the Premises, or any eviction of Tenant from the Premises.

 

**SECTION 7.6.****                                    ****SPACEPLANNING AND SUBSTITUTION**.  Landlordshall have the right, upon providing not less than forty-five (45) days writtennotice, to move Tenant to other space of comparable size in the Building or inthe Project.  The new space shall beprovided with improvements of comparable quality to those within thePremises.  Landlord shall pay thereasonable out-of-pocket costs to relocate and reconnect Tenant’s personalproperty and equipment within the new space; provided that Landlord may electto cause such work to be done by its contractors.  Landlord shall also reimburse Tenant for such other reasonableout-of-pocket costs that Tenant may incur in connection

 

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with the relocation, including withoutlimitation necessary stationery revisions, provided that a reasonable estimatethereof is given to Landlord within twenty (20) days following Landlord’snotice.  In no event, however, shallLandlord be obligated to incur or fund total relocation costs, exclusive oftenant improvement expenditures, in an amount in excess of two (2) months of BasicRent at the rate then payable hereunder. Within ten (10) days following request by Landlord, Tenant shall executean amendment to this Lease prepared by Landlord to memorialize the relocation.  Should Tenant fail timely to execute anddeliver the amendment to Landlord, or should Tenant thereafter fail to complywith the terms thereof, then Landlord may at its option elect to terminate thisLease upon not less than sixty (60) days prior written notice to Tenant.  Upon the effective date of any terminationof this Lease, Tenant shall vacate the Premises in accordance with Section15.3.

 

**ARTICLE VIII.  TAXES AND ASSESSMENTS ON TENANT’S PROPERTY**

 

Tenantshall be liable for and shall pay before delinquency, all taxes and assessmentslevied against all personal property of Tenant located in the Premises.  When possible Tenant shall cause itspersonal property to be assessed and billed separately from the real propertyof which the Premises form a part.  Ifany taxes on Tenant’s personal property are levied against Landlord orLandlord’s property and if Landlord pay s the same, or if the assessed value ofLandlord’s property is increased by the inclusion of a value placed upon thepersonal property of Tenant and if Landlord pays the taxes based upon the increasedassessment, Tenant shall pay to Landlord the taxes so levied against Landlordor the proportion of the taxes resulting from the increase in the assessment.

 

**ARTICLE IX. ASSIGNMENT AND SUBLETTING**

 

**SECTION 9.1.****                                    ****RIGHTSOF PARTIES**.

 

(a)                                  Tenant may not,either voluntarily or by operation of law, assign, sublet , encumber, orotherwise transfer all or any part of Tenant’s interest in this Lease, orpermit the Premises to be occupied by anyone other than Tenant, withoutLandlord’s prior written consent, which consent shall not unreasonably bewithheld in accordance with the provisions of Section 9.1.(c).  For purposes of this Lease, references toany subletting, sublease or variation thereof shall be deemed to apply not onlyto a sublease effected directly by Tenant, but also to a sub-subletting or anassignment of subtenancy by a subtenant at any level.  No assignment (whether voluntary, involuntary or by operation oflaw) and no subletting shall be valid or effective without Landlord’s priorwritten consent and, at Landlord’s election, shall constitute a materialdefault of this Lease.  Landlord shallnot be deemed to have given its consent to any assignment or subletting by anyother course of action, including its acceptance of any name for listing in theBuilding directory.  To the extent notprohibited by provisions of the Bankruptcy Code, 11 U.S.C. Section 101 et seq.(the “Bankruptcy Code”), including Section 365(f)(1), Tenant on behalf ofitself and its creditors, administrators and assigns waives the applicabilityof Section 365(e) of the Bankruptcy Code unless the proposed assignee of theTrustee for the estate of the bankrupt meets Landlord’s standard for consent asset forth in Section 9.1(c) of this Lease. If this Lease is assigned to any person or entity pursuant to theprovisions of the Bankruptcy Code, any and all monies or other considerationsto be delivered in connection with the assignment shall be delivered toLandlord, shall be and remain the exclusive property of Landlord and shall notconstitute property of Tenant or of the estate of Tenant within the meaning ofthe Bankruptcy Code.  Any person orentity to which this Lease is assigned pursuant to the provisions of theBankruptcy Code shall be deemed to have assumed all of the obligations arisingunder this Lease on and after the date of the assignment, and shall upon demandexecute and deliver to Landlord an instrument confirming that assumption.

 

(b)                                 If Tenant is acorporation, limited liability company, unincorporated association or partnership,the transfer of any stock or interest in the entity which results in a changein voting control shall be deemed an assignment within the meaning andprovisions of this Article.  Inaddition, any change in the status of the entity, such as, but not limited to,the withdrawal of a general partner, shall be deemed an assignment within themeaning of this Article.

 

(c)                                  If Tenant or anysubtenant hereunder desires to transfer an interest in this Lease, Tenant shallfirst notify Landlord and request in writing Landlord’s consent to thetransfer.  Tenant shall also submit inwriting to Landlord:  (i) the name andaddress of the proposed transferee; (ii) the nature of any proposed subtenant’sor assignee’s business to be carried on in the Premises; (iii) the terms andprovisions of any proposed sublease or assignment (including without limitationthe rent and other economic provisions, term, improvement obligations andcommencement date); (iv) evidence that the proposed assignee or subtenant willcomply with the requirements of Exhibit D to this Lease; and (v) any otherinformation requested by Landlord and reasonably related to the transfer.  Except as provided in Subsection (d) of thisSection, Landlord shall not unreasonably withhold its consent, provided:  (1) the use of the Premises will beconsistent with the provisions of this Lease and with Landlord’s commitment toother tenants of the Building and Project; (2) any proposed subtenant orassignee demonstrates that it is financially responsible by submission toLandlord of all reasonable information as Landlord may request concerning theproposed subtenant or assignee, including, but

 

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not limited to, a balance sheet of theproposed subtenant or assignee as of a date within ninety (90) days of therequest for Landlord’s consent and statements of income or profit and loss ofthe proposed subtenant or assignee for the two-year period preceding therequest for Landlord’s consent; (3) the proposed subtenant or assignee is, inLandlord’s good faith determination, appropriate for tenancy in a first classoffice project; (4) the proposed assignee or subtenant is neither an existingtenant or occupant of the Building or Project nor a prospective tenant withwhom Landlord is then actively negotiating; and (5) the proposed transfer willnot impose additional burdens or security risks on Landlord.  If Landlord consents to the proposedtransfer, then the transfer may be effected within ninety (90) days after thedate of the consent upon the terms described in the information furnished toLandlord; provided that any material change in the terms shall be subject toLandlord’s consent as set forth in this Section.  Landlord shall approve or disapprove any requested transfer withinthirty (30) days following receipt of Tenant’s written notice and theinformation set forth above.  Tenantshall pay to Landlord a transfer fee of Five Hundred Dollars ($500.00) if andwhen any transfer request submitted by Tenant is approved.

 

(d)                                 Notwithstandingthe provisions of Subsection (c) above, in lieu of consenting to a proposedassignment or subletting, Landlord may elect to (i) sublease the Premises (orthe portion proposed to be subleased), or take an assignment of Tenant’sinterest in this Lease, upon the same terms as offered to the proposedsubtenant or assignee (excluding terms relating to the purchase of personalproperty, the use of Tenant’s name or the continuation of Tenant’s business),or (ii) terminate this Lease as to the portion of the Premises proposed to besubleased or assigned with a proportionate abatement in the rent payable underthis Lease, effective on the date that the proposed sublease or assignmentwould have commenced.  Landlord maythereafter, at its option, assign or relet any space so recaptured to any thirdparty, including without limitation the proposed transferee identified byTenant.

 

(e)                                  Should anyassignment or subletting occur, Tenant shall promptly pay or cause to be paidto Landlord, as additional rent, fifty percent (50%) of any amounts paid by theassignee or subtenant, however described and whether funded during or after theLease Term, to the extent such amounts are in excess of the sum of (i) thescheduled rental sums payable by Tenant hereunder (or, in the event of asubletting of only a portion of the Premises, the rent allocable to suchportion as reasonably determined by Landlord) and (ii) the direct out-of-pocketcosts, as evidenced by third party invoices provided to Landlord, incurred byTenant to effect the transfer, which costs shall be amortized over theremaining Term of this Lease or, if shorter, over the term of thesublease.  Upon request by Landlord,Tenant and all other parties to the transfer shall memorialize in writing theamounts to be paid pursuant to this paragraph.

 

(f)                                    Notwithstandingthe foregoing, provided Tenant is not then in default hereunder, Tenant may,without Landlord’s prior consent but with prior written notice to Landlord andsubject to the provisions of Section 9.2, assign or transfer its right, titleand interest in this Lease or sublease the Premises to any of the following:(i) any entity resulting from a merger or consolidation with Tenant; (ii) anyentity succeeding to the business and assets of Tenant; or (iii) any entitycontrolling, controlled by, or under common control with, Tenant (collectively,“Tenant Affiliate”).

 

**SECTION 9.2.****                                    ****EFFECTOF TRANSFER**.  No subletting or assignment,even with the consent of Landlord, shall relieve Tenant, or anysuccessor-in-interest to Tenant hereunder, of its obligation to pay rent and toperform all its other obligations under this Lease.  Moreover, Tenant shall indemnify and hold Landlord harmless, asprovided in Section 10.3, for any act or omission by an assignee or subtenant.  Each assignee, other than Landlord, shall bedeemed to assume all obligations of Tenant under this Lease and shall be liablejointly and severally with Tenant for the payment of all rent, and for the dueperformance of all of Tenant’s obligations, under this Lease.  Such joint and several liability shall notbe discharged or impaired by any subsequent modification or extension of thisLease.  No transfer shall be binding onLandlord unless any document memorializing the transfer is delivered to Landlord,both the assignee/subtenant and Tenant deliver to Landlord an executed consentto transfer instrument prepared by Landlord and consistent with therequirements of this Article, and the assignee/subtenant independently complieswith all of the insurance requirements of Tenant as set forth in Exhibit D andevidence thereof is delivered to Landlord. The acceptance by Landlord of any payment due under this Lease from anyother person shall not be deemed to be a waiver by Landlord of any provision ofthis Lease or to be a consent to any transfer. Consent by Landlord to one or more transfers shall not operate as awaiver or estoppel to the future enforcement by Landlord of its rights underthis Lease.  In addition to theforegoing, no change in the status of Tenant or any party jointly and severallyliable with Tenant as aforesaid (e.g., by conversion to a limited liabilitycompany or partnership) shall serve to abrogate the liability of any person orentity for the obligations of Tenant, including any obligations that may beincurred by Tenant after the status change by exercise of a preexisting rightin this Lease.

 

**SECTION 9.3.****                                    ****SUBLEASEREQUIREMENTS**.  The following terms andconditions shall apply to any subletting by Tenant of all or any part of thePremises and shall be included in each sublease:

 

(a)                                  Tenant herebyirrevocably assigns to Landlord all of Tenant’s interest in all rentals andincome arising from any sublease of the Premises, and Landlord may collect suchrent and income and apply same toward Tenant’s obligations under this Lease;provided, however, that until a default occurs in the performance of Tenant’sobligations under this Lease, Tenant shall have the right to

 

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receive and collect the subleaserentals.  Landlord shall not, by reasonof this assignment or the collection of sublease rentals, be deemed liable tothe subtenant for the performance of any of Tenant’s obligations under thesublease.  Tenant hereby irrevocablyauthorizes and directs any subtenant, upon receipt of a written notice fromLandlord stating that an uncured default exists in the performance of Tenant’sobligations under this Lease, to pay to Landlord all sums then and thereafterdue under the sublease.  Tenant agreesthat the subtenant may rely on that notice without any duty of further inquiryand notwithstanding any notice or claim by Tenant to the contrary.  Tenant shall have no right or claim againstthe subtenant or Landlord for any rentals so paid to Landlord.  In the event Landlord collects amounts fromsubtenants that exceed the total amount then due from Tenant hereunder,Landlord shall promptly remit the excess to Tenant.

 

(b)                                 In the event ofthe termination of this Lease, Landlord may, at its sole option, take overTenant’s entire interest in any sublease and, upon notice from Landlord, thesubtenant shall attorn to Landlord.  Inno event, however, shall Landlord be liable for any previous act or omission byTenant under the sublease or for the return of any advance rental payments ordeposits under the sublease that have not been actually delivered to Landlord,nor shall Landlord be bound by any sublease modification executed withoutLandlord’s consent or for any advance rental payment by the subtenant in excessof one month’s rent.  The generalprovisions of this Lease, including without limitation those pertaining toinsurance and indemnification, shall be deemed incorporated by reference intothe sublease despite the termination of this Lease.

 

(c)                                  Tenant agrees thatLandlord may, at its sole option, authorize a subtenant of the Premises to curea default by Tenant under this Lease. Should Landlord accept such cure, the subtenant shall have a right ofreimbursement and offset from and against Tenant under the applicable sublease.

 

**ARTICLE X. INSURANCE AND INDEMNITY**

 

**SECTION 10.1.****                             ****TENANT’SINSURANCE**.  Tenant, at its sole cost andexpense, shall provide and maintain in effect the insurance described inExhibit D.  Evidence of that insurancemust be delivered to Landlord prior to the Commencement Date.

 

**SECTION 10.2.****                             ****LANDLORD’SINSURANCE**.  Landlord may, at its election,provide any or all of the following types of insurance, with or withoutdeductible and in amounts and coverages as may be determined by Landlord in itsdiscretion:  property insurance, subjectto standard exclusions, covering the Building or Project, and such other risksas Landlord or its mortgagees may from time to time deem appropriate, andcommercial general liability coverage. Landlord shall not be required to carry insurance of any kind on anytenant improvements or alterations in the Premises installed by Tenant or itscontractors or otherwise removable by Tenant (collectively, “TenantInstallations”), as well as any trade fixtures, furnishings, equipment,interior plate glass, signs and all items of personal property in the Premises,and Landlord shall not be obligated to repair or replace any of the foregoingitems should damage occur.  All proceedsof insurance maintained by Landlord upon the Building and Project shall be theproperty of Landlord, whether or not Landlord is obligated to or elects to makeany repairs.

 

**SECTION 10.3.****                             ****TENANT’SINDEMNITY**.  To the fullest extentpermitted by law, but subject to Section 10.5 below, Tenant shall defend,indemnify and hold harmless Landlord, its agents, lenders, and any and allaffiliates of Landlord, from and against any and all claims, liabilities, costsor expenses arising either before or after the Commencement Date from Tenant’suse or occupancy of the Premises, the Building or the Common Areas, or from theconduct of its business, or from any activity, work, or thing done, permittedor suffered by Tenant or its agents, employees, subtenants, vendors,contractors, invitees or licensees in or about the Premises, the Building orthe Common Areas, or from any default in the performance of any obligation onTenant’s part to be performed under this Lease, or from any act or negligenceof Tenant or its agents, employees, subtenants, vendors, contractors, inviteesor licensees.  Landlord may, at itsoption, require Tenant to assume Landlord’s defense in any action covered bythis Section through counsel reasonably satisfactory to Landlord.

 

**SECTION 10.4.****                             ****LANDLORD’SNONLIABILITY**.  Landlord shall not be liableto Tenant, its employees, agents and invitees, and Tenant hereby waives allclaims against Landlord, its employees and agents for loss of or damage to anyproperty, or any injury to any person, or loss or interruption of business orincome, resulting from any condition including, but not limited to, fire,explosion, falling plaster, steam, gas, electricity, water or rain which mayleak or flow from or into any part of the Premises or from the breakage,leakage, obstruction or other defects of the pipes, sprinklers, wires,appliances, plumbing, air conditioning, electrical works or other fixtures inthe Building, whether the damage or injury results from conditions arising inthe Premises or in other portions of the Building.  It is understood that any such condition may require thetemporary evacuation or closure of all or a portion of the Building.  Should Tenant elect to receive any servicefrom a concessionaire, licensee or third party tenant of Landlord, Tenant shallnot seek recourse against Landlord for any breach or liability of that serviceprovider.  Neither Landlord nor itsagents shall be liable for interference with light or other similar intangibleinterests.  Tenant shall immediatelynotify Landlord in case of fire or accident in the Premises, the Building orthe Project and of defects in any improvements or equipment.

 

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**SECTION 10.5.****                             ****WAIVEROF SUBROGATION.****                     **Landlord andTenant each hereby waives all rights of recovery against the other on accountof loss and damage occasioned to the property of such waiving party to theextent that the waiving party is entitled to proceeds for such loss and damageunder any property insurance policies carried or otherwise required to becarried by this Lease.  By this waiverit is the intent of the parties that neither Landlord nor Tenant shall beliable to any insurance company (by way of subrogation or otherwise) insuringthe other party for any loss or damage insured against under any propertyinsurance policies, even though such loss or damage might be occasioned by thenegligence of such party, its agents, employees, contractors or invitees.  The foregoing waiver by Tenant shall alsoinure to the benefit of Landlord’s management agent for the Building.

 

**ARTICLE XI. DAMAGE OR DESTRUCTION**

 

**SECTION 11.1.****                             ****RESTORATION**.

 

(a)                                  If the Building ofwhich the Premises are a part is damaged as the result of an event of casualty,then subject to the provisions below, Landlord shall repair that damage as soonas reasonably possible unless:  (i)Landlord reasonably determines that the cost of repair would exceed ten percent(10%) of the full replacement cost of the Building (“Replacement Cost”) and thedamage is not covered by Landlord’s fire and extended coverage insurance (or bya normal extended coverage policy should Landlord fail to carry thatinsurance); or (ii) Landlord reasonably determines that the cost of repairwould exceed twenty-five percent (25%) of the Replacement Cost; or (iii)Landlord reasonably determines that the cost of repair would exceed ten percent(10%) of the Replacement Cost and the damage occurs during the final twelve(12) months of the Term.  ShouldLandlord elect not to repair the damage for one of the preceding reasons,Landlord shall so notify Tenant in the “Casualty Notice” (as defined below),and this Lease shall terminate as of the date of delivery of that notice.

 

(b)                                 As soon asreasonably practicable following the casualty event but not later than sixty(60) days thereafter, Landlord shall notify Tenant in writing (“CasualtyNotice”) of Landlord’s election, if applicable, to terminate this Lease.  If this Lease is not so terminated, theCasualty Notice shall set forth the anticipated period for repairing thecasualty damage.  If the anticipatedrepair period exceeds two hundred seventy (270) days and if the damage is soextensive as to reasonably prevent Tenant’s substantial use and enjoyment ofthe Premises, then Tenant may elect to terminate this Lease by written noticeto Landlord within ten (10) days following delivery of the Casualty Notice.

 

(c)                                  To the extent andfor the period that Landlord is entitled to reimbursement from the proceeds ofrental interruption insurance carried by Landlord as part of OperatingExpenses, the rental to be paid under this Lease shall be abated in the sameproportion that the floor area of the Premises that is rendered unusable by thedamage from time to time bears to the tot al floor area of the Premises.

 

(d)                                 Notwithstandingthe provisions of subsections (a), (b) and (c) of this Section, but subject toSection 10.5, the cost of any repairs shall be borne by Tenant, and Tenantshall not be entitled to rental abatement or termination rights, if the damageis due to the fault or neglect of Tenant or its employees, subtenants,contractors, invitees or representatives. In addition, the provisions of this Section shall not be deemed torequire Landlord to repair any Tenant Installations, fixtures and other itemsthat Tenant is obligated to insure pursuant to Exhibit D or any other provisionof this Lease.

 

**SECTION 11.2.****                             ****LEASEGOVERNS**.  Tenant agrees that theprovisions of this Lease, including without limitation Section 11.1, shallgovern any damage or destruction and shall accordingly supersede any contrarystatute or rule of law.

 

**ARTICLE XII. EMINENT DOMAIN**

 

**SECTION 12.1.****                             ****TOTALOR PARTIAL TAKING**.  If all or a material portionof the Premises is taken by any lawful authority by exercise of the right ofeminent domain, or sold to prevent a taking, either Tenant or Landlord mayterminate this Lease effective as of the date possession is required to besurrendered to the authority.  In theevent title to a portion of the Building or Project, other than the Premises,is taken or sold in lieu of taking, and if Landlord elects to restore theBuilding in such a way as to alter the Premises materially, either party mayterminate this Lease, by written notice to the other party, effective on thedate of vesting of title.  In the event neitherparty has elected to terminate this Lease as provided above, then Landlordshall promptly, after receipt of a sufficient condemnation award, proceed torestore the Premises to substantially their condition prior to the taking, anda proportionate allowance shall be made to Tenant for the rent corresponding tothe time during which, and to the part of the Premises of which, Tenant isdeprived on account of the taking and restoration.  In the event of a taking, Landlord shall be entitled to theentire amount of the condemnation award without deduction for any estate orinterest of Tenant; provided that nothing in this Section shall be deemed togive Landlord any interest in, or prevent Tenant from seeking any award againstthe taking

 

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authority for, the taking of personalproperty and fixtures belonging to Tenant or for relocation or businessinterruption expenses recoverable from the taking authority.

 

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

 

**SECTION 12.3.****                             ****TAKINGOF PARKING AREA**.  In the event there shall be ataking of the parking area such that Landlord can no longer provide sufficientparking to comply with this Lease, Landlord may substitute reasonably equivalent parking in a locationreasonably close to the Building; provided that if Landlord fails to make thatsubstitution within ninety (90) days following the taking and if the takingmaterially impairs Tenant’s use and enjoyment of the Premises, Tenant may, atits option, terminate this Lease by written notice to Landlord.  If this Lease is not so terminated byTenant, there shall be no abatement of rent and this Lease shall continue ineffect.

 

**ARTICLE XIII. SUBORDINATION; ESTOPPEL CERTIFICATE**

 

**SECTION 13.1.****                             ****SUBORDINATION**.  At the option of Landlord or any of itsmortgagees/deed of trust beneficiaries, this Lease shall be either superior orsubordinate 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; provided,that so long as Tenant is not in default under this Lease, this Lease shall notbe terminated or Tenant’s quiet enjoyment of the Premises disturbed in theevent of termination of any such ground or underlying lease, or the foreclosureof any such mortgage or deed of trust, to which this Lease has beensubordinated pursuant to this Section. In the event of a termination or foreclosure, Tenant shall become atenant of and attorn to the successor-in-interest to Landlord upon the sameterms and conditions as are contained in this Lease, and shall promptly executeany instrument reasonably required by Landlord’s successor for that purpose.  Tenant shall also, within ten (10) daysfollowing written request of Landlord (or the beneficiary under any deed oftrust encumbering the Building), execute and deliver all instruments as may berequired from time to time by Landlord or such beneficiary (including withoutlimitation any subordination, nondisturbance and attornment agreement in theform customarily required by such beneficiary) to subordinate this Lease andthe rights of Tenant under this Lease to any ground or underlying lease or tothe lien of any mortgage or deed of trust; provided, however, that any suchbeneficiary may, by written notice to Tenant given at any time, subordinate thelien of its deed of trust to this Lease. Tenant shall agree that any purchaser at a foreclosure sale or lendertaking title under a deed in lieu of foreclosure shall not be responsible forany act or omission of a prior landlord, shall not be subject to any offsets ordefenses Tenant may have against a prior landlord, and shall not be liable forthe return of any security deposit not actually recovered by such purchaser orbound by any rent paid in advance of the calendar month in which the transferof title occurred; provided that the foregoing shall not release the applicableprior landlord from any liability for those obligations.  Tenant acknowledges that Landlord’smortgagees and successors-in-interest and all beneficiaries under deeds oftrust encumbering the Building are intended third party beneficiaries of thisSection.

 

**SECTION 13.2.****                             ****ESTOPPELCERTIFICATE**.  Tenant shall, within ten (10)days following written notice from Landlord, execute, acknowledge and deliverto Landlord, in any form that Landlord may reasonably require, a statement inwriting in favor of Landlord and/or any prospective purchaser or encumbrancerof the Building (i) certifying that this Lease is unmodified and in full forceand effect (or, if modified, stating the nature of the modification andcertifying that this Lease, as modified, is in full force and effect) and thedates to which the rental, additional rent and other charges have been paid inadvance, if any, and (ii) acknowledging that, to Tenant’s knowledge, there areno uncured defaults on the part of Landlord, or specifying each default if anyare claimed, and (iii) setting forth all further information that Landlord mayreasonably require.  Tenant’s statementmay be relied upon by any prospective purchaser or encumbrancer of all or anyportion of the Building or Project.  Inaddition to Landlord’s other rights and remedies, Tenant’s failure to deliverany estoppel statement within the provided time shall be conclusive upon Tenantthat (i) this Lease is in full force and effect, without modification except asmay be represented by Landlord, (ii) there are no uncured defaults inLandlord’s performance, and (iii) not more than one month’s rental has beenpaid in advance.

 

**ARTICLE XIV. DEFAULTS AND REMEDIES**

 

**SECTION 14.1.****                             ****TENANT’SDEFAULTS**.  In addition to any other eventof default set forth in this Lease, the occurrence of any one or more of thefollowing events shall constitute a default by Tenant:

 

(a)                                  The failure byTenant to make any payment of rent required to be made by Tenant, as and whendue, where the failure continues for a period of three (3) days after writtennotice from Landlord to Tenant; provided, however, that any such notice shallbe in lieu of, and not in addition to, any notice required under CaliforniaCode of Civil Procedure Section 1161 and 1161(a) as amended.

 

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For purposes of these default and remediesprovisions, the term “additional rent” shall be deemed to include all amountsof any type whatsoever other than Basic Rent to be paid by Tenant pursuant tothe terms of this Lease.

 

(b)                                 The assignment,sublease, encumbrance or other transfer of the Lease by Tenant, eithervoluntarily or by operation of law, whether by judgment, execution, transfer byintestacy or testacy, or other means, without the prior written consent ofLandlord unless otherwise authorized herein.

 

(c)                                  The discovery byLandlord that any financial statement provided by Tenant, or by any affiliate,successor or guarantor of Tenant, was materially false.

 

(d)                                 The failure orinability by Tenant to observe or perform any of the covenants or provisions ofthis Lease to be observed or performed by Tenant, other than as specified inany other subsection of this Section, where the failure continues for a periodof thirty (30) days after written notice from Landlord to Tenant; provided,however, that any such notice shall be in lieu of, and not in addition to, anynotice required under California Code of Civil Procedure Section 1161 and1161(a) as amended.  However, if thenature of the failure is such that more than thirty (30) days are reasonably requiredfor its cure, then Tenant shall not be deemed to be in default if Tenantcommences the cure within thirty (30) days, and thereafter diligently pursuesthe cure to completion.

 

(e)                                  (i)  The making by Tenant of any generalassignment for the benefit of creditors; (ii) the filing by or against Tenantof a petition to have Tenant adjudged a Chapter 7 debtor under the BankruptcyCode or to have debts discharged or a petition for reorganization orarrangement under any law relating to bankruptcy (unless, in the case of apetition filed against Tenant, the same is dismissed within sixty (60) days);(iii) the appointment of a trustee or receiver to take possession ofsubstantially all of Tenant’s assets located at the Premises or of Tenant’sinterest in this Lease, if possession is not restored to Tenant within thirty(30) days; (iv) the attachment, execution or other judicial seizure ofsubstantially all of Tenant’s assets located at the Premises or of Tenant’sinterest in this Lease, where the seizure is not discharged within thirty (30)days; or (v) Tenant’s convening of a meeting of its creditors for the purposeof effecting a moratorium upon or composition of its debts.  Landlord shall not be deemed to haveknowledge of any event described in this subsection unless notification inwriting is received by Landlord, nor shall there be any presumptionattributable to Landlord of Tenant’s insolvency.  In the event that any provision of this subsection is contrary toapplicable law, the provision shall be of no force or effect.

 

**SECTION 14.2.****                             ****LANDLORD’SREMEDIES**.

 

(a)                                  In the event ofany default by Tenant, then in addition to any other remedies available toLandlord, Landlord may exercise the following remedies:

 

(i)                                     Landlord mayterminate Tenant’s right to possession of the Premises by any lawful means, inwhich case this Lease shall terminate and Tenant shall immediately surrenderpossession of the Premises to Landlord. Such termination shall not affect any accrued obligations of Tenantunder this Lease.  Upon termination,Landlord shall have the right to reenter the Premises and remove all personsand property.  Landlord shall also beentitled to recover from Tenant:

 

(1)  Theworth at the time of award of the unpaid rent and additional rent which hadbeen earned at the time of termination;

 

(2)  Theworth at the time of award of the amount by which the unpaid rent andadditional rent which would have been earned after termination until the timeof award exceeds the amount of such loss that Tenant proves could have beenreasonably avoided;

 

(3)  Theworth at the time of award of the amount by which the unpaid rent andadditional rent for the balance of the Term after the time of award exceeds theamount of such loss that Tenant proves could be reasonably avoided;

 

(4)  Anyother amount necessary to compensate Landlord for all the detriment proximatelycaused by Tenant’s failure to perform its obligations under this Lease or whichin the ordinary course of things would be likely to result from Tenant’sdefault, including, but not limited to, the cost of recovering possession ofthe Premises, commissions and other expenses of reletting, including necessaryrepair, renovation, improvement and alteration of the Premises for a newtenant, reasonable attorneys’ fees, and any other reasonable costs; and

 

(5)  AtLandlord’s election, all other amounts in addition to or in lieu of theforegoing as may be permitted by law. The term “rent” as used in this Lease shall be deemed to mean the BasicRent and all other sums required to be paid by Tenant to Landlord pursuant tothe terms of this Lease, including without limitation any sums that may beowing from Tenant pursuant to Section 4.3 of this Lease.  Any sum, other than Basic Rent, shall becomputed on the basis of the average monthly amount accruing during thetwenty-four (24) month period immediately prior to default, except that if itbecomes necessary to compute such rental before the twenty-four (24) monthperiod has occurred, then the computation shall be on the basis of the averagemonthly amount during the shorter

 

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period. As used in subparagraphs (1) and (2) above, the “worth at the time ofaward” shall be computed by allowing interest at the rate of ten percent (10%)per annum.  As used in subparagraph (3)above, the “worth at the time of award” shall be computed by discounting theamount at the discount rate of the Federal Reserve Bank of San Francisco at thetime of award plus one percent (1%).

 

(ii)                                  Landlord may electnot to terminate Tenant’s right to possession of the Premises, in which eventLandlord may continue to enforce all of its rights and remedies under thisLease, including the right to collect all rent as it becomes due.  Efforts by the Landlord to maintain,preserve or relet the Premises, or the appointment of a receiver to protect theLandlord’s interests under this Lease, shall not constitute a termination ofthe Tenant’s right to possession of the Premises.  In the event that Landlord elects to avail itself of the remedyprovided by this subsection (ii), Landlord shall not unreasonably withhold itsconsent to an assignment or subletting of the Premises subject to thereasonable standards for Landlord’s consent as are contained in this Lease.

 

(b)                                 The various rightsand remedies reserved to Landlord in this Lease or otherwise shall becumulative and, except as otherwise provided by California law, Landlord maypursue any or all of its rights and remedies at the same time.  No delay or omission of Landlord to exerciseany right or remedy shall be construed as a waiver of the right or remedy or ofany breach or default by Tenant.  Theacceptance by Landlord of rent shall not be a (i) waiver of any precedingbreach or default by Tenant of any provision of this Lease, other than thefailure of Tenant to pay the particular rent accepted, regardless of Landlord’sknowledge of the preceding breach or default at the time of acceptance of rent,or (ii) a waiver of Landlord’s right to exercise any remedy available toLandlord by virtue of the breach or default. The acceptance of any payment from a debtor in possession, a trustee, areceiver or any other person acting on behalf of Tenant or Tenant’s estateshall not waive or cure a default under Section 14.1.  No payment by Tenant or receipt by Landlord of a lesser amountthan the rent required by this Lease shall be deemed to be other than a partialpayment on account of the earliest due stipulated rent, nor shall anyendorsement or statement on any check or letter be deemed an accord andsatisfaction and Landlord shall accept the check or payment without prejudiceto Landlord’s right to recover the balance of the rent or pursue any otherremedy available to it.  Tenant herebywaives any right of redemption or relief from forfeiture under California Codeof Civil Procedure Section 1174 or 1179, or under any other present or futurelaw, in the event this Lease is terminated by reason of any default byTenant.  No act or thing done byLandlord or Landlord’s agents during the Term shall be deemed an acceptance ofa surrender of the Premises, and no agreement to accept a surrender shall bevalid unless in writing and signed by Landlord.  No employee of Landlord or of Landlord’s agents shall have anypower to accept the keys to the Premises prior to the termination of thisLease, and the delivery of the keys to any employee shall not operate as atermination of the Lease or a surrender of the Premises.

 

**SECTION 14.3.****                             ****LATEPAYMENTS**.

 

(a)                                  Any rent due underthis Lease that is not paid to Landlord within five (5) days of the date whendue shall bear interest at the maximum rate permitted by law from the date dueuntil fully paid.  The payment ofinterest shall not cure any default by Tenant under this Lease.  In addition, Tenant acknowledges that thelate payment by Tenant to Landlord of rent will cause Landlord to incur costsnot contemplated by this Lease, the exact amount of which will be extremelydifficult 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 onLandlord by the terms of any ground lease, mortgage or trust deed covering thePremises.  Accordingly, if any rent duefrom Tenant shall not be received by Landlord or Landlord’s designee withinfive (5) days after the date due, then Tenant shall pay to Landlord, inaddition to the interest provided above, a late charge for each delinquentpayment equal to the greater of (i) four percent (4%) of that delinquentpayment or (ii) two hundred and fifty dollars ($250.00).  Acceptance of a late charge by Landlordshall not constitute a waiver of Tenant’s default with respect to the overdueamount, nor shall it prevent Landlord from exercising any of its other rightsand remedies.

 

(b)                                 Following eachsecond consecutive installment of rent that is not paid within five (5) daysfollowing notice of nonpayment from Landlord, Landlord shall have the option(i) to require that beginning with the first payment of rent next due, rentshall no longer be paid in monthly installments but shall be payable quarterlythree (3) months in advance and/or (ii) to require that Tenant increase theamount, if any, of the Security Deposit by one hundred percent (100%).  Should Tenant deliver to Landlord, at anytime during the Term, two (2) or more insufficient checks, the Landlord mayrequire that all monies then and thereafter due from Tenant be paid to Landlordby cashier’s check.

 

**SECTION 14.4.****                             ****RIGHTOF LANDLORD TO PERFORM**.  All covenantsand agreements to be performed by Tenant under this Lease shall be performed atTenant’s sole cost and expense and without any abatement of rent or right ofset -off.  If Tenant fails to pay anysum of money, or fails to perform any other act on its part to be performedunder this Lease, and the failure continues beyond any applicable grace periodset 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’spart.  Landlord’s election to make thepayment or perform the act on Tenant’s part shall not give rise to anyresponsibility of Landlord to continue making the same or similar payments orperforming the same or similar acts. Tenant shall, promptly upon demand by Landlord, reimburse Landlord forall sums paid

 

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by Landlord and all necessary incidentalcosts, together with interest at the maximum rate permitted by law from thedate of the payment by Landlord.

 

**SECTION 14.5.****                             ****DEFAULTBY LANDLORD**.  Landlord shall not be deemedto be in default in the performance of any obligation under this Lease unlessand until it has failed to perform the obligation within thirty (30) days afterwritten notice by Tenant to Landlord specifying in reasonable detail the natureand extent of the failure; provided, however, that if the nature of Landlord’sobligation is such that more than thirty (30) days are required for itsperformance, then Landlord shall not be deemed to be in default if it commencesperformance within the thirty (30) day period and thereafter diligently pursuesthe cure to completion.

 

**SECTION 14.6.****                             ****EXPENSESAND LEGAL FEES**.  Should either Landlord orTenant bring any action in connection with this Lease, the prevailing partyshall be entitled to recover as a part of the action its reasonable attorneys’fees, and all other costs.  Theprevailing party for the purpose of this paragraph shall be determined by thetrier of the facts.

 

**SECTION 14.7.****                             ****WAIVEROF JURY TRIAL/RIGHT TO ARBITRATE**.

 

**(a)****                                 ****LANDLORDAND TENANT EACH ACKNOWLEDGES THAT IT IS AWARE OF AND HAS HAD THE ADVICE OFCOUNSEL OF ITS CHOICE WITH RESPECT TO ITS RIGHT TO TRIAL BY JURY, AND EACHPARTY DOES HEREBY EXPRESSLY AND KNOWINGLY WAIVE AND RELEASE ALL SUCH RIGHTS TOTRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTYHERETO AGAINST THE OTHER (AND/OR AGAINST ITS OFFICERS, DIRECTORS, EMPLOYEES,AGENTS, OR SUBSIDIARY OR AFFILIATED ENTITIES) ON ANY MATTERS WHATSOEVER ARISINGOUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, TENANT’S USE OR OCCUPANCY OFTHE PREMISES, AND/OR ANY CLAIM OF INJURY OR DAMAGE.**

 

**(b)****                                 ****SHOULDA DISPUTE ARISE BETWEEN THE PARTIES REGARDING ANY MATTER DESCRIBED ABOVE, THENEXCEPT WITH RESPECT TO ACTIONS FOR UNLAWFUL OR FORCIBLE DETAINER EITHER PARTYMAY CAUSE THE DISPUTE TO BE SUBMITTED TO EITHER JAMS/ENDISPUTE (“JAMS”) OR THEAMERICAN ARBITRATION ASSOCIATION (“AAA”), OR THEIR SUCCESSORS, IN THE COUNTY INWHICH THE BUILDING IS SITUATED FOR BINDING ARBITRATION BEFORE A SINGLEARBITRATOR.  HOWEVER, EACH PARTYRESERVES THE RIGHT TO SEEK A PROVISIONAL REMEDY BY JUDICIAL ACTION.  NO ARBITRATION ELECTION BY EITHER PARTYPURSUANT TO THIS SUBSECTION SHALL BE EFFECTIVE IF MADE LATER THAN THIRTY (30)DAYS FOLLOWING SERVICE OF A JUDICIAL SUMMONS AND COMPLAINT BY OR UPON SUCHPARTY CONCERNING THE DISPUTE.  THEARBITRATION ELECTION SHALL DESIGNATE WHETHER THE ARBITRATION WILL BE CONDUCTEDWITH JAMS OR AAA.  THE ARBITRATION SHALLBE CONDUCTED IN ACCORDANCE WITH THE RULES OF PRACTICE AND PROCEDURE OF JAMS ORTHE COMMERCIAL ARBITRATION RULES OF THE AAA, AS APPLICABLE, AND OTHERWISEPURSUANT TO THE CALIFORNIA ARBITRATION ACT (CODE OF CIVIL PROCEDURE SECTIONS1280 ET SEQ.).  NOTWITHSTANDING THEFOREGOING, THE ARBITRATOR IS SPECIFICALLY DIRECTED TO LIMIT DISCOVERY TO THATWHICH IS ESSENTIAL TO THE EFFECTIVE PROSECUTION OR DEFENSE OF THE ACTION, ANDIN NO EVENT SHALL SUCH DISCOVERY BY EITHER PARTY INCLUDE MORE THAN ONENON-EXPERT WITNESS DEPOSITION UNLESS BOTH PARTIES OTHERWISE AGREE.  THE ARBITRATOR SHALL, TO THE EXTENTAPPLICABLE, FOLLOW THE SUBSTANTIVE LAW OF CALIFORNIA AND SHALL RENDER AREASONED WRITTEN DECISION WITHIN TWENTY DAYS FOLLOWING THE HEARING.  THE ARBITRATOR SHALL APPORTION THE COSTS OFTHE ARBITRATION, TOGETHER WITH THE ATTORNEYS’ FEES OF THE PARTIES, IN THEMANNER DEEMED EQUITABLE BY THE ARBITRATOR, IT BEING THE INTENTION OF THEPARTIES THAT THE PREVAILING PARTY ORDINARILY BE ENTITLED TO RECOVER ITSREASONABLE COSTS AND FEES.  JUDGMENTUPON ANY AWARD RENDERED BY THE ARBITRATOR MAY BE ENTERED BY ANY COURT HAVINGJURISDICTION.**

 

**ARTICLE XV. END OF TERM**

 

**SECTION 15.1.****                             ****HOLDINGOVER**.  This Lease shall terminatewithout further notice upon the expiration of the Term, and any holding over byTenant after the expiration shall not constitute a renewal or extension of thisLease, or give Tenant any rights under this Lease, except when in writingsigned by both parties.  If Tenant holdsover for any period after the expiration (or earlier termination) of the Term,Landlord may, at its option, treat Tenant as a tenant at sufferance only,commencing on the first (1st) day following the termination of thisLease.  However, should Landlord acceptthe payment of monthly hold-over rent by Tenant, then a month-to-month tenancyshall be deemed effected and neither party shall terminate this Lease withoutthirty (30) days prior written notice to the other party.  Any hold-over by Tenant shall be subject toall of the terms of this Lease, except that the monthly rental shall be twohundred percent (200%) of the total monthly rental for the month immediatelypreceding the date of termination, subject to Landlord’s right to modify sameupon thirty (30) days notice to Tenant. The acceptance by Landlord of monthly hold-over rental in a lesser

 

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amount shall not constitute a waiver ofLandlord’s right to recover the full amount due unless otherwise agreed inwriting by Landlord.  If Tenant fails tosurrender the Premises upon the expiration of this Lease despite demand to doso by Landlord, Tenant shall indemnify and hold Landlord harmless from all lossor liability, including without limitation, any claims made by any succeedingtenant relating to such failure to surrender. The foregoing provisions of this Section are in addition to and do notaffect Landlord’s right of re-entry or any other rights of Landlord under thisLease or at law.

 

**SECTION 15.2.****                             ****MERGERON TERMINATION**.  The voluntary or othersurrender of this Lease by Tenant, or a mutual termination of this Lease, shallterminate any or all existing subleases unless Landlord, at its option, electsin writing to treat the surrender or termination as an assignment to it of anyor all subleases affecting the Premises.

 

**SECTION 15.3.****                             ****SURRENDEROF PREMISES;  REMOVAL OF PROPERTY**.  Upon the Expiration Date or upon any earliertermination of this Lease, Tenant shall quit and surrender possession of thePremises to Landlord in as good order, condition and repair as when received oras hereafter may be improved by Landlord or Tenant, reasonable wear and tearand repairs which are Landlord’s obligation excepted, and shall remove or fundto Landlord the cost of removing all wallpapering and voice and/or datatransmission cabling installed by or for Tenant, together with all personalproperty and debris, except for any items that Landlord may by writtenauthorization allow to remain.  Tenantshall repair all damage to the Premises resulting from the removal and restorethe affected area to its pre-existing condition, reasonable wear and tearexcepted, provided that Landlord may instead elect to repair any structuraldamage at Tenant’s expense.  If Tenantshall fail to comply with the provisions of this Section, Landlord may effectthe removal and/or make any repairs, and the cost to Landlord shall beadditional rent payable by Tenant upon demand. If requested by Landlord,  Tenantshall execute, acknowledge and deliver to Landlord an instrument in writingreleasing and quitclaiming to Landlord all right, title and interest of Tenantin the Premises.

 

**ARTICLE XVI. PAYMENTS AND NOTICES**

 

Allsums payable by Tenant to Landlord shall be paid, without deduction or offset,in lawful money of the United States to Landlord at its address set forth inItem 13 of the Basic Lease Provisions, or at any other place as Landlord maydesignate in writing.  Unless this Leaseexpressly provides otherwise, as for example in the payment of rent pursuant toSection 4.1, all payments shall be due and payable within five (5) days afterdemand.  All payments requiringproration shall be prorated on the basis of the number of days in the pertinentcalendar month or year, as applicable. Any notice, election, demand, consent, approval or other communicationto be given or other document to be delivered by either party to the other maybe delivered to the other party, at the address set forth in Item 13 of theBasic Lease Provisions, by personal service or electronic facsimiletransmission, or by any courier or “overnight” express mailing service, or maybe deposited in the United States mail, postage prepaid.  Either party may, by written notice to theother, served in the manner provided in this Article, designate a differentaddress.  If any notice or otherdocument is sent by mail, it shall be deemed served or delivered three (3)business days after mailing or, if sooner, upon actual receipt.  The refusal to accept delivery of a notice,or the inability to deliver the notice (whether due to a change of address forwhich notice was not duly given or other good reason), shall be deemed deliveryand receipt of the notice as of the date of attempted delivery.  If more than one person or entity is namedas Tenant under this Lease, service of any notice upon any one of them shall bedeemed as service upon all of them.

 

**ARTICLE XVII.  RULES AND REGULATIONS**

 

Tenantagrees to comply with the Rules and Regulations attached as Exhibit E, and anyreasonable and nondiscriminatory amendments, modifications and/or additions asmay be adopted and published by written notice to tenants by Landlord for thesafety, care, security, good order, or cleanliness of the Premises, Building,Project and/or Common Areas.  Landlordshall not be liable to Tenant for any violation of the Rules and Regulations orthe breach of any covenant or condition in any lease or any other act orconduct by any other tenant, and the same shall not constitute a constructiveeviction hereunder.  One or more waiversby Landlord of any breach of the Rules and Regulations by Tenant or by anyother tenant(s) shall not be a waiver of any subsequent breach of that rule orany other.  Tenant’s failure to keep andobserve the Rules and Regulations shall constitute a default under this Lease.  In the case of any conflict between theRules and Regulations and this Lease, this Lease shall be controlling.

 

**ARTICLE XVIII.  BROKER’S COMMISSION**

 

Theparties recognize as the broker(s) who negotiated this Lease the firm(s), ifany, whose name(s) is (are) stated in Item 10 of the Basic Lease Provisions, andagree that Landlord shall be responsible for the payment of brokeragecommissions to those broker(s) unless otherwise provided in this Lease.  Each party warrants that it has had nodealings with any other real estate broker or agent

 

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in connection with the negotiation of thisLease, and agrees to indemnify and hold the other party harmless from any cost,expense or liability (including reasonable attorneys’ fees) for anycompensation, commissions or charges claimed by any other real estate broker oragent employed or claiming to represent or to have been employed by theindemnifying party in connection with the negotiation of this Lease.  The foregoing agreement shall survive thetermination of this Lease.

 

**ARTICLE XIX. TRANSFER OF LANDLORD’S INTEREST**

 

Inthe event of any transfer of Landlord’s interest in the Premises, thetransferor shall be automatically relieved of all obligations on the part ofLandlord accruing under this Lease from and after the date of the transfer,provided that Tenant is duly notified of the transfer.  Any funds held by the transferor in whichTenant has an interest shall be turned over, subject to that interest, to thetransferee.  No holder of a mortgageand/or deed of trust to which this Lease is or may be subordinate shall beresponsible in connection with the Security Deposit unless the mortgagee orholder of the deed of trust actually receives the Security Deposit.  It is intended that the covenants andobligations contained in this Lease on the part of Landlord shall, subject tothe foregoing, be binding on Landlord, its successors and assigns, only duringand in respect to their respective successive periods of ownership.

 

**ARTICLE XX. INTERPRETATION**

 

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

 

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

 

**SECTION 20.3.****                             ****JOINTAND SEVERAL LIABILITY**.  If morethan one person or entity is named as Tenant, the obligations imposed upon eachshall be joint and several and the act of or notice from, or notice or refundto, or the signature of, any one or more of them shall be binding on all ofthem 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 rightsand liabilities given to or imposed upon Landlord and Tenant shall extend to andbind their respective heirs, executors, administrators, successors andassigns.  Nothing contained in thisSection is intended, or shall be construed, to grant to any person other thanLandlord and Tenant and their successors and assigns any rights or remediesunder this Lease.

 

**SECTION 20.5.****                             ****TIMEOF ESSENCE**.  Time is of the essence withrespect to the performance of every provision of this Lease in which time ofperformance is a factor.

 

**SECTION 20.6.****                             ****CONTROLLINGLAW/VENUE**.  This Lease shall be governed byand interpreted in accordance with the laws of the State of California.  Should any litigation be commenced betweenthe parties in connection with this Lease, such action shall be prosecuted inthe applicable State Court of California in the county in which the Building islocated.

 

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

 

**SECTION 20.8.****                             ****WAIVER**.  One or more waivers by Landlord or Tenant ofany breach of any term, covenant or condition contained in this Lease shall notbe a waiver of any subsequent breach of the same or any other term, covenant orcondition.  Consent to any act by one ofthe parties shall not be deemed to render unnecessary the obtaining of thatparty’s consent to any subsequent act. No breach of this Lease shall be deemed to have been waived unless thewaiver is in a writing signed by the waiving party.

 

**SECTION 20.9.****                             ****INABILITYTO PERFORM**.  In the event that either partyshall be delayed or hindered in or prevented from the performance of any workor in performing any act required under this Lease by reason of any causebeyond the reasonable control of that party, then the performance of the workor the doing of the act shall be excused for the period of the delay and thetime for performance shall be extended for a period equivalent to the period ofthe delay.  The provisions of this Sectionshall not operate to excuse Tenant from the prompt payment of rent.

 

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**SECTION 20.10.****                      ****ENTIREAGREEMENT**.  This Lease and its exhibitsand other attachments cover in full each and every agreement of every kindbetween the parties concerning the Premises, the Building, and the Project, andall preliminary negotiations, oral agreements, understandings and/or practices,except those contained in this Lease, are superseded and of no furthereffect.  Tenant waives its rights torely on any representations or promises made by Landlord or others which arenot contained in this Lease.  No verbalagreement or implied covenant shall be held to modify the provisions of thisLease, any statute, law, or custom to the contrary notwithstanding.

 

**SECTION 20.11.****                      ****QUIETENJOYMENT**.  Upon the observance andperformance of all the covenants, terms and conditions on Tenant’s part to beobserved 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 theTerm without hindrance or interruption by Landlord or any other person claimingby or through Landlord.

 

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

 

**ARTICLE XXI. EXECUTION AND RECORDING**

 

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

 

**SECTION 21.2.****                             ****CORPORATEAND PARTNERSHIP AUTHORITY**.  If Tenantis a corporation, limited liability company or partnership, each individualexecuting this Lease on behalf of the entity represents and warrants that he isduly authorized to execute and deliver this Lease and that this Lease isbinding upon the corporation, limited liability company or partnership inaccordance with its terms.  Tenantshall, at Landlord’s request, deliver a certified copy of its organizationaldocuments or an appropriate certificate authorizing or evidencing the executionof this Lease.

 

**SECTION 21.3.****                             ****EXECUTIONOF LEASE; NO OPTION OR OFFER**.  Thesubmission of this Lease to Tenant shall be for examination purposes only, andshall not constitute an offer to or option for Tenant to lease thePremises.  Execution of this Lease byTenant and its return to Landlord shall not be binding upon Landlord,notwithstanding any time interval, until Landlord has in fact executed anddelivered this Lease to Tenant, it being intended that this Lease shall onlybecome effective upon execution by Landlord and delivery of a fully executedcounterpart to Tenant.

 

**SECTION 21.4.****                             ****RECORDING**.  Tenant shall not record this Lease withoutthe 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 mutual termination of thisLease shall be effective unless in writing signed by authorized signatories ofTenant and Landlord, or by their respective successors in interest.  No actions, policies, oral or informalarrangements, business dealings or other course of conduct by or between theparties shall be deemed to modify this Lease in any respect.

 

**ARTICLE XXII.  MISCELLANEOUS**

 

**SECTION 22.1.****                             ****NONDISCLOSUREOF LEASE TERMS**.  Tenant acknowledges and agreesthat the terms of this Lease are confidential and constitute proprietaryinformation of Landlord.  Disclosure ofthe terms could adversely affect the ability of Landlord to negotiate otherleases and impair Landlord’s relationship with other tenants.  Accordingly, Tenant agrees that it, and itspartners, officers, directors, employees and attorneys, shall not intentionallyand voluntarily disclose the terms and conditions of this Lease to any othertenant or apparent prospective tenant of the Building or Project, eitherdirectly or indirectly, without the prior written consent of Landlord,provided, however, that Tenant may disclose the terms to prospective subtenantsor assignees under this Lease or pursuant to any legal requirement.

 

**SECTION 22.2.****                             ****REPRESENTATIONSBY TENANT**.  The application, financialstatements and tax returns, if any, submitted and certified to by Tenant as anaccurate representation of its financial condition have been prepared,certified and submitted to Landlord as an inducement and consideration toLandlord to enter into this Lease.  Theapplication and statements are represented and warranted by Tenant to becorrect and to accurately and fully reflect Tenant’s true financial conditionas of the date of execution of this Lease by Tenant.  Tenant shall during the Term promptly furnish Landlord withcurrent annual financial statements accurately reflecting Tenant’s financialcondition upon written request from Landlord.

 

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**SECTION 22.3.****                             ****CHANGESREQUESTED BY LENDER**.  If, inconnection with obtaining financing for the Building, the lender shall requestreasonable modifications in this Lease as a condition to the financing, Tenantwill not unreasonably withhold or delay its consent, provided that themodifications do not materially increase the obligations of Tenant ormaterially and adversely affect the leasehold interest created by this Lease.

 

**SECTION 22.4.****                             ****MORTGAGEEPROTECTION**.  No act or failure to act onthe part of Landlord which would otherwise entitle Tenant to be relieved of itsobligations hereunder or to terminate this Lease shall result in such a releaseor termination unless (a) Tenant has given notice by registered or certifiedmail to any beneficiary of a deed of trust or mortgage covering the Buildingwhose address has been furnished to Tenant and (b) such beneficiary is affordeda reasonable opportunity to cure the default by Landlord, including, ifnecessary to effect the cure, time to obtain possession of the Building bypower of sale or judicial foreclosure provided that such foreclosure remedy isdiligently pursued.

 

**SECTION 22.5.****                             ****DISCLOSURESTATEMENT**.  Tenant acknowledges that ithas read, understands and, if applicable, shall comply with the provisions ofExhibit F to this Lease, if that Exhibit is attached.

 
| **LANDLORD:**      | **TENANT:**                     |
|--------------------|---------------------------------|
|               |                            |
| THE IRVINE COMPANY | GARDENBURGER, INC.              |
|               |                            |
|               |                            |
| By                 |                            |   | By |   |   |
|               | Donald S. McNutt                |   |   |   |   |
|               | Senior Vice President, Leasing, | Printed Name |   |   |
|               | Office Properties               |   |   |   |   |
|               | Title                           |   |   |
|               |                            |   |   |
|               |                            |   |   |
| By                 |                            |   | By |   |   |
|               | Michael T. Bennett              |   |   |   |   |
|               | Vice President, Operations,     |   | Printed Name |   |   |
|               | Office Properties               |   |   |   |   |
|               | Title                           |   |   |
|                    |                                 |  |  |  |  |  |  |

 

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**EXHIBIT B**

 

**UTILITIES AND SERVICES**

 

Thefollowing standards for utilities and services shall be in effect at theBuilding.  Landlord reserves the rightto adopt nondiscriminatory modifications and additions to these standards.  In the case of any conflict between thesestandards and the Lease, the Lease shall be controlling.  Subject to all of the provisions of theLease, including but not limited to the restrictions contained in Section 6.1,the following shall apply:

 

1.          Landlord shall make available to thePremises during the hours of 8:00 a.m. to 6:00 p.m., Monday through Friday, andif requested by Tenant on a week -by-week basis, from 8:00 a.m. to 1:00 p.m. onSaturday (“Building Hours”), generally recognized national holidays excepted,reasonable HVAC services.  Subject tothe provisions set forth below, Landlord shall also furnish the Building withelevator service (if applicable), reasonable amounts of electric current fornormal lighting by Landlord’s standard overhead fluorescent and incandescentfixtures and for the operation of office equipment consistent in type andquantity with that utilized by typical office tenants of the Building andProject, and water for lavatory purposes. Tenant will not, without the prior written consent of Landlord, connectany apparatus, machine or device with water pipes or electric current (exceptthrough existing electrical outlets in the Premises) for the purpose of usingelectric current or water.  Because theBuilding systems have been designed for normal occupancy of approximately fourpersons per one thousand usable square feet, Tenant understands that excessoccupancy of the Premises may result in excessive use of power and otherservices and may inhibit the efficient cooling of the Premises.  This paragraph shall at all times be subjectto applicable governmental regulations.

 

2.          Upon writtenrequest from Tenant delivered to Landlord at least 24 hours prior to the periodfor which service is requested, but during normal business hours, Landlord willprovide any of the foregoing building services to Tenant at such times whensuch services are not otherwise available. Tenant agrees to pay Landlord for those after-hour services at ratesthat Landlord may establish from time to time. If Tenant requires electric current in excess of that which Landlord isobligated to furnish under this Exhibit B, Tenant shall first obtain theconsent of Landlord, and Landlord may cause an electric current meter to beinstalled in the Premises to measure the amount of electric currentconsumed.  The cost of installation, maintenanceand repair of the meter shall be paid for by Tenant, and Tenant shall reimburseLandlord promptly upon demand for all electric current consumed for any specialpower use as shown by the meter.  Thereimbursement shall be at the rates charged for electrical power by the localpublic utility furnishing the current, plus any additional expense incurred inkeeping account of the electric current consumed.

 

3.          Landlord shall furnish water for drinking,personal hygiene and lavatory purposes only. If Tenant requires or uses water for any purposes in addition toordinary drinking, cleaning and lavatory purposes, Landlord may,  in its discretion, install a water meter tomeasure Tenant’s water consumption. Tenant shall pay Landlord for the cost of the meter and the cost of itsinstallation, and for consumption throughout the duration of Tenant’soccupancy.  Tenant shall keep the meterand installed equipment in good working order and repair at Tenant’s own costand expense, in default of which Landlord may cause the meter to be replaced orrepaired at Tenant’s expense.  Tenantagrees to pay for water consumed, as shown on the meter and when bills arerendered, and on Tenant’s default in making that payment Landlord may pay thecharges on behalf of Tenant.  Any costsor expenses or payments made by Landlord for any of the reasons or purposesstated above shall be deemed to be additional rent payable by Tenant toLandlord upon demand.

 

4.          In the event that any utility service to thePremises is separately metered or billed to Tenant, Tenant shall pay allcharges for that utility service to the Premises and the cost of furnishing theutility to tenant suites shall be excluded from the Operating Expenses as towhich reimbursement from Tenant is required in the Lease.  If any utility charges are not paid when dueLandlord may pay them, and any amounts paid by Landlord shall immediatelybecome due to Landlord from Tenant as additional rent.  If Landlord elects to furnish any utilityservice to the Premises, Tenant shall purchase its requirements of that utilityfrom Landlord as long as the rates charged by Landlord do not exceed thosewhich Tenant would be required to pay if the utility service were furnished itdirectly by a public utility.

 

5.          Landlord shallprovide janitorial services five days per week, equivalent to that furnished incomparable buildings, and window washing as reasonably required; provided,however, that Tenant shall pay for any additional or unusual janitorialservices required by reason of any nonstandard improvements in the Premises,including without limitation wall coverings and floor coverings installed by orfor Tenant, or by reason of any use of Premises other than exclusively asoffices.  The cleaning services providedby Landlord shall also exclude refrigerators, eating utensils (plates, drinkingcontainers and silverware), and interior glass partitions.  Tenant shall pay to Landlord the cost ofremoval of any of Tenant’s refuse and rubbish, to the extent that they exceedthe refuse and rubbish usually attendant with general office usage.

 

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6.          Tenant shall haveaccess to the Building 24 hours per day, 7 days per week, 52 weeks per year;provided that Landlord may install access control systems as it deems advisablefor the Building.  Such systems may, butneed not, include full or part-time lobby supervision, the use of a sign-insign-out log, a card identification access system, building parking and accesspass system, closing hours procedures, access control stations, fire stairwellexit door alarm system, electronic guard system, mobile paging system, elevatorcontrol system or any other access controls. In the event that Landlord elects to provide any or all of thoseservices, Landlord may discontinue providing them at any time with or withoutnotice.  Landlord may impose areasonable charge for access control cards and/or keys issued to Tenant.  Landlord shall have no liability to Tenantfor the provision by Landlord of improper access control services, for anybreakdown in service, or for the failure by Landlord to provide access controlservices.  Tenant further acknowledgesthat Landlord’s access systems may be temporarily inoperative during buildingemergency and system repair periods. Tenant agrees to assume responsibility for compliance by its employeeswith any regulations established by Landlord with respect to any card keyaccess or any other system of building access as Landlord may establish.  Tenant shall be liable to Landlord for anyloss or damage resulting from its or its employees use of any access system.

 

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**EXHIBIT C**

 

**PARKING**

 

Thefollowing parking regulations shall be in effect at the Building.  Landlord reserves the right to adoptreasonable, nondiscriminatory modifications and additions to the regulations bywritten notice to Tenant.  In the caseof any conflict between these regulations and the Lease, the Lease shall becontrolling.

 

1.          Landlord agrees to maintain, or cause to bemaintained, an automobile parking area (“Parking Area”) in reasonable proximityto the Building for the benefit and use of the visitors and patrons and, exceptas otherwise provided, employees of Tenant, and other tenants and occupants ofthe Building.  The Parking Area shall include,whether in a surface parking area or a parking structure, the automobileparking stalls, driveways, entrances, exits, sidewalks and attendant pedestrianpassageways and other areas designated for parking.  Landlord shall have the right and privilege of determining thenature and extent of the automobile Parking Area, whether it shall be surface,underground or other structure, and of making such changes to the Parking Areafrom time to time which in its opinion are desirable and for the best interestsof all persons using the Parking Area. Landlord shall keep the Parking Area in a neat, clean and orderlycondition, and shall repair any damage to its facilities.  Landlord shall not be liable for any damageto motor vehicles of visitors or employees, for any loss of property fromwithin those motor vehicles, or for any injury to Tenant, its visitors oremployees, unless ultimately determined to be caused by the sole activenegligence or willful misconduct of Landlord. Unless otherwise instructed by Landlord, every parker shall park andlock his or her own motor vehicle. Landlord shall also have the right to establish, and from time to timeamend, and to enforce against all users of the Parking Area all reasonablerules and regulations (including the designation of areas for employee parking)as Landlord may deem necessary and advisable for the proper and efficientoperation and maintenance of the Parking Area. Garage managers or attendants are not authorized to make or allow anyexceptions to these regulations.

 

2.          Landlord may, ifit deems advisable in its sole discretion, charge for parking and may establishfor the Parking Area a system or systems of permit parking for Tenant, itsemployees and its visitors, which may include, but not be limited to, a systemof charges against nonvalidated parking, verification of users, a set ofregulations governing different parking locations, and an allotment of reservedor nonreserved parking spaces based upon the charges paid and the identity ofusers.  In no event shall Tenant or itsemployees park in reserved stalls leased to other tenants or in stalls withindesignated visitor parking zones, nor shall Tenant or its employees utilizemore than the number of parking stalls allotted in this Lease to Tenant.  It is understood that Landlord shall nothave any obligation to cite improperly parked vehicles or otherwise attempt toenforce reserved parking rules during hours when parking attendants are notpresent at the Parking Area.  Tenantshall comply with such system in its use (and in the use of its visitors,patrons and employees) of the Parking Area, provided, however, that the systemand rules and regulations shall apply to all persons entitled to the use of theParking Area, and all charges to Tenant for use of the Parking Area shall be nogreater than Landlord’s then current scheduled charge for parking.

 

3.          Tenant shall, uponrequest of Landlord from time to time, furnish Landlord with a list of itsemployees’ names and of Tenant’s and its employees’ vehicle licensenumbers.  Tenant agrees to acquaint itsemployees with these regulations and assumes responsibility for compliance byits employees with these parking provisions, and shall be liable to Landlordfor all unpaid parking charges incurred by its employees.  Any amount due from Tenant shall be deemedadditional rent.  Tenant authorizesLandlord to tow away from the Building any vehicle belonging to Tenant orTenant’s employees parked in violation of these provisions, and/or to attachviolation stickers or notices to those vehicles.  In the event Landlord elects or is required to limit or controlparking by tenants, employees, visitors or invitees of the Building, whether byvalidation of parking tickets, parking meters or any other method ofassessment, Tenant agrees to participate in the validation or assessmentprogram under reasonable rules and regulations as are established by Landlordand/or any applicable governmental agency.

 

4.          Landlord mayestablish an identification system for vehicles of Tenant and its employeeswhich may consist of stickers, magnetic parking cards or other identificationdevices supplied by Landlord.  Allidentification devices shall remain the property of Landlord, shall bedisplayed as required by Landlord or upon request and may not be mutilated orobliterated in any manner.  Thosedevices shall not be transferable and any such device in the possession of anunauthorized holder shall be void and may be confiscated.  Landlord may impose a reasonable fee foridentification devices and a replacement charge for devices which are lost orstolen.  Each identification deviceshall be returned to Landlord promptly following the Expiration Date or soonertermination of this Lease.  Loss ortheft of parking identification devices shall be reported to Landlord or itsParking Area operator immediately and a written report of the loss filed ifrequested by Landlord or its Parking Area operator.

 

5.          Persons using theParking Area shall observe all directional signs and arrows and any posted speedlimits.  Unless otherwise posted, in noevent shall the speed limit of 5 miles per hour be exceeded.  All vehicles shall be parked entirely withinpainted stalls, and no vehicles shall be

 

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parked in areas which are posted or markedas “no parking” or on or in ramps, driveways and aisles.  Only one vehicle may be parked in a parkingspace.  In no event shall Tenant interferewith the use and enjoyment of the Parking Area by other tenants of the Buildingor their employees or invitees.

 

6.          Parking Areasshall be used only for parking vehicles. Washing, waxing, cleaning or servicing of vehicles, or the parking ofany vehicle on an overnight basis, in the Parking Area (other than emergencyservices) by any parker or his or her agents or employees is prohibited unlessotherwise authorized by Landlord. Tenant shall have no right to install any fixtures, equipment orpersonal property (other than vehicles) in the Parking Area, nor shall Tenantmake any alteration to the Parking Area.

 

7.          It is understood that the employees ofTenant and the other tenants of Landlord within the Building and Project shallnot be permitted to park their automobiles in the portions of the Parking Areawhich may from time to time be designated for patrons of the Building and/orProject and that Landlord shall at all times have the right to establish rulesand regulations for employee parking. Landlord shall lease to Tenant, and Tenant shall be obligated to leasefrom Landlord for the Term of this Lease, the total number of vehicle parkingspaces set forth in Item 12 of the Basic Lease Provisions (the “AllottedStalls”).  Tenant shall pay to Landlordfor the lease of the Allotted Stalls the amounts as Landlord shall from time totime determine.  Should any monthlyparking charge installment not be paid within five (5) days following the datedue, then a late charge shall be payable by Tenant equal to the greater of (i)four percent (4%) of the delinquent installment or (ii) two hundred and fiftydollars ($250.00), which late charge shall be separate and in addition to anylate charge that may be assessed pursuant to Section 14.3 of the Lease forother than delinquent monthly parking charges. Landlord may authorize persons other than those described above,including occupants of other buildings, to utilize the Parking Area.  In the event of the use of the Parking Areaby other persons, those persons shall pay for that use in accordance with theterms established above; provided, however, Landlord may allow those persons touse the Parking Area on weekends, holidays, and at other non-office hourswithout payment.  Notwithstanding theforegoing, provided Tenant is not in default under the Lease, the monthly stallcharge for the Allotted Stalls shall be waived through the end of the initialLease Term.

 

8.          Notwithstandingthe foregoing paragraphs 1 through 7, Landlord shall be entitled to pass on toTenant its proportionate share of any charges or parking surcharge ortransportation management costs levied by any governmental agency.  The foregoing parking provisions are furthersubject to any governmental regulations which limit parking or otherwise seekto encourage the use of carpools, public transit or other alternativetransportation forms or traffic reduction programs.  Tenant agrees that it will use its best efforts to cooperate,including registration and attendance, in programs which may be undertaken toreduce traffic.  Tenant acknowledgesthat as a part of those programs, it may be required to distribute employeetransportation information, participate in employee transportation surveys,allow employees to participate in commuter activities, designate a liaison forcommuter transportation activities, distribute commuter information to allemployees, and otherwise participate in other programs or services initiatedunder a transportation management program.

 

9.          Should any parkingspaces be allotted by Landlord to Tenant, either on a reserved or nonreservedbasis, Tenant shall not assign or sublet any of those spaces, eithervoluntarily or by operation of law, without the prior written consent ofLandlord, except in connection with an authorized assignment of this Lease orsubletting of the Premises.

 

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**EXHIBIT D**

 

**TENANT’S INSURANCE**

 

Thefollowing standards for Tenant’s insurance shall be in effect at the Building,and Tenant shall also cause any of its subtenants to comply with therequirements below.  Landlord reservesthe right to adopt reasonable nondiscriminatory modifications and additions tothose standards.  Tenant agrees toobtain and present evidence to Landlord that it has fully complied with theinsurance requirements.

 

1.          Tenant shall, atits sole cost and expense, commencing on the date Tenant is given access to thePremises for any purpose and during the entire Term, procure, pay for and keepin full force and effect:  (i)commercial general liability insurance with respect to the Premises and theoperations of or on behalf of Tenant in, on or about the Premises, includingbut not limited to coverage for personal injury, independent contractors, broadform property damage, fire legal liability, products liability (if a product issold from the Premises), and liquor law liability (if alcoholic beverages aresold, served or consumed within the Premises), which policy(ies) shall bewritten on an “occurrence” basis and for not less than $2,000,000 combinedsingle limit (with a $50,000 minimum limit on fire legal liability) per occurrencefor bodily injury, death, and property damage liability, or the current limitof liability carried by Tenant, whichever is greater, and subject to suchincreases in amounts as Landlord may determine from time to time; (ii) workers’compensation insurance coverage as required by law, together with employers’liability insurance coverage of at least $1,000,000; (iii) with respect toimprovements, alterations, and the like required or permitted to be made byTenant under this Lease, builder’s risk insurance, in amounts satisfactory toLandlord; (iv) insurance against fire, vandalism, malicious mischief and suchother additional perils as may be included in a standard “special form” policy,insuring all Tenant Installations, trade fixtures, furnishings, equipment anditems of personal property in the Premises, in an amount equal to not less thanninety percent (90%) of their actual replacement cost (with replacement costendorsement), which policy shall also include loss of income/businessinterruption/extra expense coverage in an amount not less than nine months lossof income from Tenant’s business in the Premises.  In no event shall the limits of any policy be considered aslimiting the liability of Tenant under this Lease.

 

2.          All policies ofinsurance required to be carried by Tenant pursuant to this Exhibit shall bewritten by responsible insurance companies authorized to do business in theState 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’sInsurance Report.  Any insurancerequired of Tenant may be furnished by Tenant under any blanket policy carriedby it or under a separate policy.  Acertificate of insurance, certifying that the policy has been issued, providesthe coverage required by this Exhibit and contains the required provisions,together with endorsements acceptable to Landlord evidencing the waiver ofsubrogation and additional insured provisions required under Paragraph 3 below,shall be delivered to Landlord prior to the date Tenant is given the right ofpossession of the Premises.  Properevidence of the renewal of any insurance coverage shall also be delivered toLandlord not less than thirty (30) days prior to the expiration of the coverage.  Landlord may at any time, and from time totime, inspect and/or copy any and all insurance policies required by thisLease.

 

3.          Unless otherwiseprovided below, each policy evidencing insurance required to be carried byTenant pursuant to this Exhibit shall contain the following provisions and/orclauses satisfactory to Landlord:  (i)with respect to Tenant’s commercial general liability insurance, a provisionthat the policy and the coverage provided shall be primary and that anycoverage carried by Landlord shall be excess and noncontributory, together witha provision including Landlord and any other parties in interest designated byLandlord as additional insureds;  (ii)except with respect to Tenant’s commercial general liability insurance, a waiverby the insurer of any right to subrogation against Landlord, its agents,employees, contractors and representatives which arises or might arise byreason of any payment under the policy or by reason of any act or omission ofLandlord, its agents, employees, contractors or representatives; and (iii) aprovision that the insurer will not cancel or change the coverage provided bythe policy without first giving Landlord thirty (30) days prior written notice.

 

4.          In the event thatTenant fails to procure, maintain and/or pay for, at the times and for thedurations specified in this Exhibit, any insurance required by this Exhibit, orfails to carry insurance required by any governmental authority, Landlord mayat its election procure that insurance and pay the premiums, in which eventTenant shall repay Landlord all sums paid by Landlord, together with interestat the maximum rate permitted by law and any related costs or expenses incurredby Landlord, within ten (10) days following Landlord’s written demand toTenant.

 

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

 

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**EXHIBIT E**

 

**RULES AND REGULATIONS**

 

Thefollowing Rules and Regulations shall be in effect at the Building.  Landlord reserves the right to adoptreasonable nondiscriminatory modifications and additions at any time.  In the case of any conflict between theseregulations and the Lease, the Lease shall be controlling.

 

1.          Except with theprior written consent of Landlord, or unless otherwise specifically authorizedin this Lease, Tenant shall not sell or permit the retail sale of goods orservices in or from the Premises, nor shall Tenant allow the Premises to beutilized for any manufacturing or medical practice.

 

2.          The sidewalks,halls, passages, elevators, stairways, and other common areas shall not beobstructed by Tenant or used by it for storage, for depositing items, or forany purpose other than for ingress to and egress from the Premises.  The halls, passages, entrances, elevators,stairways, balconies and roof are not for the use of the general public, andLandlord shall in all cases retain the right to control and prevent access tothose areas of all persons whose presence, in the judgment of Landlord, shallbe prejudicial to the safety, character, reputation and interests of theBuilding and its tenants.  Should Tenanthave access to any balcony or patio area, Tenant shall not place any furnitureor other personal property in such area without the prior written approval ofLandlord.  Nothing contained in thisLease shall be construed to prevent access to persons with whom Tenant normallydeals only for the purpose of conducting its business on the Premises (such asclients, customers, office suppliers and equipment vendors and the like) unlessthose persons are engaged in illegal activities.  Neither Tenant nor any employee or contractor of Tenant shall goupon the roof of the Building without the prior written consent of Landlord.

 

3.          The sashes, sashdoors, windows, glass lights, solar film and/or screen, and any lights orskylights that reflect or admit light into the halls or other places of theBuilding shall not be covered or obstructed. The toilet rooms, water and wash closets and other water apparatus shallnot be used for any purpose other than that for which they were constructed,and no foreign substance of any kind shall be thrown in those facilities, andthe expense of any breakage, stoppage or damage resulting from the violation ofthis rule shall be borne by Tenant.

 

4.          No sign,advertisement or notice visible from the exterior of the Premises shall beinscribed, painted or affixed by Tenant on any part of the Building or thePremises without the prior written consent of Landlord.  If Landlord shall have given its consent atany time, whether before or after the execution of this Lease, that consentshall in no way operate as a waiver or release of any of the provisions of thisLease, and shall be deemed to relate only to the particular sign, advertisementor notice so consented to by Landlord and shall not be construed as dispensingwith the necessity of obtaining the specific written consent of Landlord withrespect to any subsequent sign, advertisement or notice.  If Landlord, by a notice in writing toTenant, shall object to any curtain, blind, tinting, shade or screen attachedto, or hung in, or used in connection with, any window or door of the Premises,the use of that curtain, blind, tinting, shade or screen shall be immediatelydiscontinued and removed by Tenant.  Noawnings shall be permitted on any part of the Premises.  No antenna or satellite dish shall beinstalled by Tenant that is either located or visible from outside the Premiseswithout the prior written agreement of Landlord.

 

5.          Tenant shall notdo or permit anything to be done in the Premises, or bring or keep anything inthe Premises, which shall in any way increase the rate of fire insurance on theBuilding, or on the property kept in the Building, or obstruct or interferewith the rights of other tenants, or in any way injure or annoy them, orconflict with the regulations of the Fire Department or the fire laws, or withany insurance policy upon the Building, or any portion of the Building or itscontents, or with any rules and ordinances established by the Board of Healthor other governmental authority.

 

6.          The installationand location of any unusually heavy equipment in the Premises, includingwithout limitation file storage units, safes and electronic data processingequipment, shall require the prior written approval of Landlord.  Landlord may restrict the weight and positionof any equipment that may exceed the weight load limits for the structure ofthe Building, and may further require, at Tenant’s expense, the reinforcementof any flooring on which such equipment may be placed and/or an engineeringstudy to be performed to determine whether the equipment may safely beinstalled in the Building and the necessity of any reinforcement.  The moving of large or heavy objects shalloccur only between those hours as may be designated by, and only upon previouswritten notice to, Landlord, and the persons employed to move those objects inor out of the Building must be reasonably acceptable to Landlord.  Without limiting the generality of theforegoing, no freight, furniture or bulky matter of any description shall bereceived into or moved out of the lobby of the Building or carried in anyelevator other than the freight elevator designated by Landlord unless approvedin writing by Landlord.

 

7.          Landlord shallclean the Premises as provided in the Lease, and except with the writtenconsent of Landlord, no person or persons other than those approved by Landlordwill be permitted to enter the Building for that purpose.  Tenant shall not cause unnecessary labor byreason of

 

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Tenant’s carelessness and indifference in thepreservation of good order and cleanliness. Landlord shall not be responsible to Tenant or its employees for loss ordamage to property in connection with the provision of janitorial services bythird party contractors.

 

8.          Tenant shall notsweep or throw, or permit to be swept or thrown, from the Premises any dirt orother substance into any of the corridors or halls or elevators, or out of thedoors or windows or stairways of the Building, and Tenant shall not use, keepor permit to be used or kept any foul or noxious gas or substance in thePremises, or permit or suffer the Premises to be occupied or used in a manneroffensive or objectionable to Landlord or other occupants of the Building byreason of noise, odors and/or vibrations, or interfere in any way with othertenants or those having business with other tenants, nor shall any animals orbirds be kept by Tenant in or about the Building.  Smoking or carrying of lighted cigars, cigarettes, pipes orsimilar products anywhere within the Premises or Building is strictlyprohibited, and Landlord may enforce such prohibition pursuant to Landlord’sleasehold remedies.  Smoking ispermitted outside the Building and within the project only in areas designatedby Landlord.

 

9.          No cooking shallbe done or permitted by Tenant on the Premises, except pursuant to the normaluse of a U.L. approved microwave oven and coffee maker for the benefit ofTenant’s employees and invitees, nor shall the Premises be used for the storageof merchandise or for lodging.

 

10.              Tenant shall notuse or keep in the Building any kerosene, gasoline, or inflammable fluid or anyother illuminating material, or use any method of heating other than thatsupplied by Landlord.

 

11.              If Tenant desirestelephone, telegraph, burglar alarm or similar connections, Landlord willdirect electricians as to where and how the wires are to be introduced.  No boring or cutting for wires or otherwiseshall be made without directions from Landlord.

 

12.              Upon thetermination of its tenancy, Tenant shall deliver to Landlord all the keys tooffices, rooms and toilet rooms and all access cards which shall have beenfurnished to Tenant or which Tenant shall have had made.

 

13.              Tenant shall notmark, drive nails, screw or drill into the partitions, woodwork or plaster orin any way deface the Premises, except to install normal wall hangings.  Tenant shall not affix any floor covering tothe floor of the Premises in any manner except by a paste, or other materialwhich may easily be removed with water, the use of cement or other similaradhesive materials being expressly prohibited. The method of affixing any floor covering shall be subject to approvalby Landlord.  The expense of repairingany damage resulting from a violation of this rule shall be borne by Tenant.

 

14.              On Saturdays,Sundays and legal holidays, and on other days between the hours of 6:00 p.m.and 8:00 a.m., access to the Building, or to the halls, corridors, elevators orstairways in the Building, or to the Premises, may be refused unless the personseeking access complies with any access control system that Landlord mayestablish.  Landlord shall in no case beliable for damages for the admission to or exclusion from the Building of anyperson whom Landlord has the right to exclude under Rules 2 or 18 of thisExhibit.  In case of invasion, mob,riot, public excitement, or other commotion, or in the event of any othersituation reasonably requiring the evacuation of the Building, Landlordreserves the right at its election and without liability to Tenant to preventaccess to the Building by closing the doors or otherwise, for the safety of thetenants and protection of property in the Building.

 

15.              Tenant shall beresponsible for protecting the Premises from theft, which includes keepingdoors and other means of entry closed and securely locked.  Tenant shall cause all water faucets orwater apparatus to be shut off before Tenant or Tenant’s employees leave theBuilding, and that all electricity, gas or air shall likewise be shut off, soas to prevent waste or damage, and for any default or carelessness Tenant shallmake good all injuries sustained by other tenants or occupants of the Buildingor Landlord.

 

16.              Tenant shall notalter any lock or install a new or additional lock or any bolt on any door ofthe Premises without the prior written consent of Landlord.  If Landlord gives its consent, Tenant shallin each case promptly furnish Landlord with a key for any new or altered lock.

 

17.              Tenant shall notinstall equipment, such as but not limited to electronic tabulating or computerequipment, requiring electrical or air conditioning service in excess of thatto be provided by Landlord under the Lease except in accordance with Exhibit B.

 

18.              Landlord shallhave full and absolute authority to regulate or prohibit the entrance to thePremises of any vendor, supplier, purveyor, petitioner, proselytizer or othersimilar person if, in the good faith judgment of Landlord, such person will beinvolved in general solicitation activities, or the proselytizing, petitioning,or disturbance of other tenants or their customers or invitees, or engaged orlikely to engage in conduct which may in Landlord’s opinion distract from theuse of the Premises for its intended purpose. Notwithstanding the foregoing, Landlord reserves the absolute right anddiscretion to limit or prevent access to the Buildings by any food or beveragevendor, whether or not

 

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invited by Tenant, and Landlord maycondition such access upon the vendor’s execution of an entry permit agreementwhich may contain provisions for insurance coverage and/or the payment of a feeto Landlord.

 

19.              Tenant shall, atits expense, be required to utilize the third party contractor designated byLandlord for the Building to provide any telephone wiring services from theminimum point of entry of the telephone cable in the Building to the Premises.

 

20.              Tenant shall, uponrequest by Landlord, supply Landlord with the names and telephone numbers ofpersonnel designated by Tenant to be contacted on an after-hours basis shouldcircumstances warrant.

 

21.              Tenant shall causeits employees and agents, and shall endeavor to instruct its invitees, to wearattire suitable for a first class office project while such persons are in theBuilding or Project.

 

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

 

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