Document:

Exhibit
10.1

EXECUTIVE
RETENTION AGREEMENT

          THIS
EXECUTIVE RETENTION AGREEMENT (this “Agreement”) is made and entered into as of
this _________ day of __________ 2009, by and between PACIFIC STATE BANK, a
California corporation (“PSB”), and RICKY DEAN SIMAS, whose address is
________________, ____________, CA _______ (“Executive”).

W
I T N E S S E T H:

          WHEREAS,
Executive is currently employed by PSB as President of PSB, and the parties
wish to continue Executive’s employment on the terms and conditions set forth
in this Agreement; and

          WHEREAS,
it is in the best interest of PSB to offer the compensation set forth in this
Agreement to Executive.

          NOW,
THEREFORE, in consideration of the promises and the mutual covenants hereinafter
set forth, and intending to be legally bound hereby, it is hereby agreed as
follows:

	
  

 	
  

 
	
 1.

 	
 Position and Duties.

 

          Executive
agrees to and shall diligently and conscientiously devote Executive’s full
business time, attention, energy, knowledge, skill, and diligent efforts to the
business of PSB and the discharge of Executive’s duties hereunder. Executive
will abide by all policies and decisions made by PSB, as well as all applicable
federal, state, and local laws, regulations, and ordinances. Executive’s duties
under this Agreement shall be to serve as President of PSB, with the
responsibilities, rights, authority and duties customarily pertaining to such
office and as may be established from time to time by or under the direction of
the Board of Directors of PSB (the “Board”) or its designees. Executive shall
report to the Board. As an exempt, salaried employee, Executive shall work such
hours as required by the nature of Executive’s work assignments. PSB reserves
the right to modify Executive’s position and duties at any time in its sole
discretion.

          Executive
shall not engage in any activity that conflicts with or adversely affects
Executive’s performance of Executive’s duties under this Agreement; accept any
other employment, whether as an executive, as a consultant, or in any other
capacity, whether or not Executive is compensated therefore, or violate any of
the polices described in PSB’s then applicable Policy Manual, Employee
Handbook, or other PSB materials.

	
  

 	
  

 
	
 2.

 	
 Employment Term.

 

          Executive
is currently employed by PSB and, subject to the provisions of Section 3, the
parties agree that Executive’s employment shall continue until terminated
(“Employment Term”).

1

	
  

 	
  

 
	
 3.

 	
 At-Will.

 

          Executive
acknowledges and understands that at all times Executive’s employment with PSB is
“at-will,” which means that at all times, Executive’s employment may be terminated or changed for any reason, or
for no reason, with or without cause or notice.

          It
is PSB’s policy that all Executives are at-will employees. This at-will
employment policy is not modified by this Agreement and may not be modified by
any statements contained in PSB’s handbook or any other handbooks, employment applications, employee
handbook, or other materials provided to applicants and/or employees in
connection with their employment. None of these documents, whether singly or
combined, are to create an express or implied contract of employment for a
definite period, nor an express or implied contract concerning any terms or
conditions of employment. Similarly, PSB policies and practices with respect to any matter are not to be
considered as creating any contractual obligation on PSB’s part or as stating in any way that
termination will occur only for “just cause.” Statements of specific grounds
for termination set forth in PSB’s
handbook or in any other PSB documents are examples only, not all inclusive
lists, and are not intended to restrict PSB’s right to terminate employment.

          Completion
of an introductory period or conferral of regular status does not change an
Executive’s status as an at-will employee nor in any way restricts PSB’s right
to terminate such an employee or change the terms or conditions of Executive’s
employment.

          From
time to time, PSB may change its name or corporate structure. Such changes
shall not in any way alter the “at will” nature or unalterable fact that
Executive’s employment is “at will.”

	
  

 	
  

 
	
 4.

 	
 Place of Employment.

 

          Executive’s
performance of services under this Agreement shall be rendered at PSB’s
principal executive offices in Stockton, California, subject to the necessary
travel requirements of Executive’s position and duties hereunder.

	
  

 	
  

 
	
 5.

 	
 Compensation – Base Salary.

 

          PSB
shall pay to Executive during the Employment Term, base salary compensation at
an annual rate of not less than Two Hundred Thousand and 00/100 Dollars
($200,000.00). Upon the sale by PSB of a thirty percent (30%) or greater
shareholder interest in PSB stock or the sale of PSB stock through a public
offering, Executive’s annual salary shall be increased to Two Hundred Fifty
Thousand and 00/100 Dollars ($250,000.00). The Board shall regularly review
Executive’s base salary in light of the performance of Executive and PSB, may,
in its sole discretion, maintain or increase (but not decrease) such base
salary by an amount PSB determines to be appropriate. Executive’s annual base
salary payable hereunder, as it may be maintained or increased from time to
time, is referred to herein as “Base Salary.” Base Salary shall be paid in
equal installments in accordance with PSB’s payroll practices in effect from
time to time for executive officers, but in no event less frequently than
monthly. In addition to the Base Salary, Executive shall be eligible to earn an
annual cash performance bonus (an “Annual Bonus”) as determined by the Board.

2

	
  

 	
  

 
	
 6.

 	
 Benefits.

 

          Executive
shall be eligible to participate in all employee benefit programs of PSB
offered from time to time during the Employment Term by PSB to employees or
executive officers of Executive’s rank, to the extent that Executive qualifies
under the eligibility provisions of the applicable plan or plans, in each case
consistent with PSB’s then-current practice as approved by the Board from time
to time. The foregoing shall not be construed to require PSB to establish such
plans or to prevent the modification or termination of such plans once
established, and no such action or failure thereof shall affect this Agreement.
Executive recognizes that PSB has the right, in its sole discretion, to amend,
modify, or terminate its benefit plans without creating any rights in
Executive. This Agreement shall not amend any rights of PSB or Executive under
the Salary Continuation Agreement dated September 30, 2003.

	
  

 	
  

 
	
 7.

 	
 Vacation.

 

          Executive
shall be entitled to paid vacation and sick time (“PTO”) consistent with the
PTO offered from time to time during the Employment Term by PSB to employees.

	
  

 	
  

 
	
 8.

 	
 Business Expenses.

 

          PSB
shall promptly reimburse Executive for Executive’s reasonable and necessary
expenditures for travel, entertainment, and similar items made in furtherance
of Executive’s duties under this Agreement consistent with the policies of PSB
as applied to all executive officers. Executive shall document and substantiate
such expenditures as required by the policies of PSB as applied to all
executive officers, including an itemized list of all expenses incurred, the
business purposes for which such expenses were incurred, and such receipts as
Executive reasonably has been able to obtain.

	
  

 	
  

 
	
 9.

 	
 Termination Following PSB’s Sale of
 PSB Stock.

 

          a.
          In the event that
during the Employment Term there is a sale by PSB of a thirty percent (30%) or
greater shareholder interest in PSB stock, and then prior to December 31, 2010
Executive is terminated by PSB, except for termination pursuant to Section 9
(b), then Executive shall be paid a monthly cash payment of Twenty Thousand
Eight Hundred Thirty-Three and 00/100 Dollars ($20,833.00) until the earlier of
either:

          (1)          Executive
finds new employment paying a gross salary of no less than Twenty Thousand
Eight Hundred Thirty-Three and 00/100 Dollars ($20,833.00) per month; or

          (2)          Twelve
months after termination of Executive by PSB.

                         Notwithstanding
the foregoing, in the event Executive finds new employment following
termination by PSB and Executive’s new employment pays less than Twenty
Thousand Eight Hundred Thirty-Three and 00/100 Dollars ($20,833.00) per month
gross salary, then the Twenty Thousand Eight Hundred Thirty-Three and 00/100
Dollars ($20,833.00) per month payment set forth above, shall be reduced by the
gross salary Executive is to be paid at Executive’s new employment. (For
example, if Executive finds new employment at Ten Thousand and 00/100 Dollars
($10,000.00) per month gross salary, Bank shall pay Executive Ten Thousand
Eight Hundred Thirty-Three and 00/100 Dollars ($10,833.00) per month until the
expiration of 12 months after Executive’s termination by PSB.)

3

          b.          Notwithstanding
any provision of this Agreement to the contrary, PSB and the surviving
corporation shall not have any obligation to continue to employ, offer to
employ, or pay Executive any benefit or monies under this Agreement if
Executive has committed any of the following:

          (1)          Willful
breach of duty in the course of employment, or habitual neglect of employment
responsibilities and duties;

          (2)          Conviction
of any felony or crime involving moral turpitude, fraud, or dishonesty;

          (3)          Willful
violation of any state or federal banking or securities law, the rules or
regulations of any banking agency, or any material PSB rule, policy, or
resolution resulting in an adverse effect on PSB; or

          (4)          Disclosure
to any third party by the Executive, without authority or permission, of any
secret or confidential information of PSB.

	
  

 	
  

 
	
 10.

 	
 Designation of Beneficiaries.

 

          Executive
shall be entitled to select (and change, to the extent permitted under any
applicable law) a beneficiary or beneficiaries to receive any Compensation,
Deferred Compensation, or Benefits payable hereunder following the Executive’s
death by giving PSB written notice thereof. In the event of Executive’s death
or a judicial determination of Executive’s incompetence, reference in this
Agreement to the Executive shall be deemed, where appropriate, to refer to his
beneficiary, estate, or other legal representative(s).

	
  

 	
  

 
	
 11.

 	
 No Conflict.

 

          Executive
represents and warrants to PSB that Executive has the capacity to enter into
this Agreement and the other agreements referred to herein, and that the
execution, delivery, and performance of this Agreement and such other
agreements by Executive will not violate any agreement, undertaking, or
covenant to which Executive is party or is otherwise bound, including any
obligations with respect to proprietary or confidential information of any
other person or entity.

	
  

 	
  

 
	
 12.

 	
 Key Man Insurance.

 

          PSB
will have the right throughout the Employment Term to obtain, maintain, or
increase insurance, in the name of PSB and for PSB’s sole benefit or otherwise,
on Executive’s life in such amount as the Board in the discretion of the Board.
Upon reasonable advance notice, Executive will cooperate in any and all
necessary physical examinations without expense to Executive, supply
information, and sign documents, and otherwise cooperate fully with PSB as PSB
may request in connection with any such insurance.

4

	
  

 	
  

 
	
 13.

 	
 Litigation Cooperation.

 

          Executive
agrees to cooperate with PSB
and its attorneys, both during and after the termination of Executive’s
employment, in connection with any litigation or other proceeding arising out
of or relating to matters of which Executive was involved prior to the
termination of Executive’s employment. Executive’s cooperation shall include,
without limitation, providing assistance to PSB’s counsel, experts and
consultants, and providing truthful testimony in pretrial and trial or other
proceedings. In the event that Executive’s cooperation is requested after the
termination of Executive’s employment, PSB will (a) seek to minimize
interruptions to Executive’s schedule to the extent consistent with its
interests in the matter; and (b) reimburse Executive for all reasonable and
appropriate out-of-pocket expenses actually incurred by Executive in connection
with such cooperation upon reasonable substantiation of such expenses.

	
  

 	
  

 
	
 14.

 	
 Notices.

 

          All
notices, requests, demands or communications regarding this Agreement shall be
in writing and shall be deemed to have been duly given:

          a.          When
delivered personally;

          b.          Three
business days after being mailed by first class certified mail, return receipt
requested, postage prepaid;

          c.          One
business day after being sent by a reputable overnight delivery service,
postage or delivery charges prepaid; or

          d.          On
the date on which a facsimile is transmitted to the parties at their respective
addresses stated below. Any party may change its address for notice and the
address to which copies must be sent by giving notice of the new addresses to
the other parties in accordance with this Section 14, except that any such
change of address notice shall not be effective unless and until received.

     If to PSB:

     PACIFIC STATE BANK, A
California corporation

     1899 W. March Lane

     Stockton, CA 95207

     Attn: Board of Directors

     If to Executive, to
Executive’s address set forth above.

	
  

 	
  

 
	
 15.

 	
 Amendments, Waivers, Etc.

 

          a.          No
amendment or modification of this Agreement shall be effective unless set forth
in a writing signed by PSB and Executive. No waiver by either party of any
breach by the other party of any provision or condition of this Agreement shall
be deemed a waiver of any other provision or condition. Any waiver must be in
writing and signed by the waiving party.

          b.          There
are no representations, agreements, arrangements, or understandings, oral or
written, among the parties relating to the subject matter hereof which are not
expressly set forth herein, and no party hereto has been induced to enter into
this Agreement, except by the agreements expressly contained herein.

5

          c.          Nothing
herein contained shall be construed so as to require the commission of any act
contrary to law, and wherever there is a conflict between any provision of this
Agreement and any present or future statute, law, ordinance or regulation, the
latter shall prevail, but in such event the provision of this Agreement
affected shall be modified, amended, curtailed and/or limited only to the
extent necessary to bring it within legal requirements.

          d.          This
Agreement shall inure to the benefit of and be enforceable by Executive and
Executive’s heirs, executors, administrators, and legal representatives, and by
PSB and its successors and assigns. This Agreement is personal to Executive,
and neither this Agreement nor any rights hereunder may be assigned,
transferred, conveyed, or otherwise disposed of by Executive.

	
  

 	
  

 
	
 16.

 	
 Governing Law; Dispute Resolution.

 

          a.          
This Agreement shall be governed by and construed in accordance with the laws
of the State of California without reference to conflict of laws principles.

          b.          
ANY DISPUTE ARISING OUT OF OR RELATING TO EXECUTIVE’S EMPLOYMENT, WITH THE
EXCEPTION OF WORKERS’ COMPENSATION OR UNEMPLOYMENT CLAIMS, SHALL BE SUBMITTED
TO BINDING ARBITRATION CONDUCTED IN SAN JOAQUIN COUNTY, CALIFORNIA, PURSUANT TO
CALIFORNIA’S ARBITRATION LAW, CODE OF CIVIL PROCEDURE SECTION 1280 ET. SEQ. THE
PARTIES SHALL HAVE THE RIGHT TO DISCOVERY PURSUANT TO CODE OF CIVIL PROCEDURE
SECTION 1283.05. THE ARBITRATOR SHALL BE A RETIRED JUDGE OR AN ATTORNEY
SELECTED BY THE PARTIES WHO IS EXPERIENCED IN EMPLOYMENT LAW MATTERS AND WHO
SHALL RENDER A WRITTEN ARBITRATION DECISION. IF THE PARTIES ARE UNABLE TO AGREE
UPON AN ARBITRATOR, THEN THE ARBITRATOR SHALL BE APPOINTED BY THE SUPERIOR
COURT IN THE COUNTY OF SAN JOAQUIN UPON PROPER APPLICATION. THE ARBITRATOR SHALL NOT
HAVE THE POWER TO COMMIT ERRORS OF LAW OR LEGAL REASONING, AND THE AWARD MAY BE
VACATED OR CORRECTED ON APPEAL TO A COURT OF COMPETENT JURISDICTION FOR ANY
SUCH ERROR. EXECUTIVE SHALL NOT BE REQUIRED TO PAY ARBITRATOR’S FEES.

	
  

 	
  

 
	
 17.

 	
 Attorney’s Fees.

 

          The
prevailing party in any dispute arising out of or relating to this Agreement
shall be entitled to reasonable attorney’s fees in addition to any other relief
to which that party may be entitled.

	
  

 	
  

 
	
 18.

 	
 Taxes.

 

All payments required to be made to Executive
hereunder, whether during the term of Executive’s employment hereunder or
otherwise, shall be subject to all applicable federal, state, and local tax
withholding laws.

6

	
  

 	
  

 
	
 19.

 	
 Headings, Etc.

 

          The
headings set forth herein are included solely for the purpose of identification
and shall not be used for the purpose of construing the meaning of the
provisions of this Agreement. Unless otherwise provided, references herein to
Exhibits and Sections refer to Exhibits to and Sections of this Agreement.

	
  

 	
  

 
	
 20.

 	
 Confidentiality.

 

          The
parties agree that the existence and terms of this Agreement are and shall
remain confidential. The parties shall not disclose the fact of this Agreement
or any of its terms or provisions to any person without the prior written
consent of the other party hereto; provided, however, that nothing in this
Section 20 shall prohibit disclosure of such information to the extent required
by law, nor prohibit disclosure of such information by each party to its own
legal or financial consultants, all of whom shall first agree to be bound by the
confidentiality provisions of this Section 20, nor prohibit disclosure of such
information within PSB in the ordinary course of its business to those persons
with a need to know, as reasonably determined by PSB.

21.          Construction. Each party has cooperated
in the drafting and preparation of this Agreement. Therefore, in any
construction to be made of this Agreement, the same shall not be construed
against either party on the basis that the party was the drafter.

	
  

 	
  

 
	
 22.

 	
 Severability.

 

          If
a court which has jurisdiction finds that any provision of this Agreement is
invalid, void, or unenforceable, all remaining portions of this Agreement shall
remain in full force and effect. Similarly, if a court which has jurisdiction
finds that any provision of this Agreement as applied to particular persons,
places, and/or circumstances is invalid, unenforceable, or void, the provision
as applied to any other persons, places, and/or circumstances, as well as the
balance of the Agreement, shall remain in full force and effect.

23.          Third Party Beneficiaries. This
Agreement does not create, and shall not be construed as creating, any rights
enforceable by any person not a party to this Agreement.

	
  

 	
  

 
	
 24.

 	
 Acknowledgment by Executive.

 

          Executive
represents that Executive is knowledgeable and sophisticated as to business
matters, including the subject matter of this Agreement, that Executive has
read this Agreement, and that Executive understands its terms. Executive
acknowledges that prior to assenting to the terms of this Agreement, Executive
has been given a reasonable time to review it, to consult with legal or other
counsel of Executive’s own choice, and to negotiate at arm’s length with PSB as
to its terms and contents.

7

	
  

 	
  

 
	
 25.

 	
 Acknowledgement by PSB.

 

          PSB
represents and warrants that it is fully authorized and empowered to enter into
this Agreement and that the performance of its obligations under this Agreement
will not violate any agreement between PSB and any person, corporation, or
other legal entity.

	
  

 	
  

 
	
 26.

 	
 Counterparts.

 

          This
Agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.

	
  

 	
  

 
	
 27.

 	
 Employee Handbook.

 

          Executive
agrees to be fully bound by the terms of any Employee Handbook, Policy Manual,
or other PSB materials now or hereafter established by PSB, provided that any
such materials are applicable generally to all employees of PSB. In the event
of any conflict between the terms of any such documents and this Agreement, the
terms of this Agreement shall control.

8

          IN
WITNESS WHEREOF, the parties have executed this Agreement on the date(s)
indicated.

     PACIFIC STATE BANK,

     A California corporation

By ________________________________             Dated: ___________________,
2009
      _____________________, [President or Board
Member]

     EXECUTIVE:

	
  

 	
  

 
	
 ____________________________

 	
 Dated: _____________, 2009

 
	
 RICKY DEAN SIMAS 

 	
  

 

9Exhibit 10.1

 

***
Confidential portions
of this document have been redacted and filed separately with the Commission.

 

OFFICE
LEASE

 

KILROY REALTY

 

KILROY SABRE
SPRINGS

 

 

KILROY REALTY, L.P.,

 

a
Delaware limited partnership,

 

as
Landlord,

 

and

 

BRIDGEPOINT EDUCATION, INC.,

 

a
Delaware corporation,

 

as
Tenant.

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE 1

  	
  PREMISES, BUILDING, PROJECT, AND COMMON AREAS

  	
  5

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  2

  	
  LEASE
  TERM; OPTION TERM

  	
  7

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3

  	
  BASE RENT

  	
  12

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4

  	
  ADDITIONAL RENT

  	
  13

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5

  	
  USE OF PREMISES

  	
  24

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  6

  	
  SERVICES
  AND UTILITIES

  	
  25

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7

  	
  REPAIRS

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  8

  	
  ADDITIONS
  AND ALTERATIONS

  	
  29

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  9

  	
  COVENANT
  AGAINST LIENS

  	
  31

  
	
   

  	
   

  	
   

  
	
  ARTICLE 10

  	
  INSURANCE

  	
  32

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  11

  	
  DAMAGE
  AND DESTRUCTION

  	
  36

  
	
   

  	
   

  	
   

  
	
  ARTICLE 12

  	
  NONWAIVER

  	
  38

  
	
   

  	
   

  	
   

  
	
  ARTICLE 13

  	
  CONDEMNATION

  	
  39

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  14

  	
  ASSIGNMENT
  AND SUBLETTING

  	
  39

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  15

  	
  SURRENDER
  OF PREMISES; OWNERSHIP AND REMOVAL OF TRADE FIXTURES

  	
  44

  
	
   

  	
   

  	
   

  
	
  ARTICLE 16

  	
  HOLDING OVER

  	
  45

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  17

  	
  ESTOPPEL
  CERTIFICATES

  	
  45

  
	
   

  	
   

  	
   

  
	
  ARTICLE 18

  	
  SUBORDINATION

  	
  46

  
	
   

  	
   

  	
   

  
	
  ARTICLE 19

  	
  DEFAULTS; REMEDIES

  	
  46

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  20

  	
  COVENANT
  OF QUIET ENJOYMENT

  	
  49

  
	
   

  	
   

  	
   

  
	
  ARTICLE 21

  	
  LETTER OF CREDIT

  	
  50

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  22

  	
  SUBSTITUTION
  OF OTHER PREMISES

  	
  52

  
	
   

  	
   

  	
   

  
	
  ARTICLE 23

  	
  SIGNS

  	
  53

  

 

i

 

	
  ARTICLE 24

  	
  COMPLIANCE WITH LAW

  	
  55

  
	
   

  	
   

  	
   

  
	
  ARTICLE 25

  	
  LATE CHARGES

  	
  56

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  26

  	
  LANDLORD’S
  RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT

  	
  56

  
	
   

  	
   

  	
   

  
	
  ARTICLE 27

  	
  ENTRY BY LANDLORD

  	
  57

  
	
   

  	
   

  	
   

  
	
  ARTICLE 28

  	
  TENANT PARKING

  	
  58

  
	
   

  	
   

  	
   

  
	
  ARTICLE 29

  	
  MISCELLANEOUS PROVISIONS

  	
  59

  

 

ii

 

INDEX

 

	
   

  	
  Page(s)

  
	
   

  	
   

  
	
  13480
  Lease

  	
  7

  
	
  13480
  Premises

  	
  7

  
	
  13500
  Lease

  	
  7

  
	
  13500
  Premises

  	
  7

  
	
  Abatement
  Event

  	
  13

  
	
  Accountant

  	
  25

  
	
  Actual
  Cost

  	
  28

  
	
  Additional
  Notice

  	
  13

  
	
  Additional
  Rent

  	
  14

  
	
  Advocate
  Arbitrators

  	
  10

  
	
  Alterations

  	
  30

  
	
  Applicable
  Laws

  	
  56

  
	
  Approved
  Assignee

  	
  8

  
	
  Approved
  Bank

  	
  51

  
	
  Arbitration
  Agreement

  	
  11

  
	
  Award

  	
  12

  
	
  Bank
  Prime Loan

  	
  57

  
	
  Base
  Building

  	
  31

  
	
  Base
  Rent

  	
  13

  
	
  Base
  Year

  	
  14

  
	
  BOMA

  	
  6

  
	
  Briefs

  	
  11

  
	
  Brokers

  	
  65

  
	
  BS/BS
  Exception

  	
  29

  
	
  Building

  	
  1, 5

  
	
  Building
  Common Areas,

  	
  6

  
	
  Building
  Common Areas

  	
  6

  
	
  Building
  Hours

  	
  26

  
	
  Building
  Structure

  	
  29

  
	
  Building
  Systems

  	
  29

  
	
  Building
  Top Sign Specifications

  	
  55

  
	
  Business
  Hours

  	
  26

  
	
  Cap

  	
  19

  
	
  CC&Rs

  	
  26

  
	
  Common Areas

  	
  6

  
	
  Communication
  Equipment

  	
  69

  
	
  Comparable
  Area

  	
  2

  
	
  Contract
  Rate Schedule

  	
  9

  
	
  Contract
  Rent

  	
  9

  
	
  Control,

  	
  45

  

 

iii

 

	
   

  	
  Page(s)

  
	
   

  	
   

  
	
  Controllable
  Expenses

  	
  19

  
	
  Cost
  Pools

  	
  22

  
	
  Damage
  Termination Date

  	
  38

  
	
  Damage
  Termination Notice

  	
  38

  
	
  Direct
  Expenses

  	
  14

  
	
  Eligibility
  Period

  	
  13

  
	
  Environmental Laws

  	
  67

  
	
  Estimate

  	
  23

  
	
  Estimate
  Statement

  	
  23

  
	
  Estimated
  Excess

  	
  23

  
	
  Excess

  	
  22

  
	
  Exercise
  Conditions

  	
  8

  
	
  Exercise
  Notice

  	
  9

  
	
  Expense
  Year

  	
  14

  
	
  First
  Rebuttals

  	
  11

  
	
  Force
  Majeure

  	
  62

  
	
  Hazardous
  Material(s)

  	
  67

  
	
  Holidays

  	
  26

  
	
  HVAC

  	
  26

  
	
  Identification
  Requirements

  	
  67

  
	
  Increases

  	
  18

  
	
  Interest
  Rate

  	
  57

  
	
  Kilroy
  Sabre Springs

  	
  1, 5

  
	
  Landlord

  	
  1

  
	
  Landlord
  Parties

  	
  33

  
	
  Landlord
  Repair Notice

  	
  37

  
	
  Landlord
  Response Date

  	
  10

  
	
  Landlord
  Response Notice

  	
  9

  
	
  Landlord’s
  Initial Statements

  	
  12

  
	
  Landlord’s
  Option Rent Calculation

  	
  10

  
	
  Landlord’s
  Rebuttal Statement

  	
  12

  
	
  L-C
  Amount

  	
  51

  
	
  L-C Expiration Date

  	
  51

  
	
  L-C
  Transfer Cap

  	
  52

  
	
  Lease

  	
  1

  
	
  Lease
  Commencement Date

  	
  7

  
	
  Lease
  Expiration Date

  	
  7

  
	
  Lease
  Term

  	
  7

  
	
  Lease
  Year

  	
  7

  
	
  Lines

  	
  66

  
	
  Mail

  	
  63

  
	
  Market
  Rate Schedule

  	
  8

  

 

iv

 

	
   

  	
  Page(s)

  
	
   

  	
   

  
	
  Memorandum

  	
  61

  
	
  Neutral
  Appraiser

  	
  10

  
	
  Neutral
  Arbitrator

  	
  10

  
	
  New
  Services

  	
  19

  
	
  Nondisturbance
  Agreement

  	
  47

  
	
  Notices

  	
  63

  
	
  Objectionable
  Name

  	
  55

  
	
  Operating
  Expenses

  	
  14

  
	
  Option
  Rent

  	
  8

  
	
  Option
  Term

  	
  8

  
	
  Original
  Improvements

  	
  35

  
	
  Original
  Tenant

  	
  8

  
	
  Other
  Improvements

  	
  69

  
	
  Outside
  Agreement Date

  	
  10

  
	
  Permitted
  Chemicals

  	
  68

  
	
  Permitted
  Transferee

  	
  45

  
	
  Permitted
  Use

  	
  3

  
	
  Premises

  	
  5

  
	
  Project

  	
  5

  
	
  Project
  Common Areas

  	
  6

  
	
  Project
  Common Areas,

  	
  6

  
	
  Proposition
  13

  	
  20

  
	
  Reminder
  Notice

  	
  9

  
	
  Renovations

  	
  66

  
	
  Rent.

  	
  14

  
	
  Replacement
  Premises

  	
  53

  
	
  Review
  Period

  	
  24

  
	
  Right
  Holders

  	
  8

  
	
  Second
  Rebuttals

  	
  11

  
	
  Statement

  	
  22

  
	
  Subject
  Space

  	
  41

  
	
  Summary

  	
  1

  
	
  Tax
  Expenses

  	
  19

  
	
  TCCs

  	
  5

  
	
  Tenant

  	
  1

  
	
  Tenant
  Election Notice

  	
  10

  
	
  Tenant Parties

  	
  33

  
	
  Tenant’s
  Building-Top Signage

  	
  55

  
	
  Tenant’s
  Initial Statements

  	
  12

  
	
  Tenant’s
  Option Rent Calculation

  	
  9

  
	
  Tenant’s
  Rebuttal Statement

  	
  12

  
	
  Tenant’s
  Security System

  	
  29

  

 

v

 

	
   

  	
  Page(s)

  
	
   

  	
   

  
	
  Tenant’s
  Share

  	
  21

  
	
  Transfer

  	
  44

  
	
  Transfer
  Costs

  	
  43

  
	
  Transfer
  Notice

  	
  41

  
	
  Transfer
  Premium

  	
  43

  
	
  Transferee

  	
  41

  
	
  Transfers

  	
  41

  
	
  Unusable
  Area

  	
  13

  
	
  Utilities
  Costs

  	
  21

  
	
  Work
  Letter Agreement

  	
  5

  

 

vi

 

KILROY SABRE
SPRINGS

 

OFFICE LEASE

 

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

 

SUMMARY OF BASIC
LEASE INFORMATION

 

	
  TERMS OF LEASE

  	
   

  	
  DESCRIPTION

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  Date:

  	
   

  	
   

  	
  May 7, 2009.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Premises:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Building:

  	
   

  	
  That certain six
  (6)-story office building (the “Building”)
  located at 13520 Evening Creek Drive North, San Diego, California 92128-8104,
  which is comprised of approximately 140,915 rentable square feet.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.2

  	
  Premises:

  	
   

  	
  Approximately 18,242
  rentable (15,864 usable) square feet of space located on the fifth (5th) floor of the Building, commonly known as
  Suite 550, as further identified in Exhibit A
  to the Lease.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.3

  	
  Project:

  	
   

  	
  The Building is part of
  an office project known as “Kilroy Sabre
  Springs,” as further set forth in Section 1.1.2 of
  this Lease.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Lease Term

  (Article 2):

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Length of Term:

  	
   

  	
  Approximately seven
  (7) years and ten (10) months.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.2

  	
  Lease Commencement
  Date:

  	
   

  	
  May 7, 2009.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.3

  	
  Lease Expiration
  Date:

  	
   

  	
  February 28,
  2017.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.4

  	
  Option Term:

  	
   

  	
  One
  (1) five (5)-year option to renew, as more particularly set forth in Section 2.2
  of this Lease.

  

 

 

*** Confidential portions of this document have been
redacted and filed separately with the Commission.

 

	
  4.

  	
  Base Rent (Article 3):

  	
   

  	
   

  

 

	
  Period during 

  Lease Term*

  	
   

  	
  Annualized Base

  Rent*

  	
   

  	
  Monthly

  Installment

  of Base Rent

  	
   

  	
  Monthly

  Rental Rate

  per Rentable

  Square Foot

  	
   

  
	
  May 7, 2009 —

  May 31, 2010*

  	
   

  	
  $

  	
  656,712.00

  	
   

  	
  $

  	
  54,726.00

  	
   

  	
  $

  	
  3.000

  	
   

  
	
  June 1,
  2010 —

  May 31, 2011

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  June 1,
  2011 —

  May 31, 2012

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  June 1,
  2012 —

  May 31, 2013

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  June 1, 2013 —

  May 31, 2014

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  June 1,
  2014 —

  May 31, 2015

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  June 1,
  2015 —

  May 31, 2016

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  June 1,
  2016 —

  February 28, 2017

  	
   

  	
  $

  	
  864,188.16

  	
   

  	
  $

  	
  72,015.68

  	
   

  	
  $

  	
  3.948

  	
   

  

 

	
   

  	
  *  Base Rent shall commence to accrue upon the
  Lease Commencement Date and shall first (1st) be escalated upon (i) the first (1st) day of the twelfth (12th) calendar month after the calendar month in which
  the Lease Commencement Date occurs if the Lease Commencement Date occurs on
  the first (1st) day of any calendar month, or (ii) the
  first (1st) day of the thirteenth (13th) calendar month after the calendar month in which
  the Lease Commencement Date occurs if the Lease Commencement Date occurs on
  other than the first (1st) day of
  any calendar month.

  
	
   

  	
   

  
	
  5.

  	
  Base Year

  (Article 4):

  	
   

  	
  Calendar year
  2009.

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  Tenant’s Share

  (Article 4):

  	
   

  	
  Twelve and
  ninety-five one-hundredths percent (12.95%) of the Building.

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  Permitted Use

  (Article 5):

  	
   

  	
  Tenant shall use
  the Premises solely for general office use and uses incidental thereto,
  including, without limitation, support for online services (the “Permitted Use”); provided, however, that
  notwithstanding

  

 

2

 

*** Confidential portions of this document have been
redacted and filed separately with the Commission.

 

	
   

  	
   

  	
   

  	
  anything to the
  contrary set forth hereinabove, and as more particularly set forth in the
  Lease, Tenant shall be responsible for operating and maintaining the Premises
  pursuant to, and in no event may Tenant’s Permitted Use violate,
  (A) Landlord’s “Rules and Regulations,” as that term is set forth
  in Section 5.2 of this Lease, (B) all “Applicable Laws,” as
  that term is set forth in Article 24 of this Lease, (C) all
  applicable zoning, building codes and the “CC&Rs,” as that term is set
  forth in Section 5.3 of this Lease, and (D) the character of
  the Project as a first-class office building Project.

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  Letter of Credit

  (Article 21):

  	
   

  	
  $[***].

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  Parking Passes

  (Article 28):

  	
   

  	
  A total of sixty-Three
  (63) parking passes, fifty-seven (57) of which shall be unreserved parking
  passes, and six (6) of which shall be for reserved parking spaces, as
  more particularly set forth in, and pursuant to the terms and conditions of, Article 28.

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  Address of Tenant

  (Section 29.18):

  	
   

  	
  Bridgepoint
  Education, Inc.

  13500 Evening Creek Drive North, Suite 600 

  San Diego, California 92128 

  Facsimile No.: 858-408-2903 

  Attention: Kenny Lin 

  [Prior to, and following, Lease
  Commencement Date]

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  with
  copies to:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Sheppard Mullin
  Richter & Hampton LLC

  12275 El Camino Real, Ste 200

  San Diego, California 92130-2006

  Attention: Richard L. Kintz, Esq.

  Facsimile: 858-509-3691

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  Address of Landlord

  (Section 29.18):

  	
   

  	
  See Section 29.18
  of the Lease.

  

 

3

 

*** Confidential portions of this document have been
redacted and filed separately with the Commission.

 

	
  12.

  	
  Broker(s)

  (Section 29.24): 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Representing
  Tenant:

   

  Grubb & Ellis/BRE
  Commercial
 4350 La Jolla village Dr.,
  Suite 500
 San Diego, California 92122

  Attention: Mr. Chris Hobson

  	
   

  	
  Representing
  Landlord:

   

  None

  
	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
  Improvement Allowance

  (Section 2 of Exhibit B):

  	
   

  	
  An amount equal to
  $[***] per usable square foot of the Premises (i.e., an amount anticipated to total [***] ($[***]
  based upon 15,864 usable square feet in the Premises).

  

 

4

 

*** Confidential portions of this document have been
redacted and filed separately with the Commission.

 

ARTICLE 1

 

PREMISES, BUILDING, PROJECT, AND COMMON AREAS

 

1.1           Premises, Building, Project and Common Areas.

 

1.1.1        The
Premises.  Landlord hereby
leases to Tenant and Tenant hereby leases from Landlord the premises set forth in Section 2.2
of the Summary (the “Premises”).  The outline of the Premises is set forth in Exhibit A attached hereto and each floor or
floors of the Premises shall have approximately the number of rentable square feet as set forth in Section 2.2
of the Summary.  The parties hereto agree
that the lease of the Premises is upon and subject to the terms, covenants and
conditions (the “TCCs”) herein set
forth, and Tenant covenants as a material part of the consideration for this
Lease to keep and perform each and all of such TCCs by it to be kept and
performed and that this Lease is made upon the condition of such
performance.  The parties hereto hereby
acknowledge that the purpose of Exhibit A is to show the approximate location
of the Premises in the “Building,”
as that term is defined in Section 1.1.2, below, only, and such Exhibit is
not meant to constitute an agreement, representation or warranty as to the
construction of the Premises, the precise area thereof or the specific location
of the “Common Areas,” as that
term is defined in Section 1.1.3, below, or the elements thereof or
of the accessways to the Premises or the “Project,”
as that term is defined in Section 1.1.2, below.  Except as specifically set forth in this
Lease and in the Work Letter Agreement attached hereto as Exhibit B (the “Work Letter
Agreement”), Landlord shall not be obligated to provide or pay for
any improvement work or services related to the improvement of the
Premises.  Tenant also acknowledges that
neither Landlord nor any agent of Landlord has made any representation or
warranty regarding the condition of the Premises, the Building or the Project
or with respect to the suitability of any of the foregoing for the conduct of
Tenant’s business, except as specifically set forth in this Lease and the Work
Letter Agreement.  The taking of
possession of the Premises by Tenant shall conclusively establish that the
Premises and the Building were at such time in good and sanitary order,
condition and repair, subject only to (i) punchlist items provided to
Landlord in writing within thirty (30) days following Landlord’s delivery of
the Premises to Tenant, (ii) latent defects to the extent identified and,
thereafter, promptly communicated to Landlord, (iii) Landlord’s ongoing
obligations set forth in Sections 1.1.3 and 29.33, and Articles 7
and 24 of this Lease, and (iv) the terms of the Work Letter
Agreement.

 

1.1.2        The
Building and The Project. 
The Premises are a part of the building set forth in Section 2.1
of the Summary (the “Building”).  The Building is part of an office project
known as “Kilroy Sabre Springs.”  The term “Project,”
as used in this Lease, shall mean (i) the Building and the Common Areas, (ii) the
land (which is improved with landscaping, parking facilities and other
improvements) upon which the Building and the Common Areas are located, and (iii) the
other office buildings commonly known as 13480 and 13500 Evening Creek Drive
North (respectively, the “13480 Building”
and “13500 Building”), which are
located adjacent to the Building and the land upon which such adjacent office
building is located, and (iv) the adjacent land (commonly known as Phase
II) and any buildings or other improvements subsequently added thereon.

 

5

 

*** Confidential portions of this document have been
redacted and filed separately with the Commission.

 

1.1.3        Common
Areas.  Tenant shall have
the non-exclusive right to use in common with other tenants in the Project, and
subject to the rules and regulations referred to in Article 5
of this Lease, those portions of the Project which are provided, from time to
time, for use in common by Landlord, Tenant and any other tenants of the Project
(such areas, together with such other portions of the Project designated by
Landlord, in its discretion, including certain areas designated for the
exclusive use of certain tenants, or to be shared by Landlord and certain
tenants, are collectively referred to herein as the “Common Areas”).  The Common Areas shall consist of the “Project Common Areas” and the “Building Common Areas.”  The term “Project
Common Areas,” as used in this Lease, shall mean the portion of the
Project reasonably designated as such by Landlord.  The term “Building
Common Areas,” as used in this Lease, shall mean the portions of the
Common Areas located within the Building reasonably designated as such by
Landlord.  The Common Areas shall be
maintained and operated in a manner consistent with the “Comparable Buildings”
as that term is set forth in Section 4 of Exhibit G, attached to this
Lease.  Notwithstanding anything set
forth herein to the contrary, the use of the Common Areas shall be subject to
the express provisions of this Lease and such rules, regulations and
restrictions as Landlord may make from time to time, provided that such rules, regulations
and restrictions do not (a) unreasonably interfere with the rights granted
to Tenant under this Lease and the Permitted Use granted under Section 5.1,
below or (b) materially increase the cost of Tenant’s occupancy of the
Premises through a material increase in Additional Rent. 
Landlord reserves the right to close temporarily, make alterations or
additions to, or change the location of elements of the Project and the Common
Areas; provided that no such changes shall be permitted
which materially reduce Tenant’s rights or access hereunder, or otherwise
materially interferes with Tenant’s ability to use the Premises for the
Permitted Use.  Except when and where
Tenant’s right of access is specifically excluded in this Lease, Tenant shall
have the right of access to the Premises, the Building, and the Project parking
facility twenty-four (24) hours per day, seven (7) days per week during
the “Lease Term,” as that term is defined in Section 2.1, below.

 

1.2           Verification
of Rentable Square Feet of Premises and Building.  For purposes of this Lease, “rentable square
feet” and “usable square feet” shall be calculated pursuant to Standard Method
of Measuring Floor Area in Office Building, ANSI Z65.1 - 1996, and its
accompanying guidelines (collectively, “BOMA”).  Within thirty (30) days after the Lease
Commencement Date, Landlord’s space planner/architect shall measure the
rentable and usable square feet of the Premises, and thereafter such determined
rentable square footages of the Premises shall be presented to Tenant in
writing.  Tenant’s space
planner/architect may review Landlord’s space planner/architect’s determination
of the number of rentable square feet and usable square feet of the Premises
and Tenant may, within fifteen (15) business days after Tenant’s receipt of
Landlord’s space planner/architect’s written determination, object to such
determination by written notice to Landlord. 
Tenant’s failure to deliver written notice of such objection within said
fifteen (15) business day period shall be deemed to constitute Tenant’s
acceptance of Landlord’s space planner/architect’s determination.  If Tenant objects to such determination, Landlord’s
space planner/architect and Tenant’s space planner/architect shall promptly
meet and attempt to agree upon the rentable and usable square footage of the
Premises.  If Landlord’s space
planner/architect and Tenant’s space planner/architect cannot agree on the
rentable and useable square footage of the Premises within thirty (30) days
after Tenant’s objection thereto, Landlord and Tenant shall mutually select an
independent third party space measurement professional to field measure the
Premises pursuant to BOMA.  Such third
party

 

6

 

*** Confidential portions of this document have been
redacted and filed separately with the Commission.

 

independent
measurement professional’s determination shall be conclusive and binding on
Landlord and Tenant.  [***] pay [***] of
the fees and expenses of the independent third party space measurement
professional.  If the Lease Term
commences prior to such final determination, [***] determination shall be
utilized until a final determination is made, whereupon an appropriate
adjustment, if necessary, shall be made retroactively, and Landlord shall make
appropriate payment (if applicable) to Tenant. 
In the event that pursuant to the procedure described in this Section 1.2
above, it is determined that the square footage amounts shall be different from
those set forth in this Lease, all amounts, percentages and figures appearing
or referred to in this Lease based upon such incorrect amount (including,
without limitation, the amount of the “Rent”
and any “Security Deposit,” as
those terms are defined in Section 4.1 and Article 21
of this Lease, respectively, and the amount of the “Improvement Allowance,” as
that term is defined in Section 2.1 of the Work Letter Agreement)
shall be modified in accordance with such determination.  If such determination is made, it will be
confirmed in writing by Landlord to Tenant.

 

1.3           13480
Premises; 13480 Lease. 
Landlord and Tenant are parties to that certain Office Lease dated as of
January 31, 2008 (the “13480 Lease”),
whereby Tenant leases from Landlord, and Landlord leases to Tenant those
certain premises consisting of the entirety of the 13480 Building (the “13480 Premises”).  The terms of the 13480 Lease shall govern
Tenant’s lease of the 13480 Premises in all respects and the terms of this
Lease shall not be applicable with respect to the 13480 Lease, except to the
extent expressly set forth to the contrary herein and therein.

 

1.4           13500
Premises; 13500 Lease. 
Landlord and Tenant are parties to that certain Office Lease dated as of
January 31, 2008 (the “13500 Lease”),
whereby Tenant leases from Landlord, and Landlord leases to Tenant those
certain premises consisting of the entirety of the 13500 Building (the “13500 Premises”).  The terms of the 13500 Lease shall govern
Tenant’s lease of the 13500 Premises in all respects and the terms of this
Lease shall not be applicable with respect to the 13500 Lease, except to the
extent expressly set forth to the contrary herein and therein.

 

ARTICLE 2

 

LEASE TERM; OPTION TERM

 

2.1           Initial Lease Term.  The TCCs and provisions of this Lease shall
be effective as of the date of this Lease. 
The term of this Lease (the “Lease Term”)
shall be as set forth in Section 3.1 of the Summary, shall commence
on the date set forth in Section 3.2 of the Summary (the “Lease Commencement Date”), and shall terminate on the date
set forth in Section 3.3 of the Summary (the “Lease
Expiration Date”) unless this Lease is sooner terminated as
hereinafter provided.  For purposes of
this Lease, the term “Lease Year”
shall mean each consecutive twelve (12) month period during the Lease Term;
provided, however, the first Lease Year shall commence on the Lease
Commencement Date and end on (i) the last day of the eleventh (11th) calendar
month after the calendar month in which the Lease Commencement Date occurs if
the Lease Commencement Date occurs on the first (1st) day of any calendar
month, or (ii) the last day of the twelfth (12th) calendar month after the
calendar month in which the Lease Commencement Date occurs if the Lease Commencement
Date occurs on other than

 

7

 

*** Confidential portions of this document have been
redacted and filed separately with the Commission.

 

the first (1st) day of any calendar month, and, in either case, the
second (2nd) and each succeeding Lease Year shall commence on the first day of
the next calendar month; and further provided that the last Lease Year shall
end on the Lease Expiration Date.  At any
time during the Lease Term, Landlord may deliver to Tenant a notice in the form
as set forth in Exhibit C,
attached hereto, as a confirmation only of the information set forth therein,
which Tenant shall, after confirming the accuracy thereof, execute and return
to Landlord within five (5) business days of receipt thereof.

 

2.2           Option Term.

 

2.2.1        Option Right.  Landlord
hereby grants the Tenant originally named herein (the “Original Tenant”), its “Permitted
Transferees,” as that term is set forth in Section 14.8 of this
Lease, and any approved assignee of all of Original Tenant’s interest in this
Lease, the 13480 Lease and the 13500 Lease (defined in Section 1.4)
pursuant to the TCCs of Article 14 (an “Approved Assignee”) (collectively, the “Right Holders”), one (1) option to
extend the Lease Term for the entire Premises, by a period of five (5) years
(the “Option Term”).  Such option shall be exercisable only by
Notice delivered by Tenant to Landlord as provided below, provided that, as of
the date of delivery of such Notice, (i) Tenant is not then in monetary or
material non-monetary default under this Lease (beyond any applicable notice
and cure periods), (ii) Tenant has not been in monetary or material
non-monetary default under this Lease (beyond any applicable notice and cure
periods) more than once during the prior [***]month period, (iii) Landlord
reasonably determines that Tenant is a party of reasonable financial worth
and/or financial stability in light of the responsibilities to be undertaken in
connection with Tenant’s lease of the Premises during the Option Term, and (iv) this
Lease then remains in full force and effect and Original Tenant, its Permitted
Transferees and/or its Approved Assignees are then in occupancy of no less than
[***] of the rentable square footage of the Premises (the foregoing items (i) through
(iv) collectively constituting the “Exercise
Conditions”).  Upon the proper
exercise of such option to extend, and provided that, as of the end of the
Lease Term, there is no then existing violation of the Exercise Conditions, the
Lease Term, as it applies to the entire Premises, shall be extended for a
period of five (5) years.  The
rights contained in this Section 2.2 shall only be exercised by the
Right Holders (but not any other assignee, sublessee or other transferee of
Tenant’s interest in this Lease).

 

2.2.2        Option Rent.  The Rent
payable by Tenant during the Option Term (the “Option Rent”) shall be equal to [***] of the “Market Rent,” as
that term is defined in, and determined pursuant to, Exhibit G attached hereto, during
the Option Term; provided, however, that the Market Rent for each Lease Year
during the Option Term shall be equal to the amount set forth on a “Market Rate
Schedule,” as that term is defined below, and under no circumstances shall the
Market Rent for any Lease Year occurring during the Option Term, as set forth
on the Market Rate Schedule, be less than the corresponding “Contract Rent,” as
that term is defined below, as such Contract Rent is set forth on the “Contract
Rate Schedule,” as that term is defined below. 
The “Market Rate Schedule”
shall be derived from the Market Rent for the Option Term as determined
pursuant to Exhibit G,
attached hereto, as follows:  (i) the
Market Rent for the first Lease Year of the Option Term shall be equal to the
sum of [***], and (ii) the Market Rent for each subsequent Lease Year
shall be equal to [***] of the prior Lease Year’s Market Rent.  The “Contract
Rate Schedule” shall be derived from the Base Rent applicable to the
Premises for the Lease Year immediately preceding the Option Term, as
follows:  (x) the

 

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“Contract Rent” for the first Lease Year of
the Option Term shall equal the sum of (A) the Base Rent in effect under
this Lease for the Lease Year immediately preceding the commencement of the
Option Term, (B) an amount equal to the “Excess” (as defined in Section 4.4)
which is due under Article 4 of this Lease for the Base Year
immediately preceding the commencement of the Option Term, and (C) an
amount equal to the monthly amortization reimbursement payment for the “Renewal
Allowance” (as defined in Section 3 of Exhibit G to this Lease) to be
paid by Landlord in connection with Tenant’s lease of the Premises for the
Option Term, with such Renewal Allowance being amortized at a reasonable rate
of return to Landlord based on the rates of return then being received by the
landlords of the Comparable Buildings in connection with tenant improvement
allowances then be granted by such landlords, and (y) the Contract Rent
for each subsequent Lease Year shall be equal to [***] of the prior Lease Year’s
Contract Rent.  The calculation of the
Market Rent shall be derived from a review of, and comparison to, the “Net
Equivalent Lease Rates” of the “Comparable Transactions,” as provided for in Exhibit G.  Notwithstanding anything set forth in this
Lease to the contrary, the Base Year for the Option Term with respect to the
Renewal Premises shall be the calendar year in which the Option Term commences.

 

2.2.3        Exercise of Option.  The option contained in this Section 2.2
shall be exercised by Tenant, if at all, only in the manner set forth in this Section 2.2.3.  Tenant shall deliver notice (the “Exercise Notice”) to Landlord not more than
eighteen (18) months nor less than twelve (12) months prior to the expiration
of the initial Lease Term, stating that Tenant is irrevocably exercising its
extension option; provided, however, in the event Tenant fails to deliver the
Exercise Notice by the date which is twelve (12) months prior to the expiration
of the initial Lease Term, then Landlord shall deliver Tenant written notice of
such failure (the “Reminder Notice”),
in which event, notwithstanding the failure identified in such Reminder Notice,
Tenant shall be deemed to have timely delivered the Exercise Notice as long as
the same is delivered to Landlord within five (5) business days following
Tenant’s receipt of the Reminder Notice. 
If Tenant timely delivers an Exercise Notice to Landlord, then, on or
before the date which is nine (9) months prior to the expiration of the
initial Lease Term, Tenant shall deliver to Landlord Tenant’s calculation of
the Market Rent (the “Tenant’s Option Rent
Calculation”).  Landlord shall
deliver notice (the “Landlord Response Notice”)
to Tenant on or before the date that is eight (8) months prior to the end
of the Lease Term (the “Landlord Response
Date”), stating that (A) Landlord is accepting Tenant’s Option
Rent Calculation as the Market Rent, or (B) rejecting Tenant’s Option Rent
Calculation and setting forth Landlord’s calculation of the Market Rent (the “Landlord’s Option Rent Calculation”).  Within ten (10) business days of
its receipt of the Landlord Response Notice, Tenant shall deliver written
notice to Landlord (the “Tenant Election
Notice”), which shall set forth Tenant’s election to either (i) accept
the Market Rent contained in the Landlord’s Option Rent Calculation or (ii) reject
the Market Rent contained in the Landlord’s Option Rent Calculation, in which
event the parties shall follow the procedure, and the Market Rent shall be
determined as set forth in Section 2.2.4.  Tenant’s failure to timely deliver the Tenant
Election Notice shall be conclusively deemed to constitute Tenant’s election to
proceed pursuant to alternative (ii) from the immediately preceding
sentence.

 

2.2.4        Determination of Market Rent.  In the event Tenant objects or is deemed to
have objected to the Market Rent, Landlord and Tenant shall attempt to agree
upon the Market Rent using reasonable good-faith efforts.  If Landlord and Tenant fail to reach
agreement within sixty (60) days following Tenant’s objection or deemed objection
to the

 

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Landlord’s Option Rent Calculation (the “Outside Agreement Date”), then each party shall make a
separate, final and binding determination of the Market Rent, and within five (5) days
following the Outside Agreement Date, such determinations shall be submitted to
the other party and to the arbitrators pursuant to the TCCs of this Section 2.2.4.

 

2.2.4.1     Landlord and Tenant shall each appoint
one (1) arbitrator who shall by profession be a commercial real
estate lease broker or commercial real estate lease appraiser who shall have
been active over the five (5) year period ending on the date of such
appointment in the leasing (or appraisal, as the case may be) of Comparable
Buildings.  The determination of the
arbitrators shall be limited solely to the issue of whether Landlord’s or
Tenant’s submitted Market Rent, is the closest to the actual Market Rent as
determined by the arbitrators, taking into account the requirements of Section 2.2.2
of this Lease.  Each arbitrator shall be
appointed within fifteen (15) days after the applicable Outside Agreement
Date.  Landlord and Tenant may consult
with their selected arbitrators prior to appointment and may select an
arbitrator who is favorable to their respective positions.  The arbitrators so selected by Landlord and
Tenant shall be deemed the “Advocate
Arbitrators”.

 

2.2.4.2     The two (2) Advocate Arbitrators so
appointed shall be specifically required pursuant to an engagement letter
within ten (10) days of the date of the appointment of the last appointed
Advocate Arbitrator agree upon and appoint a third (3rd) arbitrator (“Neutral
Arbitrator”) who shall be a commercial real estate lease attorney
who shall have been active over the five (5) year period ending on the
date of such appointment in the leasing of Comparable Buildings, except that
neither the Landlord or Tenant or either party’s Advocate Arbitrator may,
directly or indirectly, consult with the Neutral Arbitrator prior to or
subsequent to his or her appearance; provided, however, the Neutral Arbitrator
shall retain an appraiser (the “Neutral
Appraiser”) to assist such Neutral Arbitrator (which Neutral
Appraiser shall be selected by the Advocates Arbitrators).  The Neutral Appraiser shall be retained for
the sole purpose of advising and assisting the Neutral Arbitrator, and such
Neutral Appraiser shall not have an independent vote as the whether Landlord’s
or Tenant’s submitted Market Rent is closest to the Market Rent.  In no event shall either the Neutral
Arbitrator or the Neutral Appraiser have represented (or have been engaged to
represent) Landlord or Tenant during the five (5) year period preceding
the Outside Agreement Date or have any business or ownership affiliation with
either of the Advocate Arbitrators during such five (5) year period (as
opposed to having had professional interaction with the same).  The Neutral Arbitrator shall be retained via
an engagement letter jointly prepared by Landlord’s counsel and Tenant’s
counsel.

 

2.2.4.3     The parties shall, in connection with the
determination of the Market Rent, enter into an arbitration agreement (the “Arbitration Agreement”) which shall set
forth the following:  (i) each party’s
final and binding Market Rent determination, (ii) an agreement to be
signed by the Neutral Arbitrator, the form of which agreement shall be attached
as an Exhibit to the Arbitration Agreement, whereby the Neutral Arbitrator
shall agree to undertake the arbitration and render a decision in accordance
with the terms of this Lease, as modified by the Arbitration Agreement, (iii) instructions
to be followed by the Neutral Arbitrator when conducting such arbitration, which
instructions shall be mutually and reasonably prepared by Landlord and Tenant
and which instructions shall be consistent with the terms and conditions of
this Lease, (iv) that Landlord and Tenant shall each have the right to
have its Advocate Arbitrator submit to the Neutral Arbitrator (with a copy to
the other parties), on or before a date

 

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agreed upon by Landlord
and Tenant, an advocate statement (and any other information such Advocate
Arbitrator deems relevant), in support of Landlord’s or Tenant’s respective
Market Rent determination (the “Briefs”),
(v) that within three (3) business days following the exchange of
Briefs by each of the Advocate Arbitrators, the Advocate Arbitrators
representing Landlord and Tenant shall each have the right to provide the
Neutral Arbitrator (with a copy to the other parties) with a written rebuttal
to the other party’s Brief (the “First
Rebuttals”); provided, however, such First Rebuttals shall be
limited to the facts and arguments raised in the other party’s Brief and shall
identify clearly which argument or fact of the other party’s Brief is intended
to be rebutted, (vi) that within three (3) business days following
Landlord’s and/or Tenant’s receipt of the other party’s First Rebuttal, the
Advocate Arbitrators representing Landlord and Tenant, as applicable, shall
have the right to provide the Neutral Arbitrator (with a copy to the other
parties) with a written rebuttal to the other party’s First Rebuttal (the “Second Rebuttals”); provided, however, such
Second Rebuttals shall be limited to the facts and arguments raised in the
other party’s First Rebuttal and shall identify clearly which argument or fact
of the other party’s First Rebuttal is intended to be rebutted, (vii) the
date, time and location of the arbitration, which shall be mutually and
reasonably agreed upon by the Advocate Arbitrators representing Landlord and
Tenant, taking into consideration the schedules of the Landlord, the Tenant,
the Neutral Arbitrator, and the Advocate Appraisers, which date shall in any
event be within fifteen (15) business days following the appointment of the
Neutral Arbitrator, (viii) that no discovery shall take place in
connection with the arbitration, (ix) that the Neutral Arbitrator shall
not be allowed to undertake an independent investigation or consider any
factual information other than presented by the Advocate Arbitrators
representing Landlord or Tenant and information provided by the Neutral
Appraiser based upon such Neutral Appraiser’s review of the factual information
presented by the Advocate Arbitrators representing Landlord or Tenant (except
that the Neutral Arbitrator, with representatives from each of Landlord and
Tenant, shall have the right to visit the Comparable Buildings), (x) the
specific persons that shall be allowed to attend the arbitration, (xi) the
Advocate Arbitrator representing Tenant shall have the right to present oral
arguments to the Neutral Arbitrator at the arbitration for a period of time not
to exceed two (2) hours (“Tenant’s Initial
Statements”), (xii) following Tenant’s Initial Statement, the
Advocate Arbitrator representing Landlord shall have the right to present oral
arguments to the Neutral Arbitrator at the arbitration for a period of time not
to exceed two (2) hours (“Landlord’s
Initial Statements”), (xiii) following Landlord’s Initial
Statements, the Advocate Arbitrator representing Tenant shall have up to one (1) additional
hour to present additional arguments and/or to rebut the arguments offered in
Landlord’s Initial Statements (“Tenant’s
Rebuttal Statement”), (xiv) following Tenant’s Rebuttal
Statement, the Advocate Arbitrator representing Landlord shall have up to one (1) additional
hour to present additional arguments and/or to rebut the arguments offered in
Tenant’s Initial Statements and Tenant’s Rebuttal Statement (“Landlord’s Rebuttal Statement”),
(xv) that the Neutral Arbitrator shall render a decision (“Award”) indicating whether Landlord’s or
Tenant’s submitted Market Rent is closest to the Market Rent as determined by
the Neutral Arbitrator, (xvi) that following notification of the Award,
the Landlord’s or Tenant’s submitted Market Rent determination, whichever is
selected by the Neutral Arbitrator as being closest to the Market Rent, shall
become the then applicable Market Rent, and (xvii) that the decision of
the Neutral Arbitrator shall be binding on Landlord and Tenant.

 

2.2.4.4     If either Landlord or Tenant fail to
appoint an Advocate Arbitrator within fifteen (15) days after the applicable
Outside Agreement Date, either party may petition 

 

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the presiding judge of
the Superior Court of San Diego County to appoint such Advocate Arbitrator
subject to the criteria in Section 2.2.4.1 of this Lease, or if he
or she refuses to act, either party may petition any judge having jurisdiction
over the parties to appoint such Advocate Arbitrator.

 

2.2.4.5     If the two Advocate Arbitrators fail to
agree upon and appoint the Neutral Arbitrator, then either party may petition
the presiding judge of the Superior Court of San Diego County to appoint the
Neutral Arbitrator, subject to criteria in Section 2.2.4.1 of this
Lease, or if he or she refuses to act, either party may petition any judge
having jurisdiction over the parties to appoint such arbitrator.

 

2.2.4.6     The costs of the Neutral Arbitrator and
Neutral Appraiser shall be [***].  The costs of the Advocate Arbitrator
representing the Tenant shall be borne by the Tenant.  The Costs of the Advocate Arbitrator
representing the Landlord shall be borne by the Landlord.  The costs of petitioning any judge under Section 2.2.4.4
shall be [***].  The costs of petitioning any judge under Section 2.2.4.5
shall be [***].

 

ARTICLE
3

 

BASE
RENT

 

3.1           Base Rent. 
Tenant shall pay, without prior notice or demand, to Landlord or
Landlord’s agent at the management office of the Project, or, at Landlord’s
option, at such other place as Landlord may from time to time designate in
writing, by a check for currency which, at the time of payment, is legal tender
for private or public debts in the United States of America, base rent (“Base Rent”) as set forth in Section 4 of the
Summary, payable in equal monthly installments as set forth in Section 4
of the Summary in advance on or before the first day of each and every calendar
month during the Lease Term, without any setoff or deduction whatsoever.  The Base Rent for the first full month of the
Lease Term which occurs after the expiration of any free rent period shall be
paid at the time of Tenant’s execution of this Lease.  If any Rent payment date (including the Lease
Commencement Date) falls on a day of the month other than the first day of such
month or if any payment of Rent is for a period which is shorter than one
month, the Rent for any such fractional month shall accrue on a daily basis
during such fractional month and shall total an amount equal to the product of (i) a
fraction, the numerator of which is the number of days in such fractional month
and the denominator of which is the actual number of days occurring in such
calendar month, and (ii) the then-applicable Monthly Installment of Base
Rent.  All other payments or adjustments
required to be made under the TCCs of this Lease that require proration on a
time basis shall be prorated on the same basis.

 

3.2           Abatement of Rent. 
In the event that Tenant is prevented from using, and does not use, the
Premises or any portion thereof, as a result of (i) repairs, maintenance
or alterations performed by Landlord, or which Landlord failed to perform,
before or after the Lease Commencement Date and required by this Lease, which
substantially interferes with Tenant’s use of or ingress to or egress from the
Building, Project (including the Common Areas), or the Premises (including the
Project parking areas to the extent reasonable replacement spaces are not
provided); or (ii) the failure by Landlord to provide necessary services,
utilities, parking spaces (unless replacement parking spaces and reasonable
accommodations associated therewith are

 

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provided by Landlord), or ingress to and egress from the Building,
Project (including the Common Areas), or Premises as required pursuant to the
TCCs of this Lease; or (iii) the presence of “Hazardous Materials” (as
that term is defined in Section 29.33.1, below) not brought on the
Premises by “Tenant Parties,” as that term is set forth in Section 10.1
of this Lease, to the extent such presence substantially interferes with Tenant’s
use of or ingress to or egress from the Building, Project (including the Common
Areas), or Premises (including the Project parking areas to the extent
reasonable replacement spaces are not provided) (any such set of circumstances
as set forth in items (i) through (iii), above, to be known as an “Abatement Event”), then Tenant shall give
Landlord notice of such Abatement Event, and if such Abatement Event continues
for five (5) or more consecutive business days after Landlord’s receipt of
any such notice (the “Eligibility Period”),
then Tenant may deliver an additional notice to Landlord (the “Additional Notice”), specifying such
Abatement Event and Tenant’s intention to abate the payment of Rent under this
Lease.  If Landlord does not cure such
Abatement Event within three (3) business days of receipt of such
Additional Notice, then as Tenant’s sole remedy vis-à-vis such Abatement Event,
the Base Rent and Tenant’s Share of Direct Expenses shall be abated or reduced,
as the case may be, after expiration of the Eligibility Period, for such time
that Tenant continues to be so prevented from using, and does not use, the
Premises, or a portion thereof, in the proportion of the rentable area of the
portion of the Premises that Tenant is prevented from using and does not use (“Unusable Area”).  To the extent an Abatement Event is caused by
an event covered by Articles 11 or 13 of this Lease, then
the terms of such Article 11 or 13, as the case may be,
shall govern Tenant’s right to abate rent and the terms of this Section 3.2
shall not be applicable thereto.

 

ARTICLE
4

 

ADDITIONAL
RENT

 

4.1           General
Terms.  In addition to
paying the Base Rent specified in Article 3 of this Lease, Tenant
shall pay “Tenant’s Share” of the
annual “Direct Expenses,” as those
terms are defined in Sections 4.2.6 and 4.2.2,
respectively, of this Lease which are in excess of the amount of Direct
Expenses applicable to the “Base Year,” as that term is defined in Section 4.2.1,
below; provided, however, that in no event shall any decrease in Direct
Expenses for any Expense Year below Direct Expenses for the Base Year entitle
Tenant to any decrease in Base Rent or any credit against sums due under this
Lease.  Such payments by Tenant, together
with any and all other amounts payable by Tenant to Landlord pursuant to the
TCCs of this Lease, are hereinafter collectively referred to as the “Additional Rent,” and the Base Rent and the Additional Rent
are herein collectively referred to as “Rent.”  All amounts due under this Article 4
as Additional Rent shall be payable for the same periods and in the same manner
as the Base Rent; provided, however, the parties hereby acknowledge that the
first monthly installment of Tenant’s Share of any “Estimated Excess,” as that
term is set forth in, and pursuant to the terms and conditions of, Section 4.4.2
of this Lease, shall first be due and payable for the calendar month occurring
immediately following the expiration of the Base Year.  Without limitation on other obligations of
Tenant which survive the expiration of the Lease Term, the obligations of
Tenant to pay the Additional Rent provided for in this Article 4
shall survive the expiration of the Lease Term.

 

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

 

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4.2.1        “Base
Year” shall mean the period set forth in Section 5 of
the Summary.

 

4.2.2        “Direct
Expenses” shall mean “Operating Expenses,” “Tax Expenses” and “Utilities
Costs.”

 

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

 

4.2.4        “Operating Expenses” shall be calculated in
accordance with sound real estate accounting practices, consistently applied
from year to year, and shall mean all expenses, costs and amounts of every kind
and nature which, in accordance with sound real estate management practices,
consistently applied from year to year, Landlord pays or accrues during any
Expense Year because of or in connection with the ownership, management,
maintenance, security, repair, replacement, restoration or operation of the
Project, or any portion thereof.  Without
limiting the generality of the foregoing, Operating Expenses shall specifically
include any and all of the following:  (i) the
cost of operating, repairing, maintaining, and renovating the utility,
telephone, mechanical, sanitary, storm drainage, and elevator systems, and the
cost of maintenance and service contracts in connection therewith; (ii) the
cost of licenses, certificates, permits and inspections and the cost of
contesting any governmental enactments which may affect Operating Expenses, and
the costs incurred in connection with a governmentally mandated transportation
system management program or similar program; (iii) the cost of all
insurance carried by Landlord in connection with the Project; (iv) the cost
of landscaping, relamping, and all supplies, tools, equipment and materials
used in the operation, repair and maintenance of the Project, or any portion
thereof; (v) costs incurred in connection with the parking areas servicing
the Project; (vi) fees and other costs, including management fees (which
management fees shall equal [***]), consulting fees, legal fees and accounting
fees, of all contractors and consultants in connection with the management,
operation, maintenance and repair of the Project; (vii) payments under any
equipment rental agreements and the fair rental value of any management office
space; (viii) wages, salaries and other compensation and benefits,
including taxes levied thereon, of all persons (other than
persons generally considered to be higher in rank than the position of “Asset
Manager”) engaged
in the operation, maintenance and security of the Project; (ix) costs
under any instrument pertaining to the sharing of costs by the Project; (x) operation,
repair, maintenance and replacement (but with respect to replacement, only to
the extent necessitated by normal wear and tear during the Lease Term) of all
systems and equipment and components thereof of the Building; (xi) the
cost of janitorial, alarm, security and other services, non-capital replacement
of wall and floor coverings, ceiling tiles and fixtures in common areas (but
only to the extent necessitated by normal wear and tear during the Lease Term),
maintenance and replacement of curbs and walkways, repair to roofs; (xii) amortization
of the cost of acquiring or the rental expense of personal property used in the
maintenance, operation and repair of the Project, or any portion thereof (which
amortization calculation shall include interest at the “Interest Rate,” as that
term is set forth in Article 25 of this Lease); (xiii) the
cost of capital improvements or other costs incurred in connection with the
Project  (A) which are
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Project,
or any portion thereof, to the extent of cost savings reasonably anticipated
by Landlord at the time of such expenditure to be incurred in connection
therewith, (B) that
are required to comply with present or anticipated conservation programs, (C) which
are replacements or modifications of nonstructural items located in the Common
Areas required to keep the Common Areas in good order or condition (but only to
the extent necessitated by normal wear and tear during the Lease Term), or (D) that
are required under any governmental law or regulation by a
federal, state or local governmental agency, except for capital repairs,
replacements or other improvements to remedy a condition existing prior to the
Lease Commencement Date which an applicable governmental authority, if it had
knowledge of such condition prior to the Lease Commencement Date, would have
then required to be remedied pursuant to then-current governmental laws or
regulations in their form existing as of the Lease Commencement Date and
pursuant to the then-current interpretation of such governmental laws or
regulations by the applicable governmental authority as of the Lease
Commencement Date; provided, however, that any capital expenditure
shall be amortized with interest at the Interest Rate over its useful life as
Landlord shall reasonably determine in accordance with sound real estate
management and accounting practices; and such amortized costs shall be included
in Operating Expenses only for that portion of the useful life which falls
within the Lease Term; (xiv) costs, fees, charges or assessments imposed
by, or resulting from any mandate imposed on Landlord by, any federal, state or
local government for fire and police protection, trash removal, community
services, or other services which do not constitute “Tax Expenses” as that term
is defined in Section 4.2.5, below; and (xv) payments under
any easement, license, operating agreement, declaration, restrictive covenant,
or instrument pertaining to the sharing of costs by the Building.  Notwithstanding the
foregoing, for purposes of this Lease, Operating Expenses shall not, however,
include:

 

(a)           costs, including marketing costs,
legal fees, space planners’ fees, advertising and promotional expenses, and
brokerage fees incurred in connection with the original construction or
development, or original or future leasing of the Project, and costs, including
permit, construction, license and inspection costs, improvement allowances,
incurred with respect to the installation of premises improvements made for
tenants or occupants occupying space in the Project or incurred in renovating
or otherwise improving, decorating, painting or redecorating space for tenants
or other occupants of the Project (excluding, however, such costs relating to
any Common Areas or parking facilities);

 

(b)           except as set forth in items (xii),
(xiii), and (xiv) above, depreciation, interest and principal payments on
mortgages and other debt costs, if any, penalties and interest costs of capital
repairs, replacements and alterations, and costs of capital improvements and
equipment and costs to repair defects in the original construction of the Project
to the extent such repair is covered by a warranty;

 

(c)           costs for which the Landlord is
reimbursed, or would have been reimbursed if Landlord had used commercially
reasonable efforts to collect such amounts, by any tenant or occupant of the
Project or by insurance by its carrier or any tenant’s carrier or by anyone
else, and electric power or other utility costs for which any tenant directly
contracts with the local public service company;

 

(d)           any bad debt loss, rent loss, or
reserves for bad debts or rent loss;

 

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(e)           costs associated with the operation
of the business of the partnership or entity which constitutes the Landlord, as
the same are distinguished from the costs of operation of the Project (which
shall specifically include, but not be limited to, accounting costs associated
with the operation of the Project). 
Costs associated with the operation of the business of the partnership
or entity which constitutes the Landlord include costs of partnership
accounting and legal matters, costs of defending any lawsuits with any
mortgagee or ground lessor (except as the actions of the Tenant may be in
issue), costs and fees incurred in the selling, syndicating, financing,
mortgaging or hypothecating any of the Landlord’s interest in the Project, and
costs or fees incurred in connection with any disputes between Landlord and its
employees or brokers, between Landlord and Project management, or between
Landlord and other tenants or occupants, and Landlord’s general corporate
overhead and general and administrative expenses;

 

(f)            the wages and benefits of any
employee who does not devote substantially all of his or her employed time to
the Project unless such wages and benefits are prorated to reflect time spent
on operating and managing the Project vis-a-vis time spent on matters unrelated
to operating and managing the Project; provided, that in no event shall
Operating Expenses for purposes of this Lease include wages and/or benefits
attributable to personnel above the level of Asset manager;

 

(g)           amount paid as ground rental for all
or any portion of the Project by the Landlord and attorneys fees, transfer
taxes, and any other transactional expenses associated with any ground lease of
the Project;

 

(h)           overhead and profit increment paid to
the Landlord or to subsidiaries or affiliates of the Landlord for services in
the Project to the extent the same exceeds the costs of such services rendered
by qualified, first-class unaffiliated third parties providing similar services
in the “Comparable Area” (as that term is defined in Exhibit G to this Lease) on a
competitive basis;

 

(i)            any compensation paid to clerks,
attendants or other persons in commercial concessions operated by the Landlord,
provided that any compensation paid to any concierge at the Project shall be
includable as an Operating Expense;

 

(j)            rentals and other related expenses
incurred in leasing air conditioning systems, elevators or other equipment
which if purchased the cost of which would be excluded from Operating Expenses
as a capital cost, except equipment not affixed to the Project which is used in
providing janitorial or similar services and, further excepting from this
exclusion such equipment rented or leased to remedy or ameliorate an emergency
condition in the Project ;

 

(k)           all items and services for which
Tenant or any other tenant in the Project reimburses Landlord or which Landlord
provides selectively to one or more tenants (other than Tenant) without
reimbursement;

 

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

 

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(m)          any costs expressly excluded from
Operating Expenses elsewhere in this Lease;

 

(n)           rent for any office space occupied by
Project management personnel to the extent the size or rental rate of such
office space exceeds the size or fair market rental value of office space
occupied by management personnel of the Comparable Buildings with adjustment
where appropriate for the size of the applicable project;

 

(o)           costs to the extent arising from the
gross negligence or willful misconduct of Landlord or its agents, employees,
vendors, contractors, or providers of materials or services;

 

(p)           costs incurred to comply with laws
relating to the removal of hazardous material (as defined under applicable law)
which was in existence in the Building or on the Project prior to the Lease
Commencement Date, and was of such a nature that a federal, State or municipal
governmental authority, if it had then had knowledge of the presence of such
hazardous material, in the state, and under the conditions that it then existed
in the Building or on the Project, would have then required the removal of such
hazardous material or other remedial or containment action with respect
thereto; and costs incurred to remove, remedy, contain, or treat hazardous
material, which hazardous material is brought into the Building or onto the
Project after the date hereof by Landlord or a “Landlord Party,” as that term
is defined in Section 10.1 of this Lease, or any other tenant of
the Project and is of such a nature, at that time, that a federal, State or
municipal governmental authority, if it had then had knowledge of the presence
of such hazardous material, in the state, and under the conditions, that it
then exists in the Building or on the Project, would have then required the
removal of such hazardous material or other remedial or containment action with
respect thereto; provided, however, Landlord hereby acknowledges that it has
not received written notice of the existence of hazardous material in the
Building or the Project;

 

(q)           costs, fees, dues, contributions or
similar expenses for political or charitable organizations;

 

(r)            reserves for future improvements,
repairs, additions, etc., in excess of such amounts in the Base Year; and

 

(s)           costs incurred in order to cause the
Building or the Project to comply with any applicable governmental law or
regulation in effect and being enforced as of the Lease Commencement Date, but
only to the extent such law or regulation required compliance prior to the
Lease Commencement Date.

 

[***] 
If Landlord is not furnishing any particular work or service (the cost
of which, if performed by Landlord, would be included in Operating Expenses) to
a tenant who has undertaken to perform such work or service in lieu of the
performance thereof by Landlord, Operating Expenses shall be deemed to be
increased by an amount equal to the additional Operating Expenses which would
reasonably have been incurred during such period by Landlord if it had at its
own expense furnished such work or service to such tenant.  If the Project is not at least [***] percent ([***]%) occupied during all or a portion of
the Base Year or any Expense

 

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Year, Landlord shall make an appropriate adjustment to
the components of Operating Expenses for such year to determine the amount of
Operating Expenses that would have been incurred had the Project been [***] percent ([***]%) occupied; and the amount so
determined shall be deemed to have been the amount of Operating Expenses for
such year.  Operating Expenses for the
Base Year shall include market-wide cost increases (including utility rate
increases) due to extraordinary circumstances, including, but not limited to,
Force Majeure, boycotts, strikes, conservation surcharges, embargoes or
shortages, or amortized costs relating to capital improvements (collectively, “Increases”); provided, however, that at
such time as any such particularly Increases are no longer included in
Operating Expenses, such Increase shall be excluded from the Base Year
calculation of Operating Expenses.  In no
event shall the components of Direct Expenses for any Expense Year related to
Utility Costs or Project services or Project insurance costs be less than the
corresponding components of Direct Expenses related to Utility Costs, Project
Services and Project insurance costs in the Base Year.  Landlord shall not (i) make a profit by
charging items to Operating Expenses that are otherwise also charged separately
to others and (ii) subject to Landlord’s right to adjust the components of
Operating Expenses described above in this paragraph, collect Operating
Expenses from Tenant and all other tenants in the Project in an amount in
excess of what Landlord incurs for the items included in Operating Expenses.  If
Landlord, in any Expense Year following the Base Year, begins providing any new
category of services (as opposed to an expansion in scope of a service or a
change in a type of service) (the “New
Services”), then for such period of time in which such New Services
apply, Operating Expenses for the Base Year shall be increased by the amount
that Landlord reasonably determines it would have incurred had Landlord
provided such New Services during the same period of time during the Base Year
as such New Services were provided during such subsequent Expense Year.  Notwithstanding the foregoing, no adjustment
to the Operating Expenses for the Base Year shall occur to the extent such New
Services (1) are attributable to Tenant’s use of the Premises (as opposed
to office use generally), in which case Landlord may elect (Y) to include
the cost of such New Services in Operating Expenses, or (Z) to invoice
Tenant directly for such costs, depending upon the nature of the New Services
and the extent to which the need for such New Services is directly attributable
to Tenant’s use, as determined in Landlord’s reasonable discretion, (2) is
being offered by landlords in the majority of Comparable Buildings, or (3) is
required by “Applicable Laws,” as that Term is set forth in Article 24.  If Landlord, in any Expense Year after the
Base Year, discontinues any type or category of service then for such period of
time in which such services are discontinued, Operating Expenses for the Base
Year shall be decreased by the amount that Landlord reasonably determines it
incurred for such type or category of service throughout the Base Year.  In no event shall Tenant be responsible to
pay any “Controllable Expenses,” as defined below, to the extent such
Controllable Expenses exceed the amount that such Controllable Expenses would
have been had they increased, from the amount of Controllable Expenses incurred
during the first twelve (12) months of the Lease Term (i.e., May 7, 2009 through May 31,
2010), at a compounded rate of [***] percent ([***]%)
per Expense Year (the “Cap”).  As used herein “Controllable Expenses” shall mean any costs incurred by
Landlord relating to services (not including utility services) provided to the
Project, labor costs paid by Landlord, and maintenance contracts paid by
Landlord; provided, however, Controllable Expenses shall not include Tax
Expenses, costs relating to the HVAC systems of a Building, costs of insurance
premiums, utility charges, or market-wide increases in labor costs due to
extraordinary circumstances, including, without limitation, boycotts and
strikes.

 

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4.2.5        Taxes.

 

4.2.5.1     “Tax Expenses”
shall mean all federal, state, county, or local governmental or municipal
taxes, fees, charges or other impositions of every kind and nature, whether
general, special, ordinary or extraordinary, (including, without limitation,
real estate taxes, general and special assessments, transit taxes, leasehold
taxes or taxes based upon the receipt of rent, including gross receipts or
sales taxes applicable to the receipt of rent, unless required to be paid by
Tenant, personal property taxes imposed upon the fixtures, machinery,
equipment, apparatus, systems and equipment, appurtenances, furniture and other
personal property used in connection with the Project, or any portion thereof),
excluding fines, default interest, and penalties, which shall be paid or
accrued during any Expense Year (without regard to any different fiscal year
used by such governmental or municipal authority) because of or in connection
with the ownership, leasing and operation of the Project, or any portion
thereof.  [***].

 

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

 

4.2.5.3     Any costs and expenses (including, without limitation,
reasonable attorneys’ fees) incurred in attempting to protest, reduce or
minimize Tax Expenses shall be included in Tax Expenses in the Expense Year
such expenses are paid.  Except as set
forth in Section 4.2.5.4, below, refunds of Tax Expenses shall be
credited against Tax Expenses and refunded to Tenant regardless of when
received, based on the Expense Year to which the refund is applicable, provided
that in no event shall the amount to be refunded to Tenant for any such Expense
Year exceed the total amount paid by Tenant as Additional Rent under this Article 4
for such Expense Year.  If Tax Expenses
for any period during the Lease Term or any extension thereof are increased
after payment thereof for any reason, including, without limitation, error or
reassessment by applicable governmental or municipal authorities, Tenant shall
pay Landlord

 

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upon demand Tenant’s Share of any
such increased Tax Expenses included by Landlord as Building Tax Expenses
pursuant to the TCCs of this Lease. 
Notwithstanding anything to the contrary contained in this Section 4.2.5
(except as set forth in Section 4.2.5.1, above), there shall be
excluded from Tax Expenses (i) all excess profits taxes, franchise taxes,
gift taxes, capital stock taxes, inheritance and succession taxes, estate
taxes, federal and state income taxes, and other taxes to the extent applicable
to Landlord’s general or net income (as opposed to rents, receipts or income
attributable to operations at the Project), (ii) any items included as
Operating Expenses, and (iii) any items paid by Tenant under Section 4.5
of this Lease.

 

4.2.5.4     Notwithstanding anything to the contrary set forth in this
Lease, the amount of Tax Expenses for the Base Year and any Expense Year shall be
calculated without taking into account any decreases in real estate taxes
obtained in connection with Proposition 8, and, therefore, the Tax Expenses in
the Base Year and/or an Expense Year may be greater than those actually
incurred by Landlord, but shall, nonetheless, be the Tax Expenses due under
this Lease; provided that (i) any costs and expenses incurred by Landlord
in securing any Proposition 8 reduction shall not be included in Direct
Expenses for purposes of this Lease, and (ii) tax refunds under
Proposition 8 shall not be deducted from Tax Expenses, but rather shall be the
sole property of Landlord.  Landlord and
Tenant acknowledge that this Section 4.2.5.4 is not intended to in
any way affect (A) the inclusion in Tax Expenses of the statutory two
percent (2.0%) annual increase in Tax Expenses (as such statutory increase may
be modified by subsequent legislation), or (B) the inclusion or exclusion
of Tax Expenses pursuant to the terms of Proposition 13, which shall be
governed pursuant to the terms of Sections 4.2.5.1 through 4.2.5.3,
above.

 

4.2.5.5     [***]

 

4.2.6        “Tenant’s Share”
shall mean the percentage set forth in Section 6 of the
Summary.  Tenant’s Share was calculated by
multiplying the number of rentable square feet of the Premises, as set forth in
Section 2.2 of the Summary, by 100, and dividing the product by the
total number of rentable square feet in the Building.

 

4.2.7        “Utilities Costs”
shall mean all actual charges for utilities for the Building and the Project
which Landlord shall pay during any Expense Year, including, but not limited
to, the costs of water, sewer and electricity, and the costs of HVAC
(including, unless paid by Tenant pursuant to Section 6.1.2 below,
the cost of electricity to operate the HVAC air handlers) and other utilities
(but excluding (i) the cost of electricity consumed in the Premises and
the premises of other tenants of the Building and any other buildings in the
Project (since Tenant is separately paying for the cost of electricity pursuant
to Section 6.1.2 below) and (ii) those charges for which
tenants directly reimburse Landlord or otherwise pay directly to the utility
company) as well as related fees, assessments and surcharges.  Utilities Costs shall be calculated assuming
the Buildings (and during the period of time when any other office buildings
are fully constructed and ready for occupancy and are included by Landlord
within the Project), are at least [***] percent ([***]%) occupied.  If, during all or any part of any Expense
Year, Landlord shall not provide any utilities other than gas and electricity
(the cost of which, if provided by Landlord, would be included in Utilities
Costs) to a tenant (including Tenant) who has undertaken to provide the same
instead of Landlord, Utilities Costs shall be deemed to be increased by an
amount equal to the additional Utilities Costs which would reasonably have been

 

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incurred
during such period by Landlord if Landlord had at its own expense provided such
utilities to such tenant.  Utilities
Costs shall include any costs of utilities which are allocated to the Real
Property under any declaration, restrictive covenant, or other instrument
pertaining to the sharing of costs by the Real Property or any portion thereof,
including any covenants, conditions or restrictions now or hereafter recorded
against or affecting the Real Property. 
For purposes of determining Utilities Costs incurred for the Utilities
Base Year, Utilities Costs for the Utilities Base Year shall not include any one
time special charges, costs or fees or extraordinary charges or costs incurred
in the Utilities Base Year only, including those attributable to boycotts,
embargoes, strikes or other shortages of services or fuel.  In addition, if in any Expense Year subsequent
to the Utilities Base Year, the amount of Utilities Costs decreases due to a
reduction in the cost of providing utilities to the Real Property for any
reason, including without limitation, because of deregulation of the utility
industry and/or reduction in rates achieved in contracts with utilities
providers, then for purposes of the Expense Year in which such decrease in
Utilities Costs occurred and all subsequent Expense Years, the Utilities Costs
for the Utilities Base Year shall be decreased by an amount equal to such
decrease.

 

4.3           Allocation of Direct Expenses.  The parties acknowledge that the Building
is a part of a multi-building project and that the costs and expenses incurred
in connection with the Project (i.e. the Direct Expenses) should be
shared between the tenants of the Building and the tenants of the other
buildings in the Project.  Accordingly,
as set forth in Section 4.2 above, Direct Expenses (which consists
of Operating Expenses, Tax Expenses and Utilities Costs) are determined
annually for the Project as a whole, and a portion of the Direct Expenses,
which portion shall be determined by Landlord on an equitable basis, shall be
allocated to the tenants of the Building (as opposed to the tenants of any
other buildings in the Project) and such portion shall be the Direct Expenses
for purposes of this Lease.  Such portion
of Direct Expenses allocated to the tenants of the Building shall include all
Direct Expenses attributable solely to the Building and an equitable portion of
the Direct Expenses attributable to the Project as a whole (i.e.,
Direct Expenses which are not attributable to any specific building in the
Project).

 

4.3.1        Cost Pools.  In conjunction with
the allocation of Direct Expenses pursuant to Section 4.3, above,
Landlord shall have the right, from time to time, to equitably allocate some or
all of the Direct Expenses for the Project among different portions or
occupants of the Project (the “Cost Pools”),
in Landlord’s discretion.  For purposes
of example only, such Cost Pools may include, but shall not be limited to, the
office space tenants of a building of the Project or of the Project, and the
retail space tenants of a building of the Project or of the Project.  The Direct Expenses within each such Cost
Pool shall be allocated and charged to the tenants within such Cost Pool in an
equitable manner.

 

4.4           Calculation and Payment of Additional Rent.  If for any Expense
Year ending or commencing within the Lease Term, Tenant’s Share of Direct
Expenses for such Expense Year exceeds Tenant’s Share of Direct Expenses
applicable to the Base Year, then Tenant shall pay to Landlord, in the manner
set forth in Section 4.4.1, below, and as Additional Rent, an
amount equal to the excess (the “Excess”).

 

4.4.1        Statement of Actual Building Direct Expenses and
Payment by Tenant. 
Landlord shall give
to Tenant following the end of each Expense Year, a statement (the “Statement”) which shall state in general major categories
the Building Direct Expenses

 

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incurred
or accrued for the Base Year or such preceding Expense Year, as applicable, and
which shall indicate the amount of the Excess. 
Landlord shall use commercially reasonable efforts to deliver such
Statement to Tenant on or before May 1 following the end of the Expense
Year to which such Statement relates. 
Upon receipt of the Statement for each Expense Year commencing or ending
during the Lease Term, if an Excess is present, Tenant shall pay, within thirty
(30) days after receipt of the Statement, the full amount of the Excess for
such Expense Year, less the amounts, if any, paid during such Expense Year as “Estimated
Excess,” as that term is defined in Section 4.4.2, below, and if
Tenant paid more as Estimated Excess than the actual Excess, Tenant shall
receive a credit in the amount of Tenant’s overpayment against Rent next due
under this Lease.  The failure of
Landlord to timely furnish the Statement for any Expense Year shall not
prejudice Landlord or Tenant from enforcing its rights under this Article 4.  Even though the Lease Term has expired and
Tenant has vacated the Premises, when the final determination is made of Tenant’s
Share of Building Direct Expenses for the Expense Year in which this Lease
terminates, if an Excess is present, Tenant shall, within thirty (30) days
after receipt of the Statement, pay to Landlord such amount, and if Tenant paid
more as Estimated Excess than the actual Excess, Landlord shall, within thirty
(30) days, deliver a check payable to Tenant in the amount of the
overpayment.  The provisions of this Section 4.4.1
shall survive the expiration or earlier termination of the Lease Term.  Notwithstanding the immediately preceding
sentence, Tenant shall not be responsible for Tenant’s Share of any Building
Direct Expenses attributable to any Expense Year which are first billed to
Tenant more than [***] after the end of such Expense Year (provided that any
expense that was not originally included in the Statement applicable to the
Expense Year in which such expense was incurred must be billed to Tenant within
[***] of the date Landlord receives the invoice for such expense), provided
that in any event Tenant shall be responsible for Tenant’s Share of Direct
Expenses levied by any governmental authority or by any public utility
companies which are attributable to any Expense Year.

 

4.4.2        Statement of Estimated Building Direct Expenses.  In addition, Landlord shall give Tenant a yearly expense
estimate statement (the “Estimate Statement”)
which shall set forth in general major categories Landlord’s reasonable
estimate (the “Estimate”) of what the total
amount of Building Direct Expenses for the then-current Expense Year shall be
and the estimated excess (the “Estimated Excess”)
as calculated by comparing the Building Direct Expenses for such Expense Year,
which shall be based upon the Estimate, to the amount of Building Direct
Expenses for the Base Year.  Landlord
shall use commercially reasonable efforts to deliver such Estimate Statement to
Tenant on or before May 1 following the end of the Expense Year to which
such Estimate Statement relates.  The
failure of Landlord to timely furnish the Estimate Statement for any Expense
Year shall not preclude Landlord from enforcing its rights to collect any
Additional Rent under this Article 4, nor shall Landlord be
prohibited from revising any Estimate Statement or Estimated Excess theretofore
delivered to the extent necessary. 
Thereafter, Tenant shall pay, within thirty (30) days after receipt of
the Estimate Statement, a fraction of the Estimated Excess for the then-current
Expense Year (reduced by any amounts paid pursuant to the second to last
sentence of this Section 4.4.2). 
Such fraction shall have as its numerator the number of months which
have elapsed in such current Expense Year, including the month of such payment,
and twelve (12) as its denominator. 
Until a new Estimate Statement is furnished (which Landlord shall have
the right to deliver to Tenant at any time), Tenant shall pay monthly, with the
monthly Base Rent installments, an amount equal to one-twelfth (1/12) of the
total Estimated Excess set forth in the previous Estimate Statement 

 

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delivered
by Landlord to Tenant.  Throughout the
Lease Term Landlord shall maintain books and records with respect to Building
Direct Expenses in accordance with generally accepted real estate accounting
and management practices, consistently applied.

 

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

 

4.5.1        Tenant shall be liable for and shall pay ten (10) days
before delinquency, taxes levied against Tenant’s equipment, furniture,
fixtures and any other personal property located in or about the Premises.  If any such taxes on Tenant’s equipment,
furniture, fixtures and any other personal property are levied against Landlord
or Landlord’s property or if the assessed value of Landlord’s property is
increased by the inclusion therein of a value placed upon such equipment,
furniture, fixtures or any other personal property and if Landlord pays the
taxes based upon such increased assessment, which Landlord shall have the right
to do regardless of the validity thereof but only under proper protest if
requested by Tenant, Tenant shall upon demand repay to Landlord the taxes so
levied against Landlord or the proportion of such taxes resulting from such
increase in the assessment, as the case may be.

 

4.5.2        If the premises improvements in the Premises, whether
installed and/or paid for by Landlord or Tenant and whether or not affixed to
the real property so as to become a part thereof, are assessed for real
property tax purposes at a valuation higher than the valuation at which
premises improvements conforming to Landlord’s “building standard” in other
space in the Building are assessed, then the Tax Expenses levied against
Landlord or the property by reason of such excess assessed valuation shall be
deemed to be taxes levied against personal property of Tenant and shall be
governed by the provisions of Section 4.5.1, above; provided,
however, Landlord’s “building standard” shall be reasonably established
vis-à-vis the customary level of premises improvements for Comparable Buildings
in the Comparable Area (as such terms are defined in Exhibit G to this Lease).

 

4.5.3        Notwithstanding any contrary provision herein, Tenant shall
pay prior to delinquency any (i) rent tax or sales tax, service tax,
transfer tax or value added tax, or any other applicable tax on the rent or
services herein or otherwise respecting this Lease, (ii) taxes assessed
upon or with respect to the possession, leasing, operation, management,
maintenance, alteration, repair, use or occupancy by Tenant of the Premises or
any portion of the Project, including the Project parking facility; or (iii) taxes
assessed upon this transaction or any document to which Tenant is a party
creating or transferring an interest or an estate in the Premises.

 

4.6           Landlord’s Books and
Records.  Upon Tenant’s written request given not more
than [***]
months after Tenant’s receipt of a Statement for a
particular Expense Year, and provided that Tenant is not then in monetary
default or material non-monetary default under this Lease beyond the applicable
notice and cure period provided in this Lease, Landlord shall furnish Tenant
with such reasonable supporting documentation in connection with said Building
Direct Expenses as Tenant may reasonably request.  Landlord shall provide said information to
Tenant within sixty (60) days after Tenant’s written request therefor.  Within [***] months
after receipt of a Statement by Tenant (the “Review
Period”), if Tenant disputes the amount of Additional Rent set forth
in the Statement, an independent certified public accountant (which accountant (A) is
a member of a nationally or regionally recognized accounting firm, and (B) is
not working on a contingency fee basis), designated and paid for by Tenant,
may, after 

 

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reasonable notice to Landlord and at reasonable times, inspect Landlord’s
records with respect to the Statement at Landlord’s corporate office (located
in either San Diego County or Los Angeles County), provided that Tenant is not
then in monetary default or material non-monetary default under this Lease (beyond
any applicable notice and cure periods) and Tenant has paid all amounts
required to be paid under the applicable Estimate Statement and Statement, as
the case may be.  In connection with such
inspection, Tenant and Tenant’s agents must agree in advance to follow Landlord’s
reasonable rules and procedures regarding inspections of Landlord’s
records, and shall execute a commercially reasonable confidentiality agreement
regarding such inspection.  Tenant’s
failure to dispute the amount of Additional Rent set forth in any Statement
within the Review Period shall be deemed to be Tenant’s approval of such
Statement and Tenant, thereafter, waives the right or ability to dispute the
amounts set forth in such Statement.  If
after such inspection, Tenant still disputes such Additional Rent, a
determination as to the proper amount shall be made, at Tenant’s expense, by an
independent certified public accountant (the “Accountant”)
selected by Landlord and subject to Tenant’s reasonable approval; provided that
if such determination by the Accountant proves that Direct Expenses were
overstated by more than five percent (5%), then the cost of the Accountant and
the cost of such determination shall be paid for by Landlord. Tenant hereby
acknowledges that Tenant’s sole right to inspect Landlord’s books and records
and to contest the amount of Direct Expenses payable by Tenant shall be as set
forth in this Section 4.6, and Tenant hereby waives any and all
other rights pursuant to applicable law to inspect such books and records
and/or to contest the amount of Direct Expenses payable by Tenant.

 

ARTICLE
5

 

USE
OF PREMISES

 

5.1           Permitted Use.  Tenant shall use the
Premises solely for the Permitted Use set forth in Section 7 of the
Summary and Tenant shall not use or permit the Premises or the Project to be
used for any other purpose or purposes whatsoever without the prior written
consent of Landlord, which may be withheld in Landlord’s sole discretion;
provided, however, that Landlord shall use its reasonable discretion in determining
whether a particular use is within the parameters of the Permitted Use.

 

5.2           Prohibited Uses.  The uses prohibited
under this Lease shall include, without limitation, use of the Premises or a
portion thereof for (i) offices of any agency or bureau of the United
States or any state or political subdivision thereof; (ii) offices or
agencies of any foreign governmental or political subdivision thereof; (iii) offices
of any health care professionals or service organization; (iv) schools or
other training facilities which are not ancillary to corporate, executive or
professional office use; (v) retail or restaurant uses; or (vi) communications
firms such as radio and/or television stations. 
Tenant shall not allow occupancy density of use of the Premises which is
greater than the occupancy density that can be reasonably supported by the
Building Systems (taking into consideration any supplemental systems installed
by Tenant) or which would result in the use of more Project parking spaces than
provided to Tenant under the terms of this Lease (taking into consideration any
offsite parking programs enacted by Tenant). 
Tenant further covenants and agrees that Tenant shall not use, or suffer
or permit any person or persons to use, the Premises or any part thereof for
any use or purpose contrary to the provisions of the Rules and Regulations
set forth in Exhibit D, attached
hereto, or in violation of the laws of

 

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the
United States of America, the State of California, or the ordinances,
regulations or requirements of the local municipal or county governing body or
other lawful authorities having jurisdiction over the Project) including,
without limitation, any such laws, ordinances, regulations or requirements
relating to hazardous materials or substances, as those terms are defined by
applicable laws now or hereafter in effect; provided, however, Landlord shall not enforce,
change or modify the Rules and Regulations in a discriminatory manner and
Landlord agrees that the Rules and Regulations shall not be unreasonably
modified or enforced in a manner which will unreasonably interfere with the
normal and customary conduct of Tenant’s business. 
Tenant shall not do or permit anything to be done in or about the
Premises which will in any way damage the reputation of the Project or obstruct
or interfere with the rights of other tenants or occupants of the Building, or
injure or unreasonably annoy them or use or allow the Premises to be used for
any unlawful or reasonably objectionable purpose, nor shall Tenant cause,
maintain or permit any nuisance in, on or about the Premises.

 

5.3           CC&Rs.  Tenant shall comply
with all recorded covenants, conditions, and restrictions currently affecting
the Project (including, but not limited to, the prohibition against using all
or any portion of the Premises as a school). 
Additionally, Tenant acknowledges that the Project may be subject to any
future covenants, conditions, and restrictions (the “CC&Rs”)
which Landlord, in Landlord’s discretion, deems reasonably necessary or
desirable, and Tenant agrees that this Lease shall be subject and subordinate
to such CC&Rs; provided, however, any such future CC&Rs shall not
materially and adversely affect Tenant’s use or occupancy of the Premises for
the Permitted Use nor any of Tenant’s rights hereunder.  Landlord hereby acknowledges that general
office use does not violate the CC&R’s. 
Landlord shall have the right to require Tenant to execute and
acknowledge, within fifteen (15) business days of a request by Landlord, a “Recognition
of Covenants, Conditions, and Restriction,” in a form substantially similar to
that attached hereto as Exhibit F,
agreeing to and acknowledging the CC&Rs.

 

ARTICLE
6

 

SERVICES
AND UTILITIES

 

6.1           Standard Tenant Services.  Landlord shall
provide the following services on all days (unless otherwise stated below)
during the Lease Term.

 

6.1.1        Subject to limitations imposed by all governmental rules,
regulations and guidelines applicable thereto, Landlord shall provide heating
and air conditioning (“HVAC”) when
necessary for normal comfort for normal office use in the Premises from 7:00 A.M.
to 6:00 P.M. Monday through Friday, and on Saturdays from 9:00 A.M.
to 1:00 P.M. (collectively, the “Building Hours”),
except for the date of observation of New Year’s Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, Christmas Day and, at Landlord’s
discretion, other locally or nationally recognized holidays (collectively, the “Holidays”); provided, however, Landlord acknowledges that,
pursuant to Tenant’s requirements, in no event shall Holidays include Martin
Luther King Day, Columbus Day or Veterans Day. 
The daily time periods identified hereinabove are sometimes referred to
as the “Business Hours.”

 

6.1.2        Landlord shall provide adequate
electrical wiring and facilities and power for normal general office use as
reasonably determined by Landlord. 
Tenant shall pay directly to

 

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the utility company pursuant to the utility company’s separate meters,
the cost of all electricity provided to and/or consumed in the Premises
(including normal and excess consumption and including the cost of electricity
to operate the HVAC air handlers if not charged to and paid by Tenant as part
of Utilities Costs), which electricity shall be separately metered.  Tenant shall pay such cost (including the
cost of such meters) within thirty (30) days after Tenant’s receipt of demand
therefor.  Landlord shall designate the
electricity utility provider from time to time.

 

6.1.3        As part of Operating Expenses, Landlord
shall replace lamps, starters and ballasts for Building standard lighting
fixtures within the Premises.  In
addition, Tenant shall bear the cost of replacement of lamps, starters and ballasts
for non-Building standard lighting fixtures within the Premises.

 

6.1.4        Landlord shall provide city water from
the regular Building outlets for drinking, lavatory and toilet purposes, and
for the Building’s life safety systems.

 

6.1.5        Landlord shall provide janitorial
services to the Premises five (5) days per week, except the date of
observation of the Holidays, in and about the Premises and window washing
services in a manner consistent with Comparable Buildings in the vicinity of
the Project.

 

6.1.6        Landlord shall provide nonexclusive, non-attended automatic
passenger elevator service during the Building Hours, shall have one elevator
available at all other times, except on the Holidays.

 

Tenant shall cooperate fully with Landlord at all
times and abide by all regulations and requirements that Landlord may
reasonably prescribe for the proper functioning and protection of the HVAC,
electrical, mechanical and plumbing systems.

 

6.2           Overstandard Tenant Use.  Tenant shall not,
without Landlord’s prior written consent, use heat-generating machines,
machines other than normal fractional horsepower office machines, or equipment
or lighting other than Building standard lights in the Premises, which may
substantially affect the temperature otherwise maintained by the air
conditioning system unless Tenant installs adequate supplementary air
conditioning units as part of the initial “Improvements” (as that term is
defined in Section 2.1 of the Work Letter Agreement) to the
Premises or as “Alterations” (as that term is defined in Section 8.1
of this Lease) authorized pursuant to the terms of this Lease.  If such consent is given, or if Tenant fails
to install adequate supplementary air conditioning units, then Landlord shall
have the right to install supplementary air conditioning units or other facilities
in the Premises, including supplementary or additional metering devices, and
the cost thereof, including the cost of installation, operation and
maintenance, increased wear and tear on existing equipment and other similar
charges, shall be paid by Tenant to Landlord upon billing by Landlord.  If Tenant uses water, electricity, heat or
air conditioning in excess of that supplied by Landlord pursuant to Section 6.1
of this Lease (for example, HVAC in excess of that required for normal
comfort for normal office use in the Premises and/or HVAC requested outside of
Building Hours), Tenant shall pay to Landlord, upon billing, the cost of such
excess consumption, the cost of the installation, operation, and maintenance of
equipment which is installed in order to supply such excess consumption, and
the cost of the increased wear and tear on existing equipment caused by such
excess consumption; 

 

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and
Landlord may install devices to separately meter any increased use and in such
event Tenant shall pay the increased cost directly to Landlord, on demand, at
the rates charged by the public utility company furnishing the same, including
the cost of such additional metering devices. 
Tenant’s use of electricity shall never exceed the capacity of the
feeders to the Project or the risers or wiring installation, and subject to the
terms of Section 29.32, below, Tenant shall not install or use or
permit the installation or use of any computer or electronic data processing
equipment in the Premises, without the prior written consent of Landlord; provided, however, the foregoing
restriction shall not apply to general office use of personal computers on the
desktops of Tenant’s employees.  If Tenant
desires to use heat, ventilation or air conditioning during hours other than
those for which Landlord is obligated to supply such utilities pursuant to the
terms of Section 6.1 of this Lease, Tenant shall give Landlord such
prior notice, if any, as Landlord shall from time to time establish as
appropriate, of Tenant’s desired use in order to supply such utilities, and
Landlord shall supply such utilities to Tenant at the “Actual Cost” thereof (as
that term is defined below) (which shall be treated as Additional Rent).  For the purpose of this Section 6.2,
“Actual Cost” shall mean the
actual cost, including reasonable depreciation (attributable to such
after-hours usage) and actual administrative charges (to the extent not
duplicative of Operating Expenses), incurred by Landlord, as reasonably
determined by Landlord but without charge for profit, provided that,
notwithstanding the foregoing, any amount actually charged by any third party
to Landlord (i.e., unaffiliated
with Landlord) for the supply of HVAC to Tenant shall be deemed part of
Landlord’s “Actual Cost.”

 

6.3           Interruption of Use. 
Except as otherwise provided in Section 6.4
or elsewhere in this Lease, Tenant agrees that Landlord shall not be liable for
damages, by abatement of Rent or otherwise, for failure to furnish or delay in
furnishing any service (including telephone and telecommunication services), or
for any diminution in the quality or quantity thereof, when such failure or
delay or diminution is occasioned, in whole or in part, by breakage, repairs,
replacements, or improvements, by any strike, lockout or other labor trouble,
by inability to secure electricity, gas, water, or other fuel at the Building
or Project after reasonable effort to do so, by any riot or other dangerous
condition, emergency, accident or casualty whatsoever, by act or default of
Tenant or other parties, or by any other cause beyond Landlord’s reasonable
control; and such failures or delays or diminution shall never be deemed to
constitute an eviction or disturbance of Tenant’s use and possession of the
Premises or relieve Tenant from paying Rent or performing any of its
obligations under this Lease, except as otherwise provided in Section 3.2
or elsewhere in this Lease.  Furthermore,
Landlord shall not be liable under any circumstances for a loss of, or injury
to, property or for injury to, or interference with, Tenant’s business,
including, without limitation, loss of profits, however occurring, through or
in connection with or incidental to a failure to furnish any of the services or
utilities as set forth in this Article 6.

 

6.4           Tenant Maintained Security.  Tenant hereby acknowledges that Landlord shall have no
obligation to provide guard service or other security measures for the benefit
of the Premises, the Building or the Project. 
Any such security measures for the benefit of the Premises, the Building
or the Project shall be provided by Tenant, at Tenant’s sole cost and
expense.  Tenant hereby assumes all
responsibility for the protection of Tenant and its agents, employees,
contractors, invitees and guests, and the property thereof, from acts of third
parties, including keeping doors locked and other means of entry to the
Premises closed.  Tenant shall be
entitled to install a separate security system for the Premises (“Tenant’s Security System”), either as an
Alteration (pursuant to the TCCs of Article 8) or as a part of the
initial Improvements 

 

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being
constructed pursuant to the TCCs of Exhibit B;
provided, however, that the plans and specifications for Tenant’s Security
System shall be subject to Landlord’s reasonable approval, and the installation
of Tenant’s Security System shall otherwise be subject to the terms and
conditions of Article 8 of this Lease and/or the Work Letter
Agreement, as applicable.  Tenant shall
at all times provide Landlord with a contact person who can disarm the security
system and who is familiar with the functions of Tenant’s Security System in
the event of a malfunction.

 

ARTICLE
7

 

REPAIRS

 

Landlord shall maintain in first-class condition and
operating order and keep in good repair and condition the structural portions
of the Building, including the foundation, floor/ceiling slabs, roof structure
(as opposed to roof membrane), curtain wall, exterior glass and mullions,
columns, beams, shafts (including elevator shafts), stairs, parking areas,
landscaping, exterior Project signage, stairwells, elevator cab, men’s and
women’s washrooms, Building mechanical, electrical and telephone closets, and
all common and public areas (collectively, “Building Structure”) and the Base Building
mechanical, electrical, life safety, plumbing, sprinkler systems and HVAC
systems which were not constructed by Tenant Parties (collectively, the “Building Systems”) and the Project Common
Areas.  Notwithstanding anything in this
Lease to the contrary, Tenant shall be required to repair the Building
Structure and/or the Building Systems to the extent caused due to Tenant’s use
of the Premises for other than normal and customary business office operations,
unless and to the extent such damage is covered by insurance carries or
required to be carried by Landlord pursuant to Article 10 and to
which the waiver of subrogation is applicable (such obligation to the extent
applicable to Tenant as qualified and conditioned will hereinafter be defined
as the “BS/BS Exception”).  Tenant
shall, at Tenant’s own expense, keep the Premises, including all improvements,
fixtures and furnishings therein, and the floor or floors of the Building on
which the Premises are located, in good order, repair and condition at all
times during the Lease Term, but such obligation shall not extend to the
Building Structure and the Building Systems except pursuant to the BS/BS
Exception.  In addition, Tenant shall, at
Tenant’s own expense, but under the supervision and subject to the prior
approval of Landlord, and within any reasonable period of time specified by
Landlord, promptly and adequately repair all damage to the Premises and replace
or repair all damaged, broken, or worn fixtures and appurtenances, but such
obligation shall not extend to the Building Structure and the Building Systems
except pursuant to the BS/BS Exception, and/or (iii) for damage caused by
ordinary wear and tear or beyond the reasonable control of Tenant;  provided however, that, at Landlord’s option,
or if Tenant fails to make such repairs, Landlord may, after written notice to
Tenant and Tenant’s failure to repair within five (5) days thereafter, but
need not, make such repairs and replacements, and Tenant shall pay Landlord the
cost thereof, including a percentage of the cost thereof (to be uniformly
established for the Building and/or the Project, and to be reasonably
consistent with similar percentages paid for such services by tenant in the
Comparable Buildings) sufficient to reimburse Landlord for all overhead,
general conditions, fees and other costs or expenses paid to third parties
arising from Landlord’s involvement with such repairs and replacements
forthwith upon being billed for same. 
Landlord may, but shall not be required to, enter the Premises at all
reasonable times to make such repairs, alterations, improvements or additions
to the Premises or to the Project or to any equipment located in the Project as
Landlord shall desire or deem necessary or as Landlord may

 

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be required to do by
governmental or quasi-governmental authority or court order or decree;
provided, however, except for (i) emergencies, (ii) repairs,
alterations, improvements or additions required by governmental or
quasi-governmental authorities or court order or decree, or (iii) repairs
which are the obligation of Tenant hereunder, any such entry into the Premises
by Landlord shall be performed in a manner so as not to materially interfere
with Tenant’s use of, or access to, the Premises; provided that, with respect
to items (ii) and (iii) above, Landlord shall use commercially
reasonable efforts to not materially interfere with Tenant’s use of, or access
to, the Premises.  Tenant hereby waives
any and all rights under and benefits of subsection 1 of Section 1932 and
Sections 1941 and 1942 of the California Civil Code or under any similar law,
statute, or ordinance now or hereafter in effect.

 

ARTICLE
8

 

ADDITIONS
AND ALTERATIONS

 

8.1           Landlord’s Consent to Alterations.  Tenant may not make any improvements, alterations, additions
or changes to the Premises or any mechanical, plumbing or HVAC facilities or
systems pertaining to the Premises (collectively, the “Alterations”)
without first procuring the prior written consent of Landlord to such
Alterations, which consent shall be requested by Tenant not less than ten (10) business
days prior to the commencement thereof, and which consent shall not be
unreasonably withheld by Landlord, provided it shall be deemed reasonable for
Landlord to withhold its consent to any Alteration which adversely affects the
structural portions or the systems or equipment of the Building or is visible
from the exterior of the Building..   
The construction of the initial Improvements to the Premises shall be
governed by the terms of the Work Letter Agreement and not the terms of this Article 8.

 

8.2           Manner of Construction.  Landlord may impose, as a condition of its consent to any and
all Alterations or repairs of the Premises or about the Premises, such
requirements as Landlord in its reasonable discretion may deem desirable,
including, but not limited to, the requirement that Tenant utilize for such
purposes only contractors reasonably approved by Landlord, and the requirement
that upon Landlord’s timely request (as more particularly set forth in Section 8.5,
below), Tenant shall, at Tenant’s expense, remove such Alterations upon the
expiration or any early termination of the Lease Term and return the affected
portion of the Premises to a building standard improved condition as determined
by Landlord.  Tenant shall construct such
Alterations and perform such repairs in a good and workmanlike manner, in
conformance with any and all applicable federal, state, county or municipal
laws, rules and regulations and pursuant to a valid building permit,
issued by the City of San Diego, all in conformance with Landlord’s
construction rules and regulations; provided, however, that prior to
commencing to construct any Alteration, Tenant shall meet with Landlord to
discuss Landlord’s design parameters and code compliance issues.  In the event Tenant performs any Alterations
in the Premises which require or give rise to governmentally required changes
to the “Base Building,” as that term is defined below, then Landlord shall, at
Tenant’s expense, make such changes to the Base Building.  The “Base Building”
shall include the structural portions of the Building, and the public
restrooms, elevators, fire stairwells and the systems and equipment located in
the internal core of the Building on the floor or floors on which the Premises
are located.  In performing the work of
any such Alterations, Tenant shall have the work performed in such manner so as
not to obstruct access to the Project or any portion thereof, by any other

 

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tenant
of the Project, and so as not to obstruct the business of Landlord or other
tenants in the  Project.  Tenant shall not use (and upon notice from
Landlord shall cease using) contractors, services, workmen, labor, materials or
equipment that, in Landlord’s reasonable judgment, would disturb labor harmony
with the workforce or trades engaged in performing other work, labor or
services in or about the Building or the Common Areas.  In addition to Tenant’s obligations under Article 9
of this Lease, upon completion of any Alterations, Tenant agrees to cause a
Notice of Completion to be recorded in the office of the Recorder of the County
of San Diego in accordance with Section 3093 of the Civil Code of the
State of California or any successor statute, and Tenant shall deliver to the
Project construction manager a reproducible copy and an electronic copy of the “as
built” drawings of the Alterations, to the extent such Alterations are of a
type for which as-built plans are generally prepared, as well as all permits,
approvals and other documents issued by any governmental agency in connection
with the Alterations.

 

8.3           Payment for Improvements.  If payment is made directly to contractors, Tenant shall (i) comply
with Landlord’s requirements for final lien releases and waivers in connection
with Tenant’s payment for work to contractors, and (ii) sign Landlord’s
standard contractor’s rules and regulations.  If Tenant orders any work directly from
Landlord, Tenant shall pay to Landlord an amount equal to five percent of the
cost of such work to compensate Landlord for all overhead, general conditions,
fees and other costs and expenses arising from Landlord’s involvement with such
work.  If Tenant does not order any work
directly from Landlord, Tenant shall reimburse Landlord for Landlord’s  reasonable, actual, out-of-pocket costs and
expenses actually incurred in connection with Landlord’s review of such work.

 

8.4           Construction Insurance.  In addition to the requirements of Article 10 of
this Lease, in the event that Tenant makes any Alterations, prior to the
commencement of such Alterations, Tenant shall provide Landlord with evidence
that Tenant carries “Builder’s All Risk” insurance in an amount reasonably
approved by Landlord covering the construction of such Alterations, and such
other insurance as Landlord may reasonably require, it being understood and
agreed that all of such Alterations shall be insured by Tenant pursuant to Article 10
of this Lease immediately upon completion thereof.  In addition, Landlord may, if the cost of any
Alteration is reasonably expected to exceed [***], in its reasonable
discretion, require Tenant to obtain a lien and completion bond or some
alternate form of security satisfactory to Landlord in an amount sufficient to ensure
the lien-free completion of such Alterations and naming Landlord as a
co-obligee.  For purposes of determining the cost of
an Alteration, work done in phases or stages shall be considered part of the
same Alteration, and any Alteration shall be deemed to include all trades and
materials involved in accomplishing a particular result.

 

8.5           Landlord’s Property.  Landlord and Tenant
hereby acknowledge and agree that (i) all Alterations, improvements,
fixtures, equipment and/or appurtenances which may be installed or placed in or
about the Premises, from time to time, shall be at the sole cost of Tenant and
shall be and become part of the Premises and the property of Landlord, and (ii) the
Improvements to be constructed in the Premises pursuant to the TCCs of the Work
Letter Agreement shall, upon completion of the same, be and become a part of
the Premises and the property of Landlord; provided, however, Tenant may remove
any Alterations, improvements (excluding the Improvements), fixtures and/or
equipment which Tenant can substantiate to Landlord have not been paid for by
any Improvement Allowance funds, provided that Tenant repairs any and all
damage to the Premises or the Building caused in whole or in part by such

 

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removal,
and returns the affected portion of the Building or the Premises to an as
improved building standard condition, as reasonably approved by Landlord.  Furthermore, Landlord may, by written notice
to Tenant, at least sixty (60) days prior to the end of the Lease Term, or
given following any earlier termination of this Lease, require Tenant, at
Tenant’s expense, to remove any Alterations or improvements located within the
Premises, to repair any damage to the Premises and Building caused by such
removal, and to return the affected portion of the Premises to a building
standard tenant improved condition as determined by Landlord; provided, however, if, in connection
with its notice to Landlord with respect to any such Alterations, (x) Tenant
requests Landlord’s decision with regard to the removal of such Alterations,
and (y) Landlord thereafter agrees in writing to waive the removal
requirement when approving such Alterations, then Tenant shall not be required
to so remove such Alterations; provided further, however, that if Tenant
requests such a determination from Landlord and Landlord, within ten (10) business
days following Landlord’s receipt of such request from Tenant with respect to
Alterations, fails to address the removal requirement with regard to such
Alterations, Landlord shall be deemed to have agreed to waive the removal
requirement with regard to such Alterations. 
If Tenant fails to complete such removal and/or to repair any damage
caused by the removal of any Alterations or improvements in the Premises, and
return the affected portion of the Premises to a building standard tenant
improved condition as determined by Landlord, then Landlord may do so and may
charge the cost thereof to Tenant. 
Tenant hereby protects, defends, indemnifies and holds Landlord harmless
from any liability, cost, obligation, expense or claim of lien in any manner
relating to the installation, placement, removal or financing of any such
Alterations, improvements, fixtures and/or equipment in, on or about the
Premises, which obligations of Tenant shall survive the expiration or earlier
termination of this Lease.

 

ARTICLE
9

 

COVENANT
AGAINST LIENS

 

Tenant shall keep the Project and Premises free from
any liens or encumbrances arising out of the work performed, materials
furnished or obligations incurred by or on behalf of Tenant, and shall protect,
defend, indemnify and hold Landlord harmless from and against any claims,
liabilities, judgments or costs (including, without limitation, reasonable
attorneys’ fees and costs) arising out of same or in connection therewith.  Tenant shall give Landlord notice at least
twenty (20) days prior to the commencement of any such work on the Premises (or
such additional time as may be necessary under applicable laws) to afford
Landlord the opportunity of posting and recording appropriate notices of
non-responsibility.  Tenant shall remove
any such lien or encumbrance by bond or otherwise within ten (10) business
days after notice by Landlord, and if Tenant shall fail to do so, Landlord may
pay the amount necessary to remove such lien or encumbrance, without being
responsible for investigating the validity thereof.  The amount so paid shall be deemed Additional
Rent under this Lease payable upon demand, without limitation as to other
remedies available to Landlord under this Lease.  Nothing contained in this Lease shall
authorize Tenant to do any act which shall subject Landlord’s title to the
Building or Premises to any liens or encumbrances whether claimed by operation
of law or express or implied contract. 
Any claim to a lien or encumbrance upon the Building or Premises arising
in connection with any such work or respecting the Premises not performed by or
at the request of Landlord shall be null and void, or at Landlord’s option
shall attach only against Tenant’s interest 

 

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in the Premises and shall
in all respects be subordinate to Landlord’s title to the Project, Building and
Premises.

 

ARTICLE
10

 

INSURANCE

 

10.1         Indemnification and Waiver.  To the extent not
prohibited by law and except as otherwise expressly provided herein, Tenant
hereby assumes all risk of damage to property or injury to persons in, upon or
about the Premises from any cause whatsoever and agrees that Landlord, its
partners, subpartners and their respective officers, agents, servants,
employees, and independent contractors (collectively, “Landlord
Parties”) shall not be liable for, and are hereby released from any
responsibility for, any damage either to person or property or resulting from
the loss of use thereof, which damage is sustained by Tenant or by other
persons claiming through Tenant.  Tenant
shall indemnify, defend, protect, and hold harmless the Landlord Parties from
any and all loss, cost, damage, expense and liability (including without
limitation court costs and reasonable attorneys’ fees) incurred in connection
with or arising from any cause in, on or about the Premises, any acts,
omissions or negligence of Tenant or of any person claiming by, through or
under Tenant, or of the contractors, agents, servants, employees, invitees,
guests or licensees of Tenant or any such person, in, on or about the Project
or any breach of the TCCs of this Lease, either prior to, during, or after the
expiration of the Lease Term, provided that the terms of the foregoing
indemnity shall not apply to the negligence or willful misconduct of Landlord
or any Landlord Party.  Should Landlord
be named as a defendant in any suit brought against Tenant in connection with
or arising out of Tenant’s occupancy of the Premises, Tenant shall pay to
Landlord its costs and expenses incurred in such suit, including without
limitation, its actual professional fees such as appraisers’, accountants’ and
attorneys’ fees.  Landlord shall indemnify, defend,
protect, and hold harmless Tenant, its partners, and their respective officers,
agents, servants, employees, and independent contractors (collectively, “Tenant Parties”) from any and all loss, cost, damage,
expense and liability (including without limitation reasonable attorneys’ fees)
arising from the gross negligence or willful misconduct of Landlord in, on or
about the Project (excluding the Premises), except to the extent caused by the
negligence or willful misconduct of the Tenant Parties.  Notwithstanding anything to the contrary set
forth in this Lease, either party’s agreement to indemnify the other party pursuant to
this Section 10.1 is not intended and shall not relieve any
insurance carrier of its obligations under policies required to be carried by
such party pursuant to the provisions of this Lease.  In addition, either
party’s agreement to indemnify the other party as set forth in this Section 10.1
shall be ineffective to the extent the matters for
which such party agreed to indemnify the other party are covered by insurance
required to be carried by the non-indemnifying party pursuant to this
Lease.  The provisions of this Section 10.1
shall survive the expiration or sooner termination of this Lease with respect
to any claims or liability arising in connection with any event occurring prior
to such expiration or termination.  Notwithstanding
anything to the contrary contained in this Lease, nothing in this Lease shall
impose any obligations on Tenant or Landlord to be responsible or liable for,
and each hereby releases the other from all liability for, consequential
damages other than those consequential damages incurred by Landlord in
connection with a holdover of the Premises by Tenant after the expiration or
earlier termination of this Lease or incurred by Landlord in connection with
any repair, physical construction or improvement work performed by or on behalf
of Tenant in the Project, but Tenant shall not be responsible for any

 

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direct or consequential damages resulting from Landlord’s or contractor’s
acts in connection with the completion by Landlord of the improvements in the
Premises pursuant to the Work Letter Agreement or Landlord’s ownership or
removal of any Alterations that are not required to be removed by Tenant
pursuant to Article 8, above.

 

10.2         Landlord’s Fire,
Casualty and Liability Insurance.

 

10.2.1      Landlord
shall maintain Commercial/Comprehensive General Liability Insurance with
respect to the Building during the Lease Term covering claims for bodily
injury, personal injury and property damage in the Common Areas and with
respect to Landlord’s activities in the Premises.

 

10.2.2      Landlord
shall insure the Building and Landlord’s remaining interest in the Improvements
and Alterations with a policy of Physical Damage Insurance including building
ordinance coverage, written on a standard Causes of Loss — Special Form basis
(against loss or damage due to fire and other casualties covered within the
classification of fire and extended coverage, vandalism, and malicious
mischief, sprinkler leakage, water damage and special extended coverage),
covering the full replacement cost of the Base Building, Premises and other
improvements (including coverages for enforcement of Applicable Laws requiring
the upgrading, demolition, reconstruction and/or replacement of any portion of
the Building as a result of a covered loss) without deduction for depreciation.

 

10.2.3      Landlord
shall maintain Boiler and Machinery/Equipment Breakdown Insurance covering the
Building against risks commonly insured against by a Boiler &
Machinery/Equipment Breakdown policy and such policy shall cover the full
replacement costs, without deduction for depreciation.

 

10.2.4      The
foregoing coverages shall contain commercially reasonably deductible amounts
from such companies, and on such other terms and conditions, as Landlord may
from time to time reasonably determine.

 

10.2.5      Additionally,
at the option of Landlord, such insurance coverage may include the risk of (i) earthquake,
(ii) flood damage and additional hazards, (iii) a rental loss
endorsement for a period of up to two (2) years, (iv) one or more
loss payee endorsements in favor of holders of any mortgages or deeds of trust
encumbering the interest of Landlord in the Building, or any portion thereof.

 

10.2.6      Notwithstanding
the foregoing provisions of this Section 10.2, the coverage
amounts, and corresponding deductibles of insurance carried by Landlord in
connection with the Building shall be comparable to the coverage and amounts of
insurance which are carried by reasonably prudent landlords of Comparable
Buildings, and Worker’s Compensation and Employer’s Liability coverage as
required by applicable law.

 

10.3         Tenant’s Compliance With
Landlord’s Fire and Casualty Insurance.  Tenant shall,
at Tenant’s expense, comply with Landlord’s insurance company requirements
pertaining to the use of the Premises. 
If Tenant’s conduct or use of the Premises causes any increase in the
premium for such insurance policies then Tenant shall reimburse Landlord for
any such increase. Tenant, at Tenant’s expense, shall comply with all rules,
orders, regulations or requirements of 

 

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the American Insurance Association (formerly the National Board of Fire
Underwriters) and with any similar body.

 

10.4         Tenant’s Insurance. 
Tenant shall maintain the following coverages in the following amounts.

 

10.4.1      Commercial
General Liability Insurance covering the insured against claims of bodily
injury, personal injury and property damage (including loss of use thereof)
arising out of Tenant’s operations, and contractual liabilities (covering the
performance by Tenant of its indemnity agreements) including a Broad Form endorsement
covering the insuring provisions of this Lease. 
Landlord shall be named as an additional insured as their interests may
appear using form CG2011 or a comparable form approved by Landlord.  Tenant shall provide an endorsement or policy
excerpt showing that Tenant’s coverage is primary and any insurance carried by
Landlord shall be excess and non-contributing. 
Such insurance shall (i) name Landlord, and any other party the
Landlord so specifies that has a material financial interest in the Project as
an additional insured, including Landlord’s managing agent, if any, and (ii) specifically
cover the liability assumed by Tenant under this Lease, including, but not
limited to, Tenant’s obligations under Section 10.1 of this Lease.  Liability limits shall not be less than:

 

 

	
  Bodily Injury and Property Damage Liability

  	
   

  	
  $5,000,000 each occurrence or any combination of
  primary and excess/umbrella liability insurance

  
	
   

  	
   

  	
   

  
	
  Personal Injury and Auto Liability

  	
   

  	
  $5,000,000 each occurrence or any combination of
  primary and excess/umbrella liability insurance

  

 

10.4.2      Property
Insurance covering (i) all office furniture, business and trade fixtures,
office equipment, free-standing cabinet work, movable partitions, merchandise
and all other items of Tenant’s property on the Premises installed by, for, or
at the expense of Tenant, (ii) the Improvements and any other improvements
which exist in the Premises as of the Lease Commencement Date (excluding the
Base Building) (the “Original Improvements”),
and (iii) all other improvements, alterations and additions to the
Premises.  Such insurance shall be
written on a Special Form basis, for the full replacement cost value
(subject to reasonable deductible amounts), without deduction for depreciation
of the covered items and in amounts that meet any co-insurance clauses of the
policies of insurance and shall include coverage for damage or other loss
caused by fire or other peril including, but not limited to, vandalism and
malicious mischief, theft, water damage, including, but not limited to,
sprinkler leakage, bursting or stoppage of pipes, and explosion.

 

10.4.3      Business
Interruption, loss of income and extra expense insurance in such amounts as
will reimburse Tenant for actual direct or indirect loss of earnings for up to
one (1) year attributable to the risks outlined in Section 10.4.2
above.

 

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10.4.4      Worker’s
Compensation and Employer’s Liability or other similar insurance pursuant to
all applicable state and local statutes and regulations and Employer’s
Liability with minimum limits not less than $1,000,000 per employee.

 

10.4.5      Commercial
Automobile Liability Insurance covering all Owned (if any), Hired, or Non-owned
vehicles with limits not less than $1,000,000 combined single limit for bodily
injury and property damage.

 

10.5         Form of Policies. 
The minimum limits of policies of insurance required of Tenant under
this Lease shall in no event limit the liability of Tenant under this
Lease.  Such insurance shall (i) be
issued by an insurance company having a rating of not less than A-X in Best’s
Insurance Guide or which is otherwise acceptable to Landlord and licensed to do
business in the State of California,  (ii) be
in form and content reasonably acceptable to Landlord; and (iii) provide
that said insurance shall not be canceled or coverage changed unless thirty
(30) days’ prior written notice shall have been given to Landlord and any
mortgagee of Landlord, the identity of whom has been provided to Tenant in
writing.  Tenant shall deliver said
policy or policies or certificates thereof to Landlord on or before the Lease
Commencement Date and at least thirty (30) days before the expiration dates
thereof.  In the event Tenant shall fail to
procure such insurance, or to deliver such policies or certificate, Landlord
may, at its option, after written notice to Tenant and Tenant’s failure to
obtain such insurance within five (5) business days thereafter, procure
such policies for the account of Tenant, and the cost thereof shall be paid to
Landlord within thirty (30) days after delivery to Tenant of bills therefor.

 

10.6         Subrogation. 
Landlord and Tenant intend that their respective property loss risks
shall be borne by reasonable insurance carriers to the extent above provided,
and Landlord and Tenant hereby agree to look solely to, and seek recovery only
from, their respective insurance carriers in the event of a property loss to
the extent that such coverage is agreed to be provided hereunder.  The parties each hereby waive all rights and
claims against each other for such losses, and waive all rights of subrogation
of their respective insurers, provided such waiver of subrogation shall not
affect the right to the insured to recover thereunder.  The parties agree that their respective
insurance policies are now, or shall be, endorsed such that the waiver of
subrogation shall not affect the right of the insured to recover thereunder, so
long as no material additional premium is charged therefor.

 

10.7         Additional Insurance
Obligations.  Tenant shall carry and maintain during the
entire Lease Term, at Tenant’s sole cost and expense, increased amounts of the
insurance required to be carried by Tenant pursuant to this Article 10
and such other reasonable types of insurance coverage and in such reasonable
amounts covering the Premises and Tenant’s operations therein, as may be
reasonably requested by Landlord. 
Notwithstanding the foregoing, Landlord’s request shall only be
considered reasonable if such increased coverage amounts and/or such new types
of insurance are consistent with the requirements of a majority of Comparable
Buildings, and Landlord shall not so increase the coverage amounts or require
additional types of insurance during the first five (5) years of the Lease
Term and thereafter no more often than one time in any five (5) year
period.

 

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ARTICLE
11

 

DAMAGE
AND DESTRUCTION

 

11.1         Repair of Damage to Premises by Landlord.  Tenant shall promptly notify Landlord of any damage to the
Premises resulting from fire or any other casualty.  If the Premises or any Common Areas serving
or providing access to the Premises shall be damaged by fire or other casualty,
Landlord shall promptly and diligently, subject to reasonable delays for
insurance adjustment or other matters beyond Landlord’s reasonable control, and
subject to all other terms of this Article 11, restore the Base
Building and such Common Areas.  Such
restoration shall be to substantially the same condition of the Base Building
and the Common Areas prior to the casualty, except for modifications required
by zoning and building codes and other laws or by the holder of a mortgage on
the Building or Project or any other modifications to the Common Areas deemed
desirable by Landlord, which are consistent with the character of the Project
and which are reasonably approved by Tenant, provided that access to the
Premises and any common restrooms serving the Premises shall not be materially
impaired.  Upon the occurrence of any
damage to the Premises, upon notice (the “Landlord Repair Notice”)
to Tenant from Landlord, Tenant shall assign to Landlord (or to any party
designated by Landlord) all insurance proceeds payable to Tenant under Tenant’s
insurance required under Section 10.3 of this Lease, and Landlord
shall repair any injury or damage to the Improvements, Original Improvements,
and any Alterations installed in the Premises and shall return such
Improvements and any Alterations to their original condition; provided that if
the cost of such repair by Landlord exceeds the amount of insurance proceeds
received by Landlord from Tenant’s insurance carrier, as assigned by Tenant,
the cost of such repairs shall be paid by Tenant to Landlord prior to Landlord’s
commencement of repair of the damage.  In
the event that Landlord does not deliver the Landlord Repair Notice within
sixty (60) days following the date the casualty becomes known to Landlord,
Tenant shall, at its sole cost and expense, repair any injury or damage to the
Improvements and Alterations installed in the Premises and shall return such
Improvements and Original Improvements to their original condition.  Whether or not Landlord delivers a Landlord
Repair Notice, prior to the commencement of construction, Tenant shall submit
to Landlord, for Landlord’s review and approval, all plans, specifications and
working drawings relating thereto, and Landlord shall select the contractors to
perform such improvement work subject to Tenant’s reasonable approval.  Landlord shall not be liable for any
inconvenience or annoyance to Tenant or its visitors, or injury to Tenant’s
business resulting in any way from such damage or the repair thereof; provided
however, that if such fire or other casualty shall have damaged the Premises or
Common Areas necessary to Tenant’s occupancy, and the Premises are not occupied
by Tenant as a result thereof, then during the time and to the extent the
Premises are unfit for occupancy, the Rent shall be abated in proportion to the
ratio that the amount of rentable square feet of the Premises which is unfit
for occupancy for the purposes permitted under this Lease bears to the total
rentable square feet of the Premises.  In
the event that Landlord shall not deliver the Landlord Repair Notice, Tenant’s
right to rent abatement pursuant to the preceding sentence shall terminate as
of the date which is reasonably determined by Landlord to be the date Tenant
should have completed repairs to the Premises assuming Tenant used reasonable
due diligence in connection therewith.

 

11.2         Landlord’s Option to Repair.  Notwithstanding the terms of Section 11.1 of this
Lease, Landlord may elect not to rebuild and/or restore the Premises, Building
and/or Project,

 

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and
instead terminate this Lease, by notifying Tenant in writing of such
termination within ninety (90) days after the date of discovery of the damage,
such notice to include a termination date giving Tenant ninety (90) days to
vacate the Premises, but Landlord may so elect only if the Building or Project
shall be damaged by fire or other casualty or cause, whether or not the
Premises are affected, and one or more of the following conditions is present: (i) in
Landlord’s reasonable judgment, repairs cannot reasonably be completed within
two hundred seventy (270) days after the date of discovery of the damage (when
such repairs are made without the payment of overtime or other premiums); (ii) the
holder of any mortgage on the Building or Project or ground lessor with respect
to the Building or Project shall require that the insurance proceeds or any
portion thereof be used to retire the mortgage debt, or shall terminate the
ground lease, as the case may be; (iii) the damage is not fully covered by
Landlord’s insurance policies; (iv) Landlord decides to rebuild the
Building or Common Areas so that they will be substantially different
structurally or architecturally; or (v) the damage occurs during the last
twelve (12) months of the Lease Term. 
Notwithstanding the foregoing, if Landlord elects to terminate this
Lease pursuant to item (i), above, then Tenant may, [***]  If Landlord does not elect to terminate this
Lease pursuant to Landlord’s termination right as provided above, and the
repairs cannot, in the reasonable opinion of Landlord, be completed within two
hundred seventy (270) days after being commenced, Tenant may elect not later
than ninety (90) days after the date of Tenant’s receipt of Landlord’s
reasonable estimate, in writing, of the time required to effectuate such
repairs, to terminate this Lease by written notice to Landlord effective as of
the date specified in the notice, which date shall not be less than thirty (30)
days nor more than sixty (60) days after the date such notice is given by
Tenant.  Furthermore, if neither Landlord
nor Tenant has terminated this Lease, and the repairs are not actually
completed within such 270-day period, Tenant shall have the right to terminate
this Lease during the first five (5) business days of each calendar month
following the end of such period until such time as the repairs are complete,
by notice to Landlord (the “Damage Termination Notice”),
effective as of a date set forth in the Damage Termination Notice (the “Damage Termination Date”), which Damage Termination Date
shall not be less than ten (10) business days following the end of each
such month.  Notwithstanding the
foregoing, if Tenant delivers a Damage Termination Notice to Landlord, then
Landlord shall have the right to suspend the occurrence of the Damage
Termination Date for a period ending thirty (30) days after the Damage
Termination Date set forth in the Damage Termination Notice by delivering to
Tenant, within five (5) business days of Landlord’s receipt of the Damage
Termination Notice, a certificate of Landlord’s contractor responsible for the
repair of the damage certifying that it is such contractor’s good faith
judgment that the repairs shall be substantially completed within thirty (30)
days after the Damage Termination Date. 
If repairs shall be substantially completed prior to the expiration of
such thirty-day period, then the Damage Termination Notice shall be of no force
or effect, but if the repairs shall not be substantially completed within such
thirty-day period, then this Lease shall terminate upon the expiration of such
thirty-day period.  At any time, from
time to time, after the date occurring sixty (60) days after the date of the
damage, Tenant may request that Landlord inform Tenant of Landlord’s reasonable
opinion of the date of completion of the repairs and Landlord shall respond to
such request within five (5) business days.  Notwithstanding the provisions of this Section 11.2,
Tenant shall have the right to terminate this Lease under this Section 11.2
to the extent each of the following conditions is satisfied: (a) the
damage to the Project by fire or other casualty was not caused by the gross
negligence or intentional act of Tenant or its partners or subpartners and
their respective officers, agents, servants, employees, and independent

 

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contractors;
(b) Tenant is not then in monetary default or material non-monetary
default under this Lease; (c) as a result of the damage, Tenant cannot
reasonably conduct business from the Premises; and, (d) as a result of the
damage to the Project, Tenant does not occupy or use the Premises at all.  In the event this Lease is terminated in accordance
with the terms of this Section 11.2, Tenant shall pay to Landlord
(or to any party designated by Landlord) a portion of the insurance proceeds
payable to Tenant under Tenant’s insurance required under items (ii) and (iii) of
Section 10.3.2 of this Lease, which portion shall be equal to [***].

 

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

 

ARTICLE
12

 

NONWAIVER

 

No provision of this Lease shall be deemed waived by
either party hereto unless expressly waived in a writing signed thereby.  The waiver by either party hereto of any
breach of any term, covenant or condition herein contained shall not be deemed
to be a waiver of any subsequent breach of same or any other term, covenant or
condition herein contained.  The
subsequent acceptance of Rent hereunder by Landlord shall not be deemed to be a
waiver of any preceding breach by Tenant of any term, covenant or condition of
this Lease, other than the failure of Tenant to pay the particular Rent so
accepted, regardless of Landlord’s knowledge of such preceding breach at the
time of acceptance of such Rent.  No
acceptance of a lesser amount than the Rent herein stipulated shall be deemed a
waiver of Landlord’s right to receive the full amount due, nor shall any
endorsement or statement on any check or payment or any letter accompanying
such check or payment be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord’s right to recover
the full amount due.  No receipt of
monies by Landlord from Tenant after the termination of this Lease shall in any
way alter the length of the Lease Term or of Tenant’s right of possession hereunder,
or after the giving of any notice shall reinstate, continue or extend the Lease
Term or affect any notice given Tenant prior to the receipt of such monies, it
being agreed that after the service of notice or the commencement of a suit, or
after final judgment for possession of the Premises, Landlord may receive and
collect any Rent due, and the payment of said Rent shall not waive or affect
said notice, suit or judgment.

 

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ARTICLE
13

 

CONDEMNATION

 

If the whole or any part of the Premises, Building or
Project shall be taken by power of eminent domain or condemned by any competent
authority for any public or quasi-public use or purpose, or if any adjacent
property or street shall be so taken or condemned, or reconfigured or vacated
by such authority in such manner as to require the use, reconstruction or
remodeling of any part of the Premises, Building or Project, or if Landlord
shall grant a deed or other instrument in lieu of such taking by eminent domain
or condemnation, Landlord shall have the option to terminate this Lease
effective as of the date possession is required to be surrendered to the
authority.  If more than twenty-five
percent (25%) of the rentable square feet of the Premises is taken, or if
access to the Premises is substantially impaired, in each case for a period in
excess of one hundred eighty (180) days, Tenant shall have the option to
terminate this Lease effective as of the date possession is required to be
surrendered to the authority.  Tenant
shall not because of such taking assert any claim against Landlord or the
authority for any compensation because of such taking and Landlord shall be
entitled to the entire award or payment in connection therewith, except that
Tenant shall have the right to file any separate claim available to Tenant for
any taking of Tenant’s personal property and fixtures belonging to Tenant and
removable by Tenant upon expiration of the Lease Term pursuant to the terms of
this Lease, and for moving expenses, so long as such claims do not diminish the
award available to Landlord, its ground lessor with respect to the Building or
Project or its mortgagee, and such claim is payable separately to Tenant.  All Rent shall be apportioned as of the date
of such termination.  If any part of the
Premises shall be taken, and this Lease shall 
not be so terminated, the Rent shall be proportionately abated.  Tenant hereby waives any and all rights it
might otherwise have pursuant to Section 1265.130 of The California Code
of Civil Procedure.  Notwithstanding
anything to the contrary contained in this Article 13, in the event
of a temporary taking of all or any portion of the Premises for a period of one
hundred and eighty (180) days or less, then this Lease shall not terminate but
the Base Rent and the Additional Rent shall be abated for the period of such
taking in proportion to the ratio that the amount of rentable square feet of
the Premises taken bears to the total rentable square feet of the
Premises.  Landlord shall be entitled to
receive the entire award made in connection with any such temporary taking.

 

ARTICLE
14

 

ASSIGNMENT
AND SUBLETTING

 

14.1         Transfers.  Tenant shall not,
without the prior written consent of Landlord, assign, mortgage, pledge,
hypothecate, encumber, or permit any lien to attach to, or otherwise transfer,
this Lease or any interest hereunder, permit any assignment, or other transfer
of this Lease or any interest hereunder by operation of law, sublet the
Premises or any part thereof, or enter into any license or concession
agreements or otherwise permit the occupancy or use of the Premises or any part
thereof by any persons other than Tenant and its employees and contractors (all
of the foregoing are hereinafter sometimes referred to collectively as “Transfers” and any person to whom any Transfer is made or
sought to be made is hereinafter sometimes referred to as a “Transferee”).  If
Tenant desires Landlord’s consent to any Transfer, Tenant shall notify Landlord
in writing, which notice (the “Transfer Notice”)
shall include (i) the proposed

 

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effective
date of the Transfer, which shall not be less than fifteen (15) days nor more
than one hundred eighty (180) days after the date of delivery of the Transfer
Notice, (ii) a description of the portion of the Premises to be
transferred (the “Subject Space”),
(iii) all of the terms of the proposed Transfer and the consideration
therefor, including calculation of the “Transfer
Premium”, as that term is defined in Section 14.3 below,
in connection with such Transfer, the name and address of the proposed
Transferee, and a copy of all existing executed and/or proposed documentation
pertaining to the proposed Transfer, including all existing operative documents
to be executed to evidence such Transfer or the agreements incidental or
related to such Transfer, provided that Landlord shall have the right to
require Tenant to utilize Landlord’s standard Transfer documents in connection
with the documentation of such Transfer, (iv) current financial statements
of the proposed Transferee certified by an officer, partner or owner thereof,
business credit and personal references and history of the proposed Transferee
and any other information reasonably required by Landlord which will enable
Landlord to determine the financial responsibility, character, and reputation
of the proposed Transferee, nature of such Transferee’s business and proposed
use of the Subject Space and (v) an executed estoppel certificate from
Tenant in the form attached hereto as Exhibit E.  Any Transfer made without Landlord’s prior
written consent shall, at Landlord’s option, be null, void and of no effect,
and shall, at Landlord’s option, constitute a default by Tenant under this
Lease.  Whether or not Landlord consents
to any proposed Transfer, Tenant shall pay Landlord’s reasonable review and
processing fees, as well as any reasonable professional fees (including,
without limitation, attorneys’, accountants’, architects’, engineers’ and
consultants’ fees) incurred by Landlord, not to exceed [***] for a Transfer in the ordinary course of
business,
within thirty (30) days after written request by Landlord.

 

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

 

14.2.1      The Transferee is of a character or reputation or engaged in
a business which is not consistent with the quality of the Building or the
Project;

 

14.2.2      The Transferee intends to use the Subject Space for purposes
which are not permitted under this Lease;

 

14.2.3      The Transferee is either a
governmental agency or instrumentality thereof, and such Transferees occupancy in the
Project may cause issues (in terms of [***]) that are significantly
less likely to arise if such Transfer were a not a governmental agency or instrumentality
thereof;

 

14.2.4      The Transferee is not a party of reasonable financial worth
and/or financial stability in light of the responsibilities to be undertaken in
connection with the Transfer on the date consent is requested;

 

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14.2.5      The proposed Transfer would cause a
violation of another lease for space in the Project, or would give an occupant
of the Project a right to cancel its lease;

 

14.2.6      Either the proposed Transferee, or any
person or entity which directly or indirectly, controls, is controlled by, or
is under common control with, the proposed Transferee, (i) occupies space
in the Project at the time of the request for consent (provided, however, that Tenant may
assign or sublease space to an occupant of the Project to the extent Landlord
cannot meet such occupant’s space needs), or (ii) is negotiating with
Landlord to lease space in the Project at such time, or (iii) has
negotiated with Landlord during the [***]-month period immediately preceding
the Transfer Notice; or

 

14.2.7      The Transferee does not intend to occupy
at least [***] of the Premises and conduct its business therefrom for a
substantial portion of the term of the Transfer.

 

If Landlord consents to any Transfer pursuant to the
terms of this Section 14.2 (and does not exercise any recapture
rights Landlord may have under Section 14.4 of this Lease), Tenant
may within six (6) months after Landlord’s consent, but not later than the
expiration of said six-month period, enter into such Transfer of the Premises
or portion thereof, upon substantially the same terms and conditions as are set
forth in the Transfer Notice furnished by Tenant to Landlord pursuant to Section 14.1
of this Lease, provided that if there are any changes in the terms and
conditions from those specified in the Transfer Notice (i) such that
Landlord would initially have been entitled to refuse its consent to such
Transfer under this Section 14.2, or (ii) which would cause
the proposed Transfer to be more favorable to the Transferee than the terms set
forth in Tenant’s original Transfer Notice, Tenant shall again submit the
Transfer to Landlord for its approval and other action under this Article 14
(including Landlord’s right of recapture, if any, under Section 14.4
of this Lease).  Notwithstanding anything
to the contrary in this Lease, if Tenant or any proposed Transferee claims that
Landlord has unreasonably withheld or delayed its consent under Section 14.2
or otherwise has breached or acted unreasonably under this Article 14,
their sole remedies shall be a suit for contract damages (other than damages
for injury to, or interference with, Tenant’s business including, without
limitation, loss of profits, however occurring) or a declaratory judgment and
an injunction for the relief sought without any monetary damages, and Tenant
hereby waives all other remedies, including, without limitation, any right at
law or equity to terminate this Lease, on its own behalf and, to the extent
permitted under all applicable laws, on behalf of the proposed Transferee.  Tenant shall indemnify, defend and hold
harmless Landlord from any and all liability, losses, claims, damages, costs,
expenses, causes of action and proceedings involving any third party or parties
(including without limitation Tenant’s proposed subtenant or assignee) who
claim they were damaged by Landlord’s wrongful withholding or conditioning of
Landlord’s consent.

 

14.3         Transfer
Premium.  If Landlord
consents to a Transfer, as a condition thereto which the parties hereby agree
is reasonable, Tenant shall pay to Landlord [***] percent ([***]%) of any “Transfer
Premium,” as that term is defined in this Section 14.3, received by
Tenant from such Transferee.  “Transfer Premium” shall mean all rent, additional rent or
other consideration payable by such Transferee in connection with the Transfer
in excess of the Rent and Additional Rent payable by Tenant under this Lease
during the term of the Transfer on a per rentable square foot basis if less
than all of the Premises is transferred, after deducting the reasonable
expenses incurred by Tenant for (i) any changes, alterations and
improvements to the

 

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Premises
in connection with the Transfer, (ii) any free base rent and other
economic concessions reasonably provided to the Transferee, (iii) any
brokerage commissions and reasonable legal fees and costs in connection with
the Transfer, (iv) any lease takeover costs
incurred by Tenant in connection with the Transfer, (v) any costs of
advertising the space which is the subject of the Transfer, and (vi) any review and processing fees paid to Landlord in connection
with such Transfer (collectively, the “Transfer
Costs”).  “Transfer Premium”
shall also include, but not be limited to, key money, bonus money or other cash
consideration paid by Transferee to Tenant in connection with such Transfer,
and (y) any payment in excess of fair market value for (1) services
rendered by Tenant to Transferee, or (2) for tangible assets (as opposed
to intellectual property), fixtures, inventory, equipment, or furniture
transferred by Tenant to Transferee in connection with such Transfer.  In the calculations of the Rent (as it
relates to the Transfer Premium calculated under this Section 14.3),
the Rent paid during each annual period for the Subject Space shall be computed
after adjusting such rent to the actual effective rent to be paid,  taking into consideration any and all
Transfer Costs.  For purposes of
calculating any such effective rent all such concessions shall be amortized on
a straight-line basis over the relevant term.

 

14.4         Landlord’s
Option as to Subject Space. 
Notwithstanding anything to the contrary contained in this Article 14,
Landlord shall have the option, by giving written notice to Tenant within
fifteen (15) days after receipt of any Transfer Notice, to recapture the
Subject Space; provided, however, if Landlord exercises its right to recapture
the Subject Space, then Tenant shall have the right, by giving written notice
to Landlord within fifteen (15) days after receipt of Landlord’s recapture
notice, to rescind its Transfer Notice, in which event Tenant shall not proceed
with the Transfer contemplated by the Transfer Notice and Landlord’s recapture
notice shall be null and void.  Such
recapture notice shall cancel and terminate this Lease with respect to the
Subject Space as of the date stated in the Transfer Notice as the effective
date of the proposed Transfer until the last day of the term of the Transfer as
set forth in the Transfer Notice (or at Landlord’s option, shall cause the
Transfer to be made to Landlord or its agent, in which case the parties shall
execute the Transfer documentation promptly thereafter).  In the event of a recapture by Landlord, if
this Lease shall be canceled with respect to less than the entire Premises, the
Rent reserved herein shall be prorated on the basis of the number of rentable
square feet retained by Tenant in proportion to the number of rentable square
feet contained in the Premises, and this Lease as so amended shall continue
thereafter in full force and effect, and upon request of either party, the
parties shall execute written confirmation of the same.  If Landlord declines, or fails to elect in a
timely manner to recapture the Subject Space under this Section 14.4,
then, provided Landlord has consented to the proposed Transfer, Tenant shall be
entitled to proceed to transfer the Subject Space to the proposed Transferee,
subject to provisions of this Article 14.

 

14.5         Effect
of Transfer.  If Landlord
consents to a Transfer, (i) the TCCs of this Lease shall in no way be
deemed to have been waived or modified, (ii) such consent shall not be
deemed consent to any further Transfer by either Tenant or a Transferee, (iii) Tenant
shall deliver to Landlord, promptly after execution, an original executed copy
of all documentation pertaining to the Transfer in form reasonably acceptable
to Landlord, (iv) Tenant shall furnish upon Landlord’s request a complete
statement, certified by an independent certified public accountant, or Tenant’s
chief financial officer, setting forth in detail the computation of any
Transfer Premium Tenant has derived and shall derive from such Transfer, and (v) no
Transfer

 

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relating
to this Lease or agreement entered into with respect thereto, whether with or
without Landlord’s consent, shall relieve Tenant or any guarantor of the Lease
from any liability under this Lease, including, without limitation, in
connection with the Subject Space. 
Landlord or its authorized representatives shall have the right at all
reasonable times to audit the books, records and papers of Tenant relating to
any Transfer, and shall have the right to make copies thereof.  If the Transfer Premium respecting any
Transfer shall be found understated, Tenant shall, within thirty (30) days
after demand, pay the deficiency, and if understated by more than five percent
(5%), Tenant shall pay Landlord’s costs of such audit.

 

14.6         Additional
Transfers.  For purposes
of this Lease, the term “Transfer” shall
also include (i) if Tenant is a partnership, the withdrawal or change,
voluntary, involuntary or by operation of law, of more than fifty percent (50%)
or more of the partners, or transfer of more than fifty percent (50%) or more
of partnership interests, within a twelve (12)-month period, or the dissolution
of the partnership without immediate reconstitution thereof, and (ii) if
Tenant is a closely held corporation (i.e., whose
stock is not publicly held and not traded through an exchange or over the
counter), (A) the dissolution, merger, consolidation or other
reorganization of Tenant or (B) the sale or other transfer of an aggregate
of more than fifty percent (50%) or more of the voting shares of Tenant (other
than to immediate family members by reason of gift or death), within a twelve
(12)-month period, or (C) the sale, mortgage, hypothecation or pledge of
an aggregate of more than fifty percent (50%) or more of the value of the
unencumbered assets of Tenant within a twelve (12)-month period.

 

14.7         Occurrence
of Default.  Any Transfer
hereunder shall be subordinate and subject to the provisions of this Lease, and
if this Lease shall be terminated during the term of any Transfer, Landlord
shall have the right to:  (i) treat
such Transfer as cancelled and repossess the Subject Space by any lawful means,
or (ii) require that such Transferee attorn to and recognize Landlord as
its landlord under any such Transfer.  If
Tenant shall be in default under this Lease, Landlord is hereby irrevocably
authorized, as Tenant’s agent and attorney-in-fact, to direct any Transferee to
make all payments under or in connection with the Transfer directly to Landlord
(which Landlord shall apply towards Tenant’s obligations under this Lease)
until such default is cured.  Such
Transferee shall rely on any representation by Landlord that Tenant is in
default hereunder, without any need for confirmation thereof by Tenant.  Upon any assignment, the assignee shall
assume in writing all obligations and covenants of Tenant thereafter to be
performed or observed under this Lease. 
No collection or acceptance of rent by Landlord from any Transferee
shall be deemed a waiver of any provision of this Article 14 or the
approval of any Transferee or a release of Tenant from any obligation under
this Lease, whether theretofore or thereafter accruing.  In no event shall Landlord’s enforcement of
any provision of this Lease against any Transferee be deemed a waiver of Landlord’s
right to enforce any term of this Lease against Tenant or any other person.

 

14.8         Non-Transfers.  Notwithstanding anything to the
contrary contained in this Article 14, (i) an assignment or
subletting of all or a portion of the Premises to an affiliate of Tenant (an
entity which is controlled by, controls, or is under common control with,
Tenant), (ii) an assignment of the Premises to an entity which acquires
all or substantially all of the assets or interests (partnership, stock or
other) of Tenant, or (iii) an assignment of the Premises to an entity
which is the resulting entity of a merger or consolidation of Tenant, or (iv) a sale of corporate shares of capital
stock in Tenant in connection with an initial public offering of

 

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Tenant’s stock on a nationally-recognized stock exchange, and the
subsequent sale of Tenant’s capital stock as long as Tenant is a publicly
traded company on a nationally-recognized stock exchange, shall not be deemed a Transfer
under this Article 14, provided that Tenant notifies Landlord of
any such assignment or sublease and promptly supplies Landlord with any documents
or information requested by Landlord regarding such assignment or sublease or
such affiliate, and further provided that such assignment or sublease is not a
subterfuge by Tenant to avoid its obligations under this Lease or otherwise
effectuate any “release” by Tenant of such obligations.  The transferee under a transfer specified in
items (i), (ii) or (iii) above shall be referred to as a “Permitted Transferee.” 
“Control,” as used in this Section 14.8,
shall mean the ownership, directly or indirectly, of at least fifty-one percent
(51%) of the voting securities of, or possession of the right to vote, in the
ordinary direction of its affairs, of at least fifty-one percent (51%) of the
voting interest in, any person or entity.

 

ARTICLE 15

 

SURRENDER OF PREMISES; OWNERSHIP AND 

REMOVAL OF TRADE FIXTURES

 

15.1         Surrender
of Premises.  No act or
thing done by Landlord or any agent or employee of Landlord during the Lease
Term shall be deemed to constitute an acceptance by Landlord of a surrender of
the Premises unless such intent is specifically acknowledged in writing by
Landlord.  The delivery of keys to the
Premises to Landlord or any agent or employee of Landlord shall not constitute
a surrender of the Premises or effect a termination of this Lease, whether or
not the keys are thereafter retained by Landlord, and notwithstanding such
delivery Tenant shall be entitled to the return of such keys at any reasonable
time upon request until this Lease shall have been properly terminated.  The voluntary or other surrender of this
Lease by Tenant, whether accepted by Landlord or not, or a mutual termination
hereof, shall not work a merger, and at the option of Landlord shall operate as
an assignment to Landlord of all subleases or subtenancies affecting the
Premises or terminate any or all such sublessees or subtenancies.

 

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

 

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ARTICLE 16

 

HOLDING OVER

 

If Tenant holds over after the expiration of the Lease
Term or earlier termination thereof, with or without the express or implied
consent of Landlord, such tenancy shall be from month-to-month only, and shall
not constitute a renewal hereof or an extension for any further term, and in
such case Base Rent shall be payable at a monthly rate equal to the product of (i) the
Base Rent applicable during the last rental period of the Lease Term under this
Lease, and (ii) a percentage equal to [***] during
the first two (2) months immediately following the expiration or earlier
termination of the Lease Term, and [***] thereafter.  Such month-to-month tenancy shall be subject
to every other applicable term, covenant and agreement contained herein.  Nothing contained in this Article 16
shall be construed as consent by Landlord to any holding over by Tenant, and
Landlord expressly reserves the right to require Tenant to surrender possession
of the Premises to Landlord as provided in this Lease upon the expiration or
other termination of this Lease.  The
provisions of this Article 16 shall not be deemed to limit or
constitute a waiver of any other rights or remedies of Landlord provided herein
or at law.  If Tenant fails to surrender
the Premises upon the termination or expiration of this Lease, in addition to
any other liabilities to Landlord accruing therefrom, Tenant shall protect,
defend, indemnify and hold Landlord harmless from all loss, costs (including
reasonable attorneys’ fees) and liability resulting from such failure,
including, without limiting the generality of the foregoing, any claims made by
any succeeding tenant founded upon such failure to surrender and any lost
profits to Landlord resulting therefrom.

 

ARTICLE 17

 

ESTOPPEL CERTIFICATES

 

Within ten (10) business days following a request
in writing by Landlord, Tenant shall execute, acknowledge and deliver to
Landlord an estoppel certificate, which, as submitted by Landlord, shall be
substantially in the form of Exhibit E,
attached hereto (or such other form as may be required by any prospective
mortgagee or purchaser of the Project, or any portion thereof), indicating
therein any exceptions thereto that may exist at that time, and shall also
contain any other factual information reasonably requested by Landlord or
Landlord’s mortgagee or prospective mortgagee. 
Any such certificate may be relied upon by any prospective mortgagee or
purchaser of all or any portion of the Project. 
At any time during the Lease Term, Landlord may require Tenant to
provide Landlord with a current financial statement and financial statements of
the two (2) years prior to the current financial statement year.  Such statements shall be prepared in accordance
with generally accepted accounting principles and, if such is the normal
practice of Tenant, shall be audited by an independent certified public
accountant.  Failure of Tenant to timely
execute, acknowledge and deliver such estoppel certificate or other instruments
shall constitute an acceptance of the Premises and an acknowledgment by Tenant
that statements included in the estoppel certificate are true and correct,
without exception.  Landlord hereby
agrees to provide to Tenant an estoppel certificate signed by Landlord,
containing the same types of information, and within the same periods of time,
as set forth above, with such changes as are reasonably necessary to reflect
that the

 

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estoppel certificate is being granted and signed by Landlord to Tenant,
rather than from Tenant to Landlord or a lender.

 

ARTICLE 18

 

SUBORDINATION

 

This Lease shall be subject and subordinate to all
present and future ground or underlying leases of the Building or Project and
to the lien of any mortgage, trust deed or other encumbrances now or hereafter
in force against the Building or Project or any part thereof, if any, and to
all renewals, extensions, modifications, consolidations and replacements
thereof, and to all advances made or hereafter to be made upon the security of
such mortgages or trust deeds, unless the holders of such mortgages, trust
deeds or other encumbrances, or the lessors under such ground lease or
underlying leases, require in writing that this Lease be superior thereto.  Landlord’s delivery to Tenant of a
commercially reasonable non-disturbance agreement(s) (the “Nondisturbance Agreement”) in favor of
Tenant from any such ground lessor, mortgage holders or lien holders of
Landlord who later come into existence at any time prior to the expiration of
the Lease Term shall be in consideration of, and a condition precedent to,
Tenant’s agreement to be bound by the terms and conditions of this Article 18.  Subject to Tenant’s receipt of a
Nondisturbance Agreement,  Tenant
covenants and agrees in the event any proceedings are brought for the
foreclosure of any such mortgage or deed in lieu thereof (or if any ground
lease is terminated), to, subject to the terms of the applicable Nondisturbance
Agreement, attorn, without any deductions or set-offs whatsoever, to the
lienholder or purchaser or any successors thereto upon any such foreclosure
sale or deed in lieu thereof (or to the ground lessor), if so requested to do
so by such purchaser or lienholder or ground lessor, and to recognize such
purchaser or lienholder or ground lessor as the lessor under this Lease,
provided such lienholder or purchaser or ground lessor shall agree to accept
this Lease and not disturb Tenant’s occupancy, so long as Tenant timely pays
the rent and observes and performs the TCCs of this Lease to be observed and
performed by Tenant.  Landlord’s interest
herein may be assigned as security at any time to any lienholder.  Tenant shall, within five (5) business
days of request by Landlord, execute such further instruments or assurances as
Landlord may reasonably deem necessary to evidence or confirm the subordination
or superiority of this Lease to any such mortgages, trust deeds, ground leases
or underlying leases.  Tenant waives the
provisions of any current or future statute, rule or law which may give or
purport to give Tenant any right or election to terminate or otherwise
adversely affect this Lease and the obligations of the Tenant hereunder in the
event of any foreclosure proceeding or sale.

 

ARTICLE 19

 

DEFAULTS; REMEDIES

 

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

 

19.1.1      Any failure by Tenant to pay any Rent or
any other charge required to be paid under this Lease, or any part thereof,
when due unless such failure is cured within five (5) business days after
notice; or

 

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19.1.2      Except where a specific time period is
otherwise set forth for Tenant’s performance in this Lease, in which event the
failure to perform by Tenant within such time period shall be a default by
Tenant under this Section 19.1.2, any failure by Tenant to observe
or perform any other provision, covenant or condition of this Lease to be
observed or performed by Tenant where such failure continues for thirty (30)
days after written notice thereof from Landlord to Tenant; provided that if the
nature of such default is such that the same cannot reasonably be cured within
a thirty (30) day period, Tenant shall not be deemed to be in default if it
diligently commences such cure within such period and thereafter diligently
proceeds to rectify and cure such default, but in no event exceeding a period
of time in excess of ninety (90) days after written notice thereof from
Landlord to Tenant; or

 

19.1.3      To the extent permitted by law, a general
assignment by Tenant or any guarantor of this Lease for the benefit of
creditors, or the taking of any corporate action in furtherance of bankruptcy
or dissolution whether or not there exists any proceeding under an insolvency
or bankruptcy law, or the filing by or against Tenant or any guarantor of any
proceeding under an insolvency or bankruptcy law, unless in the case of a
proceeding filed against Tenant or any guarantor the same is dismissed within
sixty (60) days, or the appointment of a trustee or receiver to take possession
of all or substantially all of the assets of Tenant or any guarantor, unless
possession is restored to Tenant or such guarantor within thirty (30) days, or
any execution or other judicially authorized seizure of all or substantially
all of Tenant’s assets located upon the Premises or of Tenant’s interest in
this Lease, unless such seizure is discharged within thirty (30) days; or

 

19.1.4      Abandonment pursuant to California Civil
Code Section 1951.3, of the Premises by Tenant; or

 

19.1.5      The failure by Tenant to observe or
perform according to the provisions of Articles 5, 14, 17 or 18
of this Lease where such failure continues for more than five (5) business
days after notice from Landlord; or

 

19.1.6      Tenant’s default under the terms and
conditions of either the 13480 Lease or 13500 Lease (beyond any applicable
notice and cure periods).

 

The notice periods provided herein are in lieu of, and
not in addition to, any notice periods provided by law.

 

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

 

19.2.1      Terminate this Lease, in which event
Tenant shall immediately surrender the Premises to Landlord, and if Tenant
fails to do so, Landlord may, without prejudice to any other remedy which it
may have for possession or arrearages in rent, enter upon and take possession
of the Premises and expel or remove Tenant and any other person who may be

 

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occupying
the Premises or any part thereof, without being liable for prosecution or any
claim or damages therefor; and Landlord may recover from Tenant the following:

 

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

 

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

 

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

 

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

 

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

 

The term “rent”
as used in this Section 19.2 shall be deemed to be and to mean all
sums of every nature required to be paid by Tenant pursuant to the terms of
this Lease, whether to Landlord or to others. 
As used in Sections 19.2.1(a) and (b), above, the “worth
at the time of award” shall be computed by allowing interest at the Interest
Rate.  As used in Section 19.2.1(c),
above, the “worth at the time of award” shall be computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at the
time of award plus one percent (1%).

 

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

 

19.2.3      Landlord shall at all times have the
rights and remedies (which shall be cumulative with each other and cumulative
and in addition to those rights and remedies available under Sections
19.2.1 and 19.2.2, above, or any law or other provision of this
Lease), without prior demand or notice except as required by applicable law, to
seek any declaratory, injunctive or other equitable relief, and specifically
enforce this Lease, or restrain or enjoin a violation or breach of any
provision hereof.

 

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

 

19.4         Form of
Payment After Default. 
Following the occurrence of [***] defaults by Tenant in any [***]
consecutive month time period, Landlord shall have the right to require that
any or all subsequent amounts paid by Tenant to Landlord hereunder, whether to
cure the default in question or otherwise, be paid in the form of cash, money
order, cashier’s or certified check drawn on an institution acceptable to
Landlord, or by other means approved by Landlord, notwithstanding any prior
practice of accepting payments in any different form.

 

19.5         Efforts
to Relet.  No re-entry or
repossession, repairs, maintenance, changes, alterations and additions,
reletting, appointment of a receiver to protect Landlord’s interests hereunder,
or any other action or omission by Landlord shall be construed as an election
by Landlord to terminate this Lease or Tenant’s right to possession, or to
accept a surrender of the Premises, nor shall same operate to release Tenant in
whole or in part from any of Tenant’s obligations hereunder, unless express
written notice of such intention is sent by Landlord to Tenant.  Tenant hereby irrevocably waives any right
otherwise available under any law to redeem or reinstate this Lease.

 

19.6         Landlord
Default.  Notwithstanding
anything to the contrary set forth in this Lease, Landlord shall be in default
in the performance of any obligation required to be performed by Landlord
pursuant to this Lease if Landlord fails to perform such obligation within
thirty (30) days after the receipt of notice from Tenant specifying in detail
Landlord’s failure to perform; provided, however, if the nature of Landlord’s
obligation is such that more than thirty (30) days are required for its
performance, then Landlord shall not be in default under this Lease if it shall
commence such performance within such thirty (30) day period and thereafter
diligently pursues the same to completion. 
Upon any such default by Landlord under this Lease, Tenant may, except
as otherwise specifically provided in this Lease to the contrary, exercise any
of its rights provided at law or in equity. 
Any award from a court or arbitrator in favor of Tenant requiring
payment by Landlord which is not paid by Landlord within the time period directed
by such award, may be offset by Tenant from Rent next due and payable under
this Lease;
provided, however, Tenant may not, [***].

 

ARTICLE 20

 

COVENANT OF QUIET ENJOYMENT

 

Landlord covenants that Tenant, on paying the Rent,
charges for services and other payments herein reserved and on keeping,
observing and performing all the other TCCs, provisions and agreements herein
contained on the part of Tenant to be kept, observed and performed, shall,
during the Lease Term, peaceably and quietly have, hold and enjoy the

 

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Premises subject to the
TCCs, provisions and agreements hereof without interference by any persons
lawfully claiming by or through Landlord. 
The foregoing covenant is in lieu of any other covenant express or
implied.

 

ARTICLE 21

 

LETTER OF CREDIT

 

21.1         Letter of Credit.  Tenant shall deliver to Landlord concurrently
with Tenant’s execution of this Lease, an unconditional, clean, irrevocable
letter of credit (the “L-C”) in
the initial amount of [***] (the “L-C Amount”),
which L-C shall be issued by a money-center bank (a bank which accepts
deposits, maintains accounts, has a local office in either the City of San
Diego or the City of Los Angeles (both, California) which will negotiate a
letter of credit, and whose deposits are insured by the FDIC) reasonably
acceptable to Landlord (the “Bank”),
with a short term Fitch Rating currency rating which is not less than “F2”, and
a long term Fitch Rating currency rating which is not less than “BBB+” (an “Approved
Bank”).  The L-C shall be in a form and content
as set forth in Exhibit H,
attached hereto.  Tenant shall pay all
expenses, points and/or fees incurred by Tenant in obtaining the L-C.  The L-C shall (i) be
“callable” at sight, irrevocable and unconditional, (ii) be maintained in
effect, whether through renewal or extension, for the period commencing on the
date of the Lease Commencement Date and continuing until the date (the “L-C Expiration Date”) that is one hundred twenty (120) days
after the expiration of the Lease Term
(as the same may be extended), and Tenant shall deliver a new L-C or
certificate of renewal or extension to Landlord at least sixty (60) days prior
to the expiration of the L-C then held by Landlord, without any action
whatsoever on the part of Landlord, (iii) be fully assignable by Landlord,
its successors and assigns, (iv) permit partial draws and multiple
presentations and drawings, and (v) be otherwise subject to the “International
Standby Practices” (ISP 98) International Chamber of Commerce (Publication
No 590).  If Tenant exercises its option to extend the Lease Term pursuant to Section 2.2
of this Lease then, not later than sixty (60) days prior to the commencement of the Option Term, Tenant shall deliver
to Landlord a new L-C or certificate of renewal or extension evidencing the L-C
Expiration Date as one hundred twenty (120) days after the expiration of the
Option Term.  Landlord, or its
then managing agent, shall have the right to draw down an amount up to the face
amount of the L-C if any of the following shall have occurred or be
applicable:  (1) such amount is due
to Landlord under the terms and conditions of this Lease, or (2) Tenant
has filed a voluntary petition under the U. S. Bankruptcy Code or any state
bankruptcy code (collectively, “Bankruptcy
Code”), or (3) an involuntary petition has been filed against
Tenant under the Bankruptcy Code, or (4) the Bank has notified Landlord
that the L-C will not be renewed or extended through the LC Expiration
Date.  The L-C will be honored by the
Bank regardless of whether Tenant disputes Landlord’s right to draw upon the
L-C.

 

21.2         Intentionally Omitted.

 

21.3         Landlord’s Right to Draw Upon L-C.  Tenant
hereby acknowledges and agrees that Landlord is entering into this Lease in
material reliance upon the ability of Landlord to draw upon the L-C upon the
occurrence of any breach or default on the part of Tenant under this Lease, the
13480 Lease or the 13500 Lease.  If
Tenant shall breach any provision of this Lease, the 13480 Lease or the 13500
Lease or otherwise be in default thereunder, Landlord may, but

 

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without obligation to do so, and without notice to Tenant, draw upon
the L-C, in part or in whole, to cure any breach or default of Tenant and/or to
compensate Landlord for any and all damages of any kind or nature sustained or
which Landlord reasonably estimates that it will sustain resulting from Tenant’s
breach or default.  The use, application
or retention of the L-C, or any portion thereof, by Landlord shall not prevent
Landlord from exercising any other right or remedy provided by this Lease or by
any applicable law, it being intended that Landlord shall not first be required
to proceed against the L-C, and shall not operate as a limitation on any recovery
to which Landlord may otherwise be entitled. 
Tenant agrees not to interfere in any way with payment to Landlord of
the proceeds of the L-C, either prior to or following a “draw” by Landlord of
any portion of the L-C, regardless of whether any dispute exists between Tenant
and Landlord as to Landlord’s right to draw upon the L-C.  No condition or term of this Lease shall be
deemed to render the L-C conditional to justify the issuer of the L-C in
failing to honor a drawing upon such L-C in a timely manner.  Tenant agrees and acknowledges that (a) the
L-C constitutes a separate and independent contract between Landlord and the
Bank, (b) Tenant is not a third party beneficiary of such contract, (c) Tenant
has no property interest whatsoever in the L-C or the proceeds thereof, and (d) in
the event Tenant becomes a debtor under any chapter of the Bankruptcy Code,
neither Tenant, any trustee, nor Tenant’s bankruptcy estate shall have any
right to restrict or limit Landlord’s claim and/or rights to the L-C and/or the
proceeds thereof by application of Section 502(b)(6) of the U. S.
Bankruptcy Code or otherwise.

 

21.4         Transfer of L-C by
Landlord.  The
L-C shall also provide that Landlord, its successors and assigns, may, at any
time and without notice to Tenant and without first obtaining Tenant’s consent
thereto, transfer (one or more times) all or any portion of its interest in and
to the L-C to another party, person or entity, regardless of whether or not
such transfer is separate from or as a part of the assignment by Landlord of
its rights and interests in and to this Lease. 
In the event of a transfer of Landlord’s interest in the Building,
Landlord shall transfer the L-C, in whole or in part, to the transferee and
thereupon Landlord shall, without any further agreement between the parties, be
released by Tenant from all liability therefor, and it is agreed that the
provisions hereof shall apply to every transfer or assignment of the whole or
any portion of said L-C to a new landlord. 
In connection with any such transfer of the L-C by Landlord, Tenant
shall, [***],
execute and submit to the Bank such applications, documents and instruments as
may be necessary to effectuate such transfer; provided, however, that Landlord
shall be responsible for paying the Bank transfer and processing fees in
connection therewith up to an amount equal to [***] (the “L-C Transfer Cap”) and Tenant shall be
responsible for paying the Bank’s transfer and processing fees in excess of the
L-C Transfer Cap.

 

21.5         L-C Not a Security Deposit.  Landlord
and Tenant acknowledge and agree that in no event or circumstance shall the L-C
or any renewal thereof or any proceeds thereof be (i) deemed to be or
treated as a “security deposit” within the meaning of California Civil Code Section 1950.7,
(ii) subject to the terms of such Section 1950.7, or (iii) intended
to serve as a “security deposit” within the meaning of such Section 1950.7.  The parties hereto (A) recite that the
L-C is not intended to serve as a security deposit and such Section 1950.7
and any and all other laws, rules and regulations applicable to security
deposits in the commercial context (“Security
Deposit Laws”) shall have no applicability or relevancy thereto and (B) waive
any and all rights, duties and obligations either party may now or, in the
future, will have relating to or arising from the Security Deposit Laws.  Moreover, in connection with Tenant’s waiver
of the Security Deposit Laws, which either (i) establish the time frame
concerning the actions to be

 

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taken by Landlord with regard to applying funds drawn from a letter of
credit, or (ii) provide that a landlord may apply funds so drawn from a
letter of credit only to the extent reasonably necessary to remedy defaults in
the payment of rent, to repair damage caused by a tenant or to clean the
subject premises, the parties instead acknowledge and agree that (A) any
such statutory time frames are superseded by the terms of this Article 21,
and (B) rather than be so limited, Landlord may apply from funds drawn
down from the Letter of Credit (I) any sums expressly identified in this Article 21,
above, and (II) any additional sums reasonably necessary to compensate
Landlord for any loss or damage caused by Tenant’s default of this Lease,
including, but not limited to, all damages or rent due upon termination of this
Lease pursuant to Section 1951.2 of the California Civil Code.

 

ARTICLE 22

 

SUBSTITUTION OF OTHER PREMISES

 

At any time following the first anniversary of the
Lease Commencement Date, upon no less than [***] notice to
Tenant, Landlord shall have the one-time right to move Tenant to other space
located on the fourth (4th) or sixth (6th)
floors of the Building (the “Replacement
Premises”), and all terms hereof shall apply to the new space with
equal force; provided, however, with regard thereto, (i) the size of such
Replacement Premises shall be at least [***] of the
size of the then-existing Premises, (ii) such Replacement Premises shall
have substantially the same perimeter configuration as the Premises, (iii) such
Replacement Premises shall have direct access to the interior elevator lobby, (iv) such
Replacement Premises shall be contiguous, and (v) all of the terms of this
Lease shall apply to the Replacement Premises with equal force; provided that
Tenant’s then existing monetary obligations under this Lease shall not be
increased as a result of such relocation of the Premises and Tenant’s then
existing parking rights under this Lease shall not be reduced as a result of
such relocation of the Premises; provided further, however, to the extent the
rentable square footage of the Replacement Premises is less than Premises, the
Base Rent and Tenant’s Share shall be proportionately adjusted.  In such event, Landlord shall give Tenant
prior notice, shall provide Tenant, at Landlord’s sole cost and expense, with
improvements at least equal in quality to those in the Premises and shall move
Tenant’s effects to the new space at Landlord’s sole cost and expense at such
time and in such manner as to inconvenience Tenant as little as reasonably
practicable.  In addition, Landlord shall
reimburse Tenant for the reasonable costs and expenses incurred by Tenant in
connection with such relocation (specifically including, but not limited to, (x) Tenant’s
actual, reasonable third-party expenses of moving its property, (y) Tenant’s
actual, reasonable third-party expenses of removing, relocating and
reinstalling Tenant’s security systems, voice and data cabling,
telecommunications equipment and furniture systems in the Replacement Premises,
and (z) the costs of reasonable supplies of replacement stationery and
telephone installations), within fifteen (15) days of Landlord’s receipt of an
reasonably detailed invoice therefor. 
Simultaneously with such relocation of the Premises, the parties shall
immediately execute an amendment to this Lease stating the relocation of the
Premises.  Landlord shall not have the
right to move Tenant to any Replacement Premises pursuant to the terms of this Article 22
following the sixth (6th) anniversary of the Lease Commencement
Date.  Moreover, in the event that Tenant
is prevented from using, and does not use, the Premises, the Replacement
Premises, or any portion thereof, solely and exclusively as a result of
Landlord’s exercise of its rights under this Article 22 (e.g., it is not commercially reasonable to
move all, or a defined portion [e.g., a department], of Tenant’s

 

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furniture, fixtures and
equipment from the Premises to the Relocation Premises without Tenant losing
the use of, and not using, either the Premises or the Relocation Premises, or
portions thereof (as applicable), for more than one (1) day), then as
Tenant’s sole remedy vis-à-vis such event, the Base Rent and Tenant’s Share of
Direct Expenses shall be abated or reduced, as the case may be, after the date
notice is given to Landlord, for such time that Tenant continues to be so
prevented from using, and does not use, the Premises, the Replacement Premises,
or a portion thereof (as applicable), in the proportion of the rentable area of
the portion of the Premises that Tenant is prevented from using and does not
use.  Notwithstanding the foregoing,
Tenant shall use commercially reasonable efforts to cause all removing,
relocating and reinstalling work to be completed in an expedient manner so as
not to increase or otherwise extend the amount of time that Tenant will be
prevent from relocating to, and subsequently using, the Replacement Premises.

 

ARTICLE 23

 

SIGNS

 

23.1         Full
Floors.  Subject to
Landlord’s prior written approval, which approval shall not be unreasonably
withheld, and provided all signs are in keeping with the quality, design and
style of the Building and Project, Tenant, if the Premises comprise an entire
floor of the Building, at its sole cost and expense, may install identification
signage anywhere in the Premises including in the elevator lobby of the
Premises, provided that such signs must not be visible from the exterior of the
Building.

 

23.2         Multi-Tenant
Floors.  If other tenants
occupy space on the floor on which the Premises is located, Tenant’s
identifying signage shall be provided by Landlord, [***] and such signage shall
be comparable to that used by Landlord for other similar floors in the Building
and shall comply with Landlord’s Building standard signage program.

 

23.3         Prohibited
Signage and Other Items. 
Any signs, notices, logos, pictures, names or advertisements which are
installed and that have not been separately approved by Landlord may be removed
without notice by Landlord at the sole expense of Tenant.  Tenant may not install any signs on the
exterior or roof of the Project or the Common Areas.  Any signs, window coverings, or blinds (even
if the same are located behind the Landlord-approved window coverings for the
Building), or other items visible from the exterior of the Premises or
Building, shall be subject to the prior approval of Landlord, in its sole
discretion.

 

23.4         Tenant’s Building-Top Signage.  To the extent
Original Tenant or its Permitted Transferees continue to occupy at least fifty percent
(50%) of the Premises,  Tenant shall, in connection with
Tenant’s lease of the Premises, be entitled to install and maintain
non-exclusive Building-top signage consisting of one (1) building-top sign
identifying Tenant’s name or logo located at the top of the Building in one (1) location
on the side of the Building opposite that currently featuring similar
Building-top signage identifying Hospira, Inc., as more particularly set
forth on Exhibit K
attached hereto (collectively, the “Tenant’s
Building-Top Signage”):

 

23.4.1      Specifications and Permits. 
Tenant’s Building-Top Signage shall set forth Tenant’s name and logo as
determined by Tenant in its sole discretion; provided, however,

 

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in no event shall Tenant’s Building-Top Signage include an “Objectionable
Name,” as that term is defined in Section 23.4.2, of this
Lease.  The graphics, materials, color,
design, lettering, lighting, size, illumination, specifications and exact
location of Tenant’s Building-Top Signage (collectively, the “Building Top  Sign
Specifications”) shall be subject to the prior written approval of
Landlord, which approval shall not be unreasonably withheld, conditioned or
delayed, and shall be consistent and compatible with the quality and nature of
the Project.  For purposes of this Section 23.4.1,
the reference to “name” shall mean name and/or logo.  In addition, Tenant’s Building-Top Signage
shall be subject to Tenant’s receipt of all required governmental permits and
approvals and shall be subject to all Applicable Laws and to any CC&Rs
affecting the Project.  Landlord shall use
commercially reasonable efforts to assist Tenant in obtaining all necessary
governmental permits and approvals for Tenant’s Building-Top Signage.  Tenant hereby acknowledges that,
notwithstanding Landlord’s approval of Tenant’s Building-Top Signage, Landlord
has made no representation or warranty to Tenant with respect to the
probability of obtaining all necessary governmental approvals and permits for
Tenant’s Building-Top Signage.  In the
event Tenant does not receive the necessary governmental approvals and permits
for Tenant’s Building-Top Signage, Tenant’s and Landlord’s rights and
obligations under the remaining TCCs of this Lease shall be unaffected.

 

23.4.2      Objectionable Name.  To the extent Tenant desires to change the
name and/or logo set forth on Tenant’s Building-Top Signage, such name and/or
logo shall not have a name which relates to an entity which is of a character
or reputation, or is associated with a political faction or orientation, which
is inconsistent with the quality of the Project, or which would otherwise
reasonably offend a landlord of the Comparable Buildings (an “Objectionable Name”). 
The parties hereby agree that the following names shall be deemed not to
constitute an Objectionable Name: 
Bridgepoint Education; Ashford Edu.; Ashford.Edu; Ashford Education;
Ashford University; Rockies.Edu; University of the Rockies; BPE; UOR;
Bridgepoint; Centerleaf; and Centerleaf Partners.

 

23.4.3      Termination of Right to Tenant’s Building-Top Signage.  Tenant’s Building-Top Signage rights contained
in this Section 23.4 shall be personal to the Original Tenant and
its Permitted Transferees, and may only be exercised and maintained by such
parties (and not any other assignee, sublessee or other transferee of the
Original Tenant’s interest in this Lease) to the extent (x) they are not
in monetary or material non-monetary default under this Lease (beyond any
applicable notice and cure period), and
(y) if they occupy at least fifty percent (50%) of the entire Premises.

 

23.4.4      Cost and Maintenance.  The
costs of the actual sign comprising Tenant’s Building-Top Signage and the
installation, design, construction, and any and all other costs associated with
Tenant’s Building-Top Signage, including, without limitation, utility charges
and hook-up fees, permits, and maintenance and repairs, shall be the sole
responsibility of Tenant; provided that the costs and fees associated with the
initial installation, design, and construction of such Tenant’s Building-Top
Signage may, at Tenant’s option, be deemed “FF&E,” as that term is set
forth in Section 2.2.1.8 of the Work Letter Agreement.  Should Tenant’s Building-Top Signage require
repairs and/or maintenance, as determined in Landlord’s reasonable judgment,
Landlord shall have the right to provide Notice thereof to Tenant and Tenant
(except as set forth above) shall cause such repairs and/or maintenance to be
performed within ten (10) business days after receipt of such Notice
from Landlord, at Tenant’s sole cost and expense; provided,

 

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however, if such repairs and/or maintenance are reasonably expected to
require longer than ten (10) business days to perform, Tenant shall
commence such repairs and/or maintenance within such ten (10) business
day period and shall diligently prosecute such repairs and maintenance to
completion.  Should Tenant fail to
perform such repairs and/or maintenance within the periods described in the
immediately preceding sentence, Landlord shall, upon the delivery of an
additional five (5) business days’ prior written notice, have the right to
cause such work to be performed and to charge Tenant as Additional Rent for the
cost of such work.  Upon the expiration
or earlier termination of this Lease, Tenant shall, at Tenant’s sole cost and
expense, cause Tenant’s Building-Top Signage to be removed and shall cause the
areas in which such Tenant’s Building-Top Signage was located to be restored to
the condition existing immediately prior to the placement of such Tenant’s
Building-Top Signage (excepting normal wear and tear caused by the sun, rain
and other elements to which such Tenant’s Building-Top Signage is
exposed).  If Tenant fails to timely
remove such Tenant’s Building-Top Signage or to restore the areas in which such
Tenant’s Building-Top Signage was located, as provided in the immediately
preceding sentence, then Landlord may perform such work, and all costs incurred
by Landlord in so performing shall be reimbursed by Tenant to Landlord within
thirty (30) days after Tenant’s receipt of an invoice therefor.  The TCCs of this Section 23.4.4
shall survive the expiration or earlier termination of this Lease.

 

ARTICLE 24

 

COMPLIANCE WITH LAW

 

Tenant shall not do anything or suffer anything to be
done in or about the Premises or the Project which will in any way conflict
with any law, statute, ordinance or other governmental rule, regulation or
requirement now in force or which may hereafter be enacted or promulgated
(collectively, “Applicable Laws”).  At its sole cost and expense, Tenant shall
promptly comply with all such Applicable Laws which relate to (i) Tenant’s
use of the Premises for non-general office use, (ii) the Alterations or Improvements
in the Premises, or (iii) the Base Building, but, as to the Base Building,
only to the extent such obligations are triggered by Tenant’s Alterations, the
Improvements, or use of the Premises for non-general office use.  Should any standard or regulation now or
hereafter be imposed on Landlord or Tenant by a state, federal or local
governmental body charged with the establishment, regulation and enforcement of
occupational, health or safety standards for employers, employees, landlords or
tenants, then Tenant agrees, at its sole cost and expense, to comply promptly
with such standards or regulations.  The
judgment of any court of competent jurisdiction or the admission of Tenant in
any judicial action, regardless of whether Landlord is a party thereto, that
Tenant has violated any of said governmental measures, shall be conclusive of
that fact as between Landlord and Tenant. 
Landlord shall comply with all Applicable Laws relating to the Base
Building and the Common Areas, provided that compliance with such Applicable
Laws is not the responsibility of Tenant under this Lease, and provided further
that Landlord’s failure to comply therewith would prohibit Tenant from
obtaining or maintaining a certificate of occupancy for the Premises, or would
expose Tenant to liability to any of its employees, subtenants, invitees or
customers, or any governmental or quasi-governmental authority, or would
unreasonably and materially affect the safety of Tenant’s employees,
subtenants, invitees, or customers, or create a significant health hazard for
Tenant’s employees.  Landlord shall be
permitted to include in Operating Expenses

 

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any costs or expenses
incurred by Landlord under this Article 24 to the extent consistent
with the terms of Section 4.2.4, above.

 

ARTICLE 25

 

LATE CHARGES

 

If any installment of Rent or any other sum due from
Tenant shall not be received by Landlord or Landlord’s designee when due, then
Tenant shall pay to Landlord a late charge equal to [***] percent ([***]%)
of the overdue amount plus any reasonable attorneys’ fees incurred by Landlord
by reason of Tenant’s failure to pay Rent and/or other charges when due
hereunder; provided, however, with regard to the first [***] such
failures in any [***] month period, Landlord will
waive such late charge to the extent Tenant cures such failure within five (5) business
days following Tenant’s receipt of written notice from Landlord that the same
was not received when due. 
The late charge shall be deemed Additional Rent and the right to require
it shall be in addition to all of Landlord’s other rights and remedies
hereunder or at law and shall not be construed as liquidated damages or as
limiting Landlord’s remedies in any manner. 
In addition to the late charge described above, any Rent or other
amounts owing hereunder which are not paid within ten (10) days after the
date they are due shall bear interest from the date when due until paid at the “Interest
Rate.”  For purposes of this Lease, the “Interest Rate” shall be an annual rate
equal to the lesser of (i) the annual “Bank
Prime Loan” rate cited in the Federal Reserve Statistical Release
Publication H.15(519), published weekly (or such other comparable index as
Landlord and Tenant shall reasonably agree upon if such rate ceases to be
published), plus four (4) percentage points, and (ii) the highest
rate permitted by applicable law.

 

ARTICLE 26

 

LANDLORD’S RIGHT TO CURE DEFAULT; PAYMENTS BY
TENANT

 

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

 

26.2         Tenant’s Reimbursement.  Except as may be specifically provided to the
contrary in this Lease, Tenant shall pay to Landlord, upon delivery by Landlord
to Tenant of statements therefor:  (i) sums
equal to expenditures reasonably made and obligations incurred by Landlord in
connection with the remedying by Landlord of Tenant’s defaults pursuant to the
provisions of Section 26.1; (ii) sums equal to all losses,
costs, liabilities, damages and expenses referred to in Article 10
of this Lease; and (iii) sums equal to all expenditures made and
obligations incurred by Landlord in collecting or attempting to collect the
Rent or in enforcing or attempting to enforce any rights of Landlord under this
Lease or pursuant to law, including, without limitation,

 

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all
legal fees and other amounts so expended. 
Tenant’s obligations under this Section 26.2 shall survive
the expiration or sooner termination of the Lease Term.

 

ARTICLE 27

 

ENTRY BY LANDLORD

 

Landlord reserves the right at all reasonable times
(during Building Hours with respect to items (i) and (ii) below) and
upon at least twenty-four (24) hours prior notice to Tenant (except in the case
of an emergency) to enter the Premises to (i) inspect them; (ii) show
the Premises to prospective purchasers, or to current or prospective
mortgagees, ground or underlying lessors or insurers, or during the last twelve
(12) months of the Lease Term, to prospective tenants; (iii) post notices
of nonresponsibility; or (iv) alter, improve or repair the Premises or the
Building, or for structural alterations, repairs or improvements to the
Building or the Building’s systems and equipment; provided, however, Tenant may
elect to have a representative accompany Landlord during any such entry;
provided further, however, Landlord shall not be required to delay any such
entry due to the unavailability of a Tenant representative.  Notwithstanding anything to the contrary
contained in this Article 27, Landlord may enter the Premises at
any time to (A) perform regularly scheduled services required of Landlord,
including janitorial service; (B) take possession due to any breach of
this Lease in the manner provided herein; and (C) perform any covenants of
Tenant which Tenant fails to perform. 
Landlord may make any such entries without the abatement of Rent, except
as otherwise provided in this Lease, and may take such reasonable steps as required
to accomplish the stated purposes; provided, however, except for (w) taking
possession of the Premises due to any breach of this Lease, (x) emergencies,
(y) repairs, alterations, improvements or additions required by
governmental or quasi-governmental authorities or court order or decree, or (z) repairs
which are the obligation of Tenant hereunder, any such entry shall be performed
in a manner so as not to unreasonably interfere with Tenant’s use of the
Premises and shall be performed after normal business hours if reasonably
practical.  With respect to items (y) and
(z) above, Landlord shall use commercially reasonable efforts to not
materially interfere with Tenant’s use of, or access to, the Premises.  Except as otherwise set forth in Section 3.2,
Tenant hereby waives any claims for damages or for any injuries or
inconvenience to or interference with Tenant’s business, lost profits, any loss
of occupancy or quiet enjoyment of the Premises, and any other loss occasioned
thereby.  For each of the above purposes,
Landlord shall at all times have a key with which to unlock all the doors in
the Premises, excluding Tenant’s vaults, safes and special security areas
designated in advance by Tenant.  In an
emergency, Landlord shall have the right to use any means that Landlord may
deem proper to open the doors in and to the Premises.  Any entry into the Premises by Landlord in
the manner hereinbefore described shall not be deemed to be a forcible or
unlawful entry into, or a detainer of, the Premises, or an actual or
constructive eviction of Tenant from any portion of the Premises.  No provision of this Lease shall be construed
as obligating Landlord to perform any repairs, alterations or decorations
except as otherwise expressly agreed to be performed by Landlord herein.

 

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ARTICLE 28

 

TENANT PARKING

 

Tenant shall be entitled to utilize, [***]
commencing on the Lease Commencement Date, the amount of parking passes set
forth in Section 9 of the Summary, (provided that any visitor
parking spaces and/or handicap parking spaces required by Applicable Laws due
to Tenant’s occupancy shall be included as part of the number passes provided
to Tenant) on a monthly basis throughout the Lease Term, which parking passes
shall pertain to the Project parking facility. 
As identified in Section 9 of the Summary, Tenant shall rent
six (6) parking passes on a monthly basis throughout the Lease Term (the “Reserved Passes”), each relating to one (1) reserved
parking space, three (3) of which shall be located on the second (2nd) level of that certain multi-tenant three (3) level
parking structure located in the Project, and three (3) of which shall be
located on the third (3rd) level of that same parking
structure.  The location of each of the
foregoing Reserved Passes is identified on Exhibit J
attached hereto.  Tenant shall pay to
Landlord for each Reserved Pass so rented and on a monthly basis, the
then-prevailing rate charged from time to time at the location of such parking
passes (the initial amount of which is acknowledged by the parties to be [***].  Tenant shall be responsible for the full
amount of any taxes imposed by any governmental authority in connection with
the renting of such parking passes by Tenant or the use of the parking facility
by Tenant.  Tenant’s continued right to
use the parking passes is conditioned upon Tenant abiding by all rules and
regulations which are prescribed from time to time for the orderly operation
and use of the parking facility where the parking passes are located, including
any sticker or other identification system established by Landlord, Tenant’s
exercise of commercially reasonable efforts to cause Tenant’s employees and
visitors to also comply with such rules and regulations and Tenant not
being in default under this Lease.  To
the extent reasonably necessary to ensure Tenant’s parking rights and
obligations hereunder are readily available to and maintained by Tenant and its
employees, Landlord shall establish a sticker or other identification system
for the Project; provided, however, to the extent the foregoing measures prove
insufficient, Landlord shall additionally implement, at Tenant’s sole cost and
expense, reasonable access control and/or other parking management services or
systems with regard to such Project parking facilities.  Landlord specifically reserves the right to
change the size, configuration, design, layout and all other aspects of the
Project parking facility at any time and Tenant acknowledges and agrees that
Landlord may, without incurring any liability to Tenant and without any
abatement of Rent under this Lease (except to the extent expressly set forth in
Section 3.2 of this Lease, above), from time to time, close-off or
restrict access to the Project parking facility for purposes of permitting or
facilitating any such construction, alteration or improvements.  During any period of closure of or restricted
access to the Project parking areas, Landlord shall be responsible to provide
Tenant with reasonable replacement parking in reasonable proximity and with
reasonable access to the Premises. 
Landlord may delegate its responsibilities hereunder to a parking
operator in which case such parking operator shall have all the rights of
control attributed hereby to the Landlord. 
The parking passes rented by Tenant pursuant to this Article 28
are provided to Tenant solely for use by Tenant’s own personnel, employees,
agents, contractors or invitees and such passes may not be transferred,
assigned, subleased or otherwise alienated by Tenant without Landlord’s prior
approval.

 

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ARTICLE 29

 

MISCELLANEOUS PROVISIONS

 

29.1         Terms;
Captions.  The words “Landlord”
and “Tenant” as used herein shall include the plural as well as the
singular.  The necessary grammatical
changes required to make the provisions hereof apply either to corporations or
partnerships or individuals, men or women, as the case may require, shall in
all cases be assumed as though in each case fully expressed.  The captions of Articles and Sections are for
convenience only and shall not be deemed to limit, construe, affect or alter
the meaning of such Articles and Sections.

 

29.2         Binding
Effect.  Subject to all
other provisions of this Lease, each of the covenants, conditions and
provisions of this Lease shall extend to and shall, as the case may require,
bind or inure to the benefit not only of Landlord and of Tenant, but also of
their respective heirs, personal representatives, successors or assigns,
provided this clause shall not permit any assignment by Tenant contrary to the
provisions of Article 14 of this Lease.

 

29.3         No
Air Rights.  No rights to
any view or to light or air over any property, whether belonging to Landlord or
any other person, are granted to Tenant by this Lease.  If at any time any windows of the Premises
are temporarily darkened or the light or view therefrom is obstructed by reason
of any repairs, improvements, maintenance or cleaning in or about the Project,
the same shall be without liability to Landlord and without any reduction or diminution
of Tenant’s obligations under this Lease.

 

29.4         Modification
of Lease.  Should any
current or prospective mortgagee or ground lessor for the Building or Project
require a modification of this Lease, which modification will not cause an
increased cost or expense to Tenant or in any other way materially and
adversely change the rights and obligations of Tenant hereunder, then and in
such event, Tenant agrees that this Lease may be so modified and agrees to
execute whatever documents are reasonably required therefor and to deliver the
same to Landlord within ten (10) days following a request therefor.  At the request of Landlord or any mortgagee
or ground lessor, Tenant agrees to execute a short form of Lease and deliver
the same to Landlord within ten (10) days following the request therefor.

 

29.5         Transfer
of Landlord’s Interest. 
Tenant acknowledges that Landlord has the right to transfer all or any
portion of its interest in the Project or Building and in this Lease, and
Tenant agrees that in the event of any such transfer, Landlord shall
automatically be released from all liability under this Lease that accrues
after the effective date of the transfer and Tenant agrees to look solely to
such transferee for the performance of Landlord’s obligations hereunder after
the date of such transfer, provided such transferee shall have fully assumed in
writing all obligations of this Lease to be performed by Landlord after the
date of such transfer, including the return of any Security Deposit, and Tenant
shall attorn to such transferee.  In
addition, Landlord shall be released from all liability that accrues prior to
the date of such transfer if such transferee assumes such liability in writing.  Tenant further acknowledges that Landlord may
assign its interest in this Lease to a mortgage lender as additional security
and agrees that such an assignment shall not release Landlord from its
obligations hereunder and that Tenant shall continue to look to Landlord for
the performance of its obligations hereunder.

 

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29.6         Prohibition
Against Recording.  Except
as provided in Section 29.4 of this Lease, neither Landlord nor
Tenant shall record this Lease, but upon request by Tenant, Landlord shall
execute and deliver to Tenant, for Tenant to record, a Memorandum of Lease in
the form attached hereto as Exhibit I
(the “Memorandum”).  Within 10 days after the expiration or earlier
termination of this Lease, Tenant shall enter into such documentation as is
reasonably required by Landlord to remove the memorandum of record.  The terms of this Section 29.6
shall survive the expiration or earlier termination of this Lease.

 

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

 

29.8         Relationship
of Parties.  Nothing contained
in this Lease shall be deemed or construed by the parties hereto or by any
third party to create the relationship of principal and agent, partnership,
joint venturer or any association between Landlord and Tenant.

 

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

 

29.10       Time
of Essence.  Time is of
the essence with respect to the performance of every provision of this Lease in
which time of performance is a factor.

 

29.11       Partial
Invalidity.  If any term,
provision or condition contained in this Lease shall, to any extent, be invalid
or unenforceable, the remainder of this Lease, or the application of such term,
provision or condition to persons or circumstances other than those with
respect to which it is invalid or unenforceable, shall not be affected thereby,
and each and every other term, provision and condition of this Lease shall be
valid and enforceable to the fullest extent possible permitted by law.

 

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

 

29.13       Landlord
Exculpation.  The
liability of Landlord or the Landlord Parties to Tenant for any default by
Landlord under this Lease or arising in connection herewith or with Landlord’s
operation, management, leasing, repair, renovation, alteration or any other
matter relating to the Project or the Premises shall be limited solely and
exclusively to an amount which is equal to the equity interest of Landlord in
the Building.  Neither Landlord, nor any
of the Landlord Parties shall have any personal liability therefor, and Tenant
hereby expressly waives and releases such personal liability on behalf of
itself and all persons claiming by, through or under Tenant.  The limitations of liability contained in
this Section 29.13 shall inure to the benefit of Landlord’s and the
Landlord Parties’ present and future partners, beneficiaries, officers,

 

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directors,
trustees, shareholders, agents and employees, and their respective partners,
heirs, successors and assigns.  Notwithstanding any contrary provision in
Lease, Landlord agrees (i) that the partners, shareholders, principals and
members of Tenant shall have no personal liability in respect of (or arising
out of or relating to) the obligations of Tenant under this Lease; and (ii) to
look only to assets of Tenant for satisfaction of Landlord’s remedies arising
out of the obligations of Tenant under this Lease, and that no property or
assets of any partner, shareholder, principal or member of Tenant shall be
subject to levy, execution or other enforcement procedure for satisfaction of
Landlord’s remedies arising out of such obligations; provided, however nothing
herein shall prevent Landlord from obtaining, entering and enforcing a judgment
against, from and out of the assets of Tenant with respect to any obligations
of Tenant under this Lease.  Under no
circumstances shall any present or future partner of Landlord (if Landlord is a
partnership), or trustee or beneficiary (if Landlord or any partner of Landlord
is a trust), have any liability for the performance of Landlord’s obligations
under this Lease.  Notwithstanding any
contrary provision herein, neither Landlord nor the Landlord Parties shall be
liable under any circumstances for injury or damage to, or interference with,
Tenant’s business, including but not limited to, loss of profits, loss of rents
or other revenues, loss of business opportunity, loss of goodwill or loss of
use, in each case, however occurring.

 

29.14       Entire Agreement.  It is understood and
acknowledged that there are no oral agreements between the parties hereto
affecting this Lease and this Lease constitutes the parties’ entire agreement
with respect to the leasing of the Premises and supersedes and cancels any and
all previous negotiations, arrangements, brochures, agreements and
understandings, if any, between the parties hereto or displayed by Landlord to
Tenant with respect to the subject matter thereof, and none thereof shall be
used to interpret or construe this Lease. 
None of the terms, covenants, conditions or provisions of this Lease can
be modified, deleted or added to except in writing signed by the parties
hereto.

 

29.15       Right to Lease.  Landlord reserves
the absolute right to effect such other tenancies in the Project as Landlord in
the exercise of its sole business judgment shall determine to best promote the
interests of the Building or Project. 
Tenant does not rely on the fact, nor does Landlord represent, that any
specific tenant or type or number of tenants shall, during the Lease Term,
occupy any space in the Building or Project.

 

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

 

29.17       Waiver of Redemption by Tenant.  Tenant hereby
waives, for Tenant and for all those claiming under Tenant, any and all rights
now or hereafter existing to redeem by order or

 

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judgment
of any court or by any legal process or writ, Tenant’s right of occupancy of
the Premises after any termination of this Lease.

 

29.18       Notices.  All notices,
demands, statements, designations, approvals or other communications
(collectively, “Notices”) given or required to be
given by either party to the other hereunder or by law shall be in writing,
shall be (A) sent by United States certified or registered mail, postage
prepaid, return receipt requested (“Mail”), (B) transmitted
by telecopy, if such telecopy is promptly followed by a Notice sent by Mail, (C) delivered
by a nationally recognized overnight courier, or (D) delivered
personally.  Any Notice shall be sent,
transmitted, or delivered, as the case may be, to Tenant at the appropriate
address set forth in Section 10 of the Summary, or to such other
place as Tenant may from time to time designate in a Notice to Landlord, or to
Landlord at the addresses set forth below, or to such other places as Landlord
may from time to time designate in a Notice to Tenant.  Any Notice will be deemed given (i) three
(3) days after the date it is posted if sent by Mail, (ii) the date
the telecopy is transmitted, (iii) the date the overnight courier delivery
is made, or (iv) the date personal delivery is made or attempted to be
made.  If Tenant is notified of the
identity and address of Landlord’s mortgagee or ground or underlying lessor,
Tenant shall give to such mortgagee or ground or underlying lessor written
notice of any default by Landlord under the terms of this Lease by registered
or certified mail, and such mortgagee or ground or underlying lessor shall be
given a reasonable opportunity to cure such default prior to Tenant’s
exercising any remedy available to Tenant. 
As of the date of this Lease, any Notices to Landlord must be sent,
transmitted, or delivered, as the case may be, to the following addresses:

 

Kilroy
Realty, L.P.

c/o Kilroy Realty Corporation

12200 West Olympic Boulevard, Suite 200

Los Angeles, California 90064

Attention:  Legal Department

 

with
copies to:

 

Kilroy
Realty Corporation

12200 West Olympic
Boulevard, Suite 200

Los Angeles, California 90064

Attention:  Mr. John Fucci

 

and

 

Kilroy Realty
Corporation

13520 Evening Creek Drive North, Suite 120

San Diego, California 92128

Attention:  Mr. Michael Nelson

 

and

 

Allen Matkins Leck
Gamble Mallory & Natsis LLP

1901 Avenue of the
Stars, Suite 1800

Los Angeles,
California 90067

 

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Attention:  Anton N. Natsis, Esq.

 

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

 

29.20       Authority.  If Tenant is a
corporation, trust or partnership, each individual executing this Lease on
behalf of Tenant hereby represents and warrants that Tenant is a duly formed
and existing entity qualified to do business in California and that Tenant has
full right and authority to execute and deliver this Lease and that each person
signing on behalf of Tenant is authorized to do so.  In such event, Tenant shall, within ten (10) days
after execution of this Lease, deliver to Landlord satisfactory evidence of
such authority and, if a corporation, upon demand by Landlord, also deliver to
Landlord satisfactory evidence of (i) good standing in Tenant’s state of
incorporation and (ii) qualification to do business in California.

 

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

 

29.22       Governing Law; WAIVER OF TRIAL BY JURY.  This Lease shall be
construed and enforced in accordance with the laws of the State of
California.  IN ANY ACTION OR PROCEEDING
ARISING HEREFROM, LANDLORD AND TENANT HEREBY CONSENT TO (I) THE
JURISDICTION OF ANY COMPETENT COURT WITHIN THE STATE OF CALIFORNIA, (II) SERVICE
OF PROCESS BY ANY MEANS AUTHORIZED BY CALIFORNIA LAW, AND (III) IN THE
INTEREST OF SAVING TIME AND EXPENSE, TRIAL WITHOUT A JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE
OTHER OR THEIR SUCCESSORS IN RESPECT OF ANY MATTER ARISING OUT OF OR IN
CONNECTION WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT’S
USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM FOR INJURY OR DAMAGE, OR ANY
EMERGENCY OR STATUTORY REMEDY.  IN THE
EVENT LANDLORD COMMENCES ANY SUMMARY PROCEEDINGS OR ACTION FOR NONPAYMENT OF
BASE RENT OR ADDITIONAL RENT, TENANT SHALL NOT INTERPOSE ANY COUNTERCLAIM OF
ANY NATURE OR DESCRIPTION (UNLESS SUCH COUNTERCLAIM SHALL BE MANDATORY) IN ANY
SUCH PROCEEDING OR ACTION, BUT SHALL BE RELEGATED TO AN INDEPENDENT ACTION AT
LAW.

 

29.23       Submission of Lease.  Submission of this
instrument for examination or signature by Tenant does not constitute a
reservation of, option for or option to lease, and it is not effective as a
lease or otherwise until execution and delivery by both Landlord and Tenant.

 

29.24       Brokers.  Landlord and Tenant
hereby warrant to each other that they have had no dealings with any real
estate broker or agent in connection with the negotiation of this Lease,
excepting only the real estate brokers or agents specified in Section 12
of the Summary (the

 

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“Brokers”), and that they know of no other real estate broker
or agent who is entitled to a commission in connection with this Lease.  Landlord shall pay the Brokers pursuant to
the terms of separate commission agreements. 
Each party agrees to indemnify and defend the other party against and
hold the other party harmless from any and all claims, demands, losses,
liabilities, lawsuits, judgments, costs and expenses (including without
limitation reasonable attorneys’ fees) with respect to any leasing commission
or equivalent compensation alleged to be owing on account of any dealings with
any real estate broker or agent, other than the Brokers, occurring by, through,
or under the indemnifying party.

 

29.25       Independent Covenants.  This Lease shall be
construed as though the covenants herein between Landlord and Tenant are
independent and not dependent and Tenant hereby expressly waives the benefit of
any statute to the contrary and agrees that if Landlord fails to perform its
obligations set forth herein, Tenant shall not be entitled to make any repairs
or perform any acts hereunder at Landlord’s expense or to any setoff of the
Rent or other amounts owing hereunder against Landlord.

 

29.26       Project or Building Name and Signage.  Subject to the terms
of the 13480 Lease, the 13500 Lease, and this Lease, Landlord shall have the
right at any time to change the name of the Project or Building and to install,
affix and maintain any and all signs on the exterior and on the interior of the
Project or Building as Landlord may, in Landlord’s sole discretion,
desire.  Tenant shall not use the name of
the Project or Building or use pictures or illustrations of the Project or
Building in advertising or other publicity or for any purpose other than as the
address of the business to be conducted by Tenant in the Premises, without the
prior written consent of Landlord.

 

29.27       Counterparts.  This Lease may be
executed in counterparts with the same effect as if both parties hereto had
executed the same document.  Both
counterparts shall be construed together and shall constitute a single lease.

 

29.28       Confidentiality.  Tenant acknowledges
that the content of this Lease and any related documents are confidential
information.  Tenant shall keep such
confidential information strictly confidential and shall not disclose such
confidential information to any person or entity other than Tenant’s financial,
legal, and space planning consultants, and except as required to be disclosed
by any Applicable Laws including, without limitation, any such Applicable Laws
pertaining to Tenant in the event Tenant is a publicly traded company on one of
the nationally recognized security exchanges (such as, without limitation, NYSE
or NASDAQ), or any disclosures required by the Securities and Exchange
Commission.

 

29.29       Transportation Management.  Tenant shall fully
comply with all present or future programs intended to manage parking,
transportation or traffic in and around the Building, and in connection
therewith, Tenant shall take responsible action for the transportation planning
and management of all employees located at the Premises by working directly with
Landlord, any governmental transportation management organization or any other
transportation-related committees or entities.

 

29.30       Building Renovations.  It is specifically
understood and agreed that Landlord has made no representation or warranty to
Tenant and has no obligation and has made no promises to

 

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alter,
remodel, improve, renovate, repair or decorate the Premises, Building, or any
part thereof and that no representations respecting the condition of the
Premises or the Building have been made by Landlord to Tenant except as
specifically set forth herein or in the Work Letter Agreement.  However, Tenant hereby acknowledges that
Landlord is currently renovating or may during the Lease Term renovate,
improve, alter, or modify (collectively, the “Renovations”)
the Project, the Building and/or the Premises including without limitation the
parking structure, common areas, systems and equipment, roof, and structural
portions of the same, which Renovations may include, without limitation, (i) installing
sprinklers in the Building common areas and tenant spaces, (ii) modifying
the common areas and tenant spaces to comply with applicable laws and
regulations, including regulations relating to the physically disabled, seismic
conditions, and building safety and security, and (iii) installing new
floor covering, lighting, and wall coverings in the Building common areas, and
in connection with any Renovations, Landlord may, among other things, erect
scaffolding or other necessary structures in the Building, limit or eliminate
access to portions of the Project, including portions of the common areas, or
perform work in the Building, which work may create noise, dust or leave debris
in the Building.  Tenant hereby agrees
that such Renovations and Landlord’s actions in connection with such
Renovations shall in no way constitute a constructive eviction of Tenant nor
entitle Tenant to any abatement of Rent. 
Landlord shall have no responsibility or for any reason be liable to
Tenant for any direct or indirect injury to or interference with Tenant’s
business arising from the Renovations, nor shall Tenant be entitled to any
compensation or damages from Landlord for loss of the use of the whole or any
part of the Premises or of Tenant’s personal property or improvements resulting
from the Renovations or Landlord’s actions in connection with such Renovations,
or for any inconvenience or annoyance occasioned by such Renovations or
Landlord’s actions.

 

29.31       No Violation.  Tenant hereby
warrants and represents that neither its execution of nor performance under
this Lease shall cause Tenant to be in violation of any agreement, instrument,
contract, law, rule or regulation by which Tenant is bound, and Tenant
shall protect, defend, indemnify and hold Landlord harmless against any claims,
demands, losses, damages, liabilities, costs and expenses, including, without
limitation, reasonable attorneys’ fees and costs, arising from Tenant’s breach
of this warranty and representation.

 

29.32       Communications and Computer Lines.  Tenant may install,
maintain, replace, remove or use any communications or computer wires and
cables (collectively, the “Lines”) at the
Project in or serving the Premises, provided that (i) Tenant shall obtain
Landlord’s prior written consent, use an experienced and qualified contractor
reasonably approved by Landlord, and comply with all of the other provisions of
Articles 7 and 8 of this Lease, (ii) an acceptable
number of spare Lines and space for additional Lines shall be maintained for
existing and future occupants of the Project, as determined in Landlord’s
reasonable opinion, (iii) the Lines therefor (including riser cables)
shall be (x) appropriately insulated to prevent excessive electromagnetic
fields or radiation, (y) surrounded by a protective conduit reasonably
acceptable to Landlord, and (z) identified in
accordance with the “Identification Requirements,” as that term is set forth
hereinbelow, (iv) any new or existing Lines
servicing the Premises shall comply with all applicable governmental laws and
regulations, (v) as a condition to permitting the installation of new
Lines, Tenant shall remove existing
Lines located in or serving the Premises and repair any damage in connection
with such removal, and (vi) Tenant shall pay all costs in connection
therewith.  All Lines shall
be clearly marked with adhesive plastic labels (or plastic tags attached to such
Lines with wire) to show Tenant’s name, suite number, telephone number and the
name

 

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of the person to contact in the case of an
emergency (A) every four feet (4’) outside the Premises (specifically
including, but not limited to, the electrical room risers and other Common
Areas), and (B) at the Lines’ termination point(s) (collectively, the
“Identification Requirements”).  Landlord
reserves the right to require that Tenant remove any Lines located in or
serving the Premises which are installed in violation of these provisions, or
which are at any time (1) are in violation of any Applicable Laws, (2) are
inconsistent with then-existing industry standards (such as the standards
promulgated by the National Fire Protection Association (e.g., such
organization’s “2002 National Electrical Code”)), or (3) otherwise represent a dangerous or potentially dangerous condition.

 

29.33       Hazardous Substances.

 

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

 

29.33.2    Compliance with Environmental Laws. 
Landlord covenants that during the Lease Term, Landlord shall comply
with all Environmental Laws in accordance with, and as required by, the TCCs of
Article 24 of this Lease. 
Tenant represents and warrants that, except as herein set forth, it will
not use, store or dispose of any Hazardous Materials in or on the
Premises.  However, notwithstanding the
preceding sentence, Landlord agrees that Tenant may use, store and properly
dispose of commonly available household cleaners and chemicals to maintain the
Premises and Tenant’s routine office operations (such as printer toner and
copier toner) (hereinafter the “Permitted
Chemicals”).  Landlord and
Tenant acknowledge that any or all of the Permitted Chemicals described in this
paragraph may constitute Hazardous Materials. 
However, Tenant may use, store and dispose of same, provided that in
doing so, Tenant fully complies with all Environmental Laws.

 

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29.33.3    Landlord’s Right of Environmental Audit.  Landlord may, upon reasonable
notice to Tenant, be granted access to and enter the Premises no more than once
annually to perform or cause to have performed an environmental inspection,
site assessment or audit.  Such
environmental inspector or auditor may be chosen by Landlord, in its sole
discretion, and be performed at Landlord’s sole expense.  To the extent that the report prepared upon
such inspection, assessment or audit, indicates the presence of Hazardous
Materials in violation of Environmental Laws, or provides recommendations or
suggestions to prohibit the release, discharge, escape or emission of any
Hazardous Materials at, upon, under or within the Premises, or to comply with
any Environmental Laws, Tenant shall promptly, at Tenant’s sole expense, comply
with such recommendations or suggestions, including, but not limited to
performing such additional investigative or subsurface investigations or
remediation(s) as recommended by such inspector or auditor.  Notwithstanding the above, if at any time,
Landlord has actual notice or reasonable cause to believe that Tenant has
violated, or permitted any violations of any Environmental Law, then Landlord
will be entitled to perform its environmental inspection, assessment or audit
at any time, notwithstanding the above mentioned annual limitation, and Tenant
must reimburse Landlord for the reasonable cost or fees incurred for such as
Additional Rent.

 

29.33.4    Indemnifications. 
Landlord agrees to indemnify, defend, protect and hold harmless the
Tenant Parties from and against any liability, obligation, damage or costs,
including without limitation, attorneys’ fees and costs, resulting directly or
indirectly from any use, presence, removal or disposal of any Hazardous
Materials to the extent such liability, obligation, damage or costs was a
result of actions caused or permitted by Landlord or a Landlord Party.   Tenant agrees to indemnify, defend, protect
and hold harmless the Landlord Parties from and against any liability,
obligation, damage or costs, including without limitation, attorneys’ fees and
costs, resulting directly or indirectly from any use, presence, removal or
disposal of any Hazardous Materials or breach of any provision of this section,
to the extent such liability, obligation, damage or costs was a result of
actions caused or permitted by Tenant or a Tenant Party.

 

29.34       Development of the Project.

 

29.34.1         Subdivision.  Landlord reserves
the right to further subdivide all or a portion of the Project.  Tenant agrees to execute and deliver, upon
demand by Landlord and in the form reasonably requested by Landlord, any
additional documents needed to conform this Lease to the circumstances
resulting from such subdivision.

 

29.34.2         The Other Improvements.  If portions of the
Project or property adjacent to the Project (collectively, the “Other Improvements”) are owned by an entity other than
Landlord, Landlord, at its option, may enter into an agreement with the owner
or owners of any or all of the Other Improvements to provide (i) for
reciprocal rights of access and/or use of the Project and the Other
Improvements, (ii) for the common management, operation, maintenance,
improvement and/or repair of all or any portion of the Project and the Other
Improvements, (iii) for the allocation of a portion of the Direct Expenses
to the Other Improvements and the operating expenses and taxes for the Other
Improvements to the Project, and (iv) for the use or improvement of the
Other Improvements and/or the

 

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Project
in connection with the improvement, construction, and/or excavation of the
Other Improvements and/or the Project, provided that in no event shall any such actions by
Landlord result in any increased Rent above that which would have been due had
Landlord not entered into such agreements, or any costs or charges upon Tenant,
or otherwise materially and adversely affect Tenant’s right or obligations
under this Lease.  Nothing
contained herein shall be deemed or construed to limit or otherwise affect Landlord’s
right to convey all or any portion of the Project or any other of Landlord’s
rights described in this Lease.

 

29.34.3         Construction of Project and Other
Improvements.  Tenant acknowledges that portions of the
Project and/or the Other Improvements may be under construction following
Tenant’s occupancy of the Premises, and that such construction may result in
levels of noise, dust, obstruction of access, etc. which are in excess of that
present in a fully constructed project. 
Tenant hereby waives any and all rent offsets (except as specifically set forth in this
Lease) in connection with such construction. 
Furthermore, provided that Landlord employs commercially reasonable
efforts to minimize interference with the conduct of Tenant’s business, Tenant hereby
waives any
claims of constructive eviction which may arise in connection with such
construction.

 

29.35       No Discrimination.  Tenant covenants by
and for itself, its heirs, executors, administrators and assigns, and all
persons claiming under or through Tenant, and this Lease is made and accepted
upon and subject to the following conditions: 
that there shall be no discrimination against or segregation of any
person or group of persons, on account of race, color, creed, sex, religion,
marital status, ancestry or national origin in the leasing, subleasing,
transferring, use, or enjoyment of the Premises, nor shall Tenant itself, or
any person claiming under or through Tenant, establish or permit such practice
or practices of discrimination or segregation with reference to the selection,
location, number, use or occupancy, of tenants, lessees, sublessees, subtenants
or vendees in the Premises.

 

ARTICLE 30

 

COMMUNICATIONS
EQUIPMENT

 

30.1         Subject to all governmental laws, rules and
regulations, Tenant and Tenant’s contractors (which shall first be reasonably
approved by Landlord) shall have the non-exclusive right and access to install,
repair, replace, remove, operate and maintain up to one (1) so-called “satellite
dish” or another similar device, such as an antenna no greater than thirty-six
(36) inches in diameter and weighing no more than fifty (50) pounds, together
with all cable, wiring, conduits and related equipment (collectively, “Communication Equipment”), for the purpose
of receiving and sending radio, television, computer, telephone or other
communication signals, to the extent reasonably necessary to support Tenant’s
use of the Premises, at a location on the roof of the Building designated by
Landlord and reasonably approved by Tenant; provided, however, in no event
shall Tenant be permitted to use an area of the roof of the Building in excess
of its proportionate share of the Landlord determined usable area of the roof
of the Building, as such proportionate share shall be calculated based on the rentable
square footage of the Building then occupied by Tenant.  There shall be no rental charge, license fee
or similar charge to Tenant for the right to install and maintain such
Communication Equipment at the Building during the initial Lease Term or any
extension thereof.  Further, Tenant shall
have the right of access, consistent with this Article 30, to the
area where the Communication Equipment is located for

 

68

 

*** Confidential
portions of this document have been redacted and filed separately with the
Commission.

 

the purposes of maintaining, repairing, testing and replacing the
same.  Landlord shall have the right to
require Tenant to relocate the Communication Equipment at any time to another
location on the roof of the Building, which location is reasonably acceptable
to Tenant.  Unless Landlord elects to
perform such penetrations at Tenant’s sole cost and expense, Tenant shall
retain Landlord’s designated roofing contractor to make any necessary penetrations
and associated repairs to the roof in order to preserve Landlord’s roof
warranty.  Tenant’s installation and
operation of the Communication Equipment shall be governed by the following
terms and conditions:

 

30.1.1      Tenant’s
right to install, replace, repair, remove, operate and maintain the
Communication Equipment shall be subject to all Applicable Laws and Landlord
makes no representation that such Applicable Laws permit such installation and
operation;

 

30.1.2      All
plans and specifications for the Communication Equipment shall be subject to
Landlord’s reasonable approval, the parties hereto acknowledge and agree that
it shall be reasonable for Landlord to require Tenant to leave adequate
capacity for other tenants of the Building to install communications equipment
of their own;

 

30.1.3      All
costs of installation, operation and maintenance of the Communication Equipment
and any necessary related equipment (including, without limitation, costs of
obtaining any necessary permits and connections to the Building’s electrical
system) shall be borne by Tenant;

 

30.1.4      It is
expressly understood that Tenant’s rights are superior to any later users of
the roof area and subject to the foregoing, Landlord retains the right to use
the roof of the Building for any purpose whatsoever (including granting rights
to third parties to utilize any portion of the roof not utilized by Tenant).

 

30.1.5      Tenant
shall use the Communication Equipment so as not to cause any interference to
other pre-existing tenants at the Project or with any other such tenant’s
communication equipment, and not to damage the Project or interfere with the
normal operation of the Project and Tenant hereby agrees to indemnify, defend
and hold Landlord harmless from and against any and all claims, costs, damages,
expenses and liabilities (including attorneys’ fees) arising out of Tenant’s
failure to comply with the provisions of this Section 30.5, except
to the extent same is caused by the gross negligence or willful misconduct of
Landlord which is not covered by the insurance carried by Tenant under this
Lease (or which would not be covered by the insurance required to be carried by
Tenant under this Lease);

 

30.1.6      For
the purposes of determining Tenant’s obligations with respect to its use of the
roof of the Building herein provided, all of the provisions of this Lease
relating to compliance with requirements as to insurance, indemnity, and
compliance with laws shall apply to the installation, use and maintenance of
the Communication Equipment; provided, however, Tenant shall only be provided
access to the roof after prior written notice to Landlord and subject to
Landlord’s reasonable rules and restrictions regarding access (including,
at Landlord’s option, the requirement that Tenant be accompanied by a
representative of Landlord during such access). 
Landlord shall not have any obligations with respect to the
Communication Equipment.  Landlord makes
no representation that the Communication Equipment will be able to receive or

 

69

 

*** Confidential
portions of this document have been redacted and filed separately with the
Commission.

 

transmit communication signals without interference or disturbance and
Tenant agrees that Landlord shall not be liable to Tenant therefor;

 

30.2         Tenant shall (i) be solely
responsible for any damage caused as a result of the Communication Equipment, (ii)
promptly pay any tax, license or permit fees charged pursuant to any laws or
regulations in connection with the installation, maintenance or use of the
Communication Equipment and comply with all precautions and safeguards required
by all applicable governmental authorities, and (iii) pay for all
necessary repairs, replacements to or maintenance of the Communication Equipment,
except to the extent such repairs, replacements to or maintenance of the
Communication Equipment is necessitated as a result of the gross negligence or
willful misconduct of Landlord or Landlord Parties;

 

30.3         The Communication Equipment shall remain
the sole property of Tenant.  Tenant
shall remove the Communication Equipment and related equipment at Tenant’s sole
cost and expense upon the expiration or sooner termination of this Lease or
upon the imposition of any governmental law or regulation which may require
removal, and shall repair the Building upon such removal to the extent required
by such work of removal.  If Tenant fails
to remove the Communication Equipment and repair the Building upon the
expiration or earlier termination of this Lease, Landlord may do so at Tenant’s
expense.  The provisions of this Section 30.8
shall survive the expiration or earlier termination of this Lease;

 

30.4         The Communication Equipment shall be
deemed to constitute a portion of the Premises for purposes of Article 10
of this Lease;

 

30.5         Tenant, at Tenant’s sole cost and
expense, shall install and maintain such fencing and other protective equipment
and/or visual screening on or about the Communication Equipment as Landlord may
reasonably determine;

 

30.6         If any of the conditions set forth in
this Article 30 are not complied with by Tenant, then without
limiting Landlord’s rights and remedies it may otherwise have under this Lease,
at law and/or in equity, Tenant shall correct such noncompliance within five (5) business
days after receipt of notice (or such longer period as may be reasonably
required as long as Tenant commences such correction within such five (5) business
day period and diligently prosecutes the same to completion).  If Tenant fails to correct any such
noncompliance within such five (5) day period (as may be extended), then,
at Landlord’s option, Tenant shall immediately discontinue its use of such
Communication Equipment and remove the same in accordance with the terms
hereof; and

 

30.7         Tenant’s rights under this Article 30
with respect to the Communication Equipment shall be personal to the Original
Tenant or any Permitted Transferee, and may only be utilized by the Original
Tenant or such Permitted Transferee (and may not be exercised or utilized by any
other assignee, sublessee or other transferee of the Original Tenant’s interest
in this Lease or the Premises) if the Original Tenant occupies the entire
Premises then leased by Original Tenant.

 

[signature page to
follow]

 

70

 

*** Confidential portions of this document have been
redacted and filed separately with the Commission.

 

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

 

	
   

  	
  “LANDLORD”:

  
	
   

  	
   

  
	
   

  	
  KILROY REALTY, L.P.,

  a Delaware limited partnership 

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Kilroy Realty Corporation,

  a Maryland corporation,

  General Partner 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jeffrey C. Hawken

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
  EVP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Nadine K. Kirk

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
  VP

  
	
   

  	
   

  	
   

  
	
   

  	
  “TENANT”: 

  
	
   

  	
   

  	
   

  
	
   

  	
  BRIDGEPOINT EDUCATION, INC.,

  a Delaware Corporation 

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Andrew Clark

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
  CEO

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Daniel J. Devine

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
  CFO

  

 

71

 

EXHIBIT
A

 

KILROY SABRE
SPRINGS

 

OUTLINE OF
PREMISES

 

 

1

 

EXHIBIT
B

 

KILROY
SABRE SPRINGS

 

WORK
LETTER AGREEMENT

 

This Work Letter Agreement shall set forth the terms
and conditions relating to the construction of the improvements in the
Premises.  This Work Letter Agreement is
essentially organized chronologically and addresses the issues of the
construction of the Premises, in sequence, as such issues will arise during the
actual construction of the Premises.  All
references in this Work Letter Agreement to Articles or Sections of “this Lease”
shall mean the relevant portion of Articles 1 through 30 of the
Office Lease to which this Work Letter Agreement is attached as Exhibit B and of which this Work
Letter Agreement forms a part, and all references in this Work Letter Agreement
to Sections of “this Work Letter Agreement” shall mean the relevant portion of Sections 1
through 5 of this Work Letter Agreement.

 

SECTION 1

 

BASE BUILDING AS CONSTRUCTED BY LANDLORD

 

Landlord has constructed, at its sole cost and
expense, the Base Building.  The Base
Building shall consist of those portions of the Premises which were in
existence prior to the construction of the improvements in the Premises for the
prior tenant (if any) of the Premises. 
Upon the full execution and delivery of this Lease by and between
Landlord and Tenant, Landlord shall deliver possession of the Premises and Base
Building to Tenant, and Tenant shall accept the Premises and Base Building from
Landlord in their presently existing, “as-is” condition.

 

SECTION 2

 

IMPROVEMENTS

 

2.1           Improvement Allowance. 
Tenant shall be entitled to a one-time improvement allowance (the “Improvement Allowance”) in an amount of
equal to [***]
for the costs relating to the initial design and
construction of the improvements made to the Premises pursuant to this Work
Letter Agreement which are permanently affixed to the Premises (the “Improvements”).  In no event shall Landlord be obligated to (i) make
disbursements pursuant to this Work Letter Agreement in the event that Tenant
has not previously disbursed any applicable portion of the “Over-Allowance
Amount” (defined in Section 4.2.1) in accordance with the terms and
conditions of Section 4.2.1 of this Work Letter Agreement, (ii) pay
a total amount which exceeds the Improvement Allowance, (iii) pay any “A&E
Costs,” in excess of the cap set forth in Section 2.2.1 of this
Work Letter Agreement, or (iv) pay any “FF&E Costs” in excess of the
cap set forth in Section 2.2.5 of this Work Letter Agreement.  Notwithstanding the foregoing or any contrary
provision of this Lease, all Improvements shall be deemed Landlord’s property
under the terms of this Lease.  Any
unused portion of the Improvement Allowance remaining as of [***],
shall remain with Landlord and Tenant shall have no further right thereto;
provided, 

 

1

 

however, such foregoing [***],
date shall be extended on a day-for-day basis for each day of any “Landlord
Caused Delay” (as that term is defined in Section 6.1 below).

 

2.2           Disbursement of the Improvement Allowance.

 

2.2.1        Improvement Allowance Items. 
Except as otherwise set forth in this Work Letter Agreement, the
Improvement Allowance shall be disbursed by Landlord (each of which
disbursements shall be made pursuant to Landlord’s disbursement process,
including, without limitation, Landlord’s receipt of invoices for all costs and
fees described herein) for costs related to the construction of the
Improvements (provided, however, except as expressly set forth in Sections 2.2.1.4, 4
and 5 of this Work Letter, such costs related to the
construction of the Improvements (identified in this Work Letter) shall in no
event include (A) any costs incurred in connection with the cost of
demising partitions between tenants (including, any studs, acoustical
insulation and dry wall, and any necessary penetrations, fire dampers and sound
traps), (B) any costs incurred in connection with the Base Building, or (C) any
costs or fees incurred by Landlord or its consultants or agents in connection
with the construction of the Improvements and the preparation and review
of plans related thereto, all of which foregoing costs and fees shall
be at Landlord’s sole cost and expense) and for the following items and costs
(collectively, the “Improvement Allowance
Items”):

 

2.2.1.1     Payment of the fees of the “Architect” (as that term
is defined in Section 3.4 below) and any engineers retained by
Tenant in connection with its performance of the Improvements, which fees
shall, notwithstanding anything to the contrary contained in this Work Letter
Agreement, not exceed an aggregate amount equal to $[***] per
rentable square foot of the Premises (collectively, the “A&E Costs”);

 

2.2.1.2                     The payment of plan check, permit and license fees
relating to construction of the Improvements;

 

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

 

2.2.1.4                     The cost of any changes in the Base Building when such
changes are required by the “Approved Working Drawings,” as that term is
defined in Section 3.4 of this Work Letter Agreement, such cost to
include all direct architectural and/or engineering fees and expenses incurred
in connection therewith;

 

2.2.1.5     The cost of any changes to the Approved Working
Drawings or Improvements required by all applicable building codes (the “Code”);

 

2.2.1.6     The “Coordination Fee”, as that term is defined in Section 4.2.2.1
of this Work Letter Agreement;

 

2.2.1.7     intentionally omitted;

 

2

 

2.2.1.8     The cost of installing Tenant’s furniture, fixtures,
equipment, voice and data cabling, signage, and other similar costs
(collectively, “FF&E Costs”),
not to exceed an aggregate amount equal to $[***] per
usable square foot of the Premises; and

 

2.2.1.9                     Sales and use taxes.

 

2.2.2        Disbursement of Improvement Allowance. 
During the construction of the Improvements, Landlord shall make monthly
disbursements of the Improvement Allowance for Improvement Allowance Items and
shall authorize the release of monies as follows.

 

2.2.2.1                     Monthly Disbursements. 
On or before the fifth (5th)
day of each calendar month, as determined by Landlord, during the construction
of the Improvements (or such other date as Landlord may designate), Tenant
shall deliver to Landlord:  (i) a
request for payment of the “Contractor,” as that term is defined in Section 4.1.1
of this Work Letter Agreement, certified by Tenant’s Architect, in a form
reasonably acceptable to Landlord, showing the schedule, by trade, of
percentage of completion of the Improvements in the Premises, detailing the
portion of the work completed and the portion not completed; (ii) invoices
from all of “Tenant’s Agents,” as that term is defined in Section 4.1.2
of this Work Letter Agreement, for labor rendered and materials delivered to
the Premises; (iii) executed mechanic’s lien releases from all of Tenant’s
Agents which shall comply with the appropriate provisions, as reasonably
determined by Landlord, of California Civil Code Section 3262(d); and (iv) all
other information reasonably requested by Landlord (a complete request
containing or otherwise addressing the foregoing items (i), (ii), (iii) and
(iv) shall be referred to as an “Improvement
Allowance Request”).  Tenant’s
delivery of an Improvement Allowance Request shall be deemed Tenant’s
acceptance and approval of the work furnished and/or the materials supplied as
set forth in Tenant’s Improvement Allowance Request.  Thereafter, Landlord shall, to the extent
Tenant has delivered an Improvement Allowance Request to Landlord on or before
the fifth (5th) day of an applicable calendar month,
deliver a check to Tenant made jointly payable to Contractor and Tenant on or
before the last day of such calendar month in payment of the lesser of:  (A) the amounts so requested by Tenant,
as set forth in this Section 2.2.2.1, above, less a ten percent
(10%) retention (the aggregate amount of such retentions to be known as the “Final
Retention”), and (B) the balance of any remaining available portion of the
Improvement Allowance (not including the Final Retention), provided that
Landlord does not dispute any request for payment based on non-compliance of
any work with the Approved Working Drawings, or due to any substandard work, or
for any other reason (the resulting monthly disbursement determined per the
foregoing provisions of this Section 2.2.2.1 shall be referred to
as the “IAR Amount”).  Landlord’s payment of such IAR Amounts shall
not be deemed Landlord’s approval or acceptance of the work furnished or
materials supplied as set forth in Tenant’s payment request.  Notwithstanding any provision to the contrary
contained in this Lease, to the extent (1) Landlord does not timely
disburse any particular IAR Amount pursuant to the terms of this Section 2.2.2.1,
(2) Landlord receives an additional written notice from Tenant stating
that such IAR Amount was not timely disbursed, and (3) Landlord fails to
cure such non-payment of the IAR Amount within five (5) business days
following its receipt of such additional written notice, then the Coordination
Fee to be calculated on such IAR Amount shall be reduced by fifty percent
(50%).  The foregoing reduction in the
Coordination Fee shall be in addition to any remedy Tenant may have
pursuant to the terms of Section 19.6 of the Lease or otherwise for
Landlord’s failure to timely disburse any applicable IAR Amount.

 

3

 

2.2.2.2                     Final Retention. 
Subject to the provisions of this Work Letter Agreement, a check for the
Final Retention payable jointly to Tenant and Contractor shall be delivered by
Landlord to Tenant within twenty (20) days following notice to Landlord of (1) the
completion of construction of the Premises, and (2) Tenant’s delivery of a
satisfactory request for payment, provided that in connection with such request
(i) Tenant delivers to Landlord properly executed mechanic’s lien releases
in compliance with both California Civil Code Section 3262(d)(2) and
either Section 3262(d)(3) or Section 3262(d)(4), (ii) Landlord
has determined that no substandard work exists which adversely affects the
mechanical, electrical, plumbing, heating, ventilating and air conditioning,
life-safety or other systems of the Building, the curtain wall of the Building,
the structure or exterior appearance of the Building, or any other tenant’s use
of such other tenant’s leased premises in the Building, and (iii) Architect
delivers to Landlord a certificate, in a form reasonably acceptable to Landlord,
certifying that the construction of the Improvements in the Premises has been
substantially completed.  Notwithstanding
any provision to the contrary contained in this Lease, to the extent (A) Landlord
does not timely disburse the Final Retention pursuant to the terms of this Section 2.2.2.2,
(B) Landlord has received an additional written notice from Tenant stating
that the Final Retention was not timely disbursed, and (C) Landlord fails
to cure such non-payment of the Final Retention within five (5) business
days following its receipt of such additional notice, then the Coordination Fee
to be calculated on such Final Retention shall be reduced by fifty percent
(50%).  The foregoing reduction in the
Coordination Fee shall be in addition to any remedy Tenant may have
pursuant to the terms of Section 19.6 of the Lease or otherwise for
Landlord’s failure to timely disburse any the Final Retention.

 

2.2.2.3                     Other Terms. 
Landlord shall only be obligated to make disbursements from the
Improvement Allowance to the extent costs are incurred by Tenant for
Improvement Allowance Items.  All
Improvement Allowance Items for which the Improvement Allowance has been made
available shall be deemed Landlord’s property under the terms of this Lease.

 

Landlord and Tenant
hereby acknowledge and agree that in no event shall the Improvement Allowance
Items include, and Landlord shall be solely responsible for, any and all costs
to the extent related to and arising from the negligence or willful misconduct
of Landlord.

 

2.3           Building Standards. 
Landlord has established or may establish specifications for certain
Building standard components, materials and finishes (collectively, “Building Standards”) to be used in the
construction of the Improvements in the Premises, which Building Standards are
set forth on Schedule 2
attached hereto and made a part hereof to be used in the construction of the
Improvements in the Premises.  The
quality of Improvements shall be equal to or of greater quality than the
quality of such Building standards, provided that Landlord may, at Landlord’s
option, require the Improvements to comply with certain Building
standards.  Landlord may make reasonable
changes to said specifications for such Building Standards from time to time.  Removal requirements for Improvements are
addressed in Article 8 of this Lease.

 

4

 

SECTION 3

 

CONSTRUCTION
DRAWINGS

 

3.1           Intentionally Omitted.

 

3.2           Final Space Plan. 
The space plan attached hereto as Schedule
3 (the “Final Space Plan”)
has been approved by Landlord and Tenant.

 

3.3           Intentionally Omitted.

 

3.4           Approved Working Drawings. 
The term “Approved Working Drawings”
shall mean those certain tenant improvement plans prepared by I.D. Studios (the
“Architect”), dated as of May 14,
2009, and approved by Landlord and Tenant. 
Tenant shall submit the same to the appropriate municipal authorities
for all applicable building permits on or before the date set forth in Schedule 1.  Tenant hereby agrees that neither Landlord
nor Landlord’s consultants shall be responsible for obtaining any building
permit or certificate of occupancy for the Premises and that obtaining the same
shall be Tenant’s responsibility; provided, however, that Landlord shall
cooperate with Tenant in executing permit applications and performing other
ministerial acts reasonably necessary to enable Tenant to obtain any such
permit or certificate of occupancy.  No
changes, modifications or alterations in the Approved Working Drawings may be
made without the prior written consent of Landlord, which consent may not be
unreasonably withheld, conditioned or delayed.

 

3.5           Time Deadlines. 
The applicable dates for approval of items, plans and drawings as
described in this Section 3, Section 4, below, and in
this Work Letter Agreement are set forth and further elaborated upon in Schedule 1 (the “Time  Deadlines”),
attached hereto.  Tenant agrees to comply
with the Time Deadlines.

 

SECTION 4

 

CONSTRUCTION OF THE IMPROVEMENTS

 

4.1           Tenant’s Selection of Contractors.

 

4.1.1        The Contractor.  Tenant shall
retain a contractor reasonably acceptable to Landlord to construct the
Improvements.

 

4.1.2        Tenant’s Agents.  All
subcontractors, laborers, materialmen, and suppliers used by Tenant (such
subcontractors, laborers, materialmen, and suppliers, and the Contractor to be
known collectively as “Tenant’s Agents”)
must be approved in writing by Landlord, which approval shall not be
unreasonably withheld, conditioned or delayed; provided, however, the parties
hereto acknowledge and agree that it shall be reasonable for Landlord to
withhold or condition its consent to such Tenant’s Agents to the extent
Landlord requires Tenant to use a specific contractor to perform such work (as
more particularly set forth in this Section 4.1.2 below).  If Landlord does not approve any of Tenant’s
proposed subcontractors, laborers, materialmen or suppliers, Tenant shall
submit other proposed subcontractors, laborers, materialmen or suppliers for
Landlord’s written approval.  The Electrical work must be 

 

5

 

performed
by Berg Electrical.  Fire / Life Safety
work must be performed by Berg Electrical. 
Mechanical work must be performed by either ICS or Apex Mechanical.  Mechanical Direct Digital Control work must
be performed by Dynalectric.

 

4.2           Construction of Improvements by Tenant’s Agents.

 

4.2.1        Construction Contract; Cost Budget. 
Tenant shall engage the Contractor under an AIA A101 Stipulated Sum
Agreement (1997 Electronic Version) accompanied by Landlord’s standard AIA A201
General Conditions (1997 Version) as modified by Landlord, or reasonably
similar construction contracts (collectively, the “Contract”).  At least
fifteen (15) business days prior to the commencement of the construction of the
Improvements, and after Tenant has accepted all bids for the Improvements,
Tenant shall provide Landlord with a detailed breakdown, by trade, of the final
costs to be incurred or which have been incurred, as set forth more
particularly in Sections 2.2.1.1 through 2.2.1.9, above, in
connection with the design and construction of the Improvements to be performed
by or at the direction of Tenant or the Contractor, which costs form a basis
for the amount of the Contract (the “Final
Costs”).  Concurrently with
Tenant’s payment to the Contractor of the amount disbursed by Landlord to
Tenant pursuant to Section 2.2.2.1 of this Work Letter Agreement, Tenant
shall pay the Contractor, Tenant’s pro-rata share of the total amount then due
and owing to the Contractor (which pro-rata share shall equal a fraction, the
numerator of which shall equal the “Over-Allowance Amount,” as that term is
defined below, and the denominator of which shall equal the Final Costs), and
such payment by Tenant shall be a condition to Landlord’s obligation to pay any
additional/future portions of the Improvement Allowance pursuant to the terms
and conditions of Section 2.2, above.  The “Over-Allowance
Amount” shall be equal to the difference between the amount of the
Final Costs and the amount of the Improvement Allowance (less any portion
thereof already disbursed by Landlord, or in the process of being disbursed by
Landlord, on or before the commencement of construction of the
Improvements).  In the event that, after
the Final Costs have been delivered by Tenant to Landlord, the costs relating
to the design and construction of the Improvements shall change, any additional
costs necessary to such design and construction in excess of the Final Costs,
shall be paid by Tenant to Landlord immediately as an addition to the
Over-Allowance Amount or at Landlord’s option, Tenant shall make payments for
such additional costs out of its own funds, but Tenant shall continue to
provide Landlord with the documents described in Sections 2.2.2.1(i), (ii),
(iii) and (iv) of this Work Letter Agreement, above,
for Landlord’s approval, prior to Tenant paying such costs.

 

4.2.2        Tenant’s Agents.

 

4.2.2.1     Landlord’s General Conditions for Tenant’s Agents and
Improvement Work.  Tenant’s and Tenant’s Agent’s construction of
the Improvements shall comply with the following:  (i) the Improvements shall be
constructed in strict accordance with the Approved Working Drawings; (ii) Tenant’s
Agents shall submit schedules of all work relating to the Improvements to
Contractor and Contractor shall, within five (5) business days of receipt
thereof, inform Tenant’s Agents of any changes which are necessary thereto, and
Tenant’s Agents shall adhere to such corrected schedule; and (iii) Tenant
shall abide by all rules made by Landlord’s Building manager with respect
to the use of freight, loading dock and service elevators, storage of
materials, coordination of work with the contractors of other tenants, and any
other matter in connection with this Work Letter Agreement, including, without
limitation, 

 

6

 

the construction of the
Improvements.  Tenant shall pay to
Landlord, by means of a Landlord deduction from the Improvement Allowance, a
logistical coordination fee (the “Coordination
Fee”) in an amount equal to [***], which
Coordination Fee shall be for services relating to the coordination of the
construction of the Improvements.  If,
commencing on the date of the Landlord Caused Delay and ending on the Landlord
Caused Delay Termination Date, the cost of any or all of the Improvement
Allowance Items increase by more than [***] ([***]), and
Tenant provides Landlord with reasonable back-up documentation evidencing the
resulting increase in the total cost of the Improvement Allowance Items (which
would not have occurred but for the Landlord Caused Delay), no
Coordination Fee shall be calculated on the increase in the total cost of the
Improvement Allowance Items which otherwise would have been payable by Tenant
but for the Landlord Caused Delay.

 

4.2.2.2     Indemnity.  Tenant’s
indemnity of Landlord as set forth in this Lease shall also apply with respect
to any and all costs, losses, damages, injuries and liabilities related in any
way to any act or omission of Tenant or Tenant’s Agents, or anyone directly or
indirectly employed by any of them, or in connection with Tenant’s non-payment
of any amount arising out of the Improvements and/or Tenant’s disapproval of
all or any portion of any request for payment. 
Such indemnity by Tenant, as set forth in this Lease, shall also apply
with respect to any and all costs, losses, damages, injuries and liabilities
related in any way to Landlord’s performance of any ministerial acts reasonably
necessary (i) to permit Tenant to complete the Improvements, and (ii) to
enable Tenant to obtain any building permit or certificate of occupancy for the
Premises.  Notwithstanding the foregoing
terms of this Section 4.2.2.2, in no event shall the terms hereof
be deemed to expand or otherwise increase Tenant’s obligations under Section 10.1
of this Lease, but instead the provisions of this Section 4.2.2.2
shall be viewed as setting forth examples of some, but not all, of the items
identified in Section 10.1 of this Lease for which Tenant is, pursuant to
the terms of Section 10.1, obligated to indemnify Landlord
therefor.  Moreover, in the event of any
conflict between the terms of this Section 4.2.2.2 and the terms of
Section 10.1 of this Lease, the terms of Section 10.1
shall supersede, control and be binding upon the parties hereto.

 

4.2.2.3     Requirements of Tenant’s Agents. 
Each of Tenant’s Agents shall guarantee to Tenant and for the benefit of
Landlord that the portion of the Improvements for which it is responsible shall
be free from any defects in workmanship and materials for a period of not less
than one (1) year from the date of completion thereof.  Each of Tenant’s Agents shall be responsible
for the replacement or repair, without additional charge, of all work done or
furnished in accordance with its contract that shall become defective within
one (1) year after the later to occur of (i) completion of the work
performed by such contractor or subcontractors and (ii) the Lease
Commencement Date.  The correction of
such work shall include, without additional charge, all additional expenses and
damages incurred in connection with such removal or replacement of all or any
part of the Improvements, and/or the Building and/or common areas that may be
damaged or disturbed thereby.  All such
warranties or guarantees as to materials or workmanship of or with respect to
the Improvements shall be contained in the Contract or subcontract and shall be
written such that such guarantees or warranties shall inure to the benefit of
both Landlord and Tenant, as their respective interests may appear, and can be
directly enforced by either.  Tenant
covenants to give to Landlord any assignment or other assurances which may be
necessary to effect such right of direct enforcement.

 

7

 

4.2.2.4     Insurance Requirements.

 

4.2.2.4.1  General
Coverages.  All of Tenant’s Agents
shall carry worker’s compensation insurance covering all of their respective
employees, and shall also carry public liability insurance, including property
damage, all with limits, in form and with companies as are required to be
carried by Tenant as set forth in this Section 4.2.2.4.

 

4.2.2.4.2  Special
Coverages.  Tenant shall carry “Builder’s
All Risk” insurance in an amount approved by Landlord covering the construction
of the Improvements, and such other insurance as Landlord may require, it being
understood and agreed that the Improvements shall be insured by Tenant pursuant
to this Lease immediately upon completion thereof.  Such insurance shall be in amounts and shall
include such extended coverage endorsements as may be reasonably required by
Landlord including, but not limited to, the requirement that all of Tenant’s
Agents shall carry excess liability and Products and Completed Operation
Coverage insurance, each in amounts not less than $5,000,000 per incident,
$5,000,000 in aggregate, and in form and with companies as are required to be
carried by Tenant as set forth in this Lease.

 

4.2.2.4.3  General
Terms.  Certificates for all
insurance carried pursuant to this Section 4.2.2.4 shall be
delivered to Landlord before the commencement of construction of the
Improvements and before the Contractor’s equipment is moved onto the site.  All such policies of insurance must contain a
provision that the company writing said policy will give Landlord thirty (30)
days prior written notice of any cancellation or lapse of the effective date or
any reduction in the amounts of such insurance. 
In the event that the Improvements are damaged by any cause during the
course of the construction thereof, Tenant shall immediately repair the same at
Tenant’s sole cost and expense.  Tenant’s
Agents shall maintain all of the foregoing insurance coverage in force until
the Improvements are fully completed and accepted by Landlord, except for any
Products and Completed Operation Coverage insurance required by Landlord, which
is to be maintained for ten (10) years following completion of the work
and acceptance by Landlord and Tenant. 
All policies carried under this Section 4.2.2.4 shall insure
Landlord and Tenant, as their interests may appear, as well as Contractor and
Tenant’s Agents.  All insurance, except
Workers’ Compensation, maintained by Tenant’s Agents shall preclude subrogation
claims by the insurer against anyone insured thereunder.  Such insurance shall provide that it is
primary insurance as respects the owner and that any other insurance maintained
by owner is excess and noncontributing with the insurance required
hereunder.  The requirements for the
foregoing insurance shall not derogate from the provisions for indemnification
of Landlord by Tenant under Section 4.2.2.2 of this Work Letter
Agreement.

 

4.2.3        Governmental Compliance.  The
Improvements shall comply in all respects with the following:  (i) the Code and other state, federal,
city or quasi-governmental laws, codes, ordinances and regulations, as each may
apply according to the rulings of the controlling public official, agent or
other person; (ii) applicable standards of the American Insurance
Association (formerly, the National Board of Fire Underwriters) and the
National Electrical Code; and (iii) building material manufacturer’s
specifications.

 

4.2.4        Inspection by Landlord.  Landlord
shall have the right to inspect the Improvements at all times, provided
however, that Landlord’s failure to inspect the 

 

8

 

Improvements shall in no
event constitute a waiver of any of Landlord’s rights hereunder nor shall
Landlord’s inspection of the Improvements constitute Landlord’s approval of the
same.  Should Landlord disapprove any
portion of the Improvements, Landlord shall notify Tenant in writing of such
disapproval and shall specify the items disapproved.  Any defects or deviations in, and/or
disapproval by Landlord of, the Improvements shall be rectified by Tenant at no
expense to Landlord, provided however, that in the event Landlord determines
that a defect or deviation exists or disapproves of any matter in connection
with any portion of the Improvements and such defect, deviation or matter might
adversely affect the mechanical, electrical, plumbing, heating, ventilating and
air conditioning or life-safety systems of the Building, the structure or
exterior appearance of the Building or any other tenant’s use of such other
tenant’s leased premises, Landlord may, take such action as Landlord deems
necessary, at Tenant’s expense and without incurring any liability on Landlord’s
part, to correct any such defect, deviation and/or matter, including, without
limitation, causing the cessation of performance of the construction of the
Improvements until such time as the defect, deviation and/or matter is
corrected to Landlord’s satisfaction.

 

4.2.5        Meetings.  Commencing
upon the execution of this Lease, Tenant shall hold weekly meetings at a
reasonable time, with the Architect and the Contractor regarding the
construction of the Improvements, which meetings shall be held at a location
designated by Landlord, and Landlord and/or its agents shall receive prior
notice of, and shall have the right to attend, all such meetings, and, upon
Landlord’s request, certain of Tenant’s Agents shall attend such meetings.  In addition, minutes shall be taken at all
such meetings, a copy of which minutes shall be promptly delivered to
Landlord.  One such meeting each month
shall include the review of Contractor’s current request for payment.

 

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

 

9

 

SECTION 5

 

MISCELLANEOUS

 

5.1           Tenant’s Representative. 
Tenant has designated Mr. Kenny Lin and Ms. Pattie Jensen as
its representatives with respect to the matters set forth in this Work Letter
Agreement, who, until further notice to Landlord, shall have full authority and
responsibility to act on behalf of the Tenant as required in this Work Letter
Agreement.

 

5.2           Landlord’s Representatives. 
Landlord has designated Mr. Richard Mount as its sole
representative with respect to the matters set forth in this Work Letter
Agreement, who, until further notice to Tenant, shall have full authority and
responsibility to act on behalf of the Landlord as required in this Work Letter
Agreement.

 

5.3           Time of the Essence in This Tenant Work
Letter Agreement.  Unless otherwise indicated, all references
herein to a “number of days” shall mean and refer to calendar days.  If any item requiring approval is timely
disapproved by Landlord, the procedure for preparation of the document and
approval thereof shall be repeated until the document is approved by Landlord.

 

5.4           Tenant’s Lease Default. 
Notwithstanding any provision to the contrary contained in this Lease or
this Work Letter Agreement, if any default (beyond any applicable notice and
cure periods) by Tenant under this Lease or this Work Letter Agreement
(including, without limitation, any failure by Tenant to fund any portion of
the Over-Allowance Amount) occurs at any time on or before the Substantial
Completion of the Improvements, then (i) in addition to all other rights
and remedies granted to Landlord pursuant to this Lease, Landlord shall have
the right to withhold or condition payment of all or any portion of the
Improvement Allowance and/or Landlord may, without any liability whatsoever,
cause the cessation of construction of the Improvements (in which case, Tenant
shall be responsible for any delay in the Substantial Completion of the
Improvements and any costs occasioned thereby), and (ii) all other
obligations of Landlord under the terms of this Lease and this Work Letter
Agreement shall be forgiven until such time as such default is cured pursuant
to the terms of this Lease.

 

SECTION 6

 

LANDLORD DELAY

 

6.1           Definitions. 
As used in this Lease and this Work Letter, a “Landlord Caused Delay” shall mean any
actual delay to the Substantial Completion of the Improvements, resulting from
the acts or omissions of Landlord or the Landlord Parties arising from, or
attributable to, a failure of Landlord to provide Contractor and/or Tenant with
reasonably adequate access to the Premises, provided that the foregoing shall not
apply to the extent such failure is caused (in whole or in part) by any act,
omission or occurrence that is beyond Landlord’s reasonable control, including,
without limitation, power outages and utility related lockouts, strikes or
other labor troubles.  For purposes of
this Section 6.1, “Substantial
Completion of the Improvements” shall mean completion of
construction of the Improvements in the Premises pursuant to the Approved
Working Drawings, with the exception of any punch list items.

 

10

 

6.2           Determination of Landlord Caused Delay. 
If Tenant contends that a Landlord Caused Delay has occurred, Tenant
shall notify Landlord in writing of the event which constitutes such Landlord
Caused Delay (the “Delay Notice”).  The date upon which such Landlord Caused
Delay ends shall be referred to in this Section 6.2 as the “Landlord Caused Delay Termination Date”.  If any actions, inaction or circumstances
described in such Delay Notice are not cured by Landlord within five (5) business
days after receipt of the Delay Notice, and if such actions, inaction or
circumstances otherwise qualify as a Landlord Caused Delay, then a Landlord
Caused Delay shall be deemed to have occurred commencing as of the date
Landlord received such Delay Notice and ending as of the Landlord Caused Delay
Termination Date.

 

11

 

SCHEDULE
1 TO EXHIBIT B

 

TIME
DEADLINES

 

	
  Dates*

  	
   

  	
  Actions to be Performed

  
	
   

  	
   

  	
   

  
	
  A.            June 15, 2009.

  	
   

  	
  Tenant to submit the
  Approved Working Drawings to the appropriate municipal authorities for all
  applicable building permits.

  
	
   

  	
   

  	
   

  
	
  B.            At least fifteen (15) business days prior to the
  commencement of the construction of the Improvements.

  	
   

  	
  Tenant shall provide
  Landlord with a statement of the Final Costs.

  
	
   

  	
   

  	
   

  
	
  C.            At least ten (10) days prior to the start of
  construction in the Premises.

  	
   

  	
  Tenant shall notify
  Landlord of its intent to start construction to allow Landlord to post a
  notice of non-responsibility.

  
	
   

  	
   

  	
   

  
	
  D.            Upon Tenant’s receipt of the Permits.

  	
   

  	
  Tenant shall provide
  Landlord with copies of such Permits together with the applicable notice to
  proceed allowing Contractor to perform the Improvements in the Premises.

  
	
   

  	
   

  	
   

  
	
  E.             Upon Substantial Completion.

  	
   

  	
  Tenant shall deliver to
  Landlord (a) a copy of the Architect’s certificate, in which Architect
  certifies Tenant has caused the Substantial Completion of the Improvements in
  the Premises, and (b) a copy of the “signed off” building card
  indicating Tenant is permitted to occupy the Premises or its equivalent
  permitting Tenant to occupy the Premises.

  
	
   

  	
   

  	
   

  
	
  F.             Within ten (10) days after Substantial
  Completion of the Improvements.

  	
   

  	
  Tenant shall furnish
  Landlord with a copy of the Notice of completion recorded in the office of
  the Recorder of the county in which the Building is located in accordance
  with Section 3090 of the Civil Code of the State of California or any
  successor statute.

  

 

* Notwithstanding
the outside dates set forth in items A through F above, Tenant hereby agrees to
use commercially reasonable efforts to expedite its performance of the actions
listed above.

 

1

 

SCHEDULE
2 TO EXHIBIT B

 

BUILDING STANDARDS

 

The following Premise
Improvements Standards and Construction Guidelines identify the minimum quality
for items used in the construction of Premises Improvements at the property
identified above.

 

All Premises Improvement
work associated with the project identified above shall comply with this
Building Standard for a minimum quality of material and general design
guidelines for specific design criteria, product specifications and means and
methods to be employed during the execution of the work.

 

STANDARD PARTITIONS

 

DEMISING PARTITION

a.             3-5/8” x 25 min. gauge metal studs @ 16”
on center.

b.             1 layer each side 5/8” thick type ‘x’
gypsum wallboard (where required).

c.             From floor slab to underside of concrete
and metal deck floor/roof structure.

d.             R11 batt sound insulation in partition cavity (portion
of walls — corridor, bathrooms & some office).

e.             Partition taped and sanded smooth to
receive paint.

f.              Fire caulk @ partition and metal deck as
required by City of San Diego.

g.             Provide minimum opening above ceiling as required for
return air, with sound boots.

 

INTERIOR PARTITION

a.             2-1/2” x 25 gauge metal studs @ 24” on
center.

b.             1 layer each side 5/8” thick type ‘x’ gypsum
wallboard. From floor slab to underside of ceiling grids as applicable. Height
may vary.

c.             Diagonal Bracing: 
2-1/2” x 25 gauge metal studs at 45 degree diagonal to structure above
staggered @ 4’-0” on center, and at door openings.

d.             Partition taped and sanded smooth to receive paint to
a minimum of Level 4 finish.

e.             Metal corner bead at terminations of partitions and at
the ceiling.

f.              All demising walls and tenant conference room walls to
receive R-11 batt insulation within partition cavity and four foot on either
side of partition over ceiling.

 

INTERIOR ONE-HOUR SEPARATION PARTITION

a.             Same as demising partition with fire dampers as
required for penetrations and return air.

b.             Type X 5/8” wallboard shall be fire taped
where fire ratings are required.

 

INTERIOR LOW PARTITION

a.             2-1/2” x 25 gauge metal studs @ 16” on center.

b.             1 layer each side and top 5/8” thick type ‘x’ gypsum
wallboard.

c.             Heights vary to maximum of 68” above floor.

 

1

 

d.             Metal corner beads at all exposed corners.

e.             Partition taped and sanded smooth to receive paint to
a minimum of Level 4 finish.

f.              Pipe support at free end within partition cavity and
every 4’ on center.

 

EXTERIOR WALL FURRING

a.             Below glazing sill and above glazing
head, 1 layer 5/8” thick gypsum wallboard.

b.             Taped and sanded smooth to receive paint.

 

COLUMN FURRING

a.             2-1/2” x 25 gauge metal studs @ 24” on
center.

b.             1 layer one side 5/8” thick type ‘x’
gypsum wallboard.

c.             From floor slab to 6” above ceiling grid
or to deck above.

d.             Partition taped and sanded smooth to receive paint to
a minimum of Level 4 finish.

 

DOORS,
FRAMES AND HARDWARE

 

SINGLE CORRIDOR DOOR AND HARDWARE

a.             Single leaf U.L. rated, 20-minute suite entry door
label attached to hinge side of door, 1-3/4” x 3’-0” x 8’-10”, solid core wood,
clear plain sliced select white maple, book matched edges.  Door shall be pre-finished and pre-mortised
for hardware.

b.             Frame:  3’-0” x 8’-10”
“ Western Integrated prefinished satin aluminum with clear coat with squared
edge, 20-minute fire rated.

c.             Hardware: Butts: two pair per door, Hager 700; Door
Hardware: Schlage “L” Series, Lever style #17, A- Wrought Rose- typ.; Entrance
Lockset # L9453P-626, Latchset # L9010P-626, and Office Lockset    # L9050-626; Door Stop: Hager 236W, concave
wall stop; Closer: LCN #1461FC (where required); typical hardware finish: satin
aluminum or satin stainless steel throughout unless otherwise noted.

d.             Closer at entry doors and any rated doors required by
code: LCN 1460 Series, 4111 cylinder for accessibility.

 

DOUBLE CORRIDOR DOOR AND HARDWARE

a.             Double leaf U.L. rated 20-minute suite entry doors
with label attached to hinge side of doors, 1-3/4” x 6’-0” x 8’-10”, solid core
wood, clear plain sliced select white maple, book matched edges.  Door shall be pre-finished and pre-mortised
for hardware. Book match face veneers with premium veneers grade of doors with
matching veneer at vertical edge.

b.             Door shall be pre-finished and mortised for hardware.

c.             Frame:  6’-0” x
8’-10”, ‘Western Integrated’ prefinished satin aluminum with clear coat with
squared edge, 20-minute fire rated.

d.             Hardware: Same as above modified and supplemented for
double doors.

 

SINGLE INTERIOR DOOR AND HARDWARE

a.             Single leaf, 1-3/4” x 3’-0” x 8’-10”, solid core wood,
5 ply, plain sliced maple veneer, clear finish and premium grade.

b.             Matching veneer at vertical edges.

c.             20-minute rated with label attached to hinge side of
door.

d.             Door shall be prefinished and mortised for hardware.

 

2

 

e.             Frame:  3’-0” x
8’-10”, ‘Western Integrated’ flush trim clear anodized extruded aluminum,
20-minute fire rated.

f.              Hardware: Schlage “L” Series: Lever style #17, A-
Wrought Rose, finish 626 satin chrome. 
Corbin Russwin cylinders with an inter-changeable core and keyway.  Hinges: AB700, 4.5 x 4.5, ‘Hager’, finish:
stainless steel — satin.  Stop: ‘Trimco’
1211 series, finish 626.

g.             Sidelights shall be provided at all private offices as
applicable.

 

DOUBLE INTERIOR DOOR AND HARDWARE

a.             Double leaf, 1-3/4” x 6’-0” x 8’-10”, solid core wood,
5 ply, plain sliced maple veneer, clear finish and premium grade.

b.             Match face veneers of doors.  Matching veneer at vertical edges.

c.             20-minute rated with label attached to hinge side of
the door.

d.             Door shall be prefinished and mortised for hardware.

e.             Frame:  6’-0” x
8’-10”, ‘Western Intgrated’ flush trim clear anodized extruded aluminum,
20-minute fire rated.

f.              Hardware:
Schlage “L” Series: , Lever style #17, A- Wrought Rose- typ, finish 626
hardware finish 626 satin chrome.  Corbin
Russwin cylinders with an inter-changeable core and D3 keyway.  Hinges: AB700, 4.5 x 4.5, ‘Hager’, finish:
stainless steel — satin.  Stop: ‘Trimco’
1211 series, finish 626.  Auto flush
bolts: DCI No. 942, finish to match 626. 
Coordinator: DCI No. 600 series, finish to match 626. Closer: LCN
4041 series, parallel arm-heavy duty, finish: to match 626.  Closer: LCN 4041 series, parallel arm-heavy
duty, finish to match 626.  Astragal: ‘Pemco’
355CV.

 

OPTIONAL DOORS AS APPROVED BY LANDLORD

a.             Optional Doors as Selected by the Tenant
for the tenant’s interior space may be submitted as outlined below subject to
Landlords Approval:

·      Premium Grade wood doors with single glass lites with
a stained and lacquered finish. Colors to match building standard, subject to
Landlord Approval

·      Herculite Glass Doors with Stainless Steel Styles at
top and bottom and concealed hinges.

·      Aluminum Storefront Doors with clear anodized finish
set in Aluminum frames to match.

 

ACOUSTICAL
CEILINGS

a.             2’ X 2’ x 9/16” Armstrong, Superfine XL
9/16” exposed tee system, finish: matte white, Steel T-bar grid system with
wire suspension and seismic bracing per code.

b.             Tile: 24” X 24” X 7/8” Armstrong acoustical tile;
Pattern - Cirrus with beveled tegular edge detail: Color - white. NRC: .65,
CAC:38.

c.             Optional Ceiling Tile and Grid as Selected by the
Tenant for the tenant’s interior space may be submitted as outlined below
subject to Landlords Approval.

d.             Premium Grade Architectural Ceiling Tile and Grid
subject to code compliance with textures and finishes as selected by tenant,
subject to Landlord Approval.

e.             Tenant may elect to design an open ceiling plan subject
to Landlords Approval.

f.              Open Ceilings may incorporate the following:

·      Floating Architectural Ceilings with Composo Edges and
trims.

 

3

 

·      Floating Hard lid ceilings.

·      Painted and Exposed Structure for Loft Style
Architectural Impact.

 

ELECTRICAL

The base building is served
by a 277/480v 3ph. Main Distribution Section with 3000 amp meter section.

 

New 277v distribution,
lighting panels, transformers and 120v convenience power panels shall be part
of the Premise Improvements.

 

All electrical distribution
shall be fully engineered in compliance with local building codes, the National
Electric Code and California Title 24 and shall be subject to Landlords review
and approval.

 

Tenant electrical drawings
shall include a review of the base building electrical drawings to include all
necessary metering, distribution and connections.

 

Tenant electrical design, fixtures and components
shall be compliant with Kilroy Sabre Springs Construction Guidelines and
subject to certification by Landlord’s consultant.

 

LIGHT FIXTURES

a.             Recessed Lightolier or similar 2x2 and
2x4 Direct/Indirect Fluorescent Fixtures

·      5-1/2” Micro Perforated Mesh Lamp Shield.

·      (2) T-5 lamps per fixture with
electronic T-5 rapid start ballast

·      Lamps: Phillips 32 Watt

·      Color 741-4100K (cool white)

b.             Delray Rocket II Pendant Hung Compact
Fluorescent Light Fixtures

c.             Verve II Suspended Linear Indirect Fixture

Tenant may elect to use
additional or alternate Architectural Lighting subject to Landlords Approval of
Plans and Specs.

Corridors — General
Lighting: Lithonia Lighting — Avante 2’ x 2’, 2 lamp Linear T8 indirect
recessed luminaire, model #2AV-G-2-17-MDR-277-GEB.

 

LIGHT CONTROLS

a.             Novitas Sensors.

b.             Wall - #01-DL401.

c.             Ceiling:  One
Way 01-100.

d.             Ceiling:  Two
Way 01-110

 

ELECTRICAL WALL OUTLET

a.             Specification Grade, Leviton 15A, 125V, Decora/single
switch.

b.             Color - White.

c.             Mounted vertically.

d.             Outlet height at 15” above finish floor to centerline
of outlet U.O.N. as required for ADA compliance.

 

4

 

TELEPHONE WALL OUTLET

a.             Mud ring cut into wall - mounted vertically.

b.             3⁄4” metal conduit stub above ceiling with 6” pigtail at
top of wall.

c.             Cover plate and wiring by Tenant’s telephone vendor.

 

EXIT SIGN LIGHTS

a.             Alkco Edge-Glo Exit /Directional signs, recessed
ceiling mounted LED housing, green letters on a clear panel background or
equivalent.

b.             Provide exit lights with battery back up at all exits
required by code.

c.             All life safety items including horns &
strobes and speaker shall have white covers.

 

AUTOMATIC FIRE SPRINKLERS

 

a.             Fully fire sprinklered building with main and branch
distribution lines available for tenant modification.

b.             Reliable sprinkler model “G” pendant semi-recessed
sprinkler with white sprinkler and escutcheon.

·      165 degree Fahrenheit temperature rating.

c.             Reliable sprinkler model “G4” concealed sprinkler head
with white cover plate. (To be used in all public areas).

·      165 degree Fahrenheit temperature rating.

 

HEATING AND AIR CONDITIONING
DISTRIBUTION

 

All mechanical design shall
be fully engineered in compliance with local building codes, the Uniform
Mechanical Code and California Title 24.

 

All new mechanical fixtures and components shall be
compliant with Kilroy Sabre Springs Construction Guidelines and subject to
certification by Landlord’s consultant.

 

An Indoor Air Quality Management Plan shall be
prepared in compliance with the Kilroy Sabre Springs Construction Guidelines
prior to construction.

 

AIR DISTRIBUTION FOR TYPICAL FLOORS

 

VAV’s with DDC Controls and
hot water reheat at exterior zones, designed and sized by a licensed Mechanical
Engineer approved by Landlord, shall be
supported by base building AHU’s and High-pressure ducts on a per floor basis.

 

Each zone shall be
controlled by an electronic thermostats tied back to existing base building
energy management system.

 

Tenant may elect to
design an open ceiling plan with existing exposed galvanized rigid ductwork
configured as required for tenant distribution of conditioned air.

 

Air delivery above concealed
ceiling spaces may be via low pressure, insulated ducting with air diffusers as
described below.  [***]

 

5

 

PLUMBING

 

All plumbing design shall be
fully engineered in compliance with local building codes, the Uniform Plumbing
Code and California Title 24.

 

All new plumbing fixtures shall be compliant with
Kilroy Sabre Springs construction guidelines and subject to certification by
Landlord’s consultant.

 

Approved plumbing fixtures
include:

 

a.     “Elkay” Pacemaker sink # PSR-1720 - stainless steel,
two faucet holes, or equivalent.

b.     Hi-Arc Dual Handle bar faucet by “Elkay” # LK-2437-BH
or equivalent.

c.     Undercounter Dishwasher: Asko model #D1706, suitable
for ADA requirements.

d.     Garbage Disposal: Insinkerator, Model #77, 3⁄4
horsepower, stainless steel construction.

 

FINISHES

 

GLAZING / WINDOW FRAMES AT OFFICES &
CONFERENCE ROOM:

a.             Shall be Western Integrated aluminum, 3-3/4” or 4-7/8”
throat, pre-finished satin aluminum w/ clear coat with squared edge- to match
standard door frames style and color.

b.             1⁄4” glazing, clear, tempered where required by code.

c.             Side-lite glazing, size: 1’-6” wide by full
height  (inside window frame to window
frame)

d.             All private office shall have side-lites.

 

PAINT

a.             Manufacturer: 
To Be Determined, As approved Landlord consultant in compliance with the
Kilroy Sabre Springs construction guidelines.

b.             Two coats minimum semi-gloss interior
latex washable paint.

c.             Include paint on tenant side of demising partition,
both sides of interior partition, above and below exterior glazing as required
and all column fur outs and perimeter walls.

 

FLOOR COVERING/LOBBY &
COMMON AREAS

a.             Carpet:  Loop:  28
oz. or equal, Manufacture To Be Determined, As approved Landlord consultant in
compliance with the Kilroy Sabre Springs construction guidelines.

b.             Direct glue down installation for all
carpet.

c.             12 x 12 Vinyl Tile shall be ‘Armstrong’
or approved equal.

d.             Optional architectural flooring as
approved by Landlord

 

TILE FLOORING

a.             Ceramic tile or Natural stone as selected by tenant
subject to Landlord’s approval.

 

BASE

a.             2-1/2”Rubber Base by Roppe

b.             2 1⁄2” tile base in tiled areas as approved by Landlord.

 

6

 

PLASTIC LAMINATE

a.             Formica, Wilsonart or approved equal.

 

WINDOW COVERINGS

a.             Exterior window covering to be PVC Perforated Vertical
Blinds.

b.             Blinds to be sized to fit inside window module.

c.             MechoShade —With Landlord’s prior approval, manually
operated units are to receive ThermoVeil 0900 Series Privacy Weave
ShadeCloth with an approximate openness factor of 0-1%.  Color is to match (0910 Light Grey) the
fabric used on the shades.

 

FIRE/LIFE SAFETY

a.             As required by code.

 

7

 

SCHEDULE
3 TO EXHIBIT B

 

FINAL SPACE PLAN

 

 

1

 

EXHIBIT
C

 

KILROY SABRE
SPRINGS

 

NOTICE OF LEASE
TERM DATES

 

To:

 

 

 

 

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

 

Ladies and Gentlemen:

 

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

 

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

 

2.                                       Rent commenced to accrue on
                                    ,
in the amount of
                                .

 

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

 

4.                                       Your rent checks should be made payable
to
                                    
at                                       .

 

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

 

6.                                       Tenant’s Share as adjusted based upon the
exact number of usable square feet within the Premises is
                %.

 

[signature page to follow]

 

1

 

	
   

  	
  “Landlord”:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
  ,

  
	
   

  	
  a

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  	
   

  
	
  Agreed to and Accepted

  	
   

  
	
  as of                         ,
  200    .

  	
   

  
	
   

  	
   

  
	
  “Tenant”:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  a

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
  Its:

  	
   

  	
   

  

 

2

 

EXHIBIT
D

 

KILROY SABRE
SPRINGS

 

RULES AND
REGULATIONS

 

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

 

1.             Tenant shall not alter any lock or install any new or
additional locks or bolts on any doors or windows of the Premises without
obtaining Landlord’s prior written consent. 
Tenant shall bear the cost of any lock changes or repairs required by
Tenant.  Two keys will be furnished by
Landlord for the Premises, and any additional keys required by Tenant must be
obtained from Landlord at a reasonable cost to be established by Landlord.  Upon the termination of this Lease, Tenant
shall restore to Landlord all keys of stores, offices, and toilet rooms, either
furnished to, or otherwise procured by, Tenant and in the event of the loss of
keys so furnished, Tenant shall pay to Landlord the cost of replacing same or
of changing the lock or locks opened by such lost key if Landlord shall deem it
necessary to make such changes.

 

2.             All
doors opening to public corridors shall be kept closed at all times except for normal
ingress and egress to the Premises.

 

3.             Landlord
reserves the right to close and keep locked all entrance and exit doors of the
Building during such hours as are customary for comparable buildings in the San
Diego, California area.  Tenant, its employees
and agents must be sure that the doors to the Building are securely closed and
locked when leaving the Premises if it is after the normal hours of business
for the Building.  Any tenant, its
employees, agents or any other persons entering or leaving the Building at any
time when it is so locked, or any time when it is considered to be after normal
business hours for the Building, may be required to sign the Building
register.  Access to the Building may be
refused unless the person seeking access has proper identification or has a
previously arranged pass for access to the Building.  Landlord will furnish passes to persons for
whom Tenant requests same in writing. 
Tenant shall be responsible for all persons for whom Tenant requests
passes and shall be liable to Landlord for all acts of such persons.  The Landlord and his agents shall in no case
be liable for damages for any error with regard to the admission to or
exclusion from the Building of any person. 
In case of invasion, mob, riot, public excitement, or other similar
commotion, Landlord reserves the right to prevent access to the Building or the
Project during the continuance thereof by any means it deems appropriate for
the safety and protection of life and property.

 

4.             No
furniture, freight or equipment of any kind shall be brought into the Building
without prior notice to Landlord.  All
moving activity into or out of the Building shall be scheduled with Landlord
and done only at such time and in such manner as Landlord reasonably
designates.  Landlord shall have the
right, in its reasonable discretion, to prescribe the weight, 

 

1

 

size and position of all
safes and other heavy property brought into the Building and also the times and
manner of moving the same in and out of the Building.  Safes and other heavy objects shall, if
considered necessary by Landlord, stand on supports of such thickness as is
reasonable necessary to properly distribute the weight.   Landlord will not be responsible for loss of
or damage to any such safe or property in any case.  Any damage to any part of the Building, its
contents, occupants or visitors by moving or maintaining any such safe or other
property shall be the sole responsibility and expense of Tenant.

 

5.             No
furniture, packages, supplies, equipment or merchandise will be received in the
Building or carried up or down in the elevators, except between such hours, in
such specific elevator and by such personnel as shall be reasonably designated
by Landlord.

 

6.             The
requirements of Tenant will be attended to only upon application at the
management office for the Project or at such office location designated by
Landlord.  Employees of Landlord shall
not perform any work or do anything outside their regular duties unless under
special instructions from Landlord.

 

7.             No
sign, advertisement, notice or handbill shall be exhibited, distributed,
painted or affixed by Tenant on any part of the Premises or the Building
without the prior written consent of the Landlord.  Tenant shall not disturb, solicit, peddle, or
canvass any occupant of the Project and shall cooperate with Landlord and its
agents of Landlord to prevent same.

 

8.             The
toilet rooms, urinals, wash bowls and other apparatus shall not be used for any
purpose other than that for which they were constructed, and no foreign
substance of any kind whatsoever shall be thrown therein.  The expense of any breakage, stoppage or
damage resulting from the violation of this rule shall be borne by the
tenant who, or whose servants, employees, agents, visitors or licensees shall
have caused same.

 

9.             Tenant
shall not overload the floor of the Premises, nor mark, drive nails or screws,
or drill into the partitions, woodwork or drywall or in any way deface the
Premises or any part thereof without Landlord’s prior written consent, except
in connection with the installation of wall hangings that are customarily
permitted in first-class office buildings (including, without limitation,
picture frames).  Tenant shall not purchase
spring water, ice, towel, linen, maintenance or other like services from any
person or persons not approved by Landlord.

 

10.           Except
for vending machines intended for the sole use of Tenant’s employees and
invitees, no vending machine or machines other than fractional horsepower
office machines shall be installed, maintained or operated upon the Premises
without the written consent of Landlord.

 

11.           Tenant
shall not use or keep in or on the Premises, the Building, or the Project any
kerosene, gasoline, explosive material, corrosive material, material capable of
emitting toxic fumes, or other inflammable or combustible fluid chemical,
substitute or material, except in compliance with applicable law.  Tenant shall maintain material safety data
sheets for any Hazardous Material used or kept on the Premises (provided that
Landlord acknowledges that Tenant will maintain products in the Premises which
are incidental to the operation of its offices, such as photocopy supplies,
secretarial supplies and limited janitorial supplies, which products 

 

2

 

may violate the foregoing
terms, and that the use of such products in the Premises in the manner in which
such products are designed to be used and in compliance with Applicable Laws
shall not be a violation by Tenant of this Rule 11).

 

12.           Tenant
shall not without the prior written consent of Landlord use any method of
heating or air conditioning other than that supplied by Landlord.

 

13.           Tenant
shall not use, keep or permit to be used or kept, any foul or noxious gas or
substance in or on the Premises, or permit or allow the Premises to be occupied
or used in a manner offensive or objectionable to Landlord or other occupants
of the Project by reason of noise, odors, or vibrations, or interfere with
other tenants or those having business therein, whether by the use of any
musical instrument, radio, phonograph, or in any other way.  Tenant shall not throw anything out of doors,
windows or skylights or down passageways.

 

14.           Tenant
shall not bring into or keep within the Project, the Building or the Premises
any firearms, animals, birds, aquariums, or, except in areas designated by
Landlord, bicycles or other vehicles.

 

15.           No
cooking shall be done or permitted on the Premises, nor shall the Premises be
used for the storage of merchandise, for lodging or for any improper,
objectionable or immoral purposes. 
Notwithstanding the foregoing, Underwriters’ laboratory-approved
equipment and microwave ovens may be used in the Premises for heating food and
brewing coffee, tea, hot chocolate and similar beverages for employees and
visitors, provided that such use is in accordance with all applicable federal,
state, county and city laws, codes, ordinances, rules and
regulations.  Notwithstanding the terms
of this Rule 15, Tenant shall be permitted to maintain for its own use a
customary office kitchen, subject to the terms of the Lease and Applicable
Laws.

 

16.           The
Premises shall not be used for manufacturing or for the storage of merchandise
except as such storage may be incidental to the use of the Premises provided
for in the Summary.  Tenant shall not
occupy or permit any portion of the Premises to be occupied as an office for a
messenger-type operation or dispatch office, public stenographer or typist, or
for the manufacture or sale of liquor, narcotics, or tobacco in any form, or as
a medical office, or as a barber or manicure shop, or as an employment bureau
without the express prior written consent of Landlord.  Tenant shall not engage or pay any employees
on the Premises except those actually working for such tenant on the Premises
nor advertise for laborers giving an address at the Premises.

 

17.           Landlord
reserves the right to exclude or expel from the Project any person who, in the
judgment of Landlord, is intoxicated or under the influence of liquor or drugs,
or who shall in any manner do any act in violation of any of these Rules and
Regulations.

 

18.           Tenant,
its employees and agents shall not loiter in or on the entrances, corridors,
sidewalks, lobbies, courts, halls, stairways, elevators, vestibules or any
Common Areas for the purpose of smoking tobacco products or for any other
purpose, nor in any way obstruct such areas, and shall use them only as a means
of ingress and egress for the Premises. 
Furthermore, in no event shall Tenant, its employees or agents smoke
tobacco products within the Building or within seventy-five feet (75’) of any
entrance into the Building or into any other Project building.

 

3

 

19.           Tenant
shall use commercially reasonable efforts not to waste electricity, water or
air conditioning and agrees to use commercially reasonable efforts to cooperate
fully with Landlord to ensure the most effective operation of the Building’s
heating and air conditioning system, and shall refrain from attempting to
adjust any controls.  Tenant shall
participate in recycling programs undertaken by Landlord.

 

20.           Tenant
shall store all its trash and garbage within the interior of the Premises.  No material shall be placed in the trash
boxes or receptacles if such material is of such nature that it may not be
disposed of in the ordinary and customary manner of removing and disposing of
trash and garbage in San Diego, California without violation of any law or
ordinance governing such disposal; provided, however, Tenant may, subject to
all of the terms and conditions of this Lease, including but not limited to Rules 11
and 13 above, maintain separate trash enclosures for the storage of non-conforming
disposal items to the extent Tenant satisfies and complies with applicable laws
or other governmental regulations relating to the storage and disposal
thereof.  All trash, garbage and refuse
disposal shall be made only through entry-ways and elevators provided for such
purposes at such times as Landlord shall designate.  If the Premises is or becomes infested with
vermin as a result of the use or any misuse or neglect of the Premises by
Tenant, its agents, servants, employees, contractors, visitors or licensees,
Tenant shall forthwith, at Tenant’s expense, cause the Premises to be
exterminated from time to time to the satisfaction of Landlord and shall employ
such licensed exterminators as shall be approved in writing in advance by
Landlord.

 

21.           Tenant
shall comply with all safety, fire protection and evacuation procedures and
regulations established by Landlord or any governmental agency.

 

22.           Any
persons employed by Tenant to do janitorial work shall be subject to the prior
written approval of Landlord, and while in the Building and outside of the
Premises, shall be subject to and under the control and direction of the
Building manager (but not as an agent or servant of such manager or of
Landlord), and Tenant shall be responsible for all acts of such persons.

 

23.           No
awnings or other projection shall be attached to the outside walls of the
Building without the prior written consent of Landlord, which consent shall not
be unreasonably withheld, and no curtains, blinds, shades or screens shall be
attached to or hung in, or used in connection with, any window or door of the
Premises other than Landlord standard drapes. 
All electrical ceiling fixtures hung in the Premises or spaces along the
perimeter of the Building must be fluorescent and/or of a quality, type, design
and a warm white bulb color approved in advance in writing by Landlord.  Neither the interior nor exterior of any
windows shall be coated or otherwise sunscreened without the prior written
consent of Landlord, which consent shall not be unreasonably withheld.  Tenant shall be responsible for any damage to
the window film on the exterior windows of the Premises and shall promptly
repair any such damage at Tenant’s sole cost and expense.  Tenant shall keep its window coverings closed
during any period of the day when the sun is shining directly on the windows of
the Premises.  Prior to leaving the
Premises for the day, Tenant shall draw or lower window coverings and
extinguish all lights.  Tenant shall
abide by Landlord’s regulations concerning the opening and closing of window
coverings which are attached to the windows in the Premises, if any, which have
a view of any interior portion of the Building or Building Common Areas.

 

4

 

24.           The
sashes, sash doors, skylights, windows, and doors that reflect or admit light
and air into the halls, passageways or other public places in the Building
shall not be covered or obstructed by Tenant, nor shall any bottles, parcels or
other articles be placed on the windowsills.

 

25.           Tenant
must comply with requests by the Landlord concerning the informing of their
employees of items of importance to the Landlord vis-à-vis the operation of the
Project which are not inconsistent with the TCCs of the Lease.

 

26.           Tenant
must comply with any City of San Diego “NO-SMOKING”
ordinances.  If Tenant is required under
the ordinance to adopt a written smoking policy, a copy of said policy shall be
on file in the office of the Building.

 

27.           Tenant
hereby acknowledges that Landlord shall have no obligation to provide guard
service or other security measures for the benefit of the Premises, the
Building or the Project.  Tenant hereby
assumes all responsibility for the protection of Tenant and its agents,
employees, contractors, invitees and guests, and the property thereof, from
acts of third parties, including keeping doors locked and other means of entry
to the Premises closed, whether or not Landlord, at its option, elects to
provide security protection for the Project or any portion thereof.  Tenant further assumes the risk that any
safety and security devices, services and programs which Landlord elects, in
its sole discretion, to provide may not be effective, or may malfunction or be
circumvented by an unauthorized third party, and Tenant shall, in addition to
its other insurance obligations under this Lease, obtain its own insurance
coverage to the extent Tenant desires protection against losses related to such
occurrences.  Tenant shall cooperate in
any reasonable safety or security program developed by Landlord or required by
law.

 

28.           All
office equipment of any electrical or mechanical nature shall be placed by
Tenant in the Premises to absorb or prevent any vibration, noise and annoyance.

 

29.           Tenant
shall not use in any space or in the public halls of the Building, any hand
trucks except those equipped with rubber tires and rubber side guards.

 

30.           No
auction, liquidation, fire sale, going-out-of-business or bankruptcy sale shall
be conducted in the Premises without the prior written consent of Landlord.

 

31.           No
tenant shall use or permit the use of any portion of the Premises for living
quarters, sleeping apartments or lodging rooms.

 

32.           Intentionally
Omitted.

 

33.           If
required by law, Tenant shall install and maintain, at Tenant’s sole cost and
expense, an adequate, visibly marked and properly operational fire extinguisher
next to any duplicating or photocopying machines or similar heat producing
equipment, which may or may not contain combustible material, in the Premises.

 

Landlord reserves the right at any time to change or
rescind any one or more of these Rules and Regulations, or to make such
other and further reasonable Rules and Regulations as in Landlord’s
judgment may from time to time be necessary for the management, safety, care
and cleanliness of the Premises, Building, the Common Areas and the Project,
and for the 

 

5

 

preservation of good
order therein, as well as for the convenience of other occupants and tenants therein;
provided, however, Landlord shall not make any new Rules and/or
Regulations, or change any Rule and/or Regulation, which would materially
and adversely affect Tenant’s use, occupancy or access to the Premises, the
Building, or the Project parking areas. 
Landlord may waive any one or more of these Rules and Regulations
for the benefit of any particular tenants, but no such waiver by Landlord shall
be construed as a waiver of such Rules and Regulations in favor of any
other tenant, nor prevent Landlord from thereafter enforcing any such Rules or
Regulations against any or all tenants of the 
Project; provided, however, in no event shall Landlord enforce such Rules and
Regulations in a discriminatory manner to the detriment of Tenant.  Tenant shall be deemed to have read these Rules and
Regulations and to have agreed to abide by them as a condition of its occupancy
of the Premises.

 

6

 

EXHIBIT
E

 

KILROY SABRE
SPRINGS

 

FORM OF
TENANT’S ESTOPPEL CERTIFICATE

 

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

 

1.             Attached
hereto as Exhibit A is a true and correct copy of the Lease and all
amendments and modifications thereto. 
The documents contained in Exhibit A represent the entire
agreement between the parties as to the Premises.

 

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

 

3.             Base
Rent became payable on
                        .

 

4.             The
Lease is in full force and effect and has not been modified, supplemented or
amended in any way except as provided in Exhibit A.

 

5.             Tenant
has not transferred, assigned, or sublet any portion of the Premises nor
entered into any license or concession agreements with respect thereto except
as follows:

 

6.                             Tenant shall not modify the documents
contained in Exhibit A without the prior written consent of Landlord’s
mortgagee.

 

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

 

8.             All
conditions of the Lease to be performed by Landlord necessary to the
enforceability of the Lease have been satisfied and Landlord is not in default
thereunder.  In addition, the undersigned
has not delivered any notice to Landlord regarding a default by Landlord
thereunder.

 

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

 

1

 

10.           As
of the date hereof, there are no existing defenses or offsets, or, to the
undersigned’s knowledge, claims or any basis for a claim, that the undersigned
has against Landlord.

 

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

 

12.           There
are no actions pending against the undersigned under the bankruptcy or similar
laws of the United States or any state.

 

13.           Other
than in compliance with all applicable laws and incidental to the ordinary
course of the use of the Premises, the undersigned has not used or stored any
hazardous substances in the Premises.

 

14.           To
the undersigned’s knowledge, all improvement work to be performed by Landlord
under the Lease has been completed in accordance with the Lease and has been
accepted by the undersigned and all reimbursements and allowances due to the
undersigned under the Lease in connection with any improvement work have been
paid in full.

 

The undersigned acknowledges that this Estoppel
Certificate may be delivered to Landlord or to a prospective mortgagee or
prospective purchaser, and acknowledges that said prospective mortgagee or
prospective purchaser will be relying upon the statements contained herein in making
the loan or acquiring the property of which the Premises are a part and that
receipt by it of this certificate is a condition of making such loan or
acquiring such property.

 

Executed at
                            
on the          day of                       ,
200   .

 

	
   

  	
  “Tenant”:   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  ,

  
	
   

  	
  a

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
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2

 

EXHIBIT
F

 

KILROY SABRE
SPRINGS

 

RECORDING REQUESTED BY

AND WHEN RECORDED RETURN
TO:

 

ALLEN MATKINS LECK GAMBLE

& MALLORY LLP

1901 Avenue of the Stars,
18th Floor

Los Angeles,
California  90067

Attention:  Anton N. Natsis, Esq.

 

RECOGNITION OF
COVENANTS,

CONDITIONS, AND
RESTRICTIONS

 

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

 

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

 

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

 

C.            Landlord,
as declarant, has previously recorded, or proposes to record concurrently with
the recordation of this Agreement, a Declaration of Covenants, Conditions, and
Restrictions (the “Declaration”),
dated                                 ,
200    , in connection with the Project.

 

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

 

NOW, THEREFORE, in consideration of (a) the
foregoing recitals and the mutual agreements hereinafter set forth, and (b) for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows,

 

1.             Tenant’s Recognition of Declaration.  Notwithstanding that the Lease has been
executed prior to the recordation of the Declaration, Tenant agrees to
recognize and by bound by all of the terms and conditions of the Declaration.

 

1

 

2.             Miscellaneous.

 

2.1           This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
estates, personal representatives, successors, and assigns.

 

2.2           This Agreement is made in, and shall
be governed, enforced and construed under the laws of, the State of California.

 

2.3           This Agreement constitutes the entire
understanding and agreements of the parties with respect to the subject matter
hereof, and shall supersede and replace all prior understandings and
agreements, whether verbal or in writing. 
The parties confirm and acknowledge that there are no other promises,
covenants, understandings, agreements, representations, or warranties with
respect to the subject matter of this Agreement except as expressly set forth
herein.

 

2.4           This Agreement is not to be modified,
terminated, or amended in any respect, except pursuant to any instrument in
writing duly executed by both of the parties hereto.

 

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

 

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

 

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

 

2.8           Time is of the essence of this
Agreement.

 

2.9           The Parties agree to execute any
further documents, and take any further actions, as may be reasonable and
appropriate in order to carry out the purpose and intent of this Agreement.

 

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

 

2

 

SIGNATURE PAGE OF
RECOGNITION OF

 

COVENANTS,
CONDITIONS AND RESTRICTIONS

 

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

 

	
   

  	
  “Landlord”:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  ,

  
	
   

  	
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  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  
					

 

 

	
   

  	
  “Tenant”:   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
  ,

  
	
   

  	
  a

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  
					

 

3

 

EXHIBIT
G

 

KILROY SABRE
SPRINGS

 

MARKET RENT
DETERMINATION FACTORS

 

When determining Market
Rent, the following rules and instructions shall be followed.

 

1.             RELEVANT FACTORS.  The “Comparable
Transactions” shall be the “Net Equivalent Lease Rates” per rentable
square foot, at which tenants, are, pursuant to transactions consummated within
twelve (12) months prior to the commencement of the Option Term, leasing
non-sublease, non-encumbered space comparable in location and quality to the
Premises containing a square footage comparable to that of the Premises for a
term of [***]
The terms of the Comparable Transactions shall be calculated as a “Net
Equivalent Lease Rate” pursuant to the terms of this Exhibit G, and shall take into
consideration only the following terms and concessions:  (i) the rental rate and escalations for
the Comparable Transactions, (ii) the amount of parking rent per parking
permit paid in the Comparable Transactions, if any, (iii) operating
expense and tax protection granted in such Comparable Transactions such as a
base year or expense stop (although for each such Comparable Transaction the
base rent shall be adjusted to a triple net base rent using reasonable
estimates of operating expenses and taxes as determined by Landlord for each such
Comparable Transaction); (iv) rental abatement concessions, if any, being
granted such tenants in connection with such comparable space, (v) any “Renewal
Allowance,” as defined herein below, to be provided by Tenant in connection
with the Option Term as compared to the improvements or allowances provided or
to be provided in the Comparable Transactions, taking into account the
contributory value of the existing improvements in the Premises, such value to
be based upon the age, design, quality of finishes, and layout of the existing
improvements, and (vi) all other monetary concessions.  [***]

 

2.             TENANT SECURITY.  The Market Rent shall additionally include a
determination as to whether, and if so to what extent, Tenant must provide
Landlord with financial security, such as an enhanced security deposit, a
letter of credit or guaranty, for Tenant’s Rent obligations during the Option
Term.  [***]

 

3.             RENEWAL IMPROVEMENT ALLOWANCE.  Notwithstanding anything to the contrary set
forth in this Exhibit G,
once the Market Rent for the Option Term is determined as a Net Equivalent
Lease Rate, if (i) in connection with such determination, it is deemed
that Tenant is entitled to an improvement or comparable allowance for the
improvement of the Premises (the total dollar value of such allowance, the “Renewal Allowance”), Landlord shall
disburse the Renewal Allowance pursuant to a reasonable disbursement procedure
(consistent with the terms of Section 2.2.1 of the Work Letter
Agreement) and the terms of Article 8 of this Lease, and, as set
forth in Section 5, below, of this Exhibit G, the rental rate component of the Market
Rent shall be increased to be a rental rate which takes into consideration that
Landlord will fund a Renewal Allowance and, accordingly, such payment with
interest shall be factored into the base rent component of the Market Rent.

 

4.             COMPARABLE BUILDINGS.  For purposes of this Lease, the term “Comparable Buildings” shall mean
first-class multi-tenant occupancy office buildings 

 

1

 

comparable to the
Building in terms of age (based upon the date of completion of major
renovation), quality of construction, level of services and amenities
(including the type (e.g., surface, structured, subterranean) and
amount of parking), ingress and egress, freeway access and visibility, which
Comparable Buildings are located in comparably sized office projects and are
located in the “Comparable Area,”
which is [***].

 

5.             METHODOLOGY FOR
REVIEWING AND COMPARING THE COMPARABLE TRANSACTIONS.  In order to analyze the Comparable
Transactions based on the factors to be considered in calculating Market Rent,
and given that the Comparable Transactions may vary in terms of length of term,
rental rate, concessions, etc., the following steps shall be taken into
consideration to “adjust” the objective data from each of the Comparable
Transactions.  By taking this approach, a
“Net Equivalent Lease Rate” for each of the Comparable Transactions shall be
determined using the following steps to adjust the Comparable Transactions,
which will allow for an “apples to apples” comparison of the Comparable
Transactions.

 

5.1.          The contractual rent payments for each
of the Comparable Transactions should be arrayed monthly or annually over the
lease term.  All Comparable Transactions
should be adjusted to simulate a net rent structure, wherein the tenant is
responsible for the payment of all property operating expenses in a manner
consistent with this Lease.  This results
in the estimate of Net Equivalent Rent received by each landlord for each
Comparable Transaction being expressed as a periodic net rent payment.

 

5.2           Any free rent or similar inducements
received over time should be deducted in the time period in which they occur,
resulting in the net cash flow arrayed over the lease term.

 

5.3           The resultant net cash flow from the
lease should be then discounted (using an [***] percent ([***]%)
annual discount rate)  to the lease
commencement date, resulting in a net present value estimate.

 

5.4           From the net present value, up front
inducements (improvements allowances and other concessions) and leasing
commissions should be deducted.  These
items should be deducted directly, on a “dollar for dollar” basis, without
discounting since they are typically incurred at lease commencement, while rent
(which is discounted) is a future receipt.

 

5.5           The net present value should then
amortized back over the lease term as a level monthly or annual net rent
payment using the same annual discount rate of [***] percent ([***]%)
used in the present value analysis.  This
calculation will result in a hypothetical level or even payment over the option
period, termed the “Net Equivalent Lease Rate” (or constant equivalent in
general financial terms).

 

6.             USE OF NET EQUIVALENT LEASE RATES FOR COMPARABLE TRANSACTIONS.  The Net Equivalent Lease Rates for the
Comparable Transactions shall then be used to reconcile, in a manner usual and
customary for a real estate appraisal process, to a conclusion of Market Rent
which shall be stated as a “Base Year” lease rate applicable to each year of
the Option Term.

 

2

 

An example of the
application of using the process set forth on this Exhibit G to arrive at the Market
Rent is attached hereto as Schedule 1.

 

3

 

SCHEDULE
1 TO EXHIBIT G

 

KILROY SABRE
SPRINGS

 

DETERMINATION OF MARKET RENT –
EXAMPLE

 

As an example of
the determination of the Market Rent, assume that there is a 10,000 rentable
square foot Comparable Transaction with a five (5) year term, Base Rent of
$75.00 per rentable square foot with One Dollar ($1) annual increases, a tenant
improvement allowance of $25.00 per rentable square foot, three (3) months
of free rent, and Base Year Operating Expenses and Tax Expenses of $12.00 per
rentable square foot.  Based on the
foregoing, the Net Equivalent Lease Rate analysis would be as follows.

 

1.             The contractual rent payments for
each of the Comparable Transactions should be arrayed monthly over the lease
term. See Column 2 in the attached spreadsheet.

 

2.             From this figure, the initial lease
year operating expenses (from gross leases) should be deducted, leaving a net
lease rate over the lease term.  See
Column 3 in the attached spreadsheet.

 

3.             This results in the net rent
received by each landlord under the Comparable Transactions being expressly as
a monthly net rent payment.  See Column 4
in the attached spreadsheet.

 

4.             Any free rent or similar
inducements received over time should be deducted in the time period in which
they occur, resulting in the net cash flow arrayed over the lease term.  See the amounts set forth in months 1, 2 and
3 of Column 2 in the attached spreadsheet.

 

5.             The resultant net cash flow from
the lease should be then discounted (using an eight percent (8%) annual
discount rate) to the lease commencement date, resulting in a net present value
estimate.  The net present value of the
amounts set forth in Column 4 of the attached spreadsheet is $2,479,851.66.

 

6.             From the net present value,
up-front inducements (tenant improvement allowances and other concessions)
should be deducted. These items should be deducted directly, on a “dollar for
dollar” basis, without discounting, since they are typically incurred at lease
commencement, while rent (which is discounted) is a future receipt.  The net present value amount set forth in
number 5, above, less the tenant improvement allowance, is $2,229,851.66.

 

7.             The net present value should then
amortized back over the lease term as a level monthly net rent payment using
the same annual discount rate of eight percent (8%) used in the present value
analysis. This calculation will result in a hypothetical level or even payment
over the option period, termed the “Net Equivalent Lease Rate” (or constant
equivalent in general financial terms). 
The net present value amount set forth in number 6, above, amortized
back over the term at eight percent (8%) results in a net monthly rent payment
of $45,213.35.

 

1

 

8.             The net monthly rent payment set
forth in number 7 above must then be converted to a rentable square foot number
by dividing the amount by the rentable square footage of the space (i.e.,
10,000 rentable square feet).  This
results in a net monthly rent payment per rentable square foot of $4.52.

 

9.             The net monthly rent payment per
rentable square foot must then be multiplied by the rentable square footage of
the Premises (for purposes of this example, assume the rentable square footage
of the Premises is 18,242 rentable square feet), resulting in a net monthly
rent payment for the Premises during the applicable Term of $82,453.84.

 

2

 

EXHIBIT 2 TO EXHIBIT G

 

KILROY SABRE SPRINGS

 

Determination of Market Rent - Example

 

 

	
  Premises
  (RSF)

  	
   

  	
  10,000

  	
   

  
	
  Initial
  Annual Rental Rate per RSF

  	
   

  	
  $

  	
  75.00

  	
   

  
	
  Annual
  Escalation

  	
   

  	
  $

  	
  12.00

  	
   

  
	
  Abatement
  (months)

  	
   

  	
  3

  	
   

  
	
  Tenant
  Improvement Allowance per rsf

  	
   

  	
  $

  	
  25.00

  	
   

  

 

	
  Period

  	
   

  	
  Monthly

  Base Rent

  	
   

  	
  Monthly

  Operating Expenses

  	
   

  	
  Monthly 

  Net Rent Payment

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  (10,000.00

  	
  )

  
	
  2

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  (10,000.00

  	
  )

  
	
  3

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  (10,000.00

  	
  )

  
	
  4

  	
   

  	
  $

  	
  62,500.00

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  52,500.00

  	
   

  
	
  5

  	
   

  	
  $

  	
  62,500.00

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  52,500.00

  	
   

  
	
  6

  	
   

  	
  $

  	
  62,500.00

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  52,500.00

  	
   

  
	
  7

  	
   

  	
  $

  	
  62,500.00

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  52,500.00

  	
   

  
	
  8

  	
   

  	
  $

  	
  62,500.00

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  52,500.00

  	
   

  
	
  9

  	
   

  	
  $

  	
  62,500.00

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  52,500.00

  	
   

  
	
  10

  	
   

  	
  $

  	
  62,500.00

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  52,500.00

  	
   

  
	
  11

  	
   

  	
  $

  	
  62,500.00

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  52,500.00

  	
   

  
	
  12

  	
   

  	
  $

  	
  62,500.00

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  52,500.00

  	
   

  
	
  13

  	
   

  	
  $

  	
  63,333.33

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  53,333.33

  	
   

  
	
  14

  	
   

  	
  $

  	
  63,333.33

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  53,333.33

  	
   

  
	
  15

  	
   

  	
  $

  	
  63,333.33

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  53,333.33

  	
   

  
	
  16

  	
   

  	
  $

  	
  63,333.33

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  53,333.33

  	
   

  
	
  17

  	
   

  	
  $

  	
  63,333.33

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  53,333.33

  	
   

  
	
  18

  	
   

  	
  $

  	
  63,333.33

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  53,333.33

  	
   

  
	
  19

  	
   

  	
  $

  	
  63,333.33

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  53,333.33

  	
   

  
	
  20

  	
   

  	
  $

  	
  63,333.33

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  53,333.33

  	
   

  
	
  21

  	
   

  	
  $

  	
  63,333.33

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  53,333.33

  	
   

  
	
  22

  	
   

  	
  $

  	
  63,333.33

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  53,333.33

  	
   

  
	
  23

  	
   

  	
  $

  	
  63,333.33

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  53,333.33

  	
   

  
	
  24

  	
   

  	
  $

  	
  63,333.33

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  53,333.33

  	
   

  
	
  25

  	
   

  	
  $

  	
  64,166.67

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  54,166.67

  	
   

  
	
  26

  	
   

  	
  $

  	
  64,166.67

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  54,166.67

  	
   

  
	
  27

  	
   

  	
  $

  	
  64,166.67

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  54,166.67

  	
   

  
	
  28

  	
   

  	
  $

  	
  64,166.67

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  54,166.67

  	
   

  
	
  29

  	
   

  	
  $

  	
  64,166.67

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  54,166.67

  	
   

  

 

1

 

	
  30

  	
   

  	
  $

  	
  64,166.67

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  54,166.67

  	
   

  
	
  31

  	
   

  	
  $

  	
  64,166.67

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  54,166.67

  	
   

  
	
  32

  	
   

  	
  $

  	
  64,166.67

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  54,166.67

  	
   

  
	
  33

  	
   

  	
  $

  	
  64,166.67

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  54,166.67

  	
   

  
	
  34

  	
   

  	
  $

  	
  64,166.67

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  54,166.67

  	
   

  
	
  35

  	
   

  	
  $

  	
  64,166.67

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  54,166.67

  	
   

  
	
  36

  	
   

  	
  $

  	
  64,166.67

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  54,166.67

  	
   

  
	
  37

  	
   

  	
  $

  	
  65,000.00

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  55,000.00

  	
   

  
	
  38

  	
   

  	
  $

  	
  65,000.00

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  55,000.00

  	
   

  
	
  39

  	
   

  	
  $

  	
  65,000.00

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  55,000.00

  	
   

  
	
  40

  	
   

  	
  $

  	
  65,000.00

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  55,000.00

  	
   

  
	
  41

  	
   

  	
  $

  	
  65,000.00

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  55,000.00

  	
   

  
	
  42

  	
   

  	
  $

  	
  65,000.00

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  55,000.00

  	
   

  
	
  43

  	
   

  	
  $

  	
  65,000.00

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  55,000.00

  	
   

  
	
  44

  	
   

  	
  $

  	
  65,000.00

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  55,000.00

  	
   

  
	
  45

  	
   

  	
  $

  	
  65,000.00

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  55,000.00

  	
   

  
	
  46

  	
   

  	
  $

  	
  65,000.00

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  55,000.00

  	
   

  
	
  47

  	
   

  	
  $

  	
  65,000.00

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  55,000.00

  	
   

  
	
  48

  	
   

  	
  $

  	
  65,000.00

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  55,000.00

  	
   

  
	
  49

  	
   

  	
  $

  	
  65,833.33

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  55,833.33

  	
   

  
	
  50

  	
   

  	
  $

  	
  65,833.33

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  55,833.33

  	
   

  
	
  51

  	
   

  	
  $

  	
  65,833.33

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  55,833.33

  	
   

  
	
  52

  	
   

  	
  $

  	
  65,833.33

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  55,833.33

  	
   

  
	
  53

  	
   

  	
  $

  	
  65,833.33

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  55,833.33

  	
   

  
	
  54

  	
   

  	
  $

  	
  65,833.33

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  55,833.33

  	
   

  
	
  55

  	
   

  	
  $

  	
  65,833.33

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  55,833.33

  	
   

  
	
  56

  	
   

  	
  $

  	
  65,833.33

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  55,833.33

  	
   

  
	
  57

  	
   

  	
  $

  	
  65,833.33

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  55,833.33

  	
   

  
	
  58

  	
   

  	
  $

  	
  65,833.33

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  55,833.33

  	
   

  
	
  59

  	
   

  	
  $

  	
  65,833.33

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  55,833.33

  	
   

  
	
  60

  	
   

  	
  $

  	
  65,833.33

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  55,833.33

  	
   

  

 

2

 

	
  Net
  Present Value @ 8%

  	
   

  	
  $

  	
  2,479,851.66

  	
   

  
	
  Up-front
  inducements (Tenant Improvements & Other)

  	
   

  	
  $

  	
  250,000.00

  	
   

  
	
  Net
  Present Value net of inducements

  	
   

  	
  $

  	
  2,229,851.66

  	
   

  
	
  Monthly
  Amortization @ 8%

  	
   

  	
  $

  	
  45,213.35

  	
   

  
	
  Net
  Monthly Rent Payment pre rentable square foot

  	
   

  	
  $

  	
  4.52

  	
   

  
	
  Rentable
  Square Footage of Premises

  	
   

  	
  18,242

  	
   

  
	
  Net
  Monthly Rent Payment for the Premises during the applicable Term

  	
   

  	
  $

  	
  82,453.84

  	
   

  

 

3

 

EXHIBIT
H

 

KILROY SABRE SPRINGS

 

FORM OF
LETTER OF CREDIT

 

(Letterhead of a money center bank

acceptable to the Landlord)

 

	
  FAX NO.
  [(      )
        -        ]

  SWIFT:  [Insert No., if any]

  	
  [Insert Bank Name And
  Address]

  
	
   

  	
   

  
	
   

  	
  DATE OF ISSUE:                                                 

  
	
   

  	
   

  
	
  BENEFICIARY:

  [Insert Beneficiary Name And Address]

  	
  APPLICANT:

  [Insert Applicant Name And Address]

  
	
   

  	
   

  
	
   

  	
  LETTER OF CREDIT NO.                   

  
	
   

  	
   

  
	
  EXPIRATION DATE:
                                 AT OUR
  COUNTERS

  	
  AMOUNT AVAILABLE:

  USD[Insert Dollar Amount]

  (U.S. DOLLARS [Insert Dollar Amount])

  

 

LADIES AND GENTLEMEN:

 

WE HEREBY ESTABLISH OUR
IRREVOCABLE STANDBY LETTER OF CREDIT
NO.                       
IN YOUR FAVOR FOR THE ACCOUNT OF [Insert Tenant’s Name], A [Insert Entity Type]
(“TENANT”), UP TO THE AGGREGATE AMOUNT OF USD[Insert Dollar Amount] ([Insert
Dollar Amount] U.S. DOLLARS) EFFECTIVE IMMEDIATELY AND EXPIRING ON (Expiration
Date) AVAILABLE BY PAYMENT UPON PRESENTATION OF YOUR DRAFT AT SIGHT DRAWN ON
[Insert Bank Name] WHEN ACCOMPANIED BY THE FOLLOWING DOCUMENT(S):

 

1.             THE ORIGINAL OF THIS IRREVOCABLE STANDBY
LETTER OF CREDIT AND AMENDMENT(S), IF ANY.

 

2.             BENEFICIARY’S SIGNED STATEMENT
PURPORTEDLY SIGNED BY AN AUTHORIZED REPRESENTATIVE OF [Insert Landlord’s Name],
A [Insert Entity Type] (“LANDLORD”) STATING THE FOLLOWING:

 

“THE UNDERSIGNED HEREBY
CERTIFIES THAT FUNDS IN THE AMOUNT OF
USD                  
ARE NOW DUE AND OWING BY TENANT UNDER THE LANDLORD UNDER THE LEASE (DEFINED
BELOW) AND BENEFICIARY HAS THE RIGHT TO DRAW DOWN THE AMOUNT OF USD                        IN
ACCORDANCE WITH THE TERMS OF THAT CERTAIN OFFICE LEASE DATED [Insert Lease
Date], AS AMENDED (COLLECTIVELY, THE “LEASE”),

 

1

 

BY AND BETWEEN [Insert
Landlord’s Name], A [Insert Entity Type] (“LANDLORD”), AND [Insert Tenant’s
Name], A [Insert Entity Type] (“TENANT”, AS AMENDED (COLLECTIVELY, THE “LEASE”),
OR SUCH AMOUNT CONSTITUTES DAMAGES OWING BY TENANT THE TENANT UNDER SUCH LEASE
TO BENEFICIARY RESULTING FROM THE TENANT’S BREACH OF THE SUCH LEASE BY THE
TENANT THEREUNDER, AND SUCH AMOUNT REMAINS UNPAID AT THE TIME OF THIS DRAWING.”

 

OR

 

“THE UNDERSIGNED HEREBY
CERTIFIES THAT WE HAVE RECEIVED A WRITTEN NOTICE OF [Insert Bank Name]’S
ELECTION NOT TO EXTEND ITS STANDBY LETTER OF CREDIT
NO.                       
AND HAVE NOT RECEIVED A REPLACEMENT LETTER OF CREDIT WITHIN AT LEAST
SIXTY (60) DAYS PRIOR TO THE PRESENT EXPIRATION DATE.”

 

OR

 

“THE UNDERSIGNED HEREBY
CERTIFIES THAT BENEFICIARY IS ENTITLED TO DRAW DOWN THE FULL AMOUNT OF LETTER
OF CREDIT
NO.                       
AS THE RESULT OF TENANT’S FILING OF A VOLUNTARY PETITION UNDER THE U.S.
BANKRUPTCY CODE OR A STATE BANKRUPTCY CODE BY THE TENANT UNDER THAT CERTAIN
OFFICE LEASE DATED [Insert Lease Date], AS AMENDED (COLLECTIVELY, THE “LEASE”),
, WHICH FILING HAS NOT BEEN DISMISSED AT THE TIME OF THIS DRAWING.”

 

OR

 

“THE UNDERSIGNED HEREBY
CERTIFIES THAT BENEFICIARY IS ENTITLED TO DRAW DOWN THE FULL AMOUNT OF LETTER
OF CREDIT
NO.                       
AS THE RESULT OF AN INVOLUNTARY PETITION HAVING BEEN FILED AGAINST TENANT UNDER
THE U.S. BANKRUPTCY CODE OR A STATE BANKRUPTCY CODE AGAINST THE TENANT UNDER
THAT CERTAIN OFFICE LEASE DATED [Insert Lease Date], AS AMENDED (COLLECTIVELY,
THE “LEASE”), , WHICH FILING HAS NOT BEEN DISMISSED AT THE TIME OF THIS
DRAWING.”

 

SPECIAL CONDITIONS:

 

PARTIAL DRAWINGS AND
MULTIPLE PRESENTATIONS MAY BE MADE UNDER THIS STANDBY LETTER OF CREDIT,
PROVIDED, HOWEVER, THAT EACH SUCH DEMAND THAT IS PAID BY US SHALL REDUCE THE
AMOUNT AVAILABLE UNDER THIS STANDBY LETTER OF CREDIT.

 

ALL INFORMATION REQUIRED
WHETHER INDICATED BY BLANKS, BRACKETS OR OTHERWISE, MUST BE COMPLETED AT THE
TIME OF DRAWING.  [Please Provide The
Required Forms For Review, And Attach As Schedules To The Letter Of Credit.]

 

ALL SIGNATURES MUST BE
MANUALLY EXECUTED IN ORIGINALS.

 

2

 

ALL BANKING CHARGES OTHER
THAN ISSUING BANK’S ARE FOR THE APPLICANT’S ACCOUNT.

 

IT IS A CONDITION OF THIS
STANDBY LETTER OF CREDIT THAT IT SHALL BE DEEMED AUTOMATICALLY EXTENDED WITHOUT
AMENDMENT FOR A PERIOD OF ONE YEAR  FROM
THE PRESENT OR ANY FUTURE EXPIRATION DATE, UNLESS AT LEAST SIXTY (60) DAYS
PRIOR TO THE EXPIRATION DATE WE SEND YOU NOTICE BY NATIONALLY RECOGNIZED
OVERNIGHT COURIER SERVICE THAT WE ELECT NOT TO EXTEND THIS CREDIT FOR ANY SUCH
ADDITIONAL PERIOD.  SAID NOTICE WILL BE
SENT TO THE ADDRESS INDICATED ABOVE, UNLESS A CHANGE OF ADDRESS IS OTHERWISE
NOTIFIED BY YOU TO US IN WRITING BY RECEIPTED MAIL OR COURIER. ANY NOTICE TO US
WILL BE DEEMED EFFECTIVE ONLY UPON ACTUAL RECEIPT BY US AT OUR DESIGNATED
OFFICE.  IN NO EVENT, AND WITHOUT FURTHER
NOTICE FROM OURSELVES, SHALL THE EXPIRATION DATE BE EXTENDED BEYOND A FINAL
EXPIRATION DATE OF (Expiration Date).

 

THIS LETTER OF CREDIT MAY BE
TRANSFERRED SUCCESSIVELY IN WHOLE OR IN PART ONLY UP TO THE THEN AVAILABLE
AMOUNT IN FAVOR OF A NOMINATED TRANSFEREE (“TRANSFEREE”), ASSUMING SUCH
TRANSFER TO SUCH TRANSFEREE IS IN COMPLIANCE WITH ALL APPLICABLE U.S. LAWS AND
REGULATIONS.  AT THE TIME OF TRANSFER,
THE ORIGINAL LETTER OF CREDIT AND ORIGINAL AMENDMENT(S) IF ANY, MUST BE
SURRENDERED TO US TOGETHER WITH OUR TRANSFER FORM (AVAILABLE UPON REQUEST)
AND PAYMENT OF OUR CUSTOMARY TRANSFER FEES BY BENEFICIARY.  IN CASE OF ANY TRANSFER UNDER THIS LETTER OF
CREDIT, THE DRAFT AND ANY REQUIRED STATEMENT MUST BE EXECUTED BY THE TRANSFEREE
AND WHERE THE BENEFICIARY’S NAME APPEARS WITHIN THIS STANDBY LETTER OF CREDIT,
THE TRANSFEREE’S NAME IS AUTOMATICALLY SUBSTITUTED THEREFOR.

 

ALL DRAFTS REQUIRED UNDER
THIS STANDBY LETTER OF CREDIT MUST BE MARKED: ‘‘DRAWN UNDER [Insert Bank Name]
STANDBY LETTER OF CREDIT NO.                       .”

 

WE HEREBY AGREE WITH YOU
THAT IF DRAFTS ARE PRESENTED TO [Insert Bank Name] UNDER THIS LETTER OF CREDIT
AT OR PRIOR TO [Insert Time – (e.g.,
11:00 AM)], ON A BUSINESS DAY, AND PROVIDED THAT SUCH DRAFTS PRESENTED CONFORM TO
THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT, PAYMENT SHALL BE INITIATED
BY US IN IMMEDIATELY AVAILABLE FUNDS BY OUR CLOSE OF BUSINESS ON THE SUCCEEDING
BUSINESS DAY.  IF DRAFTS ARE PRESENTED TO
[Insert Bank Name] UNDER THIS LETTER OF CREDIT AFTER [Insert Time – (e.g., 11:00 AM)], ON A BUSINESS DAY,
AND PROVIDED THAT SUCH DRAFTS CONFORM WITH THE TERMS AND CONDITIONS OF
THIS LETTER OF CREDIT, PAYMENT SHALL BE INITIATED BY US IN IMMEDIATELY
AVAILABLE FUNDS BY OUR CLOSE OF BUSINESS ON THE SECOND SUCCEEDING BUSINESS
DAY.  AS USED IN THIS LETTER OF CREDIT,
“BUSINESS DAY” SHALL MEAN ANY DAY OTHER THAN A SATURDAY, SUNDAY OR A DAY ON
WHICH BANKING INSTITUTIONS IN THE STATE OF CALIFORNIA ARE AUTHORIZED OR
REQUIRED BY LAW TO CLOSE.  IF THE
EXPIRATION DATE FOR THIS LETTER OF CREDIT SHALL EVER FALL ON A DAY WHICH IS NOT
A BUSINESS DAY THEN SUCH EXPIRATION DATE SHALL AUTOMATICALLY BE EXTENDED TO THE
DATE WHICH IS THE NEXT BUSINESS DAY.

 

PRESENTATION OF A DRAWING
UNDER THIS LETTER OF CREDIT MAY BE MADE ON OR PRIOR TO THE THEN CURRENT
EXPIRATION DATE HEREOF BY HAND DELIVERY, COURIER SERVICE, OVERNIGHT MAIL, OR
FACSIMILE.  PRESENTATION BY FACSIMILE 

 

3

 

TRANSMISSION SHALL BE BY
TRANSMISSION OF THE ABOVE REQUIRED SIGHT DRAFT DRAWN ON US TOGETHER WITH THIS
LETTER OF CREDIT TO OUR FACSIMILE NUMBER, [Insert Fax Number –
(      )       -        ],
ATTENTION:  [Insert Appropriate Recipient],
WITH TELEPHONIC CONFIRMATION OF OUR RECEIPT OF SUCH FACSIMILE TRANSMISSION AT
OUR TELEPHONE NUMBER [Insert Telephone Number –
(      )       -        ]
OR TO SUCH OTHER FACSIMILE OR TELEPHONE NUMBERS, AS TO WHICH YOU HAVE RECEIVED
WRITTEN NOTICE FROM US AS BEING THE APPLICABLE SUCH NUMBER.  WE AGREE TO NOTIFY YOU IN WRITING, BY
NATIONALLY RECOGNIZED OVERNIGHT COURIER SERVICE, OF ANY CHANGE IN SUCH
DIRECTION.  ANY FACSIMILE PRESENTATION
PURSUANT TO THIS PARAGRAPH SHALL ALSO STATE THEREON THAT THE ORIGINAL OF SUCH
SIGHT DRAFT AND LETTER OF CREDIT ARE BEING REMITTED, FOR DELIVERY ON THE NEXT
BUSINESS DAY, TO [Insert Bank Name] AT THE APPLICABLE ADDRESS FOR PRESENTMENT
PURSUANT TO THE PARAGRAPH PRECEDING THIS ONE.

 

WE HEREBY ENGAGE WITH YOU
THAT ALL DOCUMENT(S) DRAWN UNDER AND IN COMPLIANCE WITH THE TERMS OF THIS
STANDBY LETTER OF CREDIT WILL BE DULY HONORED IF DRAWN AND PRESENTED FOR
PAYMENT AT OUR OFFICE LOCATED AT [Insert Bank Name], [Insert Bank Address],
ATTN: [Insert Appropriate Recipient], ON OR BEFORE THE EXPIRATION DATE OF THIS
CREDIT, (Expiration Date).

 

IN THE EVENT THAT THE
ORIGINAL OF THIS STANDBY LETTER OF CREDIT IS LOST, STOLEN, MUTILATED, OR
OTHERWISE DESTROYED, WE HEREBY AGREE TO ISSUE A DUPLICATE ORIGINAL HEREOF UPON
RECEIPT OF A WRITTEN REQUEST FROM YOU AND A CERTIFICATION BY YOU (PURPORTEDLY
SIGNED BY YOUR AUTHORIZED REPRESENTATIVE) OF THE LOSS, THEFT, MUTILATION, OR
OTHER DESTRUCTION OF THE ORIGINAL HEREOF.

 

EXCEPT
SO FAR AS OTHERWISE EXPRESSLY STATED HEREIN, THIS STANDBY LETTER OF CREDIT IS
SUBJECT TO “INTERNATIONAL STANDBY PRACTICES” (ISP 98) INTERNATIONAL
CHAMBER OF COMMERCE (PUBLICATION NO 590).

 

	
   

  	
   

  
	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
   

  	
  (Name of Issuing Bank)

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  

 

4

 

EXHIBIT I

 

SHORT FORM OF MEMORANDUM OF
LEASE

 

RECORDING REQUESTED BY

AND WHEN RECORDED RETURN TO:

 

Sheppard
Mullin Richter & Hampton LLP

12275 El Camino Real, Suite 200

San Diego, CA 92130

Attention:  Michael R. Leake, Esq.

 

SHORT FORM OF MEMORANDUM OF LEASE

 

THIS SHORT FORM OF MEMORANDUM OF LEASE is entered
into as of the
             day of
                ,
20    , by and between KILROY REALTY, L.P., a Delaware
limited partnership (“Landlord”),
and BRIDGEPOINT EDUCATION, INC., a Delaware corporation (“Tenant”), who agree as follows.

 

1.             Terms and Premises.  Landlord leases to Tenant, and Tenant leases
from Landlord, approximately 18,242 rentable (15,864 usable) square feet of
space on the fifth (5th) floor of that certain building (the “Building”) located at 13520 Evening Creek
Drive North, San Diego, California 92128 (the “Premises”), for the term and in accordance with the provisions
of that certain Lease by and between Landlord and Tenant, dated as of May 22,
2009 (the “Lease”).  The provisions of the Lease are hereby
incorporated herein.

 

2.             Certain Express Lease Terms.  As more particularly set forth in the
referenced sections of the Lease, Tenant enjoys the following rights pursuant
to the terms and conditions of the Lease: 
(i) an initial Lease Term of approximately seven (7) years and
ten (10) months, which initial Lease Term shall commence on May 7,
2009, as more particularly set forth in the Lease, and (ii) one (1) option
to extend the Lease Term for the entire Premises by a period of five (5) years,
as more particularly set forth in the Lease.

 

3.             Provisions Binding on Parties.  The provisions of the Lease to be performed
by Landlord or Tenant, whether affirmative or negative in nature, are intended
to and shall bind or benefit the respective parties hereto and their assigns or
successors, as applicable, at all times.

 

1

 

4.             Purpose of Short Form of Memorandum of Lease.  This Short Form of Memorandum of Lease
is prepared solely for purposes of recordation, and in no way modifies the
provisions of the Lease.

 

	
  LANDLORD

  	
   

  	
  KILROY REALTY, L.P.,

  
	
   

  	
   

  	
  a Delaware limited
  partnership

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Kilroy Realty
  Corporation,

  
	
   

  	
   

  	
   

  	
  a Maryland corporation,

  
	
   

  	
   

  	
   

  	
  General Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TENANT

  	
   

  	
  BRIDGEPOINT EDUCATION,
  INC.,

  
	
   

  	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
						

 

2

 

EXHIBIT
J

 

KILROY SABRE SPRINGS

 

LOCATION OF RESERVED PASSES

 

 

1

 

 

2

 

EXHIBIT
K

 

KILROY SABRE SPRINGS

 

LOCATION OF BUILDING TOP SIGNAGE

 

 

1

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